Welcome to the Dexcom Second Quarter 2024 earnings release conference call. My name is Abby, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star one on your touch-tone phone. As a reminder, the conference is being recorded. I will now turn the call over to Sean Christensen. You may begin. Thank you, Abby, and welcome to Dexcom's second quarter 2024 earnings call. Our agenda begins with Kevin Sayer, Dexcom's Chairman, President, and CEO, who will summarize our recent highlights and ongoing strategic initiatives, followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer. 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 each, so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our second quarter 2024 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'll make on 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 on this call 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, most recent quarterly report on Form 10-Q, 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 call 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. Unless otherwise noted, all references to financial measures on this call are presented on a non-GAAP basis. This non-GAAP 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 call 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. Before we begin discussing Q2 results, let me state that overall category demand remains strong, and awareness of the value of CGM across the metabolic health spectrum continues to accelerate. This trend was evident at the recent American Diabetes Association Conference, which featured Dexcom's largest evidence to date in the non-insulin type 2 space. Dexcom Research demonstrated significant A1C reduction in multiple studies, as well as real-world evidence showing a time in range increase of greater than four hours per day for nearly 4,000 customers using Dexcom CGM at one year. We are leveraging several pathways of evidence generation to ensure that we are maximizing our market opportunity into the future as our CGM systems become increasingly tailored to the unique needs of each customer. Despite the positive progress on these fronts, we saw three near-term trends emerge over the course of the second quarter that drove results below our expectations. First, as we have worked through our U.S. sales force realignment expansion, we have seen our share of new customers fall short of our expectations, despite still strong absolute customer additions. Second, our U.S. revenue per customer has stepped down faster than expected based on two primary drivers: rebate eligibility and channel mix. With G7 coverage emerging faster than expected, we realized greater rebate eligibility relative to initial expectations and compared to 2023 levels. While we believe this enhanced G7 coverage has helped facilitate new customer starts, as mentioned above, the pace of these starts did not allow us to offset the temporary impact from this rebate eligibility. We expect the impact of this rebate eligibility dynamic will reach its peak in the third quarter, and Jereme will provide specific color on the Q3 expectations shortly. Beyond the transitory G7 eligibility dynamic, we also saw revenue per customer impacted by U.S. channel mix dynamics. U.S. customer growth has remained strong in our pharmacy business as we expand our reach into primary care and type 2 diabetes more broadly. However, our growth in the DME channel has trailed our plan. The DME distributors remain important partners for us in our business, and we've not executed well this quarter against these partnerships. We need to refocus on those relationships. Finally, our international performance was also lighter than expectations in the quarter. While we delivered strong performance in some of our core markets, such as the U.K. and France, we saw category growth soften in certain geographies as type 1 penetration advances in these regions. We continue to see a significant runway ahead across our international footprint, particularly as we drive greater access for people with type 2 diabetes. To account for these trends and appropriately reflect our base assumption, we've lowered our full year revenue guidance to 11%-13% organic growth. We have higher expectations for our business than what we experienced this quarter. We believe we have an incredible product, an incredible future pipeline, and an unparalleled market opportunity. We also have a great team capable of leading this market, but I expect more from myself and more from my team going forward. So what are we doing to enhance our competitive position and reestablish momentum? It starts with our product portfolio, which we continue to strengthen to put our field sales team in a great position with clinicians. In the second quarter, we expanded our direct-to-Apple Watch connectivity with G7, launching in the U.S. and several additional international markets, with this feature that has been among our most requested for several years. We expanded the international launch of the Dexcom ONE+ system, now reaching 18 international markets with our smaller G7 form factor for our Dexcom ONE users. We've built upon the performance of G7, making it even better. This includes a continuation of our monthly cadence of software updates, which included the second quarter additions of medication logging and the ability to ingest activity data into our G7 app. We've introduced a stronger adhesive to support our customers into the summer months, and we expanded the G7 Bluetooth connectivity range by more than 65%. We advanced Dexcom CGM leadership in the AID space with the launches of G7 integrations with Tandem's Mobi and Insulet's Omnipod 5. We've strengthened our existing products while preparing for the most expansive product launch in our company's history with the upcoming August launch of Stelo. We are seeing the demand for CGM build in the non-insulin space and consumer use, and believe that we've created a unique and engaging system to drive people to better metabolic health outcomes. Our team has worked hard to build a scalable service model for Stelo that will be great for our customers, including the e-commerce experience, seamless delivery through Amazon Fulfillment, insightful product features, digital support options, and much more to come. We'll offer both single purchase opportunities as well as discounted subscriptions that bring the monthly cost below $100. Stelo will be a full launch on stelo.com, and we continue to expect approximately 1% of revenue contribution in 2024. We are committed to personalized approaches to metabolic health management through updates like these. This is what will enable us to capture a greater share and maintain high rates of retention and utilization across our customer base. We feel that our expanded U.S. sales force physicians us very well to reignite our growth opportunity now and well into the future. We have the ability to dive deep into the technological leadership that Dexcom provides for diabetes specialty practices. We have also expanded our reach and ability to highlight the simplicity of our platform and how it fits into a busy primary care practice. We have the advantage of better coverage and the lowest out-of-pocket costs for the insulin population, and soon to be enhanced by the simplicity of the Stelo OTC platform. As we take significant steps to broaden our addressable market well into the future with Stelo and our expanded U.S. sales force, we are also working hard to ensure simplified access to our systems in the markets we serve. In the second quarter, our team worked with the CDC to create new ICD-10 diagnostic codes for problematic hypoglycemia. These codes, which were published in May and go into effect in October, can simplify the process of documenting hypoglycemic events that qualify non-insulin users for CGM coverage. Our international market expansion efforts also progressed into the second quarter as we received coverage in France for people with type 2 diabetes on basal insulin and began serving these customers in June. We also transitioned to direct sales in Japan at the outset of the quarter and look forward to taking control of our commercial efforts in that crucial market. To summarize, our second quarter performance and 2024 outlook are not up to our standards, and we look forward to better capitalizing on our opportunity as we move forward. With that, I'll turn it over to Jereme. 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 the slide deck on our IR website. For the second quarter of 2024, we reported worldwide revenue of $1.004 billion, compared to $871.3 million in the second quarter of 2023, representing growth of 15% on a reported basis and 16% on an organic basis. As a reminder, our definition of organic revenue excludes the impact of foreign exchange in addition to non-CGM revenue, acquired or divested in the trailing twelve months. U.S. revenue totaled $732 million for the second quarter, compared to $617 million in the second quarter of 2023, representing growth of 19%. As Kevin mentioned, we experienced lower-than-expected new customer starts in conjunction with our sales force expansion and realignment, particularly in the DME channel, as well as a near-term impact from pharmacy eligibility changes, which lowered our revenue per customer relative to our expectation. Together, these dynamics adversely impacted our revenue this quarter by approximately $40 million as compared to our internal estimate. Based on the compounding effect of these lower second quarter new customer starts, we also expect our growth rate in the back half of the year to be impacted. To offset this, our team is working aggressively to improve our execution and deliver the higher market share levels that we believe our product deserves. International revenue grew 7%, totaling $272 million in the second quarter. International organic revenue growth was 10% for the second quarter. While we anticipated our international growth to slow this quarter as we lapped our very strong performance from Q2 2023, our results came in lighter than expected. Our miss on new customers impacted us by approximately $10 million on the quarter. Our international performance can often ebb and flow based on coverage decisions and distributor purchases, but as Kevin mentioned, there remains a long runway ahead for Dexcom CGM globally. We continue to invest in infrastructure to expand our geographical presence, provide compelling evidence to expand market access in new segments of key markets, and leverage our product portfolio to meet the unique needs of various customers and health systems. Our second quarter gross profit was $638.1 million, or 63.5% of revenue, which was in line with the 63.5% of revenue we delivered in the second quarter of 2023. We continued to see further migration of our customer base from G6 to G7 in the second quarter as we finalized new pump integrations and transitioned Dexcom ONE to the G7 form factor. Between this ongoing customer transition and continued ramp-up of our high-volume manufacturing facilities in Mesa and Malaysia, we are making steady progress towards our long-term cost targets. Operating expenses were $442.7 million for Q2 of 2024, compared to $395.1 million in Q2 of 2023. Operating income was $195.4 million, or 19.5% of revenue in the second quarter of 2024, compared to $158.4 million, or 18.2% of revenue in the same quarter of 2023. Adjusted EBITDA was $283.9 million, or 28.3% of revenue for the second quarter, compared to $232.6 million, or 26.7% of revenue for the second quarter of 2023. Net income for the second quarter was $174.3 million, or $0.43 per share. We remain in a great financial position, closing the quarter with greater than $3.1 billion of cash and cash equivalents. Based on our strong cash position, consistent free cash flow generation, and ongoing growth opportunities, we are announcing an authorization for a share repurchase program of up to $750 million. Turning to guidance. Starting with full-year 2024, we are decreasing our revenue guidance to a range of $4.00 billion-$4.05 billion, representing organic growth of 11%-13% for the year. As mentioned earlier, the compounding effect of our slower-than-expected new customer growth in the U.S. DME channel and international business, as well as increased pharmacy eligibility, resulted in the need to recalibrate the guide. Our updated guidance reflects these dynamics and assumes a longer ramp in productivity in our U.S. sales force. For margins, we are reducing our non-GAAP gross profit margin guidance to approximately 63%, while maintaining our prior guidance on non-GAAP operating margin and adjusted EBITDA at approximately 20% and 29% respectively. In addition to our annual guidance, we are providing two additional data points to help investors and analysts understand some of the unique elements impacting our revised guidance in 2024. First, the impact to new patients from our sales force initiative, combined with our revenue per customer trends that Kevin detailed, will change the historical seasonality pattern that we have typically experienced. These impacts are expected to reach their peak in the third quarter, with total revenue expected to be between $975 million and $1 billion. In conjunction with this revenue outlook, we thought it'd be helpful to provide a mid-year update on our global active customer base, which we now estimate to be between 2.5 million and 2.6 million. This represents strong growth over where we finished 2023, though the growth percentage has decelerated slightly. Our hope is these updates will provide additional visibility as our team works to implement several of the areas of focus that we have aligned on over the past month, and as our sales force continues to ramp their efficiency. With that, we can open up the call for Q&A. Sean? Thank you, Jereme. As a reminder, we ask our audience to limit themselves to only one question at this time and then reenter the queue if necessary. Abby, please provide the Q&A instructions. Thank you. We will now begin the question- and- answer session. If you have a question, please press star one on your touch- tone phone. If you wish to be removed from the queue, please press star one again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star one on your touch-tone phone. Robbie Marcus with J.P. Morgan is on the line with a question. Your line is open. Thanks. I have a lot more than one, but I'll keep it to one. Guidance moving down about $400 million. So I appreciate, you know, a few million here or there, but, I mean, this is such a step change in the business and the outlook and the trends. You know, med tech companies split sales forces all the time and grow them. You've done it multiple times. I'm just kind of in shock at how big of a disruption and a downward guide it is on a sales force expansion. I feel like there has to be more going on. Maybe you could give us more color into, you know, are basal patients using it less? Are you seeing GLP-1 fears pop up and, you know, type 2 patients not starting on therapy as much? Are you seeing, you know, Abbott and Medtronic take a lot more share? I feel like there's just, w e need more explanation for the third and fourth quarter guidance cut behind it. Thanks a lot. Thanks, Robbie. I appreciate the question and understand your position. Let me start with, let's go back to the numbers and the things we talked about in our script. We're short a large number of new patients as to where we thought we would be at this point in time, and Jereme can provide you with the numbers as to what the new patient miss constitutes. There is a combination of things as far as the new patient shortage. Obviously, disruption on the sales force expansion side. This was a different expansion for us than other ones. In other ones we've done, we literally took territories and just divided them geographically. And this time we changed roles, we changed positions, people called on. It was a much more disruptive expansion than we've had in the past, and that did lead to a lot of disruption, particularly at the beginning of the quarter. We saw things getting better towards the end. With respect to the other factors, as far as market share, we said we've lost market share in the DME channel. While we've done well in the pharmacy channel, as you can all see by scripts and scripts that are filled in the pharmacy, on the DME side, we've lost share, and that has hurt us. And again, that is patients, it's including new patients. That's also, as we're losing in that category, we're also losing the customers who have the highest annual revenue per year as a patient. So you're losing those. And then some of those patients, even though we've lost share in the DME channel, have shifted to the pharmacy, but that is at a lower revenue per year number. The last piece of this is rebate eligibility. And again, we expected G7 to have rebate eligibility over schedule that was literally twice as fast as G6.... It's been three times faster. G7 got to full rebate very quickly, quicker than we had planned. So all those things added together, while they had somewhat of an effect on Q2, they have a longer range effect on the rest of the year. And so we added those, all those things together, and that's how we came up with our guide. I'll let Jereme come up with more, if you wanna add to that. Yeah. So to give some context to the numbers, you're right, Robbie. At the top end of guidance, it's about a $300 million decline. In Kevin's prepared remarks, we talked about $50 million, you know, really impacting the second quarter. Those end up playing out to be a little bit larger as you expand those over the course of the year. So to give you some context, the new patient miss in Q2, which we expected to drag out into Q3 as we kinda navigate through those changes, both in the U.S. and outside the U.S., we had some new patient misses there. That's about a $125 million on the year of that impact. The channel mix and really the loss of share in DME, that's a big one for us, and that's about $100 million over the course of the year. Certainly impacted Q2, but we expect it to impact the rest of the year as well, as those, as those essentially work into full quarters. And then the rebate eligibility happened again quicker than we would have expected. Again, eventually, you get there. It happened quicker than we expected. That's about $75 million. So when you add those up, that's about the $300 million that you see. Certainly not something we're happy about, but in, in full transparency, we needed to make sure what we saw, as we closed out the second quarter, we're transparent about what the impact is for the balance of the year. Thanks. Your next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open. Good afternoon. Thanks for taking the question. That was a super helpful review of the issues. Maybe Kevin, if you could go through kind of what you're doing to address each of those issues, when you think they'll be resolved. You know, it's not clear to me, for example, you know, losing share in the DME channel, why that's happening and you know how you reverse that. Just lastly, you have an LRP out there for 2025. Is that still valid? Thanks for taking the question. Yeah, let me start with the LRP for 2025. Yes, we believe our LRP for 2025 is valid, but our revenue will probably come in closer to the lower end of the range rather than the upper end of the range, as we sit here today. But we've achieved incredible progress on the P&L side, operating margin and EBITDA side, our gross profit side on that LRP. So from a P&L perspective, we're definitely hitting all our goals on the LRP side. As far as fixing all these things and, and what fixes we have in place, obviously, it's gonna be a bit of a process. On the rebate eligibility front, we believe that caps out in Q3, and we planned for this to cap out in Q4. It just happened a couple of quarters earlier than we'd planned. So that is very much a temporary thing and accelerated. With respect to DME market share, one of the factors that has actually happened that created part of this is several of the Medicare Advantage programs went to pharmacy reimbursement. So patients who were being served by the DME channel shifted to the pharmacy, and that is a piece of our lost DME share. I can't quantify exactly how much, but that's some of it. Adding to that, we need to refocus on those relationships. We need to do better, and we will talk with them. We have some plans and some things in place to start off there, but it's early. We have to implement them. Again, DME data is really the last piece of the puzzle as far as our revenues, as far as where we get by the end of the year, just given the data sources that we all look at. It's not as simple as the scripts on the pharmacy side. So we're addressing that. We will put more emphasis and time there. We'll send more customers through that channel, and do better by those guys. So we'll keep looking. On the international front, another piece to remember, we've got a few things going on there. Timing of some of the tenders affects the numbers. There are some tenders that kick in July first that will help on the international growth, and that will be helpful there. We're also looking for type 2 expansion, as I said on the call. We just got basal coverage in France that's kicking in. We know some of the other countries are moving towards basal coverage very quickly, and we can play there with our Dexcom ONE+ product. Dexcom ONE+ is still early in the game, and we're seeing that begin to pick up. So there are a number of levers to pull and a number of things we're working on, Larry. I can't quantify each one of them, but suffice to say, we're not just sitting here. Jereme, you want to add to that? Yeah, and then maybe below the hood a little bit in terms of how we allocate the investment dollars, Larry, we are reprioritizing and reallocating investments to where we know that it ultimately drives the most bang. So the team is working on that diligently in terms of refocusing where those dollars and those efforts go. So, not giving the specifics, just given the competitive nature of it, but rest assured, there are changes being made underlying the business to ensure that we get back on top of our new patients. Thank you. Your next question comes from the line of Jeff Johnson with Baird. Your line is open. Thank you. Good afternoon, guys. Kevin, maybe following up on your DME comments, you say you need to maybe work on some relationships there. You know, any color you can give there, and not to air dirty laundry, but I guess in one of our DME checks here recently, we kinda one-off the conversation, but it heard that, you know, maybe some of the comments you made about CMS changes and who would bear the brunt of the any kind of reimbursement change in 2026 or 2027, would maybe be borne more by DME than you guys. You know, is it things like that that kinda strain some relationships? What else might have strained relationships? Have there been any kind of formulary changes or anything in DME where they have just wholeheartedly moved patients to, to Abbott, and it's gonna be harder for you to get those patients back going forward? Thank you. I don't think it's been anything formulary or systematic along those lines. I think I need to take you. I 'll let Jereme take some more details, but let me move you guys back a little bit in time. When we started this journey journey down pharmacy coverage, we had, as a company, zero relationships in the pharmacy channel. We worked very hard to develop those relationships 'cause as you can all see by our numbers and our largest competitors' numbers, that is where a large portion of the business has moved at this point in time. We put a tremendous amount of effort there 'cause we'd never been there before. We didn't have any infrastructure, we didn't have other products there, we didn't have relationships there. I think in creating and building those relationships, we ignored other relationships that were very important to us more than we should have. And so we need to balance that a little better and make sure that our customers get their product through a source that's easy, efficient, and economical for them. We felt to a large extent we were doing that, but we think we need to do more. Jereme, you wanna take some more on? No, that's it. Jeff, to your comment on, you know, if there's any CMS changes in terms of reimbursement down the road, we certainly did not say that. I think that was maybe a competitor that said that. What we had said was, "We're partners, and so if there's any changes in CMS reimbursement, as partners, we would look at it as partners." And that would be our expectation going forward. So, that was not how we positioned it. But nevertheless, you know, to the extent that those have caused frayed relationships, Kevin alluded to, we just pay more attention to it irrespective. Understood. Thank you. Your next question comes from the line of Margaret Andrew with William Blair. Your line is open. Hey, good afternoon, guys. Thanks for taking the question. I guess I just wanted to follow up and be clear on the dynamics on the guidance increase. You know, the way you described it maybe wasn't super clear, at least for me. Are you assuming and continuing to assume lower new patient adds for the rest of the year? Or was that kind of new patient missing Q2 alone, driving $125 million of decrease for the year? And then, you know, continuing on that thread, are you seeing any change in some of those new patient ad dynamics or rep productivity on a month-by-month basis that would maybe give you that confidence and recovery, if that is what you're assuming? Thanks. Yeah, let me. It's a good question. Let me start on that. So Margaret, the answer is we do expect to see disruption continue into the third quarter, and that's one of the reasons why you're seeing the impact. It's really a bit of a cumulative impact. Obviously, Q2 was a big impact. You know, we've sized it in terms of patients. It was a pretty sizable disruption relative to expectation. It was around 70,000 patients, so it was a pretty big number. Obviously, that rolls through to the rest of the year, but we do expect it to take a little bit of time to recover that. And so there will be, we have lowered new patient expectations into Q3. And then into Q4, our expectation is we start to get back to where we were. But think about it as a quarter delay, effectively, as a result of some of this disruption on our longer term plans. So when you run those numbers, plus you run some expected numbers here in Q3, in disruption relative to expectation, that's ultimately how you get to the figures. In terms of improvement over the course of time, you know, ultimately, you do expect to see that, and we've seen some of that, over time. Now, we always expected perhaps a little bit of disruption and some recovery. I would say the disruption is bigger than we would have anticipated, and the recovery is there. But when the disruption is bigger than anticipated, even as you have some of that recovery, again, you're a quarter behind where you'd expect to be, and I expect that to play out as we come next year. So we revised that. We've included that in the guidance. High level, Kevin, I don't know if you have anything to add. No, I think that's good. Your next question comes from the line of Travis Steed with Bank of America. Your line is open. Hey, thanks for the question. I guess maybe could you just kinda explain what is the rebate eligibility, what it is, what it means, kind of why it's temporary, you know, why it happened? I think a lot of confusion on that aspect, and I don't know if something happened kinda late in the quarter. It's like you guys, I think, were comfortable with the consensus in June. So I just wanted to ask, did this all kinda come up late in the quarter? Yeah, I can take that. So, you know, when you think about rebate eligibility, you know, over time, you kinda get closer and closer to this 100% eligibility, and it takes a little bit of time. So plans, as they opt into coverage, opt in. So we saw this take place over G6, to a lesser extent G5, but we weren't really in the pharmacy then. We saw it take place over the course of G6. And when we launched G7, we assumed it happened about as twice as fast as G6. So the assumption is more and more folks get access, therefore, more and more folks are moving through that program, therefore, you're subject to more and more rebates. And then the offset, of course, is by having more access, you have more volumes. As you can tell by our new patient numbers, we didn't have the volumes, but also the existing patient base was also subject to rebates. And so effectively is about timing of price as you run through this. It's temporal, meaning you can only rebate up to your entire population and eventually it gets there. But that's why it's a timing thing. And it just happened, like Kevin was alluding to, three times as fast as G6, not two times as fast as G6. So that's a big piece there. In terms of the understanding of how the quarter was rolling out, you are correct. It did roll up later into the second quarter. You can see our results in the second quarter, while not up to expectations, did not impact the quarter as much as it impacted the full year. Obviously, that was driven by what you saw, the dynamics that played through really the second quarter. Kevin was alluding to DME, where there's a big con-- sorry, not big concern, a, a big change in, what I would say is, is share and, and where we certainly missed. That, that data comes in a little delayed. That is about a four- to six-week delay before we set. So as we've, as we've tallied that data, as we're leading into really the close of the quarter and into the weeks leading into the call, not only did it make us aware of certainly the impact on the quarter. But it was really important for us then to reflect that i n the guidance on the year. And so a lot of that data, you're right, it obviously took place over the course of the quarter. We became aware of it really as we closed out the quarter, but that's why it's really important to get it in front of it, for the guidance for the full year. Great. Thank you. Your next question comes from the line of Matt Taylor with Jefferies. Your line is open. Hi, thanks for taking the question. So I guess I wanted to ask if you could give us a little more color, at least qualitatively, on when you expect these issues to begin to heal, to rebound. I don't know if you wanna address them separately or together. You've given the back half guidance, but conceptually, what kind of impact is this gonna have on the first half of 2025, when you're comping more normal periods? And when do you think you're gonna see the sales force really find its footing, you know, the rebates kind of flush through? Maybe you could flesh that out a little bit more to help us model the future. Yeah. I'll start, and again, Jereme, you can add more color. With respect to the rebates, this really caps in Q3. We'd estimated in our own models that we would have full rebate eligibility by the fourth quarter of this year. It's just happened, again, a couple of quarters faster than we had planned. With respect to our field sales team and the disruption there, we believe we'll work through that in Q3 and early Q4, and by the time we start 2025, this group should be clicking on all cylinders, and things should go very well there. Another thing that Jereme talked about is reallocation and really examining where we're gonna spend the dollars that we spend and the investments we're gonna make to maximize the commercial effect of those. Those programs and those decisions are being made now, will roll into Q3, into Q4, and we believe will set us up nicely for 2025. We're obviously not giving 2025 guidance today, but we feel by the end of the year, the things that we've talked about today, we should have worked through, and we should have a very good idea as to where we're going in the future. Yeah, and Kevin alluded to it earlier. You know, we talked about, you know, the question was, is how do you feel about the 2025 LRP, and is it still valid? And again, we said, "Look, we feel it's still valid, albeit at the lower end of it, Matt." So I think that gives you some context. You know, obviously, this year is going to be impacted by these factors. As we work out of those, and we work into them next year, Kevin alluded to it, rebates shouldn't be an impact next year. So as we work out of it, and as we give, you know, as we get closer to the end of the year, we'll give 2025 guidance. But that hopefully give you some context to our confidence as we move out of this year into next year, and getting these things behind us. It shouldn't go unnoticed. Obviously, we're bullish on the business longer term. Clearly not happy with the quarter and certainly not happy with the revised guide, so don't mistake it for that. But we do are bullish on the business longer term, hence the $750 million share repurchase authorization. So, hopefully, that helps, you know, square up how we're at least thinking about 2025. Great. Thank you, guys. Your next question comes from the line of Danielle Antalffy of UBS. Your line is open. Hey, guys. Good afternoon. Thanks so much for taking the question. Just a question on this pharmacy component, and one of the sort of long-term risks here has always been that this becomes a more commoditized market. You look at finger sticks and blood glucose meters, and they're commoditized at this point. When we hear things like you know, rebates and pressure in the pharmacy, I just wanna make sure I understand, you know, is this a competitive dynamic in the pharmacy as well? What's going on there, and why is Q3 the peak? Where's the bottom, I guess, from a pharmacy rebate perspective, as you do broaden coverage? Because if this is gonna be standard of care, which I still think it is, you know, like, does that mean at what price, and how should we be thinking about this over the long term? Sorry if that didn't make a ton of sense. No, no, it made perfect sense to me. With respect to our overall pricing, our pricing within channels, when you look at the prices, remains relatively consistent. What has happened in this quarter and what has happened now is more and more people have become eligible for rebates, hence bringing our value per customer down. This was the price that we assumed we'd be targeting at the end of the fourth quarter and we'd be rolling into 2025 with. In other periods, we haven't had anything as severe as we have today, obviously, but our new patient growth number would be so high and our volumes would be so high, if something like this happened, we grew through it. So if a plan like this accelerate, our new patient numbers are so big, Danielle, that we manage through it. In this quarter, you combine the two of them, the increase in the rebates, which gets again to a net price very near what we'd expected and modeled. That doesn't mean the bottom of the price is falling out on an overall basis in the channel. It just means more people were subject to rebates than we had before, and we shifted patients from a more profitable DME channel over to that pharmacy through some... You know, again, as I talked earlier, the three largest Medicare Advantage plans adopted pharmacy coverage this year. A lot of the Medicaid plans have gone to pharmacy coverage as well. So those plans moving there, you know, necessitated a bit of that movement, a bit of those rebates going up. So no, we don't believe we have a price falling out. We believe what we do continues to provide tremendous value to people and does a lot to improve health, save their lives, and all the things we've talked about forever. This is still a very valuable component in somebody's health, and we'll continue to treat it as such. Thanks so much. Your next question comes from the line of Joanne Wuensch with Citibank. Your line is open. Good afternoon, and thank you for taking the question. I want to pivot a little bit to Stelo. It was 1% of your 2024 revenue at one level, and it's still 1% of your 2024 revenue, which has been lowered by $200 million. Does this indicate your, a change in your expectations for the year or anything that we should read into it? I'm just sort of a little curious about that and anything else that you can share as you think about that is building revenue. Thanks. No, you know, it's an integer, and so the whole point there is, yes, while the top has come down 1%, 43 versus 40, you know, at the end of the day, it was all that kind of general contribution. So there was nothing insinuated by that, Joanne. It was. It's just rounded to that integer. Thanks. Your next question comes from the line of Matthew O'Brien with Piper Sandler. Your line is open. All right. Afternoon. Thanks for taking the question, and it is one question, but it's long enough, and I'll tie it all together, I promise. Just clearly, Kevin, your comment about next year staying in the LRP, do you mean the 15% growth, or do you mean $4.6 billion at the low end? Because if it's $4.6 billion off of $4.057 billion, that's 12% growth. And then, you know, within there, the low end of the range, 15% off of even a, you know, a 12% number this year is, you know, is a deceleration versus or is it easier comp? So there is a deceleration still factored in there. So what has changed to get us from the kind of 17.5% growth we expect from you guys, you know, typical growth rate guidance to now this more, like, 15% or even lower? What, what's the difference there that, that we can really anchor on to? Because that's, I think, the biggest challenge for the stock as we think about how it'll trade tomorrow. Thank you. Sure. Maybe I can start with the next year question. I don't think we've necessarily guided to a number. What we really tried to do is say, "Here's our LRP. It's still in play." And when I say to the lower end, it's not necessarily the low end or a point estimate within there. It's really to give some context to. As we've already made plans and are looking at next year, you know, we have some, there, there's confidence in meeting that low-end number. And so really, that's really what the goal here is, rather than to set a guide number. Now, your question then coming back to, which is this year's growth, which the organic growth number, obviously 11%-13%, is lower than we've historically seen. Kevin's alluded to it a little bit in the script. This year, a little bit of what I would say is, you know, execution, where I think we need to execute better on new patients and execute better, you know, in various channels. And so that's something, as a team, we have to get our arms around. This year was impacted by a quicker, as we mentioned, a quicker rebate dynamic than we expected. And that's a part of it. Obviously, we lap that next year, and you can only rebate 100% of your units, so obviously it stops at some point. And so that piece of it will be transitory. But I think the big key then is getting back to execution and execution on new patients and executing in the DME channel and making sure we have good partnerships there and executing on our channel mix. That's really the work we have to do. Back to that point, that's one of the reasons we had a little bit of a lapse here. And to the extent that we can get back to it, that allows us to get back to what we hope is what our traditional performance has been. Your next question comes from the line of Marie Thibault with BTIG. Your line is open. Hey, good afternoon. This is Sam on for Marie. Thanks for taking the questions here. Maybe I can ask on the DME channel. You know, I recall when you guys were making that shift a few years ago, that volume mix would peak around 20%. I I guess is the right way to think about it, closer to 15% now? And then, as we think about more MA plan shifting to pharmacy, I mean, is there any risk that that could go even lower? Thanks for taking the questions. Yeah, you know, we'd always kind of got, at least in the commercial channels. This is really more about the commercial channels. We had always assumed it'd be about 75-25. That was kind of our crystal ball, and as we got there, you know, it started to skew a little bit more. But it didn't drift off of that 75-25 all that much. However, this quarter, as we started to see, really what I would say is loss of share, which for us in that channel is a bit unique and something we got to get our arms around, the split in our business was a little more. It doesn't necessarily mean that the overall market split ultimately ends up that way, but it does mean that the shift of our business certainly shifted that way. And so, does that number shift down to 85-15? Well, if we take share, no, and that's really on us. So that gets back to the execution question. We need to execute in that channel, and that channel, it's a very important channel for us, and these are very important partners, and they serve a very, very important partnership to our customers. And so we've got to get back into that channel and make sure that we're getting our fair share there. That's really the big driver. I'd also add, though, there has been a shift in government payer activity from the DME channel to the pharmacy. That actually has happened, and we have to figure out how much that has impacted, excuse me, our DME mix versus pharmacy mix as well. Thank you for taking the questions. Your next question comes from the line of Matthew Blackman with Stifel. Your line is open. Good afternoon, everybody. Can you hear me okay? We can. Yeah. Okay, great. Maybe Jereme, I think I heard you mention that the new patient shortfall was something in the neighborhood of 70,000. Is there any way to tease that out? I'm sure it's challenging by indication, I mean, the DME share, while it sounds like it maybe is skewed more to basal patients potentially, is that fair? And then what about on the sales force dislocation? Just any help on sort of the different pieces of the business. Yeah. You know, so the 70,000, the way to think about it is there's a good chunk of that that is OUS, and so there's a portion that's outside the United States. There's a portion that's inside the United States, and it's usually reflective of our patient base in total, so you kind of have our splits there. In the U.S., you know, really a lot of it is driven by, you know, the, the, the sales force. Now, one of the challenges, of course, is the sales force services all different indications. And so as, as you service all in different indications, you can probably imagine if we're not doing well in the DME, it gets back to your point. We're not doing wonderful in the basal space. That's a big piece of the DME, certainly DME Medicare and the patient base that they service. So that's the way. You know, it's really, it's really hard to parse out by category, but when we, when we look into it and we say, "Gee, we're, we're not doing, we're not taking share in the DME space," you can presume that a lot of that is in that Medicare space. And I think it is fair to say that, you know, really across the board disruption, you can assume there's a little bit really across the board, but the biggest piece there, but the best way to put it. Yeah. I appreciate that. Thanks. Your next question comes from the line of Jayson Bedford with Raymond James. Your line is open. Thanks. Just two quick ones. Appreciate the color on the installed base, but can we assume there's no real notable change in attrition? And then just on the 3Q guidance, is there not a healthy contribution from Stelo in 3Q, or is the $40 million more fourth quarter weighted? Yeah, this is Kevin. The Stelo guidance, the Q3 contribution is not overly large. Most of the Stelo revenue is fourth quarter rate-weighted as we, again, plan to launch Stelo in later August. So that is, that's how that one works. With respect to attrition, our retention and attrition by patient category remains similar to what we had in our plans. We know that our, you know, our Type 1 patient with an automated insulin delivery system is certainly our stickiest and patient with the highest utilization factors as we go down the acuity curve to people on MDI or basal users, or even those who are non-insulin users, utilization goes down. But our retention numbers are still industry standard by a very large margin, and so we're still doing very well there. Your next question comes from the line of Steve Lichtman with Oppenheimer. Your line is open. Thank you. Guys, I wanted to ask again about the sales force integration and just where you are today. Are you seeing signs of stabilization now, and what are you assuming on that front for the guide? And then can you remind us what opportunities you see, you know, with this larger sales force, that, you know, obviously can turn this into a positive ultimately? We are seeing things beginning to stabilize, but we're also seeing things slower than we'd projected in our own internal models at the start of the year. And as we developed our guidance earlier, hence, as Jereme said, the guidance coming down a bit. So we are seeing things begin to stabilize, and they're stabilizing across different categories and geographies. I think the biggest thing to anticipate for us, and one of the things plus we missed in our plans, we've sent a whole bunch of new reps into offices we've never called on before. And there's a get-to-know-you period that we probably didn't estimate being long enough. And so we're taking steps to assist our team and better interactions with those physicians and getting to know them and getting them to trust and use Dexcom. You know, if somebody hasn't prescribed Dexcom, they've got to prescribe one to see how it goes. We've been going through that cycle during this quarter, and we should be able to increase the prescription patterns of those new positions a lot more going forward. But there was a lot of getting to know you, for lack of a better word, going on here in the second quarter as this group got out there. We'll have a lot more data at the end of the third quarter. We saw better interactions in May and June, and we'll see how things go from here on out. Thank you. Your next question comes from the line of Mike Polark with Wolfe Research. Your line is open. Hey, thank you. I want to ask on your relationship with distributors and the concept of stocking. Last year, obviously, was a big year with the G7 launch and the basal coverage expansion, and there's always a lot of stuff going on, OUS. Is there any, as you look back at 2023 as the baseline for building 2024, would you frame any of kind of this setback as stocking last year, that kind of caused a snafu in your modeling? Or this year, if you can comment on inventory levels with key partners, is there, are you observing a drawdown of inventory? If there's anything to frame around that, I'd appreciate the color. Yeah, you know, if anything, usually you have these challenges when you launch a product, given, you know, inventory levels of the old and inventory levels of the new. In all fairness to our partners last year, they did a pretty good job of balancing G6 and G7 inventory levels as they went through their transition. So we didn't have a whole lot in the prior year. This year it's pretty normal, and we have inventory levels that generally range in between, you know, pretty normal levels. We keep an eye on what's in the channel, and they always stay within this really relatively tight band. And when we keep it, we keep it in that band intentionally. And so we've been in that band now, and we generally stay in that band. I don't, I don't recall a time we've been outside that band, quite frankly. And so nothing to call out specifically. The bigger issue, and I get what you're getting at, the bigger issue would have been, say, last year, during a window when you had a launch of G7 and folks were gearing up, given not sure how much, you know, demand would come in. We didn't really have that last year, and again, kudos to everybody that was holding inventory. They did a nice job. Thank you. Your next question comes from the line of Shagun Singh with RBC Capital Markets. Your line is open. Great. Thank you so much for taking the question. Just to follow up on the sales force, disruption here. You said it was more disruptive than historically because you changed roles. So can you elaborate on that? And then you talked about physicians, changed physicians, people are calling on, so is this- are you referring to the PCP channel? And then, you know, you also referred to longer time to productivity. Can you give us a sense of how long does it take to get fully productive? You know, it sounds like, you know, about two quarters or so, because you said you expect, you know, them to be fully productive, you know, getting into 2025. So, you know, is that the case? And then just finally, can you give us an update on the extended wear? Thank you. You know, I was waiting for a science question, so I'll start with extended wear. We've been committed to launching a 15-day product in 2025, and we intend to. Things are progressing well on that front. Stelo will be a 15-day product as well. We will learn a great deal from Stelo with our launch and how that goes. With respect to the sales team, again, that reorganization is much different than what we've done in the past. What we've done in the past is we would look at an area, and this total sales volume in an area, and the physicians there, and kind of just divide it up geographically and make various subareas. So the reps in those areas would call an endocrinologist and primary care physicians, and primarily their efforts were focused on those that were the highest prescribers in the territory. What we did this time is we took our territories, and we said, "Okay, we are gonna have specialty reps, and one force who calls primarily on the high-prescribing physicians, endocrinologists, and high-prescribing primary care doctors who are very familiar with the product and service them more in that type of a role." And that's one group of our sales force. Then we have more people who are prospecting, who are going down and talking to more of PCPs who don't prescribe as much product, places where we have not been before. Because what we've noted in our data is we obviously don't win in offices we don't call on, and so we needed to get into those offices and develop relationships. A lot of the time that has been spent in the first, you know, in this first quarter and, and going forward in Q3, is beginning to develop and cultivate those relationships so we can get prescriptions from those healthcare professionals. They need to learn to trust us, and they need to learn to, and have some experiences with our products. So that is how that is going, and that is why this is different. So we really did things differently than we've done in the past. We believe over the long term it's absolutely the right thing to do, and we have confidence in this team that they'll work through this. We believe it will start to turn, you know, near the end, starting into Q4 and be in a very good position by 2025. And, and that is the timeframe that we are looking at. If things go faster, great, but that's how we model our business. As Jereme said earlier, we've decelerated our new patient number from what we had in our original models for Q3 as to what we have now, and we see things picking back up in Q4, as the group gets more involved. So that's where it is. Thank you. Your next question comes from the line of Bill Plovanic with Canaccord Genuity. Your line is open. Great, thanks for taking my question. Just wanted to ask, you know, so the pharmacy is good, DME is slowing. Do you think this is potentially a slowdown in penetration into the type 1 and type 2 markets? You know, you're hitting about 60% type 1, 40% type 2 in the U.S. I mean, are you just starting to get a saturation point where each incremental market share or market penetration is this that much tougher to come by? Or do you think this... You know, so it's a broader challenge, or is this purely specific to sales force and DME and what have you? Thank you. Yeah. Yeah. So in the U.S., it's a good question. In the U.S., we don't think so. There's still quite a bit of runway, and we're still seeing the growth patterns relatively steady there. If you look at the overall total market growth, in the second quarter, I think what you can see is if you add up all the various players, it's still a very robust growth. I think in our case, certainly in the DME, in the DME channel, it was a share loss. And I think we just held our own in the retail channel this quarter. And so, and so that I don't necessarily know that I would say that. I think it's more about us getting in charge of really our go-to-market and making sure with our, you know, our leading technology, we're getting our fair share there. As you zoom outside the U.S., as Kevin alluded to a little bit in his script, outside the U.S., you know, it, it's really chunks of coverage and chunks of approval. While we got a bit of a chunk here in France, basal, there are some chunks we are waiting on, and so, you know, it can slow a bit as an overall market, and I think you see it, when you compare, you know, when you combine results globally, there is a bit of a slowdown outside the U.S. We don't think that it's a long-term issue because as chunks of approvals come in, you find that there's still certainly pent-up demand, so really it's about coverage. And we are working on coverage in various different areas, both type 2 intensive, certainly in basal, and there's even some countries where we're still working on type 1 coverage in some of the more emerging markets. So, you know, so maybe outside the U.S., you see a temporal slowdown, but not in the U.S. I think the U.S. is still a very robust market. We're still seeing basal grow at the same rates that we expected as a total category. Still seeing the intensive insulin category still growing well, and obviously with, you know, non-insulin opportunities with Stelo and the OTC products, I think it's a market that can continue to grow for some time. Yeah, I, I'll add to that. You know, you talked about a 60% penetration. I said several years ago, 80% for t ype 1 insulin users, and I believe the same with type two intensive insulin users. There is no reason somebody shouldn't be on a CGM. It's up to us to create the experience and the access structure whereby everybody can get to it, and those are the things we have to take on, Bill. And I agree with Jereme's comments. Our effort this quarter focus on our execution a lot more than a market slowdown. It's up to us to be better. Great. Thanks. Your next question comes from the line of Chris Pasquale with Nephron. Your line is open. Thanks. I wanted to just clarify two points. One, on the rebate issue, do you need to anniversary that before revenue per patient becomes less of a drag? In other words, is that a period impact or is it a resetting the bar, then you have to lap before you get back to normal? And then, Jereme, you touched on international briefly in the last question. Most of the focus thus far has been on U.S., but OUS also disappointed. Am I right in interpreting you think that the slower growth there is more normal until you get some of these new coverages to come through? That's really going to be the catalyst for a re-acceleration. Yeah. So, you know, in terms of your rebate dynamic, you know, I think, we talked about it coming faster. And because it's come faster, certainly here into Q2 and to a lesser extent, in Q1, you'll lap it pretty darn early next year. So we're gonna lap it pretty darn quick. Obviously, it's gonna impact us at a more acute number. We expected it to be gradual over the course of this year into next year, which still would have been faster than G6. So to that point, it does, it does help for next year's comps, because we will lap it pretty darn quick. In terms of the question on OUS, you know, one of the things we've, we've done historically there is it's a, it's a market where we've taken share, and obviously, it's been growing. And this quarter, I would say, we didn't take share, and that's the, that's part of it, but the other part then is in the chunks. And so there's two opportunities there. Certainly, there's chunks of reimbursement, which would help accelerate it, but our expectation with the product launches we've had and the quality of product that we have is to take share. And so I think there's two opportunities. One's within our control, which is taking share, and then the other is within the industry's control, which is coverage. And we're gonna execute on that which we can control and certainly aid in helping the industry coverage as well. Thanks. Your next question comes from the line of Matt Miksik with Barclays. Your line is open. Hey, thanks so much for taking the question. So there's a couple of things that I think investors are trying to pin down here and understand, given the announcement and the just slight change in trajectory here in the back half. And the first is around this, you know, the channel mix, indication mix, and their indication, you know, impact on pricing, maybe given that you're building out a field force that's growing into areas where you haven't traditionally called, as you talked about, you know, potentially maybe the margin impact of that. But, you know, is that something where, you know, channel mixes and these pricing factors have sort of set off on a new trajectory that we now have to think about, you know, in equation of, like, patient growth and price mix? What does that translate into growth over the next couple of years? Should we be thinking differently about that? And then I guess the other, just to cross it off the list, it doesn't sound like it's a factor, is it just around competition. You know, is there any shift given the places where you're going into new accounts and in the PCP channel or elsewhere, you know, is there are you feeling like you're into slightly tougher competitive challenges? It didn't sound like it, but just if you could maybe cross that off the list and provide any color on the first, that'd be terrific. Thanks. Yeah. So I'll maybe go with the crossing off the list. There's always competition, and, you know, certainly as we go into all of these categories, you're always gonna have that. We've always had competition, so this is an area that's been, we've been competing for some time. So I don't think that's necessarily a new dynamic. When you expand a sales force, clearly, your first call points, you've got to go through that. But this is no different than what we had in 2021, last time we expanded the sales force. We went into new locations. It's building familiarity. And yes, there's always competition, but that's not a new thing. So I think you can cross that off the list. You know, to your question then on mix, I, I'd say this, in the U.S., I don't think the market has moved all that much. I think it gets back to our performance within that market, and we have to perform in those areas. And so when you talk about, you know, is this a new mix price year over year, pure price, you know, it hasn't really changed all that much. Certainly, in the DME channel, it hasn't changed all that much, and we talk about that often. But when you have less performance in your highest reimbursed channels and better performance in a lower reimbursed channel, we've always talked about DME being higher than pharmacy, and then you don't outperform on new patients. You kind of combine all those up. That's what you really saw. So the opportunity is for us to get out there and get the new patients, and get the new patients in all of the channels, in the channels that we've been in, and get our fair share in those channels. So I think that's the best way to think about it, is, you know, we can do it. It's within our, you know, it's within our purview to go do so, as opposed to necessarily a shifting in the market itself. Thanks so much. This concludes the question and answer session. I will turn the call to Kevin Sayer for closing remarks. Well, thanks, everybody, for participating today. This is a tough call for us. I know it's a tough call for all of you who supported us. We've provided the best view that we have going forward. We obviously will work hard to do better and provide you with more color and more things going forward. We are extremely excited for our Stelo launch later this quarter, and we certainly expect to hear from you as we do that. I just want to also point out, we've talked a lot about our commercial team today. They're fabulous. They've done very well, and they will rebound from this. I have every confidence they will. When you have something like this, it's on everybody in the company. It's not just on those guys. We're all gonna put our heads down and focus more. So you can count on that. Thank you very much for being with us today, and we'll see you all soon. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect. Speakers, please stand by for your debrief.