Welcome to the DexCom First Quarter 2020 Earnings Release Conference Call. My name is Adrian and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Sean Christensen. Sean, you may begin.

Thank you, operator, and welcome to DexCom's First Quarter 2020 Earnings Call. Our agenda begins with Kevin Sayer, DexCom's Chairman, President and CEO, who will 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 first quarter performance on the DexCom Investor Relations website on the Events and 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, including statements with respect to the impacts of the COVID-19 pandemic on DexCom and the potential timing of updated 2020 annual guidance. 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 first 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. Let me start by expressing my gratitude for the many healthcare workers and first responders that are supporting all of us at this time. We certainly stand with you in this effort and our thoughts are with you and those who have been impacted by COVID-19. As a quick summary, the first quarter was another very strong quarter for DexCom, continuing the growth momentum that we've delivered for much of the past two years. First quarter revenue grew to $405 million, representing 44% growth over the first quarter of 2019 or greater than $120 million of absolute dollar growth. This performance was driven by strength in new patient additions in both the U.S. and international businesses. Even as we saw some impact in new patient opportunities related to COVID-19 beginning in mid-March. We will address first quarter performance in a moment, but first and foremost we wanted to discuss the impact of COVID-19 and DexCom's response. The past few months have brought and likely will continue to bring unprecedented challenges to global health and economic systems as a result of the virus. While this has been an incredibly difficult humanitarian crisis, we have also seen many encouraging examples of collaboration around the world from public and private entities. We have seen people working to bring care to those in need, protect the health of the vulnerable and support the wellbeing of workers and families. From the outset, we recognize that DexCom has an important role to play. Our customers rely on our CGM technology to safely manage blood glucose and deliver insulin. In many cases, these are people with diabetes who have relied on DexCom CGM since diagnosis, meaning they haven't known a world without the peace of mind and real time continuous glucose monitoring. People with diabetes are also at heightened risk for complications with COVID-19. Highlighting the importance of good glycaemic control during these challenging times, we set out with three core priorities, keep our employees safe, continue to serve our patients and work to help our communities. To meet this challenge and support these core priorities, we set in motion several initiatives. We quickly moved the majority of our global employees to home-based work arrangements, this transition enhance the safety of all of our employees, including our teams who remain onsite and benefit from a less stance work environment. Our IT and emergency response teams have done an excellent job to enable this shift and provide necessary resources for our teams to continue to function effectively and care for our patients. I could share numerous examples of DexCom teams going above and beyond to ensure that our customers receive product and the support that they need, but I'll share one that stands out to me. In order to ensure that our products were supplied in a timely manner, we had members of our IT teams who were willing to sleep onsite to meet the needs of our employees and our patients. As this story demonstrates our employees care deeply for our patients and we continue to work on new ways to enhance customer support in these unique times. This includes our announcement yesterday of a program to provide financial assistance to our existing patients who have lost or may lose access to insurance coverage for their DexCom’s supplies as a result of COVID-19. This program which we plan to launch in the next several weeks will provide up to two 90 day supply shipments for only $45 each and provide relief to our patients and what is clearly a very challenging time. As it pertains to our customers both the patient and the clinician, we are working on ways to ensure we have the appropriate infrastructure to support their evolving needs. Our extensive virtual resources for patient and clinician training and customer support are proving to be especially important as the world embraces the increasing use of telemedicine platforms. As a reminder, more than 70% of our historical new patient additions have self-trained using the resources that we provide, demonstrating the value of these resources and ease of use of our CGM systems. Even prior to the global spread of the virus, our procurement and operations teams work to access and mitigate any potential risk to the supply chain for existing products. Because of their effort, we have seen very little disruption with our manufacturing sites as both San Diego and Mesa remain fully operational. Our manufacturing teams have worked seamlessly to make sure that our customers get the CGM systems they rely on. We've implemented additional safety measures to reduce the number of people on site at any given time. We have implemented shift separations and added additional sanitation and safety measures on top of our existing procedures including thermal scanning. With the supply chain and manufacturing operations currently in good shape, we continue to be in a strong inventory position to meet the current demand for both the existing patients and new patients. We have seen some customer interest in stocking up on the product, but have worked to keep customers supplied in line with the provisions of their insurance providers. This also applies to our DME suppliers and wholesalers. We did not see a material positive impact from customer stocking on our first quarter sales performance. We have also looked at ways that DexCom could play its part in providing solutions that benefit our communities during the COVID outbreak. When avenues already played out, as hospital systems came under increasing pressure and had limited personal protective equipment, we began to feel the number of requests for our G6 sensors. In the ICU, hospital personnel often need to monitor patients with finger sticks as much as every half an hour. In response to the request, we worked with the FDA to temporarily allow for the use of G6 in the hospital setting and we quickly set out to supply product to key regions battling the COVID crisis. Because of our real time connectivity, our CGM systems allow healthcare providers to remotely monitor a patient's glucose levels in real time reducing the need for finger sticks. As a result, there are fewer physical interactions between healthcare providers and patients, which limits viral exposure for hospital staff and preserves personal protective equipment. We are already seeing promising evidence of these benefits from the initial sites. Recently the FDA removed the three hour delay requirement for CGM data into our CLARITY software, allowing for faster data integration. As we roll this out in the coming weeks, our remote monitoring solutions will be further enhanced in both the hospital setting and for telehealth consultations for people with diabetes. We expect to continue supporting hospitals in areas of the country most impacted by the COVID-19 emergency, although our top priority remains serving our existing patients without interruption. The drastic but necessary steps to mitigate the spread of the virus have also created some areas of unpredictability for us as we continue in our second quarter and the remainder of 2020. As I briefly noted above, we have seen some impact in new patient opportunities since the broader social distancing measures were put in place in mid-March. We are hopeful that this impact may be mitigated as conditions enhance their telemedicine capabilities and our team is certainly working hard to ensure patient access for those in need of DexCom CGM. Quentin will provide more detail around how we have contemplated this uncertainty relative to our 2020 guidance. Another area of unpredictability right now is around the timing of large clinical trials like we need to run for G7. We remain confident in our ability to deliver G7, but acknowledge that the timing of the pivotal trial will be delayed due to the pausing of new trials at most clinical sites. We currently expect a minimum delay of approximately six months for the pivotal trial. This is obviously a challenging time across the globe, but I'm very proud of the way the DexCom teams have responded. I will now turn the call over to Quentin for 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 first quarter of 2020 we reported worldwide revenue of $405.1 million compared to $280.5 million for the first quarter of 2019, representing growth of 44% on a reported basis and 45% on a constant currency basis. The growth performance reflects the strength of our new patient additions throughout 2019 and the first quarter of 2020. As we continue to see growing awareness of the value of DexCom CGM for both Type 1 and Type 2 patients. The U.S. business grew 39% in the first quarter of 2020 over the first quarter of 2019 with strong growth from each channel: durable medical equipment, pharmacy and Medicare. Pharmacy continues to be the fastest growing channel for us and realize the strongest sequential uptake in utilization to date as a result of the significant access improvements that our team has driven over the past year. Our international business also put up a great first quarter growing 63% on a constant currency basis relative to the same quarter in 2019. The $112.8 million in revenues for our international business represents an increase of more than $25 million from our previous quarterly high watermark. Strength was across the board including both direct and distributor markets. Our first quarter gross profit was $258.7 million or 63.9% of revenue compared to 60.2% in the first quarter of 2019. The 370 basis point improvement to year-over-year gross margin reflects the focused work of our teams to take costs out of our product design and manufacturing processes. As Kevin mentioned, our procurement team has done a great job of keeping our supply chain functioning well with little impact to our ability to produce product as well as our product cost thus far. We will continue to monitor this closely as the situation evolves globally. Operating expenses were $215.4 million for Q1 2020 compared to $176.4 million in Q1 2019. This reflects an increase at 22% year-over-year and a nearly 1,000 basis point reduction as a percentage of revenue from the first quarter of 2019. We continue to prioritize key areas of investment including our efforts to scale G6 manufacturing, progressing toward our goal of doubling capacity again in the first half of this year. We are also continuing our preparation for the scale-up of our G7 manufacturing lines and looking to support our sales growth with increasing direct-to-consumer advertising, as greater clarity evolves from the current global situation. Our non-GAAP results exclude some incremental costs that we experienced toward the end of the quarter in both cost of goods sold and operating expenses as a result of COVID-19. As Kevin noted, the safety of our employees remains our Number 1 priority. However, as an essential provider of medical devices, there are certain functions that must be performed onsite despite shelter and place orders to ensure continuity of supply. As a result, we are incurring incremental cost to assist our employees and ensure their safety to the greatest extent possible and expect to continue to do so in the near term as we support our people through this crisis. We expect to continue to incur costs related to our COVID-19 response until macro business conditions returned to normal. Operating income was $43.3 million or 10.7% of revenue in the first quarter of 2020 compared to a loss of $7.6 million or negative 2.7% of revenue in the same quarter of 2019. This reflects a year-over-year improvements of nearly 1,300 basis points in operating margin for the quarter. Similarly adjusted EBITDA margin improved by nearly 1,000 basis points to 19.2% of revenue or $77.8 million for the first quarter of 2020 compared to 9.3% of revenue or $26.1 million for the first quarter of 2019. As our operating margin and adjusted EBITDA margin performance indicate, we are doing a good job managing our expenses and gaining leverage from our strong top line results. Net income for the first quarter was $41.4 million or $0.44 per share. Our balance sheet remains very strong with more than $1.5 billion in cash and equivalents at the end of the first quarter leading us in a strong net cash position. The capital structure that we have put in place along with our improved profitability profile that demonstrates the cash earnings potential of this business provides us the flexibility to not only navigate the current environment, but also be opportunistic when needed. Our convertible notes are not due until 2022 and 2023, respectively, and are convertible in either cash or stock at our discretion. We have worked hard and are fortunate to be in this position recognizing that there are many companies that are less fortunate and struggling to support their employees. Therefore, although we are potentially entitled to stimulus funds as a healthcare provider, we have chosen not to accept these funds and hope that they could be allocated to other American businesses and employees who are in greater need. Turning to 2020 guidance, given the unpredictable current economic and global health environment, we have chosen to temporarily suspend 2020 guidance until we have greater visibility on the outlook. To be clear, this decision does not necessarily imply upside or downside to our prior guidance. Our first quarter performance was above our expectations and apart from the uncertainty created by COVID-19; we would be in a position to raise our guidance today. Ultimately, we believe the underlying demand for CGM has not changed despite the situation with COVID-19. In these early days, we have seen the benefits in the shift to telemedicine because DexCom’s real time CGM is connected. It has become one of the primary methods for physicians to monitor their patients and get newly diagnosed patients up and running. Further to this, as Kevin noted, the FDA has recently removed the three hour delay requirement for our clarity system, which will further differentiate DexCom CGM in its remote monitoring capability. In addition, as noted earlier, we've seen the FDA move quickly to enable the use of DexCom CGM in the hospital setting further increasing demand for our product. On the other hand, as we've seen office visits decline across healthcare, new patient starts could be impacted in Q2 and into the back-half of the year depending on how COVID-19 situation plays out. We will also monitor the macroeconomic environment to gauge employment levels and the ultimate impact of our financial assistance program. Further, while our global supply chain has remained stable, it is less predictable in the current environment and could experience interruption. Predicting all of these future variables has been difficult and we found it prudent to temporarily suspend our guidance until visibility improves. We will continue to monitor the situation closely and keep you updated as things evolve and we can provide greater clarity. With that, I will now turn the call over to Steve for a strategic update.

Thanks Quentin. Given our strong financial position and the growth opportunity ahead of us, we continue to press forward with the strategic initiatives that we outlined at the start of the year. As the COVID-19 pandemic has played out, we looked at how DexCom could play a role in delivering an impactful solution. Kevin already walked you through the incredible work being done in the hospital setting. Recent data published in the Journal of Diabetes Science and Technology shows the clear need for glucose control in the hospital and cements the reason we are so committed to assisting in this crisis. The study found that the COVID-19 mortality rate for people with diabetes or hyperglycemia even in non-diabetics during their stay was more than four times greater than patients without diabetes or hyperglycemia. Even more alarming for those who had no evidence of diabetes prior to hospitalization who developed hyperglycemia during their stay, 42% died in the hospital. These are sobering statistics and it served as a constant reminder to our team as we work around the clock to assist frontline workers. As we look forward, our commercial team has begun leveraging our extensive data platforms, which should prove especially valuable for patients and clinicians in an environment where telemedicine business are quickly becoming the norm. As an example, an article published last week in Diabetes Technology & Therapeutics showed great results for two newly diagnosed Type 1 patients, one a 20-year-old male and another a 12-month old female who were given a G6 and treated with telemedicine during the COVID-19 stay-at-home orders. Using G6 and our software tools, clinicians at the Barbara Davis Center in Colorado were able to significantly improve the glucose levels of these patients through virtual care. Stepping back, the fundamentals of our business remained sound and there were several encouraging developments during the first quarter as our sales growth indicates the momentum behind our no fingerstick G6 technology continued in the first quarter, and as we have said multiple times before, we continue to believe that there are significantly more people on intensive insulin therapy to standard benefit from a transition to our real time CGM. At the end of the first quarter we have now transitioned the majority of our Medicare base over to G6 as the only Class II ICGM on the market and the lowest cost CGM for the Medicare channel. We look forward to bringing G6 to people both with Type 1 and intensively manage Type 2 diabetes who are eligible for Medicare. We are also pleased that UnitedHealthcare recently began coverage for their intensive insulin Type 2 patient population. Combined with Medicare, this demonstrates the increasing traction that we are gaining in the Type 2 intensive market. In January, we introduced additional data demonstrating the value of DexCom CGM in the Type 2 non-intensive market. This includes our direct work with UnitedHealthcare, digital health programs like WellDoc, Onduo, Livongo and integrated health systems like Intermountain where our preliminary pilot should significant savings with the fulltime use of DexCom G6 relative to standard of care self monitored blood glucose. We are excited to be expanding access to DexCom CGM throughout all of these channels and look forward to sharing additional results as we progress in our Type 2 efforts. The opportunity for growth is also extensive when we look outside the U.S. where use of CGM remains far less than that of fingerstick. In February, we obtained regulatory approvals for G6 in Australia, South Korea and Japan and are progressing toward extending the G6 launch to each of these markets later this year. In support of our continuing growth, in particular the service of our international markets. We recently finalized a decision to develop a third manufacturing site in Malaysia. This will be another significant investment for DexCom and demonstrates our belief in the long-term opportunity ahead of us. We continue to advance the regulatory pathway for use of CGM in pregnancy, attaining CE Mark for wear on the back of the arm and we removed the pregnancy warning for G6 for use in Type 1, Type 2 and gestational diabetes. Following this approval, we launched G6 in the UK for pregnant women with diabetes and are currently working to broaden the clinical evidence to support the use of DexCom CGM for the management of gestational diabetes. Finally, our efforts as a forerunner in interoperability and our support of patient choice and their method of insulin delivery has us well positioned to benefit from multiple commercial systems over the next couple of years, whether through automated insulin delivery or connected smart pens. As you can see, there are many exciting things that the DexCom teams are driving forward even as we navigate the unprecedented time that we are now experiencing. With that, I'll turn it back to Kevin.

Thanks Steve. This has certainly been a challenging season for all of us. I know that there are many that I've met and people on this call that have been personally impacted by COVID-19 and as I mentioned earlier, our thoughts are certainly with you. I've been grateful to see the unified response of so many companies to work towards innovative solutions including some of the companies that we traditionally compete with. I'm also proud of the response to the DexCom team who worked selflessly to bring continuity to our business and assurance to our customer base in a time of heightened anxiety. We are pressing forward in 2020 with resilience in the current environment and continue to hope for the opportunity that lies ahead for DexCom. I would now like to open the call up for Q&A. Sean?

Thank you, Kevin. As a reminder, we ask our audience to limit themselves to only one question at this time and then reenter the queue if necessary. Operator, please provide the Q&A instructions.

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] And our first question comes from Robbie Marcus from JPMorgan. Your line is open.

Thanks and congrats on a great quarter. I have a lot of questions I could ask you about the first quarter performance, but unfortunately I'm going to address the elephant in the room with COVID-19. You pulled guidance, but you do have a month of performance here, what's happened in April, was wondering if you could just walk us through, I don't know if it's Quentin, if you want to take it or how you split it up, but maybe walk us through how we should think about the expectations for 2Q and had to think about the impact to prescribing in a recovery? How remote telehealth can help or hurt prescriptions of new patients? And how to think about the impact down the P&L as new sales might be a disrupted offset by some of the new venues that you've been able to secure here with testing? Thanks.

You know, Robbie, this is Kevin. I'll start. If I gave you a whole bunch of April color, then I'd be giving you guidance and that's what we just said that that we weren't going to do. That being said, we remain very bullish on our business, as you can see by the first quarter results and we have learned very much that the impact of the connectivity of our device with telemedicine is becoming very, very well-known by within the physician community. We hosted a webinar last week and had 900 participants sign-up. We don’t get 900 people to anything here. That was a huge win for us as we talk and learn more about that. So I think particularly with our system where it goes directly to a phone and a directly of clarity and positions can pull up clarity wherever they are working, that is a big win for patients. We know that diabetes, I'll talk about this a little more later but it's not going to go away and these patients need to be cared for. We think we – we solve a very serious problem by getting data to patients and their caregivers in a very timely basis. You heard us also talk about getting clarity more towards a real time platform that could literally give a patient the opportunity to call their doctor and say, hey, what's going on with me. And caregivers aren't on share follow all the time. A more real-time clarity is going to give that caregiver a good answer. So we see a situation where you have a very good answer. We're bullish on the business going forward. Things are just a little different now. Quentin, if you want to add a little more to it.

Yes. No, I think you describe it well. I think Robbie, the thing is coming out of the quarter or over the course of the first quarter, the strength in the core business – the underlying business was incredibly strong. And I think from our perspective we’re as bullish as we've ever been on where we're at in this opportunity, the runway that exist in front of us and, and probably even more so now when you think about the long-term just with the hospital opportunity opening up probably sooner than what we anticipated. The whole play in telehealth, telemedicine, we know we have a device that works better there than anything else in the marketplace. And folks seem to be – seem to be understanding that to Kevin's point, the 900 folks that joined the webinar, it was a webinar specifically directed towards telehealth, telemedicine. So there's a real interest out there. So I think long-term we feel incredibly bullish about where we're at. In April, yes, the new patient starts, we're down a bit. We noted that coming out of Q1. We have seen it start to rebound a bit in April. I think it continues to build over time, but we need to see that play out and have some certainty there before we can get back to where we feel comfortable providing guidance. There's just too many – too many things that are uncertain at this point in time that we need that greater clarity on. But I would just reiterate the underlying strength that the fact that folks are recognizing the value of this product and what it means in the marketplace. From a long-term perspective, we're as bullish as we've ever been.

And the next question comes from Danielle Antalffy from Leerink. Your line is open.

Hey, good afternoon guys. Thanks so much for taking the question. Congrats on a really strong quarter. And I guess just to follow-up. I was wondering if you could talk a little bit about, so appreciate the commentary. Quentin, thank you on new patient as in April and that coming down, so uptake a little bit. Can you talk a little bit about how new patient adds, patient training, things like that could look post COVID if we are in a world where telehealth is a more prominent part of patient management specifically for diabetes, I would think that that ultimately would favor CGM, but just curious about how you think if that could change your long-term expectations around penetration in these markets and maybe a little bit of color of postcodes, what things might look like based on what you're seeing today? And that's my question. Thanks so much

Danielle, I think we'll tag team this one too and I'll start. First of all, as we talked about in our call, 70% of our patients train themselves with the material that we provide and we've also had remote coaching services through DexCom care to help these patients as well. We've anticipated a day like this with respect to training for a long, long time, which is why we moved away from the model we previously had whereby we could make this easier and get patients on the system. So we don't see that changing much at all. As far as new patient opportunities and new patients coming in, whereas in the past, many times that was a result of an office visit. Now it's coming in possibly through a telemedicine conference with a healthcare provider. They can also be coming in through our direct consumer marketing. Our online efforts are – all the things that we have and then we have to turn around and figure out a way to get the proper paperwork from the healthcare provider. One of the other things that's key to remember in Quentin's remarks, he talked about how our move to the pharmacies accelerating. As we go to the pharmacy, the paper work requirements for healthcare providers come down significantly, so again making the whole process easier. And that's been our goal from the beginning to get this process easy enough to whereby. We can get the penetration that we thought we could get. And I've said for years that 80% penetration and intensive insulin users with CGM should be our long-term goal and it still is. And the easier we make it, the faster penetration will go and those efforts have not changed and won't change as a result of COVID. As far as post COVID world and what I see is demand. I think if anything, people are going to be more concerned about controlling their diabetes to make sure they're healthy. So if something like this happens again, that will not become a complicating factor because their diabetes is in control, not running rampant. So again, we see this as an opportunity to almost increased retention and increase usage within our current patient base as much as it is to grab new ones. So I don't want to sound opportunistic – too opportunistic about this, but we have an answer to a serious problem here and we think people will come to it. Well Steve, Quentin, if you have anything more to add...

You covered it, okay.

Okay.

And our next question comes from Jeff Johnson from Baird. Your line is open.

Thank you. Good afternoon guys. Maybe moving over to the hospital setting. Kevin, a nice win getting the CGM or G6 into the hospital setting. Wondering what this means maybe longer term, any discussions with the FDA on whether data you'll collect in these COVID patients could be used to maybe accelerate a broader approval down the road for hospital use? Do you think you'd still have to go through the lengthy pivotal that seemed like it might have pushed hospital approval out two to three years from now or one to two years out anyway? Is there a way to accelerate that with some of this data that you'll be collecting here over the next X months with the COVID pandemic? Thank you.

No, thank you. We actually have had discussions with the FDA about this very subject and it is our hope to gather as much data as we can from these patients as they are in this hospital with various compounds being injected and to take care of their help to see how our sensor performs in this environment, how well connectivity is and what we can learn. Our commitment to the agency is with this opportunity will gather as much data as we can and we're going to share what we learn and see if we can in fact accelerate that path and get this device approved for use as a glucose monitoring technology in the hospital environment rather than, than what they're doing with fingersticks. And as we gather data, we'll take advantage of this opportunity. I think Jeff, the learning’s we've had so far are astounding to us, as we're into a different channel with a different physician group, with different caregivers who haven't seen CGM before with rules and regulations around hospital IT departments and connecting a phone within their security system. We've had learning’s that we would have never anticipated. We will be so much more ready to go to this market when it's time. The commitment we've made here from a dollar perspective is large. We put a lot of time and effort and the hospital team has literally worked around the clock to get this going and so we'll gather the data, will file what we see or at least share what we see and then determine a course of action after that. If we see highly positive results, it's not unthinkable that they would give us an accelerated timeframe or cutback on the work that we have to do are possibly change a label to allow us to get there sooner. We're open to all that and we will look at every one of those opportunities once we're done. But we’re really taking this opportunity very seriously.

And our next question comes from Matthew O’Brien from Piper Jaffray. Your line is open. Matthew O'Brien: Afternoon, thanks for taking the questions. Can we just talk about G7 for a second? I think most people had expected a bit of a delay here, but it's a 14-day trial. So the six month delay I think is a little bit longer than some had expected. So I guess the question would be what would have to happen for it to be pushed out that entire six months or what could happen to where that delay is not necessarily that long?

I'll start; again, well all of you guys chime in. It’s not just a 14-day study. If we could run a 14-day study and put several hundred people on it for 14 days that would be relatively simple. These trials are not that simplistic. There's going to be at least four in clinic days where blood is drawn for 12 hours and we can only handle two to three patients at a time, at a clinic per day. So these trials are very well orchestrated and scheduled from a logistics perspective. We do not know when clinics who run these trials are going to open back-up and allow patients in to run these kinds of studies. Nor do we know when patients are going to run and allow themselves to this kind of study. So we're putting that time in there knowing there's going to be a while before things get back to normal in these large clinics and many large clinics where we do these studies aren't even letting patients come in the door now, let alone patients come in for clinical trials. So we've put this timeframe on it. How could it in fact accelerate, because accelerate if we found data on the system that would enable us to statistically reduce the size of the trial. But let us again remind you, we're not shooting for just anything. We're shooting for high ICGM standards and that is a high bar that is not an arbitrary bar set by the FDA. That's a high bar. We've met with G6 and we executed a perfect study to get that done. We've got to execute perfection again. So we've given ourselves this timeframe to make sure all our plans are locked down, that we can get the centers open, they can go and do this and we'll be methodical and thoughtful about it. If there's some way we can accelerate that we would, but we gave you this because we typically are prudent in our guidance and what we speak and what we think and that's what we see right now. That's it.

And the next question comes from Travis Steed from Bank of America.

Hi, congratulations on a strong Q1. Did want to get a little more color on the impact of the patient support program and also the mix headwind that I'm assuming would happen as patients move from commercial to Medicaid coverage? So any color there of how to think about the headwind for those two programs?

Yes. Travis, this is Quentin. I think what you're asking is exactly what we struggle with in terms of defining any certainty around what it – what it's going to be. As we continue to see the fallout from an unemployment perspective in the States and even globally how that ultimately shows up or translates into our numbers, it's hard for us to predict. You’ve take an existing patient who has been paying, in line with their program or their plan they've been on for some period of time and all of a suddenly fall into the patient assistance program. You're right? There is going to be a mixed impact on the business. I think that's part of the challenge with trying to draw the line on exactly where that's going to be. And until we have greater color on where those rates – unemployment rates ultimately fall out and the impacts ultimately fall out to our patient base, it's hard to predict. So that's what leads to putting us in a position where we ultimately feel best at this point just to pull guidance. Again, we couldn't be more bullish around what's going on inside the business, but we know there's going to be mixed impacts and shifts over the next several months. So right now the visibility is limited.

Our next question comes from Malgorzata Kaczor from William Blair. Your line is open.

Hey, good afternoon guys. Just wanted to follow-up with some more specific question about the hospital? And, so when we look at the sensors that are going out there, can you give us some sort of information in terms of the data sharing agreements that you guys have with the hospitals trialing? So what data are you targeting again? What endpoints are the hospitals and yourself interested in? And our patient's consent it to you or the hospital using the data at least on a de-identified basis, so that you can get kind of a larger national registry at least?

Yes. Malgorzata, this is Steve. Don't read too much in net at this early stage. This is something that literally the hospital team work 24/7 to get products into the hospital to reduce the risk to caregivers, right. They weren’t able to take fingersticks because they have to – really, they have to actually change out their PP every time they would have to go pick a finger and they were just – they couldn’t do it. So right now we are capturing data. This is all about being able to remotely monitor these patients to help the caregivers in the hospital provide better care. To the extent we have data down the road that we're obviously retaining, we'll look to see what we do with it. But right now we’ve not made any plans to do anything specifically with the data, either with a hospital or on an automized basis or otherwise.

We have a couple that are under IRB, but it's not...

Most of them are…

Most of them are getting this thing up and running to take care of people right now. But, Steve is right. We’re continuing to work on that.

Our next question comes from David Lewis from Morgan Stanley. Your line is open.

Good afternoon. Just want to come back to the first quarter a little bit here. Kevin, you touched on this briefly in your preamble. We think about the effect of stocking and the effect of inpatient use. I'm assuming inpatient use was pretty minimal in the first quarter, but both these, these positive offsets potentially was stocking several million or tens of millions, and was the inpatient opportunity here recently several million or bigger than that, just trying to get some sense of the framework of some of those positive drivers here? Thanks so much.

Hey David, this is Quentin. Yes. With respect to the inpatient, that was minimal, I mean it didn't move the needle at all. On the stocking side, you're talking several millions, not tens of millions by any stretch at all. It was on the lower end. I think that the point that we were making in our prepared remarks was there's several questions out there around whether or not stocking is driving results in the first quarter. And that the point is, there are several distributors who would have liked to have had the opportunity to stock up ahead of some of the uncertainty that they saw. But frankly we weren't in the position or we weren't enabling that to take place. We monitor this very closely. We have provisions in our agreements with those distributors; now limit the amount of days of inventory on hand that they can carry and so we monitor that. And so while there was an expressed interest to stock to a greater degree, we did not enable that and therefore it was not a driver of the results. And that was the point we were trying to get across.

And the next question comes from Joanne Wuensch from Citibank.

Good evening or afternoon. Thanks for taking the question. I'm curious what you have seen either in the month of April or in previous recessions when it comes to attrition. And do patients start going back to traditional fingersticks? And anything you could say, because many of us on this call did not cover the stock back in 2008 or 2009 or 2001 or 2002 would be helpful if it's relevant? Thank you.

Steve, you're the only one here.

What I would say is no, I mean we've obviously had a very strong quarter driven by both existing patient base and new patients back. If you remember back in the 2008-2009 timeframe, we were still on the 2007 and the 2007 plus, which those technologies just weren't really ready for prime time. It really wasn't, if you remember it wasn't until we launched the Gen 4 PLATINUM and I think it was Q4 of 2012 that you really saw the inflection in this business. We really moved to a must have versus a nice to have in terms of our technology. So I don't know that you could possibly make a comparison to back that. I mean, back in those days it was Terry and I just trying to raise money, every opportunity we could to keep the lights on. So it's just a different, it's not even a comparable business at this time.

About the only thing I could add to that is, we have done everything we can to make it easier for our patients to get CGM even during these tough times. In 2008 or 2009, we had zero Medicaid coverage. We had no Medicare coverage. We had no pharmacy benefit where the co-pays typically significantly lower than it is through DME. And pricing has been somewhat lower. So I think we've done everything we can to position our business to be more successful during a time like this and to help our patients continue on the therapy. But again, now you have what may be a recession tied to health care event, we may see exactly the opposite. The patients absolutely have to have this to it healthier, believe that they do. Again, part of the unknowns that we're trying to work through and trying to manage.

And our next question comes from Kyle Rose of Canaccord. Your line is open.

Great. Thank you very much for taking the question. So, I appreciate the additional commentary with respect to the G7 clinical trial, but maybe help us understand what you can do over the course of the next six months from a manufacturing perspective to help accelerate maybe the launch timing. Because if I remember correctly, you're going to get approval before year-end, but the launch wasn't really going to take place until you had capacity and that was a 2021 event. Can you help us understand what happens behind the scenes, while the trial might not be going and how that might help the eventual commercial pace when it does launch?

Let's be clear. We never said we'd have approval by year-end, and we said we expected a 2021 launch with a limited launch by the end of 2020 was our goal without meaningful financial impact in 2020, if we had a limited launch. There are things we can do to accelerate those studies possibly. On the manufacturing side we have similar circumstances to what Quen described earlier about the core business. We have suppliers that we're not in control of or rapidly putting equipment together and building things for us. We have orders for this equipment all over the world, waiting for it to come in, to get those lines up and running. We will remain committed to the fact, that we will not do a full scale launch of this product until we're ready to go completely. And on top of that while we wait and sometimes we forget, we have a fantastic product of what we have in G6 and so we will continue to refine and make that better. I don’t know Quen, if you have any other things, we can do on manufacturing…

No, I think the teams are doing a great job of pushing forward as well as we can, as fast as we can on G7 and just the automation capability from a production perspective, clearly having folks out of the office creates some challenging disruptions in the pace at which you move, but I think overall we're navigating it quite well. At the same time, our supply chain is one where it's global in nature. We rely on folks from all over the world to help us produce our product. And we've done a great job of managing G6 to- date G7, we've managed through it as well, but there have been situations where you have a temporary impact here or there, and you've got to quickly navigate through it to make sure everything stays on track and on time. And to-date we've done that well, but that's some of the uncertainty that starts to get introduced in the environment that we find ourselves navigating through. So to-date we're handling it well but there's a lot of balls in the air and we're doing the best that we possibly can and if we can pull it forward to Kevin's point, we certainly will look at those sorts of things.

And our next question comes from Matthew Blackman from Stifel. Your line is open.

Hi, good afternoon everyone. Thanks for taking the question. You did mention accelerating pharmacy channel mix. So I'm curious, if you had any feedback from payers talking particularly about holdout payers that may now be more willing to accommodate pharmacy access for DexCom and similarly, has there been an impact in the last six weeks or so on the insurance verification process? Is that moving along smoothly? Is it similar to the pace you've seen in the past, faster or slower? Any help there would be appreciated, thanks.

Quen, you want to go ahead.

Yes, so I think from a pharmacy perspective, the comments that we made were clear that we've seen the uptick in that pharmacy channel progress at a very rapid pace and its one channel that we always thought just has tremendous potential for us and we've proved that out over the course of the first quarter. As a matter of fact, we talk about new patients being a driver of growth, for the first time we saw record new patients in the first quarter, despite the fact that we saw slow down in the very back end of the quarter. And so I attribute a good part of that to the pharmacy channel. We haven't seen payers or at least I couldn't speak to any particular payers here in the last several weeks who have opened up more incremental pharmacy access, but we have seen payers who are willing to think differently around the requirements that they might have on patients ordering product such as clinical site visits or coming in to see the clinician, they're allowing that through telehealth, now telemedicine, we see more and more payers who are moving that direction each and every week. So we are seeing a changing dynamic from a payer perspective, haven't seen it so much in terms of opening incremental pharmacy access in the last several weeks, but there is an appetite for change here.

And our next question comes from Raj Denhoy from Jefferies, your line is open.

Hi. Good afternoon. What if I could maybe ask about international a little bit, so the 41 million increase to 60% plus was notably strong. And so I'm curious if there was particular markets in which you saw that growth. And as a related question, as we think about Germany, the UK being some of the more impacted markets with COVID, what are your thoughts around how those will trend over the next several quarters?

Yes, Raj, great question. International was clearly a bright spot in the quarter and really it was across the entire international region, whether it was Europe, Asia both regions performed incredibly well. Canada was a driver of the overall growth with the e-Commerce platform we put in place there we couldn't be more happy with the results that we see. I think one of the interesting data points coming out of the quarter, while Germany is a large market for us, continues to have great success. The UK also growing quite aggressively, very significantly outpaced most other major markets, which was nice to see. So a lot of runway continues to exist in all of these markets, but really strength across the board, even through Asia and Australia. So there's not one country to really pull out and attribute all this success to, it was performance across the entire slate that led to the overall outcome that we communicated.

Our next question comes from Jayson Bedford from Raymond James.

Hi, good afternoon. I hope everyone's healthy. I hate to blow my one question on a yes or no question, but Quentin, I think I just heard you say that you generated record new patients in 1Q is that correct?

Yes.

So meaning you generated more new patients in 1Q 2020 than in any other quarter?

Yes, correct.

The first quarter of 2020 was a record number of new patients to the company versus any other quarter in history, that's right.

And our next question comes from Ryan Blicker from Cowen. Your line is open.

Thanks for taking my questions. Two, reimburse them one. So subsequent to UNH coverage, is there any quantification you can provide on where commercial payer coverage for intensely managed Type 2 patients is in the U.S. today? And then can you also give us an update on the reimbursement environment in Japan and South Korea as you plan to launch later this year? Thank you.

The reimbursement with intensive Type 2 is obviously most of their Medicare patients we have that covered. After that it is really been payer-by-payer, we announced a healthcare Type 2 coverage today, we also have had another large payer expand their Type 2 intensive use policy, just hit us today, that'll be another win for us. I think a lot of the payers as we go to the pharmacy have actually included Type 2 as we've gone there as well. But it's a gradual thing. It's not going to happen overnight. We keep having wins and our payer team is doing a job staying on top of that and we're kind of getting the message out that insulin users and insulin user and they all need access to this. So our Type 2 intensive use patient base is growing significantly and becoming a much larger part of our business.

I don't have a great update for you on – new update for you anyway on Korea, but with respect to Japan, we did get our G6 approval. So that's an approval for consumer use, the professional use clinician product. We don't currently have reimbursement. So when we launch that product in the consumer channel before the end of this year, it'll be a cash pay product, what we've elected not to do is follow a competitor and accept really subpar reimbursement based on kind of fingerstick level pricing. We're just not going to go there with that, we're going to do our work, provide the Japanese government with the appropriate data, outcomes data and establish real reimbursement for real time CGM. So that won't be this year, but we'll give you an update when we have more.

And our next question comes from Chris Pasquale from Guggenheim. Your line is open.

Thanks. Can you quantify all the impact on new patient starts in April? Just looking for a rough sense for how significant the disruption has been. And then Quen, I just want to make sure I heard you right, that you've already seen those numbers begin to rebound, that seems a little fast. Wondering whether you have any sense for why that is, are physicians getting better at telemedicine, because it seems like most areas are still pretty locked down. Thanks.

Yes, we're not going to comment specifically on where it's at. I think, there's been a lot of research, a lot of surveys that have been done that we've seen that would indicate, new patients starts might be 40 or 50% of what they previously were, we haven't seen it to that extent, but they certainly have been impacted. And to the point I made earlier, we have seen it start to come back a bit. I think folks are just getting comfortable understanding, that there's other means of being able to interact with their physician, learn about the product and ultimately get the product on to them and that's the telehealth, telemedicine capability that continues to develop. I'll point you back to the webinar that we had just two weeks ago. Over 900 physicians dialed into that webinar to learn of the value and ways to introduce CGM through telehealth. I think that speaks to the interest level that's out there. So I think it will continue to build over time, how quickly it goes, it's hard to say and that's part of why the uncertainty exists and gives us pause on the guidance that's out there and leaving it there. But, overall I think, down the road telehealth, telemedicine is going to play a much bigger part than what we've seen historically.

And our next question comes from Steven Lichtman of Oppenheimer and Company. Your line is open.

Thank you. Hi guys. You talked about the strong cash position you're in, which is particularly important during this time. You also mentioned being opportunistic with the cash. Can you provide any color on where that cash can be put to use for growth initiatives beyond the manufacturing expansion, any other broader thoughts on potential use of cash that you can provide? Thanks.

Quen, you take first stab, and I will walk on what I can you tell you. Go ahead.

Well, I think certainly the new market opportunities that we've been after for a while now with Dolan and team leading that effort, we've been very clear around hospital, is there a way to accelerate that? There certainly seems to be an interest level beyond hours now sitting on the other side, but there's the hospital or the FDA, we want to make sure we're opportunistic and think about that in a way that can accelerate it. I think that there's, potentially in that space, even more than just the device itself, but how do you improve efficiency in the hospital setting? So even from an IT capability perspective, thinking about those sorts of things, we think about gestational diabetes, pregnancy, the whole Type 2 non-intensive space, I think that market remains significant. And I think, we're seeing each and every day that there's a validated opportunity in that space and we want to go fast. So we're keeping our eyes open out there in those spaces, around the opportunities that exist and if there's opportunities to kind of really put the foot on the gas pedal, we're going to look at those sorts of things. So that's what we mean by being opportunistic.

Yes. I just add one more thing, as far as cash because I'm the one driving Quen and his team on this. We talk about doubling manufacturing capacity before the first half of the year is over. We're pushing to get that, but that's a lot of capital equipment, as we go to a lot of G6 automated lines and get those up and running and get more lines up at our contract manufacturers, we then have a significant capital investment in G7 equipment that will be coming. And we talked about investing in a third manufacturing site in Malaysia. So there's going to be a lot of capital equipment. So we purchased the other place that we will definitely be using cash as we invest in our businesses, just in our infrastructure and in our systems. We will – if we've learned anything through this, we need to make some more investments on that side too. Our team has been fantastic with the tool they had when you give them some more tools. So we have a lot of capital use for that money for organic growth as well.

And the next question. Ravi Misra with Berenberg Capital. Your line is open.

Hi, good evening. I hope everyone over there and their families are okay. Just a question about the financial assistance program, you're providing about six months worth of supply to patients. Can you just help us understand kind of, would that be something that would be shipped out, immediately if someone signs up and also how do we think about it if the economy continues to kind of show these unemployment numbers, how willing is the company to kind of extend these programs for beyond that six month period? Is there anything that would be gating you to that? Thank you.

Well, we'll start with our six month period. As we got to that conclusion, as we've modeled that out, we're certainly comfortable with that. We're very comfortable with again, helping our patient base out. These are the people that built our company, made it what it is. And as I said in my prepared remarks, the more I traveled before this pandemic, the more I learned. There are a lot of people who have no idea how to manage their diabetes without a CGM. So we will continue to try and get product to patients. We'll evaluate the economic consequences of what we do as we roll this out over time. You know, three years ago if we had to do this, it would have been even much more difficult because we had very little Medicaid and we didn't even have Medicare up and running. Now with Medicare approval and Medicaid, there are some states where these patients have been employed can go to Medicaid programs, but it's very inconsistent and sporadic, even though we have. I want to say 60% of Medicaid programs cover – some only covers for kids and some make it very difficult. So we will continue to push for more Medicaid coverage during this time to try and Medicaid that and we'll see how it goes and we'll keep track. But, it's important that we make sure these people can stay on the system and we think this is a really good opportunity for us. So we will continue to do that.

And our last question comes from Chris Cooley from Stephens. Your line is open.

Thank you. I appreciate you taking the promotions for this evening. Congrats on the record new patient starts. Just at this point from my perspective maybe, Quentin could you help us out a little bit with, as we looked at the operating expenses trending forward, you alluded to better managing the supply chain would assume you'd keep higher levels of safety stock, have higher costs in the shorter run and appropriately so on the labor side. Just maybe help us, when we look at the first quarter, was that reflected in the 1Q results or just any way you can maybe help us better understand how we should think about maybe the margin structure as we start to go through the year, ex the capacity build out and maybe similarly from the DTC effort, what you're looking for there to kick that up just from a change in the COVID-19 situation. Thanks so much.

Yes, I think if you go back to the guidance that we set coming into the year, we spoke about some of the different levers that were in there. And certainly some of the things that were going to weigh on the organization being specific to G7 trials, development of the automation lines, ramping G6 as quickly as we can and doubling it, and DTC being a significant investment. I think, while we've walked away from guidance on the full year, those sorts of drivers are still going to be in the spend profile and they're going to be more heavily weighted in the back half of the year. So while you're seeing a 1,300 basis point improvement in operating margin in Q1 it's not likely that you're going to see that same sort of improvement in the back half of the year, because there's going to be all these incremental investments that we know that we need to make and that will set the company up for growth far into the future and we're going to commit ourselves to invest in those ways. So I think you're going to continue to see some good leverage in the first half of the year. I think in the back half of the year, you're going to see the P&L start to look a little bit differently as we make some of these key investments into what I think all of us understand to be critical growth drivers of the future. So I'll leave it at that, the P&L profile will shift a little bit, but overall we still remain committed to the longer term goals that we put out there at Analyst Day just year and a half ago or so.

And this concludes your question-and-answer session. I'll turn the call back over to the speakers for final remarks.

Hi, this is Kevin. I'll finish up today. We want to thank all of you for participating on our call. I surely under circumstances far different from what you envisioned during our 2019 Q4 earnings call last February, when I watched the night – the news night in and out, I've seen the toll that this virus has taken on communities all over the world and recognize, when this pandemic ends, our world human interaction and the administration of healthcare will be forever changed. DexCom is very fortunate to be in a strong position during this pandemic and I personally feel sense of obligation to operate from that strength to serve the needs of others in this time of heightened anxiety. We'll stay at home orders and school closures. We realize our employees day-to-day lives have been upended causing significant stress. We've attempted to reduce that stress by offering increased pay to essential onsite workers and promoting increased safety measures to best protect all DexCom employees. We recognize that diabetes doesn't take a break even for pandemics, economic slowdowns or high unemployment. Now more than ever, we have a responsibility to patients that have supported DexCom over the years and made us the company that we are today. We're therefore working quickly on a roll out of our patient assistance program to provide access to DexCom CGM for the many individuals who have lost their jobs as a result of COVID-19. In addition, we realized that helping a patient staying control their blood glucose, also his family members and clinicians providing needed relief to our healthcare system. Our core belief remains unchanged. If we do our best to take care of our patients, the business will always move in the right direction. Every intensive insulin using patients have access to real time CGM. We'll work tirelessly to make that happen. COVID-19 has had a disproportionate impact on the diabetes community. This awful virus is also attacking the pancreas of people without diabetes. As a result, brave frontline responders are having to repeatedly gown up and [indiscernible] administer finger sticks to test patient's blood glucose levels. We've worked hard with the FDA to provide these heroes with better tools to treat patients and reduce healthcare workers overall risk of infection. However employees have rallied to this cause has been nothing short of amazing. In short order, we've created new training materials, stood up a specialized technical support group, procured to configure thousands of cell phones for use in this environment at a cost in excess of $1 million and developed a separate commercial structure to launch G6 in this market at significantly reduced prices. We are making a significant investment here. Our commitment to connectivity, enable multiple platforms to consume our data and cloud based tools for healthcare providers has become even more important than we envisioned when we blazed this trail many, many years ago. As the work from the team in the Barbara Davis center in Colorado indicates, the unique features of our CGM and connected software solutions are playing an important role in driving care for newly diagnosed people with diabetes during this crisis. We are hopeful that the expanded use of telemedicine during the crisis can ultimately provide avenues for greater access to health care over the long-term and DexCom CGM providing an essential tool in the process. In addition, our efforts to assist hospitals worldwide is a big investment as I said earlier, we intend to take all of the data that we can gather, generated during this time to accelerate the development and launch of a hospital-based system that better meets the needs of healthcare providers in our current ambulatory product. It's often during difficult times that the two character of an individual or company is revealed. Our hope is that our efforts during this time will provide comfort to the many stakeholders that we serve and that our character of DexCom will stand out brightly. On behalf of our employees, I'm proud to lead these efforts. Thanks. Goodbye.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.