OK, after that weekend interruption, lets get back to some high growth stocks! This one is not like the current portfolio as it is not SaaS and not really recurring revenue, but it has been high growth, and for someone who maybe invests in more than 10-15 stocks, or wants some diversity, maybe this has a place.
I’ve been posting updates on Exact Sciences about once a quarter (or when there is news worthy to discuss). I didn’t think many people were interested in the stock, but when I looked back at my last post there were 47 recs, so I guess some people found it worthwhile, so I will continue.
Here is a link to the last post I made back in June:
For some recent history on EXAS, follow that link and it gives the numbers from 18Q1 and 2 catalysts that had been recently announced (the American Cancer Society recommending screening for colorectal cancer begin at age 45 instead of 50, thus increasing their TAM by 20%, and EXAS announcing they have developed a blood test that can detect liver cancer). Details of those announcements are in the above post, along with a link to a previous post that gives more background on the company, peruse them if you’re interested.
So what has happened since June? Well, they released their 18Q2 results which still show tremendous growth (although slowing), which brought the stock price down. And they announced a business partnership, which launched the stock back up near all time highs.
So first the Q2 results:
Highlights from the release:
- Revenue was $102.9 million, an increase of 78 percent, and test volume was 215,000, an increase of 59 percent
- Average recognized revenue per test was $479, an improvement of 12 percent
- Average cost per test was $125, an improvement of 6 percent
- Gross margin was 74 percent, an increase of 510 basis points
- Operating expenses were $108.7 million, an increase of 53 percent
- Net loss was $36.4 million or $0.30 per share, compared to $30.8 million or $0.27 per share
- Non-cash interest expense related to convertible debt was $6.7 million, or $0.05 per share
- Cash utilization was $45.3 million, compared to $43.9 million
- Cash, cash equivalents and marketable securities were $1.2 billion at the end of the quarter
- More than 10,000 healthcare providers ordered their first Cologuard test during the second quarter, and nearly 121,000 have ordered since the test was launched
Revs (Millions) Q1 Q2 Q3 Q4 Total Revs Growth 2015 $4 $8 $13 $14 $39 2088.9% 2016 $15 $21 $28 $35 $99 152.0% 2017 $48 $58 $73 $87 $266 167.9% 2018 $90 $103
So revs for the quarter went up to $103M, a QoQ sequential growth of 14%, and YoY growth of 79%. Last Q was up 87% YoY and the previous 2 years, all quarterly YoY growth was triple digits (ranging from 150-250%). The company is guiding total revs for 2018 to $420-$430M, which at the midpoint would be a 60% increase from 2017.
Here is the last 2 and a half years of revenues and growth rates:
Revs ($M) Seq Rev Growth YOY Rev Growth TTM Rev (Millions) TTM YOY Rev Growth 1Q16 $15 2.8% 244.2% $50 760.3% 2Q16 $21 43.2% 161.7% $63 353.2% 3Q16 $28 32.5% 123.0% $79 196.2% 4Q16 $35 25.3% 144.4% $99 152.0% 1Q17 $48 37.5% 227.0% $133 166.3% 2Q17 $58 19.0% 171.7% $169 168.7% 3Q17 $73 26.0% 158.4% $214 172.4% 4Q17 $87 20.4% 148.3% $266 167.9% 1Q18 $90 3.0% 87.0% $308 131.5% 2Q18 $103 14.4% 78.8% $353 108.5%
Still pretty amazing revenue growth, although the most exciting part is the announcement that came 3 weeks after the earnings release:
Exact Sciences And Pfizer Enter Into U.S. Promotion Agreement For Cologuard®
…Pfizer will join Exact Sciences’ sales representatives in reaching both physicians and health systems and will also actively participate in extending and deepening the Cologuard marketing campaign…Pfizer brings a large and experienced sales force and relationships integrating with the leading health systems…Under the terms of the agreement, Pfizer will co-promote Cologuard with Exact Sciences beginning in the fourth quarter of 2018. Exact Sciences will maintain responsibility for all aspects of manufacturing and laboratory operations of Cologuard. Pfizer will share gross profits and marketing expenses equally above an agreed upon baseline.
So the co-promotion won’t begin until 18Q4, so we won’t know how it’s doing until 2019, but I think this partnership has the potential to re-accelerate rev growth for EXAS in 2019.
The stock price has been a roller coaster with each announcement, but I’m enjoying the ride. I have positions from the $30s to the low $60s with the current price around $77. I would not recommend the stock to anyone without a high tolerance to risk and volatility.
Would love to hear others’ thoughts…