Item 16. FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

																		DEXCOM, INC. (Registrant)
Dated: February 9, 2023												By:						/s/ JEREME M. SYLVAIN
																		Jereme M. Sylvain, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kevin R. Sayer and Jereme M. Sylvain, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature						Title						Date
/s/ KEVIN R. SAYER						Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)						February 9, 2023
Kevin R. Sayer
/s/ JEREME M. SYLVAIN						Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)						February 9, 2023
Jereme M. Sylvain
/s/ MARK G. FOLETTA						Lead Independent Director						February 9, 2023
Mark G. Foletta
/s/ STEVEN R. ALTMAN						Director						February 9, 2023
Steven R. Altman
/s/ NICHOLAS AUGUSTINOS						Director						February 9, 2023
Nicholas Augustinos
/s/ RICHARD A. COLLINS						Director						February 9, 2023
Richard A. Collins
/s/ KAREN DAHUT						Director						February 9, 2023
Karen Dahut
/s/ BRIDGETTE P. HELLER						Director						February 9, 2023
Bridgette P. Heller
/s/ BARBARA E. KAHN						Director						February 9, 2023
Barbara E. Kahn
/s/ KYLE MALADY						Director						February 9, 2023
Kyle Malady
/s/ JAY S. SKYLER						Director						February 9, 2023
Jay S. Skyler, M.D.
/s/ ERIC J. TOPOL						Director						February 9, 2023
Eric J. Topol, M.D.

DexCom, Inc.
Index to Consolidated Financial Statements

			Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets			F-4
Consolidated Statements of Operations			F-5
Consolidated Statements of Comprehensive Income			F-6
Consolidated Statements of Stockholders’ Equity			F-7
Consolidated Statements of Cash Flows			F-8
Notes to Consolidated Financial Statements			F-10

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of DexCom, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of DexCom, Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 9, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

						Estimation of variable consideration for revenue recognition
Description of the Matter						As discussed in Note 1 of the consolidated financial statements, the Company includes an estimate of variable consideration in the calculation of the transaction price at the time of sale. The Company estimates reductions for pharmacy rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.
						Auditing management’s determination of transaction price including variable consideration involved a high degree of subjectivity in evaluating management’s estimates. In estimating pharmacy rebates, management applies contracted rates to estimates of products sold subject to rebate, known market events or trends and channel inventory data.

F-2

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s processes to determine pharmacy rebates, including the underlying assumptions.
						Our audit procedures also included, among others, evaluating the significant assumptions and the accuracy and completeness of the underlying data used in management’s calculations. This included testing contractual rates, management’s estimates of products sold subject to rebate, and inventory held by third parties at the end of the period, through a combination of underlying data validation by inspection of source documents, agreement to underlying contracts, review for consistency against historical data, and review of trending of inventory held at third parties versus inventory sold into the channel. In addition, we inspected the results of the Company’s retrospective review analysis of pharmacy rebates claimed and evaluated the estimates made based on historical experience.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2000.

San Diego, California

February 9, 2023

F-3

DexCom, Inc.
Consolidated Balance Sheets

			December 31,
2022						2021
(In millions, except par value data)									(As Adjusted)*
Assets
Current assets:
Cash and cash equivalents			$	642.3					$	1,052.6
Short-term marketable securities			1,813.9						1,678.6
Accounts receivable, net			713.3						514.3
Inventory			306.7						357.3
Prepaid and other current assets			192.6						81.6
Total current assets			3,668.8						3,684.4
Property and equipment, net			1,055.6						801.8
Operating lease right-of-use assets			80.0						88.1
Goodwill			25.7						26.5
Intangibles, net			173.3						31.5
Deferred tax assets			341.2						290.5
Other assets			47.1						10.5
Total assets			$	5,391.7					$	4,933.3
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities			$	901.8					$	573.0
Accrued payroll and related expenses			134.3						125.2
Current portion of long-term senior convertible notes			772.6						—
Short-term operating lease liabilities			20.5						20.5
Deferred revenue			10.1						2.1
Total current liabilities			1,839.3						720.8
Long-term senior convertible notes			1,197.7						1,981.8
Long-term operating lease liabilities			94.6						98.6
Other long-term liabilities			128.3						90.0
Total liabilities			3,259.9						2,891.2
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5.0 million shares authorized; no shares issued and outstanding at December 31, 2022 and December 31, 2021			—						—
Common stock, $0.001 par value, 800.0 million shares authorized; 393.2 million and 386.3 million shares issued and outstanding, respectively, at December 31, 2022; and 391.4 million and 388.0 million shares issued and outstanding, respectively, at December 31, 2021			0.4						0.4
Additional paid-in capital			2,258.1						2,108.7
Accumulated other comprehensive income (loss)			(11.6)						0.5
Retained earnings			479.9						138.7
Treasury stock, at cost; 6.9 million shares at December 31, 2022 and 3.4 million shares at December 31, 2021			(595.0)						(206.2)
Total stockholders’ equity			2,131.8						2,042.1
Total liabilities and stockholders’ equity			$	5,391.7					$	4,933.3
* We adjusted our 2021 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. All periods presented have also been adjusted to reflect the four-for-one stock split. Refer to Note 1, “Organization and Significant Accounting Policies,” to the consolidated financial statements for further information.

See accompanying notes

F-4

DexCom, Inc.
Consolidated Statements of Operations

			Twelve Months Ended December 31,
			2022						2021						2020
(In millions, except per share data)									(As Adjusted)*						(As Adjusted)*
Revenue			$	2,909.8					$	2,448.5					$	1,926.7
Cost of sales			1,026.7						768.0						646.6
Gross profit			1,883.1						1,680.5						1,280.1
Operating expenses:
Research and development			484.2						517.1						359.9
Collaborative research and development fee			—						87.1						—
Amortization of intangible assets			7.5						3.7						2.5
Selling, general and administrative			1,000.2						806.8						618.2
Total operating expenses			1,491.9						1,414.7						980.6
Operating income			391.2						265.8						299.5
Interest expense			(18.6)						(18.8)						(17.7)
Loss on extinguishment of debt			—						(0.1)						—
Income from equity investments			0.2						11.6						—
Interest and other income (expense), net			18.0						(1.7)						16.1
Income before income taxes			390.8						256.8						297.9
Income tax expense (benefit)			49.6						39.9						(251.8)
Net income			$	341.2					$	216.9					$	549.7
Basic net income per share			$	0.88					$	0.56					$	1.46
Shares used to compute basic net income per share			389.4						386.9						377.5
Diluted net income per share			$	0.82					$	0.53					$	1.33
Shares used to compute diluted net income per share			427.5						428.8						420.4
* We adjusted our 2021 and 2020 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. All periods presented have also been adjusted to reflect the four-for-one stock split. Refer to Note 1, “Organization and Significant Accounting Policies,” to the consolidated financial statements for further information.

See accompanying notes

F-5

DexCom, Inc.
Consolidated Statements of Comprehensive Income

						Twelve Months Ended December 31,
						2022						2021						2020
(In millions)												(As Adjusted)*						(As Adjusted)*
Net income						$	341.2					$	216.9					$	549.7
Other comprehensive income (loss), net of tax:
Translation adjustments and other						(9.8)						(1.0)						1.1
Unrealized loss on marketable debt securities						(2.3)						(1.7)						(0.2)
Total other comprehensive income (loss), net of tax						(12.1)						(2.7)						0.9
Comprehensive income						$	329.1					$	214.2					$	550.6
* We adjusted our 2021 and 2020 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1, “Organization and Significant Accounting Policies,” to the consolidated financial statements for further information.

See accompanying notes

F-6

DexCom, Inc.
Consolidated Statements of Stockholders’ Equity

						Common Stock												Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss)						Retained Earnings (Accumulated Deficit)						Treasury Stock						Total Stockholders’ Equity
(In millions)			Shares						Amount
Balance at December 31, 2019 (As Adjusted)*						366.4						$	0.4					$	1,675.6					$	2.3					$	(695.7)					$	(100.0)					$	882.6
ASU 2020-06 Convertible Debt Full Retrospective Adoption						—						—						(242.3)						—						67.8						—						(174.5)
Issuance of common stock under equity incentive plans						4.2						—						0.3						—						—						—						0.3
Issuance of common stock for Employee Stock Purchase Plan						0.3						—						15.0						—						—						—						15.0
Tax benefit related to Senior Convertible Notes						—						—						45.6						—						—						—						45.6
Repurchase and conversions of 2022 Notes						13.5						—						112.9						—						—						—						112.9
Share-based compensation expense						—						—						119.4						—						—						—						119.4
Net income						—						—						—						—						549.7						—						549.7
Other comprehensive income, net of tax						—						—						—						0.9						—						—						0.9
Balance at December 31, 2020 (As Adjusted)*						384.4						0.4						1,726.5						3.2						(78.2)						(100.0)						1,551.9
Issuance of common stock under equity incentive plans						2.9						—						—						—						—						—						—
Issuance of common stock for Employee Stock Purchase Plan						0.3						—						20.3						—						—						—						20.3
Tax benefit related to Senior Convertible Notes						—						—						(2.0)						—						—						—						(2.0)
Conversions of 2023 Notes						1.4						—						32.6						—						—						24.6						57.2
Benefit of note hedge upon conversions of 2023 Notes						(1.0)						—						130.8						—						—						(130.8)						—
Share-based compensation expense						—						—						113.4						—						—						—						113.4
Collaborative research and development fee						—						—						87.1						—						—						—						87.1
Net income						—						—						—						—						216.9						—						216.9
Other comprehensive loss, net of tax						—						—						—						(2.7)						—						—						(2.7)
Balance at December 31, 2021 (As Adjusted)*						388.0						0.4						2,108.7						0.5						138.7						(206.2)						2,042.1
Issuance of common stock under equity incentive plans						1.6						—						—						—						—						—						—
Issuance of common stock for Employee Stock Purchase Plan						0.3						—						22.5						—						—						—						22.5
Issuance of common stock in connection with achievement of regulatory approval milestone, net of issuance costs						2.9						—						(189.3)						—						—						189.2						(0.1)
Purchases of treasury stock						(6.6)						—						—						—						—						(557.7)						(557.7)
Tax benefit related to Senior Convertible Notes						—						—						(0.4)						—						—						—						(0.4)
Conversions of 2023 Notes						0.4						—						4.2						—						—						13.2						17.4
Benefit of note hedge upon conversions of 2023 Notes						(0.3)						—						33.5						—						—						(33.5)						—
Share-based compensation expense						—						—						126.5						—						—						—						126.5
Capitalization of sales-based milestones						—						—						152.4						—						—						—						152.4
Net income						—						—						—						—						341.2						—						341.2
Other comprehensive loss, net of tax						—						—						—						(12.1)						—						—						(12.1)
Balance at December 31, 2022						386.3						$	0.4					$	2,258.1					$	(11.6)					$	479.9					$	(595.0)					$	2,131.8
* We adjusted our 2021 and 2020 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis on January 1, 2020. All periods presented have also been adjusted to reflect the four-for-one stock split. Refer to Note 1, “Organization and Significant Accounting Policies,” to the consolidated financial statements for further information.

See accompanying notes

F-7

DexCom, Inc.
Consolidated Statements of Cash Flows

			Twelve Months Ended December 31,
2022						2021						2020
(In millions)									(As Adjusted)*						(As Adjusted)*
Operating activities
Net income			$	341.2					$	216.9					$	549.7
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			155.9						102.0						67.1
Share-based compensation			126.5						113.4						119.4
Collaborative research and development fee			—						87.1						—
Loss on extinguishment of debt			—						0.1						—
Non-cash interest expense			6.3						7.2						7.0
Realized (gain) loss on equity investment			(0.2)						(11.6)						—
Deferred income taxes (including benefit from valuation allowance release)			(21.6)						15.8						(260.5)
Other non-cash income and expenses			34.7						43.6						13.7
Changes in operating assets and liabilities:
Accounts receivable, net			(199.9)						(75.5)						(142.3)
Inventory			49.3						(112.2)						(114.5)
Prepaid and other assets			(131.6)						(21.3)						(2.4)
Operating lease right-of-use assets and liabilities, net			(5.8)						(0.1)						(0.8)
Accounts payable and accrued liabilities			295.1						58.0						194.5
Accrued payroll and related expenses			8.5						10.4						26.1
Deferred revenue and other liabilities			11.1						8.7						18.6
Net cash provided by operating activities			669.5						442.5						475.6
Investing activities
Purchase of marketable securities			(2,266.3)						(2,473.1)						(3,058.2)
Proceeds from sale and maturity of marketable securities			2,127.8						2,666.3						2,250.5
Purchases of property and equipment			(364.8)						(389.2)						(199.0)
Acquisitions, net of cash acquired			(3.9)						(30.2)						—
Other investing activities			(14.3)						10.1						(11.3)
Net cash used in investing activities			(521.5)						(216.1)						(1,018.0)
Financing activities
Net proceeds from issuance of common stock			22.5						20.3						15.3
Purchases of treasury stock			(557.7)						—						—
Proceeds from issuance of convertible notes, net of issuance costs			—						—						1,188.8
Repurchase of convertible notes			—						—						(282.6)
Other financing activities			(17.3)						(9.9)						(9.4)
Net cash provided by (used in) financing activities			(552.5)						10.4						912.1
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(5.8)						(1.4)						2.1
Increase (decrease) in cash, cash equivalents and restricted cash			(410.3)						235.4						371.8
Cash, cash equivalents and restricted cash, beginning of period			1,053.6						818.2						446.4
Cash, cash equivalents and restricted cash, end of period			$	643.3					$	1,053.6					$	818.2
Reconciliation of cash, cash equivalents and restricted cash, end of period:
Cash and cash equivalents			$	642.3					$	1,052.6					$	817.6
Restricted cash			1.0						1.0						0.6
Total cash, cash equivalents and restricted cash			$	643.3					$	1,053.6					$	818.2

F-8

			Twelve Months Ended December 31,
			2022						2021						2020
									(As Adjusted)*						(As Adjusted)*
Supplemental disclosure of non-cash investing and financing transactions:
Shares issued for repurchase and conversions of senior convertible notes			$	35.9					$	157.7					$	1,350.9
Shares received under note hedge upon conversion of 2023 Notes			$	(33.5)					$	(130.8)					$	—
Acquisition of property and equipment included in accounts payable and accrued liabilities			$	25.7					$	45.4					$	35.3
Supplemental cash flow information:
Cash paid during the year for interest			$	12.2					$	11.6					$	10.6
Cash paid during the year for income taxes			$	114.2					$	16.8					$	3.6
* We adjusted our 2021 and 2020 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted on a full retrospective basis. Refer to Note 1, “Organization and Significant Accounting Policies,” to the consolidated financial statements for further information.

See accompanying notes

F-9

DexCom, Inc.
Notes to Consolidated Financial Statements
December 31, 2022

1. Organization and Significant Accounting Policies

Organization and Business

DexCom, Inc. is a medical device company that develops and markets continuous glucose monitoring, or CGM, systems for the management of diabetes by patients, caregivers, and clinicians around the world. Unless the context requires otherwise, the terms “we,” “us,” “our,” the “company,” or “Dexcom” refer to DexCom, Inc. and its subsidiaries.

Basis of Presentation and Principles of Consolidation

These consolidated financial statements include the accounts of DexCom, Inc. and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. We have reclassified certain amounts previously reported in our financial statements to conform to the current presentation. Amortization expense related to intangible assets has been presented separately from selling, general and administrative expenses in our consolidated statement of operations.

We determine the functional currencies of our international subsidiaries by reviewing the environment where each subsidiary primarily generates and expends cash. For international subsidiaries whose functional currencies are the local currencies, we translate the financial statements into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for each period for revenue, costs and expenses. We include translation-related adjustments in comprehensive income and in accumulated other comprehensive income (loss) in the equity section of our consolidated balance sheets. We record gains and losses resulting from transactions with customers and vendors that are denominated in currencies other than the functional currency and from certain intercompany transactions in interest and other income (expense), net in our consolidated statements of operations.

Stock Split

On June 10, 2022, the Company effected a four-for-one forward stock split of its common stock to shareholders of record as of May 19, 2022. The par value of the common stock remains $0.001 per share. All share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make certain estimates and assumptions that affect the amounts reported in our consolidated financial statements and the disclosures made in the accompanying notes. Areas requiring significant estimates include rebates, excess or obsolete inventories and the valuation of inventory, accruals for litigation contingencies, and the amount of our worldwide tax provision and the realizability of deferred tax assets. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.

Fair Value Measurements

The authoritative guidance establishes a fair value hierarchy that is based on the extent and level of judgment used to estimate the fair value of assets and liabilities. In general, the authoritative guidance requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. An asset or liability’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the measurement of its fair value. The three levels of input defined by the authoritative guidance are as follows:

Level 1—Uses unadjusted quoted prices that are available in active markets for identical assets or liabilities.

Level 2—Uses inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, through correlation with market data. These include quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to valuation models or other pricing methodologies that do not require significant judgment because the inputs used in

F-10

the model, such as interest rates and volatility, can be corroborated by readily observable market data for substantially the full term of the assets or liabilities.

Level 3—Uses unobservable inputs that are supported by little or no market activity and that are significant to the determination of fair value. Level 3 assets and liabilities include those whose fair values are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques and significant judgment or estimation.

We estimate the fair value of most of our cash equivalents using Level 1 inputs. We estimate the fair value of our marketable equity securities using Level 1 inputs and we estimate the fair value of our marketable debt securities using Level 2 inputs. We carry our marketable securities at fair value. We carry our other financial instruments, such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities, at cost, which approximates the related fair values due to the short-term maturities of these instruments. See Note 3 “Fair Value Measurements” to the consolidated financial statements for more information.

Cash and Cash Equivalents

We consider highly liquid investments with a maturity of 90 days or less at the time of purchase to be cash equivalents.

Marketable Securities

We have classified our marketable securities with remaining maturity at purchase of more than three months and remaining maturities of one year or less as short-term marketable securities. We have also classified marketable securities with remaining maturities of greater than one year as short-term marketable securities based upon our ability and intent to use any and all of those marketable securities to satisfy the liquidity needs of our current operations.

We calculate realized gains or losses on our marketable securities using the specific identification method. We carry our marketable debt securities at fair value with unrealized gains and losses reported as a separate component of stockholders’ equity in our consolidated balance sheets and included in comprehensive income. Interest income and realized gains and losses on marketable debt securities are included in interest and other income (expense), net in our consolidated statements of operations. We carry our marketable equity securities at fair value with realized and unrealized gains and losses reported in income (loss) from equity investments in our consolidated statements of operations.

We invest in various types of debt securities, including debt securities in government-sponsored entities, corporate debt securities, U.S. Treasury securities, supranational securities, and commercial paper. We do not generally intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. See Note 3 “Fair Value Measurements” and Short-Term Marketable Securities in Note 4 “Balance Sheet Details” to the consolidated financial statements for more information on our marketable securities.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are generally recorded at the invoiced amount, net of prompt pay discounts, for distributors and at net realizable value for direct customers, which is determined using estimates of claim denials and historical reimbursement experience without regard to aging category. Accounts receivable are not interest bearing. We evaluate the creditworthiness of significant customers based on historical trends, the financial condition of our customers, and external market factors. We generally do not require collateral from our customers. We maintain an allowance for doubtful accounts for potential credit losses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a customer account is uncollectible. Generally, receivable balances that are more than one year past due are deemed uncollectible.

Concentration of Credit Risk and Significant Customers

Financial instruments which potentially subject us to concentrations of credit risk consist primarily of cash, cash equivalents, short-term marketable securities, and accounts receivable. We limit our exposure to credit risk by placing our cash and investments with a few major financial institutions. We have also established guidelines regarding diversification of our investments and their maturities that are designed to maintain principal and

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maximize liquidity. We review these guidelines periodically and modify them to take advantage of trends in yields and interest rates and changes in our operations and financial position.

The following table sets forth the percentages of total revenue or gross accounts receivable for customers that represent 10% or more of the respective amounts for the periods shown:

			Revenue**																		Gross Accounts Receivable
			Twelve Months Ended December 31,																		As of December 31,
			2022						2021						2020						2022						2021
Customer A			32		%				28		%				23		%				19		%				16		%
Customer B			11		%				12		%				11		%				10		%				11		%
Customer C			26		%				21		%				18		%				17		%				13		%
Customer D			29		%				18		%				11		%				22		%				13		%
Customer E			10		%				*						*						*						*

• Less than 10%

** Total revenue for each customer is net of fees, cash discounts, and rebates directly allocable to that customer. Rebates paid to other entities are excluded; therefore, the combined value may exceed 100%.

Inventory

Inventory is valued at the lower of cost or net realizable value on a part-by-part basis that approximates first in, first out. We capitalize inventory produced in preparation for commercial launches when it becomes probable that the product will receive regulatory approval and that the related costs will be recoverable through the commercialization of the product. A number of factors are considered, including the status of the regulatory application approval process, management’s judgment of probable future commercial use, and net realizable value.

We record adjustments to inventory for potential excess or obsolete inventory, as well as inventory that does not pass quality control testing, in order to state inventory at net realizable value. Factors influencing these adjustments include inventories on hand and on order compared to estimated future usage and sales for existing and new products, as well as judgments regarding quality control testing data and assumptions about the likelihood of scrap and obsolescence. Once written down the adjustments are considered permanent and are not reversed until the related inventory is disposed of or sold.

Our products require customized products and components that currently are available from a limited number of sources. We purchase certain components and materials from single sources due to quality considerations, costs or constraints resulting from regulatory requirements.

Historically, our inventory reserves have been adequate to cover our actual losses. However, if actual product life cycles, product quality or market conditions differ from our assumptions, additional inventory adjustments that would increase cost of goods sold could be required.

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation and amortization. We capitalize additions and improvements and expense maintenance and repairs as incurred. We also capitalize certain costs incurred for the development of enterprise-level business and finance software that we use internally in our operations. Costs incurred in the application development phase are capitalized while costs related to planning and other preliminary project activities and to post-implementation activities are expensed as incurred.

We calculate depreciation using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are generally three years for computer software and hardware, including internal use software, four to fifteen years for machinery and equipment, and five years for furniture and fixtures. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the remaining lease term. Buildings are amortized over the shorter of the ownership of the building or forty years. We include the amortization of assets that are recorded under finance leases in depreciation expense. On retirement or disposition, the asset cost and related accumulated depreciation are removed from our consolidated balance sheets and any gain or loss is recognized in our consolidated statements of operations.

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We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We estimate the recoverability of the asset by comparing the carrying amount to the future undiscounted cash flows that we expect the asset to generate. We estimate the fair value of the asset based on the present value of future cash flows for those assets. If the carrying value of an asset exceeds its estimated fair value, we would record an impairment loss equal to the difference.

Goodwill

We record goodwill when the fair value of consideration transferred in a business combination exceeds the fair value of the identifiable assets acquired and liabilities assumed. Goodwill and other intangible assets that have indefinite useful lives are not amortized, but we test them annually for impairment in the fourth quarter of our fiscal year and whenever events or changes in circumstances indicate that it is more likely than not that the fair value is less than the carrying value. Events that would indicate impairment and trigger an interim impairment assessment include, but are not limited to, current economic and market conditions, including a decline in market capitalization, a significant adverse change in legal factors, business climate or operational performance of the business, and an adverse action or assessment by a regulator.

We perform our goodwill impairment analysis at the reporting unit level, which aligns with Dexcom’s reporting structure and the availability of discrete financial information. We perform the first step of our annual impairment analysis by either comparing a reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment. We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets. If a quantitative assessment is performed the evaluation includes management estimates of cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies. Key assumptions for these projections include revenue growth, future gross margin and operating margin growth, and weighted cost of capital and terminal growth rates. The revenue and margin growth are based on increased sales of new and existing products as we maintain investments in research and development. Additional assumed value creators may include increased efficiencies from capital spending. The resulting cash flows are discounted using a weighted average cost of capital. Operating mechanisms and requirements to ensure that growth and efficiency assumptions will ultimately be realized are also considered in the evaluation, including the timing and probability of regulatory approvals for our products to be commercialized. We also consider Dexcom’s market capitalization as a part of our analysis.

If the estimated fair value of a reporting unit exceeds the carrying amount of the net assets assigned to that unit, goodwill is not impaired and no further analysis is required. If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of the unit, we perform the second step of the impairment test. In this step we allocate the fair value of the reporting unit calculated in step one to all of the assets and liabilities of that unit, as if we had just acquired the reporting unit in a business combination. The excess of the fair value of the reporting unit over the total amount allocated to the assets and liabilities represents the implied fair value of goodwill. If the carrying amount of a reporting unit’s goodwill exceeds its implied fair value, we would record an impairment loss equal to the difference. We recorded no goodwill impairment charges for the twelve months ended December 31, 2022, 2021 or 2020.

The change in goodwill for the twelve months ended December 31, 2022 and 2020 consisted of translation adjustments on our foreign currency denominated goodwill. The change in goodwill for the twelve months ended December 31, 2021 consisted of goodwill we recorded for acquisitions that were not significant, individually or in the aggregate, and translation adjustments on our foreign currency denominated goodwill.

Intangible Assets and Other Long-Lived Assets

Intangible assets are included in intangibles and other assets, net in our consolidated balance sheets. We amortize intangible assets with a finite life, such as the customer relationships, acquired technology and intellectual property, trademarks and trade name, and other intangibles, on a straight-line basis over their estimated useful lives, which range from one to seven years. We review intangible assets that have finite lives and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We estimate the fair value of the asset based on the present value of future cash flows for those assets. If the carrying value of an asset exceeds its estimated fair value, we would record an impairment loss equal to the difference.

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For transactions other than a business combination, we also capitalize as intangible assets the cost of certain milestones payable by us to collaborative partners and incurred at or after the product has obtained regulatory approval for marketing. The intangible assets associated with these milestones are amortized over the remaining estimated useful life of the underlying asset.

We recorded no significant intangible asset impairment charges for the twelve months ended December 31, 2022, 2021 or 2020.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. The effect of a change in tax rate on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under tax law and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

We file federal and state income tax returns in the United States and income tax returns in various other foreign jurisdictions with varying statutes of limitations. Due to net operating losses incurred on our U.S. Federal returns, our income tax returns from inception to date are subject to examination by taxing authorities.

We recognize interest expense and penalties related to income tax matters, including unrecognized tax benefits, as a component of income tax expense.

We recognize income tax expense for basis differences related to global intangible low-taxed income ("GILTI") as a period cost if and when incurred. GILTI is a category of income that is earned abroad by U.S.-controlled foreign corporations (CFCs) and is subject to special treatment under the U.S. tax code.

Warranty Accrual

Estimated warranty costs associated with a product are recorded at the time revenue is recognized. We estimate future warranty costs by analyzing historical warranty experience for the timing and amount of returned product, and expectations for future warranty activity based on changes and improvements to the product or process that are in place or will be in place in the future. We evaluate these estimates on at least a quarterly basis to determine the continued appropriateness of our assumptions.

Loss Contingencies

We are subject to certain legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. We review the status of each significant matter quarterly and assess our potential financial exposure. If the potential loss from a claim or legal proceeding is considered probable and the amount can be reasonably estimated, we record a liability and an expense for the estimated loss and disclose it in our financial statements if it is significant. If we determine that a loss is possible and the range of the loss can be reasonably determined, we do not record a liability or an expense but we disclose the range of the possible loss. We base our judgments on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Any revision of our estimates of potential liability could have a material impact on our financial position and operating results.

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Comprehensive Income

Comprehensive income consists of two elements, net income and other comprehensive income (loss). We report all components of comprehensive income, including net income, in our financial statements in the period in which they are recognized. Total comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. We report net income and the components of other comprehensive income (loss), including foreign currency translation adjustments and unrealized gains and losses on marketable securities, net of their related tax effect to arrive at total comprehensive income.

Revenue Recognition

We generate our revenue from the sale of disposable sensors and our reusable transmitter and receiver, collectively referred to as Reusable Hardware. We also refer to Reusable Hardware and disposable sensors in this section as Components. We generally recognize revenue when control is transferred to our customers in an amount that reflects the net consideration to which we expect to be entitled.

In determining how revenue should be recognized, a five-step process is used, which includes identifying performance obligations in the contract, determining whether the performance obligations are separate, allocating the transaction price to each separate performance obligation, estimating the amount of variable consideration to include in the transaction price and determining the timing of revenue recognition for separate performance obligations.

Contracts and Performance Obligations

We consider customer purchase orders, which in most cases are governed by agreements with distributors or third-party payors, to be contracts with a customer. For each contract, we consider the obligation to transfer Components to the customer, each of which are distinct, to be separate performance obligations. We also provide free-of-charge software, mobile applications and updates for our Dexcom Share® remote monitoring system. The standalone selling prices of Dexcom Share® are estimated based on an expected cost plus a margin approach.

Transaction Price

Transaction price for the Components reflects the net consideration to which we expect to be entitled. Transaction price is typically based on the contracted rates less an estimate of claim denials and historical reimbursement experience by payor, which include current and future expectations regarding reimbursement rates and payor mix.

Variable Consideration

We include an estimate of variable consideration in the calculation of the transaction price at the time of sale, when control of the Components transfers to the customer. Variable consideration includes, but is not limited to: rebates, chargebacks, consideration payable to customers such as specialty distributor and wholesaler fees, product returns provision, prompt payment discounts, and various other promotional or incentive arrangements. We classify our provisions related to variable consideration as a reduction of accounts receivable when we are not required to make a payment or as a liability when we are required to make a payment.

Estimates

We review the adequacy of our estimates for transaction price adjustments and variable consideration at each reporting date. If the actual amounts of consideration we receive differ from our estimates, we would adjust our estimates and that would affect reported revenue in the period that such variances become known. If any of these judgments were to change, it could cause a material increase or decrease in the amount of revenue we report in a particular period.

Rebates

We are subject to rebates on pricing programs with managed care organizations, such as pharmacy benefit managers, governmental and third-party commercial payors, primarily in the U.S. We estimate provisions for rebates based on contractual arrangements, estimates of products sold subject to rebate, known events or trends and channel inventory data.

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Chargebacks

We participate in chargeback programs, primarily with government entities in the U.S., under which pricing on products below negotiated list prices is provided to participating entities and equal to the difference between their acquisition cost and the lower negotiated price. We estimate provisions for chargebacks primarily based on historical experience on a product and program basis, current contract prices under the chargeback programs and channel inventory data.

Consideration Payable to the Customer

We pay administrative and service fees to certain of our distributors based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. We accrue for these fees based on actual net sales and contractual fee rates negotiated with the customer.

Product Returns

In accordance with the terms of their distribution agreements, most distributors do not have rights of return. The distributors typically have a limited time frame to notify us of any missing, damaged, defective or non-conforming products. We generally provide a “30-day money back guarantee” program whereby first-time end-user customers may return Reusable Hardware. We estimate our product returns provision principally based on historical experience by applying a historical return rate to the amounts of revenue estimated to be subject to returns. Additionally, we consider other specific factors such as estimated shelf life of inventory in the distribution channel and changes to customer terms.

Prompt Payment Discounts

We provide customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. We estimate prompt payment discount accruals based on actual net sales and contractual discount rates.

Various Other Promotional or Incentive Arrangements

Other promotional or incentive arrangements are periodically offered to customers, including but not limited to co-payment assistance we provide to patients with commercial insurance, promotional programs related to the launch of products or other targeted promotions. We record a provision for the incentive earned based on the number of estimated claims and our estimate of the cost per claim related to product sales that we have recognized as revenue.

Revenue Recognition

We record revenue from sales of Components upon transfer of control of the product to the customer. We typically determine transfer of control based on when the product is shipped or delivered and title passes to the customer.

In cases where our free-of-charge software, mobile applications and updates are deemed to be separate performance obligations, revenue is recognized over time on a ratable basis over the estimated life of the related Reusable Hardware component.

Our sales of Components include an assurance-type warranty.

Contract Balances

Contract balances represent amounts presented in our consolidated balance sheets when either we have transferred goods or services to the customer or the customer has paid consideration to us under the contract. These contract balances include accounts receivable and deferred revenue. Payment terms vary by contract type and type of customer and generally range from 30 to 90 days.

Accounts receivable as of December 31, 2022 included unbilled accounts receivable of $9.0 million. We expect to invoice and collect all unbilled accounts receivable within twelve months.

We record deferred revenue when we have entered into a contract with a customer and cash payments are received or due prior to transfer of control or satisfaction of the related performance obligation.

Our performance obligations are generally satisfied within twelve months of the initial contract date. The deferred revenue balances related to performance obligations that will be satisfied after twelve months was $19.0 million as of December 31, 2022 and $16.1 million as of December 31, 2021. These balances are included in other

F-16

long-term liabilities in our consolidated balance sheets. Revenue recognized in the period from performance obligations satisfied in previous periods was not material for the periods presented.

Deferred Cost of Sales

Deferred cost of sales are associated with transactions for which revenue recognition criteria are not met but product has shipped and released from inventory. Deferred cost of sales are included in prepaid and other current assets in our consolidated balance sheets.

Incentive Compensation Costs

We generally expense incentive compensation associated with our internal sales force when incurred because the amortization period for such costs, if capitalized, would have been one year or less. We record these costs in selling, general and administrative expense in our consolidated statements of operations.

Senior Convertible Notes

In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible debt instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share calculations.

We previously followed in Accounting Standard Codification, or ASC, 470-20, which required us to separate each of our convertible debt instruments at issuance into two units of accounting, a liability component, based on our nonconvertible debt borrowing rate at issuance, and an equity component. Under ASU 2020-06, we now account for each of our convertible debt instruments as a single unit of accounting, a liability, because we concluded that there were no material conversion features that require bifurcation as a derivative under ASC 815-15 and our convertible debt instruments were not issued at a substantial premium. Since we adopted ASU 2020-06 using the full retrospective approach, we were required to apply the guidance to all convertible debt instruments we had outstanding as of January 1, 2020.

Upon adoption of ASU 2020-06 as of January 1, 2020, we recognized $67.8 million cumulative-effect adjustment to increase retained earnings for the decrease in interest expense and $242.3 million decrease in additional paid in capital for the elimination of the equity component. We have updated these financial statements to reflect the cumulative adjustment for the periods presented. We have labeled our prior period financial statements and related notes “As Adjusted” to indicate the change required under the new accounting guidance.

Below is a summary of the changes in our consolidated balance sheets we originally reported as of December 31, 2020 and 2021 under the ASC 470-20 legacy guidance compared to our adjusted consolidated balance sheets under the new ASU 2020-06 guidance we adopted and reflective of our four-for-one forward stock split:

Consolidated Balance Sheet			As of December 31, 2020
(In millions)			As Previously Reported						ASU 2020-06 Adjustment						Stock Split Adjustment						As Adjusted
Deferred tax assets			$	216.4					$	91.3					$	—					$	307.7
Long-term senior convertible notes			1,667.2						365.9						—						2,033.1
Common stock			0.1						—						0.3						0.4
Additional paid-in-capital			2,125.3						(398.5)						(0.3)						1,726.5
Accumulated deficit			$	(202.1)					$	123.9					$	—					$	(78.2)

Consolidated Balance Sheet			As of December 31, 2021
(In millions)			As Previously Reported						ASU 2020-06 Adjustment						Stock Split Adjustment						As Adjusted
Deferred tax assets			$	220.8					$	69.7					$	—					$	290.5
Long-term senior convertible notes			1,702.7						279.1						—						1,981.8
Common stock			0.1						—						0.3						0.4
Additional paid-in-capital			2,504.5						(395.5)						(0.3)						2,108.7
Retained earnings (accumulated deficit)			$	(47.4)					$	186.1					$	—					$	138.7

F-17

Below is a summary of the changes in our consolidated statements of operations for the twelve months ended December 31, 2020 and December 31, 2021 we originally reported at December 31, 2021 under the ASC 470-20 legacy guidance compared to our adjusted balance sheets under the new ASU 2020-06 guidance we adopted and reflective of our four-for-one forward stock split:

Consolidated Statement of Operations			Twelve Months Ended December 31, 2020
(In millions, except per share data)			As Previously Reported						ASU 2020-06 Adjustment						As Adjusted
Loss on extinguishment of debt			$	(5.9)					$	5.9					$	—
Interest expense			(84.7)						67.0						(17.7)
Income before income taxes			225.0						72.9						297.9
Income tax expense (benefit)			(268.6)						16.8						(251.8)
Net income			493.6						56.1						549.7
Basic net income per share			1.31						0.15						1.46
Diluted net income per share (1)			$	1.27					$	0.06					$	1.33
Shares used to compute diluted net income per share			389.8						30.6						420.4

(1) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $11.1 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Consolidated Statement of Operations			Twelve Months Ended December 31, 2021
(In millions, except per share data)			As Previously Reported						ASU 2020-06 Adjustment						As Adjusted
Loss on extinguishment of debt			$	(1.5)					$	1.4					$	(0.1)
Interest expense			(100.3)						81.5						(18.8)
Income before income taxes			173.9						82.9						256.8
Income tax expense			19.2						20.7						39.9
Net income			154.7						62.2						216.9
Basic net income per share			0.40						0.16						0.56
Diluted net income per share (1)			$	0.39					$	0.14					$	0.53
Shares used to compute diluted net income per share			400.4						28.4						428.8

(1) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $11.4 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Below is a summary of our consolidated balance sheet as of December 31, 2022 and consolidated statement of operations for the twelve months ended December 31, 2022 under the ASC 470-20 legacy guidance compared to the new ASU 2020-06 guidance we adopted.

Consolidated Balance Sheet			As of December 31, 2022
(In millions)			As computed under ASC 470-20						ASU 2020-06 Adjustment						As reported under ASU 2020-06
Prepaid and other current assets			$	191.5					$	1.1					$	192.6
Deferred tax assets			293.1						48.1						341.2
Current portion of long-term senior convertible notes			740.9						31.7						772.6
Long-term senior convertible notes			1,034.9						162.8						1,197.7
Additional paid-in-capital			2,652.2						(394.1)						2,258.1
Retained earnings			$	231.1					$	248.8					$	479.9

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Consolidated Statement of Operations			Twelve Months Ended December 31, 2022
(In millions, except per share data)			As computed under ASC 470-20						ASU 2020-06 Adjustment						As reported under ASU 2020-06
Loss on extinguishment of debt			$	(0.4)					$	0.4					$	—
Interest expense			(101.9)						83.3						(18.6)
Income before income taxes			307.1						83.7						390.8
Income tax expense			28.6						21.0						49.6
Net income			278.5						62.7						341.2
Basic net income per share			0.72						0.16						0.88
Diluted net income per share (1)			$	0.70					$	0.12					$	0.82
Shares used to compute diluted net income per share			400.5						27.0						427.5

(1) Dilutive net income used for diluted net income per share under ASU 2020-06 includes $11.0 million add back of interest expense, net of tax, attributable to assumed conversion of senior convertible notes.

Product Shipment Costs

We record the amounts we charge our customers for the shipping and handling of our products in revenue and we record the related costs as cost of sales in our consolidated statements of operations.

Research and Development

We expense costs of research and development as we incur them. Our research and development expenses primarily consist of engineering and research expenses related to our continuous glucose monitoring technology, clinical trials, regulatory expenses, quality assurance programs, materials and products for clinical trials. Research and development expenses primarily consist of employee compensation, including salary, fringe benefits, share-based compensation, and temporary employee expenses. We also incur significant expenses to operate our clinical trials that include clinical site reimbursement, clinical trial product, and associated travel expenses. Our research and development expenses also include fees for design services, contractors, and development materials.

Our CGM systems include certain software that we develop. We expense software development costs as we incur them until technological feasibility has been established, at which time we capitalize development costs until the product is available for general release to customers. To date, our software has been available for general release concurrent with the establishment of technological feasibility and, accordingly, we have not capitalized any development costs.

Collaboration Agreements

We may enter into agreements with collaboration partners for the development and commercialization of our products. These arrangements may include payments contingent on the occurrence of certain events such as development, regulatory or sales-based milestones.

When we account for these agreements, we consider the unique nature, terms and facts and circumstances of each transaction. Below are some example activities and how we account for them:

• Payments to collaboration partners through issuance of common stock as consideration in an asset acquisition are considered share-based payment to non-employees in exchange for goods within the scope of ASC Topic 718, “Compensation - Stock Compensation.” The amount and the timing of the cost recognition of such milestones in our financial statements is driven by the accounting for the specific type of equity instrument under ASC 718 that aligns with the terms of the agreement, including any performance conditions.

• The value associated with in-process research and development (“IPR&D”) in an asset acquisition incurred prior to regulatory approval is expensed as it does not have an alternative future use and is recorded as research and development expense.

• The value associated with IPR&D in an asset acquisition incurred at or after regulatory approval is usually capitalized as an intangible asset and amortized over the periods in which the related products are expected to contribute to future cash flows.

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Advertising Costs

We expense costs to produce advertising as we incur them whereas costs to communicate advertising are expensed when the advertising is first run. Advertising costs are included in selling, general and administrative expenses. Advertising expense was $133.0 million, $126.4 million and $76.5 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

Leases

We determine if an arrangement is a lease at inception. Lease right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in most of our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in similar economic environments. The operating lease right-of-use asset also includes any lease payments made and excludes lease incentives. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease payments that do not depend on a rate or index, payments associated with non-lease components, and costs related to leases with terms of less than 12 months are expensed as incurred.

Share-Based Compensation

Share-based compensation expense is measured at the grant date based on the estimated fair value of the award and is recognized straight-line over the requisite service period of the individual grants, which typically equals the vesting period.

We value time-based restricted stock units or RSUs at the date of grant using the intrinsic value method. Certain RSUs granted to senior management vest based on the achievement of pre-established performance or market goals. We estimate the fair value of performance/market-based RSUs at the date of grant using the intrinsic value method and the probability that the specified performance criteria will be met. We update our assessment of the probability that the specified performance criteria will be achieved each quarter and adjust our estimate of the fair value of the performance-based RSUs if necessary. The Monte Carlo methodology that we use to estimate the fair value of market-based RSUs at the date of grant incorporates into the valuation the possibility that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the market-based RSUs at the date of grant must be recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria.

If any of the assumptions used change significantly, share-based compensation expense may differ materially from what we have recorded in the current period.

We account for forfeitures as they occur by reversing any share-based compensation expense related to awards that will not vest.

Net Income Per Share

Basic net income per share attributable to common stockholders is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period and, when dilutive, potential common share equivalents.

Potentially dilutive common shares consist of shares issuable from restricted stock units, or RSUs, performance stock units, or PSUs, warrants, and our senior convertible notes. Potentially dilutive common shares issuable upon vesting of RSUs, PSUs, and exercise of warrants are determined using the average share price for each period under the treasury stock method. Potentially dilutive common shares issuable upon conversion of our senior convertible notes are determined using the if-converted method. In periods of net losses, we exclude all potentially dilutive common shares from the computation of the diluted net loss per share for those periods as the effect would be anti-dilutive.

F-20

The following table sets forth the computation of basic and diluted net income per share for the periods shown:

						Twelve Months Ended December 31,
						2022						2021						2020
(In millions, except per share data)												As Adjusted						As Adjusted
Net income						$	341.2					$	216.9					$	549.7
Add back interest expense, net of tax attributable to assumed conversion of senior convertible notes						11.0						11.4						11.1
Net income - diluted						$	352.2					$	228.3					$	560.8
Net income per common share
Basic						$	0.88					$	0.56					$	1.46
Diluted						$	0.82					$	0.53					$	1.33
Basic weighted average shares outstanding						389.4						386.9						377.5
Dilutive potential common stock outstanding:
Restricted stock units and performance stock units						1.0						2.1						4.0
Warrants						10.2						11.5						8.4
Senior convertible notes						26.9						28.3						30.5
Diluted weighted average shares outstanding						427.5						428.8						420.4

Outstanding anti-dilutive securities not included in the diluted net income per share attributable to common stockholders calculations were as follows:

			Twelve Months Ended December 31,
			2022						2021						2020
(In millions)									As Adjusted						As Adjusted
Restricted stock units			0.4						—						0.1

Recent Accounting Guidance

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This new guidance is intended to reduce the complexity of accounting for convertible instruments. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments. Entities may adopt ASU 2020-06 using either a partial retrospective or fully retrospective method of transition. This ASU is effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We adopted ASU 2020-06 in the first quarter of 2022 using the full retrospective method, reflecting the application of the new standard in each prior reporting period.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This guidance is intended improve the accounting for acquired revenue contracts with customers in a business combination. The new guidance requires that the acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. ASU 2021-08 is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. The amendments should be applied prospectively to business combinations occurring on or after the adoption date. Any impact this guidance will have on our consolidated financial statements is dependent on when and if we complete future business combinations.

F-21

2. Development and Other Agreements

Collaboration with Verily Life Sciences

On November 20, 2018, we entered into an Amended and Restated Collaboration and License Agreement with Verily Life Sciences LLC (an Alphabet Company) and Verily Ireland Limited (collectively, “Verily”), which we refer to as the Restated Collaboration Agreement. This replaced our original Collaboration and License Agreement with Verily dated August 10, 2015, as amended in October 2016, including the royalty obligations provisions under that original agreement. Pursuant to the Restated Collaboration Agreement, we and Verily have agreed to continue to jointly develop a certain next-generation CGM product, and potentially one or more additional CGM products, for which we will have exclusive commercialization rights.

The Restated Collaboration Agreement also provides us with an exclusive license to use intellectual property of Verily resulting from the collaboration, and certain Verily patents, in the development, manufacture and commercialization of blood-based or interstitial glucose monitoring products more generally (subject to certain exclusions, which are outside of the CGM field as it is commonly understood). It also provides us with non-exclusive license rights under Verily’s other intellectual property rights to develop, manufacture and commercialize those kinds of glucose monitoring products and certain CGM-product companion software functionalities. The Restated Collaboration Agreement requires us to use commercially reasonable efforts to develop, launch and commercialize the CGM product(s) that are the subject of the collaboration according to certain timing and other objectives, and provides for one executive sponsor from each of Dexcom and Verily to meet periodically and make decisions related to the collaboration (within a limited scope of authority) by consensus.

In consideration of Verily’s performance of its obligations under the joint development plan of the Restated Collaboration Agreement, the licenses granted to us and the amendment of the original agreement, we made upfront, incentive, and the product regulatory approval payments, and will make potential payments for contingent sales-based milestones upon the achievement of certain revenue targets.

We account for the contingent milestones payable in shares of our common stock as equity instruments within the scope of ASC Topic 718. The product regulatory approval and sales-based milestones are accounted for as performance-based awards that vest when the performance conditions have been achieved and are recognized when the achievement of the respective contingent milestone is deemed probable. The value of the contingent milestones is based on our closing stock price on December 28, 2018, which was $29.57 per share.

Upfront and Incentive payments

In the fourth quarter of 2018, we made an initial payment for an upfront fee of $250.0 million through the issuance of 7,363,772 shares of our common stock. We recorded a $217.7 million charge in our consolidated statements of operations during 2018 relating to the issuance of this common stock because this milestone payment did not meet the capitalization criteria. The value of the charge was based on our closing stock price of $29.57 per share on December 28, 2018, the date on which we obtained the necessary regulatory approvals and represents the date the performance- based awards were issued. In 2019, we made a cash incentive payment of $3.2 million due to the completion of certain development obligations and we recorded these payments as research and development expense in our consolidated statements of operations.

Contingent milestones

In the fourth quarter of 2021, we determined the achievement of the regulatory approval milestone to be probable and recorded an $87.1 million research and development charge in our consolidated statements of operations. This charge is associated with IPR&D obtained in an asset acquisition prior to regulatory approval and therefore does not have an alternative future use.

In the first quarter of 2022, we received regulatory approval and issued 2,945,508 shares of our common stock in connection with our achievement of the related milestone.

In December 2022, we received FDA approval and determined the achievement of the sales-based milestones to be probable. As such, we capitalized the full value of the sales-based milestones, $152.4 million, as an intangible asset. The sales-based milestones are contingent upon the achievement of certain revenue targets. The value of the sales based milestones is based on: 1) 5,154,640 shares of our common stock, as agreed upon in November 2018 and 2) our closing stock price on December 28, 2018 of $29.57 per share. December 28, 2018 is the date on which we obtained the necessary regulatory approvals and represents the date the performance- based awards were issued. The intangible asset will be amortized using the straight-line method over its estimated useful life of 64 months through March 2028. The related amortization expense is recognized in Cost of Sales in our consolidated

F-22

statements of operations and disclosed in Note 4 “Intangibles, Net” to the consolidated financial statements in Part II, Item 8 of this Annual Report.

All milestones may be paid in cash or shares of our common stock, at our election. If we elect to make these milestone payments in cash, any such cash payment would be equal to the number of shares that would otherwise be issued for the given milestone payment multiplied by the value of our stock on the date the relevant milestone is achieved, and adjusted to give effect to any stock splits, dividends, or similar events. We intend to pay the sales-based contingent milestones in shares of our common stock.

The Restated Collaboration Agreement will continue until December 31, 2028, unless terminated by either party upon uncured material breach of the Restated Collaboration Agreement by the other party. Upon achievement of the first sales-based milestone event and payment of the corresponding milestone fee by us, the term of the Restated Collaboration Agreement will be extended until December 31, 2033, unless terminated by either party upon uncured material breach of the Restated Collaboration Agreement by the other party.

3. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We estimate the fair value of our Level 1 financial instruments, which are in active markets, using unadjusted quoted market prices for identical instruments.

We obtain the fair values for our Level 2 financial instruments, which are not in active markets, from a primary professional pricing source that uses quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Fair values obtained from this professional pricing source can also be based on pricing models whereby all significant observable inputs, including maturity dates, issue dates, settlement dates, benchmark yields, reported trades, broker-dealer quotes, issue spreads, benchmark securities, bids, offers or other market related data, are observable or can be derived from, or corroborated by, observable market data for substantially the full term of the asset. We validate the quoted market prices provided by our primary pricing service by comparing the fair values of our Level 2 marketable securities portfolio balance provided by our primary pricing service against the fair values provided by our investment managers.

The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2022, classified in accordance with the fair value hierarchy:

			Fair Value Measurements Using
(In millions)			Level 1						Level 2						Level 3						Total
Cash equivalents			$	375.9					$	44.8					$	—					$	420.7
Debt securities, available-for-sale:
U.S. government agencies (1)			—						1,530.7						—						1,530.7
Commercial paper			—						119.4						—						119.4
Corporate debt			—						163.8						—						163.8
Supranationals			—						—						—						—
Total debt securities, available-for-sale			—						1,813.9						—						1,813.9
Other assets (2)			10.2						—						—						10.2
Total assets measured at fair value on a recurring basis			$	386.1					$	1,858.7					$	—					$	2,244.8

(1) Includes debt obligations issued by U.S. government-sponsored enterprises or U.S. government agencies.

(2) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.

F-23

The following table summarizes financial assets that we measured at fair value on a recurring basis as of December 31, 2021, classified in accordance with the fair value hierarchy:

			Fair Value Measurements Using
(In millions)			Level 1						Level 2						Level 3						Total
Cash equivalents			$	791.4					$	40.0					$	—					$	831.4
Debt securities, available-for-sale:
U.S. government agencies			—						1,210.6						—						1,210.6
Commercial paper			—						189.7						—						189.7
Corporate debt			—						224.3						—						224.3
Supranationals			—						54.0						—						54.0
Total debt securities, available-for-sale			—						1,678.6						—						1,678.6
Other assets (1)			7.0						—						—						7.0
Total assets measured at fair value on a recurring basis			$	798.4					$	1,718.6					$	—					$	2,517.0

(1) Includes assets which are held pursuant to a deferred compensation plan for senior management, which consist mainly of mutual funds.

There were no transfers into or out of Level 3 securities during the twelve months ended December 31, 2022 and 2021.

We hold certain other investments that we do not measure at fair value on a recurring basis. The carrying values of these investments are $19.0 million as of December 31, 2022 and $4.5 million as of December 31, 2021. We include them in other assets in our consolidated balance sheets. It is impracticable for us to estimate the fair value of these investments on a recurring basis due to the fact that these entities are privately held and limited information is available. We monitor the information that becomes available from time to time and adjust the carrying values of these investments if there are identified events or changes in circumstances that have a significant effect on the fair values.

Fair Value of Senior Convertible Notes

The fair value, based on trading prices (Level 1 inputs), of our senior convertible notes were as follows as of the dates indicated:

			Fair Value Measurements Using Level 1
(In millions)			December 31, 2022						December 31, 2021
Senior Convertible Notes due 2023			$	2,136.2					$	2,589.6
Senior Convertible Notes due 2025			1,314.9						1,432.9
Total fair value of outstanding senior convertible notes			$	3,451.1					$	4,022.5

For more information on the carrying values of our senior convertible notes, see Senior Convertible Notes in Note 5 “Debt” to the consolidated financial statements.

Foreign Currency and Derivative Financial Instruments

We enter into foreign currency forward contracts to hedge monetary assets and liabilities denominated in foreign currencies. Our foreign currency forward contracts are not designated as hedging instruments. Therefore, changes in the fair values of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related foreign currency assets and liabilities. The duration of these contracts is generally one month. The derivative gains and losses are included in interest and other income (expense), net in our consolidated statements of operations.

F-24

As of December 31, 2022 and December 31, 2021, the notional amounts of outstanding foreign currency forward contracts were $62.0 million and $40.0 million, respectively. The resulting impact on our consolidated financial statements from currency hedging activities was not significant for the twelve months ended December 31, 2022, 2021 and 2020.

Our foreign currency exposures vary but are primarily concentrated in the Australian Dollar, the British Pound, the Canadian Dollar, the Euro, and the Malaysian Ringgit. We monitor the costs and the impact of foreign currency risks upon our financial results as part of our risk management program. We do not use derivative financial instruments for speculation or trading purposes or for activities other than risk management. We do not require and are not required to pledge collateral for these financial instruments and we do not carry any master netting arrangements to mitigate the credit risk.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

In accordance with authoritative guidance, we measure certain non-financial assets and liabilities at fair value on a non-recurring basis. These measurements are usually performed using the discounted cash flow method or cost method and Level 3 inputs. These include items such as non-financial assets and liabilities initially measured at fair value in a business combination and non-financial long-lived assets measured at fair value for an impairment assessment. In general, non-financial assets, including goodwill, intangible assets, and property and equipment, are measured at fair value when there are indicators of impairment and are recorded at fair value only when an impairment is recognized.

During the fourth quarter 2022, we vacated a leased building and made it available for sublease, resulting in an impairment of its asset group which consisted primarily of leasehold improvements and right-of-use asset. We recorded $23.0 million in impairment losses during the twelve months ended December 31, 2022. See Note 6 “Leases” to the consolidated financial statements for more information. There were no significant impairment losses during the twelve months ended December 31, 2021 and 2020.

4. Balance Sheet Details

Short-Term Marketable Securities

Short-term marketable securities, consisting of available-for-sale debt securities, were as follows as of the dates indicated:

			December 31, 2022
(In millions)			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Market Value
Debt securities, available-for-sale:
U.S. government agencies (1)			$	1,535.1					$	0.2					$	(4.6)					$	1,530.7
Commercial paper			119.6						—						(0.2)						119.4
Corporate debt			164.3						—						(0.5)						163.8
Supranationals			—						—						—						—
Total debt securities, available-for-sale			$	1,819.0					$	0.2					$	(5.3)					$	1,813.9

			December 31, 2021
(In millions)			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Market Value
Debt securities, available-for-sale:
U.S. government agencies			$	1,212.1					$	—					$	(1.5)					$	1,210.6
Commercial paper			189.8						—						(0.1)						189.7
Corporate debt			224.6						—						(0.3)						224.3
Supranationals			54.1						—						(0.1)						54.0
Total debt securities, available-for-sale			$	1,680.6					$	—					$	(2.0)					$	1,678.6

(1) Includes debt obligations issued by U.S. government-sponsored enterprises or U.S. government agencies.

F-25

As of December 31, 2022, the estimated market value of our short-term debt securities with contractual maturities up to 12 months was $1.81 billion. As of December 31, 2021, the estimated market value of our short-term debt securities with contractual maturities up to 12 months and up to 18 months was $1.36 billion and $320.7 million, respectively. Gross realized gains and losses on sales of our short-term debt securities for the twelve months ended December 31, 2022, 2021 and 2020 were not significant.

We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses on available-for-sale debt securities at December 31, 2022 were primarily due to increases in interest rates, including market credit spreads, and not due to increased credit risks associated with specific securities. Accordingly, we have not recorded an allowance for credit losses. We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

Equity Investments

During the twelve months ended December 31, 2022, 2021 and 2020, we had no unrealized gains or losses recognized during the reporting period on equity investments. Realized gains from the sale of an equity investment were $0.2 million and $11.6 million for the twelve months ended December 31, 2022 and 2021, respectively.

Accounts Receivable

			December 31,
(In millions)			2022						2021
Accounts receivable			$	720.6					$	519.7
Less allowance for doubtful accounts			(7.3)						(5.4)
Total accounts receivable, net			$	713.3					$	514.3

Reserve for prompt payment cash discounts recorded against accounts receivable, excluding allowance for doubtful accounts, was $8.3 million, $13.7 million, $15.9 million as of December 31, 2022, 2021, and 2020, respectively.

Inventory

			December 31,
(In millions)			2022						2021
Raw materials			$	159.0					$	145.2
Work-in-process			17.2						16.2
Finished goods			130.5						195.9
Total inventory			$	306.7					$	357.3

During the twelve months ended December 31, 2022, 2021 and 2020, we recorded excess and obsolete inventory charges of $13.9 million, $28.1 million and $24.4 million respectively, in cost of sales as a result of our ongoing assessment of sales demand, inventory on hand for each product and the continuous improvement and innovation of our products.

Prepaid and Other Current Assets

			December 31,
(In millions)			2022						2021
Prepaid expenses			$	48.9					$	39.8
Prepaid inventory			67.8						12.1
Income tax receivables			38.9						2.3
Other current assets			37.0						27.4
Total prepaid and other current assets			$	192.6					$	81.6

F-26

Property and Equipment

			December 31,
(In millions)			2022						2021
Land (1)			$	26.9					$	15.6
Building (1)			54.3						49.1
Furniture and fixtures			32.6						30.7
Computer software and hardware			48.8						52.7
Machinery and equipment			449.2						272.9
Leasehold improvements			264.4						251.6
Construction in progress			542.6						360.7
Total cost			1,418.8						1,033.3
Less accumulated depreciation and amortization			(363.2)						(231.5)
Total property and equipment, net			$	1,055.6					$	801.8

(1) Represents finance lease right-of-use assets.

Depreciation expense related to property and equipment for the twelve months ended December 31, 2022, 2021 and 2020 was $144.1 million, $96.3 million and $64.0 million, respectively.

Loss on disposal of property and equipment during the twelve months ended December 31, 2022, 2021 and 2020 recorded in operating expenses was $2.2 million, $24.5 million and $13.6 million, respectively.

Intangibles, Net

The following table summarizes the components of gross intangible assets, accumulated amortization, and net intangible asset balances as of December 31, 2022 and December 31, 2021

												December 31, 2022
(Dollars in millions)						Weighted Average Useful Life (in years)						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Verily intangible asset (1)						5.3						$	152.4					$	(2.4)					$	150.0
Customer relationships						3.3						24.1						(8.7)						15.4
Acquired technology and intellectual property (2)						1.7						14.6						(9.6)						5.0
Trademarks and trade name						3.5						4.2						(1.3)						2.9
Intangibles, other						0.0						0.2						(0.2)						—
Total						4.9						$	195.5					$	(22.2)					$	173.3

(1) See Note 2 “Development and Other Agreements” to the consolidated financial statements in Part II, Item 8 of this Annual Report for more information.

(2) Excludes Verily intangible asset.

															December 31, 2021
(Dollars in millions)						Weighted Average Useful Life (in years)																					Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Customer relationships						4.5																					$	22.9					$	(3.5)					$	19.4
Acquired technology and intellectual property						2.7																					15.2						(7.1)						8.1
Trademarks and trade name						4.5																					4.4						(0.5)						3.9
Intangibles, other						1.1																					0.3						(0.2)						0.1
Total						4.0																					$	42.8					$	(11.3)					$	31.5

F-27

The following table presents the total amortization expense of finite-lived intangible assets for the twelve months ended December 31, 2022, 2021 and 2020:

			Twelve Months Ended December 31,
(In millions)			2022						2021						2020
Amortization expense included in cost of sales			$	4.3					$	1.9					$	0.6
Amortization expense included in operating expenses			7.5						3.7						2.5
Total amortization of intangible assets			$	11.8					$	5.6					$	3.1

The following table presents estimated future amortization of the Company’s finite-lived intangible assets as of December 31, 2022:

(In millions)
2023						37.3
2024						35.8
2025						33.2
2026						31.3
2027						28.6
Thereafter						7.1
Total						$	173.3

Other Assets

Other assets were $47.1 million and $10.5 million as of December 31, 2022 and December 31, 2021, respectively. The increase in other assets is primarily due to an increase in long-term equity investments in privately held entities, long-term prepaid assets, and term deposits.

Accounts Payable and Accrued Liabilities

			December 31,
			2022						2021
(In millions)									As Adjusted
Accounts payable trade			$	237.9					$	189.4
Accrued tax, audit, and legal fees			44.8						40.6
Accrued rebates			556.4						260.5
Accrued warranty			12.8						12.9
Contractual obligations			—						15.0
Other accrued liabilities			49.9						54.6
Total accounts payable and accrued liabilities			$	901.8					$	573.0

Accrued Payroll and Related Expenses

			December 31,
(In millions)			2022						2021
Accrued wages, bonus and taxes			$	96.8					$	91.8
Other accrued employee benefits			37.5						33.4
Total accrued payroll and related expenses			$	134.3					$	125.2

F-28

Accrued Warranty

Warranty costs are reflected in our statements of operations as cost of sales. Reconciliations of our accrued warranty costs for the twelve months ended December 31, 2022, 2021 and 2020 were as follows:

			Twelve Months Ended December 31,
(In millions)			2022						2021						2020
Beginning balance			$	12.9					$	11.7					$	7.4
Charges to costs and expenses			43.0						41.5						41.3
Costs incurred			(43.1)						(40.3)						(37.0)
Ending balance			$	12.8					$	12.9					$	11.7

Other Long-Term Liabilities

			December 31,
(In millions)			2022						2021
Finance lease obligations			$	59.6					$	57.0
Deferred revenue, long-term			19.0						16.1
Deferred tax liabilities			4.9						5.9
Other tax liabilities			32.7						2.8
Other liabilities			12.1						8.2
Total other long-term liabilities			$	128.3					$	90.0

5. Debt

Senior Convertible Notes

The carrying amounts of our senior convertible notes were as follows as of the dates indicated:

			December 31,
			2022						2021
(In millions)									As Adjusted
Principal amount:
Senior Convertible Notes due 2023			$	774.8					$	792.3
Senior Convertible Notes due 2025			1,207.5						1,207.5
Total principal amount			1,982.3						1,999.8
Unamortized debt issuance costs			(12.0)						(18.0)
Carrying amount of senior convertible notes			$	1,970.3					$	1,981.8

For our senior convertible notes for which the if-converted value exceeded the principal amount, the amount in excess of principal was as follows as of the dates indicated:

			December 31,
(In millions)			2022						2021
Senior Convertible Notes due 2023			$	1,361.5					$	1,797.3
Senior Convertible Notes due 2025			33.6						141.8
Total by which the notes’ if-converted value exceeds their principal amount			$	1,395.1					$	1,939.1

F-29

The following table summarizes the components of interest expense and the effective interest rates for each of our senior convertible notes for the periods shown.

			Twelve Months Ended December 31,
			2022						2021						2020
(Dollars in millions)									As Adjusted						As Adjusted
Cash interest expense:
Contractual coupon interest (1)			$	8.8					$	9.3					$	9.3
Non-cash interest expense:
Amortization of debt issuance costs			5.9						6.0						5.5
Total interest expense recognized on senior notes			$	14.7					$	15.3					$	14.8
Effective interest rate:
Senior Convertible Notes due 2022 (2)			*						*						1.3		%
Senior Convertible Notes due 2023			1.1		%				1.1		%				1.1		%
Senior Convertible Notes due 2025			0.5		%				0.5		%				0.5		%
(1) Interest on the 2022 Notes began accruing upon issuance and was payable semi-annually on May 15 and November 15 of each year. Interest on the 2023 Notes began accruing upon issuance and is payable semi-annually on June 1 and December 1 of each year. Interest on the 2025 Notes began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year.
(2) The effective interest rate presented represents the rate applicable for the period outstanding. Our $400.0 million aggregate principal amount of unsecured senior convertible notes issued in June 2017 with a stated interest rate of 0.75% and maturity date of May 15, 2022 (the 2022 Notes) were repurchased and converted by August 2020.
* Not applicable as no notes were outstanding at this date.

Repurchase, Conversion, and Redemption of 2022 Notes

In May 2020, we used approximately $282.6 million of the net proceeds from the 2025 Notes offering described below and issued 7,812,268 shares of Dexcom common stock to repurchase $260.0 million principal amount outstanding of the 2022 Notes and the associated conversion feature of the repurchased notes (which was recorded in additional paid-in capital). Holders of $140.0 million in aggregate principal amount of the 2022 Notes elected conversion at their option during the twelve months ended December 31, 2020. We settled these conversions by issuing 5,649,988 shares of our common stock.

0.75% Senior Convertible Notes due 2023

In November 2018, we completed an offering of $850.0 million aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.75% and a maturity date of December 1, 2023 (the “2023 Notes”). The net proceeds from the offering, after deducting initial purchasers’ discounts and costs directly related to the offering, were approximately $836.6 million. The initial conversion rate of the 2023 Notes is 24.3476 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $41.07 per share, subject to adjustments. We entered into transactions for a convertible note hedge (the “2023 Note Hedge”) and warrants (the “2023 Warrants”) concurrently with the issuance of the 2023 Notes. The 2023 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. We use the if-converted method for assumed conversion of the 2023 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the 2023 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2023 Notes includes customary terms and covenants, including certain events of default after which the 2023 Notes may be due and payable immediately.

For the twelve months ended December 31, 2021, holders of $57.7 million in aggregate principal amount of the 2023 Notes elected conversion at their option. We settled these conversions by issuing a combination of common stock and treasury stock. We issued 1,403,112 shares to settle the converted 2023 Notes during the twelve months ended December 31, 2021, of which 794,588 shares were issued out of treasury stock. We received 967,380

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shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

For the twelve months ended December 31, 2022, holders of $17.5 million in aggregate principal amount of the 2023 Notes elected conversion at their option. We settled these conversions using treasury stock. We issued 425,552 treasury shares to settle the converted 2023 Notes. We received 287,492 shares of common stock from the exercise of a portion of the 2023 Note Hedge that we purchased concurrently with the issuance of the 2023 Notes, as described below.

Conversion Rights at the Option of the Holders

Holders of the 2023 Notes have the right to require us to repurchase for cash all or a portion of their notes at 100% of their principal amount, plus any accrued and unpaid interest, upon the occurrence of a fundamental change (as defined in the indenture relating to the notes). We will also be required to increase the conversion rate for holders who convert their 2023 Notes in connection with certain fundamental changes occurring prior to the maturity date or following the delivery by Dexcom of a notice of redemption.

Holders of the 2023 Notes may convert all or a portion of their notes at their option prior to 5:00 p.m., New York City time, on the business day immediately preceding September 1, 2023, in multiples of $1,000 principal amount, only under the following circumstances:

(1)during any calendar quarter commencing after March 31, 2019 (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the 2023 Notes on each such trading day;

(2)during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the 2023 Notes for each day of that five-day consecutive trading day period was less than 98% of the product of the last reported sale price of Dexcom’s common stock and the applicable conversion rate of the 2023 Notes on such trading day;

(3)if we call any or all of the 2023 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

(4)upon the occurrence of specified corporate transactions.

On or after September 1, 2023, until 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Circumstance (1) listed above occurred during the quarters ended December 31, 2021, March 31, 2022, June 30, 2022, and September 30, 2022. As a result, the 2023 Notes were convertible at the option of the holder from January 1, 2022 through December 31, 2022. Circumstance (1) listed above also occurred during the quarter ended December 31, 2022 and as a result, the 2023 Notes will remain convertible at the option of the holder from January 1, 2023 through March 31, 2023. See above for a description of conversion activity related to the 2023 Notes.

Conversion Rights at Our Option

Dexcom did not have a right to redeem the 2023 Notes prior to December 1, 2021. On or after December 1, 2021 and prior to September 1, 2023, Dexcom may redeem for cash all or part of the 2023 Notes, at its option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 2023 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

2023 Note Hedge

In connection with the offering of the 2023 Notes, in November 2018 we entered into convertible note hedge transactions with two of the initial purchasers of the 2023 Notes (the “2023 Counterparties”) entitling us to purchase up to 20.7 million shares of our common stock at an initial price of $41.07 per share, each of which is subject to adjustment. The cost of the 2023 Note Hedge was $218.9 million and we accounted for it as an equity instrument by recognizing $218.9 million in additional paid-in capital during 2018. The 2023 Note Hedge will expire on December 1, 2023. The 2023 Note Hedge is expected to reduce the potential equity dilution upon any conversion of the 2023 Notes and/or offset any cash payments we are required to make in excess of the principal amount of

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converted 2023 Notes if the daily volume-weighted average price per share of our common stock exceeds the strike price of the 2023 Note Hedge. The strike price of the 2023 Note Hedge initially corresponds to the conversion price of the 2023 Notes and is subject to certain adjustments under the terms of the 2023 Note Hedge. An assumed exercise of the 2023 Note Hedge by us is considered anti-dilutive since the effect of the inclusion would always be anti-dilutive with respect to the calculation of diluted earnings per share. See above for a description of conversion activity related to the 2023 Notes and shares received as the result of exercising a portion of the 2023 Note Hedge.

2023 Warrants

In November 2018, we also sold warrants to the 2023 Counterparties to acquire up to 20.7 million shares of our common stock. The 2023 Warrants require net share settlement and a pro rated number of warrants will expire on each of the 60 scheduled trading days starting on March 1, 2024. We received $183.8 million in cash proceeds from the sale of the 2023 Warrants, which we recorded in additional paid-in capital during 2018. The 2023 Warrants could have a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeds the strike price of the 2023 Warrants. The strike price of the 2023 Warrants is initially $49.60 per share and is subject to certain adjustments under the terms of the warrant agreements. We use the treasury share method for assumed conversion of the 2023 Warrants when computing the weighted average common shares outstanding for diluted earnings per share.

0.25% Senior Convertible Notes due 2025

In May 2020, we completed an offering of $1.21 billion aggregate principal amount of unsecured senior convertible notes with a stated interest rate of 0.25% and a maturity date of November 15, 2025 (the “2025 Notes”). The net proceeds from the offering, after deducting initial purchasers’ discounts and estimated costs directly related to the offering, were approximately $1.19 billion. The initial conversion rate of the 2025 Notes is 6.6620 shares per $1,000 principal amount of notes, which is equivalent to a conversion price of approximately $150.11 per share, subject to adjustments. The 2025 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. We use the if-converted method for assumed conversion of the 2025 Notes to compute the weighted average shares of common stock outstanding for diluted earnings per share.

No principal payments are due on the 2025 Notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indenture relating to the 2025 Notes includes customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately.

Conversion Rights at the Option of the Holders

In the event of a fundamental change (as defined in the indenture related to the 2025 Notes), holders of the 2025 Notes have the right to require us to repurchase for cash all or a portion of their notes at a price equal to 100% of the principal amount of the 2025 Notes, plus any accrued and unpaid interest. Holders of the 2025 Notes who convert their notes in connection with a make-whole fundamental change (as defined in the indenture) or following the delivery by Dexcom of a notice of redemption are, under certain circumstances, entitled to an increase in the conversion rate.

Prior to 5:00 p.m., New York City time, on the business day immediately preceding August 15, 2025, holders of the 2025 Notes may convert all or a portion of their notes, in multiples of $1,000 principal amount, only under the following circumstances:

(1)during any calendar quarter commencing after September 30, 2020 (and only during such calendar quarter), if the last reported sale price of Dexcom’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the applicable conversion price of the Notes on each such trading day;

(2)during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that five day consecutive trading day period was less than 98% of the product of the last reported sale price of Dexcom’s common stock and the applicable conversion rate of the Notes on such trading day;

(3)if we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

(4)upon the occurrence of specified corporate transactions.

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On or after August 15, 2025, until 5:00 p.m., New York City time, on the business day immediately preceding the maturity date, holders of the 2025 Notes may convert all or a portion of their notes regardless of the foregoing circumstances.

Conversion Rights at Our Option

Dexcom may not redeem the 2025 Notes prior to May 20, 2023. On or after May 20, 2023 and prior to August 15, 2025, Dexcom may redeem for cash all or part of the 2025 Notes, at its option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which Dexcom provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 2025 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Revolving Credit Agreement

Terms of the Revolving Credit Agreement

In October 2021, we entered into a Second Amended and Restated Credit Agreement (the "Amended Credit Agreement"), which amended and restated the credit agreement we had previously entered into in December 2018 and amended in May 2020 (the “Credit Agreement”). The Amended Credit Agreement is a five-year revolving credit facility that provides for an available principal amount of $200.0 million which can be increased up to $500.0 million at our option subject to customary conditions and approval of our lenders (the “Credit Facility”). The Amended Credit Agreement will mature on October 13, 2026. Borrowings under the Amended Credit Agreement are available for general corporate purposes, including working capital and capital expenditures.

Information related to availability and outstanding borrowings on our Amended Credit Agreement is as follows as of the date indicated:

			December 31,
(In millions)			2022
Available principal amount			$	200.0
Letters of credit sub-facility			25.0
Outstanding borrowings			—
Outstanding letters of credit			7.3
Total available balance			$	192.7

Revolving loans under the Amended Credit Agreement bear interest at our choice of one of three base rates plus a range of applicable rates that are based on our leverage ratio. The first base rate is the Alternate Base Rate (“ABR”) and loans comprising each ABR borrowing shall bear interest at the ABR plus the applicable rate between 0.375% to 1.000%. The ABR is the highest of (a) the prime rate last quoted by The Wall Street Journal, (b) the Federal Reserve Bank of New York rate plus one half of 1%, and (c) the Adjusted London Interbank Offered Rate (“LIBO Rate”) for a one month interest period plus 1%. The second base rate is the Term Benchmark rate and loans comprising each Term Benchmark borrowing shall bear interest at the Adjusted LIBO Rate, the Adjusted Euro Interbank Offered Rate, the Adjusted Stockholm Interbank Offered Rate, the Adjusted Canadian Dollar Offered Rate, Adjusted Australian Dollar Rate, the Adjusted Bank Bill Benchmark Rate or the Adjusted Tokyo Interbank Offered Rate, as applicable based on the currency denomination borrowed, plus the applicable rate between 1.375% to 2.000% . The third base rate is the Daily Simple RepoFunds Rate (“RFR”) and loans comprising each Daily Simple RFR Loan shall bear interest at a rate per annum equal to the applicable Daily Simple RFR plus the applicable rate between 1.375% to 2.000% plus an additional 0.0326%. We will also pay a commitment fee of between 0.175% and 0.250%, payable quarterly in arrears, on the average daily unused amount of the revolving facility based on our leverage ratio.

Our obligations under the Amended Credit Agreement are guaranteed by our existing and future wholly-owned domestic subsidiaries, and are secured by a first-priority security interest in substantially all of the assets of Dexcom and the guarantors, including all or a portion of the equity interests of our domestic subsidiaries and first-tier foreign subsidiaries but excluding real property and intellectual property (which is subject to a negative pledge). The Amended Credit Agreement contains covenants that limit certain indebtedness, liens, investments, transactions with affiliates, dividends and other restricted payments, subordinated indebtedness and amendments to subordinated indebtedness documents, and sale and leaseback transactions of Dexcom or any of its domestic subsidiaries. The

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Amended Credit Agreement also requires us to maintain a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with these covenants as of December 31, 2022.

As of December 31, 2022, we also have a guarantee facility related to our international operations which is collateralized by a $10.7 million term deposit that is included in non-current “Other assets” on our consolidated balance sheets.

6. Leases and Other Commitments

Leases

We lease office, manufacturing and warehouse space facilities under various domestic and international non-cancellable operating and finance lease arrangements. We also have land leases in Penang, Malaysia that expire through 2082 for the build-out of our international manufacturing facility. Our leases, excluding our land leases in Penang, Malaysia, have remaining lease terms of up to eighteen years. Some of the leases include one or more options to extend the leases for up to five years per option. Options to extend or terminate the lease are included in the lease liability if they are reasonably certain of being exercised. Leases are classified as operating or financing at lease commencement.

Operating lease right-of-use assets and lease liabilities are presented separately in our consolidated balance sheets. Finance lease right-of-use assets are included in property and equipment and finance lease liabilities are included in accounts payable and accrued liabilities and in other long-term liabilities in our consolidated balance sheets.

As of December 31, 2022, the maturities of our operating and finance lease liabilities were as shown in the table below:

(In millions)			Operating Leases						Finance Leases
2023			$	26.6					$	7.3
2024			25.0						6.3
2025			23.9						5.4
2026			23.5						5.4
2027			18.3						5.4
Thereafter			18.1						65.5
Total future lease cost (1)			135.4						95.3
Less: Imputed interest			(20.3)						(31.5)
Present value of future payments			115.1						63.8
Less: Current portion			(20.5)						(4.2)
Long-term portion			$	94.6					$	59.6

(1) Total future lease cost excludes $0.6 million of legally binding minimum lease payments for leases signed but not yet commenced.

Certain lease agreements require us to return designated areas of leased space to its original condition upon termination of the lease agreement, for which we record an asset retirement obligation and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, the asset retirement obligation is accreted for the change in its present value and the capitalized asset is depreciated, both over the term of the associated lease agreement. Asset retirement obligations of $11.1 million and $7.4 million as of December 31, 2022 and 2021, respectively, are included in other long-term liabilities in our consolidated balance sheets.

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The components of lease expense for the twelve months ended December 31, 2022, 2021 and 2020 were as follows:

			Twelve Months Ended December 31,
(In millions)			2022						2021						2020
Finance lease cost:
Amortization of right-of-use assets			$	5.6					$	4.1					$	2.0
Interest on lease liabilities			3.3						3.0						1.9
Operating lease cost			22.6						23.3						18.4
Right-of-use asset impairment			6.3						—						—
Short-term lease cost			3.5						2.3						1.3
Variable lease cost (1)			8.0						6.0						4.2
Total lease cost			$	49.3					$	38.7					$	27.8

(1) Variable lease costs are primarily related to common area maintenance charges and property taxes.

As the result of the Company’s transition to a flexible working environment, we vacated a building in San Diego during the fourth quarter and made it available for sublease. This resulted in an impairment indicator. We tested the asset group as of November 30, 2022 consisting primarily of the leasehold improvements and right-of-use asset for recoverability by comparing its carrying value to an estimate of future undiscounted cash flows. Based on the results of the recoverability test, we determined that the undiscounted cash flows of the asset group were below its carrying value.

We determined the fair value of the asset group by discounting the estimated future cash flows using level 3 fair value inputs under ASC 820 as described in Note 1. As a result of the impairment test, we recorded a non-cash charge of $23.0 million for the twelve months ended December 31, 2022 in the “Selling, general and administrative” caption of our consolidated statements of operations. The fair value of the asset group immediately subsequent to the impairment was $2.5 million and was categorized as Level 3 within the ASC 820, “Fair Value Measurements” fair value hierarchy.

Other information related to our leases is as follows:

			Twelve Months Ended December 31,
(Dollars in millions)			2022						2021						2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	26.0					$	23.3					$	18.3
Operating cash flows from finance leases			3.1						1.9						0.7
Financing cash flows from finance leases			15.5						9.9						8.5
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases			15.6						13.1						33.5
Finance leases			$	16.1					$	6.4					$	41.7
Weighted average remaining lease term:
Operating leases			5.5 years						5.5 years						6.1 years
Finance leases			15.2 years						15.9 years						23.3 years
Weighted average discount rate:
Operating leases			6.0		%				5.0		%				5.0		%
Finance leases			5.1		%				5.1		%				5.0		%

Amortization of operating lease right-of-use asset included in cash flows from operating activities in our consolidated statements of cash flows was $16.4 million for the twelve months ended December 31, 2022, $18.0 million for the twelve months ended December 31, 2021 and $12.4 million for the twelve months ended December 31, 2020.

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Purchase Commitments

We are party to various purchase arrangements related to our manufacturing and research and development activities. We had approximately $442.7 million as of December 31, 2022 and $324.1 million as of December 31, 2021 of open purchase orders and contractual obligations in the ordinary course of business, the majority of which are due within one year.

7. Contingencies

Litigation

We are subject to various claims, complaints and legal actions that arise from time to time in the normal course of business, including commercial insurance, product liability, intellectual property and employment related matters. In addition, from time to time we may bring claims or initiate lawsuits against various third parties with respect to matters arising out of the ordinary course of our business, including commercial and employment related matters.

During the year ended December 31, 2022, we and certain Abbott Diabetes Care, Inc. (“Abbott”) entities served complaints for patent infringement, validity and other patent related actions against each other in multiple jurisdictions, inside and outside the United States. We intend to vigorously pursue our claims and defenses in these cases to protect our intellectual property and to defend against Abbott’s infringement allegations.

We do not believe we are party to any other currently pending legal proceedings, the outcome of which could have a material adverse effect on our business, financial condition or results of operations. There can be no assurance that existing or future legal proceedings arising in the ordinary course of business or otherwise will not have a material adverse effect on our business, financial condition or results of operations.

8. Income Taxes

Income (loss) before income taxes subject to taxes in the following jurisdictions is as follows:

			Twelve Months Ended December 31,
			2022						2021						2020
(In millions)									As Adjusted						As Adjusted
United States			$	463.5					$	318.2					$	343.6
Outside of the United States			(72.7)						(61.4)						(45.7)
Total			$	390.8					$	256.8					$	297.9

Significant components of the provision for income taxes are as follows:

			Twelve Months Ended December 31,
			2022						2021						2020
(In millions)									As Adjusted						As Adjusted
Current:
Federal			$	32.6					$	5.7					$	—
State			26.1						8.3						6.1
Foreign			12.5						10.1						2.6
Total current income taxes			71.2						24.1						8.7
Deferred:
Federal			(4.3)						23.0						(182.9)
State			(17.6)						(0.2)						(50.5)
Foreign			0.3						(7.0)						(27.1)
Total deferred income taxes			(21.6)						15.8						(260.5)
Total			$	49.6					$	39.9					$	(251.8)

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Significant loss and tax credit carryforwards and years of expiration are as follows:

			December 31,												Year of Expiration
(In millions)			2022						2021
Net operating loss:
Federal			$	28.7					$	38.0					2028
California			185.0						236.3						2031
Other states			8.5						21.3						2029
UK			90.5						102.4						Indefinite
Other foreign			9.7						—						2033
Tax credits:
Federal
R&D credits			—						80.1
Foreign tax credits			—						1.5
California R&D credits			$	96.4					$	81.4					Indefinite

Utilization of net operating losses and credit carryforwards is subject to an annual limitation due to ownership change limitations provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. An ownership change limitation occurred as a result of the stock offering completed in February 2009. The limitation will result in approximately $1.7 million of U.S. research and development tax credits that will expire unused, and is therefore, not reflected in the tax credit carryforwards above. In addition, the related deferred tax assets have been removed from the components of our deferred tax assets as summarized in the table below. The tax benefits related to the remaining federal and state net operating losses and tax credit carryforwards may be further limited or lost if future cumulative changes in ownership exceed 50% within any three-year period.

Significant components of our deferred tax assets and liabilities as of December 31, 2022 and 2021 are shown below. Significant judgment is required to evaluate the need for a valuation allowance against deferred tax assets. We review all available positive and negative evidence, including projections of pre-tax book income, earnings history, reliability of forecasting, and reversal of temporary differences. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions.

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			December 31,
			2022						2021
(In millions)									As Adjusted
Deferred tax assets:
Net operating loss carryforwards			$	46.4					$	53.0
Capitalized research and development expenses			211.9						49.3
Tax credits			61.1						105.5
Share-based compensation			16.8						13.3
Fixed and intangible assets			34.4						26.4
Accrued liabilities and reserves			105.3						105.5
Collaborative agreement milestone accrual (1)			—						21.9
Convertible debt			9.3						21.6
Other			—						0.5
Total gross deferred tax assets			485.2						397.0
Less: valuation allowance			(78.7)						(69.9)
Total net deferred tax assets			406.5						327.1
Deferred tax liabilities:
Fixed assets and acquired intangibles assets			(69.9)						(42.5)
Other			(0.3)						—
Total deferred tax liabilities			(70.2)						(42.5)
Net deferred tax assets (liabilities)			$	336.3					$	284.6

(1) This amount is related to the $87.1 million charge recorded in the fourth quarter of 2021 associated with our Restated Collaboration Agreement with Verily, as discussed in Note 2 “Development and Other Agreements” to the consolidated financial statements.

We maintain a valuation allowance of $78.7 million against our California research and development tax credits and certain foreign intangible assets. During the year ended December 31, 2022, the valuation allowance increased by $8.9 million primarily due to generation of California research and development tax credits.

The reconciliation between our effective tax rate on income (loss) from continuing operations and the statutory rate is as follows:

			Twelve Months Ended December 31,
			2022						2021						2020
(In millions)									As Adjusted						As Adjusted
U.S. federal statutory tax rate			$	82.1					$	53.9					$	62.6
State income tax, net of federal benefit			5.4						8.9						5.3
Permanent items			0.6						5.2						2.6
Research and development credits			(23.3)						(28.9)						(24.4)
Foreign tax credit			—						(3.7)						—
Foreign rate differential			27.7						20.9						9.8
Stock and officers compensation			(1.2)						(20.4)						(28.7)
Collaboration agreement milestone share-based payment			(52.9)						—						—
Change in statutory tax rates			1.0						(10.0)						(4.1)
Other			1.3						(0.4)						0.1
Change in valuation allowance			8.9						14.4						(275.0)
Income taxes at effective rates			$	49.6					$	39.9					$	(251.8)

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The following table summarizes the activity related to our gross unrecognized tax benefits:

(In millions)
Balance at January 1, 2020			$	29.5
Decreases related to prior year tax positions			(0.9)
Increases related to current year tax positions			8.0
Balance at December 31, 2020			36.6
Increases related to prior year tax positions			0.4
Increases related to current year tax positions			9.8
Balance at December 31, 2021			46.8
Decreases related to prior year tax positions			(0.9)
Increases related to current year tax positions			6.1
Balance at December 31, 2022			$	52.0

Of the total unrecognized tax benefits at December 31, 2022, 2021, and 2020, $32.5 million, $29.5 million and $23.5 million, respectively, would affect our annual effective tax rate if recognized. Also included in the balance of unrecognized tax benefits at December 31, 2022 is $0.2 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred tax assets.

Interest and penalties are classified as a component of income tax expense and were not material for any period presented. Although the timing and outcome of audit settlements are uncertain, it is unlikely there will be a significant reduction of the uncertain tax benefits in the next twelve months.

Due to our global business activities, we file income tax returns and are subject to routine compliance audits in numerous jurisdictions, including those material jurisdictions listed in the following table. The U.S. net operating losses generated since 1999 and utilized in recent years are open for examination. The years remaining subject to audit, by major jurisdiction, are as follows:

Jurisdiction			Fiscal Year
United States (Federal and state)			1999 - 2022
Germany			2019 - 2022
United Kingdom			2019 - 2022
Canada			2018 - 2022

We operate under a tax holiday in the Philippines, which is effective through December 31, 2023, and may be extended for another three years if certain additional requirements are satisfied. The tax holiday is conditional upon remaining in good standing, committing no violation of Philippine Economic Zone Authority Rules and Regulations, pertinent circulars and directives. The impact of this tax holiday was immaterial in in 2022, 2021, and 2020. We have been granted a tax holiday by the Malaysian Investment Development Authority (MIDA) in Malaysia, which will not be triggered until we commence operations. The tax incentive had no effect on foreign taxes during 2022, 2021, or 2020.

We have approximately $9.1 million of undistributed earnings attributable to operations in our controlled foreign corporations as of December 31, 2022. We assert that any foreign earnings will be indefinitely reinvested. Accordingly, we have not recorded a liability for taxes associated with these undistributed earnings. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.

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9. Employee Benefit Plans and Stockholders’ Equity

401(k) Plan

We have a defined contribution 401(k) retirement plan (the 401(k) Plan) covering substantially all employees in the United States that meet certain age requirements. Employees who participate in the 401(k) Plan may contribute up to 90% of their compensation each year, subject to Internal Revenue Service limitations and the terms and conditions of the plan. Under the terms of the 401(k) Plan, we may elect to match a discretionary percentage of contributions. We match 50% of contributions up to 5% of eligible compensation. Total matching contributions were $11.1 million, $9.9 million and $6.7 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

Employee Stock Purchase Plan (“ESPP”)

Under the 2015 Employee Stock Purchase Plan (the 2015 ESPP), amended in December 2019, eligible employees may purchase shares of our common stock at semi-annual intervals through periodic payroll deductions during defined Offering Periods. Payroll deductions may not exceed 10% of the participant’s cash compensation subject to certain limitations, and the purchase price will be 85% of the lower of the fair market value of the common stock at either the beginning of the applicable Offering Period or the Purchase Date. A total of 6.0 million shares of common stock are reserved for issuance under the 2015 ESPP. The 2015 ESPP shall continue until the earlier to occur of (a) termination of the 2015 ESPP by our Board of Directors, (b) issuance of all of the shares of common stock reserved for issuance under the plan, or (c) May 28, 2025.

We issued 292,552, 239,240 and 356,776 shares of common stock under the 2015 ESPP during the twelve months ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, approximately 2.9 million shares remained available for future issuance under the 2015 ESPP.

Equity Incentive Plans

In May 2015, we adopted the Amended and Restated 2015 Equity Incentive Plan (the 2015 Plan), which replaced our 2005 Equity Incentive Plan and provides for the grant of incentive and nonstatutory stock options, restricted stock, stock bonuses, stock appreciation rights, restricted stock units or RSUs, and performance stock units or PSUs to employees, directors or consultants of the Company. On May 30, 2019, our stockholders approved an increase to the maximum number of shares that may be issued under the 2015 Plan.

We are authorized to issue up to 39.2 million shares of our common stock under the 2015 Plan. As of December 31, 2022, approximately 15.3 million shares remained available for future issuance under the 2015 Plan. We issue new shares of common stock to satisfy RSU and PSU vesting under our employee equity incentive plans.

RSU awards typically vest in annual installments over three or four years and vesting is subject to continued service. PSUs are granted to a group of senior officers and the number of shares of our common stock to be received at vesting will range from 0% to 200% of the target award based on the achievement of pre-established performance and market goals. PSUs vest three years from the date of grant, subject to continued employment through that date.

Share Repurchase Program and Treasury Shares

Repurchased shares of our common stock are held as treasury shares until they are reissued or retired. When we reissue treasury stock, if the proceeds from the sale are more than the average price we paid to acquire the shares we record an increase in additional paid-in capital. Conversely, if the proceeds from the sale are less than the average price we paid to acquire the shares, we record a decrease in additional paid-in capital to the extent of increases previously recorded for similar transactions and a decrease in retained earnings for any remaining amount.

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The following table summarizes our treasury share activity for the periods shown. No treasury share activity occurred during the twelve months ended December 31, 2020.

						Twelve Months Ended December 31,
(In millions)						2022						2021
Shares issued in connection with 2023 Notes conversions						0.4						0.8
Shares received from Note Hedge						(0.3)						(1.0)
Shares issued in connection with the Restated Collaboration Agreement						2.9						—
Shares repurchased under the Share Repurchase Program						(6.6)						—

On July 26, 2022, a duly authorized committee of our Board of Directors authorized and approved a share repurchase program of up to $700.0 million of our outstanding common stock, with a repurchase period ending no later than June 30, 2023 (the “Share Repurchase Program”). Shares of common stock repurchased under the Share Repurchase Program become treasury shares. Repurchases of our common stock under the Share Repurchase Program may be made from time to time, on the open market, in privately negotiated transactions or by other methods, at our discretion, and in accordance with the limitations set forth in Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, and other applicable federal and state laws and regulations.

On August 1, 2022, we entered into an accelerated share repurchase (“ASR”) agreement with JPMorgan Chase Bank, National Association (“JP Morgan”) to repurchase up to $700.0 million of our common stock on an accelerated basis through September 29, 2022. On August 3, 2022, we paid $700.0 million to JP Morgan and received an initial delivery of approximately 3.0 million shares of common stock. The final notional amount under the ASR agreement was $557.7 million or approximately 6.6 million shares of our common stock based on the daily average volume-weighted average price of our common stock during the term of the ASR for the period from August 1, 2022 to August 31, 2022, less a discount. The ASR agreement concluded on September 1, 2022.

The ASR was a forward contract indexed to our own common stock. The forward contract met all of the applicable criteria for equity classification, so we did not account for it as a derivative instrument. We have reflected the shares delivered to us by the financial institution as treasury shares as of the dates they were delivered to us in computing weighted average shares outstanding for both basic and diluted net income per share.

Repurchased shares of our common stock are held as treasury shares until they are reissued or retired. We have not yet determined the ultimate disposition of repurchased shares and consequently we continue to hold them as treasury shares rather than retiring them. Future stock repurchases under the Share Repurchase Program are at the discretion of our management, and authorization of future stock repurchase programs is subject to the final determination of our Board of Directors. The Share Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time.

Stock Options

We have not granted any stock options since 2010. As of December 31, 2022 and December 31, 2021, we had no stock options outstanding. The total intrinsic value of stock options exercised during the twelve months ended December 31, 2020 was $7.9 million.

Equity Award Activity

All periods presented have also been adjusted to reflect the four-for-one stock split. Refer to Note 1, “Organization and Significant Accounting Policies,” to the consolidated financial statements for further information.

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A summary of RSU and PSU activity under the 2015 Plan for the twelve months ended December 31, 2022, 2021 and 2020 is as follows:

									Nonvested RSU and PSU Activity
(In millions, except weighted average grant date fair value)			Shares Available for Grant						Shares						Weighted Average Grant Date Fair Value						Aggregate Intrinsic Value
Balance at December 31, 2019			19.6						7.2						$	24.20
Granted			(2.0)						2.0						75.09
Vested			—						(4.1)						23.10
Forfeited			0.4						(0.4)						34.36
Balance at December 31, 2020			18.0						4.7						45.88						$	430.6
Granted			(1.7)						1.7						87.67
Vested			—						(2.9)						34.47
Forfeited			0.5						(0.5)						69.77
Balance at December 31, 2021			16.8						3.0						76.88						403.8
Granted			(1.9)						1.9						96.79
Vested			—						(1.6)						63.90
Forfeited			0.4						(0.4)						92.54
Balance at December 31, 2022			15.3						2.9						$	94.08					$	325.6

The total vest-date fair value of RSUs and PSUs that vested during the twelve months ended December 31, 2022, 2021 and 2020 was $160.1 million, $284.5 million and $331.8 million, respectively. As of December 31, 2022, 2.6 million unvested RSUs and 0.3 million unvested PSUs were outstanding under the 2015 Plan.

Share-based Compensation

Our share-based compensation expense is associated with RSUs, PSUs, and the 2015 ESPP. The following table summarizes the share-based compensation expense included in our consolidated statements of operations for the periods shown.

			Twelve Months Ended December 31,
(In millions)			2022						2021						2020
Cost of sales			$	11.1					$	8.5					$	14.6
Research and development			42.7						41.0						37.8
Selling, general and administrative			72.7						63.9						67.0
Total share-based compensation expense			$	126.5					$	113.4					$	119.4

We value RSUs at the date of grant using the intrinsic value method. We estimate the fair value of PSUs at the date of grant using the intrinsic value method and the probability that the specified performance criteria will be met. We estimate the fair value of ESPP purchase rights on the date of grant using the Black-Scholes option pricing model and the assumptions below for the specified reporting periods.

			Twelve Months Ended December 31,
			2022						2021						2020
Risk free interest rate			0.60% - 3.34%						0.06% - 0.07%						0.13% - 0.95%
Dividend yield			—		%				—		%				—		%
Expected volatility of Dexcom common stock			45% - 55%						36% - 45%						51% - 63%
Expected life (in years)			0.5						0.5						0.5

At December 31, 2022, unrecognized estimated compensation costs related to RSUs, PSUs, and the 2015 ESPP totaled $175.5 million and are expected to be recognized through 2026.

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10. Business Segment and Geographic Information

Reportable Segments

An operating segment is identified as a component of a business that has discrete financial information available and for which the chief operating decision maker must decide the level of resource allocation. In addition, the guidance for segment reporting indicates certain quantitative materiality thresholds. None of the components of our business meet the definition of an operating segment.

We currently consider our operations to be, and manage our business globally within, one reportable segment, which is consistent with how our President and Chief Executive Officer, who is our chief operating decision maker, reviews our business, makes investment and resource allocation decisions, and assesses operating performance.

Disaggregation of Revenue

We disaggregate revenue by geographic region and by major sales channel. We have determined that disaggregating revenue into these categories achieves the ASC Topic 606 disclosure objectives of depicting how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Dexcom is domiciled in the United States. We sell our CGM systems through a direct sales organization and through distribution arrangements that allow distributors to sell our products.

Revenue by geographic region

During the twelve months ended December 31, 2022, 2021 and 2020, no individual country outside the United States generated revenue that represented more than 10% of our total revenue. The table below sets forth revenue by our two primary geographical markets, the United States and outside of the United States, based on the geographic location to which we deliver the components. The majority of our long-lived assets are located in the United States.

			Twelve Months Ended December 31,
			2022												2021												2020
(Dollars in millions)			Amount						% of Total						Amount						% of Total						Amount						% of Total
United States			$	2,142.0					74		%				$	1,849.4					76		%				$	1,509.5					78		%
Outside of the United States			767.8						26		%				599.1						24		%				417.2						22		%
Total revenue			$	2,909.8					100		%				$	2,448.5					100		%				$	1,926.7					100		%

Revenue by customer sales channel

The following table sets forth revenue by major sales channel for the twelve months ended December 31, 2022, 2021 and 2020:

			Twelve Months Ended December 31,
			2022												2021												2020
(Dollars in millions)			Amount						% of Total						Amount						% of Total						Amount						% of Total
Distributor			$	2,470.8					85		%				$	2,024.3					83		%				$	1,437.6					75		%
Direct			439.0						15		%				424.2						17		%				489.1						25		%
Total revenue			$	2,909.8					100		%				$	2,448.5					100		%				$	1,926.7					100		%

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DexCom, Inc.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
(In millions)

Allowance for doubtful accounts
Balance at December 31, 2019			$	5.8
Provision for doubtful accounts			3.2
Write-offs and adjustments			(2.1)
Recoveries			0.3
Balance at December 31, 2020			$	7.2

Allowance for doubtful accounts
Balance at December 31, 2020			$	7.2
Provision for doubtful accounts			(1.4)
Write-offs and adjustments			(0.5)
Recoveries			0.1
Balance at December 31, 2021			$	5.4

Allowance for doubtful accounts
Balance at December 31, 2021			$	5.4
Provision for doubtful accounts			2.4
Write-offs and adjustments			(0.5)
Recoveries			—
Balance at December 31, 2022			$	7.3

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