Q2 2024 SOPHiA GENETICS SA Earnings Call

and Jurgi Camblong.

Unknown Executive: from time to time, with the Securities and Exchange Commission. During this call, we'll present both IFRS and non-IFRS financial measures. A reconciliation of IFRS and non-IFRS measures is included in today's Erling Specialties, which is available on our website.

Speaker Change: During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS and non-IFRS measures is included in today's earnings press release, which is available on our website. With that, I will now turn the call over to Jurgi.

Unknown Executive: With that, I'll now turn the call over to Jurgi.

Jurgi Camblong: Thanks, Kellyanne, and good morning everyone. In Q2, we delivered another quarter of strong core-looking indicators and continued bottom line improvements, despite facing macro challenges, which have temporarily softened revenue growth.

Jurgi: Thanks, Kellen, and good morning, everyone. In Q2, we delivered another quarter of strong forward-looking indicators and continued bottom-line improvements, despite facing macro challenges which have temporarily softened revenue growth.

Jurgi Camblong: I will start the call by discussing the challenges we faced, and the few of the growth initiatives we accelerated to offset these agreements. Next, I will highlight how these initiatives have positioned us well to be accelerated growth by later this year. Last, I will provide a brief update on our path to adjusted operating profitability, which remains on track as we manage costs well and improve our bottom line.

Jurgi: I will start the call by discussing the challenges we faced and a few of the growth initiatives we accelerated to offset these headwinds. Next, I will highlight how these initiatives have positioned us well to re-accelerate growth by later this year.

Jurgi: Last, I will provide a brief update on our path to adjusted operating profitability, which remains on track as we manage costs well and improve our bottom line.

Jurgi Camblong: I will then turn the call over to Wask, who will give you a closer look at our Q2 financials, our updated outlook for 2024, and additional details regarding our path to profitability. In Q2, revenue came in below expectations. The two major drivers were challenges related to Bioforma and EMEA. Both of these challenges, which we highlighted in our Q1 earnings call, ended up being more pronounced and originally anticipated, but we are confident that they are temporary in nature. I will now take a moment to discuss each challenge, and a few of the actions we have taken to offset these agreements and the accelerated growth.

Unknown Executive: I will then turn the call over to Ross, who will give you a closer look at our Q2 financials, our updated outlook for 2024, and additional details regarding our path to profitability. Starting with bioformat, we continue to face a macroenvironment in which budget constraints have made the signing of large contracts difficult and caused sales cycles to elongate. First, we restructured the biopharma business by separating data and diagnostics. In the first half of 2024, two unexpected things happened in this market.

Ross: I will then turn the call over to Ross, who will give you a closer look at our Q2 financials, our updated outlook for 2024, and additional details regarding our path to profitability.

Ross: In Q2, revenue came in below expectations. The two major drivers were challenges related to biopharma and EMEA.

Ross: Both of these challenges, which we highlighted in our Q1 earnings call, ended up being more pronounced than originally anticipated, but we are confident that they are temporary in nature.

Ross: I will now take a moment to discuss each challenge and a few of the actions we have taken to offset these headwinds and re-accelerate growth.

Jurgi Camblong: Starting with Bioforma, we continue to face a macro-environment in which budget constraints have made the signing of large contracts difficult and co-state cycles to elongate. In order to offset these challenges, we have accelerated a few of our plan growth initiatives.

Ross: Starting with bioformat, we continue to face a macroenvironment in which budget constraints have made the signing of large contracts difficult and caused sales cycles to elongate.

Ross: In order to offset these challenges, we have accelerated a few of our planned growth initiatives.

Jurgi Camblong: First, we restructured the Bioforma business by separating data and diagnostics offerings. Our data offering leverages on the large amounts of molecular data generated by our genomic business and the multimodal data competed by our platform to provide AI-powered insights to licensed companies in the areas of drug discovery and development. Our diagnostics offering leverages our broad network and real-time fits to help Bioforma companies with clinical trail matching and market access. By separating this Bioforma data and diagnostic offerings and appointing new leaders to each business, we are now better aligned to the needs of our customers and are confident that we will be able to go to market more effectively.

Ross: First, we restructured the biopharma business by separating data and diagnostics offerings.

Ross: Our data offering leverages on the large amounts of molecular data generated by our genomic business and the multimodal data computed by our platform to provide AI-powered insights to life science companies in the areas of drug discovery and development.

Ross: Our diagnostics offerings leverages our broad network and real-time feeds to help biopharma companies with clinical trial matching and market access.

Ross: By separating these bioformal data and diagnostic offerings and appointing new leaders to each business, we are now better aligned to the needs of our customers and are confident that we will be able to go to market more effectively.

Jurgi Camblong: The second action we took was to refocus Bioforma sales efforts to target smaller, more repeatable business as opposed to emptying large contracts. This approach caters to our buyers and allows us to avoid the lengthy approval and procurement processes required by larger deals. In the past, we had success with this approach on projects like Bandit's Bio and more recently with the breast cancer study sponsored by AstraZeneca. and Eka. I'm happy to say that these actions are driving more interest than ever, as our recurrent pipeline for bioforma remains robust and is increasingly diversified. Our leaders for data and diagnostics are laser-focused on closing the deals in the pipeline and returning our bioforma business to the high growth levels we saw in 23.

Ross: The second action we took was to refocus biopharma sales efforts to target smaller, more repeatable business as opposed to hunting large contracts.

Ross: This approach caters to our buyers and allows us to avoid the lengthy approval and procurement processes required by larger deals. In the past, we've had success with this approach on projects like Banders Bio and more recently with the breast cancer study sponsored by AstraZeneca.

Ross: I'm happy to say that these actions are driving more interest than ever, as our current pipeline for bioforma remains robust and is increasingly diversified.

Ross: Our leaders for data and diagnostics are laser-focused on closing the deals in the pipeline and returning our biopharma business to the high growth levels we saw in 2013.

Jurgi Camblong: The second challenge we face in Q2 was an expected softness in Yemen, especially in France, Italy, and Spain. In the first half of 2024, two unexpected things happened in this market. First, we saw a slight moderation in the overall growth of patients being tested. Convercussions with customers and strong bookings indicate that the trend is temporary and we correct itself in the median terms. Beyond the moderation in testing, we also experience some unexpected churn and price pressure in France, Spain, and Italy. These challenges specifically relate to established applications like a regulatory tensor and rarity disorder and not our newer applications.

Ross: The second challenge we faced in Q2 was an expected softness in EMEA, especially in France, Italy, and Spain.

Ross: In the first half of 2024, two unexpected things happened in this market. First, we saw a slight moderation in the overall growth of patients being tested.

Ross: Conversations with customers and strong bookings indicate that the trend is temporary and will correct itself in the medium term.

Ross: Beyond the moderation in testing, we also experienced some unexpected churn and price pressure in France, Spain, and Italy.

Ross: These challenges specifically relate to established applications like hereditary cancer and rare inherited disorders, and not our newer applications.

Jurgi Camblong: To offset these challenges, we took two immediate actions. First, we are bringing a more strategic approach to managing key high-volume accounts. Our sales reps are now working more closely with large customers to understand their long-term growth objectives and to map out the full picture of precision medicine needs across institutions. By leveraging our large menu of applications, the scale of our platform, and volume-based pricing, we can be more successful with larger enterprises. In H2, we will invest in certain strategic accounts in Yemen in order to display its competition and win market share. Market share is critical to our disease as we believe whoever at the largest network will win.

Ross: To offset these challenges, we took two immediate actions. First, we are bringing a more strategic approach to managing kids' high-volume accounts.

Ross: Our sales reps are now working more closely with large customers to understand their long-term growth objectives and to map out the full picture of precision medicine needs across the institution.

Ross: By leveraging our large menu of applications, the scale of our platform and the volume-based pricing, we can be more successful with larger enterprise deals.

Unknown Executive: In H2, we will invest in certain strategic accounts in EMEA in order to displace competition and win market share. Since founding Sophia 13 years ago, I'm exceptionally proud of the impact we've made. From the beginning, we envisioned a future in which a cloud-based analytics platform would break data silos and enable health care institutions to compute and analyze multimodal data.

Ross: In H2, we will invest in certain strategic accounts in EMEA in order to displace competition and win market share. Market share is critical to our thesis as we believe whoever has the largest network will win.

Jurgi Camblong: The second action we took was reallocating with through these words our high growth markets, such as the US, the UK, Germany, the Middle East and Asia-Pacific Broadies. These decisions have already paid off as we signed major customers in each of these regions this year. This quarter alone, we signed major new customers such as Detroit Medical Center in the US with adopting Sophia DeGampro Immongue. The NHS North Bristol Trust in the UK with adopting Sophia DeGampro HRD NMSK Access. And Abu Dhabi's National Reference Lab in the UAE with one of the first customers to adopt MSK Impact powered with Sophia DeGampro.

Ross: The second action we took was reallocating resources towards our high growth markets such as the U.S., the U.K., Germany, the Middle East, and Asia-Pacific broadly.

Ross: These decisions have already paid off as we signed major customers in each of these regions this year.

Ross: This quarter alone, we signed major new customers such as the Troy Medical Center in the U.S. who is adopting Sophia Didiem for Emonch, the NHS North Bristol Trust in the U.K. who is adopting Sophia Didiem for HRV and MSK Access.

Ross: and Abu Dhabi's National Reference Lab in the UAE, who is one of the first customers to adopt MSK Impact powered with Sophia Lydia.

Jurgi Camblong: In addition to these immediate actions, I will also highlight that we are currently coming out of a heavier-rendy cycle and are excited to launch a suite of new applications in the second half of 2024, as well as a major upgrade of our platform overall. Initial customer feedback and early pipeline data suggest that these investments are generating significant demand and are further differentiated that we are offering across the portfolio. I'm excited to update you more on these launches in a moment.

Ross: In addition to these immediate actions, I will also highlight that we are currently coming out of a heavy R&D cycle and are excited to launch a suite of new applications in the second half of 2024, as well as a major upgrade of our platform overall.

Ross: Initial customer feedback and early pipeline data suggest that these investments are generating significant demand and have further differentiated our offering across the portfolio. I'm excited to update you more on these launches in a moment.

Jurgi Camblong: Before I do so, I want to emphasize that, despite moderating revenue growth in Q2, forward-looking indicators for our clinical business remain strong. In Q2, we deliver the third consecutive quarter of strong bookings with 20 new Sophia DeGampro customers. New business growth was driven by Solicumor's application and the newly-cute biopsy application MSC Access. I'm proud of the success we have achieved so far with MSC Access, an application that has quickly grown significant demand with pipeline in the double-digit millions. From a regional perspective, 11 of the 20 new customers signed during the quarter came from EMEA. This indicates that our strategy of refocusing land efforts to high-growth markets such as the UK, Germany, and the Middle East is working.

Ross: Before I do so, I want to emphasize that despite moderating revenue growth in Q2, forward-looking indicators for our clinical business remain strong. In Q2, we delivered the third consecutive quarter of strong bookings with 20 new Sophia DDM customers signed.

Ross: New business growth was driven by solid tumor application and the new liquid biopsy application, MSK-Access.

Ross: I am proud of the success we have achieved so far with MSK Access, an application that has quickly drawn significant demand with pipelines in the double-digit medium.

Ross: From a regional perspective, 11 of the 20 new customers signed during the quarter came from EMEA.

Speaker Change: This indicates that our strategy of refocusing land efforts to high-growth markets such as the UK, Germany, and the Middle East is working. Further, it gives us conviction that macro trends and moderation in growth in Yemeyer is temporary and will correct over the medium term.

Jurgi Camblong: Further, it gives us the conviction that macro trends and moderation in growth in EMEA is temporary and will correct over the medium-term.

Jurgi Camblong: Despite our recent success with new business wins, I want to take a moment to remind everyone about the cadences in which new signings become revenue in our business. When a new customer signs for Sophia DTM, it typically takes them about nine months to begin generating revenue. This is because all institutions have to complete proficiency testing and receive accreditation before they can serve patients in routine. As I lighted during past-learning call, the nine months sometimes becomes longer if the application they are adopting is more sophisticated, like MSC Access. After completing implementation, it can take another three to six months for the account to ramp up to full volume and revenue.

Speaker Change: Despite our recent success with new business wins, I want to take a moment to remind everyone about the cadence in which new signings become revenue in our business.

Speaker Change: When a new customer signs up for Sophia DDM, it typically takes them about 9 months to begin generating revenue. This is because all institutions have to complete proficiency testing and receive accreditation before they can serve patients in routine.

Speaker Change: As I highlighted during the past learning call, the nine months sometimes becomes longer if the application they are adopting is more sophisticated, like MSK Access.

Speaker Change: After completing implementation, it can take another three to six months.

Jurgi Camblong: This means that new business won in Q2, Q1, and even some of the signings from Q4 2023 will not enter routine usage until late in Q4 or early 2025. As we approach the second half of the year, we remain laser-focused on getting new customers into routine as quickly as possible.

Speaker Change: for the account to ramp up to full volume and revenue. This means that new business 1 in Q2, Q1, and even some of the signings from Q4 2023 will not enter routine usage until late in Q4 or early 2025.

Speaker Change: As we approach the second half of the year, we remain laser focused on getting your customers into routine as quickly as possible.

Jurgi Camblong: Our newly launched Max 13 is dedicated to expanding customers from signature to revenue. In Q2, they moved 17 new customers to routine, which is a nice step up from the 13 customers added into routine in the same period a year ago.

Speaker Change: Our newly launched MaxCurtain is dedicated to expanding customers from signature to revenue. In Q2, they moved 17 new customers to Routine, which is a nice step up from the 13 customers added into Routine in the same period a year ago.

Jurgi Camblong: One key to landing new customers and expanding within them over time is to continue offering a comprehensive and competing menu of offerings. On that note, I would like to highlight a few recent product launches and give a brief update on what's to come for the rest of 2024. I'm excited to announce that in Q2, we launched a new application in the in-month space, which measures minimal residual disease or MRD for acute family leukemia. This is an important application for both biopharma and clinical customers. During the Q4, we also announced a collaboration with Microsoft and NVIDIA to develop a scalable, well-genome sequencing application on Sofia DDM by the end of the year.

Speaker Change: One key to landing new customers and expanding within them over time is to continue offering a comprehensive and compelling menu of offerings.

Speaker Change: On that note, I would like to highlight a few recent product launches and give a brief update on what's to come for the rest of 2024.

Speaker Change: I'm excited to announce that in Q2 we launched a new application in the InMunk space which measures Minimal Residual Disease, or MRD, for acute myeloid leukemia.

Speaker Change: This is an important application for both biopharma and clinical customers.

Speaker Change: During the quarter, we also announced a collaboration with Microsoft and NVIDIA to develop a scalable whole genome sequencing application on SOFIA DDM by the end of the year.

Jurgi Camblong: In the past, NVIDIA has named us one of the leading companies using AI to drive transformative changes in Alaska. We're excited to continue a work with this partner to accelerate adoption of data-driven medicine globally. Looking ahead to the rest of 2024, we're also excited to launch MSK Impact powered with Sofia DDM, the decentralized solitim of profiling counterparts to memorials on catering liquid biopsy application MSK Impact. I'm proud to announce today that we have already signed two customers to MSK Impact, relaunch, including Sophie Vaginomiki, Taiwan, and Abu Dhabi's National Reference Lab in the UAE. Looking ahead to the second half of the year and into 2025, MSK Impact will be a key growth driver as we perit with MSK Access in order to win both liquid biopsy and solitude more testing business at institutions across the globe.

Speaker Change: In the past, NVIDIA has named us one of the leading companies using AI to drive transformative changes in healthcare. We're excited to continue our work with these partners to accelerate adoption of data-driven medicine globally.

Speaker Change: Looking ahead to the rest of 2024, we're also excited to launch MSK Impact, powered with Sophia DDM, the decentralized, solid tumor profiling counterpart to Memorandum-Kettering's liquid biopsy application, MSK-Access.

Speaker Change: I'm proud to announce today that we have already signed two customers to MSK Impact pre-launch, including Sophie Vaginomic in Taiwan and Abu Dhabi's National Reference Lab in the UAE.

Speaker Change: Looking ahead to the second half of the year and into 2025, MSK Impact will be a key growth driver as we pair it with MSK Access in order to win both liquid biopsy and solid tumor testing business at institutions across the globe.

Jurgi Camblong: Beyond expanding our menu of applications, I'm also proud to announce today that we are launching a full modernization of Sophia Lidium later this year. We'll be moving the platform from Java to web technology and microservices. This upgrade not only creates a better experience for customers, but it also enables us to compute data more efficiently and launch new applications more quickly. As we come out of the cycle of heavy-erranding investment, we are confident that this efforts will continue to differentiate our platform in new and established markets and enable us to better serve our clients in both clinical and biopharm.

Speaker Change: Beyond expanding our menu of applications, I'm also proud to announce today that we are launching a full modernization of Sophia DDM later this year. We'll be moving the platform from Java to web technology and microservices.

Speaker Change: This upgrade not only creates better experience for customers, but it also enables us to compute data more efficiently and launch new applications more quickly.

Speaker Change: As we come out of the cycle of heavy R&D investment, we are confident that these efforts will continue to differentiate our platform in new and established markets and enable us to better serve our clients in both clinical and biopharma.

Jurgi Camblong: In some things, Sophia, 13 years ago, I'm exceptionally proud of the impact we've made. Since the beginning, we envisioned a feature in which a cloud-based analytics platform would break data silos and enable healthcare institutions to compute and analyze multimodal data. We also believe that developing proprietary AI algorithms to provide insights on this data would power the future of patient care. Further, we never compromise on our commission that a decentralized model is the most sustainable approach to achieve this mission. Now, patients in over 70 countries across the globe benefit from our decentralized analytics platforms of Lidium.

Sophia: Since founding SOFIA 13 years ago, I'm exceptionally proud of the impact we've made.

Sophia: Since the beginning we envisioned a future in which a cloud-based analytics platform would break data silos and enable healthcare institutions to compute and analyze multimodal data.

Sophia: We also believe that developing proprietary AI algorithms to provide insights on this data would power the future of patient care.

Sophia: Further, we never compromise on our conviction that a decentralized model is the most sustainable approach to achieve this mission.

Sophia: Now, patients in over 70 countries across the globe benefit from our decentralized analytics platform, Sophia Lydia.

Jurgi Camblong: Our customers are able to produce highly accurate insights from multimodal data within the walls of their own institution with faster turnaround times and lower cost and while maintaining control over the data they produce. In this way, I'm proud that Sophia Genetics has pioneered the data-driven medicine movement globally, and I'm especially proud of the nearly 1.8 million genomic professional profiles that we have analyzed since inception.

Sophia: Our customers are able to produce highly accurate insights from multimodal data within the walls of their own institution, with faster turnaround times and lower costs, and while maintaining control over the data they produce.

Sophia: In this way, I am proud that Sophia Genetics has pioneered the data-driven medicine movement globally, and I am especially proud of the nearly 1.8 million genomic patient profiles that we have analyzed since inception.

Jurgi Camblong: I'm also proud of the commitment we have made to achieve our mission in a sustainable way. Our commitment to which adjusted operating profitability within the next two years not only in lots value for our shoulders, but it also ensures that we will be able to help patients for generations to come. Our ability to continue to improve our bottom line, including in a quarter as challenging as a current one, demonstrates our commitment to this objective.

Sophia: I am also proud of the commitment we have made to achieve our mission in a sustainable way. Our commitment to reach adjusted operating profitability within the next two years not only unlocks value for our shoulders, but it also ensures that we will be able to help patients for generations to come.

Sophia: Our ability to continue to improve our bottom line, including in a quarter as challenging as the current one, demonstrates our commitment to this objective.

Ross Muken: With that, I will now turn the call over to Ross, who will provide a closer look at our Q2 financials and 2024 outlook.

Ross: With that, I will now turn the call over to Ross, who will provide a closer look at our Q2 Financials and 2024 Outlook.

Ross Muken: Thank you, Yerdi, and good morning, everyone. Results in the second quarter did not meet our expectation from a revenue standpoint due to the aforementioned challenging budget conditions at Biopharma, as well as temporal macro challenges in our EMAA customer base. I am confident we have taken the necessary actions to respond to these unexpected market changes and have also adapted our cost structure accordingly.

Ross: Thank you, Jurgi, and good morning, everyone.

Ross: Results in the second quarter did not meet our expectation from a revenue standpoint due to the aforementioned challenging budget conditions at Biopharma, as well as temporal macro challenges in our EMEA customer base.

Ross: I am confident we have taken the necessary actions to respond to these unexpected market changes and have also adapted our cost structure accordingly.

Ross Muken: Overall, I am pleased with the new business environment, which supports our view that the moderation and growth is transient, and in turn, we remain committed to our path to sustainable growth. And with that, I'll move to an update on the quarter. As Yerdi highlighted, Q2 revenue was below expectation, and we have taken actions to return business to expected growth levels over the next several quarters. Total revenue for the second quarter of 2024 was $15.8 million, compared to $15.1 million for the second quarter of 2023, representing Europe a year growth of 5%. Constant currency revenue growth, excluding COVID, was 7%.

Ross: Overall, I am pleased with the new business environment which supports our view that the moderation and growth is transient and in turn we remain committed to our path to sustainable growth.

Speaker Change: And with that, I'll move to an update on the quarter. As Jurgi highlighted, Q2 revenue was below expectation, and we have taken actions to return business to expected growth levels over the next several quarters.

Speaker Change: Total revenue for the second quarter of 2024 was $15.8 million.

Speaker Change: compared to $15.1 million for the second quarter of 2023, representing year-over-year growth of 5%. Constant currency revenue growth, excluding COVID, was 7%.

Ross Muken: Platform analysis volume was approximately 87,000 for the second quarter of 2024, compared to approximately 77,000 for the second quarter of 2023. The year-over-year growth in Analysis Volume was 12%, or 14% when excluding COVID-related volumes. From an application standpoint, oncology outperformed rarely inherited disorders during the quarter, driven by strength and he-mom testing. AMEA experienced the softest growth in Q2, in addition to weak performance in Latin America. This was partially offset by notable strengths in North America and Asia Pacific, which growth grew at over 40%. I am especially proud that the strong growth delivered in the U.S.

Speaker Change: Platform analysis volume was approximately 87,000 for the second quarter of 2024 compared to approximately 77,000

Speaker Change: for the second quarter of 2023. Year-over-year growth in analysis volume was 12%, or 14% when excluding COVID-related volumes.

Speaker Change: From an application standpoint, oncology outperformed rare and inherited disorders during the quarter, driven by strength and hematopoietic testing.

Speaker Change: EMEA experienced the softest growth in Q2, in addition to weak performance in Latin America.

Speaker Change: This was partially offset by notable strength in North America and Asia-Pacific, which growth grew at over 40%. I am especially proud of the strong growth delivered in the U.S.

Ross Muken: The U.S. market has grown from its nascent stages just a few years ago, to now approaching our largest market in terms of revenue contribution. Beyond the challenges in AMEA, Jurgi also highlighted that we experienced material delays in our bioparm of business as we continued to face a challenging macro environment in which budget constraints have made the signing of large contracts difficult and caused sales cycles to elongate. Specifically, we had one major high-value contract led to later in the year, at potentially in the 2025. Despite the weak revenue performance, clinical bookings, which don't show up in revenue until nine to twelve months post-signing, were strong in the first half of 2024.

Speaker Change: The U.S. market has grown from its nascent stages just a few years ago to now approaching our largest market in terms of revenue contribution.

Ross Muken: Beyond the challenges in MEA, Jurigi also highlighted that we experience material delays in our biopharmaceuticals. The annualized revenue churn rate was around 4% for Q2 2024, which is in line with our historical averages. Net dollar retention for Q2, which is net of revenue churn for the year, was 114%, in line with Q2 2023 levels. Constant currency net dollar retention, excluding COVID-related revenue, was 113%, as compared to 121% in Q2 2023. This decrease is primarily attributable to some of the aforementioned challenges in our established markets, as patient demand and pricing pressure moderated some of our continued growth momentum.

Speaker Change: Beyond the challenges in EMEA, URED also highlighted that we experienced material delays in our biopharma business.

Speaker Change: As we continue to face a challenging macro environment in which budget constraints have made the signing of large contracts difficult and caused sales cycles to elongate.

Speaker Change: Specifically, we had one major high-value contract slip to later in the year and potentially into 2025.

Speaker Change: Despite the weak revenue performance, clinical bookings, which don't show up in revenue until 9 to 12 months post-signing,

Ross Muken: New customer wins were also strong as we signed 20 new logos during the quarter. We are laser focused on getting these 20 customers as well as the influx of new customers signed during Q1 and Q4 2023 into routine usage as quickly as possible. Beyond looking to new customer wins, we also continue to see positive momentum in our pipelines, both clinical and bioparm of business. The pipelines for our clinical and bioparm of businesses are both at all time highs, tumutally exceeding $200 million in total value. Strong new business momentum, along with growing pipelines, indicate that our end markets remain healthy despite the consumption challenges in the quarter.

Speaker Change: were strong in the first half of 2024. New customer wins were also strong as we signed 20 new logos during the quarter.

Speaker Change: We are laser-focused on getting these 20 customers, as well as the influx of new customers signed during Q1 and Q4 2023, into routine usage as quickly as possible.

Speaker Change: Beyond bookings and new customer wins, we also continue to see positive momentum in our pipelines for both clinical and biopharma business.

Speaker Change: The pipelines for our clinical and biopharma businesses are both at all-time highs, cumulatively exceeding $200 million in total value.

Speaker Change: Strong new business momentum, along with growing pipelines, indicate that our end markets remain healthy despite the consumption challenges in the quarter.

Ross Muken: Moving on to an update on other key business metrics. Courage and OMA customers were 457 as of June 30, 2024, up from 434 in the prior year period and down sequentially by six customers relative to Q1 2024, as we experienced higher than expected customer churn during the quarter, attributable to smaller accounts that were unable to scale and saw their volumes consolidate to larger related hospitals and laboratories. Annualized revenue churn rate was around 4% for Q2 2024, which is in line with our historical averages. Net dollar retention for Q2, which is net of revenue churn for the year, was 114% in line with Q2 2023 levels.

Speaker Change: Moving on to an update on other key business metrics.

Speaker Change: Core genomic customers were 457 as of June 30, 2024, up from 434 in the prior year period, and down sequentially by 6 customers relative to Q1, 2024, as we experienced higher-than-expected customer churn during the quarter.

Speaker Change: Attributable to smaller accounts that were unable to scale and saw their volumes consolidated to larger related hospitals and laboratories.

Speaker Change: Annualized revenue churn rate was around 4% for Q2 2024, which is in line with our historical averages.

Speaker Change: Net dollar retention for Q2, which is net of revenue churn for the year, was 114%, in line with Q2 2023 levels.

Ross Muken: Constant currency net dollar retention, excluding COVID-related revenue, was 113% as compared to 121% in Q2 2023. This decrease is primarily attributable to some of the aforementioned challenges in our established markets. As patient demand and pricing pressure moderated, some of our continued growth momentum. Gross Profit for the 2nd quarter of 2024 with $10.8 million, compared to gross profit of $10 million in the 2nd quarter of 2023, representing your over-year growth of 7%. Gross margin was 68.2% for the 2nd quarter of 2024, compared with 66.7% for the 2nd quarter of 2023. Adjusted gross profit with $11.6 million and improving of 10% compared to adjusted gross profit of $10.5 million in the 2nd quarter of 2023; adjusted gross margin was 73.2% for the 2nd quarter of 2024, compared to 70% for the 2nd quarter of 2023.

Speaker Change: Constant currency net dollar retention excluding COVID-related revenue was 113% as compared to 121% in Q2 2023.

Speaker Change: This decrease is primarily attributable to some of the aforementioned challenges in our established markets, as patient demand and pricing pressure moderated some of our continued growth momentum.

Speaker Change: Gross profit for the second quarter of 2024 was $10.8 million.

Speaker Change: compared to gross profit of $10 million in the second quarter of 2023, representing year-over-year growth of 7%. Gross margin was 68.2% for the second quarter of 2024, compared with 66.7% for the second quarter of 2023.

Speaker Change: Adjusted gross profit with $11.6 million, an improvement of 10% compared to adjusted gross profit of $10.5 million in the second quarter of 2023.

Speaker Change: Adjusted gross margin was 73.2% for the second quarter of 2024, compared to 70% for the second quarter of 2023. We remain proud of our ability to manage cost, scale compute, and continue to expand gross margins by over 300 basis points.

Ross Muken: We remain proud of our ability to manage costs, scale compute, and continue to expand gross margin by over 300 basis points, despite soft revenue performance. Total operating expenses for the 2nd quarter of 2024 were $25.8 million, compared to $30.1 million for the 2nd quarter of 2023. Across the functions, we continued to benefit from lower headcount on a year-over-year basis. Already, expenses decreased during the quarter as we increasingly focus on high ROI projects. Additionally, I remain pleased with our progress on the G&A side, where we also continue to benefit from targeted process improvements, system investments, and the optimization of our public company costs.

Ross Muken: Total operating expenses for the second quarter of 2024 were $25.8 million, compared to $30.1 million for the second quarter of 2023. Across the functions, we continued to benefit from lower headcount on a year-over-year basis. R&D expenses decreased during the quarter as we increasingly focused on high ROI projects. Operating loss for the second quarter of 2024 was $15 million compared to $20 million in the second quarter of 2023, an improvement of 25%.

Speaker Change: Despite soft revenue performance

Speaker Change: Total operating expenses for the second quarter of 2024 were $25.8 million compared to $30.1 million for the second quarter of 2023.

Speaker Change: Across the functions, we continue to benefit from lower headcount on a year-over-year basis. R&D expenses decrease during the quarter as we increasingly focus on high ROI projects.

Speaker Change: Additionally, I remain pleased with our progress on the G&A side, where we also continue to benefit from targeted process improvements, system investments, and the optimization of our public company costs.

Ross Muken: Sales and marketing expense was up a touch, primarily due to this left investment oriented in accelerating penetration of several key markets, as well as marketing initiatives to support our robust new product momentum. Operating loss for the 2nd quarter of 2024 was $15 million, compared to $20 million in the 2nd quarter of 2023, and improvement of 25%. Adjusted operating loss for the 2nd quarter of 2024 was $9.9 million, compared to $14.6 million for the 2nd quarter of 2023, and improvement of 32%. We continue to be pleased with our trajectory toward profitability. The additional headcount actions we took in the 2nd half of 2023 and incremental discretionary expense controls implemented were necessary to sustain the positive momentum across the balance of 2024.

Speaker Change: Sales and marketing expense was up a touch, primarily due to select investments oriented and accelerating penetration of several key markets, as well as marketing initiatives to support our robust new product momentum.

Speaker Change: Operating loss for the second quarter of 2024 was $15 million.

Speaker Change: compared to $20 million in the second quarter of 2023, an improvement of 25%. Adjusted operating loss for the second quarter of 2024 was $9.9 million, compared to $14.6 million for the second quarter of 2023, an improvement of 32%.

Ross Muken: Adjusted operating loss for the second quarter of 2024 was $9.9 million compared to $14.6 million for the second quarter of 2023, an improvement of 32%. We continue to be pleased with our trajectory toward profitability. The additional headcount actions we took in the second half of 2023 and incremental discretionary expense controls implemented were necessary to sustain the positive momentum across the balance of 2024.

Speaker Change: We continue to be pleased with our trajectory toward profitability.

Speaker Change: The additional headcount actions we took in the second half of 2023 and incremental discretionary expense controls implemented were necessary to sustain the positive momentum across the balance of 2024. In Q2, I was also proud to see us maintain strong bottom-line performance.

Ross Muken: In Q2, I was also proud to see us maintain strong bottom line performance despite the revenue challenges, a proof point of strong operating leverage in our business and the discipline of our team.

Speaker Change: Despite the Revenue Challenges, a Proved Point of Strong Operating Leverage in Our Business and the Discipline of Our Team.

Ross Muken: Lastly, total cash burn for the 2nd quarter was $12.3 million, exclusive of the $15 million in debt and associated borrowing costs that we took down as part of the financing deal with Perceptive, which we announced last quarter. The $12.3 million in cash burn represents an improvement of 70%, compared to the $13.3 million in cash burn in the prior year quarters. We remain happy with our cash utilization trend, and our contract would respect to our medium-term liquidity trajectory.

Speaker Change: Lastly, total cash burn for the second quarter was $12.3 million.

Speaker Change: Exclusive of the $15 million in debt and associated borrowing costs that we took down as part of the financing deal with Perceptive, which we announced last quarter. The $12.3 million in cash burn represents an improvement of 7%.

Speaker Change: Compared to the $13.3 million in cash burden in the prior year quarter, we remain happy with our cash utilization trend and are on track with respect to our medium-term liquidity trajectory.

Ross Muken: Cash and cash equivalents were approximately $105.4 million as of June 30, 2024, turning to our 2024 outlook. Given the more challenging macroeconomic environment we are seeing in Bioforma in our established markets in EMBA, we now expect full year revenue to be between $65 million and $67 million, representing growth of 4 to 7% compared to FY 2023. Roughly 60% of the reduction is related to lower expectations for bioforma-related business as we continue to face budgetary constraints and longer-than-anticipated failed cycles. FX is also weakened modestly from our original expectation, creating an incremental headwind of a few hundred basis points.

Speaker Change: Cash and cash equivalents were approximately $105.4 million as of June 30, 2024. Turning to our 2024 outlook.

Speaker Change: Given the more challenging macroeconomic environment we are seeing in biopharma and in our established markets in EMEA, we now expect full-year revenue to be between $65 million and $67 million.

Speaker Change: Representing growth of 4-7% compared to FY 2023.

Speaker Change: Roughly 60% of the reduction is related to lower expectations for biopharma-related business as we continue to face budgetary constraints and longer-than-anticipated sales cycles.

Speaker Change: FX is also weakened modestly from our original expectation, creating an incremental headwind of a few hundred basis points.

Ross Muken: The remainder can be attributed to a softer than expected start to the year in our clinical business due to macro-related headwinds in EMBA. While we believe the challenge is to be temporary, we do expect them to persist in Q3 and through the end of the year. I will note that despite headwinds in EMBA, clinical revenue grew low double digits in H1 2024 compared to H1 last year, while below expectations, the underlying core growth of the business does remain solid. With respect to seasonality, we now expect Q4 to be stronger than Q3 as new business comes online and revenue from bioforma-related awards signed during H1 are recognized, albeit later than originally expected, and with some moving into 2025.

Speaker Change: The remainder can be attributed to a softer than expected start to the urinary clinical business due to macro-related headwinds in the EMBA.

Speaker Change: While we believe the challenges to be temporary, we do expect them to persist in Q3 and through the end of the year. I will note that despite headwinds in EMBA, clinical revenue grew low double digits in H1 2024 compared to H1 last year.

Speaker Change: While below expectations, the underlying core growth of the business does remain solid.

Speaker Change: With respect to seasonality, we now expect Q4 to be stronger than Q3 as new business comes online and revenue from biopharma-related awards sign.

Speaker Change: During H1 are recognized, albeit later than originally expected, and with some moving into 2025.

Ross Muken: We are also updating our adjusted gross margin guidance to be between 72% and 72.5% compared to 72.2% in FY 2023. Despite the strong performance in the period, we anticipate a slight mix impacting two-h relative to new product launches, as well as investments we have decided to make in EMBA to secure certain renewals that are strategic in nature. Following our strong cost performance in Q2, we are reaffirming adjusted operating loss guidance between $45 million and $50 million, and further reiterates that we remain confident our paths were adjusted operating profitability within the next two years. Our current cash and existing capital resources are expected to be sufficient to reach this milestone.

Speaker Change: We are also updating our Adjusted Gross Margin Guidance to be between 72% and 72.5%.

Speaker Change: compared to 72.2% in FY 2023. Despite the strong performance in the period, we anticipate a slight mixed impact in 2H relative to new product launches.

Speaker Change: As well as investments, we have decided to make an EMEA to secure certain renewals that are strategic in nature.

Speaker Change: Following our strong cost performance in Q2, we are reaffirming Adjusted Operating Loss Guidance.

Speaker Change: between $45 million and $50 million and further reiterate that we remain confident in our path to adjusted operating profitability within the next two years. Our current cash and existing capital resources are expected to be sufficient to reach this milestone.

Ross Muken: This has been made possible by taking necessary cost actions and continuing to be obsessed with capital efficiency. In 2024, we will continue to revisit our discretionary expenditures and execute and identify savings via targeted process improvements, scale-focused system automation efforts, as well as continued reduction in certain public company costs.

Speaker Change: This has been made possible by taking necessary cost action.

Speaker Change: and continuing to be obsessed with capital efficiency.

Speaker Change: In 2024, we will continue to revisit our discretionary expenditures and execute an identified savings via targeted process improvement.

Speaker Change: scale focus system automation efforts, as well as continued reduction in certain public company costs. With that, I would like to turn the call back over to Jurgi for the closing remarks before we take your questions.

Jurgi Camblong: With that, I would like to turn the call back over to URG for the closing remarks before we take your questions.

Jurgi Camblong: Thank you, Ross.

Jurgi Camblong: I'm proud of what our team achieved this quarter, particularly our continued ability to expand growth margins, reduce operating loss, and improve our bottom line. I also remain excited about our future. Booking's momentum is strong and markets continue to grow. Cancer rates are increasing worldwide; better practices are being developed each day. And data is becoming more and more useful in diagnoses, therapy selection, drug development, and drug deployment. Given our business seats at the heart of these innovations, accelerating and enabling the adoption of each, we remain confident in our long-term growth.

Jurgi: Thank you, Ross. I'm proud of what our team achieved this quarter, particularly our continued ability to expand gross margins, reduce operating loss, and improve our bottom line.

Jurgi: I also remain excited about our future.

Speaker Change: Bookings momentum is strong and end markets continue to grow. Cancer rates are increasing worldwide. Better therapies are being developed each day.

Speaker Change: And data is becoming more and more useful in diagnosis, therapy selection, drug development, and drug deployment.

Speaker Change: Given our business sits at the heart of these innovations, accelerating and enabling the adoption of each, we remain confident in our long-term goals.

Jurgi Camblong: In closing, thank you to our Sophia colleagues, partners, customers, and investors for joining us in our journey to transform patient care with data-driven medicine.

Unknown Executive: In closing, thank you to our Sophia colleagues, partners, customers, and investors for joining us in our journey to transform patient care with data-driven medicine.

Speaker Change: In closing, thank you to our SOFIA colleagues, partners, customers, and investors for joining us in our journey to transform patient care with data-driven medicine.

Jurgi Camblong: Please note we are presenting at the Morgan Stanley Elster Conference next month in New York City. I look forward to continuing to update you on Sophia's future success of democratizing data-driven medicine.

Speaker Change: Please note we are presenting at the Morgan Stanley Healthcare Conference next month in New York City. I look forward to continuing to update you on Sophia's future success of democratizing data-driven medicine. Operator, you may now open the line for questions.

Unknown Executive: Operator, you may now open the line for questions. Thank you.

Unknown Executive: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star button followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star button followed by the number two. If you are using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the line of Dan Brennan, TD Colley.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Should you have a question, please press the start button followed by the number 1 on your touch-tone phone. You will hear a prompt that your hand has been raised.

Speaker Change: Should you wish to decline from the polling process, please press the star button followed by the number 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please for your first question.

Operator: Your first question comes from the line of Dan Brennan of TD Cohen. Please go ahead.

Moderator: Your first question comes from the line of Dan Brennan of TD Cohen. Please go ahead.

Daniel Brennan: Great. Thank you. Thanks for the questions, guys.

Daniel Brennan: Maybe first one, just on pharma, since that seems to be the weak spot here or one of the key weak spots in the quarter. I know in the past, Ross and you kind of decided that maybe just under 10% of revenues last year, but that is pure R&D. I think with translational could be bigger.

Dan Brennan: Great, thank you. Thanks for the questions guys. Maybe first one just on pharma, since that seems to be the weak spot here or one of the key weak spots in the quarter. I know in the past, Ross and Jurgi, you kind of sized it at maybe just under 10% of revenues last year, but

Daniel Brennan: So can you just help fingers like through how big that business is today, what you were expecting, and kind of given this is a big part of the cut, can you just kind of walk us through what expectations were for pharma and what they are now, and then kind of related to that. So basically, in the back half of the year, it's the pharma cut, and then it's basically the clinical cut. Those are the two factors, but they're anything else because the back half of year is definitely coming down, just trying to figure out kind of what's in that.

Speaker Change: That is, you know, pure R&D. I think with translational could be bigger. So can you just help think us like through

Speaker Change: How big that business is today what you were expecting and kind of given this is a big part of the cut

Speaker Change: Can you just kind of walk us through what expectations were for pharma and what they are now?

Speaker Change: and then kind of related to that so basically in the back half of the year it's the pharma cut and then it's basically the clinical cut. Those are the two factors. Was there anything else? Because the back half year you know is definitely coming down just trying to figure out kind of what's in that.

Unknown Executive: Yes, good morning.

Unknown Executive: Thank you, Dan.

Jurgi Camblong: Let me start with the bio-pharma. So on the bio-pharma side, indeed, this explains 60% of the delta versus the revenue we were expecting this quarter, and to try to address that mid-long term, we have taken some actions, right? So, as a reminder, on the pharma side, we both with the DX teams, so when it comes to decentralized testing, or when it comes to development of potential companion diagnostics, and we work with the data teams, and the data teams are focused as being primarily on the market access needs, or on the definition of patient recruitment, for instance, to improve our speed up clinical trials.

Speaker Change: Yes, good morning and thank you, Dan. Let me start with the bioformats.

Speaker Change: So, on the biopharma side, indeed, this explains 60% of the delta versus the revenue we were expecting this quarter.

Speaker Change: And to try to address that mid-long term, we have taken some actions, right?

Speaker Change: As a reminder, on the pharma side, we work both with the DX teams, so when it comes to decentralized testing, or when it comes to development of potential companion diagnostics, and we work with the data teams.

Speaker Change: And the data teams are focused as being primarily on the market access needs or on the definition of patient recruitment, for instance, to improve or speed up clinical trials.

Ross Muken: So what we have observed on the pharma side is that between 2023 and 2024, there are being some pressure on the budget, and signing deals of certain amount of dollars became a bit challenging, and hence the refocus on participating, the diagnostics, and the data business on our side of the teams that are really focused on that because it's our different people we sell to in the pharma. And second, on going for deals which are at lower value, but more of those, so that we can, there is, I would say, as well the execution of the bookings, as well as the execution of the delivery of those deals.

Speaker Change: So what we have observed on the pharma side is that between 23 and 24 there are being some pressure on the on the budget.

Speaker Change: and signing deals of a certain amount of dollars became a bit challenging, and hence the refocus on first splitting the diagnostics and the data business on our side to have teams that are really focused on that because these are different people we sell to in the format.

Speaker Change: and Second,

Speaker Change: on going for deals which are at a lower value.

Speaker Change: More of those so that we can the risk I would say as well the execution of the bookings as well as the execution Of the delivery of those deals and so this has really been the learning and the shift for us

Ross Muken: And so this has really been the learning and the shift for us. Now, why would I like, I like, than that, the bookings of the bookings, the pipeline remains strong for the biopharma business on our side, and that we believe that while this quarter and this year, given the bookings we had end of last year and beginning of this year, the number is not the one we want in terms of revenue, this is something we should be able to correct for 2025 on.

Speaker Change: Now I would like to highlight Dan that the pipeline remains strong for the biopharma business on our side.

Speaker Change: and that we believe that while this quarter and this year, given the bookings we had end of last year and beginning of this year, the number is not the one we want in terms of revenue. This is something we should be able to correct for 2025 on.

Ross Muken: Ross, do you want to give more details on the number?

Ross Muken: Thank you, Jurgi. So, Dan, you know, last year we talked about, you know, disclosing farm that if and when it got above 10% of revenues, so you can assume it was slightly below that level on a 23 basis. That business was of triple digits last year, and so what's essentially implied in 24 is that business will now be down. So we'd originally obviously assumed continued growth.

Jurgi Camblong: Thanks, Jurgi. So, Dan, you know, last year, we talked about disclosing pharma if and when it got above 10% of revenues. So, you can assume it was slightly below that level on a 23 basis. However, that business was up triple digits last year. And so, what's essentially implied in 24 is that business will now be down. So, we'd originally obviously assumed continued growth. We had a number, I would say, of contracts, verbal awards that we had received late in 23 that, frankly, are still sitting in procurement or have yet to be actualized. We're confident in sort of them ultimately getting recognized, but certainly they have not come through in the time frame that we had expected.

Speaker Change: Ross, do you want to give more details on the numbers?

Speaker Change: Thanks, Jurgi. So Dan, you know, last year, we talked about, you know, disclosing pharma if and when it got above 10% of revenues. So you can assume

Ross: It was slightly below that level on a 23 basis.

Ross: That business was up triple digits last year, and so what's essentially implied in 24 is that business will now be down.

Ross Muken: We had a number, I would say, contracts, verbal awards that we had received late in 23 that, frankly, still are sitting in procurement or have yet to be actualized. We’re confident in sort of them ultimately getting recognized, but certainly they have not come through in the time frame that we had expected. I would also say that outside sort of the direct farm of business kind of to your implication, there are products like HRD where farmer sponsorship in market is crucial. So, while our customer may remain a clinical customer, it is farmer that is obviously subsidizing to some degree that clinical testing, you know, in order to allow for improved market access for their product.

Speaker Change: So we'd originally obviously assumed continued growth. We had a number, I would say, of contracts, verbal awards that we had received late in 23 that frankly still are sitting in procurement or have yet to be actualized.

Speaker Change: were confident in sort of them ultimately getting recognized, but certainly they have not come through in the time frame that we had expected. I would also say that outside

Ross Muken: I would also say that outside of sort of the direct pharma business, kind of to your implication, there are products like HRD where pharma sponsorship in the market is crucial. So, while our customer may remain a clinical customer, it is pharma that is obviously subsidizing to some degree that clinical testing, you know, in order to allow for improved market access for their product. We've also seen in some key markets, particularly in Europe, where, you know, I would say reimbursement support has been pulled back or is less certain.

Speaker Change: of sort of the direct pharma business kind of to your implication, there are products

Speaker Change: like HRD where pharma sponsorship in market is crucial. So while our customer may remain a clinical customer, it is pharma that is obviously subsidizing to some degree that clinical testing.

Ross Muken: We've also seen in some key markets, particularly in Europe, where that, you know, I would say reimbursement support has been pulled back or less servant, and so that is as well caused, I would say some utilization or usage differences from our original forecast.

Speaker Change: you know, in order to allow for improved market access for their product. We've also seen in some key markets, particularly in Europe ,

Ross Muken: And so, that has also caused, I would say, some utilization or usage differences from our original forecast. So, while obviously, you know, we're disappointed in sort of the decline in the direct to pharma business, we're confident that will improve. The other piece we're already starting to see some of that unwind is, I believe, part of the reason why pharma pulled back their reimbursement support was due to governments putting in forth some reimbursement coverage.

Speaker Change: where that you know I would say reimbursement support has been pulled back or left certain and so that is as well cause I would say some utilization or usage

Ross Muken: So, while obviously, you know, we're disappointed in sort of the decline in the direct to farm of business, we're confident ultimately in that improving. The other piece we're already starting to see, some of that unwind is, as I believe, part of the reason why farmers pulled back their reimbursement support was due to governments putting in forth some reimbursement coverage, and so that it will start to get picked up at the country level, but in the end, it obviously led to a Delta versus original forecast.

Speaker Change: Differences from our original forecast. So while obviously, you know, we're disappointed in sort of the decline

Speaker Change: in the director form of business. We're confident ultimately in that improving.

Speaker Change: The other piece we're already starting to see some of that unwind as I believe part of the reason why pharma pulled back their reimbursement support was due to government's putting in forth some reimbursement coverage and so that will start to get picked up at the country level but in the end it obviously led to a Delta versus original forecast.

Ross Muken: And so, that will start to get picked up at the country level. But in the end, it obviously led to a Delta versus the original forecast. You know, if I think about what's implied now is essentially what we have contracted and already executed and is already underway. So, it's a much more modest expectation for this year, clearly, in the sector.

Ross Muken: You know, if I think about what's implied now, is essentially what we have contracted and already executed and is already underway, so it's a much more modest expectation for this year, clearly in the second half.

Speaker Change: If I think about what's implied now is essentially what we have contracted and already executed and is already underway. So it's a much more modest expectation for this year, clearly, in the second half.

Daniel Brennan: Got it, and then if I can just one other, you know, MSK, you cited throughout the prepared remarks about contraction that you're getting there with some new business wins, and then you also cited the Nvidia whole genome kind of product rollout.

Speaker Change: Got it. And then if I can do this one other, you know, MSK, you cited throughout the prepared remarks about some traction that you're getting there with some new business wins. And then you also cited the NVIDIA whole genome kind of product rollout. Maybe could you just speak a little bit to like,

Daniel Brennan: Maybe could you speak a little bit to, like, would you be willing to quantify the MSK business today, any pipeline impact, is how we're thinking about how critical or not that business is towards your growth, is it nice to have, is it central, and that will let the whole genome product you're looking to roll out with, you know, the help of Nvidia kind of had to be think about, you know, that product as well from a contributing basis as we go beyond 24. Thank you. Yes, thank you, Dan. Indeed, so our core business has been in ariditary cancer, in-onk, right narrative disorders, and to some extent, solitude more testing.

Speaker Change: Would you be willing to quantify the MSK business today, any pipeline?

Speaker Change: Impact is how we thinking about how critical or not that business is towards your growth Is it is it nice to have is it is it central and that will let and that the whole genome product? You're looking to roll out with you know the help of Nvidia kind of how do we think about you know that product as? Well from a contributing basis as we go beyond 24. Thank you

Speaker Change: Yes, thank you, Dan. Indeed, so our core business has been in hereditary cancer, IM-HONC, brain heredity disorders, and to some extent, solid tumor testing.

Daniel Brennan: And with the MSK access application, we're expanding our offering in the space of liquid biotech, which we expect to be significant, as the chemical utility of liquid biotech has now been clearly demonstrated. And in that sense, to give you some numbers, we signed 10 customers in MSK access, 16 in total on the liquid biopsy because we support as well other applications. And today, our clinical pipeline for MSK access is above 10 million dollars, and on the bioformite, even more significant.

Speaker Change: And with the MSK Access application, we're expanding our offering in the space of liquid biopsy, which we expect to be significant as the clinical utility of liquid biopsy is now being clearly demonstrated.

Speaker Change: And in that sense, to give you some numbers, we signed 10 customers in MSK Access.

Speaker Change: 16 in total on the liquid biopsy because we support other applications and today our clinical pipeline for MSK access is above 10 million dollars and on the biopharma it's even more significant.

Ross Muken: And maybe once you want to give some color and remind what we did with AstraZeneca sponsored testing of MSK access and how it is now being David.

Ross Muken: So Dan, obviously we're really excited about the early adoption of the liquid biopsy product, and obviously that'll be as well accelerated VR partnership with AstraZeneca. As Jurgi mentioned, I think overall this is obviously going to be a much bigger impact to 25 revenue growth. You know, these kinds of initial lands we are seeing are much larger than our typical ACV or contract value. So we're excited about that momentum.

Speaker Change: Yeah, so Dan, obviously, we're really excited about the early adoption.

Dan Brennan: the liquid biopsy product. And obviously, that'll be as well accelerated via our partnership with AstraZeneca, as Jurgi mentioned, I think

Speaker Change: Overall, this is obviously going to be a much bigger impact to 25 revenue growth. You know, these kind of initial lands we are seeing are much larger than our typical ACV or contract value. So we're excited about that momentum. Obviously, we've talked about in the past.

Ross Muken: Obviously, we've talked about in the past; this product takes a bit longer to bring into routine testing, and so that is why you're not seeing a ton of impact in 24. So that's kind of progressing as expected. But certainly we think the potential of this product can be quite significant.

Jurgi Camblong: In terms of whole genome there, I would say as well, I've been frankly a bit surprised as to the level of the commercial interest. Certainly we're seeing it in the US, and you've seen some of the large central labs talk about demand there, but we're seeing it XUS as well. I know if Jurgi, if there's anything else you want to add on the whole genome side. Yes, look on the whole genome definitively with the bigger sequencers in the chemical market. We do see that there are more and more applications, in particular for very limited disorders, but eventually as well for new applications in the future, like minimal residual disease.

Speaker Change: Commercial Interest. Certainly we're seeing it in the U.S. and you've seen some of the large central labs talk about demand there, but we're seeing it at U.S. as well. I don't know if Jurgi, if there's anything else you want to add on the whole genome side?

Jurgi Camblong: And this I would say make our opportunity bigger, right? Because more data means more data compute. More identification of complex signatures and more need of AI-driven sophisticated algorithm. So in that one, indeed, we're pretty proud of the work we've been doing with Nvidia and with Microsoft, which definitively enable us to scale to be even more competitive than what we are today versus competition. And by doing so, not only to increase our market share, but in the meantime as well protect strong cross margins.

Jurgi: So in that one, indeed, we're pretty proud, Dan, of the work we've been doing with NVIDIA and with Microsoft, which definitely enable us to scale.

Speaker Change: to be even more competitive than what we are today versus competition. And by doing so, not only to increase our market share, but in the meantime, as well, protect the strong cross margins.

Jurgi Camblong: Beyond the world genome sequencing, as I mentioned briefly, MRD. So today we don't have MRD capabilities out there in the market for slowly to more testing, but we're very excited about a new application we launched in the market for in on capability. So acutement with the chemical, which we believe will be an application that will be quite distinguished from the others both for the clinical needs and the bioform money in a decentralized way.

Speaker Change: Beyond the whole genome sequencing, as I mentioned briefly, MRD, so today we don't have MRD capabilities out there in the market for solid tumor testing.

Speaker Change: But we're very excited about a new application we launched in the market for

Speaker Change: Kim Ong at Capability, so Acute Melloid Leukemia, which we believe will be an application that will be quite distinguished from the others, both for the clinical needs and the biopharm needs in a decentralized way.

Jurgi Camblong: And last, if we speak about new applications where we believe the market is going to still grow strongly, we're very proud as well of soon launching the MSK Impact CGP application, which is a counterpart of the liquid biopsy of MSK MSK Access where we already signed, as we mentioned today, two new customers. And we're going to all in September in event in New York with a high number of US potential customers and are going to short first results on the MSK impact. And how this can be combined as well to follow patients on duty and live with MSK access.

Speaker Change: And last, if we...

Speaker Change: The MSK Impact CGP application, which is a counterpart of the liquid biopsy of MSK-MSK Access, where we already signed, as we mentioned today, two new customers.

Speaker Change: U.S. potential customers and are going to show first results on MSK Impact and how this can be combined as well to follow patients longitudinally with MSK Access. So in a nutshell, Dan, despite we're not where we want on the revenue side,

Jurgi Camblong: So, in a nutshell, then despite we're not where we want on the revenue side, I would say that we haven't been too bad on managing costs. And while we have been managing costs appropriately, we still being able to expand our R&D offering so that we can grow and increase our revenue again. We accelerated strong double digit by beginning of 2025 late. Thank you.

Dan Brennan: I would say that we haven't...

Dan Brennan: been too bad on managing cost.

Speaker Change: And while we have been managing costs appropriately, we're still being able to expand our R&D offerings so that we can grow and increase our revenue. Again, we accelerated strong double digits by beginning of 2025 latest.

Subhalaxmi Nambi: Your next question comes from the line of Subhanambi of Guggenheim.

Subhalaxmi Nambi: Please go ahead. Hey guys, thank you for taking my question. In an election year where there are heightened political tensions and now effects volatility, I'm curious if the new guide you are making any assumptions on how you set guidance just to be a bit more cautious given the environment.

Speaker Change: Your next question comes from the Lion of Subhu Nambi of Guggenheim. Please go ahead.

Unknown Caller: Hey guys, thank you for taking my question. In an election year where there are heightened geopolitical tensions and now affects volatility, I'm curious if the new guide you are making any assumptions on how you set guidance just to be a bit more cautious given the environment.

Speaker Change: Hey guys, thank you for taking my question. In an election year where there are heightened geopolitical tensions and now affects volatility, I'm curious if the new guide, you are making any assumptions on how you set guidance, just to be a bit more cautious given the environment?

Subhalaxmi Nambi: Yes, good morning, Subhan. Thanks for the question. Indeed, the environment is a bit of a challenging one. Not necessarily easy to predict everything.

Speaker Change: Yes, good morning, Subhu. Thanks for the question. Indeed, the environment, it's a bit of a challenging one, not necessarily easy to predict everything. I will let Ross guide you on how we are treating effects for our new guide.

Ross Muken: I will let Ross guide you on how we are treating effects for our new guides. So, in general, Subbu, I would say, you know, we have historically provided ourselves right on the visibility of the business. So obviously the result in the quarter were not pleased with where we came out. You know, we wanted to, as we sort of revisited, we did a deep dive into the customer base and spent a lot of time as well looking at some of the usage patterns and made assumptions, obviously relative to whether some of the softness we saw in Q2 would persist for the remainder of the year.

Ross: So, in general, Subhu, I would say, you know, we have historically prided ourselves right on the visibility of the business, so obviously the result in the quarter, we're not pleased.

Speaker Change: with where we came out. You know, we wanted to as we sort of revisited, we did a deep dive into the customer base and spent a lot of time

Speaker Change: As well, looking at some of the usage patterns and made assumptions, obviously, relative to whether some of the softness we saw in Q2 would persist for the remainder of the year.

Ross Muken: And then obviously we have new business coming online, and so those tend to be the biggest, I would say, factors, right, that ultimately drive. You know, outcomes now we also spoke about biofarma, and so there I would say we cut it quite hard, and there's not much. I would say in the second half in terms of any assumed re-acceleration, but I would say overall. You know, we tended to after this be quite conservative with respect to the cadence and some of the elements, and, you know, we know we need to now focus on that re-acceleration and ultimately prove out that this business, you know, should be growing strong double digits going forward.

Speaker Change: and then obviously we have new business coming online and so those tend to be the biggest I would say factors right that that ultimately drive

Speaker Change: you know, outcomes. Now, we also spoke about biopharma. And so there, I would say we cut it quite hard. And there's not much.

Speaker Change: I would say in the second half in terms of any assumed reacceleration. But I would say overall, you know, we tended to, after this, be quite conservative with respect to the cadence and some of the elements. And, you know, we know we need to now focus on that reacceleration and ultimately prove out.

Ross Muken: But, but clearly in the interim, given some of what we've seen and what you mentioned, you know, we wanted to be prudently conservative to make sure we don't have another experience like Q2.

Speaker Change: that this business, you know, should be growing strong double digits going forward. But clearly in the interim, given some of what we've seen and what you mentioned, you know, we wanted to be prudently conservative to make sure we don't have another experience like Q2.

Subhalaxmi Nambi: Got it. And then this has been another quarter since the LED final rule; customers have had more time to understand what this means for them. Do you expect there to be in for your customers that would slow volume for this long term, would this ever be an issue? And then similarly, I be the art, and as this progresses, it is a barrier.

Speaker Change: And then this has been another quarter since the LDD final rule. Customers have had more time to understand what this means for them. Do you expect there to be an issue for your customers that would slow volume for this long-term? Would this ever be an issue? And then similarly, IVDR and EQ, as this progresses, is it a barrier?

Unknown Executive: Thank you for that. Yeah. Yes.

Unknown Executive: Thank you for the questions. So, to your point indeed, the ledges lashing in in the US, maybe LVT. They would highlight some of the decisions for South of the year. And we've experienced that with a number of prospects that we intend to sign in H2. But despite that, what we hear from other players in the field, which are the significant contributors to molecular genomics. Is that probably the LVT legislation will make actually the decentralized version so the production of data in house bigger than what it is today. And just as a reminder, most of our customers in the US are large academic centers or large private labs.

Speaker Change: Thank you for that.

Speaker Change: So, to your point, indeed, the legislation in the U.S. around LDT.

Speaker Change: As I would say, delayed some of the decisions per half of the year, and we've experienced that with a number of prospects that we intend to sign in H2.

Speaker Change: But despite that, what we hear from other players in the field, which are the significant contributors to molecular genomics.

Jurgi Camblong: So we believe that those ones are going to benefit from the LVT legislation and going to see volume increase. And, as a reminder, actually this is something we're pretty proud of. US is where we've been growing the fastest, this quarter in terms of volume of user junior with overall 40% growth year on utilization in both US and Canada.

Speaker Change: So we believe that those ones are going to benefit from the LDT legislation and going to see volume increase. And as a reminder, actually, this is something we're pretty proud of.

Jurgi Camblong: When it comes to Europe, IVDR is still not quite there. We are making some efforts to be fully compatible for many of the applications we cover with IVDR. In some countries, it is going to be more important than in others; there are some countries where it's going to be more like the LVT, like in other countries it's going to be more around the IVDR. But we have a very good understanding of what the market needs are and the very strong plan according to the specificities of each country.

Speaker Change: When it comes to Europe ...

Speaker Change: in other countries is going to be more around the IVDR, but we have a very good understanding of what the market needs are and a very strong plan according to the specificities of each country.

Unknown Executive: Thank you so much for your time. Thank you so much. Thank you so much for your time. Thank you.

Conor Mcnamara: Your next question comes from the line of Conor McNamara of RBC Capital Markets. Please go ahead. Hey, good morning, guys, and thanks for the time. Can you comment on the sustainability of the accelerating growth you saw in North America? Is that a function of a market acceleration due to lower cost sequencing that we're asking out there, or market share gains, or a combination of those?

Subbo: Thank you, Subbo.

Speaker Change: Your next question comes from the line of Conor McNamara of RBC Capital Markets. Please go ahead.

Conor Mcnamara: Hey good morning guys and thanks for the time. Just can you comment on the sustainability of the accelerating growth you saw in North America? Is that a function of a market acceleration due to lower cost sequencing that we're asking out there or the market share gains or a combination of both?

Conor Mcnamara: Yes, good morning, Conor, and thanks for the question. So definitely the acceleration comes as well, not only from, I would say, the fact that for us it was a newer market, and we can cover many of the applications. But beyond that, indeed, there is a trend: the fact that strong private labs, large private labs, and academic centers are expanding their sequencing capabilities with sequencers, which are more powerful, increases as well the market itself. Right, and again, for us, more sequencing, more volume, better, given we are being paid on usage. But beyond that, I would say as well that we do see more and more demand for enterprise-like platforms to do data analytics. Often, large academic centers as well as large private labs are now looking for.

Speaker Change: Definitely, the acceleration comes as well, not only from, I would say, the fact that for us, it was a newer market.

Speaker Change: We can cover many of the applications, but beyond that, indeed, there is a trend, the fact that

Speaker Change: Strong private labs, large private labs and academic centers are expanding their sequencing capabilities with sequencers which are more powerful.

Speaker Change: increases as well the market itself right and again for us more sequencing, more volume, better even we are being paid on usage.

Conor Mcnamara: But beyond that, I would say as well that we do see more and more demand for enterprise-like platforms to do data analytics.

Ross Muken: So one key provider who can cover older needs from in on career, literary cancer, writing it to the other solid humor liquid biopsy. And this enables us to enter into, I would say, large enterprise discussions with a number of potential targets, given that there are not many or any companies.

Ross Muken: At the scale of Sofia, we're computing over 30,000, all close to 30,000 genomics profile a month, and these credentials are extremely important so that one can work with large academic centers or large labs, which are seeing volumes increase. Ross, in terms of other type of dynamics in the US, I don't know if you want to give more color. Thanks Shergey, so I would say, you know, obviously there's been some disruption in the US market with a related to hereditary cancer and rare disease. I think some of that has played into an insourcing thesis where we've seen a number of institutions bring in some of that volume, which has obviously benefited us.

Conor Mcnamara: Thanks, Jurgi. So I would say, you know, obviously there's been some disruption in the U.S. market related to hereditary cancer and rare disease. I think

Speaker Change: Some of that has played into an insourcing thesis.

Ross Muken: I also think in general it's caused them and some of the large institutions to rethink sort of the mix of send out and in house, and so overall I would expect volume growth in North America to remain quite robust. Additionally, I would say that, you know, probably the US is quicker to adopt some of the newer platforms and systems and some of the chemistry upgrades, and certainly there again, you're seeing probably more robust volume growth, both in terms of just sheer number of analyses, but also complexity or size of analysis. And so we expect that as well to play out in other parts of the world over the next 12 to 24 months, so certainly a favorable backdrop for us in North America, and if I look at, you know, sort of the pipeline as well as kind of our booking trajectory there, it will support continued outside growth in the reach.

Speaker Change: There again you're seeing probably more robust volume growth both in terms of just sheer number of analyses but also complexity or size of analyses.

Speaker Change: And so we expect that as well to play out in other parts of the world over the next 12 to 24 months. So certainly a favorable backdrop for us in North America, and if I look at

Speaker Change: You know, sort of the pipeline as well as kind of our booking trajectory there, it will support continued outside growth in the region.

Conor Mcnamara: Thanks for that color.

Conor Mcnamara: And then on the biopharmal weakness and the decision that you guys have to focus more on some of the small, focus on a smaller biopharmal customers, is that a function of, you know, their increased competition from other AI platforms, or is it just more of an overall market that is taking longer to develop than you guys have anticipated? Yes, thank you, Conor. So just to make sure we didn't miss this guide, the one listening to us today. On the biopharmal side, we're focusing on the top four monies, the top 20 four monies, and some biotech.

Speaker Change: Great. Thanks for that color. And then on the biopharma weakness.

Speaker Change: and the decision by you guys to focus more on some of the small, focus on a smaller biopharma customers. Is it a function of, you know, is there increased competition from other AI platforms or is it just more of an overall market that is taking longer to develop than you guys have anticipated?

Speaker Change: Yes, thank you, Conor. So just to make sure we didn't misguide the one listening to us today, on the biopharma side, we're focusing on the top pharma needs, the top 20 pharma needs and some biotech.

Conor Mcnamara: But indeed we're focusing within these accounts on deals, which are lower in terms of the budgets and the dollars. And this is due to our experience of having indeed a significant discussions and delays in signing large deals. When it comes to the current need or demand, we seek your demand in anything regarding market access, so which can be sponsored testing eventually follow on the X, which is as well access to data for market access needs. We see a bit more delayed decisions on anything, which is pre-launch of a drug, so which would be leveraging on the data to, for example, design the clinical trials in a certain way, or CDX development plans.

Speaker Change: But indeed, we're focusing within these accounts on deals which are lower in terms of the budgets and the dollars. And this is due to our experience of having, indeed, significant discussions and delays in signing large deals.

Unknown Executive: When it comes to the current need or demand, we see clear demand for anything regarding market access, so which can be sponsored testing, and eventually followed by DX, which is also access to data for market access needs. We see a bit more delayed decisions on anything which is pre-launch for a drug, so which would be leveraging data to, for example, design clinical trials in a certain way or CDX development.

Speaker Change: When it comes to the current need or demand, we secure demand in anything regarding market access, so which can be sponsored testing, eventually follow on VX.

Speaker Change: which is as well access to data for market access needs.

Speaker Change: We see a bit more delayed decisions on anything which is pre-launch of a drug, which would be leveraging on the data to, for example, design the clinical trials in a certain way, or CDX development plans.

Ross Muken: Beyond that, I don't know, Ross, if you want to add anything else.

Ross Muken: Yeah, I think just broadly, Conor, and I'm sure you've heard this from peers or other companies. I mean, certainly the budget environment at Pharma this year has been more challenging, right? Whether that means you're spending more time in procurement or the decision making is elongated. It's very clear that sort of the threshold for which multiple approvals are required is lower, and thus it's more challenging, even when you've been awarded to essentially move to contracting and then execution. So for us, to combat that, as Yergi mentioned, we're obviously trying to aim for smaller ACV type business, and so far I think that's gone fine.

Speaker Change: Beyond that, I don't know, Ross, if you want to add anything else.

Speaker Change: Yeah, I think, just broadly, Conor, and I'm sure you've heard this from

Ross: peers or other companies. I mean certainly

Speaker Change: The budget environment at pharma this year has been more challenging, right, whether that means you're spending more time in procurement.

Speaker Change: or the decision making is elongated. It's very clear that sort of the threshold for which multiple approvals are required.

Speaker Change: is lower and thus it's more challenging even when you've been awarded to essentially move to contracting and then execution. So for us

Speaker Change: To combat that, as Jurgi mentioned, we're obviously trying to aim for smaller ACV-type business.

Ross Muken: But certainly, even if we think of the portion of revenue I mentioned earlier that we had assumed with impact the forecast this year that was verbally awarded, that still is sitting in procurement and contracting, that's a seven figure plus deal. And so there, it's been certainly quite a journey trying to get some things actually realized. So we've adapted, and I would say it's much less around the competitive environment, and frankly, for much of what we offer, there's not a lot of comparative companies or similar offerings. And so our capabilities, I would say, in many senses are unique, and it's quite a new market.

Speaker Change: And so far, I think that's that's gone fine. But certainly, you know, even if we think of

Speaker Change: You know the portion of revenue I mentioned earlier that we had assumed would impact the forecast this year that was verbally awarded that still is sitting in in procurement and contracting that's a seven figure plus deal and

Speaker Change: And so there, it's been certainly quite a journey trying to get some things actually realized. So, we've adapted, and I would say it's much less around the competitive environment, and...

Speaker Change: Frankly, for much of what we offer, there's not a lot of comparative companies or similar offerings. And so our capabilities, I would say, in many senses are unique.

Ross Muken: And so there as well, obviously trying to carve out new pockets of budget and environment where things are more challenge is not easy, but the value we bring in the continued proof points right through those smaller pilot studies and or building of other examples. I think we'll continue to unlock these accounts for us increasingly over time. And we can already see some of that momentum as Yergi mentioned.

Speaker Change: It's quite a new market, and so there as well, obviously trying to carve out new pockets of budget in an environment where things are more challenged is not easy, but the value we bring and the continued proof points.

Speaker Change: Right, through those smaller pilot studies and or building of other examples, I think we'll continue to unlock these accounts for us increasingly over time. And we can already see some of that momentum as Jurgi mentioned.

Unknown Caller: Great. Thanks for that, Kyla Ross and Jurgi. Thanks for the clarification. I appreciate that. Thanks, guys.

Speaker Change: Great. Thanks for that, Kyla Ross and Jurgi. Thanks for the clarification. I appreciate that. Thanks, guys.

Conor Mcnamara: Thank you, Conor.

Tejas Savant: Your next question comes from the line of Tejas Savant of Morgan Stanley.

Conor: Thank you, Conor.

Tejas Savant: Please go ahead. Thanks for the time.

Speaker Change: Your next question comes from the line of Tejas Savant of Morgan Stanley . Please go ahead.

Tejas Savant: So, Jurgi or Ross perhaps, I want to begin a little bit on the pharma weakness here again. You know, helpful color on, you know, deal value thresholds and market access and CDX work versus the rest, but as you think about your pharma revenue mix today, how much would you say falls into that discretionary spending bucket or, and how much falls into core R&D spending? Because if it's the latter, the weakness is, I guess, a little bit surprising to me because, you know, friends seem to be generally OK at least, you know, your today's financing and so on and so forth; even commentary from peers seems to be holding up.

Unknown Caller: Thanks for the time. So Yuki or Ross, perhaps I want to...

Tejas Savant: Thanks for the time. So Yuki or Ross perhaps, I want to

Tejas Savant: Let's dig in a little bit on the pharma weakness here again. Helpful color on D value thresholds and market access and CDX work versus the rest. But as you think about your pharma revenue mix today, how much would you say falls into that discretionary spending bucket and how much falls into core R&D spending? Because if it's the latter, the weakness is, I guess, a little bit surprising to me, because trends seem to be generally okay, at least year-to-date financings and so on and so forth. Even commentary from peers seems to be holding up. So anything you can do to just parse out those two dynamics within the pharma weakness would be terrific.

Tejas Savant: So, anything you can do to just, you know, parse out those two dynamics within the pharma weakness would be terrific. Thank you.

Jurgi Camblong: Yes, thank you, and good morning, Tejas. So, our budget doesn't hold on the core R&D as you define it. So, there are more of the discretionary ones, although I would say the probably the easiest one to act on as well because they are mainly related to drugs that are finding their best way in the market. So, most of them are really related to market access on the data side and on a full on CDX or on sponsored testing on the clinical side. And we're having some discussions as well when it comes to pre-launch on the CDX side, but nothing along the line of drug discovery.

Tejas Savant: Yes, thank you and good morning Tejas.

Speaker Change: Our budgets don't hold on the core R&D as you define it.

Speaker Change: So there are more of the discretionary ones, although I would say probably the easiest one to act on as well, because they are mainly related to drugs that are finding their best way in the market, right? So most of them are really related to market access on the data side.

Speaker Change: and on full-on CDX or on sponsored testing on the clinical side. And we're having some discussions as well when it comes to pre-launch on the CDX side, but nothing along the line of drug discovery.

Tejas Savant: Got it, that's helpful.

Jurgi Camblong: And then on the AMIA weakness, can you share a little bit more color on what draws that sort of patient volume moderation. And as you think about, you know, that strategic account focus, you talked about, help us think through how you envision that helping you with some of the pricing pressures you called out for some of the core hereditary testing side of things. Yes, sure, Tejas.

Speaker Change: Got it, that's helpful. And then on the EMEA weakness, Jurgi, can you share a little bit more color on what drove that sort of patient volume moderation? And as you think about, you know, that strategic account focus you talked about, help us think through how you envision that helping you with some of the pricing pressures you called out for some of the core hereditary testing side of things.

Jurgi Camblong: So, I will start and leave it to Ross. I would just like to highlight that we believe this is temporary. So, we've seen indeed in the AMIA market, but in particular in three countries, which are important for us, where we had an important traction. So, Italy, France, and Spain, some challenges around uncertainty of some reimbursement, for example, in French for silicon, which now is resolved. And so ends, volumes are up again. And some pressure from competitors who often come with lower ESPs for an offering, which is inferior. But we believe that with the actions we are taking on the account level and the selling at the account level, this should be something we resolve.

Jeff: Yes, sure, Tejas.

Jurgi: So, I will start and then leave it to Ross. I would just like to highlight that we believe this is temporary.

Speaker Change: So we've seen indeed in the EMA market, but in particular in three countries which are important for us, where we had an important traction.

Speaker Change: Italy, France, and Spain. Some challenges around uncertainty of some reimbursement, for example, in France for solid tumor testing, which now is resolved, and so hence volumes are up again.

Speaker Change: and some pressure from competitors.

Speaker Change: who often come with lower ESPs for an offering which is inferior but we believe that with the actions we are taking on the account level and the selling at the account level this should be something we resolve and beside that I want as well to insist that just on the fact that

Jurgi Camblong: And beside that, I want as well to insist that they just on the fact that the R&D development we've been working on makes our offer more competitive.

Ross Muken: Ross, given your leading directly sales, do you want to go through the concept of the enterprise sales at the account level? And the importance of that for the French, Italian, and Spanish market in particular.

Speaker Change: The R&D developments we've been working on make our offer more competitive.

Speaker Change: Ross, given you're leading directly sales, do you want to go through the concept of the enterprise sales at the account level and the importance of that for the French, Italian and Spanish market in particular?

Ross Muken: So, thanks, Jurgi. So, first off, Tejas, I would say, as we spoke to the customers, particularly those where we saw a deviation in usage trend. Honestly, most of the feedback was generally constructive and that they expected trends to resume, and that ultimately they saw this pause in some of the demand as temporal. So, it's hard for us, in some sense, to gauge if there's a change in utilization, or a change in testing pattern, et cetera. But I guess in our work, and we obviously have deep customer relationships inherently, we did not detect anything that would lead to a more sustained change.

Ross: Thanks, Jurgi. So first off, Tejas, I would say as we spoke to the customers, particularly those where we saw a deviation in usage trend, honestly, most of the feedback was

Speaker Change: generally constructive and that they expected trends to resume.

Speaker Change: and that ultimately they saw this pause in some of the demanded temporal. So, it's hard for us in some sense.

Speaker Change: to gauge if there's a change in utilization or a change in testing pattern, etc. But I guess in our our work, and we obviously have deep customer relationships.

Ross: Inherently, we did not detect anything that would lead to a more sustained change. Now, as we think about some of the competitive dynamics or what you cited on pricing, I think we've seen very specific

Ross Muken: Now, as we think about some of the competitive dynamics, or what you cited on pricing, I think we've seen very specific competitors, smaller competitors come in with aggressive pricing on a specific product because typically, their menu is quite limited, and their capabilities are much more narrow. And so, ultimately, what we've done increasingly has gone back with an enterprise presentation whereby we can obviously bundle quite a number of applications together, as well as work with automation or chemistry partners to come up with a holistic solution for the lab that essentially can help them lower the total cost of operation and become more efficient and scale their volumes and achieve improved pricing.

Ross: Competitors, smaller competitors come in, you know, with aggressive pricing on a specific product.

Ross: Right, because typically their menu is quite limited, and their capabilities are much more narrow. And so ultimately, what we've done increasingly is gone back with sort of an enterprise presentation.

Ross: whereby we can obviously bundle quite a number of applications together as well as work with automation or chemistry partners to come up with a holistic solution for the lab.

Ross: That essentially can help them lower the total cost of operation and become more efficient and scale their volumes and achieve improved pricing, but for us, grow materially our wallet share at the customer.

Ross Muken: But for us, grow materially or wallet share at the customer. And so, I would say we've used that strategy now in our more established markets successfully. We've talked about historically, maybe two and a half applications per customer. We're seeing some customers where we can get to five, six, seven, eight bundled applications on the platform, and really essentially it proves out our thesis, and it's also a way for us to obviously defend some of the more selective, I would say, aggressive pricing we've seen from some of the smaller entities. And so, we feel quite good that this will all continue to benefit us.

Ross: And so I would say we've used that strategy now in our more established market successfully of notes, right? We've talked about historically, you know, maybe two and a half applications per customer. You know, we're seeing some customers where we can get to five, six, seven, eight.

Ross: bundled applications on the platform. And really, essentially, it proves out our thesis. And it's also a way for us to obviously defend

Ross: Some of the more selective, I would say aggressive pricing we've seen from some of the smaller Entities and so we feel quite good that this will continue to benefit us

Jurgi Camblong: And again, I'll insist on the new business environment, which for me is much more of a forward-looking indicator for us, which continues to be, I would say, quite strong even in the markets that we cited in terms of Italy, for instance, Spain, and so overall, we really see this dip in usage as temporal.

Ross: And again, you know, I'll insist on sort of the new business environment, which for me is much more of a forward looking indicator for us, which continues to be, I would say, quite strong, even in the markets.

Ross: that, you know, we cited in terms of Italy, for instance, Spain, and so overall we really see this sort of dip in usage as temporal.

Tejas Savant: Got it. Appreciate the color, guys.

Mark Massaro: Your last question comes from the line of Mark Mossaro of BTIG. Please go ahead. Hey guys, this is Vivian Anthem. Mark, thanks for taking the questions.

Speaker Change: Got it. Appreciate the color, guys. Thank you.

Speaker Change: Thank you for joining us.

Vivian: Hey guys, this is Vivian taking questions for Mark. Thanks for taking the questions. So, when do you think we could start to see the impacts of the biopharma reshuffling of sales resources across geographies? Does that just represent upside to the low-earth guide? And could you discuss when that was completed and if there are any good trends to call out here in July and early this month?

Speaker Change: Your last question comes from the line of Mark Massaro of BTIG. Please go ahead.

Mark Massaro: So just, when do you think we could start to see the impacts of the bioforma, reshuffle and of sales resources across geographies? Does that just represent upside to the lower guides? And could you discuss one that was completed, and if there's any good trends to call out here in July and early this month? Thanks. Yes, thank you, and good morning, Vivian. So we start with the first reassuring that we do see market growing, right, overall, both in the form, both in the clinical side. And on the bioforma side, despite being, I would say, refocusing our activities and defining teams that are dedicated to DX as well as to the data and focusing on overall deals which are lower ACV.

Speaker Change: Hey guys, this is Vivian on for Mark. Thanks for taking the questions.

Vivian: So just when do you think we could start to see the impacts of the biopharma reshuffling of sales resources across geographies? Does that just represent upside to the lower guide? And could you discuss when that was completed and if there's any good trends to call out here in July and early this month? Thanks.

Vivian: Yes, thank you and good morning, Vivian. So we start with a

Speaker Change: First, reassuring that we do see market growing, right, overall, both in the pharma, both in the clinical side.

Speaker Change: and on the biopharma side despite with being I would say refocusing our activities and defining teams that are dedicated to DX as well as to the data and focusing on overall deals which are lower ACV, our pipeline continues to grow.

Jurgi Camblong: Our pipeline continues to grow. And on the clinical side, I think that's what your second question regarding the macro events that made that the volume of analysis was a bit lower than what we had thought or what we had anticipated there as well. The first numbers that we see of July are re-assuring and demonstrating that this will reaccelerate, and our booking numbers suggest that this will actually reaccelerate from Q1 next year. And just maybe as an aside to be clear, on the clinical market, this quarter year or with Kibu are 14 percent, and actually what has been more penalizing us as being the bioforma related activity.

Speaker Change: And on the clinical side, I think that was your second question regarding the macro events that made that the volume of analysis was a bit lower than what we had thought.

Speaker Change: or which we had anticipated. There as well, the first numbers that we see of July are reassuring and demonstrating that, you know, this will re-accelerate and our booking numbers suggest that this will actually re-accelerate.

Speaker Change: from Q1 next year. And just maybe as an aside, to be clear, on the clinical market, this quarter, year on year, we still grew 14%. Naturally, what has been more penalizing us as being the biopharma related activities.

Jurgi Camblong: Now, that said, just to make sure that we made that point clearly as well, Vivian, despite revenue growth, was not as possible as large as what we had anticipated. And with more modest, we're being able in the meantime to protect our margins with growth margins that were above 33 percent on an adjusted basis.

Speaker Change: Now, that said, just to make sure that we made that point clearly as well, Vidyun, despite revenue growth was not as large as what we had anticipated and was more modest, we've been able, in the meantime, to protect our margins with growth margins that were above 30%.

Ross Muken: And huge improvements well on the adjusting operating last year were re-inputed by a 30-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per-per Quacha, and if I could just squeeze in one more, I'm just on the guide. I guess you guys were pretty clear in calling out by a farmer in the India headwinds. Just what's facing to the guide as far as the competitive pricing pressure that you mentioned?

Speaker Change: 73% on an adjusted basis and huge improvements as well on the adjusting operating loss versus last year where we improved by a 32%.

Ross Muken: Yes, so I will leave it to Ross to answer you and give you some more color. Yeah, so what we're seeing in terms of pricing is, on the same store basis, capture has been around 1%. Now, obviously, there is some mixed shift happening in the business, and obviously some of that you see through the farmer weakness. But ultimately, we essentially forecast that much of what you saw in the second quarter will continue throughout the year. We do have a slight benefit in the fourth quarter as some liquid biopsy-related business starts to come online late in the quarter.

Unknown Executive: Yes, so I will leave it to Ross to answer you and give you some more color.

Speaker Change: Yes, so I will leave it to Ross to answer you and give you some more color.

Ross: Yeah, so what we're seeing in terms of pricing is on a same-store basis.

Ross: Capture has been around 1%.

Ross: Now, obviously, there is some makeshift.

Ross: happening in the business. And obviously, some of that you see through the pharma weakness. But ultimately, we we essentially forecast that much of

Ross: What you saw in the second quarter will continue throughout the year.

Ross: We do have a slight benefit in the fourth quarter of some.

Vivian Anthem: But ultimately, I would say the trend that we saw in Q2 is what we're assuming happens throughout the remainder of 2024. And so, you know, we will see obviously how that certainly plays out, but we wanted to be conservative with respect to our assumptions, just given the magnitude of the delta versus original forecast. So again, I feel we've taken the steps, and we're confident that it will improve, but we've not baked that into the back half. Understood. Thanks for taking the questions.

Speaker Change: Liquid biopsy related business starts to come online late in the quarter But ultimately I would say the trend that we saw in q2 is what we're assuming happens throughout the remainder of 2024 and so You know, we will see obviously how that that certainly plays out But we wanted to be conservative with respect to our assumptions

Ross: Just given the magnitude of the Delta versus our original forecast. So again, I feel we've taken the steps and we're confident that it will improve, but we've not baked that into the back half.

Unknown Caller: Understood. Thanks for taking the questions.

Unknown Executive: Thank you, Vivian. There are no further questions at this time.

Speaker Change: Understood. Thank you for taking the questions.

Jurgi Camblong: I'd now like to turn the call back over to Yergi for final closing remarks. Please go ahead. Just thank you all for following us today and very much looking forward to reconnect early September of the Morgan Stanley event in New York.

Vivian: Thank you, Vidyun.

Speaker Change: There are no further questions at this time. I'd now like to turn the call back over to Jurgi for final closing remarks. Please go ahead.

Jurgi: Just thank you all for following us today and very much looking forward to reconnect early September at the Morgan Stanley event in New York. Have a good day.

Unknown Executive: Have a good day.

Unknown Executive: Ladies and gentlemen, this concludes your conference call for today. Please thank you for participating and ask that you please disconnect your lines.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Jurgi Camblong: and Jurgi Camblong.