DexCom (DXCM) 27 Feb 182017 Q4 Earnings call transcript

Company Profile

Participants

Matt Dolan	DexCom, Inc.
Kevin Ronald Sayer	DexCom, Inc.
Quentin Blackford	DexCom, Inc.
Steven Robert Pacelli	DexCom, Inc.
Michael Weinstein	JPMorgan Securities LLC
Jeff D. Johnson	Robert W. Baird & Co., Inc.
David Ryan Lewis	Morgan Stanley & Co. LLC
Alexa Desai	William Blair & Co. LLC
Kyle William Rose	Canaccord Genuity, Inc.
J. P. McKim	Piper Jaffray & Co.
Danielle J. Antalffy	Leerink Partners LLC
Matthew Taylor	Barclays Capital, Inc.
Steven Lichtman	Oppenheimer
Jayson T. Bedford	Raymond James & Associates, Inc.

Call transcript

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Operator

Welcome to the DexCom Fourth Quarter and Full-Year 2017 Earnings Release Conference Call. My name is Darryl and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. the to turn Dolan. now would call Matt over I Matt, begin. you may

Matt Dolan

CEO; fourth welcome Kevin earnings and and Executive Quentin and President Corporate you, Executive Chief Strategy quarter President Sayer, Pacelli, of Vice to President Blackford, is Thank Development; today Financial DexCom's XXXX Officer. and our us call. DexCom's Vice our Steve and With

to one that We up for call so then open time, will provide for will we the an begin and with with I everyone our prepared Safe one limit can we participating analysts questions. Harbor statement. follow-up will remarks At question our and opportunity your begin today.

of after statements law, date required forward-looking Securities statements results. assume statements annual no implied date future reports presentation will we forward-looking conform plans the operating factors made actual those detailed those or differ strategies, these The uncertainties, performance. on of XX-Q results and the subject to statements and by Form reflect to the this competition, as on obligation various any All to beliefs statements could Exchange by report DexCom's presentation materially are currently and of results Commission. Some DexCom forward-looking and hereof in actual any forward-looking included with forward-looking today's forward-looking about materially call that intentions, are make statements. expressed statements. in and that available in events, These actual on Form update may such or the to of constitute differ we are products, management's quarterly based from Except to the these cause could statements XX-K, this risks filings as expectations information anticipated in and and other to from

certain Please GAAP. not considered this website respect to it The or Investor that our a GAAP in information Additionally, should to measure. as a Relations and release to financial during not directly our earnings in results prepared with be or results of to additional call their our turn results. presentation will have reconciliation of in with accordance substitute for Kevin. been of measures non-GAAP discuss tables we that, the cash-based to in isolation With refer GAAP financial the I'll for comparable with over in prepared the these measures most accordance portion superior

Kevin Ronald Sayer

done non-intensive update intensive on first things us along pilot real-time finally, population. with review product with on generation support several We're essential in CGM under to our joining before Type for of introduction as Medicare which provide published number initiatives. going saw provide important little year-end DIaMonD important in an a international an our clinical I'll was and a financial calls. next to you today. followed for pass diabetes the another evidence for ever who things GX, business the to our and of tool initiated and outlook Thank Q&A. open by the made United our we've expanded results significantly the we've we X several I initiated Steve other as FDA, best including meaningful States, to studies, for rollout will landmark our is DexCom, all an to our which using DexCom progress our had experiences with Quentin call on insulin our bit review, system the the population pipeline, with presence, differently achievements the now provide will by do previous study patients, than we conclude on thoughts up of XXXX our key year defined strategic then a my we it

the saw quarter a also am our performance Our very XX%. build momentum our report international commercial XXXX, we the by XX% as more in of than at pleased sales year growth where year. led last business I revenue we with accelerated grew growing strongest was in business, the exited quarter year, and with including strong the financial which of solid XXXX growth XX% U.S. that growth revenue quarter for year, to the full of realized its fourth

the second of expense team half at our of expenses the Our less XXXX. than Consistent rate compared also the good XXXX. demonstrated grew of P&L revenue control improving growth with a in with back of half second operating to half plans, our half

initiatives for on moment, this but a look strategic call over a believe ahead, position our programs Quentin global review will now in we're and to forward. slated very we financials. we with year key later More I turn of these a solid As launch for moving multiple major a product in the

Quentin Blackford

business, Thanks, driven in U.S. reported the our revenue million DexCom by fourth compared ramp XX%, increase of the quarter-over-quarter quarter our for XX%. quarter record strongest XXXX, greater-than-anticipated of U.S. our business up a by business. resulting our increase growth quarter commercial for XX% of of to revenue in Sequentially, million with of a the fueled XXXX Kevin. and Medicare in year the $XXX same $XXX growth was in

business alluded revenue the DexCom's the rate at the we And the were of in the fourth posted year-over-year. business, U.S. while still year. pleased see another in quarters we year-over-year out to, the distraction of demonstrated given Medicare Kevin are quarter called of in and increasing pickup XX% XXXX, As to the XX% early solid growth growing commercial U.S. momentum in we OUS first significant three our had ramping stages growth the

compared of prior the the generating of XX% Our fourth same in was a quarter margin margin quarter million, profit in XX% gross year. gross gross to a approximately $XXX

XX%. For margin year, the full gross was

within geographic resulting business impact of our revenue on press our gross in mix weighted more performance towards positive provided QX tables margins. was heavily the a given we release, As stronger-than-anticipated U.S. the our

quarters, earnings bundle, while $XXX product of and rollout reductions to to, of pricing favorable the transmitters an recent the for revenue QX million with we for our for the international initiatives margin and accelerated year-over-year, that in was the which half totaled XX% lower leverage Most fourth of impact approximately opportunity which prior This to some XX% marketing, same sales, up up our our year. of QX reflects primarily quarter, OUS expansion our was are XX% one, profile. for financial period our spending two, demonstrates and by EBITDA, Adjusted expenses $XXX a half receivers of was key addition, growth revenue sensor rate the realized of initiatives upfront pricing potential saw QX having increase encouraging was sensor from compensation Medicare favored a consistent the In Average mix due invest nearly some and of the in Operating direct-to-consumer compared pipeline. and our in business and cost over the cash only our the markets. time. and is excludes share-based of good growth, including million continued R&D rate XXXX. more the proxy while

thereby that the loss recording had our loss tax of realized in tax GAAP share. taxable an million offering. be with loss GAAP or in loss anticipated recording benefit. reversal net the a position the associated our was we benefit company resulting the the in tax by of tax convertible time $X.XX was QX, net Our Included second the per net in the would driven tax expense a notes million quarter expense. At year, benefit $X was we for in This $XX

in well As tax ended benefit. foreign reversal finish previously-recorded profitable we the a IP our as jurisdictions, to the international tax a strong result into associated year the of the year, resulting as with the position in migrating business of

tax line well The non-cash expense most balance capitalized the credit net income the million in with QX earnings $X entire $XXX of per million $XXX quarter our history. We our and was representing million revolving share end at $XXX the year in the QX, sheet of Excluding or non-GAAP the remains in cash ended equivalents $XXX end million $X.XX, at on and million available. versus of of XXXX. profitable

to with to XXXX, expect this international upper gross to mid approximately the our expected sensor we to outlook by total increase provided initial all base our and comfortable for to with revenues volumes, and expenses ahead expectation January margin of remain faster growth operating in our we and than early million Looking million $XXX to $XXX continue patient revenues. grow core XX%. year We XX% anticipate

with As any associated additional we ramp our which noted programs, are this spend beginning to non-intensive this previously, excludes year.

U.S. For resetting the deductibles sales to the first our would expect be in health we investors seasonality with update. insurance strategic that Therefore, and decline over turn quarter, consistent remind year years within of in anticipate will more primarily would we that, to the of due XXXX I the our first sequentially, annual the With to quarter. XX% will generated call than the revenue for several Steve no a like past be the that

Steven Robert Pacelli

Thanks, Quentin.

would strong Early differentiated making are results data at highly systems. progress very and significant what available. Both time we DexCom presented Tandem Our in systems will once collaborations. for with demonstrated and very invested be systems integrated pilot improvements We range. partners commercially market delivery their insulin of heavily insulin believe automated each including and strong leading these to remain be outcomes, these they're ATTD Insulet

which in-human Lilly, pen forward integration, nicely is experience. Eli smart recently generate saw with also collaboration recently-announced pump is first to and Our and moving intended both

expect to when and integrations market drive We and pump to continue other smart pen update appropriate. the

Verily with currently a moving non-intensive development is with system opportunity, generation to the the CGM system ahead development real-time expected fully Turning to complete first this year. of disposable

a of calibration have the is with timing stated of we launch previously, strategy including product regulatory this our As factors, number GX. no contingent on

non-intensive into is Our to saw members products market. our of diabetes smaller new their generation device this the pilot expansion now and of announcement we many the system United actively you DexCom, are initiation enrolling introduce our for this effective cost CES well-suited the and activities At These management our program. in XXXX. of in in for opportunities segment multiple in including the are and with taking shape are of more Healthcare January, second optimistic ability

the this the As better allowing ability patients component we've immediate diabetes. health CGM action. program drug Type prior provide economic program And take for of of critical to we this still developing data management a market, connected clearer. will be couldn't both and therapy to early in benefits real-time the their of calls, and to impact The is in ability people need management and see and the with be behavior drive of the in are non-intensive outlined although caregivers X goal the

impact they our hope those following we believe of care room. be a we With a who as I end aged this visit next that our to For these likely pass how and example, with were people improve roughly ER, published have and study pilot system. of and the over had diabetes earlier XXXX. XX twice CGM ability patients emergency aged manage hospitalized We health the almost technology, fundamentally the XX XX% indicating along how enroll With the United was to XX both month, to to the diabetes Kevin. to fully it that, their by patients to evaluate will steps and visited

Kevin Ronald Sayer

pleased in I our with team's very you, Thank am performance guys. XXXX.

our preparing beginning in a XXXX. record Our accelerated for in were after revenue all U.S. breakout solid future. in our are Internationally, a had we our maintaining business growth year and And commercial while from and levels. at perspective, patient team significantly expanding financial we seeing additions the leverage P&L, QX OUS

our generation the with balance was look eligible consistent clear standard by diabetes increase data. is spotlight in me ability therapy in ATTD and in Vienna As Medicare it in More in or creates for or for opportunity standard ATTD, on competitive Nearly to next primary of significant years. presentation DexCom earlier month, suffering advantage non-intensive several a is as move penetration we that every to broadly, believe measurement are And opportunity. to device positioned throughout theme people was rates on simply the a in global the therapy. capitalize buzz patient diabetes a data, become platform, the focus Leaving MDI of or opportunities, low, take the another remained fueled whether the and strong this next this clinical a is very session our effectiveness a well robust around environment the strong we and patients. was pumps, with early we of very, as this efforts CGM Considering scientific into drug we move for CGM should process to XXXX, all CGM new to for with of part drive it population. to of patients interest DexCom DexCom we the to included CGM

no a be to productive the will GX year calibration with introducing we continue it believe midyear. goal Our and by FDA interactions we the platform with launch this globally of

to potential like haven't experienced for these experienced of well. an than more Our but opportunities, pricing past. anticipated the in activity, as J&J prior in including The the Animas accounts also competitive impact the evolving potentially marketplace, and business, pressure decision transition outlook important reflects we by pump we've periods

to product turn update. pipeline I'll our Now

As surrounds set our improvement XXXX I of The step a available this GX with CGM currently the in is represents mentioned, our launch biggest next function priority from of generation performance and diabetes. feature system. to people what platform

build alerts We have soon and reduced to-date from We on acetaminophen. foundation patients patients and calibrations simplified a favor consistency like we offered CGM including with a by of DexCom's data have excited improved important ease-of-use form reliability, no performance the improved its the this are seen because characteristics, with real-time suggests a factor. know XX-day better drugs to wear, And will accuracy, applicator, enhancements connectivity one that and GX. from interference no and day benefit

for leverage we advantage of Beyond The IoS allowing upgraded continues resolve tick share take and hope make this patient know We with expanding to to app and the offerings there to driving increasingly core mobile system, would other Medicare using offer to We to devices. valuable great we're the we of next number to the continue convenience real-time in to and our system. and the We remain with we I and our solid in be Android continue to to to advantages our the months. in also open function. able DexCom's app. schedule, becoming patients Android, on devices option six wearables. both in the had customers Apple call CMS now in off surrounding to mobile summary, connectivity XXXX. mute the start a to are continues like Matt? Wearables up a wear important Q&A. discussions alert them to questions be up year of apps Fitbit and customizable with a our the recently In our Watch, finish access their there and and strides override

Matt Dolan

Thank Kevin. you,

to Operator? to themselves only a follow-up. our reminder ask we Q&A question audience the provide As instructions. limit one Please and complete one

Operator

And our you. your Mike JPMorgan. first Weinstein is Thank question with from question. from Go ahead

Michael Weinstein

quick Two questions. guys. afternoon, Good Hi.

second may be one quick. The less

the so the I pre-announced, better And just to historical relative from? did the second, is question you difference come several first in that first could to where on year-over-year XX% fourth you that first sales in familiar The is in the noted the then last came you first guidance implies pre-announcement, the your you're highlight than the if you really the commentary. of quarter XX% quarter in come versus percentage But quarter of years, XX% have did with the quarter. growth obviously.

to $XXX $XXX versus million. know implies Street's You it million $XXX million The revenues

you more in could color on step-down much maybe business? and you're What XQ? today guiding that growth XQ shed the revenue just seeing Thanks. you're does what why So as to to drives from as some

Quentin Blackford

Yes, Mike.

Quentin is this So here.

just we deliver of respect ahead January. ahead but wanted to business. it certainly particularly weren't going had where We had us number, to We Medicare commercial in and QX, that to strong, was early, you U.S. was sure the we very to I arms felt ourselves knew but come that felt the as business. to the where particularly knew our way there. not strong, weren't the in of issues I JPMorgan the conference. going that on went sets together, business obviously make that's we approached about We with we good in very very into all that think on get quarter was JPMorgan be know, going able and of the we like said, And ourselves, around we'd that get confident up were we to

U.S. and the but than were as saw a points saw. business we commercial yet from With and in out we XXXX trend. to that's year in the in that in play to or momentum seen, uptick quarter have a about We majority of The the not things upside commercial keep that was QX came the historically sequential out stronger well. a the we're what year, one into Again, couple very all that against we're back business, of you particularly mind. in X So Again, there. of position happy with seasonality, anyhow that the the QX what it I majority the last to we've quarter it into of of respect call think the part came the

respect get going ahead with that to not we're to either. ourselves of So item

can way it the looked QX just year you historically in XX% the momentum out roughly continues, that's at going if the XXXX at and for can of think point be particular you ourselves to thinking look about that go no and be position, this is navigate and every we great ahead then need about we're I but is time. way about to to If again back think a here. in we're it seasonality of well

Kevin Ronald Sayer

is we year, been add they've that, away awareness call, anything this We've This I'll on early a very good haven't just good. has very, gone our Kevin. interest deductible bit if Mike. Yes, to very plans as said had, increased. high

make it first headwinds to are quarter and no have And well, things and tougher really hit the the reordering high before. year than it's because plans but every so encountered been these different gone it deductibles have those even deductible we've do patients they in has for

this we'll Quentin as after and little there. from while wait is see a go and trend if a said, So

Operator

your with ahead And our from next Jeff Johnson from question. question Baird. Go comes

Jeff D. Johnson

you, guys. Thank

question here the So just on little quarter first guidance. on bit maybe Mike's I a could build

your two U.S. I in launched weeks Libre of has what bit quarter? as especially in question are to the last you Obviously weeks into X the or competition months business, a over the commercial just here has increased part first seeing here the guess First so XX U.S.

comments the where So months. any been over just commercial can of of have wondering you quantitative provide qualitative U.S. on trends or couple kind last even

Kevin Ronald Sayer

the is run Kevin, up no me has it, comment campaigns seen of Make they've one. the ad. I'll people Sure. This business our on Many quarter awareness tremendously. I that mistake in tell about ramped DTC Increased into our year. helped DexCom a first

increased our I've number that made hey, say, by difference we're So On we referrals. of of Well, top large generated us go and as awareness CGM reaching physician definitely between been have see patients well. do the people. the and know technology being are you need? of aware I systems getting When what and competitive a competitors the physicians

manage we But first we expectations and pipeline good we the opportunities how can. the run the to sure quarter thing the into in first are patient new pocket patients been of my get of Where have is, every now quarter right response So and on and this U.S. for same outstanding. those as good has year okay, demand out of make we we best run very is those very much we into seeing

story likely they well, markets The piece start as those and in the our other in things than to do business that per as quarter that in told revenue patients, starts quarter earlier. thing bigger in we first first than of are quarter lower more the first traditional a our as a Medicare a blend our so quarter all patients just to first and commercial those we of remember, grow kind have European lot our as of the new patients again

Jeff D. Johnson

you in talked that follow-up offering. helpful, wanting in on on secondary investment a on company is in the you Thank question secondary? looks a but direction? seem else you maybe That's first investment then this pump Or not just to to their what of I past buying about passive you. wondering kind right. I my the All here guess the own some bought drove And their tandem recently know shares step like make but investment, just

Steven Robert Pacelli

to I'll that Steve. a as This not should by is by Street take Jeff. No, first viewed any one. stretch. an step The acquisition be No, this

answer to that to to not the by to Tandem, to still committed In question of we're fact, committed keeping Lilly, I would partners, confidential. Insulet, saying all others we're our extraordinarily pump we're committed we're we're just start committed

Like Tandem's at we our launches it would So, really the to a a we no, capital of enough market believe the a of sufficient where participation it significant they they day, if I became during participate sort with how be couple discussed and influence with and no that technology, brainer. of amount to the get we Tandem, our than we to end have that when clear that that's raised place that capital agreed can our willing exiting they raise Animus going mean, product happened. might were to incorporate it discussed offering, more became of really a new offering what

Kevin Ronald Sayer

I one system system ATTD I said great saw the very we closed was and to with would add going other as at to as many data from their that finally that diabetes it It me, it's this same at very, think saw and stuff in and We said produced very is time person one looked their data a very, were, Insulet, the that well. data thing work. Europe others like comment long we saw with time. data the good he as compelling believe just were loop we and we

So loop we're closed we're see beginning to have and out going automated delivery to some some there. that solutions insulin

for great both too. us are of those So events

Operator

question next your Go comes Lewis our ahead David from Morgan question. Stanley. And from with

David Ryan Lewis

Good afternoon.

ones of couple quick a Just for me.

marginally down was was (XX:XX) hardware just think, you tied, I and it ex-U.S. obviously mentioned some in that I talk just was the Can about called or sequentially. new very strong, out this was that ex-U.S. business And think remarks. particular So flatter your quarter? strategies U.S. the

driver here number think And the XXXX quarter fourth we sequentially? how light in that of So was about should principal ex-U.S.? the

Quentin Blackford

Hey, David. It's Quentin here.

up continue something have the in about. excess XX% if growth But more bit to to there get direct distributer And in fourth business our lumpiness business So, nearly a not that obviously, that it, in very the direct through details the you year-over-year. that to business international distributors, be we pleased is than what you seasonal the is continue we into of be there Growing and the we with end quarter business. all XX% momentum finding it in have the is happy continues of was as of and has part business.

So nothing there that us. concerns

continue into We we what both But the encouraged of direct the from very read distributer perspective. nothing be to see that to by the on business. and side

If for be about think you XXXX, a year. course the international is growth going to of to continue the over driver us

in going growth there's you're continue drive corporate X% penetrated you So far there. of I overall to less us ahead lot in to overall so growth to than just average. runway to of that see excess would probably of the a continue we're marketplace, remind

David Ryan Lewis

helpful. Very Okay. on the back Then market. U.S.

Medicare Just commentary.

share to expense last the ask patients you, the I Can numbers? mentioned for forgot jump of Can for Thanks for sorry, I'll quarter spending about kind range And queue. think in Quentin. the us you call, think quarter, third so much. those can on United I X,XXX number you And you the processed, any XXXX? in backlog. update we XX,XXX back XXXX.

Quentin Blackford

Yes.

real So the I'll quickly. spending take number

excluding course into revenue. of be finding to nearly spending, the the of drive some been see again Type the over in out that ways efficiencies started half XX%, you doing or You fourth core the done company that see this we've very year has in quarter. the know, great that of then a business, leverage really roughly XXXX. up X quarter, is And next non-intensive in business And to our the committed you'll job investment, core rate the play to will and what in third

put this not plans time based frame in to So in kind growth hold of I would at on had it point way But upon between are I that $XX back the With where programs, it. and million $XX invest opportunity our this to the time, we're already to say we future But the in incremental to of think really heads we the point see at is here. up place. going at same respect drive the at. time, what company. right with We're the in company non-intensive probably know. to continue to this somewhere that's the going do million We

repeat again, Or that question, first The one? you it? do have

Kevin Ronald Sayer

the patients were to it. that I've our a Medicare; interested. We valuable got wanted about We're had and It an the let you not details lot pipeline a going into versus and anymore. go commercial to was many Medicare out everybody did robust, We know remains going pipeline processed it we break not pipeline. talked No. Medicare and we're of of but revenues door. ongoing pipeline Medicare out patients as The the get to thing.

Operator

your comes And from William with from our next Blair. ahead question Kaczor Go question. Margaret

Alexa Desai

guys. Hi, is actually Margaret. for me This Alexa in hear Can you okay?

Kevin Ronald Sayer

Yes.

Alexa Desai

Perfect.

spend year. focus to pruning Are And Medicare? relationships, and relative where patient how the is (XX:XX) intended spending think throughout existing this So to going on force they adds, should to my first presence force more sales question is sales actually about year. sales focus and marketing the team on we the commercial digital

Kevin Ronald Sayer

force. sales force U.S., the we this expansion year that last our commercial of on year we the feel is I got This expand with had one. not with inroads feel can sales the called it's in regular last from we We that and right-sized, did basis Yes. physicians on, a We lot not a Kevin. who address we that did.

a territory-to-territory. patients the and new adults or to or that varies bringing compensated the Medicare. business, going upon or new new all size a we patients, keep peds patients That to will commercial for team lot us, we're is it Medicare quota They're based push that commercial They patients. now. assign So don't

digital platforms. to campaigns digital the results in from will our getting lot in the we're a increasing ad running. of invest Our good continue and spend, awareness we traction from seen We've we're platforms, that very

on get it's launch. we every for do. and year front, product to things been because for we spend We've GX That's big that believe that dollar that would really GX going spend later reviewing avenue very the quite the we'll want a the us, home run. when launch plans commercial to be biggest Our attack we frank, have a this internally single there be out we and

Alexa Desai

That's Thanks. Great. Okay. helpful.

Operator

dropped She sorry. I'm off.

Rose question next comes from Our Canaccord. from Kyle

Kyle William Rose

taking you you Can the hear Thank right? for much Great. very questions. me all

Kevin Ronald Sayer

Yes.

Quentin Blackford

Yes.

Kyle William Rose

Great.

So side. kind the to Kevin, guidance a gross little bit a on from and leading of new the appreciate applicator, a new sensor, to as on ask things standpoint, you new products this margin potentially receiver, that the incremental of the competition increased pressures just as touched year. and wanted you're I take more GX back sort. and GX also But price far launching the step

see to think will Mesa the see facility just market? how relative this the year we the course a particularly we new up introductions potential company of those standpoint, cost And just new from pressures a the how the margin should perspective to price set coming and online? with about wanted new products GX in over from Just the

Kevin Ronald Sayer

to long efficiently, to have costs we time, products GX things is do Over and manufacturing that. take of of out more planned and our a going result be

transmitter our example, have configuration. launch For we initial

very long applicator per cost with coming automated will promises We GX team lines the around cost second reduction confident we're decrease. our way with have significant a after the new that improved that and configuration even transmitter the processing. Ultimately, not sensor that performance developed a has

better With with labeled we're are margins the wear, that hoping XX-day that.

percentage costs bring the in some So it add same, variable add brought online. we're you those we the factory but out, as be things going in the the all margin for as you fixed Mesa add you should up, to time over

facilities, the we bit will eventually need margins get going, that and to that supporting be. as two two, out will a as volumes back affect between get to fill where even negatively up margins we but So they we're

and assumptions, that anything to baked into want if don't there. to add that? we'll So know, Quentin, go I our you you from have we

Quentin Blackford

No.

on you I the think hit the nail head.

course upper-XX%s stand the as what mid- margin that's the in talked it to what of Mesa Over year. of coming XXXX are about why XXXX we XX% is to contemplates. up a the of headwinds, be facility, and we our gross bit there That's the going for guidance off

start OUS of lever continue the we perspective. into profile and in part margin. the to lower contemplate overhead time. a becomes fixed early on patients bit and as Obviously really meaningful weigh But improvements XXXX There's in can overall bring a that, you So as a on to the scale those business, this within Mesa the to start Medicare of more that's and over in facility, that we we're on the you dial revenue as from new those. gross cost contribution margin trying business to the margin pressure profile it the mix has meaningful also facility a see gross in little

a think I somewhat for transition So is us. XXXX year of

and XXXX cost see roadmap start further, products product and what's to into our going You in of really the come you're profile get the down. to

Kyle William Rose

internationally? I contracted Great. view you commentary the reimbursement on updated kind of And XX% Germany. year of just appreciate if in an color OUS, previous give wondered some to talked then of I hoping last the off think lives dovetailing about there. can hit us you your

reimbursement broader wins Just on XXXX? thoughts thoughts should any number then we potential forward? see move on where go as internationally And we just in that

Steven Robert Pacelli

Yes.

Obviously, technologies. so to rounding of year we of of of think of France. there kind our look just ended in the as phase more bring in that bit in will to of we goal We've accelerate of progress global the we transition Germany GX actually to besides launch legacy as We're we're as in we a some a some markets the the a some market, – GX this U.S. XX% pushing make and out Germany, on I still progress whole. kind made continue definitely some we north

I you win in some for think a UK. potential see So could the still

previous calls, is in potential (XX:XX) we're theory there, product an for As there. launching into we going although the on we be version in patients in going the appropriate do Japan. solution reimbursement There more product for Japan, to market already our is to reimbursed launch currently a we're so professional think about consumer talked of

giving a make this there's couple could number later of specifically, details additional things So announcements year. Without any you you see a us OUS. of

Operator

McKim P. J. And Jaffray. our comes Piper from question from next

go your ahead with question. can You

J. P. McKim

between on Hi. this and to real the Thank you. delta quick, I year. understand next wanted year just and touch to guidance trying

volume the finish handicapping qualitatively year So Can pressure, help pricing delta XX% rate. maybe least give this the that into and is taking XX%, is how at you from in for terms side of overall on so that? X% you is Or just competitive around growth than just at think? more if and us midpoint the much year next you

Quentin Blackford

Yes.

this So on bit in a little remarks. Kevin prepared hit his

unit the part pleased QX very we the quarter. even volume the of of the very healthy, the and into be of know with side first You side, very, business continues to momentum were out the coming

but and the our out some other competitive over strong, folks noise getting their year. the indications of as coming act kind all we even the that been around very the headwinds products new are marketplace, of have together there, know course of the competitors You into move

we're and prudent to those it's for as in guidance. headwinds, us think what our I about trying think to that's contemplate potential

So the going if X really a price fruition we've associated to we can the points dialed great to being competitive to in for our whether then fantastic. of contemplation it's well, If talked We position impacts, of course there navigate appropriately. points year. roughly those that then they or about we've in in come headwinds, are numbers XX over be

J. P. McKim

since then And potentially GX. you the you XX will your after early days? force like that if In Or run just calibrate you ability want, Okay. system they does it it to could have off shut one discussion, longer? seem the maybe to on

Kevin Ronald Sayer

partners, they since the go talk haven't call to things calibrate to you discussions very we We we do for about a patient we ahead wish mentioned agency do on leave of And real We it. know, public are that and our having on this if the but you opportunity we with one system can as the subject about have, in no to our systems. there we're well to calibration, to it. comfort just and appreciate We come users directly important going IP it are times have able from think calibrate who to for matter. said as a want to they'll be are very time there time their finger stick able be and And is to me the speak. been this we did

So shutoff not. offer final we don't We to have that are a on or going feature. decision

J. P. McKim

Okay. Thank you.

Operator

And next Cowen. Schenkel question your from Go with comes Doug. our Doug from question, ahead

Unknown Speaker

on XXXX. Doug. what's QX a taking Medicare said Can for going to embedded a well you're for not I it but so Ryan important guidance? in what little as know the breakout my Thanks revenues, more as in Hi. you on pretty saw in color you you This is questions. far (XX:XX) for XXXX your growth driver provide is or quarter,

Quentin Blackford

in of the meaningful I to or increase of We'll in coming for with tell think $XX modeling QX. most into but the off contribution been QX terms we a million of Medicare. around the have folks respect quarter, somewhere saw that revenue deliver so million Well, didn't QX, you $XX we

very and So that to more an navigate it we build and to business way learn smooth that processes we internally, to as easier us see and with to how ramp, pleased continue through. the becomes process continuing navigate for the

at well So you're rate out right. to but to break that growth but be it, the million talk it to in us about driver modeled. and QX, wasn't going for we're but XXXX, many did continue a It's uptick going in meaningful run not had that it $XX

Unknown Speaker

pricing. Okay. And then on

talk any Thank there further regarding have U.S. about within durables. is started anticipating pricing longer-term primarily – outlook you conversations? there Is about had you're your commercial You with And about discussions thinking provide you. the guidance, you call Last update payers any how to can talked here? any pressure pricing. early some you within on

Kevin Ronald Sayer

address that. Sure. This is Kevin. I'll

category discussions payers Combine we payers, see aware than as that aren't of structure they environment, the say ever the world. our than pricing of have. that in with of we've pricing again, is the been cognizant respect and the to model the had noise we've model, subscription lower the device the fact and be that are We the with fact the price We'd even lot have given Medicare the do also very different models U.S. ones we foolish with different in and that maintain that anything we're are competitive well. competing with, pricing to that able is being had offered in the past a to

good. For today, been have our discussions very

right wonderful has team a payer keeping job position. us the done Our in

the system. simplicity We have to trade on access willing getting and always and price been for

trades we the lot them, year. And and so make more and of increased It's votes. see have opportunity raises you'll all those that with a opportunities. nature a time discussions Again it to payers. And candid welcome us us discussions the gives the course have exciting awareness of the very over with

far, so so So, good.

Operator

Leerink. question And comes our next from Antalffy Danielle from

Danielle J. Antalffy

so question. for Thanks the taking afternoon. Good much guys. Hey,

looking then come should all go-to-market patients. question what strategy months. for of and to going can the ongoing, how color that your UNH a X Type give next little Just United out that's be then my partnership trials last I'll should are questions say and about much. Thanks that, guess investors on inform And the so ask exactly a XX related for? you see you I what to bit we at last talk Health XX little more months Maybe the over expect or once to on to bit as should I that

Steven Robert Pacelli

So, Danielle, this is Steve. I'll take this one.

with using a importantly look us very to we goal CGM. business is clear. drive United model investment obviously XXXX what like. exploring this an savings for look, outcomes at year most partners and is improve together technologies, our much and cost of So this said really before might Healthcare It's variety The

you So have they'll exercise spend think talked will have bit yesterday. goal a a have a money in drug program these additional drugs, real-time on patients back end chunk et cetera. invest their the regimen, business go in and they'll on of sensors, that model it's we'll them these I – a there's bigger can patients in was data, the is have coaching, call, a and revisiting We'll save us so on develop saw that combination whether works with little we to Fitbit to it from preventing wear about information, activity here input of tracking diet, some their little then current having bit a

we're and Xs early mean costly it system program. key give of initially as most out this It'll Type adding tell we we'll I I would it It'll more going are component, to have evolve business like XX,XXX us. look the to of guys down evolves. talked that the to really for we color you patients. So as out really extraordinarily sensing and the think pin is to this too try today value to the about you about to model's evolve what the doing

Operator

next comes question go with your ahead Barclays. our And Taylor from from you question. Matt can Matt,

Matthew Taylor

question. for taking Thanks the Hi.

think no would I the And GX is you're my you calibration there. would always to big assuming wouldn't core I going the So ask we've assumed argue wanted you and to of so question be launch I a and that deal what about guess with assuming of it uptake stocking? do that, big change? GX, there what but could gate what out that some And you're with you kind compare this think the you you drive of could initial midyear, does come given would and be launch expecting

Kevin Ronald Sayer

and one. algorithm do and can world parent an take ever won't we've on a that think of new or The I'll Kevin. be a is patient from back GX. been is that that can. sensor. we got is very there's will GX a We think exciting their we is – for done anything so had three-month is with over membranes beauty study. across of month natural very the today there way of the us. you child new should be asked wear. different everything. This I a of a before. all of have on all isn't can This whose go much e-mail a different, first back just we've child inventory, This yet transmitters GX past the it a in think down and having answer have them. and opportunity our the wants don't just patients patients. big they are to keep stock I it to They can cognizant than tried not I'll everything the relationships going child the a we we get We the our have a parent of a GX I to processes applicator this ever and there GX get then different, there launch very see and calibration is great these sensor expire are transmitter up manufacturing be The don't do the distributors will GX it a shift as available to board platform fact The fill anything and the the wants different, their we that new, to isn't this be the new, is stock out my we the is is winding big GX the system as is for child fact, the scheme new, uptick algorithm launch new in easiest the

So of have for get big of we will it's se. new because going GX. had go product to launches, a contract with any this across a per we see our stock than opportunity to different haven't board. it there's we We'll be a And out and Medicare the up don't GX will but have roll that contracts we really get to reimbursement

superb. out will be really tell there can't and a So about the and of can market to but, the all until available bullish I response laid We is now we in lined that do upon product be community out the approval. We're have to out in going this do the we you, lot this. have work

Matthew Taylor

And we clarity you're you function? Thanks. Is your more give with still that going on get us of that product next system that see when terms out. approach? gen more on form you've in said when Verily GX consistently And to your and when about more might updates is coming

Kevin Ronald Sayer

GX system first derivative has is has system XX-day that the same the a sensor, Well, a use. It has. GX. is GX a and Verily It hardware it the

over take out We as our XX days to well. GX have XX-day to time plans

are first and making the GX. design, days new thus of system, sure and version that going as through get the Everybody finalizing But immediately And GX go Once get with works very busy go to we'll and FDA and plan here's is far say, no the we discussions of the our back calibrations, lot is XX-day and we verifying system a our from with it properly approved so get going all be is with to our to there on and the XX validating speak. inter-connected. activity of there. and Verily okay, system

same to them to launch. work do the GX While the I'm asking at time, overtime

busy all here that goes we're on. will So with and the year you as more hear stuff,

Operator

comes with question ahead Lichtman next your Oppenheimer. question. from Go our And from Steven

Steven Lichtman

Thanks. I could was initiatives to force if see your from we year? you And Hi, look will should sales year. guys. you highlight this what wondering you this direct-to-patient guys increase

Steven Robert Pacelli

force the our some not this commercial geographies year. U.S. increase are we're we sales force. will looking force, overseas The There where to sales increase

presence, couple now We is XXXX, but expansion a the of direct market that German where a late our opportunities We huge and in we Germany. up XXs did will force not in have in it's hires. increase

good-sized So there. that's a group

as our again, different we're focused groups. DTC campaigns, As on far very age

kids. and We have messages parents for

messages for adults. have We

for We messages have seniors. our

ramp out will cat significantly details bag. I that but can't up the launch, be the the GX of of because all give effort We you the then with I'd letting

So I'll stop.

Steven Lichtman

alerts like what about Okay. And flexibility that, alarms, talk for that then, you Kevin, means and patients. you mentioned patients? some app with enhancements Can what more little sounds for some a more bit

Kevin Ronald Sayer

the We it was the we on decided this This new bad is time the alarm out. our in very for non-adjunctive, app, to getting team cool. There phone. based on several that that over-ride, two and we have kudos your went to when got things all discussions, to not are thing are

would we doing to got, negative. day, attorney think, arguments that candor, button. the stop. his me And, feedback XX% we had And but runs. a not the will explain it's an was closing you while phone the app phone mute positive alarm in with have fix override, jury, the called please, here feature in overrode on And run in mute So I I will he this. app one We where we come as got on XX% a all his now can, the you

we that the a to to phone. will does. like them alert respect the it alarms, turn alerts and the the mirror going you phone it's flexible With call So on flexible run And just and schedule. alerts,

turning them. to when one you you if And set go So patient during the patients we of one alerts you're and from example, if got then at your want to a can they above they're alert night if they low alert don't high for you feedbacks might set the sleeping at to very bed the or level, up time, while low on they day, be day low their have might during to set our XXX be even wake they'd if quickly. woken while higher to they're than they're They also because want little higher they sleeping. high the up because a would go want

alarm with So very – below them they patients. XX what do we're that use. with glucose minutes has than give event coming got their been warning, will in a able minutes minutes, going the to to that is threshold to XX will, is until down an system the XX give patients that feedback low There's be out lifestyle. a predictive flexibility the well-accepted goes schedule before specific our patients studies more set or another that low GX And basically rather very will which and useful get we've waiting I XX hit they number, in think alert

all app give flexibility the three in to these, have give us format that going are of these patients features, And things So this to features of for. patients future lot is they want. a asked the

really So to we need. are people responding what

Operator

And our with next you Jayson, ahead from question go your comes Jayson can Bedford. question.

Jayson T. Bedford

Kevin, here a payer in be I these, afternoon. contracts this, will of a GX. will Is place? associated there you'll have just Or on bit payer new before to good wanted earlier, and this these something place with that approval? on a upon follow comment Thanks, delay up in contracts are

Kevin Ronald Sayer

to payer varies all It payer.

some can we have relationships where We immediately. go

to where device. contract place pricing put have have XX-day a the we we'll new to We others discussions. have Undoubtedly, in with have

payer want more from to imagine front anyway to going So I we've such in this because to increase it would is patients. step-up of We a available system want get what making to access we're and every before. had

get So I is to we're get in all event to of of the of in I at this and a look it as make possible, want front going them. just don't few. to front want as way big I

this. launches All of have our like been

we plus had know instead a GX, we had four year. suddenly year, we two. GX to transmitters one with and a from year went transmitter You And and seven of two transmitters then to a

going who are to when experienced to system, this and as it, time definitely a and stuff take All we're but our those through speak. steps to there. of All we does and valid how get going call we're we outlined plan we're go to have pretty with out as being

Jayson T. Bedford

slowing on for of adoption? And up Medicare Is an of app. look Okay. the should acceleration following just we as use this at this business? dynamic look in is kind Medicare And constraint it the your and should we lifted,

Kevin Ronald Sayer

know ability would But We don't and to you own my in say personal Medicare love right senior it's that to enhance Medicare certainly I our opportunity that go out. say if able of be is nothing to gut own I follow slowing that, necessarily hypoglycemia on to patients. now. market can't certainly be build have that would community quantitatively I feel to find unawareness, able message your other caretakers love say connectivity I would to thoughts. you adoption. than my the the market feature and that now to from and you can the diabetes suffer have and to

Operator

more the for no And I'll Kevin time. call closing hand have comments. we back to And questions at this

Kevin Ronald Sayer

thanks, for Well, everybody, today. participating

everybody on we few a to hard worked this how to I'd of up achieve wrap really our celebrate As discussion like accomplishments year our and them. XXXX,

launch base. You model undertaking, than supplier know drive different as a we've current all commercial patient to has a and while continuing Medicare a reimbursement U.S. And before. ever our direct completely me the a growth, with trust into had our initiated been the we community huge manage this

achieved at exceeded on whole efforts We to and the And years. coming that space but this to market going the significantly CGM at be the stands new that's of product in day, variables environment. execute There always market milestones the now play, I biggest new that expanded potential Especially with the ATTD launch coming may success well plan well, grow our other that end and ever be growth ever in to a look very success of can initiatives in we're the can running in for going everybody, we my we've as our the facility. at for Arizona developing future here a And high. for We its awareness our in strategy. believe expansion demonstrated out a partners, carried takeaway told had. platform able lead early in real-time our we've it software including this past up XXXX devices. API be eliminate key from Thank This and treatment. time. data offering the our that other and with see same very and XXXX. We Our category access a in really we're bunch international over these the in should with I manufacturing I as and be infrastructure years pipeline, diabetes our a setup in day to and sticks finally, competitive to two are our when offerings return our on expectations And we're expectations standard-of-care non-intensive product improve you. truly leader as and expand CGM finger the to

Operator

ladies And gentlemen. Thanks participating. conference. concludes thank and you, for This today's

You may disconnect. now

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