Thank you, operator. And welcome to DexCom’s second quarter 2020 earnings call.

Our agenda begins with Kevin Sayer, DexCom’s Chairman, President, and CEO, who’ll provide a summary of the quarter followed by a financial review and outlook from Quentin Blackford, our COO and CFO, and then a strategic update from Steve Pacelli, our Executive Vice President of Strategy and Corporate Development. Following our prepared remarks, we will open the call up for your questions.

At that time, we ask analysts to limit themselves to one question, so we can provide an opportunity for everyone participating today. Please note that, there are also slides available related to our second quarter performance on the DexCom Investor Relations website on the Events & Presentations page.

With that, let’s review our Safe Harbor statement. Some of the statements we will make in today’s call may constitute forward-looking statements.

These statements reflect management’s intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance. All forward-looking statements included in this presentation are made as of the date hereof based on information currently available to DexCom, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements.

The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in DexCom’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this presentation or to conform these forward-looking statements to actual results.

Additionally, during the call we will discuss certain financial measures that have not been prepared in accordance with GAAP, with respect to our non-GAAP and cash-based results. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis.

The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the slides accompanying our second quarter earnings presentation for a reconciliation of these measures to their most directly comparable GAAP financial measure.

Now, I will turn it over to Kevin.

Thank you, Sean. And thank you everyone for joining us today.

We entered the second quarter with several areas of uncertainty as COVID-19 quickly spread, and I’m incredibly proud of how the DexCom teams have responded. We established three pillars for our organization, to ensure the safety of our employees, to maintain service continuity for our customers, who rely on their G6 CGM systems.

And third, to do our part to assist our communities as we address this novel virus. We are executing well on all three of these measures.

And the results are indicated in our second quarter financial and operational performance. Total revenue grew 35% on a constant currency basis in the second quarter, driven by our significant growth in new patient additions over the past year.

This represents more than $115 million of absolute dollar growth over the same period in 2019. This growth includes steady traction in the type 2 market, where we continue to see strong new patient additions as coverage expands.

As of the close of the second quarter, the type 2 patient population exceeds 20% of our total US patient base, reflecting our growing traction as market access expands. Even with rising CGM awareness, there remain many people who continue to rely on fingersticks to manage diabetes, and we believe that there remains a significant opportunity for growth ahead in our core type 1 and type 2 intensive markets.

As we discussed in April, new patients were slowed at the start of the quarter as clinicians transitioned to support their patients via telemedicine. We did see a nice recovery in new patient additions in late April and over the remainder of the quarter.

Especially in the U.S. with our sales and patient care teams, doing a great job to ensure that both customers and clinicians were aware of the full set of DexCom tools to enable virtual care.

The strength of our core business also reflects our focus on the service experience that we provide. Whether through our pharmacy channel initiative, the scaling of our customer support organization or the user interface and tools we built to our software solution, we are prioritizing the needs of our customers.

We are now two years into the launch of our G6 system and the feedback that we continue to receive from our patients is incredible. In fact, Net Promoter Scores for G6 have now reached all-time highs according to both third-party industry analysis as well as our own internal measurements.

This includes the most recent dQ&A industry survey of type 1 and type 2 intensive patients, in which G6 received a Net Promoter Score of 83. Well ahead of our competitors and in line with the initial results that we saw immediately after the launch of G6 in 2018.

Our scores have been especially high among new Medicare customers, where the transition to our no fingerstick G6 system has been very well received by both Type 1 and Type 2 intensive users. Our customers are achieving these results while paying an out-of-pocket cost that is comparable more often less than the out-of-pocket cost of our largest competitor.

As we’ve mentioned before, G6 has the lowest out-of-pocket cost for Medicare patients and will be at parity with any other CGM classified as a Class II ICGM by the FDA. The pharmacy channel has also proven to be a wonderful option for many of our customers and remains our preferred long-term channel.

For customers using pharmacy benefits now, nearly 70% have an out-of-pocket cost less than $60 per month and 30% pay no out-of-pocket cost. Notably, this data is based upon the first five months of 2020, when patients are more likely to have deductibles still outstanding.

As you can see, our products continue to demonstrate their ability to perform in real world settings and drive patient outcomes at affordable levels. This includes the use of DexCom CGM in additional populations beyond those with an insulin intensive diabetes.

As we mentioned on the first quarter call, on April 1st, we received an allowance from the FDA to provide DexCom CGM to hospitals during the COVID crisis, allowing for remote monitoring on any of their hospitalized patients. Our primary goal in this initiative was and continues to be the assistance of frontline workers during the pandemic, and the team has been working continually with sites to get CGM implemented.

We have made great progress to date in training hospitals and the feedback we have received from the care teams has been great. An example, near to us in San Diego Scripps Health, published a case study on their use of DexCom G6 since the start of the COVID pandemic and highlighted several encouraging points.

The use of G6 was eagerly embraced by the hospital and nursing teams with high rates of satisfaction among patients as well. Early data indicates a trend toward reduced incidence of low- and high glucose values across all patients who use CGM.

And specific to COVID-19 patients, visits into the patient's rooms have been decreased by 30% to 50% during the length of stay, saving valuable equipment and also reducing viral exposure for the hospital staff. As we stated previously, our hospital efforts were not a material driver of revenue in the second quarter, and we do not expect it to be for the current year.

But the data that we are generating is invaluable as we assess the regulatory pathway forward for this important market. Whether it is the shift to telemedicine, the hospital initiative or our efforts to expand access for the Type 2 population with our various partnerships, our team continues to press forward in the midst of the challenges brought on by COVID.

We've successfully doubled G6 capacity in the first half of the year, putting us in a great position operationally to address the significant market opportunities ahead of us. G6 is a platform technology.

During the past 12 months, we have seen the launch of a very successful automated insulin delivery system at Tandem, significant progress at Insulet and other automated insulin delivery partners, introduction of the first daily enabled [ph] MDI systems, utilization in an app developed specifically for the Type 2 diabetes program at UnitedHealthcare and the recent launch of G6 Pro to meet a very important market need. We plan for numerous customer experience and product enhancement, as well as new market opportunities for this platform over the next two years, and many of these initiatives will be incorporated into the G7 platform going forward.

And finally, on to G7, where we are pressing forward on several fronts. As we said on the last call, COVID-19 has affected our time lines on this project.

Specifically, pivotal studies would be delayed for at least six months due to uncertainty at the clinics. And we are going to be fully ready for G6 conversion when we launch.

Some G7 manufacturing scale activities have been delayed, as some of our vendors shut down for meaningful periods of time. And let me remind you, we are going to be fully ready for a G7 conversion when we launch.

And a very small amount of G6 equipment can be used for G7. I am not going to provide you a specific clinical trial, filing and launch dates today.

In this competitive world, we have no interest in sharing our playbook with the entire industry. There will not be a limited launch of G7 in 2020.

Such a launch would not provide a meaningful financial impact and rushing to accommodate such a launch would ultimately delay our long-term plans. Design of the hardware sensor and electronics is locked and the G7 algorithm is complete.

We have used our extra time to add some great enhancements to the system. We are back in the clinics.

We are in the process of finalizing clinical sites and timing for the US and OUS pivotal studies. Our first fully automated G7 line is up in San Diego.

Additional, G7 automation equipment is arriving regularly in San Diego, Mesa and at third-party contract manufacturers. I will now turn the call over to Quentin, for a review of our financials.

Thank you, Kevin. As a reminder, unless otherwise noted, the financial metrics presented today will be discussed on a non-GAAP basis.

Reconciliations to GAAP can be found in today’s earnings release as well as on our IR website. For the second quarter of 2020, we reported worldwide revenue of $451.8 million compared to $336.4 million for the second quarter of 2019, representing an absolute dollar increase of more than $115 million and growth of 34% on a reported basis and 35% on a constant currency basis.

The strong growth continued despite some of the challenges posed early in the quarter by the pandemic with continued new patient growth reflecting the overall momentum behind real-time CGM in both the Type 1 and Type 2 patient populations. As Kevin noted, we are meeting this shift toward real-time CGM with a product in G6 that customers love, leading to our record Net Promoter Score levels.

Our US business remained very strong in the second quarter with growth of 38% over the second quarter of 2019. This growth extended across all three of our primary US channels, pharmacy, DME and Medicare.

Pharmacy remains the fastest-growing channel among the three, and our teams continue to prioritize this as a key component of our long-term strategy based on the benefits provided to DexCom, clinicians and especially our customers. The majority of national plans and PBMs are now covering DexCom via the pharmacy benefit with many incorporating a dual pharmacy and DME benefit.

Our international business grew 22% in the second quarter on a constant currency basis, with consistent growth across our direct and distributor markets. We did see a greater impact to new patients in certain international markets as a result of COVID in the second quarter compared to the US.

Unlike the first quarter, the reduced access for in-clinic visits for new patients did not allow us to offset our anticipated second quarter price impact with the same degree of volume gains. However, we remain confident in our long-term strategy, as we saw improvement throughout the quarter with new patient growth recovering and our direct markets returning to strong growth in June, as well as distributor orders beginning to rebound early in the third quarter.

We are creating streamlined pathways for new patients to access DexCom CGM through different channels in our international markets. Building from the successful launch of our Canadian e-commerce platform, which drove record new patient growth following its launch in 2019, we recently expanded the e-commerce opportunity to our UK market and are encouraged by the similar early results.

Canada and the UK were amongst our highest growth markets in the second quarter. Our second quarter gross profit was $289.7 million or 64.1% of revenue compared to 61.4% of revenue in the second quarter of 2019.

The gross margin was sequentially consistent with our Q1 performance and consistent with the expectations that we noted on the Q1 call for a more muted improvement between Q1 and Q4 of 2020 as we continue to ramp costs associated with the introduction of our G7 lines. Importantly, we now have our first G7 line in place in producing product for clinical trials.

The 270-basis point year-over-year margin improvement was driven primarily by product design developments, most notably our lower cost transmitter. Operating expenses were $213 million for Q2 2020 compared to $200.3 million in Q2 2019.

This reflects an increase of 6% year-over-year and a 1240 basis point reduction as a percent of revenue from the second quarter of 2019. As an organization, we continue to make great strides as we invest in the initiatives that will drive DexCom's long-term growth.

While also remaining disciplined as an organization, and this is evident in our second quarter results. Just as COVID did impact our topline, it also had an impact on certain spending activities, which resulted in some of the operating margin improvement during the quarter and was therefore, temporary in nature.

As a result, we expect moderation in the year-over-year margin comparisons in the second half of the year as we invest in several key initiatives for the company, including the G7 clinical trials, G7 manufacturing scale up, our new market efforts and direct-to-consumer advertising that we began to accelerate late in the second quarter. Operating income was $76.7 million or 17% of revenue in the second quarter of 2020 compared to $6.2 million or 1.8% of revenue in the same quarter of 2019.

This reflects a year-over-year improvement of more than 1,500 basis points in operating margin for the quarter. Adjusted EBITDA was $122.6 million or 27.1% of revenue for the second quarter compared to $45.9 million or 13.6% of revenue for the second quarter of 2019.

Net income for the second quarter was $77.1 million or $0.79 per share. Over the past two years, we have made tremendous progress, towards becoming a profitable company.

As a result, it is now becoming evident that we're going to be able to utilize the significant historic tax benefits that we have accrued over time. And we are approaching a position where in the near future, we expect to release the valuation allowance that we have been required to place against many of our tax benefits in the past.

This is something that we have been in front of and planning for, including the implementation of a global tax structure over the last couple of years that will allow us to continue to expand rapidly and efficiently on a global basis. As we set expectations for 2021, we will look to provide clarity around our annual tax rate expectations and leverage the benefits associated with the tax structure we put in place, in contemplation of such an event.

In early May, we took advantage of market conditions to further solidify our balance sheet, with a new convertible note offering. On the strength of the offering, we closed the quarter in a great financial position with more than $2.5 billion of cash, utilizing a combination of the cash generated from the convertible note offering, as well as DexCom's stock, we redeemed the majority of our 2022 convertible notes, in the second quarter and will redeem the remainder later this week.

Our cash position leaves us in great shape to pursue the growth opportunities ahead of us, including support of the development of new markets, opportunistic investment and capabilities that complement our growth, and capital allocation into our G7 scale up and Malaysian manufacturing facility. As we look to the second half of the year, there remains several areas of uncertainty as we contemplate the continuation of the COVID pandemic and its global impact, including employment rates, and update of our patient assistance program in the US.

Nevertheless, based on our experience in the second quarter, the tools that our teams have developed to support virtual patient care and the growing clinical awareness of the value of CGM, particularly in the current environment, we believe there is enough visibility to reinstate full year guidance. We now expect 2020 revenue to be approximately $1.85 billion, representing growth of 25% over 2019.

This represents an increase of $100 million from the midpoint of our initial 2020 guidance, resulting from the strength of the business in the first half of the year. Our teams have responded well and continued to drive new patient adoption and ensure the satisfaction of our existing patients.

Given the recent uptick in COVID cases globally and in the US in particular, our guidance assumes approximately 75% to 80% of our original expectations for global new patients in the back half of the year, which was consistent with what we had experienced in late March and into April, at the outset of the COVID outbreak globally. Turning to margins, we now anticipate the following non-GAAP results to meet or exceed the following levels, which are ahead of what we established at the start of the year, including, increasing gross margin, expectations to meet or exceed 65% and representing a steady improvement over 2019.

This includes costs associated with the initial development of our Malaysian manufacturing facility, and support of the growth of our international business and is in line with our long-term expectations for gross margins in the mid-60s. We are now increasing operating margin expectations to meet or exceed 14%.

This revised guidance contemplates the increased second half spending associated with the initiatives that I previously mentioned, yet still demonstrating annually year-over-year improvement, as we leverage our strong top our strong top line results. Finally, we are increasing our expected adjusted EBITDA margins, to meet or exceed 24% for the year.

Our team has done a great job to execute on our goal of doubling G6 capacity in the first half of 2020, despite an extraordinarily difficult and unanticipated operating environment, putting the company in its best position since the launch of G6 to meet the many opportunities in front of us. And we now look forward to replicating that momentum with the scale-up of our G7 lines.

With that, I will now turn the call over to Steve for a strategic update.

Thanks, Quentin. We continue to make great strides in executing on our strategic priorities even as we navigate the current environment with the utmost care for the health of our employees, the continued service of our patients and assistance to our communities.

The doubling of G6 capacity in the first half of the year has placed us in a great position to creatively target new customers and extend the launch of G6 in several of our existing markets. We are gaining steady traction among type 2 insulin-intensive customers, building from our efforts to drive expanded access beyond Medicare into payers as we've seen with UnitedHealthcare and more recently, Aetna, both of which now provide access to the pharmacy.

At the recent virtual ADA conference, we presented encouraging data on a subset of our type 2 intensive patients after their first 12 weeks of usage of G6. The data demonstrated average A1C reduction of 1.5%, significant improvement to quality of life metrics and 95% customer satisfaction with G6.

COVID has also brought a clear focus to the long-term potential for CGM and the importance of glycemic control. We've spoken at length about the large market opportunities ahead for DexCom, including our focus on the broader type 2 market, hospital use and use during pregnancy.

The fact that all 3 of these populations have now received exemptions to allow for broader access to DexCom CGM during the pandemic provides validation for these new market expansions. In early April, the FDA made a special allowance to permit the use of CGM in the hospital setting.

In early May, we saw a special ruling from CMS to allow access to all people with diabetes who are diagnosed with COVID-19. And earlier this month, Health Canada issued an interim order for the use of G6 for all women with diabetes who are pregnant during the pandemic, and more and more data continue to emerge supporting these decisions and the value of CGM beyond the intensive insulin-using population.

At ADA, our partners at Onduo presented data comparing the impact of CGM versus non-CGM use in their virtual diabetes clinic. While both cohorts or patients ultimately saw a significant A1C decrease.

The group using DexCom G6 are reduction nearly 2x as much as those not using CGM. In addition earlier this month, UnitedHealthcare announced the expansion of their level 2 digital health therapy to more than 230,000 people with type 2 diabetes.

This program, which utilizes G6 as a core component, saw great results in United's initial pilot work, including flinty significant A1C reduction for those with a baseline A1C greater than 8 and significant reductions to medication usage with some participants even achieving remission and no longer needing medication. We are pressing forward in support of our various partnerships to reach the whole type 2 population including our work with UnitedHealthcare, Intermountain Healthcare, Livongo, Waldo, Onduo and others.

We are also excited about the launch of our G6 professional product, which has several appealing use cases as we explore the full value of our CGM platform. We are also excited about the launch of our G6 professional product, which has several appealing use cases as we explore the full value of our CGM platform.

The product provides a natural extension into the type 2 non-intensive market by leveraging the strong existing reimbursement framework for professional CGM with a tool that empowers clinicians. G6 Pro gives doctors the flexibility to assess a patient's glycemic health in real-time for all patients with diabetes.

As a single-use product, G6 Pro will also serve as a great introduction for a patient looking to experience the functionality of DexCom CGM. G6 Pro can also be prescribed for use in blinded mode where the patient does not see the real-time data to all people, ages 2 years, not just people with diabetes, providing all people with the opportunity to assess their glycemic health.

Our strategy of prioritizing interoperability and patient choice continues to leave us well positioned as the insulin delivery market shifts toward commercial connected devices. In early May, we signed an agreement to collaborate with Ypsomed, adding another key partner to our existing partners in Eli Lilly, Insulet, Novo Nordisk and Tandem Diabetes.

Thank you, Steve. As a reminder, we ask our audience to limit themselves to only one question at this time and then re-enter the queue if necessary.

Adrianne, please provide the Q&A instructions.

Thank you. Good afternoon, guys.

Can you hear me okay?

We can, perfect.

Great. Thanks for all the information on the call and congratulations on the quarter.

So Kevin and Steve, you both touched on hospital and pregnancy, gestational use. I guess what I'd love to hear an update on is maybe the pathway and timelines to maybe extending some of those reimbursements to more of a permanent nature, whether that's Canada, the UK, where we've seen some of the movement on gestational over the last year or even in the US.

Just again, pathway and timelines on how we should think about when those can become more permanent contributors to the model? Thank you.

You bet. I’ll take that, Jeff.

On the hospital side, we are really now just starting to gather data from the centers that use CGM. When we started the whole hospital initiative, it was just let’s get the product out there and help the staff at the hospitals and also make patients healthier.

And we navigated through a series of things that we really didn’t anticipate very well, such as the IT systems of the hospital and things of that nature. So we’re now starting to gather data.

We also have learned, interestingly enough that a lot of the hospitals, even though they all got the same product, had different protocols in a different way that use CGM. Some of these centers would put it on anybody with diabetes.

Somebody would put anybody with elevated glucose levels, and others would take the approach. We're not going to do this until somebody's really sick.

So we’re going to learn more about the protocols and how it was used. And to start gathering data about the sensor and how it works, and also, we’re going to try and gather data with respect to how these patients were treated from a drug side as well.

Anecdotally, what we’ve heard is our product performed in the hospital the way we thought it would, that its accuracy and performance really wasn’t affected by the compounds used to treat these patients. And we should have a pretty good picture of where it is.

We’ve not had any additional discussions with the agency on the hospital data yet, because we really haven’t had anything in a form that we could present that would start us down a path. As far as next steps in the hospital, will take - we still have the ability to use the product in the system and with COVID not going away, I think we’ll be able to gather more data.

And now that we’ve been through this initial wave of learning, we'll probably get better data and more data and know what we're looking for going forward and put together data, we’ll present that to the FDA, and at the same time, we'll present them what the plan as to what we think we need to do next. That’s going to be a while.

And - but we’ve got some time to gather more data. On the gestational side and the pregnancy side, we have seen some countries open up and say, hey, let’s go do this, the U K and Canada that you pointed out.

We’ve had very detailed discussions with the FDA as to what we need to do on the pregnancy side to get that label, and we are working on that. We all know the product works very well in pregnancy.

All you’ve got to do is go to social media and see the DexCom’s patients who have had a child that they never thought they would have, who have diabetes of our type 1 patients on gestational side, we think our opportunity is outstanding, not only from a manage those patients who have gestational diabetes as a predictor of those who may in fact, get it. And again, we are running studies.

There are studies being run by many others to determine what that model looks like. I think our first step there, Jeff, is we need to get just a pregnancy indication with the FDA rather than specific gestational one.

And then head down the line to develop a product and a platform that fits into that market on a cost effective and a positive outcome basis, but we're very optimistic that it will.

Great. Thank you very much for taking my questions.

I just wanted to talk a little bit about the quarter and maybe just kind of understand any differences you’re seeing in underlying the patient behavior or patient demand in states or geographies that have high levels of COVID currently or any states or geographies that don't. I'm just trying to understand how much of an impact we saw to new patient starts with respect to your COVID in the quarter and how we should think about the potential for the rising case volumes, potentially increase in the second half of the year?

Yeah, we didn’t quantify exactly what we believe the impact to be in the second quarter, but we tried to give some color and it’s the foundation for how we thought about the back half of the year as well. If you look at the end of March and into April, new patient starts when COVID was really starting to ramp at that point in time was roughly 75% of kind of that normal range that we would have expected.

So you saw about a 25% impact on the new patient starts at that point in time. Now I will say over the course of the quarter, end of June, we saw that rebound nicely back in line with previous expectations, as things started to come under a bit of control.

Now we saw it pick up a little bit in July as the COVID cases have increased a bit more that we’re all aware of, and we were very clear in our guidance that we’re assuming roughly 75% to 80% of new patient starts throughout the back half of the year. That's the best data point we have at this point in time.

So I would just take you back to that reference point of 75%, 80% roughly, new patient starts throughout the month of April, is kind of how we saw the impact in the quarter.

Hi. Thank you for taking my question.

Can you talk a bit more about the recent launch of UnitedHealthcare’s level 2 program? How significant of a catalyst is this for non-intensive type 2 adoption in the US?

And do you believe that this program together with Intermountain data that you've shared suggests that CGM use - will be more frequent and sustained among non-intensive type 2 patients over the long-term than the intermittent use case you’ve historically discussed?

Yeah. I think - this is Steve.

It's certainly evolving, but I think these are all validating points for us, right, that certainly, UnitedHealthcare serves more than 230,000 non-insulin taking type 2 patients and we would hope that over time, that program has expanded pretty dramatically beyond where it is today. We're in the midst of just continuing to capture data and prove out the value of this technology in the non-intensive patient population.

We know we have something there. We know it's important.

Whether it becomes a real-time all-the-time use case, over time, it very well could be. We're seeing some very positive outcomes for people using it for, frankly, a longer period of time than maybe we would have cited previously.

So there is an opportunity. Reimbursement is still in its infancy in the non-insulin-using patient population, so we've not only got to prove the outcomes, we've got to get the product paid for.

So it's still not even the balance of this year, not going to be a material piece of the business, but it's going to continue to grow over the coming years, for sure.

Thanks. Appreciate the question and congrats on a good quarter.

Quen, I want to maybe spend a little bit on the guidance here. You touched on new patient expectations.

Usually, at the beginning of the year, at JPMorgan, when you give guidance, you give us a little flavor for how we should think about revenue per patient and the headwind expected there for throughout the year as you shift into pharmacy and restructure some of your negotiations on price and international, so I was wondering if you could give us a little bit more flavors, we're halfway through the year, what's baked into guidance? And also, if you could spend some time walking us through the bottom-line expectations.

You put a fantastic adjusted EBITDA this quarter. How much of that really is the new baseline?

And if you could quantify how much was just deferred spending that we should expect in the back part of the year. Thanks.

Great. So with respect to the first part of that question around top line and revenue per patient or maybe the pricing headwinds that we've talked about historically, certainly, we came into the year with an expectation that, that was going to be somewhere around $125 million to $150 million, likely being around $125 million to $150 million, range.

I can tell you that based upon where we saw price come in, in Q2, it was right in line with our expectation. We have not changed our pricing assumption, our full year guidance at this point in time, we still expect it to be around that $150 million range.

So not anything significant in terms of a change there, the strategy we've put in place, to step this down over time continues to play out exactly as we had expected. So that continues to be consistent.

With respect to the bottom line, we’ve made incredible progress from a profitability perspective, really over the last call it, four or five quarters now, with nearly 1,500 basis points of improvement in operating margin profile in Q2 alone. There’s no question that some of the spending was impacted in the quarter, particularly around efforts like DTC as we started to pull back some of that early in the quarter just with the uncertainty around how COVID was going to impact things over the course of the quarter and into the back part of the year.

I will tell you, we did start that back up in early Q3. So you're going to see incremental spending in the back half of the year around things like DTC.

The other thing to keep in mind that’s going to impact your spending trends that won't allow the same kind of improvement in Q2 to play through in the back half of the year is the fact that we're starting up the G7 trials. We’ve been very open and deliberate about the spend that's going to go into that.

We’re putting forward quite a bit of resources around standing up those manufacturing capabilities and ensuring that capacity is going to be there right out of the gate. We do have the first line-up.

There's incremental lines coming right behind it as we speak and building out that entire supply chain capability. And then finally, we’ve already spent some time talking about it on the call today, but you look at opportunities like hospital, gestational.

Those are significant revenue drivers for us into the future. We’re going to make sure that we're spending in those areas, to ensure that open those up and provide for growth into the future.

So we are going to spend in the back part of the year. You’re not going to see the same sort of improvement.

But at the same time, we’re committed that over time, we will continue to mature as an organization. We're going to step towards the long-term goals of profitability that we've laid out.

And I think we've made great progress towards it, but you're not going to see these sorts of improvement every single quarter. I think you need to look at it over a period of time.

Hey. Good afternoon, guys.

Thanks for taking the question. I wanted to follow-up on the type 2 mix this quarter.

The 20% number seemed pretty strong and it seems like it's increasing. So, can you guys give us any sense around where these patients are coming from?

Are they top prescribers for DexCom or other T1s? Or anything on patient profile, new to CGM or early adopters?

Long story short, as we look at that T2 growth, even within the intensive population going into the back end of this year and into next. Is it push or pull?

Or is it getting easier at all? Thanks.

This is Kevin. I’ll take that.

It is getting easier. And I think the biggest catalyst in all this was when we got Medicare approval a while ago, and now we’re getting Medicare awareness with these insulin-using patients because a large number of insulin-using patients in this type 2 population are, in fact, Medicare patients.

So, that has been a big catalyst for growth, particularly as we’ve gotten better at serving and taking care of those patients. I think the other catalyst is just the approvals we were seeing from some of the large payers.

Steve pointed out, UnitedHealthcare covering type 2 patients on intensive insulin recently, again, giving more patients access to it. As these patients are having positive outcomes, access is growing and they’re matching the CMS approvals that we've already received.

So, it’s coming across the board and it’s not coming to us from our primary prescribers, they are coming from everywhere. Many of these patients don’t even see endocrinologists.

So, they’re finding out about DexCom and coming to us directly because of our marketing efforts and because what they’ve heard word of mouth or what they’ve seen from others. We’ve always felt this would be a great use of our technology, and it's proving to be exactly that.

Hi, good afternoon. Thanks for taking the question.

So, I guess, just on the international business, it looks like that’s probably the only place you could really pick at here. Quentin, can you just summarize why the growth was a bit slower than historical trend?

You seem to infer that trends in the direct market picked up in June and in distributor markets in July. Can we assume that you expect a greater than seasonal impact in international sales in the second half?

Yeah, it's a fair question. I think it’s a bit premature to speak to that fact in terms of playing out over the course of Q3 with respect to the distributor orders.

Certainly, we saw those orders start to come through and in the third quarter. I think the question becomes based upon what was happening with COVID in the broader environment today, do we see that actually rebound and double up in terms of the orders in Q3 or does everything just kind of defer and push a bit.

Our guidance would contemplate the fact that it pushes at this point in time. Just based upon the best information that we have.

If it were to all come in and terrific, I think we'd be very happy. Just a little bit of color around that OUS result.

I think what you're seeing there is very comparable to what the broader marketplace and the industry realized over the course of the quarter as well. I think if you look at the data points that have been put out there by our competitors, thus far, they saw a slowdown in growth in Q2 in their international business, just as we did sequentially, absolute dollars step down from Q1 into Q2, which we certainly saw as well, but the broad market saw the same thing.

So, I don’t think you're seeing anything that's unique to DexCom. I think over time, we remain as bullish as ever on the international opportunity.

We’ve stated the fact that we’re going to step down price over time in the international space as well. And when you have a quarter like Q2 where the ability for new patients to get into the clinic and come on to the product becomes a bit muted, you see a bit more of a pronounced impact.

So, that’s all part of a long-term strategy that we believe in and are very bullish around. So, we’re still very, very optimistic and excited about that international business, but that's a bit of color that played out in Q2.

And with respect to Q3, our view is that things probably push. But if we see it rebound, it’s been great, there's upside to the number.

Good afternoon and nice quarter. ADA seems like a million years ago now – June, but can you give us an idea of what the key things were that you walked away from that you think we'll be talking about over the next 18 months?

Yeah, I’ll take that one. I think, again, the walk away from ADA is how important CGM has become in all this.

Almost every presentation you went to every presentation we saw the performance of drugs, the performance of other systems is based on CGM data. From DexCom's perspective, obviously, the drive of the automated insulin delivery systems was largely driven by DexCom sensors, regardless of who the presenter was up at the pulpit other than Medtronic and we can see our sensor can drive great outcomes there.

I think the other takeaway is we’re not stopping innovation in diabetes. Everybody is still pushing forward, and we still think there's better ways to attack this.

This is a big cost and healthcare problem in our country and around the world. And I don't think anybody is going to slow down.

But - our biggest takeaway, compare that to your first ADA, Joanne, where we had to beg for anybody even listened to us. And now every place we go and just our industry growth, CGM has become the dominant technology here across all of the diabetes treatments.

And we're looking forward to just continuing to be better.

Hi. Good afternoon.

This is Jason on for Matt. Thanks for taking my question.

Congrats on a nice quarter here. Kevin or Steve, a higher-level question on the non-intensive side.

I appreciate some of the comments you made, but I hope you can discuss maybe how you perceive these models or programs evolving over the next few years? Do you expect the revenue model to be similar to what you see with the intensely managed population?

Or do you expect it to take different forms with maybe some possible risk-sharing or shared cost saving developments? Just anything you can offer there and how you see the contracts coming together over time, now that you've been engaged with payers and other partners on various models.

Thanks.

Yeah. This is Kevin.

I'll add a bit to Steve’s comments earlier. We don’t see one solution yet.

We are working with a number of partners on the payer front. We’re working with clinics.

We’re working with a lot of these diabetes management systems as well to provide CGM data to that to figure out what the best model for these patients is. We’re not only working with these partners, but we’re doing a lot of market research on our own.

And one of Steve’s comments that is becoming very evident in all the work that we do is type 2 patients are more than open to wearing CGM and learning what's going on with their bodies. They want a different experience than we offer today for the Type 1 patients connecting to insulin pumps and Bluetooth pens and sophisticated predictive alerts and alarms and things like that we have today are not as important to that group.

But what is important to that group is that they're healthy and that we can reduce their meds, we can reduce their cost, that we can make their physician visits more productive and we can make changes in their help that save them these complications over the years. So I think what you’ll see is we’ll continue to pursue all these models, at the same time, we're going to pursue the proper product configuration.

And reimbursement models for us. I’ve been in numerous discussions where we ask, if we get paid X for an intensive patient for a year, what should we - what should be the reimbursement rate for non-intensive type 2 because the fact is we aren’t saving their life on a near term basis.

With an alert and alarm, we are not giving them something that determines their drug dosing decision, but we are giving information to better manage their lives. So, we think there may ultimately be a different class of product here and a different form of reimbursement even patients wear them all the time, which is, again, another reason we’re investing so much in scale here, because we like these things everywhere.

I think the market is developing nicely and the constant thread coming from all these approaches, if this thing works.

Hi. Thanks for taking my questions.

Just wanted to touch on the hospital channel a bit more, I’d just love to hear how you’re going to approach the commercial aspect longer term, you don’t really have reps in the hospital. Do you need a partner there?

Or are you planning to build out a separate sales force? And also, I don't know if you’re willing to say the revenues generated in the half of this quarter that was a few million dollars or more than that.

The revenues in the hospital wouldn't have a significant impact on the financials. The costs are exceeded the revenue.

So, we’ll leave it at that. With respect to the channel, we’ve not made a decision there as far as how we’d pursue that.

We are early enough in this process that we're not ready to adopt a commercial model. We want to leave our options open.

We would explore partners. We would explore doing it ourselves.

But we’ll figure out where to best use our dollars. And then we haven't made a decision there yet.

Good afternoon. Thanks for taking the question.

Quentin, just a quick follow-up here for you on guidance. So, in the second half, you're effectively assuming that new patient start rates are similar to sort of the trough of COVID, even though there probably has been some improvement and you're not assuming any distributors sort of recoup in ex-US markets.

And just kind of related to that, can you just give us a sense ex-US whether this was country-specific or just broadly ex-US? Because our sense is maybe Germany performed differently than Canada, performed differently than France.

So, those two quick ones? Thank you.

Yeah. I think in the prepared remarks, we were pretty clear with the fact that we saw COVID did impact certain countries a little bit differently than others.

UK and Canada performed incredibly well, particularly on the e-commerce platform that we had put in place. Germany certainly was impacted in our distributor markets were certainly impacted.

On the distributor point, again, I think it's just too early to tell if that's going to double up in Q3 or if that's just going to be simply something that pushes out over the course of the remainder of the year. I think at some point in time, it will catch up to itself, and we'll be back on that same trajectory.

It's just too hard to predict if that happens in the next six months or not. And our guidance would be based off the fact that it does not, that it's been pushed.

That's kind of how we thought about it. So - and then your point on just the new patient starts in the back half of the year.

Like I said, we're trying to create some clarity for you guys in the back half of the year around what we're confident that we can deliver on. We're using the best data points that we have from our experience.

And that 75% to 80% new patients start as what we realized early in the second quarter as COVID was kind of starting to really gain some traction. We've seen COVID numbers increasing here recently in the third quarter as well.

And so that's the best data point that we have. So, that's how we went about putting the numbers together.

Obviously, if we can navigate through that more effectively or to a better degree, then there's going to be opportunity in the guidance number, but we don't want to get ahead of ourselves at this point.

Hey, good afternoon, guys. Thanks for taking the question.

Kevin, as you mentioned upfront, Medicare is not enforcing the clinical criteria for CGM during the pandemic. It's unclear if this applies to all type 1 and type 2 patients are just those affected by COVID.

How broadly physicians interpreted this rule? And what impact have you seen in the market?

And do you expect CMS to continue to allow this exception through next year. Thanks for taking the question.

You bet. We do not believe it's had an exceptional impact on our business, as far as bringing more Medicare patients to the table.

And – but they are coming. On a broad scale basis, as we look at the Medicare ruling, we would be very pleased if we could get the criteria for Medicare patients much more condensed and much more realistic.

We actually met on that this morning. And one of the things pointed out yet again to me is, Medicare requires our patients to document that they do four fingersticks a day before they go to CGM and our patients only reimbursed for three fingersticks a day by CMS.

So there are large inconsistencies there. And this is a product that has tremendous impact with these patients.

It would certainly be our goal to have these coverage criteria and the steps that patients have to go through to get CGM simplified and more broadly applied across all of diabetes. But that's something we're working on now, and I can't anticipate where CMS is going to go.

But it certainly makes sense that we do that.

Hey. Good afternoon, guys.

Thanks so much for taking the question. Congrats on another very strong quarter.

Just a quick question on the type 2s. I think you mentioned it's now 20%.

I think you said of your installed base, correct me if I'm wrong, maybe you said new patient adds. But how has that changed versus the year ago period?

Just trying to get a sense of how that might be growing?

Yeah. No, it's certainly increasing nicely, particularly as we continue to focus in that particular area.

The 20% is of the installed base. So we didn't give a sense in terms of the overall growth in that particular area.

But we've talked about our focus there in opening up those channels. And I think the fact that we're now talking about it just indicates the progress that we're making there.

So that's the extent of the detail we've given around it.

Good afternoon, everyone. Thanks for the question.

And Quentin, thanks for the color on new patient start headwinds. I was hoping you could extend those comments, the installed base.

Was any notable change in attrition or utilization rates during the quarter or the first half of 2020? And are you making any changes to how you're thinking about those same attrition utilization risks in this new guidance?

Thanks.

Yeah. Great question.

We didn't really see anything over the course of Q2. But to be fair, I think, it's probably a bit early to really understand whether or not we will see an impact.

And therefore, we have contemplated something in our guidance in the back part of the year around our patient assistance program or attrition. And keep in mind, we announced during the second quarter that we would be putting in place a patient assistance program, but that wasn't going to be effective until the third quarter.

Our view is that, if a patient were going to a trip, they would likely fall into that program. So when we talk about guidance in the back half of the year, you've got a couple of things playing out there.

You've got the new patient starts that we've been very clear. 75% to 80% is how we’ve modeled it.

But then we also are assuming that we're going to see some impact on attrition, and they're going to fall into this Patient Assistance Program, which is going to mean quite a bit less revenue to us, obviously, than what we might have normally received from them. So that's playing out in the back part as well.

Thanks. Quentin, two quick model questions.

First, just any numbers you could put around the expense shift from 2Q in the back half of the year. The leverage was really impressive.

It would be great to have a better sense for how much of that was one time. And then can you give us any broad strokes on what you're thinking in terms of the tax rate once you start reporting one from an income statement perspective?

Thanks.

Yes. We're not going to talk to the tax rate just yet.

I think we need to get to the point where we flip that valuation allowance. We don't know exactly when that's going to be just yet, but we know that it's coming here in the near future.

And the last thing I want to do is like I said, put a couple of $100 million gain through the financial statements that surprises everybody in the particular period. I think it's important to know we're out in front of this.

We anticipate it. We've put a tax structure in place that's going to allow us to have a very efficient global tax structure and grow globally in a very efficient way with a very attractive tax rate.

So we've been well in front of this for quite some time, and the point is just to start to put it on your radar. With respect to the other question, sorry, remind me what the other question was.

OpEx in the back part of the year.

Yes.

So there wasn't a significant impact that moved the needle meaningfully in the second quarter. I mean, call it, roughly $10 million or so of spend that likely would have showed up in the quarter had we not been impacted.

But I think importantly, the back half of the year is where you're going to see a significant ramp in the overall spend profile, particularly with G7 clinical trials getting go and G7 scale really taking off. And then turning on the DTC spigot for the first time in a significant way.

I think one of the things that maybe is not as appreciated by folks is that historically, we've always been constrained from an inventory position. We exited Q2 in the strongest inventory position that we've been in with respect to G6 in our company's history.

That allows us to start to open up opportunities like DTC in a significant way that we believe can drive growth into the future. So you're going to see that play out.

Spending is going to be significantly higher in the back half. When you do your modeling, it's going to be almost $100 million of spend higher in the back half.

We recognize that and realize it. But those things that I just indicated are going to be the areas that we primarily focus on in our spending.

Hi. How are you doing?

It's Misra. I hope everyone is okay.

I just want to pick your brains a little bit more around the reimbursement for some of this less intensive insulin management patients, Steve or Kevin, can you help out to think about what's the index comps control in terms of what you think you need to do to establish that use case? In a kind of payment?

Thanks.

Obviously, first and foremost, it's to build, as Kevin mentioned, to build the right products for this patient population. We think the products are going to be different.

They're not going to have all the – there won't be nearly as – I don't want to say nearly as robust because the performance of the underlying sensor will be the same. But having some of the bells and whistles that we need for the intensive insulin population just don't apply the type 2.

The software experience needs to be different. So those types of things are within our control or even, frankly, within the control of some of our partners that we've talked about, right?

Livongo offers a patient experience to their patients. United, the Level 2 program is an experience that we've developed together with United, but it's really a UnitedHealthcare patient experience.

So we're not going to – there's not going to be a one size fits all here. We're going to offer our own tools.

We do offer our own tools today, and we're going to enable multiple players in this business to offer the appropriate tools to this patient population, because we know it's such a massive opportunity that it [inaudible] just make our sensors available to anybody who's a viable company.

Thank you. Hi, guys.

Wondering if you could provide some more color on the e-commerce initiatives that you mentioned are expanding internationally. In what ways has it helped in Canada and now U.K.

during COVID in terms of driving new patients and getting them started on CGM.

Well, certainly, I think from an access perspective, it just makes it very easy for the patient to be able to find our product available right on the web in their particular country. And in many ways, it becomes something we can scale relatively easily.

And we choose new countries to take it into. And I think that when folks are searching or trying to learn about the product and then they have the ability to purchase it, right there at their fingertips in a web platform, it just makes it naturally easier to come on to the technology.

And I think you see what played out in Canada in terms of record number of new patients shortly after we launched it. The early success in the UK clearly speaks to the benefit of the e-commerce platform as well.

So I think it's something that we can scale over time as we take into new countries and it clearly has the benefits with it. I think you heard in the prepared remarks, nearly 70% of all of our patients come on to our product for their first time through some sort of either virtual training or online training capability or in-app capability.

So the e-commerce platform kind of lends itself very naturally into that ability to come on to the product.

Thanks. This is actually Young [ph] in for Matt.

Maybe a question on the DTC ads. Can you talk a little bit about the impact that might have on second half growth?

What's the focus in terms of the patient segment or geographically, are you able to take advantage of lower ad rates to go a little bit more aggressive on that? Thanks.

Yes. This is Kevin.

I'll take that. With respect to the ad rates and the spending, I don't get too involved in that one anymore.

I leave that to the other guys. But our team is very targeted with respect to the ads that we develop, where we run them, when we run them, and we have tremendous systems in place to monitor the leads that come in from those ads.

We have, again, a team in place that if you watch our ad and e-mail us a want a information. We get back to those patients very quickly.

They don't wait for several days. It's a matter of hours, and we give back those patients and let them know we are here, and we will help them and educate them and want to get their insurance information, their doctor information, everything that patient might need.

We do track that spending and where we spend it, we track the results from it, and then we invest in those places where we think it will be better. But we are seeing -- working from home now, we see DexCom ads wherever we watch television, a lot more than we used to.

And I think they've been very successful, and our team is really good at this.

And I would just say, from a return on investment perspective, there's not a better investment that we can make inside of these four walls today than direct-to-consumer spending. It's amazing the capability that the team has put together in the targeted effort there to drive results.

Thank you very much, operator, and thanks everybody again for being on our call today. We saw a headline come across our phones while we're sitting here what pandemic DexCom rocks here.

I just want to tell everybody that we did have a great quarter, but we were affected by this like everybody else. Our commercial teams had to completely change the way they worked.

And I had a town hall meeting with our team in the Philippines last week in the stories of some people who literally kept themselves locked up in the city for two months, away from their families to help patients are incredibly inspiring. We've all been affected by this and working from homes.

And it's safe to say like everybody else, we've never experienced anything or planned for anything like this. But what an amazing six-month this company has had in this environment?

I just want to list a few accomplishments over the last six months and closing today. And we completed a financing that gives us the balance sheet strength necessary to accomplish all of our long-term goals.

We achieved an absolute -- worldwide absolute dollar sales growth increase of US$240 million during this chaotic time. Our type 2 business on the intensive insulin side is demonstrating strength and the outcomes we always said we'd have with these patients.

We've waited a long time to execute on this plan, and we finally got into the hospital. And we think that will be a great market for us.

Our financial performance is exceeding all of our plans on the bottom line, providing us with operating cash to reinvest in our business, as we talked about money that we need to spend over the next six months of the year. Our G6 satisfaction scores are at all-time highs again during this period of chaos.

We have a great product supported by a very dedicated team. Let’s not forget our pipeline.

G7 progress is excellent. As I said earlier in the call, the groups working on this project are hitting on all cylinders.

And there is nothing more exciting at DexCom than the sense of urgency related to a platform change like this that's such a monumental effort. We are redoing everything that we do now to bring this incredible product to market.

G7 is not the only thing in our pipeline. We're spending numerous hours talking about G8, 9 and 10 and whatever else comes in the future, but we're also making sure we don't ignore G6.

We have numerous product improvements and patient experience improvements with G6 that will be out over the next couple of years. We don't ever sit still.

I just completed a series of virtual presentations for various groups here at DexCom. And one of the questions I was asked to answer is, why has the company been so successful?

And I narrowed my answer down to a very simple statement. We provide a solution to a very serious problem and we do it better than anybody else ever has.

As we look to the future, we can continue to do that only, we can do it much better than we do it today, and we believe we can solve many more problems in the same manner. It's going to thrill the health care community.

And more importantly, we're going to save patients, caregivers, health care professional and payers' time, money and we're going to continue to save lives. Thank you, everybody.