DexCom (DXCM) Beats on Q3 Earnings, Raises Sales Outlook

DexCom, Inc. DXCM reported third-quarter 2023 adjusted earnings per share (EPS) of 50 cents, which beat the Zacks Consensus Estimate of 22 cents by 47.1%. The company reported earnings of 28 cents per share in the prior-year quarter.

DXCM registered GAAP net income per share of 29 cents, up from the year-ago quarter’s figure of 24 cents.

Shares of DexCom rose 17% in after-hours trading on Oct 26, following better-than-expected quarterly results. However, the stock has lost 28.4% year to date compared with the industry’s 15.5% decline. The broader S&P 500 Index has moved up 10% in the same period.

Revenue Details
Total revenues grew 27% (26% on an organic basis) to $975 million on a year-over-year basis and beat the Zacks Consensus Estimate by 4%. Strong revenue growth was driven by rising volumes on the back of increasing global awareness of the benefits of real-time Continuous Glucose Monitoring and strong customer additions.

Segmental Details
Sensor and other revenues(90% of total revenues) increased 31% on a year-over-year basis to $873.8 million. Hardware revenues (10%) decreased 2% year over year to $101.2 million.

Geographical Details
U.S. revenues (73% of total revenues) increased 24% on a year-over-year basis to $713.6 million. International revenues (27%) improved 33% (30% on an organic basis) year over year to $261.4 million.

Margin Analysis
Gross profit totaled $623.3 million, up 26.1% from the prior-year quarter’s level. DexCom reported a gross margin (as a percentage of revenues) of 62.7%, which contracted approximately 30 basis points year over year.

Research and development expenses amounted to $131.4 million, up 19.1% year over year. Selling, general and administrative expenses totaled $284.7 million, up 21.4% year over year.

The company reported total operating expenses of $417.8 million, up 20.5% from the prior-year period’s recorded number. Operating margin (as a percentage of revenues) was 21.1%, up 190 bps year over year.

Financial Position
DXCM exited the third quarter with $3.24 billion in cash, cash equivalents and marketable securities compared with $3.64 billion in the preceding quarter.

Total assets amounted to $6.6 billion compared with $6.82 billion on a sequential basis.

2023 Guidance
DexCom raised its guidance for 2023 revenues and also raised its adjusted gross and operating margin outlook. The company now expects revenues in the range of $3.575-$3.6 billion, implying 23-24% year-over-year growth. The Zacks Consensus Estimate for the same is pegged at $3.55 billion. Previously, DXCM expected revenues in the range of $3.5-$3.55 billion.

DXCM now expects an adjusted gross margin of approximately 64% versus 63% previously. Adjusted operating margin is projected to be approximately 19%, up from the previous guidance of 17%.

DXCM also announced a share repurchase program worth $500 million.

Wrapping Up
DexCom exited third-quarter 2023 on a strong note, wherein both earnings and revenues beat their respective estimates. Impressive contributions from the Sensor segment, and domestic and international revenue growth were the key catalysts. Moreover, the expansion of coverage for CGM systems during the quarter supported growth. This trend is likely to continue for the rest of 2023. The availability of new sensors like G6 & G7 in new international markets is also boosting revenue growth.

Additionally, the glucose monitoring market presents significant commercial opportunities for the company. DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it with a competitive edge in the MedTech space.
Apart from making continued advancements in terms of its key strategic objectives, the company continued to have strong new patient additions in the quarter.

The expansion of gross and operating margins buoys optimism. However, cut-throat competition in the market for blood & glucose monitoring devices remains another concern.