Q2 2023 SOPHiA GENETICS SA Earnings Call
Hello, Ladies and gentlemen, and thank you for joining Sofia genetics second quarter 2023 earnings call. Our host for today is Catherine de La.
Head of Investor Relations.
Taylor you may begin.
Good morning, and thank you for joining us on Sofia genetics second quarter fiscal 2023 earnings call.
My name is Catherine de Lon and I am the head of Investor Relations at Sofia genetics.
Joining me today are Doctor Your D Campbell, our co founder and Chief Executive Officer, and Ross you can 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 United States Federal Securities laws.
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 appears in the section entitled cautionary statement regarding forward looking statements in the form 6K for the second quarter earnings release on file with the SEC, except as required by law Sofia 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. This conference call contains time sensitive information and is accurate only as of its broadcast August eight 2023. This presentation includes non <unk> financial measures.
These measures are calculated by management and do not have any standardized meaning under ifr S. These non <unk> measures supplement ifr measures, but should not be viewed as substitutes for ISR measures. We have included a reconciliation of ifr measures to non <unk> measures in our press release issued this morning.
Which is available on our website. Please note both the replay of this call in the earnings release will be available on our website in the Investor Relations section and with that now I'll turn it over to you.
Thank you Catherine and good morning, everyone.
We appreciate you joining us on the recall to date.
I'm pleased to share that our second quarter results came in strong with total revenue for the second quarter growing 30% 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.
Im sorry, Im equally pleased to tell you that our operating loss on an adjusted basis was $14 6 million, an improvement of $5 million or 25% from the second quarter of 2022, and then improvement of $1 6 million from the prior year quarter.
On today's call I will start by reviewing our progress in the second quarter as it relates to our strong business execution and the continued customer adoption of our market leading platform.
I will then turn it over to Russ Mcmahon, our Chief Financial Officer, and Chief operating officer to share our financial results for the period in more detail followed by our outlook for the remainder of 2023, and we will end by taking your questions.
Let me start with a review of the second quarter highlights.
We added 16, new logos in the second quarter.
Of our more than 750 customers 434, our core genomics customers that utilize our platform regularly through our dry lab bundle and integrated access modes.
Our strong Q2 performance is also demonstrated by robust usage numbers across the board for.
For the second quarter of 2023 analyses volume across our core genomics customers for class a proxy for patient seven.
78146, an all time high.
18% year over year.
When excluding corporate related volumes platform analytics volumes were at 77125 for the second quarter of 2023, 27% year over year.
I will now highlight some logo wins during the quarter across our geographies.
In EMEA, we announced a new central lab in Italy at one place <unk> Medici CSM, one of Italy's largest peer.
TSMC as a consortium that brings together numerous laboratory throughout.
It operates roughly 1500 distinct types of debt to best serve the population.
The use of Sofia <unk> support TSMC expansion of next generation sequencing offerings in their military cancer and neuro them to materially improve turnaround time.
In France, we added a new logo at the Suncoast Vitale Divesture General hospital located in core telecom.
One life using Sofia DBM formula It malignancies.
Also in EMEA, Ankara ethics, Ctr Spittle, the largest hospital in the capital City of Turkey went live during the quarter The hospital, which opened stores in September 2022, and three is about 15000 patients daily we utilize multiple Sofia DRAM applications to streamline Gino.
Im existing especially associated with hereditary disorders.
In the APAC Azure Pacific region.
We still above company average growth in analytics volume in the quarter I would like to share with you our excitement for both the Peter Maccallum cancer Centre, otherwise known as Peter Mac that goes live on Sofia DBM.
These are Mac is award leading cancer research education and treatment Center based in Melbourne, Australia.
They will be using Sofia DBM to aid with testing of different remains positive.
And we'll be focused on samples from women newly diagnosed with advanced ovarian cancer.
Through our AI enabled algorithms speaker remarks, oncology will be able to know the HRD status of their patients through more aging in the determination of which of their stage for ovarian cancer patients are likely to benefit from treatment plans that include PARP inhibitors.
Relatively new alternative to chemotherapy in the treatment of ovarian cancer.
And also in that back I would like to highlight a customer expansion example, we softly about genomics of Taiwan is genomics reference lab. That's originally adopted Sofia. The gym in Q1 2022 and that is now launching the sofa genomics HRD stages, leveraging on Sofia lithium platform best in class.
AI based algorithms to maximize accuracy and defining the HIV stages are inconsistent.
In the Latam region.
Which is also growing above company average I would highlight for you know <unk> genetics that innovative reference labs specializing in genomics testing that is headquartered in Mexico City, and Santiago de Chile, Nomad genetics will also be using Sofia lithium for the remaining the HRD status of patients.
Next turning to the neuron North America region, I would like to highlight two Lund University school of Medicine.
New logo in Louisiana.
July was a grading their sequencing platform and selected Sofia DBM, because we could enable creek rollout of a metallurgical testing with Sofia DBM to Lon can quickly sort and analyzing data identified key biomarkers and perform stratification. So that researchers can ensure data.
Given recommendations with clinical researchers we're fighting over 100 types of blood cancers that are quickly progressing.
Another neuron win during the second quarter was natural State Laboratory regional labs based in little Rock, Arkansas.
<unk> to help them expand their cancer testing capabilities, especially using it to launch in our existing.
Sorry, Kevin St.
Looking at the second quarter from the standpoint of genomics applications available on Sofia DBM for oncology and rare inherited disorders. We saw both categories with data volumes growth approximately at the company average year over year.
In oncology applications newer sub segments like HRD and liquid biopsy exhibited volume growth in the triple digits, while comprehensive genomic profiling group several times above the company average.
Within the RARA and nervous disorders category eggs on base data was the fastest growing sub segments. A testament that science has quickly evolved and laboratories are comfortable going beyond Megan large gene panels.
While we are very excited about the increase of the Sofia network and the increase on Sofia DBM usage.
I'd like to take a step back and explain you why this is important.
When Sophia genetics was funded we intentionally begin by servicing the clinical market through advanced cloud based genomics data analytics in a decentralized settings.
Date using this unique approach we have established a global network of over 750, <unk> institutions that have collectively used our Sofia medium platform to analyze over one 4 million genomic profile.
So not a construct of our original idea was to be cloud based.
And to that end, we have been and waving to this commitment.
We knew that the power of data could not be achieved if silos were tolerated.
Artificial intelligence techniques, such as deep learning machine learning pattern recognition and statistically prints are being used for over 10 years to build our algorithms.
Then each analysis, we do for our customers further train our algorithms.
Sofia Division platform and demonstrated the superiority of loan sale of data in its use to the shipper the best treatment considerations in oncology.
Our analytical capabilities of being critical to successfully onboard toward leading partner such as memorial Sloan Kettering, who while not yet completing their data on Sofia DBM trusted a revision our experience and our capability to assure their most precious data assets with us.
Indeed, MSA choose to Democrat either efficient dataset of over 75000 profiles across data modality, including genomic clinical treatment and outcomes data by sharing them into the Sophia did impact form.
The vision that we shared with MSA is one in which academic institutions come together from across the world powered by a decentralized cloud based particular LNG provider such as Sofia to assure their data and knowledge. This will enable participating institutions to conduct collaborative research on bigger and more diverse fleet.
Accelerating the discovery of new insights.
Additionally, this will enable biopharma companies to partner with these institutions to leverage their data and expertise in the pursuit of truly personalized diagnostics and treatments.
The third element, which we see on the near Ryzen is creating a data lake of a select group of worlds, leading cancer institutions. The consortium of the highest tier participants where they can have a safe sharing environment to further their science.
These select leading centers such as M escape will contribute certain aspects of their data into the consortium. We're excited to serve as a trusted off of this per journey collegial protected data Lake.
We could not be more excited about the prospect of further building. This global large scale multi modal collective intelligence to advanced cancer research.
This desire of collective intelligence across hospitals has already been proven by our ongoing deep lung for flagship initiative we.
We have now on boarded Turkey hospitals across the world in this multi centric internationally initiative to develop multi mode out machine learning models that are able to predict response to immunotherapy in advanced lung cancer in.
In this context, we have recently on boarded polyclinic of Gemini in Rome, Italy, but top cancer Center in Europe .
Additionally, we are very excited to have now activated five centres across the Latam region, which will further increase the data diversity on which our algorithms are training.
The recruitment of the study is going strong and we expect to reach the milestone of 2000 patients enrolled soon.
We will be communicating a pre specified interim analysis in Q4 of this year.
And at that time, we intend to give the first solid perspective on the performance of our model.
We are very much looking forward to updating you as soon as those results will be available.
Beyond the interest of hospitals for this collective intelligence, we're also making great progress with our Biopharma partners are currently working on several advanced opportunities to deploy our multimodal capability and several oncology applications through biopharma collaborations.
Indeed beyond immunotherapy in lung cancer, we have demonstrated that our midstream without predictive models can similarly be applied to a verity of other oncology indications such as breast kidney or brain cancer, among others as well as different therapeutic modalities such as different classes of targets.
It therapies chemotherapy and combinations thereof.
Just this past quarter the top five oncology pharma company sent their phase III clinical trial data outside the organization for our teams to analyze for the proposals of multi modal algorithm built.
This was the first for both organizations and demonstrates that same trust in Sofia to be good stewards of highly sensitive efficiency information.
Turning to key events during the quarter, we attempted escrow the conference of the American Society of clinical oncology, where our collaborators from today on behalf in the old friends provided an important update on the clinical validation of HRD using samples from the polar one study, which.
The study supporting the approval of Astrazeneca PARP inhibitor collaborate as a first line treatment for ovarian cancer.
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.
So to conclude my section were experiencing the cusp of our data flywheel effect.
I see quite thrilled to see each incremental adoption of our data cloud model by some of the most preeminent global customer participants I believe this to be a leading indicator for future success for Sofia DBM.
And so in closing I feel as excited today as ever that <unk> has the elements in place that will enable us to accomplish what we set out to do 12 years ago, two rns data from the global community to generate actionable insights that contributes meaningfully to patient care and patient outcomes and now.
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 am pleased to share that we again delivered strong performance in the second quarter, continuing our commitment to sustainable growth turning to the financials total revenue for the second quarter of 2023 was $15 1 million compared to <unk>.
$11 7 million for the second quarter of 2022, representing year over year growth of 29% constant currency revenue growth was 27% and constant currency revenue growth. Excluding COVID-19 related revenue was 30%.
Now form analysis volume, including volumes from our integrated access customers was 78146 for the second quarter of 2023 compared to 66165 for the second quarter of 2022.
The 18% year over year growth was attributable to the strength of our core platform of Dallas as volume offset by expected continued decline of our COVID-19 related analysis volume, excluding COVID-19 related volume platform analysis grew a healthy 27% year over year in the period.
Core genomic customers were 434 as of June 32023 up from 426 in the prior year period. This includes 13, new routine customers in the quarter annualized revenue churn rate was 3% during the second quarter of 2023 in line with.
Our expectations net dollar retention for the second quarter improved sequentially on a reported basis to 114% constant currency net dollar retention, excluding COVID-19 related revenue was 118% strong net dollar retention at a healthy level of backlog continues to provide.
<unk> with a high level of revenue visibility going forward.
Gross profit for the second quarter of 2023 with $10 million.
Compared to gross profit of $7 6 million in the second quarter of 2022, representing year over year growth of 32% gross margin was 67% for the second quarter of 2023, compared with 65% for the second quarter of 2022 adjusted gross profit.
It was $10 5 million, an increase of 34% compared to adjusted gross profit of $7 9 million in the second quarter of 2022, adjusted gross margin was 70% for the second quarter of 2023 compared to 67% for the second quarter of 2022 over.
I remain highly encouraged by our progress on gross margin expansion and I'm increasingly confident in our medium term goal of sustaining adjusted gross margins in excess of 70% for our full fiscal year.
Total operating expenses for the second quarter of 2023 were $30 $1 million.
Compared to $31 $7 million for the second quarter of 2022 head count our most significant expense was down versus the prior year and down modestly sequentially.
We continue to make progress on containing our discretionary expenditures and remain hyper focused on maximizing capital efficiency, while sustaining targeted growth levels.
Turning to operating loss for the second quarter of 2023, it was $20 million compared to $24 1 million in the second quarter of 2022 adjusted operating loss for the second quarter of 2023 was $14 6 million.
Compared to $19 6 million for the second quarter of 2022, I remain very encouraged by our consistent improvement in adjusted operating loss given the heightened focus on capital preservation, particularly in combination with sustain 30% core growth and gross margin expansion.
Lastly, total cash burn for the second quarter of 2023 was $13 3 million.
Compared to $26 9 million in the prior year quarter down over 50%. We are quite proud of this achievement and remain committed to sustainable growth moving forward cash and cash equivalents were approximately $149 million.
As of June 32023.
Turning to our 2023 outlook <unk>.
First on our strong start to fiscal year 2023, we are reiterating all elements of our annual guidance with very slight changes to our underlying assumptions. We continue to expect reported revenue growth for the full year to be at or above 30% in 2023 constant currency revenue grew.
Excluding COVID-19 related revenue for 2023 is expected to be between 30% and 35% in line with our previously highlighted long term expectation.
Of note, we now expect a headwind into 2023 reported revenues of approximately $900000 related to our ceasing of COVID-19 related contribution which was minimal in the second quarter. This will equate to a headwind of approximately 16000 dialysis to reported volumes.
This headwind is a slight improvement from our prior update.
Furthermore, we would note for the second half at the moment exchange rates suggest a modest tailwind to reported revenues and a slight headwind to cost since the Swiss franc and to a lesser degree the euro have appreciated noticeably, albeit continued.
Volatility could change this.
Additionally, following on strong cost performance exhibited in the first half of 2023 Sofia genetics continues to expect 2023 operating losses to be below 2022 level.
Lastly, with respect to the anticipated revenue cadence for 2023 I would note a slightly increased by as the second half performance than previously communicated. This is due to a delayed start times for a small number of key contracts outside of our control. Originally this work with slated to commence in late.
First quarter, but now the majority has already begun in late <unk>. Fortunately, we do not see any impact of full year performance and medicine is purely timing of recognition with that I would like to turn the call back over to <unk> for the closing remarks before we take your questions.
Thank you Russ.
We're extremely proud of our performance, which we believe reflects our continued ability to execute on our vision and the opportunity ahead.
So fees success stance 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 long term path that we're on.
We have a fantastic opportunity to drive compelling returns and shareholder value.
And speaking of shoulder topics I would like to update you on the resolutions made at our annual general meeting of shareholders of June 26 at our headquarters in Switzerland.
In addition to approval of the board members, who are up for reelection light electricity costs, a new board member was appointed <unk> as Deputy Chief Technology Officer at Microsoft where she previously served as corporate Vice President in artificial intelligence and before Microsoft Leila Tricky Qwaqwa CEO .
The robot and we can video.
We're excited to us added to our board such a tremendous leader from the artificial intelligence and technology words with robust experience in bringing companies to scale on a global level.
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 later this month, we are attending the UBS med tech tools and genomics submit in California and in September we will attend the Morgan Stanley Global Healthcare Conference in New York.
I look forward to continuing to update you on <unk> future success of democratizing data in medicine.
And with that operator, you may now open the line for questions.
Thank you.
At this time I would like to remind everyone that in order to ask a question press star one on your telephone keypad.
We'll pause for just a moment to compile the Q&A roster.
And with that the first question comes from the line of Jay Haas Savant from Morgan Stanley .
Your line is open.
Hi, guys. This is edmund on for patients. Thank you for the time.
I was hoping to get some more color on spending trends I was wondering if you guys could speak to the demand you saw in <unk> from the lab and Biopharma side and specifically on the Biopharma side. How are you thinking about your push into Biopharma in light of recent spending dynamics reported by others in the tool space.
Yes, Thank you and good morning in months.
So as you know we've been at basketball.
In June and actually this was being.
It's a very fruitful and successful event for us where we've confirmed that.
Patient stratification, biomarkers become more and more complex and nuanced right.
And for the pharma companies, who are developing more and more combined throughout this.
This demonstrated if like for us and on the basis of the discussions we've been having with many of the top 20 pharma company the importance of de <unk>.
With algorithms.
So while we appreciate that you know maybe the word that if all of last year.
We still see the need from the Biopharma customers on getting access to real time and real World data. One example is in the context of a decentralized trials, where there is more and more demand for local NGL <unk> in oncology.
And so despite you may have read that there are more constrained from the expenses on the primary side, we do see more and more traction and I think thats definitely the result of all the years. We have spent in building the network the platform computing complex data building Mark algorithms.
And as well attracting centers like <unk>, and <unk>, which as you know is being sharing with us.
Over 75000 clinical genomics profiles.
Of which many are very important.
Interest.
For the pharma in the context of preapproval efforts on the discovery side, either Ross if you want to add anything else.
Thanks <unk> you.
Covered sort of where we are in the adoption curve. Obviously, we are a small entity right with relatively.
Modest amount of spend at pharma and so from that standpoint, I'm not sure. We're the best read on kind of the macro but I would say if I look at our pipeline growth and I look at our activity levels in meetings and our bookings trends, which we obviously don't report I feel quite good about how.
How we're positioned and where we are and obviously again, we're in a very early stage.
Of adoption and Theres quite a lot of interest currently on AI and machine learning and how that can be leveraged within all elements.
Or all three days across the pharma contacts and so obviously, it's something we're monitoring we're looking for changes in buying behavior, and so forth or interaction, but to date, it's not something we've seen but obviously, we will report to you if we see any change in the outlook or the underlying demand environment.
Got it that's super helpful and.
On that I was wondering if you guys could provide some color on your U S market performance in the quarter.
Are you guys starting to see any signs of customer spending trends diverged and across geographies.
Yes.
So as you know this was one of the important questions. When we <unk> in 2021 right. So the market was expecting that of course, we deliver our growth, which we have been doing since our marriage.
Late 2021 growing over 30% on constant currency in Mexico. For example, this quarter in order demand was demonstrating that we could work with biopharma and the vehicle market and we've been public about it with astrazeneca deal as well as with abundant.
And then another expectation that you highlight now was to demonstrate that Soviet genetics platform and that supports a decentralized network, what's compatible as well with the U S market.
Since the beginning of the year just to highlight a few names that we've been demonstrating that indeed.
<unk>, both academic centers and private labs in the U S. Private labs. So we've made public the deals we signed with synergy with accuracy in terms of academic centers reimbursement European Central and University team as you know as well that we've been partnering with <unk>, which is that I think are significant.
Partnering ship its unique if you cant testimonial of probably the most prominent cancer center.
From Sofia DBM to create these world of collective intelligence sharing their data with us and just to throw you a number at months Q2, 2023 versus Q2 2022 in the U S revenue and growing.
60%, so well above the average company growth.
Great Yogi Ross Thank you for the time.
Welcome.
Thank you.
Next question comes from the line of Dan Brennan from TD Cowen Your line is open.
Great. Thank you all for taking the questions guys.
Congrats on the quarter, maybe first one so the guide for the year, 30% to 35% constant currency growth I think you're close to 30% in the first half so.
So I guess the question is at 35% for the full year is still a possibility.
Which would entail a meaningful acceleration in the second half should we be thinking mid point most applicable.
Kind of what drives the acceleration.
Yes, good morning, and thank you for the question, Dan So I like it right.
In two days.
Disclosure bye bye rock.
We had a little delay we thought some of the pharma revenue would come would be 30 year dip.
By that because you see we'd be the fifth.
$15 1 million in revenue growing 30% year on year on a constant currency ex COVID-19 either Russ if you want to give some more guidance to Dan on how <unk> will be like.
Thanks, Jeremy So so yes, Dan on a first half basis. If you think about what we did in the first quarter as well, we're kind of in the middle of the range.
At the moment I think certainly.
For US right, we have high visibility of revenue. The one thing we we certainly cant always control is kind of new project or a new customer starts and so we did have a couple that we had expected early in the first quarter slipped into mid to late second quarter and so those are now going.
So I would say on that and we still feel quite good about our ability to perform this year and deliver on the growth as I mentioned in the commentary.
A bit atypical for US you will see a stronger second half this year than we saw last year or the year prior in terms of cadence.
And to give you a bit of color on that we do expect it to build in the second half.
And <unk>, particularly relative to last year, I think will be will.
We will be notably stronger as we had a very good <unk> last year as well and so on that.
The revenue that did move out of the second quarter, we will start to recognize in the third and then we will build upon that so.
Still feel quite good about our visibility and our ability to deliver on strong numbers for the year.
Great. Thanks Ross.
Just on Biopharma I know you guys arent really calling out the impact yet.
Given I guess its size, but when do we expect.
To get more visibility on the prepared remarks, obviously you guys are excited about the.
The demand trends within that segment and it would just be interested to find out like any color you can provide about the contribution and or kind of visibility for investors.
Yes.
We're very excited because what we build is pretty unique.
Dan.
Getting access to this data in a decentralized way real time real world.
That is very unique very appreciated by the pharma companies to work with us for another three the strategy from discovery to development and deployment now when it come to.
Highlighting the revenue, we do with the Biopharma Ross.
Your say on this one.
Thanks Jerry.
Thanks, Dan So I would say here, obviously, we're very happy with performance.
Biopharma group.
And for US we're building some real momentum within this customer base revenue was obviously up materially but as you said off of a relatively low base. So I think certainly.
We're constantly challenging ourselves to understand from a disclosure perspective when is the best time to breakout. This segment, we have some thoughts.
In terms of critical mass, but certainly.
To the degree that it becomes more material and obviously when we gave our long term guidance. We gave you some framework of what what that is likely to look like in terms of contribution when it becomes more material to wear.
For your purposes, it will help with modeling and understanding of our trend will break it out so.
Obviously some of that will depend on the size of new business wins in the cycling and so hopefully we'll have more to update on that.
In the future, but ultimately.
It's still at a size, where we feel comfortable reporting on a total revenue basis versus segment basis.
Got it Okay, Alright, Ross you. Thank you very much congrats.
Thank you Ben.
Thank you.
Your next question comes from the line of Rachel <unk> from Jpmorgan.
Your line is open.
Hi, Good morning, Thanks for taking my question to you guys.
Firstly I just wanted to ask on pharma partnerships I was wondering if you could give us a few more details on your latest expectation around boundless file and Astrazeneca and then how should we really think about these partnerships and are constantly issue heading into 2024.
Yes. Thank you for the question Rachel and good morning, So as highlighted by Ross right. So you can expect that.
H two will be.
Stronger versus other years because of this type of contract we had announced.
Partnership with Astrazeneca now quite some time ago.
In February 2023, we are announcing that we had signed a new agreement on the basis of data that we gathered in particular in the context of the deploy for study.
We've bounded by you or the projected as well progressing very nice that just as a reminder, on this by you. It's a very innovative biotech companies looking at drugs targeting.
Specific type of cancer about 20% of the cancers.
Extra multimode Yunnan. So this could be a very holistic approach and universal approach to many cancers. So very excited we're working on with them on our side on the preclinical phases, enabling them to demonstrate that we can identify patients that would respond to these type of treatments and so as you can expect to revenue.
We'll.
Starts to be visible as of Q3 Q4, and then accelerates in Q4 and 2024 Ross do you want to add any more color.
Okay.
Thanks, <unk> and welcome Rachel so from our standpoint.
As you already mentioned, obviously, we're looking for the pharma business to continue to build in the second half obviously, it's a bit early to directly comment on 2024, but I think fundamentally for us we've taken a very I would say a measured approach to growing this business.
And we have a great leader there.
He's done a really nice job of helping us penetrate obviously the accounts you named as well as others, we hope to be able to talk about with you in the future and so obviously the goal here is if we're able to deliver differentiated insights and if we're able to deliver unique capabilities are.
The ability to scale up at these accounts continues to be very material.
And as I've discussed before obviously, the the land and expand model will work in pharma as it does.
But to a greater dollar size degree than in the clinical market and so.
We look forward to hopefully proving that out for everyone.
The following years, but at the moment, we don't have any direct commentary on 24.
Great and then I just wanted to ask on gross margin.
Seven 8% adjusted gross margin this quarter I was just wondering how should we think about that gross margin trending into the back half of the year and it looks like last year. During <unk> you had some one timers on that gross margin line is there any seasonality that we should be aware of from a gross margin perspective on the pacing between <unk>. Thank you.
Thank you Rachel So I will take the opportunity of your question to highlight our strong financial discipline right. So over the last years.
As you've seen our gross margins have been constantly improving as well as being our cash burn so which is another dimension, which I think very important to highlight the financial discipline growing 30% year on year.
Not spending more money from <unk> and Thats something were still kitchen because of being very very strong just as in a light in Q2 2023, our cash burn is $13 3 million dollar Bruce who is $26 9 million in 2022 right. So.
On the gross margin, particularly we are being very clear that we were expecting to.
Tech like gross margin and I think that's what we've been demonstrating over the last quarter.
Russ you want to give some more color be go into Q2, and what could be expected in Q3 and Q4.
Sure. So on the gross margin side. Obviously this is the first quarter. We've had in the last several that doesn't involve.
Any sort of net benefit so we're now sort of that I would say a clean number.
We should be able to hopefully improve off of dependent on mix.
I think you know as you look at the back half of the year. Our goal is to sustain 70 plus.
It wasn't that long ago that we set 70 is sort of the bar of where we wanted to get to on a multiyear basis. So to get here. This quickly. We're obviously very pleased.
With that outcome.
I think we're certainly working hard on the hosting.
And compute cost side with our partner, Microsoft we're working on labor absorption.
Mix.
It tends to have some influence here and so given what we've said about pharma in the second half that should be a bit of a tailwind but ultimately.
Here I think we're pretty happy.
With our performance and we're also choosing.
At times to reinvest back in our customers when it when it makes sense, if theres an opportunity to grow that materially so we're going to be continually measured.
But certainly happy with where we are and.
Expect to.
To deliver continued 70 plus percent in the back half.
Great. That's it for me thank you.
Thank you Richard and have a good day.
Thank you and before we proceed I would like to remind everyone that in order to ask a question. Please press star one on your telephone keypad.
Now.
Next question comes from the line of Mark Massaro from BTG.
Your line is open.
Yeah.
So Mike Thanks for taking the question.
Okay.
Alastair I put up this quarter.
What's driving that or I'm almost there.
Further on this site.
I think at your Analyst day, you discussed yes Landon.
Land and expand driving more applications per customer overtime.
Just any comments you have on increased.
Thanks.
Thank you Adrienne and good morning, so indeed, our strategy in the in the clinical market in particular as being a land and expand right.
Very typical for a cloud native company. So we tend to land a customer on a specific applications for let's say on the solid tumor testing and then as the customer starts using the platform and the experience with returns we see those volumes growth and then what happens most of the time is that then the same customer will start.
Adding a new menu in at flat, let's say moving beyond solid tumor testing with <unk>.
Testing or HRD testing or liquid biopsy testing all in our platform and which is what is driving as well the gross over customers year on year.
The past we've been using the net dollar retention to give a sense of.
What is your growth like and for this quarter. It is being again above 100%, so which is really good.
Actually a 114% and if I may.
They can be.
Consistent with the previous quarter. So you should expect our model to continue grow.
Such a way and that's why it's very important as well to land new customers because customers as you land today are customers that are going to grow tomorrow and while we are very happy with the 27% year on year growth, which was well distributed across regions in terms of volume we are very happy as well with the signing of 60 new <unk>.
Logos, which enabled us now to grow with each new logos and be able as we compute to more patient data in pan impact from more patients, but as well generate more revenue.
Ross in terms of numbers do you wants to go further.
Thanks, <unk>, so I would say.
Obviously mix has been favorable for us. Additionally, currency finally is.
Starting to no longer be a headwind right. So that's helping as well and <unk> had been a drag. Additionally.
As we burn off the Covid analysis, obviously those come at a much lower asps. So it is going to help on the overall ASP performance, but I think.
Holistically, we're quite pleased with.
The application sub segments that had strong performance in the quarter. We continued to have very good price capture.
And we look for this component of growth to continue to benefit us, but again in any given quarter in a consumption model you may see some changes in volume versus mix and price, but ultimately it's all trending for us in the right direction.
Okay perfect. Thanks Ross.
And just a follow up.
Any color on the high growth area applications like HIV and liquid biopsy.
I mentioned last quarter that these were growing at triple digits.
And maybe you could also refresh us on what applications are driving the bulk of volumes today and that's okay.
Yeah. Thank you Vivian.
We're super happy with the traction we are I think with HRD that we launched.
Both the year and also go now.
We are still growing triple digit we have announced a number of customers adopting our platform for HRD testing this quarter.
Clothing, Peter Mac in Australia, but as well in other cases, the private reference lab.
Do you came in on non <unk>. So we're very very pleased with HRD testing today, a charge that testing is being required for ovarian cancer.
As you May know for other type of cancers like prostate cancer or breast cancer. There is some <unk> that needs to be performed called HR module grocery combination.
The efficiency.
And so in that front, we are very happy with the growth we're seeing.
Other one to call it liquid biopsy, which is the newer to us.
But where we are growing as well as triple digit and where we expect eventually growth to accelerate sometime next year.
You remember we have signed this agreement with Memorial Sloan, Kettering, which not only gave us the data that we can leverage on the platform. So 75000 clinical genomics cases, but as well to 15 assets that being highly published called MSP access for liquid biopsy, and then impact of course solid tumor.
Testing and so the liquid biopsy trends and growth should continue.
The significant for Sofia as we launch the.
<unk> access solution in the market decentralized and supports many other customers as of H, one so end of.
Less excuse me end of first half of next year.
On another note we still.
Strong growth in solid tumor and in particular in comprehensive genomic profiling.
As you May remember, we obtained an agreement that will be the adjuvant on their short select GP and on that one as we work to better we start to see as well good traction and good momentum in the market.
And last maybe the one I would highlight is on the raw and inherited disorders.
See a trend of more and more panels being the key.
In terms of larger gene panels, which are eggs on base, now and where we've been growing as well year on year at 66% viewing that we see demand on the farmer macro genomics a move towards possibly.
Genome sequencing and that's where we start seeing some demand on the MRO deal where.
We plan as well to launch some applications at least for amyloid.
<unk> next year.
I think thanks for taking my questions.
Thank you Vivian.
Thank you there are no further questions at this time I would like to turn the call over to the presenters. Thank you.
Thank you all today for attending our Q2 earnings.
We are very proud of what has been the achievement of our actual pms and this quarter growing significantly being extremely disciplined financially.
And being able as well to build technologies that will be launched early next year with that I encourage you following us and in particular joining us.
Soon for the next two investor conferences that UBS in Med Tech and genomics conference.
Guests and the Morgan Stanley Conference in New York.
September with that thank you very much and have a good day.
This concludes today's conference call. Thank you for joining you may now disconnect.
Okay.
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