BC TRADING
Saved by @jacobhtml

1/ How to review quarterly earnings 🧵

A step by step guide using $DXCM as an example

⬇️

 2/ The BIG question: Is the thesis on track❓

Other question:

❓Is revenue growing?
❓Are margins stable/expanding?
❓Profits?
❓Balance sheet?
❓New opportunities?
❓New threats?
3/ I open 4 browser tabs

Tab 1 - Current company earnings report / shareholder letter

Tab 2 - Previous company earnings report / shareholder letter (check guidance)

Tab 3 - Analyst estimates

Tab 4 - Call Transcript
4/ Tabs 1 & 2 - Find the current & previous earnings report

I search "Dexcom Investor Relations"

I click on "press release"

Open the newest quarterly earnings report and last quarter

It can also be a shareholder letter/presentation
5/ Tab 3 - Find the quarterly analyst estimates

Open up $DXCM in yahoo finance

The "news" section usually has a link to reports on whether the company beat/met estimates

The "analysis" tab is a good source, but sometimes it updates to the next quarter too quickly
6/ Tab 4 - Find a transcript of the earnings call

@themotleyfool transcripts are best

Sometimes links are on Yahoo Finance news

Search "Fool DXCM Transcript" if not

Seekingalpha / NASDAQ are two other free sources
7/ In most recent earnings, I check the headline numbers:

Revenue growth: 23% to $569 million
Revenue vs. Wall Street expectations (beat by 1.88%)✅

non-gaap EPS growth: -21% to $0.91

EPS vs. Wall Street expectations (meet expectation)✅
8/ Results vs. guidance

Management issued yearly guidance for 2020 in Q3 2020

Revenue +29% to $1.9 billion (actual +31% to $1.93 billion)✅

Non-GAAP Gross margin 66% (actual 66.7%)✅

Non-GAAP Operating margin 16% (actual 16.5%)✅
9/ Balance Sheet

$2.71 billion cash

$1.67 billion long-term convertible notes
10/

Margins

Use transcript / press release / or calculate yourself

Gross 70.2% vs. 66.8% (gross profit grew faster than revenue)

Non-gaap Operating: 18.3% vs. 22.5% (investigate!)

non-gaap Net: 15.8% vs. 22.9% (investigate!)
11/

News from press release?

✅Building out salesforce (explains operating margin & net margin drop)

✅Reimbursement in France
12/

Read through transcript:

✅Gross margin ⬆️ from new manufacturing facility

✅Super bowl commerical

✅New service center in Lithuania

✅New manufacturing site in Malaysia

✅New sensor launching in 2nd half 2021

✅Enter VC space
13/ Transcript

✅50% of sales now coming through pharmacy

✅International sales 35% of revenue

✅International DTC campaign launching
14/

2021 Guidance:

Revenue:
Management expects 15% to 20% growth

Wall Street expects 21%

Margins:
Gross ⬇️ to 65%
Operating ⬇️ 13%
15/

Management has a long history of under-promising & over-delivering, so I view these numbers as the floor, not the ceiling
16/

My big takeaways:

✅Revenue growing
✅Gross margin expanding
✅International expansion
✅Reinvestment year causing bottom-line to look worse
🛑2021 Margins will be weak
✅Move to pharmacy working
✅G7 launching in 2021
✅VC fund adds optionality

THESIS ON TRACK
17/

If you own $DXCM, the best move is to continue to do nothing
18/

Best guess is that $DXCM is in the top of the 5th inning of its growth cycle
19/ I email financial graphics like these every day for free

Interested?

https://t.co/SjeNPpNAHN

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