What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-04-27 compared with 2022-10-27 · 161 added, 398 removed, 472 unchanged (54% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

September 30, 2022 December 31, 2021

(In millions, except par value data) (As Adjusted)*

(In millions, except par value data) March 31, 2023 December 31, 2022

Current assets:

16 unchanged sentences

Accrued payroll and related expenses 94.8 134.3

Current portion of long-term senior convertible notes 773.2 772.6

Short-term operating lease liabilities 22.2 20.5

8 unchanged sentences

Preferred stock, $ 0.001 par value, 5.0 million shares authorized;

no shares issued and outstanding at September 30, 2022 and December 31, 2021

no shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock, $ 0.001 par value, 800.0 million shares authorized;

393.1 million and 386.2 million shares issued and outstanding, respectively, at September 30, 2022;

394.5 million and 387.6 million shares issued and outstanding, respectively, at March 31, 2023;

and 393.2 million and 386.3 million shares issued and outstanding, respectively, at December 31, 2022

Additional paid-in capital 2,305.6 2,258.1

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

( 6.5 ) ( 11.6 )

Retained earnings 528.5 479.9

Treasury stock, at cost;

6.9 million shares at September 30, 2022 and 3.4 million shares at December 31, 2021

6.9 million shares at March 31, 2023 and 6.9 million shares at December 31, 2022

( 595.0 ) ( 595.0 )

1 unchanged sentence

Total liabilities and stockholders’ equity $ 5,515.9 $ 5,391.7

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have also been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

See accompanying notes

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions, except per share data) (As Adjusted)*

(As Adjusted)*

(In millions, except per share data) 2023 2022

Revenue $ 741.5 $ 628.8

11 unchanged sentences

Income before income taxes 64.5 36.1

Income tax expense 45.0 24.7 8.2 28.2

Income tax expense (benefit) 15.9 ( 61.2 )

Net income $ 48.6 $ 97.3

3 unchanged sentences

Shares used to compute diluted net income per share 418.5 428.7

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have also been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

See accompanying notes

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

(In millions) (As Adjusted)*

(As Adjusted)*

(In millions) 2023 2022

Net income $ 48.6 $ 97.3

2 unchanged sentences

Unrealized gain (loss) on marketable debt securities 3.7 ( 5.2 )

Total other comprehensive loss, net of tax ( 18.1 ) ( 1.4 ) ( 41.6 ) ( 1.8 )

Total other comprehensive income (loss), net of tax 5.1 ( 6.6 )

Comprehensive income $ 53.7 $ 90.7

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

See accompanying notes

Consolidated Statements of Stockholders’ Equity

Three Months Ended September 30, 2022

Three Months Ended March 31, 2023

(In millions) Common Stock Additional

2 unchanged sentences

Shares Amount

Balance at June 30, 2022 392.6 $ 0.4 $ 2,028.9 $ ( 23.0 ) $ 286.9 $ ( 37.3 ) $ 2,255.9

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 12.4 — — — 12.4

Purchases of treasury stock ( 6.6 ) — — — — ( 557.7 ) ( 557.7 )

Share-based compensation expense — — 30.8 — — — 30.8

Net income — — — — 101.2 — 101.2

Other comprehensive loss, net of tax — — — ( 18.1 ) — — ( 18.1 )

Balance at September 30, 2022 386.2 $ 0.4 $ 2,072.1 $ ( 41.1 ) $ 388.1 $ ( 595.0 ) $ 1,824.5

Three Months Ended September 30, 2021

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Income Retained Earnings Treasury Stock Total

Stockholders’

Shares Amount

Balance at June 30, 2021 (As Adjusted)* 387.0 $ 0.4 $ 1,794.8 $ 2.8 $ 56.7 $ ( 100.0 ) $ 1,754.7

Balance at December 31, 2022 386.3 $ 0.4 $ 2,258.1 $ ( 11.6 ) $ 479.9 $ ( 595.0 ) $ 2,131.8

Issuance of common stock under equity incentive plans 1.1 — — — — — —

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 12.3 — — — 12.3

Conversions of 2023 Notes 0.8 — 26.7 — — 5.6 32.3

Benefit of note hedge upon conversions of 2023 Notes ( 0.5 ) — 65.1 — — ( 65.1 ) —

Share-based compensation expense — — 35.2 — — — 35.2

Net income — — — — 48.6 — 48.6

Other comprehensive loss, net of tax — — — ( 1.4 ) — — ( 1.4 )

Balance at September 30, 2021 (As Adjusted)* 387.7 $ 0.4 $ 1,925.7 $ 1.4 $ 144.0 $ ( 159.5 ) $ 1,912.0

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have also been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

See accompanying notes

Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, 2022

Other comprehensive income, net of tax — — — 5.1 — — 5.1

Balance at March 31, 2023 387.6 $ 0.4 $ 2,305.6 $ ( 6.5 ) $ 528.5 $ ( 595.0 ) $ 2,233.0

Three Months Ended March 31, 2022

(In millions) Common Stock Additional

2 unchanged sentences

Shares Amount

Balance at December 31, 2021 (As Adjusted)* 388.0 $ 0.4 $ 2,108.7 $ 0.5 $ 138.7 $ ( 206.2 ) $ 2,042.1

Balance at December 31, 2021 388.0 $ 0.4 $ 2,108.7 $ 0.5 $ 138.7 $ ( 206.2 ) $ 2,042.1

Issuance of common stock under equity incentive plans 1.4 — — — — — —

1 unchanged sentence

Issuance of common stock in connection with achievement of regulatory approval milestone, net of issuance costs 2.9 — ( 189.3 ) — — 189.2 ( 0.1 )

Purchases of treasury stock ( 6.6 ) — — — — ( 557.7 ) ( 557.7 )

Conversions of 2023 Notes 0.4 — 4.2 — — 13.2 17.4

3 unchanged sentences

Other comprehensive loss, net of tax — — — ( 6.6 ) — — ( 6.6 )

Balance at September 30, 2022 386.2 $ 0.4 $ 2,072.1 $ ( 41.1 ) $ 388.1 $ ( 595.0 ) $ 1,824.5

Nine Months Ended September 30, 2021

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Income Retained Earnings (Accumulated Deficit) Treasury Stock Total

Stockholders’

Shares Amount

Balance at December 31, 2020 (As Adjusted)* 384.4 $ 0.4 $ 1,726.5 $ 3.2 $ ( 78.2 ) $ ( 100.0 ) $ 1,551.9

Issuance of common stock under equity incentive plans 2.8 — — — — — —

Issuance of common stock for Employee Stock Purchase Plan 0.2 — 20.3 — — — 20.3

Tax benefit related to Senior Convertible Notes — — — — — — —

Conversions of 2023 Notes 0.8 — 26.7 — — 5.6 32.3

Benefit of note hedge upon conversions of 2023 Notes ( 0.5 ) — 65.1 — — ( 65.1 ) —

Share-based compensation expense — — 87.1 — — — 87.1

Net income — — — — 222.2 — 222.2

Other comprehensive loss, net of tax — — — ( 1.8 ) — — ( 1.8 )

Balance at September 30, 2021 (As Adjusted)* 387.7 $ 0.4 $ 1,925.7 $ 1.4 $ 144.0 $ ( 159.5 ) $ 1,912.0

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

All periods presented have been adjusted to reflect the four -for-one stock split.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

Balance at March 31, 2022 392.5 $ 0.4 $ 1,996.3 $ ( 6.1 ) $ 236.0 $ ( 37.3 ) $ 2,189.3

See accompanying notes

Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

(In millions) (As Adjusted)*

Three Months Ended

(In millions) 2023 2022

Operating activities

22 unchanged sentences

Other investing activities — ( 2.3 )

Net cash provided by (used in) investing activities ( 327.4 ) 280.0

Net cash used in investing activities ( 186.7 ) ( 411.8 )

Financing activities

Net proceeds from issuance of common stock 12.3 10.1

Purchases of treasury stock ( 557.7 ) —

Other financing activities ( 1.1 ) ( 4.8 )

Net cash provided by (used in) financing activities ( 551.5 ) 11.2

Net cash provided by financing activities 11.2 5.3

Effect of exchange rate changes on cash, cash equivalents and restricted cash 1.1 ( 1.0 )

Increase (decrease) in cash, cash equivalents and restricted cash ( 354.5 ) 627.0

Decrease in cash, cash equivalents and restricted cash ( 19.0 ) ( 336.5 )

Cash, cash equivalents and restricted cash, beginning of period 643.3 1,053.6

4 unchanged sentences

Total cash, cash equivalents and restricted cash $ 624.3 $ 717.1

Nine Months Ended

September 30,

(As Adjusted)*

Supplemental disclosure of non-cash investing and financing transactions:

Shares issued for conversions of 2023 Notes $ — $ 35.9

Shares received under note hedge upon conversions of 2023 Notes $ ( 33.5 ) $ ( 65.1 )

Shares received under note hedge upon conversion of 2023 Notes $ — $ ( 33.5 )

Acquisition of property and equipment included in accounts payable and accrued liabilities $ 55.8 $ 26.6

1 unchanged sentence

Right-of-use assets obtained in exchange for finance lease liabilities $ 1.0 $ 5.2

* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis.

Refer to Note 1, “Organization and Significant Accounting Policies,” for further information.

See accompanying notes

10 unchanged sentences

In the opinion of management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

We expect that revenues we generate from the sales of our products will fluctuate from quarter to quarter.

We experience seasonality that is typical in our industry, with lower sales in the first quarter of each year compared to the fourth quarter of the previous year.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2022 included in the Annual Report on Form 10-K that we filed with the SEC on February 9, 2023.

3 unchanged sentences

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

Amortization expense related to intangible assets has been presented separately from selling, general and administrative expenses in our consolidated statement of operations.

On June 10, 2022, the Company effected a four -for-one forward stock split of its common stock to shareholders of record as of May 19, 2022.

The par value of the common stock remains $ 0.001 per share.

Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common stock.” All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.

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

1 unchanged sentence

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 and in accumulated other comprehensive income (loss) in the equity section of our consolidated balance sheets.

We include translation-related adjustments in comprehensive income and in accumulated other comprehensive loss 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.

On June 10, 2022, the Company effected a four -for-one forward stock split of its common stock to shareholders of record as of May 19, 2022.

The par value of the common stock remains $ 0.001 per share.

All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.

We expect that the revenue we generate from the sales of our products will fluctuate from quarter to quarter.

We typically experience seasonality, with lower sales in the first quarter of each year compared to the immediately preceding fourth quarter.

This seasonal sales pattern relates to U.S.

annual insurance deductible resets and unfunded flexible spending accounts.

Significant Accounting Policies

There were no material changes to our significant accounting policies as described in Note 1 to the financial statements in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 during the three months ended March 31, 2023.

Use of Estimates

The preparation of consolidated financial statements in conformity with 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 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.

Areas requiring significant estimates include rebates, 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.

Accounts Receivable and Allowance for Doubtful Accounts

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.

We evaluate the creditworthiness of significant customers based on historical trends, the financial condition of our customers, and external market factors.

We generally do not require collateral from our customers.

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

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 that are more than one year past due are deemed uncollectible.

Concentration of Credit Risk

3 unchanged sentences

We review these guidelines periodically and modify them to take advantage of trends in yields and interest rates and changes in our operations and financial position.

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 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.

Once written down the adjustments are considered permanent and are not reversed until the related inventory is disposed of or sold.

Our products require customized products and components that currently are available from a limited number of sources.

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.

Revenue Recognition

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.

Contracts and Performance Obligations

We consider customer purchase orders, which in most cases are governed by agreements with distributors or third-party payors, to be contracts with a customer.

For each contract, we consider the obligation to transfer Components to the customer, each of which are distinct, to be separate performance obligations.

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

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

Transaction Price

Transaction price for the Components reflects the net consideration to which we expect to be entitled.

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.

Variable Consideration

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.

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 were to 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.

We estimate provisions for rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.

We participate in chargeback programs, primarily with government entities in the U.S., under which pricing on products below negotiated list prices is provided to participating entities and equal to the difference between their acquisition cost and the lower negotiated price.

We estimate provisions for chargebacks primarily based on historical experience on a product and program basis, current contract prices under the chargeback programs and channel inventory data.

Consideration Payable to the Customer

We pay administrative and service fees to certain of our distributors based on a fixed percentage of the product price.

These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price.

We accrue for these fees based on actual net sales and contractual fee rates negotiated with the customer.

Product Returns

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.

We generally provide a “ 30 -day money back guarantee” program whereby first-time end-user customers may return Reusable Hardware.

We estimate our product returns provision principally based on historical experience by applying a historical return rate to the amounts of revenue estimated to be subject to returns.

Additionally, we consider other specific factors such as estimated shelf life of inventory in the distribution channel and changes to customer terms.

Prompt Payment Discounts

We provide customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period.

We estimate prompt payment discount accruals based on actual net sales and contractual discount rates.

Various Other Promotional or Incentive Arrangements

Other promotional or incentive arrangements are periodically offered to customers, including but not limited to co-payment assistance we provide to patients with commercial insurance, promotional programs related to the launch of products or other targeted promotions.

We record a provision for the incentive earned based on the number of estimated claims and our estimate of the cost per claim related to product sales that we have recognized as revenue.

Revenue Recognition

The timing of revenue recognition is based on the satisfaction of performance obligations.

Substantially all of the performance obligations associated with our Components are satisfied at a point in time, which typically occurs at shipment of our products.

Terms of direct and distributor orders are generally Freight on Board (“FOB”) shipping point for U.S.

orders or Free Carrier (“FCA”) shipping point for international orders.

For certain sales transactions, control transfers at delivery of the product to the customer.

In cases where our free-of-charge software, mobile applications and updates are deemed to be separate performance obligations, revenue is recognized over time on a ratable basis over the estimated life of the related Reusable Hardware component.

Our sales of Components include an assurance-type warranty.

Contract Balances

2 unchanged sentences

Payment terms vary by contract type and type of customer and generally range from 30 to 90 days.

Accounts receivable as of September 30, 2022 included unbilled accounts receivable of $ 8.7 million.

Accounts receivable as of March 31, 2023 included unbilled accounts receivable of $ 8.9 million.

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

1 unchanged sentence

Our performance obligations are generally satisfied within twelve months of the initial contract date.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $ 23.6 million as of September 30, 2022 and $ 16.1 million as of December 31, 2021.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $ 20.7 million as of March 31, 2023 and $ 19.0 million as of December 31, 2022.

These balances are included in other long-term liabilities in our consolidated balance sheets.

Revenue recognized in the period from performance obligations satisfied in previous periods was not material for the periods presented.

Deferred Cost of Sales

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.

Incentive Compensation Costs

We generally expense incentive compensation associated with our internal sales force when incurred because the amortization period for such costs, if capitalized, would have been one year or less.

We record these costs in selling, general and administrative expense in our consolidated statements of operations.

Senior Convertible Notes

In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible debt instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share calculations.

We previously followed in Accounting Standard Codification, or ASC, 470-20, which required us to separate each of our convertible debt instruments at issuance into two units of accounting, a liability component, based on our nonconvertible debt borrowing rate at issuance, and an equity component.

Under ASU 2020-06, we now account for each of our convertible debt instruments as a single unit of accounting, a liability, because we concluded that there were no material conversion features that require bifurcation as a derivative under ASC 815-15 and our convertible debt instruments were not issued at a substantial premium.

Since we adopted ASU 2020-06 using the full retrospective approach, we were required to apply the guidance to all convertible debt instruments we had outstanding as of January 1, 2020.

Upon adoption of ASU 2020-06 as of January 1, 2020, we recognized $ 67.8 million cumulative-effect adjustment to increase retained earnings for the decrease in interest expense and $ 242.3 million decrease in additional paid in capital for the elimination of the equity component.

We have updated these financial statements to reflect the cumulative adjustment for the periods presented.

We have labeled our prior period financial statements and related notes “As Adjusted” to indicate the change required under the new accounting guidance.

Below is a summary of the changes in our consolidated balance sheets we originally reported as of December 31, 2020 and 2021 under the ASC 470-20 legacy guidance compared to our adjusted consolidated balance sheets under the new ASU 2020-06 guidance we adopted and reflective of our four -for-one forward stock split:

Consolidated Balance Sheet As of December 31, 2020

(In millions) As Previously Reported ASU 2020-06 Adjustment Stock Split Adjustment As Adjusted

Deferred tax assets $ 216.4 $ 91.3 $ — $ 307.7

Long-term senior convertible notes 1,667.2 365.9 — 2,033.1

Common stock 0.1 — 0.3 0.4

Additional paid-in-capital 2,125.3 ( 398.5 ) ( 0.3 ) 1,726.5

Accumulated deficit $ ( 202.1 ) $ 123.9 $ — $ ( 78.2 )

Consolidated Balance Sheet As of December 31, 2021

(In millions) As Previously Reported ASU 2020-06 Adjustment Stock Split Adjustment As Adjusted

Deferred tax assets $ 220.8 $ 69.7 $ — $ 290.5

Long-term senior convertible notes 1,702.7 279.1 — 1,981.8

Common stock 0.1 — 0.3 0.4

Additional paid-in-capital 2,504.5 ( 395.5 ) ( 0.3 ) 2,108.7

Retained earnings (Accumulated deficit) $ ( 47.4 ) $ 186.1 $ — $ 138.7

Below is a summary of the changes in our consolidated statements of operations for the three and nine months ended September 30, 2021 we originally reported under the ASC 470-20 legacy guidance compared to our adjusted consolidated statements of operations under the new ASU 2020-06 guidance we adopted and reflective of our four -for-one forward stock split:

Consolidated Statement of Operations Three Months Ended September 30, 2021

(In millions, except per share data) As Previously Reported ASU 2020-06 Adjustment As Adjusted

Interest expense $ ( 25.1 ) $ 20.5 $ ( 4.6 )

Income before income taxes 90.7 21.3 112.0

Income tax expense 19.8 4.9 24.7

Net income 70.9 16.4 87.3

Basic net income per share 0.18 0.05 0.23

Diluted net income per share (1)

$ 0.18 $ 0.03 $ 0.21

Shares used to compute diluted net income per share 402.0 28.3 430.3

Consolidated Statement of Operations Nine Months Ended September 30, 2021

(In millions, except per share data) As Previously Reported ASU 2020-06 Adjustment As Adjusted

Interest expense $ ( 75.1 ) $ 61.0 $ ( 14.1 )

Income (Loss) before taxes 188.6 61.8 250.4

Income tax expense (benefit) 14.5 13.7 28.2

Net income 174.1 48.1 222.2

Basic net income per share 0.45 0.12 0.57

Diluted net income per share (2)

$ 0.44 $ 0.10 $ 0.54

Shares used to compute diluted net income per share 399.3 28.6 427.9

(1) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 2.8 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

(2) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 8.6 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Below is a summary of our consolidated balance sheet as of September 30, 2022 and consolidated statements of operations for the three and nine months ended September 30, 2022 under the ASC 470-20 legacy guidance compared to the new ASU 2020-06 guidance we adopted.

Consolidated Balance Sheet As of September 30, 2022

(In millions) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

Prepaid and other current assets $ 168.6 $ ( 17.1 ) $ 151.5

Deferred tax assets 271.3 71.0 342.3

Long-term senior convertible notes 1,753.1 215.7 1,968.8

Additional paid-in-capital 2,466.5 ( 394.4 ) 2,072.1

Retained earnings $ 155.5 $ 232.6 $ 388.1

Consolidated Statement of Operations Three Months Ended September 30, 2022

(In millions, except per share data) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

Interest expense $ ( 25.5 ) $ 20.9 $ ( 4.6 )

Income before income taxes 125.3 20.9 146.2

Income tax expense 40.8 4.2 45.0

Net income 84.5 16.7 101.2

Basic net income per share 0.22 0.04 0.26

Diluted net income per share (1)

$ 0.21 $ 0.03 $ 0.24

Shares used to compute diluted net income per share 398.9 26.9 425.8

Consolidated Statement of Operations Nine Months Ended September 30, 2022

(In millions, except per share data) As computed under ASC 470-20 ASU 2020-06 Adjustment As reported under ASU 2020-06

Loss on extinguishment of debt $ ( 0.4 ) $ 0.4 $ —

Interest expense ( 76.0 ) 62.1 ( 13.9 )

Income before income taxes 195.1 62.5 257.6

Income tax expense (benefit) ( 7.8 ) 16.0 8.2

Net income 202.9 46.5 249.4

Basic net income per share (2)

0.52 0.12 0.64

Diluted net income per share $ 0.51 $ 0.09 $ 0.60

Shares used to compute diluted net income per share 401.1 26.9 428.0

(2) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $ 8.3 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

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.

Net Income Per Share

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2022 2021 2022 2021

As Adjusted As Adjusted

(In millions, except per share data) 2023 2022

Net income $ 48.6 $ 97.3

6 unchanged sentences

Dilutive potential common stock outstanding:

Restricted stock units 0.5 2.0 0.9 2.1

Restricted stock units and performance stock units 1.3 1.5

Warrants 11.6 11.3

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2023 2022

As Adjusted As Adjusted

Restricted stock units 1.3 — 0.5 —

Restricted stock units and performance stock units 0.1 0.1

Senior convertible notes 8.0 —

Total 8.1 0.1

Recent Accounting Guidance

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) .

This new guidance is intended to reduce the complexity of accounting for convertible instruments.

The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments.

Entities may adopt ASU 2020-06 using either a partial retrospective or fully retrospective method of transition.

This ASU is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

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

We adopted ASU 2020-06 in the first quarter of 2022 using the full retrospective method, reflecting the application of the new standard in each prior reporting period.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU No.

5 unchanged sentences

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

Any impact this guidance will have on our consolidated financial statements is dependent on when and if we complete future business combinations.

In March 2022, the FASB issued ASU No.

2022-01, Derivatives and Hedging (Topic 815):

Fair Value Hedging - Portfolio Layer Method.

This guidance is related to the portfolio layer method of hedge accounting.

The amendments in this update clarify the accounting and promote consistency in reporting for hedges where the portfolio layer method is applied.

ASU 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

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

We adopted ASU 2021-08 in the first quarter of 2023 and there was no impact to our consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

We do not expect any recently issued accounting pronouncements will have a material effect on our consolidated financial statements .

Development and Other Agreements

Collaboration with Verily Life Sciences

5 unchanged sentences

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 payments for contingent milestones upon the achievement of certain goals.

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 made upfront, incentive, and the product regulatory approval payments, and will make potential payments for contingent sales-based milestones upon the achievement of certain revenue targets.

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 milestone is deemed probable.

The value of the contingent milestones is based on our closing stock price of $ 29.57 per share on December 28, 2018.

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

The value of the contingent milestones is based on our closing stock price on December 28, 2018, which was $ 29.57 per share.

Upfront and Incentive payments

In the fourth quarter of 2018, we made an initial payment for an upfront fee of $ 250.0 million through the issuance of 7,363,772 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.

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 value of the charge was based on our closing stock price of $ 29.57 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 payment 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.

Contingent milestones

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.

1 unchanged sentence

In the first quarter of 2022, we received regulatory approval and issued 2,945,508 shares of our common stock in connection with our achievement of the related milestone.

Additional sales-based milestone payments equivalent to 5,154,640 shares of our common stock may become due and payable upon achievement of certain revenue targets.

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

As of September 30, 2022, 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.

In the fourth quarter of 2022, we received FDA approval and determined the achievement of the sales-based milestones to be probable.

As such, we capitalized the full value of the sales-based milestones, $ 152.4 million, as an intangible asset.

The sales-based milestones are contingent upon the achievement of certain revenue targets.

The value of the sales based milestones is based on:

1) 5,154,640 shares of our common stock, as agreed upon in November 2018 and 2) our closing stock price on December 28, 2018 of $ 29.57 per share.

December 28, 2018 is the date on which we obtained the necessary regulatory approvals and represents the date the performance- based awards were issued.

The intangible asset will be amortized using the straight-line method over its estimated useful

life of 64 months through March 2028.

The related amortization expense is recognized in Cost of Sales in our consolidated statements of operations.

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

9 unchanged sentences

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 provided by our investment managers.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of September 30, 2022, classified in accordance with the fair value hierarchy:

The following table summarizes financial assets that we measured at fair value on a recurring basis as of March 31, 2023, classified in accordance with the fair value hierarchy:

Fair Value Measurements Using

6 unchanged sentences

Corporate debt — 242.0 — 242.0

Supranationals — 13.5 — 13.5

Total debt securities, available-for-sale — 1,943.8 — 1,943.8

Other assets (2)

13.3 — — 13.3

Total assets measured at fair value on a recurring basis $ 421.1 $ 1,943.8 $ — $ 2,364.9

(1) Includes debt obligations issued by U.S.

government-sponsored enterprises or U.S.

government agencies.

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

The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2022, classified in accordance with the fair value hierarchy:

4 unchanged sentences

government agencies (1)

— 1,530.7 — 1,530.7

Commercial paper — 119.4 — 119.4

Corporate debt — 163.8 — 163.8

Supranationals — 54.0 — 54.0

Total debt securities, available-for-sale — 1,813.9 — 1,813.9

Other assets (2)

10.2 — — 10.2

Total assets measured at fair value on a recurring basis $ 386.1 $ 1,858.7 $ — $ 2,244.8

(1) Includes debt obligations issued by U.S.

government-sponsored enterprises or U.S.

government agencies.

(2) 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 three and nine months ended September 30, 2022 and 2021 .

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

The carrying values of these investments are $ 17.0 million as of September 30, 2022 and $ 4.5 million as of December 31, 2021.

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 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 effect on the fair values.

There were no transfers into or out of Level 3 securities during the three months ended March 31, 2023 and March 31, 2022.

Fair Value of Senior Convertible Notes

1 unchanged sentence

Fair Value Measurements Using Level 1

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Senior Convertible Notes due 2023 $ 2,189.0 $ 2,136.2

1 unchanged sentence

Total fair value of outstanding senior convertible notes $ 3,487.2 $ 3,451.1

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

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

Foreign Currency and Derivative Financial Instruments

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 (expense), net in our consolidated statements of operations.

As of September 30, 2022 and December 31, 2021, notional amounts of $ 51.0 million and $ 40.0 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 three and nine months ended September 30, 2022 and September 30, 2021.

We enter into foreign currency forward contracts to hedge monetary assets and liabilities denominated in foreign currencies.

Our foreign currency forward contracts are not designated as hedging instruments.

Therefore, changes in the fair values of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities.

The duration of these contracts is generally one month.

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

As of March 31, 2023 and December 31, 2022, the notional amounts of outstanding foreign currency forward contracts were $ 55.0 million and $ 62.0 million, respectively.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three months ended March 31, 2023 and March 31, 2022.

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.

7 unchanged sentences

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 an impairment is recognized.

We recorded no significant impairment losses during the three and nine months ended September 30, 2022 and September 30, 2021.

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

The carrying values of these investments are $ 19.0 million as of March 31, 2023 and December 31, 2022.

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 privately held and limited information is available.

There were no significant impairment losses during the three months ended March 31, 2023 and March 31, 2022.

Balance Sheet Details

1 unchanged sentence

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

September 30, 2022

March 31, 2023

(In millions) Amortized

5 unchanged sentences

Corporate debt 242.1 0.2 ( 0.3 ) 242.0

Supranationals 13.5 — — 13.5

Total debt securities, available-for-sale $ 1,944.0 $ 1.2 $ ( 1.4 ) $ 1,943.8

4 unchanged sentences

government agencies (1)

$ 1,535.1 $ 0.2 $ ( 4.6 ) $ 1,530.7

Commercial paper 119.6 — ( 0.2 ) 119.4

Corporate debt 164.3 — ( 0.5 ) 163.8

Supranationals 54.1 — ( 0.1 ) 54.0

Total debt securities, available-for-sale $ 1,819.0 $ 0.2 $ ( 5.3 ) $ 1,813.9

2 unchanged sentences

government agencies.

As of September 30, 2022, the estimated market value of our debt securities with contractual maturities up to twelve months was $ 1.67 billion.

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

Gross realized gains and losses on sales of our debt securities for the three and nine months ended September 30, 2022 and September 30, 2021 were not significant.

As of March 31, 2023, the estimated market value of our short-term debt securities with contractual maturities up to 12 months was $ 1.94 billion.

As of December 31, 2022, the estimated market value of our short-term debt securities with contractual maturities up to 12 months was $ 1.81 billion.

Gross realized gains and losses on sales of our short-term debt securities for the three months ended March 31, 2023 and March 31, 2022 were not significant.

We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns.

For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment.

Unrealized losses on available-for-sale debt securities at September 30, 2022 were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Unrealized losses on available-for-sale debt securities at March 31, 2023

were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities.

Accordingly, we have not recorded an allowance for credit losses.

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.

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Raw materials $ 196.9 $ 159.0

3 unchanged sentences

Prepaid and Other Current Assets

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Prepaid expenses $ 57.4 $ 48.9

Prepaid inventory 68.0 67.8

Deferred compensation plan assets 13.3 10.2

Income tax receivables 15.7 38.9

2 unchanged sentences

Property and Equipment

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

$ 26.9 $ 26.9

8 unchanged sentences

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

Other assets were $ 33.7 million and $ 10.5 million as of September 30, 2022 and December 31, 2021, respectively.

The increase in other assets is primarily due to an increase in long-term equity investments in privately held entities and a term deposit.

(In millions) March 31, 2023 December 31, 2022

Long-term deposits $ 24.6 $ 16.2

Other assets 32.0 30.9

Total other assets $ 56.6 $ 47.1

Accounts Payable and Accrued Liabilities

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Accounts payable trade $ 266.2 $ 237.9

2 unchanged sentences

Accrued warranty 11.3 12.8

Contractual obligations — 15.0

Deferred compensation plan liabilities 13.3 10.2

Other accrued liabilities 47.9 39.7

1 unchanged sentence

Accrued Payroll and Related Expenses

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Accrued wages, bonus and taxes $ 71.4 $ 96.8

2 unchanged sentences

Other Long-Term Liabilities

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Finance lease obligations

7 unchanged sentences

The carrying amounts of our senior convertible notes were as follows as of the dates indicated:

(Dollars in millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Principal amount:

5 unchanged sentences

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

(In millions) September 30, 2022 December 31, 2021

(In millions) March 31, 2023 December 31, 2022

Senior Convertible Notes due 2023 $ 1,416.9 $ 1,361.5

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in millions) 2022 2021 2022 2021

As Adjusted As Adjusted

(In millions) 2023 2022

Cash interest expense:

Contractual coupon interest (1)

$ 2.3 $ 2.4 $ 6.7 $ 7.0

Non-cash interest expense:

9 unchanged sentences

The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $ 836.6 million.

The initial conversion rate of the 2023 Notes is 24.3476 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 41.07 per share, subject to adjustments, with a maximum conversion rate of 32.2604.

We entered into transactions for a convertible note hedge (the “2023 Note Hedge”) and warrants (the “2023 Warrants”) concurrently with the issuance of the 2023 Notes.

2 unchanged sentences

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.

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.

For the twelve months ended December 31, 2022, holders of $ 17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option.

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

We issued 1,403,112 shares to settle the converted 2023 Notes during the twelve months ended December 31, 2021, of which 794,588 shares were issued out of treasury stock.

We received 967,380 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.

Holders of $ 17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option during the nine months ended September 30, 2022.

We settled these conversions using treasury stock.

We issued 425,188 treasury shares to settle the converted 2023 Notes.

We issued 425,552 shares to settle the converted 2023 Notes.

We received 287,492 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.

There were an immaterial amount of conversions during the three months ended September 30, 2022 that settled in the fourth quarter.

There were no conversions during the three months ended March 31, 2023.

Conversion Rights at the Option of the Holders

2 unchanged sentences

Holders of the 2023 Notes may convert all or a portion of their notes at their option prior to 5:00 p.m., New York City time, on the business day immediately preceding September 1, 2023, in multiples of $1,000 principal amount, only under the following circumstances:

(1) during any calendar quarter commencing after March 31, 2019 (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 2023 Notes on each such trading day;

immediately preceding calendar quarter is greater than or equal to 130 % of the applicable conversion price of the 2023 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 2023 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 2023 Notes on such trading day;

2 unchanged sentences

On or after September 1, 2023, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Circumstance (1) listed above occurred during the quarters ended December 31, 2021, March 31, 2022, and June 30, 2022.

As a result, the 2023 Notes were convertible at the option of the holder from January 1, 2022 through September 30, 2022.

Circumstance (1) listed above also occurred during the quarter ended September 30, 2022 and as a result, the 2023 Notes will remain convertible at the option of the holder from October 1, 2022 through December 31, 2022.

Circumstance (1) listed above occurred during the quarter ended December 31, 2022.

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

Circumstance (1) listed above also occurred during the quarter ended March 31, 2023 and as a result, the 2023 Notes will remain convertible at the option of the holder from April 1, 2023 through June 30, 2023.

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

5 unchanged sentences

In connection with the offering of the 2023 Notes, in November 2018 we entered into convertible note hedge transactions with two of the initial purchasers of the 2023 Notes (the “2023 Counterparties”) entitling us to purchase up to 20.7 million shares of our common stock at an initial price of $ 41.07 per share, each of which is subject to adjustment.

The cost of the 2023 Note Hedge was $ 218.9 million and we accounted for it as an equity instrument by recognizing $ 218.9 million

in additional paid-in capital during 2018.

The cost of the 2023 Note Hedge was $ 218.9 million and we accounted for it as an equity instrument by recognizing $ 218.9 million in additional paid-in capital during 2018.

The 2023 Note Hedge will expire on December 1, 2023.

12 unchanged sentences

In May 2020, we completed an offering of $ 1.21 billion aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.25 % and a maturity date of November 15, 2025 (the “2025 Notes”).

The net proceeds from the offering, after deducting initial purchasers’ discounts and estimated costs directly related to the offering, were approximately $ 1.19 billion.

The initial conversion rate of the 2025 Notes is 6.6620 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 150.11 per share, subject to adjustments, with a maximum conversion rate of 9.4928.

The net proceeds from the offering, after deducting initial purchasers’ discounts and estimated costs directly related

to the offering, were approximately $ 1.19 billion.

The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.

22 unchanged sentences

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

(In millions) September 30, 2022

(In millions) March 31, 2023

Available principal amount $ 200.0

5 unchanged sentences

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 ABR is the highest of (a) the prime rate last quoted by The Wall Street Journal, (b) the Federal Reserve Bank of New York 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, the Adjusted Stockholm Interbank Offered Rate, the Adjusted Canadian Dollar Offered Rate, Adjusted Australian Dollar Rate, the Adjusted Bank Bill Benchmark Rate or the Adjusted Tokyo Interbank Offered 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 %.

3 unchanged sentences

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 September 30, 2022.

As of September 30, 2022, we also have a guarantee facility related to our international operations which is collateralized by a $ 9.8 million term deposit that is included in non-current “Other assets” on our consolidated balance sheets.

We were in compliance with these covenants as of March 31, 2023.

As of March 31, 2023, we also have a guarantee facility related to our international operations which is collateralized by a $ 10.8 million term deposit that is included in non-current “Other assets” on our consolidated balance sheets.

Contingencies

1 unchanged sentence

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.

During the year ended December 31, 2021 and the nine months ended September 30, 2022, we and certain Abbott Diabetes Care, Inc.

(“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.

As of the three months ended March 31, 2023, we and certain Abbott Diabetes Care, Inc.

(“Abbott”) entities have previously served complaints for patent infringement, validity and other patent related actions against each other in multiple jurisdictions, inside and outside the United States.

In June and July 2021, we initiated patent infringement litigation against Abbott in the United States and in Germany over certain of Abbott's continuous glucose monitoring products.

In both the United States and Germany, we seek injunctive relief and monetary damages.

In July 2021, Abbott initiated patent infringement litigation against Dexcom in the United States, United Kingdom, and in Germany over certain of Dexcom's continuous glucose monitoring products.

Abbott seeks injunctive relief and monetary damages.

In response to the suits in the United Kingdom, Dexcom brought infringement counterclaims there.

One trial on liability has already been conducted in the United Kingdom, and the parties are awaiting a ruling.

In December 2021, Abbott filed a breach of contract suit against Dexcom in the United

States alleging that Dexcom breached the parties' 2014 Settlement and License Agreement.

Dexcom’s patent infringement claims in the United States are stayed pending resolution of Abbott’s breach of contract claims.

A jury trial on Abbott’s breach of contract claims is set for July 10, 2023.

Abbott’s U.S.

patent infringement action against Dexcom is currently scheduled for trial on November 5, 2023.

In February and March of 2023, Abbott initiated additional patent infringement litigation against Dexcom in both the United States and in Germany.

Abbott seeks injunctive relief and monetary damages.

Due to uncertainty surrounding patent litigation processes in the U.S.

and Europe, we are unable to reasonably estimate the ultimate outcome of any of the litigation matters at this time.

Dexcom intends to protect its intellectual property and defend against Abbott’s claims vigorously in all of these actions.

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.

1 unchanged sentence

We estimate our annual effective tax rate to be 30.9 % for the full year 2023, which differs from the U.S.

federal statutory rate due to state and foreign income taxes, nondeductible executive compensation, and increases to unrecognized tax benefits offset by federal research tax credits generated.

Our effective tax rate of 3.2 % for the nine months ended September 30, 2022 was primarily due to income tax expense from normal, recurring operations, partially offset by discrete excess tax benefits recognized for share-based compensation for employees and the Verily milestone payment.

federal statutory rate due to state and foreign income taxes, nondeductible executive compensation, and increases to unrecognized tax benefits offset by federal tax credits generated.

Our actual effective tax rate of 24.7 % for the three months ended March 31, 2023 was primarily due to income tax expense from normal, recurring operations, partially offset by discrete excess tax benefits recognized for share-based compensation for employees, net of disallowed executive compensation.

Stockholders’ Equity

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(In millions) 2023 2022

3 unchanged sentences

Total share-based compensation expense $ 35.2 $ 29.1

At September 30, 2022, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 201.9 million and is expected to be recognized through 2026.

At March 31, 2023, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 312.8 million and are expected to be recognized through 2027.

Equity Award Activity

The total vest date fair value of RSUs and PSUs that vested during the nine months ended September 30, 2022 was $ 135.2 million and $ 17.3 million, respectively.

The total vest date fair value of RSUs and PSUs that vested during the three months ended March 31, 2023 was $ 119.3 million and $ 9.9 million, respectively.

Share Repurchase Program and Treasury Shares

2 unchanged sentences

Repurchases of our common stock under the Share Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions or by other methods, at our discretion, and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, and other applicable federal and state laws and regulations.

On August 1, 2022, we entered into an accelerated share repurchase (“ASR”) agreement with JPMorgan Chase Bank, National Association (“JP Morgan”) to repurchase up to$ 700.0 million of our common stock on an accelerated basis through September 29, 2022.

On August 3, 2022, we paid $ 700.0 million to JP Morgan and received an initial delivery of approximately 3.0 million shares of common stock.

The final notional amount under the ASR agreement was $ 557.7 million or approximately 6.6 million shares of our common stock based on the daily average volume-weighted average price of our common stock during the term of the ASR for the period from August 1, 2022 to August 31, 2022, less a discount.

The ASR agreement concluded on September 1, 2022.

The ASR was a forward contract indexed to our own common stock.

The forward contract met all of the applicable criteria for equity classification, so we did not account for it as a derivative instrument.

We have reflected the shares delivered to us by the financial institution as treasury shares as of the dates they were delivered to us in computing weighted average shares outstanding for both basic and diluted net income per share.

As of March 31, 2023, approximately $ 142.3 million remained available for repurchase pursuant to our share repurchase program.

Repurchased shares of our common stock are held as treasury shares until they are reissued or retired.

11 unchanged sentences

We have determined that disaggregating revenue into these categories achieves the ASC Topic 606 disclosure objectives of depicting how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Dexcom is domiciled in the United States.

We sell our CGM systems through a direct sales force in the North America, Asia Pacific, Europe, and the Middle East, 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 three and nine months ended September 30, 2022 and September 30, 2021, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

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.

During the three months ended March 31, 2023 and March 31, 2022, no individual country outside the United States generated revenue that represented more than 10% of our total revenue.

The following table sets forth revenue by our two primary geographical markets, the United States and International, based on the geographic location to which we deliver the components, for the periods shown:

Three Months Ended

September 30, 2022 Three Months Ended

September 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

United States $ 573.4 75 % $ 489.6 75 %

Outside of the United States 196.2 25 % 160.6 25 %

Total revenue $ 769.6 100 % $ 650.2 100 %

Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

March 31, 2023 Three Months Ended

March 31, 2022

(In millions) Amount % of Total Amount % of Total

United States $ 526.0 71 % $ 451.2 72 %

Outside of the United States 559.0 27 % 418.0 24 %

International 215.5 29 % 177.6 28 %

Total revenue $ 741.5 100 % $ 628.8 100 %

Revenue by customer sales channel

The following table sets forth revenue by major sales channel for the three and nine months ended September 30, 2022 and September 30, 2021:

We sell our CGM systems through a direct sales organization and through distribution arrangements that allow distributors to sell our products.

The following table sets forth revenue by major sales channel for the periods shown:

Three Months Ended

September 30, 2022 Three Months Ended

September 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

Distributor $ 656.2 85 % $ 552.3 85 %

Direct 113.4 15 % 97.9 15 %

Total revenue $ 769.6 100 % $ 650.2 100 %

Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021

(Dollars in millions) Amount % of Total Amount % of Total

March 31, 2023 Three Months Ended

March 31, 2022

(In millions) Amount % of Total Amount % of Total

Distributor $ 618.9 83 % $ 527.1 84 %

2 unchanged sentences

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-Q

Item 1. Financial Statements