On March 7, 2023 SOPHiA GENETICS SA (Nasdaq: SOPH), a cloud-native software company in the healthcare space, reported financial results for its fourth quarter and full fiscal year ended December 31, 2022 (Press release, Sophia Genetics, MAR 7, 2023, View Source [SID1234628293]).
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Recent Highlights
Revenue for the full-year 2022 was $47.6 million, representing year-over-year growth of 18% on a reported basis. 2022 constant currency revenue growth excluding COVID-19-related revenues was 39%
Revenue was $13.4 million for the fourth quarter, representing a 22% increase on a reported basis over the corresponding period of 2021. Constant currency revenue growth excluding COVID-19-related revenues was 44%
Gross margins reached a record 72% on a reported basis and 75% on adjusted basis for the fourth quarter of 2022
Operating losses moderated in the fourth quarter to $15.1 million on a reported basis and $12.1 million on an adjusted basis, marking the third consecutive quarter of improvement
2023 reported revenue growth guided to at or above 30%; 2023 constant currency revenue growth guidance excluding COVID-19 related revenues initiated at 30% to 35% vs. prior year comparable levels
Expanded strategic partnership with AstraZeneca to apply multimodal technology and expertise to the AstraZeneca oncology portfolio
Entered into an expanded agreement with Memorial Sloan Kettering Cancer Center ("MSK"), which allows SOPHiA GENETICS’ global network of healthcare providers access to MSK’s proprietary comprehensive liquid biopsy and tumor sequencing tests such as MSK-ACCESS and MSK-IMPACT, powered with SOPHiA DDMTM ("Data Driven Medicine")
Entered into agreement with Qiagen to pair QIAseq reagent technology with the universal SOPHiA DDMTM platform to enhance cancer and rare disease analysis for next-generation sequencing ("NGS") applications
CEO Commentary
"SOPHiA GENETICS delivered an acceleration of constant currency ex COVID revenue growth in each subsequent quarter of 2022, finishing the year with 44% year-over-year growth in the fourth quarter. Full year 2022 constant currency revenue growth was 32%, within our long-term growth guidance of 30-35%, however excluding the impact of expected COVID revenue declines, growth was a robust 39% driven by continued execution of our land and expand strategy across our clinical base, particularly the strong adoption of HRD, at triple-digit growth, and increased traction in our BioPharma business. This performance reflects the relevance of our unique market offering," said Jurgi Camblong, PhD., Chief Executive Officer and co-founder of SOPHiA GENETICS. "To be able to deliver in a time of global uncertainty speaks to the strength of our platform and our operating expense reductions are a demonstration of our fiscal discipline. Looking into 2023, on the heels of recent announcements with AstraZeneca, MSK, and Qiagen I could not be more excited about the opportunities that lie ahead and SOPHiA GENETICS’ ability to capitalize."
Ecosystem Update
In February, SOPHiA GENETICS announced an important expansion of its AstraZeneca partnership. SOPHiA GENETICS and AstraZeneca’s initial focus was targeting expanding worldwide access to homologous recombination deficiency ("HRD") testing. Now the companies will build on this by collaborating on how SOPHiA GENETICS’ multimodal approach might help AstraZeneca further their capabilities and elevate precision oncology, currently driven by genomic-based biomarkers, into a truly multimodal connected health ecosystem, specifically around discovery, by accelerating clinical trials.
Memorial Sloan Kettering Cancer Center, considered one of the most prominent cancer centers in the United States, entered into an agreement with SOPHiA GENETICS in January. The collaboration allows SOPHiA GENETICS’ global network of healthcare providers access to MSK’s proprietary comprehensive liquid biopsy and tumor sequencing tests such as MSK-ACCESS and MSK-IMPACT, powered with SOPHIA DDMTM. Additionally, the collaboration agreements will combine MSK’s rich precision oncology data with the SOPHiA CarePathTM module to enable the acceleration of actionable insights from data to improve patient outcomes.
In March, SOPHiA GENETICS announced a partnership with Qiagen N.V. to enhance the analysis of data generated from QIAseq reagent technology in cancers and rare diseases on the SOPHiA DDMTM platform. The partnership will allow customers to order combined QIAseq panels with the SOPHiA DDMTM platform from Qiagen directly. The goal is to allow customers to use SOPHiA GENETICS’ Set-Up Program, an efficient and reliable process that establishes and demonstrates the analytical performance of any test prior to it being carried out. This will enable customers to better and more efficiently design new workflows using QIAseq technologies.
Fourth Quarter 2022 Financial Results
Total revenue for the fourth quarter of 2022 was $13.4 million compared to $10.9 million for the fourth quarter of 2021, representing year-over-year growth of 22% on a reported basis. Constant currency revenue growth was 36%, and constant currency revenue growth excluding COVID-19-related revenue was 44%.
Platform analysis volumes were 71,066 for the fourth quarter of 2022 compared to 65,595 for the fourth quarter of 2021. The 8% year-over-year growth was attributable to strength in our core platform analysis volume, offset by the continued decline of our COVID-19-related analysis volume. Excluding COVID-19-related volumes, platform analysis volumes were 67,679 for the fourth quarter of 2022 compared to 57,204 in the fourth quarter of 2021, representing growth of 18% year-over-year in the period.
Gross profit for the fourth quarter of 2022 was $9.6 million compared to gross profit of $6.8 million in the fourth quarter of 2021, representing year-over-year growth of 41%. Gross margin was 72% for the fourth quarter of 2022 compared with 62% for the fourth quarter of 2021. Adjusted gross profit was $10.0 million, an increase of 42% compared to adjusted gross profit of $7.1 million in the fourth quarter of 2021. Adjusted gross margin was 75% for the fourth quarter of 2022 compared to 65% for the fourth quarter of 2021.
Total operating expenses for the fourth quarter of 2022 were $24.7 million compared to $27.8 million for the fourth quarter of 2021. Total adjusted operating expenses were $22.1 million compared to $24.6 million in the fourth quarter of 2021.
R&D expenses for the fourth quarter of 2022 were $6.8 million compared to $6.4 million for the fourth quarter of 2021.
Sales and marketing expenses for the fourth quarter of 2022 were $4.2 million compared to $8.6 million for the fourth quarter of 2021. The reduction in expenses was attributable in part to reallocation of headcount and related expenses to R&D and general and administrative.
General and administrative expenses for the fourth quarter of 2022 were $13.9 million dollars compared to $13.0 million for the fourth quarter of 2021.
Operating loss for the fourth quarter of 2022 was $15.1 million, compared to $21.0 million in the fourth quarter of 2021. Adjusted operating loss for the fourth quarter of 2022 was $12.1 million, compared to $17.6 million for the fourth quarter of 2021.
Net loss for the fourth quarter of 2022 was $14.0 million or $0.22 per share compared to $21.4 million or $0.33 per share in the fourth quarter of 2021. Adjusted net loss for the fourth quarter of 2022 was $11.0 million or $0.17 per share, compared to $17.9 million or $0.28 per share for the fourth quarter of 2021.
Full Year Fiscal 2022 Financial Results
Total revenue for full year 2022 was $47.6 million compared to $40.5 million for full year 2021, representing growth of 18% on a reported basis. The growth in revenue was primarily driven by increased usage rates across our existing customers, favorable mix shift to higher priced applications, and strength in HRD and our BioPharma offerings. Constant currency revenue growth was 32%, and constant currency revenue growth excluding COVID-19-related revenue was 39%.
Annualized revenue churn rate was 4% of total full year revenue for 2022, as compared to the historic low of 3% seen in 2021 as a result of pent-up demand due to the pandemic. Average revenue per platform customer for the full year was approximately $93,700 compared to approximately $92,000 for the prior year period, despite negative impact from significant currency headwinds. Net dollar retention for the year decreased to 102% from 142% in 2021, also negatively impacted by significant currency headwinds. Constant currency net dollar retention excluding COVID-19-related revenue was 123% as compared to 132% in 2021. Total recurring platform customers grew to 390 as of December 31, 2022, up from 382 as of December 31, 2021, and 383 as of September 30, 2022.
Gross profit for the full year 2022 was $31.3 million, an increase of 24% compared to a gross profit of $25.2 million for full year 2021. Gross margin was 66% for full year 2022 as compared with 62% for full year 2021. Adjusted gross margin was 68% as compared with 64% for the full year 2021.
Total operating expenses for full year 2022 were $119.1 million compared to $96.7 million for full year 2021. Total adjusted operating expenses for the full year 2022 were $104.3 million compared to $87.3 million for 2021.
R&D expenses for full year 2022 were $35.4 million, compared to $26.6 million for full year 2021.
Sales and marketing expenses for full year 2022 were $28.3 million, compared to $28.7 million for full year 2021.
General and administrative expenses for full year 2022 were $55.8 million, compared to $41.5 million for full year 2021.
Operating loss for full year 2022 was $87.8 million, compared to $71.5 million for full year 2021. Adjusted operating loss for full year 2022 was $72.0 million, compared to $61.5 million for full year 2021.
Net loss for full year 2022 was $87.4 million or $1.36 per share, compared to $73.7 million or $1.33 per share for full year 2021. Adjusted net loss for the full year 2022 was $71.6 million or $1.12 per share, compared to $62.3 million or $1.13 per share for full year 2021.
Cash and cash equivalents were $178.6 million as of December 31, 2022.
Full Year 2023 Outlook
Based on current business conditions, business trends and other factors, for the full year ending December 31, 2023, the Company initiates guidance of:
reported revenue growth expected to be at or above 30%;
full year constant currency revenue growth excluding COVID-19-related revenue to be between 30% and 35%; and
2023 operating losses to be below 2022 levels.
Constant currency revenue growth excluding COVID-19-related revenue is a non-IFRS measure. See "Presentation of Constant Currency Revenue and Excluding COVID-19-Related Revenue" below for a description of its calculation. The Company is unable to provide a reconciliation of forward-looking Constant currency revenue growth excluding COVID-19-related revenue to Revenue, the most comparable IFRS financial measure, due to the inherent difficulty in forecasting and quantifying the impact of foreign currency translation.
Webcast and Conference Call Information
SOPHiA GENETICS will host a conference call and live webcast to discuss the fourth quarter and full year 2022 financial results as well as business outlook on Tuesday, March 7, 2023, at 8:00 a.m. Eastern Time / 2:00 p.m. Central European Time. The call will be webcast live on the SOPHiA GENETICS Investor Relations website. The conference call can also be accessed live over the phone by dialing 1-866-652-5200 (United States) or 1-412-317-6060 (outside of the United States). Additionally, an audio replay of the conference call and webcast will be available on the SOPHiA GENETICS website after completion.