On Friday, shares of DexCom experienced a significant decline following the announcement from the diabetes device manufacturer that it has significantly reduced its full-year revenue outlook. This announcement comes in light of the disappointing second-quarter revenue results, which did not meet market expectations amid ongoing expansion efforts and a strategic realignment of its sales force.
According to the company, revenue for the year 2024 is now projected to fall between approximately $4 billion and $4.05 billion. This marks a downward adjustment from the previous forecast of about $4.2 billion to $4.35 billion. Analysts were expecting a revenue figure of around $4.01 billion, leading to a sharp decline of more than 35% in DexCom's premarket trading. Chief Financial Officer Jereme Sylvain addressed the reasons behind this recalibration during a recent earnings call, stating, "The compounding effect of our slower-than-expected new customer growth in the US durable medical equipment channel and international business, as well as increased pharmacy eligibility, has necessitated this adjustment." Sylvain's comments emphasized the complexity of the current market environment, reflecting the dynamics that underlie their updated guidance.
He added that the revisions assume a more extended ramp-up in productivity for DexCom's US sales force. In terms of financial performance, DexCom reported a year-over-year revenue increase of 15%, totaling $1 billion for the quarter ended June 30. This figure, however, fell below analysts' expectations of $1.04 billion.
Adjusted earnings per share rose to $0.43, an improvement from $0.34 from the previous year, and exceeded the analysts' estimate of $0.39. Despite this positive growth in adjusted earnings, the company reported that the share of new customers fell below expectations. Chief Executive Kevin Sayer highlighted this inconsistency during the earnings call, noting that the company had still achieved strong absolute customer additions, albeit amidst its ongoing sales team expansion. Sales within the US sector, which constituted 73% of total revenue, saw an uptick of 19%, reaching $731.9 million.
Meanwhile, international sales increased by 7%, amounting to $272.4 million. Sylvain noted that although they anticipated a slowdown in international growth, the results were still below expectations. He commented, "Our miss on new customers impacted us by approximately $10 million on the quarter," clearly illustrating the challenges the company faces in market expansion. Furthermore, adjusted operating income represented 19.5% of total revenue for the quarter, an improvement from 18.2% the previous year.
Nevertheless, operating expenses rose to $468.7 million, compared to $418.3 million in the same quarter the prior year, revealing the rising costs associated with operational management. Looking ahead, DexCom has set its revenue expectations for the ongoing quarter between $975 million and $1 billion, slightly below the market's projected figure of $1 billion.
Sylvain indicated that the expected impact from the company's sales force initiative and the trends in revenue per customer are predicted to reach their peak in the current period, suggesting a cautious optimism for future performance. Additionally, DexCom announced a $750 million share repurchase program, signaling confidence in its long-term growth and value proposition to shareholders.
In summary, while DexCom continues to expand and drive its technological advancements in diabetes care, the company faces significant hurdles with customer acquisition and market expectations. The successful navigation of these challenges will be critical as DexCom seeks to align its operational strategies with the evolving dynamics of the healthcare landscape..