Dexcom Inc 10-Q for FY2020 Q2

Dexcom Inc (DXCM)

10-Q 2020-07-28 For: 2020-06-30

Added on April 11, 2026

About this 10-Q

Dexcom Inc filed this 10-Q on July 28, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $451.8M; up 34.3% from $336.4M a year earlier
Net income: $46.3M; compared with a net loss of $10.5M a year earlier
Diluted EPS: $0.48; compared with -$0.12 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 June 30, 2020 (unaudited) and December 31, 2019	3
	Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended June 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and 2019	8
	Notes to Consolidated Financial Statements (unaudited)	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34
ITEM 4.	Controls and Procedures	35
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	36
ITEM 1A.	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	74
ITEM 3.	Defaults Upon Senior Securities	74
ITEM 4.	Mine Safety Disclosures	74
ITEM 5.	Other Information	74
ITEM 6.	Exhibits	75
	Signatures	76



(In millions, except par value data)	June 30, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	530.0		$	446.2
Short-term marketable securities	1,978.8			1,087.1
Accounts receivable, net	296.5			286.3
Inventory	165.3			119.8
Prepaid and other current assets	62.4			30.0
Total current assets	3,033.0			1,969.4
Property and equipment, net	384.3			321.3
Operating lease right-of-use assets	71.6			71.5
Goodwill	18.7			18.6
Other assets	14.2			14.2
Total assets	$	3,521.8		$	2,395.0
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	315.9		$	256.4
Accrued payroll and related expenses	67.4			88.5
Operating lease liabilities, current portion	15.1			13.6
Deferred revenue	1.7			1.7
Total current liabilities	400.1			360.2
Long-term senior convertible notes	1,658.8			1,059.7
Operating lease liabilities, net of current portion	73.7			72.4
Other long-term liabilities	35.3			20.1
Total liabilities	2,167.9			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 June 30, 2020 and December 31, 2019	—			—
Common stock, $0.001 par value, 200.0 million shares authorized; 96.2 million and 95.4 million shares issued and outstanding, respectively, at June 30, 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	2,079.8			1,675.9
Accumulated other comprehensive income	3.5			2.3
Accumulated deficit	(629.5		)	(695.7		)
Treasury stock, at cost; 0.8 million shares at June 30, 2020 and December 31, 2019	(100.0		)	(100.0		)
Total stockholders’ equity	1,353.9			882.6
Total liabilities and stockholders’ equity	$	3,521.8		$	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 June 30,						Six Months Ended June 30,
(In millions, except per share data)	2020			2019			2020			2019
Revenues	$	451.8		$	336.4		$	856.9		$	616.9
Cost of sales	167.7			129.9			316.3			241.6
Gross profit	284.1			206.5			540.6			375.3
Operating expenses:
Research and development	79.9			69.0			153.0			128.0
Selling, general and administrative	136.4			138.3			286.2			262.5
Total operating expenses	216.3			207.3			439.2			390.5
Operating income (loss)	67.8			(0.8		)	101.4			(15.2		)
Interest expense	(20.3		)	(15.0		)	(35.7		)	(29.9		)
Loss on extinguishment of debt	(5.4		)	—			(5.4		)	—
Loss from equity investments	—			—			—			(4.2		)
Interest and other income, net	4.1			6.5			8.3			13.4
Income (loss) before income taxes	46.2			(9.3		)	68.6			(35.9		)
Income tax expense (benefit)	(0.1		)	1.2			2.4			1.5
Net income (loss)	$	46.3		$	(10.5	)	$	66.2		$	(37.4	)

Basic net income (loss) per share	$	0.49		$	(0.12	)	$	0.71		$	(0.41	)
Shares used to compute basic net income (loss) per share	93.8			91.1			92.8			90.7
Diluted net income (loss) per share	$	0.48		$	(0.12	)	$	0.69		$	(0.41	)
Shares used to compute diluted net income (loss) per share	97.0			91.1			95.6			90.7



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2020			2019			2020			2019
Net income (loss)	$	46.3		$	(10.5	)	$	66.2		$	(37.4	)
Other comprehensive income (loss), net of tax:
Translation adjustments and other	0.5			(0.1		)	(0.2		)	(0.1		)
Unrealized gain (loss) on marketable debt securities	(0.7		)	0.5			1.4			0.6
Total other comprehensive income (loss), net of tax	(0.2		)	0.4			1.2			0.5
Comprehensive income (loss)	$	46.1		$	(10.1	)	$	67.4		$	(36.9	)



	Three Months Ended June 30, 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 March 31, 2020	92.3	$	0.1	$	1,706.5	$	3.7		$	(675.8	)	$	(100.0	)	$	934.5
Issuance of common stock under equity incentive plans	0.1	—		—		—			—			—			—
Issuance of common stock for Employee Stock Purchase Plan	—	—		—		—			—			—			—
Equity component of 2025 Notes issuance, net of issuance costs	—	—		289.4		—			—			—			289.4
Repurchase and conversions of 2022 Notes	3.0	—		53.2		—			—			—			53.2
Share-based compensation expense	—	—		30.7		—			—			—			30.7
Net income	—	—		—		—			46.3			—			46.3
Other comprehensive loss, net of tax	—	—		—		(0.2		)	—			—			(0.2		)
Balance at June 30, 2020	95.4	$	0.1	$	2,079.8	$	3.5		$	(629.5	)	$	(100.0	)	$	1,353.9



	Three Months Ended June 30, 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 March 31, 2019	91.0	$	0.1	$	1,590.6	$	1.6	$	(823.7	)	$	(100.0	)	$	668.6
Issuance of common stock under equity incentive plans	0.2	—		0.1		—		—			—			0.1
Issuance of common stock for Employee Stock Purchase Plan	—	—		—		—		—			—			—
Share-based compensation expense	—	—		29.7		—		—			—			29.7
Net loss	—	—		—		—		(10.5		)	—			(10.5		)
Other comprehensive income, net of tax	—	—		—		0.4		—			—			0.4
Balance at June 30, 2019	91.2	$	0.1	$	1,620.4	$	2.0	$	(834.2	)	$	(100.0	)	$	688.3



	Six Months Ended June 30, 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	0.8	—		0.3		—		—			—			0.3
Issuance of common stock for Employee Stock Purchase Plan	—	—		6.4		—		—			—			6.4
Equity component of 2025 Notes issuance, net of issuance costs	—	—		289.4		—		—			—			289.4
Repurchase and conversions of 2022 Notes	3.0	—		53.2		—		—			—			53.2
Share-based compensation expense	—	—		54.6		—		—			—			54.6
Net income	—	—		—		—		66.2			—			66.2
Other comprehensive income, net of tax	—	—		—		1.2		—			—			1.2
Balance at June 30, 2020	95.4	$	0.1	$	2,079.8	$	3.5	$	(629.5	)	$	(100.0	)	$	1,353.9



	Six Months Ended June 30, 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	—	—		—		—		2.1			—			2.1
Issuance of common stock under equity incentive plans	1.1	—		0.3		—		—			—			0.3
Issuance of common stock for Employee Stock Purchase Plan	0.1	—		4.8		—		—			—			4.8
Share-based compensation expense	—	—		54.7		—		—			—			54.7
Net loss	—	—		—		—		(37.4		)	—			(37.4		)
Other comprehensive income, net of tax	—	—		—		0.5		—			—			0.5
Balance at June 30, 2019	91.2	$	0.1	$	1,620.4	$	2.0	$	(834.2	)	$	(100.0	)	$	688.3



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



DexCom, Inc.
Table of Contents



1. Organization and Significant Accounting Policies



Organization and Business



Basis of Presentation and Principles of Consolidation



	Six Months Ended
	June 30,
(In millions)	2020			2019
Net income (loss)	$	66.2		$	(37.4	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization	28.3			21.5
Share-based compensation	54.6			54.7
Loss on extinguishment of debt	5.4			—
Non-cash interest expense	30.3			24.5
Realized loss on equity investment	—			4.2
Other non-cash income and expenses	3.5			(1.9		)
Changes in operating assets and liabilities:
Accounts receivable, net	(10.4		)	9.2
Inventory	(45.5		)	(47.2		)
Prepaid and other assets	(26.6		)	(2.3		)
Operating lease right-of-use assets and liabilities, net	(1.2		)	(1.1		)
Accounts payable and accrued liabilities	56.8			53.9
Accrued payroll and related expenses	(20.8		)	1.6
Deferred revenue and other liabilities	15.4			(3.4		)
Net cash provided by operating activities	156.0			76.3
Cash flows from investing activities:
Purchases of marketable securities	(1,740.0		)	(934.5		)
Proceeds from sale and maturity of marketable securities	849.5			513.8
Purchases of property and equipment	(91.4		)	(86.2		)
Other investing activities	(2.8		)	(1.2		)
Net cash used in investing activities	(984.7		)	(508.1		)
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net of issuance costs	1,188.8			—
Repurchase of convertible notes	(282.6		)	—
Net proceeds from issuance of common stock	6.7			5.1
Other financing activities	(0.4		)	(0.3		)
Net cash provided by financing activities	912.5			4.8
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.2		)	(0.3		)
Increase (decrease) in cash, cash equivalents and restricted cash	83.6			(427.3		)
Cash, cash equivalents and restricted cash, beginning of period	446.4			1,137.1
Cash, cash equivalents and restricted cash, end of period	$	530.0		$	709.8

Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents	$	530.0		$	709.2
Restricted cash	—			0.6
Total cash, cash equivalents and restricted cash	$	530.0		$	709.8

Supplemental disclosure of non-cash investing and financing transactions:
Common stock issued for repurchase and conversions of senior convertible notes	$	1,190.0		$	—
Acquisition of property and equipment included in accounts payable and accrued liabilities	$	17.0		$	7.1
Right-of-use assets obtained in exchange for lease liabilities	$	5.3		$	55.8


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


•	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.



	Fair Value Measurements Using
(In millions)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	402.6	$	—	$	—	$	402.6

Debt securities, available for sale:
U.S. government agencies	—		1,600.2		—		1,600.2
Commercial paper	—		295.3		—		295.3
Corporate debt	—		83.3		—		83.3
Total debt securities, available for sale	—		1,978.8		—		1,978.8

Other assets ⁽¹⁾	2.4		—		—		2.4

Total assets measured at fair value on a recurring basis	$	405.0	$	1,978.8	$	—	$	2,383.8



	Fair Value Measurements Using Level 1
(In millions)	June 30, 2020		December 31, 2019
Senior Convertible Notes due 2022	$	151.9	$	890.8
Senior Convertible Notes due 2023	2,108.2		1,260.0
Senior Convertible Notes due 2025	1,239.2		*
Total fair value of outstanding senior convertible notes	$	3,499.3	$	2,150.8



	June 30, 2020
(In millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Debt securities, available for sale:
U.S. government agencies	$	1,598.7	$	1.6	$	(0.1	)	$	1,600.2
Commercial paper	295.3		0.2		(0.2		)	$	295.3
Corporate debt	83.1		0.2		—			$	83.3
Total debt securities, available for sale	$	1,977.1	$	2.0	$	(0.3	)	$	1,978.8



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2020			2019			2020			2019
Cash interest expense:
Contractual coupon interest ⁽¹⁾	$	2.4		$	2.4		$	4.7		$	4.7
Non-cash interest expense:
Accretion of debt discount	16.5			11.3			28.3			22.6
Amortization of debt issuance costs	1.1			0.9			2.0			1.8
Total interest expense recognized on senior notes	$	20.0		$	14.6		$	35.0		$	29.1

Effective interest rates:
Senior Convertible Notes due 2022	5.1		%	5.1		%	5.1		%	5.1		%
Senior Convertible Notes due 2023	5.6		%	5.6		%	5.6		%	5.6		%
Senior Convertible Notes due 2025	5.5		%	*			5.5		%	*


(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 2022 Notes for each day of that five day consecutive trading day period was less than 98% of


(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)	June 30, 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		291.68
Vested	(0.8	)	87.53
Forfeited	—		107.68
Nonvested at June 30, 2020	1.4		$	161.58	$	572.2



	Three Months Ended June 30, 2020				Three Months Ended June 30, 2019
(Dollars in millions)	Amount		% of Total		Amount		% of Total
United States	$	367.1	81	%	$	266.3	79	%
Outside of the United States	84.7		19	%	70.1		21	%
Total	$	451.8	100	%	$	336.4	100	%



	Six Months Ended June 30, 2020				Six Months Ended June 30, 2019
(Dollars in millions)	Amount		% of Total		Amount		% of Total
United States	$	659.4	77	%	$	476.8	77	%
Outside of the United States	197.5		23	%	140.1		23	%
Total revenues	$	856.9	100	%	$	616.9	100	%



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



	Three Months Ended June 30,					2020 - 2019
(In millions, except per share amounts)	2020		2019			$ Change		% Change
Total revenue	$	451.8	$	336.4		$	115.4	34	%
Gross profit	284.1		206.5			77.6		38	%
Operating income (loss)	67.8		(0.8		)	68.6		*
Net income (loss)	46.3		(10.5		)	56.8		*

Basic net income (loss) per share	0.49		(0.12		)	0.61		*
Diluted net income (loss) per share	$	0.48	$	(0.12	)	$	0.60	*



	Six Months Ended June 30,					2020 - 2019
(In millions, except per share amounts)	2020		2019			$ Change		% Change
Total revenue	$	856.9	$	616.9		$	240.0	39	%
Gross profit	540.6		375.3			165.3		44	%
Operating income (loss)	101.4		(15.2		)	116.6		*
Net income (loss)	66.2		(37.4		)	103.6		*

Basic net income (loss) per share	0.71		(0.41		)	1.12		*
Diluted net income (loss) per share	$	0.69	$	(0.41	)	$	1.10	*


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