Title

Presentation

Exact Sciences Corporation beats earnings expectations. Reported EPS is $-0.21, expectations were $-0.37.

Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Exact Sciences First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s 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: Thanks, operator. Thank you for joining us for Exact Sciences first quarter 2025 conference call. On the call today are Kevin Conroy, the Company’s Chairman and CEO, and Aaron Bloomer, our Chief Financial Officer. Exact Sciences issued a news release earlier this afternoon detailing our first 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 Conroy: Thanks Derek. Highlights in the first quarter include delivering 1.2 million total results to patients, growing core revenue 11% while non-GAAP operating expenses grew just 4%, improving our profitability by increasing adjusted EBITDA more than 60%, launching Cologuard Plus our next generation Cologuard test with Medicare coverage and quality measure inclusion and being recognized as a Gallup Exceptional Workplace for the second year in a row. Cologuard is driving significant and durable growth because it satisfies an unmet need in an expanding market. We’re pleased to share some of the early successes from the commercial initiatives we began last year. Our purpose built commercial organization and expanded field team are engaging providers with the highest potential to order at record rates.

The shift to territories and calling on providers with the highest potential to order is making our team even more effective. Our team is expanding the number of providers we engage each quarter. As a result, they are helping reach new ordering providers much faster. We’re also seeing positive feedback from new advertising campaigns and customer satisfaction was at an all time high in the first quarter. Our customer initiated ordering platform grew triple digits in the first quarter and we have plans to improve these initiatives from further. We are incredibly proud of our entire commercial organization and their positive impact on advancing our mission. Commercial improvements are just one of many drivers that will fuel growth over the coming years.

Others include our Rescreen program. We have a growing base of loyal customers, which now represent more than 25% of our revenue. This provides a predictable, recurring source of revenue and we are getting even better at keeping those patients screened. Our care gap program, this program helps payers and health systems close gaps in screening. This program grew triple digits last year and will continue to grow strong double digits this year. We are still in the early innings of driving higher adherence in these programs. The launch of Cologuard Plus. This will deliver increased value, improved performance, higher adoption and improved margins. New products we’re starting to see the benefit of investments we’ve made to launch and scale new tests in large and growing markets.

These growth drivers will continue to play out over 2025 and beyond. It’s never been a more exciting time at Exact. I’ll now pass it on to Aaron to discuss our first quarter financial results and provide an updated outlook for 2025.

Aaron Bloomer: Thanks Kevin, and good afternoon everyone. Our team delivered strong results in the first quarter ahead of our expectations while navigating through one of the worst flu seasons we have seen in years. The team’s dedication to our mission also enabled us to deliver two product launches, which will fuel growth and create value for years to come. First quarter revenue grew 11% on both a reported and core basis $19 million above the midpoint of our guidance Screening revenue exceeded guidance increasing 14% to $540 million. Broad based Cologuard growth was led by continued success in rescreens, care gap programs and growth in new ordering providers. Precision Oncology revenue also exceeded guidance increasing 4% to $167 million on a core basis.

Growth in the quarter was led by continued strength in Oncotype DX adoption internationally. Adjusted EBITDA increased 61% to $63 million. Adjusted EBITDA margin expanded 280 basis points driven by volume leverage, productivity, cost cutting initiatives and improvements in G&A. As a percentage of revenue, adjusted G&A improved more than 520 basis points and was down 7% year-over-year. This was partially offset by sales and marketing investments to drive near and long-term growth. We expect continued leverage across the P&L. In the first quarter, we took 25 million in actions to optimize costs and increase operational efficiency over time. We expect these actions to deliver annual savings of $18 million with $9 million coming in 2025. We have additional operational excellence initiatives planned and will provide additional updates in the coming quarters.

Free cash flow reached break even during the first quarter, a year-over-year improvement of $120 million. We are making progress to generate meaningful free cash flow growth through productivity and working capital initiatives and expect strong full year cash generation. Looking at free cash flow cadence, we expect a meaningful build in our AR balance as we launch Cologuard Plus temporarily impacting our cash flow in Q2. We expect to collect on these in the back half of the year, driving our full year cash flow to a new record. We ended the quarter with cash and securities of $786 million, which reflects the $249 million convertible note paydown. Turning to guidance, we are increasing total revenue guidance to between $3.07 and $3.12 billion for the year, an increase of $40 million at midpoint with second quarter revenue between $765 million and $780 million.

This assumes screening revenue between $595 million and $605 million for the second quarter and between $2.39 billion and $2.425 billion for the year, and precision oncology revenue between $170 million and $175 million for the second quarter and between $680 million and $695 million for the full year. We’re also raising adjusted EBITDA guidance to between $425 million to $455 million for the full year, or 14.2% adjusted EBITDA margins at midpoint. Annual guidance at midpoint implies total revenue growth of 12%, including 14% in screening and 5% in precision oncology. Underpinning our increased screening guidance are early signs of improved commercial execution. As Kevin noted earlier, we’re seeing several leading indicators fueling growth ahead of our expectations in new to Cologuard orders.

To highlight a couple customer engagement by our field force is up more than 30% year-over-year and over 190,000 providers ordered during the first quarter, an increase of nearly 10% year-over-year. These factors are coupled with continued momentum in rescreens, care gap orders and Cologuard Plus pricing, which help inform our increased annual guidance. Specific to Precision Oncology guidance we are excited about the Oncodetect launch and the core business is performing as expected. Shifting to profitability guidance. We are pleased with the leverage in the first quarter and continue to find ways to drive improved margins. Additionally, we have little to no impact from tariffs as we manufacture and perform our lab work in the United States.

Guidance at midpoint implies more than 35% adjusted EBITDA growth, or about 250 basis points of adjusted EBITDA margin expansion. Back to you Kevin.

Kevin Conroy: Thanks Aaron. Cologuard Plus is one of the most accurate screening tests ever developed and will help revolutionize colorectal cancer screenings. The test detects 95% of colon cancer at a 94% specificity resulting in a 40% reduction in false positives. Cologuard Plus fits into our best-in-class primary care commercial organization and proprietary ExactNexus platform. Our team is seamlessly bringing Cologuard Plus to physicians and patients. We have rapidly achieved Medicare coverage, pricing and quality measure guideline inclusion. Cologuard Plus builds on the strong Cologuard brand and top of mind awareness of Cologuard surpassed colonoscopy for four out of the last six months. All of these benefits equip our commercial team with a practice changing message for healthcare providers.

Cologuard First Colonoscopy as needed we are working to ingrain Cologuard Plus as the first option in healthcare provider screening toolkit. The launch is going well and we are excited about the test potential. We know which patients are covered for Cologuard Plus through our exact Nexus platform and can triage them accordingly. We’ve already completed over 30,000 tests and are engaging commercial payers to bring Cologuard Plus to more patients. In April, we advanced Exact Science’s unique position to guide a cancer patient’s journey every step of the way by launching Oncodetect, our molecular residual disease test. This vital tool could help benefit 6 million cancer patients. Oncodetect fits right into our precision oncology portfolio led by Oncotype DX.

Deep relationships with oncologists, a global footprint, our customer experience and our evidence generation strategy will drive adoption of Oncodetect for years to come. We are actively working with Medicare to secure reimbursement for our test in colorectal cancer, which we expect to occur this quarter. We look forward to sharing updates on Oncodetect over the course of the year. We remain on track and there is no change to our timeline to share mid-summer top line results from our pivotal Blue Sea study supporting our blood based colon cancer screening test. Over the last few months, our product development team took important steps to bring the best possible science to patients and physicians. Since our last update, we have completed three studies to optimize and lock our algorithm.

Based on those results, we believe we have a high quality test and optimized algorithm. As we head into the testing of the clinical trial samples, our team is focused on final steps ahead of running samples including Lab, IT, manufacturing, quality and sample readiness. After we have run the BLUE-C samples, we plan to announce via press release top line data including overall cancer and pre-cancer sensitivity and specificity. Our blood test features our unique scientific approach and a differentiated cost profile. The test will fit into our existing commercial infrastructure and our ExactNexus platform. Shifting to multi cancer screening, we remain on track for the launch of Cancerguard in the second half of 2025 through our large screening and precision oncology commercial organization.

Cancerguard also fits into our unique ExactNexus technology platform. Our test enables population level screening for cancer and we look forward to bringing this test to patients later this year. In summary, we are off to a very strong start in 2025. We launched two new innovative products that will make positive impacts on patients. The commercial improvements we made are building momentum and we believe will deliver sustained growth. The Exact Sciences platform, our deeply embedded standard-of-care tests and our growing portfolio of innovative diagnostics puts us in the best position to make early detection and personalized treatment the new standard. We’re now happy to answer your questions.

Operator: [Operator Instructions] Our first question comes from the line of Tycho Peterson with Jefferies. Please go ahead.

Tycho Peterson: Okay, thanks. Yes, I’ll keep it to one. Let others ask in the pipeline. But Kevin, I want to focus on commercial execution. You highlighted this a number of times. You made a lot of changes in the last two quarters. Obviously, we’re now seeing the results. You talked about the shift to territories, dynamic calling lists, but maybe what are some of the other changes you made on the commercial front that are really working? How is that driving new to Cologuard orders, rescreens and care gap, and then the 30% year-over-year increase in customer engagement? Can you clarify? Is that Doc calls? Is that Doc calls per rep? Thank you.

Kevin Conroy: It’s Doc calls. The volume of calls is up and thanks, Tycho. Yes, we are really pleased with the leading indicators based on the changes that we made. You have to go back to December of last year when we made many of the changes. And then throughout the first quarter these changes we’ve seen responsiveness. We’re really pleased. We have the right number of reps. We are engaging with the right customers with the right frequency. The rep productivity, the per rep productivity is up about 10%. That’s fantastic. That tells you that you have an engaged sales force that is out there really making sure that people are getting screened. Cologuard Plus is making a difference. We have the benefit of having a test that is 95% sensitive, 94% specific.

Docs Healthcare providers are really excited to learn more about Cologuard Plus. We’re equipping our sales force with the right data on who to call on in their geographic territory and the geographic territory alignment that’s clearly having an impact. We’re targeting the right, those right providers with the right frequency. We think that builds out as you go throughout the year and beyond. And one of the things that we’re really happy about is 3 out of 4 new ordering providers in the quarter have been reached actively by either our inside team or our field team within a week or two of that first order. We call that no order left behind. And it’s having an impact. Always has, we believe, always will, and we’ll just keep aggressively surrounding every new customer with education, demo kits, etcetera.

The engagement, the depth of our relationship with our customers continues to strengthen. So here’s a data point, our customer satisfaction has reached an all time high. We track this rigorously. It’s part of, typically part of our bonus structure has been in the past, it’s at an all time high in Q1. Our care gap programs continue to be robust. We’re on track there. We also, our brand awareness is at a high. So when you poll customers, which we’ve done this for years, and ask them on an unaided basis, what is a way to get screened for colon cancer? More people say Cologuard than colonoscopy in four of the last six months. That’s telling you something. You’re moving towards Cologuard becoming the frontline way that people think about screening.

And as you know, there are a lot of people out there, 50 million to 60 million people out there that are not up to date with screening. And then one final thing is ordering Cologuard through our website. If anybody on this call is listening and hasn’t is not up to date with screening, go to the cologuard.com website and you can, you’re going to have to answer some questions and put in your health card, health insurance information and excuse me, you can get screened and you can get screened quickly. That CIO customer initiated ordering business is growing in triple digits. So firing on all cylinders, but it’s a start. So we have a lot of work to do throughout the course of the year.

Operator: Your next question comes from the line of Catherine Schulte with Baird. Please go ahead.

Catherine Schulte: Hey guys, thanks for the question. Maybe one for you. Aaron, can you just unpack guidance a bit? How should we think about cadence in the back half of the year? And then can you walk us through the puts and takes there of the raised revenue outlook? How much of that is care gap versus rescreens versus broader commercial execution or any other color you might have? Thanks.

Aaron Bloomer: Hey, Catherine, it’s early in the year and we would take any increase in guidance at this early point, we’d treat it with caution. But coming off of the strong Q1 that we have, and we’ve got excellent visibility now into kind of how Q2 is shaping up in terms of orders. Kevin just outlined all the reasons why we’re really pleased with the changes that we made last December. The leading indicators that we’re seeing and ultimately starting to see that translate into orders, and so that’s giving us visibility to raise not only from Q1, but also Q2. And ultimately, it is still early and so as we think about revenue pacing, first half versus second half, the back half of the year already implied slightly higher revenue growth.

If you just look at screening as an example, this revenue guidance will imply about 13% growth in the first half of the year, and that would step up to about 15% growth in the back half of the year, primarily driven by the launch of Cologuard Plus the pricing benefit that we’ll see from that and then some of the benefit from the commercial execution. Specific to kind of what led to the increased guidance raise that was entirely attributable to some of the improvements that we’re seeing that Kevin noted earlier related to commercial execution.

Operator: Your next question comes from the line of Brandon Couillard with Wells Fargo. Please go ahead.

Brandon Couillard: Thanks. Good afternoon. Aaron, back to you. On just margins so sales and marketing is a lot higher than we had modeled. Can you kind of unpack where you made investments in the first quarter? Was there anything one time in there? How should we think about that line over the balance of the year? And where do you expect free cash flow to land for the year? Thank you.

Aaron Bloomer: Hey, Brandon, first of all, we’re really pleased with the progress that we made on overall profitability in the first quarter so we grew it by more than 60%. And I think it just showed the power of what we have. And we have multiple ways in order for us to expand our margins. I’ll start with gross margin. We do, we had some headwinds last year, just as it pertains to care gaps. And so we challenged our manufacturing, our lab, our supply chain team to figure out how do we get costs down over time. And really, really pleased with the hard work that they put in in the back half of last year. And that really showed in the first quarter. So we saw gross margins expand again in the first quarter going down the lines of the P&L.

The next area I’d highlight is G&A. So G&A has been an area that we’ve talked about. We’ve taken some actions there. We saw more than 500 basis points of margin growth in the first quarter alone. Sales and marketing we highlighted on our initial call this year that was going to be an area of an investment. And yes, it was up in the first quarter, but I’d like to unpack that just a little bit. If we think about the investments we’ve made within our screening portfolio supporting everything that we’re doing from a Cologuard perspective, the growth that we saw in revenue in the first quarter significantly outpaced the growth and the investments that we made within sales and marketing. And so we saw leverage on that in the first quarter and we will see leverage on that throughout this entire year and in the years to come.

The bigger investment from a sales and marketing perspective is really to support the new product launches that we have this year. You know, we just launched Oncodetect recently. We’ve got the Cancer Guard launch coming later this year. These are brand new markets for us and we wanted to make sure that we were enhancing the size of those teams to be able to support those launches in a very big way. And then just you had asked about free cash flow as well. We saw $120 million improvement year-over-year in free cash flow. And again, just kudos to the entire exact team. This has been an area of focus for us. We’ve taken a number of steps to drive improvements in working capital. Of note, we’ve seen a significant improvement within our days to pay.

So how we manage our suppliers and that showed up in a very meaningful way here in the first quarter. As we do think about the pacing. As I as I said in the prepared remarks, we do expect a build in the second quarter. So we want to make sure that that’s incorporated into everybody’s models. And that just has to do with the launch of Cologuard Plus. We’re able to recognize a higher revenue right away. But the MACs have into Q3 until all of that coding gets updated into the system at which time we would build a bill for that and then collect into the back half of the year. And then just on the pacing of sales and marketing, Brandon, pretty consistent as we pace throughout the year. As we’ve talked about before, I think the team is loaded to bear, fully ready to go to support the full year.

And you saw that in Q1, would expect that to pace throughout the balance of the year.

Kevin Conroy: Operator, next question please. Operator, next question please.

Operator: Your next question comes from the line…

Kevin Conroy: Operator, next question please. The operator has indicated that there is a challenge and to give her a minute. So please bear with us.

Operator: Apologies for the delay. Your next question comes from the line of Doug Schenkel from Wolfe Research. Your line is open.

Colleen Babington: Hi, this is Colleen Babington on for Doug. Thanks for taking our question. So I believe in the prepared remarks that rescreens are now about 25% of total Cologuard orders. Is it reasonable to assume rescreens could get to 26% to 28% of total volume this year? Or should we assume that those should stay stable at around 25% as patients get access to Cologuard Plus for first time testing? Also, we know patients become more compliant with rescreening with subsequent rescreens. So as patients become eligible for their third or second and third Cologuard test, how should we be thinking about the pacing? From your path of your current hit rate of about 55% to your long-term goal of 70% plus. Thank you.

Aaron Bloomer: Rescreens continues to be just an unbelievable growth driver for us. It’s a great predictable recurring form of revenue for us that’s going to provide a long term annuity for our screening business. We’ve talked about how there’s more than 2 million patients eligible rescreen this year. That’s up more than 30% versus where it was a year ago. And yes, we do have opportunities to get even better in terms of driving adherence. We continue to get a couple of points of improvement per year over the last several years and we’ll continue to drive that forward. In terms of just the guide we did more than 25% of our revenue in the first quarter came through rescreens. And yes, it is a fair assumption that rescreens would add a couple of points in terms of their overall contribution to our volume this year.

Operator: Your next question comes from the line of Patrick Donnelly from Citi. Your line is open.

Patrick Donnelly: Hey guys, thanks for taking the questions. Kevin, maybe just to pick up on the pipeline, helpful commentary there on the blood piece. Can you just talk about, I guess the hurdles left the timeline, it sounds like pretty well locked in here, tracking towards the mid-summer. But yes, maybe just talk about the milestones needed, what we should be keeping an eye on to get there and just confidence in the timeline. And again, obviously the data I think the expectation is maybe some dilution from the case control, but help us on the expectations as well would be great. I appreciate it.

Kevin Conroy: Yes, sure. We’re to that point in moving forward to testing clinical trial samples that our team excels at. We’ve done this with Cologuard. We’ve done it with Cologuard Plus. It’s a big undertaking. You have one chance to do it. You want to do it really well, so you have to prepare the lab. You need multiple software systems that need to be validated, reagents, manufacturing, quality, the actual testing of the samples. And there’s a ton of work that goes into that. As you know, it’s a 20,000 patient study overall, there’s just a lot of work, and you want to do it well. We are on track from a timing standpoint. There’s no change. We believe we’ll be competitive. So we believe in the assay team has done a ton of work to validate and lock that algorithm.

And but I also want to take a step up a little bit. All roads lead to getting into the quality measures, which is gated by USPSTF. That’s going to take likely a few years. There are changes there at USPSTF in terms of the budget being cut recently. So we don’t have a clear idea of when the guideline group will meet and then the heat us and starts quality measures. In terms of blood modeling, we know from multiple different studies that have been published in the last year that blood just doesn’t model at anywhere at basically, substantial reduction in life years gained at and a substantial increase in total costs. So it’s we where does this shape out? We believe that blood there will be a niche for blood testing. We don’t know whether blood will get into the guidelines.

It’s certainly not going to be an easy road there. We believe and this is tying back to something that Aaron just said. This big base of customers that we have in our data, in our massive database. We have 30 million people today that have had a Cologuard test order. We believe that could grow to 50 million over the next several years and that allows us to parse the people who are willing to get screened with Cologuard, most are, and then the fraction that aren’t, we have a solution for. And we have a great commercial team, an incredible commercial team, to deploy our blood tests through, to make sure that if there are patients that refuse guideline recommended forms of screening, that we can go and get them screened. So, we believe we’ll win because of the brand, the commercial capability, our tech platform, our cost.

I was just talking with one of our area managers yesterday and said, okay. What are customers saying? And the area manager said, what we’re hearing from the field is that people are waiting for Exact’s blood tests. And I believe that because of the depth of our relationships over the last eleven years of engaging with customers. So that’s where we are really pleased with the progress. We’re at that point in time that the operations and lab and IT teams just they excel. So looking forward to the midsummer readout.

Operator: Your next question comes from the line of Michael Ryskin from Bank of America. Your line is open.

Michael Ryskin: Great. Thanks for taking the question guys. Apologies if I missed this earlier, but the update to the guide on revenues makes sense and you kind of talked through some of the screening contributions. On EBITDA, I just want to get a little bit more color there on where and how that’s flowing through versus reinvestment in some of the commercial initiatives and especially upcoming pipeline. So just want to talk about the EBITDA margin raise to guide. How we should think about that throughout the course of the year? Thanks.

Aaron Bloomer: Hey, Michael. We’re really pleased with the progress again that we made in the first quarter that gave us the belief to be able to raise the guide for the full year in line with the revenue guide that we raised. As well, I already called attention to the world class gross margins that we have in place continuing to get better, the productivity that we’re seeing within G&A. I also alluded to in prepared remarks some of the actions we took in the first quarter to not only impact back half of the year margins but also set ourselves up for long term cost out initiatives as well and as said earlier, we have more operational excellence initiatives planned on that front. And then just in terms of the rest of the drop through, we will continue and are just investing in sales and marketing, in particular, in Oncodetect launch costs this year.

But again, seeing really great productivity out of the investments that we’ve made on the CRC side, which we would expect to get meaningful leverage on throughout each of the quarters this year.

Operator: Your next question comes from the line of Vijay Kumar from Evercore ISI. Your line is open.

Vijay Kumar: Hi guys. Thanks for taking my question and congrats on a nice sprint here. Kevin, maybe if I can just big picture sort of question. If I look at the stock, we’re at the low end of trading range. I look at your test volumes. You’re doing north of 1 million tests here within screening. And yet the market doesn’t seem to give their credit. And part of it, I suspect, is this fear on blood, right? You have one of the largest sales force. When you put all of these elements together, it’s hard for us to see why the market is not giving you the credit. When you think about the blood, A, on the data itself, when you look at versus competition, why is the market fearful of perhaps exact data not being comparable? Would love your thoughts on the work you’ve done internally. And second on pricing, I do think like you guys have a pricing advantage when it comes to blood, wouldn’t that negate the entire competition thesis? Thank you.

Kevin Conroy: Thanks, Vijay. I found over the years that you control and focus on what you really can control. And what we have focused on is getting more people screened and driving that with an incredible commercial focus. And I would say that probably if you look out over the past nine months, there’s been we’ve been more challenged by the commercial execution of Cologuard than, any noise around blood testing. That’s my particular view. But what we can control is execution and on the commercial front, we’re executing. On the CRC colon cancer blood front, we’re executing, and we’re going to have a readout this summer. The key thing for the team, the management team, all of our team members is to focus on the long-term value creation.

And we had a good quarter. A lot of what happened in this quarter is because of things that we did two years ago and three years ago. And that’s where we keep focusing on building a company that has sustainable impact and that’s what we’re going to keep focusing on. And we’re also excited for a midsummer readout.

Operator: Your next question comes from the line of Puneet Souda from Leerink Partners. Your line is open.

Puneet Souda: Yes. Hi, Kevin and team, and thanks for taking my question here. First one on Cologuard Plus It’s been a month since the launch. Could you provide a view on what traction you’re seeing? What’s the mix of Cologuard versus current Cologuard versus Cologuard Plus? And just how should we think about that in the 2Q guide and for the full year? Thank you.

Kevin Conroy: Well, thanks. You should think about Cologuard Plus as today being available for Medicare Part B patients, which is right around 14%, 15% of our customer volume. As you know, Medicare Advantage is becoming a much bigger part of the Medicare patient population, and we think that will grow over time. So think around 15% as we get more payers to change their contracts to include Cologuard Plus, we will be able to flip those orders. Bottom line is that we are testing a large volume of Cologuard Plus tests presently, and that will grow over time as those new patients those patients have access based upon their payer covering Cologuard and contracting with our team. So we’re excited. If we can get more of those payers on board sooner, that means more lift earlier.

And right now, we’re focused on meeting the demand that we’re already seeing. I think it was a couple hundred thousand orders that converted to Cologuard Plus pretty early there in the launch and then a lot of new orders coming in.

Aaron Bloomer: And just in terms of what’s embedded into the guide then for Q2, it’s exactly what Kevin said. It’s the Medicare Part B that obviously then would grow as we go into the back half of the year. But think kind of right around that 15%. To the extent we’re successful with securing contracting with any of the larger payers, we will keep you all updated and then obviously reflect that.

Operator: Your next question comes from the line of Subu Nambi from Guggenheim. Your line is open.

Subu Nambi: Thank you guys for taking my question. On the commercial payer front, could things still be a source of upside this year? Or, is that, too far out or maybe early next year is the right time frame to think about? And then my second question was, have you settled on the cancer guide pricing yet? You previously said folks were willing to pay roughly 500 to 700 out of pocket. So would it be reasonable to think that it’ll be in that range? Thank you.

Kevin Conroy: On the first question in terms of coverage for Cologuard Plus, I think the base assumption is that there would be modest to little non Medicare Part B patients being tested this year. The team is working really hard in the early indications are pretty positive. The payers like Cologuard Plus why do they love Cologuard Plus it’s a forty percent lower false positive rate. That means fewer unnecessary colonoscopies. So we’re engaged in discussions. Those discussions are quite positive. The team is excited, and I think it’s going to be a lot easier go around than it than it was the first time in part because, look, nine out of the top 10 payers are running care gap programs with us. We’ve become partners with the payers and it it’s so important.

Cologuard has become so important to them in terms of their in terms of how they drive their quality metrics so that they can maximize their Medicare Advantage bonuses. We have on the second question, cancer guard pricing, we have not decided yet.

Operator: Your next question comes from the line of Andrew Brackmann from William Blair. Your line is open.

Andrew Brackmann: Hi, guys. Good afternoon. Thanks for taking the question. Kevin, maybe one for you on the pipeline. In the proxy, there’s mention of Cologuard 2.5. Can you maybe just talk about that product, the milestones that you’ve met and are expected and just how we should think about potentially launching that in the future? Thanks.

Kevin Conroy: Cologuard 2.5 is our internal name for Cologuard Plus, which has a smaller collection kit. So if you think out into the future, we want to make sure that we meet the needs of all patients, and there are some patient populations that would like to have a very small kit that they could put inside a purse or a backpack or even in their back pocket. And so we have program going on right now. We’re having conversations with the FDA around that program. That also could be used in certain patient populations like care gap programs because the kit would be less expensive and much more efficient. It is also an opportunity. This collection device really started as an opportunity to think about Cologuard outside of the U.S. where cost requirements would be even be more sensitive to cost requirements. And so there are multiple different attributes that we think will be beneficial to expand Cologuard in the U. S. and beyond. More to come later.

Operator: Your next question comes from the line of Luke Sergott from Barclays. Your line is open.

Luke Sergott: Great. Thanks for the question. I just kind of want to follow there on Ryskin’s question about the margin ramp and you guys have the three big launches, but I wanted to touch on the gross margin here. You guys had a good jump off point in the 1Q. You talked about some of the drivers there, but you have Cologuard Plus coming later on. You have some better pricing as well. How should we think about the gross margin progression throughout the rest of the year? Is there a risk there that or is there a dynamic whereas those volumes continue start ramping and some of the other tests like Oncodetect, you could have a little bit of leverage or underutilized leverage?

Aaron Bloomer: It was a great launch point that we had off of Q1. Again, sequential improvement versus Q4 and also year-over-year improvement versus where we were Q1 a year ago. Obviously, launching Cologuard Plus, even if it’s just in the Medicare Part B, at an increased value that we’ll realize on both the top line and then the flow through on that from a price perspective will be accretive to our gross margins. That will more than offset any, potential headwinds as it pertains to just sorting and having to do run two different lines at the same time. Keep in mind too, with Cologuard Plus, the actual cost to run the test is lower by about 5% or 6% than it is for Cologuard. Oncodetect will be a headwind on our gross margins in the back half of the year to the extent we’re very successful with that launch, and we’ll keep everybody appraised on impacts from that.

But net net, what I would say, just looking at the sequential pacing of gross margins throughout the year, we would expect to kind of sustain at that potentially even a bit better heading into the back half of the year.

Operator: Your next question comes from the line of Dan Brennan from Cowen. Your line is open.

Dan Brennan: Great. Thanks. Thanks for the questions. Maybe I just wanted to go back to Blood, Kevin, if you don’t mind. I know back in September with the strong data you reported, the 31% AA, 88 CRC sensitivity. At the time, it seemed propelled by that new biomarker class. So I was hoping maybe you could speak to, A, is that new biomarker class included in the new locked assay? B, are there any new additional biomarkers that came into the assay? And C, I know back then you talked about the 31% AA potentially remaining like fit like to somewhere in the low to mid-20s. Just wondering kind of your confidence in the assay today that you have in locked moving forward versus where you were back in September. Thank you.

Kevin Conroy: We have been asked this question multiple times, Dan, over since September. And what we have said, including in the press release in September, is we expect degradation. Anytime you go from a smaller study to a large prospective study, you’re going to see degradation. We’ll get into the exact composition of the test. It’ll be detailed in the publication that follows the top line data release or as we present this. We believe our multi omic platform is a differentiated platform because of both performance and cost. And so in terms of going into all the details, we’re not going to go into more details than that now. Thing is you never know how a clinical trial is going to work. Is it going to perform better than expected or worse than expected?

That’s what the exciting part of what we do is. And I want to reiterate, we feel good about the performance of the test based on the three additional studies that we have run, which included prospectively collected samples to lock the algorithm. And so that’s where we are. We’re going to keep working really hard to deliver the best possible tests and the highest quality clinical trial results in midsummer.

Operator: Your next question comes from the line of Matt Sykes from Goldman Sachs. Your line is open.

Matt Sykes: Good afternoon. Thanks for taking my questions. Maybe just focusing on a different topic on the capital allocation. Just looking at the change in the financial profile, your free cash flow breakeven moving to positive free cash flow going forward. You’ve got a lot of things to spend money on organically in your own business, which I totally understand. But as your financial profile improves and that free cash flow generation increases, how do you think about priorities of capital allocation? Are you still going to be gearing towards investing organically in the opportunities you have? Are there certain areas that a tuck in or bolt on acquisition would make sense maybe on the technology side? Just how are you thinking about that as the profile evolves?

Kevin Conroy: Yes, I’ll take this first and then it over to Aaron. This is an area of intense focus with our team, with our board, as we move to being a both a fast growing company, on the top line and the bottom line and generating cash. It’s an intense focus of the company. It gives us a ton of optionality moving forward. And we’ll start to lay out our philosophy as we get closer to that point. We’re not quite there yet, but that’s right around the corner. Aaron, do you want to add color to that?

Aaron Bloomer: I would just say we’re proud of the strong balance sheet that we have and all of the hard work that the team’s put in over the last several quarters to really be able to even further strengthen that, increase our free cash generation. As Kevin alluded to, it just gives us the optionality moving forward. And we already started to evolve some of our capital structure last quarter with the convertible note debt pay down as well as taking out the revolving credit facility. And so all of these are meant to help us continue to evolve into the future and give us optionality moving forward.

Operator: Your next question comes from the line of Brad Bowers from Mizuho. Your line is open.

Brad Bowers: Hey, thanks for taking the question here. I wanted to talk on Cologuard Plus. DTC initiative has been pretty strong, sort of spending and some of the ROI has been pretty good there. Just wanted to hear if there are any initiatives planned for Cologuard Plus and also the extent that you’re starting to have the conversation about moving up the continuum versus colonoscopy, how that’s also playing into some of the coverage conversations with payers? Thank you.

Kevin Conroy: I want to make sure I understand the question correctly. In terms of Cologuard Plus did I hear you say DTC initiatives?

Brad Bowers: Sorry, advertisements.

Kevin Conroy: Yes. Okay. So right now, the advertisements are just focused on continuing to build the Cologuard brand that will start to move more towards Cologuard Plus as we secure more contracts with payers. And so that will be in the coming quarters that that focus changes from an advertising perspective. However, from a Salesforce perspective, there’s an intense focus on educating healthcare providers in the primary care setting of the data around Cologuard Plus. As I mentioned earlier, the data is generating a lot of excitement among our large and growing base of health care providers. They want to spend time with our sales force and our MSLs on that data. It’s remarkable. 95% sensitivity, 94% specificity. There is no other screening test, and we’re really proud of this.

No other screening test with that level of sensitivity and that level of specificity. So it’s kind of eye popping. That allows us to challenge all of our customers Cologuard first, if necessary, colonoscopy. That’s a game changer. If that’s happening right at the time, as we mentioned earlier, that the brand awareness of Cologuard is actually exceeding colonoscopy. It’s an exciting time at Exact, and I think if you look out over the next three or four years, here’s what the impact is going to be. We’re going to get more people screened. We’re going to push towards eighty percent screening and when you get to eighty percent screening, you’re near mammograms. You’re near Pap smears, and that’s where you start to bend the curve in terms of incidence and mortality.

That’s our ultimate goal.

Operator: Your next question comes from the line of Eve Bernstein from Bernstein Research. Your line is open.

Eve Burstein: Great. Thanks so much. I’m going to build off Mike’s question also. So it’s clear that this year you’re cutting costs, you’re investing for growth. But this quarter, your revenue guidance went up $40 million and EBITDA guidance went up $50 million. So is it fair to say this is roughly what incremental margin looks like going forward? And can we expect that now that the company is more or less reached scale, there’s going to be a high thirties incremental margin on additional revenues?

Aaron Bloomer: Thanks for the question, Eve. I would say that this I’ll reiterate. This is a year of investment that we would expect to get meaningful leverage on for the years to come. And so when you think about incremental margins being in the high thirties, I would say we should be able to do better than that just given our world class gross margin profile over time. 2025 is a little bit unique just given the product launches that we are supporting. And I’d also just call attention on the 40 versus 15 to that it’s still very early in the year. We’ve got a lot of really exciting initiatives planned to further lean out and gain efficiencies throughout the P&L, and we’ll keep you posted on the progress to those later in the year.

Operator: Your next question comes from the line of Bill Bonello from Craig Hallum. Your line is open.

Bill Bonello: Hey, thanks a lot guys. I just wanted to circle back to somebody mentioned several times on this call and a lot recently, Kevin, and just talked about the — this concept of Cologuard first. Can you maybe which seems like kind of a radical change in how you’ve ever talked about this. In the in the past, can you maybe talk through what has to happen for that to be the paradigm? Are there are there guidelines that that would have to be changed? Is it more of a payer driven phenomenon? Is it really something you can drive literally just through your marketing and interaction with physicians? I mean, what how do we think about that change actually taking place?

Kevin Conroy: Bill, I would say we are driving this and you are starting to near the point that there will be more people screened with Cologuard in a given year than with colonoscopy. I’ll repeat that. We’re nearing the point that more people will opt for Cologuard in a year than colonoscopy. As you know, there’s a limit in The US to how many screening colonoscopies can be performed. Let’s say it’s a range somewhere between, call it, five million and six million. It’s hard actually to get that accurate data, but between five and six million screening colonoscopies are performed every year. There are fifty five to sixty million people not up to date with screening. If you just try to go and get those people screened, it would take you nine or ten years, take you a long, long time.

And so what Cologuard has been able to do, and again, this is based on a ton of work that we’ve done in the past, is now moving towards when I talk to people and say, hey, are you up to date with your colon cancer screening, which I always do, more and more and more and more people, people say, I use Cologuard. These are people who have no idea what it is that I do. So that’s it’s a sea change. It’s going to happen. The question is, how much can we expedite it with innovative marketing, with our commercial organization, our field force, our MSLs, our ExactNexus platform, which is becoming more sophisticated with our rescreens, which are going to keep growing over time, and then, with our consumer initiated ordering capability and our care gap programs.

And what’s going to come along next? Are employers going to want to drive this? Are other avenues of growth going to occur? And then is international growth going to occur? So it’s a really exciting time to be at Exact, and there are a lot of possibilities for the future. But this one, we’re confident of. Cologuard will be first. Colonoscopy will be utilized as appropriate.

Operator: And your final question comes from the line of Jack Meehan from Nephron Research. Your line is open.

Jack Meehan: Hello. Thanks for squeezing me in. I wanted to follow-up on some of the discussion around coverage contracting for Cologuard Plus. Just any additional color you can share on progress signing up Medicare Advantage plans and then commercial payers, the discussions there as well? Thank you.

Kevin Conroy: Sure. Those conversations tend to be one and the same because most plans we talk to have commercial lines, they have Medicare Advantage lines, they have Medicaid lines, And so those conversations all go hand in hand. We’re pleased with the conversations that we’ve had. As I mentioned earlier, payers are excited about the higher sensitivity for both cancer and pre-cancer with a lower false positive rate. They’re excited about what they’re seeing in terms of the progress with our care gap programs with them. And so there’s a potential for these conversations to be faster than occurred the first time. But why is that happening? Well, it’s because three things happened in succession quickly, FDA approval, Medicare including us with a price in the clinical lab fee schedule, and then importantly, the immediate inclusion into the quality measures.

So those three things happening in succession, that wasn’t accidental. That was an incredible team of people who made those things happen very quickly. And so we’ll lever that, those conversations. We’ll give you color as the year progresses but again, the base assumption should be Medicare fee for service only this year.

Operator: And we have reached the end of our question-and-answer session. I will now turn the call back over to Kevin for some final closing remarks. Thank you for joining us on today’s call. We look forward to updating you on all of our progress throughout this transformational year at Exact Sciences. Most importantly, thanks to the dedicated team at Exact Sciences for your commitment to our purpose of eradicating cancer. Thank you.

Operator: That concludes today’s conference call. Thank you for your participation. You may now disconnect.