SOPHiA GENETICS S.A. (SOPH) Q2 2025 Earnings Report, Transcript and Summary

Good morning. My name is Danny, and I'll be your conference operator today. At this time, I would like to welcome everyone to the SOPHiA GENETICS Second Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, August 5, 2025. I would now like to turn the conference over to Kellen Sanger, SOPHiA GENETICS Head of Strategy and Investor Relations. You may begin.

Welcome to the SOPHiA GENETICS Second Quarter 2025 Earnings Conference Call. Joining me today to discuss our results are Dr. Jurgi Camblong, our Co-Founder and Chief Executive Officer; Ross Muken, our Company President; and George Cardoza, our Chief Financial Officer. I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the press release issued by SOPHiA GENETICS today and in the documents and reports filed by SOPHiA GENETICS from time to time with the Securities and Exchange Commission. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS to non-IFRS measures is included in today's earnings press release, which is available on our website. With that, I'll now turn the call over to Jurgi.

Thanks, Ken, and good morning, everyone. I will start today's call with a brief recap of Q2 performance in which revenue growth continued to reaccelerate and cash burn decreased notably. I will then turn the call over to Ross, who will give a more detailed update on the business. George will close with a review of our Q2 financial performance before we take your questions. For the last several quarters, we've highlighted that new business momentum has been strong. New customer signings have been at record levels, and clinical bookings have consistently exceeded expectations. In Q2, like in Q1, these efforts continue to pay off. Total revenue grew 16% year-over-year despite headwinds from BioPharma. Excluding BioPharma, revenue grew over 20%, representing a solid return to near historical growth levels. Strength in the clinical market was driven by the 3 growth drivers we outlined at the beginning of the year, an impressive cohort of recently signed new customers, continued success in the U.S. market, and new applications such as MSK-ACCESS. In Q2, we signed an all-time high of 35 new customers to SOPHiA DDM. These 35 new signings, combined with the 28 new signings in Q1, bring our total to 63 new customers signed this year alone. Our focus continues to be on implementing these new customers as quickly as possible so that they begin generating revenue faster. In Q2, we implemented 18 new customers, up slightly since the prior year period. I look forward to these customers ramping up usage over the next few months and adopting additional applications over time. The second growth driver I will address is continued expansion in the U.S. market. In Q2, U.S. revenue, excluding BioPharma, grew more than 19% year-over-year. In addition, new business momentum continues to build. We recently signed major new U.S. customers, including UC Irvine, which is adopting solid tumor and hemonc applications, as well as the University of Alabama, Birmingham, which is adopting SOPHiA DDM for HemOnc. We also announced today recent success in the central lab customer category. Similar to academic medical centers, central labs use SOPHiA DDM to power their bioinformatics needs. In Q2, we welcomed 2 new central labs to the SOPHiA network. Simply PCR, based in Toronto, Canada, is adopting the MSK-ACCESS application for liquid biopsy testing. And Igenomix, a pioneer in reproductive genetics with global operations, is adopting SOPHiA DDM for rare and inherited disorders. Igenomix and Simply PCR joined other recent central labs who have adopted SOPHiA DDM, including Light Labs, Premier Integrated Labs, Dasa, Unilabs, Berry Health and Genetics, Eurofins, and more. The third growth driver we will continue to focus on is expanding the adoption of our liquid biopsy application, MSK-ACCESS. Last year, we launched this application by industrializing MSK's world-renowned test and made liquid biopsy testing accessible to the entire world. In Q2, we signed an impressive 11 new customers to the application, bringing our total number of liquid biopsy customers to 50 across the globe. Just this quarter, we signed MSK-ACCESS customers in Canada, Colombia, Brazil, Australia, India, Malaysia, Turkey, France, Spain, Italy, and Saudi Arabia. It's been incredible to see this diverse global community come together on SOPHiA DDM to share their knowledge and insights and contribute to a collective intelligence. Last quarter, we discussed how our growing global network and the collective intelligence house within SOPHiA DDM benefits not only clinical customers, but also biopharma companies. This quarter, I'm thrilled to bring to you a major new update. Today, we announced the signing of the largest contract in the history of SOPHiA GENETICS with a new multiyear extension of our collaboration with AstraZeneca. The new partnership focuses on 2 primary areas. First, AZ will leverage SOPHiA's proprietary AI factories to analyze multimodal healthcare data to develop a bespoke AI-powered predictive model to optimize outcomes for patients undergoing treatment for breast cancer. Second, we will leverage our extensive global network to generate real-world evidence to advance the understanding of breast cancer treatment in North America and Europe. These 2 efforts highlight the value of data and AI to BioPharma companies and the value that SOPHiA and these partners can bring to patients across the globe. Before I hand it over to Ross and George, I would like to recognize the SOPHiA team for their continued focus on driving productivity and efficiency across the business. In Q2, we reduced cash burn to $8.7 million in the quarter, a 35% year-over-year improvement on a reported basis or 10% after adjusting for FX. This, in part, was driven by innovations from our tech and data sales teams who continue to engineer new ways to optimize the data compute and processing power of our platform. In Q2, we delivered a 74.4% adjusted gross margin, up 120 basis points year-over-year. These improvements are especially impressive given data processed by SOPHiA DDM is growing at more than 50% CAGR in recent years. While analysis volumes continue to grow, so does the complexity of data. Gene panels are becoming larger, additional modalities are becoming more useful, and more sophisticated tests are being deployed each day. Our scalable cloud-based platform, SOPHiA DDM, is designed to support the medical innovations of today and tomorrow, deploying innovations with accuracy and efficiency. This spirit places our platform at the center of a vibrant community of the leading minds in healthcare. These leaders, whom we call the SOPHiA community, depend on SOPHiA DDM each day to generate insights for their patients. In doing so, our community contributes a constant stream of data and insights to the platform, which fuels one of the most sophisticated AI engines in health care. Unlike other technologies, SOPHiA is grounded in everyday real-world clinical use cases. And in Q2 alone, SOPHiA DDM generated insights for over 95,000 patients across 800 institutions and 70 countries worldwide. These everyday use cases and the power of SOPHiA community were on full display during a series of innovation days hosted at the SOPHiA headquarters during Q2. In May and June, we invited customers, partners, and industry collaborators to full-day summits in Geneva and Boston. In total, more than 200 unique customers attended the event, bringing together top pathologists, oncologists, BioPharma leaders, and tech innovators to discuss the best ways to use AI and SOPHiA DDM to help patients. Events like this bring out the best of SOPHiA by connecting a passionate group of individuals with a shared goal to solve the most pressing problems facing our world. They also demonstrate the momentum we are feeling in the business right now, as SOPHiA sits at the center of exciting market trends. With that, I will now turn the call over to Ross, who will discuss how this growing momentum has been materializing into results.

Thanks, Jurgi. The go-to-market team shares your excitement and confirms there is broad and growing demand for the SOPHiA offering. Along those lines, I'll start today by giving a brief update on our Q2 performance as we continue to have a strong start to 2025 across both new and existing business. I'll then cover some of the broader market dynamics before closing with a look at what we are seeing in the pipeline. First, the core business returned to healthy growth levels as revenue, excluding BioPharma, grew an impressive 20% year-over-year in the second quarter. BioPharma continued to present some modest headwinds, bringing overall revenue growth to 16%. Despite BioPharma weakness, the core business remains strong, and new BioPharma wins, such as the latest partnership with AstraZeneca, represent encouraging signs that the business is moving towards a point of stabilization. Given these positive developments, we expect the second quarter to be the final quarter of the year in which biopharma negatively impacts overall growth. On the clinical side, from a regional perspective, North America and Asia Pacific continue to outperform in the second quarter with 24% and 33% year-over-year revenue growth, respectively. EMEA growth remains solid with the United Kingdom as a notable driver. Consistent wins and expansion across the NHS has resulted in over 50% year-over-year volume growth. In Latin America, we continued to experience softness this quarter, but recent bookings such as our expanded partnership with Dasa give us conviction that meaningful growth will return to the business in the medium term. From an application standpoint, we continue to establish ourselves as the global leader in hematology testing. HemOnc analysis grew 19% year-over-year in the second quarter off an increasingly large base. Beyond HemOnc, we also saw the initial wave of liquid biopsy testing begin coming online. In the second quarter, we reached almost 2,000 liquid biopsy analysis in the quarter. As a reminder, more sophisticated applications like MSK-ACCESS carry a higher ASP than other product lines. We will look to the back half of the year for MSK-ACCESS to meaningfully drive overall growth as customers complete implementations and ramp up usage. Moving to the new business side. I'm happy to share that in the second quarter, we continued to book new business at record speeds. We landed a historic 35 new core genomic customers in the quarter, up from 19 new customers signed in the second quarter of 2024. In North America, new business momentum continued with several major additions to the SOPHiA network. As Jurgi announced, we signed UC Irvine and the University of Alabama at Birmingham, 2 notable U.S. academic medical centers. We also expanded our footprint in the central lab customer segment, signing Simply PCR and Igenomix, in addition to LifeLabs last quarter. These partnerships demonstrate our ability to serve a diverse range of health care institutions from academic centers to centralized reference labs and reinforce our ability to drive cost savings and turnaround time in a variety of settings. We also expanded our partnership with Sunnybrook Health Sciences Center, the largest single-site hospital in Canada. Last quarter, we announced that Sunnybrook added HemOnc applications on top of their solid tumor testing. Now in the second quarter, they are also adopting a rare and inherited disorders application for clinical exomes. We look forward to continuing our collaboration with Sunnybrook as they broaden their precision medicine capabilities. In EMEA, last quarter, we announced a partnership with M42, the Abu Dhabi-based World Health leader that is adopting MSK- ACCESS at select hospitals throughout the UAE. In the second quarter, we capitalized on this momentum and signed another premier institution in the Middle East with the addition of King Faisal Specialist Hospital and Research Center in Riyadh, Saudi Arabia. Similar to M42, King Faisal Hospital is adopting MSK-ACCESS for liquid biopsy testing. Beyond the Middle East, our decentralized liquid biopsy application continues to attract interest. In the second quarter, we signed Hospital Del Mar Research Institute in Barcelona, Spain; Instituto Oncologico Veneto in Padua, Italy, and Assistance Publique - Hôpitaux de Marseille to MSK-ACCESS, amongst others. Congrats to the EMEA team on an excellent quarter. In APAC, MSK-ACCESS was a major theme as well. The Royal North Shore, a major public teaching hospital located outside of Sydney, Australia, recently joined the list of customers adopting MSK-ACCESS. Australia continues to be a highlight as volume increased nicely again this quarter, with over 50% year-over-year growth. Beyond Australia, India has outperformed as well. The quarter revenue growth grew almost 100% year-on-year. And like Australia, new business momentum remains strong. In the second quarter, we expanded our partnership with Tata Memorial Hospital, one of the oldest and largest cancer centers in India. Tata is expanding their suite of Sofia applications to include MSK-ACCESS, in addition to solid tumor, HemOnc, and hereditary cancer. We expect these new business wins will keep the APAC business growing into 2026 and beyond. Lastly, in Latin America, we signed EPS SURA, one of the most renowned healthcare providers in Colombia, who is using SOPHiA DDM and the MSK-ACCESS application to launch liquid biopsy testing. I'm also proud to announce today a significant new expansion of our long-standing partnership with Dasa. Dasa, the largest medical diagnostics company in Latin America, is now adopting new applications for HemOnc and rare disease testing. This expansion will add an estimated 12,000 new analyses per year on top of the volume Dasa is currently running today across hereditary cancer, solid tumor, and liquid biopsy applications. Thank you, Dasa, for your continued partnership. In conclusion, new clinical business remains strong across all geographies. We continue to sign new customers at impressive rates, and the average contract value of signings continues to increase. In the second quarter, similar to the first quarter, ACVs on new business were up more than 100% year-on-year. This is primarily due to 3 factors: one, our success at selling the value of our precision medicine platform to enterprise-level accounts, resulting in more multi-application lands; two, heightened competitive win rates amongst large U.S. accounts; and three, an industry-wide migration towards more sophisticated applications that require significant data compute and highly advanced algorithms. As the quantity and size of new customer signings grow, bookings continue to be strong and revenue growth improves, one might expect that the total value of our pipeline may go down. I'm proud to say that this has not been the case. Despite the high conversion rates, we have been able to consistently replenish our pipeline with new opportunities. Pipeline has more than doubled since the same time last year. Consistent growth of our pipeline reflects an increased level of discipline from our sales team and the strength of our end markets. Clinical users are increasingly demanding cutting-edge solutions, which utilize the latest advancements in AI to better serve their patients. In this way, the health care data space has become more sophisticated than ever, and solutions like SOPHiA stand out for its technical excellence. But technical sophistication alone does not create meaningful change in healthcare. While many companies, including the major tech players, launch academically interesting AI models, they often lack practical application in a clinical setting. SOPHiA is set apart in this area. Our platform and the AI, which powers it, impacts thousands of patients each day and hundreds of thousands of patients per year. Embedded in the daily workflows of providers across 800 institutions and 70 countries, SOPHiA has an unparalleled ability to deploy AI models in the clinical setting and learn from the real-time, real-world use of such models. The latest proof point of our differentiated AI capabilities is the recently signed collaboration with AstraZeneca. As part of the partnership, SOPHiA will develop a bespoke AI-powered predictive model for AstraZeneca's breast cancer portfolio to optimize patient outcomes in North America and Europe. This engagement was made possible by SOPHiA DDM's world-class AI in combination with the vast global network we have created. From a business perspective, the collaboration offers an incredible opportunity to demonstrate to BioPharma partners the impact we can jointly have on patients. We look forward to keeping you updated on the progress of this project, and on future developments across the biopharma business. To conclude, I'm proud of the team for delivering an excellent quarter, and I'm also encouraged by the growth of our pipeline and our end markets. With that, I will now turn it over to George, who will provide a more detailed look at our second-quarter financial results.

Thank you, Ross, and good morning, everyone. As Jurgi and Ross highlighted, Q2 results came in slightly ahead of expectations as new business from 2024 begins to come online. Total revenue for the second quarter of 2025 was $18.3 million compared to $15.8 million for the second quarter of 2024, representing year-over-year growth of 16%. While we're pleased with the second quarter revenue, new business bookings were also strong, and the future is expected to remain bright. Platform analysis volume was approximately 95,000 for the second quarter of 2025 compared to approximately 87,000 for the second quarter of 2024, representing year-over-year growth of 9%. Core genomic customers were 490 as of June 30, 2025, up 33 from 457 in the prior year period and flat relative to Q1 of 2025. As Ross mentioned, we have intentionally focused our sales team on winning larger and larger accounts. While we moved 18 new customers into routine this quarter, we also churned out a few small accounts. The average revenue across all churned accounts in Q2 was less than $16,000 per year, and revenue churn was approximately 5%. Net dollar retention for the quarter was 107%, with strong performance in Europe and North America, partially offset by a decline in growth in Latin America. We look forward to seeing our substantial and healthy new customer base grow over time. Gross profit for the quarter was $12.3 million, representing year-over-year growth of 14%. Gross margin was 67% for the second quarter of 2025 compared with 68.2% for the second quarter of 2024, down slightly from last year. Adjusted gross profit was $13.6 million, an increase of 18%. Adjusted gross margin was 74.4% for the second quarter, up 120 basis points from 73.2% in Q2 2024. As Jurgi mentioned, targeted platform improvements throughout the year continue to drive cloud compute and storage costs lower, an achievement we remain proud of and plan to continue throughout the year. Total operating expenses for Q2 were $30.8 million compared to $28.2 million in the first quarter of 2025 for a sequential increase of 9% versus the first quarter. This was driven primarily by sales and marketing expenses, which were up due to higher commissions expense during the quarter as sales performance continued to be strong. The remainder of the sequential increase was primarily driven by foreign exchange impacts. We had $1.6 million foreign exchange expense headwind during the quarter due to the appreciation of the Swiss franc and the euro relative to the U.S. dollar. The majority of our employees are paid in Swiss francs or euros, and these 2 currencies appreciated significantly compared to the U.S. dollar in the second quarter. The $30.8 million was higher than the prior year figure of $25.8 million for the second quarter of 2024, representing an increase of 19% year-over-year. This increase was again driven by the change in exchange rates as well as sales and marketing expenses, which were up due to higher commissions paid during the quarter, as growth is accelerating and sales performance continued to be very strong. On a year-over-year basis, we have invested heavily in our sales team and are seeing the payback from that as clinical growth accelerates. Operating loss for the quarter was $18.5 million compared to $15.0 million in the prior year period. Adjusted operating loss was $12.6 million compared to $9.9 million in Q2 2024, representing an increase of 27% year-over-year. Once again, the key deltas were the higher sales commission expenses and foreign exchange impacts. Adjusted EBITDA loss for Q2 was $11.7 million compared to $8.8 million in Q2 2024. Sequentially, adjusted EBITDA loss was up $1.9 million this quarter, the entirety of which can be explained by foreign exchange headwinds and higher commissions as a result of the improved sales performance. As with previous quarters, we remain laser-focused on driving efficiency gains across the business and reducing costs down the P&L. We also remain confident in our commitment to be approaching adjusted EBITDA breakeven by the end of 2026 and crossing over to positive adjusted EBITDA in the second half of 2027. Lastly, total cash burn, which we define as the change in cash and cash equivalents for the second quarter of 2025, was $8.7 million compared to $13.3 million in the prior year quarter, representing a year-over-year improvement of 35%. Excluding the impacts of exchange rate differences, cash burn improved 10% in Q2. We had significant foreign exchange benefit during the second quarter as the cash that we held in Swiss francs and euros appreciated substantially against our reporting currency, which is the U.S. dollar. Thus, our foreign exchange cash was worth more U.S. dollars at the end of the second quarter due to the change in FX rates. Given growth is returning to the business and forward-looking indicators such as new business bookings and pipeline remain strong, we drew on the second tranche of debt financing available through our May 2024 agreement with Perceptive Advisors. We continue to have a good relationship with Perceptive, and we're appreciative of their support. We believe that we are in a position of strength to continue accelerating growth and therefore, reinforced our already strong balance sheet with an additional $35 million in June. With the addition of these funds, we finished the quarter with cash and cash equivalents of $94.8 million as of June 30, 2025. We remain confident in our current capital position with respect to the achievement of our long-term goals. I'll now turn to our 2025 outlook. Given the promising reacceleration of revenue growth in Q2, SOPHiA GENETICS is reaffirming our full-year revenue guidance for 2025 of $72 million to $76 million, representing 10% to 17% growth on a reported basis. As a reminder, we expect Q4 to continue being the strongest quarter seasonably during the year. We also expect that exchange rates will likely remain volatile due to macro uncertainties, which may have an impact to reported results, which are reported in U.S. dollars. Last, recognition of revenue related to the newly announced partnership with AstraZeneca will primarily begin in Q4, with milestones continuing into 2026 and beyond. Expenses related to the partnership may be incurred prior to the ability to recognize the related milestone-based revenue. Beyond revenue, we are also reaffirming our full-year adjusted EBITDA loss guidance of $35 million to $39 million. We continue to make targeted investments in our platform to optimize cloud compute and storage costs and expect to expand gross margins beyond 2024 levels. We also expect to continue to largely hold the line on operating expenses in local currencies as we currently have the correct team size to support our medium-term growth objectives. This excludes some high ROI investments we will continue to make related to marketing activities, as well as certain investments in the commercial team, including commission payments for overperformance. Our growth has been accelerating, and we believe these investments will pay off later in the year and in 2026 and beyond. To note, the continued volatility of exchange rates due to macro uncertainties may continue to have an impact on reported expenses. The U.S. dollar weakened significantly during the second quarter of the year as compared to the Swiss franc and the euro, and this increases our reported expenses in U.S. dollars. If the dollar were to recover and appreciate during the second half of the year, this impact would be reduced. Finally, we will continue to revisit our discretionary expenditures and execute on identified savings in systems, professional services, and certain public company costs throughout 2025. The combined nature of these items and the natural operating leverage in the business from strong revenue growth will further our path to profitability in the next 2 years. With that, I would like to turn the call back over to Jurgi for the closing remarks before we take your questions.

Thank you, George. I'm proud of what the team achieved this quarter. We continued our strong start to 2025 by delivering total revenue growth of 16% and 20% revenue growth, excluding BioPharma. Forward-looking indicators remain strong across the business as we signed 35 new customers in the quarter, and average contract size is higher than ever. We announced a second straight quarter of major new BioPharma contracts, and the recent signing of the major multiyear AI partnership with AstraZeneca lays a solid foundation for future growth. On top of this, we continue to be laser-focused on cost, improving adjusted gross margins, and reducing our cash burn. Thank you to the SOPHiA team, customers, partners, and investors for joining us on our mission to transform patient care by expanding access to data-driven medicine globally. Operator, you may now open the line for questions.

[Operator Instructions] Your first question comes from Subhalaxmi of Guggenheim.

Thank you for clarifying that the AstraZeneca partnership will be more of a full-year '26 driver. Any additional color you could provide on what these milestones look like? What needs to be done to achieve these milestones?

So indeed, over the last quarters, we've been highlighting that the clinical performance was good and growing. And we had highlighted that we're expecting as well BioPharma to improve with the signing of some important deals. Today, we announced a deal with AstraZeneca on our multimodal AI factory capabilities. And I will leave now to Ross to give you a bit more color on how this should play out in terms of traction as well as deliveries and so on.

Thanks, Subbu. So as Jurgi mentioned, this is obviously a very material deal for us and one that really, I would say, validates the strategy that we sort of put forth roughly 12 months ago as we started to, I would say, narrow our focus within the BioPharma market. It's the largest deal in our history, right? It's multiyear. And so it's going to be nicely, I would say, additive for us in terms of the business. In terms of milestones, there's a series of deliverables over the next, I would say, several quarters and into a multiyear period. And again, these contracts typically work where you have a portion that ultimately is recognized based on delivery of certain items and then achievement of certain outcomes, right? And so we feel quite confident that we'll be able to achieve the full value of this contract and be able to deliver for AZ in a timely manner and really deliver something of value to them. So ultimately, for us, this is a really exciting validation. We hope it's the first of more of this type. But obviously, we're very focused at the moment of being able to deliver what we've now set forth and really prove out the value of the AI factories and our technology as well as the uniqueness of our global network.

Pretty big win, guys. Congratulations on that. In non-sequitor, understandably, a lot of focus of this call has been on oncology, but I wanted to focus on rare disease for a moment. A competitor acquired a decentralized rare disease data and secondary analysis provider recently and intends to use that acquisition to grow their presence in OUS market. Could you tell us a bit more about your adoption of rare disease applications outside the U.S. and what these markets look like, and what the competitive landscape is today?

Yes. Thank you, Subbu. So first, indeed, right, about 80% of our business is in oncology, including hereditary cancer, and 20% is in rare disorders, which I think is this area you referred to. So on that one, we're seeing great progress. So we're growing this quarter 20% year-on-year on rare disorders. There is more and more demand on exomes and possibly on genomes around the world due to the fact that, on one side, hospitals and labs have themselves equipped their own labs with superior technologies with more depth capabilities, so more sequencing volume capabilities. And in the meantime, science is progressing, right? And recently, there were as well some, I think, discussions in the U.S. whether pharmacogenetics possibly might be reimbursed and scaled as an example. So definitively, a lot of demand in rareinorative disorders. And in that vein, if you like, we are very well positioned as well because these type of questions and problems tend to be complex. And so by enabling labs and hospitals to produce exomes, genomes locally, leverage on our AI capabilities, we basically enable them to solve very complex indications and diagnostics for this class of diseases. So I would say, for us, all good news. Ross, I don't know if you would like to add anything else regarding the market dynamics.

Sure. So first, maybe, Subbu, obviously, we've operated in a highly competitive market for a very long time. And our win rates continue to move up. We're pushing 35% right now on our win rate in many categories. And I would actually argue rare and inherited is probably higher. So generally, we feel quite good about how we are positioned and confident with any entrants, new or old, that our product portfolio, particularly with our enhanced exome product, is poised for really substantial growth. And maybe just to sort of drive a fine point on that. So you can see this quarter, there's a spike in sales and marketing expenditures. A lot of that is due to significant bookings outperformance. And if you peel back that onion a little bit more, a lot of that is coming with our enhanced exome product on top of liquid biopsy and solid tumors. So we are seeing, particularly with enhanced exomes, significant adoption, particularly in the U.S., but also in Mid East and Europe. And so we're extremely excited about that product, and we think it's just getting started.

Your next question comes from Conor McNamara of RBC Capital Markets.

Congrats on a very solid quarter. Just one financial question and then more on MSK-ACCESS. Just the decision to draw the revolver, the $35 million, should we be looking into that as you're expecting a step-up in expenses, either what you expect, the work you expect to do with AstraZeneca? Or is that just the normal course of business?

Yes. No, I think the decision was made to draw it at the very end of the second quarter. It's moved our cash balance up to over almost $95 million. So I think we're pleased with that. And I think that gives us the liquidity we need, certainly for the near term. So I think the decision was made to put that on the balance sheet and just to strengthen our cash position. We are seeing our growth accelerate, and we're seeing it across the clinical side. We're seeing it now on the pharma side as well in the out years. So it's an exciting time, and we wanted to make sure that our cash balance was solid to accommodate that growth

And then on MSK-ACCESS, what are the adoption trends in the United States from time to sign to how quickly they get up and running? And is that tracking kind of in line with what you thought? Or is there any update you could give us on what the trend line is like from signing to revenue recognition?

Yes. Thank you for that question. Indeed, Conor. Liquid biopsy, I think, now is clinically becoming extremely relevant, right? And so for many, many years, the utility would be more sophisticated. And now the publications highlighted the importance of liquid biopsy, and clinicians understand utility even more. And so definitively, it's overall something that is triggering a lot of interest in the U.S., but outside the U.S. as well. And just to highlight some numbers, since the beginning of the -- well, up to year-to-date, we've signed a number of new customers. This quarter, we signed 11 new customers on MSK-ACCESS. Today, we have 50 customers on MSK- ACCESS. So this is basically one of the marquee applications in the space of liquid biopsy. We grew year-on-year our liquid biopsy revenue of about 900%. So definitively, those numbers are highlighting a lot of demand in the market. Specifically in the U.S. in terms of implementations, Ross, do you want to give Conor some more information or where we stand and what we see?

Sure. So the first cohort of customers we signed in the U.S., which was roughly 12-plus months ago, are starting to come online. We're excited about that ramp and think, again, this product will continue to be a major growth driver and do so at scale over the upcoming quarters. So we're quite optimistic. I would also say when you look at the 50-plus logos we have in the pipeline currently, there's some really exciting ones in the U.S., and they range from a spectrum of small and midsized academics to the very largest labs. And so I would say our positioning in the North America market is one we remain quite constructive on and think it will be obviously a multiyear journey as it's quite a competitive market. But I think in the end, we feel like we will win our fair share here, and it's a superior product to many aspects of what exists today, given the tumor normal concept. And we think it as well fits in with where biopharma is trying to push liquid biopsy within the global scheme. And so overall, I feel very good about our positioning.

And maybe, Conor, beyond MSK-ACCESS in the U.S., your question is very important because the market is more centralized. This quarter, we grew 19% year-on-year, right? So -- which I think highlights that our technology is very well adapted to help customers in the U.S., whether those are academic centers or central labs. Today, we announced as well a number of central labs that have started using our technology in the U.S.

Your next question comes from Dan Brennan of TD Cowen.

Congrats on the quarter. Maybe just going back to the AZ deal. So it sounds like you guys are not going to size the aggregate size of the contract. Was that from a disclosure agreement with AZ, or just you prefer not to disclose it? Or just any more color on the size, since it sounds like a very exciting deal, and you guys would kind of showcase what you're doing.

Yes. Maybe, Dan, being Swiss, we tend to be a touch more conservative than some of our peers. But I would say, just to drive home, this is a very, I would say, on several fronts, material contract for us and one that will contribute again. And I'll let George maybe give color on what for guidance for this year and '26. But we're incredibly excited about this opportunity. We think it will bring as well with it other abilities to showcase our AI factories and multimodal and multi-omic capabilities, and one that, again, you'll be hearing us talk about for quite a bit as contributing to our overall performance in a significant way.

Yes. No, we do expect to see revenue in the fourth quarter. I mean, I think it will still be less than $1 million in the fourth quarter. But as Ross said, we're mostly excited about 2026. I think this really is going to give us significant lift in 2026. And you've heard, I mean, our clinical growth this quarter was 20% and pharma, unfortunately, dragged the total down. And next year, we're actually looking at pharma being an accelerator to that. So I think that's why we're excited about this. And certainly, in the near term, it will be on the lower end, but certainly, we're very optimistic about the long-term prospects for this. And really, we're viewing this as something that I think is going to be terrific for AZ, but this could even be used for other pharmas as well. And I think this is really just the beginning.

Great. And then maybe just a second one, just on ASPs and the backlog. You talked a lot about the initial contribution. I think you talked about like a doubling of ASPs that AZ is enabling. So how do we think about the benefit of ASPs as we look out, say, beyond 2025, and how might we be able to translate that into top-line growth? And then since you talked a lot about bookings, just wondering if you can disclose any color on book-to-bill or what the backlog looks like? I heard funnel and backlog. Just trying to get a sense of what the visibility is.

Yes. Thank you, Dan. So first, to start on ASPs. As you know, we're being paid on consumption, right, per patient data. And in our space, because of the innovation and the science, one basically produces more data per patient. So more data, whether it's more genes, whether it's more data modalities, whether it's more depth, means that probably they are going to further valorize the data compute over the data production. And so hence, why over time, you should expect indeed that our ASP continues to grow, maybe slightly, given the complexity of the data that our customers are producing and hence the need of sophisticated AI algorithms. Yes.

And Dan, one of the other key points we were making was also around ACVs, right, so average contract value. So we're seeing much bigger deals in markets. Some of that is coming from North America as well as the U.K., Middle East, et cetera. And so that means both higher-priced products, more complex products, but also much larger institutions. And so that general mix is driving a real acceleration in bookings. And so as we look at -- again, we don't necessarily track book-to-bill. But I would say, at the moment, we have significant double-digit million backlog that will come online. And again, we tried to give you color around implementations, and that continues to accelerate. We expect that to accelerate in the upcoming periods, and we're incredibly focused on pushing what has been great commercial momentum, right, on the pipeline and bookings side into the revenue over the next 6 to 12 months. So again, some of our products and some of our customers, just given the complexity for them of getting to reimbursement, et cetera, and getting launched, can take up to 12 months. right, to drive revenue. And we're obviously working to shorten those time frames. But the main point we're trying to drive home is all of the activity we're seeing commercially right now should lead to our return to more normalized growth rates over the near term. And just to make one other fine point, that doubling of ACV and the improvement of ASPs does not include any impact from AZ, right? So this is happening independent of itself in the clinical business within our hospital customer base and lab customer base. And then on top of that, we're also seeing improvement and stabilization, and reacceleration in the pharma business.

Your next question comes from William Bonello of Craig-Hallum.

A couple of different topics here. First, I also want to go back to the AZ contract. So is it exclusively or predominantly milestone payments? Or is there also some baseline payment that you're receiving independent of the milestones?

Yes, there's a mix, Bill, right? So these are typically -- and you obviously know this well coming from what you did prior. These tend to have sort of a mix of kind of base and then some bullets. And so it will cause, at times, a bit of, I would say, lumpiness on top of our normal, I would say, recurring revenue. But ultimately, in terms of the ability for us to recognize and achieve this, we feel incredibly confident that we'll be able to see the full value of the contract pull-through.

And are the milestones, they're all within your control? Or is any element dependent on AZ's success developing some kind of a product?

Yes, this is not an at-risk deal, just to be clear, right? So this is -- when we're talking about milestones, we're talking about deliverables, right? So think about we're building algorithms, we're deploying algorithms, right? We're bringing back unique multimodal data sets, et cetera. And so in that, think about there just being the normal staging within a project. But this is not something where we are taking clinical risk or some other aspect. It's much more suited with generally their overall development of their pipeline. And so it's not tied to sort of a specific drug, et cetera.

Okay. And anything that would come out of this that could be a product that generates ongoing revenue for SOPHiA?

Yes. I would say, Bill, this is probably too early to talk about this in that way. But certainly, as we think about these sorts of deals in general, our ultimate goal is to bring unique tools to our clinical customers, right, to enable them to better identify patients or to better treat patients and prescribe therapy. And so closing that flywheel loop of clinical and pharma is obviously the end result we're seeking. But these are early-stage engagements. And obviously, we're all seeking to kind of bring that view of data-driven medicine closer to the patient, but it doesn't happen overnight. So that would be a separate engagement relative to this. But ultimately, that's where, with AZ as well as any pharma, we're trying to drive this to close that flywheel to improve patient outcomes.

But overall, Bill, I would highlight that as we had mentioned earlier and even in Q1 earnings, the clinical business is growing nicely and will continue to accelerate. This quarter, we grew 20% year-on-year. The bookings have been excellent, the number of implementation as well. And now having BioPharma that start to be fixed again gives us a lot of hope to further accelerate our growth at some point.

And then just one last thing on AZ, if I could, one follow-up question. I know I'm asking a lot. But I get your reluctance to size it. I just -- if I think about 4% drag on revenue this quarter, that's about $2.6 million. I just want to make sure people aren't running away with this thing. I mean we're not talking $10 million or something like that. It sounds like maybe we're talking $3 million-ish or something more in that ballpark. I mean, just anything you can give so that folks don't get ahead of themselves.

Yes, Bill, we said it's material. So I'll leave it at that. We're not going to size it. So -- but I would say, in general, there's obviously, as you mentioned, different flavors of types of pharma relationships, and this is a large one. So again, without putting a specific number on it, I would think about it more for us is helping to give you now, as George mentioned, visibility to the back half and some of the back half ramp, right, as well as giving you confidence that, obviously, we've returned to more normalized growth rates, and we're still looking for ideally further acceleration in the clinical business. Now you have something that's additive to that. So no, I don't think anyone needs to go and sort of add a significant number to the out years. But I think, obviously, for a while, we've been quite confident of getting back to normalized growth rates, and this is another proof point.

Perfect. And then just the last thing has nothing to do with AZ. But can you just talk to us about the terms of the Perceptive financing.

George?

Yes. It's the -- well, it's not LIBOR anymore. It's SOFR, I think, the secured overnight financing rate, plus 6%. So that is the standard term about this. And they're also -- and this is disclosed in our SEC documents, they received 200,000 warrants for the first tranche and an additional 200,000 warrants for the second tranche. But Perceptive has been very good to work with, and I think we have a very positive relationship with them, and we certainly look to continue and maybe even expand that relationship.

Your next question comes from Mark Massaro of BTIG.

This is Vivian on for Mark. I'll just keep it to one. Just on the implementation timelines, I think you previously talked about that being in the range of 6 to 9 months. You also talked about having a double-digit revenue backlog. Just any steps you've taken to nudge closer to 6 months? I think you've talked about different sequencer types in the past, being a headwind here. So just what are some of the puts and takes to the go-live times?

No, it's a very good question. It's obviously an area we're incredibly focused on. And just to give you a flavor, when I was talking about sort of near 12 months, that's typically where we have been seeing the MSK-ACCESS implementations that's not indicative of sort of the broader portfolio. And that's really just because of the, I would say, novel nature of liquid as well as the need to have the tumor normal match pairs, right, when you're doing your validation work, which are harder samples to acquire than is typical for some organizations. But I would say, overall, we've spent a lot of time and effort, and we'll continue to put in and utilize both improved processes and automation and AI to kind of enable us to engage with our customers better and speed the time to market of some of these solutions. To give you an example, we have a very important exome client that we signed in the first quarter that will come online late summer, right? So it was a late Q1 signing, and they're already going to be generating revenue in the August time period. So we do have examples now on the, I would say, faster end, particularly when it's one of our more standard products that we've deployed many times on a sequencer that we're obviously quite accustomed to. So again, I would say, overall, often, this sometimes does depend on the customer, but we are compressing those time lines, and it will ease that path to revenue, and it's something we remain incredibly focused on because, as you mentioned, it's exciting to have the forward visibility of the backlog, but obviously, we'd rather see that pull through, right? And so as that happens, obviously, you will see that come through on the revenue line.

There are no further questions at this time. I will now turn the call over to Jurgi Camblong. Please continue.

Thank you all for joining us today in our Q2 2025 earnings call. Thank you as well to the SOPHiA employees for their dedication to our mission, to our partners, customers, and investors, and looking forward to update you in November for our Q3 performance. Have a good day.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.