UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of March 2023.
____________________________________
Commission File Number: 001-40627
SOPHiA GENETICS SA
(Exact name of registrant as specified in its charter)
Rue du Centre 172
CH-1025 Saint-Sulpice
Switzerland
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | x | Form 40-F | |||||||||||||||
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SOPHiA GENETICS SA | ||||||||
| Date: March 7, 2023 | ||||||||
| By: | /s/ Daan van Well | |||||||
| Name: | Daan van Well | |||||||
| Title: | Chief Legal Officer | |||||||
EXHIBIT INDEX
| Exhibit No. | Description | ||||
SOPHiA GENETICS Reports Fourth Quarter and Year End 2022 Financial Results
Fourth Quarter Revenue Growth Accelerates; Operating Losses Notably Moderate
BOSTON and LAUSANNE, Switzerland, March 7, 2023 — SOPHiA GENETICS SA (Nasdaq: SOPH), a cloud-native software company in the healthcare space, today announced financial results for its fourth quarter and full fiscal year ended December 31, 2022.
Recent Highlights
•Revenue for the full-year 2022 was $47.6 million, representing year-over-year growth of 18% on a reported basis. 2022 constant currency revenue growth excluding COVID-19-related revenues was 39%
•Revenue was $13.4 million for the fourth quarter, representing a 22% increase on a reported basis over the corresponding period of 2021. Constant currency revenue growth excluding COVID-19-related revenues was 44%
•Gross margins reached a record 72% on a reported basis and 75% on adjusted basis for the fourth quarter of 2022
•Operating losses moderated in the fourth quarter to $15.1 million on a reported basis and $12.1 million on an adjusted basis, marking the third consecutive quarter of improvement
•2023 reported revenue growth guided to at or above 30%; 2023 constant currency revenue growth guidance excluding COVID-19 related revenues initiated at 30% to 35% vs. prior year comparable levels
•Expanded strategic partnership with AstraZeneca to apply multimodal technology and expertise to the AstraZeneca oncology portfolio
•Entered into an expanded agreement with Memorial Sloan Kettering Cancer Center (“MSK”), which allows SOPHiA GENETICS’ global network of healthcare providers access to MSK’s proprietary comprehensive liquid biopsy and tumor sequencing tests such as MSK-ACCESS® and MSK-IMPACT®, powered with SOPHiA DDMTM (“Data Driven Medicine”)
•Entered into agreement with Qiagen to pair QIAseq reagent technology with the universal SOPHiA DDM™ platform to enhance cancer and rare disease analysis for next-generation sequencing (“NGS”) applications
CEO Commentary
“SOPHiA GENETICS delivered an acceleration of constant currency ex COVID revenue growth in each subsequent quarter of 2022, finishing the year with 44% year-over-year growth in the fourth quarter. Full year 2022 constant currency revenue growth was 32%, within our long-term growth guidance of 30-35%, however excluding the impact of expected COVID revenue declines, growth was a robust 39% driven by continued execution of our land and expand strategy across our clinical base, particularly the strong adoption of HRD, at triple-digit growth, and increased traction in our BioPharma business. This performance reflects the relevance of our unique market offering.” said Jurgi Camblong, PhD., Chief Executive Officer and co-founder of SOPHiA GENETICS. “To be able to deliver in a time of global uncertainty speaks to the strength of our platform and our operating expense reductions are a demonstration of our fiscal discipline. Looking into 2023, on the heels of recent announcements with AstraZeneca, MSK, and Qiagen I could not be more excited about the opportunities that lie ahead and SOPHiA GENETICS’ ability to capitalize.”
Ecosystem Update
In February, SOPHiA GENETICS announced an important expansion of its AstraZeneca partnership. SOPHiA GENETICS and AstraZeneca’s initial focus was targeting expanding worldwide access to homologous recombination deficiency (“HRD”) testing. Now the companies will build on this by collaborating on how SOPHiA GENETICS’ multimodal approach might help AstraZeneca further their capabilities and elevate precision oncology, currently driven by genomic-based biomarkers, into a truly multimodal connected health ecosystem, specifically around discovery, by accelerating clinical trials.
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Memorial Sloan Kettering Cancer Center, considered one of the most prominent cancer centers in the United States, entered into an agreement with SOPHiA GENETICS in January. The collaboration allows SOPHiA GENETICS’ global network of healthcare providers access to MSK’s proprietary comprehensive liquid biopsy and tumor sequencing tests such as MSK-ACCESS® and MSK-IMPACT®, powered with SOPHIA DDMTM. Additionally, the collaboration agreements will combine MSK’s rich precision oncology data with the SOPHiA CarePathTM module to enable the acceleration of actionable insights from data to improve patient outcomes.
In March, SOPHiA GENETICS announced a partnership with Qiagen N.V. to enhance the analysis of data generated from QIAseq reagent technology in cancers and rare diseases on the SOPHiA DDM™ platform. The partnership will allow customers to order combined QIAseq panels with the SOPHiA DDM™platform from Qiagen directly. The goal is to allow customers to use SOPHiA GENETICS’ Set-Up Program, an efficient and reliable process that establishes and demonstrates the analytical performance of any test prior to it being carried out. This will enable customers to better and more efficiently design new workflows using QIAseq technologies.
Fourth Quarter 2022 Financial Results
Total revenue for the fourth quarter of 2022 was $13.4 million compared to $10.9 million for the fourth quarter of 2021, representing year-over-year growth of 22% on a reported basis. Constant currency revenue growth was 36%, and constant currency revenue growth excluding COVID-19-related revenue was 44%.
Platform analysis volumes were 71,066 for the fourth quarter of 2022 compared to 65,595 for the fourth quarter of 2021. The 8% year-over-year growth was attributable to strength in our core platform analysis volume, offset by the continued decline of our COVID-19-related analysis volume. Excluding COVID-19-related volumes, platform analysis volumes were 67,679 for the fourth quarter of 2022 compared to 57,204 in the fourth quarter of 2021, representing growth of 18% year-over-year in the period.
Gross profit for the fourth quarter of 2022 was $9.6 million compared to gross profit of $6.8 million in the fourth quarter of 2021, representing year-over-year growth of 41%. Gross margin was 72% for the fourth quarter of 2022 compared with 62% for the fourth quarter of 2021. Adjusted gross profit was $10.0 million, an increase of 42% compared to adjusted gross profit of $7.1 million in the fourth quarter of 2021. Adjusted gross margin was 75% for the fourth quarter of 2022 compared to 65% for the fourth quarter of 2021.
Total operating expenses for the fourth quarter of 2022 were $24.7 million compared to $27.8 million for the fourth quarter of 2021. Total adjusted operating expenses were $22.1 million compared to $24.6 million in the fourth quarter of 2021.
R&D expenses for the fourth quarter of 2022 were $6.8 million compared to $6.4 million for the fourth quarter of 2021.
Sales and marketing expenses for the fourth quarter of 2022 were $4.2 million compared to $8.6 million for the fourth quarter of 2021. The reduction in expenses was attributable in part to reallocation of headcount and related expenses to R&D and general and administrative.
General and administrative expenses for the fourth quarter of 2022 were $13.9 million dollars compared to $13.0 million for the fourth quarter of 2021.
Operating loss for the fourth quarter of 2022 was $15.1 million, compared to $21.0 million in the fourth quarter of 2021. Adjusted operating loss for the fourth quarter of 2022 was $12.1 million, compared to $17.6 million for the fourth quarter of 2021.
Net loss for the fourth quarter of 2022 was $14.0 million or $0.22 per share compared to $21.4 million or $0.33 per share in the fourth quarter of 2021. Adjusted net loss for the fourth quarter of 2022 was $11.0 million or $0.17 per share, compared to $17.9 million or $0.28 per share for the fourth quarter of 2021.
Full Year Fiscal 2022 Financial Results
Total revenue for full year 2022 was $47.6 million compared to $40.5 million for full year 2021, representing growth of 18% on a reported basis. The growth in revenue was primarily driven by increased usage rates across our existing customers, favorable mix shift to higher priced applications, and strength in HRD and our BioPharma offerings. Constant currency revenue growth was 32%, and constant currency revenue growth excluding COVID-19-related revenue was 39%.
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Annualized revenue churn rate was 4% of total full year revenue for 2022, as compared to the historic low of 3% seen in 2021 as a result of pent-up demand due to the pandemic. Average revenue per platform customer for the full year was approximately $93,700 compared to approximately $92,000 for the prior year period, despite negative impact from significant currency headwinds. Net dollar retention for the year decreased to 102% from 142% in 2021, also negatively impacted by significant currency headwinds. Constant currency net dollar retention excluding COVID-19-related revenue was 123% as compared to 132% in 2021. Total recurring platform customers grew to 390 as of December 31, 2022, up from 382 as of December 31, 2021, and 383 as of September 30, 2022.
Gross profit for the full year 2022 was $31.3 million, an increase of 24% compared to a gross profit of $25.2 million for full year 2021. Gross margin was 66% for full year 2022 as compared with 62% for full year 2021. Adjusted gross margin was 68% as compared with 64% for the full year 2021.
Total operating expenses for full year 2022 were $119.1 million compared to $96.7 million for full year 2021. Total adjusted operating expenses for the full year 2022 were $104.3 million compared to $87.3 million for 2021.
R&D expenses for full year 2022 were $35.4 million, compared to $26.6 million for full year 2021.
Sales and marketing expenses for full year 2022 were $28.3 million, compared to $28.7 million for full year 2021.
General and administrative expenses for full year 2022 were $55.8 million, compared to $41.5 million for full year 2021.
Operating loss for full year 2022 was $87.8 million, compared to $71.5 million for full year 2021. Adjusted operating loss for full year 2022 was $72.0 million, compared to $61.5 million for full year 2021.
Net loss for full year 2022 was $87.4 million or $1.36 per share, compared to $73.7 million or $1.33 per share for full year 2021. Adjusted net loss for the full year 2022 was $71.6 million or $1.12 per share, compared to $62.3 million or $1.13 per share for full year 2021.
Cash and cash equivalents were $178.6 million as of December 31, 2022.
Full Year 2023 Outlook
Based on current business conditions, business trends and other factors, for the full year ending December 31, 2023, the Company initiates guidance of:
•reported revenue growth expected to be at or above 30%;
•full year constant currency revenue growth excluding COVID-19-related revenue to be between 30% and 35%; and
•2023 operating losses to be below 2022 levels.
Constant currency revenue growth excluding COVID-19-related revenue is a non-IFRS measure. See “Presentation of Constant Currency Revenue and Excluding COVID-19-Related Revenue” below for a description of its calculation. The Company is unable to provide a reconciliation of forward-looking Constant currency revenue growth excluding COVID-19-related revenue to Revenue, the most comparable IFRS financial measure, due to the inherent difficulty in forecasting and quantifying the impact of foreign currency translation.
Webcast and Conference Call Information
SOPHiA GENETICS will host a conference call and live webcast to discuss the fourth quarter and full year 2022 financial results as well as business outlook on Tuesday, March 7, 2023, at 8:00 a.m. Eastern Time / 2:00 p.m. Central European Time. The call will be webcast live on the SOPHiA GENETICS Investor Relations website. The conference call can also be accessed live over the phone by dialing 1-866-652-5200 (United States) or 1-412-317-6060 (outside of the United States). Additionally, an audio replay of the conference call and webcast will be available on the SOPHiA GENETICS website after completion.
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About SOPHiA GENETICS
SOPHiA GENETICS (Nasdaq: SOPH) is a software company dedicated to establishing the practice of data-driven medicine as the standard of care and for life sciences research. It is the creator of the SOPHiA DDMTM Platform, a cloud-native platform capable of analyzing data and generating insights from complex multimodal data sets and different diagnostic modalities. The SOPHiA DDMTM Platform and related solutions, products and services are currently used by a broad network of hospital, laboratory, and biopharma institutions globally. For more information, SOPHiAGENETICS.COM, or connect on Twitter, LinkedIn, Facebook, and Instagram. Where others see data, we see answers.
Non-IFRS Financial Measures
To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this earnings release the following non-IFRS measures:
•Adjusted cost of revenue, which we calculate as cost of revenue adjusted to exclude amortization of capitalized research and development expenses and expenses associated with the write-off of inventory that were damaged as a result of a refrigeration equipment malfunction;
•Adjusted gross profit, which we calculate as revenue minus adjusted cost of revenue;
•Adjusted gross profit margin, which we calculated as adjusted gross profit as a percentage of revenue;
•Adjusted operating expenses, which we calculate as operating expenses adjusted to exclude amortization of intangible assets, share-based compensation expense, non-cash portion of pensions expense paid in excess of actual contributions to match the actuarial expense, and non-recurring expenses related to the IPO that were not capitalized;
•Adjusted operating loss, which we calculate as operating loss adjusted to exclude those adjustments made to calculate adjusted cost of revenue, amortization of intangible assets, share-based compensation expense, non-cash portion of pensions expense paid in excess of actual contributions to match the actuarial expense, and non-recurring expenses related to the IPO that were not capitalized;
•Adjusted finance income (expense), net, which we calculate as finance income (expense), net adjusted to exclude changes in the fair valuation of the derivative tied to the success fee we paid to TriplePoint Capital LLC upon completion of our initial public offering;
•Adjusted loss for the period, which we calculate as loss for the period adjusted to exclude those adjustments made to calculate adjusted cost of revenue, adjusted operating loss and adjusted finance income (expense); and
•Adjusted loss per share, which we calculate as adjusted net loss divided by the weighted-average number of shares.
These non-IFRS measures are key measures used by our management and board of directors to evaluate our 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, we believe that these non-IFRS measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our 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 our results as reported under IFRS. Some of these limitations are:
•These non-IFRS measures exclude the impact of amortization of capitalized research and development expenses and intangible assets. Although amortization is a non-cash charge, the assets being amortized may need to be replaced in the future and these non-IFRS measures do not reflect capital expenditure requirements for such replacements or for new capital expenditures;
•These non-IFRS measures exclude the impact of expenses associated with the write-off of inventory damaged by a refrigeration equipment malfunction. Such write-offs may occur from time to time;
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•These non-IFRS measures exclude the impact of share-based compensation expenses. Share-based compensation has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy;
•These non-IFRS measures exclude the impact of the non-cash portion of pensions paid in excess of actual contributions to match actuarial expenses. Pension expenses have been, and will continue to be for the foreseeable future, a recurring expense in our business;
•These non-IFRS measures exclude the impact of non-recurring expenses related to our IPO, which are cash expenditures, and we expect to incur financing expenses from time to time;
•These non-IFRS measures exclude the impact of changes in fair value of the derivative associated with the fee paid to TriplePoint Capital LLC in connection with the completion of our IPO; and
•Other companies, including companies in our industry, may calculate these non-IFRS measures differently, which reduces their usefulness as comparative measures.
Because of these limitations, you should consider these non-IFRS measures alongside other financial performance measures, including various cash flow metrics, net income and our 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
We operate internationally, and our 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 our 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 our 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 we use the term “constant currency”, it means that we have 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. We then calculate the difference between the IFRS revenue and the constant currency revenue to yield the “constant currency impact” for the current period.
Our management and board of directors use constant currency revenue growth to evaluate our 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 our customer acquisition efforts and land-and-expand strategy. Accordingly, we believe that this non-IFRS measure provides useful information to investors and others in understanding and evaluating our revenue growth in the same manner as our 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 our revenue and could significantly impact our 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 our other IFRS results.
In addition to constant currency revenue, we present constant currency revenue excluding COVID-19-related revenue to further remove the effects of revenues that we derived from sales of COVID-19-related offerings, including a NGS assay for COVID-19 that leverages our SOPHiA DDMTM Platform and related products and solutions analytical capabilities and COVID-19 bundled access products. We do not believe that these revenues reflect our core business of commercializing our platform because our COVID-19 solution was offered to address specific market demand by our customers for analytical capabilities to assist with their testing operations. We do not anticipate additional development of our 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 we do not expect COVID-19-related revenues to constitute in the future, a significant part of our revenue. Accordingly, we believe that this non-IFRS measure provides useful information to investors and others in understanding and evaluating our revenue growth. However, this non-IFRS measure has limitations, including that COVID-19-related revenues contributed to our cash position, and other companies may define COVID-19-related revenues differently. Because of these limitations, you should
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consider this non-IFRS measure alongside other financial performance measures, including revenue and revenue growth presented in accordance with IFRS and our 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.
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 2023 guidance and statements regarding our 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 our management’s beliefs and assumptions and on information currently available to our 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 our 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 document speak only as of the date of this press release. We expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this press release to reflect any change in our 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.
Investor Contact:
Katherine Bailon
VP, Investor Relations
IR@sophiagenetics.com
Media Contact:
Kelly Katapodis
Sr Manager, Media & Communications
media@sophiagenetics.com
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SOPHiA GENETICS SA
Consolidated Statement of Loss
(Amounts in USD thousands, except per share data)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue | $ | 13,384 | $ | 10,937 | $ | 47,560 | $ | 40,450 | ||||||||||||||||||
| Cost of revenue | (3,753) | (4,107) | (16,306) | (15,229) | ||||||||||||||||||||||
| Gross profit | 9,631 | 6,830 | 31,254 | 25,221 | ||||||||||||||||||||||
| Research and development costs | (6,790) | (6,358) | (35,371) | (26,578) | ||||||||||||||||||||||
| Selling and marketing costs | (4,247) | (8,574) | (28,267) | (28,735) | ||||||||||||||||||||||
| General and administrative costs | (13,929) | (12,959) | (55,816) | (41,505) | ||||||||||||||||||||||
| Other operating (expense) income, net | 252 | 52 | 377 | 108 | ||||||||||||||||||||||
| Operating loss | (15,083) | (21,009) | (87,823) | (71,489) | ||||||||||||||||||||||
| Finance income (expense), net | 855 | (890) | 238 | (2,018) | ||||||||||||||||||||||
| Loss before income taxes | (14,228) | (21,899) | (87,585) | (73,507) | ||||||||||||||||||||||
| Income tax benefit (expense) | 257 | 525 | 136 | (168) | ||||||||||||||||||||||
| Loss for the year | (13,971) | (21,374) | (87,449) | (73,675) | ||||||||||||||||||||||
| Attributable to the owners of the parent | (13,971) | (21,374) | (87,449) | (73,675) | ||||||||||||||||||||||
| Basic and diluted loss per share | $ | (0.22) | $ | (0.33) | $ | (1.36) | $ | (1.33) | ||||||||||||||||||
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SOPHiA GENETICS SA
Consolidated Statement of Comprehensive Loss
(Amounts in USD thousands)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Loss for the year | $ | (13,971) | $ | (21,374) | $ | (87,449) | $ | (73,675) | ||||||||||||||||||
| Other comprehensive (loss) income: | ||||||||||||||||||||||||||
| Items that may be reclassified to statement of loss (net of tax) | ||||||||||||||||||||||||||
| Currency translation differences | 5,913 | 2,978 | (4,336) | (4,736) | ||||||||||||||||||||||
| Total items that may be reclassified to statement of loss | 5,913 | 2,978 | (4,336) | (4,736) | ||||||||||||||||||||||
| Items that will not be reclassified to statement of loss (net of tax) | ||||||||||||||||||||||||||
| Remeasurement of defined benefit plans | (299) | 461 | 2,154 | 461 | ||||||||||||||||||||||
| Total items that will not be reclassified to statement of loss | (299) | 461 | 2,154 | 461 | ||||||||||||||||||||||
| Other comprehensive (loss) income for the period | $ | 5,614 | $ | 3,439 | $ | (2,182) | $ | (4,275) | ||||||||||||||||||
| Total comprehensive loss for the period | $ | (8,357) | $ | (17,935) | $ | (89,631) | $ | (77,950) | ||||||||||||||||||
| Attributable to owners of the parent | $ | (8,357) | $ | (17,935) | $ | (89,631) | $ | (77,950) | ||||||||||||||||||
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SOPHiA GENETICS SA
Consolidated Balance Sheet
(Amounts in USD thousands)
(Audited)
| December 31, 2022 | December 31, 2021 | |||||||||||||
| Assets | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | 161,305 | $ | 192,962 | ||||||||||
| Term deposits | 17,307 | 72,357 | ||||||||||||
| Accounts receivable | 6,649 | 6,278 | ||||||||||||
| Inventory | 5,156 | 5,729 | ||||||||||||
| Prepaids and other current assets | 5,838 | 5,529 | ||||||||||||
| Total current assets | 196,255 | 282,855 | ||||||||||||
| Non-current assets | ||||||||||||||
| Property and equipment | 7,129 | 4,663 | ||||||||||||
| Intangible assets | 19,963 | 15,673 | ||||||||||||
| Right-of-use assets | 14,268 | 11,292 | ||||||||||||
| Deferred tax assets | 1,940 | 1,990 | ||||||||||||
| Other non-current assets | 4,283 | 3,700 | ||||||||||||
| Total non-current assets | 47,583 | 37,318 | ||||||||||||
| Total assets | $ | 243,838 | $ | 320,173 | ||||||||||
| Liabilities and equity | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | 6,181 | $ | 6,737 | ||||||||||
| Accrued expenses | 14,505 | 15,972 | ||||||||||||
| Deferred contract revenue | 3,434 | 4,069 | ||||||||||||
| Lease liabilities, current portion | 2,690 | 1,813 | ||||||||||||
| Other current liabilities | — | 12 | ||||||||||||
| Total current liabilities | 26,810 | 28,603 | ||||||||||||
| Non-current liabilities | ||||||||||||||
| Lease liabilities, net of current portion | 14,053 | 11,246 | ||||||||||||
| Defined benefit pension liabilities | 2,675 | 4,453 | ||||||||||||
| Other non-current liabilities | 170 | 471 | ||||||||||||
| Total non-current liabilities | 16,898 | 16,170 | ||||||||||||
| Total liabilities | 43,708 | 44,773 | ||||||||||||
| Equity | ||||||||||||||
| Share capital | 3,464 | 3,328 | ||||||||||||
| Share premium | 471,623 | 470,887 | ||||||||||||
| Treasury shares | (117) | — | ||||||||||||
| Other reserves | 23,963 | 12,539 | ||||||||||||
| Accumulated deficit | (298,803) | (211,354) | ||||||||||||
| Total equity | 200,130 | 275,400 | ||||||||||||
| Total liabilities and equity | $ | 243,838 | $ | 320,173 | ||||||||||
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SOPHiA GENETICS SA
Consolidated Statement of Cash Flows
(Amounts in USD thousands)
(Audited)
| Year ended December 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Operating activities | ||||||||||||||
| Loss before income tax | $ | (87,585) | $ | (73,507) | ||||||||||
| Adjustments for non-monetary items | ||||||||||||||
| Depreciation | 3,791 | 2,517 | ||||||||||||
| Amortization | 1,780 | 1,092 | ||||||||||||
| Interest expense | 639 | 658 | ||||||||||||
| Interest income | (1,324) | (20) | ||||||||||||
| Gain on TriplePoint success fee | — | (430) | ||||||||||||
| Expected credit loss allowance | (467) | (988) | ||||||||||||
| Share-based compensation | 13,613 | 8,514 | ||||||||||||
| Intangible assets write-off | 73 | 30 | ||||||||||||
| Movements in provisions, pensions, and government grants | 953 | (23) | ||||||||||||
| Research tax credit | (1,292) | (1,597) | ||||||||||||
| Loss on disposal of property and equipment | — | 22 | ||||||||||||
| Working capital changes | ||||||||||||||
| (Increase) decrease in accounts receivable | 1,332 | 1,806 | ||||||||||||
| (Increase) decrease in prepaids and other assets | (977) | (2,330) | ||||||||||||
| (Increase) decrease in inventory | (200) | (2,336) | ||||||||||||
| Increase (decrease) in accounts payables, accrued expenses, deferred contract revenue, and other liabilities | (1,428) | 8,980 | ||||||||||||
| Cash used in operating activities | ||||||||||||||
| Income tax received (paid) | — | (55) | ||||||||||||
| Interest paid | (266) | (286) | ||||||||||||
| Interest received | 1,265 | 14 | ||||||||||||
| Net cash flows used in operating activities | (70,093) | (57,939) | ||||||||||||
| Investing activities | ||||||||||||||
| Purchase of property and equipment | (4,097) | (2,683) | ||||||||||||
| Acquisition of intangible assets | (464) | (130) | ||||||||||||
| Capitalized development costs | (5,820) | (3,858) | ||||||||||||
| Proceeds upon maturity of term deposits and short-term investments | 78,533 | 21,878 | ||||||||||||
| Purchase of term deposits and short-term investments | (26,179) | (72,141) | ||||||||||||
| Net cash flow provided from (used in) investing activities | 41,973 | (56,934) | ||||||||||||
| Financing activities | ||||||||||||||
| Proceeds from exercise of share options | 748 | 4,527 | ||||||||||||
| Proceeds from initial public offering, net of transaction costs | — | 211,663 | ||||||||||||
| Proceeds from greenshoe, net of transaction costs | — | 8,488 | ||||||||||||
| Proceeds from private placement, net of transaction costs | — | 19,648 | ||||||||||||
| Payment of TriplePoint success fee | — | (2,468) | ||||||||||||
| Proceeds from borrowings | — | — | ||||||||||||
| Repayments of borrowings | — | (3,167) | ||||||||||||
| Payments of principal portion of lease liabilities | (2,316) | (918) | ||||||||||||
| Net cash flow (used in) provided from financing activities | (1,568) | 237,773 | ||||||||||||
| Increase (decrease) in cash and cash equivalents | (29,688) | 122,900 | ||||||||||||
| Effect of exchange differences on cash balances | (1,969) | (4,563) | ||||||||||||
| Cash and cash equivalents at beginning of the year | 192,962 | 74,625 | ||||||||||||
| Cash and cash equivalents at end of the year | $ | 161,305 | $ | 192,962 | ||||||||||
10
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, expect for %)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Growth | 2022 | 2021 | Growth | |||||||||||||||||||||||||||||||||
| IFRS revenue | $ | 13,384 | $ | 10,937 | 22 | % | $ | 47,560 | $ | 40,450 | 18 | % | ||||||||||||||||||||||||||
| Current period constant currency impact | 1,497 | — | 5,931 | — | ||||||||||||||||||||||||||||||||||
| Constant currency revenue | $ | 14,881 | $ | 10,937 | 36 | % | $ | 53,491 | $ | 40,450 | 32 | % | ||||||||||||||||||||||||||
| COVID-19-related revenue | (167) | (704) | (1,080) | (2,642) | ||||||||||||||||||||||||||||||||||
| Constant currency impact on COVID-19-related revenue | 15 | — | 123 | — | ||||||||||||||||||||||||||||||||||
| Constant currency revenue excluding COVID-19-related revenue | $ | 14,729 | $ | 10,233 | 44 | % | $ | 52,534 | $ | 37,808 | 39 | % | ||||||||||||||||||||||||||
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Cost of Revenue
(Amounts in USD thousands)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Cost of revenue | $ | (3,753) | $ | (4,107) | $ | (16,306) | $ | (15,229) | ||||||||||||||||||
Amortization of capitalized research & development expenses(1) | 378 | 154 | 1,133 | 483 | ||||||||||||||||||||||
Damaged inventory write-off(2) | — | 88 | — | 88 | ||||||||||||||||||||||
| Adjusted cost of revenue | $ | (3,375) | $ | (3,865) | $ | (15,173) | $ | (14,658) | ||||||||||||||||||
11
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Gross Profit and Gross Profit Margin
(Amounts in USD thousands, except percentages)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue | $ | 13,384 | $ | 10,937 | $ | 47,560 | $ | 40,450 | ||||||||||||||||||
| Cost of revenue | (3,753) | (4,107) | (16,306) | (15,229) | ||||||||||||||||||||||
| Gross profit | $ | 9,631 | $ | 6,830 | $ | 31,254 | $ | 25,221 | ||||||||||||||||||
Amortization of capitalized research & development expenses(1) | 378 | 154 | 1,133 | 483 | ||||||||||||||||||||||
Damaged inventory write-off(2) | — | 88 | — | 88 | ||||||||||||||||||||||
| Adjusted gross profit | $ | 10,009 | $ | 7,072 | $ | — | $ | 32,387 | $ | 25,792 | ||||||||||||||||
| Gross profit margin | 72 | % | 62 | % | 66 | % | 62 | % | ||||||||||||||||||
Amortization of capitalized research & development expenses(1) | 3 | % | 2 | % | 2 | % | 2 | % | ||||||||||||||||||
Damaged inventory write-off(2) | — | % | 1 | % | — | % | — | % | ||||||||||||||||||
| Adjusted gross profit margin | 75 | % | 65 | % | 68 | % | 64 | % | ||||||||||||||||||
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Operating Expense
(Amounts in USD thousands)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Operating expenses | $ | (24,714) | $ | (27,839) | $ | (119,077) | $ | (96,710) | ||||||||||||||||||
Amortization of intangible assets(3) | 110 | 153 | 647 | 609 | ||||||||||||||||||||||
Share-based compensation expense(4) | 2,596 | 3,640 | 13,613 | 8,514 | ||||||||||||||||||||||
Non-cash pension expense(5) | (77) | (595) | 468 | (73) | ||||||||||||||||||||||
Non-recurring IPO-related expenses(6) | — | — | — | 323 | ||||||||||||||||||||||
| Adjusted operating expenses | $ | (22,085) | $ | (24,641) | $ | (104,349) | $ | (87,337) | ||||||||||||||||||
12
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Operating Loss
(Amounts in USD thousands)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Operating loss | $ | (15,083) | $ | (21,009) | $ | (87,823) | $ | (71,489) | ||||||||||||||||||
Amortization of capitalized research & development expenses(1) | 378 | 154 | 1,133 | 483 | ||||||||||||||||||||||
Damaged inventory write-off(2) | — | 88 | — | 88 | ||||||||||||||||||||||
Amortization of intangible assets(3) | 110 | 153 | 647 | 609 | ||||||||||||||||||||||
Share-based compensation expense(4) | 2,596 | 3,640 | 13,613 | 8,514 | ||||||||||||||||||||||
Non-cash pension expense(5) | (77) | (595) | 468 | (73) | ||||||||||||||||||||||
Non-recurring IPO-related expenses(6) | — | — | — | 323 | ||||||||||||||||||||||
| Adjusted operating loss | $ | (12,076) | $ | (17,569) | $ | (71,962) | $ | (61,545) | ||||||||||||||||||
SOPHiA GENETICS SA
Reconciliation of IFRS to Finance Expense, Net
(Amounts in USD thousands)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Finance expense | $ | 855 | $ | (890) | $ | 238 | $ | (2,018) | ||||||||||||||||||
Change in fair value on derivative(7) | — | — | — | 1,444 | ||||||||||||||||||||||
| Adjusted finance expense | $ | 855 | $ | (890) | $ | 238 | $ | (574) | ||||||||||||||||||
13
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Loss for the Period and Loss per Share
(Amounts in USD thousands, except per share and share data)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Loss for the period | $ | (13,971) | $ | (21,374) | $ | (87,449) | $ | (73,675) | ||||||||||||||||||
Amortization of capitalized research & development expenses(1) | 378 | 154 | 1,133 | 483 | ||||||||||||||||||||||
Damaged inventory write-off(2) | — | 88 | — | 88 | ||||||||||||||||||||||
Amortization of intangible assets(3) | 110 | 153 | 647 | 609 | ||||||||||||||||||||||
Share-based compensation expense(4) | 2,596 | 3,640 | 13,613 | 8,514 | ||||||||||||||||||||||
Non-cash pension expense(5) | (77) | (595) | 468 | (73) | ||||||||||||||||||||||
Non-recurring IPO-related expenses(6) | — | — | — | 323 | ||||||||||||||||||||||
Change in fair value on derivative(7) | — | — | — | 1,444 | ||||||||||||||||||||||
| Adjusted loss for the period | $ | (10,964) | $ | (17,934) | $ | (71,588) | $ | (62,287) | ||||||||||||||||||
| Basic and diluted loss per share | $ | (0.22) | $ | (0.33) | $ | (1.36) | $ | (1.33) | ||||||||||||||||||
| Adjusted basic and diluted loss per share | $ | (0.17) | $ | (0.28) | $ | (1.12) | $ | (1.13) | ||||||||||||||||||
| Number of shares used in computing basic and diluted loss per share | 64,218,959 | 63,857,604 | 64,099,213 | 55,299,863 | ||||||||||||||||||||||
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)Damaged inventory write-off consists of expenses associated with the write-off of inventory that were damaged as a result of a refrigeration equipment malfunction. We expect such expenses could still be incurred from time to time.
(3)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.
(4)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.
(5)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.
(6)Non-recurring IPO-related expenses represent expenses incurred for our initial public offering that were not capitalized and are not expected to be recurring during the ordinary course of our business.
14
(7)Change in fair value of derivative consists of changes in the fair valuation of the derivative related to the success fee owed to TriplePoint Capital LLC upon the completion of our initial public offering. We paid the fee in cash in September and ceased to continue to incur associated expenses.
15
Dear Fellow Shareholders,
2022 was an incredible year for SOPHiA GENETICS. We made tremendous progress across our strategic objectives and demonstrated a continued ability to execute our vision. I am extraordinarily proud of what we have achieved and am excited by the opportunities ahead.
We have come a long way since 2011, from just a handful of people in a 10 square meter room with a vision to democratize and drive the adoption of data-driven medicine to the present, where SOPHiA has expanded globally, attracted a broad network of customers to our platform, and built world-class R&D capabilities to support our mission. Thank you to all the SOPHiA GENETICS employees for your dedication and to our shareholders for believing in us. Without you, none of this would be possible.
Let me start by acknowledging the strongest evidence of our success. In 2022, we delivered robust, full-year revenue growth of 39% on a constant currency basis after adjusting for COVID-19-related headwinds. I am incredibly proud of this achievement.
Our six strategic pillars remain our focus for driving this long-term growth and creating value for our customers, partners, and shareholders. We are as confident as ever in our strategic path, and I am excited to share our progress with you.
Accelerating customer adoption with new clinical customers
Healthcare institutions continue to choose SOPHiA GENETICS as their trusted cloud-based analytics platform for establishing data-driven medicine as their standard of care. In 2022, we served more than 750 customers across 72 countries. Of our more than 750 customers, 390 are recurring SOPHiA DDM Platform customers. I am thrilled to announce that we signed 58 new customers in 2022.
Growing the adoption of our platform in the U.S. market continues to be one of our primary focuses. In 2022, we delivered a significant proof point for our compatibility with the U.S. market through our new relationship with Memorial Sloan Kettering (“MSK”) Cancer Center. Long considered one of the most prominent cancer centers in the United States, we entered into an agreement where we will commercialize the first comprehensive liquid biopsy test powered by the SOPHiA DDM platform. By combining our predictive algorithms and the power of the global SOPHiA GENETICS network with the clinical expertise of MSK in cancer genomics, we jointly envision that advanced precision oncology tools will reach a more diverse global population of cancer patients.
We remain incredibly excited and encouraged by the scale of our opportunity in the U.S. and will continue investing in this massive but largely unpenetrated opportunity going forward.
Increasing utilization within our existing customer base
We employ a “land and expand” commercial model that focuses on winning new customers and then driving utilization of our solution by those customers. Once we secure a customer, we use our direct sales force to build further engagement and help that customer profitably increase its testing operations. For example, we may initially support a customer with setting up its NGS testing operations for hereditary cancer screening. Once the customer is fully onboarded onto our platform, it is comparatively easier to deploy additional germline and somatic oncology testing solutions. We also target incremental users within each institution, such as additional clinicians within a provider across expanded departments such as radiology or pathology.
We are excited with the momentum we see as users continue to increase their utilization after experiencing the value of the SOPHiA DDM Platform. In 2022, we analyzed an all-time high of 264,000 genomic profiles. To date, the SOPHiA DDM Platform has supported the analysis of more than 1,200,000 genomic profiles, recently growing by more than 24,000 new profiles per month. Again, I am incredibly proud of our ability to delight customers and continue driving more and more usage of our platform.
Driving innovation of our SOPHiA DDM Platform to increase its capabilities and broaden its applications
As a team, we are energized about the opportunities ahead and expanding the capabilities of SOPHiA DDM. We plan to continue to invest in scientific innovation to bring new, high-impact content to our customers through regular updates to our platform.
When we went public in July 2021, there were outstanding questions about the viability of our platform when applied to other data modalities beyond genomics. In 2022, we unveiled SOPHiA CarePath, a new multimodal module on our SOPHiA DDM Platform that integrates the capabilities of our genomics and radiomics solutions with additional modalities to enable clinical decision-making. The module will allow healthcare practitioners to visualize data across multiple modalities (including genomic, radiomic, clinical, and biological) for individual patients in a longitudinal manner and derive additional insights through cohort design and comparison.
SOPHiA CarePath has already been deployed as part of our Deep-Lung IV multimodal clinical study on non-small cell lung cancer, and we plan to commercialize the module upon a formal launch. We remain incredibly excited about the adoption of SOPHiA CarePath by our existing clinical customers and by the opportunities the multimodal and longitudinal data will unlock for our biopharma partners.
Leveraging our platform to drive adoption with BioPharma companies
As we continue to deliver value to our clinical clients and generate more clinical data, we are better able to service the biopharma market. We leverage our clinical data, as well as data from BioPharma customers, to offer a robust package capabilities of pre- and post-market solutions to our BioPharma customers across Discovery, Development, and Deployment stages.
In February 2022, we proved our value to BioPharma companies by announcing our expanded partnership with AstraZeneca (“AZ”). We started working with AZ in the Deployment stage by taking our exciting homologous recombination deficiency (“HRD”) application worldwide with AstraZeneca’s support. Then, we began collaborating in the Discovery stage by examining how SOPHiA GENETICS’s multimodal expertise could accelerate clinical trials, support evidence generation for market access, and improve clinical decision-making, helping clinicians to select the best possible treatments.
In 2023, we look forward to continuing our partnership with both traditional BioPharma players as well as others. In September, we announced a partnership with Boundless Bio, a next-generation precision oncology Biotech company developing innovative therapeutics directed against extrachromosomal DNA (“ecDNA”) in oncogene-amplified cancers. Our decentralized, global genomic solution combines with Boundless Bio’s drug development capabilities to optimize patient selection and clinical trial design while enabling our global collective network of major hospitals and academic centers to deliver new treatment options to patients with oncogene-amplified cancers.
Given the many exciting opportunities that lie ahead, we will continue to invest heavily in our biopharma team and are excited about what 2023 holds.
Developing key partnerships
As evidenced throughout this note, building the future of data-driven medicine is not something we can do alone. We achieved considerable momentum in 2022 by collaborating with premier leaders in our industry, further enabling our applications to reach more patients.
In 2022, we delivered significant partnerships with Memorial Sloan Kettering Cancer Center, Boundless Bio, and Microsoft, among others, and continued strengthening our partnerships with AstraZeneca, GE HealthCare, and other existing collaborators. Through strategic collaborations, we will be able to spark innovation, more quickly increase the size and scale of our network, connect with a larger volume of data, and offer more capabilities than we could provide individually.
Excelling operationally within SOPHiA GENETICS
Our final strategic pillar focuses on excelling operationally at every level within SOPHiA GENETICS. I’m proud to announce that our adjusted gross margin ended the year at a high of 75% for the fourth quarter of 2022 compared with 65% for the fourth quarter of 2021, bringing our full-year result closer to our long-term target of 70%.
In addition, reducing operating expenses is a muscle we learned to flex in 2022. We reduced our operating expenses in each of the last three quarters of 2022 and intend to continue to advance our fiscal discipline and ability to make the best use of our cash balance. Based on our current trajectory, we remain confident in our capital position and continue to see sufficient runway to execute our ambitious growth plans. We will continue to be responsive to the current operating and macro environment and remain-laser focused on delivering sustainable growth.
Closing remarks
After a successful and unforgettable 2022, our focus shifts to the future. We are incredibly proud of our performance, which reflects our continued ability to execute our vision and the opportunity ahead. Our six strategic pillars remain our foundation to drive growth and value creation for this year and the years to come. I am encouraged and as confident as ever about our long-term trajectory.
In closing, I’d like to thank the SOPHiANs, our passionate and dedicated employees, for their hard work and incredible contributions towards building the future of precision medicine. I’d also like to Thank thank you to our partners, customers, and investors for joining us on this journey. Without you, none of this would be possible. I look forward to continuing to update you on SOPHiA GENETICS’s future success in democratizing data-driven medicine.
Sincerely,
Dr. Jurgi Cambling
Co-Founder and Chief Executive Officer
SOPHiA GENETICS
Consolidated Financial Statements of SOPHiA GENETICS SA for the year ended
December 31, 2022
SOPHiA GENETICS SA Saint-Sulpice Report of the statutory auditor to the General Meeting on the consolidated financial statements 2022 | ||
Report of the statutory auditor
to the General Meeting of SOPHiA GENETICS SA
Saint-Sulpice
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of SOPHiA GENETICS SA and its subsidiaries (the Group), which comprise the consolidated statement of loss and the consolidated statement of comprehensive loss for the year ended 31 December 2022, the consolidated balance sheet as at 31 December 2022, the consolidated statement of change in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2022 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Basis for opinion
We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the consolidated financial statements' section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit approach
| Overview | Overall Group materiality: USD 4,377 thousand | ||||
 | We concluded full scope audit work at the Swiss and French entity. Our audit scope addressed over 91% of the Group’s total revenue. In addition, specified procedures were performed on the U.S. entity. | ||||
As key audit matter the following area of focus has been identified: Revenue from SOPHiA DDM platform | |||||
PricewaterhouseCoopers SA, avenue C.-F. Ramuz 45, case postale, 1001 Lausanne, Switzerland Téléphone: +41 58 792 81 00, www.pwc.ch PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. | ||
Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole.
Overall Group materiality | USD 4,377 thousand | ||||
Benchmark applied | Loss before tax | ||||
Rationale for the materiality benchmark applied | We chose loss before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured, and it is a generally accepted benchmark. | ||||
We agreed with the Audit Committee that we would report to them misstatements above USD 437 thousand identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
Audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.
The Group financial statements are a consolidation of 7 reporting entities. We, the Group audit team, identified and performed the audit over 2 reporting entities that, in our view, required an audit of their complete financial information due to their size or risk characteristics. To obtain appropriate coverage of material balances, we also performed specified audit procedures on 1 reporting entity. None of the reporting entities excluded from our Group audit scope individually contributed more than 5% to net sales or total assets. Audit procedures were also performed over the Group’s Corporate activities (including certain employee benefits) and Group consolidation.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
3 SOPHiA GENETICS SA | Report of the statutory auditor to the General Meeting | ||
Revenue from SOPHiA DDM platform
Key audit matter | How our audit addressed the key audit matter | |||||||
During the year ended December 31, 2022, the Group’s revenue from the SOPHiA DDM platform was USD 45,679 thousand. As discussed in note 4 to the consolidated financial statements, the Group has determined that the stand-alone selling price for the analyses, in both a dry lab arrangement and bundle arrangement, is not discernible from past transactions. As a result, the residual approach is used to determine the stand-alone selling price of the analyses for both arrangements. Two different margins have been determined by the Group, one for enrichment kits which are produced and one for enrichment kits which are purchased. In our view, this is a key audit matter, as the determination of the stand-alone selling price is based to a large extent on estimates made by the Group. | We obtained and read the accounting memo and discussed with management the determination of the accounting treatment of the residual approach. We critically challenged the estimates used in the determination of the enrichment kit margin for both produced and purchased enrichment kits by comparing the peer group information included in management’s memo to publicly available information. We assessed the appropriateness of the Group’s conclusions in the application of the accounting policy in accordance with IFRS 15. We tested the application of the estimates throughout our revenue testing and as part of the enrichment kit cost testing. We noted no deviations from the two estimates management outlined in their accounting memo. In addition, we performed a sensitivity analysis over the Group’s estimate of the margin applied to the enrichment kits to understand the impact on the timing of the revenue recognized. Based on our procedures we consider management’s approach regarding the determination of the accounting treatment, the approach used to allocate the transaction price to the analyses and estimates used for the determination of the enrichment kit margin to be reasonable. | |||||||
Other information
The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the compensation report and our auditor’s reports thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Board of Directors' responsibilities for the consolidated financial statements
The Board of Directors is responsible for the preparation of the consolidated financial statements, which give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
4 SOPHiA GENETICS SA | Report of the statutory auditor to the General Meeting | ||
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Swiss law, ISAs and SA-CH, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
•Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
•Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made.
•Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
•Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
•Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the
5 SOPHiA GENETICS SA | Report of the statutory auditor to the General Meeting | ||
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
In accordance with article 728a paragraph 1 item 3 CO and PS-CH 890, we confirm that an internal control system exists which has been designed for the preparation of the consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers SA
| /s/ Michael Foley | /s/ Pierre-Alain Dévaud | ||||
Licensed audit expert Auditor in charge | Licensed audit expert | ||||
Lausanne, 7 March 2023
6 SOPHiA GENETICS SA | Report of the statutory auditor to the General Meeting | ||
SOPHiA GENETICS SA, Saint-Sulpice
Consolidated Statements of Loss
(Amounts in USD thousands, except per share data)
| Year ended December 31, | ||||||||||||||||||||||||||
| Notes | 2022 | 2021 | 2020 | |||||||||||||||||||||||
| Revenue | 4 | $ | 47,560 | $ | 40,450 | $ | 28,400 | |||||||||||||||||||
| Cost of revenue | 5 | (16,306) | (15,229) | (10,709) | ||||||||||||||||||||||
| Gross profit | 31,254 | 25,221 | 17,691 | |||||||||||||||||||||||
| Research and development costs | 6 | (35,371) | (26,578) | (18,588) | ||||||||||||||||||||||
| Selling and marketing costs | 6 | (28,267) | (28,735) | (17,432) | ||||||||||||||||||||||
| General and administrative costs | 6 | (55,816) | (41,505) | (18,965) | ||||||||||||||||||||||
| Other operating income (expense), net | 7 | 377 | 108 | (93) | ||||||||||||||||||||||
| Operating loss | (87,823) | (71,489) | (37,387) | |||||||||||||||||||||||
| Finance income (expense), net | 8 | 238 | (2,018) | (3,838) | ||||||||||||||||||||||
| Loss before income taxes | (87,585) | (73,507) | (41,225) | |||||||||||||||||||||||
| Income tax benefit (expense) | 9 | 136 | (168) | 1,886 | ||||||||||||||||||||||
| Loss for the year | (87,449) | (73,675) | (39,339) | |||||||||||||||||||||||
| Attributable to the owners of the parent | $ | (87,449) | $ | (73,675) | $ | (39,339) | ||||||||||||||||||||
| Basic and diluted loss per share | 10 | $ | (1.36) | $ | (1.33) | $ | (0.93) | |||||||||||||||||||
The Notes form an integral part of these consolidated financial statements
SOPHiA GENETICS SA, Saint-Sulpice
Consolidated Statements of Comprehensive Loss
(Amounts in USD thousands)
| Year ended December 31, | |||||||||||||||||||||||
| Notes | 2022 | 2021 | 2020 | ||||||||||||||||||||
| Loss for the year | $ | (87,449) | $ | (73,675) | $ | (39,339) | |||||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||
| Items that may be reclassified to statement of loss (net of tax) | |||||||||||||||||||||||
| Currency translation differences | (4,336) | (4,736) | 7,338 | ||||||||||||||||||||
| Total items that may be reclassified to statement of loss | $ | (4,336) | $ | (4,736) | $ | 7,338 | |||||||||||||||||
| Items that will not be reclassified to statement of loss (net of tax) | |||||||||||||||||||||||
| Remeasurement of defined benefit plans | 22 | 2,154 | 461 | 184 | |||||||||||||||||||
| Total items that will not be reclassified to statement of loss | $ | 2,154 | $ | 461 | $ | 184 | |||||||||||||||||
| Other comprehensive (loss) income for the year | $ | (2,182) | $ | (4,275) | $ | 7,522 | |||||||||||||||||
| Total comprehensive loss for the year | $ | (89,631) | $ | (77,950) | $ | (31,817) | |||||||||||||||||
| Attributable to owners of the parent | $ | (89,631) | $ | (77,950) | $ | (31,817) | |||||||||||||||||
The Notes form an integral part of these consolidated financial statements
SOPHiA GENETICS SA, Saint-Sulpice
Consolidated Balance Sheets
(Amounts in USD thousands)
| Notes | December 31, 2022 | December 31, 2021 | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | 11 | $ | 161,305 | $ | 192,962 | |||||||||||||||
| Term deposits | 12 | 17,307 | 72,357 | |||||||||||||||||
| Accounts receivable | 13 | 6,649 | 6,278 | |||||||||||||||||
| Inventory | 14 | 5,156 | 5,729 | |||||||||||||||||
| Prepaids and other current assets | 15 | 5,838 | 5,529 | |||||||||||||||||
| Total current assets | 196,255 | 282,855 | ||||||||||||||||||
| Non-current assets | ||||||||||||||||||||
| Property and equipment | 16 | 7,129 | 4,663 | |||||||||||||||||
| Intangible assets | 17 | 19,963 | 15,673 | |||||||||||||||||
| Right-of-use assets | 18 | 14,268 | 11,292 | |||||||||||||||||
| Deferred tax assets | 9 | 1,940 | 1,990 | |||||||||||||||||
| Other non-current assets | 19 | 4,283 | 3,700 | |||||||||||||||||
| Total non-current assets | 47,583 | 37,318 | ||||||||||||||||||
| Total assets | $ | 243,838 | $ | 320,173 | ||||||||||||||||
| Liabilities and equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable | 20 | $ | 6,181 | $ | 6,737 | |||||||||||||||
| Accrued expenses | 21 | 14,505 | 15,972 | |||||||||||||||||
| Deferred contract revenue | 4 | 3,434 | 4,069 | |||||||||||||||||
| Current portion of lease liabilities | 18 | 2,690 | 1,813 | |||||||||||||||||
| Other current liabilities | — | 12 | ||||||||||||||||||
| Total current liabilities | 26,810 | 28,603 | ||||||||||||||||||
| Non-current liabilities | ||||||||||||||||||||
| Lease liabilities, net of current portion | 18 | 14,053 | 11,246 | |||||||||||||||||
| Defined benefit pension liabilities | 22 | 2,675 | 4,453 | |||||||||||||||||
| Other non-current liabilities | 170 | 471 | ||||||||||||||||||
| Total non-current liabilities | 16,898 | 16,170 | ||||||||||||||||||
| Total liabilities | 43,708 | 44,773 | ||||||||||||||||||
| Equity | ||||||||||||||||||||
| Share capital | 3,464 | 3,328 | ||||||||||||||||||
| Share premium | 471,623 | 470,887 | ||||||||||||||||||
| Treasury shares | (117) | — | ||||||||||||||||||
| Other reserves | 23,963 | 12,539 | ||||||||||||||||||
| Accumulated deficit | (298,803) | (211,354) | ||||||||||||||||||
| Total equity | 200,130 | 275,400 | ||||||||||||||||||
| Total liabilities and equity | $ | 243,838 | $ | 320,173 | ||||||||||||||||
The Notes form an integral part of these consolidated financial statements
SOPHiA GENETICS SA, Saint-Sulpice
Consolidated Statement of Changes in Equity
(Amounts in USD thousands, except share data)
| Notes | Shares | Share capital | Treasury Shares | Treasury Share capital | Share premium | Other reserves | Accumulated deficit | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| January 1, 2020 | 38,319,760 | $ | 1,947 | — | $ | — | $ | 119,227 | $ | (581) | $ | (98,340) | $ | 22,253 | ||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | — | — | — | — | — | — | (39,339) | (39,339) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | 7,522 | — | 7,522 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | — | — | 7,522 | (39,339) | (31,817) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | 23 | — | — | — | — | — | 1,359 | — | 1,359 | |||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with owners | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share options exercised | 319,000 | 17 | — | — | 1,055 | — | — | 1,072 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issue of share capital, net of transaction costs | 27 | 9,316,940 | 496 | — | — | 107,147 | — | — | 107,643 | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2020 | 47,955,700 | $ | 2,460 | — | $ | — | $ | 227,429 | $ | 8,300 | $ | (137,679) | $ | 100,510 | ||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | — | — | — | — | — | — | (73,675) | (73,675) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (4,275) | — | (4,275) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | — | — | (4,275) | (73,675) | (77,950) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | 23 | — | — | — | — | — | 8,514 | — | 8,514 | |||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with owners | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share options exercised | 1,271,300 | 69 | — | — | 4,458 | — | — | 4,527 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sale of ordinary shares in initial public offering, net of transaction costs | 26 | 13,000,000 | 710 | — | — | 210,953 | — | — | 211,663 | |||||||||||||||||||||||||||||||||||||||||||||||
| Sale of ordinary shares in private placement, net of transaction costs | 26 | 1,111,111 | 61 | — | — | 19,587 | — | — | 19,648 | |||||||||||||||||||||||||||||||||||||||||||||||
| Sale of ordinary shares in greenshoe offering, net of transaction costs | 26 | 519,493 | 28 | — | — | 8,460 | — | — | 8,488 | |||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | 63,857,604 | $ | 3,328 | — | $ | — | $ | 470,887 | $ | 12,539 | $ | (211,354) | $ | 275,400 | ||||||||||||||||||||||||||||||||||||||||||
| Loss for the period | — | — | — | — | — | — | (87,449) | (87,449) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (2,182) | — | (2,182) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | — | — | — | — | — | (2,182) | (87,449) | (89,631) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | 23 | — | — | — | — | — | 13,613 | — | 13,613 | |||||||||||||||||||||||||||||||||||||||||||||||
| Transactions with owners | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share options exercised and vesting of Restricted Stock Units | 23 | — | — | 373,616 | 19 | 736 | (7) | — | 748 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares to be held as treasury shares | 2,540,560 | 136 | (2,540,560) | (136) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2022 | 66,398,164 | $ | 3,464 | (2,166,944) | $ | (117) | $ | 471,623 | $ | 23,963 | $ | (298,803) | $ | 200,130 | ||||||||||||||||||||||||||||||||||||||||||
The Notes form an integral part of these consolidated financial statements
SOPHiA GENETICS SA, Saint-Sulpice
Consolidated Statement of Cash Flows
(Amounts in USD thousands)
| Year ended December 31, | ||||||||||||||||||||||||||
| Notes | 2022 | 2021 | 2020 | |||||||||||||||||||||||
| Operating activities | ||||||||||||||||||||||||||
| Loss before income tax | $ | (87,585) | $ | (73,507) | $ | (41,225) | ||||||||||||||||||||
| Adjustments for non-monetary items | ||||||||||||||||||||||||||
| Depreciation | 16,18 | 3,791 | 2,517 | 1,758 | ||||||||||||||||||||||
| Amortization | 17 | 1,780 | 1,092 | 632 | ||||||||||||||||||||||
| Interest expense | 8 | 639 | 658 | 1,224 | ||||||||||||||||||||||
| Interest income | 8 | (1,324) | (20) | (96) | ||||||||||||||||||||||
| Gain on TriplePoint success fee | 25 | — | (430) | — | ||||||||||||||||||||||
| Expected credit loss allowance | 13 | (467) | (988) | 763 | ||||||||||||||||||||||
| Share-based compensation | 23 | 13,613 | 8,514 | 1,359 | ||||||||||||||||||||||
| Intangible assets write-off | 17 | 73 | 30 | 226 | ||||||||||||||||||||||
| Movements in provisions, pensions, and government grants | 953 | (23) | 1,203 | |||||||||||||||||||||||
| Research tax credit | (1,292) | (1,597) | (763) | |||||||||||||||||||||||
| Loss on disposal of property and equipment | 16 | — | 22 | — | ||||||||||||||||||||||
| Working capital changes | ||||||||||||||||||||||||||
| (Increase) decrease in accounts receivable | 1,332 | 1,806 | 1,118 | |||||||||||||||||||||||
| (Increase) decrease in prepaids and other assets | (977) | (2,330) | 2,347 | |||||||||||||||||||||||
| (Increase) decrease in inventory | (200) | (2,336) | 536 | |||||||||||||||||||||||
| Increase (decrease) in accounts payables, accrued expenses, deferred contract revenue, and other liabilities | (1,428) | 8,980 | (185) | |||||||||||||||||||||||
| Cash used in operating activities | ||||||||||||||||||||||||||
| Income tax received (paid) | — | (55) | 153 | |||||||||||||||||||||||
| Interest paid | (266) | (286) | (855) | |||||||||||||||||||||||
| Interest received | 1,265 | 14 | 75 | |||||||||||||||||||||||
| Net cash flows used in operating activities | (70,093) | (57,939) | (31,730) | |||||||||||||||||||||||
| Investing activities | ||||||||||||||||||||||||||
| Purchase of property and equipment | 16 | (4,097) | (2,683) | (450) | ||||||||||||||||||||||
| Acquisition of intangible assets | 17 | (464) | (130) | (318) | ||||||||||||||||||||||
| Capitalized development costs | 17 | (5,820) | (3,858) | (2,436) | ||||||||||||||||||||||
| Proceeds upon maturity of term deposits and short-term investments | 12 | 78,533 | 21,878 | — | ||||||||||||||||||||||
| Purchase of term deposits and short-term investments | 12 | (26,179) | (72,141) | (21,119) | ||||||||||||||||||||||
| Net cash flow provided from (used in) investing activities | 41,973 | (56,934) | (24,323) | |||||||||||||||||||||||
| Financing activities | ||||||||||||||||||||||||||
| Proceeds from exercise of share options | 23 | 748 | 4,527 | 1,072 | ||||||||||||||||||||||
| Proceeds from issuance of share capital, net of transaction costs | 27 | — | — | 107,643 | ||||||||||||||||||||||
| Proceeds from initial public offering, net of transaction costs | 26 | — | 211,663 | — | ||||||||||||||||||||||
| Proceeds from greenshoe, net of transaction costs | 26 | — | 8,488 | — | ||||||||||||||||||||||
| Proceeds from private placement, net of transaction costs | 26 | — | 19,648 | — | ||||||||||||||||||||||
| Payment of TriplePoint success fee | 25 | — | (2,468) | — | ||||||||||||||||||||||
| Proceeds from borrowings | 24 | — | — | 15,839 | ||||||||||||||||||||||
| Repayments of borrowings | 24 | — | (3,167) | (16,529) | ||||||||||||||||||||||
| Payments of principal portion of lease liabilities | 18 | (2,316) | (918) | (980) | ||||||||||||||||||||||
| Net cash flow (used in) provided from financing activities | (1,568) | 237,773 | 107,045 | |||||||||||||||||||||||
| Increase (decrease) in cash and cash equivalents | (29,688) | 122,900 | 50,992 | |||||||||||||||||||||||
| Effect of exchange differences on cash balances | (1,969) | (4,563) | 5,564 | |||||||||||||||||||||||
| Cash and cash equivalents at beginning of the year | 192,962 | 74,625 | 18,069 | |||||||||||||||||||||||
| Cash and cash equivalents at end of the year | $ | 161,305 | $ | 192,962 | $ | 74,625 | ||||||||||||||||||||
The Notes form an integral part of these consolidated financial statements
SOPHiA GENETICS SA, Saint-Sulpice
Notes to the Consolidated Financial Statements
1. Company information and operations
General information
SOPHiA GENETICS SA and its consolidated subsidiaries (NASDAQ: SOPH) (“the Company”) is a cloud-native software company in the healthcare space, incorporated on March 18, 2011, and headquartered in Saint-Sulpice, Switzerland. The Company is dedicated to establishing the practice of data-driven medicine as the standard of care in healthcare and for life sciences research. The Company has built a cloud-native software platform capable of analyzing data and generating insights from complex multimodal datasets and different diagnostic modalities. This platform, commercialized as “SOPHiA DDMTM,” standardizes, computes, and analyzes digital health data and is used in decentralized locations to break down data silos.
As of December 31, 2022, the Company had the following wholly-owned subsidiaries:
| Name | Country of domicile | ||||
| SOPHiA GENETICS S.A.S. | France | ||||
| SOPHiA GENETICS LTD | UK | ||||
| SOPHiA GENETICS, Inc. | USA | ||||
| SOPHiA GENETICS Intermediação de Negócios LTDA | Brazil | ||||
| SOPHiA GENETICS PTY LTD | Australia | ||||
| SOPHiA GENETICS S.R.L. | Italy | ||||
Interactive Biosoftware S.A.S., a wholly owned subsidiary located in France and acquired in 2018, was merged into SOPHiA GENETICS S.A.S. in 2020.
On April 9, 2021, SOPHiA GENETICS PTY LTD, a wholly owned subsidiary located in Australia, was incorporated.
On May 27, 2021, SOPHiA GENETICS S.R.L., a wholly owned subsidiary located in Italy, was incorporated.
On December 12, 2022, the Company changed the name of SOPHiA GENETICS Intermediação de Negócios EIRELI to SOPHiA GENETICS Intermediação de Negócios LTDA.
The Company’s Board of Directors approved the issue of the consolidated financial statements on March 7, 2023.
Share split
On June 30, 2021, the Company effected a one-to-twenty share split of its outstanding shares. Accordingly, all share and per share amounts for all periods presented in these consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this share split.
Initial public offering
In July 2021, the Company completed its initial public offering (“IPO”) in the United States on the Nasdaq Global Market (“Nasdaq”) under the trading ticker symbol “SOPH”. Trading on the Nasdaq commenced at market open on July 23, 2021. The Company completed the IPO of 13,000,000 ordinary shares, at an
IPO price of $18.00 per share, par value $0.05 (CHF 0.05). The aggregate net proceeds received from the IPO, net of underwriting discounts and commissions and offering expenses, was $211.7 million. Immediately prior to the completion of the IPO, all then outstanding shares of preferred shares were converted into 24,561,200 shares of ordinary shares on a one-to-one basis.
Concurrent with the IPO, the Company closed a private placement, in which it sold 1,111,111 ordinary shares to an affiliate of GE Healthcare at a price of $18.00 per share, par value $0.05 (CHF 0.05). The aggregate net proceeds received from the private placement, net of offering expenses, was $19.6 million.
On August 25, 2021, the underwriters of the IPO elected to exercise in part their option to purchase an additional 519,493 ordinary shares (“greenshoe”) at the IPO price of $18.00 per share, par value $0.05 (CHF 0.05). The aggregate net proceeds received from the greenshoe, net of underwriting discounts and commissions and offering expenses, was $8.5 million.
Issued share capital
As of December 31, 2022, the Company had issued 66,398,164 shares of which 64,231,220 are outstanding and 2,166,944 are held by the Company as treasury shares. As of December 31, 2021, the Company had issued outstanding shares of 63,857,604. All shares were considered paid as of December 31, 2022
Treasury shares
During the first quarter of 2022, the Company issued 2,540,560 common share options to SOPHiA GENETICS LTD pursuant to a share delivery and repurchase agreement, which were immediately exercised, and repurchased the shares to hold as treasury shares for the purposes of administering the Company's equity incentive programs. As of December 31, 2022, the Company held 2,166,944 treasury shares. The Company held no treasury shares in 2021.
Treasury shares are recognized at acquisition cost and recorded as treasury shares at the time of the transaction. Upon exercise of share options or vesting of restricted stock units, the treasury shares are subsequently transferred. Any consideration received is included in shareholders’ equity.
2. Significant accounting policies
Basis of preparation
Compliance with International Financial Reporting Standards
The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and interpretations issued by the IFRS Interpretations Committee (“IFRS IC”) applicable to companies reporting under IFRS. The consolidated financial statements comply with IFRS as issued by the International Accounting Standards Board (“IASB”).
Basis of consolidation
A subsidiary is an entity over which the Company has control. The Company controls an entity when it has the power to direct its activities and has rights to its variable returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and deconsolidated from the date that control ceases.
During the consolidation process intercompany transactions, balances, and unrealized gains on transactions between companies are eliminated. Unrealized losses are also eliminated unless there is
evidence of an impairment of the transferred asset. In order to ensure consistency with the accounting policies of the Company, the accounting policies of subsidiaries have been changed where necessary.
Foreign currency translation
Items included in the consolidated financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). In individual entities, transactions in foreign currencies are translated as of transaction date. Monetary assets and liabilities in foreign currencies are translated at month end rates. The Company’s reporting currency of the Company’s consolidated financial statements is the U.S. dollar (“USD”). Assets and liabilities denominated in foreign currencies are translated at the month-end spot exchange rates, income statement accounts are translated at average rates of exchange for the period presented, and equity is translated at historical exchange rates.
On consolidation, assets and liabilities of foreign operations reported in their local functional currencies are translated into USD. Differences arising from the retranslation of opening net assets of foreign operations, together with differences arising from the translation of the net results for the year of foreign operations, are recognized in other comprehensive income under currency retranslations. Gains or losses resulting from foreign currency transactions are included in net income.
The Company selected the U.S. dollar as its presentation currency for purposes of its consolidated financial statements instead of the Company’s functional currency, the Swiss franc, because of the global nature of its business, its expectation that an increasing portion of revenues and expenses will be denominated in USD, and its plans to continue to access U.S. capital markets.
Use of estimates
The preparation of consolidated financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise judgement in applying the Company’s accounting policies. The Company’s significant estimates and judgements included in the preparation of the consolidated financial statements are related to revenue recognition, capitalized internal software development costs, share-based compensation, expected credit loss, goodwill, defined benefit pension liabilities, uncertain tax positions, and derivatives.
Disclosed in the corresponding sections within the footnotes are the areas which require a high degree of judgment, significant assumptions, and/or estimates.
Going concern basis
The consolidated financial statements have been prepared on a going concern basis (See Note 31 – “Capital management”).
Historical cost convention
The consolidated financial statements have been prepared on a historical cost basis except for certain assets and liabilities, which are carried at fair value.
Accounting policies
The significant accounting policies adopted in the preparation of the consolidated financial statements have been consistently applied, unless otherwise stated.
Provisions and contingencies
Provisions comprise liabilities of uncertain timing or amount. The provisions and liabilities are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period, unless the impact of discounting is immaterial. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognized as interest expense.
Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not fully within the control of the Company.
The likelihood of occurrence of provisions and contingent liabilities requires use of judgement. Judgement is also required to determine if an outflow of economic resources is probable, or possible but not probable. Where it is probable, a liability is recognized, and further judgement is used to determine the level of the provision. Where it is possible but not probable, further judgement is used to determine if the likelihood is remote, in which case no disclosures are provided; if the likelihood is not remote then judgement is used to determine the contingent liability disclosed.
Financial assets classification
Upon recognition, financial assets are classified on the basis of how the financial assets are measured: at amortized cost or fair value through income.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them. Except for accounts receivable that do not contain a significant financing component, the Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through income, transaction costs. Accounts receivable that do not contain a significant financing component are measured at the transaction price.
The Company’s business model for managing financial assets is defined by whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets held in order to collect contractual cash flows are measured at amortized cost. Financial assets held both to collect contractual cash flows and for sale are measured at fair value through other comprehensive income/loss.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized on the trade date, i.e., the date that the Company commits to purchase or sell the asset.
Financial assets measured at amortized cost
Financial assets initially measured at amortized cost are subsequently measured using the effective interest rate (“EIR”) method and are subject to impairment. Gains and losses are recognized in income when the asset is derecognized, modified, or impaired. The Company’s financial assets at amortized cost include cash, term deposits and accounts receivable.
Financial assets—derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Company’s consolidated balance sheet) when:
•the rights to receive cash flows from the asset have expired or;
•the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either;
•the Company has transferred substantially all the risks and rewards of the asset, or;
•the Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When the Company has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Company continues to recognize the transferred asset to the extent of its continuing involvement. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.
Financial assets—impairment
For cash, cash equivalents, and term deposits, the Company invests in assets where it has never incurred and does not expect to incur credit losses.
For accounts receivable the Company recognizes a loss allowance based on lifetime estimated credit losses (“ECL”) at each reporting date. When estimating the ECL the Company takes into consideration: readily available relevant and supportable information (this includes quantitative and qualitative data), the Company’s historical experience and forward-looking information specific to the receivables and the economic environment.
See Note 13 – “Accounts receivable” for further information about the Company’s accounting for trade receivables.
Financial liabilities classification
Financial liabilities are classified upon initial recognition as financial liabilities measured at fair value through income or at amortized cost. The Company’s financial liabilities include accounts payable and debt (including borrowings and lease liabilities), which are measured at amortized cost, and derivatives, which are measured at fair value through income.
Interest-bearing borrowings are initially recognized at fair value less directly attributable costs and subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in income when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of income/loss.
Financial liabilities—derecognition
A financial liability is derecognized when the obligation under the liability is discharged or canceled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statements of loss.
New standards, amendments to standards and interpretations
New standards, amendments to standards, and interpretations issued recently effective
As of January 1, 2022 the Annual Improvements to International Financial Reporting Standards (“IFRS”) Standards 2018–2020 (“Annual Improvements”) and the narrowed scope of the (“IFRS”) 3, Business Combinations (“IFRS 3”), IAS 16, Property, plant, and equipment (“IAS 16”), and IAS 37, Provisions, contingent liabilities, and contingent assets (“IAS 37”), as issued by the IASB became effective. The Company assessed the changes to the accounting standard and determined the improvements had no impact on the Company’s financial statements.
New standards, amendments to standards, and interpretations issued not yet effective
In January 2020, IASB issued amendments to paragraphs 69 to 76 of International Accounting Standard (“IAS”) 1, Presentation of Financial Statements (“IAS 1”), to specify the requirements for classifying liabilities as current or non-current, effective for annual reporting periods beginning on or after January 1, 2023. The Company determined the amendment has no impact.
There are no other IFRS or IFRS IC interpretations that are not yet effective and that could have a material impact to the consolidated financial statements.
3. Segment reporting
The Company operates in a single operating segment. The Company’s financial information is reviewed, and its performance assessed as a single segment by the senior management team led by the Chief Executive Officer (“CEO”), the Company’s Chief Operating Decision Maker (“CODM”).
For the years ended December 31, 2022 and 2021, respectively, the Company had a physical presence in three countries outside of its headquarters in Switzerland: France, the United States, and Brazil. An analysis of the location of non-current assets other than financial instruments and deferred tax assets by country is as follows (in USD thousands):
| Year ended December 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Switzerland | $ | 39,052 | $ | 28,973 | ||||||||||
| France | 498 | 290 | ||||||||||||
| United States | 1,803 | 2,357 | ||||||||||||
| Brazil | 6 | 8 | ||||||||||||
| Total non-current assets other than financial instruments and deferred tax assets | $ | 41,359 | $ | 31,628 | ||||||||||
4. Revenue
Critical accounting estimates and judgements
The Company recognizes revenue when control of promised goods or services is transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. Significant judgment is required to determine the stand-alone selling price (“SSP”) for each performance obligation in the SOPHiA DDM Platform, the amount allocated to each performance obligation and whether it depicts the amount that the Company expects to receive in exchange for the related product and/or service.
The Company enters into arrangements with multiple performance obligations where it could be difficult to determine the performance obligations under a sales agreement; in such cases, how and when revenue should be recognized is subject to certain estimates or assumptions. Should these judgments and estimates not be correct, revenue recognized for any reporting period could be adversely affected.
Accounting policies
Revenue represents amounts received and receivable from third parties for goods supplied and services rendered to customers. Revenues are reported net of rebates and discounts and net of sales and value added taxes in an amount that reflects the consideration that is expected to be received for goods or services. The majority of the sales revenue is recognized: (i) when customers generate analyses on their patient data through the SOPHiA DDM Platform, (ii) when consumables, namely DNA enrichment kits, are delivered to customers at which point control transfers, (iii) when services, namely set-up programs, are performed and (iv) over the duration of the software licensing arrangements for the Alamut software offerings.
Products and services are sold both directly to customers and through distributors, generally under agreements with payment terms of up to 180 days. Therefore, contracts do not contain a significant financing component.
For all contracts with customers the following steps are performed to determine the amount of revenue to be recognized and when it should be recognized: (1) identify the contract or contracts; (2) determine whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (3) measure the transaction price, including the constraint on variable consideration; (4) allocate the transaction price to the performance obligations based on estimated selling prices; and (5) recognize revenue when (or as) each performance obligation is satisfied.
SOPHiA DDM Platform
The majority of the SOPHiA DDM Platform revenue is derived from each use of the SOPHiA DDM Platform by customers to generate analysis on their patient data. Analysis revenue is recognized as analysis results are made available to the customer on the SOPHiA DDM Platform. The Company recognizes accrued contract revenue in accounts receivable for any analyses performed by customers that have not been invoiced at the reporting date and where the right to consideration is unconditional. Any payments received in advance of customers generating analyses are recorded as deferred contract revenue until the analyses are performed.
Customers use the SOPHiA DDM Platform to perform analyses under three different models: dry lab access; bundle access; and integrated solutions.
For dry lab contracts, customers use the testing instruments and consumables of their choice and the SOPHiA DDM Platform and algorithms for variant detection and identification. In these arrangements, the Company has identified one performance obligation, which is the delivery of the analysis result to the customer.
For bundle arrangements, customers purchase a DNA enrichment kit along with each analysis. Customers use the DNA enrichment kit in the process of performing their own sequencing of each sample. Customers then upload their patient data to the SOPHiA DDM Platform for analysis. In these arrangements, the Company has identified two performance obligations: the delivery of the DNA enrichment kits and the performance of the analyses. Revenue is recognized for the DNA enrichment kits when control of products has transferred to the customer, which is generally at the time of delivery, as this is when title and risk of loss have been transferred. Revenue for the performance of the analyses is recognized on delivery of the analysis results to the customer. Refer to Arrangements with multiple performance obligations below for how revenue is allocated between the performance obligations.
Deferred contract revenue balances relating to analyses not performed within 12 months from the date of the delivery date are recognized as revenue. This policy is not based on contractual conditions but on the Company’s experience of customer behavior and expiration of the kits associated with the analyses.
For integrated arrangements, customers have their samples processed and sequenced through selected SOPHiA DDM Platform partners within the clinical network and access their data through the SOPHiA DDM Platform. The Company has identified one performance obligation, which is delivery of the analysis results to the customer through the SOPHiA DDM Platform.
The Company also sells access to its Alamut software application (“Alamut”) through the SOPHiA DDM Platform. Some arrangements with customers allow customers to use Alamut as a hosted software service over the contract period without the customer taking possession of the software. Other customers take possession of the software, but the utility of that software is limited by access to the Company’s proprietary SOPHiA database, which is provided to the customer on a fixed term basis. Under both models, revenue is recognized on a straight-line basis over the duration of the agreement.
The Company also derives revenue from the SOPHiA DDM Platform by providing services to biopharma customers who engage the Company to (i) develop and perform customized genomic analyses and/or (ii) access the database for use in clinical trials and other research projects.
The Company does enter into biopharma contracts that contain multiple products or services or non-standard terms and conditions. The biopharma contracts are generally unique in nature and each contract is assessed upon execution.
Generally, the primary performance obligation in these arrangements is the delivery of analysis results in the form of a final report, resulting in revenue being recognized, in most cases, upon the issuance of the final report or successful recruitment of clinical trial participants.
Workflow materials and services
Revenue from workflow materials and services includes all revenue from the sale of materials and services that do not form part of a contract for the provision of platform services. These include the provision of set-up programs and training and the sale of kits and tests that are not linked to use of the platform. Set-up programs and training are typically combined with a customer’s first order prior to the customer beginning to use the SOPHiA DDM Platform.
Revenue from services is generally recognized when the services are performed. Revenue from materials is recognized when control of the goods is transferred to the customer, generally at the time of delivery. This category of revenue also includes the revenue from the sale of DNA sequencing automation equipment accounted for under IFRS 16, Leases (“IFRS 16”), leasing and the fees charged for the maintenance of this equipment.
Arrangements with multiple performance obligations
The Company sells different combinations of analyses, consumables, and services to its customers under its various SOPHiA DDM Platform models.
The Company has determined that the stand-alone selling prices for services and DNA enrichment kits are directly observable. For set-up programs and training sold along with dry lab arrangements or bundle arrangements, the stand-alone selling price of these services is determined on a time and materials basis. For DNA enrichment kits sold as part of a bundle, the SSP is based on an expected cost-plus-margin approach of the kit portion of the bundle.
The Company has determined that the SSP for the analyses, in both a dry lab arrangement and bundle arrangement, is highly variable and therefore a representative SSP is not discernible from past transactions. As a result, the residual approach is used to determine the stand-alone selling price of the analyses in dry lab arrangements that include services and in bundle arrangements that include DNA enrichment kits and, in some cases, services.
The Company also has a small number of bundle contracts with a fixed term that also include providing the customer with DNA sequencing automation equipment, which the Company has determined is an IFRS 16 leasing component. In these arrangements the Company provides DNA sequencing automation equipment to the customer over the fixed term and at completion of the contract term the customer takes possession of the equipment. The Company has determined that it is a dealer lessor and provision of this equipment to the customer is classified as a finance lease. As a result, upon delivery of the leased equipment at the inception of the arrangement, a selling profit is recognized based on the fair value of the underlying equipment less the cost of the equipment. Over the term of the agreement, the minimum lease payment is deducted from the proceeds of the bundle sales in order to reduce the net investment in the corresponding lease receivable over the contract term and interest income is recognized as the discount on the lease receivable unwinds. The remaining proceeds from the contract are accounted for under IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), using the policies described above.
Contract Balances
Accrued contract revenue
Accrued contract revenue is related to unbilled SOPHiA DDM Platform analyses and are recorded in accounts receivable. As of December 31, 2022 and December 31, 2021, accrued contract revenue was $1.5 million and $0.7 million, respectively. The Company recorded no loss allowance related to the accrued contract revenue as of December 31, 2022 and December 31, 2021, respectively
Deferred contract costs
Deferred contract costs comprise deferred fulfillment costs related to biopharma, prepayments on contracts, and prepaid maintenance costs relating to DNA sequencing automation equipment.
Costs are incurred to fulfill obligations under certain contracts once obtained, but before transferring goods or services to the customer. Fulfillment costs are recognized as an asset, provided these costs are not addressed by other accounting standards, if the following criteria are met: (i) the costs relate directly to a contract or an anticipated contract that the Company can specifically identify, (ii) the costs generate or enhance resources of the Company that will be used in satisfying (or continuing to satisfy) performance obligations in the future and (iii) the costs are expected to be recovered.
The asset recognized from deferring the costs to fulfill a contract is recorded in the consolidated balance sheet as deferred contract costs within other current assets and amortized on a systematic basis consistent with the pattern of the transfer of the goods or services to which the asset relates, which
depends on the nature of the performance obligation(s) in the contract. The amortization of these assets is recorded in cost of revenue.
The timing of revenue recognition and billings can result in accrued contract revenue, which are presented within accounts receivable in the consolidated balance sheet and deferred contract revenue which is presented on the face of the consolidated balance sheet.
Deferred contract revenue
Deferred contract revenue relates to prepayments received from customers before revenue is recognized and is primarily related to SOPHiA DDM Platform analyses invoiced in advance of the customers performing the analyses, deferred Alamut software revenue and progress payments received as part of biopharma contracts.
Deferred contract revenue brought forward as of January 1, 2022 and January 1, 2021 amounts to $4.0 million and $2.9 million, respectively. During the twelve months ended December 31, 2022 and 2021, the Company satisfied the performance obligations associated with that deferred contract revenue to the extent that revenue was recognized of $4.0 million and $2.9 million, respectively.
The majority of the platform revenue is derived from contracts with an original expected length of one year or less. However, there are certain biopharma and Alamut contracts in which performance obligations extend over multiple years. The Company has elected to apply the practical expedient not to disclose the value of remaining performance obligations associated with these types of contracts.
Disaggregated Revenue
When disaggregating revenue, the Company considered all of the economic factors that may affect its revenues. The Company assess its revenues by four geographic regions Europe, the Middle East, and Africa (“EMEA”); North America (“NORAM”); Latin America (“LATAM”); and Asia-Pacific (“APAC”). The following tables disaggregate the Company's revenue from contracts with customers by geographic market (in USD thousands):
| Year ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| EMEA | $ | 34,878 | $ | 31,583 | $ | 22,073 | ||||||||||||||
| NORAM | 6,732 | 4,730 | 2,923 | |||||||||||||||||
| LATAM | 3,003 | 2,295 | 2,131 | |||||||||||||||||
| APAC | 2,947 | 1,842 | 1,273 | |||||||||||||||||
| Total revenue | $ | 47,560 | $ | 40,450 | $ | 28,400 | ||||||||||||||
Revenue streams
The Company’s revenue from contracts with customers has been allocated to the revenue streams indicated in the table below (in USD thousands):
| Year ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| SOPHiA DDM Platform | $ | 45,679 | $ | 39,465 | $ | 27,221 | ||||||||||||||
| Workflow equipment and services | 1,881 | 985 | 1,179 | |||||||||||||||||
| Total revenue | $ | 47,560 | $ | 40,450 | $ | 28,400 | ||||||||||||||
Workflow equipment and services includes revenues from payments from leased equipment recognized under IFRS 16, Leases, of $0.1 million, $0.2 million, and $0.1 million for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively.
5. Cost of revenue
Accounting policies
Cost of revenue comprises costs directly incurred in earning revenue, including computer costs and data storage fees paid to hosting providers, manufacturing costs, materials and consumables, the cost of equipment leased out under finance leases, personnel-related expenses and amortization of capitalized development costs.
6. Operating expense
Accounting policies
Research and development
Research and development costs consist of personnel and related expenses for technology, application, and product development, depreciation and amortization, laboratory supplies, consulting services, computer costs and data storage fees paid to hosting providers related to research and development and allocated overhead costs. These costs are stated net of government grants for research and development and innovation received as tax credits and net of capitalized costs.
Government grants for research and development and innovation received as tax credits
The Company receives government grants in France for research and development and innovation by way of tax credits. Total government grants for research and development and innovation recognized in the statement of loss amounts to $1.3 million, $1.6 million, $0.8 million for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively. There are no unfulfilled conditions or other contingencies attached to these grants.
Selling and marketing costs
Selling and marketing costs consist of personnel and related expenses for the employees of the sales and marketing organization, costs of communications materials that are produced to generate greater awareness and utilization of the platform among customers, costs of third-party market research, costs related to transportation and distribution of our products, and allocated overhead costs. These costs are stated net of government grants under the US Paycheck Protection Program (“PPP”) for payroll and/or rental obligations received as a loan that is forgiven if utilized as intended.
The Company pays sales commission to its employees for obtaining contracts. These costs are expensed as part of employee compensation in selling and marketing costs. They are not capitalized as contract costs as the commissions either represent bonuses payable for revenue earned in the period or have a service condition attached.
General and administrative costs
General and administrative costs consist of personnel and related expenses for our executive, accounting and finance, legal, quality, support and human resources functions, depreciation and amortization, professional services fees incurred by these functions, general corporate costs and allocated overhead costs, which include occupancy costs and information technology costs.
Operating expense by nature
The table presents operating expenses by nature (in USD thousands):
| For the year ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Changes in inventories of finished goods and work in progress | $ | 47 | $ | 568 | $ | (259) | ||||||||||||||
| Raw materials and consumables used | (13,341) | (9,650) | (3,843) | |||||||||||||||||
| Employee benefit expenses | (59,333) | (53,802) | (36,732) | |||||||||||||||||
| Social charges | (11,480) | (8,373) | (6,983) | |||||||||||||||||
| COVID—salaries reimbursement | — | — | 1,129 | |||||||||||||||||
| Research tax credit | 1,292 | 1,597 | 763 | |||||||||||||||||
| Share-based compensation | (13,613) | (8,514) | (1,359) | |||||||||||||||||
| Depreciation | (3,791) | (2,517) | (1,758) | |||||||||||||||||
| Amortization | (1,780) | (1,092) | (632) | |||||||||||||||||
| Professional fees | (13,837) | (11,318) | (5,371) | |||||||||||||||||
| Office expenses | (6,635) | (5,333) | (2,006) | |||||||||||||||||
| Travel | (3,217) | (1,576) | (1,361) | |||||||||||||||||
| Marketing | (2,213) | (1,493) | (972) | |||||||||||||||||
| Licenses | (3,949) | (2,021) | (1,647) | |||||||||||||||||
| Less: capitalized software development costs ("Note 17 - Intangible assets”) | 5,820 | 3,858 | 2,436 | |||||||||||||||||
| Other expense | (9,730) | (12,381) | (7,099) | |||||||||||||||||
| Total | $ | (135,760) | $ | (112,047) | $ | (65,694) | ||||||||||||||
Depreciation and amortization have been charged in the following expense categories (in USD thousands):
| For the year ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
| Depreciation | Amortization | Depreciation | Amortization | Depreciation | Amortization | |||||||||||||||||||||||||||||||||
| Cost of revenue | $ | — | $ | (1,133) | $ | — | $ | (483) | $ | — | $ | (111) | ||||||||||||||||||||||||||
| Research and development costs | (1,748) | — | (1,028) | — | (727) | — | ||||||||||||||||||||||||||||||||
| Selling and marketing costs | (906) | — | (744) | — | (543) | — | ||||||||||||||||||||||||||||||||
| General and administrative costs | (1,137) | (647) | (745) | (609) | (488) | (521) | ||||||||||||||||||||||||||||||||
| Total | $ | (3,791) | $ | (1,780) | $ | (2,517) | $ | (1,092) | $ | (1,758) | $ | (632) | ||||||||||||||||||||||||||
The table presents employee costs by function, which consists of “Employee benefit expenses”, “Social charges” and “Share-based compensation” from the operating expense table (in USD thousands):
| For the year ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Research and development costs | $ | 29,169 | $ | 23,899 | $ | 16,109 | ||||||||||||||
| Selling and marketing costs | 20,216 | 21,659 | 12,085 | |||||||||||||||||
| General and administrative costs | 35,041 | 25,131 | 16,880 | |||||||||||||||||
| Total | $ | 84,426 | $ | 70,689 | $ | 45,074 | ||||||||||||||
7. Other operating income (expense), net
Accounting policies
The Company records income and expenses that are not regularly occurring or normal business income and expense to other operating income (expense). Other operating income (expense) consists of government grants, gains on disposal of tangible assets, intangible write-offs, and other operating income (expense).
8. Finance income (expense), net
| December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Interest income | $ | 1,324 | $ | 20 | $ | 96 | ||||||||||||||
| Total interest income | $ | 1,324 | $ | 20 | $ | 96 | ||||||||||||||
| Interest on loans | — | (120) | (513) | |||||||||||||||||
| Interest on lease liabilities | (422) | (225) | (121) | |||||||||||||||||
| Other interest | (217) | (313) | (206) | |||||||||||||||||
| Total interest expense | $ | (639) | $ | (658) | $ | (840) | ||||||||||||||
| Derivative fair value (losses) | — | (1,444) | (384) | |||||||||||||||||
| Foreign exchange gains (losses), net | (447) | 64 | (2,710) | |||||||||||||||||
| Total finance income (expense), net | $ | 238 | $ | (2,018) | $ | (3,838) | ||||||||||||||
Accounting policies
Interest income consists of interest income earned on cash and cash equivalents, short-term investments, and lease receivables.
Interest expense on lease liabilities and loans, which includes, interest on commercial borrowings, and also interest on COVID-19 loans using the effective interest rate method.
The foreign exchange gains and losses arise principally on USD cash balances and intercompany receivable balances in the parent company, whose functional currency is the Swiss Franc.
The Company had an obligation to pay a success fee linked to a loan that is now repaid. The obligation had many features of a cash-settled share option. It was revalued at fair value at each reporting date using an option pricing model based on a Monte Carlo simulation. This model demands inputs that require the exercise of considerable judgement. Refer to Note 25 - “TriplePoint success fee” for additional discussion on the derivative accounting.
9. Income tax
Critical accounting estimates and judgements
Uncertain tax positions
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and therefore subject to tax examination by various taxing authorities. In the normal course of business, the Company is subject to examination by local tax authorities in Switzerland, France, Italy, Brazil, the UK and the US. With the exception of a tax assessment rendered by the French tax authority during an audit of its 2018 and 2019 tax returns as discussed below, the Company is not aware of any additional issues that could result in any other significant payments, accruals or material deviation from its tax positions. There are no other tax examinations in progress.
The Company records tax liabilities or benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. There is inherent uncertainty in quantifying income tax positions, especially considering the complex tax laws and regulations in each of the jurisdictions in which the Company operates.
Accounting policies
The Company is subject to taxes in different countries. Taxes and related fiscal assets and liabilities recognized in the Company’s consolidated financial statements reflect management’s best estimate of the outcome based on the facts known at the balance sheet date in each individual country. These facts may include but are not limited to change in tax laws and interpretation thereof in the various jurisdictions where the Company operates. They may have an impact on the income tax as well as the resulting income tax assets and liabilities. Any differences between tax estimates and final tax assessments are charged to the statement of income/loss in the period in which they are incurred. Taxes include current and deferred taxes on income as well as actual or potential withholding taxes on current and expected transfers of income from subsidiaries and tax adjustments relating to prior years. Income tax is recognized in the statement of income/loss, except to the extent that it relates to an item directly taken to other comprehensive income/loss or equity, in which case it is recognized against other comprehensive income/loss or equity, respectively.
Current income tax liabilities refer to the portion of the tax on the current year taxable profit (as determined according to the rules of the taxation authorities) and includes uncertain tax liabilities. The Company determines the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates consistently with the tax treatment used or planned to be used in its income tax filings if the Company concludes it is probable that the taxation authority will accept an uncertain tax treatment.
Otherwise, the Company reflects the effect of uncertainty using either the most likely outcome or the expected value outcome, depending on which method the entity expects to better predict the resolution of the uncertainty.
Deferred taxes are based on the temporary differences that arise when taxation authorities recognize and measure assets and liabilities with rules that differ from the accounting policies of the Company’s consolidated financial statements. They also arise on temporary differences stemming from tax losses carried forward. Deferred taxes are measured at the rates of tax expected to prevail when the temporary differences reverse, subject to such rates being substantively enacted at the balance sheet date. Any changes of the tax rates are recognized in the statement of income/loss unless related to items directly recognized against other comprehensive income. Deferred tax liabilities are recognized on all taxable temporary differences excluding non-deductible goodwill. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are
determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, on the basis of the business plans for individual subsidiaries in the Company. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized; such reductions are reversed when the probability of future taxable profits improves.
The tax impact of a transaction or item can be uncertain until a conclusion is reached with the relevant tax authority or through a legal process. The Company uses in-house tax experts when assessing uncertain tax positions and seeks the advice of external professional advisors where appropriate. The assessment of the uncertain tax position is done by first making a determination of whether it is more likely than not that a tax position would be sustained upon an examination, and then by calculating the amount of the benefit, of that tax position that meets the more likely than not threshold, that should be recognized in the financial statements.
As of December 31, 2022, and 2021, the Company recorded a provision of $0.3 million and $0.1 million for unrecognized tax liabilities including interest and penalties. The Company records interest and penalties related to income tax amounts as a component of income tax expense.
France tax audit
The Company has been under examination in France for its 2018 and 2019 tax returns. The French tax authority issued a tax assessment in December 2022 that reduced the balance of the Company’s tax losses carryforward in France by $1.8 million ($0.5 million tax effected amount) stemming from a review of the Company’s transfer pricing policy. The tax assessment is subject to appeal. However, the Company has elected to take a conservative approach and adjusted the balance of its deferred tax assets to reflect the reduction in the balance of tax losses carryforward. The tax assessment in France has resulted in no other material tax liability or payment.
Presentation of tax (expense) benefits
The following table presents the current and deferred tax (expense) benefits (in USD thousands):
| For the year ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Current income tax expense | ||||||||||||||||||||
| Current year | $ | (310) | $ | — | $ | — | ||||||||||||||
| Uncertain tax positions | 328 | (110) | (74) | |||||||||||||||||
| Total current income tax expense | $ | 18 | $ | (110) | $ | (74) | ||||||||||||||
| Deferred income tax (expense) benefit | ||||||||||||||||||||
| Origination and reversal of temporary differences | $ | 118 | $ | (58) | $ | 1,960 | ||||||||||||||
| Total deferred income tax (expense) benefit | $ | 118 | $ | (58) | $ | 1,960 | ||||||||||||||
| Total income tax (expense) benefit | $ | 136 | $ | (168) | $ | 1,886 | ||||||||||||||
The following table presents the reconciliation of the expected tax expense to the tax expense report in the statement of loss (in USD thousands):
| For the year ended December 31, | ||||||||||||||||||||
| 2022 | 2021 | 2020 | ||||||||||||||||||
| Loss before tax | $ | (87,585) | $ | (73,507) | $ | (41,225) | ||||||||||||||
| Tax at Swiss statutory rate | 11,749 | 9,907 | 5,541 | |||||||||||||||||
| Effect of tax rates in foreign jurisdictions | (292) | (218) | (177) | |||||||||||||||||
| Tax effect of: | ||||||||||||||||||||
| Unrecognized deferred tax assets | (9,386) | (9,077) | (3,276) | |||||||||||||||||
| Income not subject to tax (expense not deductible for tax purposes) | (1,940) | (805) | 41 | |||||||||||||||||
| Uncertain tax positions | 328 | (110) | (74) | |||||||||||||||||
| Recognition of deferred tax assets from previously unrecognized tax assets | 509 | — | — | |||||||||||||||||
| 2018-2019 French tax assessment | (427) | — | — | |||||||||||||||||
| Other | (405) | 135 | (169) | |||||||||||||||||
| Income tax (expense)/benefit | $ | 136 | $ | (168) | $ | 1,886 | ||||||||||||||
Movement in the deferred tax balances
During the year ended December 31, 2022, the Company recognized deferred tax assets for its foreign subsidiaries due to intercompany transfer pricing arrangements that will assure realization of their respective deferred tax assets in each country. The following table presents the changes in the Company’s deferred tax assets and deferred tax liabilities (in USD thousands):