Welcome to the Dexcom Q1 2021 earnings release conference call. My name is Adrian, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question and answer session. During the question and answer session, if you have a question, please press star, then one on your touchtone phone. Please note this conference is being recorded. Now to the caller is Sean Christensen. Sean, you may begin.
Thank you, Operator. Good afternoon, everyone. Welcome to Dexcom's Q1 2021 earnings call. Our agenda begins with Kevin Sayer, Dexcom's Chairman, President, and CEO, who will provide a summary of our progress, followed by a financial review and outlook from Jereme Sylvain, our Chief Financial Officer, and then an update from Quentin Blackford, our Chief Operating Officer, on the company's strategic initiatives and scaling progress. Following our prepared remarks, we'll open up the call for your questions. At that time, we ask analysts to limit themselves to one question so we can provide an opportunity for everyone participating today. Please note that there are also slides available related to our first quarter performance on the Dexcom investor relations website on the Events and Presentations page. With that, let's review our safe harbor statement. Some of the statements we will make in today's call may constitute forward-looking statements.
These statements reflect management's intentions, beliefs, and expectations about future events, strategies, competition, products, operating plans, and performance. All forward-looking statements included in this presentation are made as of the date hereof based on information currently available to Dexcom, are subject to various risks and uncertainties, and actual results could differ materially from those anticipated in the forward-looking statements. The factors that could cause actual results to differ materially from those expressed or implied by any of these forward-looking statements are detailed in Dexcom's annual report on Form 10-K, most recent quarterly report on Form 10-Q, and other filings with the Securities and Exchange Commission. Except as required by law, we assume no obligation to update any such forward-looking statements after the date of this presentation or to conform these forward-looking statements to actual results.
Additionally, during the call, we will discuss certain financial measures that have not been prepared in accordance with GAAP with respect to our non-GAAP and cash-based results. Unless otherwise noted, all references to financial metrics are presented on a non-GAAP basis. The presentation of this additional information should not be considered in isolation or as a substitute for results or superior to results prepared in accordance with GAAP. Please refer to the tables in our earnings release and the slides accompanying our Q1 earnings presentation for a reconciliation of these measures to their most directly comparable GAAP financial measure. Now, I will turn it over to Kevin.
Thank you, Sean, and thank you, everyone, for joining us. Today, we reported strong Q1 results with total revenue growth of 25% over the Q1 of 2020. As I often tell our employees, our ability to thrive as a company ultimately comes down to solving significant problems with a great product, and that is what we continue to see with G6. We hear incredible stories of improved glucose control, reduced disease burden, and people being empowered. Those responses have only increased as we've enhanced tools to better drive our customer experiences.
These stories are coming from multiple sources as well, whether it is coming from G6 users or their family members who are gaining better control of their glucose levels to real-time data, or clinicians who are empowered by the ability to gather unique insights into the diabetes treatment of their type one or type two patients and optimize therapy accordingly. Even new settings like nurses and doctors in the inpatient setting who are deploying CGM and learning about its potential to optimize workflows and benefit from our remote monitoring technology. New customer additions are off to a great start in 2021, especially in the U.S., as we continue to see growth across all channels, building from the increased access that we've gained over the past several years.
This includes continued traction for people with type 1 diabetes and type 2 intensively managed diabetes, both of which have continued the strong growth momentum that we've seen over the past couple of years. We're also seeing a growing number of type 2 non-intensive customers on G6, not only through our partnerships like UnitedHealthcare's Level2 program, but also including the other innovative programs and providers that are establishing early access to Dexcom CGM. We're also progressing our strategic commercial efforts with the remainder of our commercial sales force expansion completed in the Q1 and our direct consumer marketing efforts generating new levels of brand awareness. The Super Bowl commercial featuring Nick Jonas was a highlight for the company in the first quarter.
We were able to generate significant excitement for our employees and customers, many of whom have sent us pictures and stories of their pride and feeling represented during one of the biggest annual events in the world. We also contributed to a broader conversation in the diabetes community that we hope will help facilitate broader access to CGM in the future. The ad drove a record number of visitors to our website, a record for single-day new customer leads, and significantly more media impressions than we generated in all of 2020, and we are confident that there will be ongoing benefits that will come from the ad. In fact, according to the independent Harris Poll, Dexcom led all Super Bowl advertisers in brand equity growth. Overall, it was a great investment for the company, and I'm really proud of our team for pulling it together.
Our commercial efforts also include a strong push from our teams to expand access to Dexcom CGM technology internationally, both deeper in existing markets as well into new geographies. With Dexcom in the strongest inventory position in the company's history as a result of our scaling initiatives, we are aggressively advocating for broader access to our G6 systems for people with type 1 diabetes and intensively manage type 2 diabetes similar to what we have done here in the United States. Since we last reported in February, we have received confirmation from three additional Canadian provinces that they will begin covering Dexcom CGM. This is a great step forward in expanding access for people with diabetes. There is significant demand from customers and clinicians, and we are optimistic that we will continue this positive momentum in Canada with both the public and private payers over the coming months.
In certain reimbursed markets, we are proactively lowering price to significantly expand access to incremental customer populations. This positions us well to continue to grow sensor volume significantly now and into the future, and we believe the incremental volumes will more than offset the impact of price in the near term. In conjunction with our commercial initiatives and the growing CGM category awareness, we are advancing the clinical and regulatory path for our next generation G7 CGM system. As a reminder, we expect G7 to improve all aspects of the current customer experience offered with G6 in a disposable wearable that is less than half the size. We are working to prepare the submission for CE mark in accordance with the new medical device reporting standard in the EU. At this point, we remain on track for our target launch of G7 in the second half of 2021.
We also plan to present preliminary data on G7 performance at the upcoming ATTD conference in early June. Our trial that will support our U.S. ICGM filing is also well underway, and we received outstanding feedback from the investigators and patients involved. We expect to complete that trial in the current quarter, and will keep you updated as we progress towards regulatory approvals and launch. Even as we advance our strategic plans and have seen continued customer growth over the past year, the evidence of the global pandemic remains with us. We continue to navigate certain closures in territories that have seen cases spike, and our team remains focused on the three priorities that we have emphasized throughout the past year: the health and safety of our employees, continued supply of our customers, and service to our communities.
Toward this end, we were pleased to recently work with the state of Arizona to open the first indoor mass vaccination facility in Arizona to help the community as it transitions to the heat of the summer months. This facility rests within our Mesa distribution facility and has the capacity to support several thousand appointments per day. I am proud to lead a company whose employees are so dedicated to the service of our customers and willing to think creatively about what it means to be a leader in the communities that we serve. As we come back to Q1 results, I want to welcome a new voice to our earnings call, though it's familiar to many of you already.
Last month, we announced the promotion of Jereme Sylvain to the role of chief financial officer, and I am pleased to have Jereme join Quentin and I for his first Dexcom earnings call this afternoon. Jereme?
Thank you, Kevin. I'm excited to be with you today and in the new role as we advance our work together for people with diabetes. As a reminder, unless otherwise noted, the financial metrics presented today will be discussed on a non-GAAP basis. Reconciliations to GAAP can be found on today's earnings release as well as on our IR website. For the Q1 of 2021, we reported worldwide revenue of $505 million, compared to $405 million for the Q1 of 2020, representing growth of 25% on a reported basis and 23% on a constant currency basis. This is our seventh consecutive quarter of revenue growth of $100 million or more. Impressively, our revenue performance came against our toughest quarterly comparison in 2020 for both our U.S. and international businesses, as the Q1 of 2020 was largely unaffected by the COVID-19 pandemic.
We also saw nearly 40% global unit volume growth in the quarter, demonstrating the continued customer growth in the business. U.S. revenue totaled $381 million for the Q1 , compared to $292 million for the Q1 in 2020, representing growth of 30%. Our U.S. business was the primary driver of growth in the Q1 with our commercial efforts and rising CGM awareness driving solid volumes and an acceleration from our Q4 growth percentage. We believe that we are well-positioned to continue this momentum. Our DTC efforts are driving awareness of Dexcom CGM. We have new connected systems coming to market that build from years of collaborative work with our partners, and we have an expanded field sales force equipped with a product that our customers love.
Our international business reached another quarterly high watermark with a revenue of $124 million, or 10% growth on a reported basis compared to the Q1 of 2020. As we saw in the final Q3 of 2020, the impact of COVID-19 lockdowns has had a greater impact on new customer growth in certain international markets, which has a compounding effect on our reoccurring revenue model. Nevertheless, we delivered growth against our toughest quarterly comp of 2020, where international revenue grew 61% before the pandemic. We continue to see strong growth across a number of our markets, particularly in countries where the administrative requirements to access CGM are minimized via our e-commerce channel or via broad reimbursement. As many of you have seen, we've successfully reduced our manufacturing costs and intentionally increased sensor production capacity.
Through these manufacturing efficiencies and increased capacity, we are no longer restricted to focusing on high-risk, high-reimbursement populations. With this increased commercial flexibility, we are executing on our strategy to broaden access to our CGM technology by pushing deeper into existing markets we previously could not address. Through the incremental volumes generated by these efforts, we believe we will offset any near-term price impact while better positioning the company for long-term growth. Our first quarter gross profit was $343.9 million, or 68.1% of revenue, compared to 63.9% of revenue in the Q1 of 2020. The fact that we are driving margin expansion despite absorbing the channel mix impact associated with the acceleration of our U.S. business to the pharmacy channel is a testament to the work of our teams to drive down material and production costs.
Operating expenses were $297.5 million for the Q1 of 2021, compared to $215.4 million for the Q1 of 2020. The increase in operating expenses as a percentage of sales in the Q1 of 2021 is a result of several of the key initiatives that we outlined in our original 2021 guidance in February. This includes our expanded commercial efforts, with the doubling of our U.S. sales force and increased global DTC marketing efforts, both reflected in the quarterly results. In addition, the Q1 research and development expense includes costs associated with our large U.S. iCGM trial for G7, which will continue into the Q2 as we generate the data necessary to support our regulatory filing. Offsetting those strategic investments, we continue to gain leverage in our general administrative expenses in the quarter, demonstrating the benefits of our scaling initiatives.
To that end, as we've previously indicated, we have launched a global business services facility in Lithuania, which is now officially live and servicing our customers. Operating income was $46.4 million, or 9.2% of revenue in the Q1 of 2021, compared to $43.3 million or 10.7% of revenue in the same quarter of 2020, with 150 basis point decrease resulting from our strategic investments offset by our gross margin improvement. Adjusted EBITDA was $94.4 million, or 18.7% of revenue for the Q1 compared to $77.8 million, or 19.2% of revenue for Q1 of 2020. Net income for the Q1 was $32.8 million, or $0.33 per share.
We remain in a great financial position, closing the Q1 with more than $2.6 billion in cash or cash equivalents and well-positioned to continue our G7 scale up and remain opportunistic as we look to expand our growth opportunities. Turning to guidance, we expect some impact to new customer starts to continue during the ongoing global vaccine rollout, particularly in certain international markets, as well as continued higher than usual volumes in our U.S. Medicaid channel as the economy recovers. With a strong Q1 performance, as well as the currency benefit that we saw in the Q1 and continue to anticipate, we are pleased to be in a position to raise our full year 2021 revenue guidance. We now expect 2021 revenue to be between $2.26 billion-$2.36 billion, representing growth of 17%-22% over 2020.
This growth continues to factor in strong unit growth volumes, which are offsetting the impact of lower revenue per customer channels and our recent efforts to broaden access to Dexcom G6 in international markets, as well as the impact of currency. Turning to margins, we are affirming the full year 2021 targets previously established on our Q4 call. This includes non-GAAP results to be approximately at the following levels. Gross profit margins of approximately 65%, operating margins of approximately 13%. We continue to expect adjusted EBITDA margins to be approximately 23%. Finally, as you may have noticed, from a tax perspective, we have transitioned to profitability, and we'll have a tax rate applicable to earnings going forward. The call over to Quentin for a scale and strategy update.
Thank you, Jereme. It's been a pleasure to work alongside Jereme for the last seven years of our careers, and I am thrilled for him as he now steps into the CFO role. I look forward to watching him take this next step in his career and look forward to the many contributions that he'll make in his new role, while also excited by the opportunity to turn my attention much more broadly to our strategic and scaling efforts across the organization. Our teams remain incredibly focused on our strategic initiatives and are making great progress on several fronts. As Kevin mentioned, we are advancing our regulatory and clinical efforts for G7 and will present the first set of G7 data at the upcoming ATTD conference in early June.
As we press forward toward our G7 goals, we are making steady progress in our effort to scale G7 manufacturing to support our launches and the continued growth of our global customer base. In the near term, this includes the lines that we are building in our San Diego and Mesa, Arizona facilities. We've also broken ground on our manufacturing site in Malaysia, which we expect to enable us to significantly scale our G7 production capacity to serve meaningfully more customers as we continue to grow our business in the years to come. Even with G7 on the horizon, we remain committed to building on the leading customer experience that we have established for users of our G6 system. Following a December regulatory approval in the U.S., we rolled out an update to the G6 algorithm in the Q1.
We believe this update will drive further reductions to times in which data is temporarily unavailable and have seen excellent results from the initial launch of this updated algorithm in Canada in 2020. These are the kinds of incremental improvements that we are always looking to provide, and they are contributing to our strong customer retention and satisfaction levels reflected in our industry-leading net promoter scores. On the insulin delivery front, we were encouraged to see the great results from the Omnipod five pivotal trial presented at ENDO 2021 and look forward to the upcoming launch of that system for our Dexcom customers using the Omnipod pump.
With this launch and Omnipod's differentiated patch pump form factor, as well as Tandem's continued market traction with their Dexcom connected Control-IQ, we believe that we are very well positioned to continue to benefit from the growing appreciation for these automated insulin delivery systems. Similarly, we continue to advance our development with Eli Lilly, Novo Nordisk, and more recently, Ypsomed, leaving us in a strong position in future years as people with diabetes stand to benefit from greater variety in their choices for Bluetooth connected insulin delivery options that integrate Dexcom CGM.
We've discussed the excellent Q1 performance in our U.S. IIT market, as well as some of the key strategic initiatives that we are undertaking to expand access in our international markets. We are also making excellent progress in our effort to drive the third pillar of near-term growth that we highlighted at our 2020 Investor Day, the non-intensive type two market. As we've mentioned before, we are taking multi-channel approach to enabling access to Dexcom CGM in the absence of widespread reimbursement. This involves direct work with payers, digital health programs, healthcare providers, and integrated networks, as well as the patients themselves. The early rollout of Level two is progressing well as we continue to see that program expand. Our teams are working well with the UnitedHealthcare team to optimize the experience for members using our G6 system as part of that program.
We also worked with several partners to expand their use of G6 in their respective type two populations in the first quarter. This includes the initiation of commercial pilots with Teladoc Health's Livongo for Diabetes platform, as well as with Welldoc. Everside Health also announced that it will offer G6 to its members with type 2 diabetes in its Healthstat business unit, and we are proceeding there now in a pilot phase. This relationship builds from our initial work with Healthstat over the previous two years, including the use of Dexcom CGM in a pilot for health screenings at on-site clinics. Each of these relationships is expanding the pool of customers who can access our technology while generating evidence of the utility of Dexcom CGM for the broader type 2 market that we believe will drive access and awareness in the future.
Beyond these core growth initiatives, our teams continue to advance innovative research and product development that we feel will contribute to long-term growth for Dexcom. This includes the hospital market, where we are generating data via our patient registry and receiving great feedback as many hospitals across America continue to take advantage of the FDA's temporary allowance to use Dexcom CGM in the inpatient setting during the pandemic. This also includes several clinical studies assessing the use of Dexcom CGM for better management of gestational diabetes, a solution that we believe can enhance the outcomes for both the mother and the child. Finally, we continue to access next-generation technologies that we believe can build from the sensor platform that we've established with G6 and G7. We look forward to updating you as we progress. With that, I will pass it back to Kevin.
Thanks, Quentin. As you can see, we're off to a great start to the year and working hard to execute on the strategic pathway that we've laid out for 2021. I would now like to open up the call for Q&A. Sean?
Thank you, Kevin. As a reminder, we ask our audience to limit themselves to only one question at this time and then reenter the queue if necessary. Operator, please provide the Q&A instructions.
Thank you. We'll now begin the question and answer session. If you have a question, please press star then one on your touch-tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have an audio question, please press star then one on your touch-tone phone. We're standing by for questions. Our first question comes from Jeff Johnson from Baird. Your line is open.
Thank you. Good afternoon, guys. I'll put it into a multi-part question, I guess, but Kevin, I think it's officially one question. On the channel mix headwinds that we've been talking about here the last six to eight quarters or so, is it still fair to be thinking around $200 million ± this year? Given the exit rate from 4Q of 2020, still fair to think a little bit of that is front-end loaded? When I look at your 30% U.S. growth, it would seem like if I X out the channel headwinds, the pricing headwinds there, volumes must have grown well north of 40%. If you could just confirm that from a pricing versus volume mix in 1Q U.S. number, that would be helpful as well. Thanks, guys.
Jereme will take that one, Jeff.
Jeff, to your question on what the channel mix headwinds are, we will just tell you what the numbers were for the quarter. It was about $50 million for the quarter. If you recall, we talked about it being a little bit more straight-lined over the course of 2021 due to comps. The one thing we have talked about, Kevin referred to it on the call, as did I, is that we are going to be a little more aggressive in international markets. Because of that, we are raising what we call channel mix/pricing headwinds to about $250 million on the year. That obviously takes into account the aggressive steps we are taking outside the U.S. In terms of your question in terms of growth and unit volume, we talked about unit volume approaching 40% on a global basis.
When you take the channel mix headwinds we talked about, you are correct. The U.S. unit volume growth was well in excess of that, obviously being the stronger point of the quarter from a growth perspective. You are seeing that performance on the quarter.
Our next question comes from Joanne Wuensch from Citibank. Your line is open.
Thank you very much. Can I go back to what you just said, please? To be clear, the $50 million in the quarter, how much of that was U.S. versus OUS?
Yeah. Joanne, we generally don't break down the two. What we did talk about was $50 million is the global. A majority of that has traditionally been the channel mix from DME into pharmacy. When we give that number, we give a global number. That was $50 million globally on the quarter. Again, heavily weighted U.S.
Okay. I'm going to sneak one more in because that was a clarification. Is there any reason that it's not possible for G7 to be in the U.S. by the end of this year?
We're not giving any Dexcom G7 timelines other than we will launch it by the end of the year. As I said in the earlier portion of our remarks. Our U.S. pivotal study will conclude this quarter, then we'll file. We're working on our filing in Europe under MDR rules for CE Mark, we'll go from there. Time will tell, everything is going well. We're happy with the progress of the product. We're extremely happy with the feedback we've gotten from clinicians and patients. In fact, one clinician called me this morning in between our prep for this call to tell me how great the product was. We're very happy with it, we're not going to give any other timelines than what we have so far.
Our next question comes from Robbie Marcus from J.P. Morgan.
Great. Congrats on a nice quarter, thanks for taking the question. I wanted to talk about the guidance raise. It was more than the beat you had in the Q1 . Maybe walk us through your new patient assumptions and what's driving that U.S. versus OUS. If you could comment at all on how the early trends of the Super Bowl and increased DTC spend and sales force doubling has benefited the company so far, and what to expect in 2021. Thanks.
Sure. Yeah, we can walk you through it. The guidance raise was approximately $25 million of it was currency. We referenced some of the foreign currency tailwinds associated with it. The other half was related to volume growth, expected both in the Q1 and on the balance of the year. In terms of what we saw in terms of new patient adds in the Q1 , new patient adds were slightly ahead of expectations. That's really as we look to the balance of the year, certainly those repeat customers obviously play through in the balance of revenue for the year, and so we've added that to the guidance. We still are bullish on the year. We still expect to have a very strong year. I didn't think there was any question there.
I think if you see the performance in the U.S. results, I think you're obviously seeing, to your second question, a lot of the DTC, a lot of the Super Bowl ads, as well as the new sales force ads starting to really play through. Not to mention, the fact that we have a sampling program that's out there that is starting to allow folks to trial the product, which we think is garnering interest as well. That's all been contemplated in the guidance as we lay it out, and I think what you'd say is for the balance of the year, I do think you are seeing the momentum continue to support raising what we raised it by.
Robbie, the one thing I'd add to that is, as Jereme laid out in the prepared remarks, our decision on the international markets with respect to opening up access, I do expect you're going to see that new patient number continue to perform very nicely in the back half of the year as we're accessing markets that are five to 6x larger than what we had coming into the year in some of these markets. Very excited about where that new patient number potentially goes to.
Our next question comes from Matthew O'Brien from Piper Sandler. Your line is open.
Afternoon. Thanks for taking the question. Just to follow up on the pricing commentary. The $200-$250 is obviously a pretty meaningful increase. We've got FreeStyle Libre three over in Germany now. You're talking about being more aggressive in terms of lowering pricing OUS, I think, for more access. Is it a function of FreeStyle Libre three? You're trying to be aggressive in front of a more broad launch there with Dexcom G6 over there? Is that a reason why you're increasing the pricing concessions right now? What does that say about when three comes to the U.S., and how can Dexcom G7 kind of offset that?
We've not made our decisions based on Libre three, Mathew. We've looked at what we accomplished in the U.S. here. What we've done is we've increased access by going to the pharmacy channel by looking at Medicare approval, for example, which came in at a lower price than what our DME price was before. As we've set up Medicaid pricing structures in the U.S. that are yet once again, a pricing structure lower than what we had before, but to increase access to a number of patients. We have looked at our OUS business in several of our key geographies and said, you know what? Our access is not broad enough. Our access is very much focused on very intensively managed type 1s, oftentimes just children or adults with pumps or adults with incredibly bad hypoglycemia awareness or something along those lines.
It's more important to us to reach more patients. We've taken the strategy we've used in the U.S., and we're deploying it in other places as well to increase our access. We won't let Libre three drive our decisions. We'll drive our own.
I think one important thing to note there is the pricing point. It's always been part of our global pricing strategy, and the level that we're going to is still very much in line with where we're at in the U.S. pharmacy channel, to be honest with you. We're just stepping down as we've had inventory availability now. We're in the best position we've ever been in from that perspective. We know we've got to reduce the burdens to get on the product. We're in a position now to continue to execute against that global pricing strategy. This is very much part of where we were heading. It doesn't create risk elsewhere globally. Like I mentioned, it's right in line with our U.S. pharmacy pricing if you get into the comps. We're excited about what this has the potential to create for us.
Our next question comes from Bob Hopkins from Bank of America.
Great. Thank you, and good afternoon. I just wanted to ask a question on G7. I was wondering if you could comment on two things. First thing, I just wanted to clarify, when do you expect to file CE Mark in Europe? I thought that was something that was going to happen or might have happened already. Secondly, I was wondering if you just could comment on the upcoming data that we're going to see on G7, just maybe help give us a sense of just what we're going to see and how meaningful it might be and just a little bit more detail there would be great. Thank you.
Well, G7, we have not filed yet. We will file it in the not too distant future, we need all our ducks in a row. For example, we want to file both the Android and the iOS app at the same time, not file one and then do another filing. Making sure our software is validated and verified is really one of the bigger tasks. The clinical data is in, and we're ready with that part of the filing, and we've had direct discussions with our authorities over there, and we feel we're in good shape, but we'll file when we're ready. We don't want to do it twice and spend a lot of time answering questions. With respect to the data that we'll present here in the summer, it will be on some of the smaller studies that we've done.
It will not be on any of the U.S. pivotal data, obviously. You'll see how the product performs and how consistent and how happy we are with it. Obviously, I'm happy with the data, as is our team. I've made the comment on several times, when all is said and done, everything you love about G6, you're going to love more about G7. When that product comes to market, that's exactly how we're going to feel about it, not only from the smaller wearable and the easier insertion and all the other wonderful patient ease-of-use features we're putting in there, but the software, the app, and the performance of the system, we believe is going to be spectacular, and again, set a real standard for people to go over.
Our next question comes from Kyle Rose from Canaccord. Your line is open.
Great. Thank you very much. We wanted to talk about a few of the commercial initiatives in the U.S. Obviously, it's still early in the sampling program. You've just completed the doubling of the sales force, and shifting some of the focus to more on the primary care. Maybe just help us understand how some of those initiatives have played out in the early days with respect to the Q1 and early in the Q2. Just are there any metrics or is there any sort of goalposts you can help me frame the early execution on those initiatives for us, and how do we think about that as we move through 2021?
Sure. I'll take a quick shot at the sampling and then hand it over to Kevin here. There aren't any metrics that we're going to disclose particular to sampling in and of itself. Although I will tell you, the early response to this program has been beyond our expectations, both from a physician's perspective of just how easy we've enabled these PCPs to get product into the hands of our patients, and then also from a patient perspective when they realize just how easy it is to use the Dexcom product. The sampling program has been beyond what we imagined coming out of the gate. It will continue to be a big part of what we do into the future. In terms of giving specific metrics around it, that's not something we will do.
I will tell you, it's one of the better investments that we look to make at this point.
Yeah, I'd agree with that. With respect to the sales force, we've added everybody we were going to add. Everybody's in place, and everybody's getting up to speed. Some of the people came from a diabetes background, so they get up to speed easier because they have relationships already established in these offices, possibly from another company. Others, it's going to take a little while longer, and we plan for that as we do this expansion. As far as calling on more voices, we are learning that in all fairness, we've been underserved with respect to our ability to call on people. There's a great story we heard from down in Texas. One of our reps called on a physician and talked to him about our product, and the doctor said, "I know nothing about your product.
I've put people on your competitor's product because they come and ask me for it. Again, using the sample program that Quentin described with Hello Dexcom, we put this patient on the system, introduced the physician to it, and now he's prescribing Dexcom all the time because of the experience that patient had. We needed a deeper reach. We'll get that deeper reach with what we've done, and we'll continue to evaluate over time. We've got tremendous metrics on our salespeople. We have an incredible commercial organization that monitors that. We also very much understand it takes a while to get up to speed. The other great thing I can tell you about this expansion, we literally had thousands of people apply for these jobs and a lot of very qualified people that we did not hire.
This is a place that people want to work and a product that they really want to represent, and we want to continue that culture and maintain that.
Our next question comes from Mathew Blackman from Stifel. Your line is open.
Hi. Good afternoon, everybody. Thanks for taking my question. I wanted to follow up on the OUS pricing strategy and sort of a multi-part question here. Is the incremental $50 million headwind you called out isolated to 2021, or will these price headwinds continue beyond 2021 outside the U.S.? If I think about the full-year guidance range raise of about $50 million, I think about half of that you said is underlying outperformance. That's also in the face of another $50 million headwind on price. Is it fair to say that the guidance range raise is actually closer to, call it, $75 million ex FX on an underlying basis? Thanks.
Yeah. Good question. Let's go step by step. In terms of your question on the international pricing, a majority of the raise is our strategy outside the U.S. What you are seeing is we are taking an incremental $50 million of, call it, mix headwinds as a result of going into there. We still, yes, you're right, we did raise guidance in the face of that by $50 million, of which $25 was currency. Absent that incremental, yes, you would have seen a $75 million. Now we are going to be taking those pricing headwinds, and we're going to be taking those pricing headwinds and making up for it in incremental volume. It's obviously net neutral to the full-year guide. You are correct.
Absent taking on that strategy or because of that strategy, we expect to add new patients to the point where it increases our full-year outlook.
Our next question comes from Nate Taylor from UBS. Your line is open.
Hi, thanks for taking the question. Okay, I'd like to ask one just about the U.S. momentum improvement. That was impressive, and you called out the factors. Is it possible for you to say which of the DTC sampling and sales force you think contributed more to that? Which of those is still more to come? Is it just all equal?
I think they're all more to come, and I think they're relatively equal. As I called out on the call, the effect of the Super Bowl ad was more than just short-term sales growth, in our minds. The awareness we generated, the text messages I was getting during the Super Bowl from industry and technology executives that I've met over the years made it all worth it. I'm just sitting on the couch saying, "Hey, this is really cool." It really created a lot of awareness for our company, awareness we hadn't had before, and that was really the goal, as we talked about. We developed more brand equity from our ad than anybody else, so that was important to us. The DTC remains important. As you watch our ads, you'll see certainly more with Nick and certainly other campaigns as well.
On top of that, having more feet on the street's good. We needed it, but it will take time to develop those relationships. I think of the three, I couldn't quantify one of them, but I think ultimately, the sales force expansion will be extremely helpful in this. We probably got less bang out of that just because we were ramping it up in the Q1 , but the DTC work and the Super Bowl ad, that was probably the biggest. Hello Dexcom, and the reps will come more throughout the rest of the year.
Our next question comes from Jayson Bedford from Raymond James.
Hi, good afternoon. Somewhat similar to the last question. The Q1 strength in the U.S., much better than historical seasonality. I'm just wondering, is this more a function of just the channel shifts that have gone on in the business, or a function of the new momentum that you've seen perhaps from some of these new initiatives? I know it's a tough question, if there's any way to parse that out, that would be helpful.
Sure. Yeah. Good question. Some of that is a bit of a change in shift in dynamics, and you're absolutely right, as more and more goes to the pharmacy, I think you are seeing that neutralization, if you will, of the Q4, Q1 dynamic. One thing we did see this quarter, and we thought it was certainly a testament to the work that our customer experience team is doing, is we saw a slight decline in attrition and a slight increase in utilization. As you think about the customer experience that we're trying to create here, we've been talking about increases in net promoter scores. That's starting to play through in customer utilization habits. That's certainly something we saw a little bit of. Then I think what we also saw is just a little bit of incremental performance.
We saw some of the performance outpace expectations. I think what we talked about is an expectation of new patient growth, slightly outpacing it, as a result of increased awareness as a result of DTC. I think it's all three of those coming together.
Our next question comes from Chris Pasquale from Guggenheim. Your line is open.
Thanks. Two quick questions for Jereme on the margin front. First, just given how strong gross margin was in 1Q, I was hoping you could talk about why 65% is the right number for the full year. Your audio cut out a little bit when you were talking about the tax rate. If you could just go back to that and what you're expecting for an overall tax rate this year, that'd be great. Thanks.
Sure. I'll start with the latter first. We expect the tax rate for the year to be, a non-GAAP tax rate, between 23% and 25%. Back to your question on margins. We did have a great quarter in Q1. Certainly, we're very proud of the 68%. The one thing we do want to do is, first off, it's the Q1 , so we think about it from a Q1 and really thinking about before taking a look at changing anything, being mindful that we want to see things play out over time. There's really two components you have to be aware of. We do expect to take on incremental channel mix headwinds in our international markets for the back half of the year. We have to contemplate that in light of some of the efficiencies you're starting to see.
Getting back to our previous discussions about the drivers when we set guidance is, in the back half of the year is when we're going to launch G7. When we launch G7, the yield that you get on some of these lines generally is a little lower. You saw it also happen with our launch of G6. There's a little bit of step back as you start to work out the kinks of these lines and the yields start to play out. As those play out in the back half of the year, that's why we feel very comfortable with our guidance, but we didn't feel any need to raise it at this point and let the year play out.
Our next question comes from Cecilia Furlong from Morgan Stanley.
Great. Thanks for taking our questions. I basically just wanted to go back to the pricing headwinds, just in light of increasing ex US headwinds, should we expect your 2Q ex US results to look more like they did in 2019, just in terms of relatively flat sequential performance? Or can you really still grow ex US revenues quarter-over-quarter before G7?
I don't think we're going to get into details of providing specific guidance around U.S. versus OUS, particularly at a quarterly level. I think we're incredibly bullish on where the international business can go. There's so much runway that continues to sit in front of us. A big part of that is continuing to step into this global pricing strategy that we've laid out.
Over a multi-year basis. Really what you're seeing with the pricing decisions today is that we're in a position now where we can pull some of those decisions forward where we couldn't have historically. A lot of that comes down to having inventory available to us, being highly confident in the ability to continue to grow and scale the levels of production as we go into the future. I'm confident you're going to see terrific results coming out of that international business over time. With some of these decisions that we've made, we're now opening up access to patient volumes that are 5x or 6x larger than what we were really addressing historically. I think all of that sets up very well for a very strong international business here into the future.
Our next question comes from Danielle Antalffy from SVB Leerink. Your line is open.
Hey, good afternoon, everyone. Thanks so much for taking the question. I was just wondering if you could talk a little bit about the potential impact from doubling the sales force, and specifically as it relates to the primary care physician. I'm curious if you guys have this detail as to what % of your prescribing physicians are coming from primary care today, so we can sort of have a sense of with the sales force doubling and better calling on the primary care, how many more physicians you could potentially capture. Thanks so much.
Well, this is Kevin. I'll take that. Very little comes from that channel right now. That's why we added them, and that's why we've expanded. If you take a look at the Type two intensive insulin users, most of them are found in those offices, and that's why we needed to get out there. Over time, this will certainly increase. We expect it to, and those are the expectations of the team we brought on board. We're hearing good anecdotal stories, and things are starting to heat up. In all reality, Danielle, with the large book of business we already have and the recurring orders from our current patients, we got a ways to go. We think they'll do great, and we'll monitor it. If we see great returns, we'll just keep giving them tools to get great returns is the best way to describe it.
I think Hello Dexcom is going to be the best one that we have for that group.
Our next question comes from Ravi Misra from Berenberg Capital, and your line is open.
Hi. Thanks for taking the questions. Good evening. Congrats, Jereme and Quentin, on the moves. A lot of management changes over at Dexcom or rotations, I guess, over the last year or so. The question I had, I guess I wanted to go after the gross margin and pricing commentary from maybe a different angle. When you had the similar type of pricing impact in the U.S., when you started going the pharma channel, we really saw a pretty strong level of uptake through that arena, albeit the pricing headwind continues. I guess what I'm trying to ask is, does guidance factor in that type of immediate impact from the price cut, I guess, in Europe? Do you think that $50 million is the kind of extent of it as we go forward here? Thanks.
Yeah, sure. I can take that. Our gross margin certainly contemplates the impact of pricing impacts in our international markets. I wouldn't expect any changes there. In terms of the extent of it, as we go after these incremental markets and open up access, we almost look at that as new patients. When we go after new patients and new markets, certainly pricing is going to change over time. There could be impacts that drag out over time into future years as a result of just going after incremental pockets of patients, and any sort of knock-along impact. Certainly not anything that we would expect to be significant. That will always be contemplated in our guidance, and it'll all be something that we certainly talk to on these calls.
I wouldn't expect anything that we provide hasn't been thought through and contemplated in any of the targets that we provide to you guys.
Our next question comes from Marie Thibault from BTIG. Your line is open.
Hi. Good evening. Thanks for taking the questions and congrats to you as well, Jereme. I wanted to ask a question on OUS. I understand that the impact of COVID last year obviously having a impact on revenue this year. Curious if you're still seeing a COVID impact in this Q1 quarter as well as the existing quarter here in terms of that still affecting new patient starts. We've certainly heard from other companies that Europe is lagging on the vaccine rollout. Would love to hear if that's been contemplated in guidance, and if so, how you expect that to change over the year. Thanks.
I think from our perspective, all that we know right now is kind of the environment we operate within with respect to COVID, which we know from an international perspective has certainly created some incremental pressure in pockets of that business, particularly those that require in-clinic visit to get onto the product or some of those administrative hurdles that have been put there. In other channels where we have e-commerce, for example, we're seeing incredible results. I think one thing to point out on that first quarter international result is that when you look at it from a two-year growth perspective, it's an incredibly strong number. Last year was an absolute record growth for us in that Q1 from an international perspective. I think you got to normalize that when you're looking at that first quarter growth.
In terms of the remainder of the year on an international basis and patient adoption, a big part of stepping price down in line with kind of our global pricing strategy was the fact that we had to see administrative requirements reduced or eliminated altogether to get patients onto the product. In these markets where we've done that, the hurdle to get onto the product has been removed. We absolutely would expect to see new patient acquisition become much easier for us and see that start to take off in a very positive way. I do think you're going to see that uptick over the course of the year, even in the COVID environment, with, of course, the caveat being that it kind of stays stable to where it's at today.
If it were to get worse in some case, then we might have to think about that differently. We're trying to look at the future based upon what we see today and how it's impacted the markets here in the moment.
Our next question comes from Larry Biegelsen from Wells Fargo. Your line is open.
Hey, guys. Thanks for taking the question. On pricing, once G7 and FreeStyle Libre three are competing with each other, how much of a price premium do you think is sustainable? How close do you think you are to that premium today in the U.S. and outside the U.S., and do you see the opportunity to price G6 as a value brand? Thanks for taking the question.
Larry, thanks for your question. We have numerous opportunities here. I'm not going to give our pricing strategy on earnings call. We're very thoughtful about this. We run several models. We know what our technology's worth. We know what great benefit we provide. We'll price it accordingly. We're also going to price our products in a manner to whereby our patients have access to it as well. I think our commercial team, combined with our finance team and everybody who's done a wonderful job balancing that, will continue to balance. Will continue to grow as well. Look at the volume growth versus our dollar growth this quarter. We already said our U.S. volumes were in excess of the overall volume growth. We've managed it extremely well. We'll continue to do so.
Our next question comes from Anthony Petrone from Jefferies. Your line is open.
Thanks. A couple questions, one on G7, one on margins as well. On G7, trying to get a sense when you look at U.S. timing to entry and efforts to get ICGM. Do you think the market actually behaves differently? In other words, new patient starts potentially slow a bit as the new form factor is coming to market? On margins, taking the other side, the COG side specifically, breaking ground in Malaysia. Maybe just an update on timing as to when FDA inspections will take place for that facility, and just a recap of what that can do on the COG side for sensors on a per unit basis. Thanks a lot.
I'll take the latter part of that. With respect to Malaysia, we're clearly well into that project, making great progress. We'll have a building in place as we exit the year, with plans in place to have a clean room up and ready for validation right at the turn of the year into the Q1 of next year. The expectation is we'll be producing product out of that in the first half of next year there in Malaysia. Very excited about what we're seeing there.
Yeah, I'll take the G6, G7, and the cut-over question. Again, with respect to U.S. timing, we've not disclosed anything. One of our great learnings on G6 was have enough product ready to go when you go, and really be fully ready for launch. We've made that commitment to our customers that we will be ready when we do launch this product, that we will be able to literally flip a switch and go over. As far as patients slowing their purchases of G6, in particular in the pharmacy channel, you're buying one month of product at a time. It's not like you're going in there and loading up with three to six months as we did in the past in the DME channel.
Even in the DME channel today, there's less of that loading up by patients with G6 than there was in G5 and G4 prior to that. We don't view that people will quit purchasing their G6s when G7 is announced, because in all fairness, our customers can't live without it. When we have the opportunity to take care of them all, what we'll do is as organized but as rapid a migration as we possibly can. As far as G6 future plans, we do see a lot of opportunity here, but we really haven't disclosed anything.
Our next question comes from Steven Lichtman from Oppenheimer. Your line is open.
Great. Thanks for taking our questions. Just had a question on your international expansion efforts. What are some of the key countries and focus for you here over the near term? Are you anticipating any contribution from these new regions in this year's guidance? Is that really more of a driver for 2022? Thank you.
Yeah, I think that'll be more of a driver for future years. We've talked about our launch in Japan with Terumo, and that's scheduled to happen in the second half of the year. We got reimbursement in France, as many of you know. We do expect France to be a bigger part of our business than it has in the past. The law of large numbers in our business is things have gotten so big, they can't give us a whole lot that moves the needle when we start. Hence, the discussion we've had about increasing access in our more mature markets and looking at how we follow similar paths in these other geographies. With the operating capability we have now, there's no sense in going through and selling just the top end of this market. We want to get more aggressive and be more broad.
I think you'll see as we go into these geographies over time, we'll start as we've started in the past, but we are going to get more reimbursement and try to get more patients more rapidly.
Our next question comes from Brandon Vazquez from William Blair. Your line is open.
Hi, thanks for taking the question. I just wanted to go back to one of the comments made during the prepared remarks. It sounded like there was maybe a little hinting at new connected systems coming this year. Just curious if you could talk about those, and specifically what those kind of products. I'm thinking, is there something outside of the regular hardware upgrades that we see, maybe somewhere on the software side, that could be a catalyst maybe for growth within maybe some of the TAM expansion opportunities like the type 2 non-intensives or gestational diabetes or anything like that? Is there anything we're kind of not thinking out of the box here from the normal hardware that will be important in the coming 12 months or so?
I don't think that there's anything that you guys are missing in terms of the prepared remarks and speaking to some of those systems. The one thing that we certainly are excited about has to be the Omnipod five product in the back half of the year. We'll let Insulet speak to the exact timing of when we're ready to put that product into the marketplace. Having connectivity into a product like that is something that we're very excited about and believe that they'll have success with, and we'll have success with as well. I think with respect to the whole type 2 population and the opportunity there, we couldn't be more bullish on the opportunity that sits in front of us.
I think by the day, we learn more and more that increases that bullishness for us and the confidence that there's going to be some real opportunity there to create value coming from it. You're going to see a study a little bit later this year, mid-year, at some of the mid-year society meetings, that's going to start to really lay out the benefit of using CGM relative to BGM in this type two population, particularly the non-intensive population, that just demonstrates the sort of impact we can have on patients, say, that are on basal only. That's a 4 million patient population in the U.S. I think that sort of data starts to really accumulate in favor of opening up a whole other market segment that doubles the existing core U.S. intensive market today that we're very excited about.
You'll see that data here mid-year, but I think all of it starts to point to the fact that this Type two space is going to open up in a significant way, and we're well positioned to take advantage of it.
That concludes the question and answer session. I'll turn the call back over to Kevin Sayer for final remarks.
Thank you, thanks everybody for participating. As we wrap up our call today, I want to take a minute to acknowledge some very important recognition that Dexcom received this week. Forbes recently published their 100 company list of America's Best Employers for Diversity. Dexcom was honored to be number 66 on that list. While we consider this a perpetual journey, we're very happy to have been recognized for some of the work that we've done so far. As far as our outlook on the business going forward, our great quarter fuels our continued belief that the best is yet to come. I recently caught up with a friend who's a long-time healthcare industry executive, the gist of his message to me was very simple. Everything important in diabetes care is going to revolve around CGM.
For example, there are numerous insulin delivery devices and algorithms available for automated insulin delivery. There's only one CGM commercially capable of delivering the patient experience and outcomes that we've all envisioned for a very long time, and that's only the beginning. There are incredible new compounds, treatments, and programs stepping forward for the treatment of type 2 diabetes, and we are very confident that the right CGM experience will become an integral part of all these solutions. We haven't even started talking about the difference we can make as part of a pre-diabetes program. We've never been more excited and engaged in our opportunity than we are today. Thank you again, everyone, and have a great day.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.