01—Abstract
Summary
Summary of the 10-K filed February 9, 2023. Cited figures are marked; the original filing is the authoritative source.
DexCom's FY2022 Form 10-K (filed February 9, 2023) shows a strong year of growth and margin-driven earnings improvement.
Revenue rose 19% to $2.91 billiona, led by higher disposable sensor volume as the installed base expanded, partly offset by price and channel mix. Gross margin fell to 64.7% from 68.6%, reflecting price, product and channel mix and FX, while operating income rose 47% to $391.2 million and net income rose 57% to $341.2 million. Note that 2021 comparatives were restated for the ASU 2020-06 convertible debt accounting change and the four-for-one stock split, and the 2022 net income benefited from a roughly $52.9 million tax benefit tied to the Verily milestone share payment, which affects comparability.
Liquidity remains solid. Cash, cash equivalents and short-term marketable securities totaled $2.46 billionb (about 93% held in the U.S.), and operating cash flow was $669.5 million, up 51%. Capital spending of $364.8 million was directed at the Malaysia manufacturing facility and Mesa, Arizona capacity expansion.
The company repurchased $557.7 millionc of stock under an accelerated share repurchase program and has $142.3 million remaining under its $700 million authorization. Debt consists of convertible senior notes: about $772.6 million current (due December 2023) and about $1.2 billion long-term (due November 2025), plus an undrawn $200 million revolver. The filing also highlights material risks for investors.
Medicare coverage is expanding to adjunctive CGMs, which introduces a large competitor into the Medicare market, and CMS has proposed broader coverage for CGM. Pricing pressure from payors, concentration of revenue among a few distributors (four customers accounted for 10%d or more of revenue, with the largest at 32%), supply-chain constraints on single-source components, and ongoing patent litigation with Abbott are all significant. The G7 received FDA clearance in December 2022, and the company is working toward Medicare and Medicaid coverage for it.
02—Key points
Key Highlights
- Revenue grew 19% to $2.91 billion, driven by disposable sensor volume growth; disposable sensors and other were about 87% of revenue in 2022.
- Gross margin contracted to 64.7% from 68.6% due to price, product and channel mix changes and FX, even as gross profit rose 12% to $1.88 billion.
- Operating income increased 47% to $391.2 million, and net income rose 57% to $341.2 million, helped by a $52.9 million tax benefit tied to the Verily milestone share payment.
- Operating cash flow reached $669.5 million (up 51%), and the company ended 2022 with $2.46 billion in cash and short-term securities.
- Capital spending was $364.8 million, focused on the Malaysia manufacturing facility and Mesa, Arizona capacity, and $557.7 million was used for share repurchases.
- The G7 CGM system received FDA 510(k) clearance in December 2022, with an 8.2% MARD, and is being pursued for Medicare and Medicaid reimbursement.
- Key risks include payor cost containment, Medicare coverage expansion for competing adjunctive CGMs, customer concentration (the largest customer was 32% of revenue), single-source supply, and active patent litigation with Abbott.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Dexcom Inc kept $0.12.
- Revenue$2.91B100.0%
- Cost of revenue−$1.03B35.3%
- Gross profit$1.88B64.7%
- Operating costs−$1.49B51.3%
- Operating income$391.2M13.4%
- Interest, other & tax−$50.0M1.7%
- Net income$341.2M11.7%
Where FY2022 revenue went
$2.91B- Cost of revenue: $1.03B, 35% of revenue
- SG&A: $1.01B, 35% of revenue
- R&D: $484.2M, 17% of revenue
- Net income: $341.2M, 12% of revenue
- Interest, other & tax: $50.0M, 1.7% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 9, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $2.91B$2.45B | +18.8% |
| Cost of Revenue | $1.03B$768.00M | +33.7% |
| Gross Profit | $1.88B$1.68B | +12.1% |
| R&D Expenses | $484.20M$517.10M | −6.4% |
| SG&A Expenses | $1.01B$810.50M | +24.3% |
| Operating Expenses | $1.49B$1.41B | +5.5% |
| Operating Income | $391.20M$265.80M | +47.2% |
| Interest Expense | $14.70M$18.80M | −21.8% |
| Net Income | $341.20M$216.90M | +57.3% |
| EPS (Basic) | $0.88$0.56 | +57.1% |
| EPS (Diluted) | $0.82$0.53 | +54.7% |
| Shares Outstanding (Basic) | 389.40M386.90M | +0.6% |
| Shares Outstanding (Diluted) | 427.50M428.80M | −0.3% |
05—Questions
Frequently Asked Questions
How fast is DexCom's revenue growing, and what is driving it?
Revenue grew 19% to $2.91 billion in 2022, primarily from higher disposable sensor volume as the worldwide customer base expanded. Growth was partially offset by price and channel mix shifts. International revenue reached 26% of the total, up from 24% in 2021.
Why did gross margin decline even though revenue and profit grew?
Gross margin fell to 64.7% from 68.6%. The company attributed the decline to price, product and channel mix changes and the effect of foreign currencies on revenue. Cost of sales rose 34% against 19% revenue growth, reflecting higher volume and the mix effects described above.
Is DexCom's debt a near-term concern?
About $772.6 million of convertible notes is classified as current, maturing in December 2023. Management stated that cash and short-term investments of $2.46 billion, plus $192.7 million of available revolver capacity, are sufficient to cover obligations and operations for at least the next 12 months. The company may settle the 2023 notes in cash, stock, or a combination, and the 2023 note hedge partly offsets dilution.
What are the main regulatory and reimbursement risks to the business?
CMS finalized a December 2021 rule extending Medicare DME coverage to adjunctive CGMs, which allows competitors to compete in the Medicare market. Pending draft coverage guidance could expand Medicare CGM eligibility beyond intensive insulin users, which would be favorable. Coverage for the G7 is still being sought, and private payors continue to press on pricing.
Did the company return capital to shareholders in 2022?
Yes. DexCom executed a $700 million accelerated share repurchase in August 2022, with $557.7 million of the total settled in 6.6 million shares during 2022. About $142.3 million remained under the authorization at year-end, which runs through June 30, 2023. The company does not pay dividends and its credit agreement restricts them.
06—Continue