Exact Sciences(US:EXAS)2025-08-06 21:07Part I - Financial Information This section presents the company's financial statements, management's discussion and analysis, market risk disclosures, and internal controls Item 1. Financial Statements The financial statements for the period ended June 30, 2025, show a 16.0% year-over-year revenue increase to $811.1 million for the second quarter, driven by growth in both Screening and Precision Oncology, with a significantly narrowed net loss Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $5.80 billion, a slight decrease from year-end 2024, while total liabilities decreased to $3.33 billion, largely due to convertible notes settlement Condensed Consolidated Balance Sheets (in thousands) | Balance Sheet Item | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 1,507,859 | 1,571,423 | | Cash and cash equivalents | 657,099 | 600,889 | | Marketable securities | 201,336 | 437,137 | | Total Assets | 5,797,365 | 5,928,139 | | Total Current Liabilities | 521,933 | 732,187 | | Convertible notes, net, current portion | — | 249,153 | | Total Liabilities | 3,327,951 | 3,525,890 | | Total Stockholders' Equity | 2,469,414 | 2,402,249 | Condensed Consolidated Statements of Operations For Q2 2025, revenue grew 16.0% to $811.1 million, with a significantly reduced net loss of $1.2 million, while six-month revenue increased 13.5% to $1.52 billion Condensed Consolidated Statements of Operations - Q2 (in thousands, except EPS) | Metric (in thousands, except EPS) | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $811,085 | $699,264 | +16.0% | | Gross Profit | $562,453 | $488,316 | +15.2% | | Loss from Operations | $(2,148) | $(26,257) | +91.8% | | Net Loss | $(1,185) | $(15,808) | +92.5% | | Net Loss Per Share | $(0.01) | $(0.09) | +88.9% | Condensed Consolidated Statements of Operations - H1 (in thousands, except EPS) | Metric (in thousands, except EPS) | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $1,517,870 | $1,336,788 | +13.5% | | Gross Profit | $1,063,000 | $934,639 | +13.7% | | Loss from Operations | $(98,158) | $(132,949) | +26.2% | | Net Loss | $(102,400) | $(126,036) | +18.8% | | Net Loss Per Share | $(0.55) | $(0.69) | +20.3% | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash provided by operating activities significantly improved to $119.8 million, with cash and cash equivalents increasing by $50.5 million Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $119,826 | $24,754 | | Net cash provided by (used in) investing activities | $190,458 | $(318,567) | | Net cash provided by (used in) financing activities | $(260,685) | $221,601 | | Net increase (decrease) in cash | $50,463 | $(73,658) | - The primary use of cash in financing activities was a $249.2 million payment for the settlement of convertible notes that matured in January 20252398 Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, revenue recognition, debt, and collaborations, highlighting strong Screening revenue growth, convertible notes settlement, and a new collaboration with Freenome Revenue by Source (in thousands) | Revenue Source (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Screening | $628,481 | $531,606 | +18.2% | | Precision Oncology | $182,604 | $167,658 | +8.9% | | Total Revenue | $811,085 | $699,264 | +16.0% | - In January 2025, the company settled its 2025 Convertible Notes with a cash payment of $250.4 million upon maturity98 - On July 22, 2025, the company initiated a restructuring plan expected to result in approximately $30 million in costs through 2026, primarily for employee termination and consulting fees167 - On August 4, 2025, the company entered into a collaboration and license agreement with Freenome, involving a $75.0 million upfront payment and up to $700.0 million in potential milestone payments for developing and commercializing blood-based colorectal cancer screening tests169 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2025 revenue growth to increased Cologuard and Oncotype DX test volumes, with new product launches and a multi-year productivity plan targeting over $150 million in annual savings by 2026 - Key milestones in Q2 2025 include delivering over 1.3 million test results, obtaining Medicare reimbursement for the Oncodetect MRD test, and entering an exclusive license agreement with Freenome for blood-based CRC screening177 - The company launched its next-generation Cologuard Plus test in late March 2025 and its Oncodetect MRD test in April 2025, with plans to launch its Cancerguard multi-cancer early detection test in Q3 2025182 - A multi-year productivity plan is expected to deliver over $150 million in annual savings by 2026, primarily from general and administrative efficiencies, with expected restructuring costs of $105 million to $120 million through 2026189 Results of Operations Screening revenue grew 18.2% in Q2 2025 due to higher Cologuard test volume, while Precision Oncology revenue increased 8.9% driven by Oncotype DX adoption and sublicense revenue, with R&D expenses decreasing due to non-recurring items - The increase in Screening revenue was primarily due to a higher number of completed Cologuard tests, driven by increases in rescreen rates, care gap programs, and growth in new ordering providers196 - Precision Oncology revenue growth was driven by an increase in Oncotype DX breast cancer tests, particularly in Japan, and recognition of $7.5 million in sublicense revenue197 - Research and development expenses decreased by 10.1% YoY for the quarter, primarily because Q2 2024 included a $25.8 million expense for a license agreement termination202 Liquidity and Capital Resources As of June 30, 2025, the company held $657.1 million in cash and cash equivalents and $201.3 million in marketable securities, with a new undrawn $500.0 million revolving credit agreement, sufficient to fund operations for at least the next 12 months - The company had $657.1 million in cash and cash equivalents and $201.3 million in marketable securities as of June 30, 2025214 - In January 2025, the company entered into a new $500.0 million senior secured revolving credit agreement, which was undrawn as of June 30, 2025212 - A material cash requirement was met in January 2025 with a $250.4 million payment to settle the 2025 Notes upon maturity221 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposures relate to interest rate risk on its cash, cash equivalents, and marketable securities, and foreign currency risk from its international operations, managed through conservative investment policies and forward contracts - Market risk is primarily confined to cash, cash equivalents, and marketable securities, which are invested in high-quality, investment-grade instruments227 - The company uses foreign currency forward contracts to mitigate exchange rate risk, with open contracts having a notional value of $50.8 million as of June 30, 2025231 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no significant changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective232 - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2025233 Part II - Other Information This section covers legal proceedings, risk factors, and other significant corporate events Item 1. Legal Proceedings The company is involved in ongoing intellectual property litigation with Geneoscopy, Inc., concerning patent infringement and false advertising, with recent PTAB decisions impacting patent validity - The company is in a legal dispute with Geneoscopy, Inc. over alleged patent infringement of the '781 and '746 patents and violations of the Lanham Act153 - On July 9, 2025, the Patent Trial and Appeals Board (PTAB) found all claims of the '781 Patent unpatentable, with a notice of appeal potentially filed by September 10, 2025154 Item 1A. Risk Factors The company faces key risks including reliance on strategic collaborations, dependence on single-source suppliers, and uncertainties from potential healthcare reforms and evolving reimbursement policies - The company relies on strategic collaborations, such as with Mayo and the new Freenome agreement, and faces risks if these agreements are not maintained or if anticipated benefits are not realized237 - Dependence on single-source suppliers like Phillips-Medisize (Cologuard kits), Illumina (sequencing platforms), and Hamilton (lab equipment) poses a significant operational risk240241 - Uncertainty related to healthcare reform, including legal challenges to the ACA and changes in Medicare reimbursement under PAMA, could adversely affect coverage and profitability246247 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Mine Safety Disclosures Not applicable Item 5. Other Information This section details significant corporate events including a collaboration with Freenome, amendments to executive employment agreements, and a Board of Directors resignation - On August 4, 2025, the company entered into a Collaboration and License Agreement with Freenome to develop and commercialize blood-based CRC screening products, which includes a $75 million upfront payment and potential milestones255 - On August 5, 2025, the company amended the employment agreements for executives Brian Baranick, Aaron Bloomer, Sarah Condella, and Jake Orville, modifying the acceleration of equity vesting upon certain termination events259 - Daniel Levangie resigned from the Board of Directors on August 5, 2025, due to his retirement261 Item 6. Exhibits This section lists the documents filed as part of the Form 10-Q, including amendments to employment agreements, certifications, and iXBRL data files