Q4 2024 DexCom Inc Earnings Call
All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Sean Christensen, VP of Finance and Investor Relations. Please go ahead.
Sean Christensen: Thank you, Abby, and welcome to Dexcom's fourth quarter and fiscal year 2024 earnings call.
Sean Christensen: Our agenda begins with Kevin Sayer, Dexcom's Chairman, President, and CEO, who will summarize our recent highlights and ongoing strategic initiatives.
Sean Christensen: Followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer.
Sean Christensen: Following our prepared remarks, we will open the call up for your questions.
Sean Christensen: At that time, we ask analysts to limit themselves to one question each so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our fourth quarter and fiscal year 2024 performance on the Dexcom Investor Relations website on the events and presentations page. With that, let's review our safe harbor statement.
Sean Christensen: Some of the statements we will make on today's call may constitute forward-looking statements.
Sean Christensen: These statements reflect management's intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance.
Sean Christensen: All forward-looking statements included on this call are made as of the date hereof, based on information currently available to Dexcom, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements.
Sean Christensen: The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in DEXCOM's annual report on Form 10-K, most recent quarterly report on Form 10-Q, and other filings with the Securities and Exchange Commission.
Sean Christensen: Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this call or to conform these forward-looking statements to actual results. Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP.
Sean Christensen: Unless otherwise noted, all references to financial measures on this call are presented on a non-GAAP basis.
Sean Christensen: This non-GAAP information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP.
Kevin Sayer: Please refer to the tables in our earnings release and the slides accompanying our fourth quarter and fiscal year 2024 earnings call for reconciliation of these measures to their most directly comparable GAAP financial measure. Now I will turn it over to Kevin.
Thank you, Sean, and thank you, everyone, for joining us.
Speaker Change: Today, we reported fourth quarter organic revenue growth of 8% compared to the fourth quarter of 2023. This brought our full year organic revenue growth to 12%, which was in line with our latest 2024 guidance.
Speaker Change: 2024 was a year of strategic investment for Dexcom, and through these investments we believe we enter 2025 in a stronger position to capitalize on our next wave of growth.
Speaker Change: To recap, over the past year, we broadened our commercial reach, launched new products that define the category, built greater scale, and advanced CGM reimbursement globally. Through this work, we continue to lead the biosensing market and have positioned ourselves to impact millions of more lives around the world.
Speaker Change: We ended 2024 with more than 2.8 million customers globally on our G-Series and D-Series products as demand for Dexcom C-Chem remains high.
Speaker Change: This represents an increase of approximately 25% to our global active customer base compared to 2023. This increase in customers was driven by momentum both in the category and through our improving execution in the field, which we're very excited about.
Speaker Change: This was evident in the U.S. where our Salesforce productivity metrics showed improvement in the fourth quarter.
Speaker Change: We have now grown our U.S. prescriber base by more than 50,000 over the past year. Through these new relationships, we've successfully broadened our presence within primary care and made early inroads with emerging CGM care points like maternal-fetal medicine.
Speaker Change: Importantly, across this growing physician base, we are also seeing prescribing depth improve. It often takes only a single Dexcom experience for a physician to recognize the potential to deliver better care with Dexcom CGM.
Speaker Change: As these new physicians now expand their use of Dexcom CGM across their practices, we've seen the impact to our new patient performance build from the strong third quarter finish that we described on our last call. This helped us achieve another quarter of record new customer starts.
Speaker Change: As discussed earlier in the year, we knew that the opportunity ahead was tremendous when expanding the U.S. sales force.
Speaker Change: With this focus on execution, we look to build upon our momentum in 2025 as we further cultivate these relationships and connect with the next leg of CGM prescribers. Our team is also helping many of these physicians navigate the evolving coverage landscape within diabetes care.
Speaker Change: In the past two years alone, reimbursement for CGM has significantly expanded as we've helped establish our clinical value well beyond insulin management. As many of you remember, a key milestone on this journey was the publication of our mobile randomized controlled trial, which demonstrated significantly improved outcomes beyond intensive insulin use.
Speaker Change: This data prompted clinical societies to update their standards of care and quickly led to widespread reimbursement for anyone on basal insulin.
Speaker Change: There is also a growing economic argument for incorporating CGM earlier into care plans, as this has been shown to reduce hospitalizations, specialty visits, and utilization of healthcare resources.
Speaker Change: As this comprehensive body of evidence continues to grow, payers have started to act. We recently shared that as of January 2025, two of the three largest PBMs now cover Dexcom CGM for anybody with diabetes.
Speaker Change: With these national formularies leading the way by the end of the year, Dexcom will have coverage for more than five million people with type 2 diabetes who are not on S1 in the U.S.
Speaker Change: For context, this is even larger than the type 2 basal reimbursement that came less than two years ago, and yet this only represents around 20 percent of the 25 million type 2 non-insulinized with diabetes in the U.S.
Speaker Change: In 2025, we will be actively pursuing coverage for the remaining 20 million lives.
Speaker Change: To strengthen our case even more, we recently announced that we initiated a randomized controlled trial for people with type 2 diabetes who are not on insulin and expect to complete enrollment soon.
Speaker Change: As we advance this important work to further expand coverage in the U.S., we have already significantly broadened access to Dexcom technology with the launch of our over-the-counter product, Stello.
Speaker Change: In line with our mission to empower people to take control of health, this product has allowed us to reach many more people. As we said at the J.P. Morgan conference last month, more than 140,000 people wore Stelo in the first four months of the launch, with demand spanning across the type 2 diabetes, pre-diabetes, and health and wellness populations.
Speaker Change: Importantly, regardless of where someone is in their metabolic health journey, work quickly enhancing Stelo to make it more personalized and drive greater engagement across our platform.
Speaker Change: Key to this will be Dexcom's proprietary Generative AI technology, which was recently launched in its initial feature in Stello, and will become a key source of personalized content as we expand its functionality over time.
Speaker Change: We're also building on the Stello experience through targeted partnerships that will consolidate multiple biomarkers into our platform.
Speaker Change: This includes our recently announced relationship with Aura, which will integrate Dexcom glucose data with vital sign, sleep, stress, heart health, and activity data from the Aura ring to provide an even broader picture of health for our mutual customers.
Speaker Change: Overall, we've been thrilled by customer demand for Stelo in these initial months, and we're excited to build on this momentum as we enter 2025. We see an opportunity to further elevate the Stelo brand this year through product iteration, broad awareness campaigns, and new distribution channels.
Speaker Change: This will include Stella's upcoming introduction on the Amazon storefront, which we expect to be live in the coming weeks.
Speaker Change: Finally, we ended the year on a high note across our international business.
Speaker Change: We have spoken time and time again about the importance of building greater access. And our most recent international coverage wins have again served as a nice catalyst for our business. Most notably, early in the fourth quarter, we finalized Bazel coverage for our Dexcom One Plus system in France and saw strong demand in the first quarter of its implementation.
Speaker Change: France is another great example of our ability to leverage our product portfolio to match the needs of each customer and reimbursement system.
Speaker Change: It has also proven to be on the forefront of Type 2 CGM coverage as one of the only two international markets with broad basal coverage today.
Speaker Change: In fact, across many of our markets, even type 2 intensive coverage is in much earlier stages, though we're seeing interest and reimbursement steadily build. As it does, we believe we're better positioned than at any time in our company's history to participate and lead growth in this category.
Speaker Change: As we look forward to 2025, there is a lot for us to be excited about. We remain in a unique position to help pioneer a fast-growing industry that has significant potential to broaden its impact. With that, I'll turn it over to Jereme.
Jereme Sylvain: Thank you, Kevin. As a reminder, unless otherwise noted, the financial measures presented today will be discussed on a non-GAAP basis.
Jereme Sylvain: Reconciliations to GAP can be found in today's earnings release as well as the slide deck on our IR website. For the fourth quarter of 2024, we reported worldwide revenue of $1.11 billion compared to $1.03 billion for the fourth quarter of 2023, representing growth of 8% on both a reported basis and organic basis.
Jereme Sylvain: As a reminder, our definition of organic revenue excludes the impact of foreign exchange, in addition to non-CGM revenue acquired or divested in the trailing 12 months.
Jereme Sylvain: U.S. revenue totaled $803 million for the fourth quarter, compared to $769 million for the fourth quarter of 2023, representing an increase of 4%.
Jereme Sylvain: As Kevin mentioned, new customer demand has steadily built over the past two quarters as our Salesforce productivity metrics continue to improve. Rebate eligibility again negatively impacted our U.S. growth rate by several points in Q4, but we expect this impact to step down in the first quarter and then be minimal over the course of 2025.
Jereme Sylvain: In the DME channel, our share remains stable during the fourth quarter, in line with our expectations based on the strengthening performance of our sales team. While channel mix again had the largest year-over-year impact to our revenue per customer in Q4, recent DME share trends should help this impact moderate over the course of 2025.
Jereme Sylvain: International revenue grew 17%, totaling $311 million in the fourth quarter.
Jereme Sylvain: International organic revenue growth was 19% for the fourth quarter. Our international business accelerated for the second quarter in a row as new access wins and the expanded availability of G7 and Dexcom 1 Plus generated higher demand in many key markets.
Jereme Sylvain: In addition to France, another nice win came in New Zealand, where we unlocked broader Type 1 coverage and saw a similar uptick in demand. These are great examples of how each market is unique and at different stages of reimbursement development.
Kevin Sayer: As Kevin mentioned, we still see a long runway ahead to build much greater global access, even within our existing markets.
Kevin Sayer: Our fourth quarter gross profit was $661.2 million, or 59.4% of revenue compared to 64.2% of revenue in the fourth quarter of 2023.
Kevin Sayer: During the fourth quarter, our gross margin was negatively impacted by a $21 million non-cash charge. The majority of this was related to inventory that our quality management system identified as being mishandled by one of our shipping partners.
Kevin Sayer: The remainder of this charge is related to new build configurations that lowered our production yield in the quarter. As a result of these disruptions, we are currently managing channel inventory tightly for the next few weeks.
Kevin Sayer: Our facilities are running at full capacity to rebuild optimal supply for our distribution partners, and we expect to have these levels back to normal by the end of the first quarter. This is why we have made the investment in capacity, to manage through growth and scale opportunities.
Kevin Sayer: Operating expenses were $451.7 million for Q4 of 2024 compared to $421.1 million in Q4 of 2023.
Kevin Sayer: Operating income was $209.5 million, or 18.8% of revenue in the fourth quarter of 2024, compared to $242.7 million, or 23.5% of revenue in the same quarter of 2023.
Kevin Sayer: Adjusted EBITDA was $300.1 million or 27.0% of revenue for the fourth quarter compared to $321.5 million or 31.1% of revenue for the fourth quarter of 2023. Net income for the fourth quarter was $177.8 million or $0.45 per share.
Turning to 2025 Guidance.
Kevin Sayer: As we stated last month, we anticipate total revenue to be $4.6 billion, representing growth of 14% for the year.
This guidance assumes continued strong category growth.
Kevin Sayer: Steady DME share, new access wins internationally, broader distribution for Stello, and several product advancements across our platform.
Kevin Sayer: We also expect to see U.S. revenue and volume growth converging as the year progresses, as we lap some of the unique rebate and channel dynamics discussed earlier.
Kevin Sayer: From a margin perspective, we expect full-year non-GAAP gross profit margin to be in a range of 64 to 65 percent.
Kevin Sayer: Non-Gap Operating Profit Margin to be approximately 21% and Adjusted EBITDA of approximately 30%.
Kevin Sayer: Our guidance assumes gross margins will improve at least 200 basis points in 2025, as we convert more of our installed base to G7 and drive greater scale at our high-volume manufacturing facilities.
Kevin Sayer: It also assumes a second-half launch of our 15-day G7 system, which we expect to provide greater gross margin leverage beyond 2025 as we convert more of our installed base to the 15-day system. With that, we can open up the call for Q&A. Sean?
Sean Christensen: Thank you, Jereme. In addition to Kevin and Jereme, we will also have Jake Leach, our Chief Operating Officer, joining us for our question and answer session. As a reminder, we ask our audience to limit themselves to only one question at this time and then re-answer the queue if necessary. Abby, please provide the Q&A instructions.
Sean Christensen: Ladies and gentlemen, we will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number 1 on your telephone keypad.
Sean Christensen: If you would like to withdraw your question, press star 1 again.
Sean Christensen: We kindly ask everyone to limit themselves to one question and come back to join the queue for follow-up. We will pause for just a moment to compile the Q&A roster.
Sean Christensen: And our first question comes from the line of Larry Beagleson with Wells Fargo. Your line is open.
Larry Beagleson: Good afternoon. Thanks for taking the question. Kevin, I wanted to start with the issues you identified on the Q2 call, the Salesforce issue and the DME issues. Jereme gave some color in his prepared remarks, but I'd love to hear a little bit more from you on the status of each. It sounds like your share in the DME channel has stabilized.
Speaker Change: So, how are you thinking about those issues that negatively impacted 24, you know, in 25? Thanks for taking the questions.
Kevin Sayer: You bet, Larry. We've made great progress on those issues since we talked about them the second quarter. We've worked very hard with our DME partners.
to identify opportunities to improve and to grow.
Kevin Sayer: We've also worked with our sales team to make sure we consider all channels across all markets and have that dual benefit offered where we can.
Kevin Sayer: With respect to the U.S. Salesforce, Larry, what we've seen is this group that we brought on board has now become more productive. I mentioned earlier that we've added 50,000 prescribers.
Kevin Sayer: over the course of the year. And what we're seeing now, you know, when we initially expanded...
Kevin Sayer: that group, we saw the prescriptions per health care professional come down. That number's come back up even though they're calling on more health care professionals now. So we're seeing more productivity per prescriber, even as we add more prescribers. So that group is doing what we asked them to. And I think that's really supported by the fact
Kevin Sayer: that we've had record new start to each of the last two quarters. So both those things are going very well for us right now.
Speaker Change: And our next question comes from the line of Jeff Johnson with Baird. Your line is open.
Speaker Change: gap in the US that has been pretty wide here in the last couple quarters. I mean, if I just put some numbers on it, it seems like in the fourth quarter, that gap was maybe 16 points, 17 points. And again, I don't have the perfect volume estimates in my number, but 16 or 17 points, that's down from maybe 20, 21 points, something like that in the third quarter.
Speaker Change: You know, where do you think that goes? You said it falls off in the one cue. Does it fall to low double digits, just that kind of volume versus?
Speaker Change: revenue gap in the US and then as it further converges throughout the year can you get that back into the single digits into the mid single digits just conceptually help us understand how to think about that that gap between those US volumes and the US revenue growth. Thank you.
Speaker Change: Sure, yeah, and thanks for the question. You know, it'll certainly converge and we talked, you know, as we walk through it, I'll try to walk through it.
Speaker Change: and the cadence over the course of the year. So certainly as we lap the rebate dynamic here in the first quarter.
Speaker Change: That will start to converge a little bit here in the second quarter. You know, as you start to then compare year-over-year channels, as we start to get those channel stability, you'll start to see that converge as you move into the third and the fourth quarter, as we get to the tail end of the year.
Speaker Change: And so the amount that you would expect to see it come in, it starts to get much, much closer to the numbers that you quoted. We haven't given a specific number.
Speaker Change: You've seen our growth numbers at 14% essentially as guide and if you you know exclude Stello from that it's more like 12% so you can already see implied there that the numbers are coming in if you just assume that the patient base continues to grow.
Speaker Change: into next year. So you're already seeing it. I'd expect similar gaps as you see us exiting Q4 as we lap the rebate channel in 1Q, but you're going to start to see that coming in more and more over the course of the year. We don't have a number specifically to give you at this point, but you're right, it'll start to come in closer and closer, especially as we exit 2025.
Speaker Change: Your next question comes from the line of Robbie Marcus with J.P. Morgan. Your line is open.
Robbie Marcus: Thanks for taking the question. Jereme, maybe just to follow up on that. There's a lot of considerations on both the top line and down the P&L between 15-day sensor, lapping of some of the...
Robbie Marcus: The headwinds on pricing. How should we think about cadence through the year? Obviously, the math points to a much stronger second half on a growth rate basis. But how should we think about cadence through the year and particularly first quarter as we set up expectations here? Thanks a lot.
Robbie Marcus: Sure, yeah, and you know, as you think about the first quarter, I'll start with the first quarter and then we can get to the year.
Robbie Marcus: You know, we talked a little bit about this at your conference, actually, Robby, about how the first quarter...
Robbie Marcus: It's going to look a little bit, I don't know, similar to where, you know, historical sequential patterns had taken us. So if you look at our best sequential Q1 relative to Q4 in the past few years, it was about a 9%.
Robbie Marcus: sequential decline. We talked about a J.P. Morgan it being about an 8 to 9 percent sequential decline. So it actually looks a little bit better in terms of seasonality here into Q1 and we'd expect it to do that. Nothing's changed. That was our guidance. We'd still expect that.
Robbie Marcus: and then typical seasonality over the course of the year. It should look relatively similar. I say that knowing full well that, you know, one percentage point in a split, if you will, can create a few different points of growth.
Robbie Marcus: But what I would say is there's going to be a relative stable cadence of improvement over the course of the year. Obviously, the comps in the back half of the year make it a little bit easier, so you would imply that. But in terms of just thinking about how you progress through the course of the year,
Robbie Marcus: dollar-wise. The progress through the course of the year dollar-wise should look pretty good and consistent with, I'd say, more normal years. Last year was a bit of a unique year for us, so that'll help you get cadence from that perspective.
Robbie Marcus: In terms of gross margin, you know, typically from Q4 to Q1, we step back a couple hundred basis points.
Robbie Marcus: This quarter we talked about Q4 being a little bit burdened by some one-time charges.
We've quantified those.
Robbie Marcus: I would expect there to be a little bit of a step back from Q4 to Q1 if you adjust for those one-time items. It means Q1 will be a little bit ahead of Q4. If you don't adjust for those items, moving up over the course of the year. We've got to move through some of the Q1 dynamics as we move forward, which is going to include certainly working through some of the yields.
Robbie Marcus: on improvements, which he talked about in Q4. We'll work through a little bit of that in Q1.
Robbie Marcus: But as you move into the rest of the year, based on the volumes that we're moving through our Malaysia facility, and really through our entire facilities,
Robbie Marcus: You're going to see that continue to improve, and we have a clear line of sight to our standard costs and what those margins look like, really looking good as we exit the year. So this is a year where you're going to see a lot of the benefit.
Robbie Marcus: of scale really drive that margin. You'll see a little bit of a benefit in the back half of the year from 15-day as well, but the big driver is going to be even without 15-day. You're seeing the scale and volume that's running through our facilities will certainly make that back of the half of the year look pretty good on a margin basis.
Speaker Change: And your next question comes from the line of Daniel Antalfi with UBS. Your line is open.
Daniel Antalfi: Hey, good afternoon guys. Thanks so much for taking the question. Congrats on a strong end to the, excuse me, year. Just wanted to follow up on the comment around some of the type 2 coverage, I think.
Daniel Antalfi: you know, two of the three largest PBMs are now covering for non-insulin using type 2. And Jereme, maybe this question is for you and how to think about, I appreciate what you're saying for 2025 as far as, you know, revenue growth converging with volume growth.
Daniel Antalfi: intensive patient population and just trying to get a sense of what you guys are seeing from a pricing perspective from those. Thanks so much.
Daniel Antalfi: Yeah, it's a good question. So maybe I can put some clarity there. So the unit economics of each purchase is actually similar across it.
Daniel Antalfi: We don't necessarily have a different purchase price for a month of sensors.
Daniel Antalfi: between one disease state or another, so type 1 and type 2 non-insulin using.
Daniel Antalfi: Generally is at the same price point in our contracts. So from that perspective profitability wise you shouldn't see any impact there. Now I think in the models the one thing you will have to be mindful of is when you look at a PMPY basis
Daniel Antalfi: Our Type 2 users typically don't use the product as often. They can go a weekend without it. There's, you know, lower retention utilization.
Daniel Antalfi: similar to what we disclosed at a JPMorgan conference where we had our persistence and use of product there.
Daniel Antalfi: So I think from a modeling perspective, profitability-wise, I don't think you make any changes there. From a revenue per patient, and just through your modeling on a per-year basis,
Daniel Antalfi: I think you have to make those changes, and I think we've given the retention utilization data that's up on the website, so that'll be easy to at least model as you're moving through there. But good news there is I think you're kind of implying, hey, is there an impact on gross margin, operating margin?
Daniel Antalfi: Now, Danielle, I'd just add to that, when we have coverage with these type 2 patients, our retention and utilization rates are actually quite high.
Daniel Antalfi: It's not like it's a one month and then you're done. These patients, if this product's reimbursed, we know they stay on it because they have such good outcomes. So while the model may be slightly different in a reimbursed world, it's still very strong. There's very good utilization, very good patient retention.
Speaker Change: And your next question comes from the line of Travis Steed with Bank of America. Your line is open.
Travis Steed: Hey, thanks for the question and congrats. I just wanted to ask on the G7 15 day I know you don't usually comment, but wanted to see how the process the FDA is going I guess the question is really like what's giving you the confidence to still say, you know second half launch?
Travis Steed: here. And once you get that approval, how should we think about that process rolling out in a couple quarters before the patient base is kind of fully converted?
Yeah, thanks Travis and Jake.
Travis Steed: Yeah, the 15-day review, right, we mentioned that we'd submitted it on the last call, so we're basically towards the tail end of that review. We've had a great interactive, you know, review with the FDA. We feel like we're right at the tail end because we basically have answered all the questions that they've asked us.
Travis Steed: And, you know, we do have the confidence that, you know, we're going to see an approval here shortly.
Travis Steed: We, as you kind of transition over to once we have approval, we do expect to launch that product in the second half of this year.
Travis Steed: Really, it's about securing coverage. We want to get the 15-day product out as fast as possible, but we are mindful of the user experience. We've got to make sure we've got coverage in place, and we have to be mindful of our pump.
Travis Steed: integrations as we launch this 15-day product. So yeah that's why you know we expect approval here shortly but we'll get it out here in the second half of the year. We're also looking forward to presenting
Travis Steed: the 15-day clinical data at ATTD next month in Europe. So that'll be one of our lead investigators from that clinical trial is actually presenting the data. So we look forward to sharing that with all of you next month.
Travis Steed: And your next question comes from the line of Joanne Wench with CDBAC. Your line is open.
Thank you very much for taking the questions. Briefly,
Joanne Wench: What does it take to get the 15-day integrated with the pumps? Is that a difficult process? And I'm going to also ask, I think they've heard or saw on a slide G8. Is there anything you can tell us about that? Thank you.
Joanne Wench: with the 15-day sensor. We thought about that as we were doing the original G7 integrations, so it is a much smaller lift than, for example, the difference between integrating, you know, as we moved it from G6 to G7.
Quite a big lift for our partners.
Joanne Wench: in terms of security interfaces and the Bluetooth interface. But as we look at the 15-day, most of it stays exactly the same. The pump basically interrogates the sensor, and the sensor tells it it's a 15-day. There is a little bit, once we get approval, a little bit our pump partners have to do on validations, but we do anticipate it to be quite quick.
Joanne Wench: in terms of the integration, with 15 data across our partner base.
Joanne Wench: So, we'll be mindful, you know, as soon as they get those done, we'll be pushing the product out harder into the channels, but that's that's part of it. And then your question about GA's.
Joanne Wench: We are very actively in the development process on G8. It'll be our next.
hardware platform that we'll use across our portfolio of products.
Joanne Wench: I won't get into all the details, but a couple of highlights are it's a smaller wearable with even more capability built into it.
And, you know, we're looking towards compatibility with pumps.
Joanne Wench: much closer to launch of that product. We've learned a lot through our G7 integrations, and so we're very excited about the progress.
Joanne Wench: on G8. It also has a multi-analyte capability built into it.
Speaker Change: I'd just add to that, we look at G8 also as a series of innovations. You know, the jump from G6 to G7 we learned a lot because we changed pretty much everything. We're going to do this more stepwise and we'll have literally a series of features leading to that configuration.
Speaker Change: talking about where you get to multi-analyte somewhere down the road. So we're looking forward to revealing more about this product platform as time goes on.
Speaker Change: And your next question comes from the line of Matt Taylor with Jeffries. Your line is open.
Speaker Change: Hi guys, thank you for taking the question. I did want to ask one about the expanding coverage.
in terms of the PBMs now covering these lives and...
and also thinking through to
Speaker Change: Hopefully next year or the year after getting the non-intensive type 2 coverage, but I just don't want you to understand how you think about the additional lives being covered as a driver this year. Do you expect that group to show in the numbers? Is that contemplated in your guidance and
Speaker Change: If you play through the study, when do you think you'll actually get more of an uptake in that non-insulin type 2 population?
Yeah, thanks for the question, Matt. I can take that.
Speaker Change: You know, the expectation, we've included it in our guidance. Now, there's all sorts of levels of uptake, and as you can imagine, every model has the ups and downs associated with it. We're really bullish on the long-term nature of it. I think it's about us getting out there and letting folks know they have coverage. So we're very mindful.
Speaker Change: that there's education that we have to continue to do and the sales force is really excited about it. I know that the materials are now out there circulating in the field and so we're excited about pushing those. That will be some of the work we do over the course of this year.
Speaker Change: The work to be done now is, you talked a little bit about the PBMs, so it's working with, we have two PBMs and as you go deeper into those PBMs and you get to more customized...
Speaker Change: formularies. We will be working with those PBMs to expand access even within there, knowing full well the benefits that CGM provides to those populations. We'll also be working with the third PBM, right, and looking at ways to ultimately gain coverage there. And so we're hard at work there.
Speaker Change: And make no mistake, on the flip side, we are also looking at how we would work with CMS, certainly to make sure that folks have access to the product. We know the benefits of folks using CGM and what it does to the system, and given the capitated nature of Medicare fee-for-service, even Medicare Advantage plans,
Speaker Change: Those are real interesting things and so we'll be working heavily there.
Speaker Change: What you generally need in those cases, not all the time, but but it's always helpful is an RCT and is
Speaker Change: You know, we've talked about in the past we are running an RCT, you know, Jake would tell you we're already in enrollment right now and we've talked about really completing that enrollment here in the first half of this year with early readouts at the back end of this year.
Speaker Change: So we'd be using that in conjunction with all of this evidence to look to expand coverage, but it is top of mind. So as we have our market access team potentially even listening to this call, they all know it's in the goals and for the year is to make sure we advance this as much as we can.
Speaker Change: And your next question comes from the line of Matthew O'Brien with Piper Sander. Your line is open.
Matthew O'brien: And if so, can you just talk a little bit about the composition of, you know, where that's coming from, just given that we're getting a little bit more.
Matthew O'brien: saturated on the intensive side and a lot more of this needs to come from basal and then non-intensively managed type 2. So just maybe talk about the
Matthew O'brien: proposition to get you to that level if you are committing to that and just making investors or helping investors feel comfortable you can do that given this patient population that historically you haven't been as strong with. Thanks.
Matthew O'brien: Yeah, sure. I can give you at least how we're thinking about the year. Certainly, we do expect it to be a record patient year.
Matthew O'brien: We do see continued penetration across the insulin-intensive segment and across T1 and T2 insulin-intensive. We still expect quite a bit of penetration in that market, and it still plays a very large portion of our new patient starts.
Matthew O'brien: We do expect a consistent penetration in basal over the course of this year.
Matthew O'brien: And so, as you think about basal and the progress made across that population in 2024, we'd expect something similar here in 2025. And so, that's continued steady adoption in basal. Remember, basal is a big grower. Since it's a smaller base as part of that population, it'll continue to contribute there. And then, of course, we do expect a greater contribution this year on the type 2 non-insulin side, given some of the coverage.
Matthew O'brien: that's in place. And so it's continuing to move along, Basel, it's continuing to move along on insulin coverage, as you've seen, or insulin-intensive coverage, with the addition.
Matthew O'brien: of type 2 here. And, you know, what's interesting, and this doesn't include stelo, so I think what's important is this is in our G-series and D-series approach, and so we're not even including stelo in those numbers. And so it should give you a little bit more confidence as you move even beyond type 2 and into prediabetes and health and wellness where we have an over-the-counter product.
Matthew O'brien: like Stello. That's just even more opportunity for us to take advantage of that. Kevin, I would add there's also some coverage wins that really start taking effect in 2025 in our U.S. markets with basal coverage in France, some spotty growing basal coverage in Germany. We've had
Speaker Change: you know, wins in Canada, Australia, we've got our direct team in Japan, you know, on the street now. So, we've seen our national growth in those markets. You know, I just kind of go along with what Jereme said. Now that we have more type 2 non-intensive open, obviously,
Speaker Change: That's going to contribute a larger portion of the new patients than we've done in the past because we have access to those people But we still believe there's growth in the insulin population. I mean as I disclosed earlier with 60% penetration in type 1 and 55% penetration in type 2 intensive
Speaker Change: We've still got a lot of people that need access to this technology to better control their health. And we believe with the field force, their increased productivity and all the things we're doing, we're in a good place to get after it.
Speaker Change: Your next question comes from the line of Jason Bedford with Raymond James. Your line is open.
Jason Bedford: Good afternoon. Excuse me. I apologize if this is redundant, but
Speaker Change: It sounds like there's no change to the Stello expectation of 2-3% of sales.
Speaker Change: If you'd confirm that, great. But can you just also talk about the STELA trend through the year, meaning specifically the timing of drivers? It sounds like...
Speaker Change: Amazon's coming on soon, but when do the five million newly reimbursed come online and when do you have full app integration with with Aura? Thanks.
Speaker Change: Yeah, maybe I'll start with some of that and I can hand it off to Jake here. So let's start with the type 2 coverage first so that we can move into Stello. So type 2 coverage that we announced effective 1.1, so it's already in place right now.
So that's good news.
Speaker Change: I can also confirm that Stello is 2-3%, the expectation is 2-3% of revenue in the year. So we've obviously considered the type 2 coverage in making that call. In terms of the cadence over the year and the integrations and Amazon, maybe I can hand it to Jake just to cover some of the expectations around that.
Jake: Sure, yeah, so around Stello we're working fast and furious on a whole host of new...
capabilities. We actually just launched one.
Jake: but in the past weeks that allows users to look back.
Jake: at their historic data within the app, so that was something that was one of the number one requests we got.
Jake: after we launched Stello, and so we got that function out in the field.
Jake: We are working, as you mentioned, very closely with Aura on a deeper integration. Today, we do import already Aura data into the Stellar platform, but
Jake: working with the team over at Aura. We're working on a deeper integration where we have access to a lot more of the intrinsic data from the Aura platform and so we're working to integrate that.
Jake: into our app. So the first thing we're working on right now is just the pipes to get the data flowing in, and then we'll start working on visualizations. You will start to see those integrations coming out in the first half of this year, but we'll continue to. We have two very innovative groups with the...
Jake: the team over at Aura and our software team. And so I'm really excited to see what they've been developing and will be throughout the course of the year having multiple releases that continue to build on the functionality.
Speaker Change: Yeah, and then I think the last question's in channel. And so channel, we are seeing DME channels selling it today.
Speaker Change: You're seeing partners selling it now. And I think the Amazon is expected in one cue, Jason. So we expect to see it here on Amazon very, very shortly. And so keep your eyes out. But one cue is when we expect to launch.
Speaker Change: And your next question comes from the line of Shagun Singh with RBC Capital Markets. Your line is open.
Shagun Singh: for Record New Patient Starts. So can you walk me through that, through the assumptions, should we assume the 14% growth as a base case? And then just on the 15 day sensor, what is assumed in that guidance for the second half? Thank you.
Shagun Singh: Sure, yeah, I can give you some of the data points here and we cover a little bit on the script But I think it's it's helpful just to walk through them. So
Shagun Singh: You know, we do expect about one to two points to be growth related to Stello. Obviously, if it was one percent last year and it's two to three this year.
There's a couple points there.
Shagun Singh: As you peel that back, you'll see that the core, I'd say, G and D series business is still in the low teens growth, you know, 12-13%.
Shagun Singh: And as you break down what happened, you know, our international market, which we continue to expect to continue to perform well, and the U.S. market, you can see that U.S. market, we expect to grow a little faster than the U.S. market, at least in the guidance. And that's how we've set that up over the course of the year. But you still see the U.S.
Shagun Singh: The U.S. performance doing quite well over the course of the year.
Shagun Singh: I would say I would say what we've given you is the figures that we think is reasonable given the year we understand that
Shagun Singh: you know over the course of last year we put a few things in place those has take a bit of a step back so we want to make sure we put out some guidance that's very reasonable that's very achievable and that's what we've done here to your point there are some some tailwinds in those assumptions
Kevin Sayer: Kevin alluded to it earlier, there's access wins outside the U.S., and that's going to be very interesting. In the U.S., we have a sales force that's now up and stable and running, and it's wonderful to see. They've done a really great job.
and so really looking forward to some of that.
Kevin Sayer: obviously with with more and more coverage wins coming out there in the U.S. over type 2. These are all things that are potential upsides and we'll certainly, if we can achieve those, we'll certainly pass them along but I think we want it to be reasonable.
Kevin Sayer: We put through that guidance and certainly it's an acceleration when you look at the back half of this year as we exit the year We had a three and an eight percent. So
Kevin Sayer: 14% would be a tailwind there. We do assume stable DME share. I think it's a prudent thing to do. We will be working closely with our DME partners. I think
Kevin Sayer: navigated through this quarter and I think they're great partners and we'll look to continue to partner with them. But I think that's a reasonable assumption to take a start into the year.
Speaker Change: Yeah, I'd just add one other thing with respect to 15 days. Yes, that's another tailwind. But again, we don't have an approved product yet. We've talked about launching this.
Speaker Change: in the second half of the year, but there is a time frame where we have to get coverage up and running with all the payers, get it through CMS for Medicare, and then get it on the shelves.
Speaker Change: and also integrate with our partners. There's a timeframe for a launch here. We learned a lot from the G7 launch. We'll apply all these to 15 day, but make no mistake about it, there's a little bit of a lag. It takes a little bit of time. And so...
Speaker Change: Well, it's a tailwind. It's going to be helpful. It's not the big tailwind. There's certainly some upside if things were to go very quickly, but what we've assumed is a base case based on our knowledge and what we've experienced in the past.
Speaker Change: And your next question comes from the line of Chris Pasquale with Nifron Research. Your line is open.
Chris Pasquale: Thanks. I wanted to follow up on Stello. You're coming off your first holiday season, first New Year's resolution season with a consumer product.
Chris Pasquale: Did you see an acceleration in subscription activity tied to those seasonal factors? And now with a few months under your belt of the launch, how are you feeling about your ability to keep users engaged after they've gone through their first couple of sensors? You mentioned AI. I would just love to hear a little bit more about what role that plays in that engagement.
Speaker Change: I'll start a bit and I'll let Jake take the question. We did see a nice spike of New Year's resolutions in January as the year started and we saw a lot of people sign up.
Speaker Change: to get the year started and kick things off. With respect to users continuing to use Stello, our subscription renewal rate for those who signed up to subscription plans has been excellent.
Speaker Change: users have signed up and they bought more sensors. We feel very good about that. Ironically, or not ironically, but just as a side note, the type 2 diabetes population in Stello certainly signs up and buys more frequently than the others and that that renewal rate has been very very strong.
Speaker Change: So our initial design of that product, the way we thought the app would work.
Speaker Change: It's really serving the audience that we targeted for, and then we'll add features over the course of the year that will benefit those users.
Speaker Change: In addition to the other user groups that we serve, Jake, I'll let you take the AI stuff. Yeah, sure. So, we did roll out the first generative AI capability within a glucose biosensor on Stello, and it's really around those insight reports that the users get after a week of wear. And it's, you know, we've seen good feedback. We actually did a staggered rollout of that. We rolled it out to half the users at first, and then we quickly ramped that up, so we kind of compare some of the usage patterns. And so,
Speaker Change: You know, I think one of the key areas that I talked about earlier when I said we've got a robust sequence of releases, a lot of it will be to continue to build on the insights. The number one thing, you know, now that we've got the historic data in the platform, the next request from users has been, you know, even deeper insights, which is clearly in our, you know, crosshairs as we look at
Speaker Change: the integration with Aura data, and then the further utilization of that generative AI report and feedback. The insights are going to continue to get deeper and more personalized as we go, and really looking forward to releasing more of that capability throughout the year.
Steve Lichtman: And your next question comes from the line of Steve Lichtman with Oppenheimer. Your line is open.
Steve Lichtman: Hi, thanks guys. Yeah, just building on Stello, you had ADA last year, you talked
Steve Lichtman: purposely about focusing the Stella messaging on the non-insulin type 2 first. With the coverage making real progress here, how are you thinking about that messaging changing over the next couple of years and there being more of a bifurcation between G-series for type 2 and Stella for maybe prediabetes and beyond?
Steve Lichtman: You know, that's a great question and something we discuss on a regular basis.
Steve Lichtman: We know that if products reimbursed we have a much better chance of getting it to somebody and them staying out and using it all the time.
Steve Lichtman: So, what you're going to see is a migration of some of the features we put into Celo geared towards type 2 patients not on insulin into the G-Series app.
Steve Lichtman: So our users can have the opportunity to identify their glucose spikes and interact with.
Steve Lichtman: G7 with the AI module and things like we put into the Stello.
Steve Lichtman: Conversely, you'll see Stella will add more features, again, that would be more conducive to health and wellness and serving other populations, pre-diabetes.
Steve Lichtman: along those lines, but you'll see us migrate features from one app to the other where it makes a lot of sense, and that's a credit to our software team and the software platform we built with our ability to iterate very quickly.
Steve Lichtman: You know one thing I'd add is that if you look at the indication for use on stelo it is very very broad and that was purposeful and we we went and pioneered the over-the-counter indication. It's all adults not an insulin so it very much is indicated for use outside of
diabetes and we intend to over time...
Steve Lichtman: continue to build the features set out to serve more and more users. We actually have
Quite a few of the users that have...
Steve Lichtman: wellness and longevity, just seeking to learn more about their metabolic health through using this the system. So, you know, we did target diabetes and pre-diabetes at first, but clearly as the capability of the platform builds out, it's going to become more and more applicable to a broader group.
Speaker Change: And your next question comes from the line of EC Kirby with Redburn Atlantic. Your line is open.
Thank you.
Speaker Change: Hi guys, thanks for taking my question. I wanted to ask about the G8 sensor and how we should be thinking around potential accuracy improvements really going after MARD on the glucose monitoring side with this device.
Speaker Change: and then you've touched upon multi-analyte, what discussions are you having with payers about the ability to perhaps look at a premium price for a sensor with these capabilities? Thanks.
Speaker Change: Yeah, thanks for the question. Yeah, so we are always striving to enhance.
Speaker Change: the accuracy and reliability of our sensors. You know, G7 is the most accurate sensor available, but there's still opportunities to enhance this technology and make it more accurate, more reliable for, you know, broader
Speaker Change: group of users and so you know with even within the G7 platform we're still working to further enhance the accuracy of that system and so you know as we look to G8
Speaker Change: We're actually building, one of the things I mentioned, right, it's a smaller wearable but with more capability, and part of that capability is further ability for fault detections as well as accuracy enhancements.
Speaker Change: and so you we will we do intend to improve the accuracy of the system as we continue to build on the different hardware platforms.
Speaker Change: The multi-analyte is, we've got different analytes in various stages of development.
Speaker Change: There's actually quite a few, and so we're kind of early days in terms of the use case applications and whether, you know, we haven't really had discussion around premium price yet, but the way that we think about it is
Speaker Change: amplifying the value of the the CGM by adding those additional analytes and you know broader use cases and chronic diseases around diabetes is certainly one of the areas that that we'll consider once we get the technology a little farther along.
Speaker Change: And your next question comes from the line of Michael Polark with Wolf Research. Your line is open.
I'd appreciate any color. Thank you.
Speaker Change: Sure yeah I mean the reason we went with a point and you know obviously we went out in January at JPM and now again
Speaker Change: Last year was a bit of a unique year for us. I think what's really important is we set everybody with what our best thoughts are around the year. And so this is our best thoughts around the year. We don't necessarily want to couch it as.
Speaker Change: Good low high low etc. Because we'd be putting out a range again
Speaker Change: So we thought it was the right thing to do. And as the year moves on and as the year progresses, we'll certainly give you guys updates. But it was really just designed around that, is making sure we got everybody on the same page with us, and we'll hopefully move all forward together.
Speaker Change: Your next question comes from the line of Bill Plovanich with Catacord Genuity. Your line is open.
Speaker Change: I'm going to go a different angle here. You know, we've been talking about revenue a lot. I really want to talk about profitability if we can. You know, obviously, 2024 was a tough year. You know, we've really kind of tapped out at that 20-ish percent operating level. You're looking for a little increase in 2025.
Speaker Change: How do we think about kind of the years after is this going to be something where it's a you know 1% expansion per year in operating adjusted operating or are there any lever points that could really accelerate this? Thanks for taking my question
Speaker Change: Sure. Thanks, Bill. Appreciate it. You know, I think there's a couple things. One, you know, obviously, one of the big things that we've been focusing on is building a bunch of levers into the business on the operating expense. And I think you've seen it over the years.
Speaker Change: OPEX as a percentage of revenue has continued to come down. I would expect that to take place over future years. That all being said, we do allocate a significant amount of money to R&D. And that's intentional because of all the opportunities ahead of us. And so we balance this investment, re-investment in the business.
Speaker Change: across both R&D and sales and marketing because not only do we believe there's a lot of opportunities for development and growth, we also believe as we move into these new markets there's a lot of opportunity to spread the word and that's why we've invested in Salesforce expansion, it's why we invest in marketing.
Speaker Change: So levers are you can you can invest less in the business. I don't think that's what we really want to do We are doing a wonderful job of managing GNA as an organization and I think we'll continue to do that So that's where the leverage will come from
Speaker Change: The other piece of leverage will come from gross margin. I mean, we've guided out to 65 over the years. If you look in the past year, we came in obviously lower than that in 2024.
Speaker Change: You know, so I think as you think about gross margins, certainly getting back to 65, and I think you guys all know the levers with 15-day.
Speaker Change: You know, continuing to design cost out of the product. Those are opportunities that obviously can head back to the bottom line over the years. So I think those are the two levers to play with. And you know as long as there's an opportunity to continue to reinvest in the business, which we believe will drive long-term growth, we'll continue to do that. If that doesn't make sense, there's certainly leverage we can get in the PNL.
Speaker Change: I think, Bill, you know this from all the years you've done this. Building levers is really important for a business, and some of those levers go into reinvestment. Some of those levers will go back to return of investment. And those are the two things we're going to make sure we balance as we grow the company.
Speaker Change: And your next question comes from the line of Patrick Wood with Morgan Stanley. Your line is open.
Beautiful. Thanks for taking the question.
Speaker Change: Interesting day again, so apologies about that, but it's obviously a big impact, I guess.
Speaker Change: You know, how are you thinking long-term about what the average wear time will do? Because presumably, you know there'd be a subset of patients who may want to change their sensor a little bit more frequently for all kinds of different reasons whether it's you know how they react to the adhesive or gets dirty or things like that.
Speaker Change: Do you have any info from like early days and stello to get a sense for change out rates? Or I'm just trying to think where where does it ultimately end up? It's obviously not completely 15 days But I'm just trying to get a sense where you think the average consumer is going to end up. Thanks
Speaker Change: Actually our Stella wearers are very happy with the 15-day wear so far and as far as them being unhappy with
Speaker Change: sticky tape or something not looking right, that really hasn't been that much of an issue. The number of patients getting to 15 days with stella has been very strong so far. Look, 15 days is the preferred use case for this patient population and for their caregivers.
Speaker Change: Certainly, there may be groups, for example, children where they may change more frequently. We have right now,
Speaker Change: a very generous and a very yet efficient service model if the sensor fails or falls off
Speaker Change: We work with people to make sure they have the sensors that they need. We're looking at that service model as we go to 15 days to make it as streamlined as possible so people do have the experiences that they want. At the same time, we increase our profitability and our margins across the way.
Speaker Change: And this is something we'll look at and talk about on a regular basis, Patrick, but most people really do want to wear it 15 days if they can. They'd rather not change the sensor.
Speaker Change: And I think it's safe to say, I mean, in the interim, you're 100% right, Patrick. The timing is going to be who moves, when they move, what the preferred... Longer term...
Speaker Change: They're all going to be 15. So it's just a matter of timing as opposed to necessarily how many people are going to stay on a 10-day.
Speaker Change: And your next question comes from the line of Marie Sebald with BTIG. Your line is open.
Speaker Change: Hey, good afternoon. This is Sam Montgomery. Thanks for taking the questions here. Maybe I can just ask about the sustainability of international growth and just getting your thoughts about contribution from maybe the several levers you have, whether it's expanding into new markets, going direct in other countries, and just increasing penetration through coverage lines. Thanks.
Thank you. Thank you.
Speaker Change: Our primary goal internationally, again, is to go to the large international markets where sensors are approved, where CGM is approved, and it's a growing technology.
Speaker Change: Certainly, there are countries in this group where there's more type 1 penetration to get. Many of the countries don't even cover type 2 intensive insulin use yet, so we're looking to drive more access there. And then basal insulin, as I said earlier in the call, is only fully approved in two OUS markets, Japan and France.
Speaker Change: So we're looking to build the case in those markets. So we'll expand into markets where CGM is already a proven technology and becoming the standard of care for insulin use.
As far as other markets, you know, when we launched...
Speaker Change: D1, our Dexcom 1 product in the beginning, we built a very efficient model to launch a digital platform in those geographies and get those geographies up and running.
Speaker Change: What we've experienced in those geographies, in all fairness, is oftentimes it grows to reimbursement very quickly.
Speaker Change: when the government sees how many of these sensors are purchased and the great outcomes these patients have.
Physicians put pressure on the reimbursement authorities.
Speaker Change: And your next question comes from the line of Mike Kracke with Learinc. Your line is open.
Mike Kracke: Hi everyone, thanks for taking our question. You walked through some of the growth trends across the different segments of the diabetes population earlier on the call. Maybe as a follow-up to that, have you seen any noteworthy shifts in your market share that you're capturing across the different segments and anything in particular you'd expect to see in 2025?
Mike Kracke: Yeah, I mean, as you looked at over the course, call it, say, the fourth quarter. Um, you know, we had a really good, you know, good bounce back in the third quarter in a really strong fourth quarter.
Mike Kracke: And in the fourth quarter, given it was record new patients and we saw strength really across the board, we saw some good.
Mike Kracke: really good share performance across really all of it. Now the area when we historically we've had you know the least share was in the area we haven't had coverage and so as you fast forward into 2025
Mike Kracke: you know coverage is a good opportunity for us there and so I'd expect us to continue to do well especially with the expanded sales force and all of the innovation we're putting into the product as well as having stelo in the bag and that's really important as we call them physicians so I expect us to do really well in the markets we're in.
Mike Kracke: And then an area we alluded to a little bit earlier on the call where we haven't had coverage and we're excited to see where this goes in 2025 is in that non-insulin space.
Mike Kracke: I think that's an area where, with coverage, we expect to perform well, but I think you saw the performance in Q4, the new patient performance in Q4, as a precursor to really a good jumping point for 2025.
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Mike Kracke: And our next question comes from the line of Matt Nixick with Barclays. Your line is open.
Speaker Change: Hey, thanks so much for taking the question. So just one quick clarification and then a question on some of the comments you made about economics of patients. So the quick clarification was just.
Speaker Change: I'm not sure if you've given a time frame for G8 yet, approximately, is it one year away, two years away, that'd be helpful. And then the question on the economics.
was
You know
Speaker Change: I think the perception is among investors that as you move up, and call it to the right, lower acuity,
Speaker Change: and so on, that the economics and the economic value of that
Speaker Change: per patient is lower, and it sounds like on a per unit basis, I think, as you were describing earlier, not true. So, is that purely driven by...
you know, use case, utilization, renewed prescriptions, and so on.
Speaker Change: or is there different rebates, maybe, how would you sort of like dispute that kind of perception out there about, you know, that segment of the market? Thanks so much.
Speaker Change: Let's start with your G8 question. We've not given a timeline. Right now we're all hands on deck for 15-day G7.
Speaker Change: And that's the timeline we're most concerned about today as far as giving you guidance. Again, that's in the second half of the year.
as we look forward to approval in the not-too-distant future.
Speaker Change: With respect to these other markets as we get into non-intensive.
diabetes treatment, even basal treatment when we started.
Speaker Change: We know that utilization rates amongst these patient groups are a bit different.
Speaker Change: but they're not as dramatically different as one would expect. Certainly our type 1 patients who are made insulin delivery systems, some of which don't even function without a sensor,
Speaker Change: The utilization there is going to be very, very high, obviously, and if they're having a good experience with their system, retention is incredibly strong as well. As we move down the acuity curve, what we see is utilization may decrease some.
Speaker Change: But as long as it's reimbursed it doesn't decrease like it doesn't go from 90% down to 40 it goes down a little bit
Speaker Change: Now, mind you, as we expand in these categories and get more and more users, utilization patterns will change and they will shift. So maybe the value of a patient over the course of the year will come down a little bit.
Speaker Change: But if it's reimbursed, we don't expect it to come down that much. Where we have to build out models and learn more is with Stello.
Speaker Change: with these cash pay patients. How many cents are they going to purchase cash wise? How many are they going to use and what does that look like? And we're too early in that journey to really define it. Yeah, and Matt, I think, you know, the question earlier was do the economics per transaction change? I think the answer is no.
Speaker Change: However, does utilization change? The answer is yes. So it gets back to the per user per year. It may come down, but remember, the amount of sensors you sell comes down because it's a utilization question. So the gross margin and the odd margins...
Speaker Change: remain the same? I think that's the important part of it. So it depends. Are you talking about the economics of the transaction or the economics of the lifetime value of customer? They are different, but I think there was a question about does the margins go down because you're moving to a different and the answer is no.
Speaker Change: Ladies and gentlemen, that concludes our Q&A session. I will now turn the conference back over to Kevin Sayer for closing remarks.
Kevin Sayer: We thank everybody for participating today. We're very pleased with our 2024 results and our record new patients and the things we achieved in the fourth quarter. We're looking forward to a great 2025, many levers in place for us to have a great year, and we look forward to your continued support. Thank you.
Kevin Sayer: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Thank you.
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