Q4 2025 Earnings Call Transcript

Ladies and gentlemen, good afternoon, welcome to the DexCom, Inc. Fourth Quarter and Fiscal Year 2025 Earnings Release Conference Call. My name is Abby, I will be your operator today. At this time, all participants are in a listen only mode.

Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star 1 on your telephone keypad. As a reminder, the conference is being recorded. 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, Inc.'s fourth quarter and fiscal year 2025 earnings call. Our agenda begins with Jacob Steven Leach, DexCom, Inc.'s President and CEO who will summarize our recent highlights and ongoing strategic initiatives. Followed by a financial review and outlook from Jereme M. Sylvain, our Chief Financial Officer.

Following our prepared remarks, we will open the call up for your questions. At that time, we ask the 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 fourth quarter and fiscal year 2025 performance, on the DexCom, Inc. 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, Inc. 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, Inc.'s annual report on Form 10-Ks, 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 fourth quarter and fiscal year 2025 earnings call for a reconciliation of these measures to their most directly comparable GAAP financial measure. Now I will turn it over to Jacob Steven Leach.

Thank you, Sean, and thank you everyone for joining us. It's an honor to join you today with my first earnings call since officially stepping into the role of CEO last month. As many of you know, in more than twenty years at DexCom, Inc., I've had the privilege of helping build the CGM category and redefine diabetes care. But as I reflect on all the innovation and impact we've delivered, I believe we are still early in our journey.

There remains a massive opportunity to help improve metabolic health for our customers globally. And I'm excited to lead DexCom, Inc. into our next chapter. I recently had the opportunity to share my initial vision as CEO and highlight three key areas of focus for our organization. First, we will be the premier glucose sensing solution for all.

Glucose remains central to all stages of metabolic health management. And we still see significant opportunity to improve the experience of glucose sensing. This will include greater sensor accuracy, improved reliability, stronger connectivity, and more. We will always keep pushing to enhance this experience for our customers and further entrench our position as the market innovator.

A great example of this can be seen today with the broad rollout of our DexCom G7 15-day system. As of early January, this product is now available across all channels in the US. And while it's still early, the initial feedback has been excellent. Customers and physicians have been thrilled with the longer wear time, which reduces the number of sensor changes required each month, as well as the new algorithm, which offers our greatest accuracy to date.

We are currently in the process of building greater awareness of this product's availability in the market, and we will be working hard to get G7 15-day into the hands of as many people as possible. Our second strategic priority is that we will set the standard for customer experience. This includes raising the bar for all of our customers. Not only the individuals that wear our sensors, but also prescribers, caregivers, distribution partners, payers, and more.

We want DexCom, Inc. to consistently create experiences that delight our customers and make their lives easier. We recently highlighted several new products and features that do just that. This includes My Dexcom Account, our newly launched digital support system, which is significantly streamlining the customer support experience and saving valuable time for our customers. We also have additional offerings planned as we further integrate AI into this customer experience in the near future.

We are also excited to start the early access launch for DexCom Smart Basal this month. We have always looked for ways to ease customer burden and improve outcomes. And Smart Basal has the potential to become the new standard for any person managing type two diabetes with basal insulin. We believe this personalized dosing module can lead to more accurate basal insulin titration, accelerate the time to reach optimal dose, significantly simplify workflows for the prescriber, and most importantly, improve outcomes for those using our products.

Our DexCom Direct EHR integration, which is now live, or onboarding at over 160 health systems, provides a quick and easy connection to customer CGM data across multiple EHR platforms. This is something that the prescribing community has been requesting for years and we are happy to be the first to provide this in our industry. For Stelo, we recently announced a comprehensive nutrition database that will be launched shortly in our smart food logging feature. Following this update, Stelo can provide a detailed breakdown of macronutrient information for each meal, giving customers a better understanding of how food choices impact their glucose.

We will also be following this up with a completely redesigned app experience later this year, which will offer a more consumer friendly experience and enhanced customer insights. And just last week, we received clearance for a new patch technology that we believe will provide an even better experience for customers across our entire product portfolio. This technology has demonstrated in clinical trials the ability to strengthen sensor survival on our G7 system including G7 15-day. This is the type of customer focused innovation that we need to continuously deliver.

We want to create meaningful, seamless experiences for our customers that drive greater satisfaction, engagement, and utilization. Ultimately, this can also increase customer lifetime value and serve as a growth driver for our business. Our third strategic priority is that we will expand international market share. The core pillars of our international playbook remain the same.

We can drive growth and share through broader DexCom awareness and by expanding CGM access for more people globally. In recent years, we've also broadened our market reach with the expansion of our CGM product portfolio, which can be tailored to the needs of each market and reimbursement system. We now have several examples of how this tiered offering has enabled us to win new coverage, and greater share. We also plan to add to our portfolio in 2026 with Stelo, and a new CGM system in our international markets to expand access to new segments of the market.

I could not be more excited about the significant opportunity across our international markets. In fact, as we look across the evolving market landscape internationally, there is a path for this opportunity to become even larger than our core US market. As you can tell, there is a lot to be energized about as I step into the role of CEO. I am also very encouraged by the way we closed out 2025. In the fourth quarter, we delivered revenue growth of 13%, which brought our full year revenue above the high end of our most recent guidance.

This reflected continued strong new customer demand and encouraging sell through trends as the quarter progressed. We will now look to build on this momentum as we move into the new year. I also want to call out continued progress from our manufacturing and logistics teams which left us exiting the year at an operational high note. Over the course of Q4, we built our inventory toward preferred levels of finished goods, reestablished more efficient shipping routes through ocean freight, and continued to strengthen performance throughout our supply chain.

As expected, this helped us deliver nice sequential improvement in gross margin and drove the expected reduction in the sensor deployment issues that we identified earlier last year. Our team was able to manage all of this while simultaneously preparing for our G7 15-day product launch. We know that first impressions matter, so we have been incredibly focused on product performance and ensuring a great initial experience. It has been rewarding to now see that effort be recognized in the market.

In summary, we have a lot to be excited about in both 2026 and in the coming years. Along those lines, we are currently planning an investor day for May 2026 where we plan to provide additional details on our outlook. We hope to see you there. With that, I will turn it over to Jereme.

Thank you, Jacob Steven Leach. As a reminder, unless otherwise noted, the financial metric 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 2025, we reported worldwide revenue of $1,260,000,000 compared to $1,110,000,000 for 2024, representing growth of 13% on a reported basis and 12% on an 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 twelve months. US revenue totaled $892,000,000 for the fourth quarter, compared to $803,000,000 in 2024, representing an increase of 11%. As Jacob Steven Leach mentioned, we saw sell through trends build over the course of the fourth quarter, which we are now also seeing carry into the new year. This is correlated well with our broader G7 15-day product launch, which has already generated a lot of interest among customers and prescribers.

International revenue grew 18%, totaling $368,000,000 in the fourth quarter. International organic revenue growth was 15% for the fourth quarter. Our international business finished the year well, with particular strength in some of our largest markets, including Germany, United Kingdom, and France. France ended the year as one of our fastest growing markets as we benefited from significant type two access expansion at the end of last year.

This is a great example of our ability to drive growth and market share as broader type two coverage forms across the globe. Our fourth quarter gross profit was $799,800,000 or 63.5% of revenue compared to 59.4% of revenue in 2024. As expected, we drove more than 200 basis points of sequential gross margin improvement during the fourth quarter. This reflected continued progress in our freight expense as we were able to reestablish ocean shipping during the quarter as well as continued improvement in our scrap rates as we strengthened supply chain performance throughout the quarter. Given some of the supply challenges we had in 2025, this demonstrates the dedication and incredible work by our team for our customers.

Operating expenses were $4,683,000,000 for 2025, compared to $451,700,000 in 2024. Operating income was $331,500,000 or 26.3% of revenue in 2025 compared to $209,500,000 or 18.8% of revenue in the same quarter of 2024. Adjusted EBITDA was $422,200,000 or 33.5% of revenue for the fourth quarter compared to $300,100,000 or 27% of revenue for 2024. Net income in the fourth quarter was $265,100,000, $0.68 per share. We remain in a great financial position, closing the quarter with approximately $2,000,000,000 of cash and cash equivalents. Our strong cash position provides us with significant financial flexibility.

This was evident during the fourth quarter as we both settled our expiring $1,200,000,000 convertible notes in cash and repurchased another $300,000,000 of stock in the open market. Even after this activity, we remain in a great financial position. This is also supported by our growing free cash flow profile. In 2025, we have surpassed $1,000,000,000 of free cash flow for the first time.

Turning to 2026 guidance. As we stated last month, we anticipate total revenue to be in a range of $5.16 to $5.25 billion, representing growth of 11% to 13% for the year. This guidance assumes continued strong category growth and incremental growth contribution from Stelo, and new product advancements across our platform. It also assumes that the coverage landscape remains predominantly the same as it stands today, but we will continue to push for additional CGM access globally.

From a margin perspective, we expect full year non-GAAP gross profit margin to be in a range of 63% to 64%, non-GAAP operating profit margin to be approximately 22% to 23% and adjusted EBITDA margin of approximately 30% to 31%. Our guidance assumes gross margin will improve 200 to 300 basis points in 2026 as we benefit from lower freight expenses, additional manufacturing efficiencies, and the growing contribution from G7 15-day. We also expect that gross margin expansion to play through an operating margin expansion in 2026 even as we have incremental hiring and spending planned to support sales, innovation, the launch of our Ireland manufacturing facility late in the year.

These investments will better position us to capitalize on broader global coverage, including our expectation for Medicare coverage for the type two non-insulin population. With that, we will now open for questions. Sean?

Thank you, Jereme M. Sylvain. 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.

Thank you. And we will now begin the question and answer session. If you have a question, please press star 1 on your telephone keypad. If you wish to be removed from the queue, press star 1 a second time.

If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Again, it is star 1 if you have a question. And our first question comes from the line of Matthew Charles Taylor with Jefferies. Your line is open.

Hi, great. Thanks for taking the question. Jake, I wanted to ask you on your first call as CEO to talk a little bit more about some big picture items. You mentioned in your comments that feel like the company is early on the the glucose journey, on the fencing journey.

And I guess I'd imagine a lot of that has to do with the potential coverage to come here in the future. So I wanted to have you talk a little bit more about where the existing legacy and core markets could go in the coming years, but also with an eye to non intensive type two coverage that we could see coming over the next twelve to twenty four months. Thanks.

Thanks, Matt. You know, I really do think we are in the early innings of a game here with when you think about the size of the problem out there with metabolic health and the growth of diabetes globally. And then you look at the solutions that we provide with our technology and the outcomes that we can drive, if you look across every segment of patients that we serve, whether it is type one, type two insulin users, or type two non insulin users, we drive significant outcomes both health outcomes for the user and their prescribing physician, but also financial outcomes for the health systems. And so the awareness of those outcomes continues to grow, and we have generating evidence for years to help unlock the access for millions of users so as you mentioned, you know, as we look at the landscape of coverage, we have started, you know, towards last year, seeing coverage unlocked commercially for type two non insulin users, and we are on the verge of of expansion into the broader group of type two that are covered by Medicare.

And so when that expansion happens, it is almost 12,000,000 people would then suddenly get access to CGM. So that is why when I think about the road ahead and the the durable years of growth we have got, there is just this tremendous opportunity to have an impact on the lives of of many people. And, you know, as you think internationally too, the opportunity there is pretty significant. As I mentioned in my comments, it is we so we see this being larger the US over time.

Now internationally, typically, the coverage trails a bit from the US, but with the evidence we continue to generate, and the awareness we continue to generate, we are confident that over time, this access is going to continue to open and provide opportunity for us to impact more more lives.

And our next question comes from the line of Lawrence H. Biegelsen with Wells Fargo. Your line is open.

Good afternoon. Thanks for taking the question. I guess I will follow-up on type two noninsulin. Jake, based on your response there, it sounds like you think it is coming soon.

The CMS I am asking about the CS CMS proposal. You know, your main competitor is saying first half 2026. Are you in agreement with that? And when when are when should we expect to see the RCT data and and just maybe lastly, how do you want us to think about the kind of potential impact from CMS coverage of of type two non insulin, non insulin? Thanks for taking the question.

Yeah. Thanks, Larry. You know, as we, we we continue to work with CMS, and, you know, actually, as we have been sitting here waiting for the coverage decision from them, actually had the ADA update their their guidelines for type two non insulin and really further moving towards recommending the product for that group and recommending if they have a choice. And so I think that is clearly based on the real world outcomes that we have been generating.

So we mentioned at JPMorgan around the the registry we have started for non insulin users, and that is basically people that have covered today that are type two non insulin users, and at those outcomes, we are seeing great sustained outcome in terms of health improvement and high sensor utilization. And so that gives us confidence that we know that we can make an impact in this population, and, clearly, the the private payers have seen that and have started moving the direction of coverage. And so we are going to continue to do everything we can do to support a coverage decision here with with Medicare, in which one of the things you mentioned is our randomized control trial in type two non insulin users that trial, we are very excited to read that trial out here towards the middle of this year.

And, you know, it is a trial about 300 people. We have got two arms, you know, those who are not using CGM and those using, standard care methods. And we are fairly excited to share the results of that as as we get towards the end of the study.

Our next question comes from the line of Travis Lee Steed with Bank of America. Your line is open.

Hey, everybody. Wanted to ask about fifteen day and, you know, both how we should think about the rollout of that, the impact on in margins, and and also kind of the use of that to to open up new markets. I I heard you mention new products, launching internationally and talking about international getting to be bigger than the US. That is only 30% of your company today.

So lot of international growth there. So just wanted to kinda touch on on those two topics.

Yeah. Sure, Travis. This Jereme. I I can certainly start on the margin side, and and then I can turn over to Jacob Steven Leach in terms of you know, talking about long term opportunities outside the US.

So, you know, as we think about the fifteen day product, you know, clearly in the US, it is launched today, and and and we would expect that to to certainly start to contribute to margins over the course of this year. The reality is it starts to contribute to margins even more in future years because this is a year about getting folks interested, making sure they understand the benefits, really converting a base over time. Start with new patients, and we will convert the base. So the contributions, yes, there will be some some some certainly some help this year, and and you can see that in our gross margin guidance.

The real opportunity starts as you get further out. Obviously, Stelows on a fifteen day platform. G7 has moved to that platform. You can imagine most of our products moved to that platform over time.

And and as as we launch out new product platforms, that is obviously the focus. So you can see where that becomes kind of the basis for launching. And that cost ultimately, it it becomes a bit of an advantage, right, in terms of going into new markets. It is really hard to get into this space.

There is there is really, you know, a few companies that can really produce it at scale. And that scale is how you are able to build the product at a cost that as you move into, say, some emerging markets, where you can take advantage of those opportunities, both wear length and cost, and ultimately delivering the highest quality product within those confines. So I do think it does provide us an opportunity, not only from a margin perspective, but also from the opportunity of expanding and driving new opportunities where there is a fit for need purpose for our product. You have already seen us move to fit for need where you start to see our product portfolio strategy outside the US.

This just helps us continue to drive down that pathway. Jacob Steven Leach, you wanna give some some just thought longer term on international and and what we can do with that?

Sure. Yeah. Absolutely. The fifteen day product wear time, we will be extending that to the portfolio globally.

So we have launched it on Stelo. We have launched in the G7. In the US, we are going to extend it globally. And the feedback from users has been pretty incredible. One note that is important is that, you know, over the time frame that we have had seven in the market, we have made a lot of enhancements to the product and to the technology.

To the processes, everything about how build that sensor and provide it to users has been enhanced. And so the fifteen day product got all of that from day one, so as we launched this new version of G7, seeing great feedback about both the longevity of the sensor, the reliability, but also the accuracy. This is the most accurate sensor we have ever produced. And users are noticing it.

You can see it out there in the blogs. You can see it in customer feedback. They really are seeing that this algorithm enhancement we have made is playing through in their their experience, which is important as we are striving to continue to be the premier glucose sensing solution for all. And so excited about the ability to continue to to expand fifteen day across the portfolio.

And our next question comes from the line of Robert Justin Marcus with JPMorgan. Your line is open.

Great. Thanks for taking the question. Jereme, I wanted to ask on the OpEx guide. You have a 63% to 64% gross margin and when I do the math, it looks like you are getting about a 100 basis points of deleverage on OpEx to get to the the range. So what are you spending it on after such a great year of expense control? What where are you kinda listening the the flow a little bit in 2026? Thanks.

Yeah. It is it is a fair question, Robbie. And and look. We had a we had a really great year this year in terms of OpEx control. In fact, I think Q4 you know, you you look at the spend profile sequentially from Q3 to Q4. Spend is essentially flat. And so, you know, really great job done by the team there.

As you as you roll forward the map, I mean, if if you kinda use it in round numbers, the the goal is not necessarily to delever. I think if you kinda know you gotta play within the ranges a bit to get there, but the goal is not necessarily to delever. The point is is the leverage in the P&L next year predominantly will flow through gross margin. And and the goal is to keep the op margin or the op expenses as a percent flat.

Now what is running through that P&L is the launch of our Ireland manufacturing facility. So we have a facility in in Ireland that you guys are all all aware of it. We are going to be hiring and staffing up. We will obviously be turning on there will be a lot of folks there in training.

We will be running, you know, validation validation samples across those lines. We expense those that happen. So there is a big investment in that in that manufacturing facility. We will turn that on here likely in the fourth quarter of this year.

At which point those costs will come out of OpEx and up into COGS. But as we ramp up those expenses over the course of the year, you will see those playing through. That is what really soaks it up. So, obviously, that is a bit of a one time thing when you are opening up a facility.

Those will dissipate as we move, obviously, to turn that facility on into 2027. Underneath all of that, Robbie, I think it is important to note that because you are still getting leverage it is just there is an investment we are making into a facility though, obviously, that that that investment in leverage will obviously then play through in 2027 and beyond. So we are still getting leverage there. We are still getting leverage obviously in gross margin. The work continues.

Just this year, gross margin is going to do a little bit of the work while there is some I will say, temporal things running through OpEx.

And our next question comes from the line of Danielle Joy Antalffy with UBS. Your line is open.

Hey. Good afternoon, guys. Thanks so much for taking the question. Jake or or Jereme, whichever one wants to take this, I had a question on how you guys are thinking about utilization.

And obviously, as basal ramps, I I I suspect utilization is coming down a bit. And as we do get coverage for non insulin using two utilization will also look different there. And I am just curious as you guys are sort of thinking about not only 2026 but beyond and obviously do not want to front run the analyst day, but even qualitatively, how to think about utilization based on what you know today. Thanks so much.

Yeah. Thanks, Danielle. You know, as we look at the spectrum of users with our you know, the the highest utilization we see in those those AID users type one on automated and some delivery systems, you know, they are they are well north of 90% utilization, which makes sense because those AID systems do not operate without sensor connected to them, and they are you know, the ease of use and the outcomes that they drive are so powerful that that is what we see there.

Type two IIT and non AID

type ones are it is very similar. It is kind of in that 90 to 85% range. And those those utilization rates have remained fairly consistent over time. So we are not seeing much much change there.

To your question around Bazel and and also the NIT users. So Bazel, we have had a longer time frame with those users as coverage opened up a number of years ago. And so that that group has about an 85 to 80% utilization rate. That is actually what we saw in our in our studies, you know, and we have seen it play out the real world, which is always great when you see the clinical trial actually reflect real world use.

And so 80-85% in that type two base. Some of the more recent learnings is from our registry where you know, we we always anticipated that type two non insulin users might not have the same rate of utilization as those type two basal users just because of the the difference in the insulin. They are not taking a dose of insulin. There is not the risk of hypoglycemia.

Number of those things. So we are kind of assume there might be slightly less utilization in that group. In the registry, which is which is this new group of patients that have coverage, for CGM, that are type two non insulin users, that registry is about twelve months old, and we are seeing high utilization rates in that group very similar to those basal when you are in a reimbursed environment. I think that is that is a key we see the best utilization when our patients have coverage.

And so we are seeing good utilization there, and and we will continue to track it. But so far, those rates have remained pretty stable. And it is an important aspect as we think about our expansion globally. And as as we continue to see more customers come on to to the products.

And important also because type two is our largest opportunity as we think about the long term, and so we will keep those in mind. But we are feeling good about what we are seeing you know, as we look at user experience too, there is really an opportunity to drive further utilization as we get more engagement with the product. And so as we make the software updates, we start adding more AI insights to the technology. The idea is can we drive utilization even higher?

So I think that is still a question to be to be out there, but I would like to see it improve even further.

Think the best way to take it, Danielle, is at least back to the models is to think about it as the utilization, the trends have remained the same. In fact, there is work we are doing to make them better. It is just really more about the mix. And as you guys are modeling, by cohort, think about it that way versus utilization by cohort going down.

Just make sure you have the mix right, and and and that should help out.

And our next question comes from the line of David Harrison Roman with Goldman Sachs. Your line is open.

Thank you. Good afternoon, I wanted just to maybe dig a little bit more into the 2026 revenue outlook and maybe specifically around just the new patient dynamic. I think sometimes we get wrapped around the axle on this record, new patient dynamic. That may or may not be significant as we look forward here.

But can you maybe just give us some broader perspective on what is assumed from sort of underlying volume growth at different ends of the guidance range? And what are some of the factors operationally that need to play out that would put you the 13% level, and and what would put you at the 11% level?

Yeah. Thanks. It is a it is a fair question. And and at the end of the day, I know we do spend a lot of time talking about new patients.

At the end of the day, what drives revenue is your patient base. And and, obviously, a key component to that is how many new patients you add, but it is also what you do around retention, utilization, and then, of course, price. And so and so, you know, as as you think about the the puts and takes into next year, you know, think about it this way. You know, we start we start we exit the year.

And I will and I will talk about this in the in the coral, say, G and D series business. We actually are talking about patient base growing at about 20%. Almost 20%. And so that is your starting point for what you would expect in terms of starting point for volumes as you move into the year.

Over the course of the year, our expectation you know, is is we have a couple points of price, and and that has been consistent. Our our and that the the remainder in the delta what I would say is any anticipations around unit volumes would be around mix. And the reason mix is still there, it is much smaller than it used to be. We do still have a lot of new coverage coming on, specifically in the PBM space for for type two non insulin.

And then outside the US, we are winning a lot of tenders in in Dexcom One Plus, and it comes at a different price point. So that mix is still there. And and it will but will come down from from 2025. That mix impact. So that puts your unit volume growth there just south of that 20. It puts you in the, you know, the mid to upper teens, and that gives you kind of presumptions around unit volume.

You know, from there in terms of that, you are thinking about the inputs. We we talked a little bit about this at JP Morgan, so we are happy to reiterate it. We do not necessarily need a record new patients to hit the the low end of our guidance. And you would wanna hit a record new patient to certainly hit the top end of the range and and beyond.

And so that is the way we are going to run the business. Obviously, we had a record new patient year in 2025. We will obviously focus on on setting high targets internally and achieving those targets internally. But that gives you some of the inputs and puts and takes in the guidance. The other piece of the guidance, I think, is just important to note.

This assumes coverage stays predominantly the same. And so, obviously, if things change around coverage, that would change our our patient outlook certainly. And then we would have to kinda give you guys an update as that moves through the year. Hopefully, that gives you some puts and takes.

You are right though, David. The the end of the day, these are all puts and takes around a user base and how that user base grows and moves over time. And that is why it is it is really important we always acclimate everybody with how did our user base grow year over year, and you guys have the most recent update based on our last touch point. So they use the puts and takes and and and any other questions, we would be happy to follow-up with.

And our next question comes from the line of Jeff Johnson with Baird. Your line is open.

Jeremy or Jake, I think you pointed on your prepared remarks about

strengthening U. S. Sensor uptake trends in the fourth quarter and said those continued into the first quarter. Maybe you could just flesh that out a little bit for us.

What was that some of the recovery from the central deployment issues kind of midyear? Was that continued strength in maybe T2 AID uptake? Anything you can point to there and just talk about maybe Jeremy, you also mentioned your installed base being an important driver of growth. Just how stable that T1 and IIT T2 user base has been now as Libre three is starting to launch in the U.

S? Thanks.

Yeah. Thanks, Jeff, for the question. You know, I think as you look at you know, the the we look at what is called sell through trends. And that is that is our way of looking at who is ultimately you know, going to the pharmacy or going to the to the DME, picking up product.

That becomes really important. You know, you can look at other things. There is various other data points we use but we certainly use those as well because that is people actually physically picking up and using the product. And we saw that improve over the course of the fourth quarter and continue.

Now there is a couple different reasons out there, and and certainly, you know, part of it is going to be certainly some work we have done around, you know, certainly, sensor deployment. Jacob Steven Leach alluded to it earlier. We have done some really nice work around that. We have seen our warranty rates coming down and and certainly our complaint rates coming down.

Moving into the year. That is that is exciting to see. It also helps to have launched our fifteen day product. We only launched it in the DME in the fourth quarter.

So that is not necessarily a large piece of it, but certainly, we expect having that new product out there to be a really good opportunity. And then, you know, naturally, as you would expect, as as we get out in front of physicians one, two, three, four times, and and and they can see the coverage landscape changing for those non insulin users. You know, that certainly starts to play out a little bit as well. I think what you are seeing is a little bit of all that.

I mean, all of these things are intertwined. The end of the day, you know, providing a a fifteen day product and all the features and the accuracy associated with great, having less sensor deployment challenges is great. And and certainly having our our Salesforce out calling on folks. All those things really coming together.

So we are seeing that play through. In terms of stability of the user base retention utilization, know, you are kind of alluding more to the retention side. It is been it is been stable. I mean, we have not seen many changes at all.

Over that time frame. Certainly, there was there was a lot of there was some noise. Over the course of the summer, but I think we have been we have been very focused on making sure that we have gotten in front of those and that the experience that folks have when using the product is an excellent one. Jacob Steven Leach alluded to it earlier.

Spent a ton of time really focused on this speaking to patients, speaking to to physicians, speaking to advocacy groups over the course of time, and making sure we are listening. And and to the extent that we do need to make changes, make those changes. All in all, at the end of the day, I think what it proves is DexCom, Inc. has built an incredible product. Built on amazing accuracy.

And and and I think people are passionate about one, using the product and making sure they are getting all the benefit out of it. I think you are you are seeing that as we are getting out into the field. So we have seen that stable. I I I would expect to see that stable moving forward.

Even with know, other even competitive product launches out there.

And our next question comes from the line of Marie Yoko Thibault with BTIG. Your line is open.

Hi, good evening. Thanks for taking the questions. Jeremy, wanted to on pricing. You mentioned a couple points of pricing as one of the factors being some of the commercial unlock of the type two noninformed patient population.

Would you have us thinking about any potential facing headwinds as we think about the Medicare unlock that could be coming here in the next twelve months or so. And most, of course, volume will be an offset. The the amount of volume mix will make a difference, but how would you have us thinking about that in regards to the couple points that you referenced with the commercial? Thanks.

Sure. Yeah. You know, every year, you know, when we go through negotiations, it is interesting. You know, it is it is we are always asking for more coverage, and and and and for good reason.

Right? There is a lot of folks who ultimately need it, we know that we can deliver value really to all pathology. But but, you know, every year, there is it is the classic, you know, volume price conversations, and and everybody goes through it. It has been pretty stable for some time.

As you are so so nothing new this year, but, you know, in the context of how you are thinking about, you know, CMS and you know, coverage and how that unlocks, you know, I I think the the the way CMS at least has has done work around this space is they have done the work around competitive bid. Really, that is where the the the rubber hits the road in terms of how they are thinking about it from that perspective. If you think about how how the approvals work, you know, there is there is there is an L code. Ultimately, that is proved.

And and and that coding applies to where the coverage ultimately sits. That typically does the approval. Pathology approval, it is the is the guidelines, the rules. Pricing is typically handled separately from that.

And so I think what what you have got is you have already got a natural mechanism in place for what is a fair value is through the competitive bidding process, which I we will we will we will obviously work through, and we would expect that to to kick in really here more in 2028. So I think that is at least how we are thinking about it in terms of how that unlock would play out statutorily is maybe the best way to put it. Should something change, we will certainly keep you posted. But at least that is our read on on kind of how the that would play out, and we will know a lot more. Right?

Obviously, we are we are excited about CMS coverage. We we talked about it. We are building for it as we speak. I mean, as we start to build capacity today, we are building to be ready for it as if it came tomorrow.

So that I mean, that is how bullish we are on on on it coming. And so, you know, we will we will certainly give you more more feedback as we go because we we obviously expect it to be a key part of everything we do this year, including, obviously, an RCT readout. Which, again, we will have here in the first half. Said the middle of the year, obviously, it is it is going to be in the first half.

We committed to that, but but as we kinda move here over the next few months.

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

Jason, and Jeremy, I would love to double click on that that commentary on international just saying that, you know, you are gonna you are gonna basically make up think it is about a $2,000,000,000 delta between your US and your OUS business. And I know it is going to take time. But can you talk about you have got a big competitor out there. They have got a huge international business.

How do you do that? How do you close that $2,000,000,000 delta? And I am assuming we are we are just talking revenues and not just volume. How do you do that?

Over what time frame? Is it fifteen years? Is it five years? And and then, Jeremy, what kind of impact does it have do we have any pockets of weakness on the margin side as you are scaling that business that it is becoming a bigger portion of the overall revenue base.

Thanks so much.

Yeah. Thanks, Matt. You know, when I look at the international opportunity, there is two big pieces. Right?

There is the opportunity to continue to within the markets we are already present in. If you think about we have we have established pretty strong businesses throughout Europe and we are just getting started in the Asia Pacific region. And so when you think about just going deeper in the patient populations, you know, coverage across the international markets, as I mentioned earlier, trails the US. So there is really a lot of coverage to still unlock when we think about the international patients.

You know, type two basal is only starting to coverage wins. We got a win in France. We have seen Japan move there. And, you know, we are we are looking towards Germany to start.

We have got some coverage there for basal insulin users, but that is just basal. I mean, there is still the opportunity for NIT around the globe. If you just look at the the sheer volume of patients and the impact that we know that our tech technology can make, the opportunity is there. The key and the unlock is for us to generate the the evidence make sure there is awareness of the evidence, the advocacy from both the clinicians and the patients and basically drive that through each of these markets.

We have been very successful. We have we have basically we have been the leader in driving evidence generation for the unlock millions of lives, and so we are going to keep doing that. Around the globe. It takes work.

Every health care system is slightly different. It is actually reflection of that is in the the fact that we have a a pretty substantial product portfolio outside the US to really meet the needs of both different segments of users, but also the different tiered structures of pricing that we see outside the United States. And so we are going to continue, as we mentioned, to add another product to that portfolio, which will help us expand to that the customers that we do not have today. And so going to be very focused on on driving access and also making sure we have a product per that takes advantage of that access when it comes, and we will be ready.

I think previously, with our focus in the United States, we there was more opportunity outside of United States we did not take advantage of, as you mentioned, that our competitor did. But we are we are going to be ready this time as more access opens. We are going to be there to be the one for for taking the share there.

Yeah. In terms of time frame, it it will take a little while. You know, it is not going to be in the next five years.

And the reason is is we have a lot of bullish expectations still here in the US. And so that is why I think it is really important. We will talk about, obviously, we are going to be talking about it until we see the coverage with CMS expansion, obviously. And we will not stop there.

We will be looking to try to expand into prediabetes and beyond. And so, you know, the US has a long runway ahead of it. As you think about the international markets, though, you know, we are still not in. Tons of markets around the world.

And so the Jacob Steven Leach alluded to the markets we are already in. There is an opportunity to go deeper. There is certainly an opportunity to work on taking share, and and we will do that. And you know, I think we have done a really nice job over the years.

But there is a lot of markets we are we are going to need to go into over the years, and and we have plans to do that. We will talk a little bit more about it in May at at our investor day. But a lot of opportunity with that is not even in our P&L and or in our revenue today. That that we can see ahead of us.

And so and so, yes, it it it is a longer term vision. Absolutely. But when you start to sit down and think about the countries we are not in today and think about, you know, how many folks around the world are impacted with diabetes, and and the coverage that is starting to kick up when we we show up in countries, you can see the the opportunity is immense. And it is really on us to get out there, make sure we get into those countries, and we are in those countries to take share.

So it it is more than five years. You are you are it is fair point. And we will have a little bit more color as we as we get into May.

And our next question comes from the line of Jason with Raymond James. Your line is open.

Good afternoon. I had a question on Basal, which is seems to be the segment of the market that is taken a little longer to evolve. What has been the hurdle to to deeper adoption into this segment? And do you view Smart Basal as a tool to kinda reintroduce G7 to this population? And drive better growth?

Yeah. Thanks for the question. You know, to your point, we we do feel like Smart Basal is a great opportunity for us to meet the needs of of the patients. I think we have seen good growth in basal given the population and the coverage and as we continue to wanna expand that across the globe, we are going to use this new tool.

And and it is really designed to improve the user experience both for the patient and the prescriber so that when they think about a patient who is going to go on to basal insulin therapy, this is the product they should get. They should get a G7 paired up with Smart Basal. And the system, we we are very excited to start piloting that that technology this month. We have got a number of clinics across the United States already selected.

They will come on, and we we would tend to learn from the workflows and how this product fits in seamlessly. To their workflow and and drives the outcomes that both the patients and the physicians are after. Getting to the right dose faster so that they can really see the benefit of that insulin therapy. I think as we we do more of that and we we get the experiences around it, it is going to drive more and more share of of that patient population.

Feel better, Jason.

And our next question comes from the line of Michael K. Polark with Wolfe Research. Your line is open.

Hey. Good afternoon. I have a gross margin question, maybe two parter. So in 2025, I think there were 325 basis points of one timers called out scrap freight and small receiver recall.

If I look at the '26 guide, the midpoint calls for 270 bps of expansion. So not not even getting all of that one timer stuff back and and and also not considering credit for fifteen day, which is starting. So the question is why is this the right gross margin guide? And do you agree or where are we on the scrap and and freight kind of overhangs.

And if I could sneak in one related item just on hardware mix in the US. Excluding Stelo. In 2025. What was G6 versus G7 ten day and by the end of '26, what will G6 mix be versus G7, ten day, G7, fifteen day? Thank you.

Got it. So I will I will I will answer the first one. You know, at the the I think you have a little bit too much math in what I call the O COGS associated with that. It is a little bit less than that.

And so what you should see as you think about the year if you were rolling it forward, is is you will see improvements across the certainly, OCOG. A little bit a little bit of that will spill here in Q1 just because you cap enroll certain variances and obviously, freight and scrap stays in, but there is certain variances as you are getting up to speed. So you just have to be mindful of that. It does not go away immediately overnight.

Because you do roll those in. But but it is a little bit less than the number you have. It is little bit of roll into the year. You will see the improvements play through.

You will also see fifteen day, and so you will you will see those numbers. And and and likely, what you will do is you will pop out of the top end of our of our guidance range. But just just remember, in the fourth quarter, we turn on Ireland. So all of those fixed costs we talked earlier with Robbie about that weigh down the P&L in the first three quarters.

In the op margin side or the OpEx side flip to COGS, and so we would actually expect a decline in our gross margins in the fourth quarter you have a full facility turning on all those costs, but the production levels will be much lower. And so there is a lot of fixed overhead that you will not pick up in cap and and enroll that. So I I think that that at least helps understand, you know, there that is why there is some geography that might help there a little bit. And obviously, the con the converse of that is you would expect to see op op expenses come down in the fourth quarter.

It is all a moot point across the board when you look at op margin. Because it is all geography. But, hopefully, that helps you at least as you are kinda penciling out the year. And then you are thinking about the sequencing over the course of the year.

Just a little bit too about customer base and the products they are using. So we have seen, you know, rapid obviously, declines of G6 users as they have switched over to G7. And so the vast majority of our our base here in the US is is on G7. And as we we have launched the fifteen day actually in December, we start seeing quite a few up upgrades from G6 to G7 15-day. And so we anticipate that that will continue. And and our intent is towards the middle of this year, is when when G6 will really start phasing out and so we will start building in more capacity for for G7.

And our next question comes from the line of Joanne Karen Wuensch with Citi. Your line is open.

Good evening, and thank you for taking the question. Could you tease out what the Cello contribution was to the 2025 results and what is embedded in your 2026 guidance? And any color you can give on how that is going, that would be wonderful. Thank you so much.

Sure. Yeah. So we we talked about a $130,000,000 of Stellar revenue in 2025. And so, you know, kind of at the top end of our two to 3% number. So that is certainly we are happy to see that.

And a lot of great progress over the course of the year channel wise and you know, really excited about the the the new and we we shared a little bit of the some of the pictures at JPMorgan on our presentation, so you will see it up on our website. We have got some new new new app coming for Stelo here in the the coming months. So really excited about that. In terms of 2026, you know, we had talked about it contributing about a point to growth in 2026. So guys can do the math on that.

Obviously, those are big round numbers just given how big the organization is, but again, we still expect it to be a nice contributor to growth. Albeit, the base, you will actually have a base this year versus, obviously, in 2025, you did not have a base to compare it to.

And, Joanne, it is just on when you think about the how it is going with Stelo, you know, as Jereme mentioned, we are really excited about the new innovation that we are bringing. We have a whole new redesigned app. We are launching a new smart basically, enhancing the smart food logging that we already had that now will capture macronutrients and things. But what we are seeing is, you know, a whole spectrum of different types of users start using Stella.

And particularly, one of the groups that we have got our eye on is this type two non insulin users. These are the folks that that do not have coverage for CGM. And so they are using the Stelo product over the counter. But over time, what we are seeing is there is there is a real opportunity for those folks for us to transition them Cello over to G7 as coverage emerges.

And so if Cello becomes a very important part of our portfolio, not just for prediabetes and health and wellness, but also to get type twos access to the technology early and then transition them to a covered product as coverage continues to unlock.

And our next question comes from the line of Brandon Vazquez with William Blair. Your line is open.

Hey, everyone. Thanks for taking the question. Wanted to focus, you know, a little bit on the innovation pipeline, but know there is a lot to be done on the hardware still. We are talking about a G8 and things like that.

But there is a lot of software you guys are coming out with, like Smart Basal. We are just talking about Stellows, meal tracking, things like that. Just spend a minute talk to us little bit about what is left in the pipe on the software side. Like, what else can you do here what else can you leverage the software side for?

And then maybe the kind of follow-up to that is, do you think at some point you need to start to validate these features in clinical trials for them to make more meaningful impact and drive kind of large scale adoption. Thanks.

Yeah. Thanks thanks, Brandon. Fantastic question. No.

We are nowhere near done. There is so much more we can do. On both that you mentioned the hardware, but also on the software. You know, our goal is to be the premier glucose sensing solution for all people.

Which what that really means is that it takes into account all the different journeys that a patient has from becoming aware of our product to a physician prescribing it to the patient onboarding, to them using it and driving the outcomes that are so important. And then, of course, service. In all of those aspects, if you think about that whole journey, there is many things that we can continue to enhance digitally through software. Whether it is for the physician or for the patient themselves, to help them onboard faster.

So really our our goal is to remove friction, to remove any kind of speed bumps so that they get the experience that is the highest caliber. And so trying to develop the best solution plus the best experience, and we do feel like over time, that is going to be the winning formula because you have got folks that are not only seeing the outcomes, but they are also sticky and staying and retained and having a wonderful experience for many years to come. Basically increasing the lifetime value. You know, driving those outcomes, as you mentioned, is very important for us to run clinicals and or generate real world evidence that shows the outcome of how those new features do actually drive outcomes.

And we have we have done that, you know, basically through all the different patient segments. We have done some recent work with real world evidence type two, but even things like our delayed high alert, which is an innovative feature that is built into the product that basically delays the high alert and it it has clinical outcomes associated with it. And so that is something that as our Salesforce gets out there, and talks to physicians, they can talk about the difference that that the competitive difference that we provide in the outcomes that we drive. And I just one thing I wanted to mention is our Salesforce is so fired up right now based on the fifteen day and all the enhanced we have made and all the enhancements we have coming.

We are really looking forward to spend some time with them at the national sales meeting in a couple of weeks, but there is so much more we can do. And I cannot wait to show you guys over time all the innovation that we are going to bring.

And to your question, the whole clinical, you know, validation of features, you know, I I think the you know, for example, I mean, most of these that is exactly what you do. Right? I mean, you think about Dex Bazel, that that their SmartBasel that goes through, obviously, a 510(k) clearance US, o US. So just just think about all these features.

They are all going through the appropriate clinical pathways where appropriate and where where where meaningful. So expect us to continue to do that, but also expect us to look at new and novel ways to navigate technical features into the hands of users over time and work with the administration on how we do that. And then there is obviously a lot of coming out now about how to bring innovation quicker and Jacob Steven Leach's team is teed up to do just that or the R&D team is teed up just to do that, is to bring innovation quicker and quicker and put it in the hands of users.

And our next question comes from the line of Joshua Thomas Jennings with TD Cowen. Your line is open.

Wanted to ask two parter on G7 fifteen days. Sounds like the early patient experience has been strong. Great durability with the centers lasting out to to fifteen days. Just wanted to see if there is any more color on on any or any data you have just on that durability of where and and does the patch that you just got approved, the new adhesive technology, maybe improve the percentage of sensors that get out to fifteen days, out into the 90% range.

And then, I guess it is a three parter, but just any any rebate dynamics that we should be thinking about in 2026 as G7 fifteen day enters the pharmacy channel. Thanks, Ruth. Taking all the questions.

Yeah. Thanks, Josh. Yeah. Sensor survival longevity, as we call it, is is a super important part and super important part of CGM portfolio.

And as we extend sensor wear, it is obviously something we look closely at. And it is actually the the our goal is to ensure a good user experience so we are we do not unlock that extended life until we are confident in its performance. And so, in the field, what we are seeing is very consistent across the patient spectrum with what we saw in our clinical studies. Now we recognize that, you know, from very early days of CGM when it all when our first CGM only lasted three days, not all sensors last, and often, it is as as you mentioned, related to adhesive.

And so we have been driving adhesive innovation for several decades. And with the new version of the patch for G7, we are excited that it it it does drive a pretty meaningful improvement in survival, and we will put it across the whole portfolio of Dexcom OnePlus and Stellows so that all of our patients get get the benefit. So it will continue to drive drive that performance. For any sensor that does not last a period of time, we have a very robust program that we continue to enhance around how to ensure patients always have the sensors they need because we know how important this technology is to all of our users and the benefits they get from it.

So that goes back to that the idea of setting the bar for service and and being the the the gold star there. We we are making investments there. We are continuing to enhance the way that we handle those types of situations to ensure our users get the best experience.

Yeah. And then just your question on rebates. You know, the the there is two ways to think about rebates. One is what is the rebate rate and what is the net price?

And then the second piece is is how many folks select you know, the the the the, essentially, the rebate rate. In those plans. The rebate rate in terms of, you know, the the the the pricing slotted right into the G7 ten day. So effectively, G7 fifteen day, G7 ten day are effectively the same price.

So that for for a month supply, think that is important. So effectively same same revenue per per per month. On the flip side, in terms of utilization, our expectation oh, not utilization. Select or, yes, inclusion into that rebate catalog, our expectation is 100% of all those sensors.

So, you know, sometimes you you start at 96, 97, 98. Now, you know, you move up those areas. Someone folks you know, some say not preferred or or not covered. Fifteen day essentially is slotting in right where G7 is. So we are at 100%, a percent.

We should not see any changes essentially in rebates trends as a result of moving over fifteen days.

And our next comes from the line of Richard Newitter with Truist Securities. Your line is open.

Just

simple one for me. I just wondered if you can comment on revenue cadence at all specifically the 1Q, but but anything else throughout the year. I think Street said about a 6% sequential sequentially lower 1Q versus 4Q. Is that, you know, is that a reasonable place and way to think about it or anything else you would call out?

It is it is good good question. Fair question. You know, I think cadence wise for the full year, you know, our expectation is continuing to see a little less into Q4 and a little more into Q1. And it just it it is a slow evolution over time, but as more and more goes to the pharmacy, and less and less goes through the the the DME commercial part of the business in terms of at least the total patients. So still both good businesses.

You you do not have that stocking dynamic you typically see in house in the fourth quarter where someone tries to maximize benefits. You still have that. You still have a decent sized business, but it is just less of a percentage of the business. So the expectation is, obviously, Q1 is a little bit higher than than typically in Q4. I would say last year, we talked about, you know, Q1 being, you know, a seven to 8% decline, and we came in closer to seven in that range.

I would say this year, we have been talking oh, we talked about this at JPMorgan. On stage. We we think it is a six to 7% decline. So I think the street is a little bit is within the range probably at the higher end of that range, but but not far out of it.

It is a pretty it is a pretty safe place to be. Six to 7% sequential is about what we would think, and this is a little bit less seasonality this year than than last year.

And our final question comes from the line of William John Plovanic with Canaccord Genuity. Your line is open.

Hey, guys. It is Zachary on for Bill. Thank you for taking the question. So I guess back to the G7 non intensive type two.

So in the past, you say, know, right now, we have 6,000,000 covered lives, and we can get to 25,000,000. You said Medicare would be 12,000,000. So just where do we stand today? And then you know, and just, I guess, explain what I guess, the cadence of covered labs could look like. Thank you.

Sure. Yeah. So you are really you are really thinking about the the commercial side of the house. Obviously, the Medicare side of the house will start with fee for service, and then you move into Med Advantage.

So, you know, it will go Part B then into Part C, and we can talk about that as it as it comes. But that should happen pretty quickly. On the commercial side, kind of the side, think you are more alluding to in progress we have made. You know, we talked about 6,000,000 lives.

It was the three big PBMs, and and we talked about knocking down, you know, some additional plans, etcetera. I I think the expectation is we have knocked down you know, another percent of that market over the course of renewals this year. But that will continue to take place. We you will keep working that.

It does not have happen just annually. It is something that we will continue to do. Over the course. So that would be, you know, individual plans, kinda smaller PBMs, PBMs on custom formularies.

We got another good chunk of it, I think, but, you know, we will keep chipping away at that. So it puts you at maybe 6,500,000 of the 12 and a half, maybe a little bit higher than that even. But we will keep chipping away, but that is at least the updates. We have a few more in there that continue and you know, I would I would expect to give you updates over the course of the year as we we keep chipping away and and try to get that to to full coverage over time.

And that concludes our question and answer session. I will now turn the call back over to Jacob Steven Leach for closing remarks.

Thank you, operator, and I would actually like to take this moment to thank our employees around the world. This past quarter and, frankly, this past year demanded focus, resilience, teamwork, and our people really delivered. What what makes DexCom, Inc. special, it is not just our technology. It is the people behind it.

Our team's commitment shows up our execution. And in the trust that millions of people place in DexCom, Inc. So on behalf of the leadership team, and our board, thank you to our employees for everything you do. And thank you all for joining us today.

We look forward to updating you next quarter.

And ladies and gentlemen, this concludes today's and we thank you for your participation. You may now disconnect.