Strength in U.S. Growth Offset by Challenges in BioPharma and EMEA; Strong Cost Management Buffers Loss
BOSTON and ROLLE, Switzerland, Aug. 6, 2024 /PRNewswire/ -- SOPHiA GENETICS (Nasdaq: SOPH), a cloud-native software company and leader in data-driven medicine, today reported financial results for the second quarter ended June 30, 2024.
Second Quarter 2024 Financial Update
2024 Financial Outlook
"We delivered another quarter of strong forward-looking indicators and continued bottom-line improvements in Q2, despite facing macro-related headwinds in BioPharma and EMEA which offset outsized performance in the U.S.," said Jurgi Camblong, PhD., Chief Executive Officer and Co-founder. "We believe the headwinds we are facing are temporary in nature and remain encouraged by positive new business momentum, such as bookings and new customers signed, which will materialize as revenue later this year and into 2025. Despite the headwinds, I'm proud that we delivered a 32% year-over-year improvement to adjusted operating loss during the quarter and that disciplined spending has kept our path to profitability on track."
Camblong added, "Looking ahead, we remain confident in our long-term growth and in the growth prospects of our end markets. Exciting catalysts such as the continued success of MSK-ACCESS® powered with SOPHiA DDM™, a suite of new applications launching this year, and refreshed momentum in our BioPharma business offer meaningful upside and give us conviction in a medium-term growth recovery."
Business Highlights
Expanding usage of SOPHiA DDM™ worldwide
Accelerating adoption of SOPHiA DDM™ by landing new Clinical customers
Building strong business momentum with new product launches
Growing sustainably by maintaining an obsession with operational excellence
Accelerated planned growth initiatives to offset headwinds in BioPharma and EMEA
Earnings Call and Webcast Information
SOPHiA GENETICS will host a conference call and live webcast to discuss the second quarter 2024 results on Tuesday, August 6, 2024, at 8:00 a.m. (08:00) Eastern Time / 2:00 p.m. (14:00) Central European Time. The call will be webcast live on the SOPHiA GENETICS Investor Relations website, ir.sophiagenetics.com. Additionally, an audio replay of the conference call will be available on the SOPHiA GENETICS website after its completion.
Non-IFRS Financial Measures
Other than with respect to revenue, the Company only provides guidance on a non-IFRS basis. The Company does not provide a reconciliation of forward-looking adjusted gross margin (non-IFRS measure) to gross margin (the most comparable IFRS financial measure), due to the inherent difficulty in forecasting and quantifying amortization of capitalized research & development expenses that are necessary for such reconciliation. In addition, the Company does not provide a reconciliation of forward-looking adjusted operating loss (non-IFRS measure) to operating loss (the most comparable IFRS financial measure), due to the inherent difficulty in forecasting and quantifying amortization of capitalized research & development expenses and intangible assets, share-based compensation expenses, and non-cash portion of pensions paid in excess of actual contributions, that are necessary for such reconciliation.
To provide investors with additional information regarding the company's financial results, SOPHiA GENETICS has disclosed here and elsewhere in this earnings release the following non-IFRS measures:
These non-IFRS measures are key measures used by SOPHiA GENETICS management and board of directors to evaluate its operating performance and generate future operating plans. The exclusion of certain expenses facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable charges. Accordingly, the company believes that these non-IFRS measures provide useful information to investors and others in understanding and evaluating its operating results in the same manner as its management and board of directors.
These non-IFRS measures have limitations as financial measures, and you should not consider them in isolation or as a substitute for analysis of SOPHiA GENETICS' results as reported under IFRS. Some of these limitations are:
Because of these limitations, you should consider these non-IFRS measures alongside other financial performance measures, including various cash flow metrics, net income and other IFRS results.
The tables below provide the reconciliation of the most comparable IFRS measures to the non-IFRS measures for the periods presented.
Presentation of Constant Currency Revenue and Excluding COVID-19-Related Revenue
SOPHiA GENETICS operates internationally, and its revenues are generated primarily in the U.S. dollar, the euro and Swiss franc and, to a lesser extent, British pound, Australian dollar, Brazilian real, Turkish lira and Canadian dollar depending on the company's customers' geographic locations. Changes in revenue include the impact of changes in foreign currency exchange rates. We present the non-IFRS financial measure "constant currency revenue" (or similar terms such as constant currency revenue growth) to show changes in revenue without giving effect to period-to-period currency fluctuations. Under IFRS, revenues received in local (non-U.S. dollar) currencies are translated into U.S. dollars at the average monthly exchange rate for the month in which the transaction occurred. When the company uses the term "constant currency", it means that it has translated local currency revenues for the current reporting period into U.S. dollars using the same average foreign currency exchange rates for the conversion of revenues into U.S. dollars that we used to translate local currency revenues for the comparable reporting period of the prior year. The company then calculates the difference between the IFRS revenue and the constant currency revenue to yield the "constant currency impact" for the current period.
The company's management and board of directors use constant currency revenue growth to evaluate growth and generate future operating plans. The exclusion of the impact of exchange rate fluctuations provides comparability across reporting periods and reflects the effects of customer acquisition efforts and land-and-expand strategy. Accordingly, it believes that this non-IFRS measure provides useful information to investors and others in understanding and evaluating revenue growth in the same manner as the management and board of directors. However, this non-IFRS measure has limitations, particularly as the exchange rate effects that are eliminated could constitute a significant element of its revenue and could significantly impact performance and prospects. Because of these limitations, you should consider this non-IFRS measure alongside other financial performance measures, including revenue and revenue growth presented in accordance with IFRS and other IFRS results.
In addition to constant currency revenue, the company presents constant currency revenue excluding COVID-19-related revenue to further remove the effects of revenues that are derived from sales of COVID-19-related offerings, including a NGS assay for COVID-19 that leverages the SOPHiA DDM™ Platform and related products and solutions analytical capabilities and COVID-19 bundled access products. SOPHiA GENETICS do not believe that these revenues reflect its core business of commercializing its platform because the company's COVID-19 solution was offered to address specific market demand by its customers for analytical capabilities to assist with their testing operations. The company does not anticipate additional development of its COVID-19-related solution as the pandemic transitions into a more endemic phase and as customer demand continues to decline. Further, COVID-19-related revenues did not constitute, and the company does not expect COVID-19-related revenues to constitute in the future, a significant part of its revenue. Accordingly, the company believes that this non-IFRS measure provides useful information to investors and others in understanding and evaluating its revenue growth. However, this non-IFRS measure has limitations, including that COVID-19-related revenues contributed to the company's cash position, and other companies may define COVID-19-related revenues differently. Because of these limitations, you should consider this non-IFRS measure alongside other financial performance measures, including revenue and revenue growth presented in accordance with IFRS and other IFRS results.
The table below provides the reconciliation of the most comparable IFRS growth measures to the non-IFRS growth measures for the current period.
About SOPHiA GENETICS
SOPHiA GENETICS (Nasdaq: SOPH) is a cloud-native healthcare technology company on a mission to expand access to data-driven medicine by using AI to deliver world-class care to patients with cancer and rare disorders across the globe. It is the creator of SOPHiA DDM™, a platform that analyzes complex genomic and multimodal data and generates real-time, actionable insights for a broad global network of hospital, laboratory, and biopharma institutions. For more information, visit SOPHiAGENETICS.COM and connect with us on LinkedIn.
Forward-Looking Statements
This press release contains statements that constitute forward-looking statements. All statements other than statements of historical facts contained in this press release, including statements regarding SOPHiA GENETICS future results of operations and financial position, business strategy, products and technology, partnerships and collaborations, as well as plans and objectives of management for future operations, are forward-looking statements. Forward-looking statements are based on SOPHiA GENETICS' management's beliefs and assumptions and on information currently available to the company's management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including those described in the company's filings with the U.S. Securities and Exchange Commission. No assurance can be given that such future results will be achieved. Such forward-looking statements contained in this press release speak only as of its date. We expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this press release to reflect any change in the company's expectations or any change in events, conditions, or circumstances on which such statements are based, unless required to do so by applicable law. No representations or warranties (expressed or implied) are made about the accuracy of any such forward-looking statements.
SOPHiA GENETICS SA Interim Condensed Consolidated Statements of Loss (Amounts in USD thousands, except per share data) (Unaudited) | ||||||||
Three months ended June 30, | Six months ended June 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Revenue | $ 15,808 | $ 15,054 | $ 31,587 | $ 29,020 | ||||
Cost of revenue | (5,032) | (5,007) | (10,406) | (9,279) | ||||
Gross profit | 10,776 | 10,047 | 21,181 | 19,741 | ||||
Research and development costs | (7,958) | (8,891) | (17,349) | (18,225) | ||||
Selling and marketing costs | (7,258) | (7,203) | (14,209) | (13,627) | ||||
General and administrative costs | (10,583) | (14,041) | (23,408) | (27,283) | ||||
Other operating income, net | 18 | 41 | 24 | 60 | ||||
Operating loss | (15,005) | (20,047) | (33,761) | (39,334) | ||||
Interest income, net | 450 | 1,134 | 1,208 | 1,996 | ||||
Fair value adjustments on warrant obligations | 84 | — | 84 | — | ||||
Foreign exchange (losses) gains, net | (561) | (2,410) | 4,049 | (3,578) | ||||
Loss before income taxes | (15,032) | (21,323) | (28,420) | (40,916) | ||||
Income tax expense | (161) | (73) | (477) | (180) | ||||
Loss for the period | (15,193) | (21,396) | (28,897) | (41,096) | ||||
Attributable to the owners of the parent | (15,193) | (21,396) | (28,897) | (41,096) | ||||
Basic and diluted loss per share | $ (0.23) | $ (0.33) | $ (0.44) | $ (0.64) |
SOPHiA GENETICS SA Interim Condensed Consolidated Statements of Comprehensive Loss (Amounts in USD thousands) (Unaudited) | ||||||||
Three months ended June 30, | Six months ended June 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Loss for the period | $ (15,193) | $ (21,396) | $ (28,897) | $ (41,096) | ||||
Other comprehensive (loss) income: | ||||||||
Items that may be reclassified to statement of loss (net of tax) | ||||||||
Currency translation adjustments | 252 | 3,680 | (9,139) | 5,651 | ||||
Total items that may be reclassified to statement of loss | 252 | 3,680 | (9,139) | 5,651 | ||||
Items that will not be reclassified to statement of loss (net of tax) | ||||||||
Remeasurement of defined benefit plans | (41) | (226) | (58) | (296) | ||||
Total items that will not be reclassified to statement of loss | (41) | (226) | (58) | (296) | ||||
Other comprehensive (loss) income for the period | $ 211 | $ 3,454 | $ (9,197) | $ 5,355 | ||||
Total comprehensive loss for the period | $ (14,982) | $ (17,942) | $ (38,094) | $ (35,741) | ||||
Attributable to owners of the parent | $ (14,982) | $ (17,942) | $ (38,094) | $ (35,741) |
SOPHiA GENETICS SA Interim Condensed Consolidated Balance Sheets (Amounts in USD thousands) (Unaudited) | ||||
June 30, 2024 | December 31, 2023 | |||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | $ 105,396 | $ 123,251 | ||
Accounts receivable | 9,924 | 13,557 | ||
Inventory | 6,545 | 6,482 | ||
Prepaids and other current assets | 3,887 | 4,757 | ||
Total current assets | 125,752 | 148,047 | ||
Non-current assets | ||||
Property and equipment | 6,134 | 7,469 | ||
Intangible assets | 27,428 | 27,185 | ||
Right-of-use assets | 14,067 | 15,635 | ||
Deferred tax assets | 1,717 | 1,720 | ||
Other non-current assets | 5,998 | 6,100 | ||
Total non-current assets | 55,344 | 58,109 | ||
Total assets | $ 181,096 | $ 206,156 | ||
Liabilities and equity | ||||
Current liabilities | ||||
Accounts payable | $ 5,321 | $ 5,391 | ||
Accrued expenses | 12,229 | 17,808 | ||
Deferred contract revenue | 7,918 | 9,494 | ||
Lease liabilities, current portion | 2,569 | 2,928 | ||
Warrant obligations | 572 | — | ||
Total current liabilities | 28,609 | 35,621 | ||
Non-current liabilities | ||||
Borrowings | 13,344 | — | ||
Lease liabilities, net of current portion | 14,157 | 15,673 | ||
Defined benefit pension liabilities | 3,123 | 3,086 | ||
Other non-current liabilities | 420 | 334 | ||
Total non-current liabilities | 31,044 | 19,093 | ||
Total liabilities | 59,653 | 54,714 | ||
Equity | ||||
Share capital | 4,048 | 4,048 | ||
Share premium | 472,140 | 471,846 | ||
Treasury share | (590) | (646) | ||
Other reserves | 52,526 | 53,978 | ||
Accumulated deficit | (406,681) | (377,784) | ||
Total equity | 121,443 | 151,442 | ||
Total liabilities and equity | $ 181,096 | $ 206,156 |
SOPHiA GENETICS SA Interim Condensed Consolidated Statements of Cash Flows (Amounts in USD thousands) (Unaudited) | ||||
Six months ended June 30, | ||||
2024 | 2023 | |||
Operating activities | ||||
Loss before tax | $ (28,420) | $ (40,916) | ||
Adjustments for non-monetary items | ||||
Depreciation | 2,287 | 2,873 | ||
Amortization | 1,809 | 1,281 | ||
Finance (income) expense, net | (5,747) | 1,394 | ||
Interest expense from borrowings | — | — | ||
Fair value adjustments on warrant obligations | (84) | — | ||
Expected credit loss allowance | (34) | 123 | ||
Share-based compensation | 7,797 | 7,106 | ||
Movements in provisions and pensions | 410 | 478 | ||
Research tax credit | (283) | (600) | ||
Working capital changes | ||||
Decrease (Increase) in accounts receivable | 3,042 | (834) | ||
Decrease (increase) in prepaids and other assets | 934 | (1,061) | ||
Increase in inventory | (655) | (268) | ||
(Decrease) Increase in accounts payables, accrued expenses, | (6,100) | 3,749 | ||
Cash used in operating activities | (25,044) | (26,675) | ||
Income tax paid | (18) | (676) | ||
Interest paid | (572) | (5) | ||
Interest received | 1,795 | 2,243 | ||
Net cash flows used in operating activities | (23,839) | (25,113) | ||
Investing activities | ||||
Purchase of property and equipment | (111) | (1,246) | ||
Acquisition of intangible assets | (167) | (788) | ||
Capitalized development costs | (3,637) | (2,842) | ||
Proceeds upon maturity of term deposits | — | 17,546 | ||
Net cash flow (used in) provided from investing activities | (3,915) | 12,670 | ||
Financing activities | ||||
Proceeds from exercise of share options | 298 | 207 | ||
Proceeds from borrowings, net of transaction costs | 13,930 | — | ||
Payments of principal portion of lease liabilities | (1,477) | (1,761) | ||
Net cash flow provided from (used in) financing activities | 12,751 | (1,554) | ||
Decrease in cash and cash equivalents | (15,003) | (13,997) | ||
Effect of exchange differences on cash balances | (2,852) | 1,244 | ||
Cash and cash equivalents at beginning of the year | 123,251 | 161,305 | ||
Cash and cash equivalents at end of the period | $ 105,396 | $ 148,552 |
SOPHiA GENETICS SA Reconciliation of IFRS Revenue Growth to Constant Currency Revenue Growth and Constant Currency Revenue Growth Excluding COVID-19-Related Revenue (Amounts in USD thousands, except for %) (Unaudited) | ||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||
2024 | 2023 | Growth | 2024 | 2023 | Growth | |||||||
IFRS revenue | $ 15,808 | $ 15,054 | 5 % | $ 31,587 | $ 29,020 | 9 % | ||||||
Current period constant currency impact | 179 | — | (5) | — | ||||||||
Constant currency revenue | $ 15,987 | $ 15,054 | 6 % | $ 31,582 | $ 29,020 | 9 % | ||||||
COVID-19-related revenue | (4) | (72) | (39) | (197) | ||||||||
Constant currency impact on COVID-19-related revenue | — | — | 1 | — | ||||||||
Constant currency revenue excluding COVID-19-related revenue | $ 15,983 | $ 14,982 | 7 % | $ 31,544 | $ 28,823 | 9 % |
SOPHiA GENETICS SA Reconciliation of IFRS to Adjusted Gross Profit and Gross Profit Margin (Amounts in USD thousands, except percentages) (Unaudited) | ||||||||
Three months ended | Six months ended | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Revenue | $ 15,808 | $ 15,054 | $ 31,587 | $ 29,020 | ||||
Cost of revenue | (5,032) | (5,007) | (10,406) | (9,279) | ||||
Gross profit | $ 10,776 | $ 10,047 | $ 21,181 | $ 19,741 | ||||
Amortization of capitalized research and development expenses(1) | 794 | 496 | 1,521 | 928 | ||||
Adjusted gross profit | $ 11,570 | $ 10,543 | $ 22,702 | $ 20,669 | ||||
Gross profit margin | 68.2 % | 66.7 % | 67.1 % | 68.0 % | ||||
Amortization of capitalized research and development expenses(1) | 5.0 % | 3.3 % | 4.8 % | 3.2 % | ||||
Adjusted gross profit margin | 73.2 % | 70.0 % | 71.9 % | 71.2 % |
SOPHiA GENETICS SA Reconciliation of IFRS to Adjusted Operating Loss for the Period (Amounts in USD thousands) (Unaudited) | ||||||||
Three months ended | Six months ended | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Operating loss | $ (15,005) | $ (20,047) | $ (33,761) | $ (39,334) | ||||
Amortization of capitalized research & development expenses(1) | 794 | 496 | 1,521 | 928 | ||||
Amortization of intangible assets(2) | 114 | 179 | 288 | 352 | ||||
Share-based compensation expense(3) | 4,084 | 4,676 | 7,797 | 7,106 | ||||
Non-cash pension expense(4) | 96 | 84 | 173 | 162 | ||||
Adjusted operating loss | $ (9,917) | $ (14,612) | $ (23,982) | $ (30,786) |
SOPHiA GENETICS SA Reconciliation of IFRS to Adjusted Operating Loss for the fourth quarter and fiscal year 2023 (Amounts in USD thousands) (Unaudited) | ||||
Three months ended | Year ended | |||
December 31, 2023 | ||||
Operating loss | $ (18,946) | $ (74,826) | ||
Amortization of capitalized research & development expenses (1) | 619 | 2,099 | ||
Amortization of intangible assets(2) | 193 | 729 | ||
Share-based compensation expense(3) | 4,211 | 15,247 | ||
Non-cash pension expense(4) | (625) | (394) | ||
Costs associated with restructuring(5) | 1,232 | 1,232 | ||
Adjusted operating loss | $ (13,316) | $ (55,913) |
Notes to the Reconciliation of IFRS to Adjusted Financial Measures Tables | |
(1) | Amortization of capitalized research and development expenses consists of software development costs amortized using the straight-line method over an estimated life of five years. These expenses do not have a cash impact but remain a recurring expense generated over the course of our research and development initiatives. |
(2) | Amortization of intangible assets consists of costs related to intangible assets amortized over the course of their useful lives. These expenses do not have a cash impact, but we could continue to generate such expenses through future capital investments. |
(3) | Share-based compensation expense represents the cost of equity awards issued to our directors, officers, and employees. The fair value of awards is computed at the time the award is granted and is recognized over the vesting period of the award by a charge to the income statement and a corresponding increase in other reserves within equity. These expenses do not have a cash impact but remain a recurring expense for our business and represent an important part of our overall compensation strategy. |
(4) | Non-cash pension expense consists of the amount recognized in excess of actual contributions made to our defined pension plans to match actuarial expenses calculated for IFRS purposes. The difference represents a non-cash expense but remains a recurring expense for our business as we continue to make contributions to our plans for the foreseeable future. |
(5) | Costs associated with restructuring consists of compensation paid to employees during their garden leave period, severance, and any other amounts legally owed to the employees resulting from their termination as part of a planned workforce reduction, which we undertook to optimize our operations. Additionally, it includes any legal fees incurred as part of the restructuring process. While such actions are not planned going forward as part of our regular operations, we expect such expenses could still be incurred from time to time based on corporate needs. |
SOURCE SOPHiA GENETICS
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SOPHiA GENETICS
La Pièce 12, CH-1180
Rolle, Switzerland
+41 21 694 10 60
Transfer Agent
Computershare Trust Company, N.A.
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P.O. Box 43006
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www.computershare.com