Welcome to the DexCom Fourth Quarter and Full-Year 2016 Earnings Release Conference Call. My name is Ashley 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. Please note, that this conference is being recorded. I'll now turn the call over to Kevin Sayer, President and CEO. Mr. Sayer, you may begin.

Thank you very much. And good afternoon, everyone, we appreciate you listening to our fourth quarter 2016 earnings call. We'll start off with our Safe Harbor statement from Steve Pacelli.

Thanks, Kevin. Some of the statements that 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. All forward-looking statements included in this presentation are made as of the date hereof based on information currently available to DexCom and 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, quarterly reports 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 presentation or to confirm these forward-looking statements to actual result. Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP with respect to our cash-based operating results. 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. Kevin?

Thank you, Steve. Joining me today are Steve Pacelli, our Executive Vice President of Strategy and Corporate Development; Jess Roper, our Chief Financial Officer; and Kevin Sun our Vice President of Finance. Before I begin, l would like to take this opportunity to congratulate Jess on his pending retirement. We wish Jess the best and thank him for his many important contributions over the past several years. Jess has helped us scale through our period of tremendous growth and has assembled a very capable team led by our VP of Finance, Kevin Sun, who will serve as our interim CFO until we complete a search for a new one. Now, let me highlight a few exciting recent developments for DexCom, before I turn the call over to Steve to review our fourth quarter 2016 financial results. 2016 was a very big year for us. In December, five months after our positive advisory panel meeting, we achieved a landmark milestone in attaining the first-ever non-adjunctive or insulin dosing indication from the Food and Drug Administration. As a result of this approval, a new classification of therapeutic CGM has been established. This was a monumental achievement and I'm very proud of the DexCom team whose hard work over a number of years helped to make this a reality for our patients. DexCom G5 Mobile is the only glucose measurement device that is FDA approved for therapeutic decision-making. And in early January, as the directors hold off our label expansion, Medicare issued a positive ruling providing us the opportunity to bring this life-saving technology to our senior population here in the United States. Together with the advances we are making to our technology platform, we see a clear path to making the vision we have when the company first started this journey a reality, eliminating fingersticks altogether. As you can probably tell, we've never been more excited about the work we're doing here at DexCom for people with diabetes. With that, I will now turn the call over to Steve for a review of our financials, after which I will expand on these accomplishments and provide a business update.

Thanks, Kevin. DexCom reported revenue of $171 million for the fourth quarter of 2016 compared to $131 million for the same quarter in 2015, a $40 million or 31% increase. This is slightly ahead of the $168 million revenue estimate we provided in early January during our preannouncement. Sequentially, revenue for Q4 was up approximately 15% from the prior quarter. Our fourth quarter gross profit was $117 million, generating a gross margin of 68% compared to a gross profit of $91 million and a gross margin of 70% for the same quarter in the prior year. On a year-over-year basis, our hardware gross margin was negatively impacted by sales of our G5 Mobile transmitter which has a shorter useful life and lower ASP. In addition, although we are seeing some improvement in our warranty expense rates, we are still experiencing warranty expenses at higher than historical levels. This includes the impact of our receiver replacement efforts in certain European markets. Note that we reserved for our current estimated exposure for this issue throughout 2016 and do not anticipate a material impact on our financial statements in the future. Going forward, we anticipate continued decreases in our warranty expense rates throughout 2017. Some final thoughts on our revenues and our gross profits, our mix between durable and consumable products was within on our normal historical range in Q4 at approximately 30% durable and 70% consumable. The ASP for our hardware has remained stable and sensor pricing remains within an ASP range of $70 to $75 per sensor. Finally, our international business showed continued year-over-year growth, generating $21 million in revenue during the quarter, up 28% from last year and 15% sequentially. For the year, our U.S. revenues grew 38% and represented 13% of our overall revenue. Research and development expense totaled…

Thank you, Steve. As I said in my introductory remarks, we are very proud of the milestones we achieved over the past few months, particularly with our non-adjunctive claim and Medicare's rapid response to cover CGM as a result. The dosing claim represents a paradigm shift in diabetes management. These events are the culmination of a long and thoughtful process and we appreciate the collaborative efforts of both the FDA and CMS as well as our patient advocates to bring this technology to a population that desperately needs it. We estimate Medicare aged patients represent approximately 20% of the overall Type 1 market or as many as 300,000 patients in the U.S. Intensive insulin-using Type 2 Medicare patients could be an even larger addressable patient population over time. Looking ahead, we are engaging with the MACs to establish the scope of coverage and facilitate reimbursement for our patients on a broader basis later this year. We believe these achievements were fundamentally driven by the strong performance of our CGM platform both in clinical trials and in the real world. Notably, this performance is driving clinical outcomes. In January, data from both the first phase of our DIaMonD study and the GOLD trial were published in JAMA. Each trial demonstrated that CGM can significantly improve A1c in MDI patients. We are already seeing the benefits of this message in our business today, where the majority of our new patient additions are MDI patients. The publication of DIaMonD and GOLD, both prospective randomized controlled trials in a highly respected peer reviewed journal, will accelerate our awareness campaigns with physicians, patients and payers. In addition, we saw an abundance of DexCom CGM data at the Advanced Technologies & Treatments for Diabetes or ATTD Conference in Paris earlier this month. Additional data from DIaMonD…

Thank you. We will now begin the question-and-answer session. And from JPMorgan, we have Mike Weinstein.

Thank you. Good evening, everybody. Just maybe want to start, Kevin, with reimbursement. And let's cover if we can the progress both in the U.S. and in Germany. So, I heard your comments on both. How should we think about the timing of getting reimbursement from all the MACs? When do you think you'll have that process effectively complete? And then second, in Germany, could you just give us a sense of how much – give us a percentage of coverage that you may now have in place and how you expect that to track over the course of the year. I know you made comments earlier in the year when we were in San Francisco that about how strong December was in particular for Germany. So, we'd love to get your updated thoughts there.

Well, things continue to go well in Germany as reimbursement expands. We only have a partial group of the payers covered with specific contracts at this point in time, and we're reaching out to the rest of them. Those efforts will continue over the course of the year, Mike, and certainly we'd like to have a large percentage of them. I can't really give you where that is. Obviously, we'll shoot for 100%, but inevitably there ends up being nits along the way, but so far so good. The growth has been very good, so far in Germany, products are being very well received. As I said back in January, we're doing well with CGM in Germany. With respect to the MACs, we're just starting those discussions. And I believe as I said back in January, as a goal for us, we would love to have all this resolved by the middle of the year. But again, I also said in January that we weren't expecting approval till 2018. So, we have plans, we are working on presentations, meetings, et cetera well. We'll go as quick as we can.

But obviously, we're not going to see any benefit from the Medicare expansion this quarter? If we see a benefit, it'll start to accrue in the second quarter, is that fair?

Yeah. There won't be any – there's no benefit in this quarter. The only thing that I wouldn't help though is we're getting a lot of phone calls from Medicare patients who would like it. So, we are optimistic for the opportunity once we can really go out and market this and present more. And we have a lot of opportunities in the pipeline waiting for the coverage.

Okay. The G6 filing and the Verily G1 filing, are you going to do those in tandem, is that possible in your dialog with the FDA or are you going to space those out?

We will file the G6 system first. That trial will be done first. And then Verily filing will reference the G6 filing, particularly all the manufacturing of the sensor. And then we'll see where the filings go and what additional work we have to do. Obviously, we'll have to validate and verify all the electronics configurations and probably run some kind of study with that system since it will be a no calibration system. And it will be labeled different more than likely than the G6 because of the calibrations. So, we'll file G6 first, but the Verily configuration will come certainly not too long after that. We'll push pretty hard.

Okay. And then last topic is, there was some question on the Street in terms of what impact Medicare reimbursement would have on your outlook for the year, obviously it's only late February at this point, and you still have to discuss with the MACs. So, the question I think probably people have is, one, are you seeing any impact of the FDA label change prior to getting the reimbursement from the MAC? Separate topics there. So, are you seeing any benefit from that? And is your confidence in the initial guidance you gave at the start of the year the same, unchanged, or is it higher as a result of the Medicare reimbursement?

Let's start with the non-adjunctive labeling change. For any of you who've seen our marketing campaigns, we have been marketing to that and the response from the public has been very well in our DTC campaigns with the non-adjunctive claim and therapeutic use of CGM. So, we are seeing some benefit to that right now. With respect to our guidance for the year, we reaffirmed in our call our guidance for the year. We have not really considered Medicare in those numbers at this point in time. And there will be moving pieces once Medicare gets approved, and we'll update everybody after we have that. I think Medicare will be very good for us. But we really need to know what group of patients is going to be covered, so we can peg it to a population and look at how many of those patients we can add. And we don't have that guidance yet, Mike. And when we get that, we'll provide you guys with more information.

Very helpful. Thank you, guys. I'll let some others jump in.

Thank you. And next from William Blair, we have Ben Andrew. Ben C. Andrew - William Blair & Co. LLC: Good afternoon. And, Jess, congratulations on your decision to retire. I'm sure you'll enjoy your boat a whole lot more now.

Thank you, Ben, for the kind words. It's been great working with you the last decade. Ben C. Andrew - William Blair & Co. LLC: Yeah. You as well. We'll miss you. A couple of questions from me. Kevin, maybe is there an update on the G5x timing and how do you think about the magnitude, the impact of that as you roll that out over the course of, presumably, the year, or back half of the year?

We don't have an update on timing. We received questions from the FDA and we are finishing our response to those. We will submit those. I would tell you the only factor in G5x timing for us – this is a very complicated change for us as I've talked about it before. We have to change pretty much every manufacturing process that we do with respect to G5x to get that thing launched. So, the sooner we can get started, the better, but it is complicated because patients will be on G5 and G4 and G5x and so there's a very detailed plan that we have to roll out. I don't have a timing update today. We'll see how our responses are received by the FDA and combine that with the complexity of just receiving a non-adjunctive claim as well. So, this is a very thoughtful process by the FDA that they're putting us through and that we're going through, and it needs to align with everything that we do. Ben C. Andrew - William Blair & Co. LLC: Okay. And then on the reimbursement discussion with the payers relative to the DIaMonD and GOLD data, particularly the new DIaMonD data, Kevin, how have your conversations changed now that you have that data in hand? Does it make – does it embolden you to consider risk-sharing contracts sooner than you might otherwise? And can you build on the notion of CGM first as you go through those conversations?

We've had the risk discussions and now that the DIaMonD data is rolled out, it does become a very strong talking point that we'd never had before. I would tell you, Ben, internally, we're not opposed to risk-sharing arrangements with the payers, particularly as we look at the DIaMonD data, and the type of A1c reduction we achieved, the minimal amount of severe hypoglycemic events that have gone on, that our past experience in our studies, where our patients have very few severe hypoglycemic events, hence, not a lot of hospitalization cost as well. The challenge for us in these types of contracts has not been our willingness to accept risk. It's been figuring out how to structure them based on the information that the payers have about their patients combining that with the information that we have regarding the performance of our systems. I'll give you a simple example. If a payer said, I'll do a risk-sharing arrangement with you, but you have to produce a report from the patient and if that patient chooses to use the receiver instead of the phone app, we don't necessarily have that patient's data readily accessible. So, it creates some different types of scenarios. And so, we're pursuing all of those. We've had very active discussions. They're interactive. They're lively. We're willing to accept some risk there. It's what we just need to get a few of these done. I'm hoping for some really good outcomes over the course of 2017 on that front. Ben C. Andrew - William Blair & Co. LLC: Okay. And then last one for me. You talked about increasing the field organization to 130. I thought I heard you say that was in Q1 and what was the number before, was it around 110?

It was closer to 100, little between 100 and 110. And most of those reps were added over the course of Q4 and early in Q1. So, we've been through our training and got these people on the street, and going. I would tell you whenever you have an expansion of this nature, it is a bit disruptive. It'll take the new ones a bit of time to get up to speed and our existing sales force a bit of time to get used to their readjusted territories. Ben C. Andrew - William Blair & Co. LLC: Okay. Thank you.

Thank you. And next from Stephens, Inc. we have Chris Cooley.

Thank you. Good afternoon. I appreciate you taking the questions. Could you just remind us, maybe, Steve, a little bit more in terms of the metrics that you had built into the 2017 guide and maybe more specifically what you're expecting for attrition rates relative to year-end run rates as we play through the year? And then I have just one other quick follow-up. Thank you.

Yeah. So, we've never kind of broken out what specifically went into the guide. Obviously, you can assume – obviously U.S. ramp – continued U.S. ramp penetration in MDI patients is something we've talked quite a bit about as we've more recently added a majority of MDI versus pump patients. So that was factored in. Germany is obviously kind of ramped over the course of the year. We didn't – obviously when we gave the guidance early this year. At the same time, we estimated that Medicare was coming in 2018. So, you should assume in the current guidance there is no ramp for Medicare this year. But it's kind of the usual stuff. And then – sorry. Tell me the second part of your question.

No.

On attrition rates?

Yes.

Yeah. So, we've never disclosed a specific attrition rate but the color we tried to give at the beginning of this year in the 8-K, we're trying to let you triangulate it. Attrition is a complex problem. It's a complex thing to analyze here because you have different time frames in which we have different attrition metrics and we're not going to go into that level of detail. But what we tried to triangulate you guys to was that an attrition rate that you could calculate, giving you a single number of somewhere between 8% and 12% on an annual basis. I know that's a bit of a range, but that was what we were trying to triangulate when we talked about kind of net new adds in 2016 and anticipated to gross adds plus net new adds, net total at the end of the year of around $275 million. It can get you to kind of a once a year attrition rate of somewhere between 8% to 12%.

Thank you. Just wanted to verify that. And then secondly, could you just maybe comment – I realize this is a longer-term growth opportunity but how you would see the potential benefit of shall we say smart pens going forward and helping further drive growth for CGM especially as you're starting to see more of your patients come from the MDI population? Thank you.

Yeah. We think the opportunity is huge, particularly as we look to the future and we know – we know ultimately the day will come where this fight is going to be fought. It's not being fought today at the payer level even more so – not just in the U.S. but in the O-U.S. markets where pumps are really probably less than 10% penetrated and in many markets far less than that. So, we think the – we're very bullish on the opportunity for smart pens. We believe many companies both insulin companies and non-insulin companies are working on smart pen development, a number of licensor are working and announced publicly they're working with different algorithms and different software developers. So, I think over the next 18 to 24 months we're pretty excited to see some of the products that can come to market. I think much like our sensors driving some of the work we're doing on the automated insulin delivery systems with some of the pump partners, you're going to see really the real value in these systems. We'll be integrating that insulin on board information from a smart pen together with our CGM data in a single unified app on the phone. And we can do some pretty powerful stuff there. So, we start demonstrating outcomes with a smart pen together with CGM data and providing patients with dosing support information, behavior modification information. Really, at a fraction of cost of some more complex systems, I think we really have a home run there.

Thank you.

Thank you. And next from Canaccord Genuity, we have Kyle Rose.

Great. Thank you very much. Can you hear me all right?

Yes.

Yes.

Great. Thanks for taking the question. Just wanted to – I know it's still early days with regard to the CMS and the Medicare opportunity, but just wanted to take a step back and think from a high level. One of the things, I think our takeaways from 2016 was just the changing needs of the new patients that are adopting the technology at this pace. And obviously, there were some big customer service investments took place last year. And just – how do you – when you think about the CMS population and that being a different demographic just from a user basis, what type of investments do you foresee from an infrastructure standpoint? And how do you view those patients just from a potential utilization perspective different than some of the previous patients you've seen in prior years?

Sure. I'll take that one, Kyle. From a customer service perspective, obviously we need to be ready on the phone to talk to these people. And we've made a lot of investments just in underlying IT tools to make our team more effective and enable them to handle more calls and have more of a knowledge-based type system as they address when they work with these patients. And so, we believe we're ready for this. We are also expanding our call center operations in Q2. We're going to take our facility in Arizona and have a second call center over there. Several of our people actually are moving from San Diego over there to man that. So, we won't have a bunch of start-up time to get up and running. We'll have some great people over there working and that will help us as well. With respect to utilization, it's been interesting as we've gone through analytics on our patient base. Forever, our most loyal patient group has been the over 50. The over 50 patients, while they're on this, they have not left us. They have been very, very loyal. So, I think what you'll see with these patients is very similar to what Steve talked about as we broaden the patient base. It will probably be a function of – they'll start off and if they don't like it, they'll quit fast, and if they like it, we will, we think we can keep them on for a very long time. And it's our job and our challenge to make sure that quick-fast thing doesn't happen. And we have to make our system. We have a team called Dexcom CARE that reaches out to patients and can train them directly on tools like Skype and FaceTime, and things like that. We need to make sure that group is heavily involved with our senior population as we ramp them up. And we'll do that, and we're working on that. So, we're optimistic that they'll stay.

Okay. That's very helpful. And then, just another one there. When we read the CMS rule, it provided reimbursement on a monthly basis. That includes some of the other related supplies. Just, I know you're putting the business model together now, but from a longer term perspective, I mean do you envision a plan where your yield provides some of the other ancillary supplies for calibration and things of that sort at least in the near term or do you plan to partner to add some of those incremental products? How do you view that getting distributed to the customer?

Yeah. In the near term, it will probably be in partnership with one of our DME suppliers, but over time, who knows? I think that looking at the economics broadly speaking, I think particularly as we look to some of our future sensor products which go to 10 days or 14 days, the economics are quite favorable to us. I think we're pretty happy there.

Okay. Great. And then just a last question for me is, just any expectations to see the initial or your feasibility data from the Verily, G1 at some point this year, and if so, is ADA the most likely place we should think about that?

Probably not. Well, not ADA. Hopefully, we can do something before the end of the year. I mean we have initial data in-house, but it's in a limited number of patients, so it's not something that we're – we typically wait until the study is pretty well baked. We don't attend (39:39) patient in-house studies and something we spend a lot of time talking about. I can tell you there's a lot of people at Google who walk around with this thing as well. There's a pretty good data set, but we're not – probably not in ADA, maybe later in the year.

Great. Thank you very much for taking the questions.

Okay.

Thank you. And next from Morgan Stanley, we have David Lewis. David Ryan Lewis - Morgan Stanley & Co. LLC: Good afternoon. Maybe just two questions for Kevin, one tactical one, one strategic. So, Kevin, just given the changing competitive dynamics were a big focus last quarter, I wonder if you could just update us on these dynamics in the U.S. and ex-U.S. sort of in the fourth quarter or perhaps kind of early 2017, relative to your commentary in the third quarter and what assumptions, if any were made, for 670G or Libre timing in the 2017 guide? And I have a quick strategic follow-up.

With respect to our 2017 guidance, we built out the model based on what we think we can achieve. And we do consider the fact that these other products will be out. I think a lot will depend on how they're labeled and how they're going to be used, and timing. So. we built our models out with the best assumptions we had at hand and leave them at that. So, we did consider some of those things. We do not like competitors drive our growth assumptions. We hold our people to a standard that this technology and this therapy is important for everybody. So, we don't get to sit back and see where there's competition. I'll take my foot off the gas. So, we don't do that. We do consider it. And then, we'd be aware where that with line on sight. I forgot the other part of your question, David? David Ryan Lewis - Morgan Stanley & Co. LLC: Sure. So, you think competitive dynamics, Kevin, were pretty stable sort of the fourth quarter relative to your commentary in the third?

Yeah. I'd say. Yeah. Coming into that third quarter call, remember the 670G had just been approved. And so, I think there is considerable additional noise at that point in time that's largely dived down, I would argue. And we were just at a big diabetes conference in Paris, and without tapping ourselves on the back, I would say DexCom was again the shining star particularly in terms of our sensor performance and the data we released. So, I think it's quieted down quite a bit. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then Kevin, just real quick strategically. I apologize, I'm in an airport here. But this announced divesture of J&J – this J&J divesture has ignited a debate around your integrated products. So, I feel like there is two gaps, right? Some see value in the second integrated pump CGM player, and other say, given the DIaMonD study and the market opportunities at MDI and T2, why bother with pumps? And I wonder if you provide or share your updated perspective and I'll jump back in queue. Thank you.

We continue to support several integrated insulin delivery systems and we'll continue to do so. We have built our company on the concept that our goal is CGM first. And these guys will tell you I walk around the hall all-day long, and saying, some more sensors, some more sensors, some more sensors. I think there will be some benefit to the integrated systems. We have to drive our business based on the information through reimbursement and sales dynamics that we have today. And so, we're focused on that and we'll see where our investments and our relationships and partnerships pay off over time.

Thank you. And next from Raymond James, we have Jayson Bedford. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon. Thanks for taking the question. Just a few kind of clean-up type question. Just to clarify, the expected year-end installed base is still 270,000, correct?

270,000. Yes. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. In terms of the new transmitter and inserter, do you plan on waiting for the G6 to launch these products or you're going to launch them as they get approved?

It will depend upon timing, the approval and the timing of the G6 filing and a number of factors. Our plan today is launch when they get approved. But we will consider all that, Jayson, as we look out over the course of the year. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. Fair enough. And on Germany, of the contracts that you've signed, are they covering both Type 1 and insulin-dependent Type 2?

Yeah. They are. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. And then just lastly from me, on the Medicare opportunity, are you actively selling or marketing into this market opportunity right now or do those efforts get kick-started maybe in the second quarter?

We're not really actively marketing. We are getting a lot of enquiries about that and it is indicated as CMS approved. So, people call and ask us to market that. The physician – individuals can get approved CMS reimbursement on their own if they apply and go through the process of getting into dual reimbursement. We are not leading those efforts. We are guiding towards getting more clarification from the MACs and CMS in general, so we can get it approved and then make it easier for the entire population. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. That's all. Thank you.

And next from Leerink Partners, we have Danielle Antalffy.

Hey. Good afternoon, guys. Thanks so much for taking the question.

How're you doing?

Kevin, this question is for you. And, Jess, just congratulations on your retirement. I hope you enjoy the time. Kevin, as we get closer to a Verily product, closer to a real Type 2 opportunity, how do you see DexCom as a company from a scale perspective both manufacturing, distribution, et cetera, evolving? And how much lead time do you need to sort of get there, to where you can handle what is potentially a massive opportunity?

That's a fantastic question and one that we debate and struggled with. And one of the reasons quite frankly you'll see over the next several quarters large capital equipment investments for us as we build out an alternative manufacturing facility in Arizona. We need to be ready to handle this type of volume. And it is going to be different. Many of these patients, for example, won't wear sensors all the time. They may wear four sensors a year. So, even our relationship with these patients is going to be different. The call will be different. We're doing a lot of studies and a lot of work right now to figure out what that market's going to look like. We think a lot of it will be payer-driven. These patients don't spend a lot of money on fingerstick today for us to go in and offer a solution. Similar with Type 1 patients are paying, we know doesn't work. So, intermittency jam (47:00) will be a reality for these patients and how much are we going to spend a year, and how many sensors are patients going to wear and what we're working on is just developing thoughts as to what those programs look like and what type of benefit they could provide. But again, as we've shown in our investor slides in a two- to four-week period, we can see some of these patients taking their estimated A1c down more than a full point and their average glucose values move down significantly, because they don't get feedback from anything like CGM. And it really enables patients to pull the three levers that there are in taking care of Type 2 diabetes, medication, exercise and diet. And by pulling those three levers and getting real-time feedback in a mechanism that's easy to look at, their phones, say, hey, well, maybe I ought to do something a little bit different. We see dramatic results. In fact, somebody I talked to the other day was looking at Type 2 study data and said, do you realize this is more significant than any Type 2 drug I've ever seen? I said, yeah, I do. And so, we know the opportunities there. It is going to be a different business model, Danielle, and we really have to give it a lot of thought and go pretty quickly and develop a lot of data. I think there will be a lot of exciting announcements from us. We're going to have to be creative. We're going to have to think differently than we have in the past, but we're preparing to do that and having a lot of fun trying to put it together.

All right. Thanks so much for that. And then just a follow-up on the Type 2 opportunity. Do you think the first-gen Verily product that we could see in 2018 – at the end of 2018 I guess, I should say, is that going to be a product that can open up that Type 2 market or will that be limited to maybe insulin dependent Type 2s or how do we think about that product and approaching Type 2s in a real way?

We hope to open up the market with that product. We are doing work now with our Gen 5 product even with the two calibrations a day and getting very good results from that. But that is one thing we would certainly like to focus on. If we could accelerate and go faster with our current configuration, we can. But we're somewhat cost-constrained today due to the cost of the hardware and the fact that it is reusable now. So just – that is a product certainly will drive this market with. The app, for example, could look a little different than what we have today, but still provide the same data, just maybe in a little different format. There's a lot of decisions to be made as we go forward.

Thank you so much.

Thank you. And next from Cowen and Company, we have Doug Schenkel.

Hey, guys, good afternoon. Thank you for taking the questions. I guess maybe my first one is just another one on Medicare. Given the pent-up demand, upcoming reimbursement, and the huge clinical need for these patients, why can't penetration move to where the broader market rate is today pretty rapidly – maybe not this year but in 2018 and 2019?

Yeah. I mean, I think the biggest gating factor would be just education, right? We've not at all targeted this patient population historically. In fact, we spent a lot of time targeting younger patients when we got our pediatric approval. So, I think there's going to be an element of education. Right now, most folks probably still believe there is not reimbursement for the over-65 patient population. So it's going to take a little time.

But we think – I absolutely think we can get there if not even higher.

Yeah. But certainly with the demand we've seen generated just at the early stages here – yeah, that's right.

Okay. Thanks for that. And then, I guess a follow-up on some of the Type 2 questions. You've discussed ongoing programs with commercial payers in the U.S. and an effort to improve Type 2 reimbursement. Can you give us a status update on these programs, and do you believe broader Type 2 commercial coverage could come faster than you've previously discussed, given the progress with CMS?

No. I mean. Again, we're still waiting to see what the ultimate scope of coverage looks like out of CMS. But I think on the private payer side, my belief is that we still need some more data. The DIaMonD Type 2 data was great. We showed benefit in that patient population, but I think we're going to need some additional larger studies, particularly as we look outside of the intensively managed Type 2 population into folks on orals or diet and exercise. We've got to show not just outcomes, we've got to show cost benefit and that some of the initiatives we have internally. I'm not going to get into details, but some of the things we're working on internally, we're really starting to look at that data and look at how we will present it to the payers, but it's certainly not a this year event...

There's a lot of work to do I agree, Steve. Although I guess the caveat that I would add, if we went by the assumption that Type 2 intensive insulin using CMS patients had access to CGM and we could see very positive outcomes there as we gather data from the phone systems in particular, we would have a very good case to go back to payers with that we don't have today. So, this might provide us a wonderful opportunity to go do that. We just need to see how it plays out.

Okay. Super helpful. Thank you.

Thank you. And next from BMO Capital Markets, we have Joanne Wuensch.

Good evening and it's great to talk to you. The new hires that happened in the fourth quarter, could you help me understand how these people are going to be focused. Is it more educational? Is it more regional? And is it more counter-detailing all the competitive launches which are currently happening and expected to?

No, I mean these are folks that – so as Kevin alluded to when he described that the existing sales force getting used to new territories. What happens when we do a field sales force expansion is many territories will end up shrinking, quotas go up and territories shrink, and that's just sort of the nature of a growth business like this. So, the people that we added in Q4 and maybe a little bit in Q1 these are kind of quota-carrying sales reps who will have their own territory. Their primary detail will be doctors, will be endocrinologists. In terms of counter-detailing, no, we don't spend our time bashing the competition because frankly right now we don't have much competition. We're out detailing the benefits of our product to doctors. And so, these people, as Kevin said, it takes a little time to get them ramped up but they've gone through sales force training and they're currently in the field, so we'll start to look for contribution as we look into the latter parts of 2017.

Terrific. And then just a follow-up question. It sounds like some of the noise that we talked about in the third quarter call has quieted down. Anything in particular that drove that other than – I mean, I won't even answer my own question, what sort of caused that quieter or calmer moment? Thank you.

Yeah. The news is kind of out between – particularly with respect to 670G. There's like a pretty broad-based media blitz surrounding 670G both from Medtronic and from – some from other industry, the advocacy groups. So, it's just kind of quieted down at this point, they still haven't launched the product, still remains to be seen when they will actually start the commercial launching and to what scale and scope that commercial launch will be when they actually do launch it. So, I think just the noise has certainly died down in the clinics and otherwise.

Very helpful. Have a good evening. Thank you.

Thanks.

Thank you. And next, from Piper Jaffray, we have Tom Bakas. Thomas J. Bakas - Piper Jaffray & Co.: Hey, guys. Good afternoon. Thanks for squeezing me in. My first question, I just want to make sure I heard you correctly. Did you say that the second generation Verily product is now potentially a 2021 product? And what we're seeing – go ahead, sorry.

We're focused on 2020. We had it 2021 to be conservative just in case. Our focus is 2020 right now. Thomas J. Bakas - Piper Jaffray & Co.: Okay.

But we just – we did that to give ourselves a bit of hedge. I don't think anybody would be happy if it were 2021, but you know what, there's a lot going on in our industry that will be moving between now and when that product gets launched, and there's a lot of variables that are under our control at this point in time. So, we did that to be a little conservative. We have very aggressive timelines for that system and we'll stick with them. Thomas J. Bakas - Piper Jaffray & Co.: Okay. That makes sense. Thank you. And then, I guess, just given all the other developments that have sort of come up over the last few quarters, the transition of the pharmacy seem to sort of taken a back seat. Just hoping you could update us on the progress of that channel shift and just how important this is moving forward for the company?

Of all the initiatives we started, this is the one that has moved, quite frankly, slower than anything that we wanted to. And the key, there have been two factors that have made it slower than we liked. Number one, we want to maintain a certain level of pricing, so we've had opportunities to move from time to time, where pricing is just prohibited and we're not willing to set these options, and the other one in, in all honesty, our providers, our payers, everybody does not share the same sense of urgency with our technology that we do, whereas we see this opportunity to make it wonderful for people to go to the drugstore and pick this up. By the time somebody from accounting goes back and figures out how many Type 1 patients they have in their system and how many Type 1 patients through CGM, and then it takes time and we've had numerous creative proposals by our payer team to get us to pharmacy then with more of that literally have – they haven't died, they're just being evaluated beyond belief. And we would love to go there. I think as we go forward, in 2020, when we're selling the Verily mandate-type product for 2021, if I go with the conservative, that has to be sold at the drugstore. We can't handle the demand that we're going to have for this number of patients, even in Type 2 with 20 million patients as you look at penetrating that in at a rate of intermittent use much higher than what we have now, those products all have to be sold on the drugstore and the reimbursement channel has to change. For our current Type 1 population that change has not happened this quickly as we'd like it.…

Thank you.

Thank you. And next from Wedbush Securities, we have Tao Levy.

Great. Thanks, gentleman. Maybe a quick clarification of – I feel obligated to ask this question. So, I apologize ahead of time. The agreement that you have with European countries that's not the same as in the U.S. regarding the receiver. Can you explain that briefly if possible?

Yeah. So, in essence, it is the same. In Europe, it is also a voluntary recall. But what we did agree and we agreed in a couple of countries to affirmatively bring product back. You're going to see other countries posting similar notifications is my guess over the next, I don't know, months probably. But as we mentioned in the prepared remarks, we've already – we accrued for any potential exposure in 2016 and this shouldn't have any impact going forward.

Got you. So, if we have to replace those receivers out in the international markets, that shouldn't have a financial impact going forward?

Yeah, in the selected financial markets. And again, remember we launched the new configuration of our receiver in the fall. And so, as we've sold more receivers that we've grown since last fall, those receivers won't be subject to this initiative. But the patients in Europe got the same letter the patients did in the U.S. when we started the recall procedure. This isn't anything new to us. And we've been talking with many of the countries for months and many of the countries are signed off on what we did in the U.S. and felt it was good enough. We continue to have a piece of paper in the sensor box reminding people please test the other functionality of your receiver. Many of the countries felt that was good enough. Some of the others are still evaluating, some including the one that we read about recently, have decided it isn't. They want us to recall the devices that may be subject to failure and replace them with the newer configuration in the interest of patient safety, and we'll do that.

Got you. Okay. And I didn't hear whether you reiterated your gross margin guidance that you provided at the beginning of the year, the 67%, you had 70%?

Yeah. We didn't change.

We didn't change anything.

Okay. And lastly, you provided you guidance for the installed base to grow kind of around 35% this year, but your sales guidance is only – you're guiding for 25% to 30%. What's the difference there? Because normally when a comeback historically, I mean those two numbers of growth rates are pretty close to each other and then this year it seems to be a wider delta. Thanks.

Yeah. It's primarily timing-driven. When we add the new patients, we ramp over the course of the year and the fourth quarter is always the largest number, but sometimes the fair margin and the largest number of new patient additions during the given year, but those guys don't contribute from a sensor-disposable perspective like patients that are already onboard.

Yeah. I guess the other thing I would add is just the size of the installed base already. Even as we look at our monthly and quarterly numbers, new patients don't move the needle as much as they did in the past, because the installed base purchase is so much of the product that's there. So, I think the timing combined with more from our installed base are what make those numbers a little different.

Okay, right. Thank you.

Thank you. And next from Robert Baird, we have Jeff Johnson. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you. Good evening, guys. Just a couple of last minute question or maybe. So, on CMS, I know we've talked about it a lot. But Kevin, when the document first came out in January it looked like it included both T1 and T2 coverage. I'm assuming that's probably a negotiated point, though, with the MACs. Just maybe your latest feeling on, do we see T2 coverage early on once some of the coverage starts coming in? And then I'd heard that – and I don't remember where I heard this, but that you're maybe not having to negotiate with all 12 MACs. There's more consolidated negotiating point there that you're dealing with. Can you just flesh that out for me a little bit?

Yes. I would say it's too early to tell on the first part of your question. We're not deep enough in discussions on what the scope is going to look like. But you're correct in that under Part B, where we reside, there are only four MACs that need to actually work together with. So... Jeff D. Johnson - Robert W. Baird & Co., Inc.: And I would...

Too much more efficient process under Part B. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Just more efficient and easier to get these agreements put in place. And then Kevin, you've talked about your 50-year-old and older patient base being kind of the most loyal portion of the wearers. I don't know that I've asked this question before but as patients' age into the Medicare population at 65, what's the dropout rate? Is it a very high dropout rate? Or said another way, I'd assume your penetration rate in the Medicare population is pretty low. I just don't know if I ever heard you answer that question. Thanks.

Excuse me. It's been very low because they don't have reimbursement. So, our dropout rate's been relatively high unless they want to pay cash. So, it's been a challenge for us. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Yeah. And I guess that was my question. You said they were very loyal after 50, so most of them know they're loyal until 65 and then they do dropout, so this is a very low penetration rate.

Yeah. And we get heartbreaking e-mails from them or from their spouses all the time. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Yeah. Understood. I just want to make sure. Thanks then.

They can't afford it. Yeah.

Thank you. And we have no further questions at this time.

You know what, I'm going to offer some concluding remarks and then we'll be done. Thanks, everybody, for the questions and for listening. Year-end earnings calls are a great time of reflection as we look back at the accomplishments of another year. In a year of much confusion and turmoil in the diabetes industry, DexCom grew revenues more than 40% and annual increase of approximately $170 million in worldwide revenue, a number that's quite frankly more amazing than the percentage when you compare DexCom to everybody else in our industry. We received our non-adjunctive claim, CMS approval came right after the end of the year, and significant advancements have been made on the international reimbursement front. All these things point to realization of our vision, that CGM will become the standard of care for diabetes and this is going to happen very quickly. No company has a product pipeline like ours and the investments we've made in products, facilities, people, processes, our Verily relationship and other relationships will put us in a position to remain a leader in this industry and continue to have a major impact on the lives of people affected by diabetes, their healthcare providers, and ultimately upon reducing the costs associated with diabetes across the board. Thank you very much.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.