SOPHiA GENETICS SA Q1 2023 Earnings Call

Good morning, and welcome to the Sofia Genetics first quarter 2023 earnings conference call.

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Now I'd like to turn the conference over to Catherine <unk> head of Investor Relations.

Please go ahead.

Good morning, and thank you for joining us on Sofia genetics first quarter fiscal 2023 earnings call. My name is Catherine Balan and I am the head of Investor Relations Sofia Genetics, joining me today are Dr. Yankee Campbell our cofounder.

And Chief Executive Officer, and Ross <unk>, our Chief Financial Officer, and Chief operating Officer.

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 Law. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated additional information regarding these risks and uncertainties.

<unk> appears in the section entitled cautionary statement regarding forward looking statements and form 6K on file with the SEC, except as required by law Sofia genetics disclaims any intention or obligation to update or revise any financial our product pipeline protection.

Good 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 nine 2023.

This presentation includes non <unk> financial measures. These measures are calculated by management and did not have any standardized meaning under ifr at these non <unk> measures supplement I FRS measures, but should not be viewed as a substitute.

If measures will.

Included a reconciliation of ifr at measured channel.

Measures in our press release issued this morning, which is available on our website. Please note. The replay of this call in the earnings release will be available on our website in the Investor Relations section and with that I'll now turn it over to Jacky.

Thank you Catherine and good morning, everyone.

We appreciate you joining us on our call this morning.

I'm pleased to share that our first quarter results came in strong.

Revenue for the first quarter growing 37% year over year on a constant currency basis.

After adjusting for COVID-19 related revenues.

We delivered this growth while maintaining our fiscal discipline, resulting in meaningful expense reductions from the prior year period, and so I am equally pleased to tell you that our operating loss on an adjusted basis.

$16 2 million an improvement of $4 18, again for the first quarter of 2020.

On today's call I will start by reviewing our progress in the first quarter as it relates to our strong business momentum and the continued customer adoption of our market leading platform.

And I will then turn it over to Ross <unk>, our Chief Financial Officer, and Chief operating officer to assure all of our financial results for the press.

In more detail and our outlook for the remainder of 2023 and then we will end by taking your questions.

Let me start with a review of the first quarter highlights.

Momentum in our business continues to be robust on a global basis, we added 18, new logos in Q1.

So far more than 750 customers 437, our core genomics customers that utilize our platform regularly.

Dry lab bundle.

<unk> integrated access modes.

Our strong Q1 performance is demonstrated by very robust usage numbers across the board or.

For the first quarter of 2023 analysis volume across our record genomics customers for close broke heath for patients with <unk>.

77819, an all time high up 9% sequentially and up 18% year over year.

When excluding COVID-19 related volume that from another huge volumes were 75868 for the first quarter of 2023 up 12% sequentially and up 25% year over year.

We ended the quarter at.

Nearly 13000 in Leds.

Indicating that we are well on our way to being the leader for technology agnostic software for genomic and Modelo.

I would now like Soma rest of particular strength in the quarter.

In EMEA.

The country with one of our largest and longest standing prison continues to demonstrate strong growth.

Customers such as the Institut Gustave <unk>, Paris, amongst the top cancer centers in Europe , and arguably among the top specialty just because the work for the treatment of rare and complex tumours are expanding their use of our platform.

Could you start with T began working we still pigeon it peaks in 2017 with a vision to offer patients personalized treatment.

They will now be using the Sophia data capability for the analysis of over a dozen country related applications, including solid tumours hematological and their regulatory cancers, establishing our platform is at a record genomic analytics platform.

We also recently established for several of our new bi directional communication, Inc. Commscope <unk> directly to the database.

This will enable them to facilitate more efficient into protection of their research data and to further grow the internal knowledge that the base okay.

Yeah.

In the APAC region, like India, which us usage growth well ahead of our company outbreak in the quarter and well ahead of our expectations.

During the quarter accretion that gets nasty central lab, when labor I'm Sophia DBM technology.

Krishna Mustique is India's largest diagnostic service provider in radiology and pathology.

They will be expanding their current and next generation DNA sequencing offering adopting Sofia DCM or there are really three customer needs.

In addition, we announced that <unk>, a leading diagnostic brand in India as launch HRD testing capabilities with Sofia.

The <unk> solution will enable unique path to retain full ownership of their data.

Saving time and expense, while offering comprehensive genomic insights powered by deep learning algorithm.

In Latam right.

It is a country that delivered usage growth in the quarter well above the company average.

In this region I would highlight for you does that is an example of an expanding customer within our land and expand strategy.

Does that is the largest diagnostic companion Lucky number eight cats and largest integrated healthcare network in Brazil, serving approximately 10% of the Brazilian population.

Does that has been longstanding customer and partner of Sofia genetics.

A year ago does that launch HRD testing capabilities from <unk>.

And we are pleased to tell you that to just one year after implementation.

No one else does over 2000 samples using HRD on Sofia DBM, a true Testament of the democratization of data driven means.

Next turning to neuron customer momentum I would like to highlight the recent win at the University of Maryland Medical Center.

M T with selected Sofia DBM to enhance their capabilities are on grub disease detection through the combination of all exam plus mitochondrial DNA sequencing.

Thanks to Sofia DBM UMC can maintain their simple keynote and using artificial intelligence and machine learning capabilities.

And the more efficient way to analyze and interpret data further developing the expertise and rajiv.

Looking at the first quarter from the standpoint of a progression of ads on the Sophia data and platform in rare disease. We saw one of them sequencing data volumes grow above company average year over year, which supports the broader view that as sequencing cost continues to go up customer.

As we shift to larger panels at higher volume.

We are encouraged that this trend supports increased value for those that to enable large scale data production with in an increasingly complex workflow.

In cancer progression of radiotherapy cancer, and solid tumors grew volumes above company average and some newer our best like HRD and that he could biopsy granola volumes in triple digits.

The Bayou from upfront, we continue to be very active in our engagement stopped Biopharma company. The more we discuss our capabilities with the top 20 players. The more we realize there are needs to our real world and real time data.

At the recent American Association for Cancer Research, a ACR meeting we noted high interest in your application and particular for Qs on MSP axis liquid biopsy not the last of reaching to the discussion to run yet and global commercial part.

Our ships to support coming drug launches with several top 20 pharma.

At the ACR meeting, we gave a talk on the decentralization and collective intelligence and precision medicine, highlighting the benefits of having a harmonized platform approach to promote the greater St. In the 70 plus countries, we serve while human tenuously collecting data in real time.

And we'll work that can benefit decision, making.

Interest in our multi centric deep lung force did you watch high, particularly with respect to multi modality and predictive analytics with discussions at the conference looking to apply a similar approach, but beyond lung and into additional indications such as prostate and breast cancer.

As you know so kitchen at peak started 12 years ago on the clinical sites and clinical as being our primary customer bookings to date.

Biopharma is a new class of customer for us and while other informatics theaters have approached the market launching initially with your Biopharma, we feel confident about our approach and its uniqueness and value.

As we introduce biopharma to soup kitchen ethics and provide them the unique pathway to anonymize real time.

And real World data not previously available we believe in our differentiation and it's slightly successful birthday.

On a related note.

We are very much looking forward to attending a school the conference of the American Society of clinical oncology next month in Chicago, where so Piet genetics technology will be featured in several poster sessions.

Of note our collaborators at the country on behalf of Indian friends will provide an important update on the clinical validation of HRD using samples from Depaolo, One study, which was the study supporting the approval of a stroke and they cause a PARP inhibitor all operate in the first line treatment for ovarian cancer.

Additionally, <unk> will be showcasing exciting new results in the Medicaid model analytics space as applied to kidney cancer and highlighting how our proprietary multi modal capability enable next generation sequencing stratification of patients according to risk of progression.

We expect this work May open many promising avenues for further collaborations with Biopharma companies.

Taking a step back I would like to touch on our continued sand, particularly no questions on this topic I would like to review for you today, a recent publication, we made which was accepted in translational medicine.

It involves the topic of molecular barcoding of genomics technique that allows labs to detect mutation signals with low tumor content, which is becoming quite popular in applications, such as somatic genomic profiling or MRV trucking, however, its benefits and different application context.

He is not well studied.

And so Piet genetics.

We use DNA sequencing data generated by molecular barcoding from various types and quantities of input material to chubb's fresh frozen DNF for Monday treated DNS and cell free DNA to evaluate the performance of mutation detection indifference clinically relevant context.

We have demonstrated that benefits of supplying molecular barcoding system are not uniform across different genomic applications.

We are excited that our work is being accepted in the journal of transaction on may be in a peer reviewed journal.

And we'll HP labs to understand better their extreme mental setting and how it will affect analytical performance.

In light of this work we also established a proprietary molecular barcoding system called <unk> that encodes the barcode in a novel way and this combined with probability based Marines calling algorithm.

This technology is already being incorporated into our offering notably liquid biopsy and we to facilitate the detection of mutations seatbelts with low tumor collection.

Now moving from scientific aspects of our business to technology.

I think it is worth highlighting that last month, we attended the HIMSS conference, which is perhaps the most influential LTE information technology event of the year.

Gathering of approximately 40000 attendees.

This year, we were thrilled to attend alongside Microsoft where we shared a booth and cost is a learning lunch.

Our team development and <unk> and LMA, we're highlighting.

In the provider space.

Large language model is a typo part D. Phishing intelligence algorithm that uses deep learning techniques and massively large dataset.

Our new collaboration with Microsoft we leverage the same technology as well as.

Conversational AI technologies from Microsoft's 2022 acquisition welcome again to create a scalable approach to integrate various structured and unstructured data.

Data to train and test the AI in our care possible.

We estimate the goal is to enable the collection and sharing of large dataset historically found not just within the EMR, but also in bookstore notes as well as other structured format.

With all this momentum you can sense, what makes us super excited about the investments, we're making today and their potential in the future.

Allow me to wrap up my section by telling you about two ordinary except we were bestowed on the companies since we last spoke.

In March so kitchen, and teach was named to fast company's prestigious annual lease indoor world's most innovative companies for the 2023 and an appealing so Piet genetics joined the ranks of Actelion and loans that in accepting the suites Biotechs you Theresa Award for outstanding contribution as a leader in data.

During the day.

So to conclude my section I feel as excited today as ever that soup kitchen and peak as the elements in place that will enable us to accomplish what we set out to do 12 years ago to harness data from the global community to generate actionable insights that contribute meaningful.

Fully to patient care and patient outcomes insights that contributes meaningfully to work our customers success and Thats deliver outstanding performance of Sofia genetics in 2023 and beyond.

And now I will turn the call over to Ross to discuss our financial performance in more detail.

Thank you <unk> and good morning, everyone I'm pleased to share that we started 2023 on a strong note continuing our commitment to sustainable growth turning to the financials total revenue for the first quarter of 2023 was $14 million compared to $10 9 million.

For the first quarter of 2022, representing year over year growth of 29% constant currency revenue growth was 34% in constant currency revenue growth, excluding COVID-19 related revenue was 37%.

Platform analysis volume, including volumes from our integrated access customers with 77819 for the first quarter of 2023 compared with 65694 for the first quarter of 2022, the 18% year over year growth was attributable to the strength of.

Our core platform analysis volume offset by the expected continued decline of our COVID-19 related analysis volume, excluding COVID-19 related volume platform analyses grew a healthy 25% year over year in the period.

Our genomic customers grew to 437 as of March 31, 2023.

Up from $4 26 in the prior year period.

Including 14, new routine customers in the quarter.

No our definition of core genomic customer now includes all three access modes, including integrated access versus OLED bundle and dry lab previously and is a better representation of BD M land adoption.

Annualized revenue churn rate was 4% during the first quarter of 2023 in line with our expectations net dollar retention for the quarter improved sequentially on a reported basis to 107%.

Constant currency net dollar retention, excluding COVID-19 related revenue was 118% strong MBR and a healthy level of backlog continue to provide us with a high level of revenue visibility going forward.

Gross profit for the first quarter of 2023 was $9 $7 million compared to gross profit of $6 7 million in the first quarter of 2022, representing a year over year growth of 44% gross margin was 69% for the first quarter of 2023 compared with 62%.

For the first quarter of 2022.

Adjusted gross profit was $10 1 million, an increase of 47% compared to adjusted gross profit of $6 9 million in the first quarter of 2022 adjusted gross margin was 73% for the first quarter of 2023 compared to 64% for the first quarter.

In 2022.

Note in the period, we did again benefit from an expected one time credit of approximately $300000 related to a previously disclosed cloud optimization efforts overall I remain encouraged by our progress on gross margin expansion and I'm increasingly confident in our medium term goal of <unk>.

Staining adjusted gross margins in excess of 70%.

Total operating expenses for the first quarter of 2023 $129 million.

Compared to $31 $7 million for the first quarter of 2022.

Adjusted operating expenses were $26 3 million compared to $27 9 million in the first quarter of 2022 head count our most significant expense was down versus the prior year, but remained relatively flat sequentially. We continue to make progress on containing our discretionary.

Spend insurers and remain hyper focused on maximizing capital efficiency, while sustaining targeted growth levels turning to operating loss for the first quarter of 2023, it was $19 $3 million compared to $25 million in the first quarter of 2022 adjusted operating loss for the firm.

First quarter of 2023, with $16 2 million compared to $21 million for the first quarter of 2022.

Cash and cash equivalents were approximately $162 million as of March 31, 2023 now.

Now turning to our 2023 outlook based on our strong start to fiscal year 2023, we are reiterating all elements of our annual guidance. We continue to expect reported revenue growth to be at or above 30% in 2023 constant currency revenue growth, excluding COVID-19.

Related revenue for 2023 is expected to be between 30% and 35% in line with our previously highlighted long term expectations of note. We continue to expect a headwind to 2023 reported revenues of approximately $1 million relate.

Related to our ceasing of COVID-19 related contribution which was minimal in the first quarter. This will equate to a headwind of approximately 19000 analysis to reported volumes.

Furthermore, we would note that exchange rates remain highly volatile, but at the moment, we anticipate a modest impact to reported results, albeit I would note that they have improved slightly from our fourth quarter call. Lastly, following on strong Cogs performance continuing in the first quarter of 2023, So phe Nellix expects 2023.

Operating losses to be below 2022 levels with that I'd like to turn the call back over to year Gabe for the closing remarks before we take your questions.

Thank you Ross, we're extremely proud of our performance.

Which we believe reflects our continued ability to execute on our vision and the opportunity ahead.

If you have success tons on our ability to delight customers and continue driving more and more usage of our platform.

Im encourage and as confident as ever about the long term path that we're on.

We have a fantastic opportunity to drive compelling returns and shareholder value.

In closing, thank you to our Sofia colleagues partners customers and investors for joining us in our journey without you none of this would be possible.

Please note next month, we are attending the William Blair growth conference in Chicago.

I look forward to continuing to update you on some P. S features successful democratizing data driven medicine.

Operator, you May now open the line for questions.

We will now begin the question and answer session.

I ask a question you May press star.

One on your telephone keypad.

Yes.

Speakerphone, please pick up your handset before pressing.

Keith.

To withdraw your question. Please press Star then two.

Once again that was star then one to ask a question at this time, we will pause momentarily to assemble the roster.

And our first question will come from Josh <unk> Morgan.

Finally, please go ahead.

Hey, guys. Good morning, and thanks for the time here maybe.

Maybe I'll start with one Ross or perhaps you can chime in as well.

I think you did a 30000 sort of monthly run rate here in March I think that was.

That compares to about 24000 at the end of the last quarter or so really nice tick up there but.

But you've kept the guide sort of unchanged you're just wanted to get some color around the degree of conservatism in right in light of the recent momentum here and Ross I think in your prepared remarks I caught.

You mentioned something about.

Change in volume definition does that sort of like play into this sort of monthly run rate dynamic at all any color would be helpful. Thank you.

Yes, good morning to Jonathan Thanks for the questions. Indeed, you're touching some team we're very excited about so first of all there was no change on the definition for the the volume of analogies to changing the definition west for the number of recurring platform custom.

Customers, so I'm devoting more finality. Indeed, we ended up with a high demand in Q1, almost 30000 in Leds to your point Deane.

In March.

And already now 77918, analogies, including Covid related and that is used in Q1, which is basically 18%.

<unk> Q1, 2022, and even more important I would say to just 9% versus Q4 2022.

I think the demand to just really comes from hospitals.

Hospitals and labs that are adopting bigger sequences right.

I've been traveling a recently as well in Canada in Louisiana and the <unk>.

New York and he was pretty fascinating to see how OSB downturn moving if we referred to the Illumina Sequencers beyond next seek to novo seek and I think this is primary now driving higher volume.

Consumption as well as the consumption of larger gene panels. When it comes to the guidance maybe leave Ross answer to you.

Thanks, Dave just so in terms of just the start to the year and the full year Guide I would say obviously, we're encouraged by demand in general.

Had very strong bookings all throughout last year, and obviously as we've talked about that gives us a good degree of visibility and so I would say relative to our own expectations. We did come in a bit above in Q1 on the volume side. So it was strong.

Overall, and we did close the quarter quite well it.

It is a consumption based model I will remind you and so.

It's not as if you get up to that run rate and then and then you're all of a sudden catering at that I think we'll expect some variability, particularly in the third quarter, where you typically see in the summer months a bit of a dip but overall, we're very encouraged by the start in terms of.

The definitional change.

There was a slight benefit.

It was de Minimis.

Integrated is a very very small percent of our business less than 1%. So not not much changed there. This is truly I would say underlying volume strength and again, if you look globally, where we're winning some business in some of the new countries as I'm sure you're he will talk about as well.

Some of these are initial starts are quite high volume and so we're very encouraged overall around sort of the environment and obviously look forward to be able to continue.

Continue to deliver on our results for the year and given its Q1, we obviously decided not to make any any formal change.

And we.

We obviously aim to be able to continue to deliver on what we have said and ideally.

If the underlying volume environment continues above our own expectations. We will obviously update you, but at this point I think it's prudent to leave it answers.

Got it that's helpful and actually it's a nice segue into my next question.

<unk> you highlighted a couple of sort of marquee wins in India over here, one that you need to have in the other what question on diagnostics.

How big is that opportunity for you over the medium term.

And to what degree are you seeing cross selling sort of kick in among your existing customers there.

Highlighted do you need to have being more HRD or are they starting to adopt like some of the other tests as well and the same question for Chris on your other existing customers.

Yes, Thanks for that question to Jeff first we're very proud right.

Our tagline is demo tagging data driven medicine, and so we are very proud to now thats well, indeed marquee names, but in countries, which are other than the U S and.

Europe . So as a reminder, we started signing Tata Memorial Hospital. So another marquee names with whom we are working on multiple applications, but we started we've done one solid tumor testing and beat similarly, indeed, we do need pass and decrease not yet gnostics. So these are customers that we have on boarded on first application.

For one of them it as being an HRD testing, which is I think an application where now we can.

We have a unique capability given the adoption that we've been adding since figure at time, but to your point, yes, we have as well upselling opportunities into these centers.

As we have in <unk>. So just a reminder to everyone who is listening to us our model is really land and expand.

We penetrate and account most of the time with one application such as HRD and then once they start adopting our platform does gives us the opportunity to expand beyond the other applications and so along those lines beyond India, where we are actually very enthusiastic.

We are as well very happy with the performance of some of the historical centers that we have recently expanded.

That we've been talking a lot about tend to wear now we've been announcing and celebrating the fact that over the last 12 months, we've been helping them on doing 2000 analyses on HRD, but as well another marquee name in Europe may be the most sophisticated cancer centre in Europe , asking to do stuff with <unk> with whom now basically we work.

With that we felt them across all of the cancer applications that cover and for which they produce our genomic data.

I'm very interested in I would say very excited about the penetration in India.

And I think this will give us ideas as well eventually to go in the future to other accumulator market and I would just add one of the interesting dynamics is obviously, we've seen adoption there both of central labs as well as academic medical centers. So I think thats quite encouraging for the market. We also recently did an event with our partner <unk>.

He there, which I would say was quite good in terms of broad branding across quite a number of hospitals.

Obviously, you know, it's a very large country in terms of population.

I'm a little bit later I would say.

In Asia Pac to the sequencer game, but obviously they are bringing huge populations, so even at lower price points.

It's a really nice long term opportunity for us, but again one of many across the globe, where we're seeing really nice adoption.

Got it.

And then can you give us a quick update on the adjuvant and Qiagen partnerships that I mean, there is still sort of early days there, but just curious as to what youre seeing in terms of.

Opening up the opportunity among new customers for you and so on.

Yes look thanks.

Indeed, we announced these partnerships which are important ships enough.

For our Q4 results right.

In.

Mark Asia III natrium.

And since that's how we are being very nicely working with both companies. We are revising the partnership yesterday and our executive team meeting. So we are being able to create a number of.

Opportunities with existing and new customers in the U S in Germany in particular by combining our platform. There are consumables. So we're very excited about those partnerships and we believe that.

As to your point. This is early but if we are successful in the first opportunities. We worked on together that this should benefit as well to Sofia in being able to land new customers and continue to grow significantly the number of analogies for Arthur Arthur and I would just add.

Engagement up and down those organizations from the field all the way up through the C suite has been great.

And really speaks I think to sort of the evolution of the market.

Obviously, everyone realizes data and analytics or where we play.

Is an incredibly important piece of the puzzle, particularly as sequencing costs are coming down and volumes are likely to go up and so it's great to have these very large and significant organizations right to have quite a significant commercial presence and great product portfolio is recognize that we are a very strong partner to that and then I can.

Help it in sort of that market evolution.

Got it.

And then one final one on the gross margin side for you Ross I mean, I think you did 73% non-GAAP in the quarter.

Nicely above your long term goal there so just curious as to.

Any context, you can share in terms of how youre thinking about those long term targets I mean, you probably don't want to raise them today on this call but.

Any color on that would be helpful.

Yes, thanks for calling this one suggests this is a result of a lot of discipline now so maybe taking a step back right being able to grow year on year on constant currency and excluding COVID-19 with the therapy.

37%, while in the meantime, we've been basically able to improve our gross profit year on year by 47% price. So I can definitively decided legacy discipline, we added in being lesser focus on the cost side and basically.

Being pretty selective targeting the investments, we're making are very proud to receive gross margin big improvement in data.

Just as a reminder, the 73% on a gross margin adjusted basis compared to 64% in Q1 2022.

So kudos to our team at Sofia, because they have been working very hard to be I would say, even more efficient than we have ever been and when it comes to the guidance I will leave that to Russ yes. So obviously really impressed by the team's execution here, it's been a big focus as you know right as we're trying to push towards <unk>.

The ability.

There's a number of levers do you honestly a revenue growth you have your incremental gross margin and then you have opex controls and so we've been trying to balance all three I think here, we're really proud of the gross margin execution on the technology side, our partnership with Microsoft and our efforts around architecture I think are really playing off there.

I think we still have more room to go per.

Per sort of GB in terms of cost of hosting and cost of storage.

The other dynamic that's happening is there is a shift and we will talk about it I'm sure later to larger panels to whole genome sequencing and so we're also on that path to kind of preparing for a bigger explosion of data and so in that.

Ensuring we are future proofed in terms of where all of these different technologies are going but frankly. Some of this is just good old fashion rolling up your sleeves, and saving money in execution and labor absorption and all of the things that drive gross margins in the software business and so I'm really proud as you.

We're not going to be changing the long term guide, but I do think our obviously our confidence in sustaining let's say, 70% plus gross margin continues to go up and obviously.

At a later date as we get to look at it we will have a formal update for you on sort of a target, but certainly you would think relative to where our software business should operate in and we're getting closer to.

What you would normally expect from a consumption based business and frankly, if you compare us to some of the players on the technology side pure Tech players, we're actually now above those levels. So I feel really good about our discipline and execution.

Got it thanks, guys I appreciate the time.

Thank you Jeff.

The next question comes from Julia Quinn of J P. Morgan. Please go ahead.

Oh, Thank you for taking the question.

Julia.

Two quick questions, maybe you could discuss the macro headwinds.

Quanta I know towards the end of the call mentioned that Opex I'm trying to get better but.

What do you think perhaps in terms of customer financial strain.

And are there any different.

Okay.

Okay.

Yes. Thank you marika. So so first I would start.

<unk> that there is demand everywhere right saw when it comes to the macro level, but in genomics right.

From the recent visits.

Finally in.

In the U S and Canada or in Europe .

Our view is that the demand is growing.

And I would say from one out of two meeting towards we're doing each period that there is an opportunity for Sofia to either expand the usage of the platform for a new application or otherwise land the platform with new customers. So in that sense I would say at the macro level when it comes to clinical.

<unk> huge excitement.

Sort of excitement as well on the Biopharma side.

Where I would say.

There is a growing demand on getting access to <unk> capabilities that are combining multi modal offering saw genomics radio mix in clinical in particular, but beyond that as well a lot of excitement on being able to work with the Texas a year that can get access to real time and real.

Words data through.

Network of 750, plus hospitals and lapping 70 countries.

Doing that maybe on the macro level when it comes to the currencies and Sean and I will leave a rough comment yes. So obviously for US just given the X U S exposure currency movements, which I would say have been quite volatile continue to to pump around I wouldn't say, it's had an effect on demand it's more on a.

<unk> basis.

And so again, just sort of something outside of our control, but certainly.

As we think about sort of the remainder of the year. There's no reason for us to think.

Youre going to see anything different than sort of what we saw in the recent period, which is strong underlying demand, but then quite a bit of noise on the reporting side I will say at the customer level, we certainly see economic pressures right in certain parts of the world.

Typically in the U S for a number of the customers on the labor side labor.

Labor markets for a lot of our folks are still quite tight or some of the larger central lab players are obviously moving to cut cost I would say in some of that frankly for us. It's a positive right whether that means they need us to help them with menu expansion or with cost savings on the Cogs side.

Had a lot more of those conversations with a number of different players, but frankly.

The underlying dynamics for the industry overall in or at least as we can see is still quite good.

You know, we're certainly though always prepared for a change in the environment right and so where we are in the field. All the time, we obviously have a very large presence.

Globally and so we're we're we're small but our ears are to the street, but we don't know much more in terms of how are you know whatever happens over the remainder of this year economically.

Play out, but I would say for us where we're preparing for any environment and we're also thankfully in a business where the visibility remains quite good and so overall.

While not everything plays out exactly as you want.

We tend to be able to also attempt to pull different levers to make sure we're hitting our results and so we're going to obviously continue to.

To do that for the remainder of this year.

Great. Thank you and I guess the second question more on the modeling how should we think about Remy gross margin pacing for the rest of the year any color you can share there.

Yes, thank you marika, so indeed that.

As well the answer to that Jeff.

We're very proud of both the gross margin performance for Q1, which was 73% on an adjusted basis versus 64% in.

In Q1 2022.

Being the result of definitively grew.

Growing the business, 30%, 37% year on year on constant currency, excluding COVID-19 versus.

Q1 2022.

This is being as well as the result of a lot of focus on targeted investments as well as continuous improvement on better controlling costs and in particular, our indirect costs. So again kudos to our teams I think this is a strong quarter and we need to recognize all the hard work of our soft.

The equity and behind that.

<unk> hundred 92 wants to give some color on how you see that evolving in the future right. So obviously our business being consumption base.

It tends to follow a bit of what you would think of as the utilization cycle.

Which tends to be sort of building over the course of the year.

Seasonal dip in <unk>, and then I would say a bit stronger.

<unk> in the fourth quarter and this is similar to what we've seen.

In the past I would say this year.

One caveat I would give us just given some of the timing of some large contracts coming on I would expect.

The third and fourth quarter to be even a bit stronger.

And then as typical for US just in terms of overall payments.

But overall I would say it would follow on.

On an analysis basis, the more of the normal sequencing.

Our year now on the gross margin side, we did call out about $300000 benefit from.

The cloud side in Q2 that will cease or sorry in Q1 that will cease in Q2.

You will see now sort of I would say the new run rate of gross margins in the second quarter for us that we hope to obviously build off of that but certainly.

Some degree of variability in either regional demand or in product demand can always influenced that number so I'm not going to give you an exact.

Amount for <unk> for the remainder of the year, but I would say you certainly want to pull out that $300000 benefit as you think about Q2, and then again thinking about that being sort of a new rebating from where we are as we now come out of this period, where we spent quite a bit of energy on gross margin expansion.

That's very helpful. Thank you.

Thank you Monica.

The next question comes from Dan Brennan of Keybanc Cowen. Please go ahead.

Hey, Good morning. This is Kyle on for Dan Thanks for taking the questions here maybe.

Maybe starting on the just the composition of the guidance can you just remind us what is implied in your guide for volume and pricing this year and.

Can you provide any color on what the average revenue per classroom customer wasn't <unk>. Thank you.

So in terms of the.

The guidance right.

Focused drilling out in that 30% to 35% ex COVID-19 growth I would say there.

We're still expecting volumes to be in the high teens.

And then the remainder would obviously come from.

Asps.

And I would say mix in pharma right. So.

That sort of contribution.

Today, there is really no no change to have even though obviously we had.

Better than anticipated volume growth in the first quarter.

And certainly as we think about our business again.

It is consumption based and so there could be timing elements, which is for us why again, given where in Q1, we wanted to remain.

Conservative on the outlook, but again, we are constructive.

How things have kind of developed.

In terms of the full year picture.

Sure.

In terms of the other portion I don't know if you have anything else you want to add there but for me.

We generally feel quite confident with what we've communicated.

Got it and then maybe just an update on the pharma partnerships when do those become more meaningful is that something that happens in a way in the back half of this year and into 'twenty for sure.

Should we see a notable contribution.

Yes, so as you remember kalo, we've started our journey by first to building.

Our platform serving customers, which are in the clinical space right and this is because we wanted to own a network of connected hospitals and labs that would be computing real time real world data that then being computed through the platform and our algorithms and on which basis were being paid as.

We compute the data and the second we knew that when we would have being able to build such a network. This would be extremely valuable to <unk>.

<unk> deficient working with Biopharma companies pre and post approval of drugs. So besides being a more recent markets to us, but the market as we are being.

I would say announcing a number of deals we are being seen great traction.

It's a year now and maybe I will call two of the announcement, we made last year and beginning of this year with boundless Bayou and Astrazeneca.

These partnerships are being well executed, but as you know unlike our business on the clinical side, which is consumption based and purely if you like based on the volume of data we compute these type of partnerships.

Our sometimes basis well on specific type of milestones, where we'd need to deliver some objective and we're basically getting access to the data might be SaaS, where computing data might be another step. So what began bidding new is that while indeed this opportunities in the partnership we signed are.

Being well executed you should in this consider that they will come rather towards the end of the year in terms of revenue recognition.

And as a quick reminder, particularly relative to the pharma customer base right. As you remember as we've reported previously <unk> been around let's say 100 K.

Roughly.

And thats more indicative I would say what are our.

Clinical customer would look like.

On the pharma side.

Multiples of that right and many times, a significant seven figure or eight figure even contracts potentially over time, and so with that I'll just.

<unk> start date.

And sort of when they ramp is really important from a cadence perspective, and so you can imagine with the visibility we have on the clinical business. Obviously, there we feel quite good even though it's consumption based on how that will fall on the farm side, we're still early enough, where even a month or two monitor three months change it.

Start date, we will have a pretty material impact.

Quarter to quarter, our entrepreneur recognition to get overall the contracts are are quite visible but.

Is that that's why I would say for this year with some of the ramping you do see a little bit more recognition of revenue likely in the second half of this year.

But that will continue in terms of some of those moving parts dependent.

On pharma starts and again there is we have more pharma contracts that will start to average out.

There will be less noticeable to you on the reported side, but remember we don't also.

The analysis volume relative to pharma and so you typically will see that as many of that is around data development.

On the ASP side, and so just from a modeling standpoint keep that keep that point in mind and then Caleb.

Beyond the modeling side for the revenue recognition, which is definitively important and where I think you understand that.

We have already this opportunities in the bag and we're executing them even.

Even more may be important to highlight that the demand on the pharma side continues to grow.

Inc.

The strategy go freeing of Sofia, along the three D, which is from discovery to development to deployment all around the data is more and more understood and <unk>. We already have a lot of activities that are being planned with the top pharma company to discuss about potential deals.

Got it thank you guys.

Thank you Kyle.

This concludes our question and answer session I would like to turn the conference back over to Dr. Juergen, Kim along for any closing remarks.

Well, thank you all for joining us today.

Q1, as being a very strong performance for Sofia and they really would like to thank all the Sofia and swap being working very hard and being very disciplined very passionate so that our pro funds performance could be such stay tuned.

Going to be at the Astro conference in beginning of June .

Chicago following that we will be as well at the William Blair Conference and so we will be very eager to meet.

Our partners and investors. So while we are in these conferences. Thank you so much again and have a good day.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

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Good morning, and welcome to the Sofia Genetics first quarter 2023 earnings conference call.

All participants will be in listen only mode.

Should you need assistance. Please suddenly conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

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 Catherine <unk> head of Investor Relations.

Please go ahead.

Good morning, and thank you for joining us on Sofia genetics first quarter fiscal 2023 earnings call. My name is Catherine Daren and I am the head of Investor Relations at Sofia Genetics. Joining me today are Doctor Yankee Campbell, our co founder and Chief Executive Officer, and Ross <unk>, our chief financial.

Officer, and Chief operating officer.

Before we get started I'd like to remind you that the management team we will make statements. During this call that are forward looking within the meaning of U S. Federal Securities Law. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated additional information regarding these risks and uncertainties.

It appears in the section entitled cautionary statement regarding forward looking statements and form 6K filed with the S. E C. Except as required by law Sofia genetics disclaims any intention or obligation to update or revise any financial our product pipeline protection and forward looking statements, whether because of new information.

Future events or otherwise.

This conference call contains time sensitive information is accurate only as of its broadcast may nine 2023.

Presentation includes non ifr as financial measures. These measures are calculated by management and did not have any standardized meaning under ifr at these non I F. R. S measure supplement I FRS measures, but should not be viewed as substitutes for ifr measures. We have included a reconciliation of RF measures.

There are measures in our press release issued this morning, which is available on our website. Please note. The replay of this call in the earnings release will be available on our website in the Investor Relations section and with that I'll now turn it over to Archie.

Thank you Catherine and good morning, everyone.

We appreciate you joining us on our call this morning.

I'm pleased to share that our first quarter results came in strong with two.

Revenue for the first quarter growing 37% year over year on a constant currency basis. After adjusting for COVID-19 related revenues.

We delivered this growth while maintaining our fiscal discipline.

<unk> and meaningful expense reductions from the prior year periods and so yeah I'm equally pleased to tell you that our operating loss on an adjusted basis was $16 2 million an improvement of $4 18 again for the first quarter of 2020.

On today's call I will start by reviewing our progress in the first quarter as it relates to our strong business momentum and the continued customer adoption of our market leading platform.

And I will then turn it over to Ross <unk>, our Chief Financial Officer, and Chief operating officer to share our financial results for the <unk>.

In more detail and our outlook for the remainder of 2023 and then we will end by taking your questions.

Let me start with a review of the first quarter highlights.

Momentum in our business continues to be robust on a global basis, we added 18, new logos in Q1.

Of our more than 750 customers 437, our core genomics customers that utilize our platform regularly to our gray lab bundle.

And integrated access modes.

Our strong Q1 performance is demonstrated by very robust usage numbers across the board.

For the first quarter of 2023 analysis volume across our core genomics customers. So close broke he for patients.

77819, an all time high up 9% sequentially and up 18% year over year.

When excluding COVID-19 related volume split for malaria volumes were 75868 for the first quarter of 2023 up 12% sequentially and up 25% year over year.

We ended the quarter at <unk>.

Nearly 30000 in Leds.

Indicating that we are well on our way to being the leader for technology agnostic software for genomic and T mobile and <unk>.

I will now highlight some a raise of particular strength in the quarter.

In EMEA <unk>.

The country with one of our largest and longest standing prison continues to demonstrate strong growth.

Customers, such as Institut Gustave <unk>, Paris, amongst the top cancer centers in Europe , and arguably among the top especially just because the work for the treatment of rare and complex tumours are expanding their use of our platform.

And could you just have begun.

We began working with still pitching it peaks in 2017 with a vision to offer patients personalized treatment.

They will now be using the Sophia data capability for the analogy so over a dozen country related application, including solid tumours and metallurgical and they're really carry cancers, establishing our platform either a core genomic analytics platform.

We also recently established produced coupled with the.

The new bidirectional communication knee Commscope here DBM.

Key to that debate.

This will enable them to facilitate more efficient and to protection of their research data and helps to further grow the internal knowledge database authentic your stomach.

In the APAC region, like India, which us usage growth well ahead of our company a break in the quarter and well ahead of our expectations.

During the quarter accretion that diagnostics central lab when live on Sofia DBM technology.

<unk> is India's largest diagnostic service provider in radiology and pathology.

They will be expanding their current and next generation DNA sequencing offering by adopting Sofia DCM.

I read it a recap for me.

In addition, we announced that <unk>, a leading diagnostic run in India as long to HRD testing capabilities with Sofia.

The <unk> solution will enable unique path to retain full ownership of the data saving time and expense, while offering comprehensive genomic insights powered by deep learning algorithm.

In Latam, Brazil is a country that delivered usage growth in the quarter well above the company average in this region I would highlight for you does that is an example of an expanding customer within our land and expand strategy.

Does that is the largest agnostic company in Latin America, and largest integrated healthcare network in Brazil, serving approximately 10% of the Brazilian population.

Data is being longstanding customer and partner of Sofia genetics.

A year ago does that launch HIV testing capabilities in <unk> and we are pleased to tell you that to just one year after implementation.

No wonder like over 2000 samples using HRD on Sofia DBM.

Good Testament of the Democrats ingestion of data.

Next turning to neuron customer momentum I would like to highlight the recent win at the University of Maryland Medical Center UMC with selected Sofia DBM to and then their capabilities are on grub disease detection through the combination of all exempt plus NATO countries.

DNA sequencing.

Thanks to Sofia, the yen UMC can maintain their assemble keynote and using our artificial intelligence and machine learning capabilities find a more efficient way to analyze and interpret data further developing the expertise in drug abuse.

Looking at the first quarter from the standpoint of our progression to react on the Sofia platform in rare disease. We saw what is the sequencing data volumes grow.

<unk> company average year over year, which supports the broader view of that as sequencing costs continue to go up customers, we shift to larger panels at higher volume.

We are encouraged that this trend supports increased value for those that enable large scale data production within an increasingly complex workflow.

You can through a progression of regulatory cancer and solid tumors grew volumes above company average and some newer I read like HRD and liquid biopsy grew.

<unk> volumes in triple digits.

The Biopharma front, we continue to be very active in our engagement stopped Biopharma company. The more we discuss our capabilities within the top 20 players the more we realize there a need to have real world and real time data.

At the recent American Association for Cancer Research a.

Our mid teen we noted highly interesting new application and particular for Qs on MSP access liquid biopsy not the last of which included discussion to run yet and global commercial partnerships to support.

Drug launches with several top 20 pharma.

At the ACR meeting, we gave a talk on the decentralization and collective intelligence in precision medicine, highlighting the benefits of having a harmonized platform approach to promote the greatest reach in the 70 plus countries, we serve while simultaneously collecting data in real time.

And we'll work that can benefit decision, making.

Interest in our multi centric deep lung force too high, particularly with respect to multi modality and predictive analytics with discussion at the conference looking to apply a similar approach, but beyond lung and into additional indications such as prostate and breast cancer.

As you know so Piet genetic started 12 years ago on the clinical site and vehicle as being our primary customer focus today.

Biopharma is a new class of customer for us and while other informatics theaters have approached the market launching initially with Biopharma, we feel confident about our approach and its uniqueness and value.

As we introduce Biopharma to Sofia genetics and provide them. This unique pathway to anonymize real time and real world data not previously available we believe in our differentiation and it's slightly successful birthday.

On a related note.

We are very much looking forward to attending a school the conference of the American Society of clinical oncology next month in Chicago, where Sofia genetics technology will be featured in several poster efficient.

Of note our collaborators at the country on behalf and young French will provide an important update on the clinical validation of HRD using samples from Depaolo, One study, which was the study supporting the approval of a stroke and it got the PARP inhibitor or elaborate in the first line treatment for ovarian.

Answer.

Additionally, <unk> will be showcasing exciting new results in the Medicaid model analytics space as applied to kidney cancer and highlighting how our proprietary multi modal capability enable next generation sequencing stratification of patients according to risk of progression.

We expect this work May open many promising avenues for further collaborations with Biopharma companies.

Taking a step back I would like to touch on our continued sand, particularly no questions on this topic I would like to review for you today, a recent publication, we made which was accepted in translational medicine.

It involves the topic of molecular barcoding of genomics technique that the lowest labs to detect mutation signals with low tumor content, which is becoming quite popular in applications, such as somatic genomic profiling or MRV trucking. However, its benefits in different application content.

It is not well studied.

So kitchen at peak.

We use DNA sequencing data generated by molecular barcoding from various types and quantities of input materials, such as fresh frozen DNF or Monday treated DNS and cell free DNA to evaluate the performance of mutation detection indifferent clinically relevant context.

We have demonstrated that benefits of applying molecular barcoding system are not uniform across different genomic applications.

We're excited that that work is being accepted in the journal transaction on may be in a peer reviewed journal.

And we'll eight clinical labs to understand better their extreme mental settings, and how it will affect analytic outperformance.

In light of this work we also established a proprietary molecular barcoding system called <unk> that encodes the barcode in a novel way and this combined with probability based brand calling algorithm.

This technology is already being incorporated into our offering notably liquid biopsy and we can facilitate the detection of mutational signals with low tumor collection.

Now moving from scientific aspects of our business to technology.

I think it is worth highlighting that last month, we attended the HIMSS conference, which is perhaps the most influential LTE information technology event of the year the gathering of approximately 40000 attendees.

This year, we were thrilled to attend alongside Microsoft where we shared a booth and cost is a learning lunch.

Opinion development, and generative AIE, and Llm's, where I like <unk>.

In the provider space large language model is a typo park efficient intelligence algorithm that uses deep learning techniques and massively large dataset.

Our new collaboration with Microsoft we leverage this same technology as well as.

Conversational AI technologies from Microsoft's 2022 acquisition welcome again to create a scalable approach to integrate various structured and unstructured data.

Data to train and test the AI in our care possible.

We estimate the goal is to enable the collection and sharing of large dataset historically found not just within the EMR, but also in bookstore notes as well as other unstructured format.

With all this momentum you can sense, what makes us super excited about the investments, we're making today and their potential in the future.

Allow me to wrap up my section by telling you about the two owners that we were bestowed on the companies since we last spoke in.

In March <unk> was named to fast company's prestigious annual lease indoor world's most innovative companies for the 2023 any appealing so Piet genetics joined the ranks of Actelion and longer in accepting the Swiss biotech Perique Award for outstanding contribution as a leader in data.

During the day.

So to conclude my section I feel as excited today as ever that's so kitchen antiques as the element in place that will enable us to accomplish what we set out to do 12 years ago to harness data from the global community to generate actionable insights that contribute meaningful.

Patient care and patient outcomes insight that contributes meaningfully to work our customer success and that deliver outstanding performance of <unk> in 2023 and beyond.

And now I will turn the call over to Ross to discuss our financial performance in more detail.

Thank you <unk> and good morning, everyone I'm pleased to share that we started 2023 on a strong note continuing our commitment to sustainable growth turning to the financials total revenue for the first quarter of 2023 was $14 million compared to $10 9 million.

For the first quarter of 2022, representing year over year growth of 29% constant currency revenue growth was 34% in constant currency revenue growth, excluding COVID-19 related revenue was 37%.

Platform analysis volume, including volumes from our integrated access customers with 77819 for the first quarter of 2023 compared to 65694 for the first quarter of 2022, the 18% year over year growth was attributable to the strength of.

Our core platform analysis volume offset by the expected continued decline of our COVID-19 related analysis volume, excluding COVID-19 related volume platform analyses grew a healthy 25% year over year in the period.

Our genomic customers grew to 437 as of March 31, 2023 up from $4 26 in the prior year period.

Including 14, new routine customers in the quarter.

Our definition of core genomic customer now includes all three access modes, including integrated access versus OLED bundle and dry lab previously and is a better representation of DD and land adoption.

Annualized revenue churn rate was 4% during the first quarter of 2023 in line with our expectations net dollar retention for the quarter improved sequentially on a reported basis to 107%.

I think currency net dollar retention, excluding COVID-19 related revenue was 118% strong MBR and a healthy level of backlog continue to provide us with a high level of revenue visibility going forward.

Gross profit for the first quarter of 2023 was $9 7 million compared.

Compared to gross profit of $6 7 million in the first quarter of 2022, representing a year over year growth of 44% gross margin was 69% for the first quarter of 2023 compared with 62% in the first quarter of 2022, adjusted gross profit was $10 1 million.

An increase of 47% compared to adjusted gross profit of $6 9 million in the first quarter of 2022 adjusted gross margin was 73% for the first quarter of 2023 compared to 64% for the first quarter of 2022.

In the period, we did again benefit from an expected one time credit of approximately $300000 related to our previously disclosed cloud optimization efforts.

Overall I remain encouraged by our progress on gross margin expansion and I'm increasingly confident in our medium term goal of sustaining adjusted gross margin in excess of 70%.

Total operating expenses for the first quarter of 2023 were $29 million compared.

Compared to $31 $7 million for the first quarter of 2022.

Adjusted operating expenses were $26 3 million compared to 27 $9 million in the first quarter of 2022 head count our most significant expense was down versus the prior year, but remained relatively flat sequentially. We continue to make progress on containing our discretionary.

Spend insurers and remain hyper focused on maximizing capital efficiency, while sustaining targeted growth levels turning to operating loss for the first quarter of 2023, it was $19 $3 million compared to $25 million in the first quarter of 2022 adjusted operating loss for the firm.

First quarter of 2023, with $16 2 million compared to $21 million for the first quarter of 2022.

Cash and cash equivalents were approximately $162 million as of March 31, 2023.

Now turning to our 2023 outlook based on our strong start to fiscal year 2023, we are reiterating all elements of our annual guidance. We continue to expect reported revenue growth to be at or above 30% in 2023 constant currency revenue growth, excluding COVID-19.

<unk> related revenue for 2023 is expected to be between 30% and 35% in line with our previously highlighted long term expectations of note. We continue to expect a headwind to 2023 reported revenues of approximately $1 million related to a ceasing of COVID-19 relate.

Contribution, which was minimal in the first quarter. This will equate to a headwind of approximately 19000 analysis to reported volumes.

Furthermore, we would note that exchange rates remain highly volatile, but at the moment, we anticipate a modest impact to reported results, albeit I would note that they have improved slightly from our fourth quarter call. Lastly, following on strong Cogs performance continuing in the first quarter of 2023, So phe Nellix expects 2020.

Three operating losses to be below 2022 levels with that I'd like to turn the call back over to year Gabe for the closing remarks before we take your questions.

Thank you Ross, we're extremely proud of our performance.

Which we believe reflects our continued ability to execute on our vision and the opportunity ahead.

If you have success tons on our ability to delight customers and continued driving more and more usage of our platform.

I am encouraged and as confident as ever about the long term path that we're on.

We have a fantastic opportunity to drive compelling returns and shareholder value.

In closing, thank you to our Sofia colleagues partners customers and investors for joining us in.

In our journey without you none of this would be possible.

Please note next month, we are attending the William Blair growth conference in Chicago.

Look forward to continuing to update you on <unk> future success of democratizing data driven 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.

Yes.

Be careful.

Your handset before pressing magee.

To withdraw your question. Please press Star then two.

Once again that was star then one to ask a question.

This time, we will pause momentarily to assemble the roster.

And our first question will come from Josh.

Shaban with Morgan Stanley . Please go ahead.

Hey, guys good morning, and thanks for the time here.

I'll start with one.

So perhaps you can chime in as well.

You did a 30000 sort of monthly run rate here in March I think that was.

That compares to about 24000 at the end of the last quarter or so really nice pick up there.

But you've kept the guide sort of unchanged here just wanted to get some color around the degree of conservatism in right and in light of the recent momentum here and Ross I think in your prepared remarks I caught you.

You mentioned something about.

Change in volume definition does that sort of like play into this sort of monthly run rate dynamic at all any color would be helpful. Thank you.

Yes, good morning to Jonathan Thanks for the questions. Indeed, you're touching some team we're very excited about so first of all there was no change on the definition for the the volume of analogies the change in the definition west for the number of recruiting platform.

Customers, so I'm devoting more finality. Indeed, we ended up with a high demand in Q1, almost 32000 and then Andy just to your point in that in March.

And already now 77918 analogies, including Covid related 90 used in Q1, which is basically 18%.

Versus Q1, 2022, and even more important I would say to just 9% versus Q4 2022.

I think the demand to just really comes from Fox.

Hospitals and labs that are adopting bigger sequencer Tonight.

<unk> been traveling recently as well in Canada in Louisiana and the <unk>.

New York and he was pretty fascinating to see how all speak downtown moving if we referred to the Illumina Sequencers beyond next seek to Novo seek and I think this is primary now driving higher volume of consumption as well as the consumption of larger gene panels when it can.

So the guidance, maybe we'd leave Ross answer to you.

Thanks, Dave just so in terms of just the start to the year and the full year Guide I would say obviously, we're encouraged by demand in general.

Very strong bookings all throughout last year, and obviously as we've talked about that gives us a good degree of visibility and so I would say relative to our own expectations. We did come in a bit above in Q1 on the volume side. So it was strong.

Overall, and we did close the quarter quite well it.

It is a consumption based model I will remind you and so.

It's not as if you get up to that run rate and then and then you're all of a sudden CAGR at that I think we will expect some variability, particularly in the third quarter, where you typically see in the summer months a bit of a dip but overall, we're very encouraged by the start in terms of.

The definitional change.

There was a slight benefit.

It was de Minimis.

Integrated is a very very small percent of our business less than 1%. So not not much changed there. This is truly I would say underlying volume strength and again, if you look globally, where we're winning some business in some of the new countries as Im sure Youre, He will talk about that as well.

Some of these are initial starts are quite high volume and so we're very encouraged overall around sort of the environment and obviously look forward to be able to continue.

Continue to deliver on our results for the year and given its Q1, we obviously decided not to make any any formal change.

And.

We obviously aim to be able to continue to deliver on what we have said and ideally.

If the underlying volume environment continues above our own expectations. We will obviously update you, but at this point I think it's prudent to leave it answers.

Got it that's helpful and actually it's a nice segue into my next question.

You highlighted a couple of sort of marquee wins in India over here, one that you need to have in the other what question on diagnostics.

How big is that opportunity for you over the medium term and to what degree are you seeing cross selling sort of kick in among your existing customers there.

Highlighted do you need to have being more HRD or are they starting to adopt like some of the other tests as well and the same question for Christian on your other existing customers.

Yes. Thanks for that question, Jeff Fritz we're very proud right. Our tagline is demo tagging data driven medicine, and so we are very proud to alpha as well indeed marquee names, but in countries, which are other than the U S and.

Europe . So as a reminder, we started signing Tata Memorial Hospital. So another marquee names with whom we are working on multiple applications, but we started we've done one solid tumor testing and beat humans R&D. Indeed, we do need pass and decrease not yet <unk>. So these are customers that we have on boarded on first application.

For one of them. It is being run HRD testing, which is I think an application where now we can.

We have a unique capability given the adoption that we've been adding since figure at time, but to your point, yes, we have as well as upselling opportunities into these centers.

As we have in <unk>, so just to remind to everyone who is listening to us our model is really London expand so we penetrate and account for most of the time with one application such as HRD and then once they start adopting our platform does gives us the opportunity to expand beyond their applications and so on.

Along those lines beyond India, where we are actually very enthusiastic.

We are as well very happy with the performance of some of the historical centers that we have recently expanded.

That we have been talking a lot about and to work now we've been announcing and celebrating the fact that over the last 12 months, we've been helping them on doing 2090, <unk> HRD, but as well another marquee name in Europe may be the most sophisticated cancer centre in Europe , <unk>, which will now basically we work slip.

We got to them across all of the cancer applications that cover and for which they put us genomics data. So I'm very interested in I would say very excited about the penetration in India and I think this will give us ideas as well eventually to go in the future to other accumulate.

And I would just add one of the interesting dynamics is obviously, we've seen adoption there both of central labs as well as academic medical centers. So I think thats quite encouraging for the market. We also recently did an event with our partner GE, there, which I would say was quite good in terms of broad branding across quite a number of hospital.

So obviously you know it's a very large country in terms of population they've come a little bit later I would say.

In Asia Pac to the sequence of game, but obviously they are bringing huge populations so even at lower price points.

It's a really nice long term opportunity for us, but again one of many across the globe, where we're seeing really nice adoption.

Got it.

And then can you give us a quick update on the adjuvant and Qiagen partnerships that I mean, theres still sort of early days, there, but just curious as to what youre seeing in terms of.

Opening up the opportunity among new customers for you and so on.

Yes look thanks, Jeff Indeed, we announced these partnerships which are important to understand the ships.

For our Q4 results right.

In.

Mark Asia April or in April .

And it seems that now we are being very nicely working with both companies. We are revising the partnership yesterday and our executive team meeting. So we are being able to create a number of.

Opportunities with existing and new customers in the U S in Germany in particular by combining our platform. There are consumables. So we're very excited about those partnerships and we believe that.

As to your point it is early but if we are successful in the first opportunities. We worked on together that this should benefit as well to Sofia in being able to land new customers and continue to grow significantly the number of analogies for Arthur.

And I would just add.

Engagement up and down those organizations from the field all the way up through the C suite has been great.

And really speaks I think to sort of the evolution of the market.

Obviously, everyone realizes data and analytics or where we play.

It's an incredibly important piece of the puzzle, particularly as sequencing costs are coming down and volumes are likely to go up and so it's great to have these very large and significant organizations right that have quite a significant commercial presence and great product portfolio is recognize that we are a very strong partner to them and I can.

Help it in sort of that market evolution.

Got it.

And then one final one on the gross margin side for you Ross I mean, I think you did 73% non-GAAP in the quarter.

No no.

Nicely above your long term goal there so just curious as to.

Any context, you can share in terms of how youre thinking about those long term targets. I mean, you probably don't want to raise them today on this call, but any any color on that would be helpful.

Yes. Thanks for putting these wanted just this is a result of a lot of discipline now so maybe taking a step back craig to being able to grow.

Year on year on constant currency and excluding Covid, we the 30.

37%, while in the meantime, we've been basically able to improve our gross profit year on year by 47% price. So I can definitively say likes the discipline, we added in being laser focused on the cost side and basically.

Being pretty selective targeting the investments we're making.

Proud to receive gross margin big improvement in data.

Just as a reminder, the seven.

<unk>, 3% on a gross margin adjusted basis compared to 64% in Q1 2022.

So kudos to our team that Sofia, because they have been working very hard to be I would say, even more efficient than we have ever been and when it comes to the guidance I will leave that to Russ yes. So obviously really impressed by the team's execution here, it's been a big focus as you know right as we're trying to push towards <unk>.

Profitability.

There's a number of levers do you honestly of revenue growth you have your incremental gross margin and then you have opex controls and so we've been trying to balance all three I think here, we're really proud of the gross margin execution on the technology side, our partnership with Microsoft and our efforts around architecture I think are really playing off there.

I think we still have more room to go.

Per.

<unk> sort of GB in terms of cost of hosting and cost of storage.

The other dynamic that's happening is there is a shift and we will talk about it I'm sure later to larger panels to whole genome sequencing and so we're also on that path to kind of preparing for a bigger explosion of data and so in that.

We are ensuring we are future proofed in terms of where all of these different technologies are going but frankly. Some of this is just good old fashion rolling up your sleeves, and saving money in execution and labor absorption and all of the things that drive gross margins in the software business and so I'm really proud as.

You mentioned and we're not going to be changing the long term guide, but I do think our obviously our confidence in sustaining let's say, 70% plus gross margin continues to grow up in.

Obviously it is.

Later date as we take a look at it we will have.

Formal update for you on sort of a target, but certainly you would think relative to where our software business should operate we're getting closer to.

What you would normally expect from a consumption based business and frankly, if you compare us to some of the players on the technology side pure Tech players, we're actually now above those levels. So I feel really good about.

Our discipline and execution.

Got it thanks, guys I appreciate the time.

Thank you Jeff.

The next question comes from Julia Quinn of Jpmorgan. Please go ahead.

Hello. Thank you for taking the question this is Julian.

Two quick questions, maybe you could discuss the macro headwinds.

Water I know towards the end of the call.

You mentioned that FX trade it better but.

What do you think perhaps the question Nathan.

And are there any differences that you're seeing.

Okay.

Okay.

Yes. Thank you marika. So so first I would start.

<unk> that there is demand everywhere right saw.

When it comes to the macro level, but in genomics right. So from the recent visits.

Personally.

In the U S and Canada or in Europe .

Is that the demand is growing and I would say from one out of two meetings, where we're doing each period that there is an opportunity for sofia to either expand the usage of the platform for a new application.

Otherwise land the platform with new customers. So in that sense I would say at the macro level. When it comes to clinical genomics huge excitement a lot of excitement as well on the Biopharma side.

Where I would say.

There is a growing demand on getting access to <unk> that are combining multi modal offering saw genomics radio mix in clinical in particular, but beyond that as well a lot of excitement on being able to work with the Texas a year that can get access to real time envy.

Worth of data through.

Network of 750, plus hospitals and lapping 70 countries.

Doing that maybe on the macro level when it comes to the currencies and Sean and I will leave a rough comment yes. So honestly for us just given the X U S exposure currency movements, which I would say it's been quite volatile continue to bump around I wouldn't say, it's had an effect on demand it's more on a.

<unk> basis.

And so again, just sort of something outside of our control, but certainly.

As we think about sort of the remainder of the year. There's no reason for us to think.

Youre going to see anything different than sort of what we saw in the recent period, which is strong underlying demand, but then quite a bit of noise on the reporting side I will say at the customer level, we certainly see economic pressures in certain parts of the world.

Particularly in the U S for a number of the customers on the labor side labor.

Labor markets for a lot of our folks are still quite tight or some of the larger central lab players are obviously moving to cut costs I would say in some of that frankly for us. It's a positive right whether that means they need us to help them with menu expansion or with cost savings on the Cogs side, we've had a lot more of those conversations with a number of <unk>.

Current players, but frankly.

The underlying dynamics for the industry overall at least as we can see is still quite good.

We're certainly though always prepared for changing the environment right and so where we are in the field. All the time, we obviously have a very large presence.

Globally and so we're we're we're small but our ears are to the street, but we don't know much more in terms of how are you know whatever happens over the remainder of this year economically we'll sort of play out, but I would say for us where we're preparing for any environment and we're also thankfully in a business where the visibility.

Remains quite good and so overall.

While not everything plays out exactly as you want.

We tend to be able to also attempt to pull different levers to make sure. We're hitting our results and so we're going to obviously continue to attempt to do that for the remainder of this year.

Great. Thank you and I guess, the second question more on the modeling.

How should we think about Remy gross margin pacing for the rest of the year any color you can share there.

Yes, Thank you Martha so indeed that.

As well the answer to that yes, we are.

Very proud to about the gross margin performance for Q1, which was 73% on an adjusted basis versus 64% in.

In Q1 2022.

Being the result of definitively grew.

Growing the business, 30%, 37% three year on year on constant currency, excluding COVID-19 versus.

Q1 2022.

This has been as well as the result of a lot of focus on targeted investments as well as continuous improvement on better controlling costs and in particular, our indirect costs. So again kudos to our teams I think this is a strong quarter and we need to recognize all the hard work of our soft.

The equity and behind that real estate to 90 wants to give some color on how you see that evolving in the future right. So obviously our business being consumption base.

It tends to follow a bit of what you would think of as the utilization cycle.

Which tends to be sort of building over the course of the year.

Seasonal dip in <unk>, and then I would say a bit stronger.

Results in the fourth quarter and this is similar to what we've seen.

In the past I would say this year.

One caveat I would give us just given some of the timing of some large contracts coming on I would expect.

The third and fourth quarter to be even a bit stronger.

And it's typical for US just in terms of overall payments, but.

But overall I would say it would follow on.

On an analysis basis, the more of the normal sequencing.

Our year now on the gross margin side, we did call out about $300000 benefit from.

The cloud side in Q2 that will cease I'm sorry in Q1 that will cease in Q2.

You will see now sort of obviously, the new run rate of gross margins in the second quarter for us that we hope to obviously build off of it but certainly.

Some degree of variability in either regional demand or in product demand can always influenced that number so I'm not going to give you an exact.

Amount for <unk>, where the remainder of the year, but I would say you certainly want to pull out that $300000 benefit as you think about Q2, and then again thinking about that being sort of the new re basing for where we are as we now come out of this period, where we spent quite a bit of energy on gross margin expansion.

That's very helpful. Thank you.

Thank you Martha.

The next question comes from Dan Brennan of Keybanc Cowen. Please go ahead.

Hey, Good morning. This is Kyle on for Dan Thanks for taking the questions here.

Maybe starting on the just the composition of the guidance can you just remind us what is implied in your guide for volume and pricing this year and.

Can you provide any color on what the average revenue per platform customer wasn't <unk>.

Yes.

So in terms of.

The guidance right.

We're focused really on that 30% to 35% ex COVID-19 growth I would say there.

We're still expecting volumes to be in the high teens.

And then the remainder would obviously come from.

Asps.

And I would say mixed in pharma right. So.

That sort of contribution.

Today, there is really no no change to have even though obviously we had.

Than anticipated volume growth in the first quarter.

Certainly as we think about our business again.

It is consumption based and so there could be timing elements, which is for us why again, given where in Q1, we want to remain.

Conservative on the outlook, but again, we are constructive.

How things have kind of developed in terms of the full year picture.

In terms of the <unk>.

Other portion I don't know if you have anything else you want to add there but for me.

We generally feel quite confident with what we've communicated.

Got it and then maybe just an update on the pharma partnerships. When it does become more meaningful is that something that happens way in the back half of this year and into 'twenty for sure.

When should we see a notable contribution.

Yes, so as you remember we started our journey by first building.

Our platform serving customers, which are in the clinical space right and this is because we wanted to own a network of connected hospitals and labs that would be computing real time real world data that then being computed through the platform and our algorithms and on which basis were being paid us.

We compute the data and the second we knew that when we would that being able to build such a network. This would be extremely valuable to us.

Sufficient working with Biopharma companies pre and post approval of drugs. So this has been a more recent markets to us, but the market as we are being I would say announcing a number of deals we have being seeing great traction since a year now.

Maybe I will call two of the announcement, we made last year and beginning of this year, we have boundless Bayou and Astrazeneca. So these partnerships are being well executed, but as you know unlike our business on the clinical side, which is consumption based and purely if you like based on the volume of data we compute these type of partner.

Ships.

Our sometimes base as well on specific type of milestones, where we'd need to deliver some objectives and we're basically getting access to the data might be SaaS, where computing data might be another step. So what began bidding new is that while indeed this opportunities and partnership we signed.

Being when executed you should in this consider that they will come rather towards the end of the year in terms of revenue recognition.

And as a quick reminder, particularly relative to the pharma customer base right as you remember as we've reported previously.

<unk> been around let's say 100 K.

Roughly.

And thats more indicative I would say of what a clinical.

Customer would look like.

On the pharma side.

Multiple of that right and many times.

Inefficient seven figure or eight figure even contracts potentially over time, and so with that obviously.

<unk> start date.

And sort of when they ramp is really important from a cadence perspective, and so you can imagine with the visibility we have on the clinical business. Obviously, there we feel quite good even though it's consumption based on how that will fall on the farm side, we're still early enough, where even a month or two months or three months change it.

Start date, we will have a pretty material impact.

Quarter to quarter, an onslaught of recognition to get overall the contracts are are quite visible but.

That's why I would say for this year with some of the ramping you do see a little bit more recognition of revenue likely in the second half of this year.

But that will continue in terms of some of those moving parts dependent on pharma starts and again. There is we have more pharma contracts that will start to average out.

Be less noticeable Tijuana reported but remember we don't also.

Here's the analysis volume relative to pharma and so you typically will see that as many of that is around data development.

On the ASP side, and so just from a modeling standpoint keep that keep that point in mind and then.

Beyond the modeling side for the revenue recognition, which is definitively important and where I think you understand that.

We have already this opportunity is in the bag and we're executing them even.

Even more may be important to highlight that the demand on the pharma side continues to grow.

Inc.

The strategy go freeing of Sofia, along the three D, which is from discovery to development to deployment all around data is more and more understood and <unk>. We already have a lot of activities that are being planned with the top pharma company to discuss about potential deals.

Got it thank you guys.

Thank you guys.

This concludes our question and answer session I would like to turn the conference back over to Dr. Juergen Kimba long for any closing remarks.

Well, thank you all for joining us today.

Q1, as being a very strong performance for Sofia and they really would like to thank all the <unk>, who are being working very hard and being very disciplined very passionate so that our pro funds performance could be such stay tuned.

Going to be at the Astro conference in beginning of June .

Chicago following that we will be as well at the William Blair Conference and so we will be very eager to meet.

Our partners and investors. So while we are in these conferences. Thank you so much again and have a good day.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.