EXACT SCIENCES CORP Q1 FY2024 earnings call

• The Exact Sciences team started the year strongly, with highlights including testing over 1 million people globally for cancer and rare diseases, being recognized as a Gallup Exceptional Workplace, increasing Cologuard adoption in large health systems, expanding Oncotype DX international ordering providers by over 20% year-over-year, advancing Precision Oncology portfolio onto Exact Nexus platform, launching hereditary cancer test Risk Guard, and the New England Journal of Medicine publishing results of BLUE-C study supporting Cologuard Plus approval. • The commercial engine is fueling Cologuard growth through targeted engagements with patients and providers, marketing investments boosting brand awareness and customer satisfaction, and the Exact Nexus platform and customer service helping health systems and payers with screening. • Precision Oncology team delivered strong results with Oncotype DX testing a record number of people globally and expanding international adoption. • Over the next 18 months, set to launch new tests like Oncodetect, OncoLiquid, and Cologuard Plus which will drive growth.

First quarter revenue was $638 million, growing 6% on reported and core basis. Screening revenue was $475 million, up 7%, accounting for approximately 74.45% of total revenue. Precision Oncology revenue was $163 million, up 5%, accounting for approximately 25.55% of total revenue. GAAP gross margin was 70%, non-GAAP gross margin (excluding amortization of acquired intangibles) was 73%. Net loss was $110 million, adjusted EBITDA was $39 million. Free cash flow was negative $120 million in the first quarter. Ended the quarter with cash and securities of $652 million. In April, completed a refinancing by issuing $621 million in 2031 notes, reducing 2028 notes by $360 million and receiving $260 million in cash net of fees, bringing first quarter pro forma cash to $912 million.

• Annual revenue guidance is between $2.81 billion and $2.85 billion, adjusted EBITDA guidance is between $325 million and $350 million. • Expect robust cash flow generation for the rest of the year. • Second quarter expected total revenue between $677 million and $697 million, with screening revenue between $522 million and $532 million and Precision Oncology revenue between $155 million and $165 million. • Recent marketing investments started to pay off in Q2, with bigger impact expected in the second half of the year but facing easier comparisons in the second half. • Greater demand for Cologuard and care gap programs run by payers and health systems, typically accelerating in Q3 and Q4.

• Market competition risks, such as new entrants in the screening test market and their potential impact. • Uncertainty regarding USPSTF update timing and its effect on market positioning. • Uncertainty in the effectiveness of marketing investments in driving growth as expected. • Operational cost control challenges, including the impact of automation and other operational factors on margins.

Q: Congrats to Jeff. Starting with Cologuard, Screening revenue grew 7% in Q1. Guidance implies more like 16% for full year, mid-teens in Q2 and over 20% in back half. Can you talk through confidence in growth outlook and profitability?

A: Kevin mentioned the large opportunity, broadened and deepened customer relationships, the power of the commercial team, Exact Nexus platform, customer service, and brand awareness at an all-time high. Jeff added on profitability that Q1 had a tough comp, with 2-year stacked comp up 24% last year due to IT upgrades, expecting faster growth and lower OpEx as a percent of revenue in the second half, and gross margin expected to improve over time due to lab automation and increased mix of rescreened patients.

Q: Vijay Kumar asked on competitive landscape. Thoughts?

A: Kevin responded that Cologuard and Cologuard Plus offer superior performance to FIT test, specialized teams educate providers on studies supporting Cologuard, new tests need long path to get into quality measures, and Exact has a patent infringement and false advertising suit against a new entrant, defending intellectual property aggressively.

Q: Douglas Schenkel asked about Cologuard trends, transitory impact, capturing reorder opportunities, and rep impact.

A: Kevin said despite concerns, he's confident in Cologuard, made marketing investments in Q1 with expected growth, Jeff added on reorder rate with cohorts of providers continuing to climb and strong underlying trends, and Everett mentioned new reps are experienced with deep relationships and will hit the ground running with quicker impact.