Ladies and gentlemen, welcome to the DexCom Second Quarter 2025 Earnings Release Conference Call. My name is Abby, and I'll be your conference operator today. As a reminder, this conference is being recorded. And I will now turn the call over to Sean Christensen, Vice President of Finance and Investor Relations. Mr. Christensen, you may begin.

Thank you, operator, and welcome to DexCom's Second Quarter 2025 Earnings Call. Our agenda begins with Kevin Sayer, DexCom's Chairman and CEO, who will summarize our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer. Following our prepared remarks, we will open the call up for your questions. At that time, we ask analysts to limit themselves to one question each so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our second quarter 2025 performance on the DexCom Investor Relations website on the Events and Presentations page. With that, let's review our safe harbor statement. Some of the statements we will make on today's call may constitute forward-looking statements. These statements reflect management's intentions, beliefs and expectations about future events, strategies, competition, products, operating plans and performance. All forward-looking statements included on this call are made as of the date hereof based on information currently available to DexCom and are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements. The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in DexCom's annual report on Form 10-K, most recent quarterly report on Form 10-Q and other filings with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this call or to conform these forward-looking statements to actual results. Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP. Unless otherwise noted, all references to financial measures on this call are presented on a non-GAAP basis. This non-GAAP information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the slides accompanying our second quarter earnings call for a reconciliation of these measures to their most directly comparable GAAP financial measure. Now I will turn it over to Kevin.

Thank you, Sean, and thank you, everyone, for joining us. Today, we reported second quarter organic revenue growth of 15% compared to the second quarter of 2024. We continue to see strong category growth, focused execution by our team and a growing contribution from our recent access wins. In the U.S., our new customer demand and volume growth remained consistent with the high levels we experienced during the first quarter. With the year now under our belt since expanding our sales force, our commercial team is operating at a very high level. Our expanded reach has helped us build relationships with a wider base of physicians, grow our market share and more quickly educate the market on the evolving coverage landscape. This has been particularly important as coverage continues to build. In fact, as of this month, our type 2 non-insulin reimbursement went live with a third major PBM. With this coverage in place, we now have reimbursement established for anyone with diabetes on the national formularies of the three largest commercial PBMs in the U.S. As previously stated, this will provide us with coverage for nearly 6 million type 2 non-insulin lives this year. But we're not stopping there. This is only a first step as we work to build coverage for this entire 25 million person population in the U.S. Given our growing body of health outcomes evidence, as well as DexCom CGM's proven ability to save costs for the healthcare system, we believe this is only a matter of time. Importantly, clinicians are quickly recognizing the potential to deliver better type 2 care. Many experienced providers have wanted to integrate DexCom CGM earlier into care plans, and this new coverage has greatly improved their ability to do so. As a result, during the second quarter, we again saw strong growth from the type 2 non-insulin population, which helped us take share in this quickly growing part of the market. With more opportunity than we've ever had, we are building on this momentum with new access wins, more personalized software and leveraging our differentiated product portfolio to deliver for our communities. Along those lines, interest in Stelo, our over-the-counter glucose biosensor, also continued to grow during the second quarter. In fact, as of this summer, the Stelo app has been downloaded more than 400,000 times. This reflects both the improving brand awareness for Stelo, particularly as more customers share their early success stories as well as the broader consumer movement toward health wearables and personalized metabolic health management. Physicians are also more broadly leveraging Stelo across their practices, as they now have a simple and easily accessible DexCom biosensor available for any patient that doesn't have coverage. While we are less than a year into Stelo's launch, we've already greatly enhanced the customer experience with new software features, broader distribution and digital health partnerships, steadily increasing the value of our features and providing more choice in how and where they engage with their glucose data. These connections will also enable us to expand the range of health and activity data available in the Stelo app experience. For example, our integration with Oura is now live, which allows customers to integrate DexCom glucose data with vital signs, sleep, stress, heart health and activity data provided by the Oura Ring. This broader data set can help us deliver more personalized and well-rounded insights over time, particularly as we continue to expand our generative AI capabilities within the app. Similarly, we recently introduced a new feature across both Stelo and G7 that leverages AI to greatly simplify the process of meal logging for our customers. With the launch of our Smart Food Logging feature, our apps can now generate a detailed meal description based on a photo, and then the post-meal glycemic impact for our customers. Additionally, users can now search for previous meals through the History tab, which can help support healthier decisions in the future as well as interaction with their care providers. On the hardware side, we're very excited for the upcoming launch of our 15-day G7 System. With FDA clearance now secured, we're working through the standard reimbursement contracting process in advance of launch. These discussions are progressing as planned, leaving us right on track to start the launch in the second half of the year. We continue to balance a focus on long-term platform innovation like our 15-day G7 and our G8 development while simultaneously embracing the mindset of rapid software development like a consumer technology company. Along those lines, we've already introduced 17 app updates across our Stelo, G-Series and DexCom ONE+ core products in the first half of 2025. These updates address real needs for our users and their caregivers, simplifying complex diabetes and metabolic health management for the good of our customers. We already mentioned the simplicity of AI food logging. We've also enabled our share and follow system to work for our customers using direct-to-watch connectivity. As a real-world example of how this can benefit our customers, I recently met the parents of a competitive swimmer while traveling. They were thrilled with this new functionality, as it allowed them to track their son's glucose during swim competitions even if he does not have a phone nearby. We've enhanced the data visualization for our customers while giving them greater ability to customize their experience with adjustable target ranges. We've brought to market connected pen technologies for our customers using insulin pens, allowing them to automatically log doses without the hassle of tracking them manually. We also know how much our customers rely on their DexCom sensors to manage their health and the challenge that any disruption to their supply represents. This is one of the reasons why we have prioritized resources so heavily this year to maintain continuity for our customers. We've also recently rolled out a nationwide warranty program for our pharmacy customers, allowing them to access replacement sensors as early as the same day. One of the core values that we embrace is summed up in the simple word, listen. With enhancements like I just reviewed, we are taking direct feedback from our customers and driving innovative solutions that address their core needs. Essentially, we continue to bring greater value to our products every month and are thankful for the sincere loyalty that this has driven amongst our customer base. As we've mentioned before, our definition of customer goes beyond just the end user. It includes caregivers, channel partners, payers and certainly the healthcare practitioners who rely upon DexCom CGM. Along those lines, we have seen significant momentum and excitement since we became the first CGM company to offer a direct, no-cost integration into Epic EHR last year. At this point, we already have more than 100 health systems either integrated or in the process of onboarding to enable DexCom CGM data to flow directly into their customer health records. As many of you recall, we exited the first quarter with inventory levels in a tighter position than we typically would like and set a clear focus on continuing to support our overall customer demand while rebuilding our finished goods inventory. I'm proud of the seamless customer support provided by our manufacturing and logistics teams during the second quarter. To accomplish this, we delivered multiple months of record production across our facilities and invested strategically in expedited shipping routes. This helped us to successfully restore inventory levels with key channel partners and allowed us to start rebuilding our own stock of finished goods internally. As a result, our supply dynamics today are in a much better position than they were even 90 days ago. Finally, we're thrilled to showcase our latest collection of clinical evidence at the American Diabetes Association's 85th Scientific Sessions last month. This year, we presented or supported nearly 40 studies during the event, with the majority of these exploring earlier stages of metabolic health management in areas where market access remains more limited today. This included the readout of two randomized controlled trials, which studied DexCom CGM usage for gestational diabetes and type 2 non-insulin care. Each of these presented very compelling outcomes, which we expect to further bolster the case for broader access and adoption. The momentum behind CGM for the type 2 non-insulin population was abundantly clear during the weekend, building on the update to the ADA standard of care that we saw at the end of 2024. Across the session, we heard more KOLs advocating for CGM to become the standard of care in this population. To further support this movement, our own type 2 non-insulin RCT remains on track to read out early next year. Our team also presented data looking at the next frontier of glucose biosensing. This included studies outside of diabetes, such as chronic kidney disease, where the data showed a significant reduction in disease progression over a three-year period for those using DexCom CGM. As always, I left this year's conference as excited as ever about the future of our company and the potential we have to serve a much larger population over time.

Thank you, Kevin. As a reminder, unless otherwise noted, the financial measures presented today will be discussed on a non-GAAP basis. Reconciliations to GAAP can be found in today's earnings release as well as the slide deck on our IR website. For the second quarter of 2025, we reported worldwide revenue of $1.16 billion compared to $1 billion for the second quarter of 2024, representing growth of 15% on both a reported basis and organic basis. As a reminder, our definition of organic revenue excludes the impact of foreign exchange in addition to non-CGM revenue acquired or divested in the trailing 12 months. U.S. revenue totaled $841 million for the second quarter compared to $732 million for the second quarter of 2024, representing an increase of 15%. As Kevin mentioned, we had a strong quarter in the U.S. as we benefited from our recently expanded type 2 access and growing presence within the primary care channel. This helped us deliver new customer starts that were right in line with the record levels that we experienced in Q1. International revenue grew 16%, totaling $316 million in the second quarter. International organic revenue growth was 14% for the second quarter. We experienced an acceleration in growth across our international markets in Q2, with particular strength coming from our DexCom ONE+ platform. Several of our key type 2 coverage wins recently have been for DexCom ONE+, and we've started to see a growing contribution from this expanded access. We expect this will remain a nice source of continued growth for us as type 2 coverage continues to expand globally. Along those lines, we were recently excited to announce coverage for anyone on insulin with the Ontario Drug Benefit Program in Canada. This represents a significant expansion for us in the largest Canadian province, as our public coverage was previously very limited in this region. In addition, the coverage expansion includes all insulin, continuing the momentum that we are seeing in international markets for broader type 2 coverage. We view this as another nice example of the growing recognition globally of DexCom's ability to deliver improved outcomes for anyone with diabetes. Our second quarter gross profit was $695.9 million or 60.1% of revenue compared to 63.5% of revenue in the second quarter of 2024. During the second quarter, we again invested in expedited shipping routes to ensure consistent customer supply while we stabilized our supply chain. This helped us keep our key distribution partners with sufficient supply during the quarter and allowed us to start refilling our own finished goods inventory. This includes more educational samples available in the field, which were limited in the second quarter. These samples often play a critical role in enabling clinicians and people with diabetes to have an introductory experience with DexCom CGM. We still have some work to do to reach the preferred inventory levels that give us greater flexibility in our operations, but the rebuild is moving forward as we planned. I'm very proud of our continued progress, which will help us return to more targeted inventory levels and efficient shipping options throughout the year. Operating expenses were $474.1 million for Q2 of 2025 compared to $442.7 million in Q2 of 2024. Operating income was $221.8 million or 19.2% of revenue in the second quarter of 2025 compared to $195.4 million or 19.5% of revenue in the same quarter of 2024. Adjusted EBITDA was $327.6 million or 28.3% of revenue for the second quarter compared to $283.9 million or 28.3% of revenue for the second quarter of 2024. Net income for the second quarter was $192.8 million or $0.48 per share. We remain in a great financial position, closing the quarter with approximately $2.9 billion of cash and cash equivalents. This cash level, along with our growing free cash flow profile, provides us with a lot of financial flexibility in our capital allocation decisions. We're currently watching the macroeconomic and capital market environments closely as we finalize plans to address our 2025 convertible notes, along with any other strategic uses of capital. Turning to guidance. We are raising our revenue guidance to a range of $4.6 billion to $4.625 billion, representing growth of 14% to 15% for the year. For margins, we are reaffirming our 2025 guidance of non-GAAP gross profit margin of approximately 62%, non-GAAP operating margin of approximately 21% and adjusted EBITDA margin of approximately 30%. With that, I'm going to pass the call back to Kevin.

As many of you saw in the press release today, I also want to take the opportunity to formally announce our succession plan, as I will hand over my CEO responsibilities to Jake Leach at the beginning of 2026. We've taken an initial step in this process with the announcement of Jake's promotion to President in May. And the Board and I are convinced that now is the right time to provide clarity on the next step for DexCom. I am confident that the company is in a great position with the right leadership team in place to not only continue the significant momentum that we carry right now but to capitalize on the massive future opportunity ahead for DexCom by advancing access and executing on our exciting product portfolio, and there is nobody that I trust more than Jake to lead the company into the future. As we transition to Q&A, I'll hand it over to Jake for a few words.

Thanks, Kevin, and hello, everyone. I'll keep my comments fairly brief at this point. I've been at DexCom since we launched our very first product, and I know the impact that we've had on the lives of our customers. And I'm proud of that impact. And yet, when I look to the future potential for DexCom, I can honestly say that I believe this company is just getting started. We have an incredible team, and I'm excited to lead the next phases of our journey to both expand access to our technology and to innovate across our portfolio of products to drive better health outcomes for our customers. I look forward to continuing to work closely with Kevin throughout this transition and also more closely with all of you as we move forward. With that, Sean, let's open it up for Q&A.

Thank you, Jake. As a reminder, we ask our audience to limit themselves to only one question at this time and then reenter the queue if necessary. Operator, please provide the Q&A instructions.

Our first question comes from Travis Steed with Bank of America.

I want to start by congratulating Kevin on his long and successful career. I will miss having you on these calls. I’d like to ask about the reasons behind raising the guidance for the full year. It was a strong quarter, but what insights can you share regarding new starts in the non-insulin opportunity and the confidence level for raising the full year revenue guidance at this point in the year?

Travis, thank you. This is Jereme. I'm happy to cover that. We are seeing solid progress in the non-insulin user market, particularly with the three major PBMs we discussed earlier this year. We view this as a significant opportunity for us. With strong coverage and what we believe is the best product available, coupled with Stelo's offerings, we've empowered our sales team to perform exceptionally well. This has been evident throughout the first and into the second quarter. Our third PBM is now operational as of the third quarter, which has reinforced our confidence based on our strong performance in the first half of the year. This has led us to slightly increase our full-year guidance. We remain committed to meeting the goals we set at the beginning of the year, and we are optimistic about the future. As we move into the latter part of the year, we are excited about the opportunities and developments that have arisen, especially related to the access wins Kevin mentioned.

And our next question comes from the line of Larry Biegelsen with Wells Fargo.

Kevin, congratulations on all your success at DexCom. And Jake, congratulations on the promotion. I guess I feel compelled, Kevin, to ask you about the CMS competitive bidding for CGM and pumps. So maybe can you frame the exposure to Medicare and the potential risk to DexCom? And if finalized as proposed, how might that impact your price in that channel? And lastly, when do you expect it to start? Is 2027 the earliest?

Larry, this is all very early. I'm going to pass it over to Jake, let him do that.

Thank you for the question, Larry. We are closely monitoring the CMS basic proposal for competitive bidding. We have been analyzing it, and currently, it is just a proposal. Approximately 15% of our business comes from fee-for-service Medicare, which is the group we are discussing. Regarding distributor pricing and market dynamics, we are confident in the value we offer relative to our product pricing, especially when considering the outcomes and cost savings. This process will involve an initial response, and there are some specific aspects of this version of competitive bidding that we need to clarify regarding its potential impacts. Our primary goal is to ensure that Medicare beneficiaries do not experience any interruptions while we navigate this process, which has occurred in previous competitive bidding scenarios. Therefore, our top priority is to make sure our customers have access to the products they need.

Yes. To address your question about when it begins, it's still early. We expect to gain more clarity on the competitive bidding process as it unfolds. Historically, if it were to start immediately, the earliest we might see it is 2027. Of course, this is based on past experiences. Regarding pricing, it's premature to make any predictions. However, if there’s any pricing compression, it will also lead to supplier compression. It's crucial to consider the appropriate value and how it will evolve. We anticipate that more volume will concentrate among suppliers if the current plan is followed. We'll keep you updated throughout this process. Our team, including Kevin, Jake, and myself, is deeply involved and committed to ensuring that any changes benefit our patients and those who utilize our products.

And our next question comes from the line of Robbie Marcus with JPMorgan.

Kevin, I'll also, I guess, add my congratulations to a long and very successful career. And Jake, I look forward to working with you in the new role. Question for me on margin progression through the year. Was just a touch low on gross margin, good on operating margins with good expense control. It sounds like you still have a little bit of inventory building to go, but was hoping you could just walk us through sort of the margin progression through the rest of the year and the puts and takes there to get to the guide?

Sure. Thanks, Robbie. This is Jereme. I can answer that one. You've captured it well. Looking at the progress from Q1 to Q2, there was a few hundred basis points of improvement. It's important to note that Q2 included a receiver recall, which meant we had to swap out some receivers. While this didn't have a significant impact, we did take a charge for it in the second quarter, which affected the results by about 100 basis points. So, the results were slightly better than they appear. The effect on the full year is negligible, but it’s worth discussing for the quarter. I anticipate a sequential improvement of a couple of hundred basis points more as we approach Q3 and Q4. As we aim for the full year guidance of 62%, those numbers align. Significant progress has been made from Q1 to Q2, especially after adjusting for the recall accrual. I expect to see continued improvement throughout the year, particularly as we start replenishing our inventory. Kevin noted this in his remarks, and I touched on it as well. We're beginning to build up finished goods on our balance sheet, and as this happens, we can consider more efficient and cost-effective freight routes. We're still relying on chartered flights to ensure our inventory is available and customer service remains uninterrupted. I hope this clarifies the expected trends for the year. As we increase our production volume and improve plant efficiency, I expect these results to materialize.

And our next question comes from the line of Joanne Wuensch with Citibank.

Good afternoon, and congrats to both of you. Awesome. And thinking about next steps, I'm thinking about G8, the timing of it, what it might look like, and there's a lot of discussion about dual analyte sensor. And I'd love to get your opinion on what do you think about competitive dual analyte sensors and what it may mean for how I started the question on G8?

Thank you for the question, Joanne. We are very excited about G8, our next-generation wearable platform. It is 50% smaller in size, yet we have incorporated even more functionality into it. The platform features a custom chipset designed for multiple analyte sensing, specifically for continuous glucose monitoring. As we expand our user base, which includes both diabetic and non-diabetic individuals, it is essential to build sensors that are reliable and accurate. We are currently deep in the development of G8 and will provide updates on timelines as we move through the necessary clinical studies and approach the launch. In terms of competition in multi-analyte sensing, there’s a lot of focus on the clinical benefits of ketones and the importance of measuring them alongside glucose. Ultimately, the value of a continuous glucose monitor lies in the user experience. Key safety features, such as our Urgent Low Soon alert, help prevent severe hypoglycemia. Similarly, our Smart High Alert provides notifications when glucose levels have been too high for too long, reminding users to take insulin if needed. We do have a ketone sensor in our development pipeline and will introduce it when the time is right. For now, our priority is on enhancing safety and user-friendliness for both patients and their doctors.

And our next question comes from the line of Matt Taylor with Jefferies.

Congrats on the transition there and looking forward to working with you, Jake. So I wanted to just ask if you could give us an update on how things are going with the FDA and the progress that you've been making in the plants that were inspected. And maybe just touch on the outlook for 15 days, you're going to be launching that here in the second half of the year.

Yes, thank you for the question. Things have been going really well with the FDA. We responded quickly to the warning letter and their concerns, and we have been providing them with periodic updates. We’ve made significant improvements to our processes and documentation, addressing many of the FDA's concerns. While there's still work to be done, we are making excellent progress. Regarding the 15-day launch, we are excited to introduce our 15-day product to the market, and you will see 15-day sensors soon in our Warrior population. We will definitely have it available this quarter, followed by a broader launch shortly thereafter. We are thrilled to offer the longest-lasting, most accurate sensor to our users in the G7 15-day.

And our next question comes from the line of Danielle Antalffy with UBS.

Kevin, congratulations. You are DexCom, and there will certainly be adjustments ahead. Jake, I have full confidence in your abilities, and I'm looking forward to collaborating with you. I have a question regarding the competitive landscape, particularly with your main sensor competitor integrating with insulin pumps and possibly strengthening their presence among your core patient group, the type 1 population. Can you share what actions you are taking as they approach their launch in that demographic and how you plan to safeguard your competitive advantage?

I'll start with that, and then Jake can add some other technology, if you like. We've got more than 2 million patient-years on AID systems. And these outcomes have been phenomenal. I've been out in the field quite a bit the past couple of months. And the stories I hear from people and the things I'm learning, we're doing a very good job with our partners. We very much do everything we can to improve anything we can do to make those experiences better. And we do have a nice head start, and we have a number of patients on those systems. At the end of the day, these algorithms were built based on DexCom technology and DexCom CGM. They will perform best using the DexCom CGM sensor. So we're very comfortable with our position, but we'll never sit still if our patients and our partners need something to make the systems better. We communicate with them all frequently and we work very hard to make that happen. I don't know if you have anything else to add to that one, Jake?

I would like to add that Kevin discussed our long-standing relationships with automated delivery partners, highlighting the successful outcomes we've achieved together. Additionally, all the components of our system, including its features and benefits, will continue to be enhanced. Regardless of whether you are using the AID system, you will still receive all the advantages of DexCom, such as alerts, Share, Follow features, and now photo meal logging. These elements collectively enhance our offering, making it more than just the sensor itself. This positions us advantageously. As Kevin noted, we are committed to ongoing innovation—not just for our users, but also for our partners.

And our next question comes from the line of David Roman with Goldman Sachs.

Kevin, I'm sorry that I won't have the chance to work with you in this role. Jake, I'm eager to get to know you and collaborate as you step into the CEO position. Let me start by discussing utilization. One area where we constantly receive inquiries is regarding the inclusion of type 2 non-insulin dependent users and its impact on overall utilization rates. What opportunities do you see for improving retention in that group? Does this relate to coverage or integration with the Oura Ring and other features? Please share your thoughts on how to maximize the value of that segment as you look to expand down the acuity curve.

Yes, this is Jereme. Let's start with the specifics regarding utilization. If you check our presentation on our website, you'll find utilization trends for covered users. It's quite interesting that the utilization for the type 2 population remains between 75% and 80%, which is relatively high and often surprises people. This high rate stems from users recognizing the value in our product. The feedback we provide allows them to make positive changes in their lives. You've touched on the features we are offering that can enhance utilization. For instance, our integration with Oura certainly helps users incorporate it into their daily routines. Features like Share and Follow that encourage teamwork in managing diabetes also play a significant role. Meal logging was mentioned by Jake and Kevin, too. These elements add value to the app. While meal logging exists in various standalone apps, combining it with activity, sleep, and meals in relation to glucose levels offers meaningful feedback. We're addressing the question of how to act on the numbers users receive. This approach is key to increasing both utilization and outcomes, and we will continue to focus on this area. Many of the upcoming features will blend hardware and software, which will enhance the daily value of our products. Choosing DexCom means you receive all these benefits, regardless of whether you use G-Series, D-Series, or Stelo, and we will keep providing these options for all DexCom users moving forward.

And our next question comes from the line of Jayson Bedford with Raymond James.

Congratulations to both of you. Regarding Stelo, the over 400,000 app downloads is certainly higher than we anticipated. Is the guidance still indicating 2% to 3% of sales for the year as we checked last week? Does that remain accurate? Additionally, could you comment on the mix of users with diabetes, wellness, or prediabetes?

Sure, again. Let me start with the guide. Yes, the guide is still 2% to 3%, off to a great start in the first half of the year, Jayson. So I think we're excited about that. But yes, I think we haven't necessarily changed that range. In terms of the user base, Kevin, do you want to kind of cover the user base, who's using it?

When we first started, Jayson, it was very much geared towards the type 2 non-insulin patients. And quite candidly, that's how we designed and developed the app. Because last year, at this time, we didn't have very much, if any, type 2 coverage for non-insulin users. So early days, that was the group who was buying it very much and they were the biggest group. As time has gone on and now G7 has coverage by the three largest PBMs in the country, we're seeing a shift from those type 2 patients to coverage. Because it has always been within our history when we have coverage, we grow, and we grow markets very quickly when we have that. So right now, I would tell you, our biggest user group would be health and wellness as far as numbers, prediabetes and type 2 non-insulin after that. And we'll continue to design and develop and work with the app to make sure we hit the features of the user base that's going to be most relevant in what we're doing. Our partners, Oura, and our distribution partners, like in particular, Amazon, have made a huge difference in our ability to reach that population. And it's been a great learning for us as we look at our strategies going forward.

And our next question comes from the line of Matthew O'Brien with Piper Sandler.

Kevin, best of luck in the future. And Jake, congratulations on your new role. I would like to discuss guidance a bit more for the second half. I'm not sure if this is a question for Jereme, but it did come up earlier. It appears to be less optimistic than the beat we saw in Q2, indicating a significant deceleration over two years at a time when we should expect fewer negative mix shifts. I'm trying to understand how much of this is due to the new CEO wanting a conservative outlook versus any competitive concerns or lack of type 2 adoption in the business, possibly with Abbott entering the insulin pump market or any other specific issues, versus simply being cautious with the guidance for the second half.

Sure. I can address that. Thank you for your question. We are optimistic about this business. As we move into the latter half of the year, we've discussed the downloads in Stelo and type 2 coverage for our third PBM. We've had some positive outcomes in the first half of the year. Our initial commitment for the year was $4.6 billion, and we've exceeded expectations slightly in both the first and second quarters. I understand the concerns behind your question. Our focus is on fulfilling our commitments, and we intend to deliver on them. This influences our guidance for the year. If you look at the upper end of our guidance, it encompasses the full constant currency benefit observed in the second quarter. To summarize, we are committed to executing our plans, and if we surpass our commitments, we will certainly share that information.

And our next question comes from the line of Marie Thibault with BTIG.

Congrats on the nice quarter. Also passing my congrats to you, Kevin and Jake. I wanted to ask here, I think, Kevin, I heard in your prepared comments that DexCom would love to try to go after the entire type 2 non-insulin patient population when it comes to securing reimbursement coverage for these patients. I wanted an update here then clinical trial work you guys have been doing. I believe that there was a trial underway. Wondering if we could get an update on how that is progressing? Any other clinical trial work you're hoping to do and any readouts that we might look forward to?

I'm pleased to provide an update on the randomized controlled trial we're conducting. We are currently running a trial involving a diverse group of type 2 non-insulin users, specifically those on various therapies, including GLP-1s and SGLT2s. This trial is focused on improvements in glycemic control, time in range, and A1c levels. Additionally, we have several registries worldwide generating real-world evidence from users of G7 or DexCom ONE+. The results we are observing regarding improvement in glycemic control and achieving A1c and time in range goals are outstanding. We are excited about this study, which is on track, and we expect to share the results early next year.

This is Kevin. I'll add to that. When you consider the changes in CGM reimbursement and access, it goes back to 2017 when we achieved Medicare coverage for the first time. Then our study facilitated basal coverage afterward. We have worked diligently to gather evidence to support CGM coverage in the CMS world for people with type 2 diabetes who are not on insulin, focusing on demonstrating the outcomes. At the same time, there is frequent discussion in political circles about an impending wearables revolution. We have a wearable that is quite revolutionary for users. We will continue to advocate for this. We are collaborating across the country to identify actions we can take to advance this initiative and will persist in our efforts.

And our next question comes from the line of Issie Kirby with Redburn Atlantic.

Echoing my congratulations to you both. I wanted to talk about the sales force one year on from the challenges last year and the new prescriber base. Just what are you currently seeing with respect to rep productivity? Any sort of increase versus where you expect it to be when you made these changes? And then just around the prescriber base, can you remind us the extent to which that was increased in the U.S. with the sales force transition? And what are you seeing in terms of the prescription rates from these new docs that you've onboarded?

Yes, I can begin. If anyone else would like to contribute, please feel free to do so. We are currently in a strong position. The performance of new patients this year shows that our sales team is excelling in reaching new physicians and highlighting the value of DexCom’s CGM. With Stelo’s presence, we’re seeing effective adoption of CGM, and our sales teams leveraging that product is beneficial. The team continues to improve year after year and is becoming more comfortable in their roles. After over a year, they are operating efficiently and increasing productivity as they learn and adjust. I believe no sales team ever claims to be at maximum productivity; they are eager for more challenges, and we observe that drive in our team. As for the prescribers, it’s challenging to distinguish the growth from our sales efforts versus organic growth, but we now have over 100,000 prescribers writing DexCom prescriptions. We are seeing a desirable trend: as we expand our prescriber base, the average number of prescriptions written by each physician remains consistent. New physicians who start with a few prescriptions are increasing their writing over time. This trend indicates positive movement in our prescription rates. It is particularly encouraging as our third PBM coverage is being implemented, allowing an increased number of non-insulin prescribers familiar with CGM to take advantage of this opportunity in the latter half of the year and beyond.

And our next question comes from the line of Steve Lichtman with Oppenheimer.

Congrats on the quarter and congratulations, Kevin and Jake. I wanted to circle back on the international beat in the quarter and outlook. How would you have us think about the underlying international growth outlook here in the near to medium term? And what are the biggest incremental catalysts outside of the U.S.?

Sure, Steve. Thanks. This is Jereme again. I'll cover it briefly. The international business has clearly accelerated since Q1. It's important to note that despite some fluctuations, new patient additions in Q1 were strong, and this trend has continued in Q2 as well. The underlying volumes in our international operations are performing well. A key factor has been the DexCom ONE+ coverage. We touched on this last quarter, and it has remained relevant this quarter with new coverage opportunities emerging from the latter part of last year and the beginning of this year, including France's basal coverage. We've also seen, as mentioned earlier, that in Canada, the Ontario Drug Benefit has become a significant development, as it's now approved coverage for DexCom for all insulin users in the largest Canadian province. This is indicative of broader coverage emerging in major areas. More importantly, we are witnessing increased coverage for basal insulin in various global markets. The opportunities lie in established markets, where we can enhance penetration among insulin-intensive users, especially for basal insulin, which currently has very low adoption. For instance, in Japan and France, basal adoption remains low despite having coverage. This effort involves deepening our market presence and looking to establish additional coverage. Germany, for example, has some basal coverage that presents a significant opportunity, as do our efforts in emerging markets where coverage is still limited. We've previously mentioned initiatives in places like Bulgaria, Estonia, Latvia, and Lithuania, where we introduced DexCom ONE and DexCom ONE+, eventually resulting in coverage for type 1. Establishing coverage, particularly among intensive users, serves as a foundation to showcase our capabilities. There are numerous opportunities for growth worldwide, as we've discussed regarding the Ontario Drug Benefit, and we expect to see continuous coverage advancements in the coming months and years, which will also benefit our U.S. business.

And our next question comes from the line of Shagun Singh with RBC.

Congratulations, Kevin and Jake. I wanted to go back and touch on the CEO transition and the strategy going forward. Jake, can you share with us what your vision for DexCom is, what you plan to do similarly or differently to define your era at DexCom? And are there any goalposts or milestones that you would like us to evaluate your progress on? And I guess more specifically, anything you can share on how you plan to further build operational, global scale at DexCom and further capitalize on the opportunity ahead?

Yes, absolutely. Thanks for the question. I think I'm really excited about the opportunity that we have in front of us. If you think about the runway that DexCom has in terms of the number of people around the world that we can impact and change the lives, you mentioned it around global scale. That is certainly something that we're seeing good progress in our growth globally, but there's so much more to do in terms of gaining access for people around the globe that could benefit from our technology. Our technology not only improves health outcomes but also saves money for the healthcare systems. And so as we continue to make sure that, that message is very clear and we bring those products to the markets around the globe, that's a key part of our growth strategy going forward. The other thing I'm incredibly excited about is continuing to drive innovation that provides real value to our customers, and that includes our end users, which is becoming a much broader group of people. Think of type 1, type 2, pre-diabetes and those who are looking to have a healthier metabolic condition. Those are our customers, those end users, but also when we think about our prescribers and our EHR integration is a great example of where we focused on how do we make DexCom the CGM of choice for some of these prescribers so that they have a preference for DexCom because our technology is the best, and we want people to have the advantage it brings. And so I think those are my two key areas of focus right now is access, driving innovation. And then the last one is really around the scale of the business. I think there's lots of things we do well. There's lots of things we need to continue to enhance and how we scale our business and how we provide efficiencies in the future so we can continue to invest in that innovation.

And our next question comes from the line of Richard Newitter with Truist Securities.

This is Ravi in for Rich. Congrats on the new announcements. I just kind of want to press on the back half guide or the implied back half guide a little bit. Can you talk maybe about the dynamic between U.S. and O-U.S. here? I believe earlier in the year, we were talking about kind of U.S. volume and revenue growth converging. How should we kind of still think about that in the back half, kind of given that reiterated Stelo guide and strength in terms of what appears to be a pretty robust growth O-U.S.?

Certainly. Let's begin with two key questions. One pertains to the U.S. regarding volume and revenue growth percentages, while the other looks at performance outside the U.S. We entered the year anticipating that our international business would grow at a faster pace than our U.S. operations, which has been our historical trend. We expected this situation to remain similar until we reach a 70-30 split. If the U.S. business and Stelo continue to perform well, we would be glad to share that it's exceeding expectations. This perspective is what we carried into the year and still hold for the remainder of it. Regarding the U.S. business, we anticipate the price volume difference will be slightly more favorable as the year progresses. We are moving past the rebate discussions we had last year, so as we move forward, it's reasonable to expect improvements in that area throughout the year. You've observed some of this in the first quarter, and to a degree in the second quarter as well. This is our outlook for at least the latter half of the year. Considering our performance in the first half, we believe we're in a good position moving forward. While we are optimistic about the direction we're heading for the rest of the year, we also want to remain cautious and not get ahead of our guidance. This is how we are approaching our guidance for the remainder of the year.

And our next question comes from the line of Michael Polark with Wolfe Research.

I want to follow up on a prepared remarks comment. You announced that you've rolled out a nationwide warranty program for your pharmacy customers. My question is, is this financially consequential? If so, how? Why now? And is this something that's different than your competitor or now similar?

Sure, we can address that. From a financial standpoint, we are neutral at this point, which means our costs remain balanced. Regarding technology, we are utilizing the existing technology and partnerships to facilitate this. As this technology and those partnerships develop and the new feature becomes available, it will become a distinguishing factor for us. For customers who are willing to wait for us to send them a sensor, especially if they already have extras from previous shipments, that's great. It's similar to how many of us order from Amazon — items arrive at your home in a few days, and waiting is perfectly fine. For those who are down to their last sensor or need a quick replacement due to travel, picking one up from the pharmacy is a viable option. When Jake talks about enhancing customer experience, that was exactly the aim. With the technology now available, our customers can choose how they want to receive their products. This choice adds value, which is why we decided to move forward with it, and we are enthusiastic for our customers to start experiencing this.

And our next question comes from the line of Josh Jennings with TD Cowen.

I apologize if you've addressed this already, but I was hoping to just get the status of the recovery in the DME channel. I know you guys have been working and making strides over the last number of quarters since last year. But where do you stand today? How much more work is left? Or do you feel like that channel has been stabilized and the DME partnerships are back to where they started at the end of 2023?

Yes. This is Kevin. I'll take that. We've spent a lot of time with our DME partners to learn things that we can do better. I think those relationships, particularly with the large DME partners, are much stronger than they were before. We're working hard to get them enough inventory to keep everybody stocked up and to be able to serve patients with what is typically a three-month supply. We communicate regularly with them. We have a new commercial team right now, and they are spending a great deal of time on these relationships and understanding what goes on. These partners are going to be very important to us as we go through this competitive bidding process. This is not something we're going to go through alone. So we'll work with them continually. We'll have regular conversations, and we're comfortable that we can get to the right place.

And our final question comes from the line of Brandon Vazquez with William Blair.

Congratulations to Kevin and Jake on the transition. I wanted to ask about the next 15 days as we approach the actual launch and refine our models. Historically, you’ve mentioned considering this in terms of annual revenue per patient. Now that you have discussions with payers following the approval, how are those going? Should we still think of this in terms of annual revenue per patient? As these discussions evolve, how do you anticipate the annual revenue per patient will vary between the 10-day and 15-day options now that we have this information to fine-tune our models?

Sure. Thanks, Brandon. The negotiations are ongoing and have been for a while. It's really about providing continuous support, almost like a service model, similar to the CMS proposal where we consider things on a monthly rental basis. When we negotiate, we focus on the monthly reimbursement. Therefore, by multiplying that by 12 for annual reimbursement, we expect the same approach to apply to the 15-day sensor. This strategy is consistent across all our business lines, including the commercial sector, and CMS has been reimbursing this way for some time, so I don't anticipate much change in that regard.

And our final question comes from the line of Bill Plovanic with Canaccord Genuity.

Just wanted to switch over to the pregnancy, the type 1 pregnancy and the gestational. You did have a lot of data at ADA. This has been an area that's been an opportunity for a long time. I was wondering if you could give us some kind of granularity on where are you today in penetration of that market? Does the data that's been presented provide the information needed to kind of change physician behavior and guidelines? And kind of how do you see this playing out over the next year or two? And remind us again of the TAM of that market.

Thank you, Bill. I believe we are still in the early stages of market penetration. Approximately one in ten pregnancies in the United States is affected by gestational diabetes, representing a significant population. As we focus on our product, we recently made updates to G7 to better serve this group. We included fasting glucose measurements and customizable target ranges since physicians often prefer tighter control during pregnancy. Our teams are beginning to reach out to these offices, and we have a lot to accomplish, including increasing awareness of the technology among physicians who may not be familiar with prescribing CGM and ensuring proper reimbursement processes with payers. Everything is starting to come together, and this presents a fantastic opportunity to enhance birth outcomes. A study presented at ADA highlighted the advantages for mothers using CGM compared to those using finger sticks for gestational diabetes, showing significant reductions in unscheduled C-sections and NICU admissions among the CGM users. The evidence is compelling, and now it is our responsibility to raise awareness.

Thank you, everybody, and thanks for the kind words today. I just want to remind you all that I'm not riding the retirement wave out of here right now. I got about 5 more months, and we need to drive this company, but I've learned a very valuable lesson over the years. My main job is to position these guys for success as much as I possibly can. And that's what we'll be doing in the 5 months I'm still CEO, and then when I'm an Executive Chairman after that. So I totally look forward to being around this company for a while and learning and being involved. And I thank you all for your support and all the time that we've worked with you. You guys have a great day.

And ladies and gentlemen, that concludes our question-and-answer session. I would now like to turn the call back over to Mr. Kevin Sayer for closing remarks. And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.