SOPHiA GENETICS Reports Third Quarter 2021 Financial Results and Raises 2021 Guidance
11/10/2021 - 07:00 AM
Third quarter year-over-year revenue growth of 45% ; executed Master Alliance Agreement with GE Healthcare
BOSTON and LAUSANNE, Switzerland, Nov. 10, 2021 (GLOBE NEWSWIRE) -- SOPHiA GENETICS SA (Nasdaq: SOPH), today reported financial results for the third quarter ended September 30, 2021.
Recent Highlights
Revenue was $10.4 million for the third quarter, representing a 45% increase over the corresponding period of 2020 Following a previous letter of intent with GE Healthcare, executed a final Master Alliance Agreement under which we will be working together with GE on a variety of oncology opportunities in the healthcare market and will collaborate on different initiatives and projects Total recurring platform customers grew from 367 in the second quarter of this year to 375 customers in the third quarter. Net dollar retention for the rolling twelve-month period improved to 137% , indicating that we are growing our revenue generated from existing customers net of churn Continued to see momentum in customer adoption with both clinical customers, such as City of Hope and Institut Gustave Roussy, and biopharma customers, such as AstraZeneca “I am proud of our solid execution across our organization this quarter, as year-over-year revenue again grew significantly and as we continue to make progress in entering into exciting new relationships and expanding on existing ones,” said Jurgi Camblong, Co-Founder and CEO of SOPHiA GENETICS. “There is much to look forward to at SOPHiA, including our exciting progress in HRD, growing penetration in North America, expanding opportunities with biopharma partners, and potential inorganic growth opportunities. I am immensely proud of what we have accomplished at SOPHiA and continue to be even more optimistic about what lies ahead of us. 2021 has been and continues to be a momentous year for our organization, and we remain confident in our objectives and mission going forward.”
Third Quarter 2021 Financial Results
Total revenue for the third quarter of 2021 was $10.4 million compared to $7.2 million for the third quarter of 2020, representing a 45% increase. The increase in revenue for the third quarter 2021 was primarily driven by new customers onboarded onto our platform and improved usage rates across our existing customers.
Gross profit in the third quarter of 2021 was $6.5 million , an increase of 53% compared to a gross profit of $4.3 million in the third quarter of 2020. Gross profit margin was 63% in the third quarter of 2021 as compared to 60% in the third quarter of 2020. Adjusted gross margin was 65% in the third quarter of 2021 after adjusting for the capitalization of our software development expenses. Gross margins improved year-over-year as a result of continued improvements in managing computational and storage-related costs, while adjusted gross margins were in line with the same period last year.
Total operating expenses for the third quarter of 2021 were $27.0 million compared to $13.7 million in the third quarter of 2020.
R&D expenses for the third quarter of 2021 were $7.7 million , compared to $5.0 million in the third quarter of 2020. This was primarily due to an increase in employee-related expenses for R&D initiatives related to the development of new products and applications.
Sales and marketing expenses for the third quarter of 2021 were $7.7 million , compared to $4.1 million in the third quarter of 2020. The increase was primarily due to an increase in headcount related expenses, commissions and sales related costs and higher variable expenses, including marketing and travel-related expenses, as COVID-19 restrictions continue to be lifted.
General and administrative expenses for the third quarter of 2021 were $11.7 million , compared to $4.6 million in the third quarter of 2020. This increase was primarily driven by the continued scale-up of the organization, the development of quality-related initiatives to support a potential expansion of the business into more regulated markets, increased share-based compensation expenses related to the IPO, and IPO and new public company-related expenses.
Operating loss in the third quarter of 2021 was $20.5 million , compared to $9.4 million in the third quarter of 2020.
Net loss in the third quarter of 2021 was $21.2 million or 35 cents per share, compared to $10.5 million or 24 cents per share in the third quarter of 2020.
Adjusted net loss in the third quarter of 2021 was $18.0 million or 30 cents per share, compared to $9.0 million or 20 cents per share in the third quarter of 2020.
Cash and cash equivalents and term deposits and short-term investments were $280.6 million as of September 30, 2021.
2021 Outlook $40 million , representing growth of at least 41% over the prior year.
Agreement with GE Healthcare
We also intend to work together to combine SOPHiA’s and GE’s existing capabilities to jointly develop and provide multimodal analytics.
Webcast and Conference Call Information
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Non-IFRS Financial Measures
To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this earnings release the following non-IFRS measures:
Adjusted cost of revenue, which we calculate as cost of revenue adjusted to exclude amortization of capitalized research and development expenses and expenses associated with the write-off of custom inventory related to the cancellation of a contract due to the acquisition of the customer; Adjusted gross profit, which we calculate as revenue minus adjusted cost of revenue; Adjusted gross profit margin, which we calculated as adjusted gross profit as a percentage of revenue; Adjusted operating loss, which we calculate as operating loss adjusted to exclude those adjustments made to calculate adjusted cost of revenue, amortization of intangible assets, share-based compensation expense, non-cash portion of pensions expense paid in excess of actual contributions to match the actuarial expense, and non-recurring expenses related to the IPO that were not capitalized; Adjusted finance income (expense), net, which we calculate as finance income (expense), net adjusted to exclude changes in the fair valuation of the derivative tied to the success fee we paid to TriplePoint Capital LLC upon completion of our initial public offering; Adjusted loss for the period, which we calculate as loss for the period adjusted to exclude those adjustments made to calculate adjusted cost of revenue, adjusted operating loss and adjusted finance income (expense); and Adjusted loss per share, which we calculate as adjusted net loss divided by the weighted-average number of shares. These non-IFRS measures are key measures used by our management and board of directors to evaluate our operating performance and generate future operating plans. The exclusion of certain expenses facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable charges. Accordingly, we believe that these non-IFRS measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
These non-IFRS measures have limitations as financial measures, and you should not consider them in isolation or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:
These non-IFRS measures exclude the impact of amortization of capitalized research and development expenses and intangible assets. Although amortization is a non-cash charge, the assets being amortized may need to be replaced in the future and these non-IFRS measures do not reflect capital expenditure requirements for such replacements or for new capital expenditures; These non-IFRS measures exclude the impact of expenses associated with the write-off of custom inventory related to the cancellation of a customer contract due to the acquisition of the customer. Although we do not expect custom inventory write-offs to be a recurring event, such write-offs may occur from time to time; These non-IFRS measures exclude the impact of share-based compensation expenses. Share-based compensation has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy; These non-IFRS measures exclude the impact of the non-cash portion of pensions paid in excess of actual contributions to match actuarial expenses. Pension expenses have been, and will continue to be for the foreseeable future, a recurring expense in our business; These non-IFRS measures exclude the impact of non-recurring expenses related to our IPO, which are cash expenditures, and we expect to incur financing expenses from time to time; These non-IFRS measures exclude the impact of changes in fair value of the derivative associated with the fee paid to TriplePoint Capital LLC in connection with the completion of our IPO; and Other companies, including companies in our industry, may calculate these non-IFRS measures differently, which reduces their usefulness as comparative measures. Because of these limitations, you should consider these non-IFRS measures alongside other financial performance measures, including various cash flow metrics, net income and our other IFRS results.
The tables below provide the reconciliation of the most comparable IFRS measures to the non-IFRS measures for the periods presented.
Forward-Looking Statements
Media Contact: ebamonti@sophiagenetics.com
Investor Contact: ir@sophiagenetics.com
SOPHiA GENETICS SA Interim Condensed Consolidated Statement of Loss (Amounts in USD thousands, except per share data) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Revenue $ 10,359 $ 7,168 $ 29,513 $ 20,565 Cost of revenue (3,815 ) (2,901 ) (11,122 ) (7,764 ) Gross profit 6,544 4,267 18,391 12,801 Research and development costs (7,655 ) (5,021 ) (20,220 ) (13,417 ) Selling and marketing costs (7,706 ) (4,066 ) (20,161 ) (13,204 ) General and administrative costs (11,689 ) (4,617 ) (28,546 ) (12,141 ) Other operating income (expense), net 4 6 56 (139 ) Operating loss (20,502 ) (9,431 ) (50,480 ) (26,100 ) Finance income (expense), net (263 ) (1,039 ) (1,128 ) (2,726 ) Loss before income taxes (20,765 ) (10,470 ) (51,608 ) (28,826 ) Income tax (expense) (478 ) 4 (693 ) (32 ) Loss for the period (21,243 ) (10,466 ) (52,301 ) (28,858 ) Attributable to the owners of the parent $ (21,243 ) $ (10,466 ) $ (52,301 ) $ (28,858 ) Loss per share Basic and diluted loss per share $ (0.35 ) $ (0.24 ) $ (1.00 ) $ (0.71 )
SOPHiA GENETICS SA Interim Condensed Consolidated Statement of Comprehensive Loss (Amounts in USD thousands) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Loss for the period $ (21,243 ) $ (10,466 ) $ (52,301 ) $ (28,858 ) Other comprehensive loss: Items that may be reclassified to loss (net of tax) Currency translation differences (2,993 ) 2,305 (7,714 ) 2,505 Total items that may be reclassified to loss $ (2,993 ) $ 2,305 $ (7,714 ) $ 2,505 Other comprehensive income (loss) for the period $ (2,993 ) $ 2,305 $ (7,714 ) $ 2,505 Total comprehensive loss for the period $ (24,236 ) $ (8,161 ) $ (60,015 ) $ (26,353 ) Attributable to owners of the parent $ (24,236 ) $ (8,161 ) $ (60,015 ) $ (26,353 )
SOPHiA GENETICS SA Interim Condensed Consolidated Balance Sheet (Amounts in USD thousands)
(Unaudited) September 30, 2021 December 31, 2020 Assets Current assets Cash and cash equivalents $ 209,990 $ 74,625 Term deposits and short-term investments 70,566 22,720 Accounts receivable, net 7,948 6,363 Inventory 4,502 3,384 Prepaids and other current assets 7,819 2,602 Total current assets 300,825 109,694 Non-current assets Property and equipment, net 4,045 1,772 Intangible assets, net 14,331 13,282 Right-of-use assets 11,536 3,767 Deferred tax asset 1,623 2,114 Other non-current assets 2,558 1,486 Total non-current assets 34,093 22,421 Total assets $ 334,918 $ 132,115 Liabilities and equity Current liabilities Accounts payable $ 8,759 $ 5,907 Accrued expenses 12,641 9,081 Deferred contract revenue 4,742 2,642 Current portion of borrowings — 2,873 Current portion of lease liabilities 1,388 1,036 Other current liabilities 227 48 Total current liabilities 27,757 21,587 Non-current liabilities Deferred contract revenue, net of current portion 134 142 Borrowings, net of current portion — 457 Lease liabilities, net of current portion 11,562 2,883 Defined benefit pension liabilities 5,293 5,158 Other non-current liabilities 477 1,378 Total non-current liabilities 17,466 10,018 Total liabilities 45,223 31,605 Equity Share capital 3,328 2,460 Share premium 470,887 227,429 Other reserves 5,460 8,300 Accumulated deficit (189,980 ) (137,679 ) Total equity 289,695 100,510 Total liabilities and equity $ 334,918 $ 132,115
SOPHiA GENETICS SA Interim Condensed Consolidated Statement of Cash Flows (Amounts in USD thousands) (Unaudited)
For the nine months ended September 30, 2021 2020 Operating activities Loss before tax $ (51,608 ) $ (28,826 ) Adjustments for non-monetary items Depreciation 1,595 1,310 Amortization 785 437 Interest expense 2,297 901 Interest income (13 ) (89 ) Gain on TriplePoint success fee (430 ) — Expected credit loss allowance (657 ) 546 Share-based compensation 4,874 994 Intangible assets write-off — 218 Movements in provisions, pensions, and government grants 1,221 732 Research tax credit (413 ) (565 ) Working capital changes (Increase) decrease in accounts receivable (1,168 ) 1,904 (Increase) decrease in prepaids and other current assets (5,519 ) 925 Increase in inventory (1,326 ) (62 ) Increase (decrease) in accounts payables, accrued expenses, deferred contract revenue, and other liabilities 8,111 (322 ) Cash used in operating activities Income tax refund received 90 150 Interest paid (368 ) (739 ) Interest received 9 88 Net cash flows used in operating activities (42,520 ) (22,398 ) Investing activities Purchase of property and equipment (2,532 ) (270 ) Acquisition of intangible assets (132 ) (300 ) Capitalized development costs (2,530 ) (1,830 ) Proceeds upon maturity of term deposits and short-term investments 10,968 — Purchase of term deposits and short-term investments (61,421 ) — Net cash flow used in investing activities (55,647 ) (2,400 ) Financing activities Proceeds from exercise of share options 4,527 346 Proceeds from issuance of share capital, net of transaction costs — 107,643 Proceeds from initial public offering, net of transaction costs 211,907 — Proceeds from greenshoe, net of transaction costs 8,488 — Proceeds from private placement, net of transaction costs 19,648 — Payment of TriplePoint success fee (2,468 ) — Proceeds from borrowings — 15,646 Repayments of borrowings (3,167 ) (14,183 ) Payments of principal portion of lease liabilities (715 ) (728 ) Net cash flow provided in financing activities 238,220 108,724 Increase in cash and cash equivalents 140,053 83,926 Effect of exchange differences on cash balances (4,688 ) 2,539 Cash and cash equivalents at beginning of the period 74,625 18,069 Cash and cash equivalents at end of the period $ 209,990 $ 104,534
SOPHiA GENETICS SA Reconciliation of IFRS to Adjusted Cost of Revenue (Amounts in USD thousands) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Cost of revenue $ (3,815 ) $ (2,901 ) $ (11,122 ) $ (7,764 ) Amortization of capitalized research and development expenses (1) $ 152 $ — $ 329 $ — Custom inventory write-off (2) $ — $ 419 $ — $ 419 Adjusted cost of revenue $ (3,663 ) $ (2,482 ) $ (10,793 ) $ (7,345 )
Reconciliation of IFRS to Adjusted Gross Profit and Gross Profit Margin (Amounts in USD thousands, except percentages) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Revenue $ 10,359 $ 7,168 $ 29,513 $ 20,565 Cost of revenue $ (3,815 ) $ (2,901 ) $ (11,122 ) $ (7,764 ) Gross profit $ 6,544 $ 4,267 $ 18,391 $ 12,801 Amortization of capitalized research and development expenses (1) $ 152 $ — $ 329 $ — Custom inventory write-off (2) $ — $ 419 $ — $ 419 Adjusted Gross Profit $ 6,696 $ 4,686 $ 18,720 $ 13,220 Gross profit margin 63 % 60 % 62 % 62 % Amortization of capitalized research and development expenses (1) 2 % — % 1 % — % Custom inventory write-off (2) — % 5 % — % 2 % Adjusted gross profit margin 65 % 65 % 63 % 64 %
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Operating Loss (Amounts in USD thousands) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Operating loss $ (20,502 ) $ (9,431 ) $ (50,480 ) $ (26,100 ) Amortization of capitalized research and development costs (1) $ 152 $ — $ 329 $ — Custom inventory write-off (2) $ — $ 419 $ — $ 419 Amortization of intangible assets (3) $ 143 $ 174 $ 456 $ 437 Share-based compensation expense (4) $ 3,038 $ 410 $ 4,874 $ 994 Non-cash pension expense (5) $ 187 $ 381 $ 522 $ 954 Non-recurring IPO-related expenses (6) $ — $ — $ 323 $ — Adjusted operating loss $ (16,982 ) $ (8,047 ) $ (43,976 ) $ (23,296 )
Reconciliation of IFRS to Adjusted Income (Expense), Net (Amounts in USD thousands) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Finance income (expense), net $ (263 ) $ (1,039 ) $ (1,128 ) $ (2,726 ) Change in fair value of derivative (7) $ (254 ) $ 40 $ 1,444 $ 280 Adjusted finance income (expense), net $ (517 ) $ (999 ) $ 316 $ (2,446 )
SOPHiA GENETICS SA
Reconciliation of IFRS to Adjusted Loss for the Period and Loss per Share (Amounts in USD thousands, except per share and share data) (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 2021 2020 2021 2020 Loss for the period $ (21,243 ) $ (10,466 ) $ (52,301 ) $ (28,858 ) Amortization of capitalized research and development costs (1) $ 152 $ — $ 329 $ — Custom inventory write-off (2) $ — $ 419 $ — $ 419 Amortization of intangible assets (3) $ 143 $ 174 $ 456 $ 437 Share-based compensation expense (4) $ 3,038 $ 410 $ 4,874 $ 994 Non-cash pension expense (5) $ 188 $ 381 $ 523 $ 954 Non-recurring IPO-related expenses (6) $ — $ — $ 323 $ — Change in fair value of derivative (7) $ (254 ) $ 40 $ 1,444 $ 280 Adjusted loss for the period $ (17,977 ) $ (9,042 ) $ (44,353 ) $ (25,774 ) Loss per share Basic and diluted loss per share $ (0.35 ) $ (0.24 ) $ (1.00 ) $ (0.71 ) Adjusted basic and diluted loss per share $ (0.30 ) $ (0.20 ) $ (0.85 ) $ (0.64 ) Number of shares used in computing basic and diluted loss per share 60,172,641 44,406,845 52,415,936 40,545,497
Notes to the Reconciliation of IFRS to Adjusted Financial Measures Tables
(1) Amortization of capitalized research and development expenses consists of software development costs amortized using the straight-line method over an estimated life of five years. These expenses do not have a cash impact but remain a recurring expense generated over the course of our research and development initiatives. (2) Custom inventory write-off consists of expenses associated with the write-off of inventory related to the cancellation of a customer contract due to the acquisition of the customer. The inventory was specifically procured to satisfy a contract and could not be liquidated, sold, or otherwise marketed to other customers due to the nature of the contract. Given the unusual nature of the cancellation, and overall scarcity of contract cancellations, these expenses are not expected to be a recurring event in our business. (3) Amortization of intangible assets consists of costs related to intangible assets amortized over the course of their useful lives. These expenses do not have a cash impact but we could continue to generate such expenses through future capital investments. (4) Share-based compensation expense represents the cost of equity awards issued to our directors, officers, and employees. The fair value of awards is computed at the time the award is granted and is recognized over the vesting period of the award by a charge to the income statement and a corresponding increase in other reserves within equity. These expenses do not have a cash impact but remain a recurring expense for our business and represent an important part of our overall compensation strategy. (5) Non-cash pension expense consists of the amount recognized in excess of actual contributions made to our defined pension plans to match actuarial expenses calculated for IFRS purposes. The difference represents a non-cash expense but remain a recurring expense for our business as we continue to make contributions to our plans for the foreseeable future. (6) Non-recurring IPO-related expenses represent expenses incurred for our initial public offering that were not capitalized and are not expected to be recurring during the ordinary course of our business. (7) Change in fair value of derivative consists of changes in the fair valuation of the derivative related to the success fee owed to TriplePoint Capital LLC upon the completion of our initial public offering. We paid the fee in cash in September and ceased to continue to incur associated expenses.
