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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

DexCom Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	352,450)	233,041)	294,086)	150,334)	(115,440)
Cost of capital²	17.91%	17.96%	18.23%	18.06%	17.89%
Invested capital³	1,649,000)	1,899,300)	1,367,200)	836,300)	1,449,197)

Economic profit⁴	57,131)	(108,063)	44,811)	(717)	(374,721)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 352,450 – 17.91% × 1,649,000 = 57,131

The financial trajectory from 2018 to 2022 reflects a transition from substantial value destruction toward intermittent value creation. While operational profitability has trended upward, the ability to consistently generate returns exceeding the cost of capital has remained volatile.

Net Operating Profit After Taxes (NOPAT): A strong upward trajectory is observed in NOPAT, which moved from a deficit of US$ 115.4 million in 2018 to a peak of US$ 352.5 million in 2022. Despite a moderate contraction in 2021, the overall trend indicates significant growth in core operational profitability over the five-year period.
Cost of Capital: The cost of capital remained remarkably stable, fluctuating within a narrow range between 17.89% and 18.23%. This consistently high threshold indicates a demanding requirement for returns on invested capital to achieve positive economic value added.
Invested Capital: Invested capital exhibited significant volatility. A sharp decline was noted in 2019, followed by a period of expansion that peaked at US$ 1.9 billion in 2021. A subsequent reduction to US$ 1.65 billion in 2022 suggests a move toward capital optimization or a strategic reduction in asset intensity.
Economic Profit: Economic profit has been inconsistent, shifting from severe losses in 2018 to positive value creation in 2020, before returning to a negative state in 2021. The recovery to a positive economic profit of US$ 57.1 million in 2022 is attributable to the combination of the highest recorded NOPAT and a reduction in the total invested capital base.

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DexCom Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income (loss)	341,200)	154,700)	493,600)	101,100)	(127,100)
Deferred income tax expense (benefit)¹	(21,600)	(4,900)	(277,300)	200)	(2,200)
Increase (decrease) in allowance for doubtful accounts²	1,900)	(1,800)	1,400)	(1,400)	(4,300)
Increase (decrease) in deferred revenue³	10,900)	(100)	500)	(1,200)	(300)
Increase (decrease) in accrued warranty⁴	(100)	1,200)	4,300)	600)	(2,000)
Increase (decrease) in equity equivalents⁵	(8,900)	(5,600)	(271,100)	(1,800)	(8,800)
Interest expense	18,600)	100,300)	84,700)	60,300)	22,700)
Interest expense, operating lease liability⁶	6,906)	5,955)	5,915)	4,300)	3,198)
Adjusted interest expense	25,506)	106,255)	90,615)	64,600)	25,898)
Tax benefit of interest expense⁷	(5,356)	(22,314)	(19,029)	(13,566)	(5,439)
Adjusted interest expense, after taxes⁸	20,150)	83,941)	71,586)	51,034)	20,460)
Net operating profit after taxes (NOPAT)	352,450)	233,041)	294,086)	150,334)	(115,440)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in accrued warranty.

⁵ Addition of increase (decrease) in equity equivalents to net income (loss).

⁶ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 115,100 × 6.00% = 6,906

⁷ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 25,506 × 21.00% = 5,356

⁸ Addition of after taxes interest expense to net income (loss).

The financial data over the five-year period reveals several notable trends in profitability metrics.

Net Income (Loss)

The net income (loss) shows a significant transition from a negative figure in 2018 to positive values in subsequent years. In 2018, the company reported a net loss of approximately US$127.1 million. In 2019, net income turned positive, reaching US$101.1 million, indicating a substantial improvement.

The growth trend continued strongly with net income rising to US$493.6 million in 2020, representing the highest value within the observed period. However, in 2021, net income decreased to US$154.7 million, indicating a contraction compared to the previous year. In 2022, net income rebounded materially to US$341.2 million, suggesting recovery and sustained profitability despite some volatility.

Net Operating Profit After Taxes (NOPAT)

The NOPAT data parallels the net income trend but displays some differences in magnitude and yearly variation. In 2018, NOPAT was negative at approximately US$115.4 million, consistent with the net loss reported that year.

From 2019 onward, NOPAT remained positive, increasing from US$150.3 million in 2019 to US$294.1 million in 2020. Unlike net income, NOPAT decreased less sharply in 2021, recording US$233 million, reflecting a smaller decline compared to net income's sharper fall in the same period.

In 2022, NOPAT increased further to US$352.5 million, reaching its highest value during the period and indicating enhanced operational efficiency and profitability after taxes.

Overall, the data suggests the company experienced a turnaround starting in 2019, moving from losses to profits. The peak in profitability occurred in 2020, followed by a decline in 2021, then a recovery in 2022. The NOPAT figures indicate that operational profitability after taxes has generally improved, and although fluctuations exist, the trend is positive, with 2022 reflecting stronger operational results than previous years. These patterns may indicate strategic or operational improvements that influenced earnings performance and operational efficiency over the period.

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DexCom Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for (benefit from) income taxes	49,600)	19,200)	(268,600)	3,100)	600)
Less: Deferred income tax expense (benefit)	(21,600)	(4,900)	(277,300)	200)	(2,200)
Add: Tax savings from interest expense	5,356)	22,314)	19,029)	13,566)	5,439)
Cash operating taxes	76,556)	46,414)	27,729)	16,466)	8,239)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

Provision for (benefit from) income taxes: The provision for income taxes demonstrates considerable volatility over the five-year period. Initially, it was a modest positive figure of 600 thousand US dollars at the end of 2018, increasing significantly to 3,100 thousand US dollars by the end of 2019. In 2020, the provision shifted dramatically to a large tax benefit of -268,600 thousand US dollars, marking a substantial reversal. Following this, the provision reverted to positive values, reporting 19,200 thousand US dollars in 2021 and further rising to 49,600 thousand US dollars in 2022. The notable negative provision in 2020 suggests an exceptional tax event or adjustment during that year.
Cash operating taxes: Cash operating taxes have exhibited a consistent upward trajectory throughout the five years. Starting at 8,239 thousand US dollars in 2018, the cash outflow more than doubled by 2019 to 16,466 thousand US dollars. This trend of increasing cash tax payments continued steadily, reaching 27,729 thousand US dollars in 2020, 46,414 thousand US dollars in 2021, and finally 76,556 thousand US dollars in 2022. The persistent growth in cash operating taxes indicates increasing taxable income or changes in tax policy resulting in higher cash tax obligations.

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DexCom Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Short-term finance lease liabilities	4,200)	3,300)	8,800)	600)	—)
Current portion of long-term senior convertible notes	772,600)	—)	—)	—)	—)
Long-term senior convertible notes	1,197,700)	1,702,700)	1,667,200)	1,059,700)	1,010,300)
Long-term finance lease liabilities	59,600)	57,000)	54,000)	14,400)	7,300)
Operating lease liability¹	115,100)	119,100)	118,300)	86,000)	58,897)
Total reported debt & leases	2,149,200)	1,882,100)	1,848,300)	1,160,700)	1,076,497)
Stockholders’ equity	2,131,800)	2,251,500)	1,826,500)	882,600)	663,300)
Net deferred tax (assets) liabilities²	(336,300)	(214,900)	(216,400)	100)	(100)
Allowance for doubtful accounts³	7,300)	5,400)	7,200)	5,800)	7,200)
Deferred revenue⁴	29,100)	2,100)	2,200)	1,700)	2,900)
Accrued warranty⁵	12,800)	12,900)	11,700)	7,400)	6,800)
Equity equivalents⁶	(287,100)	(194,500)	(195,300)	15,000)	16,800)
Accumulated other comprehensive (income) loss, net of tax⁷	11,600)	(500)	(3,200)	(2,300)	(1,500)
Adjusted stockholders’ equity	1,856,300)	2,056,500)	1,628,000)	895,300)	678,600)
Construction in progress⁸	(542,600)	(360,700)	(219,000)	(132,600)	(57,300)
Available-for-sale debt securities⁹	(1,813,900)	(1,678,600)	(1,890,100)	(1,087,100)	(248,600)
Invested capital	1,649,000)	1,899,300)	1,367,200)	836,300)	1,449,197)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue.

⁵ Addition of accrued warranty.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of available-for-sale debt securities.

The financial data over the five-year period reveals several notable trends in the company’s debt, equity, and invested capital.

Total Reported Debt & Leases: This metric shows a consistent upward trend, increasing from approximately $1.08 billion in 2018 to about $2.15 billion in 2022. The most significant jump occurs between 2019 and 2020, where the debt rose by roughly 59%, then continued growing at a steadier pace through 2022. This indicates increasing leverage and possibly expanding financing commitments or capital expenditures funded by debt.
Stockholders’ Equity: Stockholders’ equity also experienced growth from 2018 through 2021, rising sharply from approximately $663 million to $2.25 billion. However, in 2022, equity declined by around 5% to approximately $2.13 billion. The substantial increase up to 2021 suggests successful retention of earnings or capital infusion, while the slight downturn in 2022 might point to losses, dividend payments, or other equity-reducing transactions during that year.
Invested Capital: Invested capital demonstrates a more volatile pattern over the period. After starting at about $1.45 billion in 2018, it dropped substantially by 2019 to $836 million, a decrease of over 40%. This was followed by a recovery and growth to approximately $1.9 billion in 2021, before declining again to $1.65 billion in 2022. These fluctuations could reflect changes in the mix of debt and equity financing, asset acquisitions or disposals, or shifts in working capital components.

Overall, the data indicates increasing reliance on debt with growing total reported debt and leases, balanced by a rise in equity up to 2021. The fluctuations in invested capital suggest dynamic capital management strategies, potentially responding to operational needs or market conditions. The slight decline in equity and invested capital in 2022 may warrant further analysis to determine underlying causes and implications for financial stability and investment capacity.

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DexCom Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	41,439,004)	41,439,004)	÷	45,069,004)	=	0.92	0.92	×	19.41%	=	17.84%
Debt³	3,514,900)	3,514,900)	÷	45,069,004)	=	0.08	0.08	×	0.87% × (1 – 21.00%)	=	0.05%
Operating lease liability⁴	115,100)	115,100)	÷	45,069,004)	=	0.00	0.00	×	6.00% × (1 – 21.00%)	=	0.01%
Total:	45,069,004)					1.00					17.91%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,505,713)	39,505,713)	÷	43,707,613)	=	0.90	0.90	×	19.41%	=	17.54%
Debt³	4,082,800)	4,082,800)	÷	43,707,613)	=	0.09	0.09	×	5.53% × (1 – 21.00%)	=	0.41%
Operating lease liability⁴	119,100)	119,100)	÷	43,707,613)	=	0.00	0.00	×	5.00% × (1 – 21.00%)	=	0.01%
Total:	43,707,613)					1.00					17.96%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,451,954)	39,451,954)	÷	42,788,654)	=	0.92	0.92	×	19.41%	=	17.89%
Debt³	3,218,400)	3,218,400)	÷	42,788,654)	=	0.08	0.08	×	5.53% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	118,300)	118,300)	÷	42,788,654)	=	0.00	0.00	×	5.00% × (1 – 21.00%)	=	0.01%
Total:	42,788,654)					1.00					18.23%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	23,100,043)	23,100,043)	÷	25,351,843)	=	0.91	0.91	×	19.41%	=	17.68%
Debt³	2,165,800)	2,165,800)	÷	25,351,843)	=	0.09	0.09	×	5.42% × (1 – 21.00%)	=	0.37%
Operating lease liability⁴	86,000)	86,000)	÷	25,351,843)	=	0.00	0.00	×	5.00% × (1 – 21.00%)	=	0.01%
Total:	25,351,843)					1.00					18.06%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	13,161,858)	13,161,858)	÷	14,627,856)	=	0.90	0.90	×	19.41%	=	17.46%
Debt³	1,407,100)	1,407,100)	÷	14,627,856)	=	0.10	0.10	×	5.43% × (1 – 21.00%)	=	0.41%
Operating lease liability⁴	58,897)	58,897)	÷	14,627,856)	=	0.00	0.00	×	5.43% × (1 – 21.00%)	=	0.02%
Total:	14,627,856)					1.00					17.89%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

DexCom Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	57,131)	(108,063)	44,811)	(717)	(374,721)
Invested capital²	1,649,000)	1,899,300)	1,367,200)	836,300)	1,449,197)
Performance Ratio
Economic spread ratio³	3.46%	-5.69%	3.28%	-0.09%	-25.86%
Benchmarks
Economic Spread Ratio, Competitors⁴
Abbott Laboratories	-2.40%	-1.92%	—	—	—
Elevance Health Inc.	0.18%	1.50%	—	—	—
Intuitive Surgical Inc.	-3.27%	12.34%	—	—	—
Medtronic PLC	-5.04%	-6.68%	—	—	—
UnitedHealth Group Inc.	4.11%	3.96%	—	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 57,131 ÷ 1,649,000 = 3.46%

⁴ Click competitor name to see calculations.

An analysis of the financial performance from 2018 to 2022 reveals a period of significant volatility in value creation, characterized by a transition from substantial economic losses toward a pattern of intermittent positive economic spread. The overall trajectory indicates a recovery in the organization's ability to generate returns exceeding its cost of capital, although this progress has not been linear.

Economic Spread Ratio Trends: The economic spread ratio experienced a dramatic improvement between 2018 and 2020, moving from a deeply negative -25.86% to a positive 3.28%. This indicates a shift from significant value destruction to the creation of economic value. However, this momentum was interrupted in 2021, when the ratio fell back to -5.69%, before recovering to 3.46% by the end of 2022. This fluctuation suggests a sensitivity in the spread to shifts in operating performance or changes in the cost of capital.
Economic Profit Volatility: Economic profit mirrors the spread ratio, starting at a deficit of US$ 374.7 million in 2018. A near break-even point was achieved in 2019, followed by a positive result of US$ 44.8 million in 2020. The return to a negative economic profit of US$ 108.1 million in 2021 aligns with the contraction of the spread ratio, while the 2022 result of US$ 57.1 million confirms a return to positive value generation.
Invested Capital Dynamics: Invested capital exhibited non-linear fluctuations over the five-year period. A notable reduction occurred in 2019, dropping to US$ 836.3 million, which coincided with the narrowest negative spread. Capital deployment peaked in 2021 at US$ 1.9 billion, a period that also saw a decline in the economic spread ratio to -5.69%. This suggests that the capital expansion in 2021 did not immediately yield returns sufficient to cover the associated cost of capital. By 2022, invested capital was optimized down to US$ 1.65 billion, coinciding with an increase in both economic profit and the spread ratio.

The correlation between the expansion of invested capital in 2021 and the subsequent dip in economic spread suggests a lag between capital investment and value realization. The recovery in 2022 demonstrates a more efficient alignment between the capital base and the generated economic profit, resulting in a stabilized positive spread.

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DexCom Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	57,131)	(108,063)	44,811)	(717)	(374,721)

Revenue	2,909,800)	2,448,500)	1,926,700)	1,476,000)	1,031,600)
Add: Increase (decrease) in deferred revenue	10,900)	(100)	500)	(1,200)	(300)
Adjusted revenue	2,920,700)	2,448,400)	1,927,200)	1,474,800)	1,031,300)
Performance Ratio
Economic profit margin²	1.96%	-4.41%	2.33%	-0.05%	-36.33%
Benchmarks
Economic Profit Margin, Competitors³
Abbott Laboratories	-3.38%	-2.77%	—	—	—
Elevance Health Inc.	0.08%	0.70%	—	—	—
Intuitive Surgical Inc.	-2.82%	9.71%	—	—	—
Medtronic PLC	-11.06%	-16.04%	—	—	—
UnitedHealth Group Inc.	2.10%	1.94%	—	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 57,131 ÷ 2,920,700 = 1.96%

³ Click competitor name to see calculations.

Analysis of the economic profit margin indicates a period of substantial volatility occurring alongside consistent revenue expansion from 2018 through 2022.

Adjusted Revenue Trends: Adjusted revenue exhibited a steady and uninterrupted growth trajectory, increasing from 1,031,300 thousand USD in 2018 to 2,920,700 thousand USD in 2022. This represents a consistent scaling of the operational base over the five-year period.
Economic Profit Fluctuations: Economic profit demonstrated significant instability. A substantial deficit of 374,721 thousand USD in 2018 was reduced to nearly zero in 2019, followed by a positive result of 44,811 thousand USD in 2020. This progress was interrupted by a reversal to a deficit of 108,063 thousand USD in 2021, before recovering to 57,131 thousand USD by the end of 2022.
Economic Profit Margin Performance: The economic profit margin mirrored the volatility of the absolute economic profit. The margin improved dramatically from -36.33% in 2018 to -0.05% in 2019, reaching a peak of 2.33% in 2020. A subsequent decline to -4.41% in 2021 was followed by a recovery to 1.96% in 2022, suggesting a continuing struggle to maintain a stable positive spread over the cost of capital despite increasing revenue.

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DexCom Inc. (NASDAQ:DXCM)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin