Exact Sciences Raises Full-Year 2023 Guidance

Bottom-Up Insights
  • Exact Sciences raised full-year 2023 revenue guidance across all business segments. The business only needed six months to achieve its full-year 2023 adjusted EBITDA guidance, which was increased by 56%. As a reminder, our view is that adjusted EBITDA is a relatively low-value metric. It doesn't factor into our modeling.
  • The modeled fair valuation displayed in the Margin of Safety Dashboard remains $101.55 per share and reflects our 2025 model. This is a high-quality growth stock and we believe investors can feel comfortable paying up now for future growth, but shares are likely overvalued based on expected 2023 or 2024 financial performance.
  • Solt DB Invest may increase its 2023, 2024, and 2025 models after reviewing the earnings call (this short research note was written before the call) and quarterly filing (unavailable as of this writing).
MVP Article Disclosure: Please note this article was from our MVP platform and was written prior to October 2023. We've made numerous refinements, which means article structure, image and data visualization formats, and how we communicate models or the Margin of Safety may have changed.

Cologuard keeps delivering for Exact Sciences.

The multi-omics diagnostic leader turned in a solid second-quarter 2023 performance at first glance. The business generated the highest quarterly operating cash flow since the final three months of 2020, when COVID-19 testing revenue surged and non-cash charges helped to inflate the number. It has now delivered positive operating cash flow for three consecutive quarters.

One blemish that stands out: general and administrative expenses (excluding sales, so this isn't to be confused with SG&A) are growing rapidly. Exact Sciences reported $238 million in G&A expenses during the second quarter. That follows a first-quarter total of $217.3 million and $193.9 million in the fourth quarter of last year. The recent increases have eaten any benefit from growing revenue -- in the last three months, anyway. It's a metric to watch going forward, listen for on the quarterly conference call, and search for in regulatory documents.

Full-year revenue guidance was raised for each segment -- even COVID-19 testing (it's still immaterial).

Despite the increased guidance, Solt DB Invest still expects higher revenue in full-year 2023. This is from our 2023 model that was shared in May 2023 and has not been updated to reflect second-quarter 2023 results. We may update our models after digging into the data further, although a quick glance at the numbers suggest Exact Sciences is on pace to almost exactly hit our modeled revenue for each segment.

I'll listen in on a recorded version of the earnings call and pore over SEC filings (if published) ahead of the weekly update on Friday.

Further Reading

  • August 2023 press release announcing second-quarter 2023 results
  • June 2023 research note discussing disappointing BLUE-C data
  • May 2023 research note from Solt DB Invest discussing first-quarter 2023 results