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DexCom Beats, Sees Narrower Q4 Loss

Zacks Equity Research

DexCom, Inc. (DXCM) reported a narrower loss of $2.6 million or 4 cents per share in the fourth quarter of 2013 as compared with $8.5 million or 12 cents in the comparable quarter of 2012.  

On adjusted basis, Dexcom earned $6.7 million or 9 cents in the quarter in sharp contrast to a loss of $2.2 million or 3 cents in the fourth quarter of 2012. This compared with the Zacks Consensus Estimate of a loss of 7 cents for the quarter under review.

Owing to narrower reported loss or adjusted earnings in the 2013-fourth quarter, shares of the company rose 3.5% since the announcement of earnings results.

For full year 2013, Dexcom also reported a narrower loss of $29.8 million or 42 cents per share compared with $54.5 million or 79 cents per share in 2012. However, on adjusted basis, the company has earned $5.2 million or 7 cents per share, which compared with a loss of $29.2 million or 42 cents per share.

Revenues

DexCom’s total revenue surged 55.3% to $51.7 million, topping the Zacks Consensus Estimate of $48.0 million, on a handsome 61.8% rise in product revenues to $51.3 million in the quarter due to robust sales related to the launch of the G4 PLATINUM in the 2012-fourth quarter. Development grant and other revenues plunged 75.0% to $0.4 million in the quarter.  

For full year 2013, revenues soared 60.2% to $160.0 million on the back of a 68.8% rise in product revenues to $157.1 million. Development grant and other revenues dipped 58.0% to $2.9 million in the year.  

Expenses and Margins

Selling, general and administrative (SG&A) expenses went up 37.6% to $23.8 million in the quarter, driven by increased headcount and higher variable compensation related to robust product sales in the quarter.

DexCom expects SG&A expenses to increase 20% year-over-year in 2014 driven by investments in sales and marketing and infrastructure in order to support growth.

Research and development (R&D) expenses escalated 46.5% to $12.6 million in the quarter due to additional payroll related costs and expenses related to work on near term product pipeline. DexCom anticipates R&D expense to increase between 10% and 20% year over year in 2014.

Product gross profit nearly doubled to $34.1 million while product gross margin surged 1200 basis points (bps) to 66% in the fourth quarter of 2013. Operating loss was $2.3 million compared to a wider $8.4 million loss in the 2012-fourth quarter.

Financial Status

DexCom had cash and cash equivalents of $43.2 million as of Dec 31, 2013, significantly up from $8.1 million as of Dec 31, 2012. Total long-term debt went down to $6.8 million as of Dec 31, 2013 compared with $7.0 million as of Dec 31, 2012. Long-term debt to capitalization ratio fell 80 bps to 7.5% from 8.3% as of Dec 31, 2012.

Our Take

California-based DexCom is a medical device company focused on the design, development and commercialization of continuous glucose monitoring systems. The company relies significantly on its base of recurring revenue which reflects increasing usage rate with existing patients. Thus, higher patient base will bolster top-line for DexCom.

DexCom currently retains a Zacks Rank #2 (Buy). Other players in the medical instruments industry that are also performing well include Cynosure, Inc. (CYNO), Natus Medical Inc. (BABY), and ABIOMED, Inc. (ABMD). Both Cynosure and Natus Medical carry a Zacks Rank #1 (Strong Buy), while ABIOMED carries a Zacks Rank #2 (Buy).

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