Welcome to the DexCom First Quarter 2018 Earnings Release Conference Call. My name is Adrian and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Please note this conference is being recorded. I'll now turn the call over to Matt Dolan. Matt Dolan, you may begin.

Thank you, operator, and welcome to DexCom's first quarter 2018 earnings call. With us today is Kevin Sayer, DexCom's President and CEO; Quentin Blackford, our Executive Vice President and Chief Financial Officer; and Steve Pacelli, our Executive Vice President of Strategy and Corporate Development. We will begin with our prepared remarks and then open the call up for your questions. At that time, we will limit analysts to one question and one follow-up so we can provide an opportunity for everyone participating today. I will begin with our Safe Harbor statement. 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 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 non-GAAP and cash-based results. The presentation of this additional information should not be considered in isolation, or as a substitute for, or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the Investor Relations portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measure. With that, I'll turn it over to Kevin.

Thank you for joining us. Like last time, I will provide an introduction and pass it on to Quentin for a financial review, followed by Steve who will give you an update on our key strategic initiatives. I will then conclude with my thoughts on the business and our outlook before we open up to Q&A. We are off to a great start here in 2018. First quarter revenue grew by 30% to $184 million. This growth rate sits above our anticipated 2018 range and we feel very well-positioned so far this year. Our key growth indicators, including sensor volumes, international sales, and new patient additions, all helped drive the better-than-expected top-line result. From a profitability perspective, our team, again, showed good expense control, as operating spend grew at just one-third over our top-line growth rate. In the short time since we last spoke with you about the FDA's clearance of our G6 system, the DexCom team has been sprinting to get this product out the door. The initial excitement from the field has been phenomenal. First, the elimination of fingersticks while maintaining industry-leading performance has created quite a buzz. In addition, the simplicity of the auto-applicator and an improved on-body form factor have the diabetes community excited to experience this great new technology. Our limited launch has commenced and we remain on track for a full launch ahead of this year's ADA meeting in Orlando in June. I will now turn the call over to Quentin for a review of our financials.

Thanks, Kevin. DexCom reported revenue of $184 million for the first quarter of 2018, compared to $142 million for the same quarter in 2017, representing growth on a worldwide basis of 30%. We are very pleased with the broad-based strength we saw in the business both in the U.S. and internationally, which grew 25% and 49%, respectively. It is clear that the momentum we saw during the fourth quarter has carried into the New Year supported in part by continued uptake among our Medicare population and the continued momentum in our international business as sequential revenue grew by 17%. Our first quarter gross profit was $119 million, generating a gross margin of 64.5%, compared to a gross margin of 66.1% in the same quarter of the prior year. When comparing our Q1 gross margin to the prior year, it was negatively impacted by three factors. First, we took an excess in obsolete inventory charge related to our prior generation receivers as we accelerate the transition to the new touch screen device we launched last year. Second, our mix continues to shift toward both OUS and Medicare where we see lower pricing. And third, we began deferring some revenue in Q1 after the G6 approval and the introduction of our upgrade program. The aggregate effect of these items totaled approximately 250 basis points of headwinds in the first quarter. As presented in the tables of our press release, our geographic revenue mix was more heavily weighted towards our OUS business, with international revenue exceeding 20% of our global sales for the first time in our history. International growth remains an important area of focus for us as CGM continues to have single-digit penetration in that region. Average sensor pricing was consistent with recent quarters, while transmitters and receivers saw some reduction,…

Thanks, Quentin. Since the G6 approval, we have held a number of conversations with our insulin delivery partners and are excited that the advent of integrated continuous glucose monitoring, or iCGM, could accelerate the interoperability of our sensor on a number of key platforms. Just last week, a group of industry leaders gathered with the FDA, JDRF, the Helmsley Trust and others to discuss the implications of this approval and how we can collectively push these initiatives forward. Although it is still early, we believe this new iCGM category is a major step in the right direction. Our initial read is that we may be able to consider products configurations that were previously rolled out based on the requirements surrounding a Class 3 system. More on this as we further develop the strategy. In the meantime, we believe we are very well positioned, given the progress we're seeing with multiple integrated insulin delivery partnerships. As we assess the current market landscape, we now see an opportunity to drive a steady cadence of highly competitive systems over the next few years with a potential to leapfrog currently available products. Our collective goal is to deliver a variety of integrated systems that meet the needs of our diverse target population, including platforms with smart pens and automated insulin delivery. Beyond insulin delivery, we remain enthusiastic about DexCom's opportunities in alternative markets such as the non-intensive diabetes management space, the hospital, gestational, pre-diabetes and obesity, just to name a few. Our next-generation fully-disposable CGM systems are moving ahead, and the design of these devices will allow us to leverage our technology into multiple new opportunities. Our pilot efforts in non-intensive diabetes management are ongoing, and we will have more updates as these progress into 2019. We are also evaluating other novel opportunities that remain early but exciting. The bottom-line is that we know that CGM offers significant value beyond our core intensive insulin management segment. The G6 system brings us to a level of performance and ease-of-use that will help us establish CGM as a platform for diabetes management. With that, I will pass it back to Kevin.

Thank you, Steve. This is the most exciting time ever to be at DexCom. The business is performing exceptionally well, even in the face of shifting market dynamics. Not only did we see sustained strong year-over-year revenue growth, but we again demonstrated good financial leverage. As we have always said, our long-term goal is to replace fingersticks with CGM as the primary tool in glucose management across the board. In spite of our continued success and sustained growth, we still have a very long ways to go. A system like G6, which removes fingersticks and represents a significant jump in performance and ease-of-use, provides us with a platform to drive CGM toward the standard of care in the next several years. We know the diabetes community is ready for G6, and we appreciate everyone's patience as we go through the difficult steps to commercial launch. Our cross-functional team has worked very hard to get to this point. I want to take a moment to congratulate them on our progress to-date. We are very well positioned to hit our launch targets, and we believe we are on the cusp of raising the bar for the CGM category forever. We know the primary question you will all have on this call surrounds our pricing and utilization assumptions with the introduction of G6. We are not currently changing our annual revenue per patient assumptions in our internal models. With respect to pricing, although we believe G6 could be priced consistently with G5 on a labeled per-day basis, which would imply a sensor ASP increase, our guidance assumes sensor ASPs remain relatively flat between G5 and G6. We have also modeled utilization trends remaining fairly similar between the two platforms. On top of these assumptions, let us reiterate what we've been saying all along.…

Thank you, Kevin. As a reminder, we ask our audience to limit themselves to only one question and one follow-up. Operator, please provide the complete Q&A instructions.

Thank you. And the first question comes from Jeff Johnson from Baird. Please go ahead. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you. Good evening, guys. Can you hear me okay?

Yes, everything is great. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Great. Kevin, so I agree with you, we're all trying to figure out utilization and pricing for G6, but I kind of want to step back and look at your comments on the 1Q for G5 that sensor pricing was stable, sensor volumes contributed to your growth. I'm wondering what you can say that the implications are of that from a competitive standpoint, again just kind of especially on your U.S. commercial business and what kind of impact the competition is having on your U.S. commercial business at this point.

Certainly, in our U.S. business things were very robust this quarter. We certainly met our expectations as is supported by the numbers. And with respect to competition in the U.S., our new patient numbers, we met them. We hit our new patient goals. And, on top of that, we saw continued usage of our sensors by our current patients. So we did not see anything out of the ordinary with respect to patient attrition. Now, balance that with the fact that the first quarter is always the least predictable because of patients' copays and deductibles and everything resetting. But, all that being said, we've not been impacted in the markets where we participate by competition. If anything, we have heard numerous stories of patients who try competitors' products and switch over versus patients who try ours and switch over to theirs. So, no, first quarter was very good commercially in U.S. No problems. Jeff D. Johnson - Robert W. Baird & Co., Inc.: All right. Great. Thanks. And, Quentin, maybe for my follow-up, I just want to ask a gross margin question. So you broke out the three factors that contributed 250 basis points on a combined basis. The mix to OUS and CMS, I think we've all been trying to model that. So that I would say at least in our model was somewhat embedded. The obsolescence charge and the deferral of revenue out of 1Q into I'm assuming future quarters, any further detail you can provide on how much of that 250 basis points those two factors had? And should we see those more be transient and come out of the model over the next couple quarters? Thanks.

Yes, good question, Jeff. And E&O was far and away the vast majority of the 250 basis points that I laid out for you guys and was trying to reconcile in. And really that reconciliation was year over year, not necessarily relative to your models. And you're right, the mix in OUS and Medicare is something you would have already had in your model. So it's more of a year-over-year mix shift that we were talking about. What we're seeing with respect to the excess and obsolete charge that we took is that the teams here have done an incredible job of trying to improve upon the quality of our receiver, issues that we had in the past. And we rolled out a new receiver last year, and we're seeing meaningful reductions in the warranty rates on that new receiver, but we still had a good amount of the old receiver in inventory. And what we've done is essentially accelerated our plans and moved towards the new receiver. So what you will see over the course of the year is a reduced warranty cost that does benefit margin. But to your point, we ended up seeing the headwind in the first quarter, as we took that excess and obsolete charge. So over the course of the year, this will actually turn around and be a benefit for us, but it was something we had to get behind us. And so yes, we took it in the first quarter. But that's the vast majority of the 250 basis points. Jeff D. Johnson - Robert W. Baird & Co., Inc.: Thank you.

And our next question comes from Margaret Kaczor from William Blair. Please go ahead. Margaret M. Kaczor - William Blair & Co. LLC: Hey. Good afternoon, guys. Thanks for taking the question. First one for me is following up on your commentary regarding the G6 contracts. Any clarity that you guys can give us in terms of what stage you're at and timing of that? And how many of those have really been on pharmacy? Has the reception been maybe better with G6 at the payer level for pharmacy than it has in the past?

So Margaret, this is Steve. I'll take that. We're still very, very early in the process, which is frankly why we're remaining conservative when we're building our guidance and assuming basically static sensor pricing, right? So if we have an ASP on Gen 5 of around $70 a sensor, for modeling and for guidance purposes we're going to maintain that. We've had some early successes in a few places where we have direct-to-commercial contracts where, as Kevin mentioned, the labeled price per day for a 7-day sensor for a G5 has translated into something higher on the label basis for G6. But it's very, very early. I would say the same is true on the pharmacy side, that we're just too early to give you any signals as to whether this is going to advance our efforts in the pharmacy. We hope so, but kind of early to tell.

Yeah, I'd just add to that, Margaret. We've already filed with CMS for Medicare, so that should come sometime in the fall. And we'll be able to move those patients over, but that pricing isn't going to change from G5 to G6. And I'll go back to what we said in our prepared remarks, we're going to take this opportunity with the new product to try and expand access and get to more patients. And to the extent we can make it easier for the payers and easier for us to manage this, we'll certainly entertain interesting pricing models and interesting business models, like we've done in Europe. Margaret M. Kaczor - William Blair & Co. LLC: Got it. And then as a follow up to some of the commentary I think Steve had on new integrated solutions, can you give us any clarity for what you may have ruled out before that now is back on the table? And why is it back on the table? Is it because someone else is coming up to you guys asking for that? Or some of the discussions from JDRF, et cetera? Thanks.

So I thought you said Nasdaq. What? Can you -?

If we've ruled anything out. Have we ruled anything out? Margaret M. Kaczor - William Blair & Co. LLC: Yeah, things that were ruled out that maybe are back on the table right now.

No, just, I mean there're certain product configurations that living in a Class 3 world may not have made sense, because in the Class 3 world they might have taken 9 to 12 months for a review cycle, that that review cycle can be expedited. But I would say if anything, there are some things we're looking at, we're looking at on the software side, integrations with partners on the software side, et cetera, that may actually be put back on the table. So much like the payer process though, discussions with partners and product plans are still evolving, because the G6 approval was just so recent.

And our next question comes from J.P. McKim from Piper Jaffray. Please go ahead. J.P. McKim - Piper Jaffray & Co.: Hi. Thanks for taking the question. I just wanted to first touch just broadly on guidance and then just one on pricing as well. Given the two good quarters you put up for Q4 and Q1 this year, obviously growing 30% and just the back half of the year is a little slower than that. So I just want to – how should we interpret that? Is that more of just there's a lot of moving pieces? You want to remain conservative? Or is it that the G6 has caused a delay in Q2 that you need to counter for? I mean, how should we just interpret the implied back half growth rates?

Sure, it's a good question. This is Quentin here. I think a couple things to keep in mind, and these are consistent with what we've been talking about as we came into the year. Certainly, we have pricing considerations that we're trying to dial into that guidance. We don't want to get ahead of ourselves here. If we're able to navigate those well then I think we'd contemplate them effectively in the forward-looking Q3 and Q4 timeframe and hopefully they don't (00:24:18) materialize. There's upside to that number. But we're not going to get ahead of ourselves at this point. At the same time, we've got some stiff competition that's out there. And so we're contemplating that as well. The competitive landscape continues to evolves and as we navigate it, we're very confident in our ability to execute well but we want to be mindful of it. So again, just not getting ahead of ourselves. I would tell you on Q2, we basically reaffirmed where the Street's at, at this point in time, and I think the thing to keep in mind there is there is this aspect of needing to defer some of the revenue as folks wait for the G6 device to come out. We have folks who are currently buying the G5 transmitter. We're going to upgrade them free of charge which does result in a deferral within the quarter. And so that's going to weigh on the revenue number in the quarter and that's why if you look at sequential revenue trends, you may not be able to make sense of Q2, but you've got to keep that in mind. So I think if you adjust for that then your numbers will make sense, your modeling will make sense. But those are going to be the things that we certainly considered as we looked at Q2, Q3 and Q4. J.P. McKim - Piper Jaffray & Co.: That's helpful and then just one on pricing is when you made the decision to kind of keep the flat sensor price, is that something that you're taking to the payers, hey, you know, we're saving you money, and we've got a better system? Or was it the payers are pushing a little back harder on price? And then, Kevin, just broadly, when you think about expanding the label to 14-day wear, is that part of your strategy just to bring pricing down over time as you get the 14-day and then you keep it around the same price as well? Is that kind of a gradual way to bring down cost and increase penetration?

Yeah. So this is Steve. Just to be clear, we didn't say that we've made the decision to bring sensor pricing down. What we said is for purposes of our guidance and our internal modeling, we're assuming that average revenue per patient per year remains static. What we said in Kevin's remarks, there is some upside to the extent as we go back to the payers and negotiate the Gen 6 pricing and contracts that if we maintain a per day pricing similar to G5, that we get a slight uptick. But it's also critically important to remember that we might use, and we've said this, I've said this at conferences for probably years now, that we would use that – some of that potential upside, certainly, if we can negotiate with the payers a little bit lower price per day in exchange for improved access, improved access in the pharmacy, improved access, as Kevin mentioned, for potential bundled solutions, adding intensive type 2s to a bundle or to our coverage universe. So there's a lot of moving parts here, but it wouldn't be accurate to say that we've made the decision to just arbitrarily lower our price down to a Gen 5 pricing. That's not what we're saying.

What we've said is we've modeled that as we worked through all this. What I'd add on the 14-day sensor, and we're shooting for 14-day sensors and we've done that for a long time, that's something that we've heard from patients for a long time, that they would like to wear fewer sensors. That plays into lower cost model, certainly. We have to really evaluate what that does on the revenue side, and the cost side. I can give you a perfect example of two things we have to consider. Number one, we have to consider the special controls that have now been put out by the FDA as to how the system performs. And while we're confident in our system that 14 days will perform well enough, we haven't run the study yet and we need to see how the data looks. We're very comfortable with where we are with 10. We will need to run a study at the 14 days. But number two, just a very simple thing to consider is, for example, DexCom is really helpful to patients with respect to warranty. If that sensor falls off at day four, we've shipped you a new one every time. Are we going to ship a new one at day 12? I've never – I've worn a lot of sensors. I've never had anything last 14 days on my old body, so I don't know how that works yet and we have to model that out. Certainly, when we develop new products and embark in a program, we have four pillars within our development team. And the first one is performance. We will never compromise sensor performance. The second one is convenience, and you can see what we've done with G6 as you talk to people when they use it. And the third one is cost, and G6 ultimately will cost less for us to manufacture than G5 and not just because of the 10-day life versus the 7. So we consider all those things as we go forward.

And our next question comes from Robbie Marcus from JPMorgan.

Great. And congrats on the really good quarter. Quentin, maybe I could start with the guidance question. When you gave 2018 guidance and the first quarter guidance on the fourth quarter call, it was for $166 million to $170 million. You ended up doing almost $20 million better than that. So as you look at the rest of the year, it's factoring in for the back half 15% growth. Is that sort of the way you want people to think of your exit rate into 2019? Or is that more a conservative nature ahead of one of the biggest product launches and you just – that you don't want people to read too much into it going into 2019 from that?

Yeah, and I think it's more the latter at this point in time. We're very early in the stages of what is the biggest launch in the history of our company. In the midst of an environment that certainly, pricing has come under some pressure, we've navigated that quite effectively. And early indications are that we're going to continue to be able to do that effectively, particularly with a product that has a premium feature set with it like G6 does. So we're very bullish, very excited about what we're seeing but at the same time, aren't going to get ahead of ourselves here and introduce any unnecessary risk to the expectations. If we can navigate it well in the back half of the year, those growth rates are going to be in excess of 15% that you point out because you're right. The back half in our guidance would imply roughly 15% with the headwinds contemplated, so it's more the latter of what you're speaking about there.

And then as you try and bridge the gap between what you gave for guidance in the first quarter and what you ultimately did, can you help give us a couple of the different buckets? You mentioned Medicare; you mentioned international. Can you give us a sense of how Medicare improved from the fourth quarter and what sort of patient growth you're seeing, because it's such a substantial difference, any help would be appreciated. Thanks.

No, it's a good question and a fair question here. I would tell you new patient additions, Medicare, both continue to perform incredibly well. We did see a slight uptick in that Medicare business as we anticipated. I think you go back to Q1, and the big thing that frankly we couldn't spend a lot of time talking about on the call but we were deep into the discussions with the FDA at the time, we knew that the G6 approval could be imminent. It could have been any day at that point in time, but that wasn't something we could get out in the front and talk about, particularly with the change in the pathway going to Class 2. And so we knew that if there was an approval, say a day or two after that earnings announcement, there was going to be risk in that Q1 number and we didn't want to introduce that risk. We wanted to make sure we were mindful of that. And so you can chalk up roughly half the beat to that aspect alone, but that then leaves the other half, the true operational performance and that really is across the board. It's in our commercial business, it's in the Medicare business, and it's in the international business. So I would tell you, the underlying volumes performed very well. We were very happy with what we saw, but at the same time, we were trying to contemplate the fact that we could have a very early G6 approval and not be dealing with the negative surprise. So that accounted for some of the beat as well.

And the next question comes from Kyle Rose from Canaccord. Please go ahead.

Great. Thank you very much, and congrats on a strong quarter. I just wanted to take a step back and talk about the G6 and what you really think of as the biggest step forward here from a product standpoint. I mean, I think we all understand the accuracy and then the no calibration features. But when you think about the smaller on-body form factor, the new alerts and alarms as well as the applicator, are there any of those that you think really stand out as far as adding value that you think investors don't really truly appreciate?

This is Kevin. I'll take that. I'll let the other guys chip in if they've heard anything else. I would tell you the thing that I have heard the most about is the insertion system and the ease of use. Every text message I've got from a person in the limited launch study, is focused conveniently (00:33:06) on the insertion device. They love no calibration also. They say that's very awesome. But the insertion of this system and the ease-of-use is such a step-up. It's almost indescribable. And as we look at new patients, patients foreign to DexCom and who haven't used it before, when they went into a physician's office and saw the DexCom insertion device, I can tell you there's some trepidation, because that looks like another great big needle that you're going to stick in me. With this device, it is push a button. We saw a video of a child who put on their first G6 today, and she hit the button and said, I don't feel anything. Is it on? And it was. And that experience from a new-to-CGM patient we think is going to be very, very important and very, very good for people to use. But I don't think you can ignore the other two things either. No calibrations with continued DexCom performance puts us in a class that nobody else is. And patients will rely on this, and really we think it can lead to much stronger compliance and possibly increase utilization over time, because if they can look at that number and rely on it and patients don't have to stick their finger, you truly can eliminate fingersticks from the equation. So all around, we couldn't be more excited about a product launch than we are this one.

Great. And then just one follow-up question on guidance. I think, and Quentin you alluded to it a little bit in some of your remarks to a previous question, but I think at the beginning of – on the Q4 call when you were talking about the full year, you had contemplated I think somewhere around 10% pricing and competitive headwinds in the guidance. I guess is that still embedded in the updated guidance here? And is that kind of how we should think about the potential upside if those don't play out in the second half of the year, which we kind of – you have a 10% jump ball there?

Yeah, no change there. We continue to assume the same type of headwinds. And again, if we can navigate those well, then fantastic.

Terrific. Thank you very much for taking the questions.

And our next question comes from David Lewis from Morgan Stanley. Please go ahead. David Ryan Lewis - Morgan Stanley & Co. LLC: Thanks so much. Quentin, a couple of financial questions for you. Just for the quarter obviously you're raising by the beat. The incremental raise if you had to say, what is driving that incrementally? Would you say it's just a broader, stronger volumes U.S. and ex-U.S.? Is that sort of the principal factor?

Yeah, it is. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then, Kevin, I know it's somewhat early, but if you think about the iCGM guidelines relative to your pipeline, if you think about the timeline around Verily Gen 2 and receiver optional, do you have an updated timeline for receiver optional this year? And is it too early to sort of say that your Verily Gen 2 probably comes earlier in light of the updated guidance?

This is Kevin, David. I'll take that. With respect to receiver optional, we're now putting plans together to get that filed. And that really consists of a lot of risk mitigation and human factor study. It's very apparent FDA is willing to go there, and so we're contemplating that here now. We've had great success with that program in Europe, less than about 40% of our patients even where we have reimbursement are purchasing receivers. So if we can eliminate some of that upfront cost, we will certainly provide that opportunity to patients here. With respect to Verily Gen 2, there is still a lot of R going on in that R&D process. And I think you can see us go faster. What we have to balance, and it's a little bit too much fun here, I've got to be honest with you, how many new things could we put in it as far as going faster, because there is really a tremendous amount of new technology within the walls of our R&D group over there with respect to membrane technology, wires, algorithms, all sorts of things. And we have to really sit down and discipline ourselves. Our goal right now is 2020, and 2020 contemplates many, many changes. For example, this insertion device we've just spent tens of millions of dollars engineering to get it on the market is replaced in Verily Gen 2, and we have to have something every bit as elegant and every bit as seamless for a patient to use. So some of that work has to be done. We'll stick with our 2020 goal. If we find the opportunity to go faster, David, we absolutely would. But that's going to be as big a transition manufacturing as this one, so we'll just play it by ear.

And the next question comes from Danielle Antalffy from Leerink Partners. Please go ahead.

Hey. Good afternoon, guys. Thanks so much for taking the question. Just, Quentin, a question for you on all the pricing commentary. Can you talk a little bit about what that means for operating margins longer term? I know there is a lot of moving parts here, but I'd love to get your view on how you're thinking about it relatively new to the company, balancing this whole competitive pricing dynamic with margin expansion long-term?

Yeah, well, I think absent any pricing pressure we're still focused on the fact that we need to drive operating margin improvement over the course of time. But then you drop on top of that the fact that there is going to be pricing pressure over time, it only accelerates the need to get focused here. There are a lot of really interesting opportunities in front of us, many things that the company has already identified, and it has plans in place to reduce costs to run the business as we head into the future or to produce the product. And you're going to see some of those things as we get closer to the end of the year and start to roll into 2019 and further. You take the Mesa, Arizona manufacturing facility for example, a world-class operation that puts – and stood up (00:38:57) by the team that will handle the capacity of this organization for years into the future. And once we get into there and really start to leverage that overhead and put automation into there, you're going to see meaningful reductions in the cost profile of the business. And then you get into some of the things that the R&D team has done to engineer costs out of the system without sacrificing the quality and the accuracy of the sensor that we already have, you're talking about meaningful levers that are going to be able to combat any potential price headwinds that are out there. They're going to let us compete head-to-head in any market that we need to from a price perspective if that's where it ultimately goes. Or you're going to drop it straight through to the bottom-line and start to improve the operating margin profile. So we're excited about those kind of things. And then you get into the operating expense profile of the business, and we're always going to be an innovator. R&D is always going to be an area that we're going to spend meaningfully in. We want to out-innovate our competition, and we've proven that we can do that. We believe we can continue to do that into the future. So we'll probably always be outpaced in terms of spending relative to our peer group there. But you get into the G&A profile and that's where we have meaningful opportunity to really think differently in terms of how we manage the business today, in terms of automation, taking things online versus the very manual nature that we have today, and those are all kind of right in the crosshairs of what we're looking to do as we think about becoming more efficient into the future. So we're focused on operating margin no matter what. The pricing pressure in the marketplace only accelerates that focus, but there are meaningful levers and many of them in front of us to address any of those concerns.

Perfect. Thank you so much for that. And just a question on international market dynamics, another strong quarter there. Wondering if you could talk a little bit about market share shifts type 1s versus type 2s? What you're seeing there specifically in the markets like Germany where you have reimbursement coverage and you're competing with all the relevant players? Thanks so much.

Hi, Danielle. This is Kevin. Our product is primarily being used in the type 1 market in our European markets where it's reimbursed. With respect to competition, for example, in Germany or the Nordics where we have good reimbursement, we're very, very strong, and we're absolutely getting a number of patient. It's broad-based growth across all those markets, but it is primarily intensive management area not in those non-intensive managed patients or even down into type 2 yet. We haven't reached down that far.

And our next question comes from Jayson Bedford from Raymond James. Jayson T. Bedford - Raymond James & Associates, Inc.: Hi. Good afternoon, and thanks for taking the questions, and congrats on the quarter. I apologize if these are redundant, but you started off the year, I think you mentioned that the installed base would grow faster than sales. Given the lift in the sales guidance here, do you still expect the installed base to grow faster than sales in 2018?

Yes, we do. And the reason for that is because you have some mix pressures that are contemplated from a dollar revenue perspective, right? So as the Medicare business outpaces the rest of the business, as the international business continues to grow faster than our U.S. business, you're going to see some mix pressure, which ultimately means the installed base is growing faster while the dollar revenue lags it a bit. Jayson T. Bedford - Raymond James & Associates, Inc.: Okay. And then just there's been a bit of commentary here on the 14-day wear. When will you run the study for the 14-day wear device? And just can you remind us Verily 1 I think employed the 14-day sensor, just in terms of a potential timeline on that? Thanks.

We have not communicated anything, and we won't. We certainly would run the trial this year. We're in the middle of discussing the scope of that trial internally and then ultimately presenting it to the FDA as part of an IDE to get there. The special controls really requires to do a lot of statistical setting, determining exactly what size sample of patients we need, how many points we need in the study, and all those criteria. So we're early in that. We'd expect to run that in the back half of 2018.

And your next question comes from Doug Schenkel from Cowen & Company. Please go ahead. Ryan Blicker - Cowen & Co. LLC: Hi. This is Ryan on for Doug. Thanks for taking my questions. You noted that you expect sensor utilization for G6 to remain similar versus G5. Why wouldn't on average, patients end up using more sensors per year with G6, given the four shut-offs?

You know what? What we said is that's what we've modeled. We haven't said that's necessarily what we anticipate. Remember with respect to sensor utilization that can be defined as how many sensors a year does a patient wear and how many do they utilize? And that's a function of two things: How many days they wear their sensor and if they take a break in-between sensor sessions. That's sometimes driven by economics. That's sometimes driven by just the nature of patients. As I've talked to several parents whose kids, for example, if they can get away from their sensors for a little while and not be followed, they will do so. With the shut off, in theory, you're absolutely right. In theory, if patients wear sensors all the time and they were extending the wear, they would buy and purchase more sensors. But for purposes of our modeling, we kept everything consistent for now until we know more. It's just really early. We don't even have 1,000 patients on G6 and we haven't even had anybody's sensor run out except for my 10-day sensor and I'm on number two, so there you go. Ryan Blicker - Cowen & Co. LLC: Got it. That's helpful. And then maybe just for Q2, can you give any more color on how big of a revenue headwind you're expecting from the G6 upgrade program on transmitters? Assuming on a normalized basis, you'd be growing around 20% sequentially, if the delta to where the Street is, which I think you mentioned was primarily due to that, it's a pretty large number relative to I think where the Street is would be about 11% sequential growth. Any more color you can provide there?

No. I think you're thinking about it the right way. We understand what the historical seasonality would imply on the quarter. We've tried to model to our best, what we think the potential impact could be, both from the deferral as well as from folks who just may choose to wait to make the purchase. So again, there's no need for us to get ahead of ourselves here and try to not contemplate these kind of headwinds when they know they do exist or believe that we can fully overcome them. We'll navigate it as well as we can, but some of that revenue may come back in Q3 versus getting back there in Q2, given the fact that the launch will be late in the quarter.

And our next question comes from Joanne Wuensch from BMO Capital Markets.

Hi. Can you hear me okay?

Absolutely.

Wonderful. Very nice quarter, by the way.

Thank you.

Can we just spend a minute talking about the competitive landscape? We're now two, maybe three quarters into the launch of Libre, and you have Medtronic approval intra-quarter for its stand-alone sensor. You're closest to this than anybody else. What are you seeing?

Well, we just posted 30% growth.

That's why I'm asking.

I guess I can start there. I'll let the other guys comment and then I will – I'll go back to what I said earlier. We've not seen DexCom losing patients to Libre. Our patients haven't left. We have heard that physicians do appreciate the ease of writing that prescription but that's really all that we've heard. We've had – continue to have great growth with respect to Medtronic's launch of Guardian Connect. It's a sensor that you calibrate multiple times. As I've been out in the field, I've not heard excitement in the physician's office for that. And I guess the only point I could compare it to is where we've gone head to head with them in Australia, for example. The Australian Government approved CGM reimbursement not long ago. And Medtronic and us came in together and Medtronic priced significantly lower than us and we have over 70% share. So I don't view – that has not been a factor in our business up to this point in time and – but we don't see this as being one but we're wary and we're mindful and we will certainly look at everything that is out there. Steve, Quentin, do you have anything to add?

Thank you.

No. I think that (47:19).

Okay.

And then as my follow up, what are the steps to going from a limited launch of G6 to the full launch that we all expect at ADA? And thank you.

Our biggest step is we got to build us some inventory, and we're in the process of getting all the manufacturing operations up and running at full scale. And we're building up inventory right now. We're very pleased to do limited launches like this. There's always little things that you learn when you do limited launch on a product, and we've learned a couple of nips that we've been able to fix before we go out to the masses already with the first sensor startups. And so we've incorporated those. As we said earlier, we expect to launch full force before ADA. It's May 2 today. That means it's all coming in early June, so we were building up inventories. We've got to get some more contracts in place with payers. We've got to get our distributor arrangements lined up. We've got to get quantities built to stock the distributors for their initial stocking orders so they can get things out. So it is literally all hands on deck here, Joanne. I can tell you they meet very regularly, very long, detailed, arduous, brutal meetings about every T to cross and every I to dot on this launch, and so far so good.

And our next question comes from Chris Cooley from Stephens. Please go ahead.

Hey. Good afternoon. Thank you for taking the questions. Just maybe two quick ones for me at this point. Steve, maybe could you elaborate a little bit more on the non-intensive diabetes management initiatives and, more specific, give us any update on the UNH project and when we might see that data and its application? And then I have just one other quick follow up.

Yeah, so I think Kevin kind of mentioned it on – in one of his questions. We've got north of 1,000 patients enrolled now, just gathering data at this point. Like we've said before, you're not going to see published like clinical data in a medical journal kind of data out of this. It'll be more anecdotal. But I think probably closer to the end of this year or the first part of next year, we'll have a lot more to talk about on – really, the kind of cadence that we're thinking through is really focusing on non-intensive, non-insulin-taking type 2s first. And then really using the Gen 6 and some future products as a platform. We think any of us, we spend time out in the field and the first thing we hear when we go into a clinic is hey this thing needs to be in the hospital, right? Not sure that G6, in its current form, is the right product, but some of the future iterations as the platform evolves certainly allow us to go to the hospital, will allow us to put these things on pre-diabetics and then particularly, pre-type 2s to try to identify these people early and have the ability to intervene. We mentioned gestational, obesity, obviously, linked to type 2 as well. So whole host of really broad opportunities. The first, obviously, for the near-term, foreseeable future, the intensive business is still going to be the core of our revenue, but over the coming years, you're going to see us really branching out into some of these alternative markets. I think it's going to be really important for us.

Super. Thank you. And then I apologize if you touched on this at the outset; I've juggled a couple of calls here. But did you give any color, or can you give any color, as it pertains to growth in the quarter between the commercial and the Medicare populations, either in terms of starts or in terms of dollars in terms of how that helped to drive the very strong first quarter results? Thanks so much.

Yeah, we're not going to get down into breaking out the specifics of our commercial and Medicare business for competitive reasons. What we have provided in terms of some color is that Medicare continues to accelerate. We did see an uptake in the Medicare business, which continues to demonstrates the opportunity there that would be, A, being able to realize and the commercial business continues to be very strong as well fueled by new patient additions. So that's the extent of the color we're going to provide there.

And our next question comes from Steven Lichtman from Oppenheimer. Please go ahead. Steven Lichtman - Oppenheimer & Co., Inc.: Thank you. Hi, guys. Given your U.S. performance and the Libre roll out, it certainly looks like we're seeing an inflection in market penetration. Guys, based on your discussion with physician customers, what are your latest thoughts on where penetration can go over the next three to five years, maybe specifically in the type 1 population within the intensive insulin population, if you could?

This is Kevin, and that's a great question. I have said on numerous times, I think type 1 penetration for CGM should be at least 80%. I don't believe that is a stretched number. I believe that given the value of the technology that we provide and the information we provide patients, I don't know how anybody would manage the disease without it. I really don't, and I think over time, again, as we refine our product portfolio to include [Technical Difficulty] (00:52:18) we have, with G6 and no calibration, the connectivity, the interoperability with the other devices, that somebody with type 1 diabetes would have to intensively manage their disease, I think we can absolutely lead that charge, but I truly believe that penetration in the type 1 space. And I believe the intensive type 2 space should be just as high. These patients need CGM. They need data to understand how to manage their condition and their overall health. Steven Lichtman - Oppenheimer & Co., Inc.: Thanks, Kevin. And just as a follow up, apologize if you've mentioned this earlier. But latest thoughts on additional country opportunities for you guys. I know in the last call, I think you mentioned Japan. Should we still expect to hear from you guys before the end of the year on some new opportunities there?

Yeah, most certainly. I mean, we expect an approval in Japan kind of any time now and would hope to be launching really before the end of the second quarter in Japan. We mentioned Korea previously. We're looking at some other direct opportunities as reimbursement evolves in Europe. So yeah. Continued international expansion through the balance of this year and certainly into 2019 will be an important contributor for us.

And our next question comes from Chris Pasquale from Guggenheim. Please go ahead.

Yeah, thanks. Kevin, you mentioned patient's desire to change out their sensor less frequently. You have another competitor with a long-term sensor; they had a positive advisory panel meeting back in March that could potentially be approved here in the next few months. What are your thoughts on the appeal of an implantable form factor?

That's where DexCom started in the past. And I'll go back to the pillars of the product that I talked about. You've got to perform. You've got to be convenient, and you've got to meet the cost requirements of a patient. If that system fits into those categories and patients prefer it, that is fine. We have not seen tremendous uptick for that system in Europe, but their data clinically appears reasonable. And there may be some patients who prefer that. We believe if we can get our technology small enough, and convenient enough, and easy enough to use that we can replace any advantage that somebody with that system may think that they have. And that's how we look at it. But we wish them well.

Thanks. That's helpful. And then can you give an update on timing of two pipeline items – first, the second Gen G6 transmitter with the lower cost of production; and then share availability for Medicare patients.

The G6 lower cost transmitter is in the middle – we're really ramping that up engineering wise. We would hope to launch that early 2019, late 2018. Those are the two timeframes that I see on my desk. We believe the filing can go faster now that we're in a 510(k) world, because that transmitter doesn't perform any different than the current one that we have. With respect to Medicare and the share function, let me tell you, we work at it diligently. We are writing letters. We're engaged politically. We meet with CMS on a regular basis. We are hoping to resolve that by the end of the quarter. But I will tell you the commitment I made on behalf of our team to the Medicare population. If we can't get this resolved, we'll come up with a Medicare configuration in our product portfolio that does. We're not going to let seniors go without share. It is absolutely too important to them to have it, and it's important to their infrastructure and diabetes ecosystem. So I'm really hopeful I have a positive announcement on the next call.

Our next question comes from Isaac Ro from Goldman Sachs. Please go ahead. Isaac Ro - Goldman Sachs & Co. LLC: Good afternoon, guys. Thanks for taking the question. Wanted to get a little more detail if I could on your comments regarding pricing for transmitters and receivers outside the U.S. I think you said a little bit of ASP pressure. Just curious, what drove that?

Yeah, a couple things. Mix is one of the drivers there, just as you look at the geographic and within the geography country mix, or direct versus distributor. And then the other aspect is we are receiver optional throughout Europe. And so you do find patients who continue to move towards the receiverless option. So it puts a bit of pressure on the overall revenue per patient calculation. Isaac Ro - Goldman Sachs & Co. LLC: Okay. Thanks. Wait for the (56:38) jets to fly by.

We've got you. Let's let the jets fly by before you go, Isaac. Give us a couple of minutes here. Isaac Ro - Goldman Sachs & Co. LLC: No problem. I thank them for their service. Okay. Just a follow-up would be on the Libre – I'm sorry the Verily program. You guys mentioned that it's in development there. Sounds like it's on track. Can you help us think about when the investment there peaks over the next couple of years? Is it a this year kind of thing? Or is it going to kind of increase in investment into 2019 as well? Thank you.

Our R&D investment is really big already, and the biggest project we're spending most of our money on, on the R&D front right now in all candor is the second Verily product. The first one is in a (00:57:19) phase where it's in validation and verification as we get ready to run the study and then decide where and how we're going to launch that, which are some variables we're still discussing internally. Our biggest investment in Verily right now is that second product, as we really have a lot of neat things going into that. So that will be part of our standard R&D spend really for the next three years as we get the first one out, and then going forward as we modify it and make it better.

And our next question comes Ravi Misra from Berenberg Capital. Please go ahead.

Hi. Thank you for taking the call. Two questions. The first I had was on the receiver optional commentary that you've been having. I'm just curious to think kind of longer-term what your thoughts are and what the impact of that could be on gross margins? Having one less device to manufacture and for a patient to purchase seems to be that it could be a potential gross margin tailwind in the long-term. Would you agree with that characterization? And kind of how should we think about that, a couple of basis points or this is kind of a step function driver? And then secondly, my follow-up would be with the G6 launch, I was just wondering a little bit on the strategy of patient acquisition. Are you focusing on existent patient conversions or kind of new patient acquisitions? Thank you.

With respect to the receiver and the potential future impact on gross margin, as we do move away from the receiver and become more of a receiver optional or the receiver just goes away altogether, it is going to be a tailwind on the gross margin. It currently has a gross margin profile that is less than the corporate average by a pretty meaningful amount, so it will be a nice contributor over time. We're not going to size it up just yet, but it is something that will make a meaningful move in the gross margin profile.

Yeah, and I'll add to that and then answer your second question. While we move away from that and it will make gross margins better, it will decrease the gross profit per patient. And that's how we analyze this stuff is what is the value of a patient to us on the gross profit line as we look at our pricing models and the products that we offer and how we roll our services out. So there are pluses and there are minuses, and we will weigh all of that, as we pursue this strategy. With respect to G6 patients, we're going to do it the way we always do. We're going after all of them. We will get as many patients as we can to continue to buy G5 and get them the upgrade program so they do not wait for CGM. We've had very good response from our existing patients with respect to the G5 purchase up to the – and waiting for the G6 upgrade. But literally, we will attempt to build enough to be able to serve everybody out of the gate, so it's a big launch for us.

And our last question comes from Margaret Kaczor from William Blair. Margaret M. Kaczor - William Blair & Co. LLC: Hey, guys. Just wanted to follow up on something. Specifically, there are a few databases that have these weighted cost average pricing data that's available. Can you guys true-up some of the commentary that you guys had at the beginning of the call for the cost relative to the patient, relative to this pricing data that's available on the databases? Thanks.

Sure, Margaret. This is Steve. I'll take that. So WACC pricing isn't really representative of kind of the net pricing that we receive as a company. We take a look as we launch G6 and as we look to the pharmacy strategy. G6 really gives us an opportunity to get back and revisit our pharmacy strategy. With G5, our WACC frankly was higher, and what we would do is we provide rebates that would get our net price rebates back to the payer, and/or the pharmacy, the patient to get our net price closer to what our DME pricing was. The problem is in many instances in the pharmacy, some individuals have a co-insurance versus a co-pay, and those that have a co-insurance would end up having to pay a percentage out of pocket of the WACC, so they could end up paying a much higher out-of-pocket expense than a traditional co-pay. So what we can do here is if we reduce our WACC, which again really isn't representative of the net price and the net value to DexCom, we can reduce what we have to pay back in rebates to the payer. We can also get appropriate pricing, net pricing to those folks with co-insurance, they can actually pay a much lower out of pocket, potentially as much as like 50% lower from an out-of-pocket perspective. So this is a real – it's a real positive for us. Margaret M. Kaczor - William Blair & Co. LLC: Thanks.

And that concludes our question-and-answer session. I'll now turn the call back over to Kevin for final remarks.

Thank you, everybody, for participating. While it seems like yesterday, today marks the 7th Anniversary of my participation in DexCom earning calls. In that time, we've gone from a theme of explaining how we have enough cash to survive another day, to the unknowns in the G4 launch, to connectivity with G5 and now G6. This is by far and away the most anticipated, exciting and complicated period we've ever been associated with. A change like this early on in DexCom's history would've affected a few thousand patients here in the United States, but now we play a key role in the lives of hundreds of thousands of patients all over the world. This is our first-ever global launch, and it's a much more complex environment and literally every single thing about this product is different. In typical DexCom fashion, we're executing at warp speed. We received approval in late March; we'll be in full launch mode in early June. We continue to hold ourselves to the highest standards possible to deliver the best technology on our patients. Early reviews of G6 haven't disappointed. I'm going to share one from a young lady who is in our first phase of our limited launch and she's a teenager. Upon her first experience with G6, she texted three words – beautiful, incredible and unbelievable. Do teenagers say that about anything other than their phones? Thank you for your continued support. The future at DexCom continues to be amazing. Have a great day, everybody.

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