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Debt | 9 Months Ended
--- | ---
Sep. 30, 2024
Debt Disclosure [Abstract] |
Debt |
5. Debt
Senior Convertible Notes
The carrying amounts of our senior convertible notes were as follows as of the dates indicated:
(In millions) | September 30, 2024 |  | December 31, 2023
Principal amount: |  |  |
Senior Convertible Notes due 2025 | $ | 1,207.5 |  |  | $ | 1,207.5 |
Senior Convertible Notes due 2028 | 1,250.0 |  |  | 1,250.0 |
Total principal amount | 2,457.5 |  |  | 2,457.5 |
Unamortized debt issuance costs | (17.9) |  |  | (23.3) |
Carrying amount of senior convertible notes | $ | 2,439.6 |  |  | $ | 2,434.2 |
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:
(In millions) | September 30, 2024 |  | December 31, 2023
Senior Convertible Notes due 2025 | $ | — |  |  | $ | 56.1 |
Senior Convertible Notes due 2028 | — |  |  | 33.6 |
Total by which the notes’ if-converted value exceeds their principal amount | $ | — |  |  | $ | 89.7 |
The following table summarizes the components of interest expense and the effective interest rates for our senior convertible notes for the periods shown:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(In millions) | 2024 |  | 2023 |  | 2024 |  | 2023
Cash interest expense: |  |  |  |  |  |  |
Contractual coupon interest (1) | $ | 1.9 |  |  | $ | 1.8 |  |  | $ | 5.8 |  |  | $ | 7.0 |
Non-cash interest expense: |  |  |  |  |  |  |
Amortization of debt issuance costs | 1.8 |  |  | 2.0 |  |  | 5.4 |  |  | 5.5 |
Total interest expense recognized on senior notes | $ | 3.7 |  |  | $ | 3.8 |  |  | $ | 11.2 |  |  | $ | 12.5 |
Effective interest rate: |  |  |  |  |  |  |
Senior Convertible Notes due 2023 (2) | * |  | 1.1 | % |  | * |  | 1.1 | %
Senior Convertible Notes due 2025 | 0.5 | % |  | 0.5 | % |  | 0.5 | % |  | 0.5 | %
Senior Convertible Notes due 2028 | 0.7 | % |  | 0.7 | % |  | 0.7 | % |  | 0.7 | %
(1) Interest on our unsecured senior convertible notes due 2023, or the 2023 Notes, began accruing upon issuance and was payable semi-annually on June 1 and December 1 of each year until the 2023 Notes matured on December 1, 2023. Interest on our unsecured senior convertible notes due 2025, or the 2025 Notes, began accruing upon issuance and is payable semi-annually on May 15 and November 15 of each year. Interest on our unsecured senior convertible notes due 2028, or the 2028 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. The 2023 Notes matured on December 1, 2023 and are no longer outstanding.
* Not applicable as no notes were outstanding in the relevant period.
Convertible Debt Summary The following table summarizes key details of the 2023 Notes, 2025 Notes, and 2028 Notes:
Senior Convertible Notes | Offering Completion Date | Maturity Date | Stated Interest Rate | Aggregate Principal Amount Issued | Net Proceeds(1) | Initial Conversion Rate(2) (per $1,000 principal amount) | Conversion Price (per share) | Settlement Methods(3)
2023 Notes (4) | November 2018 | December 1, 2023 | 0.75% | $850.0 million | $836.6 million | 24.3476 shares | $41.07 | Cash and/or shares
2025 Notes | May 2020 | November 15, 2025 | 0.25% | $1.21 billion | $1.19 billion | 6.6620 shares | $150.11 | Cash and/or shares
2028 Notes | May 2023 | May 15, 2028 | 0.375% | $1.25 billion | $1.23 billion | 6.1571 shares | $162.41 | Cash and/or shares
(1) Net proceeds are calculated by deducting the initial purchasers’ discounts and estimated costs directly related to the offering from the aggregate principal amount of the applicable series of notes.
(2) Subject to adjustments as defined in the applicable indentures.
(3) The 2025 Notes and 2028 Notes may be settled in cash, stock, or a combination thereof, solely at our discretion. The 2023 Notes, while outstanding, could be settled in cash, stock, or a combination thereof, solely at our discretion.
(4) The 2023 Notes matured on December 1, 2023 and are no longer outstanding.
We use the if-converted method for assumed conversion of our senior convertible notes to compute the weighted average shares of common stock outstanding for diluted earnings per share. No principal payments are due on any of our senior convertible notes prior to maturity. Other than restrictions relating to certain fundamental changes and consolidations, mergers or asset sales and customary anti-dilution adjustments, the indentures relating to our senior convertible notes include customary terms and covenants, including certain events of default after which the senior convertible notes may be due and payable immediately. 2023 Note Hedge In connection with the offering of the 2023 Notes, in November 2018 we entered into convertible note hedge transactions, or the 2023 Note Hedge, with two of the initial purchasers of the 2023 Notes, which we refer to as the 2023 Counterparties, entitling us to purchase up to 20.7 million shares of our common stock. The 2023 Note Hedge expired on December 1, 2023. See below for a description of conversion activity related to the 2023 Notes and shares received as the result of exercising the remaining portion of the 2023 Note Hedge in 2023. 2023 Warrants In November 2018, we also sold warrants, or the 2023 Warrants, to the 2023 Counterparties to acquire up to 20.7 million shares of our common stock. The 2023 Warrants required net share settlement and a pro-rated number of warrants expired on each of the 60 scheduled trading days following 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 had a dilutive effect on our earnings per share to the extent that the price of our common stock during a given measurement period exceeded the strike price of the 2023 Warrants. The strike price of the 2023 Warrants was initially $49.60 per share, 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. On February 13, 2024, we entered into a warrant termination agreement with one of the 2023 Counterparties to terminate outstanding warrants to purchase an aggregate of 10.3 million shares of our common stock. In consideration of the termination of these warrants, we delivered 6.0 million shares of our common stock to the holder. During the first quarter of 2024, a portion of the 2023 Warrants was exercised and we issued 1.9 million shares of our common stock in addition to the aforementioned 6.0 million shares issued in connection with the warrant termination agreement. During the second quarter of 2024, the remaining portion of the 2023 Warrants was exercised and we issued 4.6 million shares of our common stock in connection with the exercise. 2028 Capped Call Transactions In May 2023, in connection with the offering of the 2028 Notes, we entered into privately negotiated capped call transactions, or the 2028 Capped Calls, with certain financial institutions. The 2028 Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes, the number of shares of our common stock initially underlying the 2028 Notes. The 2028 Capped Calls are expected generally to reduce potential dilution to our common stock upon conversion of the 2028 Notes and/or offset any cash payments that we are required to make in excess of the principal amount of converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap. The 2028 Capped Calls have an initial cap price of $212.62 per share, subject to adjustments, which represents a premium of 80% over the closing price of our common stock of $118.12 per share on the Nasdaq Global Select Market on May 2, 2023. The cost to purchase the 2028 Capped Calls of $101.3 million was recorded as a reduction to additional paid-in capital in our consolidated balance sheets as the 2028 Capped Calls met the criteria for classification in stockholders’ equity. Conversion Activity for Senior Convertible Notes The 2023 Notes matured on December 1, 2023 and all outstanding principal was settled. There was no conversion activity for the 2025 Notes or 2028 Notes for the nine months ended September 30, 2024. See the following table for the details of conversion activity for the 2023 Notes for the fiscal year ended December 31, 2023:
Fiscal Period | Converted Notes | Aggregate Principal Amount Converted | Shares Issued for Settlement | Shares Received from Exercise of 2023 Note Hedge
1/1/2023 - 12/31/2023 | 2023 Notes | $774.8 million | 12.2 million | 12.2 million
Conversion Rights for Senior Convertible Notes Holders of our outstanding senior convertible 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 applicable indenture relating to the notes). We are also required to increase the conversion rate for holders who convert their notes in connection with certain fundamental changes occurring prior to the maturity date or following the delivery by Dexcom of a notice of redemption. The following table outlines the conversion options related for each of our senior convertible notes:
Summary of Conversions Rights at the Option of the Holders for the 2025 Notes and 2028 Notes, which we refer to collectively as the Notes
Conversion Rights at the Option of the Holders |  | Holders of the Notes have the ability to convert all or a portion of their notes in multiples of $1,000 principal amount, at their option prior to 5:00 p.m., New York City time, on the business day immediately preceding August 15, 2025 and February 15, 2028 for the 2025 Notes and 2028 Notes, respectively, only under the following circumstances:
Circumstance 1(1) |  | During any calendar quarter commencing after the applicable period (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 for the Notes on each applicable trading day
Circumstance 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 trading day of that five 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 each such trading day
Circumstance 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 (only with respect to the notes called or deemed called for redemption)
Circumstance 4 |  | Upon the occurrence of specified corporate events
Circumstance 5(2) |  | Holders of the Notes may convert all or a portion of their Notes regardless of the foregoing circumstances prior to the close of business on the business day immediately preceding the maturity date for the 2025 Notes and prior to the close of business on the second scheduled trading day immediately preceding the maturity date for the 2028 Notes
(1) Circumstance 1 is available after the calendar quarter ended September 30, 2020 and September 30, 2023 for the 2025 Notes and 2028 Notes, respectively.
(2) Circumstance 5 is available on or after August 15, 2025 and February 15, 2028 for the 2025 Notes and 2028 Notes, respectively.
Summary of Conversion Right at the Option of the Company for the 2025 Notes and 2028 Notes
Conversion Right at Our Option(1) |  | Dexcom may redeem for cash all or part of the 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 Notes to be redeemed plus accrued and unpaid interest to, but excluding, the redemption date
(1) Dexcom does not have the right to redeem the Notes prior to May 20, 2023 and May 20, 2026 for the 2025 Notes and 2028 Notes, respectively. Dexcom has the right to redeem the notes on or after May 20, 2023 and prior to August 15, 2025 for the 2025 Notes, and on or after May 20, 2026 and prior to February 15, 2028 for the 2028 Notes.
Revolving Credit Agreement
Terms of the Revolving Credit Agreement In June 2023, we entered into the First Amendment to the Second Amended and Restated Credit Agreement, as amended, or the Amended Credit Agreement, which we had previously entered into in October 2021. The Amended Credit Agreement is a five-year revolving credit facility, or the 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 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:
(In millions) | September 30, 2024
Available principal amount | $ | 200.0 |
Letters of credit sub-facility | 25.0 |
Outstanding borrowings | — |
Outstanding letters of credit | 7.6 |
Total available balance | $ | 192.4 |
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 minimum and maximum range of applicable rates per annum with respect to any ABR Loan, Term Benchmark Revolving Loan, or RFR Revolving Loan, each as defined in the Amended Credit Agreement under the captions “ABR Spread”, “Term Benchmark”, and “RFR Spread”, or “Unused Commitment Fee Rate”, respectively, are outlined in the following table:
Range | ABR Spread | Term Benchmark/RFR Spread | Unused Commitment Fee Rate
Minimum | 0.375% | 1.375% | 0.175%
Maximum | 1.000% | 2.000% | 0.250%
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 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 September 30, 2024. As of September 30, 2024, we have no other material guarantee facilities or lines of credit.

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