What changed in this filing

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Item 9A. Controls and Procedures

2022-02-14 compared with 2021-02-11 · 384 added, 425 removed, 1063 unchanged (43% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Regulations under the Securities Exchange Act of 1934 require public companies to maintain “disclosure controls and procedures,” which are defined to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and timely communicated to management, including our Chief Executive Officer and Chief Financial Officer, recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Our management, including our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report of the effectiveness of our disclosure controls and procedures.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of DexCom, Inc.

as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 11, 2021 expressed an unqualified opinion thereon.

as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 14, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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ITEM 9B - OTHER INFORMATION

ITEM 9C - DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning our directors required by this Item is incorporated by reference to the section in our Proxy Statement entitled “Proposal No.

The information concerning our directors required by this Item is incorporated by reference to the section in the Proxy Statement entitled “Proposal No.

1 – Election of Directors.”

The information concerning our executive officers required by this Item is incorporated by reference to the section in our Proxy Statement entitled “Executive Officers.”

The information concerning our executive officers required by this Item is incorporated by reference to the section in the Proxy Statement entitled “Executive Officers.”

We have adopted a written code of ethics for financial employees that applies to our principal executive officer, principal financial officer, principal accounting officer, controller and other employees of the finance department designated by our Chief Financial Officer.

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The information required by this Item with respect to director independence is incorporated by reference to information set forth in the Proxy Statement.

The information concerning certain relationships and related transactions required by the Item is incorporated by reference to the section in our Proxy Statement entitled “Certain Transactions.”

The information concerning certain relationships and related transactions required by this Item is incorporated by reference to the section in the Proxy Statement entitled “Certain Transactions.”

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information concerning principal accountant fees and services required by this Item is incorporated by reference to the section in our Proxy Statement entitled “Ratification of Selection of Independent Registered Public Accounting Firm.”

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The information concerning principal accountant fees and services required by this Item is incorporated by reference to the section in the Proxy Statement entitled “Ratification of Selection of Independent Registered Public Accounting Firm.”

ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report:

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First Filing Exhibit

Registrant’s Restated Certificate of Incorporation.

S-1/A 333-122454 March 3, 2005 3.03

Amendment No.

1 to Registrant’s Restated Certificate of Incorporation.

DEF 14 A 000-51222 April 20, 2017 Appendix B

Registrant’s Amended and Restated Bylaws.

8-K 000-51222 September 9, 2020 3.1

Restated Certificate of Incorporation of Dexcom, Inc.

8-K 000-51222 May 21, 2021 3.1

Amended and Restated Bylaws of DexCom, Inc.

8-K 000-51222 May 21, 2021 3.3

Form of Specimen Certificate for Registrant’s common stock

7 unchanged sentences

Description of Securities Registered Under Section 12 of the Exchange Act.

10-K 000-51222 February 11, 2021 4.04

Office Lease Agreement, dated March 31, 2006, between DexCom, Inc.

1 unchanged sentence

8-K 000-51222 April 7, 2006 99.01

Offer letter between DexCom, Inc.

and Steven R.

Pacelli dated April 10, 2006.*

8-K 000-51222 April 13, 2006 99.01

Form of Amended and Restated Executive Change of Control & Severance Agreement.*

10-K 000-51222 March 5, 2009 10.20

Non-Exclusive Distribution Agreement, between RGH Enterprises, Inc.

and DexCom, Inc., dated April 30, 2008.**

10-Q 000-51222 August 3, 2009 10.23

Amended and Restated Development, Manufacturing, Licensing and Supply Agreement, between DSM PTG, Inc.

and DexCom, Inc., dated February 19, 2010.**

10-K 000-51222 March 9, 2010 10.25

First Amendment to Office Lease between DexCom, Inc.

4 unchanged sentences

10-Q/A 000-51222 July 1, 2011 10.26

Number Exhibit Description Incorporated by Reference Provided

Form File No.

First Filing Exhibit

Offer letter between DexCom, Inc.

7 unchanged sentences

10-K 000-51222 February 20, 2014 10.28

Non-Exclusive Distribution Agreement between Dex C om, Inc.

Number Exhibit Description Incorporated by Reference Provided

Form File No.

First Filing Exhibit

Non-Exclusive Distribution Agreement between DexCom, Inc.

and Diabetes Specialty Center, LLC dated October 12, 2009, as amended on September 30, 2010, October 11, 2011, November 14, 2012 and November 1, 2013.**

10-K 000-51222 February 20, 2014 10.29

Settlement and License Agreement by and among Abbott Diabetes Care, Inc.

and DexCom, Inc., dated July 2, 2014.

10-Q 000-51222 August 6, 2014 10.31

Amendment No.

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2015 Employee Stock Purchase Plan

DEF 14A 000-51222 April 13, 2015 Appendix A

DEF 14A 000-51222 April 13, 2015 Appendix B

Form of Subscription Agreement under 2015 Employee Stock Purchase Plan

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8-K 000-51222 June 6, 2017 10.3

Number Exhibit Description Incorporated by Reference Provided

Form File No.

First Filing Exhibit

First Amendment to Credit Agreement dated June 17, 2016 by and among DexCom, Inc., the Lenders, and JPMorgan Chase Bank, as Administrative Agent.

10-Q 000-51222 August 1, 2017 10.46

Standard Form of Agreement dated May 1, 2017, by and between DexCom, Inc.

1 unchanged sentence

10-Q 000-51222 August 1, 2017 10.47

Offer Letter for Quentin S.

Blackford dated July 28, 2017.

8-K 000-51222 August 1, 2017 10.10

Form of Indemnity Agreement

6 unchanged sentences

10-K 000-51222 February 21, 2019 10.60

Number Exhibit Description Incorporated by Reference Provided

Form File No.

First Filing Exhibit

Amended and Restated Credit Agreement dated December 19, 2018 by and among DexCom, Inc., Bank of America, Silicon Valley Bank and Union Bank, and JPMorgan Chase Bank, as Administrative Agent.

11 unchanged sentences

10-K 000-51222 February 13, 2020 10.38

Amendment to the Distribution Services Agreement between Dex C om Inc.

Amendment to the Distribution Services Agreement between DexCom Inc.

and AmerisourceBergen Drug Corporation.****

11 unchanged sentences

10-K 000-51222 February 13, 2020 10.42

First Amendment to Amended and Restated Credit Agreement by and among DexCom, Inc., the Lenders, and JPMorgan Chase Bank as Administrative Agent, dated May 11, 2020

10-Q 000-51222 July 28, 2020 10.01

Form of Indemnity Agreement between Registrant and each of its directors and executive officers.

10-K 000-51222 February 11, 2021 10.43

2015 Employee Stock Purchase Plan, amended on December 13, 2019

10-K 000-51222 February 11, 2021 10.44

Form of Subscription Agreement under 2015 Employee Stock Purchase Plan amended on December 13, 2019

10-K 000-51222 February 11, 2021 10.45

DexCom Incentive Bonus Plan

8-K 000-51222 March 17, 2021 10.1

Second Amended and Restated Credit Agreement dated October 13, 202 1 by and among DexCom, Inc., Bank of America, Silicon Valley Bank and Union Bank, and JPMorgan Chase Bank, as Administrative Agent.

10-K 000-51222 February 14, 2022 X

Sixth Amendment to Office Lease between DexCom, Inc.

and Sequence Tech.

Center CA LLC, dated May 25, 2021

10-K 000-51222 February 14, 2022 X

Tenant Estoppel Certificate - Sequence

10-K 000-51222 February 14, 2022 X

Office Lease between DexCom, Inc.

and GC Pacific Court Center Owner, LLC, dated January 31, 2020

10-K 000-51222 February 14, 2022 X

First Amendment to Office Lease between DexCom, Inc.

and GC Pacific Court Center Owner, LLC, dated November 17, 2020

10-K 000-51222 February 14, 2022 X

Tenant Estoppel Certificate - Pacific Center

10-K 000-51222 February 14, 2022 X

Number Exhibit Description Incorporated by Reference Provided

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First Filing Exhibit

2015 Employee Stock Purchase Plan, amended on December 13, 2019

Form of Subscription Agreement under 2015 Employee Stock Purchase Plan amended on December 13, 2019

Incentive Agreement between Dex C om, Inc.

and Jeffrey Moy dated April 28, 2020

Transition and Consulting Agreement between Dex C om, Inc.

and Richard B.

Doubleday dated December 10, 2020

Tenant’s Acceptance of Possession - Pacific Center

10-K 000-51222 February 14, 2022 X

List of Subsidiaries

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February 14, 2022

/S/ QUENTIN S.

Chief Operating Officer and Chief Financial Officer (Principal Financial Officer)

/s/ JEREME M.

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kevin Sayer and Quentin Blackford, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kevin R.

Sayer and Jereme M.

Sylvain, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

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SAYER Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer) February 14, 2022

/S/ QUENTIN S.

BLACKFORD Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) February 11, 2021

/S/ MARK FOLETTA Lead Independent Director

/s/ JEREME M.

SYLVAIN Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) February 14, 2022

FOLETTA Lead Independent Director

February 14, 2022

/S/ STEVE ALTMAN Director February 11, 2021

/s/ STEVEN R.

ALTMAN Director February 14, 2022

/s/ NICHOLAS AUGUSTINOS Director February 14, 2022

Nicholas Augustinos

/S/ RICHARD COLLINS Director February 11, 2021

Richard Collins

/s/ RICHARD A.

COLLINS Director February 14, 2022

/s/ KAREN DAHUT Director February 14, 2022

/S/ BRIDGETTE HELLER Director February 11, 2021

Bridgette Heller

/S/ BARBARA KAHN Director February 11, 2021

/s/ BRIDGETTE P.

HELLER Director February 14, 2022

/s/ BARBARA E.

KAHN Director February 14, 2022

/s/ KYLE MALADY Director February 14, 2022

/S/ JAY SKYLER Director February 11, 2021

Jay Skyler, M.D.

/S/ ERIC TOPOL Director February 11, 2021

Eric Topol, M.D.

SKYLER Director February 14, 2022

TOPOL Director February 14, 2022

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity

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We have audited the accompanying consolidated balance sheets of DexCom, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Estimation of transaction price and variable consideration for revenue recognition

Description of the Matter As discussed in Note 1 of the consolidated financial statements, the Company recognizes revenue based on a transaction price which reflects the net consideration to which the Company expects to be entitled.

The transaction price is typically based on the contracted rates less an estimate of claim denials and historical reimbursement experience by payor, which include current and future expectations regarding reimbursement rates and payor mix.

The Company estimates reductions for rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Estimation of variable consideration for revenue recognition

Description of the Matter As discussed in Note 1 of the consolidated financial statements, the Company includes an estimate of variable consideration in the calculation of the transaction price at the time of sale.

The Company estimates reductions for pharmacy rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.

Auditing management’s determination of transaction price including variable consideration involved a high degree of subjectivity in evaluating management’s estimates.

In determining transaction price, management develops estimates based on the contracted rates less an estimate of claim denials and historical reimbursement experience by payor.

In estimating rebates, management applies contracted rates to estimates of products sold subject to rebate, known market events or trends and channel inventory data.

In estimating pharmacy rebates, management applies contracted rates to estimates of products sold subject to rebate, known market events or trends and channel inventory data.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s processes to determine transaction price and rebates, including the underlying assumptions.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s processes to determine pharmacy rebates, including the underlying assumptions.

Our audit procedures also included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management’s calculations.

For transaction price, this included testing management’s estimate of the claim denials and historical reimbursement experience through a combination of underlying data validation by inspection of source documents and independent recalculation of management’s analysis.

For rebates, this included testing contractual rates, management’s estimates of products sold subject to rebate, and inventory held by third parties at the end of the period, through a combination of underlying data validation by inspection of source documents, agreement to underlying contracts, review for consistency against historical data, and trending of inventory held at third parties versus inventory sold into the channel.

In addition, we inspected the results of the Company’s retrospective review analysis of rebates claimed, evaluated the estimates made based on historical experience and performed sensitivity analyses over the Company's significant assumptions.

Valuation allowances on deferred tax assets

Description of the Matter

As discussed in Note 8, significant judgment is required to evaluate the need for a valuation allowance against deferred tax assets.

The Company reviews all available positive and negative evidence, including projections of pre-tax book income, earnings history, reliability of forecasting, and reversal of temporary differences.

A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized.

Realization of deferred tax assets is dependent upon future earnings.

Prior to 2020, due to the Company’s U.S.

operating losses and earnings volatility in previous years, which did not allow sustainable profitability, the Company had established and maintained a full valuation allowance on its deferred tax assets.

In 2020, the Company achieved three years of cumulative income.

The Company analyzed both positive and negative evidence, and as a result, released its valuation allowance of $287.2 million on its deferred tax assets.

The Company maintains a valuation allowance of $55.5 million against its California research and development tax credits and certain foreign intangible assets, as it is more likely than not that those deferred tax assets will not be realized.

Auditing management's analysis of the realizability of the deferred tax assets was complex and highly judgmental because the assessment process involves significant judgment and subjective evaluation of assumptions that may be affected by future operations of the Company, market or economic conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to assess the realizability of the deferred tax assets and measurement of the valuation allowances, including controls over management’s scheduling of the future reversal of existing taxable temporary differences, identification and use of available tax planning strategies and projections of future taxable income.

Among other audit procedures performed, we tested the reversal of the existing taxable temporary differences, including assessment of the completeness and accuracy of related schedules.

We evaluated the assumptions used by the Company to develop projections of future taxable income by jurisdiction.

For example, we compared the projections of future taxable income with the actual results from prior periods, as well as management’s consideration of current trends.

We also considered the relevant tax laws and regulations in the various jurisdictions, including considering whether the estimated future sources of taxable income were of the appropriate character to utilize the deferred tax assets.

We also considered the accuracy of management’s historical projections and performed sensitivity analyses of the significant assumptions to evaluate the changes in realizability of deferred tax assets that would result from changes in the assumptions.

In addition, we evaluated the Company’s income tax disclosures related to the matters described above.

This included testing contractual rates, management’s estimates of products sold subject to rebate, and inventory held by third parties at the end of the period, through a combination of underlying data validation by inspection of source documents, agreement to underlying contracts, review for consistency against historical data, and trending of inventory held at third parties versus inventory sold into the channel.

In addition, we inspected the results of the Company’s retrospective review analysis of pharmacy rebates claimed, evaluated the estimates made based on historical experience and performed sensitivity analyses over the Company's significant assumptions.

/s/ Ernst & Young LLP

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Deferred tax assets 220.8 216.4

Other assets 21.4 14.2

Intangibles and other assets, net 42.0 21.4

Total assets $ 4,863.6 $ 4,290.5

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Treasury stock, at cost;

0.8 million shares at December 31, 2020 and December 31, 2019

0.8 million shares at December 31, 2021 and 0.8 million shares at December 31, 2020

( 206.2 ) ( 100.0 )

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Total operating expenses 1,414.7 980.6 789.2

Operating income (loss) 299.5 142.3 ( 186.3 )

Operating income 265.8 299.5 142.3

Interest expense ( 100.3 ) ( 84.7 ) ( 60.3 )

1 unchanged sentence

Income (loss) from equity investments 11.6 — ( 4.2 )

Interest and other income, net 16.1 26.4 2.4

Income (loss) before income taxes 225.0 104.2 ( 126.5 )

Interest and other income (expense), net ( 1.7 ) 16.1 26.4

Income before income taxes 173.9 225.0 104.2

Income tax expense (benefit) 19.2 ( 268.6 ) 3.1

Net income (loss) $ 493.6 $ 101.1 $ ( 127.1 )

Basic net income (loss) per share $ 5.23 $ 1.11 $ ( 1.44 )

Shares used to compute basic net income (loss) per share 94.4 91.1 88.2

Diluted net income (loss) per share $ 5.06 $ 1.10 $ ( 1.44 )

Shares used to compute diluted net income (loss) per share 97.5 92.3 88.2

Net income $ 154.7 $ 493.6 $ 101.1

Basic net income per share $ 1.60 $ 5.23 $ 1.11

Shares used to compute basic net income per share 96.7 94.4 91.1

Diluted net income per share $ 1.55 $ 5.06 $ 1.10

Shares used to compute diluted net income per share 100.1 97.5 92.3

See accompanying notes

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

Twelve Months Ended

(In millions) 2021 2020 2019

Net income (loss) $ 493.6 $ 101.1 $ ( 127.1 )

Other comprehensive income, net of tax:

Foreign currency translation gain 1.1 0.4 4.0

Net income $ 154.7 $ 493.6 $ 101.1

Other comprehensive income (loss), net of tax:

Translation adjustments and other ( 1.0 ) 1.1 0.4

Unrealized gain (loss) on marketable debt securities ( 1.7 ) ( 0.2 ) 0.4

Total other comprehensive income, net of tax 0.9 0.8 4.1

Comprehensive income (loss) $ 494.5 $ 101.9 $ ( 123.0 )

Total other comprehensive income (loss), net of tax ( 2.7 ) 0.9 0.8

Comprehensive income $ 152.0 $ 494.5 $ 101.9

See accompanying notes

Consolidated Statements of Stockholders’ Equity

(In millions)

Common Stock Additional

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Stockholders’

(In millions)

Shares Amount

Balance at December 31, 2018 90.0 $ 0.1 $ 1,560.6 $ 1.5 $ ( 798.9 ) $ ( 100.0 ) $ 663.3

Issuance of common stock under equity incentive plans 1.8 — 1.9 — — — 1.9

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 8.9 — — — 8.9

Issuance of common stock for collaborative research and development fee 1.8 — 217.7 — — — 217.7

Convertible note hedge — — ( 218.9 ) — — — ( 218.9 )

Equity component of convertible 2023 Note issuance, net of issuance costs — — 171.6 — — — 171.6

Purchases of treasury stock ( 0.8 ) — — — — ( 100.0 ) ( 100.0 )

Sale of warrants — — 183.8 — — — 183.8

Share-based compensation expense — — 101.9 — — — 101.9

Net loss — — — — ( 127.1 ) — ( 127.1 )

Other comprehensive income, net of tax — — — 4.1 — — 4.1

Balance at December 31, 2018 90.0 0.1 1,560.6 1.5 ( 798.9 ) ( 100.0 ) 663.3

Cumulative-effect adjustment from adoption of new lease accounting standard (Note 6) — — — — 2.1 — 2.1

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Balance at December 31, 2020 96.1 0.1 2,125.3 3.2 ( 202.1 ) ( 100.0 ) 1,826.5

Issuance of common stock under equity incentive plans 0.7 — — — — — —

Issuance of common stock for Employee Stock Purchase Plan — — 20.3 — — — 20.3

Tax benefit related to Senior Convertible Notes — — ( 1.1 ) — — — ( 1.1 )

Conversions of 2023 Notes 0.4 — 28.7 — — 24.6 53.3

Benefit of note hedge upon conversions of 2023 Notes ( 0.2 ) — 130.8 — — ( 130.8 ) —

Share-based compensation expense — — 113.4 — — — 113.4

Collaborative research and development fee — — 87.1 — — — 87.1

Net income — — — — 154.7 — 154.7

Other comprehensive loss, net of tax — — — ( 2.7 ) — — ( 2.7 )

Balance at December 31, 2021 97.0 0.1 2,504.5 0.5 ( 47.4 ) ( 206.2 ) 2,251.5

See accompanying notes

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Operating activities

Net income (loss) $ 493.6 $ 101.1 $ ( 127.1 )

Adjustments to reconcile net income (loss) to cash provided by operating activities:

Net income $ 154.7 $ 493.6 $ 101.1

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization 102.0 67.1 48.7

Share-based compensation 113.4 119.4 102.7

Collaborative research and development fee 87.1 — —

Loss on extinguishment of debt 1.5 5.9 —

Non-cash interest expense 88.7 74.0 49.6

Non-cash collaborative research and development fee through issuance of common stock — — 217.7

Unrealized gain on equity investment — — ( 36.0 )

Realized (gain) loss on equity investment ( 11.6 ) — 4.2

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Net proceeds from issuance of common stock 20.3 15.3 11.9

Purchases of treasury stock — — ( 100.0 )

Proceeds from issuance of convertible notes, net of issuance costs — 1,188.8 —

Repurchase of convertible notes — ( 282.6 ) —

Proceeds from sale of warrants — — 183.8

Purchase of convertible note hedge — — ( 218.9 )

Other financing activities ( 9.9 ) ( 9.4 ) ( 1.2 )

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Twelve Months Ended

2021 2020 2019

Supplemental disclosure of non-cash investing and financing transactions:

Common stock issued for repurchase and conversions of senior convertible notes $ 1,350.9 $ — $ —

Shares issued for repurchase and conversions of senior convertible notes $ 157.7 $ 1,350.9 $ —

Shares received under note hedge upon conversion of 2023 Notes $ ( 130.8 ) $ — $ —

Acquisition of property and equipment included in accounts payable and accrued liabilities $ 45.4 $ 35.3 $ 14.2

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We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation.

The functional currencies of our international subsidiaries are generally the local currencies.

We translate the financial statements of our foreign subsidiaries into U.S.

We determine the functional currencies of our international subsidiaries by reviewing the environment where each subsidiary primarily generates and expends cash.

For international subsidiaries whose functional currencies are the local currencies, we translate the financial statements into U.S.

dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses.

We include translation-related adjustments in comprehensive income (loss) and in accumulated other comprehensive income in the equity section of our consolidated balance sheets.

Gains and losses resulting from certain intercompany transactions as well as transactions with customers and vendors that are denominated in currencies other than the functional currency of each entity give rise to foreign exchange gains or losses that we record in interest and other income, net in our consolidated statements of operations .

We include translation-related adjustments in comprehensive income and in accumulated other comprehensive income in the equity section of our consolidated balance sheets.

We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in interest and other income (expense), net in our consolidated statements of operations .

Use of Estimates

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generally accepted accounting principles, or GAAP, requires us to make certain estimates and assumptions that affect the amounts reported in our consolidated financial statements and the disclosures made in the accompanying notes.

Areas requiring significant estimates include pharmacy rebates, transaction price, net accounts receivable, excess or obsolete inventories and the valuation of inventory, and accruals for litigation contingencies.

Areas requiring significant estimates include rebates, transaction price, the collectibility of accounts receivable, excess or obsolete inventories and the valuation of inventory, accruals for litigation contingencies, and the amount of our worldwide tax provision and the realizability of deferred tax assets.

Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.

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The three levels of input defined by the authoritative guidance are as follows:

Level 1—Unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Level 2—Inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, through correlation with market data.

Level 1—Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Level 2—Uses inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, through correlation with market data.

These include quoted prices in active markets for similar assets or liabilities;

1 unchanged sentence

and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the determination of fair value.

Level 3—Uses unobservable inputs that are supported by little or no market activity and that are significant to the determination of fair value.

Level 3 assets and liabilities include those whose fair values are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques and significant judgment or estimation.

We estimate the fair value of most of our cash equivalents using Level 1 inputs.

We estimate the fair value of our marketable equity securities using Level 1 inputs and we estimate the fair value of our marketable debt securities using Level 2 inputs.

We carry our marketable securities at fair value.

We carry our other financial instruments, such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, at cost, which approximates the related fair values due to the short-term maturities of these instruments.

For more information see Note 3, “Fair Value Measurements.”

We carry our other financial instruments, such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, at cost,

which approximates the related fair values due to the short-term maturities of these instruments.

See Note 3 “Fair Value Measurements” for more information.

Cash and Cash Equivalents

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We calculate realized gains or losses on our marketable securities using the specific identification method.

We carry our marketable debt securities at fair value with unrealized gains and losses reported as a separate component of stockholders’ equity in our consolidated balance sheets and included in comprehensive income (loss).

Realized gains and losses on marketable debt securities are included in interest and other income, net in our consolidated statements of operations.

We carry our marketable equity securities at fair value with realized and unrealized gains and losses reported in income on equity investments in our consolidated statements of operations.

Realized gains and losses on marketable debt securities are included in interest and other income (expense), net in our consolidated statements of operations.

We carry our marketable equity securities at fair value with realized and unrealized gains and losses reported in income (loss) from equity investments in our consolidated statements of operations.

We invest in various types of debt securities, including debt securities in government-sponsored entities, corporate debt securities, U.S.

Treasury securities and commercial paper.

Treasury securities, supranational securities, and commercial paper.

We do not generally intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

See Note 3, “Fair Value Measurements” and Note 4, “Balance Sheet Details – Short-Term Marketable Securities ” for more information on our marketable debt securities and our marketable equity securities.

See Note 3 “Fair Value Measurements” and Short-Term Marketable Securities in Note 4 “Balance Sheet Details” for more information on our marketable securities.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are generally recorded at the invoiced amount for distributors and at net realizable value for direct customers, which is determined using estimates of claim denials and historical reimbursement experience without regard to aging category.

Accounts receivable are generally recorded at the invoiced amount, net of prompt pay discounts, for distributors and at net realizable value for direct customers, which is determined using estimates of claim denials and historical reimbursement experience without regard to aging category.

Accounts receivable are not interest bearing.

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We maintain an allowance for doubtful accounts for potential credit losses.

Uncollectable accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a customer account is uncollectable.

Generally, receivable balances greater than one year past due are deemed uncollectable.

Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a customer account is uncollectible.

Generally, receivable balances greater than one year past due are deemed uncollectible.

Concentration of Credit Risk and Significant Customers

Financial instruments which potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term marketable securities, and accounts receivable.

We limit our exposure to credit risk by placing our cash and investments with high credit quality financial institutions.

We limit our exposure to credit risk by placing our cash and investments with a few major financial institutions.

We have also established guidelines regarding diversification of our investments and their maturities that are designed to maintain principal and maximize liquidity.

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Inventory is valued at the lower of cost or net realizable value on a part-by-part basis that approximates first in, first out.

We record adjustments to inventory for potentially excess, obsolete or scrapped goods in order to state inventory at net realizable value.

We capitalize inventory produced in preparation for commercial launches when it becomes probable that the product will receive regulatory approval and that the related costs will be recoverable through the commercialization of the product.

A number of factors are considered, including the status of the regulatory application approval process, management’s judgment of probable future commercial use, and net realizable value.

We record adjustments to inventory for potential excess or obsolete inventory, as well as inventory that does not pass quality control testing, in order to state inventory at net realizable value.

Factors influencing these adjustments include inventories on hand and on order compared to estimated future usage and sales for existing and new products, as well as judgments regarding quality control testing data and assumptions about the likelihood of scrap and obsolescence.

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We purchase certain components and materials from single sources due to quality considerations, costs or constraints resulting from regulatory requirements.

Historically, our inventory reserves have been adequate to cover our actual losses.

However, if actual product life cycles, product quality or market conditions differ from our assumptions, additional inventory adjustments that would increase cost of goods sold could be required.

Property and Equipment

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We capitalize additions and improvements and expense maintenance and repairs as incurred.

We also capitalize certain costs incurred for the development of enterprise-level business and finance software that we use internally in our operations.

Costs incurred in the application development phase are capitalized while costs related to planning and other preliminary project activities and to post-implementation activities are expensed as incurred.

We calculate depreciation using the straight-line method over the estimated useful lives of the assets.

Estimated useful lives are generally three years for computer software and hardware, four to fifteen years for machinery and equipment, and five years for furniture and fixtures.

Estimated useful lives are generally three years for computer software and hardware, including internal use software, four to fifteen years for machinery and equipment, and five years for furniture and fixtures.

Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the remaining lease term.

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We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets.

If a quantitative assessment is performed the evaluation includes management estimates of cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies.

If a quantitative assessment is performed the evaluation includes management estimates of cash flow projections based on internal future

projections and/or use of a market approach by looking at market values of comparable companies.

Key assumptions for these projections include revenue growth, future gross margin and operating margin growth, and weighted cost of capital and terminal growth rates.

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If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of the unit, we perform the second step of the impairment test.

In this step we allocate the fair value of the

reporting unit calculated in step one to all of the assets and liabilities of that unit, as if we had just acquired the reporting unit in a business combination.

In this step we allocate the fair value of the reporting unit calculated in step one to all of the assets and liabilities of that unit, as if we had just acquired the reporting unit in a business combination.

The excess of the fair value of the reporting unit over the total amount allocated to the assets and liabilities represents the implied fair value of goodwill.

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We recorded no goodwill impairment charges for the twelve months ended December 31, 2021, 2020 or 2019.

The change in goodwill for the twelve months ended December 31, 2020 and December 31, 2019 consisted of translation adjustments on our foreign currency denominated goodwill.

The change in goodwill for the twelve months ended December 31, 2021 consisted of goodwill we recorded for acquisitions that were not significant, individually or in the aggregate, and translation adjustments on our foreign currency denominated goodwill.

The change in goodwill for the twelve months ended December 31, 2020 and 2019 consisted of translation adjustments on our foreign currency denominated goodwill.

Intangible Assets and Other Long-Lived Assets

Intangible assets are included in other assets in our consolidated balance sheets.

We amortize intangible assets with a finite life, such as acquired technology, customer relationships, trade names and trademarks, on a straight-line basis over their estimated useful lives, which range from two to seven years .

Intangible assets are included in intangibles and other assets, net in our consolidated balance sheets.

We review intangible assets that have finite lives and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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If the carrying value of an asset exceeds its estimated fair value, we would record an impairment loss equal to the difference.

For transactions other than a business combination, we also capitalize as intangible assets the cost of certain milestones payable by us to collaborative partners and incurred at or after the product has obtained regulatory approval for marketing.

The intangible assets associated with these milestones are amortized over the remaining estimated useful life of the underlying asset.

We recorded no intangible asset impairment charges for the twelve months ended December 31, 2021, 2020 or 2019.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Significant judgment is required to evaluate the need for a valuation allowance against deferred tax assets.

We review all available positive and negative evidence, including projections of pre-tax book income, earnings history, reliability of forecasting, and reversal of temporary differences.

A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized.

Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions.

Prior to 2020, due to our US operating losses and earnings volatility in previous years, which did not allow sustainable profitability, we had established and maintained a full valuation allowance on our deferred tax assets.

In 2020, we achieved three years cumulative income and expect to continue that profitability in future years.

We analyzed both positive and negative evidence, and as a result released our valuation allowance on our deferred tax assets.

We maintain the valuation allowance on our California research and development tax credits and certain foreign intangible assets, as it is more likely than not that those deferred tax assets will not be realized.

The effect of a change in tax rate on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized.

In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under tax law and results of recent operations.

If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

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Loss Contingencies

We are subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business.

We review the status of each significant matter quarterly and assess our potential financial exposure.

If the potential loss from a claim or legal proceeding is considered probable and the amount can be reasonably estimated, we record a liability and an expense for the estimated loss and disclose it in our financial statements if it is significant.

If we determine that a loss is possible and the range of the loss can be reasonably determined, then we disclose the range of the possible loss.

Significant judgment is required in the determination of whether a potential loss is probable, reasonably possible, or remote as well as in the determination of whether a potential exposure is reasonably estimable.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of two elements, net income (loss) and other comprehensive income.

We report all components of comprehensive income (loss), including net income (loss), in our financial statements in the period in which they are recognized.

Total comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

We report net income (loss) and the components of other comprehensive income, including foreign currency translation adjustments and unrealized gains and losses on marketable securities, net of their related tax effect to arrive at total comprehensive income (loss).

If we determine that a loss is possible and the range of the loss can be reasonably determined,we do not record a liability or an expense but we disclose the range of the possible loss.

We base our judgments on the best information available at the time.

As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates.

Any revision of our estimates of potential liability could have a material impact on our financial position and operating results.

Comprehensive Income

Comprehensive income consists of two elements, net income and other comprehensive income (loss).

We report all components of comprehensive income, including net income, in our financial statements in the period in which they are recognized.

Total comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

We report net income and the components of other comprehensive income (loss), including foreign currency translation adjustments and unrealized gains and losses on marketable securities, net of their related tax effect to arrive at total comprehensive income.

Revenue Recognition

We generate our revenue from the sale of our reusable transmitter and receiver, collectively referred to as Reusable Hardware, and disposable sensors.

We refer to Reusable Hardware and disposable sensors in this section as Components.

We generate our revenue from the sale of disposable sensors and our reusable transmitter and receiver, collectively referred to as Reusable Hardware.

We also refer to Reusable Hardware and disposable sensors in this section as Components.

We generally recognize revenue when control is transferred to our customers in an amount that reflects the net consideration to which we expect to be entitled.

In determining how revenue should be recognized, a five-step process is used, which includes identifying performance obligations in the contract, determining whether the performance obligations are separate, allocating the transaction price to each separate performance obligation, estimating the amount of variable consideration to include in the transaction price and determining the timing of revenue recognition for separate performance obligations.

Policy Elections and Practical Expedients Taken

• We report revenue net of taxes collected from customers, which are subsequently remitted to governmental authorities;

• We account for shipping and handling activities that are performed after a customer has obtained control of a good as fulfillment costs rather than as separate performance obligations;

• We do not assess whether promised goods or services are performance obligations if they are immaterial in the context of the contract with the customer;

• If we expect, at contract inception, that the period between the transfer of control and corresponding payment from the customer will be one year or less, we do not adjust the amount of consideration for the effects of a significant financing component.

Contracts and Performance Obligations

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We also provide free-of-charge software, mobile applications and updates for our Dexcom Share ® remote monitoring system.

The standalone selling prices of our free-of-charge software, mobile applications and updates are estimated based on an expected cost plus a margin approach.

The standalone selling prices of Dexcom Share ® are estimated based on an expected cost plus a margin approach.

Transaction Price

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We include an estimate of variable consideration in the calculation of the transaction price at the time of sale, when control of the Components transfers to the customer.

Variable consideration includes but is not limited to rebates, chargebacks, consideration payable to customers such as specialty distributor and wholesaler fees, product returns provision, prompt payment discounts, and various other promotional or incentive arrangements.

We classify our provisions related to variable consideration

as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.

Variable consideration includes but is not limited to:

rebates, chargebacks, consideration payable to customers such as specialty distributor and wholesaler fees, product returns provision, prompt payment discounts, and various other promotional or incentive arrangements.

We classify our provisions related to variable consideration as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.

We review the adequacy of our estimates for transaction price adjustments and variable consideration at each reporting date.

If the actual amounts of consideration that we receive differ from our estimates, we would adjust our estimates and that would affect reported revenue in the period that such variances become known.

If any of these judgments were to change, it could cause a material increase or decrease in the amount of revenue we report in a particular period.

We are subject to rebates on pricing programs with managed care organizations, such as pharmacy benefit managers, governmental and third-party commercial payors, primarily in the U.S.

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Product Returns

In accordance with the terms of their distribution agreements, most distributors do not have rights of return outside of our limited warranty.

In accordance with the terms of their distribution agreements, most distributors do not have rights of return.

The distributors typically have a limited time frame to notify us of any missing, damaged, defective or non-conforming products.

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Accounts receivable as of December 31, 2021 included unbilled accounts receivable of $ 9.6 million.

Unbilled accounts receivable consists of revenue recognized for Components we have delivered but not yet invoiced to customers.

We expect to invoice and collect all unbilled accounts receivable within twelve months.

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Deferred Cost of Sales

Deferred cost of sales are associated with sales for which revenue recognition criteria are not met but product has shipped and released from inventory.

Deferred cost of sales are associated with transactions for which revenue recognition criteria are not met but product has shipped and released from inventory.

Deferred cost of sales are included in prepaid and other current assets in our consolidated balance sheets.

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Product Shipment Costs

We record the amounts we charge our customers for the shipping and handling of our products in revenue and we record the related costs as cost of sales in our statements of operations.

We record the amounts we charge our customers for the shipping and handling of our products in revenue and we record the related costs as cost of sales in our consolidated statements of operations.

Research and Development

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To date, our software has been available for general release concurrent with the establishment of technological feasibility and, accordingly, we have not capitalized any development costs.

Collaboration Agreements

We may enter into agreements with collaboration partners for the development and commercialization of our products.

These arrangements may include payments contingent on the occurrence of certain events such as development, regulatory or sales-based milestones.

When we account for these agreements, we consider the unique nature, terms and facts and circumstances of each transaction.

Below are some example activities and how we account for them:

• Payments to collaboration partners through issuance of common stock as consideration in an asset acquisition are considered share-based payment to non-employees in exchange for goods within the scope of ASC Topic 718, “Compensation - Stock Compensation”.

The amount and the timing of the cost recognition of such milestones in our financial statements is driven by the accounting for the specific type of equity instrument under ASC 718 that aligns with the terms of the agreement, including any performance conditions.

• The value associated with in-process research and development (“IPR&D”) in an asset acquisition incurred prior to regulatory approval is expensed as it does not have an alternative future use and is recorded as research and development expense.

• The value associated with IPR&D in an asset acquisition incurred at or after regulatory approval is usually capitalized as an intangible asset and amortized over the periods in which the related products are expected to contribute to future cash flows.

Advertising Costs

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We account for forfeitures as they occur by reversing any share-based compensation expense related to awards that will not vest.

Net Income (Loss) Per Share

Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of shares issuable from stock options, restricted stock units, warrants, and our senior convertible notes.

Potentially dilutive common shares issuable upon vesting of stock options and restricted stock units and exercise of warrants are determined using the average share price for each period under the treasury stock method.

Net Income Per Share

Basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period.

Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of shares issuable from restricted stock units, warrants and our senior convertible notes.

Potentially dilutive common shares issuable upon vesting of restricted stock units and exercise of warrants are determined using the average share price for each period under the treasury stock method.

Potentially dilutive common shares issuable upon conversion of our senior convertible notes are determined using the if-converted method.

In periods of net losses, we exclude all potentially dilutive common shares from the computation of the diluted net loss per share for those periods as the effect would be anti-dilutive.

The following table sets forth the computation of basic and diluted net income (loss) per share for the periods shown.

The following table sets forth the computation of basic and diluted net income per share for the periods shown.

Twelve Months Ended

(In millions) 2021 2020 2019

Net income (loss) $ 493.6 $ 101.1 $ ( 127.1 )

Net income (loss) per common share

Net income $ 154.7 $ 493.6 $ 101.1

Net income per common share

Basic $ 1.60 $ 5.23 $ 1.11

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Dilutive potential common stock outstanding:

Stock options and employee stock purchase plan — — —

Restricted stock units 0.5 1.0 1.2

Warrants 2.9 2.1 —

Senior convertible notes — — —

Diluted weighted average shares outstanding 100.1 97.5 92.3

Outstanding anti-dilutive securities not included in the diluted net income (loss) per share attributable to common stockholders calculations were as follows:

Outstanding anti-dilutive securities not included in the diluted net income per share attributable to common stockholders calculations were as follows:

Twelve Months Ended

(In millions) 2021 2020 2019

Stock options — — 0.1

Restricted stock units — — 0.2

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Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments , which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities.

This update is effective for annual periods beginning after December 15, 2019, and interim periods within those periods, and early adoption is permitted.

Our adoption of ASU 2016-13 at the beginning of the first quarter of 2020 did not have a significant impact on our consolidated financial statements.

In addition, the outbreak of the novel strain of coronavirus, SARS-CoV-2 (“COVID-19”), has not had a significant impact on our expected credit losses or our consolidated financial statements during 2020.

We are continuing to monitor the impact of COVID-19 on expected credit losses.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment (ASU 2017-04) .

This new guidance eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge.

Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.

ASU 2017-04 is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

Our adoption of ASU 2017-04 at the beginning of the first quarter of 2020 did not have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement:

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13 ), which adds and modifies certain disclosure requirements for fair value measurements.

Under the new guidance, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, or valuation processes for Level 3 fair value measurements.

However, public business entities will be required to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and related changes in unrealized gains and losses included in other comprehensive income.

ASU 2018-13 is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

Our adoption of ASU 2018-13 at the beginning of the first quarter of 2020 did not have a significant impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles - Goodwill and Other - Internal-Use Software:

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15) .

This new guidance requires a customer in a cloud computing arrangement to determine which implementation costs to capitalize as assets or expense as incurred.

Capitalized implementation costs related to a hosting arrangement that is a service contract will be amortized over the term of the hosting arrangement, beginning when the module or component of the hosting arrangement is ready for its intended use.

ASU 2018-15 is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

Application of this guidance can be applied either prospectively or retrospectively.

We adopted the new standard on January 1, 2020 on a prospective basis.

Our adoption of ASU 2018-15 at the beginning of the first quarter of 2020 did not have a significant impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU No.

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ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted.

We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

Our adoption of ASU 2019-12 at the beginning of the first quarter of 2021 did not have a significant impact on our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU No.

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Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We will adopt ASU 2020-06 in the first quarter of 2022, and expect to use the full retrospective method, reflecting the application of the new standard in each prior reporting period.

We have started the process of evaluating the impact of the full retrospective adoption of ASU 2020-06 on our consolidated financial statements.

We continue to evaluate the effect of ASU 2020-06 on our consolidated financial statements.

Under ASU 2020-06, we will account for our senior convertible notes entirely as a liability and will no longer separately account for them with liability and equity components.

Therefore, we will no longer recognize a debt discount for the value of the conversion option, instead we will record the face value of our senior convertible notes as a liability on our consolidated balance sheet.

The derecognition of the unamortized debt discount will result in an increase in the Long-term senior convertible notes on our consolidated balance sheet.

The elimination of the separation model for the convertible debt instruments is expected to reduce additional paid-in capital.

As the separation of the embedded conversion feature will no longer be amortized into income as interest expense, non-cash interest expense will decrease by the full amount of the previous accretion of debt discount, offset by incremental interest expense from amortization of debt issuance costs that were allocated to the equity component.

We will finalize our retrospective presentation of our historical financial statements under the new standard in connection with our Form 10-Q filings during fiscal year 2022 and our Form 10-K for the fiscal year ending December 31, 2022.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This guidance is intended improve the accounting for acquired revenue contracts with customers in a business combination.

The new guidance requires that the acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted.

The amendments should be applied prospectively to business combinations occurring on or after the the adoption date.

We are currently evaluating the impact that this guidance will have on our consolidated financial statements.

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The Restated Collaboration Agreement requires us to use commercially reasonable efforts to develop, launch and commercialize the CGM product(s) that are the subject of the collaboration according to certain timing and other objectives, and provides for one executive sponsor from each of Dexcom and Verily to meet periodically and make decisions related to the collaboration (within a limited scope of authority) by consensus.

In consideration of Verily’s performance of its obligations under the joint development plan of the Restated Collaboration Agreement, the licenses granted to us and the amendment of the original agreement, we have made upfront and incentive payments and we will make potential future milestone payments upon the achievement of certain goals.

In the fourth quarter of 2018, we made an initial payment of $ 250.0 million through the issuance of 1,840,943 shares of our common stock.

In consideration of Verily’s performance of its obligations under the joint development plan of the Restated Collaboration Agreement, the licenses granted to us and the amendment of the original agreement, we have made upfront and incentive payments and we will make potential future payments for contingent milestones upon the achievement of certain goals.

In the fourth quarter of 2018, we made an initial payment for an upfront fee of $ 250.0 million through the issuance of 1,840,943 shares of our common stock.

We recorded a $ 217.7 million charge in our consolidated statements of operations during 2018 relating to the issuance of this common stock because this milestone payment did not meet the capitalization criteria.

The amount of the charge was based on our closing stock price of $ 118.28 per share on December 28, 2018, the date on which we obtained the necessary regulatory approvals and the transaction closed.

During 2020 we made no incentive payments, while in 2019 we made incentive payments of $ 3.2 million due to the completion of certain development obligations and we recorded these payments as research and development expense in our consolidated statements of operations.

Additional milestone payments of up to a total of $ 275.0 million may become due and payable by us upon the achievement of future development, product regulatory approval and revenue milestones.

These payments may be paid in cash or shares of our common stock, at our election.

If we elect to make all $ 275.0 million of these payments in shares, we will issue a total of 2,025,036 shares of our common stock, based on the volume weighted average trading price during the 15 consecutive days ending on the date of the Restated Collaboration Agreement.

Alternatively, if we elect to make all $ 275.0 million of these payments in cash, any such cash payment would be equal to the number of shares that would otherwise be issued for the given milestone payment multiplied by the value of our stock on the date the relevant milestone is achieved, adjusted for stock splits, dividends, and the like.

The value of the charge was based on our closing stock price of $ 118.28 per share on December 28, 2018, the date on

which we obtained the necessary regulatory approvals and represents the date the performance- based awards were issued.

In 2019, we made a cash incentive payments of $ 3.2 million due to the completion of certain development obligations and we recorded these payments as research and development expense in our consolidated statements of operations.

Upon the first regulatory approval of our next CGM system, a milestone payment equivalent to 736,377 shares of our common stock will become payable.

Additional sales-based milestone payments equivalent to 1,288,660 shares of our common stock may become due and payable upon achievement of certain revenue targets.

All milestones may be paid in cash or shares of our common stock, at our election.

If we elect to make these milestone payments in cash, any such cash payment would be equal to the number of shares that would otherwise be issued for the given milestone payment multiplied by the value of our stock on the date the relevant milestone is achieved, adjusted for stock splits, dividends, and the like.

We intend to pay the regulatory and sales-based contingent milestones in shares of our common stock.

We account for the contingent milestones payable in shares of our common stock as equity instruments within the scope of ASC Topic 718.

The regulatory and sales-based milestones are accounted for as performance-based awards that vest when the performance conditions have been achieved and will be recognized if and when the achievement of the respective contingent milestones are deemed probable.

The value of the contingent milestones is based on our closing stock price of $ 118.28 per share on December 28, 2018.

In the fourth quarter of 2021, we determined the achievement of the regulatory approval milestone to be probable and recorded an $ 87.1 million research and development charge in our consolidated statements of operations.

This charge is associated with IPR&D obtained in an asset acquisition prior to regulatory approval and therefore does not have an alternative future use.

The sales-based milestones are contingent upon the achievement of certain revenue targets for a future commercial product.

As of December 31, 2021, we have not determined the achievement of the sales-based milestones to be probable and as such, no cost has been recognized for these milestones.

The Restated Collaboration Agreement will continue until December 31, 2028, unless terminated by either party upon uncured material breach of the Restated Collaboration Agreement by the other party.

Upon achievement of the first revenue milestone event and payment of the corresponding milestone fee by us, the term of the Restated Collaboration Agreement will be extended until December 31, 2033.

Upon achievement of the first sales-based milestone event and payment of the corresponding milestone fee by us, the term of the Restated Collaboration Agreement will be extended until December 31, 2033.

Fair Value Measurements

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Fair values obtained from this professional pricing source can also be based on pricing models whereby all significant observable inputs, including maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers or other market related data, are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset.

We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values of our Level 2 marketable securities portfolio balance provided by our investment managers.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2021, classified in accordance with the fair value hierarchy:

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Corporate debt — 224.3 — 224.3

Supranationals — 54.0 — 54.0

Total debt securities, available-for-sale — 1,678.6 — 1,678.6

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Total assets measured at fair value on a recurring basis $ 494.9 $ 2,040.1 $ — $ 2,535.0

(1) Includes assets which are held pursuant to a deferred compensation plan for our executives, which consist mainly of mutual funds.

There were no transfers between Level 1 and Level 2 securities during the years ended December 31, 2020 and 2019.

There were no transfers into or out of Level 3 securities during the years ended December 31, 2020 and 2019.

(1) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.

There were no transfers into or out of Level 3 securities during the twelve months ended December 31, 2021 and 2020.

We hold certain other investments that we do not measure at fair value on a recurring basis.

The carrying values of these investments are not significant and we include them in other assets in our consolidated balance sheets.

It is impracticable for us to estimate the fair value of these investments on a recurring basis due to the fact that these entities are often privately held and limited information is available.

It is impracticable for us to estimate the fair value of these investments on a recurring basis due to the fact that these entities are privately held and limited information is available.

We monitor the information that becomes available from time to time and adjust the carrying values of these investments if there are identified events or changes in circumstances that have a significant adverse effect on the fair values.

Fair Value of Senior Convertible Notes

The fair value, based on trading prices (Level 1), of our senior convertible notes were as follows as of the dates indicated:

The fair value, based on trading prices (Level 1 inputs), of our senior convertible notes were as follows as of the dates indicated:

Fair Value Measurements Using Level 1

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Senior Convertible Notes due 2025 1,432.9 1,219.2

Senior Convertible Notes due 2025 1,219.2 *

Total fair value of outstanding senior convertible notes $ 4,022.5 $ 3,155.6

*Not applicable as no notes were outstanding at this date.

For more information on the carrying values of our senior convertible notes, see Note 5, “Debt.”

For more information on the carrying values of our senior convertible notes, see Senior Convertible Notes in Note 5 to the consolidated financial statements.

Foreign Currency and Derivative Financial Instruments

From time to time we engage in hedging transactions to reduce foreign currency risks.

From time to time we use foreign currency contracts to manage foreign currency risks.

Our foreign currency contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.

The fair values of these derivatives are based on quoted market prices, which are Level 1 inputs, and the derivative instruments are recorded in current assets or current liabilities in our consolidated balance sheets consistent with the nature of the instrument at period end.

Derivative gains and losses are included in interest and other income, net in our consolidated statements of operations.

Derivative gains and losses are included in interest and other income (expense), net in our consolidated statements of operations.

As of December 31, 2021 and December 31, 2020, notional amounts of $ 40.0 million and $ 48.0 million, respectively, were outstanding to hedge certain foreign currency risk.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the twelve months ended December 31, 2021, 2020 and 2019.

Our foreign currency exposures vary but are primarily concentrated in the British Pound, the Euro, and the Canadian Dollar.

Our foreign currency exposures vary but are primarily concentrated in the Australian Dollar, the British Pound, the Canadian Dollar, the Euro and the Malaysian Ringgit.

We monitor the costs and the impact of foreign currency risks upon our financial results as part of our risk management program.

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These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived assets measured at fair value for an impairment assessment.

In general, non-financial assets, including goodwill, intangible assets, and property and equipment, are measured at fair value when there are indicators of impairment and are recorded at fair value only when any impairment is recognized.

We recorded no significant impairment losses during the twelve months ended December 31, 2021, 2020 and 2019.

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Short-Term Marketable Securities

Short-term marketable securities, consisting of debt securities, were as follows as of the dates indicated:

Short-term marketable securities, consisting of available-for-sale debt securities, were as follows as of the dates indicated:

December 31, 2021

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Corporate debt 224.6 — ( 0.3 ) 224.3

Supranationals 54.1 — ( 0.1 ) 54.0

Total debt securities, available-for-sale $ 1,680.6 $ — $ ( 2.0 ) $ 1,678.6

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Total debt securities, available-for-sale $ 1,890.0 $ 0.2 $ ( 0.1 ) $ 1,890.1

As of December 31, 2020 and 2019, all of our debt securities had contractual maturities of less than twelve months .

As of December 31, 2021, the estimated market value of our debt securities with contractual maturities up to 12 months and up to 18 months were $ 1.36 billion and $ 320.7 million, respectively.

As of December 31, 2020, all of our debt securities had contractual maturities of less than 12 months.

Gross realized gains and losses on sales of our debt securities for the twelve months ended December 31, 2021, 2020 and 2019 were not significant.

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We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

The following table reconciles the net gain recognized on marketable equity securities during the twelve months ended December 31, 2020, 2019 and 2018 to the unrealized gain recognized during those periods on equity securities still held at the reporting dates.

Twelve Months Ended

(In millions) 2020 2019 2018

Net gains and losses recognized during the period on equity securities $ — $ ( 4.2 ) $ 80.1

Net gains and losses recognized during the period on equity securities sold during the period — 4.2 ( 44.1 )

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date $ — $ — $ 36.0

Equity Investments

During the twelve months ended December 31, 2021, 2020 and 2019, we had no unrealized gains or losses recognized during the reporting period on equity investments.

Realized gains from the sale of an equity investment were $ 11.6 million for the twelve months ended December 31, 2021.

Accounts Receivable

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Total accounts receivable, net $ 514.3 $ 428.5

Reserve for prompt payment cash discounts recorded against accounts receivable, excluding allowance for doubtful accounts, was $ 13.7 million, $ 15.9 million, $ 4.6 million as of December 31, 2021, 2020, and 2019, respectively.

(In millions) 2021 2020

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Total inventory $ 357.3 $ 234.7

During the twelve months ended December 31, 2020 and 2019, we recorded excess and obsolete inventory charges of $ 24.4 million and $ 14.1 million, respectively, in cost of sales as a result of our ongoing assessment of sales demand, inventory on hand for each product and the continuous improvement and innovation of our products.

During the twelve months ended December 31, 2018, we recorded excess and obsolete inventory charges of $ 7.3 million in cost of sales primarily as a result of the approval and launch of our G6 system and our ongoing assessment of sales demand and the continuous improvement and innovation of our products.

During the twelve months ended December 31, 2021, 2020 and 2019, we recorded excess and obsolete inventory charges of $ 28.1 million, $ 24.4 million and $ 14.1 million respectively, in cost of sales as a result of our ongoing assessment of sales demand, inventory on hand for each product and the continuous improvement and innovation of our products.

The raw materials inventory balance of $ 145.2 million as of December 31, 2021 includes $ 5.5 million of pre-launch inventory related to our next CGM product.

Prepaid and Other Current Assets

Prepaid and other current assets were $ 81.6 million and $ 53.9 million as of December 31, 2021 and 2020, respectively.

The increase in prepaid assets is driven primarily due to an increase in software and inventory related prepaid expenses.

Property and Equipment

(In millions) 2021 2020

$ 15.6 $ 15.6

Furniture and fixtures 30.7 15.3

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Total property and equipment, net $ 801.8 $ 515.3

(1) Represents our finance lease right-of-use assets.

(1) Represents finance lease right-of-use assets.

Depreciation expense related to property and equipment for the twelve months ended December 31, 2021, 2020 and 2019 was $ 96.3 million, $ 64.0 million and $ 46.9 million, respectively.

Loss on disposal of property and equipment during the twelve months ended December 31, 2021, 2020 and 2019 recorded in operating expenses was $ 24.5 million, $ 13.6 million and $ 10.5 million, respectively.

Intangibles and Other Assets, Net

We recorded net intangible assets of $ 22.6 million, consisting primarily of customer-related relationships, as result of an acquisition in the third quarter of 2021.

Accounts Payable and Accrued Liabilities

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Accrued warranty 12.9 11.7

Contractual obligations 15.0 —

Other accrued liabilities 47.9 43.8

Total accounts payable and accrued liabilities $ 573.0 $ 481.1

Accrued Payroll and Related Expenses

(In millions) 2021 2020

Accrued wages, bonus and taxes $ 91.8 $ 87.7

Other accrued employee benefits 33.4 26.6

Total accrued payroll and related expenses $ 125.2 $ 114.3

Accrued Warranty

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Contractual obligations — 12.6

Deferred tax liabilities 5.9 —

Other liabilities 27.1 14.3

Total other liabilities $ 80.9 $ 20.1

Total other long-term liabilities $ 90.0 $ 80.9

Senior Convertible Notes

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Senior Convertible Notes due 2025 1,207.5 1,207.5

Senior Convertible Notes due 2025 1,207.5 —

Total principal amount 1,999.8 2,057.5

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Remaining amortization period of debt discount on the liability component:

Senior Convertible Notes due 2022 * 2.5 years

Senior Convertible Notes due 2023 1.9 years 2.9 years

Senior Convertible Notes due 2025 4.9 years *

* Not applicable as no notes were outstanding at this date.

Senior Convertible Notes due 2025 3.9 years 4.9 years

For our senior convertible notes for which the if-converted value exceeded the principal amount, the amount in excess of principal is as follows as of the dates indicated:

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Total by which the notes’ if-converted value exceeds their principal amount $ 1,939.1 $ 1,077.5

* Not applicable as no notes were outstanding at this date.

The following table summarizes the components of interest expense and the effective interest rates for each of our senior convertible notes for the periods shown.

(Dollars in millions) Twelve Months Ended

2020 2019 2018

Twelve Months Ended

(Dollars in millions) 2021 2020 2019

Cash interest expense:

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(2) The effective interest rate presented represents the rate applicable for the period outstanding.

The Senior Convertible Notes due 2022 were fully redeemed by July 31, 2020, as described below.

Our $ 400.0 million aggregate principal amount of unsecured senior convertible notes issued in June 2017 with a stated interest rate of 0.75 % and maturity date of May 15, 2022 (the 2022 Notes) were repurchased and converted by August 2020.

* Not applicable as no notes were outstanding at this date.

0.75% Senior Convertible Notes due 2022

In June 2017, we completed an offering of $ 400.0 million aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.75 % and a maturity date of May 15, 2022 (the 2022 Notes).

The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $ 389.0 million.

The initial conversion rate of the 2022 Notes was 10.0918 shares per $1,000 principal amount of notes, which was equivalent to a conversion price of approximately $ 99.09 per share, subject to adjustments.

The 2022 Notes could be settled in cash, stock, or a combination thereof, solely at our discretion.

We used the if-converted method for assumed conversion of the 2022 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

Since upon conversion by the holders we could elect to settle such conversion in shares of our common stock, cash, or a combination thereof, we accounted for the cash conversion option as an equity instrument classified to stockholders’ equity.

As a result, we recognized $ 70.6 million in additional paid-in-capital, net of debt issuance costs, during 2017.

No principal payments were due on the 2022 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2022 Notes included customary terms and covenants, including certain events of default after which the 2022 Notes could be due and payable immediately.

Conversion Rights at the Option of the Holders

In the event of a fundamental change (as defined in the indenture related to the 2022 Notes), holders of the 2022 Notes had the right to require us to repurchase for cash all or a portion of their notes at a price equal to 100 % of the principal amount of the 2022 Notes, plus any accrued and unpaid interest.

Holders of the 2022 Notes who would convert their notes in connection with a make-whole fundamental change (as defined in the indenture) or following the delivery by Dexcom of a notice of redemption were, under certain circumstances, entitled to an increase in the conversion rate.

Prior to 5:00 p.m., New York City time, on the business day immediately preceding February 15, 2022, holders of the 2022 Notes could convert all or a portion of their notes, in multiples of $1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after September 30, 2017 (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or not consecutive) during

the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the 2022 Notes on each such trading day;

(2) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2022 Notes for each day of that five day consecutive trading day period was less than 98 % of the product of the last reported sale price of Dexcom’s common stock and the applicable conversion rate of the Notes on such trading day;

(3) if we called any or all of the Notes for redemption, at any time prior to the close on business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate transactions.

On or after February 15, 2022, until 5:00 p.m., New York City time, on the business day immediately preceding the maturity date, holders of the 2022 Notes could convert all or a portion of their notes regardless of the foregoing circumstances.

Circumstance (1) listed above occurred during the quarters ended December 31, 2019 and March 31, 2020.

As a result, the 2022 Notes became convertible at the option of the holder from January 1, 2020 through June 30, 2020.

On June 29, 2020, Dexcom issued a notice of redemption to the holders of its outstanding 2022 Notes which is described below.

Conversion Rights at Our Option

On or after May 15, 2020, Dexcom could redeem for cash all or part of the 2022 Notes, at its option, if the last reported sale price of our common stock had been at least 140 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provided notice of redemption.

The redemption price would be equal to 100 % of the principal amount of the 2022 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Repurchase, Conversion, and Redemption of 2022 Notes

In May 2020, we used approximately $ 282.6 million of the net proceeds from the 2025 Notes offering described below and issued 1,953,067 shares of Dexcom common stock to repurchase $ 260.0 million principal amount outstanding of the 2022 Notes and the associated conversion feature of the repurchased notes (which was recorded in additional paid-in capital).

In addition, holders of 2022 Notes with a principal amount of $ 140.0 million exercised their option to convert their 2022 Notes during the twelve months ended December 31, 2020.

Holders of $ 140.0 million in aggregate principal amount of the 2022 Notes elected conversion at their option during the twelve months ended December 31, 2020.

We settled these conversions by issuing 1,412,497 shares of our common stock.

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The loss on extinguishment of debt included the unamortized debt issuance costs for the 2022 Notes.

On June 29, 2020, we issued a notice of redemption to the holders of our outstanding 2022 Notes pursuant to which we would redeem the outstanding 2022 Notes for cash at a price of 100 % of the principal amount of the 2022 Notes plus accrued and unpaid interest, if any, on July 31, 2020, unless earlier converted.

The principal amount of 2022 Notes actually redeemed for cash was not significant.

0.75% Senior Convertible Notes due 2023

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We use the if-converted method for assumed conversion of the 2023 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

Since upon conversion by the holders we may elect to settle such conversion in shares of our common stock, cash, or a combination thereof, we accounted for the cash conversion option as an equity instrument classified to stockholders’ equity.

As a result, we recognized $ 171.6 million in additional paid-in capital, net of debt issuance costs, during 2018.

No principal payments are due on the 2023 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2023 Notes includes customary terms and covenants, including certain events of default after which the 2023 Notes may be due and payable immediately.

As a result, we recognized $ 171.6 million in additional paid-in capital, net of debt issuance costs, during 2018.

Holders of $ 57.7 million in aggregate principal amount of the 2023 Notes elected conversion at their option during the twelve months ended December 31, 2021.

We settled these conversions by issuing a combination of common stock and treasury stock.

We issued 350,778 shares to settle the converted 2023 Notes during the twelve months ended December 31, 2021, of which 198,647 shares were issued out of treasury stock.

As a result of the elected conversions, we recorded a loss on extinguishment of debt of $ 1.4 million.

We received 241,845 shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

Conversion Rights at the Option of the Holders

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As a result, the 2023 Notes were convertible at the option of the holder from January 1, 2021 through December 31, 2021.

actual conversions during that period were not significant.

Circumstance (1) listed above also occurred during the quarter ended December 31, 2020 and as a result, the 2023 Notes will be convertible at the option of the holder from January 1, 2021 through March 31, 2021.

Circumstance (1) listed above also occurred during the quarter ended December 31, 2021 and as a result, the 2023 Notes will remain convertible at the option of the holder from January 1, 2022 through March 31, 2022.

See above for a description of conversion activity related to the 2023 Notes.

Conversion Rights at Our Option

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The strike price of the 2023 Note Hedge initially corresponds to the conversion price of the 2023 Notes and is subject to certain adjustments under the terms of the 2023 Note Hedge.

An assumed exercise of the 2023 Note Hedge by us is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share.

An assumed exercise of the 2023 Note Hedge by us is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive

with respect to the calculation of diluted earnings per share.

See above for a description of conversion activity related to the 2023 Notes and shares received as the result of exercising a portion of the 2023 Note Hedge.

2023 Warrants

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We received $ 183.8 million in cash proceeds from the sale of the 2023 Warrants, which we recorded in additional paid-in capital during 2018.

The 2023 Warrants could have a dilutive effect on our

earnings per share to the extent that the price of our common stock during a given measurement period exceeds the strike price of the 2023 Warrants.

The 2023 Warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeds the strike price of the 2023 Warrants.

The strike price of the 2023 Warrants is initially $ 198.38 per share and is subject to certain adjustments under the terms of the warrant agreements.

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We use the if-converted method for assumed conversion of the 2025 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

As a result, we recognized $ 289.4 million in additional paid-in-capital, net of debt issuance costs, during 2020.

No principal payments are due on the 2025 Notes prior to maturity.

Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2025 Notes includes customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately.

As a result, we recognized $ 289.4 million in additional paid-in-capital, net of debt issuance costs, during 2020.

Conversion Rights at the Option of the Holders

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Terms of the Revolving Credit Agreement

On December 19, 2018, we entered into an amended and restated revolving credit agreement which was subsequently amended on May 11, 2020 (as amended, the Credit Agreement).

The Credit Agreement provides for available principal amount of $ 200.0 million which can be increased up to $ 500.0 million at our option subject to customary conditions and approval of our lenders.

Borrowings under the Credit Agreement are available for general corporate purposes, including working capital and capital expenditures.

Information related to availability and outstanding borrowings on our Credit Agreement is as follows as of the date indicated:

In October 2021, we entered into a Second Amended and Restated Credit Agreement (the Amended Credit Agreement), which amended and restated the credit agreement we had previously entered into in December 2018 and amended in May 2020 (the Credit Agreement).

The Amended Credit Agreement is a five-year revolving credit facility that provides for an available principal amount of $ 200.0 million, which can be increased up to $ 500.0 million at our option subject to customary conditions and approval of our lenders.

The Amended Credit Agreement will mature on October 13, 2026.

Borrowings under the Amended Credit Agreement are available for general corporate purposes, including working capital and capital expenditures.

Information related to availability and outstanding borrowings on our Amended Credit Agreement is as follows as of the date indicated:

(In millions) 2021

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Total available balance $ 192.7

Revolving loans under the Credit Agreement bear interest at our choice of one of two base rates plus a range of applicable margin rates that are based on our leverage ratio.

The first base rate is the highest of (a) the publicly announced JPMorgan Chase prime rate, (b) the federal funds rate, or (c) the overnight bank funding rate, and the applicable margin rate ranges from 0.375 % to 1.000 %.

The second base rate is a LIBOR-based rate, and the applicable margin rate ranges from 1.375 % to 2.000 %.

Revolving loans under the Amended Credit Agreement bear interest at our choice of one of three base rates plus a range of applicable rates that are based on our leverage ratio.

The first base rate is the Alternate Base Rate (“ABR”) and loans comprising each ABR borrowing shall bear interest at the ABR plus the applicable rate between 0.375 % to 1.000 %.

The ABR is the highest of (a) the prime rate last quoted by The Wall Street Journal, (b) the Federal Reserve Bank of New York (“NYFRB”) rate plus one half of 1%, and (c) the Adjusted London Interbank Offered Rate (“LIBO Rate”) for a one month interest period plus 1 %.

The second base rate is the Term Benchmark rate and loans comprising each Term Benchmark borrowing shall bear interest at the Adjusted LIBO Rate, the Adjusted Euro Interbank Offered Rate (“EURIBOR Rate”), the Adjusted Stockholm Interbank Offered Rate (“STIBOR Rate”), the Adjusted Canadian Dollar Offered Rate (“CDOR”), Adjusted Australian Dollar (“AUD”) Rate, the Adjusted Bank Bill Benchmark Rate (“BKBM Rate”) or the Adjusted Tokyo Interbank Offered Rate (“TIBOR Rate”), as applicable based on the currency denomination borrowed, plus the applicable rate between 1.375 % to 2.000 % .

The third base rate is the Daily Simple RepoFunds Rate (“RFR”) and loans comprising each Daily Simple RFR Loan shall bear interest at a rate per annum equal to the applicable Daily Simple RFR plus the applicable rate between 1.375 % to 2.000 % plus an additional 0.0326 %.

We will also pay a commitment fee of between 0.175 % and 0.250 %, payable quarterly in arrears, on the average daily unused amount of the revolving facility based on our leverage ratio.

The Credit Agreement will mature on the earlier to occur of (i) December 19, 2023 or (ii) 91 days prior to the maturity date of the 2022 Notes or (iii) 91 days prior to the maturity date of the 2023 Notes if both (a) the aggregate outstanding principal amount of the 2022 Notes or the 2023 Notes, as applicable, is greater than EBITDA for the period of four consecutive fiscal quarters ending prior to such date and (b) unrestricted domestic cash on hand is less than the aggregate outstanding principal amount of the 2022 Notes or the 2023 Notes, as applicable, plus $ 100.0 million.

Our obligations under the Credit Agreement are guaranteed by our existing and future wholly-owned domestic subsidiaries, and are secured by a first-priority security interest in substantially all of the assets of Dexcom and the guarantors, including all or a portion of the equity interests of our domestic subsidiaries and first-tier foreign subsidiaries but excluding real property and intellectual property (which is subject to a negative pledge).

The Credit Agreement contains covenants that limit certain indebtedness, liens, investments, transactions with affiliates, dividends and other restricted payments, subordinated indebtedness and amendments to subordinated indebtedness documents, and sale and leaseback transactions of Dexcom or any of its domestic subsidiaries.

The Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum fixed charge coverage ratio.

Our obligations under the Amended Credit Agreement are guaranteed by our existing and future wholly-owned domestic subsidiaries, and are secured by a first-priority security interest in substantially all of the assets of Dexcom and the guarantors, including all or a portion of the equity interests of our domestic subsidiaries and first-tier foreign subsidiaries but excluding real property and intellectual property (which is subject to a negative pledge).

The Amended Credit Agreement contains covenants that limit certain indebtedness, liens, investments, transactions with affiliates, dividends and other restricted payments, subordinated indebtedness and amendments to subordinated indebtedness documents, and sale and leaseback transactions of Dexcom or any of its domestic subsidiaries.

The Amended Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum fixed charge coverage ratio.

We were in compliance with these covenants as of December 31, 2021.

Leases And Other Commitments

We lease office, manufacturing and warehouse space facilities under various domestic and international non-cancellable operating lease arrangements that expire at various times through December 2030.

We also have one land lease that expires in 2080.

Certain of our leases have renewal options which allow us to extend the lease term typically between three and five years per option and some of our leases have multiple options to extend.

The remaining lease terms of our leases range from less than one year to approximately twenty years and represent the non-cancellable periods of the leases, including extension options that we determined are reasonably certain to be exercised.

We lease office, manufacturing and warehouse space facilities under various domestic and international non-cancellable operating and finance lease arrangements.

We also have a land lease in Penang, Malaysia, that expires in 2080, for the build-out of our international manufacturing facility.

Our leases, excluding our land lease in Penang, Malaysia, have remaining lease terms of up to nineteen years , some of which include one or more options to extend the leases for up to five years per option.

Options to extend the lease are included in the lease liability if they are reasonably certain of being exercised.

Leases are classified as operating or financing at lease commencement.

We adopted ASC 842 utilizing the modified retrospective transition method through a $ 2.1 million cumulative-effect adjustment to accumulated deficit at the beginning of the first quarter of 2019.

We will continue to report financial information for fiscal years prior to 2019 under the previous lease accounting standards and as such prior comparative periods have not been recast.

We elected the package of practical expedients permitted under the transition guidance in the new standard, which allowed us to carry forward the historical classification of leases that were in place as of January 1, 2019.

Under the previous lease accounting standards we were deemed the owner of our Mesa, Arizona building during the construction period.

As a result of our adoption of ASC 842, we have de-recognized the estimated fair value of the building shell and the related lease liability as of December 31, 2018 and recorded the difference between the asset and liability as an adjustment to retained earnings at the beginning of the first quarter of 2019.

In addition, as a result of our adoption of ASC 842 we recorded operating lease right-of-use assets of $ 26.7 million, finance lease right-of-use assets of $ 15.3 million, operating lease liabilities of $ 40.4 million and finance lease liabilities of $ 15.9 million in our consolidated balance sheets at the beginning of the first quarter of 2019, with no material impact to our consolidated statements of operations.

Operating lease right-of-use assets and lease liabilities are presented separately in our consolidated balance sheets.

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Long-term portion $ 98.6 $ 57.0

(1) Total future lease cost excludes $ 16.3 million of legally binding minimum lease payments for leases signed but not yet commenced .

Certain lease agreements require us to return designated areas of leased space to its original condition upon termination of the lease agreement, for which we record an asset retirement obligation and a corresponding capital asset in an amount equal to the estimated fair value of the obligation.

In subsequent periods, the asset retirement obligation is accreted for the change in its present value and the capitalized asset is depreciated, both over the term of the associated lease agreement.

Asset retirement obligations of $ 4.5 million and $ 2.6 million as of December 31, 2020 and 2019, respectively, are included under “Other long-term liabilities” in our consolidated balance sheets.

Asset retirement obligations of $ 7.4 million and $ 4.5 million as of December 31, 2021 and 2020, respectively, are included in other long-term liabilities in our consolidated balance sheets.

The components of lease expense for the twelve months ended December 31, 2021, 2020 and 2019 were as follows:

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(2) Variable lease costs are primarily related to common area maintenance charges and property taxes .

Prior to January 1, 2019, we recorded operating lease rent expense under ASC 840 on a straight-line basis over the non-cancellable lease term.

Rent expense for the twelve months ended December 31, 2018 was $ 12.5 million .

Other information related to leases was as shown in the table below.

All figures include the leases recorded at the beginning of the first quarter of 2019 as a result of our adoption of ASC 842.

Other information related to our leases is as follows:

Twelve Months Ended

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Weighted average remaining lease term:

Operating leases 6.1 years 6.2 years

Finance leases 23.3 years 13.3 years

Operating leases 5.5 years 6.1 years 6.2 years

Finance leases 15.9 years 23.3 years 13.3 years

Weighted average discount rate:

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Finance leases 5.1 % 5.0 % 5.0 %

Amortization of operating lease right-of-use asset included in cash flows from operating activities in our consolidated statements of cash flows was $ 12.4 million for the twelve months ended December 31, 2020 and $ 9.1 million for the twelve months ended December 31, 2019.

Amortization of operating lease right-of-use asset included in cash flows from operating activities in our consolidated statements of cash flows was $ 18.0 million for the twelve months ended December 31, 2021, $ 12.4 million for the twelve months ended December 31, 2020 and $ 9.1 million for the twelve months ended December 31, 2019.

Purchase Commitments

We are party to various purchase arrangements related to our manufacturing and research and development activities.

As of December 31, 2020, we had approximately $ 335.6 million of open purchase orders and contractual obligations in the ordinary course of business, the majority of which are due within one year .

We had approximately $ 324.1 million as of December 31, 2021 and $ 335.6 million as of December 31, 2020 of open purchase orders and contractual obligations in the ordinary course of business, the majority of which are due within one year .

Contingencies

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In addition, from time to time we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters.

We do not believe we are party to any currently pending legal proceedings, the outcome of which could have a material adverse effect on our business, financial condition or results of operations.

During the fiscal year ended December 31, 2021, we and certain Abbott entities served complaints for patent infringement, validity and other patent related actions against each other in multiple jurisdictions, inside and outside the United States.

We intend to vigorously pursue our claims and defenses in these cases to protect our intellectual property and to defend against Abbott’s infringement allegations.

We do not believe we are party to any other currently pending legal proceedings, the outcome of which could have a material adverse effect on our business, financial condition or results of operations.

There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, financial condition or results of operations.

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UK 102.4 113.2 Indefinite

Federal 73.1 54.4 2026

California $ 66.2 $ 52.7 Indefinite

R&D credits 80.1 73.1 2026

Foreign tax credits 1.5 — 2031

California R&D credits $ 81.4 $ 66.2 Indefinite

On June 29, 2020, California’s Governor Newsom signed AB 85 into law, suspending California net operating loss utilization and imposing a $5.0 million cap on the amount of business incentive tax credits companies can utilize, effective for tax years 2020 through 2022.

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research and development tax credits that will expire unused.

The related deferred tax assets have been removed from the components of our deferred tax assets as summarized in the table below.

The related deferred tax

assets have been removed from the components of our deferred tax assets as summarized in the table below.

The tax benefits related to the remaining federal and state net operating losses and tax credit carryforwards may be further limited or lost if future cumulative changes in ownership exceed 50% within any three-year period.

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Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions.

Prior to 2020, due to our U.S.

operating losses and earnings volatility in previous years, which did not allow sustainable profitability, we had established and maintained a full valuation allowance on our deferred tax assets.

In 2020, we achieved three years of cumulative income.

We analyzed both positive and negative evidence, and as a result, we released our valuation allowance on our deferred tax assets, with the exception of our California research and development tax credits and certain foreign intangible assets, as it is more likely than not that those deferred tax assets will not be realized.

(In millions) 2021 2020

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Accrued liabilities and reserves 105.5 110.3

Convertible debt — 1.7

Collaborative agreement milestone accrual (1)

Total gross deferred tax assets 375.4 364.1

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Net deferred tax assets (liabilities) $ 214.9 $ 216.4

We released $ 287.2 million of valuation allowance related to our deferred tax assets, of which $ 285.5 million was recorded to income tax benefit and $ 1.7 million was recorded to additional paid-in capital.

We maintain a valuation allowance of $ 55.5 million against our California research and development tax credits and certain foreign intangible assets.

(1) This amount is related to the $ 87.1 million charge recorded in the fourth quarter of 2021 associated with our Restated Collaboration Agreement with Verily, as discussed in Note 2 to the consolidated financial statements.

The current year change in net deferred tax assets of $ 1.5 million is primarily comprised of purchase accounting adjustments of $ 7.3 million recorded in goodwill and $ 0.5 million tax effect of unrealized loss on investments recorded in other comprehensive income, offset by $ 4.9 million of deferred tax benefit recorded through income tax expense and $ 1.1 million of convertible debt adjustments recorded as a reduction to additional paid-in capital.

We maintain a valuation allowance of $ 69.9 million against our California research and development tax credits, foreign tax credits, and certain foreign intangible assets.

The reconciliation between our effective tax rate on income (loss) from continuing operations and the statutory rate is as follows:

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Research and development credits ( 28.9 ) ( 24.4 ) ( 10.8 )

Foreign tax credit ( 3.7 ) — —

Foreign rate differential ( 0.1 ) ( 0.1 ) 5.6

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Change in statutory tax rates ( 10.0 ) ( 4.1 ) —

Impact of adoption of ASU 2016-16 — — ( 13.3 )

Impact of Tax Cuts and Jobs Act of 2017 — — ( 0.4 )

Other ( 0.4 ) 0.1 ( 1.0 )

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$ 19.2 $ ( 268.6 ) $ 3.1

On June 22, 2020, the Supreme Court effectively resolved the Altera Corp.

Commissioner case when it denied its petition to hear the case.

argued that the Treasury Department’s regulation requiring related companies to share the cost of stock-based employee compensation is arbitrary, and thus invalid.

The denial to hear the case supports that related companies should share in the cost of stock-based employee compensation.

Pursuant to an Altera clause in our cost-sharing agreement, we recalculated and retroactively billed stock-based compensation for years 2016-2020, resulting in an additional $ 32.0 million cost-share payment.

The 2017 Tax Cuts and Jobs Act included provisions for tax on Global Intangible Low-taxed Income (“GILTI”) effective for tax years of foreign corporations beginning after December 31, 2017.

We have elected to account for GILTI in the period the tax is incurred.

We have elected to account for Global Intangible Low-Taxed Income (“GILTI”) in the period the tax is incurred.

The following table summarizes the activity related to our gross unrecognized tax benefits:

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Increases related to current year tax positions 4.5

Decrease related to Tax Cuts and Jobs Act of 2017 —

Balance at December 31, 2019 29.5

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Balance at December 31, 2020 36.6

Decreases related to prior year tax positions ( 0.9 )

Increases related to prior year tax positions 0.4

Increases related to current year tax positions 9.8

Balance at December 31, 2021 $ 46.8

Of the total unrecognized tax benefits at December 31, 2020, 2019, and 2018, $ 23.5 million, $ 0 , and $ 0 , respectively, would reduce our annual effective tax rate if recognized.

Of the total unrecognized tax benefits at December 31, 2021, 2020, and 2019, $ 29.5 million, $ 23.5 million, and $ 0 , respectively, would reduce our annual effective tax rate if recognized.

Interest and penalties are classified as a component of income tax expense and were not material for any period presented.

We conduct business globally and consequently file income tax returns and are subject to routine compliance audits in numerous jurisdictions including those material jurisdictions listed in the following table.

We are currently under a routine examination by the Federal Central Office in Germany for fiscal years 2016-2018.

We do not expect any material adjustments as a result of this audit.

Although the timing and outcome of audit settlements are uncertain, it is unlikely there will be a significant reduction of the uncertain tax benefits in the next twelve months.

Due to our global business activities, we file income tax returns and are subject to routine compliance audits in numerous jurisdictions, including those material jurisdictions listed in the following table.

net operating losses generated since 1999 and utilized in recent years are open for examination.

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We operate under a tax holiday in the Philippines, which is effective through December 31, 2023, and may be extended for another three years if certain additional requirements are satisfied.

The tax holiday is conditional upon remaining in good standing, committing no violation of PEZA Rules and Regulations, pertinent circulars and directives.

The impact of this tax holiday decreased foreign taxes by $ 0.1 million in 2020.

We have been granted an investment tax allowance incentive by the Malaysian Investment Development Authority (MIDA) in Malaysia, which is effective through December 31, 2025.

The tax incentive had no effect on foreign taxes during 2020.

The tax holiday is conditional upon remaining in good standing, committing no violation of Philippine Economic Zone Authority Rules and Regulations, pertinent circulars and directives.

The impact of this tax holiday was immaterial in in 2021 and 2020.

We have been granted an investment tax

allowance incentive by the Malaysian Investment Development Authority (MIDA) in Malaysia, which is effective through December 31, 2025.

The tax incentive had no effect on foreign taxes during 2021 or 2020.

We have approximately $ 15.3 million of undistributed earnings attributable to operations in our controlled foreign corporations as of December 31, 2021.

We assert that any foreign earnings will be indefinitely reinvested.

Accordingly, we have not recorded a liability for taxes associated with any future distributions of these undistributed earnings as any distribution would be immaterial.

Accordingly, we have not recorded a liability for taxes associated with these undistributed earnings.

If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S.

state income taxes.

Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.

Employee Benefit Plans and Stockholders’ Equity

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We match 50 % of contributions up to 5 % of annual compensation.

Total matching contributions were $ 6.7 million and $ 4.8 million for the twelve months ended December 31, 2020, and 2019, respectively.

Employee Stock Purchase Plan, or ESPP

Under the 2015 Employee Stock Purchase Plan (the 2015 ESPP), amended in December 2019, eligible employees can purchase shares of our common stock at semi-annual intervals through periodic payroll deductions during defined Offering

A total of up to 1.5 million shares may be issued under the 2015 ESPP and it expires upon the earliest to occur of (a) termination of the 2015 ESPP by our board of directors, (b) issuance of all of the shares of common stock reserved for issuance under the plan, or (c) May 28, 2025.

Payroll deductions may not exceed 10 % of the participant’s cash compensation subject to certain limitations, and the purchase price will not be less than 85 % of the lower of the fair market value of the common stock at either the beginning of the applicable Offering Period or the Purchase Date.

We issued 89,194 and 150,408 and 189,904 shares of common stock under the 2015 ESPP during the twelve months ended December 31, 2020, 2019 and 2018, respectively.

Total matching contributions were $ 9.9 million, $ 6.7 million and $ 4.8 million for the twelve months ended December 31, 2021, 2020 and 2019, respectively.

Employee Stock Purchase Plan (“ESPP”)

Under the 2015 Employee Stock Purchase Plan (the 2015 ESPP), amended in December 2019, eligible employees may purchase shares of our common stock at semi-annual intervals through periodic payroll deductions during defined Offering Periods.

Payroll deductions may not exceed 10 % of the participant’s cash compensation subject to certain limitations, and the purchase price will be 85 % of the lower of the fair market value of the common stock at either the beginning of the applicable Offering Period or the Purchase Date.

A total of 1.5 million shares of common stock are reserved for issuance under the 2015 ESPP.

The 2015 ESPP shall continue until the earlier to occur of (a) termination of the 2015 ESPP by our Board of Directors, (b) issuance of all of the shares of common stock reserved for issuance under the plan, or (c) May 28, 2025.

We issued 59,810 , 89,194 and 150,408 shares of common stock under the 2015 ESPP during the twelve months ended December 31, 2021, 2020 and 2019, respectively.

As of December 31, 2021, approximately 0.8 million shares remained available for future issuance under the 2015 ESPP.

Equity Incentive Plans

In May 2015, we adopted the Amended and Restated 2015 Equity Incentive Plan (the 2015 Plan), which replaced our 2005 Equity Incentive Plan and provides for the grant of incentive and nonstatutory stock options, restricted stock, stock bonuses, stock appreciation rights, and restricted stock units to employees, directors or consultants of the Company.

In May 2015, we adopted the Amended and Restated 2015 Equity Incentive Plan (the 2015 Plan), which replaced our 2005 Equity Incentive Plan and provides for the grant of incentive and nonstatutory stock options, restricted stock, stock bonuses, stock appreciation rights, restricted stock units or RSUs, and performance stock units or PSUs to employees, directors or consultants of the Company.

On May 30, 2019, our stockholders approved an increase to the maximum number of shares that may be issued under the 2015 Plan.

We are permitted to issue up to 9.8 million shares under the 2015 Plan.

We are authorized to issue up to 9.8 million shares of our common stock under the 2015 Plan.

As of December 31, 2021, approximately 4.2 million shares remained available for future issuance under the 2015 Plan.

RSU awards typically vest in annual installments over three or four years and vesting is subject to continued service.

PSUs are granted to a group of senior officers and the number of shares of our common stock to be received at vesting will range from 0 % to 200 % of the target award based on the achievement of pre-established performance and market goals.

PSUs vest three years from the date of grant, subject to continued employment through that date.

Treasury Stock

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Conversely, if the proceeds from the sale are less than the average price we paid to acquire the shares, we record a decrease in additional paid-in capital to the extent of increases previously recorded for similar transactions and a decrease in retained earnings for any remaining amount.

We issue new shares of common stock to satisfy RSU vesting under our employee equity incentive plans.

We have not yet determined the ultimate disposition of the 0.8 million shares that we repurchased in 2018, and consequently we continue to hold them as treasury shares rather than retiring them.

We issue new shares of common stock to satisfy RSU and PSU vesting under our employee equity incentive plans.

We repurchased 0.8 million shares of our common stock in 2018.

No shares of our common stock were repurchased during 2019 or 2020.

Treasury stock increased by 43,198 net shares during 2021 as a result of shares received from the exercise of a portion of the 2023 Note Hedge less the issuance of shares to settle the converted 2023 Notes.

We have not yet determined the ultimate disposition of our treasury shares and consequently we continue to hold them as treasury shares rather than retiring them.

Stock Options

We have not granted any stock options since 2010.

As of December 31, 2020, we have no stock options outstanding.

The total intrinsic value of stock options exercised as of the date of exercise was as follows:

Twelve Months Ended

(In millions) 2020 2019 2018

Intrinsic value of options exercised $ 7.9 $ 7.4 $ 30.0

Restricted Stock Units (RSUs)

RSU awards typically vest annually over three or four years and vesting is subject to continued services.

A summary of our RSU activity for the twelve months ended December 31, 2020, 2019 and 2018 is as follows:

(In millions except weighted average grant date fair value) Shares Weighted

As of December 31, 2021 and December 31, 2020, we had no stock options outstanding.

The total intrinsic value of stock options exercised during the twelve months ended December 31, 2020 and 2019 was $ 7.9 million and $ 7.4 million, respectively.

Equity Award Activity

A summary of RSU and PSU activity under the 2015 Plan for the twelve months ended December 31, 2021, 2020 and 2019 is as follows:

Nonvested RSU and PSU Activity

(In millions except weighted average grant date fair value) Shares Available for Grant Shares Weighted

Fair Value Aggregate

Intrinsic Value

Nonvested at December 31, 2017 2.7 $ 70.68

Balance at December 31, 2018 3.2 2.7 $ 69.19

Additional shares authorized 2.2 —

Granted ( 0.7 ) 0.7 144.37

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Forfeited 0.2 ( 0.2 ) 83.45

Nonvested at December 31, 2018 2.7 69.19 $ 319.0

Balance at December 31, 2019 4.9 1.8 96.63 $ 392.0

Granted ( 0.5 ) 0.5 300.36

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Forfeited 0.1 ( 0.1 ) 137.44

Nonvested at December 31, 2019 1.8 96.63 392.0

Balance at December 31, 2020 4.5 1.2 183.51 430.6

Granted ( 0.4 ) 0.4 351.32

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Forfeited 0.1 ( 0.1 ) 279.12

Nonvested at December 31, 2020 1.2 $ 183.51 $ 430.6

The total vest-date fair value of RSUs vested was $ 331.8 million, $ 207.2 million and $ 120.9 million for the twelve months ended December 31, 2020, 2019 and 2018, respectively.

Common Stock Reserved for Future Issuance

Shares of common stock reserved for future issuance were as follows as of the dated indicated:

(In millions) 2020 2019

Stock awards under our plans:

Unvested restricted stock units 1.2 1.8

Reserved for future grant 4.5 4.9

Employee Stock Purchase Plan 0.8 0.9

Total 6.5 7.6

Balance at December 31, 2021 4.2 0.8 $ 307.86 $ 411.3

The total vest-date fair value of RSUs and PSUs that vested during the twelve months ended December 31, 2021, 2020 and 2019 was $ 284.5 million, $ 331.8 million and $ 207.2 million, respectively.

As of December 31, 2021, 0.7 million unvested RSUs and 0.1 million unvested PSUs were outstanding under the 2015 Plan.

Share-based Compensation

The following table summarizes share-based compensation expense related to restricted stock units and employee stock purchases under the ESPP for the twelve months ended December 31, 2020, 2019 and 2018:

Our share-based compensation expense is associated with RSUs, PSUs, and the 2015 ESPP.

The following table summarizes the share-based compensation expense included in our consolidated statements of operations for the periods shown.

Twelve Months Ended

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Total share-based compensation expense $ 113.4 $ 119.4 $ 102.7

We value RSUs at the date of grant using the intrinsic value method.

We estimate the fair value of PSUs at the date of grant using the intrinsic value method and the probability that the specified performance criteria will be met.

We estimate the fair value of ESPP purchase rights on the date of grant using the Black-Scholes option pricing model and the assumptions below for the specified reporting periods.

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Risk free interest rate 0.06 % - 0.07 %

0.13 % - 0.95 %

1.72 % - 2.55 %

Dividend yield — % — % — %

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Expected life (in years) 0.5 0.5 1

At December 31, 2020, unrecognized estimated compensation costs related to unvested restricted stock units and ESPP shares totaled $ 147.6 million and are expected to be recognized through 2024.

At December 31, 2021, unrecognized estimated compensation costs related to RSUs, PSUs, and the 2015 ESPP totaled $ 157.8 million and are expected to be recognized through 2024.

Business Segment and Geographic Information

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Dexcom is domiciled in the United States.

We sell our CGM systems through a direct sales force in the United States, Canada and some countries in Europe, and through distribution arrangements in the United States, and certain countries in Africa, Asia, Europe, Latin America, and the Middle East, as well as Australia, Canada, and New Zealand.

We disaggregate our revenue from contracts by geography and by major sales channel as we believe they best depict how the nature, amount and timing of revenues and cash flows are affected by economic factors.

Revenues by geographic region

We sell our CGM systems through a direct sales force in United States, Australia, Canada, New Zealand, and some countries in Europe, and through distribution arrangements in the United States, and certain countries in Africa, Asia, Europe, Latin America, and the Middle East, as well as Australia, Canada, and New Zealand.

Revenue by geographic region

During the twelve months ended December 31, 2021, 2020 and 2019, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

The table below sets forth revenues by our two primary geographical markets, the United States and outside of the United States, based on the geographic location to which we deliver the product.

The table below sets forth revenue by our two primary geographical markets, the United States and outside of the United States, based on the geographic location to which we deliver the components.

The majority of our long-lived assets are located in the United States.

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Outside of the United States 599.1 24 % 417.2 22 % 314.5 21 %

Total $ 1,926.7 100 % $ 1,476.0 100 % $ 1,031.6 100 %

Revenues by customer sales channel

The following table sets forth revenues by major sales channel for the twelve months ended December 31, 2020, 2019 and 2018:

Total revenue $ 2,448.5 100 % $ 1,926.7 100 % $ 1,476.0 100 %

Revenue by customer sales channel

The following table sets forth revenue by major sales channel for the twelve months ended December 31, 2021, 2020 and 2019:

Twelve Months Ended December 31,

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Direct 424.2 17 % 489.1 25 % 464.4 31 %

Total $ 1,926.7 100 % $ 1,476.0 100 % $ 1,031.6 100 %

Total revenue $ 2,448.5 100 % $ 1,926.7 100 % $ 1,476.0 100 %

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures