Full Year 2022 Sophia Genetics SA Earnings Call
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Speaker 2: Good morning and welcome to Sophia Genetics's fourth quarter fiscal 2022 earnings call. All participants will be in listen only mode.
Speaker 2: Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions.
Speaker 2: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Katherine Baelon, head of investor relations at Sofia Genetics.
Speaker 2: Please go ahead.
Speaker 3: Good morning, and thank you for joining us on the Sophia Genetics Q4 fiscal 2022 earnings call. My name is Catherine Belon, and I am head of investor relations at Sophia Genetics.
Speaker 3: Joining me today are Dr. Jurgi Kamblam, our co-founder and Chief Executive Officer, and Ross Mueken, our Chief Financial Officer.
Speaker 3: Before we get started, I'd like to remind you that the management team will make statements during this call that are forward-looking within the meaning of U.S. federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
Speaker 3: Additional information regarding these risks and uncertainties appear in the section entitled Cautionary Statement Regarding Forward Looking Statements, Inform 20F on file with the SEC.
Speaker 3: Except as required by law, so FIA genetics disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements whether because of new information, future events or otherwise.
Speaker 3: This conference call contains time-sensitive information and is accurate only as of its broadcast, March 7, 2023.
Speaker 3: This presentation includes non-IFRS financial measures. These measures are calculated by management and do not have any standardized meaning under IFRS. These non-IFRS measures supplement IFRS measures.
Speaker 3: but should not be viewed as substitutes for IFRS measures.
Speaker 3: We have included a reconciliation of IFRS measures to non-IFRS measures in our press release issued this morning, which is available on our website.
Speaker 3: Please note both the replay of this call and the earnings release will be available on our website in the investors section. With that, I will now turn it over to Yurgy.
Speaker 4: Thank you, Catherine, and good morning, everyone.
Speaker 4: 2022 was a tremendous year for Sophia genetics.
Speaker 4: And I am pleased to share with you today the momentum that we built in the period, including a strong finish to our fourth quarter.
Speaker 4: On today's call, I will review our 2022 year as a whole and the organic growth acceleration we experienced throughout the year and into Q4.
Speaker 4: Next, I will share my thoughts about the key deliverables we executed upon as a company in 2022 and tie our focus areas back to a discussion with you about fiscal discipline at Sophia Genet.
Speaker 4: as demonstrated by our third consecutive quarter of improved operating leverage.
Speaker 4: Then, I will touch on our partnership that fuels our ecosystem and wrap up with our six strategic pillars, guiding Sofia's long-term trajectory towards being the preferred cloud native software analytics platform for healthcare participants globally.
Speaker 4: I will then turn it over to our Chief Financial Officer, Ross McEn. We will provide a more detailed look into financial results for the period and our outlook for 2023. And we will end by taking your questions.
Speaker 4: Please join me in congratulating Ross who in addition to being our ever capable CFO is being promoted as of March 15th 2023 to Chief Operating Officer. Congratulations Ross!
Speaker 4: Let me start by reminding you that when Sophia Genetics went public, investors had one expectation and three questions for us as a company.
Speaker 4: The major expectation was for Sofia to deliver on its top-line growth commitment.
Speaker 4: The major expectation was for Sofia to deliver on its top-line growth commitment, while the three questions were
Speaker 4: One, while successful so far in Europe , is the Asian-Eatic decentralized model compatible with the US market.
Speaker 4: Two, would Sophia Genetics be able to demonstrate that their anonimide genomic profile data collected in the course of their clinical business would have value beyond clinical, especially to biopharma.
Speaker 4: Three, goods of Hyagenetic show that their AI and machine learning algorithms would be applicable across multiple modalities beyond just genomics.
Speaker 4: I would suggest today that given the momentum we have demonstrated this year, we have not only delivered on our growth commitments but can also confidently answer yes to all three questions.
Speaker 4: all while having to overcome the unexpected challenges associated with both a volatile macro environment and a constrained capital marketplace.
Speaker 4: So we at Sofia have taken on these lofty expectations and challenges in stride and are committed both on finding efficiencies and to achieving our growth in a sustainable fashion, without incurring significant incremental costs.
Speaker 4: Let me start by acknowledging the strongest evidence of our success. In 2022, we delivered robust full-year revenue growth of 39% on a constant currency basis after adjusting for COVID-related headwinds.
Speaker 4: I am incredibly proud of this achievement.
Speaker 4: Full year 2022 constant currency revenue growth was 32%, in line with our long-term constant currency growth guidance of 30% to 35%.
Speaker 4: I should remind you that we introduced our COVID-19 solution in Q4 2020 in response to the global pandemic impacting our customers.
Speaker 4: Given this, COVID analysis had a reasonable impact on our 2021 results as some of our customers shifted efforts within their laboratories to address global testing initiatives, which we were able to help accommodate.
Speaker 4: thereby demonstrating the versatility of our platform.
Speaker 4: Early in 2022, we decided to shift our focus back towards our core of oncology and rare disease applications. So we are quite pleased that adjusting for the impact of COVID-19 related headwinds in 2022, our growth in 2022 was, as I stated, a robust 39%.
Speaker 4: Why are we having such a strong market adoption during a period many would consider challenging?
Speaker 4: Healthcare institutions continue to choose Sophia Genetics as their trusted cloud-based analytics platform for establishing data-driven medicine as a standard of care.
Speaker 4: In 2022, we served more than 750 customers across 72 countries.
Speaker 4: Of our more than 750 customers, 390 are recurring Sophia DDM platform customers.
Speaker 4: I am also thrilled to announce that we signed 58 new customers in 2022.
Speaker 4: During the year, we continue to improve positioning of the Sophia's platform in the market to where it can have the greatest impact, helping inform clinicians in their determination of cancer and radiology.
Speaker 4: This happens through our ability to handle complex core datasets produced from next generation sequencers.
Speaker 4: Our customers are producing locally what are incredibly large noisy raw data sets that can be up to 2 terabytes in size.
Speaker 4: The production lab at our customers is often an heterogeneous environment using multiple types of sequencers and potentially using chemistry from many different suppliers.
Speaker 4: From their labs, our customers upload those files from the sequencer onto our decentralized Sophia DVM cloud platform.
Speaker 4: We then apply our disease-specific machine learning and artificial intelligence-based algorithms, which in essence is proprietary codes that we have built up and trained meticulously over the 12 years since our funding.
It is with this code, our secret source, if we will, that we find and harmonize signals in the huge and noisy genomic file and identify and annotate the relevant biomarkers which the pathologist or the geneticist will have access to through Sophia Didia. With each genomic profile we analyze...
Our cloud design was foundational decision.
It underpins our platform's ability to become the network to democratize cancer care because in real time, it provides back-each incremental learning to our community of customers.
This direct network effect was intentional, allowing the value of the Sofia platform to increase as the number of users who leverage it does.
The cancer patient in Brazil can benefit from learnings extracted from the cancer journey of a patient in Australia.
Turning to Platform Usage.
For the full year 2022, analysis volume, a close proxy for patients, was 264,000, an all-time high and up 9% year-over-year. When excluding our COVID-related volumes, analysis volume was 246,000, and the high-level volume was 36,000.
up 18% year over year. Importantly, I want to highlight for you that to date, the Sophia DDM platform has supported the analysis of more than 1.2 million genomics profiles.
recently growing by more than 24,000 new profiles per month.
This, we think, makes us the industry leader. We are excited with the momentum we see as users continue to increase their utilization after experiencing the value of the Sophia DVM platform.
As our focus shifts towards more complex these areas where the benefits from our technology are high, it's no surprise that in 2022 we saw an expected and desired lift in overall ASPs.
This is above and beyond the expected price increase we took mid-year in 2022.
HRD is one example of a product that is helping mix with a notably higher ASP.
So to carry this idea through, the strategic focus on oncology and rare diseases is evident in our reported revenue growth, outpacing our analysis volume growth.
This is an important phenomenon as we expect mix or the value of each analysis patient to increase at a healthy cadence over time.
While I discussed how we delivered on our guidance for 2022, I want to also draw for you the picture of how that played out over the year.
We are pleased to share that constant currency ex-COVID revenue growth accelerated each quarter in 2020.
finishing the year with 44% year-over-year growth in the fourth quarter.
And adjusted gross margin ended the year at a high of 75% for the fourth quarter of 2022 compared with 65% for the fourth quarter of 2021, bringing our full year result increasingly closer to our long term target of 70%.
These figures, analyses, volumes, growth margins, and accelerating revenue growth suggest to us that our strategic path is strong.
While our top-line performance has of course been a keen focus, of equally keen focus has been our desire to solve the new challenge of optimizing capital efficiency.
Reducing operating expenses is a muscle we learned to flex in 2022.
We reduced our operating expenses in each of the last three quarters of the year and intend to continue to advance our fiscal discipline and ability to make the best use of our cash balance.
We have been very precise intending to control our indirect costs.
We also targeted projects maintaining sponsorship of key programs, but not all.
So in summary, I am proud to say we have delivered on our commitment of revenue execution with a material added benefit of cost discipline.
So as I suggested in my opening remarks, when we went public there were several outstanding questions.
With respect to the first question, let me expand on the compatibility of Sophia Genetics decentralized model in the US market.
The major proof point in 2022 and one that we are super proud of is our new relationship with Memorand Son Kettering MSK Cancer Center.
Considered one of the most prominent cancer centers in the United States, we entered into an agreement where we will commercialize the first comprehensive liquid biopsy test powered by the Sophia DDM platform.
By combining our predictive algorithms and the power of global Sophia genetics network with the clinical expertise of MSK in cancer genomics, we jointly envision that advanced precision oncology tools will reach a more diverse global population of cancer patients.
Next.
Turning to US customer momentum, I would like to highlight a recent win at the University of Parkinson's.
They will be implementing SophiaDDM to gain deeper insight into hematological malignancies.
University of Arkansas for Medical Sciences, UAMS, is a state-only health science university.
Sophia DDM will enable them to synthesize NGS data in-house
building on local expertise and allowing for materially improved data turnaround time, which is crucial given the fast-moving nature of hematological malignancies such as leukemia, lymphoma, or multiple myeloma. Cancer, together as a group, are the fourth most frequent type of cancer globally.
Beyond University of Arkansas, I would also highlight Synergy Labs, a U.S. full-service diagnostic lab based in Mobile, Alabama, which we signed in the fourth quarter.
They will be using Sofia DDM for a hereditary cancer solution.
They decided to use our platform because they felt we could help them accelerate their menu offering to the forefront of a regulatory cancer patient outcome.
Synergy is also typical of many of our central lab clients as they have NGS sequencers from multiple leading suppliers in the lab.
The MGS data coming off each machine is a bit unique. Normally, a lab would either use the shelf software solved by each manufacturer specialized for that specific machine or homegrown solutions that are expensive to scale and difficult to maintain.
The code for these software programs typically struggles in such an heterogeneous environment, as often times this software has limited compatibility with respect to the output files of various visitors regions, automation or library prep tools.
We at Sofia solve this heterogeneous environment challenge in the customers' lab through our platform's innovative and unique capability to harmonize signals in the data regardless of the source of the region's sequencer.
It is a key differentiator for Sofia Didiem. So, if I may tie this back to the US market and Synergy, after 12 years of co-development and refinement, we are able to confidently digest genomic data from heterogeneous environments like at Synergy and in doing so, help Synergy deliver the most accurate results in a secure manner.
at the lowest cost.
This is a winning solution for both us and them.
In total, I am pleased with our progress in North America and look forward to updating you in 2023 on our continuous progress.
And for our second question, could we show that our anonymized genomic profile data produced locally at the source and not purchased as some of our competition do, have a value beyond clinical, especially to biopharma customers?
When we talked about this, we felt that pharmaceutical companies faced similar challenges to the clinical space regarding data and silo when reconciling their clinical trial data with disparate real-world data sources.
These challenges result in a high variability in the quality of insight. We serve our biopharma customers by helping them solve bottlenecks across the biopharma value chain, allowing our products, services, and applications to address the drug development continuum from discovery to development and ultimately deployment.
We call this the 3Ds.
All of which are powered by SOFIA DDM data generated in real time and in the real world.
We launched our initial applications for the biopharma market in 2019 and we currently have four branded applications for biopharma customers.
So back to the question, is Sophia able to show value to biopharma?
I would tell you my opinion on this is a resounding yes and the proof point that demonstrates that is our February announcement expanding our AstraZeneca partnership.
We started working with AZ in the deployment phase. This was taken HRD testing worldwide with AstraZeneca support.
Then, from there, we built on our relationship and are now working with them on Discovery. Now we will be collaborating on our Sofia's multi-modal technology and expertise, could we apply to AstraZeneca Global Leading on Collogy portfolio. Beyond that, we will be collaborating on our own. We will be collaborating on our own.
We're today in conversation with over half of the top 20 former company in the world, as well as many leading CROs, because we would argue they understand the benefit of our network, our platform, and the data we have.
With new biopharma customers, we expect they may have different start points with SOFIA, but they will follow the same land-and-expand behavior we see in the clinical space. Beyond those traditional biopharma players, we announced in September that we are working with BoundedBio regarding a very exciting technology in eCGNM.
Bondes Bio is a next-generation precision oncology biotech company developing innovative therapeutics directed against extra chromosomal DNA or e c-DNA in oncogene amplified cancer.
Extracromosomal DNA involves release of DNA outside of the chromosome and is found in around 40% of metastatic cancer.
Boundless Bio is developing the first therapies along with a precision diagnostic method to detect e c d n a from a patient's routine to more sequencing data.
Our partnership will further develop this diagnostic method for use in clinical trials.
Our decentralized global genomic solution combines with bounded by your drug development capabilities to unlock value by breaking the barriers inherent to a traditional central lab approach. This should lead to optimized patient selection and clinical trial design.
and enable our global collective network of major hospitals and academic centers to effectively deliver new treatment options to patients with oncogene amplified calcium.
And beyond that, as we always say, data is important.
Now with memorizing tetraene, Sophia DDM will have incremental access to over 75,000 curated clinical genomic profiles across cancer types.
Together, we are going to democratize the use of precision medicine applications around the globe.
Now, let me address the third question, the viability of our platform when applied to other modalities beyond genomics.
From early on, we have felt that over time our insight should be generated not just from genomic data but also from imaging, clinical, and laboratory data. Intuitively, we have felt that data gathered from data modalities beyond genomics out.
to further improve the predictive capabilities of our algorithms for the benefit of patients.
I would tell you, for us,
Multimodability has delivered strong proof of concept across a range of cancer types.
The flagship example of the promise of such multimodal approaches is our DeepLung4 multimodal clinical study which we launched in December 2021.
The deep lung for study focuses on the treatment of metastatic non-small-sanglion cancer patients with immunotherapy. In this context, we aggregate real-world multi-modal data, including genomic data, genomic data, clinical data, and biological data.
Our technology then leverages deep learning-enabled analysis of the aggregation of this real-world multimodal data to identify and validate predictive signatures of response to therapy, progression-free survival, or overall survival. These predictive signatures are being validated at the same time as the result of the analysis of the real-world multimodal data.
We reported at ASCO 2022 a third set of preliminary results suggesting a predictive power of around eighty percent.
which for us validates the potential of our multimodal approach in an international, multicentric and decentralized setting.
This is highly important, as similar multimodal studies are typically done at the single center level today.
with strong limitations regarding the applicability and scalability of this model outside of that particular institution.
In this context, we are very happy to report that we continue to expand our deep-long footprint with our multimodal algorithms now also being exposed to data from Latin America through our collaboration with Dada in Brazil which is in the process of activating several sites.
There are currently 25 participating sites across the US, France, Italy, Spain, Germany, Canada, Israel and now Brazil that have already signed up for participation in the study with around 1,500 patients recruited to date. Through this intentional global footprint
we aim to maximize exposure of our machine learning algorithms to a wide range of diverse real-world data. Additionally, this footprint exposes us to a diverse set of technologies that produce that data.
For example, in the imaging data modality, our Sophia DDM platform is exposed to thousands of medical images generated through different CT, MRI and PET scanners from different manufacturers.
This gives us the unique capability to offer harmonized and standardized analytics in imaging as well.
in a decentralized setting, further demonstrating our technology agnostic market positioning as a data analytics platform.
We are notably working with our partner G-ELSCR in the context of the Deep Lung Prostrating, where GIS imaging fabric services are used to visualize segments and annotate lung lesions for medical imaging visualization and annotation proposals. This allows Sophia genetics to further accelerate proprietary...
of the Sofia DDM platform, offering advanced multimodal data visualization, coding, and predictive capabilities in a single solution.
We feel that the deep lung for study has a potential to usher in a new generation of precision medicine that would enable prediction at the individual patient level.
We look forward to further validating our vision of building a multimodal decentralized collective intelligence, leveraging on real-world data to generate novel insights at the individual patient level.
So in total I am happy to share that we continue to deliver on our commitments and make progress across all of our key growth drivers.
As I touched on earlier, reducing operating expenses is a key muscle we learned to flex in 2022.
What became apparent to us as the global environment deteriorated since our IPO is how paramount our fiscal discipline is.
With the intention to minimize any impact on our growth, we set at this challenge of operating expense reduction with a precision mindset.
I am pleased to report that in each subsequent quarter of 2022, we were able to reduce our operating expenses, accumulating in the most significant improvement in the fourth quarter. Our headcount stands at 466 as of December 31, 2022.
down from a high of over 530. This reduction has occurred primarily through planned accretion and selective actions aimed at improving productivity.
We intend to continue furthering our fiscal discipline and related abilities regarding making the best use of our cash balance.
Based on our current trajectory, we remain confident in our capital position and continue to see sufficient runway to execute our ambitious growth plan. We continue to be responsive to the current operating and macro environment and remain laser focused on delivering sustainable growth.
Layered into our thinking on capital efficiency as being capitalizing on the commercial leverage of partners.
Our mindset was rather than doing everything ourselves, with this partnership now in place, we felt we could leverage others to help us grow. I already spoke about MSK and you can understand how thrilled we are to have a cancer center of their caliber trusting us with our technology and intellectual property.
In 2022, we continued strengthening our partnership with AstraZeneca, GELSTER, K
connect with a large volume of data and offer more capabilities than we could provide individually.
I would like to take a moment to highlight one of these partnerships for you in detail. Microsoft Microsoft Office
Microsoft brings to Sophia several intersecting points of leverage.
We all understand that scaling the cloud is very important.
And on that concept, Microsoft will serve us well as we demonstrate multi-modal capabilities.
Kaling, the capture of multimodal data is no small feat, but with Microsoft as a partner, we will enjoy their support and significant infrastructure and capability.
Let me walk you through our first 4 months since announcing it in November .
We have held strategic alignment meetings at high levels between the two companies, including operational steering committee meetings on commercial and innovation workstreams. These meetings included Microsoft General Manager of Healthcare and Strategy Lead, Microsoft Industry Lead for healthcare in the US.
as well as the Microsoft Senior Vice President for Strategy and Business Incubation.
The focus of our strategic collaboration with Microsoft is currently threefold and includes Kerpa, scaled by Nuance Microsoft to accelerate our DeepLab 4 program, expanding our commercial reach, and supporting our scaling the environment program.
I am pleased to report over 40 Microsoft salesperson have been trained on Sophia DDM and ultimately will be selling to our target market.
This is meaningful as Microsoft Salesforce will help amplify our presence in the market.
I would like to wrap up by reminding you of our six strategic pillars which remain our focus for driving long-term growth and value creation for our customers, partners and shareholders at Sofia Genetics.
They are as follows. One, accelerating customer adoption and network expansion with new clinical customers with a focus on the US market.
On this measure, we have discussed today our attraction highlighting recent wins with synergy and University of Arkansas.
I would also note of our deep long for study six of 25 current participating sites being in the US.
2. Increasing utilization within our existing customer base
Currently, 50% of our customers use only one Sofia application, 37% use two or three applications, and only 13% use four or more applications.
Regarding utilization, I would also share that our top customers see growth faster than our smaller customers.
It appears to us that adopting our technology enables our customers to take share in their respective markets. 3. Further innovating our platform to increase our capabilities and house a growing portfolio of applications and modules.
We highlighted the moments on Catherine for you in today's call. Four, developing key partnerships and collaborations to foster our ecosystem. On the topic of getting leverage from our ecosystem, we have highlighted to you our burgeoning Microsoft relationship.
Five, leveraging our platform to further drive adoption with biopharmaceutical companies.
Here we have highlighted our existing developments with AstraZeneca. Six and lastly, excelling operationally within SOFIA, which we displayed through our improved operating loss trajectory despite hitting our top line goals.
Regarding our execution against these pillars, paired with the momentum building with our partners,
be that Microsoft, MSK, QIAGEN, and AstraZeneca. I feel more than excited today.
that these are the elements that will enable Sofia to do what we set out to do 11 years ago. To harness data from the global community to generate actionable insights
That contributes meaningfully to patient care and patient outcomes. That contributes meaningfully to our customer success.
and that deliver outstanding performance for Sophia Genetics in 2023 and beyond.
that deliver outstanding performance for Sophia Genetics in 2023 and beyond. With that.
I will now turn the call over to Ross to discuss our financial performance in more detail. Thank you, Yergi. We saw continued momentum across the board in Q4 with superior execution and consistent operational discipline setting us up for a strong end of the year.
I was particularly pleased with our revenue performance in the face of significant loss in cash flow improvement, delivering on our commitments highlighted earlier in the year.
Total revenue for the fourth quarter of 2022 was $13.4 million compared to $10.9 million for the fourth quarter of 2021, representing year-over-year growth of 22%. Constant currency revenue growth was 36%.
and constant currency revenue growth, excluding COVID-19-related revenue, was 44%. Platform analysis volumes were 71,000 from the fourth quarter of 2022, compared to 66,000 from the fourth quarter of 2021. The 8% year-over-year growth was a trivial disstrained in our core platform analysis volume.
offset by the continued decline of our COVID-19 related analysis volume. Excluding COVID related volumes, platform analyses grew a healthy 18 percent year-over-year in the period. Gross profit for the fourth quarter of 2022 was $9.6 million. The30boat Sergei Risingizzo Using respirator recognizability licensing
compared to gross profit of $6.8 million in the fourth quarter of 2021, representing year-over-year growth of 41%. Gross margin was 72% for the fourth quarter of 2022, compared with 62% for the fourth quarter of 2021.
Adjusted gross profit was $10 million, an increase of 42%, compared to adjusted gross profit of $7.1 million in the fourth quarter of 2021. Adjusted gross margin was a record 75% for the fourth quarter of 2022, compared to 65% for the fourth quarter of 2021.
Of note, while I'm pleased with our efficiency gains in the period, particularly on the hosting side, I will highlight a benefit of $1 million we recognized in the period related to the previously announced cloud optimization efforts.
Total operating expenses for the fourth quarter of 2022 were $24.7 million compared to $27.8 million for the fourth quarter of 2021.
Total adjusted operating expenses were $22.1 million compared to $24.6 million in the fourth quarter of 2021.
R&D expenses for the fourth quarter of 2022 were $6.8 million compared to $6.4 million for the fourth quarter of 2021.
Sales and marketing expenses for the fourth quarter of 2022 were $4.2 million compared to $8.6 million for the fourth quarter of 2021. General and administrative expenses for the fourth quarter of 2022 were $13.9 million compared to $13 million for the fourth quarter of 2021.
Overall, I am quite pleased with the progress we exhibited with respect to operating expense leverage in the period. However, I would like to highlight a few items that impacted reporting in the period. With respect to R&D expenditures, we did benefit from a credit related to our ongoing cloud optimization efforts.
which was recognized in the period. Additionally, there was a modest reclassification of certain expenses from R&D to G&A that shifted certain expenses in the period. Lastly, there was a slight adjustment to employee-related expenses in the quarter, which resulted in a modest benefit. Cumulatively, the impact on operating expenses was roughly a benefit of $900,000.
$17.6 million for the fourth quarter of 2021. Net loss for the fourth quarter of 2022 was $14 million or a loss of 22 cents per share compared to $21.4 million or a loss of 33% per share in the fourth quarter of 2021.
Adjusted net loss in the fourth quarter of 2022 with $11 million or a loss of 17 cents per share compared to $17.9 million or a loss of 28 cents per share for the fourth quarter of 2021. Turning to full year fiscal 2022 financial results.
Total revenue for the full year 2022 was $47.6 million compared to $40.5 million for 2021, representing growth of 18%. The growth in revenue was primarily driven by increased usage rates across our existing customers, favorable mix shift to higher price analysis, and increased usage rates.
strength in HRD and our BioPharma offering. Constant currency revenue growth was 32% and constant currency revenue growth excluded COVID-19 related revenue was 39%. Annualized revenue churn rate was 4% of total revenue for 2022 as compared to the historic low of 3% seen in 2021.
as a result of pent-up demand due to the pandemic. Average revenue per platform customer for the full year was approximately $93,700 compared to approximately $92,000 for the prior year period. Of note, this metric was significantly impacted by currency-related headwinds over the balance of 2022.
Net dollar retention for the year decreased to 102% from 142% in 2021. Constantly currency net dollar retention, excluding COVID-related revenue, was 123% as compared to 132% in 2021. Total recurring platform customers grew to 390 as of December 31, 2022.
up from 382 as of the end of December 31, 2021, and 383 as of September 30, 2022.
Through the respect of land momentum, I am encouraged by the 63 new customers we have converted into our routine recurring bays in 2022. However, on a net basis, recurring platform customer additions were modest than the prior year as we strategically decided to turn smaller, more price-sensitive accounts in certain regions.
We expect this metric on a net basis to return to more historical levels of increase in 2023. Looking to our expand momentum, we are quite happy with our NDR performance and it provides us with a high degree of revenue visibility for 2023.
Gross profit for the full year 2021 was $31.3 million, an increase of 24% compared to a gross profit of $25.2 million for the full year 2021. Gross margin was 66% for the full year 2022 as compared with 62% for the full year 2021.
adjusted gross margin was 68% as compared with 64% for the full year 2021. Total operating expenses for full year 2022 were $119.1 million compared to $96.7 million for the full year 2021. Total adjusted operating expenses for the full year 2022 were $9.2 million.
were $104.3 million compared to $87.3 million for 2021. R&D expenses for the full year 2022 were $35.4 million compared to $26.6 million for the full year 2021. Sales and marketing expenses for the full year 2020
were $28.3 million compared to $28.7 billion for the full year 2021. General administrative expenses for the full year 2022 were $55.8 million compared to $41.5 million for the full year 2021.
Operating loss for full year 2022 was $87.8 million compared to $71.5 million for full year 2021. Adjusted operating loss for the full year was $72 million compared to $61.5 million for the full year 2021.
Net loss for the full year 2022 with $87.4 million or a loss of $1.36 per share, compared to $73.7 million or a loss of $1.33 per share for the full year 2021. Adjusted net loss for the full year 2022 with $71.6 million or a loss of $1.12 per share.
compared to $62.3 million or a loss of a dollar and 13 cents per share for the full year 2021. Caching cash equivalents were $178.6 million as of December 31st, 2022. Turning to our 2023 outlook.
Sophia Genetics expects reported revenue growth to be at or above 30% in 2023. The current currency revenue growth, excluding COVID-related
Revenue for 2023 is expected to be between 30 and 35 percent in line with our previously high-delighted long-term expectations.
Of note, we currently expect a headwind to 2023 reported revenues of approximately $1 million related to a ceasing of COVID-19-related contribution. This will equate to a headwind of approximately 19,000 analysis to reported volumes. Furthermore, we would note that exchange rates remain highly volatile.
but the moment we anticipated a modest impact to reported results. With respect to the quarterly cadence in 2023, we would note that our clinical analysis volumes tend to exhibit the typical seasonality of patient utilization. With usage building over the course of a year, the third quarter typically exhibiting stabilization and the fourth quarter being the largest contributor.
With respect to our form of business, we would note it remains in its nascent stages and in turn it will be highly sensitive to new business wins. Lastly, following on strong cost performance in the second half of 2022, Sophia Genetics expects 2023 operating losses to be below 2022 levels. Finally, some closing thoughts on our current capital position.
I remain encouraged by the progress our team has made over the balance of 2022, enabling us to deliver strong revenue growth while also making significant strides toward our long-term gross margin goal of 70% and our commitment to a path to profitability. As a Capital Light Software Business, I oppose Care M spoilsfounder into saying, Review Connections
we will remain vigilant with respect to our headcount and indirect expenses, balancing our long-term growth against the need to become self-sustaining, all with an eye on long-term value creation. Based on our current trajectory, we remain confident in our capital position and continue to see.
sufficient runway to execute against our ambitious growth plans. We will continue to be responsive to the current operating and macro environment and remain laser focused on delivering sustainable growth. With that, I'd like to turn the call back over to Yurgie for the closing remarks before we take your questions. Thanks to Ruff, we're extremely proud of our performance.
which we believe reflects our continuity to execute on our vision and the opportunity ahead. Sophia's success stands on our ability to delight customers and continue driving more and more usage of our platform.
Our six strategic pillars remain our foundation to drive growth and value creation for this year, as well as the years to come.
I am encouraged and as confident as ever about the long-term path that we are on.
We have a fantastic opportunity to drive compelling returns and shoulder value.
After a successful and unforgettable 2022, our focus shifts to Sophia's future.
I will show just a few thoughts looking to the near future.
with three key priorities for 2023. One in Somatic oncology, we see both clinical and bioform markets increasingly focusing on rare patient populations defined by molecular alterations that are more challenging to detect comfidently.
This includes alterations such as exon skipping events, frisions, partial copy number variations, or complex biomarkers such as HRD, as well as new modalities to detect those alterations, for example to liquid biopsies.
Through our algorithmic capabilities to detect the signal from the noise and our global scale, we are uniquely positioned for growth in that segment, leveraging a wave of upcoming launches in the CGP and liquid biopsy space, notably through our collaboration with MSK, as well as new features.
in our Sofia DDM platform. Two, in biopharma we see accelerating traction across our offering as evidenced by the recent expansion of our existing partnership with AstraZeneca to now cover our multi-modal algorithmic capabilities applied to their oncology portfolio. This is a great example of how we leverage our Land and Expand model not only in the...
several external collaborations.
We see high interest from BIOFORMA to engage with our career path capabilities. In closing, thank you to our partners, customers and investors for joining us on this journey. Without you, none of this would be possible.
Later today we are presenting at the Carwan Healthcare Conference here in Boston. Feel free to join our webcast on that presentation from the link on the IR section of our website and next week we will be presenting at Berkley Healthcare Conference in Miami.
I look forward to continuing to update you on Sofia's future successes of democratizing data viewing medicine. Operator, you may now open the line for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad.
If you are using a speaker phone, please pick up your handset before pressing the keys.
If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster. The first question comes from Tehaut Savant with Morgan Stanley . Please go ahead.
Hey guys, good morning and thanks for the time here. Maybe I'll start with one for you Ross, just on the guide. Help us frame that growth rate of above 30% here. How are you thinking about drivers of conservatism versus potentially upside levers that you're not incorporating in the guide? Thank you for the question Tejas. Ross, can you address that?
Thanks, Jerky. So, Tejas, in terms of the reported guide, obviously, we gave you the core guidance, right, which for the underlying business is in line with our long-term growth rates we shared at the analyst day. So, for us, that's where we have a high degree of visibility, particularly relative to our clinical business.
If we think about the other pieces there, obviously we talked a bit about that sex, which has been bumping around and today doesn't have a material impact. And then obviously the million dollars roughly of COVID related revenue that will roll off. But as we think about the ability for us to achieve our range.
Obviously, as I shared at the analyst day, and it continues to be the case, given our business model, we have very high degree of visibility on forward 12 month revenues. Right? That's quite true based on our contracting and our consumption based model. And so there, I would say, particularly in clinical, you know, 90 plus percent visibility on forward results. You know, the, the element for us where you could see, or continue to see upside is obviously in the biopharma business there. We've had great momentum and maybe I'll let your comment a bit on some of the trends and trajectory.
So in terms of how we think about it relative to the guidance, we've been pretty conservative. I would say, but you're deeply pleased that maybe just give some color there on bioform as I think that's the key one is we think about upside driver. Yes. Thank you, Rob. So things are right. That's rough set. The two meet up business now or business. It's quite mature, but we have a little opportunities. So the roads really related to existing customers who are consuming the bathroom and even the low-churn we have in the bathroom. So it's an educational??i? Monroe stays.??
we can from there have a good idea of how we're going to grow. Transcontracted is like opportunities that now are going to move into a team. So on that one we have a lot of visibility. On the bioformer side we have visibility from some contract we have signed, but as you can imagine some of them can be quite decent. And so this might be an add-on into our revenue, but we depend on when they are contracted and how quickly we can execute them, right? And so.
to give you some perspective that is just right now we really have been able to demonstrate the value proposition of Sofia in terms of network platform and data assets for the former around the strategy that we call 3D which is from a discovery to development to deployment. We mentioned AstraZeneca being an important partner with whom we started on the...
deployment sites, so post market approval of PARP inhibitors and now we are working with them on the discovery aspects leveraging on the data We've gathered in particular in the context of the deep land for study, but as well the algorithms we develop in that context and just to give you some tendencies right now Tejas and pharma We are engaging with the top 20 pharma in the world
And the trends we see and the appetite for sorpia are very much related to our decentralized operating model, our multi-model capabilities. And now one thing that we have not yet disclosed, I would say intensively, but on which we are working, which are liquid biopsy capabilities, such as what we are doing with MSK access, but as well in our detesting.
So on top of what we highlighted you in terms of guidance, indeed we may have positive news from the former sites That could jump our increase our revenue growth in 2020 and beyond Got it that's helpful and then you know, I know you called out you know effects and some pandemic normalization on the churn and the net dollar retention metrics
Yes, thank you for these questions Tejas. Before I let Ross answer to you on those specific metrics, indeed it's an opportunity for me as well to remind that we had a strong growth in Q4, right? Despite actually challenges with FX, even though most of our revenue is being done.
in currencies which are not dollar and that we report our results in dollar. So on Q4 2022, on the report today we grow 22% versus Q4 2021. Extruding COVID analysis and extruding constant currency, we actually grow 44% in Q4 2022 for it, this where even clearly the pop trust and have not reached peak number beefup data, should continue? prakt2. Wow Invest Invest also published the Q4 2020? We lookout, comavér déjuct?? a
Q42021, right? So strong growth and to your point, right, these effects at wins are as well indirectly affecting some of our metrics like NDR and so on because they are being done on current, excuse me, unreported, but this is not on constant currency.
Yeah, so on the other two metrics, right? So I know to be the cat that was around four times for the years is still well above. You know, that signaling to us as well that both were obviously, you know, keeping our customers, we're growing them effectively and our our at cost of acquisition, which is obviously important.
As we think about path to profitability remains quite attractive, but we actually recently added a new head of marketing. Uh, from from outside actually from the technology space, and I'm pretty excited about what he could bring to the table as well to be able to accelerate, particularly on the land. I think they are obviously there's still a lot of places, particularly, but also in other parts of the world where there's quite a lot of opportunity. So again, we're really looking for sustainable growth and that's a sign.
and next-gen sequencing. So the use of grant to get a sequencer, they began in COVID and had hoped to transition to oncology or rare disease or others. Some of them didn't make it, right, I would say, or some of them were enabled to shift. And so ultimately there, we obviously allowed some of them to leave. And then you can also think of areas like Turkey, which we've called out, which has obviously been a pretty...
They're quite small, so nothing notable in there. And so we feel quite good of where ultimately we shook out, I mean, 4% still on the churn rate for a software business is incredibly impressive. And so despite some of that noise, I'm still quite happy with the delivery. And we're going to continue to balance this.
over time in regions where we see pricing that doesn't make long-term sense. As you can see, it's very hard to sustain a profitable model if you continue to price at levels that are unsustainably low. We're not going to chase that, and I think we've looked at the competitive landscape, and you know you know some of the businesses, and so that's not a trap we're going to fall into. Got it. And then one final sort of big picture strategic question for you.
impact that vendors like Illumina are now focused on informatics on board with their new instruments. Impact the value proposition for DDM. So, thanks for the question to just. So first to remind where we stand today, right? Remember that our strategy is a land and expense model. We are ready in 390 recurring customers of Sofia in total.
expand of our customers and in the expand we grow by adding more applications, more menu rights to their utilization they made about Sophia. So for example moving from solid tumor to regulatory cancer and then to liquid biopsy and then to IMONC. Today only 50% of our 390 recurring platform customers are using one application at Sophia.
37% are using two or three applications and 13% are using only four or more applications. So what I'm trying to tell you is that despite what you observe or what you have heard about, we are already there in place and we can grow with these existing customers. But to say that, I would say that we don't see the same dynamics actually, such as
We see more and more decentralization, and I don't know where you got those messages, but in that context, we just signed synergy, which is a reference lab in the US, we signed a University of Arkansas, which is another academic center that we announced in our earnings today. So this is a trend that we continue seeing. I was traveling last week in Colombia, in Brazil. I can tell you that volumes are all going up because sequencing is getting cheaper and cheaper.
and we'll get cheaper and cheaper because of competition. I was in a site where actually in Brazil today, they have seven sequencer out of each four-dumina, two thermo-fisher and one-ngi. So I think we are ourselves in a very good position to be able to leverage on having more and more people adopting sequencers and having actually volume fire and sequencing price cheaper is better for us, right? Let's be.
in the context of the universe, we are quite synergistic with, right, in terms of growing NGS clinical volumes, which is one of their main goals as well. I would say, you know, putting it on board is certainly a strategy for them. I'm sure that makes sense, but the reality is what we're trying to animate in the industry in terms of a decentralized network across many different players sharing information across all technologies.
types of reagents, providers, et cetera, and across all of the realities. It's just a fundamentally different strategy, right? So I think, you know, on the research side, I understand why someone they prefer, you know, something as simple as an onboard biomepharmatic with their sequencer. But I think in the clinical space where, again, this idea of data sharing and collective intelligence globally is really gaining momentum for us. We feel quite comfortable with our position. And I think all of these players, frankly, can.
Can coexist in a nice way and frankly just continue to grow the market overall quite effectively? Thanks guys, appreciate the time. Thank you, Ted Jeff. Have a good day. The next question comes from Rich Hilliker with Credit Suisse. Please go ahead. I think thanks for taking my question.
Being met at the top of right now is wondering if you can give us a sense of how you imagine generative AI enhancing the platform as we iterate from here. So thank you for the question, Rich. So I understood your question was about generative AI, right? Is that correct? Opening it. There's a lot of rat use cases. Yeah.
Yeah, exactly. Good question. Yeah, good question. So look, in our story, AI has been there at the heart since beginning, right? Because as I was just explaining to Tejas in our customer sites, there is a lot of heterogeneity. They use different sequinsers, they use different consumables and so on. And so one has to build algorithms on the basis of partner recognition.
And in that aspect, I would say AI related efforts will be extremely important in my opinion on anything which is clinical data. And in particular, any clinical data that are being today gathered into documents or in the HR systems, where I think AI techniques and OPA AI techniques will be applied to basically gather those data in a more...
sophisticated, more, I would say precise, and formed, and be able to bring this comprehensive information to an individual. So for us, pathologists, geneticists, without swamping, if you like, these people with too many information, right? But really bringing them the precise information that is consistent and that is important to take actions on this patient in the context of many other patients.
Okay, got it. Thanks. And then just quickly, Ross, you can grab some on the COO promotion. Wondering if you can share maybe a couple of your top priorities, obviously you're very familiar with the business as it is, but maybe a few things that you'll be focused in on initially. And then that's all for me. Thanks, guys. Thank you, Rich. So I would say in general, right?
You know, my priority set in terms of my new functional role is, if not too different from what we've been focused on as an organization overall, right? So obviously we've got a very large market opportunity in front of us and we've got to execute against it and we've got to execute it against it in a sustainable way, right, with the capital that we have.
And so in that, you know, I'm personally very focused on how do we accelerate our land, particularly in North America, and how do we get ultimately this market to the place where we think it can be. And again, we're seeing a lot of really good green shoots and momentum there, but there's still a lot more to be done in North America. I also think it's well on the bio-farm aside. We're just scratching the...
We obviously have spent a lot of time on MSK, and so making sure we get returns and momentum out of that is crucial. And then lastly, you know, being able to do all of that with what we have, right? You know, I'm proud of what our team was able to do in terms of operating a net loss this quarter. We've made huge strides. You know, as a European entity, it takes us some time, obviously, to sometimes display that sequential operating loss improvement some we're looking for. But...
Certainly, we're getting more productive, we're getting more efficient, we're getting more focused, and being able to execute on those items without adding headcount and without adding significant indirect costs, that's where we're really focused and what I'm focused
more productive, we're getting more efficient, we're getting more focused, and being able to execute on those items without adding headcounts and without adding significant indirect costs, that's where we're really focused and what I'm focused on. Thanks, I appreciate the call.
Thank you, Rich. Have a good day. The next question comes from Mark Massaro with BTIG. Please go ahead. Hey, guys. Thanks for the questions, and congrats on a strong 2022. My question is for Jurgi. On the deep lung study, I appreciate all of the questions.
You know the detail I believe you've enrolled 1500 patients. How many more patients do you expect to enroll? When do you think that study will wrap up and when do you think we can see another interim readout?
Thank you for the question, Marc. So, just as a reminder, right, that's a study we launched in 2020 at RSNA and basically in a year and a half time now we've been able to onboard 25 sites around the world on this multi-modal journey out of which six in the US
and we've been able to follow along to only 1,500 patients having molecular information, so genomic data, imaging data, as well as 200 clinical data points. So, which is pretty awesome in terms of how quickly we've been able to operate that. Now, we are said that when we started the study, that this would be a retrospective study on 4,000 patients.
So this can give you a sense of how many patient data we're going to gather this year, so it should be around 2,500. And beyond that, we are thinking, so this is still very premature, but as well as considering prospective studies, right? But we would first have to disclose the retrospective data.
which I think we're going to do as well in the next oncology conferences we're participating at. Overall I would say Mark we're very excited about it because when we went to public you know there were some expectation on us of course hitting the numbers about demonstrating we're compatible with the U.S. market for genomics, demonstrating we could penetrate the pharma but as well demonstrate the market that we could go beyond genome right and with what we did with DPLA.
able to follow the patients that are analyzing either in cancer or rather disorder. So I think here we have to be now very disciplined on executing diplomas and beyond. And this is where we count a lot of our partners like G. We mentioned what we're doing with them on the imaging fabric side as well as Microsoft were.
We are working together on being able to gather clinical data at scale in a decentralized way. It's really exciting, Mark, by the way. This is why we build Sofia. Exactly. Yeah, it's a great use case of your multi-modality, so definitely look forward to the next data set readout. My last question is for Ross, great to see the gross margins come in above 70%. I think you've already exceeded.
How should we think about the levers to hit your 30% revenue growth this year?
Thank you Marc, thank you for highlighting that because this doesn't come with a lot of discipline and a lot of work and before I let Ross give you some more color on what you asked, I would like to highlight that this is not by chance, right? We've been super disciplined on headcounts, we've been super disciplined on indirect expenses, assistance, professional services, public company costs.
We have been working as well on major cloud savings, not only by better negotiating, but by improving as well our code so that the code would be running more efficiently in the cloud and this would cost us less. And then we have been focusing as well on projects, you know, maybe not doing some projects that were interesting, but really focusing on higher impact projects with a higher ROI.
So, Mark, first on the gross margin side, I would say certainly relative to our performance in the quarter, I'm very proud of the team, right? We had fantastic execution. We did benefit in the period. I did call out a credit related to our compute and cloud spend that was recognized in the quarter. So it did add a couple of points to the gross margin line. That being said, even exclude.
certainly look at that call out right in terms of the benefit in the period and then adjust as you think about your cadence and the Q1 and the rest of the year. But certainly our goal is to be able to sustain margin certainly north of 70%. You know, we had obviously thought of it at the time without knowing all of the drivers by 2025.
Certainly, we hope to get there sooner on an annual basis as recall for this year we ended at 68, right? I would say in terms of going forward, you know, business mix and also a bit of our strategy will sort of dictate the pace, but we're trying to have, I would say, more consistent expansion on the Gross Profit or Gross Margin Line.
And we're obviously, you know, we've benefited from price in this environment, et cetera as well, but certainly some of it will also depend on mix. Right? And also our decisions of driving volume in some of our newer areas. And so I would say, stay tuned. Our goal is certainly to be able to deliver for this metric in terms of 70% in the near to medium term versus maybe 2025. But certainly our ambition is to also drive best in class overall margins for the business and also.
So maybe just quickly on revenue, you saw us on an ex-cloat basis, you know, behind growth has been in the high teens. You know, I think in that range maybe a touch higher makes sense, right, as you think about the clinical business.
for next year. Pricing, we did take another price increase in the beginning of the year, that will add low single digits and then we also have the continued expansion of RASPs, which this year I would say despite currency, we're obviously quite good, right? And so again, in terms of the drivers, the underlying levers.
for it. And so to degree we do see upside there that's where we'll come versus the peer analysis volume. And I would add Mark that obviously growth margins are very important because they reflect the sustainability of the business, right? And Sophia, which in English stands for wisdom, was not only there to bring sustainability in Esther, making sure that data efficient today can be used to have efficient, but that's where leverage so that we can further out-
Thanks for all the time.
Thanks, Mark.
The next question comes from Julia Kin with JP Morgan. Please go ahead. Well, this is Martin and I have been on for Julia and I'm glad it's on the quarter and thanks for taking that question. I just want to quick question. So compared to 2022, what are your expectations for the customer base in terms of geography?
And then also in terms of clinical versus biopharma. Thank you, Martha. So as you may remember, right, we are today in 70 countries. So we are already global. We started in Europe and our presence being more dominant in Europe , but since then we've been very nicely growing everywhere. And I think...
Today we have demonstrated that our model was working in any country, right? So I just mentioned some years we announced recently with a synergy mobile being one of the examples of reference labs that can work with us I mentioned as well University of Arkansas, sorry for that I learned that this is not how we were pronouncing Arkansas So I hope I didn't offend anyone there And so this I think gives you a color on where we were trying to get more focus, right? So definitively
You can see our growth expectations for the year and look back to what I see at the analyst day. I don't think there's any shift in our view of what clinical can deliver. I think, frankly, it could possibly accelerate from there, but that will take us to continue to, I would say, improve execution in the U.S. On form, I'm super proud in the team. This was really a transformational year for us.
on the vial pharmaceutical side. I'm very optimistic around what we will see in 23 from that team. But just remember again, those tend to be longer sales cycles, just given the size of the business. And then again, the burden might be a bit quicker, but still it takes some time to kind of contract and sign. And so in terms of contribution, I would say certainly look toward the second half of the year in terms of the next level of inflection on the bioforma business. And then what again.
their KSC consumables with Sofia BDM and so you know if you see where KAGEN is present as well which is even broader than Sofia this can give you a sense of where we expect to grow as well as partners and beyond that Microsoft right so we have a decent I would say self steam but obviously not
a system which is as big as one of Microsoft. And so they're in particular in the US, we're making a strong focus on expanding our market penetration, so the landing of Sophia DTM together with Microsoft.
and a sales team which is as broad and as big as one of Microsoft. And so they're in particular in the US, we're making a strong focus on expanding our market penetration so the landing of Sofia DDM together with Microsoft. All right, thank you for taking a question.
This concludes our question and answer session. I would like to turn the conference back over to Dr. Yurgi. Come along for any closing remarks.
Yes, thank you all for joining us in the call today. We're actually very excited with the Waxopia has been able to achieve in overall 2022 and even the acceleration in Q4 2022. So stay tuned. We will be today at the Cowan Elkir Conference next week in Miami at the Barclays Conference.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.