U.S. Markets closed

DexCom Sees Narrower Q2 Loss; Revenues Top Estimates

Zacks Equity Research

DexCom, Inc. (DXCM) reported a narrower loss of $7.0 million or 10 cents per share in the second quarter of 2014 compared with $10.1 million or 14 cents in the comparable quarter of 2013. The loss was in line with the Zacks Consensus Estimate.
 

Dexcom, Inc - Earnings Surprise | FindTheBest

DexCom’s total revenues surged 64.2% to $58.8 million, topping the Zacks Consensus Estimate of $53.0 million. The upside was driven by a significant 63.9% rise in product revenues to $58.2 million and a 100% growth in development grant and other revenues to $0.6 million in the quarter.  

Expenses and Margins

Product gross profit spiked 81.2% to $39.5 million while product gross margin expanded 650 basis points (bps) to 67.9% in the second quarter of 2014.

Research and development (R&D) expenses rose 24.3% to $13.8 million in the quarter owing to additional payroll and consulting costs. Selling, general and administrative (SG&A) expenses went up 49.3% to $30.9 million in the quarter, driven by additional payroll costs and commissions.

Despite the increase in both R&D and SG&A expenses, operating loss narrowed to $4.8 million from the year-ago level of $9.9 million. As a result, operating (loss) margin reduced significantly by 1950 bps to 8.2% from 27.7% in the second quarter of 2013.

Financial Status

DexCom had cash and cash equivalents of $49.5 million as of Jun 30, 2014, up 14.6% from $43.2 million as of Dec 31, 2013. Total long-term debt went down 14.7% to $5.8 million from $6.8 million as of Dec 31, 2013. Consequently, the long-term-debt-to-capitalization ratio declined 200 bps to 5.5% from 7.5% as of Dec 31, 2013.

Our Take

We are encouraged by DexCom’s narrower loss in the second quarter as well as the revenue beat. However, the company needs to keep a check on its rising operating expenses mainly buoyed by additional payroll costs, consulting costs, commissions and share-based compensations.

Nevertheless, DexCom exited the quarter with an improved financial position as indicated by a higher cash balance and reduced long-term debt.

DexCom presently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the medical instruments sector include Accuray Inc. (ARAY), Alphatec Holdings, Inc. (ATEC) and RTI Surgical Inc. (RTIX). All these stocks sport a Zacks Rank #1 (Strong Buy).
 

Read the Full Research Report on ARAY
Read the Full Research Report on DXCM
Read the Full Research Report on ATEC
Read the Full Research Report on RTIX


Zacks Investment Research