DexCom Stock Rises Despite Q4 Earnings Miss & Lower Margins

Core Insights - DexCom, Inc. reported fourth-quarter 2024 adjusted earnings per share (EPS) of 45 cents, missing the Zacks Consensus Estimate of 50 cents by 10% and down from 50 cents in the prior-year quarter [1] - Total revenues grew 7.6% year over year to $1.11 billion, driven by strong new patient performance and expanded availability of its G7 and DexCom ONE+ product platforms [2] - The company expects 2025 revenues to be$4.6 billion, implying 14% year-over-year growth, in line with the Zacks Consensus Estimate [10] Revenue Performance - Total revenues increased by 7.6% (8% on an organic basis) to $1.11 billion year over year [2] - Sensor and other revenues, which account for 96$1.07 billion, while hardware revenues decreased by 49% year over year to $45 million [5] - U.S. revenues (72$802.8 million, and international revenues (28%) improved 17.1% (19% on an organic basis) year over year to $310.7 million [6] Margin Analysis - Adjusted gross profit totaled$661.2 million, down 0.4% from the prior-year quarter, with an adjusted gross margin of 59.4%, down 480 basis points year over year [7] - Adjusted operating margin was 18.8%, down 460 basis points year over year, with total adjusted operating expenses of $209.5 million, down 13.7$2.58 billion in cash, cash equivalents, and marketable securities, compared to $2.49 billion in the third quarter [9] - Total assets amounted to$6.48 billion, up sequentially from $6.35 billion [9] Strategic Initiatives - DexCom's active customer base reached over 2.8 million users worldwide, up 25% from the 2023 level, driven by strategic initiatives including an expanded sales force and new product launches [12] - The company added more than 50,000 new U.S. prescribers, enhancing access to its CGM technology and driving record new patient starts in the fourth quarter [13] - Stelo has contributed significantly to growth, with over 140,000 users, particularly among type 2 diabetes and prediabetes populations [14] Market Expansion - International revenues are driven by expansion in markets such as France and New Zealand, with broader reimbursement coverage achieved [15] - DexCom is focusing on increasing basal insulin coverage across other markets, with early wins in Germany, Canada, Australia, and a growing presence in Japan [15] Future Outlook - The company expects adjusted gross margin to be 64-65% and adjusted operating margin to be approximately 21% for 2025 [11] - Key plans include the rollout of a 15-day wear G7 system, improved manufacturing efficiencies, and further penetration into the non-insulin diabetes market [16] - Reimbursement expansion is crucial, with coverage extending beyond insulin users, potentially granting access to over 5 million people with type 2 diabetes not on insulin [17]