Dexcom Inc 10-Q for FY2020 Q1

Dexcom Inc (DXCM)

10-Q 2020-04-28 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

Dexcom Inc filed this 10-Q on April 28, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $405.1M; up 44.4% from $280.5M a year earlier
Net income: $19.9M; compared with a net loss of $26.9M a year earlier
Diluted EPS: $0.21; compared with -$0.30 a year earlier

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Delaware		33-0857544
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.001 Par Value Per Share	DXCM	Nasdaq Global Select Market



Large Accelerated Filer	☒	Accelerated Filer	☐

Non-Accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐



		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019	3
	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended March 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements (unaudited)	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	30
ITEM 4.	Controls and Procedures	31
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	32
ITEM 1A.	Risk Factors	32
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
ITEM 3.	Defaults Upon Senior Securities	70
ITEM 4.	Mine Safety Disclosures	70
ITEM 5.	Other Information	71
ITEM 6.	Exhibits	72
	Signatures	73



(In millions, except par value data)	March 31, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	584.6		$	446.2
Short-term marketable securities	925.9			1,087.1
Accounts receivable, net	300.7			286.3
Inventory	141.9			119.8
Prepaid and other current assets	42.6			30.0
Total current assets	1,995.7			1,969.4
Property and equipment, net	346.1			321.3
Operating lease right-of-use assets	73.8			71.5
Goodwill	18.6			18.6
Other assets	13.7			14.2
Total assets	$	2,447.9		$	2,395.0
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	267.5		$	256.4
Accrued payroll and related expenses	59.0			88.5
Operating lease liabilities, current portion	14.5			13.6
Deferred revenue	1.8			1.7
Total current liabilities	342.8			360.2
Long-term senior convertible notes	1,072.4			1,059.7
Operating lease liabilities, net of current portion	77.3			72.4
Other long-term liabilities	20.9			20.1
Total liabilities	1,513.4			1,512.4
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5.0 million shares authorized; no shares issued and outstanding at March 31, 2020 and December 31, 2019	—			—
Common stock, $0.001 par value, 200.0 million shares authorized; 93.1 million and 92.3 million shares issued and outstanding, respectively, at March 31, 2020; and 92.4 million and 91.6 million shares issued and outstanding, respectively, at December 31, 2019	0.1			0.1
Additional paid-in capital	1,706.5			1,675.9
Accumulated other comprehensive income	3.7			2.3
Accumulated deficit	(675.8		)	(695.7		)
Treasury stock, at cost; 0.8 million shares at March 31, 2020 and December 31, 2019	(100.0		)	(100.0		)
Total stockholders’ equity	934.5			882.6
Total liabilities and stockholders’ equity	$	2,447.9		$	2,395.0



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



DexCom, Inc.
Consolidated Statements of Operations
(Unaudited)



	Three Months Ended March 31,
(In millions—except per share data)	2020			2019
Revenues	$	405.1		$	280.5
Cost of sales	148.6			111.7
Gross profit	256.5			168.8
Operating expenses:
Research and development	73.1			59.0
Selling, general and administrative	149.8			124.2
Total operating expenses	222.9			183.2
Operating income (loss)	33.6			(14.4		)
Interest expense	(15.4		)	(14.9		)
Loss from equity investments	—			(4.2		)
Interest and other income, net	4.2			6.9
Income (loss) before income taxes	22.4			(26.6		)
Income tax expense	2.5			0.3
Net income (loss)	$	19.9		$	(26.9	)

Basic net income (loss) per share	$	0.22		$	(0.30	)
Shares used to compute basic net income (loss) per share	91.8			90.3
Diluted net income (loss) per share	$	0.21		$	(0.30	)
Shares used to compute diluted net income (loss) per share	94.1			90.3



	Three Months Ended March 31,
(In millions)	2020			2019
Net income (loss)	$	19.9		$	(26.9	)
Other comprehensive income, net of tax:
Translation adjustments and other	(0.7		)	—
Unrealized gain on marketable debt securities	2.1			0.1
Total other comprehensive income, net of tax	1.4			0.1
Comprehensive income (loss)	$	21.3		$	(26.8	)



	Three Months Ended March 31, 2020
(In millions)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
(In millions)	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
Balance at December 31, 2019	91.6	$	0.1	$	1,675.9	$	2.3	$	(695.7	)	$	(100.0	)	$	882.6
Issuance of common stock under equity incentive plans	0.7	—		0.3		—		—			—			0.3
Issuance of common stock for Employee Stock Purchase Plan	—	—		6.4		—		—			—			6.4
Share-based compensation expense	—	—		23.9		—		—			—			23.9
Net income	—	—		—		—		19.9			—			19.9
Other comprehensive income, net of tax	—	—		—		1.4		—			—			1.4
Balance at March 31, 2020	92.3	$	0.1	$	1,706.5	$	3.7	$	(675.8	)	$	(100.0	)	$	934.5



	Three Months Ended March 31, 2019
(In millions)	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
(In millions)	Shares	Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
Balance at December 31, 2018	90.0	$	0.1	$	1,560.6	$	1.5	$	(798.9	)	$	(100.0	)	$	663.3
Cumulative-effect adjustment from adoption of new lease accounting standard (Note 2)	—	—		—		—		2.1			—			2.1
Issuance of common stock under equity incentive plans	0.9	—		0.2		—		—			—			0.2
Issuance of common stock for Employee Stock Purchase Plan	0.1	—		4.8		—		—			—			4.8
Share-based compensation expense	—	—		25.0		—		—			—			25.0
Net loss	—	—		—		—		(26.9		)	—			(26.9		)
Other comprehensive income	—	—		—		0.1		—			—			0.1
Balance at March 31, 2019	91.0	$	0.1	$	1,590.6	$	1.6	$	(823.7	)	$	(100.0	)	$	668.6



DexCom, Inc.
Consolidated Statements of Cash Flows
(Unaudited)



	Three Months Ended
	March 31,
(In millions)	2020			2019
Net income (loss)	$	19.9		$	(26.9	)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	13.0			9.9
Share-based compensation	23.9			25.0
Non-cash interest expense	12.7			12.2
Realized loss on equity investment	—			4.2
Other non-cash income and expenses	0.1			0.3
Changes in operating assets and liabilities:
Accounts receivable, net	(14.7		)	21.5
Inventory	(22.2		)	(30.4		)
Prepaid and other assets	(7.6		)	(5.2		)
Operating lease right-of-use assets and liabilities, net	(0.4		)	(0.2		)
Accounts payable and accrued liabilities	5.3			25.5
Accrued payroll and related expenses	(29.1		)	(21.1		)
Deferred revenue and other liabilities	1.0			(3.0		)
Net cash provided by operating activities	1.9			11.8
Cash flows from investing activities:
Purchases of marketable securities	(365.8		)	(50.7		)
Proceeds from sale and maturity of marketable securities	530.0			222.5
Purchases of other equity investments	—			(1.2		)
Purchases of property and equipment	(33.2		)	(39.3		)
Other investing activities	(0.4		)	—
Net cash provided by investing activities	130.6			131.3
Cash flows from financing activities:
Net proceeds from issuance of common stock	6.7			5.0
Other financing activities	(0.2		)	(0.1		)
Net cash provided by financing activities	6.5			4.9
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.5		)	0.6
Increase in cash, cash equivalents and restricted cash	138.5			148.6
Cash, cash equivalents and restricted cash, beginning of period	446.4			1,137.1
Cash, cash equivalents and restricted cash, end of period	$	584.9		$	1,285.7

Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents	$	584.6		$	1,285.1
Restricted cash	0.3			0.6
Total cash, cash equivalents and restricted cash	$	584.9		$	1,285.7

Supplemental disclosure of non-cash investing and financing transactions:
Acquisition of property and equipment included in accounts payable and accrued liabilities	$	19.6		$	10.1
Right-of-use assets obtained in exchange for lease liabilities	$	5.3		$	45.2


•	We report revenue net of taxes collected from customers, which are subsequently remitted to governmental authorities;



DexCom, Inc.
Table of Contents



1. Organization and Significant Accounting Policies



Organization and Business



Basis of Presentation and Principles of Consolidation


•	We account for shipping and handling activities that are performed after a customer has obtained control of a good as fulfillment costs rather than as separate performance obligations;


•	We do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer; and


•	If we expect, at contract inception, that the period between the transfer of control and corresponding payment from the customer will be one year or less, we do not adjust the amount of consideration for the effects of a significant financing component.



	Three Months Ended March 31,
(In millions)	2020	2019
Options outstanding to purchase common stock	—	—
Unvested restricted stock units	0.1	2.3
2023 Warrants	4.1	5.2
Senior convertible notes due 2022	4.0	4.0
Senior convertible notes due 2023	5.2	5.2
Total	13.4	16.7



	Fair Value Measurements Using
(In millions)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	363.7	$	100.0	$	—	$	463.7

Debt securities, available for sale:
U.S. government agencies	—		623.9		—		623.9
Commercial paper	—		189.1		—		189.1
Corporate debt	—		112.9		—		112.9
Total debt securities, available for sale	—		925.9		—		925.9

Other assets ⁽¹⁾	1.8		—		—		1.8

Total assets measured at fair value on a recurring basis	$	365.5	$	1,025.9	$	—	$	1,391.4



	Fair Value Measurements Using Level 1
(In millions)	March 31, 2020		December 31, 2019
0.75% Senior Convertible Notes due 2022	$	1,088.9	$	890.8
0.75% Senior Convertible Notes due 2023	1,474.0		1,260.0
Total fair value of outstanding senior convertible notes	$	2,562.9	$	2,150.8



	March 31, 2020
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Debt securities, available for sale:
U.S. government agencies	$	620.4	$	3.5	$	—		$	623.9
Commercial paper	189.1		0.1		(0.1		)	$	189.1
Corporate debt	113.7		—		(0.8		)	$	112.9
Total debt securities, available for sale	923.2		3.6		(0.9		)	925.9



	Three Months Ended March 31,
(Dollars in millions)	2020			2019
Cash interest expense
Contractual coupon interest	$	2.3		$	2.3
Non-cash interest expense
Accretion of debt discount ⁽¹⁾	11.8			11.3
Amortization of debt issuance costs	0.9			0.9
Total interest expense recognized on senior notes	$	15.0		$	14.5

Effective interest rates:
0.75% Senior Convertible Notes due 2022	5.1		%	5.1		%
0.75% Senior Convertible Notes due 2023	5.6		%	5.6		%


(2)	during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that five day consecutive trading day period was less than 98% of the product of the last reported sale price of common stock and the applicable conversion rate of the Notes on such trading day;


(3)	if we call any or all of the Notes for redemption, at any time prior to the close on business on the scheduled trading day immediately preceding the redemption date; or


(3)	if we call any or all of the 2023 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or



(In millions)	March 31, 2020
Available principal amount	$	200.0
Letters of credit sub-facility	10.0
Outstanding borrowings	—
Outstanding letters of credit	5.4
Total available balance	$	194.6



			Weighted
			Average		Aggregate
			Grant Date		Intrinsic
(In millions, except weighted average grant date fair values)	Shares		Fair Value		Value
Nonvested at December 31, 2019	1.8		$	96.63	$	392.0
Granted	0.4		286.45
Vested	(0.7	)	87.22
Forfeited	—		105.48
Nonvested at March 31, 2020	1.5		$	153.08	$	401.3



ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



	Three Months Ended March 31,					2020 - 2019
(In millions)	2020		2019			$ Change		% Change
Total revenue	$	405.1	$	280.5		$	124.6	44	%
Gross profit	256.5		168.8			87.7		52	%
Operating income (loss)	33.6		(14.4		)	48.0		*
Net income (loss)	19.9		(26.9		)	46.8		*

Basic net income (loss) per share	0.22		(0.30		)	0.52		*
Diluted net income (loss) per share	$	0.21	$	(0.30	)	$	0.51	*


•	the revenue generated by sales of our approved products and other future products;


•	the expenses we incur in manufacturing, developing, selling and marketing our products;


•	the third-party reimbursement of our products for our customers;


•	our ability to efficiently scale our operations to meet demand for our current and any future products;


•	the costs, timing and risks of delays of additional regulatory approvals;