DexCom (DXCM -42%), a leading supplier of continuous glucose monitoring (CGM) systems for diabetes, saw its stock drop sharply today following its earnings report last night. The company beat Q2 EPS estimates but fell short on revenue. More concerning was the guidance, with Q3 revenue projections falling short and FY24 revenue guidance dropping significantly to $4.00-4.05 billion from $4.20-4.35 billion.
Despite strong overall demand and growing awareness of CGM benefits, DexCom identified three near-term trends affecting results and guidance:
- During a sales force realignment expansion, DexCom's share of new customers didn't meet expectations, despite strong absolute customer additions.
- US revenue per customer declined faster than expected due to:
- Faster-than-expected G7 sensor coverage led to greater rebate eligibility, impacting revenue temporarily. This effect is expected to peak in Q3.
- Growth in the DME channel lagged behind internal expectations, requiring a refocus on DME relationships.
- International performance was below expectations, with strong results in core markets like the UK and France but softer growth in other regions.
DexCom has a history of strong performance, with eight consecutive quarters of EPS upside and typically strong revenue. However, today's significant share price drop indicates that the guidance was a shock to investors. This marks DexCom's first guidance reduction in two years. Peers Tandem Diabetes (TNDM -2%) and Insulet (PODD +1%) also saw initial drops but have since recovered. Notably, PODD guided Q2 revenue above consensus this morning, likely in response to DexCom's news.
