Exact Sciences (EXAS) Q4 2024 Earnings Call Transcript

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Exact Sciences (EXAS 1.71%)
Q4 2024 Earnings Call
Feb 19, 2025, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Exact Sciences fourth quarter 2024 earnings call. Today’s call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

[Operator instructions] I would now like to turn the conference over to Derek Leckow, vice president, investor relations. Please go ahead, sir.

Derek Leckow — Vice President, Investor Relations

Thanks, operator. Thank you for joining us for Exact Sciences’ fourth quarter 2024 conference call. On the call today are Kevin Conroy, the company’s chairman and CEO; and Aaron Bloomer, our chief financial officer. Brian Baranick, our general manager of Precision Oncology, will also be available for questions.

Exact Sciences issued a news release earlier this afternoon detailing our fourth-quarter financial results. This news release and today’s presentation are available on our website at exactsciences.com. During today’s call, we will make forward-looking statements based on current expectations. Our actual results may be materially different from such statements.

Discussions of non-GAAP figures and reconciliations to GAAP figures are available in our earnings press release, and descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings. Both can be accessed through our website. I’ll now turn the call over to Kevin.

Kevin T. Conroy — Chairman and Chief Executive Officer

Thanks, Derek. Good afternoon, everyone. Our purpose is to help eradicate cancer by preventing it, detecting it earlier, and guiding personalized treatment. We are making this a reality by extending and leveraging our platform.

Highlights in 2024 include delivering more than 4.6 million results to patients with our portfolio of cancer tests. Growing core revenue 11%, while non-GAAP operating expenses grew just 2%, increasing EBITDA by 48% and more than doubling free cash flow; securing FDA approval and Medicare pricing for Cologuard Plus, our next-generation colon cancer screening test; completing two studies for Oncodetect, our molecular residual disease test; generating evidence for our liquid biopsy colon cancer screening test as well as our multi-cancer screening test, Cancerguard and being recognized as a great place to work for the sixth consecutive year. This year, we’ll increase adoption of our current test and launch three new tests. Exact Sciences scale and reach with a large commercial engine and tens of millions of additional touch points with patients and healthcare providers will power continued leadership across the largest impact opportunities in cancer diagnostics.

We will also create an even better customer experience with our secure ExactNexus technology platform. Aaron will now discuss our fourth-quarter financial results and outlook for 2025.

Aaron Bloomer — Chief Financial Officer

Thanks, Kevin, and good afternoon, everyone. We’re proud of our team’s resilience and continued focus on operational excellence, enabling us to deliver another solid quarter. Fourth quarter revenue grew 10% or 11% on a core basis. Adjusted EBITDA increased 52% to $75 million.

Screening revenue increased 14% to $553 million. Growth was led by momentum in Cologuard adoption among providers, health systems, and payers. On average, more than 900 providers became new Cologuard customers each week, and 35 of the top U.S. health systems and payers closed gaps in care with Cologuard, a new record.

Our expanding customer base supports our long-term growth outlook. Precision Oncology revenue increased slightly to $161 million. Growth in the quarter was led by increased adoption of Oncotype DX internationally. Adjusted EBITDA margin expanded nearly 300 basis points, driven by volume and expense controls.

As a percentage of revenue, adjusted G&A improved more than 400 basis points. This allowed us to reinvest back into growth and innovation while still meaningfully expanding margins. During the fourth quarter, we recognized an $830 million noncash impairment charge related to the Thrive acquisition, which closed in January 2021. The write-down reflects changes in external factors since the acquisition, primarily the expected reimbursement outlined in the recent [Inaudible] legislation.

Additionally, to better reflect our current operations, costs related to customer care were reclassified from G&A to sales and marketing. For modeling purposes, we have included a quarterly view of our updated historical income statement within our 10-K. Moving to the full year. Core revenue grew 11% to $2.75 billion, and adjusted EBITDA margin expanded nearly 300 basis points.

We also strengthened our balance sheet in 2024 by more than doubling free cash flow, ending the year with $1.04 billion in cash and securities. Our strong free cash flow generation and outlook also allowed us to use cash on hand to repay the full $250 million in maturing convertible notes. Turning to our 2025 guidance. Including some key assumptions underpinning our outlook, we expect total revenue between $680 million and $695 million for the first quarter and between $3.025 billion and $3.085 billion for the full year.

This assumes Screening revenue between $520 million and $530 million for the first quarter and between $2.35 billion and $2.39 billion for the year. And Precision Oncology revenue between $160 million and $165 million for the first quarter and between $675 million and $695 million for the full year. We expect $410 million to $440 million in adjusted EBITDA for the full year. Annual guidance at midpoint implies total revenue growth of 11% including 13% in Screening and 5% in Precision Oncology.

In Screening, we’re including approximately two points of lift from Cologuard Plus, which will primarily benefit second-half revenue. Cologuard Plus will initially be available in the second quarter to Medicare fee-for-service patients who represented about 15% of Cologuard volumes last year. We are also starting to add coverage with some commercial and Medicare Advantage plans and growth from price and volume acceleration will phase in over the next 18 to 24 months as we establish contracts with payers. Specific to Q1, please recall first quarter Screening revenue tends to be down sequentially because of seasonal trends.

Primary care utilization is lower in December and early January because of the holidays. This impacts Screening revenue during the first quarter due to the normal timing between a Cologuard order and a completed test. Additionally, about two-thirds of Care GAAP revenue in 2024 was recognized in the second half and our 2025 outlook assumes similar phasing. In Precision Oncology, we expect steady Oncotype DX growth in the U.S.

and strong double-digit growth internationally in this year. Shifting to profitability. Guidance at midpoint implies 220 basis points of adjusted EBITDA margin expansion. Key drivers include volume leverage across our fixed cost structure, price from Cologuard Plus, and continued opex leverage and productivity, especially within G&A as well as in our lab and supply chain. These initiatives allow us to reinvest back into near- and long-term growth areas, including educating patients and providers about the benefits of Cologuard, the launch of Oncodetect, and research and development to support continued innovation.