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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-35092
EXACT SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 02-0478229
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
5505 Endeavor Lane, Madison WI
 53719
(Address of principal executive offices) (Zip Code)
(608) 535-8815 (Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share EXAS The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer  ☐
Non-accelerated filer ☐ Smaller reporting company  ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 1, 2022, the registrant had 176,959,543 shares of common stock outstanding.


EXACT SCIENCES CORPORATION
INDEX
Page
Number
3
4
5
6
8

2
EXACT SCIENCES CORPORATION
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data - unaudited)
Part I — Financial Information
June 30, 2022 December 31, 2021
ASSETS
Current Assets:
Cash and cash equivalents $ 213,421  $ 315,471 
Marketable securities 514,623  715,005 
Accounts receivable, net 186,542  216,645 
Inventory 115,172  104,994 
Prepaid expenses and other current assets 71,875  74,122 
Total current assets 1,101,633  1,426,237 
Long-term Assets:
Property, plant and equipment, net 663,653  580,248 
Operating lease right-of-use assets 182,494  174,225 
Goodwill 2,345,922  2,335,172 
Intangible assets, net 2,046,773  2,094,411 
Other long-term assets, net 96,680  74,591 
Total assets $ 6,437,155  $ 6,684,884 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 84,167  $ 67,829 
Accrued liabilities 308,219  398,556 
Operating lease liabilities, current portion 25,813  19,710 
Other current liabilities 25,132  30,973 
Total current liabilities 443,331  517,068 
Long-term Liabilities:
Convertible notes, net 2,183,145  2,180,232 
Long-term debt 50,000  — 
Other long-term liabilities 364,107  417,782 
Operating lease liabilities, less current portion 187,226  182,166 
Total liabilities 3,227,809  3,297,248 
Commitments and contingencies (Note 14)
Stockholders’ Equity:
Preferred stock, $0.01 par value Authorized—5,000,000 shares issued and outstanding—no shares at June 30, 2022 and December 31, 2021
 —  — 
Common stock, $0.01 par value Authorized—400,000,000 shares issued and outstanding—176,801,434 and 173,674,067 shares at June 30, 2022 and December 31, 2021
 1,769  1,738 
Additional paid-in capital 6,204,742  6,028,861 
Accumulated other comprehensive loss (8,645) (1,443)
Accumulated deficit (2,988,520) (2,641,520)
Total stockholders’ equity 3,209,346  3,387,636 
Total liabilities and stockholders’ equity $ 6,437,155  $ 6,684,884 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data - unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $ 521,640  $ 434,819  $ 1,008,211  $ 836,896 
Operating expenses
Cost of sales (exclusive of amortization of acquired intangible assets) 144,600  113,968  279,305  223,961 
Research and development 106,083  106,235  208,331  221,802 
Sales and marketing 215,922  194,827  448,103  380,968 
General and administrative 181,672  167,629  351,442  435,356 
Amortization of acquired intangible assets 26,356  23,824  51,010  47,014 
Intangible asset impairment charge 6,591  —  6,591  — 
Total operating expenses 681,224  606,483  1,344,782  1,309,101 
Loss from operations (159,584) (171,664) (336,571) (472,205)
Other income (expense)
Investment income (expense), net (3,719) 3,429  (5,206) 34,617 
Interest expense (4,511) (4,652) (8,989) (9,268)
Total other income (expense) (8,230) (1,223) (14,195) 25,349 
Net loss before tax (167,814) (172,887) (350,766) (446,856)
Income tax benefit (expense) 1,751  (4,025) 3,766  238,780 
Net loss $ (166,063) $ (176,912) $ (347,000) $ (208,076)
Net loss per share—basic and diluted $ (0.94) $ (1.03) $ (1.98) $ (1.22)
Weighted average common shares outstanding—basic and diluted 176,364  171,494  175,396  170,469 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Comprehensive Loss
(Amounts in thousands - unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net loss $ (166,063) $ (176,912) $ (347,000) $ (208,076)
Other comprehensive loss, before tax:
Unrealized loss on available-for-sale investments (1,488) (297) (6,455) (629)
Foreign currency translation loss (510) —  (747) — 
Comprehensive loss, before tax (168,061) (177,209) (354,202) (208,705)
Income tax benefit related to items of other comprehensive loss —  —  —  170 
Comprehensive loss, net of tax $ (168,061) $ (177,209) $ (354,202) $ (208,535)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share data - unaudited)
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity
Number of Shares
$0.01
Par Value
Balance, January 1, 2022 173,674,067  $ 1,738  $ 6,028,861  $ (1,443) $ (2,641,520) $ 3,387,636 
Exercise of common stock options 485,537  5  4,277  —  —  4,282 
Compensation expense related to issuance of stock options and restricted stock awards 1,391,797  14  52,427  —  —  52,441 
Other 7  —  (7) —  —  (7)
Net loss —  —  —  —  (180,937) (180,937)
Other comprehensive loss
 —  —  —  (5,204) —  (5,204)
Balance, March 31, 2022 175,551,408  $ 1,757  $ 6,085,558  $ (6,647) $ (2,822,457) $ 3,258,211 
Exercise of common stock options 84,485  1  742  —  —  743 
Issuance of common stock to fund the Company’s 2021 401(k) match 391,129  4  29,198  —  —  29,202 
Compensation expense related to issuance of stock options and restricted stock awards 183,095  2  58,930  —  —  58,932 
Issuance of common stock for business combinations 265,186  2  14,788  —  —  14,790 
Purchase of employee stock purchase plan shares 326,131  3  15,526  —  —  15,529 
Net loss —  —  —  —  (166,063) (166,063)
Other comprehensive loss
 —  —  —  (1,998) —  (1,998)
Balance, June 30, 2022 176,801,434  $ 1,769  $ 6,204,742  $ (8,645) $ (2,988,520) $ 3,209,346 

6
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Stockholders’ Equity
(Amounts in thousands, except share data - unaudited)
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity
Number of Shares
$0.01
Par Value
Balance, January 1, 2021 159,423,410  $ 1,595  $ 4,279,327  $ 526  $ (2,045,896) $ 2,235,552 
Settlement of convertible notes, net of tax 344  —  26  —  —  26 
Exercise of common stock options 967,107  10  8,749  —  —  8,759 
Issuance of common stock to fund the Company’s 2020 401(k) match 162,606  2  22,932  —  —  22,934 
Compensation expense related to issuance of stock options and restricted stock awards 1,355,435  13  158,239  —  —  158,252 
Issuance of common stock for business combinations, net of issuance costs 9,384,410  94  1,254,704  —  —  1,254,798 
Net loss —  —  —  —  (31,164) (31,164)
Other comprehensive loss
 —  —  —  (162) —  (162)
Balance, March 31, 2021 171,293,312  $ 1,714  $ 5,723,977  $ 364  $ (2,077,060) $ 3,648,995 
Settlement of convertible notes, net of tax 197  —  14  —  —  14 
Exercise of common stock options 140,478  1  2,857  —  —  2,858 
Compensation expense related to issuance of stock options and restricted stock awards 121,575  2  56,283  —  —  56,285 
Issuance of common stock for business combinations 126,026  1  16,119  —  —  16,120 
Purchase of employee stock purchase plan shares 173,717  2  12,036  —  —  12,038 
Net loss —  —  —  —  (176,912) (176,912)
Other comprehensive loss —  —  —  (297) —  (297)
Balance, June 30, 2021 171,855,305  $ 1,720  $ 5,811,286  $ 67  $ (2,253,972) $ 3,559,101 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands - unaudited)
Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net loss $ (347,000) $ (208,076)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 48,498  42,007 
Loss on disposal of property, plant and equipment 166  639 
Unrealized (gain) loss on equity investments 4,247  (2,486)
Deferred tax benefit (4,940) (244,509)
Stock-based compensation 111,373  133,577 
Post-combination expense for acceleration of unvested equity —  80,960 
Realized gain on preferred stock investment —  (30,500)
Amortization of deferred financing costs, convertible note debt discount and issuance costs, and other liabilities 3,420  3,282 
Amortization of premium on short-term investments 1,493  1,616 
Amortization of acquired intangible assets 51,010  47,014 
Intangible asset impairment charge 6,591  — 
Asset acquisition IPR&D expense —  85,337 
Remeasurement of contingent consideration (51,759) 9,201 
Non-cash lease expense 17,281  11,837 
Changes in assets and liabilities:
Accounts receivable, net 30,632  8,995 
Inventory, net (10,178) 4,267 
Operating lease liabilities (10,668) (7,095)
Accounts payable and accrued liabilities (79,339) 27,138 
Other assets and liabilities (5,497) (94)
Net cash used in operating activities (234,670) (36,890)
Cash flows from investing activities:
Purchases of marketable securities (79,110) (915,289)
Maturities and sales of marketable securities 269,310  325,380 
Purchases of property, plant and equipment (96,949) (37,504)
Business combination, net of cash acquired and issuance costs 685  (415,549)
Asset acquisition —  (58,073)
Investments in privately held companies (26,667) (10,000)
Other investing activities (49) (244)
Net cash provided by (used in) investing activities 67,220  (1,111,279)
Cash flows from financing activities:
Proceeds from accounts receivable securitization facility 50,000  — 
Proceeds from exercise of common stock options 5,025  11,617 
Proceeds in connection with the Company’s employee stock purchase plan 15,529  12,038 
Other financing activities (4,407) (3,068)
Net cash provided by financing activities 66,147  20,587 
Effects of exchange rate changes on cash and cash equivalents (747) — 
Net decrease in cash, cash equivalents and restricted cash (102,050) (1,127,582)
Cash, cash equivalents and restricted cash, beginning of period 315,768  1,491,594 
Cash, cash equivalents and restricted cash, end of period $ 213,718  $ 364,012 
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EXACT SCIENCES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands - unaudited)
Six Months Ended June 30,
2022 2021
Supplemental disclosure of non-cash investing and financing activities
Property, plant and equipment acquired but not paid $ 34,604  $ 15,139 
Business combination contingent consideration liability $ 4,600  $ 350,348 
Supplemental disclosure of cash flow information:
Interest paid $ 5,133  $ 5,414 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents $ 213,421  $ 363,715 
Restricted cash — included in prepaid expenses and other current assets as of June 30, 2022, and other long-term assets, net as of June 30, 2021 297  297 
Total cash, cash equivalents and restricted cash $ 213,718  $ 364,012 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Exact Sciences Corporation (together with its subsidiaries, “Exact,” or the “Company”) was incorporated in February 1995. Exact is a leading global cancer diagnostics company. It has developed some of the most impactful tests in cancer screening and diagnostics, including Cologuard® and Oncotype DX®. Exact is currently working on the development of additional tests, with the goal of bringing new, innovative cancer tests to patients throughout the world.
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements, which include the accounts of Exact Sciences Corporation and those of its wholly owned subsidiaries and variable interest entities, are unaudited and have been prepared on a basis substantially consistent with the Company’s audited financial statements and notes as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K (the “2021 Form 10-K”). All intercompany transactions and balances have been eliminated upon consolidation. These condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of adjustments of a normal and recurring nature) considered necessary for a fair statement of its financial position, operating results and cash flows for the periods presented. The condensed consolidated balance sheet at December 31, 2021 has been derived from audited financial statements, but does not contain all of the footnote disclosures from the 2021 Form 10-K. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year. The statements should be read in conjunction with the audited financial statements and related notes included in the 2021 Form 10-K.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that affect the Company’s financial statements materially and involve difficult, subjective or complex judgments by management, and actual results could differ from those estimates. These estimates include revenue recognition, valuation of intangible assets and goodwill, and accounting for income taxes among others. The Company’s critical accounting policies and estimates are explained further in the notes to the condensed consolidated financial statements in this Quarterly Report and the 2021 Form 10-K.
The spread of the coronavirus (“COVID-19”) has affected many segments of the global economy, including the cancer screening and diagnostics industry. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of June 30, 2022 and through the date of the filing of this Quarterly Report on Form 10-Q. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts and credit losses, marketable and non-marketable investments, software, and the carrying value of the goodwill and other long-lived assets. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in additional material impacts to the Company’s consolidated financial statements in future reporting periods.
The pandemic and related precautionary measures began to materially disrupt the Company's operations in March 2020 and may continue to disrupt the business for an unknown period of time. As a result, the pandemic had an impact on the Company’s revenues and operating results.
The ultimate impact of COVID-19 depends on factors beyond the Company’s knowledge or control, including the duration and severity of the outbreak, as well as third-party actions taken to contain its spread and mitigate its public health effects. As a result, the Company is unable to estimate the extent to which COVID-19 will negatively impact its financial results or liquidity.
10
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Significant Accounting Policies
During the six months ended June 30, 2022, there were no changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except as described in the Collateralized Debt Instruments and Recently Adopted Accounting Pronouncements sections below.
Collateralized Debt Instruments
Debt instruments that are collateralized by security interests in financial assets held by the Company are accounted for as a secured borrowing and therefore: (i) the asset balances pledged as collateral are included within the applicable balance sheet line item and the borrowings are included within long-term debt in the condensed consolidated balance sheet; (ii) interest expense is included within the condensed consolidated statements of operations; and (iii) in the case of collateralized accounts receivable, receipts from customers related to the underlying accounts receivable are reflected as operating cash flows, and (iv) borrowings and repayments under the collateralized loans are reflected as financing cash flows within the condensed consolidated statements of cash flows.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation in the condensed consolidated financial statements and accompanying notes to the condensed consolidated financial statements.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In October 2021, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805). This update requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606. This differs from the current requirement to measure contract assets and contract liabilities acquired in a business combination at fair value. The amendments in this update should be applied prospectively, and are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company early adopted the amendments in this update during the first quarter of fiscal year 2022. There was no material impact to the Company’s condensed consolidated financial statements.
Net Loss Per Share
Basic net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. Basic and diluted net loss per share is the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive as a result of the Company’s losses.
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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect due to net losses for each period:
June 30,
(In thousands) 2022 2021
Shares issuable in connection with acquisitions (1) 45  157 
Shares issuable upon exercise of stock options 1,683  2,486 
Shares issuable upon the release of restricted stock awards 5,772  4,334 
Shares issuable upon the release of performance share units 992  867 
Shares issuable upon conversion of convertible notes 20,309  20,309 
28,801  28,153 
______________
(1)During the third quarter of 2021, shares were issued related to holdback amounts on the previously closed acquisition of Viomics, Inc. (“Viomics”) causing the decrease in shares issuable as of June 30, 2022 as compared to June 30, 2021. The remaining issuable shares relate to the previously closed acquisition of Paradigm Diagnostics, Inc. (“Paradigm”) in March 2020.

(2) REVENUE
The Company’s revenue is primarily generated by its laboratory testing services utilizing its Cologuard, Oncotype, and COVID-19 tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider.
Disaggregation of Revenue
The following table presents the Company’s revenues disaggregated by revenue source:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2022 2021 2022 2021
Screening
Medicare Parts B & C $ 135,252  $ 111,387  $ 249,007  $ 212,946 
Commercial 181,186  140,149  342,866  268,023 
Other 37,456  12,401  68,543  23,296 
Total Screening 353,894  263,937  660,416  504,265 
Precision Oncology
Medicare Parts B & C $ 52,621  $ 48,310  $ 105,186  $ 93,147 
Commercial 45,940  47,144  92,002  93,956 
International 28,341  26,848  57,784  52,904 
Other 27,093  15,507  51,643  27,209 
Total Precision Oncology 153,995  137,809  306,615  267,216 
COVID-19 Testing $ 13,751  $ 33,073  $ 41,180  $ 65,415 
Total $ 521,640  $ 434,819  $ 1,008,211  $ 836,896 
Screening revenue primarily includes laboratory service revenue from the Cologuard test while Precision Oncology revenue primarily includes laboratory service revenue from global Oncotype® products.
At each reporting period end, the Company conducts an analysis of the estimates used to calculate the transaction price to determine whether any new information available impacts those estimates made in prior reporting periods. The Company recognized revenue from a change in transaction price of $7.1 million and $11.3 million for the three and six months ended June 30, 2022, respectively. The Company recorded a downward adjustment to revenue from a change in transaction price of $14.7 million and $13.0 million for the three and six months ended June 30, 2021, respectively.
12
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company had deferred revenue of $1.2 million and $1.0 million as of June 30, 2022 and December 31, 2021, respectively. Deferred revenue is reported in other current liabilities in the Company’s condensed consolidated balance sheets.
Revenue recognized for the three months ended June 30, 2022 and 2021, which was included in the deferred revenue balance at the beginning of each period, was $0.1 million and $10.4 million, respectively. Of the $10.4 million of revenue recognized for the three months ended June 30, 2021, $10.3 million related to COVID-19 testing. Revenue recognized for the six months ended June 30, 2022 and 2021, which was included in the deferred revenue balance at the beginning of each period, was $0.4 million and $24.4 million, respectively. Of the $24.4 million of revenue recognized for the six months ended June 30, 2021, $24.1 million related to COVID-19 testing.

(3) MARKETABLE SECURITIES
The following table sets forth the Company’s cash, cash equivalents, restricted cash, and marketable securities at June 30, 2022 and December 31, 2021:
(In thousands) June 30, 2022 December 31, 2021
Cash, cash equivalents, and restricted cash
Cash and money market $ 157,219  $ 247,335 
Cash equivalents 56,202  68,136 
Restricted cash 297  297 
Total cash, cash equivalents, and restricted cash 213,718  315,768 
Marketable securities
Available-for-sale debt securities $ 513,520  $ 711,669 
Equity securities 1,103  3,336 
Total marketable securities 514,623  715,005 
Total cash and cash equivalents, restricted cash and marketable securities $ 728,341  $ 1,030,773 
Available-for-sale debt securities at June 30, 2022 consisted of the following:
(In thousands) Amortized Cost Gains in Accumulated Other Comprehensive Income (Loss) (1) Losses in Accumulated Other Comprehensive Income (Loss) (1) Estimated Fair Value
Cash equivalents
Commercial paper $ 53,265  $ —  $ —  $ 53,265 
U.S. government agency securities 2,937  —  —  2,937 
Total cash equivalents 56,202  —  —  56,202 
Marketable securities
Corporate bonds $ 157,170  $ 1  $ (2,290) $ 154,881 
U.S. government agency securities 250,731  1  (4,555) 246,177 
Certificates of deposit 24,211  —  (12) 24,199 
Commercial paper 10,208  —  (1) 10,207 
Asset backed securities 79,121  —  (1,065) 78,056 
Total marketable securities 521,441  2  (7,923) 513,520 
Total available-for-sale securities $ 577,643  $ 2  $ (7,923) $ 569,722 
______________
(1)Gains and losses in accumulated other comprehensive income (loss) (“AOCI”) are reported before tax impact.
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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Available-for-sale debt securities at December 31, 2021 consisted of the following:
(In thousands) Amortized Cost Gains in Accumulated Other Comprehensive Income (Loss) (1) Losses in Accumulated Other Comprehensive Income (Loss) (1) Estimated Fair Value
Cash equivalents
U.S. government agency securities $ 3,543  $ —  $ —  $ 3,543 
Commercial paper 64,593  —  —  64,593 
Total cash equivalents 68,136  —  —  68,136 
Marketable securities
U.S. government agency securities $ 250,793  $ —  $ (873) $ 249,920 
Asset backed securities 94,565  2  (107) 94,460 
Commercial paper 6,996  —  —  6,996 
Certificates of deposit 47,147  2  (10) 47,139 
Corporate bonds 313,634  13  (493) 313,154 
Total marketable securities 713,135  17  (1,483) 711,669 
Total available-for-sale securities $ 781,271  $ 17  $ (1,483) $ 779,805 
______________
(1)Gains and losses in AOCI are reported before tax impact.
The following table summarizes contractual underlying maturities of the Company’s available-for-sale debt securities at June 30, 2022:
Due one year or less Due after one year through five years
(In thousands) Cost Fair Value Cost Fair Value
Cash equivalents
Commercial paper $ 53,265  $ 53,265  $ —  $ — 
U.S. government agency securities 2,937  2,937  —  — 
Total cash equivalents 56,202  56,202  —  — 
Marketable securities
U.S. government agency securities $ 224,768  $ 220,874  $ 25,963  $ 25,303 
Corporate bonds 123,496  121,974  33,674  32,907 
Certificates of deposit 24,211  24,199  —  — 
Asset backed securities —  —  79,121  78,056 
Commercial paper 10,208  10,207  —  — 
Total marketable securities 382,683  377,254  138,758  136,266 
Total $ 438,885  $ 433,456  $ 138,758  $ 136,266 
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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table summarizes the gross unrealized losses and fair values of available-for-sale debt securities in an unrealized loss position as of June 30, 2022, aggregated by investment category and length of time those individual securities have been in a continuous unrealized loss position:
Less than one year One year or greater Total
(In thousands) Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss
Marketable securities
Corporate bonds $ 149,879  $ (2,290) $ —  $ —  $ 149,879  $ (2,290)
Certificates of deposit 24,199  (12) —  —  24,199  (12)
Asset backed securities 78,056  (1,065) —  —  78,056  (1,065)
U.S. government agency securities 244,179  (4,555) —  —  244,179  (4,555)
Commercial paper 2,999  (1) —  —  2,999  (1)
Total available-for-sale securities $ 499,312  $ (7,923) $ —  $ —  $ 499,312  $ (7,923)
The Company evaluates investments that are in an unrealized loss position for impairment as a result of credit loss. It was determined that no credit losses exist as of June 30, 2022 and December 31, 2021, because the change in market value for those securities in an unrealized loss position has resulted from fluctuating interest rates rather than a deterioration of the credit worthiness of the issuers.
The gains and losses recorded on available-for-sale debt securities and equity securities are included in investment income, net in the Company’s condensed consolidated statements of operations. The gains and losses recorded were not significant for the three and six months ended June 30, 2022 and 2021.

(4) INVENTORY
Inventory consisted of the following:
(In thousands) June 30, 2022 December 31, 2021
Raw materials $ 57,087  $ 51,321 
Semi-finished and finished goods 58,085  53,673 
Total inventory $ 115,172  $ 104,994 

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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(5) PROPERTY, PLANT AND EQUIPMENT
The carrying value and estimated useful lives of property, plant and equipment are as follows:
(In thousands) Estimated Useful Life June 30, 2022 December 31, 2021
Property, plant and equipment
Land n/a $ 4,716  $ 4,716 
Leasehold and building improvements (1) 166,559  147,083 
Land improvements 15 years 5,207  5,206 
Buildings
30 - 40 years
 215,280  210,560 
Computer equipment and computer software 3 years 123,464  109,119 
Laboratory equipment
3 - 10 years
 213,261  189,748 
Furniture and fixtures
3 - 10 years
 29,833  28,293 
Assets under construction n/a 165,365  100,339 
Property, plant and equipment, at cost 923,685  795,064 
Accumulated depreciation (260,032) (214,816)
Property, plant and equipment, net $ 663,653  $ 580,248 
______________
(1)Lesser of remaining lease term, building life, or estimated useful life.
Depreciation expense for the three months ended June 30, 2022 and 2021 was $25.5 million and $21.5 million, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 was $48.5 million and $42.0 million, respectively.
At June 30, 2022, the Company had $165.4 million of assets under construction, which consisted of $94.1 million related to buildings, $41.5 million in laboratory equipment, $15.8 million in leasehold and building improvements, $13.0 million in capitalized costs related to software projects, and $1.0 million in land improvements. Depreciation will begin on these assets once they are placed into service upon completion.

16
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(6) INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of June 30, 2022:
(In thousands) Weighted Average Remaining Life (Years) Gross Carrying Amount Accumulated Amortization
Net Balance at June 30, 2022
Finite-lived intangible assets
Trade name 13.0 $ 104,000  $ (17,028) $ 86,972 
Customer relationships 8.5 4,000  (222) 3,778 
Patents 3.2 10,942  (7,458) 3,484 
Acquired developed technology (1) 8.1 920,334  (219,788) 700,546 
Supply agreements 4.9 2,295  (302) 1,993 
Total finite-lived intangible assets 1,041,571  (244,798) 796,773 
In-process research and development n/a 1,250,000  —  1,250,000 
Total intangible assets $ 2,291,571  $ (244,798) $ 2,046,773 
______________
(1)The gross carrying amount includes an immaterial foreign currency translation adjustment related to the intangible assets acquired as a result of the acquisition of OmicEra Diagnostics GmbH (“OmicEra”), whose functional currency is also its local currency. Intangible asset balances are translated into U.S. dollars using exchange rates in effect at period end, and adjustments related to foreign currency translation are included in other comprehensive income.
The following table summarizes the net-book-value and estimated remaining life of the Company’s intangible assets as of December 31, 2021:
(In thousands) Weighted Average Remaining Life (Years) Gross Carrying Amount Accumulated Amortization
Net balance at December 31, 2021
Finite-lived intangible assets
Trade name 13.4 $ 104,700  $ (13,554) $ 91,146 
Customer relationships 9.6 6,700  (1,577) 5,123 
Patents and licenses 3.6 10,942  (6,763) 4,179 
Acquired developed technology 8.6 918,171  (176,402) 741,769 
Supply agreements 5.4 2,295  (101) 2,194 
Total finite-lived intangible assets 1,042,808  (198,397) 844,411 
In-process research and development n/a 1,250,000  —  1,250,000 
Total intangible assets $ 2,292,808  $ (198,397) $ 2,094,411 
17
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of June 30, 2022, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:
(In thousands)
2022 (remaining six months) $ 49,288 
2023 98,574 
2024 98,240 
2025 97,192 
2026 96,132 
Thereafter 357,347 
$ 796,773 
The Company’s acquired intangible assets are being amortized on a straight-line basis over the estimated useful life.
During the second quarter of 2022, the Company recorded a non-cash, pre-tax impairment loss of $6.6 million related to the acquired developed technology intangible asset acquired as a result of the acquisition of Paradigm Diagnostics, Inc. due to lower than anticipated performance of the underlying product. The impairment is recorded in intangible asset impairment charge in the condensed consolidated statement of operations for the three and six months ended June 30, 2022.
Goodwill
The change in the carrying amount of goodwill for the periods ended June 30, 2022 and December 31, 2021 is as follows:
(In thousands)
Balance, January 1, 2021
 $ 1,237,672 
Thrive acquisition 948,105 
Ashion acquisition 56,758 
PreventionGenetics acquisition 92,637 
Balance, December 31, 2021
 2,335,172 
OmicEra acquisition 10,748 
PreventionGenetics acquisition adjustment 42 
Effects of changes in foreign currency exchange rates (1) (40)
Balance June 30, 2022
 $ 2,345,922 
______________
(1)Represents the impact of foreign currency translation related to the goodwill acquired as a result of the acquisition of OmicEra. Goodwill balances are translated into U.S. dollars using exchange rates in effect at period end, and adjustments related to foreign currency translation are included in other comprehensive income.
There were no impairment losses for the three and six months ended June 30, 2022 and 2021.

(7) FAIR VALUE MEASUREMENTS
The three levels of the fair value hierarchy established are as follows:
Level 1    Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2    Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
18
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Level 3    Unobservable inputs that reflect the Company’s assumptions about the assumptions that market participants would use in pricing the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.
The following table presents the Company’s fair value measurements as of June 30, 2022 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.
(In thousands) Fair Value at June 30, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Cash, cash equivalents, and restricted cash
Cash and money market $ 157,219  $ 157,219  $ —  $ — 
Commercial paper 53,265  —  53,265  — 
U.S. government agency securities 2,937  —  2,937  — 
Restricted cash 297  297  —  — 
Marketable securities
Corporate bonds $ 154,881  $ —  $ 154,881  $ — 
Certificates of deposit 24,199  —  24,199  — 
Commercial paper 10,207  —  10,207  — 
U.S. government agency securities 246,177  —  246,177  — 
Asset backed securities 78,056  —  78,056  — 
Equity securities 1,103  1,103  —  — 
Non-marketable securities $ 2,690  $ —  $ —  $ 2,690 
Liabilities
Contingent consideration $ (311,785) $ —  $ —  $ (311,785)
Total $ 419,246  $ 158,619  $ 569,722  $ (309,095)
19
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The following table presents the Company’s fair value measurements as of December 31, 2021 along with the level within the fair value hierarchy in which the fair value measurements, in their entirety, fall.
(In thousands) Fair Value at December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Cash and cash equivalents
Cash and money market $ 247,335  $ 247,335  $ —  $ — 
Commercial paper 64,593  —  64,593  — 
U.S. government agency securities 3,543  —  3,543  — 
Restricted cash 297  297  —  — 
Marketable securities
U.S. government agency securities $ 249,920  $ —  $ 249,920  $ — 
Corporate bonds 313,154  —  313,154  — 
Asset backed securities 94,460  —  94,460  — 
Certificates of deposit 47,139  —  47,139  — 
Commercial paper 6,996  —  6,996  — 
Equity securities 3,336  3,336  —  — 
Non-marketable securities $ 3,090  $ —  $ —  $ 3,090 
Liabilities
Contingent consideration $ (359,021) $ —  $ —  $ (359,021)
Total $ 674,842  $ 250,968  $ 779,805  $ (355,931)
There have been no changes in valuation techniques or transfers between fair value measurement levels during the three and six months ended June 30, 2022. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities are valued using a third-party pricing agency where the valuation is based on observable inputs including pricing for similar assets and other observable market factors.
Contingent Consideration
The fair value of contingent consideration as of June 30, 2022 and December 31, 2021 was $311.8 million and $359.0 million, respectively, which was recorded in other long-term liabilities in the condensed consolidated balance sheets.
The following table provides a reconciliation of the beginning and ending balances of contingent consideration:
(In thousands) Contingent Consideration
Beginning balance, January 1, 2022 $ 359,021 
Purchase price contingent consideration (1) 4,600 
Changes in fair value (51,759)
Payments (77)
Ending balance, June 30, 2022
 $ 311,785 
______________
(1)The increase in contingent consideration liability is due to the contingent consideration associated with the acquisition of OmicEra. Refer to Note 16 for further information.
This fair value measurement of contingent consideration is categorized as a Level 3 liability, as the measurement amount is based primarily on significant inputs not observable in the market.
20
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The fair value of the contingent consideration liability recorded related to regulatory and product development milestones associated with the acquisitions of Thrive Earlier Detection Corporation (“Thrive”), Ashion Analytics, LLC (“Ashion”), and OmicEra acquisitions was $310.6 million and $357.8 million as of June 30, 2022 and December 31, 2021, respectively. The Company evaluates the fair value of the expected contingent consideration and the corresponding liability related to the regulatory and product development milestones using the probability-weighted scenario based discounted cash flow model, which is consistent with the initial measurement of the expected contingent consideration liabilities. Probabilities of success are applied to each potential scenario and the resulting values are discounted using a present-value factor. The passage of time in addition to changes in projected milestone achievement timing, present-value factor, the degree of achievement, if applicable, and probabilities of success may result in adjustments to the fair value measurement. The fair value of the contingent consideration liability recorded related to regulatory and product development milestones was determined using a weighted average probability of success of 91% as of June 30, 2022 and December 31, 2021, and a weighted average present-value factor of 6.5% and 2.3% as of June 30, 2022 and December 31, 2021, respectively. The projected fiscal year of payment range is from 2024 to 2027. Unobservable inputs were weighted by the relative fair value of the contingent consideration liability.
The fair value of the contingent consideration earnout liability related to certain revenue milestones associated with the Biomatrica acquisition was $1.2 million as of June 30, 2022 and December 31, 2021. The revenue milestone associated with the Ashion acquisition is not expected to be achieved and therefore no liability has been recorded for this milestone.
Non-Marketable Equity Investments
As of June 30, 2022 and December 31, 2021, the aggregate carrying amounts of the Company’s non-marketable equity securities without readily determinable fair values were $48.7 million and $25.3 million, respectively, which are classified as a component of other long-term assets, net in the Company’s condensed consolidated balance sheets. There have been no material downward or upward adjustments made on these investments since initial recognition.
The Company has committed capital to venture capital investment funds (the “Funds”) of $17.5 million, of which $14.4 million remained callable through 2033 as of June 30, 2022. The aggregate carrying amount of the Funds, which are classified as a component of other long-term assets, net in the Company’s condensed consolidated balance sheets, were $3.1 million and $1.5 million as of June 30, 2022 and December 31, 2021, respectively.
Derivative Financial Instruments
The Company enters into foreign currency forward contracts on the last day of each month to mitigate the impact of adverse movements in foreign exchange rates related to the remeasurement of monetary assets and liabilities and hedge our foreign currency exchange rate exposure. As of June 30, 2022 and December 31, 2021, the Company had open foreign currency forward contracts with notional amounts of $28.9 million and $46.7 million, respectively. The Company's foreign exchange derivative instruments are classified as Level 2 within the fair value hierarchy as they are valued using inputs that are observable in the market or can be derived principally from or corroborated by observable market data. The fair value of the open foreign currency forward contracts was zero at June 30, 2022 and December 31, 2021, and there were no gains or losses recorded to adjust the fair value of the open foreign currency contract held as of June 30, 2022. The contracts are closed subsequent to each month-end, and the gains and losses recorded from the contracts were not material for the three and six months ended June 30, 2022 and 2021.

(8) LONG-TERM DEBT
Accounts Receivable Securitization Facility
On June 29, 2022, the Company, through a wholly-owned special purpose entity, Exact Receivables LLC (“Exact Receivables”) entered into an accounts receivable securitization program (the “Securitization Facility”) with PNC Bank, National Association (“PNC”), with a scheduled maturity date of June 29, 2024. The Securitization Facility provides Exact Receivables with a revolving line-of-credit of up to $150.0 million of borrowing capacity, subject to certain borrowing base requirements, by collateralizing a security interest in the domestic customer accounts receivable of certain wholly-owned subsidiaries of the Company. The amount available under the Securitization Facility fluctuates over time based on the total amount of eligible customer accounts receivable generated by the Company during the normal course of operations. The Securitization Facility requires the Company to maintain minimum borrowings under the facility of $50.0 million. The debt issuance costs incurred related to the Securitization Facility were not material and are being amortized over the life of the Securitization Facility through interest expense within the condensed consolidated statements of operations.
21
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
In connection with the Securitization Facility, the Company also entered into two Receivables Purchase Agreements (“Receivable Purchase Agreements”) on June 29, 2022. The Receivable Purchase Agreements are among the Company and certain wholly-owned subsidiaries of the Company, and between the Company and Exact Receivables. Under the agreements, the wholly-owned subsidiaries sell all of their right, title and interest of their accounts receivable to Exact Receivables. The receivables are used to collateralize borrowings made under the Securitization Facility. The Company retains the responsibility of servicing the accounts receivable balances pledged as collateral under the Securitization Facility and provides a performance guaranty.
As of June 30, 2022, the eligible borrowing base under the Securitization Facility was $119.2 million of which the Company elected to collateralize $50.0 million. As of June 30, 2022, the Company had an outstanding balance of $50.0 million, which is recorded to long-term debt on the Company’s condensed consolidated balance sheets. The outstanding balance accrues interest at a rate equal to a daily secured overnight financing rate (“SOFR”) rate plus a SOFR adjustment and an applicable margin. The interest rate was 3.24% at June 30, 2022.
Revolving Loan Agreement
During November 2021, the Company entered into a revolving loan agreement (the “Revolving Loan Agreement”) with PNC. The Revolving Loan Agreement provides the Company with a revolving line of credit of up to $150.0 million (the “Revolver”). The Revolver is collateralized by the Company’s marketable securities held by PNC, which must continue to maintain a minimum market value of $150.0 million. The Revolver is available for general working capital purposes and all other lawful corporate purposes. In addition, the Company may request, in lieu of cash advances, letters of credit with an aggregate stated amount outstanding not to exceed $20.0 million. The availability of advances under the line of credit will be reduced by the stated amount of each letter of credit issued and outstanding.
Borrowings under the Revolving Loan Agreement accrue interest at an annual rate equal to the sum of the daily Bloomberg Short-Term Bank Yield Index Rate plus the applicable margin of 0.60%. Loans under the Revolving Loan Agreement may be prepaid at any time without penalty. The Revolver’s maturity date is November 5, 2023.
The Company has agreed in the Revolving Loan Agreement to various financial covenants, and as of June 30, 2022, the Company is in compliance with all covenants.
During the fourth quarter of 2021, PNC issued a letter of credit of $2.9 million, which reduced the amount available for cash advances under the line of credit to $147.1 million as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, the Company has not drawn funds from, nor are any amounts outstanding under, the Revolving Loan Agreement.

(9) CONVERTIBLE NOTES
Convertible note obligations included in the condensed consolidated balance sheet consisted of the following as of June 30, 2022:
Fair Value (1)
(In thousands) Principal Amount Unamortized Debt Discount and Issuance Costs Net Carrying Amount Amount Leveling
2028 Convertible notes - 0.375%
 $ 1,150,000  $ (17,313) $ 1,132,687  $ 767,625  2
2027 Convertible notes - 0.375%
 747,500  (10,577) 736,923  545,750  2
2025 Convertible notes - 1.000%
 315,005  (1,470) 313,535  291,058  2
22
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Convertible note obligations included in the condensed consolidated balance sheet consisted of the following as of December 31, 2021:
Fair Value (1)
(In thousands) Principal Amount Unamortized Debt Discount and Issuance Costs Net Carrying Amount Amount Leveling
2028 Convertible notes - 0.375%
 $ 1,150,000  $ (18,826) $ 1,131,174  $ 1,139,650  2
2027 Convertible notes - 0.375%
 747,500  (11,691) 735,809  771,794  2
2025 Convertible notes - 1.000%
 315,005  (1,756) 313,249  415,473  2
______________
(1)The fair values are based on observable market prices for this debt, which is traded in less active markets and therefore is classified as a Level 2 fair value measurement.
Summary of Conversion Features
Until the six-months immediately preceding the maturity date of the applicable series of the Company’s convertible notes (the “Notes”), each series of Notes is convertible only upon the occurrence of certain events and during certain periods, as set forth in the Indentures filed at the time of the original offerings. On or after the date that is six-months immediately preceding the maturity date of the applicable series of Notes until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert such Notes at any time. The Notes will be convertible into cash, shares of the Company’s common stock (plus, if applicable, cash in lieu of any fractional share), or a combination of cash and shares of the Company’s common stock, at the Company’s election.
It is the Company’s intent and policy to settle all conversions through combination settlement. The initial conversion rate is 13.26, 8.96, and 8.21 shares of common stock per $1,000 principal amount for the convertible notes due in 2025 (“2025 Notes”), 2027 (“2027 Notes”), and 2028 (“2028 Notes”), respectively, which is equivalent to an initial conversion price of approximately $75.43, $111.66, and $121.84 per share of the Company’s common stock for the 2025 Notes, 2027 Notes, and 2028 Notes, respectively. The 2025 Notes, 2027 Notes, and 2028 Notes are potentially convertible into up to 4.2 million, 6.7 million, and 9.4 million shares, respectively. The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the Indentures filed at the time of the original offerings but will not be adjusted for accrued and unpaid interest. In addition, holders of the Notes who convert their Notes in connection with a “make-whole fundamental change” (as defined in the Indenture), will, under certain circumstances, be entitled to an increase in the conversion rate.
If the Company undergoes a “fundamental change” (as defined in the Indenture), holders of the Notes may require the Company to repurchase for cash all or part of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.
Based on the closing price of the Company’s common stock of $39.39 on June 30, 2022, the if-converted values on the Notes do not exceed the principal amount.
The Notes do not contain any financial or operating covenants or any restrictions on the payment of dividends, the issuance of other indebtedness or the issuance or repurchase of securities by the Company.
Ranking of Convertible Notes
The Notes are the Company’s senior unsecured obligations and (i) rank senior in right of payment to all of its future indebtedness that is expressly subordinated in right of payment to the Notes; (ii) rank equal in right of payment to each outstanding series thereof and to all of the Company’s future liabilities that are not so subordinated, unsecured indebtedness; (iii) are effectively junior to all of the Company’s existing and future secured indebtedness and other secured obligations, to the extent of the value of the assets securing that indebtedness and other secured obligations; and (iv) are structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries.
23
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Issuance Costs
Issuance costs are amortized to interest expense over the term of the Notes. The following table summarizes the original issuance costs at the time of issuance for each set of Notes:
(In thousands)
January 2025 Notes $ 10,284 
June 2025 Notes 7,362 
2027 Notes 14,285 
2028 Notes 24,453 
Interest Expense
Interest expense includes the following:
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2022 2021 2022 2021
Debt issuance costs amortization $ 1,428  $ 1,428  $ 2,840  $ 2,840 
Debt discount amortization 37  37  73  73 
Coupon interest expense 2,566  2,566  5,133  5,133 
Total interest expense on convertible notes 4,031  4,031  8,046  8,046 
Other interest expense 480  621  943  1,222 
Total interest expense $ 4,511  $ 4,652  $ 8,989  $ 9,268 
The following table summarizes the effective interest rates of the Notes:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
2025 Convertible Notes 1.18  % 1.18  % 1.18  % 1.18  %
2027 Convertible Notes 0.67  % 0.67  % 0.67  % 0.67  %
2028 Convertible Notes 0.64  % 0.64  % 0.64  % 0.64  %
The remaining period over which the unamortized debt discount will be recognized as non-cash interest expense is 2.55, 4.71, and 5.67 years for the 2025 Notes, 2027 Notes, and 2028 Notes, respectively.

(10) LICENSE AND COLLABORATION AGREEMENTS
The Company licenses certain technologies that are, or may be, incorporated into its technology under several license agreements, as well as the rights to commercialize certain diagnostic tests through collaboration agreements. Generally, the license agreements require the Company to pay single-digit royalties based on net revenues received using the technologies and may require minimum royalty amounts, milestone payments, or maintenance fees.
Mayo
In June 2009, the Company entered into a license agreement with the Mayo Foundation for Medical Education and Research (“Mayo”). The Company’s license agreement with Mayo was most recently amended and restated in September 2020. Under the license agreement, Mayo granted the Company an exclusive, worldwide license to certain Mayo patents and patent applications, as well as a non-exclusive, worldwide license with regard to certain Mayo know-how. The scope of the license covers any screening, surveillance or diagnostic test or tool for use in connection with any type of cancer, pre-cancer, disease or condition.
24
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The licensed Mayo patents and patent applications contain both method and composition claims that relate to sample processing, analytical testing and data analysis associated with nucleic acid screening for cancers and other diseases. The jurisdictions covered by these patents and patent applications include the U.S., Australia, Canada, the European Union, China, Japan and Korea. Under the license agreement, the Company assumed the obligation and expense of prosecuting and maintaining the licensed Mayo patents and is obligated to make commercially reasonable efforts to bring to market products using the licensed Mayo intellectual property.
Pursuant to the Company’s agreement with Mayo, the Company is required to pay Mayo a low-single-digit royalty on the Company’s net sales of current and future products using the licensed Mayo intellectual property each year during the term of the Mayo agreement.
As part of the most recent amendment, the Company agreed to pay Mayo an additional $6.3 million, payable in five equal annual installments through 2024. The annual installments are recorded in research and development expenses in the Company’s condensed consolidated statements of operations.
The license agreement will remain in effect, unless earlier terminated by the parties in accordance with the agreement, until the last of the licensed patents expires in 2039 (or later, if certain licensed patent applications are issued). However, if the Company is still using the licensed Mayo know-how or certain Mayo-provided biological specimens or their derivatives on such expiration date, the term shall continue until the earlier of the date the Company stops using such know-how and materials and the date that is five years after the last licensed patent expires. The license agreement contains customary termination provisions and permits Mayo to terminate the license agreement if the Company sues Mayo or its affiliates, other than any such suit claiming an uncured material breach by Mayo of the license agreement.
In addition to granting the Company a license to the covered Mayo intellectual property, Mayo provides the Company with product development and research and development assistance pursuant to the license agreement and other collaborative arrangements. In September 2020, Mayo also agreed to make available certain personnel to provide such assistance through January 2025. In connection with this collaboration, the Company incurred charges of $1.3 million and $1.0 million for the three months ended June 30, 2022 and 2021, respectively. The Company incurred charges of $2.7 million and $2.2 million for the six months ended June 30, 2022 and 2021, respectively. The charges incurred in connection with this collaboration are recorded in research and development expenses in the Company’s condensed consolidated statements of operations.
Johns Hopkins University (“JHU”)
Through the acquisition of Thrive, the Company acquired a worldwide exclusive license agreement with JHU for use of several JHU patents and licensed know-how. The license is designed to enable the Company to leverage JHU proprietary data in the development and commercialization of a blood-based, multi-cancer early detection test. The agreement terms include single-digit sales-based royalties and sales-based milestone payments of $10.0 million, $15.0 million, and $20.0 million upon achieving calendar year licensed product revenue using JHU proprietary data of $0.50 billion, $1.00 billion, and $1.50 billion, respectively.

(11) PFIZER PROMOTION AGREEMENT
In August 2018, the Company entered into a Promotion Agreement (the “Original Promotion Agreement”) with Pfizer Inc. (“Pfizer”), which was amended and restated in October 2020 (the “Restated Promotion Agreement”). The Restated Promotion Agreement extended the relationship between the Company and Pfizer and restructured the manner in which the Company compensates Pfizer for promotion of the Cologuard test through a service fee, and provision of certain other sales and marketing services related to the Cologuard test. The Restated Promotion Agreement included fixed and performance-related fees, some of which retroactively went into effect on April 1, 2020. In November 2021, the Company and Pfizer entered into an amendment to the Restated Promotion Agreement (the “November 2021 Amendment”), which provided that after November 30, 2021, Pfizer will no longer promote the Cologuard test to healthcare providers. The November 2021 Amendment provides that the Company will pay Pfizer a total of $35.9 million in three installments during the second, third, and fourth quarters of 2022. The November 2021 Amendment eliminated the Company's obligation to pay Pfizer royalties or other fees except for certain media fees, advertising fees, and any detail fees owed to Pfizer for promoting the Cologuard test prior to November 30, 2021. The $35.9 million fee incurred as a result of the November 2021 Amendment was recognized in full during the fourth quarter of 2021. All payments to Pfizer are recorded in sales and marketing expenses in the Company’s condensed consolidated statements of operations.
25
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Under the Original Promotion Agreement, the service fee was calculated based on incremental gross profits over specified baselines during the term. Under the Restated Promotion Agreement (and prior to giving effect to the November 2021 Amendment), the service fee provided a fee-for-service model that included certain fixed fees and performance-related bonuses. The performance-related bonuses were contingent upon the achievement of certain annual performance criteria with any applicable expense being recognized ratably upon achievement of the payment becoming probable. The Company incurred charges of $2.5 million and $24.1 million for the service fee for the three months ended June 30, 2022 and 2021, respectively. The Company incurred charges of $5.0 million and $46.8 million for the service fee for the six months ended June 30, 2022 and 2021, respectively. The Company incurred charges of $27.1 million and $31.1 million for promotion, sales and marketing services performed by Pfizer on behalf of the Company during the three months ended June 30, 2022 and 2021, respectively. The Company incurred charges of $65.5 million and $57.7 million for promotion, sales and marketing services performed by Pfizer on behalf of the Company during the six months ended June 30, 2022 and 2021, respectively.

(12) STOCKHOLDERS’ EQUITY
OmicEra Diagnostics Acquisition Stock Issuance
In May 2022, the Company completed its acquisition of OmicEra. In connection with the acquisition, which is further described in Note 16, the Company issued 0.3 million shares of the Company's common stock that had a fair value of $14.8 million.
PreventionGenetics LLC (“PreventionGenetics”) Acquisition Stock Issuance
In December 2021, the Company completed its acquisition of PreventionGenetics. In connection with the acquisition, which is further described in Note 16, the Company issued 1.1 million shares of the Company's common stock that had a fair value of $84.2 million.
Ashion Acquisition Stock Issuance
In April 2021, the Company completed its acquisition of Ashion. In connection with the acquisition, which is further described in Note 16, the Company issued 0.1 million shares of the Company’s common stock that had a fair value of $16.2 million.
Thrive Acquisition Stock Issuance
In January 2021, the Company completed its acquisition of Thrive. In connection with the acquisition, which is further described in Note 16, the Company issued 9.3 million shares of the Company’s common stock that had a fair value of $1.19 billion.
Targeted Digital Sequencing (“TARDIS”) License Acquisition Stock Issuance
In January 2021, the Company acquired a worldwide exclusive license to the TARDIS technology from The Translational Genomics Research Institute (“TGen”), which is further described in Note 16. As part of the consideration transferred, the Company issued 0.2 million shares of the Company’s common stock that had a fair value of $27.3 million.
26
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Changes in Accumulated Other Comprehensive Income (Loss)
The amount recognized in AOCI for the six months ended June 30, 2022 were as follows:
(In thousands) Foreign Currency Translation Adjustments Unrealized Gain (Loss) on Marketable Securities (1) Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2021 $ 23  $ (1,466) $ (1,443)
Other comprehensive loss before reclassifications (747) (6,551) (7,298)
Amounts reclassified from accumulated other comprehensive loss —  96  96 
Net current period change in accumulated other comprehensive loss (747) (6,455) (7,202)
Balance at June 30, 2022 $ (724) $ (7,921) $ (8,645)
______________
(1)There was no tax impact from the amounts recognized in AOCI for the three and six months ended June 30, 2022.
The amounts recognized in AOCI for the six months ended June 30, 2021 were as follows:
(In thousands) Unrealized Gain (Loss) on Marketable Securities Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020 $ 526  $ 526 
Other comprehensive loss before reclassifications (399) (399)
Amounts reclassified from accumulated other comprehensive income (230) (230)
Net current period change in accumulated other comprehensive income, before tax (629) (629)
Income tax benefit related to items of other comprehensive income 170  170 
Balance at June 30, 2021 $ 67  $ 67 
Amounts reclassified from AOCI for the six months ended June 30, 2022 and 2021 were as follows:
Affected Line Item in the
Statements of Operations		 Six Months Ended June 30,
Details about AOCI Components (In thousands) 2022 2021
Change in value of available-for-sale investments
Sales and maturities of available-for-sale investments Investment income (expense), net $ 96  $ (230)
Total reclassifications $ 96  $ (230)

(13) STOCK-BASED COMPENSATION
Stock-Based Compensation Plans
The Company maintains the following plans for which awards were granted from or had shares outstanding in 2022: 2010 Omnibus Long-Term Incentive Plan (As Amended and Restated Effective July 27, 2017), the 2019 Omnibus Long-Term Incentive Plan, and the 2010 Employee Stock Purchase Plan (collectively referred to as the “Stock Plans”).
27
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Stock-Based Compensation Expense
The Company records stock-based compensation expense in connection with the amortization of restricted stock and restricted stock unit awards (“RSUs”), stock purchase rights granted under the Company’s employee stock purchase plan and stock options granted to employees, non-employee consultants and non-employee directors. The Company recorded $58.9 million and $56.3 million in stock-based compensation expense during the three months ended June 30, 2022 and 2021, respectively. The Company recorded $111.4 million and $219.7 million in stock-based compensation expense during the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022, there was approximately $472.7 million of expected total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all equity compensation plans. The Company expects to recognize that cost over a weighted average period of 2.9 years.
In connection with the acquisition of Thrive, the Company accelerated the vesting of shares of previously unvested stock options and restricted stock units for employees with qualifying termination events. During the three months ended June 30, 2021, the Company accelerated 4,982 shares of previously unvested stock options and 5,827 shares of previously unvested restricted stock awards and restricted stock units and recorded $1.0 million of non-cash stock-based compensation for the accelerated awards. During the six months ended June 30, 2021, the Company accelerated 103,996 shares of previously unvested stock options and 33,306 shares of previously unvested restricted stock awards and restricted stock units and recorded $14.5 million of non-cash stock-based compensation for the accelerated awards. As further discussed in Note 16, the Company also recorded $86.2 million in stock-based compensation related to accelerated vesting of awards held by Thrive employees in connection with the acquisition.
Stock Options
A summary of stock option activity under the Stock Plans is as follows:
Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (1)
(Aggregate intrinsic value in thousands)
Outstanding, January 1, 2022 2,284,276  $ 34.65  5.5
Granted —  — 
Exercised (570,138) 8.83 
Forfeited (31,385) 79.11 
Outstanding, June 30, 2022 1,682,753  $ 42.57  5.3 $ 22,630 
Vested and expected to vest, June 30, 2022
 1,682,753  $ 42.57  5.3 $ 22,630 
Exercisable, June 30, 2022 1,448,347  $ 37.22  5.0 $ 20,988 
______________
(1)The total intrinsic value of options exercised during the six months ended June 30, 2022 and 2021 was $32.5 million and $140.2 million, respectively, determined as of the date of exercise.
The Company received approximately $5.0 million and $11.6 million from stock option exercises during the six months ended June 30, 2022 and 2021, respectively.
Restricted Stock and Restricted Stock Units
The fair value of restricted stock and restricted stock units is determined on the date of grant using the closing stock price on that day.
28
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A summary of restricted stock and restricted stock unit activity during the six months ended June 30, 2022 is as follows:
Restricted stock and restricted stock units Shares Weighted Average Grant Date Fair Value (1)
Outstanding, January 1, 2022 4,320,910  $ 108.84 
Granted 3,313,712  74.52 
Released (2) (1,256,999) 97.38 
Forfeited (605,450) 93.95 
Outstanding, June 30, 2022 5,772,173  $ 92.31 
______________
(1)The weighted average grant date fair value of the restricted stock units granted during the six months ended June 30, 2021 was $140.63.
(2)The fair value of restricted stock units vested and converted to shares of the Company’s common stock was $122.4 million and $93.1 million during the six months ended June 30, 2022 and 2021, respectively.
Performance Share Units
The Company has issued performance-based equity awards to certain employees which vest upon the achievement of certain performance goals, including financial performance targets and operational milestones.
In January 2022, the Company issued additional performance-based equity awards, which include a market condition in the form of a total shareholder return (“TSR”) modifier. At the end of the three-year performance period, the total units earned, if any, are adjusted by applying the modifier, ranging from 50% to 150%. The TSR modifier is based on stock price performance relative to a group of peer companies for the same three-year period. The fair value of the awards granted was calculated using a Monte Carlo simulation model, as the TSR modifier contains a market condition.
A summary of performance share unit activity is as follows:
Performance share units Shares (1) Weighted Average Grant Date Fair Value (2)
Outstanding, January 1, 2022 878,114  $ 107.18 
Granted 744,844  92.05 
Released (3) (292,134) 93.22 
Forfeited (338,977) 114.78 
Outstanding, June 30, 2022 991,847  $ 105.81 
______________
(1)The performance share units listed above assumes attainment of maximum payout rates as set forth in the performance criteria. Applying actual or expected payout rates, the number of outstanding performance share units as of June 30, 2022 was 256,242.
(2)The weighted average grant date fair value of the performance share units granted during the six months ended June 30, 2021 was $140.96.
(3)The fair value of performance share units vested and converted to shares of the Company’s common stock was $27.2 million for the six months ended June 30, 2022. There were no performance share units vested and converted to shares of the Company’s common stock during the six months ended June 30, 2021.
29
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Employee Stock Purchase Plan (“ESPP”)
The fair value of ESPP shares is based on the assumptions in the following table:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
ESPP Shares
Risk-free interest rates
1.49% - 2.73%
0.04% - 0.16%
1.49% - 2.73%
0.04% - 0.16%
Expected term (in years)
0.5 - 2
0.5 - 2
0.5 - 2
0.5 - 2
Expected volatility
50.94% - 60.34%
48.38% - 68.51%
50.94% - 60.34%
48.38% - 68.51%
Dividend yield —% —% —% —%
(14) COMMITMENTS AND CONTINGENCIES
Leases
Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows:
Six Months Ended June 30,
(In thousands) 2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 15,899 $ 12,309
Operating cash flows from finance leases 56 480
Finance cash flows from finance leases 2,845 2,443
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities (1) $ 22,158 $ 54,451
Right-of-use assets obtained in exchange for new finance lease liabilities 6,033 2,308
Weighted-average remaining lease term - operating leases (in years) 7.33 8.43
Weighted-average remaining lease term - finance leases (in years) 3.64 3.28
Weighted-average discount rate - operating leases 6.11  % 6.32  %
Weighted-average discount rate - finance leases 6.09  % 5.54  %
_____________
(1)For the six months ended June 30, 2022, this includes right-of-use assets recorded as a result of the lease modification discussed below of $8.1 million. For the six months ended June 30, 2021, this includes right-of-use assets acquired as part of the business combinations described in Note 16 of $39.6 million.
As of June 30, 2022 and December 31, 2021, the Company’s right-of-use assets from operating leases are $182.5 million and $174.2 million, respectively, which are reported in operating lease right-of-use assets in the Company’s condensed consolidated balance sheets. As of June 30, 2022, the Company has outstanding operating lease obligations of $213.0 million, of which $25.8 million is reported in operating lease liabilities, current portion and $187.2 million is reported in operating lease liabilities, less current portion in the Company’s condensed consolidated balance sheets. As of December 31, 2021, the Company had outstanding operating lease obligations of $201.9 million, of which $19.7 million is reported in operating lease liabilities, current portion and $182.2 million is reported in operating lease liabilities, less current portion in the Company’s condensed consolidated balance sheets.
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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
As of June 30, 2022 and December 31, 2021, the Company’s right-of-use assets from finance leases are $9.5 million and $18.2 million, respectively, which are reported in other long-term assets, net in the Company’s condensed consolidated balance sheets. As of June 30, 2022, the Company has outstanding finance lease obligations of $9.7 million, of which $2.6 million is reported in other current liabilities and $7.1 million is reported in other long-term liabilities in the Company’s condensed consolidated balance sheets. As of December 31, 2021, the Company had outstanding finance lease obligations of $18.7 million, of which $6.2 million is reported in other current liabilities and $12.5 million is reported in other long-term liabilities in the Company’s condensed consolidated balance sheets.
On June 1, 2022, certain of the Company’s vehicle leases were amended. The Company determined that this amendment was a lease modification, effective June 1, 2022. Under the lease modification guidance within ASC 842, the Company reassessed the lease classification and remeasured the corresponding right-of-use assets and lease liabilities. The Company determined that a portion of the modified leases are to be accounted for as operating leases, and therefore derecognized the previous finance lease right-of-use asset of $10.3 million and the related finance lease liability of $10.8 million, and recognized an operating lease right-of-use asset of $8.1 million and the related operating lease liability of $8.6 million.
Legal Matters
The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company’s best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.
As of the date of this Quarterly Report on Form 10-Q, amounts accrued for legal proceedings and regulatory matters were not material except for the amounts accrued related to the Medicare Date of Service Rule Investigation (the “DOS Rule Investigation”) discussed below. However, it is possible that in a particular quarter or annual period the Company’s financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of, or development in, legal and/or regulatory proceedings, including as described below. Except for the proceedings discussed below, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity.
The Company is currently responding to civil investigative demands and administrative subpoenas issued pursuant to the Health Insurance Portability and Accountability Act of 1996 by the United States Department of Justice (“DOJ”) concerning Genomic Health’s compliance with the Medicare Date of Service billing regulations. The Company has been cooperating with these inquiries and has produced documents in response thereto.
During the second quarter of 2021, as part of ongoing discussions between the DOJ and the Company regarding the DOS Rule Investigation, the DOJ presented an initial estimate of civil damages in the amount of $48.2 million relating to alleged non-compliance with the Medicare Date of Service billing regulations from 2007 to 2020. The initial civil damages estimate did not include potential treble damages, civil or criminal penalties or other remedies that the DOJ could seek against the Company. The DOJ has since presented a total adjusted demand of $53.8 million for civil damages, which includes a multiplier and penalties. Based on the Company’s review and analysis of the DOJ presentation, ongoing discussions held with the DOJ, the civil damages estimate, and range of potential exposure, the Company recorded an accrual of approximately $10 million as of June 30, 2022.
As noted above, litigation outcomes are difficult to predict, and the estimation of probable losses requires an analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. Accordingly, the recorded accrual of approximately $10 million as of June 30, 2022 is based on several factors, considerations, and judgments, and the ultimate resolution of this matter could result in a material loss in excess of the recorded accrual.
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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
On June 24, 2019, Niles Rosen M.D. filed a sealed ex parte qui tam lawsuit against the Company in the United States District Court for the Middle District of Florida, that alleged a violation of the Federal Anti-Kickback Statute and False Claims Act for offering gift cards to patients in exchange for returning the Cologuard screening test (the “Qui Tam Suit”). Dr. Rosen seeks on behalf of the U.S. government and himself an award of civil penalties, treble damages and fees and costs. On February 25, 2020, the Company received a civil investigative demand by the DOJ related to the Company’s gift card program. The Company produced documents in response thereto. On March 25, 2021, the DOJ filed a notice of its election to decline intervention in the Qui Tam Suit. This election does not prevent Dr. Rosen from continuing the Qui Tam Suit. On April 12, 2021, Dr. Rosen filed an amended complaint against the Company, alleging violations of the Federal Anti-Kickback Statute and False Claims Act. The Company first learned of the Qui Tam Suit and the DOJ’s election to decline intervention in July 2021. The Company intends to vigorously defend itself against Dr. Rosen's claims and seek, among other things, the Company’s attorneys' fees and costs incurred in defending this action. Although the Company denies Dr. Rosen's allegations and believes that it has meritorious defenses to his False Claims Act claims, neither the outcome of the litigation nor can a reasonable estimate or an estimated range of loss associated with the litigation be determined at this time.
Adverse outcomes from the DOS Rule Investigation and the Qui Tam Suit could include the Company being required to pay treble damages, incur civil and criminal penalties, paying attorneys’ fees, entering into a corporate integrity agreement, being excluded from participation in government healthcare programs, including Medicare and Medicaid, and other adverse actions that could materially affect the Company’s business, financial condition, and results of operation.

(15) WISCONSIN ECONOMIC DEVELOPMENT TAX CREDITS
During February 2015, the Company entered into an agreement with the Wisconsin Economic Development Corporation (“WEDC,” “Original WEDC Agreement”) to earn $9.0 million in refundable tax credits on the condition that the Company expends $26.3 million in capital investments and establishes and maintains 758 full-time positions over a seven-year period.
During December 2021, the Company amended its agreement with the WEDC (“Amended WEDC Agreement”) to earn an additional $18.5 million in refundable tax credits on the condition that the Company expends $350.0 million in capital investments and establishes and maintains 1,300 additional full-time positions over a five-year period. The capital investment credits are earned at a rate of 10% of eligible capital investments up to a maximum of $7.0 million, while the jobs creation credits are earned annually pursuant to the agreement.
The tax credits earned are first applied against the tax liability otherwise due, and if there is no such liability present, the claim for tax credits will be reimbursed in cash to the Company. The maximum amount of the refundable tax credit to be earned for each year is fixed, and the Company earns the credits by meeting certain capital investment and job creation thresholds over the term of the agreement. Should the Company earn and receive the job creation tax credits but not maintain those full-time positions through the end of the agreement, the Company may be required to pay those credits back to the WEDC.
Under the Original WEDC Agreement, the Company recorded the earned tax credits as job creation and capital investments occurred. The tax credits earned from capital investment are being recognized as an offset to depreciation expense over the expected life of the acquired capital assets. The tax credits earned related to job creation were recognized as an offset to operational expenses through December 31, 2020.
As of June 30, 2022, the Company has earned all $9.0 million of the refundable tax credits and has received payment of $9.0 million from the WEDC under the Original WEDC Agreement.
Under the Amended WEDC Agreement, the Company records the earned tax credits as job creation and capital investments occurs. The tax credits earned from capital investment are recognized as a reduction to capital expenditures at the time the costs are incurred, and then as an offset to depreciation expense over the expected life of the acquired capital assets. The tax credits earned related to job creation are recognized as an offset to operational expenses in the period in which the credits are earned. The credits recognized will be required to be repaid if the Company does not maintain minimum cumulative job requirements.
As of June 30, 2022, the Company has earned $9.0 million of the refundable tax credits under the Amended WEDC Agreement. The unpaid portion is $9.0 million as of June 30, 2022, of which $1.7 million is reported in prepaid expenses and other current assets and $7.3 million is reported in other long-term assets, net in the Company’s condensed consolidated balance sheets reflecting when collection of the refundable tax credits is expected to occur.
32
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
During the three and six months ended June 30, 2022, the Company recorded zero and $1.0 million respectively, as a reduction to operational expenses for the credits earned for job creation.

(16) BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
Business Combinations
OmicEra Diagnostics, GmbH
On May 2, 2022, the Company completed the acquisition (the “OmicEra Acquisition”) of all of the outstanding equity interests of OmicEra Diagnostics GmbH. The OmicEra Acquisition provided the Company a state-of-the-art proteomics lab based in Planegg, Germany. OmicEra combines its mass spectrometry-based proteome analysis technology with its in-house proteomics scientific expertise to discover more reliable and valuable protein biomarkers, which will expand the Company’s research and development capabilities. The Company has included the financial results of OmicEra in the consolidated financial statements from the date of the combination.
The combination date fair value of the consideration transferred for OmicEra was approximately $19.4 million, which consisted of the following:
(In thousands)
Common stock issued $ 14,792 
Contingent consideration 4,600 
Working capital adjustment to be settled in cash 16 
Total purchase price $ 19,408 
The fair value of the 265,186 common shares issued as part of the consideration transferred was determined on the basis of the average of the high and low market price of the Company’s shares on the acquisition date, which was $55.78.
The purchase agreement requires the Company to pay a maximum of $6.0 million of additional cash consideration to OmicEra upon the achievement of certain earnout conditions related to the identification of protein biomarkers, as well as the growth of the proteomics research and development team. The fair value of the contingent consideration at the acquisition date was $4.6 million. The fair value of the contingent consideration was estimated using a probability-weighted scenario-based discounted cash flow model. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820. The key assumptions are described in Note 7.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
(In thousands)
Net operating assets $ 2,586 
Developed technology 10,000 
Total identifiable assets acquired 12,586 
Net operating liabilities (3,926)
Net identifiable assets acquired 8,660 
Goodwill 10,748 
Net assets acquired $ 19,408 
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EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company recorded $10.0 million of identifiable intangible assets related to the developed technology associated with OmicEra’s proteome analysis platform. Developed technology represents purchased technology that had reached technological feasibility and for which OmicEra had substantially completed development as of the date of combination. The fair value of the developed technology has been determined using the income approach multi-period excess earnings method, which involves significant unobservable inputs (Level 3 inputs). These inputs include projected sales, margin, obsolescence factor, required rate of return, and tax rate. Cash flows were discounted to their present value as of the closing date. Developed technology is amortized on a straight-line basis over its estimated useful life of 16 years.
The calculation of the excess purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill, which is primarily attributed to the acquired workforce expertise, the potential to enhance the capabilities of current and future products, and expected research and development synergies. The total goodwill related to this combination is not deductible for tax purposes.
The total purchase price allocation is preliminary and based upon estimates and assumptions that are subject to change within the measurement period as additional information for the estimates is obtained. The measurement period remains open pending the completion of valuation procedures related to certain acquired assets and liabilities assumed, primarily in connection with the developed technology intangible asset.
Pro forma impact and results of operations disclosures have not been included due to immateriality.
Acquisition-related costs were not material and have been recorded within general and administrative expenses in the condensed consolidated statement of operations. These costs include fees associated with financial, legal, accounting, and other advisors incurred to complete the merger.
PreventionGenetics LLC
On December 31, 2021, the Company completed the acquisition (the “PreventionGenetics Acquisition”) of all of the outstanding equity interests of PreventionGenetics, LLC. The PreventionGenetics Acquisition provided the Company a Clinical Laboratory Improvement Amendments (“CLIA”) certified and College of American Pathologist (“CAP”) accredited sequencing lab based in Marshfield, Wisconsin. PreventionGenetics provides more than 5,000 predefined genetic tests for nearly all clinically relevant genes, additional custom panels, and comprehensive germline, whole exome (“PGxome®”), and whole genome (“PGnome®”) sequencing tests.
Refer to the Company’s 2021 10-K for detailed disclosures on the combination, including the fair value of the consideration transferred, purchase price allocation, and goodwill and intangible assets identified in the transaction. During the three and six months ended June 30, 2022, there were no material changes to the purchase price and purchase price allocation. The measurement period remains open pending the completion of valuation procedures related to certain acquired assets and liabilities assumed, primarily in connection with the intangible assets.
Ashion Analytics, LLC
On April 14, 2021, the Company completed the acquisition (“Ashion Acquisition”) of all of the outstanding equity interests of Ashion Analytics, LLC from PMed Management, LLC (“PMed”), which is a subsidiary of TGen. The Ashion Acquisition provided the Company a CLIA certified and CAP accredited sequencing lab based in Phoenix, Arizona. Ashion developed the GEMExTra® test, a comprehensive genomic cancer test, and provides access to whole exome, matched germline, and transcriptome sequencing capabilities.
Refer to the Company’s 2021 10-K for detailed disclosures on the combination, including the fair value of the consideration transferred, purchase price allocation, and goodwill and intangible assets identified in the transaction. During the three and six months ended June 30, 2022, there were no changes to the purchase price allocation and the measurement period has closed.
34
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Thrive Earlier Detection Corporation
On January 5, 2021, the Company completed the acquisition of all of the outstanding capital stock of Thrive Earlier Detection Corporation. Thrive, headquartered in Cambridge, Massachusetts, is a healthcare company dedicated to incorporating earlier cancer detection into routine medical care. The Company expects that combining Thrive's early-stage multi-cancer early detection test with the Company’s scientific platform, clinical organization and commercial infrastructure will bring an accurate blood-based, multi-cancer detection test to patients faster.
Refer to the Company’s 2021 10-K for detailed disclosures on the combination, including the fair value of the consideration transferred, final purchase price allocation, and goodwill and intangible assets identified in the transaction.
Asset Acquisitions
PFS Genomics Inc.
On May 3, 2021, the Company acquired 90% of the outstanding capital stock of PFS Genomics Inc. (“PFS”). On June 23, 2021, the Company completed the acquisition of the remaining 10% interest in PFS. The Company expects this acquisition to expand its ability to help guide early-stage breast cancer treatment through individualized radiotherapy treatment decisions.
The transaction was treated as an asset acquisition under GAAP because substantially all of the fair value of the gross assets acquired were deemed to be associated with the acquired technology. Refer to the Company’s 2021 10-K for detailed disclosures on the asset acquisition, including the fair value of the consideration transferred and purchase price allocation.
TARDIS License Agreement
On January 11, 2021, the Company entered into a worldwide exclusive license to the proprietary TARDIS technology from TGen, an affiliate of City of Hope. Under the agreement, the Company acquired a royalty-free, worldwide exclusive license to proprietary TARDIS patents and know-how. The Company intends to develop and commercialize the TARDIS technology as a minimal residual disease test.
The Company accounted for this transaction as an asset acquisition. Refer to the Company’s 2021 10-K for detailed disclosures on the asset acquisition, including the fair value of the consideration transferred and information related to contingent milestones.

(17) SEGMENT INFORMATION
Management determined that the Company functions as a single operating segment, and thus reports as a single reportable segment. This operating segment is focused on the development and global commercialization of clinical laboratory services allowing healthcare providers and patients to make individualized treatment decisions. Management assessed the discrete financial information routinely reviewed by the Company's Chief Operating Decision Maker, its President and Chief Executive Officer, to monitor the Company's operating performance and support decisions regarding allocation of resources to its operations. Performance is continuously monitored at the consolidated level to timely identify deviations from expected results.
The following table summarizes total revenue from customers by geographic region. Product revenues are attributed to countries based on ship-to location.
Three Months Ended June 30, Six Months Ended June 30,
(In thousands) 2022 2021 2022 2021
United States $ 493,299  $ 407,971  $ 950,427  $ 783,992 
Outside of United States 28,341  26,848  57,784  52,904 
Total revenues $ 521,640  $ 434,819  $ 1,008,211  $ 836,896 
Long-lived assets located in countries outside of the United States are not significant.

35
EXACT SCIENCES CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(18) INCOME TAXES
The Company recorded an income tax benefit of $1.8 million and an income tax expense of $4.0 million for the three months ended June 30, 2022 and 2021, respectively. The Company recorded an income tax benefit of $3.8 million and $238.8 million for the six months ended June 30, 2022 and 2021, respectively. The Company’s income tax benefit recorded during the three months ended June 30, 2022 is primarily related to the future limitations on and expiration of certain Federal and State deferred tax assets, offset by current foreign and state tax expense. The Company’s income tax benefit recorded during the six months ended June 30, 2022 is primarily related to the future limitations on and expiration of certain Federal and State deferred tax assets, offset by current foreign and state tax expense. A deferred tax liability of approximately $27.4 million was recorded as of June 30, 2022, which is included in other long-term liabilities on the Company’s condensed consolidated balance sheet. The Company continues to maintain a full valuation allowance against its deferred tax assets based on management’s determination that it is more likely than not the benefit will not be realized.
The Company had $24.4 million and $21.8 million of unrecognized tax benefits at June 30, 2022 and December 31, 2021, respectively. These amounts have been recorded as a reduction to the Company’s deferred tax asset, if recognized they would not have an impact on the effective tax rate due to the existing valuation allowance. Certain of the Company's unrecognized tax benefits could change due to activities of various tax authorities, including possible settlement of audits, or through normal expiration of various statutes of limitations. The Company does not expect a material change in unrecognized tax benefits in the next twelve months.
As of June 30, 2022, due to the carryforward of unutilized net operating losses and research and development credits, the Company is subject to U.S. federal income tax e