Aaron Bloomer

Thanks Kevin and good afternoon, everyone total revenue grew 13% year over year to $709 million. Growth was led by broad based momentum and Cologuard adoption along with international expansion, Ivana type CX adjusted de margin expanded 500 basis points to 14%. Highlighting another strong quarter of operational execution from the team.
We generated a record $113 million in free cash flow up nearly 60% sequentially and ended the quarter with cash and security of more than a billion dollars.
Screening revenue grew 15% to $545 million driven by cold guard volume precision oncology revenue grew 5% to $164 million. Growth was led by oncotype DX which expanded 28% internationally.
We generated $99 million in adjusted EBITDA.
An increase of $42 million year over year adjusted ebita margin expansion was driven by volume and expense controls as a percentage of revenue adjusted G&A improved about 550 basis points year over year.
This more than offset a decline in nongaap gross margin of about 85 basis points.
We are making strong progress, expanding profitability and generating free cash flow allowing us to reinvest in growth and innovation.
Turning together we now expect full year revenue between 2.73 and $2.75 billion including full year screening revenue between 2.08 and $2.095 billion and precision oncology revenue between 656 $155 million.
Recall on our earnings call in July, we outlined four key reasons for accelerated cold guard growth in the second half of 2024 typical seasonality care GAAP programs, read screens and recent sales and marketing investments.
Although we are pleased with progress on rescreens and care GAAP programs which are powered by our exact Nexus platform and capabilities. We fell short of driving demand at faster rate within primary care offices excluding care GAAP programs. Since August Cold Guard orders have grown below the historical rate which our prior guidance assumed this impacted third quarter screening revenue and will have a bigger impact on fourth quarter revenue due to the normal 30 day timing between a Cologuard order and a completed test.
Second, disruption from hurricane Helene and Milton negatively impacted Cologuard orders and results in September and October.
Historically, about 18% of Cologuard tests are from patients who live in affected areas.
Our thoughts are with those who suffered from the devastating storms.
We continue to monitor these situations closely with expected impacts incorporated into our updated guidance.
Third, we are seeing positive contributions from the new cohort of reps who joined Exact Sciences beginning in May.
This progress has been more gradual than our prior guidance assumed and we expect the return on those investments will increase in the near and long term.
Lastly, at the beginning of the third quarter, we moved our Precision Oncology portfolio onto exact nexus. We face transitional challenges that we expect will have a one time negative impact on precision oncology revenue in the second half of 2024.
These challenges impacted our ability to collect on some of the tests we performed over time. We expect this upgrade will enhance the efficiency of our teams and systems and the challenges we faced have been resolved as a result of our updated revenue outlook, we're revising adjusted bits of guidance to be between 310 and $320 million.
This implies our full year adjusted ebita margin at midpoint expands 270 basis points year over year to 11.5%.
Although we're facing near term challenges, we expect growth will accelerate in 2025 and margins will continue to expand.
We are well on our way to achieving our 2027 financial target of 15% compounded revenue growth and greater than 20% adjusted the margin back to you, Kevin.

Kevin Conroy

Thanks, Darin Cologuard is an open ended growth story because it's become synonymous with colon cancer screening.
Our sophisticated exact nexus platform allows us to connect electronically with nearly a quarter of a million providers who've ordered cguard. So far this year, 24 million patients, more than 370 us health systems and over 800 payers over time, the power of our exact nexus platform continues to increase increase both Cologuard order and adherence rates in the primary care and care, GAAP settings.
Our platform will help us address the 60 million people who are not up to date with screenings by sharing data and insights with key stakeholders. It also allows us to build lifelong relationships with patients who are new to screening and those who have previously completed Cologuard.
We expect this will drive Cologuard growth for years to come and expect similar benefits in precision oncology.
Our precision oncology team guides treatment decisions for more than 600 cancer patients every day.
Archetype DX helps early stage breast cancer patients determine whether they will benefit from chemotherapy and assess their risk of recurrence. It's globally recognized as standard of care with 90% of us oncologists ordering an adoption, expanding internationally through this same channel oncode can aid in the early detection of residual or recurring cancer and better informed therapy decisions.
We're excited to share clinical validation data. This January in a peer reviewed journal highlighting Onco detects accuracy in detecting residual disease in colon cancer patients.
We're on track to launch Onco Deette with reimbursement in colon cancer. Next year, we're also conducting clinical studies to expand into multiple other solid tumor types including breast cancer results from these studies will be shared at regular intervals over the next few years supporting our goal to cement this technology as standard of care.
We achieved another major pipeline milestone by receiving FDA approval for Cologuard plus our next generation Cologuard test.
Cologuard plus sets a new performance standard in colorectal cancer screening.
Cologuard plus detects 95% of cancers with 94% specificity relative to Cologuard. This represents approximately a 40% improvement in both the false negative and false positive rates per the modeling assumptions that inform us PST F guidelines only Cologuard plus and colonoscopy will be on the efficient frontier which defines the best colon cancer screening strategies.
Next, we plan to establish a higher price through an available Medicare pathway before launching the test with Medicare coverage and guideline inclusion.
Our blood based colon cancer screening data presented at ESMO in September demonstrated meaningful progress towards another option to screen 16 million Americans who remain on screen.
Results of a large well defined study showed our test achieved 88% overall cancer sensitivity and 31% sensitivity for advanced precancerous lesions. At 90% specificity. These data reinforce the power of our unique scientific approach which delivers an unrivaled cost profile and extends beyond colon cancer. We expect to have the best stool and blood based screening options available with the technology and commercial platforms necessary to engage patients.
We see a clear path to accelerating growth and expanding profitability. In 2025 the progress we're making with commercial execution, our exact Nexus platform, re screens care, GAAP programs and new product launches reinforces our positive outlook.
This positions us to continue making a positive impact on the lives of millions of patients around the world with our portfolio of innovative cancer diagnostics. We're now happy to take your questions.

Question and Answer Session

Operator

Thank you. And as a reminder to ask a question, simply press star followed by the number one and again, please limit yourself to one question. Our first question comes from the line of
Brandon Collier from Wells Fargo. Please go ahead.

Brandon Collier

Hey, thanks, good afternoon. Kevin or Aaron. Do you just kind of walk through? What changed in the second half outlook relative to where you stood 90 days ago would be helpful if you could maybe unpack some of the moving parts and contribution be it between care? GAAP. The hurricane disruptions slow ramp from from new reps and have you seen any bounce and orders following the hurricane in those effective areas? Thank you.

Kevin Conroy

Sure. Why don't I take this at a high level and then hand it over to Erin. First of all, I'd say that a long term trend for Cologuard remain intact. With that said, I take accountability. Our management team takes accountability for the, the lesson performance and guidance for Q3 and Q4 respectively. We can do better.
And we have our arms around these execution issues and we have clear plans in place to address them. We'll talk more about that on the call. Let me say that Cologuard is and remains promotionally responsive.
It's responsive the most and the newer health care providers that have begun ordering Cologuard since the pandemic, we are calling on those that cohort of positions the least and that is an opportunity for us to execute much better as we have in the past.
We're disappointed, but at the same time, we see a very clear path to improvement.
The size of the opportunity remains unchanged. There are 60 million Americans who are not up to date with screening.
We are seeing a change in the way that patients are consuming health care with a decrease over time in face to face office visits in the primary care setting that has changed and it has changed most significantly since COVID that provides on one hand, a challenge. Another a real opportunity because of the exact nexus platform and our ability to reach people as we are with care. GAAP programs initiated by our customers where health systems and payers, we'll, we'll talk about that more. And then I just want to keep everybody to keep in mind that 2025 tails and why we believe that growth in 2025 and beyond will continue starting with re screens, which continues to grow. We'll unpack that a little bit and we believe over time that'll grow from 25% to 50%. The Care GAAP programs which are becoming a larger part of our overall Cologuard volumes, Cologuard plus the introduction of it and the price increase that we will seek in 2025 and then finally, stronger commercial execution than you saw in Q3 and we expect to see in Q4 Erin.

Aaron Bloomer

Yeah. Hey Brandon. So as we laid out on the, on the last call, you know, there were really four key reasons for why we expected growth to accelerate into the back half of the year, typical seasonality, re screens, care gaps. And then the recent sales and marketing investments that we've made really proud of what's what's going on in the team execution around re screens and care GAAP, driving significant growth for us in the back half of the year. If you look at kind of what's driving the shortfall, you know, first, as we laid out, we typically see the highest volume of Cologuard order growth really from that kind of early August through late October, that's the steepest part of our growth curve. And while we have seen increases over this period of time, it's not been at the levels that we expect or that we've seen historically, the second key reason would be we've seen a positive signal on recent sales and market investments that we've made. But that signal is, is a bit more gradual than the prior guidance. Assumed.
The third key driver really comes down to, to hurricanes and as outlined on the call, the those that live in the affected areas of the two hurricanes that hit, that represents roughly 18% of co guard volumes historically. And that has had an impact on orders and results in September and October and obviously given the 30 day time lag between, you know, when, when we see an order and a result, this has a bigger impact on the fourth quarter.

Operator

Tycho Peterson, Jefferies.

Tycho Peterson

Hey, thanks. I'm I'm I'm going to pick up right there. So you're, you're not willing to quantify each of the impacts. And then how long do you expect care GAAP and rep productivity issues to linger and then fourth quarter guidance, you're down sequentially. I'm just curious, you know, as to why that, that would be the case. And then lastly anything you're willing to say about 25 at this point. Thanks.

Aaron Bloomer

Hey, Tyco. Yeah. So as we look at and you know, in, in the fourth quarter, it is down sequentially, we're not going to size each one of the kind of four key, three, key reasons that we outlined. The single biggest reason for why revenue would be down sequentially from Q3 to Q4 is the hurricanes. Again, as we look at patients who in affected areas and we closely monitor on a week to week basis. What's been happening both with orders and results. We know that this is going to have an outsized impact on Q4 relative to Q3. Again, those that live in affected areas make up roughly 18% of co guard volumes as it relates to care gaps. You know, care GAAP continues to be a strong growth driver for us into the back half of the year. The pacing between Q3 and Q4, we actually saw some of the payer programs pull forward from Q4 into Q3 and some of the care GAAP programs we had contemplated in Q4 are happening a little bit later in the quarter. So some of that revenue will be recognized in 2025 as we result those orders, you know, turning to to 2025 just reiterate what Kevin said before. We've got four key reasons to be excited about growth heading into next year. First is re screens. Second is Care GAAP programs. Third is the launch of Cologuard Plus and the pricing increase that we expect to see. And then fourth would be commercial execution.

Kevin Conroy

Yeah, and adding on to that new products with our launch of MRD occurring next year too in the first half.

Operator

Andrew Brackmann, William Blair.

Andrew Brackmann

Hi, good afternoon.
Thanks for taking the question. You know, I think one of the things folks are going to want some comfort around is just your ability to forecast the business, especially in the context of how things sort of played out this quarter. But can you maybe just sort of talk about the signs that you saw in inter quarter that this was sort of playing out against your favor? And I guess specifically how those changed or evolved over the last couple of years and I guess bigger picture here, the number of variables in the model. How are those sort of moving in and out of your control as we look forward? Thanks.

Aaron Bloomer

Hey, Andrew. Yeah, the, the biggest thing that I would say from an intra quarter perspective is just obviously, again, reiterating that, that growth that we expect to see and have seen over time from August through October and that's been a very reliable period of growth in the past. We did see growth in orders during that time period, just not at the levels as we have historically and to reiterate some of the points Kevin made, you know, this comes down to commercial execution and we're taking actions to address that heading into 2025. The second thing that we saw play out intra quarter was obviously the the two large hurricanes which kind of hit back to back and we monitor those effective areas very, very closely and are able to predict what's happening both in terms of orders as well as results heading into the fourth quarter.

Operator

Doug Schenkel, Wolfe Research.

Doug Schenkel

Hey, good. Good afternoon. So question on the guidance and then just thinking ahead from here for the next couple of years. So Aaron is doing some quick math, if we assume 18% of your revenue went to zero for one month, I think that would equate to 35 to $40 million in revenue, you cut guidance for the year by more than half that. So just just want to make sure I'm in the right neighborhood. I want to be, you know, crystal clear that even if it were not for the hurricanes, you would be cutting guidance here because of your lack of visibility. And, and just not executing to, to plan. So that's my first question. My second is, you know, your, your guidance implies that Cologuard fourth quarter volume growth is going to moderate, I think to around 10%. And, you know, this is in a period where you talked about again, material care, GAAP benefits coming in. The reps you hired, you know, that were completed in May, but we're hired earlier than that in some cases starting to become more efficient as they're supposed to be. And then the opportunity to convert reorders from three years years ago, you know, as we look at the second half of this year, that's as big as ever. So if that's what's going on with Cologuard, your other major product line oncotype, great product, but it's mature. That's a mid single digit growth franchise, pulling those things together, you know, and acknowledging the tailwinds that you talked about in your prepared remarks, you know, let's just cut to it. Recognizing a key part of the buy thesis for exact is your ability to grow revenue double digits. Can you do that over the next 1 to 2 years? Unless you get the ASP increases or get help from other products like MRD or Cologuard Plus? Thank you.

Kevin Conroy

Doug. Thanks for that. Let me take the first part and then hand it over to Erin. You know, when you zero in on the biggest impact in terms of the fourth quarter, it is on the responsiveness to in our core customer base, the the customers who are, are seeing patients and there is a change that is ongoing in the way that Americans are consuming health care with a decrease in primary care visits. That's, that's a fact. There's also a transition going on in the way that Cologuard is being delivered through these care GAAP programs. Well, let's let's come back to our ability to grow our customer base. The reason that we're confident that we'll continue to grow at that in the primary care setting is because we have seen tremendous growth in new users and new health care providers. And we haven't called on them very frequently, but we're calling on the cohorts of new ordering physicians from 2020 beyond at half the rate that we're calling on the more tenured. So there's an opportunity for us to execute. And one thing that we see and we can see this from our data is when you call on those health care providers, you see a response in terms of how frequently they order klog.
And so refocusing our efforts there. We have done the math and we know what that we have confidence that that will lead to growth. But there are other growth drivers that provide kind of a minimum floor of double digit growth next year. Maybe Erin you can touch upon those.

Aaron Bloomer

Yeah. So the the floor it really comes down to, to re screen those care GAAP programs. And then Cologuard plus pricing sets a solid base for double digit plus growth in our screening business. And as we turn around on the commercial execution side, that obviously provides upside to that coming back to kind of the the fourth quarter deceleration Doug, you, you had decent math on on the hurricanes. You know, still a we'd still be cutting the guide, right. The the larger impact for us is ultimately on not accelerating growth during that critical time period from August through October. There is a smaller but maybe less of an impact on the recent sales and marketing investments. We have seen a positive signal from those and look forward to a greater contribution impact from those heading into to 2025 on the Q3 to Q4. Sequential. The the biggest impact there, Doug is the hurricane absent the hurricane, you, you would see a sequential growth from Q3 to Q4 and as I called out earlier to a lesser extent, you know, if you just look at care GAAP from a year over year perspective, we saw higher growth year over year in Q3 than we would in in Q4.

Operator

Dan Brennan, TD Cowen.

Dan Brennan

Great, thanks. Since there's been a lot of questions on the quarter and care, maybe I could focus on 2.0 Kevin, you talked about you know, the upside driver a couple of times for 2025. Can you just kind of remind us of the pricing strategy for 2.0 sounds like ad LT will be the focus given the clinical fee schedule. You know, I think the interim update didn't go your way. So can you let us know kind of what price you you know, you look to seek with ad LT status you talked about? It'll apply to Medicare. Just remind us what percent of volumes it'll apply to. And then how do you deal with the commercial payers? Like any, any, any kind of thoughts about what commercial payers will sign up for it and won't. And then if that's the case, then how do you deal with maybe running two tests in terms of the margin profile of that? Thank you.

Kevin Conroy

Thanks Dan. So first, I'll start with Cold Guard plus, it's a major advancement. We got the final safety and effectiveness data and the, the final label for Cold Guard plus. And this sensitivity ended up at 95% and 94% specificity. When you adjust to the census by age which the agency allowed us to do and look at what's called category six specificity, the true normals, those patients without any poly polyps in their colon. And so that 95% sensitivity, 94% specificity is unmatched by any non invasive approach. In terms of how we intend to price that we are still before Medicare with the clinical fee schedule process that plays out before the end of the year. And we remain, we continue to engage with C MS on getting a clinical the, the CD LT process to seek a price increase. But if not, then we will go the AD LT path and the AD LT path, it's just a slightly longer path we get. There's a benefit that you probably start with a higher price than the CD LT path. The process then takes a couple of years to transition from Cologuard to Cologuard plus the patients who have access to Cologuard plus, we get Cologuard plus and over time, we will, well, we will start with the Medicare patients and then move into the commercial and then Medicaid patients. That process probably takes 12 to 24 months to, to play out. Obviously, there are a lot of benefits for payers and their members to have access to Cologuard plus including the, the performance and, and also the price of the, the cost make up of Coldu plus is lower and you know, it will take some time, but we're confident about what that process will look like. We will create value and increase price because of the innovation that we're delivering.

Operator

Mat Sykes, Goldman Sachs.

Mat Sykes

Yeah, thanks for taking my questions. Maybe just to dig a little bit deeper on the commercial side. Kevin, you talked about the response you see from some of those newer, newer doctors and, and systems that you brought on post COVID. But clearly the, the calls weren't going into them and you've been dealing with sort of the lack of in office visits for some time now. So, could you maybe just talk a little bit about sort of what the breakdown was? I know you've had some turnover in sales management. Was it a sales management issue? Was it turnover of reps? Was it just new reps ramping up? Just it seems like something that you had focused on previously where the focus was lost. So I'm just wondering, you know, kind of what the breakdown was there. Thanks.

Kevin Conroy

You know, I don't want to look backwards. I want to look forwards because there are just, there's a whole list of things that we can do to execute better. We have an incredible sales team, they're trained, they're hungry, they're motivated, they have integrity and we are giving them better tools to be able to be more successful in what they do. Remember, there are two almost 200,000 health care providers that order Cold Guard during the quarter and we know they are responsive to to visits by our field force, but that our base of customer continues to grow. So you have a dilution effect in terms of our ability to focus we are going to provide, we are providing tools to our field force to allow them to really focus on the physicians and nurses and pas that are most responsive to their calls. We owe that to them. We can deliver that we take accountability here at headquarters to help them achieve that success. And remember there's a significant stickiness to the providers that order coga I'll give you one example for a reason that we believe that we will continue to grow in this core part of our business.
If you take a look at providers who ordered for the first time, let's say before 2020 compare them to health care providers who ordered 2020 or beyond there in their initial couple of quarters of ordering, these newer providers are ordering at a 50% rate, more than 50% higher rate when they first start ordering.
So they want to use Cologuard. They know about Cologuard. Patients are asking for Cologuard. We can do a better job of giving them the tools that they need to be successful so that they're even more sticky than, than older co cohorts. So, this is about execution and this starts with me and it extends to the whole team and everybody is confident about our ability to address this.

Operator

Vijay Kumar, Evercore ISI.

Vijay Kumar

Hey guys. Thanks for taking my question, Kevin, maybe back of those comments you made. You know, when you look at the, how, how third quarter played out and you look at the guidance for Q4, is the change here between the 45 to 49 age group or is this the about 50 you know, first time screening screen patients? Was there any regional variant? I guess, what were the learnings? And when you say commercial execution will improve? What, what is going to change here? That, that, that, you know, resolves I guess or fixes the execution issues. Thank you.

Kevin Conroy

Yeah, we're not going to go into all the details about what we're doing from a commercial execution standpoint. I'll just keep going back to the ability for us to access offices and to drive re screens care gaps. Cologuard plus is significant. Let me zero in on Cologuard for an example. Cologuard plus is such a step up in terms of performance as we have done research and focus groups on Coldu Plus, there's a clear excitement among our, our customers to be able to have access to the data and and they need, and we need to get out there and do that with our field force. The new data will provide us greater access and time with the health care providers. And that is something that will we believe will help us help drive greater volumes with both Cologuard and Cologuard plus. But there are a whole range of areas where we can improve. Not going to, again, not going to go into them. Now, we, we know that this is disappointing to you, to investors. We're confident in our ability to grow and achieve or exceed our long range plan as we've laid out.

Aaron Bloomer

And BJ just maybe a little bit of additional color on on the breakdown, both in Q3 and expectations for, for Q4. We did see growth obviously across care gaps as well as re screens and new ordering providers. The biggest contribution and growth coming from care gaps and re screen, you know, double clicking on on re screens. This is a really great source of revenue for us. It's obviously highly predictable, recurring high margin revenue last year, we disclosed that represented roughly 20% of screening revenue in 2023. We're at 25% now here in the back half of the year and thinking about, you know, new providers, new users. This is an area as Kevin alluded to. This is an area we know we can grow faster, particularly amongst the 45 to 49 cohort, which remains a very large unpenetrated cohort. Many of whom are still unaware of, of CRC screening and, and one of the things that we've been seeing is with the Care GAAP program is it represents an opportunity to get at this 45 to 4,545 to 49 age cohort.

Operator

Dan Arias, Stifel.

Dan Arias

Hey guys. Thanks for the questions, Kevin or Aaron. I'm, I'm sure you don't want to give exact numbers on total number of reps in the field. But I'm hoping you can sort of provide us with a four Q snapshot if you will on commercial, just when it comes to how many more reps you'll have in the field come mid four Q when everybody should sort of be up and running versus four Q of last year, it would just be helpful to try to understand the productivity difference year over year as you're finishing the year this year versus finishing the year last year.

Kevin Conroy

Yeah, we're not going to get into the number of reps that we have in the field. It won't be appreciably different in Q4 than it was in Q3.
It's, as you know, we talked in on our Q1 call about our, our step up in that field force where we added about 100 reps. That group of reps has shown the ability to have an impact on the physicians, health care providers that they call on. Maybe not quite at the rate that we expected, but we see that positive impact that continues to grow month over month. And that clearly is going to be have been a good investment to make. You know, that's where we are in terms of the sizing of the field force.
And.

Aaron Bloomer

If you, and if you look at, if you look at productivity, you know, we saw leverage again, not only in Q2, but also in Q on the sales and marketing line. So we got operating leverage on sales and marketing expenses. And obviously, we'll continue to expect that moving forward.

Operator

Jack Meehan, Nephron Research.

Jack Meehan

Thank you. Good evening. Wanted to ask more about care GAAP. Kevin just more directly has the recent Medicare star situation led to increased engagement with large payers. Is it possible to talk about your hit rate and then use of Cologuard relative to fit and for Erin? Not sure if I heard this wrong, but just wanted to be clear. Are the care GAAP sales expected to be lower in four Q sequentially? If you could just talk about why some programs were pulled forward versus pushed out, that would be great.

Kevin Conroy

Yeah, let me first give background on care, GAAP programs, care back care. GAAP programs are initiated by payers and health systems, probably three parts payers, one part health systems. But I think over time that changes driven by quality measures, both payers and health systems care about their quality measures. And historically have used the fit test to reach those patients who are under screened or who've never been screened. And typically the fit test seats about they ship out 10 fit tests for every one they get back at 10% compliance rate. Now note that last year with our care GAAP programs, we saw about a 18% compliance rate, that has grown to about 22% this year, but 24% in the third quarter. So we keep getting better at that compliance rate. And just imagine is that double? So today, the Care GAAP program I think is bigger than people appreciate. And over time, we think this is going to be a major avenue for how people get screened for colon cancer and probably other services too that we're able to provide over time. But the, the doubling, let's assume that we go from 22% to 44% which is still 22% less than we're at with our with our core base of customers and, and their compliance rate.
So as if we were to double that, you know, we wouldn't be talking about the challenge in the quarter today. It would be a a it would be just another leg of large growth. And we know that the tools that we provide through the exact nexus platform, our service capabilities will drive that improvement in the K return rate over time.

Aaron Bloomer

Yeah. And so just speaking Q3 to Q4, we would expect roughly similar revenue sizes Q4 versus Q3 maybe up slightly. Jack, I think the other thing just to reinforce what Kevin was talking about this being larger than I think most people appreciate our thing. We've talked a lot about how significant of a growth driver for us. This is in 2024 but maybe just to size this a little bit. You know, historically, you know, there's been about 3 million fit tests completed through care GAAP programs run by Med Advantage plans each year. And if you zoom out beyond Med Advantage plans, you know, we, we we would estimate that the addressable opportunity is between four and 5 million completed fit tests per year. And keep in mind, those are at about roughly, you know, a 10 ish percent compliance rate as Kevin just talked about, we've already demonstrated the ability to double that compliance rate and we'd obviously look to double from the roughly 22% we're at today. And so if you kind of get this even to the 40 to 50% level, Kevin talked about you adjust for interval and apply our Cologuard average sale price. You know, this is a multi billion dollar opportunity for us over time and we're really, really excited to go after it.

Operator

Patrick Donnelly, Citi.

Patrick Donnelly

Hey, guys, thanks for taking the questions. Kevin, maybe the first one just in terms of the headwinds you, I'd be curious how they developed as the quarter went. I mean, was this something, you know, you guys picked up steadily as the quarter progressed? Was it a little later? Obviously, the hurricanes, you know, when those happen, but just curious in terms of when you guys realized, you know, the shortfall is going to happen and the headwinds were there. And then secondly, just on the Ebida guide down, you know, how you guys are thinking about the cost structure going forward. You know, it sounds like you reiterated the confidence in that EBITA target a few years out, but just how to think about the trajectory near term here and launching off into the 25 on the EBITA piece would be helpful. Thank you guys.

Kevin Conroy

Right? So the number that we look at, most intently is that daily and weekly number of orders and what we saw in the first half of the year was the typical seasonal growth that you see in the spring where you see typically week, over week improvement in or increase in the number of orders driven by that by office visits. And by our, what we would call our point of care delivery.
And over starting in August and going into October, we saw an increase, we just didn't see the increases. Erin mentioned that we typically would see at that time of year. So when, did we know that there was going to be a challenge that, you know, really, it starting in September and into October, we realized that there was a greater challenge there than we had seen in past, falls during that time period of the year which we have described as typically the steepest increase.

Aaron Bloomer

Yeah. And Patrick just turning to, to EBITA, right. So we're very confident in our ability to achieve our 20% plus adjusted to guide, you know, we've made meaningful progress on profitability ahead of expectations. If you turn to the full year, it's, it's up at midpoint roughly 270 basis points unpacking that, you know, it starts with growth. Obviously, double digit revenue growth is an important part of our value creation story and drives a lot of meaningful leverage. And we're seeing that play out here in 2024 Kevin alluded to, we have reasons to be confident that that's going to accelerate even more as we head into 2025. Really driven by again, re screens care, GAAP new product launches as well as pricing.
But if you look at it, you know, we're driving leverage across the P&L right now. So whether that's sales and marketing efficiency on the investments that we're making, we've seen a slight decline in gross margins in the near term, largely driven by some of the one time ASP benefits we've talked about as well as a temporary headwind from care GAAP due to the lower adherence that should flip to a tailwind for us in 2025 with the launch of Cologuard Pro Plus, which will give us added ASP as well as a lower cost of goods.
And then looking at G&A just so proud of the efforts from the team thus far this year, you know, we saw more than 500 basis points of operating leverage on G&A. But there's a lot more that we can and will do to address GN A. It's come down on an adjusted basis from, you know, roughly 35% to, to a roughly 30% where we were in the quarter. And we know, and we take plans to make sure that we address that to continue to bring that down moving forward.

Operator

Dan Leonard, UBS.

Dan Leonard

Thank you. Just a couple of questions on the Cologuard plus mechanics. I think Kevin, you mentioned the launch would be in, in Q2 for some reason, I thought it might be Q1. So, so could you educate me on, on why Q2? And then secondly, on the ad LT pricing mechanics, I I just like to better understand the way that mechanism works. If you want the AD LT route, you get paid list price by nine months or for nine months by Medicare. But, but your list price for Cologuard is actually quite a bit higher than your ASP. So are you going to get an increase from that list price and then get paid at a far, far higher rate from Medicare for a period of time? But I'd just like to understand that better. Thank you.

Kevin Conroy

Yeah. So first the launch timing is kind of the end of Q1, beginning of Q2 is what we're shooting for. You know, is that going to adjust one way or the other by a little bit? It couldn't, but that's what we're shooting for in terms of the mechanics. Yeah, you have that essentially right that you have a list price, you pick that list price, you get paid by Medicare for that list price. And then, at the end of a period, it reverts to the median of the commercial rate if there's commercial rates that are, where there are claims that have been processed. And, you know, you can dig into how the mechanics of the ad LT process works. That's the essence of it. And then you get that price for two years and then it readjust and every year after that, so you do have the ability to control that price. And you get paid on the Medicare claims initially, be the Medicare fee for service claims over time as you get, commercial contracts or your commercial contracts that exist cover Cold Guard plus, you would start to have those patients access Coldu Plus and then with the commercial deals and that just takes time to work through all of that.

Operator

Puneet Souda, Leerink Partners.

Puneet Souda

Yeah, hi, thanks, Kevin. Thanks for taking the question. So, just a clarification. Is there any air pocket that you saw from switching, you know, due to the nexus or due to the care GAAP switching of the patients. And just a quick follow up on there was a launch of a product in early August in blood just wondering if you're seeing that in any of the accounts. I'll just leave it at that. Thank you.

Kevin Conroy

Yeah. In terms of, I think you referenced an air bubble, we saw an impact as we moved on to type DX onto the exact Nexus platform. Because some of the claims of the test that we processed, we do believe we will not get paid for it. I won't go into all of those details, but that was a component of the the, the really what's going on in the fourth quarter in terms of an impact in the quarter by a blood based colon cancer screening tests. No, we've stayed close to that and we anecdotally and also based on research, we we have seen no impact on our business based on that competitive dynamic.

Operator

Subu Nambi, Guggenheim Securities.

Subu Nambi

Hey guys. Thank you for taking my question. Regarding 2025 revenue growth, your comments suggest that you're confident in the outlook for high single digit or even double digit screening revenue growth and continued low to mid single digit onco type growth. Is that right? If so, are you confident you can do this while growing operating spend at mid single digit levels? And finally, is your 2027 20% ebida target still intact?

Kevin Conroy

Yes, to the last question. To the first question we expect next year to you are not giving guidance now for next year, but the 15% growth target over the next three years is intact and again, the re screens care gaps, Cologuard plus commercial execution can deliver mid double digit increase or greater. So we and we'll spend more time talking through this, but there's a, there's a floor and the floor is at a very attractive level.

Aaron Bloomer

Yeah, just to reiterate screening growth this year while we're disappointed is is that 12% at midpoint. And as Kevin alluded to earlier for those four key reasons, we actually expect growth will accelerate in screening in 2025 turning to adjusted EBITA, it is absolutely still intact. I want to reiterate, we are very confident in our ability to get to 20% plus adjusted EBITA by 2027. You know, we will have expanded from just under 9% profitability last year to approaching 12% profitability in 2024. You could expect meaningful margin expansion again in 2025. Both coming from a double digit screening growth, but importantly, also coming from addressing our cost base particularly in G&A.

Operator

Andrew Cooper, Raymond James.

Andrew Cooper

Hey, everybody. Thanks for the question. A lot already asked. So maybe just one more on sort of the comments that you've reiterated in, in response to a couple of questions on the dot Being promotionally responsive, but at the same time saying it's taking longer to ramp these new reps and kind of some of the comments there. Like, can you help us adjudicate those two things? And what gives you the confidence that doctors are truly as responsive as they are receptive as they always have been versus potentially a change in their behavior, not as much directly tied to your execution as we think about three Q and four Q.
And.

Kevin Conroy

So tying those together as we move into the fourth quarter. And next year, we're able to, to provide tools and deployment of our field force in a way that focuses their efforts on those hcps who are the most responsive.
And we have a plan to do that in terms of knowing that that responsiveness exists. We're fortunate to have a ton of data and our data allows us to look at hcps that we call on versus hcps that we don't and the frequency of calling on them. And then what the responsiveness is. And based on that data, we're confident that with a greater amount of analytics and focus, we will expect to see stronger growth in in that core part of the Cold Guard business.

Operator

Mark Massaro, BTIG.

Mark Massaro

Hey guys. Thank you for taking the questions. The first one is Kevin, did you make any changes in the field to people's territories? And if you did are those folks sort of in their new territories at this time? And then the second part is on the transition to Cold Guard plus next year. So I'm just curious if, if it, if an indi if a clinician orders a Cologuard for someone with a commercial health plan, you know, let's just call it in Q3. If there's no contract there, what happens? Do they automatically default to Cologuard one point? Oh, I'm just really asking how you can prevent potential zeros or no pays?

Kevin Conroy

Yeah, sure. So as you know, we have about 800 payers with contracts around Cologuard plus or with Cologuard and we see north of 96%. I don't know, Eric, what is the, the latest 96% to 98% recovery on every dollar bill? So, we're proud of that. We're also proud of, you know, the depth of our relationships with, with those payers. So when we start to make this transition to Cold Guard, plus we'll be able to deliver the test, whether it's Cold Guard or Cold Guard. Plus that the patient has access to and our system has the ability to look that up and deliver the right test to the patient. It's very important that we do that in a thoughtful way and and not deliver those what you call zeros. We haven't seen zeros in many, many years and we don't plan to see zeros as we look into 2025 and beyond because it's very important that people get screened. And remember Coldu Cologuard is a great test with 92% sensitivity and 90% specificity so that patients will get one of those tests, whichever they have access for. We have the ability to deliver in terms of territory changes and that level of commercial execution.
We we have total confidence in our sales and marketing leadership. We're excited about some of the changes we're making. The team is fired up. I've been out. And I've talked to many of those teams and the energy is high. The engagement is very high. I, I want to make one other point as you look into 2025 and beyond. And I want to really drive home this point around re screens, care gaps, Cologuard plus commercial execution and new products like oncode detect. But, but let's talk about re screens for a minute. This year, there were 1.6 million people who are eligible for re screen next year. It's 2 million people the year after that, it's 2.6 million people.
They get delivered the new orders for Cologuard through the exact Nexus platform largely.
And we get a ton of leverage because we built that exact Nexus platform. And we know what the adherence rate is today. And we also know very discrete things that we're doing and there dozens of them to improve the adherence rate of that population.
So we're confident about the base level of growth that we expected to see next year. But I also want to come back to where we started. We as a management team are accountable for this.
We've never been more focused in doing our job to make sure that this doesn't happen in the future. There is a big transition that is occurring and we are in a unique and competitively unique position to be able to deliver for these health systems and payers who are facing the same challenges of getting people screened. That's through the Care GAAP program. We're excited about that and we're truly excited about Cologuard plus and the improved performance. They're setting a new standard of care. We look forward to completing this year heading into 2025 and talking with you in the near term. Thank you.

Operator

Thank you. And that is all the time we have for our questions. Thank you so much for joining the exact sciences. Third quarter, 2024 earnings conference call. Have a pleasant evening.