Welcome to the DexCom First Quarter 2017 Earnings Release Conference Call. My name is Danielle, 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. Mr. Sayer, you may begin.

Thank you, Danielle, and welcome everyone to DexCom's First Quarter 2017 Earnings Call. We'll start 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 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 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; and Kevin Sun, our Vice President of Finance and Interim CFO. Before Steve dives into a more detailed financial update, let me highlight a number of recent positive developments here at DexCom since our last call only two months ago. First, in terms our sales performance, the quarter came in consistent with our expectations with revenue growing 22% over the first quarter in 2016. Our CGM First message continues to resonate. Again, in Q1 of this year, new multiple daily injection or MDI patients drove our growth that represented the majority of our new U.S. patient additions estimated at just above two-thirds of our new patients for the quarter. Second, as we discussed on our last call, we received a non-adjunctive indication from the Food and Drug Administration near the end of 2016, making DexCom G5 Mobile, the only CGM system approved for therapeutic decision-making. Shortly after FDA's decision, Medicare issued a positive ruling for therapeutic CGM. And then late in Q1, we received additional coverage details from the regional MACs confirming that all people with diabetes on intensive insulin therapy will be covered under this ruling. This includes people with Type 1 and Type 2 diabetes. We have always believed that all intensively managed patients should have access to CGM regardless of age, and we hope to leverage the Medicare coverage criteria to our commercial relationships. So far, patient interest has been outstanding. We currently have over 10,000 perspective new Medicare patient opportunities in our pipeline and this is before we have even started promoting Medicare availability. We commend CMS on this decision. And while we are still early in establishing the framework to serve these patients in a streamlined manner, we are excited to begin rolling this out to seniors who we believe will benefit tremendously from this technology. I will provide more on timing later. And finally, we're beginning to see good initial uptick in Germany following our positive reimbursement decision there last year. Although we're still early in adoption curve, Germany helped fuel 37% O-U.S. growth in Q1. 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 general business update. Steve?

Thanks, Kevin. DexCom reported revenue of $142 million for the first quarter of 2017 compared to $116 million for the same quarter in 2016, a $26 million or 22% increase. Sequentially, revenue for Q1 was down approximately 17%. This reflects the seasonality we have experienced in the past several years, as our U.S. patients face resetting insurance deductibles at the beginning of the calendar year. In addition, because of the January CMS ruling, we're prohibited by law from balance billing our existing cash-pay Medicare eligible patients, which we estimate accounted for approximately $2 million to $3 million in lost sales during the quarter. As Kevin mentioned, there is a lot of excitement around the CMS ruling and our sales channel is experiencing a significant amount of noise in the field, which has not yet translated into revenue. During Q1, we also saw a good uptick in our international business. This led to a slightly lower global sensor ASP to a greater mix of distributor revenue outside of the U.S. Finally, we saw new weaker – weaker new patient additions from our pump partners, which Kevin will touch on later. Our first quarter gross profit was $94 million, generating a gross margin of 66% compared to a gross profit of $75 million and a gross margin of 65% for the same quarter in the prior year. Our gross margin came in slightly below our anticipated range for the quarter due to a few factors. Obviously, gross margin was impacted by seasonally lower first quarter sales and slightly lower sensor ASPs. Our hardware sales mix continues to shift toward our G5 Mobile transmitter, which has a shorter useful life and a lower ASP. And our warranty expense rate has stabilized, but continues to run above historical levels exceeding 3% in Q1. Some…

Thank you, Steve. Life at DexCom continues to be very exciting. The company achieved multiple historical millstones in the past several months and now it's time for us to execute on them. Following our non-adjunctive claim late last year and the CMS ruling in Q1, our pipeline is at an all-time high. We're proud that the DexCom G5 Mobile is the first and currently the only CGM system to be classified as therapeutic CGM. We continue to believe these accomplishments are a direct result of the strength of our CGM platform, both in clinical trials and in the real world. In the U.S. our recently expanded sales force is ramping up and will be critical in supporting our preliminary launch into the Medicare market later this year. Our worldwide new patient additions met our internal projections. As I mentioned earlier, the estimated mix of our new MDI patients in the U.S. is now consistent with the underlying Type 1 market. However, we have experienced softness in the growth of our new pump patient additions. As you are mostly likely aware, our two commercial pump partners have encountered difficulties in recent quarters driven by a variety of factors. However, we see several highly competitive DexCom-enabled insulin delivery systems, both on the near- and long-term horizons that will provide attractive options for the diabetes community. Outside the U.S, our year-over-year growth accelerated from fourth quarter levels buoyed by broader reimbursement in Germany, efforts in our two other direct markets, the UK and Canada, and increased volumes throughout the European distribution channel. Turning to Medicare, nothing in this process has gone according to the standard plan. A CMS Administrator's ruling is incredibly rare and the timing of that ruling was completely unanticipated by us. Medicare certainly got this right for patients, as this…

Thank you. We will now begin the question-and-answer session. And we have our first question. Our first question comes from Mike Weinstein of JPMorgan. Go ahead Mike, your line is now open.

Good afternoon, guys. Thanks for taking the questions. Let me just start with the U.S. sales performance. So, it sounds like the inability to bill some of your cash-based customers cost $2 million to $3 million. Even if I adjust for that, it looks like the U.S. business was down 21% sequentially. The last two years your U.S. business was down 15% sequentially. So, can you give us some additional commentary on just the U.S. revenue performance? And then, in there, I'd like to follow up with the commentary you made about that backlog of 10,000 Medicare patients. Can you just explain what that backlog is and how are you coming up with that number? Thanks.

Well, I'll start with the backlog, because that's very concrete. Once the coverage decision was announced, we certainly have criteria when a patient comes in or goes to our website for creating what we believe is a patient opportunity or patient lead. And these are patients who have met criteria, who have shown enough interest and have enough of the criteria within our system to be qualified as patient lead. So, again, there are more than 10,000 Medicare patients in our system outside of the traditional patients that we have as well coming in through the field, or coming in through our website and through the digital market space. So, these are again patients who have reached out to us and expressed interest, and have enough information to qualify as someone is truly interested in CGM. With respect to the U.S. business and our growth year-over-year, I think one thing that's very important to remember is we were in the middle of the G5 Mobile launch last year. We launched it late in the first quarter. Could not meet everybody's need in the fourth quarter, didn't meet all the needs in the fourth quarter and a lot of that carried over into the first. So, it is a tough U.S. comparison quarter-over-quarter. With respect to our patient adds, again, pretty much like we had discussed before Mike, the majority of our growth came from MDI patients and we see the MDI patient base growing very quickly. Where we were down a bit, where we've been in previous years on the new patient side was on insulin pumpers and we had fewer of those than we've had in the past. With respect to reorders and patient behavior, the other thing Steve talked about and I can elaborate a bit on as well gets back to seasonality in the first quarter and possibly a changing nature in our patient base. We have good reorders, our patients called in, that wasn't a problem, but the bigger issue is deductibles and copays. And particularly as we get into the MDI market, our insulin pump patients spend a lot more money on insulin supply – insulin pump supplies than their pumps, meaning deductible is faster than this new market in this group of patients that we're seeing. So, we know that there is some financial pressure on these people. We have not seen anything that would indicate increased attrition. We have not seen anything that would indicate decreased utilization on the sensor. First quarter is a tough seasonal one and those are really pretty much everything around the revenue numbers in the U.S.

Okay. So you – well, just go over few things. So you reiterated your projections for the year on new patient starts and where your installed base would end up, which was just going back to the fourth quarter fall was basically your patient adds are going to exceed your revenue growth in 2017. You think your pipeline is an all-time high and you're reiterating your sales guidance for the year. So, two questions. So one, can you give us some sense on the second quarter, what your visibility is today and how you're thinking about the second quarter versus the balance of the year? Because obviously, there is some disconnect between how the Street's modeling you guys and how you're thinking about it. And then second, can you just talk about how your expectations, they have shifted to the positive on Germany and that may be offsetting a little bit of incremental U.S. weakness from your pump partners? Thanks.

Well, Germany has been very successful for us. While we've grown quite a bit in Germany, it's still only about 20% of our total international revenue. So, it's not as big as it can be. We have contracts in place with less than 20% of the payers. We're sitting in front of two of the largest ones with contracts that should be executed shortly that would get us up to 50% of contracted reimbursement with the payers we have been contracted with. We can process those claims and get paid, but it's very much one-off and requires a lot of documentation. So, Germany will provide us some significant growth opportunities going forward. With respect to our estimates for the year and our pump patients, there are a number of factors that we look at as we weigh this. Again, we have our Medicare situation. We have a robust pipeline of potential new patients to serve without promoting it. Once we got this, we're excited we think we can add a number of patients there. We think on the patient number front, that would offset some softness on the pump side, and possibly more than offset any softness on the pump side, where the Medicare model is a little bit different, is the revenue we derive from a new patient when we add them. And if I can give you an illustration, you all know if we go back in time or if you look at a new patient, the initial transmitters and a receiver and three sensors, the hardware is between $800 and $900 and three boxes of sensors just for the sake of being simple, let's say they're $300 apiece or $75. So, you've got somewhere between $1,500 and $2,000 to startup a new patient. On the Medicare side, as you've all read the CMS rulings, we're not going to get that big of an upfront payment. We will be getting – us or our distributors will be getting rental payments on the receiver over a 13-month period and the average payment per month on the disposable components would be somewhere between $205 and $300. So a new patient in that first quarter of use will bring us somewhere $750 to $900. So even if we grow the patient base significantly past the 270,000, if a number of them are Medicare patients, it won't have the immediate pop that we've experienced in our commercial business in the past. As we look out, as we look at the opportunities and the number of patients who continue to request CGM, the number of new non-Medicare patients in our pipeline, we're comfortable with our guidance for the year in spite of all the other diabetes news that is out there and we plan on achieving those goals. And second quarter, typically for us, has been up over first. We certainly expect that it will be much better than the first quarter and we'll see how it goes from there.

Yeah. I mean, Mike, on the other...

Yeah, go ahead.

Just a quick....

Let Steve (27:05).

Yeah. Just a quick addition on – you asked about Q2 specifically and the sell-side models, I mean we certainly don't control the sell-side models. But what we said in our Q4 call, if you recall, is we expected do somewhere between 18% and 20% of our annual revenues in the first quarter. And I think, where we landed was right square in the middle of that. We've also typically, historically, said we expect to do 40% to 45% of our annual revenue in the first half of the year. And so, I think we would be comfortable sticking with that as a historical guide.

Understood. And then last one and I'll let some – I'll jump and let everybody in (27:40). Just want a comment on kind of what you think the feedback has been so far in 670G in terms of how that's pairing with the early clinicians and patients?

Well, they've put it on 500 people and my guess is they probably picked those 500 people specifically. So, we've heard some relatively good feedback. We've also heard mixed reviews with respect to the complexity of the system and going out of auto mode and everything. I don't think the book can be written on 670G till this has commercialized to a broad number of patients. I would tell you on the pump front, we do see – as is evidenced by, I think, what we heard on TAMP's (28:23) call, that some doctors are waiting to see – before they put a patient on a pump – to see how 670G goes, and this will be more applicable to a patient. But in all reality, pumps again are four-year warranty cycle. We believe that we can do very well with the pump patients that we have now. As I said earlier, our new patient adds on the pump side were slow. And now it's really the most negative thing that we saw in the first quarter. So, we'll just keep going from there. And there's a lot of MDI patients who really can use CGM and we will focus on those guys and our other pump partners patients as well.

Understood. I'll let some others jump in. Go ahead.

Thank you. We have our next question from Jayson Bedford of Raymond James. Go ahead, Jason. Your line is now open. Jayson T. Bedford - Raymond James & Associates, Inc.: Good afternoon. Can you hear me, guys?

Yeah, perfectly. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. Just a couple of quick ones. Kevin, I appreciate the explanation around Medicare, but what really needs to happen from here for Medicare patients to access the technology?

The most important thing that can happen next is a coverage decision. And what a coverage decision does is it provides an explanation around the benefit criteria that have already been established. For example, in the documents that have been issued already, it says a patient needs to be taking four fingersticks a day, but we don't have any guidance as how to document that. What the local coverage decision will provide is documentation, requirements to document four fingersticks a day this is what you have to do. Same thing with the other criteria Type 1 diabetes and the other things that are on that list. Also with the local coverage decision, Jason, while under the current pronouncements of Medicare, you can't bill on a one-by-one basis on claims, we've processed a few Medicare claims and our distributor has and they've all been pretty much denied awaiting a coverage decision. So, we really need this coverage decision and then we can really open this up and get this process running smoothly. That is the next obstacle. And again, I want to be very clear. CMS has been very progressive in helping us try and get this out. The things that they've done, the last guidance they gave towards the end of the first quarter, that was very much a positive step. At least viewed as a positive step by us to outline the criteria to specifically identify Type 1 and Type 2 diabetes patients using intensive therapy and that did keep the ball rolling. We need to get this local coverage decision and we are going for local coverage decisions as soon as possible and then we can really get this thing going. That's the big holdup right now more than anything else. Jayson T. Bedford - Raymond James & Associates, Inc.: And Kevin, are we going to see a series of local coverage decisions or is it one national that can be overlaid on the local?

Again, it's more consolidated than that, it may be more than one, but it probably would be two, up to a maximum of four. So, a little bit unclear. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. And when do you anticipate this to be put in place? Is midyear still a fair estimate?

There was a CMS webcast actually that happened earlier today and they said basically that it's in process. And they wouldn't give specific timing, but it seemed like it would be sooner rather than later. So, we're hopeful before the summer.

Certainly, before the end of this quarter is what we're hoping for.

Yeah. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. And last one on this topic is, when the local coverage decision is in place, is that when you kick in a more aggressive marketing effort?

That is correct. The last thing we want to do is to add another 10,000 patients to the 10,000 patients we're not currently shipping and have them all frustrated. So, yeah, we will aggressively go after that as soon as we get that local coverage decision. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. Thanks. I...

We're teed up. We're ready to go. This isn't something that will require a bunch of time. We'll get after it very quickly. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. I'll jump back in queue and let some others ask. Thanks.

And we have our next question from Doug Schenkel of Cowen & Company. Go ahead, Doug. Your line is now open. Ryan Blicker - Cowen & Co. LLC: Hi. This is Ryan on for Doug. Thanks for taking my questions. So, you've talked historically about international ASPs being about 20% lower than the U.S. on average. Is this still the case in direct markets or should we assume it's closer to the U.S. indirect markets? And what are your expectation for sensor ASPs over the remainder of 2017?

Yeah. So, what we've said is the pricing in Germany is more reflective of our direct pricing in the U.S. But remember, Germany doesn't represent – it represents an okay chunk, but it doesn't represent a huge chunk of our O-U.S. business yet. So, the vast majority of our O-U.S. business is still through third-party distribution, which is at a lower ASP. As we look to go direct in other markets, I think you'll see some pricing improvement versus through distribution. But I will tell you, give an example, in one of our reimbursed markets, we actually elected to lower the price slightly to drive sales, to drive volume, and it's had a wonderful response, particularly against some of the competition that is priced lower. So we're still evaluating how we'd proceed O-U.S. But, yeah, I mean, what you're seeing today, certainly Germany being the only big direct market is still more reflective of our U.S. pricing. Ryan Blicker - Cowen & Co. LLC: Okay. So should we expect the – where ASPs were this quarter or around that, we should expect it to be towards the lower end of your historical range for the remainder of 2017?

Yeah. This is Kevin. I think we'll get back up into the $70 range, probably not towards $75 as the U.S. volumes become a larger percentage of our business. And the U.S./international mix in Q1 of last year was also similar to this. In fact, the international business doesn't really suffer the seasonality that we suffer in the U.S. and many times Q1 has been our biggest quarter of the year internationally. Now, we certainly wouldn't want to that to be the way this year. But as U.S. business goes up and becomes a bigger percentage of the business, again, you will see prices naturally move up because of, again, just distribution channel shift and geographic shift. Ryan Blicker - Cowen & Co. LLC: Okay. That's helpful. And then moving back to Medicare, you said on the Q4 call that you believe within Medicare, penetration of the Type 1 patients could exceed the broader market rate over the next few years. What do you believe will happen within the intensively managed Type 2 population? Thank you.

All right. Specifically to Medicare or more broadly speaking? Ryan Blicker - Cowen & Co. LLC: Specifically to Medicare, but both would be helpful.

Yeah. I mean, I'd tell you, it's still a bit of an unknown. As Kevin said in his prepared remarks, we hope to leverage the coverage criteria, the coverage language from Medicare into the commercial side of the business. I think it's still a little bit of an unknown because our core commercial business is not – it's not dominated by intensively managed Type 2s due to a lack of coverage. So, we're probably, I'd tell you, taking a little bit of a wait-and-see approach, but the numbers of patients are much, much larger than the Type 1. So, I think it could be extremely additive over the next several years.

Yeah. And with respect to the Type 1 market, again, from a patient profile, these are patients many of whom, who suffer from hypoglycemia unawareness, and this a wonderful tool to help them and help give their families peace of mind. So, we see a tremendous opportunity here. And if we didn't see a tremendous opportunity here, I can tell you it's emphasized, because it would appear to me that most of the Medicare cash patients who we didn't ship have all sent me e-mails regarding the fact that they don't have their product and they want it soon. So, this is a group that's been very committed to the technology and done extremely well. So, I think we have a wonderful opportunity here. The key for us will be executing, streamlining the reimbursement and shipment process as we have to bundle this with the strips and meters upfront, and making sure the patients are properly trained and qualified. And we've staffed up for that. We've added more people on our tech support group and on our patient care team, and in our processing team in anticipation of this. So, we've done some things much better than we did a year ago. We've put good plans in place to anticipate this and we're just really excited to get started. But getting started is the key word, we really need to go.

We have our next question from Jeff Johnson of Robert Baird. Go ahead, Jeff. Your line is now open. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you, guys. Good afternoon. So, let me ask, I guess, one other Medicare question. So, if I'm looking at the Noridian coverage decision from late March, the wording is pretty clear in there that you'll only get coverage if you're using the DexCom receiver to display data. And, in fact, I think in that document, the word only is capitalized and then it goes on to say that if a beneficiary uses a smartphone as the display device, the supply allowance will be non-covered by Medicare. So, I guess my question is, Liberty recently decided they're no longer going to process G5 orders at least, and I'm not sure if that's temporary or not. But is there any connection between that and the display wording? Is there any risk that the payers take if it's found out that the patients are using their phone? Do patients take any risks? Do you guys have to change the share functionality on Medicare or Medicare patients? It just seems like a big issue tied to this word only and I'm just trying to figure out if there's anything there to be thinking about?

Excuse me. This is Kevin. I'll take that. What is lost on many of us is we're about a year ahead of where we thought we'd be with respect to this Medicare stuff. And in order to get DME approval, we had to have a durable component of the system that would last a specific period of time that we would cover. And working with Medicare, again, they worked very hard and they determined that durable component is the receiver. So, we'll start with the rules that we have. As far as Liberty concluding this, they have absolutely nothing to do with their decision and with this. And that is by far and away the least important gaining factor in doing this, Liberty's decision. And as we've looked at this and, quite frankly, spoke with other distribution channels, not knowing exactly what the coverage decision looks like and not knowing what you're going to have to have in your file to get paid when you have a Medicare license at risk and your business is very much Medicare-oriented is something of a risk that Liberty just wasn't ready to take at this point in time, even though they could get paid on individual claims and go through the process and do a lot of work. So, they stepped back and they're waiting – they want to wait for this local coverage decision as much as we do. Once this becomes clear, we'll determine how to best proceed. And I think it's important for everybody to understand, this has been a one-time thing, this has been a process over several years. And while we may sit here today with that position on the receiver being the durable part and being kind of like the centerpiece and the most important component of…

The receiver rental. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Got it. Yeah.

...was that payment for the first 13 months. That's why I have that. And then again, what we end up getting will depend upon the distribution channel and our terms with distributors and we'll have more color on that once we start going in future quarters. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Yeah. Very helpful. Thank you.

And our next question comes from Kyle Rose with Canaccord. Go ahead Kyle, your line is now open.

Great. Thank you very much for taking the question. Can you hear me, all right?

Yeah.

Yeah.

Yeah. So just wanted to ask you just more on the pump partnership side, has the disruption in that side of the market changed how you guys think about the long-term opportunity of where partnership should look, whether it'd be pump partnerships versus smart pens, versus connected health? Obviously, when you think about the Type 2 opportunities, just trying to understand how you guys view some of the value of those longer-term partnerships?

Yes. I'll take that one, Kyle. No, I don't think it changes our thinking on that at all. I think there is an extremely important segment of the market that we'll look to have to utilize these semi-automated or hybrid closed loop systems and we remain active with folks who you know, with Insulet and some others, and there are some others that you don't know. I think those are critically important to some subset of the market. We also think, as you mentioned, smart pens, a smart pen paired with a CGM, we think, as an extraordinarily compelling – a compelling product offering, particularly when you think about the power and computing power that we have on the phone and being able to really mimic using the algorithms that would be the similar algorithms that you'd have on the pump, on the phone and actually really provide detailed dosing assistance and other lives (42:54) to the patient. But then if you really look out at the market, thinking about Type 2s, more broadly speaking, Kevin gave some color on our initial thoughts there. There's a much, much broader opportunity, even in the non-insulin taking patient population in Type 2s. And I think we're starting to see some really compelling preliminary data that will marry up with the appropriate products as we continue forward with our Verily relationship. So, I don't think our partnership strategy has changed. In fact, I think our partners are becoming, frankly, more important, perhaps more diverse. We're not just going to focus on closed loop or hybrid closed-loop systems. I think there is a broad spectrum of partnership product opportunities for us, but they're all going to be critically important over time.

Great. And I appreciate that. And then just – a two-part question and then I'll hop back in the queue. Just wanted to see, is it fair to think of the product cadence – and I appreciate the color – but just the product cadence coming as G6 and then Verily G1, and then the Verily G2? And I don't mean to imply that that's not a very robust pipeline, but I'm just trying to understand, if we may see some incremental launches, whether that be different labeling, different types of used cases for those products along the way, as we think about 2017 to 2020 to 2021 time period? And just second question is anything you guys want to highlight when we think about heading to ADA in June?

Let me start with the product pipeline. On the product pipeline front, it's a real good question and a very good observation. We have been very successful over time, once we get a technology platform established on the sensor side to turn that into enhanced performance and other different opportunities. And I think in today's software world, and with the expertise we're developing, and the expertise, quite frankly, at some of these important partners that Steve has talked about, is I think you will see derivations of our core technologies. We tend to speak to our core technologies on these calls, but I can give you a simple example. We've certainly run feasibility studies on the Gen 6 sensor for 14 days, not only for purposes of the Verily first product that we're going to launch, because it will be a G6 sensor, but also for possibly a 14-day version of G6, but all this is in feasibility phases. We're giving all these things thoughts and you will see iterations that will be different. I think the other place that we can iterate that will be very meaningful will be software. We believe, once we have that accurate stable industry standard sensor platform and algorithms that generate extremely accurate and well performing numbers, that we can then in future worlds come up with possibly different apps that might be approved for different labeling and might have different use cases for patients, and back to what Steve talked about with our Type 2 business models and our Type 2 relationships. So, there is a lot going on and there is a lot more going on here than just the – we talk about really the core basic things on these calls. There are many other projects and many others things we're considering along with those. And with respect to ADA, certainly there will be talk about the second phase of the DIaMonD study, the Type 2 DIaMonD data. And we have several technology papers, there will be posters, we have a couple of oral presentations. We don't have a new product coming this year. We would love to be able – knock on wood, if we could launch Android at ADA that would be a wonderful event, but we're not there yet. So, it'll certainly be a good show for us. It always is. And we'll have a great time here in San Diego.

Thank you very much for taking the questions.

And our next question comes from Margaret Kaczor of William Blair. Go ahead, Margaret. Your line is now open. Margaret, this is the conference operator. If you're on speaker-phone, could you please pickup the handset or unmute. Margaret M. Kaczor - William Blair & Co. LLC: Yeah, sorry about that. Can you guys hear me?

Yeah, we can. Margaret M. Kaczor - William Blair & Co. LLC: Perfect. Thanks. So, the first question for me, in terms of the final pieces for Medicare, once they're in place, how should we think about the ramp of these patients. Are you continuing to see that pipeline of patients grow even now, as we go couple months beyond the initial announcement? And I guess, more specifically, over what timeframe should we look at those 10,000 patients to come online?

Well, certainly, we want to get the 10,000 patient up and going as quickly as possible. I think the Medicare ramp, once this final coverage decision is in place, can go relatively quickly, as we qualify these patients and make sure they meet all the criteria and understand what documentation then we have to have. The impact of the patients, though, as I described earlier, is a little different than our regular new patients, just based on the reimbursement model on the fact that we get a monthly rental rather than the big upfront payment. So our relationships with distributors are going to be a little bit different. Where the Medicare revenue really becomes material and significant is when we get like a 30,000 or 40,000 patient base and we're billing them all that monthly charge. And so, you've got a regular monthly revenue stream combined with monthly shipments that we think can be highly predictable. So, like I said, a new Medicare patient upfront is probably about half of what a commercial patient is in our upfront revenues. But as that bolus goes out over time, those patients become extremely valuable to us. So, it's going to be a little bit different model, but it will be highly – we're very excited about it, and we think it will be very additive to our business. Margaret M. Kaczor - William Blair & Co. LLC: And are those pipeline of patients still growing beyond the 10,000 kind of the rate over the period?

Yes. Well, we are still getting people calling in and wanting to join the pipeline. We get many opportunities per day. But when they hear we can't serve – we can't ship them yet, it's been a little bit difficult. I would say that we really need to turn on the faucet once we get the coverage decision, Margaret, and then we'll have a very good idea as to how robust these patients who have inquired is and how many will convert and how they use it. We really need to get going. Margaret M. Kaczor - William Blair & Co. LLC: Got it. And in terms of the second question, on the U.S. patient adds. Is there anything that you guys can do in the near term to help maybe your existing pump partners improve those patient adds? And Steve, I don't know if you have the numbers or willing to share, but what percentage of your patient adds in the past have been through those pump partners last year versus what you guys saw this quarter?

Well, it's not – I wouldn't say it's just pump partners. I mean, what we've said is, historically, this is two years, three years ago, we were – a typical quarter, we would add roughly 60% pumpers, which included Animas, Tandem, not just integrated – DexCom integrated systems, but pumpers broadly speaking. So, Animas, Tandem, Insulet...

And Medtronic.

...and even Medtronic. And so, with the couple of pump partners that we're seeing just not adding new patients, generally speaking, we've seen a slowdown. So, the point, though, is that while that did have an impact, we have shifted the mix pretty dramatically over the last 12 months or so. So now, in a typical quarter, we're adding two-thirds of our new patients are actually MDI patients. So while it's had an impact, it's not crippling the business. We just drew attention to it because it was a factor in the quarter.

It's a factor. Yeah. Margaret M. Kaczor - William Blair & Co. LLC: Got it. And then last one from me, maybe as we think about the G6 label, Kevin, what could DexCom offer patients in exchange for that hard shutoff on the sensor? Whether it's 10 days, I think you mentioned 14 days, that you're thinking about? What would make them excited about that prospect and effectively pay more per day per sensor than they do today?

Well, the 10-day life for G6, the way G6 is configured, there's not a hard shutoff on G6, as we are filing it at this point of time and we will evaluate that hard shutoff up feature going forward. We all read the blogs on our system. And every time I get on the DexCom G5 user group, pretty much every night, somebody says, hey, I just got my DexCom and I wore my sensor for two weeks, how much longer is it going to last and what do I do to make it last longer? And then you read – the last couple of weeks ago, I heard somebody said, yeah, I get 48 days for each of my sensors or seven weeks per sensor, and here is all the things that I do. So, this is a feature we have build into our products. I mean our product has been very reliable for more than seven days. I think over time the way our model works, particularly as you get out to 10 or 14 days, if we were to shut it off, it would be – I mean, absolutely, for quality purposes and to make sure that it's accurate, in particular, with our non-injunctive claim and the way we would look at that, Margaret, in all reality, well, we're billing somewhere between $10 and $12 a day in the U.S. to the reimbursement entities. If we did shut the thing off hard, we would make sure we repair with the patients because we always do and we would have a program to whereby patients – we would hope patients would not be hurt economically. And it's something we will study and explore all the time and give it lots of thought and consideration. So, it will be an interesting evolution on our technology curve and we have a lot of things to think about and consider. Margaret M. Kaczor - William Blair & Co. LLC: Good. Thank you.

And we have our next question. Our next question comes from Danielle Antalffy from Leerink Partners.

Thanks so much, guys. Thanks for taking the question. Just a question on the competitive landscape. Don't want to belabor this, but Kevin I'd love to hear your thoughts on another competitor expected to come to market at some point later this year, the Abbott, Libre. And they've added a significant number of patients internationally. What I'm really looking for is maybe your view on how the U.S. market, the dynamics there are different than the international markets where you compete head-to-head with them and therefore why the competitive landscape, when they do come to the U.S., might be different than we what we see internationally?

Well, one of the first things to note, international us versus Libre is, when Libre started, our entire international team consisted of three people. And so we really hadn't built much infrastructure over there and we didn't have any reimbursement and decision for a patient was very simple, pay cash for Libre, which is much less expensive than a DexCom system. So adding cash patients with that low price point upfront led to some significant growth. As Steve alluded to earlier and I can validate again, as we have received reimbursement in some of these European geographies, a reasonable number of our patient adds are a Libre users, who aren't getting what they want from Libre. In the U.S. markets, again, one of our biggest assets is our non-adjunctive claim that a patient can dose insulin off of the system and we believe people intensively manage their diabetes, that's going to be an important feature. And so, we believe in the intensive market, we can do well. And the fact is – again, even in Europe, where we don't have near the resources they've had, you just heard us talk about a 37% first quarter growth factor in Europe. And I mean in the O-U.S. markets for this quarter and in our reimbursed markets, we're doing very well. So in the U.S., I think there is a niche for this. I think there will be people who want it. I think in the intense world where we are now, we can maintain our share with our connectivity, our share features. The android app, the new technology we have coming in, and really more important than anything else , our accuracy in the performance of our system that has been documented time and time and time again. Over time...

Okay.

...as we look at that market, I assure you as you look at the Verily products, we will have products to compete head-to-head with that in the not-too-distinct future that we think will be – that'll be extremely good.

Okay. That's helpful. And I guess another issue for Libre might be what reimbursement looks like for that system, but one more question, Kevin, I have on the long-term outlook here from an OpEx perspective. And not asking for guidance, but just trying to think directionally, you've talked about how the look of the business will have to change when you do have a Type 2 product. And just curious about how the run rate for OpEx might change? Can you drive leverage as you sort of shift the infrastructure and build the infrastructure for the Type 2 market, or should we think about, just directionally speaking, over the next two years as you get ready for that sort of negative leverage, or at best flat? Thanks so much.

I appreciate that. You're talking really more about the commercial and the SG&A aspect of those expenses. And it's become very clear to us that this will be a different type of business model for us. We can't have the one-on-one ordering that we have now and walk patients through their DME benefits, and the way that we do things. It's going to have to be different and we are exploring new business models that can do that. As Steve talked about earlier, outcome based type programs that we can sell with employers, payers, communities and things of that nature, that's going to have to be leveraged and it's going to have to be done differently than what we do today and we think can leverage that and be successful. And so, we are taking as much time with the business model in this area as we are taking with the technology. And the development of the business model is every bit as high tech and challenging and different as developing the technology is. It's really been a wonderful effort so far and you'll hear more, probably more towards late this year and early next year as to what that's going to look like for us.

All right. Thanks so much.

And we have our next question. Our next question comes from David Lewis of Morgan Stanley. Go ahead, David. Your line is now open. David Ryan Lewis - Morgan Stanley & Co. LLC: Thanks. A couple of follow-ups and some clarification. Kevin, just on this topic, and maybe Steve, actually, I think you've answered this question. But on the two-thirds in the (57:49) mix, if that mix holds at two-thirds, where it sort of has for the next several quarters, you're still comfortable with your guidance? I'm assuming because that's where it's been the last several quarters. You seem to have popped up a little bit. But is two-thirds MDI throughout the remainder of the year an issue or something you're comfortable with?

No, that's actually been a goal, right. I mean, historically, we were even with the endocrinology community, people always – this is the old days. But people used to characterize CGM as just an adjunct to a pump. So, we set out a number of years ago with our CGM First campaigns to show the world that CGM is the most important tool in diabetes management. So if you're on MDI, you can effectively manage your diabetes without going to a pump with MDI and CGM. So, no, I think it's actually – that's a huge positive for us. David Ryan Lewis - Morgan Stanley & Co. LLC: So, I totally understand this. Steve, I guess what I'm getting at is if that number were to go to 80% in the back half of the year, do you have enough MDI momentum to offset the pump degradation?

Sure. There's lots more patients on MDI. I mean, remember, pumps are only about 30% penetrated in the U.S. and less than 10% penetrated outside the U.S. So there's tons more patients in the MDI group. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then Kevin just or for Steve, guidance this year, I mean, no one was specifically asking, but how should we think about the impact Medicare is having on guidance? Should we still assume a very limited impact in your expectations for Medicare? Was there any channel load at all here in the first quarter into your DME partners to speak of?

No, there is no channel room for us. We monitor our distributors very carefully and no there is no channel out there. With respect to the impact of Medicare, again – and even the impact of new patients and patient growth and that's a very good question. In all reality, as you're looking at a $700 million-plus business, the number of new patients you can add in your quarter dwarfs what new patients could contribute three years ago to a quarter. So, the new patients are very important and Medicare will have an impact, but I don't think you can move the needle like 10% or 20% certainly over the back half of the year. It can move it at a lower amount of that, depending upon on how many patients that we have. So, we'll give you more guidance and color on that as we add them, and we're probably going to have to be very clear with Medicare patient numbers on margins and breaking some of this out so everybody understands the story. Where it really moves the needle is in the periods going forward as you get a large established base with recurring revenues and we continue to shift to that business and it can evolve more over time than the upfront payments we get from new patients now. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then Kevin just we get this question a lot from shareholders, the last couple of weeks and months. In light of this year, with Medicare Libre 670G, is it likely we get a guidance update earlier in the year this year based on those parameters or do those parameters actually make it a lot less likely you provide an update for the year into your more traditional period? Thanks so much.

Go ahead, Steve.

Yeah. No, I mean, we evaluate our guidance on a quarterly basis. And at this point, we're not comfortable because we're not shipping to Medicare. We're not comfortable upping it. We do think Medicare is a huge opportunity and we'll evaluate it at the end of Q2, which will – that call will probably happen a month after the end of the quarter.

Yeah.

Just where we sit today we just didn't feel conformable changing it, yeah.

And our next question comes from Tao Levy of Wedbush. Go ahead Tao. Your line is now open.

Great. Thanks. Good afternoon. Maybe some clarification questions. In terms of the percent of the patients who are on G5 versus G4, is that a number that you guys can provide?

No, we've not broken it out. But remember, the disposable sensor is the same. So, with respect to 70% of our revenue, it doesn't matter whether they are on G4 or G5. The only difference it makes to us financially, as we noted in our prepared remarks, is that the COGS on the...

Transmitter.

G5 transmitter, yeah, are a little higher.

Right. And so, that has a decent size impact on sort of your hardware sales. if you separate the two, I mean, hardware sales growth was reasonable this quarter, up over 30%. And kind of where you fell a little bit short, at least versus my model, was on the sensor side. And what you had said on the call was you've got more international, so that lowered the ASP a bit. And so, my question is that that $2 million to $3 million related to Medicare, was that all sensor related or was any of that hardware? And also what happen to that in the second quarter?

I mean, it's much more sensor related. These would be existing patients, so not new patients. I suppose there could be, in that mix, some anticipated transmitters, if the transmitter died during the quarter. But it would be predominantly sensor revenue.

Got you. And what happens in the second quarter with that $2 million to $3 million? Can you start charging for?

So, we haven't been able to ship for cash. These were ex-cash pay patients. And now that we have Medicare coverage, we cannot ship to them and charge them cash. So once we have coverage – again, back to once we have the formal coverage in place, we can absolutely continue to service these patients. There won't be a make-up, per se...

Right.

...because that's revenue that they would have – we'll start charging them – we'll start charging Medicare for sensors and shipping sensors to them. But there won't be a catch up.

Got you. And then just lastly from a sort of like a strategic perspective. I think when the question around, will you guys ever buy a pump company, had come up in the past, I think the response was, no, not really, but if it did potentially have an impact on our sensor business, not having a competitor of artificial pancreas or similar device, then we – you guys might consider it. Is this kind of what we're talking about here where your pump partners aren't as quick to launch artificial pancreas technology that you try (1:04:26)?

Yeah. I mean, I can cut you short. No, we're not looking to buy a pump company. I think we continue to evaluate our partnership relationships. You could see us become a little more involved with one or more of the partners if some of them seem to fall off. But at this point in time, we're going to continue with our partnership strategy, again, both on the pump side and on interconnected pens and other software platforms. So, not interested in buying a pump.

Great. Thanks.

And our next question comes from Joanne Wuensch of BMO Capital Markets. Go ahead, Joanne. Your line is now open.

Thank you for taking the question. Can you hear me, okay?

Absolutely.

Yeah.

Thank you so much. Okay. Other than sales force hires, is there a way to sort of qualify or quantify the people that you have coming onboard and how are they spending their time largely? And then the second question, which is somewhat related, you talked about 10,000 Medicare patients coming in before you really do an outreach program towards them. Can you discuss what that outreach program might look like and the timing of when that might happen? Thank you.

Well, the outreach program will start as soon as we get a coverage decision in earnest, and it will much more noisy. It will be a combination of digital platforms. We'll also – we have some TV ads that will run and other media programs very similar to what we do with our DTC campaigns. Today, we have a very focused web, all that type of stuff to identify and help these patients. And so, we're going to do that one and that's when that will come. Sorry, what was your other question?

It had to do with the new sales force hires....

Sales reps, okay.

Yup.

So, the new sales reps came onboard late last year and early this year. The sales heads in the U.S. were determined literally by dividing current territories and reassigning people within those territories. I would tell you, like any sales force reorganization, there are some bumps, some speed bumps along the way. We are extremely happy with the quality of the people that we brought onboard and we had absolutely no shortage of people running these jobs who are very, very qualified. But it does take a while to get everybody up and running and we did experience that in the first quarter as well. In the U.S. Dr. Jones in Sun City (1:06:54) just lost their rep (1:06:56) to the new one's coming in and relationships have to be redeveloped and redeployed. We believe our team is up and running and doing well, and it does take a little while. I mean, we expanded 20% to 25% on the U.S. side, and so there's a lot of new people, they've all been trained, they've all been in for training, we've had our national sales meeting and they should be ready to go and certainly very productive in the second quarter. The way we analyze all our salespeople in the U.S. So, our key criteria is new patient adds and we evaluate everybody based on their new patient targets and are very thoughtful and deliberate as we set those up and get that done. And so, we watch everybody.

Thank you very much.

And we have our next question. Our next question comes from Steven Lichtman of Oppenheimer. Go ahead Steven your line is now open. Steven Lichtman - Oppenheimer & Co., Inc. (Broker): Thank you. Hi, guys. So obviously, a nice uptake in Germany and that continues to build. Where are we in terms of CGM reimbursement in additional countries in Europe? I know you've talked about France and UK in the past.

Why don't you go ahead, Steve.

Yeah, I mean, we're still working with the French authorities. I don't want to be more specific other than we're hopeful within the next 6 to 12 months, we hope to see some reimbursement in France. Similarly, in the UK, we've submitted the appropriate paperwork and are having discussions with the National Health Service there. We're starting to see reimbursement, but in a more limited fashion in some of the other countries in Europe, where they're looking to provide a fixed amount of money for reimbursement. We're trying to figure out how we will play in some of those markets. Australia is starting to reimburse. So, we're seeing it, it's happening certainly as quickly as we would have hoped. Steven Lichtman - Oppenheimer & Co., Inc. (Broker): Okay. Great. And then, beyond the dosing claim, you also had positive data obviously come through over the past few quarters through DIaMonD. How do you think you can leverage the DIaMonD data sets with clinicians and with patients, particularly as they get published?

Well, I don't think that one, certainly having a publish paper to take into clinicians, particularly as they go back to the example Steve gave, and when I first started with DexCom going out in the field frequently, when I would go into physicians office, the first thing they would say to me, I'm not giving a patient CGM unless they're on a pump. They have to be on a pump first. And what the DIaMonD study clearly shows is that is not the case, that you can derive significant benefit being an MDI patient and wearing in DexCom CGM. And I'd tell you, as we have clinicians, as we meet with clinicians and conduct symposium and educational programs across the country that attitude has changed. The CGM First message is taking hold in that DIaMonD paper is really the first thing we've ever had to document those outcomes. We think it can also be helpful for us with payers over time, as we look for lower cost solutions in managing patients with Type 1 diabetes and intensive insulin using Type 2 patients and we will use it for that, as we try and expand our markets and our coverage and go deeper. So, it's a very good start and the other data will be very helpful as well. Steven Lichtman - Oppenheimer & Co., Inc. (Broker): Great. Thank you, guys.

And our next question comes from Chris Cooley of Stephens. Go ahead, Chris. Your line is now open.

Good evening, guys, and thanks for working me in here in the queue. Just two for me. One, would you be willing to characterize the Medicare pipeline in terms of which channel they're primarily served in? Are they coming in primarily through the endo channel or are these patients that are being cared for by GPs? Just trying to think a little bit about how frequently they visit their practitioner and then converting them over time once the coverage decision comes into place. And then just as a quick follow up, from a model perspective. When the additional two payers come online in Germany and you're up over 50% of the covered lives there, should we think about incremental pressure to the global ASP on the sensor side or is that already kind of factored into your prior comments? Thanks so much.

As Steve said earlier, in Germany, our sensor reimbursement in Germany is very similar to what we did here in the U.S. So again, as these payers come on in Germany, chances are it would have a positive impact if Germany becomes a greater percentage of our international business. As I said earlier, it's probably around 20% of the total O-U.S. right now. So, we'll just have to see how that goes. With respect to referrals and physicians of our Medicare patients, we're getting leads from two sources; certainly, online and online referrals, the patients coming through our website and enrolling. And those patients can have general practitioners and endocrinologists. With respect to referrals from the field, those are primarily coming from endocrinologists, which is where our field teams spend the most of their time. And if you go into an endocrinologist office, at least when I go in, as much as I want to talk about our pipeline and all the stuff that's coming in the future, the first question I get every time is when you're going to be able to take care of my Medicare patients. So, I think there is good pent-up demand amongst endocrinologists to help that senior population.

Thank you, Kevin.

I'm showing no further questions at this time.

All right. I'm going to wrap it up. I want to thank everybody for their participation on our call today and your continued support of DexCom. In preparation for today's call, we noted that my first earnings call with DexCom was exactly six years ago today, and we proudly reported $13.1 million in product revenue for the quarter. Not one week's revenue for us going forward from now on. It's been a very fast and extremely rewarding six years driven by a tremendous amount of hardworking commitment from our team here. Think about the short list of industry first: CGM performance that finally met patient expectations; The first FDA-approved apps to allow patients to share data; the first system ever to communicate directly to a phone; the first device ever to be labeled to make therapeutic insulin dosing decisions; and finally, the first product to Medicare, at least in a few weeks or a few months, we hope. While this list is great and we're very proud of all that we've done, everybody here at DexCom would tell you that if you look out over the next six years, that list is going to be much longer and much more meaningful as we drive the message of CGM as a standard of care for glucose measurement across the board. I had an opportunity this past weekend to speak with an individual, whose family has been greatly affected by diabetes at a recent JDRF Gala here in San Diego. This person commented to me that while he is very generous and he is supporting diabetes research, it's DexCom that saves his children every night and he told me to be very mindful of that as we go forward in what we do. We'll never forget that. As we launch our new product platforms, incorporate Verily's high technology and truly merge hi-tech and mid-tech, build out our new factory, communicate and connect to more and more devices and expand into new markets over the next several years, our commitment to patients will never change. We truly want to enable people to take control of their diabetes. Thank you.

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