1/ How to review quarterly earnings 🧵
A step by step guide using $DXCM as an example
⬇️
A step by step guide using $DXCM as an example
⬇️
2/ The BIG question: Is the thesis on track❓
Other question:
❓Is revenue growing?
❓Are margins stable/expanding?
❓Profits?
❓Balance sheet?
❓New opportunities?
❓New threats?
Other question:
❓Is revenue growing?
❓Are margins stable/expanding?
❓Profits?
❓Balance sheet?
❓New opportunities?
❓New threats?
3/ I open 4 browser tabs
Tab 1 - Current company earnings report / shareholder letter
Tab 2 - Previous company earnings report / shareholder letter (check guidance)
Tab 3 - Analyst estimates
Tab 4 - Call Transcript
Tab 1 - Current company earnings report / shareholder letter
Tab 2 - Previous company earnings report / shareholder letter (check guidance)
Tab 3 - Analyst estimates
Tab 4 - Call Transcript
4/ Tabs 1 & 2 - Find the current & previous earnings report
I search "Dexcom Investor Relations"
I click on "press release"
Open the newest quarterly earnings report and last quarter
It can also be a shareholder letter/presentation
I search "Dexcom Investor Relations"
I click on "press release"
Open the newest quarterly earnings report and last quarter
It can also be a shareholder letter/presentation
5/ Tab 3 - Find the quarterly analyst estimates
Open up $DXCM in yahoo finance
The "news" section usually has a link to reports on whether the company beat/met estimates
The "analysis" tab is a good source, but sometimes it updates to the next quarter too quickly
Open up $DXCM in yahoo finance
The "news" section usually has a link to reports on whether the company beat/met estimates
The "analysis" tab is a good source, but sometimes it updates to the next quarter too quickly
6/ Tab 4 - Find a transcript of the earnings call
@themotleyfool transcripts are best
Sometimes links are on Yahoo Finance news
Search "Fool DXCM Transcript" if not
Seekingalpha / NASDAQ are two other free sources
@themotleyfool transcripts are best
Sometimes links are on Yahoo Finance news
Search "Fool DXCM Transcript" if not
Seekingalpha / NASDAQ are two other free sources
7/ In most recent earnings, I check the headline numbers:
Revenue growth: 23% to $569 million
Revenue vs. Wall Street expectations (beat by 1.88%)✅
non-gaap EPS growth: -21% to $0.91
EPS vs. Wall Street expectations (meet expectation)✅
Revenue growth: 23% to $569 million
Revenue vs. Wall Street expectations (beat by 1.88%)✅
non-gaap EPS growth: -21% to $0.91
EPS vs. Wall Street expectations (meet expectation)✅
8/ Results vs. guidance
Management issued yearly guidance for 2020 in Q3 2020
Revenue +29% to $1.9 billion (actual +31% to $1.93 billion)✅
Non-GAAP Gross margin 66% (actual 66.7%)✅
Non-GAAP Operating margin 16% (actual 16.5%)✅
Management issued yearly guidance for 2020 in Q3 2020
Revenue +29% to $1.9 billion (actual +31% to $1.93 billion)✅
Non-GAAP Gross margin 66% (actual 66.7%)✅
Non-GAAP Operating margin 16% (actual 16.5%)✅
9/ Balance Sheet
$2.71 billion cash
$1.67 billion long-term convertible notes
$2.71 billion cash
$1.67 billion long-term convertible notes
10/
Margins
Use transcript / press release / or calculate yourself
Gross 70.2% vs. 66.8% (gross profit grew faster than revenue)
Non-gaap Operating: 18.3% vs. 22.5% (investigate!)
non-gaap Net: 15.8% vs. 22.9% (investigate!)
Margins
Use transcript / press release / or calculate yourself
Gross 70.2% vs. 66.8% (gross profit grew faster than revenue)
Non-gaap Operating: 18.3% vs. 22.5% (investigate!)
non-gaap Net: 15.8% vs. 22.9% (investigate!)
11/
News from press release?
✅Building out salesforce (explains operating margin & net margin drop)
✅Reimbursement in France
News from press release?
✅Building out salesforce (explains operating margin & net margin drop)
✅Reimbursement in France
12/
Read through transcript:
✅Gross margin ⬆️ from new manufacturing facility
✅Super bowl commerical
✅New service center in Lithuania
✅New manufacturing site in Malaysia
✅New sensor launching in 2nd half 2021
✅Enter VC space
Read through transcript:
✅Gross margin ⬆️ from new manufacturing facility
✅Super bowl commerical
✅New service center in Lithuania
✅New manufacturing site in Malaysia
✅New sensor launching in 2nd half 2021
✅Enter VC space
13/ Transcript
✅50% of sales now coming through pharmacy
✅International sales 35% of revenue
✅International DTC campaign launching
✅50% of sales now coming through pharmacy
✅International sales 35% of revenue
✅International DTC campaign launching
14/
2021 Guidance:
Revenue:
Management expects 15% to 20% growth
Wall Street expects 21%
Margins:
Gross ⬇️ to 65%
Operating ⬇️ 13%
2021 Guidance:
Revenue:
Management expects 15% to 20% growth
Wall Street expects 21%
Margins:
Gross ⬇️ to 65%
Operating ⬇️ 13%
15/
Management has a long history of under-promising & over-delivering, so I view these numbers as the floor, not the ceiling
Management has a long history of under-promising & over-delivering, so I view these numbers as the floor, not the ceiling
16/
My big takeaways:
✅Revenue growing
✅Gross margin expanding
✅International expansion
✅Reinvestment year causing bottom-line to look worse
🛑2021 Margins will be weak
✅Move to pharmacy working
✅G7 launching in 2021
✅VC fund adds optionality
THESIS ON TRACK
My big takeaways:
✅Revenue growing
✅Gross margin expanding
✅International expansion
✅Reinvestment year causing bottom-line to look worse
🛑2021 Margins will be weak
✅Move to pharmacy working
✅G7 launching in 2021
✅VC fund adds optionality
THESIS ON TRACK
17/
If you own $DXCM, the best move is to continue to do nothing
If you own $DXCM, the best move is to continue to do nothing
18/
Best guess is that $DXCM is in the top of the 5th inning of its growth cycle
Best guess is that $DXCM is in the top of the 5th inning of its growth cycle
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