01—Abstract
Summary
Summary of the 10-K filed February 8, 2024. Cited figures are marked; the original filing is the authoritative source.
DexCom's FY2023 10-K (filed February 8, 2024) shows a strong year of growth and profitability.
Revenue rose 24% to $3.62 billiona, gross margin was 63.2% (down from 64.7%), operating income climbed 53% to $597.7 million, and net income rose 59% to $541.5 million (diluted EPS $1.30). Operating cash flow was $748.5 million, and cash plus short-term securities ended the year at $2.72 billion. Disposable sensors and other revenue made up about 90% of total revenue, supporting the recurring-revenue model.
Growth was driven by sensor volume from a larger worldwide customer base, partly offset by channel and pricing mix shifts. Distributors accounted for 85%b of revenue, and four customers each represented 10% or more of revenue. The balance sheet shows more leverage and capital deployment.
Convertible notes now total $2.46 billionc principal, following the May 2023 issuance of $1.25 billion of 2028 notes and the repayment of the 2023 notes. Dexcom bought back $500 million of stock under the 2023 ASR and repurchased about $689 million in total during 2023. Inventory and accounts receivable rose sharply, and accrued rebates reached $950.7 million, which makes the rebate estimates an important area to watch.
The auditor flagged estimation of pharmacy rebates as a critical audit matter. Capital spending is elevated for manufacturing expansion in Malaysia, Mesa, Arizona and a planned facility in Ireland. The main risks are pricing pressure from payors and distributor consolidation, competition from Abbott's Libre, Medtronic and new entrants, and GLP-1 drugs, which management says are a companion product but which could reduce demand.
Ongoing patent litigation with Abbott spans multiple jurisdictions, and management cannot estimate the outcome. Supply constraints, regulatory dependence, and the sales lift expected from the G7 and planned Stelo launch are also key items for investors.
02—Key points
Key Highlights
- Revenue grew 24% to $3.62 billion, with disposable sensors and other revenue representing about 90% of the total.
- Operating income rose 53% to $597.7 million; net income rose 59% to $541.5 million, and diluted EPS was $1.30.
- Gross margin declined to 63.2% from 64.7%, reflecting amortization of an intangible asset and price and channel mix changes.
- Operating cash flow was $748.5 million; cash, equivalents and short-term securities totaled $2.72 billion at year-end.
- Convertible debt rose to $2.46 billion principal after the $1.25 billion 2028 notes offering, and $500 million of stock was repurchased under the 2023 ASR.
- Accrued rebates of $950.7 million and an auditor critical audit matter on pharmacy rebate estimates highlight a key accounting judgment area.
- Ongoing patent litigation with Abbott spans the U.S., Germany, the UK, the UPC and Spain, and management cannot estimate the outcome.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Dexcom Inc kept $0.15.
- Revenue$3.62B100.0%
- Cost of revenue−$1.33B36.8%
- Gross profit$2.29B63.2%
- Operating costs−$1.69B46.7%
- Operating income$597.7M16.5%
- Interest, other & tax−$56.2M1.6%
- Net income$541.5M14.9%
Where FY2023 revenue went
$3.62B- Cost of revenue: $1.33B, 37% of revenue
- SG&A: $1.19B, 33% of revenue
- Net income: $541.5M, 15% of revenue
- R&D: $505.8M, 14% of revenue
- Interest, other & tax: $56.2M, 1.6% of revenue
Kept 15% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 8, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $3.62B$2.91B | +24.5% |
| Cost of Revenue | $1.33B$1.03B | +29.9% |
| Gross Profit | $2.29B$1.88B | +21.5% |
| R&D Expenses | $505.80M$484.20M | +4.5% |
| SG&A Expenses | $1.19B$1.01B | +17.6% |
| Operating Expenses | $1.69B$1.49B | +13.4% |
| Operating Income | $597.70M$391.20M | +52.8% |
| Interest Expense | $16.40M$14.70M | +11.6% |
| Net Income | $541.50M$341.20M | +58.7% |
| EPS (Basic) | $1.40$0.88 | +59.1% |
| EPS (Diluted) | $1.30$0.82 | +58.5% |
| Shares Outstanding (Basic) | 386.00M389.40M | −0.9% |
| Shares Outstanding (Diluted) | 425.50M427.50M | −0.5% |
05—Questions
Frequently Asked Questions
What drove the strong revenue growth in 2023?
Revenue rose 24% to $3.62 billion, primarily from higher disposable sensor volume as the worldwide customer base grew. This was partly offset by product, price and channel mix shifts. Medicare expanded coverage for CGMs for insulin users in April 2023.
Is the company's debt load a concern?
Convertible notes totaled $2.46 billion principal at year-end, and the company issued $1.25 billion of 2028 notes in 2023 while repaying the 2023 notes. Management says it can service the debt, has a $200 million undrawn revolver, and was in covenant compliance. Cash and short-term investments of $2.72 billion provide a significant cushion.
What are the biggest competitive threats?
Abbott's Libre family of CGMs is the main competitor, and Medtronic and other companies also compete, including in adjunctive CGM products now covered by Medicare. Management also flagged GLP-1 drugs for obesity and Type 2 diabetes as a potential competitive risk, although it views them as largely complementary.
How concentrated is the business?
Distributors generated 85% of 2023 revenue, and four customers each accounted for 10% or more of revenue, with the largest at 37%. Loss of a major distribution relationship could materially affect results.
What is the outlook for new products and manufacturing?
Dexcom G7 is cleared for ages 2 and older, and Dexcom Stelo for non-insulin type 2 diabetes was submitted to the FDA in Q4 2023. The company began commercial manufacturing in Malaysia, is expanding Mesa, Arizona, and plans a facility in Ireland. Management also warned that capacity scaling and supply constraints could limit growth.
06—Continue