Q1 2022 Earnings Call

May 10, 2022

Thank you for standing by and welcome to the Sofia Genetics first quarter fiscal 2022 earnings conference call.

At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that todays call may be recorded excuse me.

You require any further assistance. Please press star zero I would now like to hand, the call over to Jennifer <unk> head of Investor Relations.

Good morning, and thank you for joining us on Sofia Genetics Q1 fiscal 2022 earnings call My.

My name is Jennifer <unk> and Im.

Head of Investor Relations at Sofia.

Joining me today are Dr. Gordon Campbell, our co founder and Chief Executive Officer, and Ross Morgan, Our Chief Financial Officer.

Before we get started I would like to remind you that management will make statements. During the call that are forward looking within the scope of U S Federal Securities laws.

These statements are based on management's current views and assumptions, which are subject to material risks and uncertainties that could cause actual results or events to differ materially from those projected.

Additional information regarding these risks and uncertainties are included in the section entitled cautionary statement regarding forward looking statements and exhibit 99.

Of the report on form 6K filed with the SEC.

Except as required by law Sofia genetics disclaims any intention or obligation to update or revise any forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the broadcast May 10 2022.

Please note the replay of this call involve the earnings release and associated slides will be available on our website in the investors section.

And now I'll turn the call over to Europe .

Thank you Jen good morning, everyone.

I'm happy to be here with you today to share the excellent performance of <unk> during Q1.

As announced last month, we reached an incredible nice guidance.

Now have over 1 million genomic profiles in light of the Sofia DBM platform further strengthening our position as a leading cloud native knowledge sharing platform connecting thousands of healthcare professionals worldwide.

As one of the founders of Sofia and brings me immense joy to reflect on the progress we have made.

<unk> come a long way since 2011 from just a handful of people in the 10 square meter room with a vision to democratize data driven Medici.

While we're proud of this milestone we are just getting started.

To that end I want to recognize the Sofia employees, who continue to fuel our success every day.

Because without them none of this would that being placebo.

<unk> edge to be able to work with such talented individuals who care. So deeply about what we are building ensure metrial passion for using the power of data analytics and predictive AI to transform the world of healthcare.

On today's call I will walk through our first quarter business highlights and following Russ will review the financial results and business outlook.

Before I go on let me remind you of the <unk> continued to guide our long term growth.

They are accelerating the expansion of our network through new customer adoption.

Increasingly TV <unk> within our existing customer base, expanding our menu of offerings developing key partnerships and collaborations.

Bridging our platform to drive further growth with Biopharma and exceeding operationally within Sofia.

Now, let's begin with the first pillar, we have had a solid start to 2020 tool with custom reduction and network expansion.

Institutions all over the work are continuing to recognize the importance of using data and analytics to drive decision, making more than ever.

It beards reiterating that Sofia is a leading cloud native platform.

If he can global size and scale that enables healthcare institutions to third contextual data into deep insights that can improve patient diagnosis and outcomes.

The Sofia EDM platform is unmatched in the market and we are the first movers in this unique category of software, which has resumed need to deeply with the health care industry at large.

Furthermore, our platform is optimally designed to support rapid growth and benefit from network effects as we aggressively onboard more healthcare and license institutions to the Sofia network more data generated on the Sofia EDM platform, which ultimately leads to richer insights that can be generated a Democrat.

So new institutions.

Since advising them to join our network as well.

The platform improves and scales as more data is analyzed which importantly translates to more patients benefiting from the practice of data driven medicine overtime.

We continue to build long lasting relationship with new customers to increase and diversify the platform network.

At Q1 customer growth and global scale, we added nine net new logos.

Momentum on boarding new customers globally across North America, Europe , Asia Pacific and Latin America demonstrates our strong execution and the universal nature of a compelling offering.

Moving to the next pillar of increasing utilization within our existing customer base.

Broadening and deepening our existing customer relationship is crucial.

Customers continue to benefit from the value of the associated with the <unk> platform, where we used to progression increases.

And how do we know we are providing real value to our customers.

This is evidenced by our exceptional net dollar retention rate, which is a percentage of the large retailers across customers.

Annualized net dollar retention rate has exceeded 140% for the past two quarters consecutively, indicating that our customer base has been consistently expanding their business with us.

Russ will get more into this later on during the call.

Our sales strategy revolved around ensuring that new and existing customers keep the full range of use cases that the Sofia DBM platform can provide.

<unk> cash consumption is a key to the rising material benefits between us and our customers.

Pending key customers wins into transformative long term business relationships.

During the quarter, we took several exciting expansion deals one of which was we the key longstanding customer Moffitt cancer center in the U S will nearly triple their consumption.

Combined with the additional momentum we have seen across other key customers in the U S or North America revenue has nearly doubled.

Additionally, we are in the midst of signing an expansion deal with another long standing customer data the largest medical diagnostic company in Latin America.

Total recurring platform customers grew to 384 in the first quarter of each year.

345 customers in the first quarter of 2021.

The total number of classroom analysis increased to over 65000 in the first quarter up from 53000 in LNG in the first quarter of 2021, representing a growth rate of 23% year over year.

Consumption trends have continued to be strong despite challenging comparisons from the prior year periods due to COVID-19 related impact.

And now on to our third pillar of menu expansion.

Nothing is more core to our mission then innovating the platform.

We consistently provide users with new content, and we're combining and analyzing data in more ways than ever before.

Having a robust ecosystem is essential for delivering our platform vision and we currently offer the most exciting product road map in our company's history.

Last quarter, we spoke a lot about sofia newly launching charging solution as.

Well as the soon to be deployed to characterize the HRD solution has already been adopted by an abundance of customers across the globe and is on track to be one of our best application launches in history.

With respect to care path.

We would note. This key deployment is still on track for later this year.

Deep lung for rational.

Rational clinical study that is validating predictive model fueling her path as being progressing well as expected three additional sites, including Roswell Park comprehensive cancer Center in New York.

Signed up to participate bringing the total to 90 nights across seven countries.

Nearly 500 patients have already been recruited for the study to date, which is tremendous.

We expect to update you.

On our preliminary findings at ESCO next months during our Q, Jim with TL Securities, We hope to see many of you there.

Speaking of which this leads me into Sofia next pillar of developing key partnerships and collaborations at Sophia we looked at work alone.

Our core we are an enabler and a partner which is indicative of the versatility of our platform for.

We're achieving momentum with our partners, enabling our shirts customer base to interpret complex data sets and generate novel insights.

Gm's care for example has been a fantastic partners to so far.

Our partnership has been going extremely well and we continue to see significant commercial traction in joint customer engagements.

We're proud of our partnership with them and the trust that you have put in our team and Sofia DBM platform to help accelerate future growth.

We're excited about the opportunity to continue partnering with organizations, leading the data transformation of healthcare as we leverage our combined capabilities to support innovation.

Next I want to quickly touch on our pillar of strengthening for <unk> presence in the Biopharma space.

We continue to promote our growing menu of offerings, which we believe will uniquely position us.

<unk> for example is a product we expect to support Biopharma to ensure the right patients are selected for clinical trial.

We're encouraged by recent discussions and it is clear that our value proposition to Biopharma companies continues to grow with the expanding scale of our multimodal data and continuously improving predictive algorithms.

Last quarter, we spoke about our partnership with Astrazeneca to expand access of HRD.

HRD testing of course laboratory and institutions around the world.

We're excited to collaborate with other Biopharma partners regarding our capability to develop and deploy highly impactful solutions.

With a focus on patients and Tyco and <unk> approaches.

And now on the final key pillar, which is exceeding operationally within Sofia.

One of our core strengths is operating as a unified team in everything that we do so via continues to review its organic growth initiatives and M&A pipeline and he's focused on opportunities that will enhance the capabilities of our robust platform.

Over the longer term, we are confident in our ability to execute a targeted focus on scaling the business to position <unk> into the future.

And we don't I will turn the call over raws to get into the numbers Ross.

Thank you <unk> and good morning, everyone Q1 was yet another solid quarter of execution, despite a challenging macro backdrop, but before I dive into the results I would like to remind everyone that it is important to understand that we are not a traditional SaaS software model Sofia employed the consumption.

<unk> based business model, which means our reported revenue has a direct relationship with the consumption of our platform during the period.

Meaning unlike most SaaS models, we only recognize revenue if a customer uses our platform for many customers. It takes time until they are at full capacity and then the consumption based model gives them the flexibility to consume what they need and want as they ramp up their operations.

Obvious benefit of this model is we can grow materially with our customers over time as evidenced by our strong net dollar retention. Furthermore, we also have a very high level of visibility as our contracts tend to contain contractual minimums and our churn remains impressively low overall this should provide.

<unk> heightened confidence in our ability to sustain growth.

The started the year reflected strong consumption trends as.

Q1 revenue grew 21% year over year to $10 9 million, despite FX headwinds, which negatively impacted our growth by approximately 850 basis points, excluding the impact from Covid related revenues constant currency revenue growth was approximately 35% for the.

Period. This constant currency performance was strong despite a tough macroeconomic environment compared to the prior year period from a geographical standpoint, we experienced challenges in our Turkish market, where a devaluation of the Turkish lira and reimbursement uncertainty resulted in a low single digit headwind to first.

Growth on a positive note our north American business continued to be a standout with revenues in the period nearly doubling relative to the prior year period.

Main incredibly encouraged by our momentum and Norad and look forward to providing future updates on this important market as.

As Jeremy mentioned earlier, our net dollar retention remains above 140% on a trailing 12 month basis and its considered exceptional among top software and cloud peers.

Kicking us of our customer base has served as the foundation for us to build upon as our customers continue to expand our annualized revenue churn remains approximately 3% again this should provide confidence in the sustainability of the underlying momentum of our business.

Platform analysis volumes increased to over 65000 analyses in the first quarter of 2022 compared to approximately 53000 analyses in the first quarter of 2021 analysis volume grew 23% despite modest COVID-19 related headwinds of approximately 400 basis points.

Average revenue per platform customer increased to $92000 compared to $74000 for the prior year period.

Gross profit in the first quarter of 2022 with $6 7 million, an increase of 19% compared to a gross profit of $5 6 million in the first quarter of 2021 gross margin was 62% in the first quarter of 2022 compared to 63% in the first quarter of 2021.

Adjusted gross margin was 64% for the first quarter of 2022 compared to 63% in the prior year period.

Note unfavorable movements in exchange rates negatively impacted gross margin by approximately 170 basis points in the quarter.

Total operating expenses for the first quarter of 2022 were $31 7 million compared to $19 7 million.

In the first quarter of 2021 <unk> basis operating expenses were positively impacted by foreign exchange trends by approximately $1 $3 million in the current period.

R&D expenses for the first quarter of 2022 were $9 $5 million, an increase from $6 2 million in the first quarter of 2021, which underscores our continued investment in technology and product development. As a reminder, the vast majority of our incremental spend here is related to people primarily.

Engineers and data scientists and our.

<unk> will further expand our multimodal data capabilities versus the competition.

Sales and marketing expenses for the first quarter were $7 9 million compared to $4 $9 million in the first quarter of 2021 general and administrative expenses.

The first quarter were $14 4 million compared to $8 6 million in the first quarter of 2021 of note a majority of the increase in expenditures is related to our scale up as a public company.

Operating loss in the first quarter of 2000 $20 million to $25 million compared to $14 1 million in the first quarter of 2021 adjusted operating loss in the first quarter of 2022 was $21 million compared to $13 1 million in the first quarter of 2021 net loss in the.

First quarter was $25 5 million or <unk> 40 per share compared to $12 7 million or 26 per share in the first quarter of 2021.

Just did net loss in the first quarter of 2022 was $21 5 million or <unk> 34 per share compared to $11 7 million or 24 per share in the first quarter of 2021 cash and cash equivalents were approximately $243 5 million as of March 30.

One 2022 of note we continue to be disciplined with respect to our growth investments and have put in place numerous internal initiatives in order to enhance productivity and efficiency with an eye toward maximizing our capital runway without sacrificing long term growth objectives, we are committed to our shareholders to remain incredibly.

<unk> diligent and the current macro environment with respect to organic and inorganic investments.

Before I turn to our outlook given the global scope of our business I wanted to highlight the impact that foreign currency exchange rates have on our reported financial results. We are sensitive to fluctuations in key FX rates for currencies, we transacting against the U S dollar, particularly the euro Turkish lira.

Our functional currency the Swiss franc to that degree fluctuations in the euro and the euro and Frank against the dollar will continue to impact our reported results, including the revenue guidance. We provided previously in January now turning to our updated view of guidance. The company maintains expectation of 30% to 35%.

Constant currency revenue growth for 2022 remains unchanged.

Fire range, representing nominal reported revenue growth of 27% to 33% had contemplated the negative impact on growth from FX of approximately 250 basis points based on the current macroeconomic trends, we now face a forecasted headwind to 2022 reported growth really.

<unk> to FX of approximately 600 basis points at the present, we are still comfortable with the low end of our prior guidance range of 51 5 million to $54 million on a reported basis for 2022, despite the macroeconomic and FX related challenges remain calm.

And our business as we continue to see very encouraging trends in our pipeline with respect to north <unk> Biopharma, an HRD related opportunities as well as exciting prospects amongst our partner ecosystem.

Our underlying revenue visibility remains very high with respect to our existing recurring platform customers that constitute a majority of our revenue.

Our vision for Sofia as long term future remains unchanged, we are disruptive growth company with substantial potential and our results demonstrate high quality durable growth. So he is a leader in the sizable yet emerging market of data driven medicine with the right platform technology people and strategic partners to execute our ambitious plan.

We are energized by the future more than ever as we start the new Sofia fiscal year. This concludes my remarks, So I will now pass it back over to Europe .

Thank you Russ.

We're very pleased with this quarter's performance and remain confident in the business momentum as we build an ever stronger Sofia in the remainder of 2022 and beyond.

Before I close today's call I am thrilled to announce that we are taking the first few steps.

She journey.

At Sophia, we placed patient care at the heart of all our decisions and our success is deep rooted in our core values and the positive impact we have across all levels of the organization.

This is critical to our mission of creating a wiser and most sustainable healthcare system.

Our forthcoming impact report will provide a deeper look into Sofia <unk> sustainability and performance in key priority areas and is expected to be available. Later this month on our website. We look forward to continuing to update you more on this front.

Additionally, we're also excited to announce that we are hosting our first ever Investor Day in New York City on September 20 <unk>.

We invite the investor community to attend in person gained a better understanding of Sofia.

Here, the latest news interventions and long term opportunities.

If you would like to request an invitation please E mail.

So kitchen ethics outcome.

And finally, we look forward to seeing some of you at the Jpmorgan technology Media and Communications conference in Boston coming up in a few weeks.

Thank you all again for joining us on our earnings call today, and we that Ross and I are happy to take your questions and we will turn it back over the operator.

Operator.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question Press press the pound key once again Thats star one on your Touchtone telephone to ask a question. Please standby, while we compile the Q&A roster.

Our first question comes from the line of Dan Brennan of Cowen Your question. Please.

Great. Thank you for taking the questions, maybe just to kick it off given.

The macro in Q1, just be interested to see how did the quarter play out when you think about versus your own expectations.

Kind of what came in maybe better maybe where it was more challenged just kind of maybe walk us through a little bit how how things played out given the difficult environment.

Yes, good morning, and thank you for your question Doug.

So indeed, we have knowledge that the macro environment is.

Challenging around the workplace for everyone.

Despite that they would say that given Sofia.

More Delaware, where very much like a software company being paid on consumption.

The resolution being pretty good and.

And we haven't seen any major surprise.

So to give you. Some color then the growth is being pretty strong in Northern America <unk> nearly doubled.

The number of analysts that are being run in the platform and when it comes to digital.

And as we have a consistent and solid equal across these RF, but solid two more on chromatology already 30 cancer as well as inherited disorders.

Maybe one yen was that HRD capabilities that we launched.

Early this year, even go further than the volumes grow in the other it is a risk so all in all despite I would say the current macroeconomic environment. Good results on our side no impact on Covid and of course. This means and I think your question Thats what would trigger that.

On how we are making use of our proceeds right in terms of further investments down.

And as you know so if he has been always pretty discipline and diligence in using our per key we don't invest in the lab, we don't invest in Capex. We are again, our software business. So we continue to invest diligently on things, where we do see future growth such as the U S and the Biopharma market.

It's a regulated environment, where we believe that platforms like for <unk>.

Benefit from a more regulated environment, where it used to be with us.

Probably be more favorable than what it is today such as awards were immediately mobile capabilities for decision making.

Extremely important unless the northeast.

Awards were as well one is it takes a year kind of grow quicker partnering with players like GE. So on all of that front.

We are happy with the growth we had this quarter considering the macro environment and we are diligent regarding the investments in the expenses.

And Dan just to add a five point. So if you look at it in terms of where revenues landed versus our internal model, we were pretty much spot on an organic basis for Q1 versus what we were looking for in the forecast I would say moderate outperformance in <unk>.

<unk>, which continues to build and I think it will be one of our biggest product launches ever.

I'd say, probably a little bit offset by Turkey, which was marginally worse than we were modeling, notably obviously the lira has collapsed but also.

<unk> seen some reimbursement pressure in Turkey, but I would say aside from that.

It's really it's really about FX right, that's sort of the main delta on a reported basis and obviously not an area, where we can at least in the immediate term offset but we still feel quite good about our ability even mitigate some of those.

Our reported headwinds over the balance of the year.

Great. Thanks, and then maybe.

Ross I wanted to ask you and you talked about.

Something about.

The balance sheet, how are you going to be disciplined and things of that nature, maybe could you just expand on that a bit like how do we think about the burn from here how do we think about like in the future that is more of a focus.

With the volatility in the broader sector coming under pressure about companies that could.

Self finance or extend their runway of cash how do we think about that aspect for Sofia and how far out do you think your current cash balance will last you.

Yes. Thank you.

I will let <unk>.

What gives you some color on when we have.

The cash we used the proceeds of the IPO.

But when it comes to the expenses and the investments.

Again as a reminder, so we are a software company.

Our investments are very much run people right.

And over the last two years, we made I would say significant investments in scaling up our team in terms of tech and science in terms of regulatory and quality in terms of finance legal and the BD and now we're getting a little better.

In the sales side because of what we experienced in the Biopharma space as well as in the U S. Chemical market. So you shouldn't take Exxon that significantly more investments in the next year because our base infrastructure is already speak for proposed so that we can grow accordingly to our plan, but cross maybe you can you want to.

To give some more color on the cash side, yes. So as we as we commented Dan last quarter, we obviously feel quite confident on the level of cash burn and the trajectory, allowing us to certainly have visibility into 2024.

That I would say we have.

Obviously, given the environment you noted we have taken a very I would say comprehensive look at sort of our investments.

As we have so much growth and much of it again, we play in a much more established markets in many of the new emerging players and so we have quite visibility to a number of these opportunities and so we will continue to put investment behind areas, where we will earn a very high return on invested capital, but ultimately to your point if you think.

The Opex base that we've built up today.

Can sustain a much larger company right and so we're making investments around some of the key initiatives you talked about and so I think relative to that you should expect right as revenue ramps.

At the rates, we've talked about historically and again, our aim is to grow organically in that 40% range year on year out.

I think we can certainly absorb quite a bit of that growth and dropped out at pretty attractive incremental margins.

To be able to sustain I would say that cash potentially even longer. We also I would say have a number of efficiency initiatives that we are undergoing in the business.

That through automation in systems.

And upgrades in certain areas I think as well.

Allow for better cash preservation, and so again, we're not going to change our strategy dramatically in this environment just given the visible revenue opportunities that we see and what's in our pipeline.

I would say, we are being diligent and prudent with our capital as one can be NR.

Very mindful of sort of the backdrop and making sure we are.

Managing things for our shareholders effectively.

Great. Thank you and then maybe one more just on North America since I know that's a.

An area, where there's a tremendous amount of opportunity and youre getting some traction could.

Could you just walk through a little bit more color.

On you mentioned Moffitt, just how do we think about the funnel in North America.

Whats kind of baked in how do we think about the contribution this year and kind of whats the upside opportunity as we look over the next couple of years in North America, and I guess, particularly in the U S.

Yes. Thank you for your question.

Probably yes, we went to <unk> and this was one of the questions. We received from the investment community right now our model which is.

Reporting a decentralized where that would be compatible with the U S market, which is a bit more centralized and I think the numbers prove that we are compatible with this model and we're growing quicker in Northern America and in the other regions. So as you pointed out more fit in with.

With triple the consumption as more feet on oncor metallo changed over the last quarters. So we are very proud about is we see as well great traction with other academic centers such as UCSF.

<unk> signed as well as some things that we can dose.

Which are not publicly disclose that ball and we see a lot of demand now than from Central labs, like we mentioned last quarter Ambry genetics.

Being more conversations with.

Tier one.

That's a very well known in the west where our menu offering and the fact that our platform is fully scalable could enable them to enter a new market such as HRD, but well operationally.

The more effective so that they could ask for a better gross margin.

We are optimistic about our northern American.

Future performance and to and I would say that the.

Our pipeline is greater than ever in Northern America.

Got it great I don't think one marine just just on Biopharma you have the asset relationship I know, that's something you've talked about it could become a more material driver broadly, but maybe it's more of a 'twenty two 'twenty three event given the timetable at which these customers sign on but just maybe just give us an update on what the funnel looks like and Biopharma.

How much we can expect it.

To contribute this year and just whats what could drive a faster I guess inflection in that business. Thanks, yes.

Yes. Thanks.

For the question. So indeed, we mentioned AG.

As you can imagine this is related as well as to some extent or HRD capabilities that might go beyond.

And we will speak about <unk>.

Surplus and the planned forced to be a lot at the optical and I think this should give you a cohort done on.

We start to be perceived by the biopharma space or.

Industry.

Is it kind of unique partner to be able to leverage on real work real time data around the world and I think the deep lung study as well as the surplus capabilities that we will be showing the fixture or really lessening that.

As you know capturing and standardizing baytown letting others to produce that very challenging and so far. So she has proven to be the only one being able to do that and I think that pharma starts to be very interested to both our position to be able to leverage on that data pre approval as well as post approval.

And Dan maybe just one reminder, rights of pharma for us tends to be much larger dollar revenue per customer right and so as those relationships ramp and it's factored in obviously to our guidance that will account for some of the larger step ups quarter to quarter over this year and into <unk>.

<unk> 23, and you would traditionally see from Sofia from our clinical business and so just keep in mind again. Some of these deals can be quite sizable and so those step function changes.

Tend to be bigger than what you would expect from us in the past with much of our clinical business. So just a little piece to remind you there on the modeling side it doesn't perfectly correlate with that very nice steady predictable growth.

We've historically had again this is very visible for us, but it's a bit more step function that is linear.

Great. Okay. Thank you very much.

Thank you for that.

Thank you. Our next question comes from <unk> <unk> of Morgan Stanley . Your question. Please.

Hey, guys good morning.

Just to follow up on that train of thought.

Russ one for you on revenue phasing through the year can you just walk us through how you expect the FX dynamic and then some of the large contract phasing.

<unk>, even beyond Astrazeneca and <unk>.

To impact your revenue split between the first half of the year in the second half of the year.

Then a related follow up what exactly are you assuming for the HRD offering I know you mentioned thats off to a stronger than expected start but would that be sort of upside to the low end of the guide or is that already included.

In your current outlook.

So I'll, let <unk> comment on his excitement for the HIV product and its demand on a global basis, because I do think certainly there as it ramps its going to be a material driver of growth for us in the near to medium term, but as you think about the phasing over the course of the year, obviously Q1 was.

Noticeably impacted by FX Youll see a similar or a greater impact in Q2, and then that will begin to moderate in the back half again remember in <unk> of last year is when the Turkish lira in particular.

Collapsed and so that will provide a fair amount of relief on a reported basis that being said to your other comment we do have a number of these significant.

Contracts coming online over the balance of the year and we also have quite a robust pipeline of net new business, that's starting into what we would call routine when it's generating.

Regular revenue daily Q2 is going to be a certainly a nice step up from Q1, but I would still expect as I mentioned last quarter and again as I had said earlier to Dan's question, our organic forecast, obviously, we reiterate it but Q1 played out essentially as we had expected on that basis. So my comment from last quarter is.

Well that the second half will continue to be a bigger contributor that still holds true and we have I would say increased visibility on some of those drivers maybe you or do you want to quickly just comment on HIV, specifically in your sort of enthusiasm there. Yes, I think it suggests is being provided.

One of our best historical loan sheets.

And today, we estimate the total addressable market to over $1 billion.

So to give you some context right we are.

Our core business grew.

Putting COVID-19 related volume aside that 27% quarter on a.

A year on year from Q1, 2021 to Q2, 2020% to 35%.

The revenue level and just to give you some color HRD. Despite was launched only in Q1.

<unk> basically twice faster.

So we are very optimistic about our competing HRT offering today importantly.

You're probably aware right HRD testing is primarily used for ovarian cancer, but in the future given the number of clinical trials that are going ongoing.

People expect this market to be significantly bigger as HRD testing might be used for prostate cancer breast cancer and pancreatic cancer as well so a lot of excitement around that lunch suggests.

And I think in the future you should expect the same type of excitement as we deploy clarify that as well.

Got it.

And then a couple of quick ones on on just.

The macro backdrop here.

Can you just walk us through I know you mentioned the.

The expansion of the contracts with some of these larger cancer centers and traction with pharma, but as you think about sort of the long tail of the onesie <unk> customers so to speak.

Is there any impact there from the inflationary environment or perhaps on budgets, particularly in Europe .

Just yet or are things essentially.

Going along as you expected and then on the on the labor side, among hospitals or perhaps sort of shortfalls in screening volumes.

How does how do those metrics trend relative to perhaps.

To the pandemic.

Yeah.

Thanks stages, so just to be clear when we talk about sort of the macro or the level of volatility for the most part I'm talking about the impact on reported revenue right relative to FX and that's really where if you look at what happened with the Euro Swiss franc and with the lira in the quarter on a reported basis, we were challenged.

On an organic basis, we're seeing no impact frankly from the macro Fortunately even in Europe I would say if you look at again, our net dollar retention, which should be the best sign that the underlying health of the broad business.

140% is certainly world class right. So I think on that and we feel quite good around the underlying environment I would say also we are in.

Entity that tends to provide as a technology enabler.

Efficiency savings improvement to almost all of our customers and so I would say in that we tend to be almost.

A help to them in the current backdrop and certainly I think.

Finding individuals to operate sequences right in certain parts of the world may be at any given time I don't think there's anything to do with the macro can be challenging, but frankly, given we typically work with tier one academic medical centers all over the world. This is not the area, where you're going to see material changes right in <unk>.

We're just saying or demand I mean, right now if we look at some of those largest customers were going out 345 years on contracts.

With high levels of visibility it materially upgraded spend at sort of historical levels and so again I think it's quite a different business.

As a software business than many of the other.

Company is within sort of the broader universe right and so in that I would say.

Our visibility levels again in the duration of our growth tends to be a lot more visible than for most it suggests if I may just two things.

We are in an industry, where our volumes will continue to go up there is no doubt that there will be more genomic testing and that's combining others become more that genomics will become more and more important and given where we're being paid on consumption. That's good for us and.

The second point I would add is that.

Because the menu offering with fueled over time and the scale of our platform.

Almost like irreplaceable now for the <unk> Academy centers, and even for some central labs, and that's why I think you know as.

We disclosed the relationship we're building with <unk>.

We and others are recognizing that now it's better leveraging on our <unk> technology and platform to work with us and be quicker to market and be more.

Savi in terms of expenses, rather than jewelry solutions by themselves right. So I would say the more the industry is not shrink the mortgage is favorable to us.

Got it Super helpful. And then one last one on me for margins you guys.

Last year, you guys had talked about sort of.

A benefit from compute costs from some of your cloud providers.

As you lap those impacts I mean is there anything to be thinking about in terms of the gross margin trajectory through the year.

And then to.

To the extent you mentioned sort of people being really your biggest expense.

Can you walk us through I mean, some of the inflationary impacts here and the degree of pricing power Thats embedded in your customer contracts.

So yes, so maybe before it goes into some of the labor impacts than I.

I can also cover our inflation protection, but but ultimately.

As we think about a number of these elements I would say, we can debris pretty insulated and I think on the labor side right. You've got to think about the fact, we operate a number of different countries like France.

We're in other parts of Europe , where inflationary pressures are not quite as dramatic and so on that I would say relative to our operating spend.

We've had I would say a more favorable.

Mix than than than others, and so again on the on the Opex side overall I would say we've been very targeted with where we put investments we've been very mindful again of the backdrop, but we also do have quite a number of areas that you already called out where there is I would say significant opportunity, where we either have contract in hand.

We've got a pathway to very attractive revenue upside and so again I think fortunate for us.

From a reported revenue basis, the impact of currency the remainder of our having a global business that has left us a bit more protected than others on that and you can see right in the Opex side right. We had a $1 $3 million benefit from FX now quickly on the gross margin side.

The good thing about the cloud right is it doesn't it's not like costs just stopped going down right. So it follows.

Moore's law and so every year there are new things, we can do to continue to drive expansion right and so we made some investments last year. We've got an entire now roadmap of investments for this year into next year.

We did again in Q1 experienced a bit of FX headwind on the gross margin side and Theres not a lot we can do there.

To offset that but ultimately on an underlying basis, we feel quite good about the trend and we still feel quite confident in our ability long term to get to that 70, plus trajectory, which I think again, given our our business mix and having the level of software we have is quite healthy.

Yes to just regarding Europe .

Question regarding the insertion on labor cost.

Youre right details matter right.

When we have been growing.

We cannot make it improve both.

To strategically build our data science team in Switzerland, and fueled our ticketing became friends.

We are quite uniquely position, if you like where we have less competitors who can recruit.

And where we can grow those tenants as they are part of Sofia.

And Ah side, that's the other element I would that is that.

And I think it's clear from our number of sites over the last 18 months, we get invested quite intensively on the human capital side, because we have projects because we were moving to a new partnerships. Because we are building a career path because we wanted to move into our in our platform compatible with a regulated environment.

Now this.

Capital infrastructure, there and so again, you shouldn't expect any big impact in terms of.

The number of employees, we should add into the company. Neither in terms of the cost of the labor.

Got it very helpful guys. Thank you.

Thank you to just have a good day.

Thank you. Our next question comes from Julia Chin of Jpmorgan. Your line is open.

Hi, good morning, guys.

So I wanted to follow up on the U S. Expansion. Obviously, you guys have shown very strong progress and you highlighted the volume ramp this year quite a lap.

Just wondering if you can talk a little more about the pipeline of additional customers, especially across central labs versus academic and how much further acceleration do you expect to drive, especially with the menu expansion here.

Thank you Julia and good morning. So indeed, we are very pleased I would say.

The.

Adoption, we're seeing.

In the U S.

Volume almost doubled.

Year on year, if we compare our Q1 2021 to Q1 2022, which highlights. The fact that we've got really compatible with the U S market.

Three we have demonstrated to be compatible with the academic centers, such as UCSF or more feet, where our business is still growing.

I was mentioning.

Then on more fit our.

Consumption as people physically water consumption up more people on our platform for people, but beyond that as you referred to the centralized which are gathering a lot of samples in the U S. We do a intense conversations now with both of the both angry and in the next month. So you should expect us to speak about others.

You want to control that with Homer.

<unk>.

Elaborating basically development plants and deployment plans HRD being definitively for to that.

But it should be beyond so very optimistic today with what we see.

Needs to still be diligent or cards close to their customers and continue I would tell you as well to build our team are assisting Julia accordingly to the U S specific cities and this is ware.

Our subject matter experts are so important.

Able to build the right trust as well as.

Accelerates if you like the launch of any application into the central lab and.

And I would say just as a follow up.

<unk>.

And there was sort of started to communicate around our strategy in North America I think the theme of decentralization right, we're sort of at the heart of it and I think there was a lot of questions around how we would penetrate some of the more centralized elements in the U S and I would say pretty confidently now if you look at our pipeline and you look at some of the announcements.

We hope to make over the back half of the year and into 2023, we feel quite good about that thesis right evolving to not just be decentralization, but actually powering up some of the top specialty in central labs in the U S. It's probably where a majority of our activity in the pipeline is right now just on a dollar basis in North America.

And I would say that's only grown over the last quarter or two and then again if you think about some of the comments that changes made around labor pressure and other margin pressures.

The easy ways to get gross margin savings is to move to Sofia right on the bioinformatics side I would say as well if you think about many of the other entities that have very narrow pipelines are menus the ability to add menu quickly right in their Ngls lab with Sofia and power up again, a bunch of new.

<unk> capabilities. It is quite unique right and so far I think the current environment.

Where a lot of these entities are evolving and competition remains high and interest remains high and new technology, our value prop is super compelling and I think also.

The question in a lot of entities wanted to.

Get into the data business right or wanted it to be players from a technology standpoint, and the reality is on their own from where they started very hard right and so that's the other places we can help again power up their data strategy and they don't have to build it themselves. They can build it on our backbone right, which again if you look at the technology sector is a hallmark.

Sure.

That's great Super helpful.

And then on care path. That's launching later this year could you maybe help us think about the revenue ramp and how much long term potential we can generate.

Thank you further question Judy Yeah I.

I think the plan is already demonstrating the value of our platform <unk> is like a decentralized for it to be able to capture real time or in real world data to us.

Obviously patients that eventually as well as serve as a platform for the Biopharma industry.

And so this is why we're so excited on presenting.

The outcome or the initial results from this study.

In our school.

Started the study just as a reminder.

In January this year. Since then we are being able to up 19 site across seven countries that signed up already 17, one seven of these sites have been activated we are already being able to follow a 500 patients.

And so the momentum is definitively we struck when it comes to how economically we're going to leverage on that we will see I think we are very.

A variety of options.

Could be leveraging on the data could be leveraging on the model it could be leveraging as an infrastructure with the pharma.

And I would say, yes, you will hear about these things as we deploy this capability in the future. Yes. So just specifically obviously nothing included in the 22 forecasts related to care path and to a degree post launch right it becomes material.

And we have a better sense of sort of the pipeline build and right now, we're obviously engaging with quite a number of institution, but it's obviously too early to give you any formal view on the trajectory, but certainly relative to your comments were quite excited about the multitude of ways will be able to monetize this move in.

It's a pretty material I would say.

Upgrade and the business strategy for US moving again, just from an insight player to a true data player, which is I think on a long term basis in terms of our positioning a very compelling proposition.

Got it great and just a clarification.

Yeah.

<unk> on the Montana motto, how does cap have overlap.

Initiate a multi.

Multimodal campaigns that Youre also co developing with GE.

Thank you for the question Judy.

So with <unk>, we are doing is basically leveraging on our platform and on our surplus capabilities, but that's what genomics capabilities to break data silos not only across institutions, but of course Mortalities right you may remember that Gee.

A software solution that runs data look at into the hospitals close to the MRI and through the city's can't coast Edison and so what we are doing basically is that we are putting characterized and Sofia DBM on top of it is some to be able to combine the two.

<unk> clinical data that we are ready to the computing.

Real time real worth every months around the world in <unk> with the data imaging data that are being produced look at it right.

And so these are things that are we're going to present together with GE at the symposium.

At school and hopefully as we presented to you will see the power of this.

Partnership and distribution team without a capabilities in surplus.

Okay. Thank you for your time today.

Yeah.

Thank you again to ask a question. Please press star one on your Touchtone telephone quest.

Question comes from Mark Massaro BTG. Please go ahead.

This is Dan on for Mark Thanks for taking my question.

How should we think about it he campaign.

Pending the potential ramp up numerous high value product add to your portfolio and I think we've previously talked about mid single digit range growth.

Any color you could get there thanks.

So indeed, thank you for the question. Good morning. So as you may remember, we have different levers right to grow.

The year, so first we land a customer.

And so then we can grow because of.

The volumes going up because of the ASP going up or because of that customer, adding new menu new capabilities to it.

<unk> capabilities using our platform.

So in that sense I think the complete menu offering in a platform like folks yet again to our campaign.

Summers for their multiple applications is something very important.

Over time <unk> been building this menu.

It's the reason why we're unique and we are growing with customers such as more feet on volume basis. They may increase their volumes.

When it comes to the precise numbers I would let Ros answer to you. Yes. So if you think again about the commentary we've made historically.

We're aiming for price right.

Lever in let's say, 3% to 5% range for the business now obviously on a reported level. This quarter you had a lot of noise from FX. So you don't really get to see that but ultimately.

Given again, a unique positioning we have in market, that's typically where we will.

Aim for relative to that driver now.

I will also just say to the degree we're able to get a material increase in volume with the customer right. We can be flexible on price at big scale right and so I.

I would not always expect.

That level of ASP improvement, probably on a net new basis, but more so on legacy stable business as we think about sort of two sets for Sofia is sort of our recurring revenue right, which is our core base, where we talked to you about.

Net dollar retention, where we've got very high level of visibility and we keep growing that base over time, and then you've got the incremental new business coming onto the platform every year and that's where again you may see slightly different dynamics in those two buckets dependant on the solution and dependent on.

The size of that customer maybe to come to the end of the main growth comes from our cash and debt.

Covering in the platform right. So you should think about the new applications.

Being primarily.

<unk> business for us So we're king.

20 end of 2022 and 2023.

Great. Thanks for the time and so I guess, a quick follow up am I able to Kansas Cleburne for your current customer base.

With academic centers.

Large hospitals in Biopharma and for your final how Youre prioritizing.

Different types of partnerships.

Thank you Vivian so we don't disclose.

The specific number of separate segment right, but this gives me the opportunity and the two I'd like some numbers.

So from Q1 2021.

Q1, 2022, we grow the number of.

Platform customers, who are using the best from day in day out from 345 to 384, so demonstrating again that we grow because of our customers I think more volume because of our customers are adopting new applications coming back to a previous question, but that.

Because of having our network expanding right in terms of size and I'm pretty proud to say that.

Year on year, comparing Q1 2021 to Q1 2022, all numbers are going up right spending 40 to 380 584 active customers in the Platts firm 653000 analysis back Q1, 2021 65000 of disease in the platform in Q1.

2022, and coming back to the ASB, which kind of is being reflected in the average revenue per user we grew as well the average revenue per user from $74000 in Q1 2021 to $92000 in Q1 2022 now coming.

Back to some of the.

Punch that Russ mate.

In Northern America, we do see more and more activity with the central lab and so why do we want to disclose how much we do we tend to rollout than we can.

Image sensors. The tendency is that you should expect us to do more and more we central lab.

Okay. Thanks for taking the question.

Thank you Vivian.

At this time I'd like to turn the call back over to Dr. <unk>.

<unk> for closing remarks, Sir.

So thank you all for joining US today. It was an exciting earnings call for US we're very proud of what our team has been able to achieve in our Q1 performance and we hope to see you all soon in our Investor day in New European September I have a good day.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Thanks.

Thank you for standing by and welcome to the Sofia Genetics first quarter fiscal 2020.

Two earnings conference call at this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Be advised that todays call maybe recorded.

If you require any further assistance please press star zero.

I'd now like to hand, the call over to Jennifer <unk> head of Investor Relations.

Good morning, and thank you for joining us on Sofia Genetics Q1 fiscal 2022 earnings call.

NIM is Jennifer <unk> and I'm, the head of Investor Relations at Sofia.

Joining me today are Dr. Yu, Heng Campbell, and co founder and Chief Executive Officer, and Ross <unk>, Our Chief Financial Officer.

Before we get started I would like to remind you that management will make statements. During the call that are forward looking within the scope of U S Federal Securities laws.

Additional information regarding these risks and uncertainties are included in the section entitled cautionary statement regarding forward looking statements.

99 of the report on form 6K filed with the SEC.

Except as required by law and genetics disclaims any intention or obligation to update or revise any forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of its broadcast May 10 2020.

Please note that a replay of this call as well as the earnings release and associated slides will be available on our website in the investors section.

And now I'll turn the call over to you.

Thank you Jen good morning, everyone.

Im happy to be here with you today to share the excellent performance of <unk> during Q1.

As announced last month, we reached an incredible milestone.

Now have over 1 million genomic profile analyzed from the Sofia DBM Vectra.

The strengthening our position as a leading cloud native knowledge sharing platform connecting thousands of healthcare professional toward way.

As one of the founders of Sofia and brings me immense joy to reflect on the progress we have made.

We have come a long way since 2011 from just a handful of people in that 10 square meter room with a vision to democratize data driven maybe seen.

While we're proud of this milestone we are just getting started.

To that end I want to recognize the Sofia employees, who continue to fuel our success every day because without them. None of this would have been placebo.

Privileged to be able to work with such talented individuals who care. So deeply about what we are building ensure mutual pension we're using the power of data analytics and predictive AI to transform the world of health care.

On today's call I will walk through our first quarter business highlights and following Russ will review the group's financial results and business outlook.

But before I go on.

Let me remind you of the six key pillars that continued to guide our long term growth.

They are accelerating the expansion of our network through new customer adoption.

Increasingly TV section within our existing customer base, expanding our menu of offerings developing key partnerships and collaborations leveraging our platform to drive further growth with biopharma and exiting operationally within Sofia.

Now, let's begin with the first pillar, we have had a solid start to 2022 with customer adoption and network extension healthcare institutions. All over the work are continuing to recognize the importance of using data and analytics to drive decision, making more than ever.

It bears reiterating that Sofia is a leading cloud native platform.

Difficult global size and scale that enables healthcare institutions to turn complex with data into deep insights that can improve patient diagnosis and outcomes.

The Sofia. These permits are matched in the market and we are the first movers in this unique category of software, which has resumed need to deeply with the <unk>.

History at large.

Furthermore, our platform is optimally designed to support rapid growth and benefit from network effects as we aggressively on boards more healthcare and license institutions to the Sofia network more data generated on the Sofia DBM platform, which ultimately leads to richer insights that can be generated and Democrats.

So new institutions.

Since advising them to join our network as well.

The platform improves in this case as more data is analyzed which importantly translates to more patients benefiting from the practice of data driven medicine over time.

We continue to build long lasting relationship with new customers to increase and diversify the platform network looking at Q1, <unk> customer growth and global scale, we added nine net new logos.

The strong momentum on boarding new customers globally across North America, Europe , Asia Pacific and Latin America demonstrates our strong execution and the universal nature of a compelling offering.

Moving to the next pillar of increasing utilization within our existing customer base.

Broadening and deepening our existing customer relationship is crucial.

As customers continue to benefit from the value of the Sofia platform there is utilization increases.

And how do we know.

<unk>, providing real value to our customers.

This is evidenced by our exceptional net dollar retention rate, which is a percentage of the large retailers across customers.

Our annualized net dollar retention rate has exceeded 140% for the past two quarters consecutively, indicating that our customer base has been consistently expanding their business with us.

Russ will get more into this later on during the call.

Our sales strategy revolves around ensuring that new and existing customers see the full range of use cases that the Sofia DBM platform can provide.

Gross application consumption is a key to rising material benefits between us and our customers expanding key customers wins into transformative long term business relationships.

During the quarter, we took several exciting expansion deals one of which was we the key longstanding customer multi cancer center in the U S will nearly triple their consumption.

Combined with the additional momentum we have seen across other key customers in the U S or North America revenue nearly doubled.

Additionally, we are in the midst of signing an expansion deal with another longstanding customer does that the largest medical diagnostic company in Latin America.

Total recurring platform customers grew to 384 in the first quarter of this year.

345 customers in the first quarter of 2021.

The total number of classroom analysis increased to over 65000 in the first quarter up from 53000 in LNG in the first quarter of 2021, representing a growth rate of 23% year over year.

It is key consumption trends have continued to be strong despite challenging comparisons from the prior year period due to COVID-19 related impact.

And now on to our third pillar of menu expansion nothing is more core to our mission and innovating the platform.

We consistently provide users with new content, and we're combining and analyzing data in more ways than ever before.

Having a robust ecosystem is essential for delivering our platform vision and we currently have the most exciting product roadmap in our company's history.

Last quarter, we spoke a lot about sofia as newly launching charging solution.

As well as the soon to be deployed.

The HR the solution has already been adopted by an abundance of customers across the globe and is on track to be one of our best <unk> launches in history.

With respect to care path.

We would note. This key deployment is still on track for later this year.

Deploy for.

Rational clinical study that is validating predictive model fueling Cooper has been progressing well.

<unk> three additional sites, including Roswell Park comprehensive cancer Center in New York are signed up to participate bringing the total to 90 nights across seven countries.

Nearly 500 patients have already been recruited for the study to date, which is tremendous.

We expect to abate.

On our preliminary findings at ESCO next month's <unk> with <unk>, we hope to see many of you there.

Speaking of which this leads me into Sofia next pillar of developing key partnerships and collaborations at Sophia we looked at work alone.

Our core we are an enabler and a partner which is indicative of the versatility of our platform.

We're achieving momentum with our partners and enabling our shirts customer base to interpret complex data sets and generate novel insights.

<unk> care for example has been a fantastic partners to so far.

Our partnership has been going extremely well and we continue to see significant commercial traction in joint customer engagements.

We're proud of our partnership with them and the trust that you have put in our team and Sofia DBM platform to help accelerate future growth.

We're excited about the opportunity to continue partnering with organizations, leading the data transformation on Fidelis care as we leverage our combined capabilities to support innovation.

Next I want to quickly touch on our pillar of strengthening for <unk> presence in the Biopharma space.

We continue to promote our growing menu of offerings, which we believe will uniquely position us.

<unk> for example is a product we expect to support Biopharma to ensure the right patients collected for clinical trial.

We're encouraged by recent discussions and it is clear that our value proposition to Biopharma companies continues to grow with the expanding scale of a multimodal data and continuously improving predictive algorithms.

Last quarter, we spoke about our partnership with Astrazeneca to expand access.

HRD testing of course laboratories and institutions around the world.

We're excited to collaborate with other Biopharma partners regarding our capability to develop and deploy highly impactful solutions.

With a focus on patients and <unk> approaches.

And now on the final key pillar, which is exceeding operationally within Sofia.

One of our core strengths is operating as a unified team in everything that we do so via continues to review its organic growth initiatives and M&A pipeline and is focused on opportunities that will enhance the capabilities of our robust platform.

Over the longer term, we are confident in our ability to execute a targeted focus on scaling the business to position it well into the future.

And we don't I will turn the call over raws to get into the numbers.

<unk> based business model, which means our reported revenue has a direct relationship with the consumption of our platform during the period.

<unk> benefit of this model is we can grow materially with our customers over time as evidenced by our strong net dollar retention. Furthermore, we also have that very high level of visibility as our contracts tend to contain contractual minimums and our churn remains impressively low overall this should.

<unk> heightened confidence in our ability to sustain growth.

The started the year reflected strong consumption trends as Q1 revenue grew 21% year over year to $10 9 million.

FX headwinds, which negatively impact growth by approximately 850 basis points, excluding the impact from Covid related revenues constant currency revenue growth was approximately 35% for the period. This constant currency performance was strong despite a tough macroeconomic environment.

<unk> compared to the prior year period from a geographical standpoint, we experienced challenges in our Turkish market, where a devaluation of the Turkish lira and reimbursement uncertainty resulted in a low single digit headwind to first quarter growth on a positive note our north American business continued to be a standout.

With revenues in the period, nearly doubling relative to the prior year period.

Remain incredibly encouraged by our momentum and nor am and look forward to providing future updates on this important market.

As Jeremy mentioned earlier, our net dollar retention remains above 140% on a trailing 12 month basis and its considered exceptional among top software and cloud peers.

Stickiness of our customer base has served as the foundation for us to build upon as our customers continue to expand our annualized revenue churn remains approximately 3% again this should provide confidence in the sustainability of the underlying momentum of our business.

Average revenue per platform customer increased to $92000 compared to $74000 for the prior year period.

Adjusted gross margin was 64% for the first quarter of 2022 compared to 63% in the prior year period of note unfavorable movements in exchange rates negatively impacted gross margin by approximately 170 basis points in the quarter.

Total operating expenses for the first quarter of 2022 were $31 7 million compared to $19 7 million.

In the first quarter of 2021, and <unk> basis operating expenses were positively impacted by foreign exchange trends by approximately $1 $3 million in the current period.

Engineers and data scientists and our.

<unk> will further expand our multimodal data capabilities versus the competition.

<unk> marketing expenses for the first quarter were $7 9 million compared to $4 $9 million in the first quarter of 2021 general and administrative expenses.

The first quarter were $14 4 million compared to $8 $6 million in the first quarter of 2021 of note a majority of the increase in expenditures is related to our scale up as a public company.

First quarter was $25 5 million or <unk> 40 per share compared to $12 7 million or 26 per share in the first quarter of 2021.

<unk> net loss in the first quarter of 2022 was $21 5 million or <unk> 34 per share compared to $11 7 million or 24 cents per share in the first quarter of 2021 cash and cash equivalents were approximately $243 5 million as of March 30 <unk>.

<unk> 2022 of note, we continue to be disciplined with respect to our growth investments and have put in place numerous internal initiatives in order to enhance productivity and efficiency with an eye toward maximizing our capital runway without sacrificing long term growth objectives, we are committed to our shareholders to remain incredibly.

<unk> diligent and the current macro environment with respect to organic and inorganic investments.

Our functional currency the Swiss franc to that degree fluctuations in the euro lire and Frank against the dollar will continue to impact our reported results, including the revenue guidance. We provided previously in January now turning to our updated view of guidance. The company maintains expectation of 30% to 35%.

Constant currency revenue growth for 2022 remains unchanged.

And in our business as we continue to see very encouraging trends.

Pipeline with respect to <unk> biopharma, an HRD related opportunities as well as exciting prospects amongst our partner ecosystem.

Note, our underlying revenue visibility remains very high with respect to our existing recurring platform customers that constitute a majority of our revenue.

Our vision for Sanofi as long term future remains unchanged, we are disruptive growth company with substantial potential and our results demonstrate high quality durable growth. So if he is a leader in the sizable yet emerging market of data driven medicine with the right platform technology people and strategic partners to execute our ambitious plans.

We are energized by the future more than ever as we start the new Sofia fiscal year. This concludes my remarks, So I will now pass it back over to <unk>.

Thank you Russ.

We're very pleased with this quarter's performance and remain confident in the business momentum as we build an ever stronger Sofia in the remainder of 2022 and beyond.

Before I close today's call I am thrilled to announce that we are taking the first few steps.

She journey.

At Sophia, we placed patient care at the heart of all of our decisions and our success is deep rooted in our record values and the positive impact we have across all levels of the organization.

This is critical to our mission of creating a wiser and most sustainable healthcare system.

Our forthcoming impact report will provide a deeper look into <unk> sustainability and performance in key priority areas and is expected to be available. Later this month on our website. We look forward to continuing to update you more on this front.

Additionally, we're also excited to announce that we are hosting our first ever Investor Day in New York City on September 20 <unk>.

We invite the investor community to attend in person gain a better understanding of Sofia.

Year, the latest news interventions and long term opportunities.

If you would like to request an invitation please E mail.

Our Sofia genetics outcome.

And finally, we look forward to seeing some of you at the Jpmorgan technology Media and Communications conference in Boston coming up in a few weeks.

Thank you all again for joining us on our earnings call today, and we that Ross and I are happy to take your questions and we will turn it back over the operator.

Operator.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key once again Thats star one on your Touchtone telephone to ask a question. Please standby, while we compile the Q&A roster.

Our first question comes from the line of Dan Brennan of Cowen Your question. Please.

Great. Thank you for taking the questions, maybe just to kick it off given.

The macro in Q1, just be interested to see how did the quarter play out when you think about versus your own expectations.

Kind of what came in maybe better maybe where it was more challenged just kind of maybe walk us through a little bit how how things played out given the difficult environment.

Yes, good morning, and thank you for your question Dan.

So indeed, we have knowledge that the macro environment is challenging around the workplace for everyone.

Despite that they would say that given Sofia.

More Delaware, where very much like a software company being paid on consumption.

The resolution being pretty good.

And we haven't seen any major surprise.

So to give you. Some color then the growth is being pretty strong in Northern America <unk> nearly doubled.

The number of analyses that are being run in the platform and when it comes to these areas, we have a consistent and solid growth across these arrest, but solid two more on chromatology, a really thorough cancer as well as inherited disorders.

Maybe one <unk> was that HRD capabilities that we launched.

Early this year, even go further than the volumes grow in the other these are risks so all in all despite I would say the current macroeconomic environment. Good results on our site no impact on Covid and of course this means and I think your question Thats what triggered that.

On how we are making use of our proceeds right in terms of further investments then.

As you know so if he is being always pretty discipline and diligence in using our proceeds we don't invest in the lab, we don't invest in Capex. We are again, our software business. So we continue to invest diligently on things, where we do see future growth such as the U S and the Biopharma market such.

As a regulated environment, where we believe that platforms like for <unk>.

Benefit from a more regulated environment, where <unk> will probably be more favorable than what it is today such as awards were immediately mobile capabilities for decision making.

Extremely important unless the northeast.

Awards were as well one is it takes a year kind of grow quicker partnering with players like GE. So on all of that front.

We are happy with the growth we had this this quarter considering the macro environment and we are diligent regarding the investments in the expenses.

And Dan just to add a final point. So if you look at it in terms of where revenues landed versus our internal model, we were pretty much spot on an organic basis for Q1 versus what we were looking for in the forecast I would say moderate outperformance in HRD, which continues to build that.

I think it will be one of our biggest product launches ever and I would say, probably a little bit offset by Turkey, which was marginally worse than we were modeling notably.

The lira has collapsed but also.

You've seen some reimbursement pressure in Turkey, but I would say aside from that it is.

Really it's really about FX right, that's sort of the main delta on a reported basis and obviously not an area, where we can at least in the immediate term offset but we still feel quite good about our ability EBIT mitigate some of those.

Reported headwinds over the balance of the year.

Great. Thanks, and then maybe.

Ross I wanted to ask you and you talked about.

Something about.

The balance sheet, and how youre going to be disciplined and things of that nature, maybe could you just expand on that a bit like how do we think about the burn from here how do we think about like in the future that is more of a focus with the volatility in the broader sector coming under pressure about companies that could sell.

<unk> finance or extend their runway of cash so how do we think about that aspect for Sofia and how far out do you think your current cash balance will last you.

Yes. Thank you.

I will let <unk>.

Ill give you some color on Q1, we have a strict.

Cash and cash we used the proceeds of the IPO.

But when it comes to the expenses and investments.

Again as a reminder, so we are a software company.

Our investments are very much run people right.

And over the last two years, we made I would say significant investments in scaling up our teams in term in terms of tech and science in terms of regulatory and quality in terms of finance legal and BD and now we're scaling a little data.

In the sales side because of what we experienced in the Biopharma space as well as in the U S. Chemical market. So you Shouldnt expect from us significantly more investments in the next year because our base infrastructure is already fit for proposed so that we can grow accordingly to our plan, but growth maybe you can if you want to.

Give some more color on the cash side, yes, so as we as we commented Dan last quarter, we obviously feel quite confident on the level of cash burn and the trajectory, allowing us to certainly have visibility into 2024th on that I would say we have.

Obviously, given the environment you noted we have taken a very I would say comprehensive look at sort of our investments. The reality is we have so much growth and much of it again, we've played a much more established market and many of the new emerging players and so we have quite visibility too.

Number of these opportunities and so we will continue to put investment behind areas, where we will earn a very high return on invested capital, but ultimately to your point. If you think about the Opex base that we've built up today it could sustain a much larger company right and so we're making investments around some of the key initiatives you already talked about.

And so I think relative to that you should expect right as revenue ramps.

At the rates, we've talked about historically and again, our aim is to grow organically in that 40% range year in year out.

I think we can certainly absorb quite a bit of that growth and dropped out at pretty attractive incremental margins.

To be able to sustain I would say that cash potentially even longer.

Also I would say have a number of efficiency initiatives that we are undergoing in the business.

That through automation in systems.

And upgrades in certain areas I think as well could allow for better cash preservation and so again, we're not going to change our strategy dramatically in this environment just given the visible revenue opportunities that we see and what's in our pipeline.

But I would say, we are being diligent and prudent with our capital as one can be NR.

We're very mindful of sort of the backdrop and making sure we are.

Managing things for our shareholders effectively.

Great. Thank you and then maybe one more just on North America since I know that's a.

An area, where there's a tremendous amount of opportunity and youre getting some traction.

You just walk through a little bit more color anything on you mentioned moffitt just how do we think about the funnel in North America.

Whats kind of baked in how do we think about the contribution this year and kind of whats the upside opportunity as we look over the next couple of years in North America.

Particularly in the U S.

Yes. Thank you for your question then.

Probably yes, we went to <unk> and this was one of the questions. We received from the investment community right now our model which is.

Supporting a decentralized where that would be compatible with the U S market, which is a bit more centralized and I think the numbers prove that we are compatible with this model and we're growing quicker in Northern America and in the other regions. So as you pointed out more feet, indeed with triple the consumption as more fitness.

Metallurgy.

Over the last quarters. So we are very proud about is we see as well great traction with other academic centers, such as UCSF, we signed as well as some lanes that we cannot disclose.

Which are not publicly disposable and we see a lot of demand now.

From a central lab like we mentioned.

Last quarter Ambry genetics.

We're having more conversations with.

Tier one.

That's a very well known in the U S, where our menu offering and the fact that our platform is fully scalable could enable <unk> to enter a new market such as HRD, but thats well operationally.

The more effective so that they could ask for a better gross margins. So we are optimistic about our northern American.

Future performance and to and I would say that the.

<unk> pipeline is greater than ever in Northern America.

Got it great maybe don't think one marine just just on Biopharma you have the asset relationship I know, that's something you've talked about that could become a more material driver broadly, but maybe it's more of a 'twenty two 'twenty three event given the current table at which these customers sign on but just maybe just give us an update on what the funnel looks like and Biopharma.

How much we can expect it.

To contribute this year and just what.

What could drive a faster I guess inflection in that business yes.

Yes. Thank you for the question. So indeed, we mentioned AG.

And as you can imagine this is related as well to some extent or HRD capabilities that might go beyond.

And we will speak about.

TERP bus and the planned for it to be a lot at tactical and I think this should give you a cohort done on.

Why we start to be perceived by the Biopharma space.

Industry.

As a kind of unique partner to be able to leverage on real work real time data around the world and I think the deep plant study as well as the <unk> capabilities that we will be showing the fixture or really lessening that as you know capturing and standardizing data listing.

Others to produce that very challenging and so far so.

<unk> proven to be the only one being able to do that and I think the pharma starts to be very interested to both our position to be able to leverage that data pre approval as well as post approval.

Thanks.

You would traditionally see from Sofia from our clinical business and so just keep in mind again. Some of these deals can be quite sizable and so those step function changes.

We've historically had again this is very visible for us, but it is a bit more step function that is linear.

Great. Okay. Thank you very much.

Thank you that.

Thank you. Our next question comes from <unk> <unk> of Morgan Stanley . Your question. Please.

Hey, guys good morning.

Maybe just to follow up on that vein of thought.

Russ one for you on revenue phasing through the year.

Can you just walk us through how you expect the FX dynamic and then some of the large contract phasing, perhaps even be on Astrazeneca and Ann Marie.

The impact to our revenue split between the first half of the year in the second half of the year.

And then a related follow up what exactly are you assuming for the HRD offering I know you mentioned that's off to a stronger than expected start but would that be sort of upside to the low end of the guide or is that already included in your current outlook.

Noticeably impacted by FX Youll see a similar or greater impact in Q2, and then that will begin to moderate in the back half again remember in <unk> of last year is when the Turkish lira in particular.

<unk>, so that will provide a fair amount of relief on a reported basis that being said to your other comment we do have a number of these significant.

Contracts coming online over the balance of the year and we also have quite a robust pipeline of net new business, that's starting into what we would call routine when it's generating.

Regular revenue daily Q2 is going to be certainly a nice step up from Q1, but I would still expect as I mentioned last quarter and again as I had said earlier to Dan's question, our organic forecast, obviously, we reiterated but Q1 played out essentially as we had expected on that basis. So my comment from last quarter.

Well that the second half will continue to be a bigger contributor that still holds true and we have I would say increased visibility on some of those drivers maybe you or do you want to quickly comment on HIV, specifically in your sort of enthusiasm there, yes, I think its strategy to just as being provided.

One of our best historical launches.

And today, we estimate the total addressable market to over $1 billion.

So to give you some context right we said.

Our core business grew putting COVID-19 related volume aside that 27% quarter on well excuse me a year on year from Q1, 2021 to Q2, 2020% to 35%.

The revenue level and just to give you some color HRD. Despite was launched only in Q1.

<unk> twice faster.

So we are very optimistic about our competing HRP offering today importantly.

You're probably aware right HRD testing is primarily used for ovarian cancer, but in the future given the number of clinical trials that are going ongoing.

People expect this market to be significantly bigger as HRD testing might be used for prostate cancer breast cancer and pancreatic cancer as well so a lot of excitement around that lunch suggests.

And I think in the future you should expect the same type of excitement as we deploy clarify that as well.

Got it.

A couple of quick ones on on just the.

The macro backdrop here.

Can you just walk us through I know you mentioned the.

The expansion of the contracts with some of these larger cancer centers and traction with pharma, but as you think about sort of the long tail of the onesie <unk> customers so to speak.

Is there any impact there from the inflationary environment or perhaps on budget, particularly in Europe .

Just yet or are things essentially.

Going along as you expected and then on the on the labor side, among hospitals or perhaps sort of shortfalls in screening volumes.

How does how do those metrics trend relative to perhaps.

To the pandemic.

We were challenged on an organic basis, we're seeing no impact frankly from the macro Fortunately even in Europe I would say if you look at again, our net dollar retention, which should be the best sign that the underlying health of the broad business that 140% is certainly world class right. So I think.

On that and we feel quite good around the underlying environment I would say also we are in <unk>.

Entity that tends to provide as a technology enabler.

<unk> see savings improvement to almost all of our customers and so I would say in that we tend to be almost.

A help to them in the current backdrop and certainly I think.

Finding individuals to operate sequences right in certain parts of the world maybe at any given time I don't think it says anything to do with the macro can be challenging, but frankly, given we typically work with tier one academic medical centers all over the world. This is not the area, where you're going to see material changes right in Perth.

<unk> our demand I mean, right now if we look at some of those largest customers were going out 345 years on contracts.

With high levels of visibility it materially upgraded spend at sort of historical levels and so again I think it's quite a different business.

As a software business and many of the other <unk>.

<unk> is within sort of the broader universe right and so in that I would say our visibility levels again in the duration of our growth tends to be a lot more visible.

And for most it suggests if I may just have two things.

We are in an industry, where our volumes will continue to go up right. There is no doubt that there will be more genomic testing and that combining other modalities with genomics will become more and more important and given that we were being paid on consumption that is good for us and the.

The second point I would add is that the.

Because the menu offering with fueled over time and the scale of our platform.

We are almost like irreplaceable now for the big academic centers and even for some central labs and that's why I think you know as we disclosed the relationship we're building with <unk>.

Henri and others are recognizing that now better leveraging on our <unk> technology and platform to work with us and be quicker than the market and be more savvy.

Savi in terms of expenses, rather than fueled solutions by themselves right. So I would say the more the industry is maturing the mortgage is favorable to us.

Got it Super helpful. And then one last one on me for margins Joe days.

Last year, you guys had talked about sort of.

A benefit from compute costs from some of your cloud providers.

As you lap those impacts I mean is there anything to be thinking about in terms of the gross margin trajectory through the year.

And then to.

To the extent, you're giving them.

Mentioned sort of people being really your biggest expense.

Can you walk us through some of the inflationary impacts here and the degree of pricing power Thats embedded in your customer contracts.

So yes, so maybe before it goes into some of the labor impacts than I.

I can also cover our inflation protection, but but ultimately.

As we think about a number of these elements I would say we tend to be pretty insulated and I think on the labor side right and you got to think about the fact, we operate a number of different countries like France.

We're in other parts of Europe , where inflationary pressures are not quite as dramatic and so on that I would say relative to our operating spend.

We've had I would say a more favorable.

We've got a pathway to very attractive revenue upside and so.

Again, I think fortunate for us aside from a reported revenue basis the impact of currency.

The remainder of our having a global business has left us a bit more protected than others on that and you can see right in the Opex side right. We had a $1 $3 million benefit from FX now quickly on the gross margin side.

The good thing about the cloud right is it doesn't it's not like costs just stopped going down right. So it follows.

On the gross margin side and Theres not a lot we can do there.

Just regarding your comp.

Regarding the insertion on labor cost.

Youre right details matter right and when we have been growing yet we cannot make it improve both.

Strategically build our data science team in Switzerland, and fueled our ticketing became friends where are we.

We are quite uniquely position, if you like where we have less competitors, who can recruit talents and where we can grow those tenants as they are part of Sofia and aside that the other element I would that is that.

I think it's clear from our number of sites over the last 18 months, we have invested quite intensively on the human capital side, because we have projects because we were moving to new partnerships. Because we were building a career path because we wanted to move into our in our platform compatible with a regulated environment and to reflect.

Now this human capital infrastructure, there and so again, you shouldn't expect any big impact in terms of.

The number of employees, we should add into the company. Neither in terms of the cost of the labor.

Got it very helpful guys. Thank you.

Thank you for such as have a good day.

Thank you. Our next question comes from Julia Chin of Jpmorgan. Your line is open.

Hi, good morning, guys.

So I wanted to follow up on the U S. Expansion. Obviously, you guys have shown very strong progress and you highlighted the volume ramp this quarter lap.

I'm just wondering if you can talk a little more about the pipeline of additional customers, especially across central labs versus academic and how much further acceleration do you expect to drive.

With the menu expansion here.

Thank you Judy and good morning. So indeed, we are very pleased I would say.

<unk>.

Adoption, we're seeing in the U S.

<unk> almost doubled right year on year, if we compare our Q1 2021 to Q1 2022, which highlights. The fact that we are really compatible with the U S. Market. Obviously, we have demonstrated to be compatible with the academic centers such as UCSF are more fit where our business is still growing.

As I was mentioning.

One on more fit our.

Consumption as people physically water consumption up more people on our platform for Es triples, but beyond that as you referred to the central labs, which are gathering a lot of samples in the U S. We do have intense conversations now with both of the both angry and in the next month. So you should expect us to speak about others.

You want to control that with whom we are.

Elaborating basically development plants and deployment plans HRD being definitively for to that.

But it should be beyond so very optimistic today with what we see.

Needs to still be diligent work hard at close to their customers and continue I would tell you as well to build our team are assisting Julia accordingly to the U S specific cities and this is ware.

Our subject matter experts are so important.

Able to build the right trust as well as.

Accelerates if you like the launch of any application into the central lab and.

And I would say just as a follow up you know when we.

And I would say that's only grown over the last quarter or two and then again if you think about some of the comments that <unk> made around labor pressure and other margin pressures.

<unk> to add menu quickly right in their Ngls lab with Sofia and power up again, a bunch of new capabilities. It is quite unique right and so far I think the current environment.

Where a lot of these entities are evolving and competition remains high and interest remains high and new technology, our value prop is super compelling and I think also.

The question in a lot of entities wanted too.

Get into the data business right or wanted to be players from a technology standpoint, and the reality is on their own from where they start it's very hard right and so that's the other places we can help again power up their data strategy and they don't have to build it themselves. They can build it on our backbone right, which again if you look at the technology sector is a hallmark.

<unk>.

That's great Super helpful.

And then on care path. That's launching later this year could you maybe help us think about the revenue ramp and how much long term potential we can generate.

Thank you further question Jude, Yes, I think the plan is already demonstrating the value of our platform <unk> 14, if like a decentralized for us to be able to capture real time or in real world data to add obviously patience, but eventually as well as serve as a platform for the Biopharma industry.

And so this is why we're so excited on presenting the outcome or the initial results from this study.

In our school.

We started this study just as a reminder.

In January this year.

<unk>, we are being able to up 19 sites across seven countries that signed up already 17, one seven of these sites have been activated we are already being able to follow a 500 patients.

And so.

The momentum is definitively we struck when it comes to how economically we're going to leverage on that we will see I think we have very very a variety of options.

It could be leveraging on the data could be leveraging on the model it could be leveraging as an infrastructure with the pharma.

And I would say, yes, you will hear about these things.

<unk> deployed this capability in the future, yes. So just specifically obviously nothing included in the 22 forecast related to care path and to a degree post launch right it becomes material.

We have a better sense of sort of the pipeline building right now, we're obviously engaging with quite a number of institution, but it's obviously too early to give you any.

Formal view on the trajectory, but certainly relative to your comments were quite excited about the multitude of ways will be able to monetize this move and it's a pretty material I would say.

Got it great and just a clarification.

Yeah.

<unk> been on the model.

Campath overlap.

Initiate a.

Multimodal campaign.

So co developing with GE.

Thank you for the question Judy so.

So with <unk>, we are doing is basically leveraging on our platform and on our surplus capabilities, but that's about genomics capabilities to break data silos, not only across institutions, but across modalities right you may remember that Gee.

A software solution that runs data look at into the hospitals close to the MRI and <unk> to the steep discounts coast Edison and so what we are doing basically is that we are putting characterize and Sofia DBM.

Of Edison to be able to combine the genomic and clinical data that we are ready to the computing.

Real time real worth every months around the world in <unk> with the data imaging data that are being produced locally right.

And so these are things that are we're going to present together with GE at the symposium.

And hopefully as we presented to you will see the power of this.

Partnership and the community more of our capabilities in surplus.

Okay. Thank you for your time today.

Yeah.

Thank you again to ask a question. Please press star one on your Touchtone telephone quest.

Question comes from Mark Massaro <unk>.

Please go ahead.

This is Ian on for Mark Thanks for taking the question.

How should we think about is pending with the potential ramp of some new work.

Our new product add to your portfolio.

Thank you previously talked about mid single digit range growth.

Just any color you could get there thanks.

So in the GDN. Thank you for the question. Good morning. So as you may remember, we have different levers right to grow as a taxpayer.

First we learned in our customer.

And so then we can grow because of the.

The volume is going up because of ESP going up or because of <unk>.

That is customers, adding new menu new capabilities to it.

Lab capabilities using our platform.

So in that sense, adding a complete menu offering in a platform like books, yet again to our combined customers for their multiple applications is something very important and this is where over time <unk> been building. This menu and it's the reason why we're unique and we are growing with customers such as more feet on volume based.

They may increase their volumes.

When it comes to the precise numbers I would let Ros answer to you. Yes. So if you think again about the commentary we've made historically.

Amy for price right.

Lever in let's say, 3% to 5% range for the business now obviously on a reported level. This quarter you had a lot of noise from FX. So you don't really get to see that but ultimately.

Given again, a unique positioning we have in market, that's typically where we will.

Aim for relative to that driver now I will also just say to the degree we're able to get a material increase in volume with the customer right. We can be flexible on price at big scale right and so I.

I would not always expect.

Net dollar retention, where we've got very high level of visibility and we can keep growing that base over time, and then you've got the incremental new business coming onto the platform every year and that's where again you may see slightly different dynamics in those two buckets dependant on the solution and dependent on.

The size of that customer maybe to come to the end of the main growth comes from our cash and debt.

Covering in the platform right. So you should think about the new applications as being primarily.

Driving business for silver King.

From the end of 2022 and 2023.

Great. Thanks for the time and so just a quick follow up.

Thank you.

Your current customer base.

With academic centers.

Large hospitals in Biopharma and for your final how you're prioritizing.

Different types of partnerships.

Thank you Vivian so we don't disclose.

The specific numbers separate hikmet right, but this gives me the opportunity to isolate some numbers. So from Q1 2021 to Q1 2022, we grow the number of.

Platform customers, who are using the best from Dean they out from 345 to 384, so demonstrating again that we grow because of our customers I think more volume because of our customers adopting new applications coming back to a previous question, but that was it.

Cost of having our network expanding right in terms of size and I'm pretty proud to say that.

<unk> 22, and coming back to the <unk>.

ASP, which kind of is being reflected in the average revenue per user we grew as well the average revenue per user from $74000. In Q1 2021 to $92000 in Q1, 2022, now coming back to some of the.

Once that Russ mate.

In Northern America, we do see more and more activity with the central labs, and so why do we want to disclose how much we do with central lab.

Image sensors. The tendency is that you should expect us to do more and more we central lab.

Okay. Thanks for taking the question.

Okay.

Thank you Vivian.

At this time I'd like to turn the call back over to Dr. <unk> for closing remarks, Sir.

So thank you all for joining US today was an exciting earnings goal for US. We are very proud of what our team is being able to achieve and our Q1 performance and we hope to see you all soon in our Investor day in New European September I have a good day.

This concludes today's conference call. Thank you for participating you may now disconnect.

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