Sophia Genetics(SOPH) - 2022 Q2 - Quarterly Report

Unaudited Interim Condensed Consolidated Financial Statements Unaudited Interim Condensed Consolidated Statements of Loss The company reported increased revenue but also significantly higher operating and net losses for the three and six months ended June 30, 2022, compared to the prior year periods Key Financial Performance (USD thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $11,667 | $10,178 | $22,528 | $19,154 | | Gross profit | $7,620 | $6,230 | $14,331 | $11,847 | | Operating loss | $(24,079) | $(15,924) | $(49,100) | $(29,978) | | Loss for the period | $(24,681) | $(18,390) | $(50,168) | $(31,058) | | Basic and diluted loss per share | $(0.39) | $(0.38) | $(0.78) | $(0.64) | - Operating loss for the six months ended June 30, 2022, increased by 63.8% to $(49,100) thousand from $(29,978) thousand in the prior year period[5] - Research and development costs for the six months ended June 30, 2022, rose to $(18,465) thousand from $(12,565) thousand in the same period of 2021, indicating increased investment[5] Unaudited Interim Condensed Consolidated Statements of Comprehensive Loss The company's total comprehensive loss significantly widened for the three and six months ended June 30, 2022, due to increased net loss and negative currency translation differences Key Comprehensive Loss Data (USD thousands) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Loss for the period | $(24,681) | $(18,390) | $(50,168) | $(31,058) | | Currency translation differences | $(5,028) | $2,302 | $(6,989) | $(4,721) | | Total comprehensive loss for the period | $(28,373) | $(16,088) | $(55,393) | $(35,779) | - Currency translation differences shifted from a gain of $2,302 thousand in Q2 2021 to a loss of $(5,028) thousand in Q2 2022, contributing to the increased comprehensive loss[7] Unaudited Interim Condensed Consolidated Balance Sheets As of June 30, 2022, total assets decreased compared to December 31, 2021, primarily due to a reduction in cash, cash equivalents, and term deposits Key Balance Sheet Items (USD thousands) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total assets | $277,222 | $320,173 | | Cash and cash equivalents | $178,901 | $192,962 | | Term deposits | $37,712 | $72,357 | | Total current assets | $234,596 | $282,855 | | Total liabilities | $49,107 | $44,773 | | Total equity | $228,115 | $275,400 | - Cash and cash equivalents decreased by $14,061 thousand from December 31, 2021, to June 30, 2022[10] - Total equity decreased by $47,285 thousand from December 31, 2021, to June 30, 2022, largely due to the accumulated deficit[10] Unaudited Interim Condensed Consolidated Statements of Changes in Equity Total equity decreased to $228,115 thousand by June 30, 2022, primarily due to the period's net loss and other comprehensive loss Changes in Equity (USD thousands) | Metric | As of January 1, 2022 | As of June 30, 2022 | | :--- | :--- | :--- | | Total Equity | $275,400 | $228,115 | | Loss for the period | — | $(50,168) | | Other comprehensive loss | — | $(5,225) | | Share-based compensation | — | $7,360 | | Exercise of share options | — | $748 | - Share-based compensation contributed $7,360 thousand to equity for the six months ended June 30, 2022[11] - The accumulated deficit increased from $(211,354) thousand at January 1, 2022, to $(261,522) thousand by June 30, 2022[11] Unaudited Interim Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2022, the company saw increased cash used in operations, a positive shift in investing activities, and an overall decrease in cash Cash Flow Summary (USD thousands) | Activity | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash flows used in operating activities | $(36,945) | $(26,345) | | Net cash flow provided from (used in) investing activities | $26,703 | $(2,956) | | Net cash flow provided from (used in) financing activities | $(179) | $533 | | Decrease in cash and cash equivalents | $(10,421) | $(28,768) | | Cash and cash equivalents at end of period | $178,901 | $42,487 | - Cash used in operating activities increased by $10,600 thousand, from $(26,345) thousand in 2021 to $(36,945) thousand in 2022[15] - Investing activities saw a substantial positive swing, primarily due to $42,337 thousand in proceeds from maturity of term deposits and short-term investments in 2022[15] Notes to the Unaudited Interim Condensed Consolidated Financial Statements 1. Company information This section provides an overview of SOPHiA GENETICS SA, including its business, accounting practices, recent corporate actions, and details on its share capital General information - SOPHiA GENETICS SA is a cloud-native software company in healthcare, headquartered in Saint-Sulpice, Switzerland, focused on data-driven medicine through its SOPHiA DDM Platform[17] Basis of preparation - The unaudited interim condensed consolidated financial statements are prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting[19] Accounting policies - Significant accounting policies are consistent with the annual consolidated financial statements as of December 31, 2021, with appropriate estimates made for interim income taxes and pension costs[20][21][22] Designated cash - In July 2021, the Company designated $30 million to a separate bank account to settle potential liabilities from claims against Directors and Officers, reducing D&O Policy premiums[23] Recent accounting new standards, amendments to standards, and interpretations - Recent IFRS amendments (Annual Improvements 2018–2020, IFRS 3, IAS 16, IAS 37) had no impact on the financial statements[24] - Amendments to IAS 1 regarding liability classification (effective January 1, 2023) are expected to have an immaterial impact[25] Critical estimates and judgement - The preparation of financial statements requires management to make significant judgments, estimates, and assumptions[27] Going concern basis - The unaudited interim condensed consolidated financial statements have been prepared on a going concern basis[28] Translation of foreign currency - The Company's reporting currency is the United States Dollar (USD); assets and liabilities are translated at month-end spot rates, income statement accounts at average rates, and equity at historical rates[29] Historical cost convention - The financial statements are prepared on a historical cost basis, with exceptions for certain assets and liabilities carried at fair value[30] Share split - On June 30, 2021, the Company effected a one-to-twenty share split of its outstanding shares, with all share and per share amounts retroactively adjusted[31] Initial public offering - The Company completed its IPO in July 2021 on Nasdaq (SOPH) at $18.00 per share, raising $211.7 million net proceeds[32] - A concurrent private placement with a GE Healthcare affiliate raised $19.6 million, and underwriters exercised a greenshoe option for an additional $8.5 million[33][34] Issued share capital - As of June 30, 2022, the Company had 66,453,719 shares issued, with 64,153,719 outstanding and 2,300,000 held as treasury shares[35] Treasury shares - The Company held 2,300,000 treasury shares as of June 30, 2022, acquired in Q1 2022 for equity incentive programs; no treasury shares were held in 2021[36] 2. Fair Value The carrying amounts of the Company's financial assets and liabilities were considered a reasonable approximation of their fair value as of June 30, 2022 - The carrying amount was a reasonable approximation of fair value for financial assets including cash and cash equivalents, term deposits, accounts receivable, and other non-current assets[38][39] - No significant changes in business or economic circumstances affected the fair value of the Company's financial assets and liabilities during the three and six months ended June 30, 2022[40] 3. Financial Risk Management The Company is exposed to various financial risks but reported no significant changes in its financial risk management since the prior year-end - The Company is exposed to credit and counterparty risk, funding and liquidity risk, and market risk (foreign currency risk and interest rate risk)[41] - There have been no significant changes in financial risk management since December 31, 2021[41] 4. Segment Reporting SOPHiA GENETICS SA operates and is managed as a single operating segment - The Company operates in a single operating segment[42] - Financial information is reviewed and performance assessed as a single segment by the senior management team, led by the Chief Executive Officer (CODM)[42] 5. Revenue The Company's revenue increased across all geographic regions and primary revenue streams for the six months ended June 30, 2022, compared to the prior year Disaggregated revenue Revenue by Geographic Market (USD thousands) | Region | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | | EMEA | $16,616 | $15,253 | | NORAM | $3,193 | $2,073 | | LATAM | $1,360 | $1,034 | | APAC | $1,359 | $794 | | Total | $22,528 | $19,154 | - North America (NORAM) revenue grew by 54% for the six months ended June 30, 2022, compared to the same period in 2021[43] Revenue streams Revenue by Stream (USD thousands) | Revenue Stream | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | | SOPHiA Platform | $21,653 | $18,562 | | Workflow equipment and services | $875 | $592 | | Total revenue | $22,528 | $19,154 | - SOPHiA Platform revenue increased by 16.6% for the six months ended June 30, 2022, compared to the prior year[45] Contract assets and liabilities Contract Assets and Liabilities (USD thousands) | Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Accrued contract revenue | $1,000 | $700 | | Deferred contract costs | <$100 | $100 | 6. Accounts receivable Net accounts receivable increased slightly as of June 30, 2022, while the concentration of receivables with the largest customer decreased significantly Accounts Receivable (USD thousands) | Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Accounts receivable | $8,228 | $7,717 | | Lease receivable | $171 | $237 | | Allowance for expected credit losses | $(1,752) | $(1,676) | | Net accounts receivable | $6,647 | $6,278 | Roll-forward of Allowance for Expected Credit Losses (USD thousands) | Item | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | | As of January 1 | $1,676 | $2,664 | | Increase | $280 | $742 | | Reversals | $(128) | $(1,077) | | Currency translation differences | $(76) | $(70) | | As of June 30 | $1,752 | $2,003 | - The largest customer's balance represented 9% of accounts receivable as of June 30, 2022, down from 18% as of December 31, 2021[50] 7. Loss per share The basic and diluted loss per share increased for the three and six months ended June 30, 2022, reflecting a higher net loss and more shares in issue Loss Per Share Data (USD thousands, except per share data) | Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss attributed to shareholders | $(24,681) | $(18,390) | $(50,168) | $(31,058) | | Weighted average number of shares in issue | 64,089,566 | 48,917,028 | 63,991,145 | 48,468,831 | | Basic and diluted loss per share | $(0.39) | $(0.38) | $(0.78) | $(0.64) | - The weighted average number of shares in issue for the six months ended June 30, 2022, increased by approximately 32% compared to the same period in 2021[52] - Potential ordinary shares from share option plans were deemed non-dilutive for the periods presented due to the Company's loss position[52] 8. Leases The Company amended its Rolle office lease in January 2022, resulting in the recognition of a new right-of-use asset and corresponding lease liability - On January 25, 2022, the Company amended its lease for office space in Rolle, Switzerland, adding approximately 21,258 square feet[53] - Upon commencement of the additional lease on April 1, 2022, the Company recorded a right-of-use asset of $4.5 million and a lease liability of $4.5 million[53] 9. Borrowings The Company entered into a new revolving credit facility for up to CHF 5.0 million in June 2022 but had no outstanding borrowings as of June 30, 2022 - On June 21, 2022, the Company entered into a credit agreement for a revolving credit facility of up to CHF 5.0 million with Credit Suisse Group AG[54] - As of June 30, 2022, the Company had no outstanding borrowings under the Credit Facility[54] 10. Share-based compensation Share-based compensation expense significantly increased across all functional areas for the three and six months ended June 30, 2022, compared to the prior year Share-based Compensation Expense (USD thousands) | Functional Area | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | | Research and development | $1,140 | $142 | | Sales and marketing | $768 | $296 | | General and administrative | $5,452 | $1,398 | | Total | $7,360 | $1,836 | - Total share-based compensation expense for the six months ended June 30, 2022, increased by over 300% compared to the same period in 2021[56] 11. Related party transactions Compensation for key management personnel significantly increased for the six months ended June 30, 2022, driven by a substantial rise in share-based compensation Key Management Compensation (USD thousands) | Compensation Type | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--- | :--- | :--- | | Salaries and other short-term employee benefits | $1,086 | $852 | | Pension costs | $99 | $35 | | Share-based compensation expense | $4,760 | $1,266 | | Other compensation | $153 | $90 | | Total | $6,098 | $2,243 | - Total compensation for key management personnel increased by 171.8% for the six months ended June 30, 2022, compared to the prior year[58] - A change in the CEO's option strike price in March 2021 resulted in an additional $0.1 million incremental cost recognized over the vesting period[58] 12. Events after the reporting date The Company determined there were no material subsequent events requiring recognition or disclosure in these interim financial statements - No material subsequent events were identified after the reporting date up to the date the unaudited interim condensed consolidated financial statements were available for issue[59]