What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-04-27 · 168 added, 77 removed, 556 unchanged (31% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

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

(In millions, except par value data) June 30, 2023 December 31, 2022

Current assets:

27 unchanged sentences

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

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

no shares issued and outstanding at June 30, 2023 and December 31, 2022

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

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

394.6 million and 386.1 million shares issued and outstanding, respectively, at June 30, 2023;

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

4 unchanged sentences

Treasury stock, at cost;

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

8.5 million shares at June 30, 2023 and 6.9 million shares at December 31, 2022

( 784.1 ) ( 595.0 )

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions, except per share data) 2023 2022 2023 2022

10 unchanged sentences

Income from equity investments — — — 0.2

Interest and other income (expense), net 21.9 ( 0.8 )

Interest and other income, net 37.1 3.0 59.0 2.2

Income before income taxes 159.3 75.3 223.8 111.4

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2023 2022 2023 2022

3 unchanged sentences

Unrealized gain (loss) on marketable debt securities ( 2.6 ) ( 3.0 ) 1.1 ( 8.2 )

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

Total other comprehensive loss, net of tax ( 22.8 ) ( 16.9 ) ( 17.7 ) ( 23.5 )

Comprehensive income $ 93.1 $ 34.0 $ 146.8 $ 124.7

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

(In millions) Common Stock Additional

2 unchanged sentences

Shares Amount

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

Issuance of common stock under equity incentive plans 0.1 — — — — — —

Purchases of treasury stock ( 1.6 ) — — — — ( 189.1 ) ( 189.1 )

Purchase of capped call transactions, net of tax — — ( 76.3 ) — — — ( 76.3 )

Share-based compensation expense — — 39.7 — — — 39.7

Net income — — — — 115.9 — 115.9

Other comprehensive loss, net of tax — — — ( 22.8 ) — — ( 22.8 )

Balance at June 30, 2023 386.1 $ 0.4 $ 2,269.0 $ ( 29.3 ) $ 644.4 $ ( 784.1 ) $ 2,100.4

Three Months Ended June 30, 2022

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total

Stockholders’

Shares Amount

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

Issuance of common stock under equity incentive plans 0.1 — — — — — —

Share-based compensation expense — — 32.6 — — — 32.6

Net income — — — — 50.9 — 50.9

Other comprehensive loss, net of tax — — — ( 16.9 ) — — ( 16.9 )

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

See accompanying notes

Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2023

(In millions) Common Stock Additional

Capital Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total

Stockholders’

Shares Amount

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

1 unchanged sentence

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

Purchases of treasury stock ( 1.6 ) — — — — ( 189.1 ) ( 189.1 )

Purchase of capped call transactions, net of tax — — ( 76.3 ) — — — ( 76.3 )

Share-based compensation expense — — 74.9 — — — 74.9

Net income — — — — 164.5 — 164.5

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

Other comprehensive loss, net of tax — — — ( 17.7 ) — — ( 17.7 )

Balance at June 30, 2023 386.1 $ 0.4 $ 2,269.0 $ ( 29.3 ) $ 644.4 $ ( 784.1 ) $ 2,100.4

Six Months Ended June 30, 2022

(In millions) Common Stock Additional

11 unchanged sentences

Other comprehensive loss, net of tax — — — ( 23.5 ) — — ( 23.5 )

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

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

See accompanying notes

Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(In millions) 2023 2022

26 unchanged sentences

Net proceeds from issuance of common stock 12.3 10.1

Purchases of treasury stock ( 188.7 ) —

Proceeds from issuance of senior convertible notes, net of issuance costs 1,230.6 —

Purchases of capped call transactions ( 101.3 ) —

Other financing activities ( 2.2 ) ( 9.1 )

1 unchanged sentence

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1.1 ) ( 5.3 )

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

Increase (decrease) in cash, cash equivalents and restricted cash 552.7 ( 317.2 )

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

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

Operating results for the three and six months ended June 30, 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.

10 unchanged sentences

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.

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, net in our consolidated statements of operations.

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

3 unchanged sentences

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

11 unchanged sentences

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

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

Accounts receivable as of June 30, 2023 included unbilled accounts receivable of $ 9.2 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 $ 20.7 million as of March 31, 2023 and $ 19.0 million as of December 31, 2022.

The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $ 21.4 million as of June 30, 2023 and $ 19.0 million as of December 31, 2022.

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

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions, except per share data) 2023 2022 2023 2022

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2023 2022 2023 2022

55 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 March 31, 2023, 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 June 30, 2023, classified in accordance with the fair value hierarchy:

Fair Value Measurements Using

27 unchanged sentences

(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 months ended March 31, 2023 and March 31, 2022.

There were no transfers into or out of Level 3 securities during the three and six months ended June 30, 2023 and June 30, 2022.

Fair Value of Senior Convertible Notes

1 unchanged sentence

Fair Value Measurements Using Level 1

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

(In millions) June 30, 2023 December 31, 2022

Senior Convertible Notes due 2023 $ 2,418.9 $ 2,136.2

Senior Convertible Notes due 2025 1,290.7 1,314.9

Senior Convertible Notes due 2028 1,279.1 —

Total fair value of outstanding senior convertible notes $ 4,988.7 $ 3,451.1

5 unchanged sentences

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.

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

As of June 30, 2023 and December 31, 2022, the notional amounts of outstanding foreign currency forward contracts were $ 61.0 million and $ 62.0 million, respectively.

The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the three and six months ended June 30, 2023 and June 30, 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.

8 unchanged sentences

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.

The carrying values of these investments are $ 35.0 million as of June 30, 2023 and $ 19.0 million as of December 31, 2022.

We include them in other assets in our consolidated balance sheets.

1 unchanged sentence

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 significant impairment losses during the three months ended March 31, 2023 and March 31, 2022.

There were no significant impairment losses during the three and six months ended June 30, 2023 and June 30, 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:

March 31, 2023

June 30, 2023

(In millions) Amortized

18 unchanged sentences

government agencies.

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 June 30, 2023, the estimated market value of our short-term debt securities with contractual maturities up to 12 months was $ 2.44 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.

Gross realized gains and losses on sales of our short-term debt securities for the three and six months ended June 30, 2023 and June 30, 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 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.

reports, and the severity of impairment.

Unrealized losses on available-for-sale debt securities at June 30, 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) March 31, 2023 December 31, 2022

(In millions) June 30, 2023 December 31, 2022

Raw materials $ 240.4 $ 159.0

3 unchanged sentences

Prepaid and Other Current Assets

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

(In millions) June 30, 2023 December 31, 2022

Prepaid expenses $ 55.0 $ 48.9

5 unchanged sentences

Property and Equipment

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

$ 26.9 $ 26.9

(In millions) June 30, 2023 December 31, 2022

Land and land improvements $ 29.0 $ 26.9

Building 139.5 54.3

Furniture and fixtures 34.8 32.6

6 unchanged sentences

Total property and equipment, net $ 1,077.6 $ 1,055.6

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

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

(In millions) June 30, 2023 December 31, 2022

Long-term investments $ 35.0 $ 19.0

Long-term deposits 19.1 16.2

2 unchanged sentences

Accounts Payable and Accrued Liabilities

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

(In millions) June 30, 2023 December 31, 2022

Accounts payable trade $ 269.1 $ 237.9

6 unchanged sentences

Accrued Payroll and Related Expenses

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

(In millions) June 30, 2023 December 31, 2022

Accrued wages, bonus and taxes $ 76.9 $ 96.8

2 unchanged sentences

Other Long-Term Liabilities

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

(In millions) June 30, 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:

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

(In millions) June 30, 2023 December 31, 2022

Principal amount:

1 unchanged sentence

Senior Convertible Notes due 2025 1,207.5 1,207.5

Senior Convertible Notes due 2028 1,250.0 —

Total principal amount 3,232.3 1,982.3

2 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) March 31, 2023 December 31, 2022

(In millions) June 30, 2023 December 31, 2022

Senior Convertible Notes due 2023 $ 1,649.5 $ 1,361.5

Senior Convertible Notes due 2025 84.6 33.6

Senior Convertible Notes due 2028 56.7 —

Total by which the notes ’ if-converted value exceeds their principal amount

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(In millions) 2023 2022 2023 2022

1 unchanged sentence

Contractual coupon interest (1)

$ 3.0 $ 2.2 $ 5.2 $ 4.4

Non-cash interest expense:

4 unchanged sentences

Senior Convertible Notes due 2025 0.5 % 0.5 % 0.5 % 0.5 %

Senior Convertible Notes due 2028 0.7 % * 0.7 % *

(1) Interest on the 2023 Notes began accruing upon issuance and is payable semi-annually on June 1 and December 1 of each year.

Interest on the 2025 Notes began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.

Interest on the 2028 Notes began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.

0.75 % Senior Convertible Notes due 2023

11 unchanged sentences

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

During the second quarter of 2023, holders of $ 532.2 million in aggregate principal amount of the 2023 Notes exercised their conversion option.

We elected to settle these conversions through a combination of cash for the principal amount and common stock for any amount due in excess of the principal amount.

The conversions will settle in the third quarter of 2023.

From July 1, 2023 through July 26, 2023, holders of $ 7.8 million in aggregate principal amount of the 2023 Notes exercised their conversion option.

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:

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;

(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;

(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 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.

Circumstance (1) listed above occurred during the quarters ended December 31, 2022 and March 31, 2023.

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

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

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

17 unchanged sentences

The strike price of the 2023 Warrants is initially $ 49.60 per share and is subject to certain adjustments under the terms of the warrant agreements.

We use the treasury share method for assumed conversion of the 2023 Warrants when computing the weighted average common shares outstanding for diluted earnings per share.

the treasury share method for assumed conversion of the 2023 Warrants when computing the weighted average common shares outstanding for diluted earnings per share.

0.25 % Senior Convertible Notes due 2025

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 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.

16 unchanged sentences

The redemption price will be equal to 100 % of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

0.375 % Senior Convertible Notes due 2028

In May 2023, we completed an offering of $ 1.25 billion aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.375 % and a maturity date of May 15, 2028 (the “2028 Notes”).

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

the offering, were approximately $ 1.23 billion.

The initial conversion rate of the 2028 Notes is 6.1571 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $ 162.41 per share, subject to adjustments.

The 2028 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion.

We use the if-converted method for assumed conversion of the 2028 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the 2028 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 2028 Notes includes customary terms and covenants, including certain events of default after which the 2028 Notes may 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 2028 Notes), holders of the 2028 Notes have 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 2028 Notes, plus any accrued and unpaid interest.

Holders of the 2028 Notes who 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 are, 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, 2028, holders of the 2028 Notes may 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, 2023 (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 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 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 call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;

(4) upon the occurrence of specified corporate transactions.

On or after February 15, 2028, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, holders of the 2028 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Conversion Rights at Our Option

Dexcom may not redeem the 2028 Notes prior to May 20, 2026.

On or after May 20, 2026 and prior to February 15, 2028, Dexcom may redeem for cash all or part of the 2028 Notes, at its option, if the last reported sale price of our common stock has been at least 130 % 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 provides notice of redemption.

The redemption price will be equal to 100 % of the principal amount of the 2028 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

2028 Capped Call Transactions

In May 2023, in connection with the offering of the 2028 Notes, we entered into privately negotiated capped call transactions (the “2028 Capped Calls”) with certain financial institutions.

The 2028 Capped Calls will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes, the number of shares of our common stock that will initially underlie the 2028 Notes.

The 2028 Capped Calls are expected generally to reduce potential dilution to our common stock upon conversion of the 2028 Notes and/or offset any cash payments that we are required to make in excess of the principal amount of converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap.

The 2028 Capped Calls have an initial cap price of $ 212.62 per share, subject to adjustments, which represents a premium of 80 % over the closing price of our common stock of $ 118.12 per share on the Nasdaq Global Select Market on May 2, 2023.

The cost to purchase the 2028 Capped Calls of

$ 101.3 million was recorded as a reduction to additional paid-in capital in our consolidated balance sheets as the 2028 Capped Calls met the criteria for classification in stockholders’ equity.

Revolving Credit Agreement

Terms of the Revolving Credit Agreement

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”).

In June 2023, we entered into the First Amendment to the Second Amended and Restated Credit Agreement (the "Amended Credit Agreement"), which we had previously entered into in October 2021.

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 “Credit Facility”).

2 unchanged sentences

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

(In millions) March 31, 2023

(In millions) June 30, 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 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 %.

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 Term Secured Overnight Financing Rate (“Term SOFR”) 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 Term SOFR, 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 Adjusted 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 for Sterling or Dollars (as applicable) plus the applicable rate between 0.0326 % to 0.100 % depending on the loan denomination.

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.

2 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 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.

We were in compliance with these covenants as of June 30, 2023.

As of June 30, 2023, we also have a guarantee facility related to our international operations which is collateralized by a $ 5.5 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.

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

For the six months ended June 30, 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.

5 unchanged sentences

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.

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.

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

On July 14, 2023, the jury awarded a verdict finding Abbott was not licensed to several claims of certain Dexcom patents and that Abbott was licensed to a few claims.

We will continue to enforce the remaining claims in the patents asserted in Delaware and elsewhere.

Abbott’s U.S.

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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 intend to protect our 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 28.5 % 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 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.

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

Our actual effective tax rate of 26.5 % for the six months ended June 30, 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

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Three Months Ended

June 30, Six Months Ended

(In millions) 2023 2022 2023 2022

3 unchanged sentences

Total share-based compensation expense $ 39.7 $ 32.6 $ 74.9 $ 61.7

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.

At June 30, 2023, unrecognized estimated compensation costs related to RSUs, PSUs and ESPP totaled $ 272.5 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 three months ended March 31, 2023 was $ 119.3 million and $ 9.9 million, respectively.

The total vest date fair value of RSUs and PSUs that vested during the six months ended June 30, 2023 was $ 127.3 million and $ 9.9 million, respectively.

Share Repurchase Program and Treasury Shares

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Shares of common stock repurchased under the Share Repurchase Program become treasury shares.

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.

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

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 Exchange Act, and other applicable federal and state laws and regulations.

We repurchased approximately $ 557.7 million of our outstanding common stock throughout the duration of the Share Repurchase Program.

The Share Repurchase Program and the remaining authorization of approximately $ 142.3 million expired on June 30, 2023.

There were no share repurchases under the Share Repurchase Program in 2023.

In May 2023, we used a portion of the proceeds of the 2028 Notes to repurchase 1.6 million shares of our common stock for $ 188.7 million for an average per share price of $ 118.12 , via privately negotiated transactions, independent of the Share Repurchase Program.

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

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

Future stock repurchases under the Share Repurchase Program are at the discretion of our management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors.

The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time.

Authorization of future stock repurchase programs is subject to the final determination of our Board of Directors.

Business Segment and Geographic Information

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Revenue by geographic region

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.

During the three and six months ended June 30, 2023 and June 30, 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

March 31, 2023 Three Months Ended

March 31, 2022

June 30, 2023 Three Months Ended

June 30, 2022

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

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Total revenue $ 871.3 100 % $ 696.2 100 %

Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

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

United States $ 1,142.6 71 % $ 962.2 73 %

International 470.2 29 % 362.8 27 %

Total revenue $ 1,612.8 100 % $ 1,325.0 100 %

Revenue by customer sales channel

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Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

June 30, 2023 Three Months Ended

June 30, 2022

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

2 unchanged sentences

Total revenue $ 871.3 100 % $ 696.2 100 %

Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

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

Distributor $ 1,357.7 84 % $ 1,112.2 84 %

Direct 255.1 16 % 212.8 16 %

Total revenue $ 1,612.8 100 % $ 1,325.0 100 %

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