Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exact Sciences Corp (EXAS, Financial) reported a strong start to the year with significant advancements in cancer screening and testing, reaching over 1 million people globally.
- The company's revenue grew by 6% to $638 million, with screening revenue up by 7% and precision oncology revenue growing by 5%.
- Exact Sciences Corp (EXAS) was recognized as a Gallup Exceptional Workplace, highlighting its strong organizational culture.
- The company successfully expanded the adoption of its Oncotype DX product internationally, with a 20% increase in ordering providers year-over-year.
- Exact Sciences Corp (EXAS) is well-positioned for future growth with the upcoming FDA approval of Cologuard Plus and the launch of new tests like Oncodetect and OncoLiquid.
Negative Points
- Exact Sciences Corp (EXAS) reported a net loss of $110 million for the quarter.
- The company experienced a negative free cash flow of $120 million during the first quarter, consistent with seasonal trends but still a significant outflow.
- Gross margins were slightly lower year-over-year due to added fixed costs from new automation and lab infrastructure investments.
- There were unique one-time expenses amounting to $4 million related to facilities consolidation and a $6 million non-cash expense related to acquisition earnouts.
- The company faces increasing competition in the colon cancer screening market, which could impact its market share and growth trajectory.
Q & A Highlights
Q: Congrats to Jeff. You will certainly be missed. Starting with Cologuard, Screening revenue grew 7% in the first quarter. Guidance implies more like 16% for the full year, kind of mid-teens in the second quarter and over 20% in the back half. So can you just talk through what gives you confidence in that growth outlook and excites you about the Cologuard growth story from here? And if I could just squeeze one in on profitability. And you saw adjusted EBITDA decline year-over-year in the first quarter. So if you could just talk through the drivers there, that would be great.
A: Kevin T. Conroy - Exact Sciences Corporation - Chairman of The Board & CEO: Sure. Why don't I take the first part and hand it over to Jeff afterwards. Here's why we're excited about this year. The size of the opportunity remains enormous. 16 million people in the U.S. are not up-to-date with colon cancer screening. And our customer relationships have broadened and deepened deepen immeasurably over the last year. There are over 330 health systems today that rely on electronic ordering and advanced tools that we provide -- are really our consulting services that we provide around IT patients. There are over 2 million people today who are due for a rescreen. There will be 400,000 new patients due in Q2 alone. Payers, their gap closure programs will get into them, but that is a new and significant growth area. The biggest impact will be in Q4. And then Q3, we'll start to see that impact.
Q: Jeff, wishing you all the best. My one question here, Kevin, perhaps on what is the -- this comps that you didn't mention that are different ways of looking at it, is the right way to look at this is on a CAGR basis versus pre-pandemic level? Or it seems like it's pretty consistent when we do the CAGR math in related to that. There's been some noise on the competitive landscape. I think one of the stool-based companies got an approval, an FDA approval. I'm curious on your thoughts on the competitive landscape?
A: Kevin T. Conroy - Exact Sciences Corporation - Chairman of The Board & CEO: Sure. Let me go back to Cologuard and Cologuard Plus. The -- both tests offer performance that is unequal to -- that is superior to the FIT test and the performance of the studies that we ran were large studies with a significant number of cancers -- cancer patients across a broad age range. And Cologuard Plus advance the standard of care over Cologuard. Our specialized teams make sure that health care providers are aware of the broad studies that support Cologuard. And we have the ability to deliver that in a very clear way, plus the strength of our platforms and all of that. But now you've got to go to -- remember, anybody who brings a new screening test to market. One of the key things that they need to do to have that test be relevant is to get into the quality measures. The path to getting into the quality measures is a very long one. We think a new test, and this excludes Cologuard Plus because Cologuard Plus, like Cologuard is already in the quality measures, we've already -- all that work has been done.
Q: Kevin, thanks for all the comments on the market opportunity, which remains large and unpenetrated or underpenetrated. It's helpful to hear about your awareness building efforts and the progress you're making. And I think we recognize that the comparison was tough here. That said, I do think recognizing you're cutting things a smidge different or at least not giving us quite as much information as you told us to be prepared for. It does seem like orders per practice dropped relative to what we saw maybe in every quarter last year. And I think it's fair to say that folks expected the Cologuard number to be a little bit better. So I just want to make sure that we understand a few things. Like one, was there any transitory impact? Was there something that you maybe saw that was worse than expected when it came to respiratory? Or anything else that might have been transitory? Two, was there anything different in terms of capturing reorder opportunities, maybe more of those lagged into the following quarter? And then I guess kind of building off of this, when would you expect reps to make an impact? Is there still going to be a 6- to 9-month lag? Or is there something different here that can get you a quicker return on investment? All of this is meant to just get to the question of -- based on what you're seeing in terms of trends based on what we saw in the quarter, more importantly, as we look longer term and think about the opportunity, the progress you're making with awareness all of those good things. How do we get comfortable that Cologuard for not just this year, but for the foreseeable future is a double-digit growth franchise?
A: Kevin T. Conroy - Exact Sciences Corporation - Chairman of The Board & CEO: Yes. Well, let me start by seeing despite the items you raised, I've never been more excited or confident about Cologuard. And one thing that we learned from turning down the sales and marketing spend is that -- for 6 months, you'll see continued progress. I mean -- and we saw that last year. You can't go forever, though with the brand is large and it's impactful as Cologuard with the size of the investment that we were making. And the good news is we have the data and analytics to back that up. We made the investments in the first quarter. And as we sit here today, without the addition of all of the salespeople in the first quarter, most of them are coming online right now. We've already seen a return to the growth that we expected.
Q: Obviously, a lot on the kind of reps -- rep adding side. If I can just continue to add on that. Kevin, I guess how do you think about potential revenue upside flowing through? I mean, obviously, last year, when you guys were able to raise the revenue targets, your EBITDA seemed to go up by more every single time. Do you feel like now that you've added these reps and the cost base is set here if you do see revenue upside, is the flow-through there are going to be pretty attractive? Or does additional costs come back? You've obviously mentioned a few times investing in these high-impact sales marketing opportunities. So do you see more costs coming if there is revenue upside? Or are we in a pretty good spot here? And then I don't know if I missed it, but just the magnitude of the rep adds in terms of head count would be helpful if you could break that out.
A: Kevin T. Conroy - Exact Sciences Corporation - Chairman of The Board & CEO: Yes. We're not -- we
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
