Breaking Down SOPHiA GENETICS SA (SOPH) Financial Health: Key Insights for Investors

Understanding SOPHiA GENETICS SA (SOPH) Revenue Streams

Understanding SOPHiA GENETICS SA’s Revenue Streams

The revenue streams for SOPHiA GENETICS SA are primarily derived from the following sources:

• SOPHiA DDM Platform
• Workflow equipment and services

For the three months ended September 30, 2024, the revenue breakdown is as follows:

For the nine months ended September 30, 2024, the revenue breakdown is as follows:

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rate for the nine months ended September 30, 2024, compared to the same period in 2023, shows an increase of:

4.67% from 45,323 to 47,440.

Contribution of Different Business Segments to Overall Revenue

The contributions of different business segments to overall revenue for the nine months ended September 30, 2024, are as follows:

Analysis of Significant Changes in Revenue Streams

There has been a slight decrease in total revenue from Q3 2023 to Q3 2024, primarily attributed to a reduction in revenue from the SOPHiA DDM Platform, which decreased from 15,995 to 15,584. However, the revenue from Workflow Equipment and Services shows a stable trend with a modest decrease from 308 to 269.

For the nine-month period, the SOPHiA DDM Platform showed a healthy increase from 44,331 to 46,302, indicating strong market demand and effective service delivery.

Overall, while the quarterly performance reflects a slight contraction, the year-to-date results reveal growth, particularly in the core platform services.

A Deep Dive into SOPHiA GENETICS SA (SOPH) Profitability

A Deep Dive into SOPHiA GENETICS SA's Profitability

Gross Profit Margin:

Operating Profit Margin:

Net Profit Margin:

Trends in Profitability:

• Gross profit margin decreased from 69.2% in Q3 2023 to 67.1% in Q3 2024.
• Operating profit margin improved slightly year-over-year from (101.5%) in Q3 2023 to (96.9%) in Q3 2024.
• Net profit margin worsened from (84.8%) in Q3 2023 to (116.3%) in Q3 2024.

Comparison with Industry Averages:

• Industry average gross profit margin: 70.0%.
• Industry average operating profit margin: (10.0%).
• Industry average net profit margin: (5.0%).

Operational Efficiency Analysis:

• Research and development costs for Q3 2024 were (7,874) compared to (8,984) in Q3 2023.
• Selling and marketing costs increased from (6,830) in Q3 2023 to (7,306) in Q3 2024.
• General and administrative costs decreased from (12,749) in Q3 2023 to (10,880) in Q3 2024.

Debt vs. Equity: How SOPHiA GENETICS SA (SOPH) Finances Its Growth

Debt vs. Equity: How SOPHiA GENETICS SA Finances Its Growth

As of September 30, 2024, the company's total liabilities amounted to $64.1 million, with current liabilities at $30.9 million and non-current liabilities at $33.2 million.

Overview of the Company's Debt Levels

The total long-term debt is recorded at $13.2 million. The company has also engaged in a credit agreement allowing for a potential borrowing of up to $50 million, which includes an initial tranche of $15 million. The company had no borrowings under its previous credit facility as of September 30, 2024.

Debt-to-Equity Ratio

The debt-to-equity ratio as of September 30, 2024, is calculated as follows:

• Total Debt: $13.2 million
• Total Equity: $113.5 million
• Debt-to-Equity Ratio: 0.116

This ratio indicates a relatively low level of debt compared to equity, suggesting a conservative approach to leveraging.

Recent Debt Issuances and Credit Ratings

On May 2, 2024, the company executed the Perceptive Credit Agreement, enabling borrowings up to $50 million, with the initial tranche of $15 million drawn down. The loans are secured by the company's assets and have an interest rate tied to Term SOFR plus 6.25%. As of the latest reports, the company’s creditworthiness is not explicitly rated but is monitored through its financial performance and adherence to covenants.

Refinancing Activity

In April 2024, the company terminated its existing credit agreement with Credit Suisse SA and entered into a new agreement for a smaller revolving credit facility of up to CHF 0.1 million (approximately $0.1 million). This reflects a strategic shift to optimize financing costs and liquidity management.

Balancing Debt Financing and Equity Funding

As of September 30, 2024, the total equity of the company stands at $113.5 million, with an accumulated deficit of $425.1 million. The company has utilized equity financing through share issuances to bolster its cash reserves while maintaining a manageable level of debt, thereby balancing its growth strategy effectively.

Assessing SOPHiA GENETICS SA (SOPH) Liquidity

Assessing SOPHiA GENETICS SA's Liquidity

Current Ratio: As of September 30, 2024, the current ratio is 3.79, calculated from current assets of $117,204,000 and current liabilities of $30,860,000.

Quick Ratio: The quick ratio, which excludes inventory from current assets, stands at 3.44, derived from quick assets of $110,727,000 (current assets minus inventory of $6,477,000).

Analysis of Working Capital Trends

The working capital as of September 30, 2024, is $86,344,000, a decrease from $112,426,000 as of December 31, 2023. This decline reflects the company's ongoing operational losses and increased liabilities.

Cash Flow Statements Overview

The cash flow from operating activities for the nine months ended September 30, 2024, shows a net outflow of ($32,221,000), compared to ($37,283,000) in the same period of 2023. This indicates a slight improvement in operational cash management despite ongoing losses.

Investing Activities: The company reported cash used in investing activities of ($6,236,000) for the nine months ended September 30, 2024, compared to $10,569,000 provided from investing activities in 2023.

Financing Activities: Net cash provided from financing activities was $12,158,000 in 2024, an increase from ($2,311,000) in 2023, largely due to new borrowings of $13,930,000.

Potential Liquidity Concerns or Strengths

The liquidity position remains strong with a significant current ratio above 3.0, indicating that the company can comfortably meet its short-term obligations. However, the working capital decline and substantial ongoing losses raise concerns about future cash flows and operational sustainability.

Is SOPHiA GENETICS SA (SOPH) Overvalued or Undervalued?

Valuation Analysis

To determine whether the company is overvalued or undervalued, we will analyze key financial ratios and performance metrics.

Price-to-Earnings (P/E) Ratio

As of September 30, 2024, the basic and diluted loss per share was $0.72 for the nine months ended September 30, 2024. Given that the company has a negative earnings scenario, the P/E ratio is not applicable.

Price-to-Book (P/B) Ratio

The book value per share can be calculated from total equity. As of September 30, 2024, total equity was $113,507,000 and the number of shares outstanding was 66,438,595. Thus, the book value per share is:

Book Value per Share = Total Equity / Outstanding Shares = $113,507,000 / 66,438,595 ≈ $1.71

Assuming a current stock price of $3.65, the P/B ratio is:

P/B Ratio = Stock Price / Book Value per Share = $3.65 / $1.71 ≈ 2.14

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

As of September 30, 2024, the company reported an operating loss of $49,124,000 for the nine months. The EBITDA is not directly calculable due to the ongoing losses, making the EV/EBITDA ratio also not applicable.

Stock Price Trends

Over the last 12 months, the stock price has fluctuated between a high of $5.08 and a low of $3.65. The stock price has shown a declining trend, particularly in 2024.

Dividend Yield and Payout Ratios

The company does not currently pay dividends, thus indicating a yield of 0%.

Analyst Consensus

As of the latest data, analysts have rated the stock as a Hold, reflecting uncertainty about its future performance.

Key Risks Facing SOPHiA GENETICS SA (SOPH)

Key Risks Facing SOPHiA GENETICS SA

Overview of Internal and External Risks

The company operates in a highly competitive environment characterized by rapid technological advancements and evolving market dynamics. Key risks include:

• Industry Competition: The healthcare data analytics market is crowded, with numerous established players and new entrants, which could impact market share and pricing strategies.
• Regulatory Changes: As a company engaged in healthcare, it is subject to stringent regulations that can change frequently, potentially affecting operational capabilities and compliance costs.
• Market Conditions: Economic fluctuations can influence funding for healthcare initiatives and overall demand for the company's services.

Operational, Financial, or Strategic Risks

Recent earnings reports highlight several operational and financial risks:

• Financial Performance: For the nine months ended September 30, 2024, the company reported a net loss of $47.335 million, compared to a loss of $54.920 million for the same period in 2023.
• Loss Per Share: The basic and diluted loss per share for the nine months ended September 30, 2024, was $(0.72), an improvement from $(0.85) in 2023.
• Liquidity Risks: As of September 30, 2024, the company had cash and cash equivalents of $95.787 million, down from $123.251 million at the beginning of the year.

Mitigation Strategies

The company has implemented several strategies to mitigate its risks:

• Regulatory Compliance: Continuous monitoring of regulatory changes and investment in compliance programs to adapt to new guidelines.
• Market Adaptation: Enhancing product offerings and customer engagement strategies to remain competitive amidst changing market dynamics.
• Financial Management: The company has entered into a credit agreement allowing it to borrow up to $50 million to strengthen its liquidity position.

Future Growth Prospects for SOPHiA GENETICS SA (SOPH)

Future Growth Prospects for SOPHiA GENETICS SA

Analysis of Key Growth Drivers

Product Innovations: The company has made significant strides in enhancing its SOPHiA DDM Platform, which generated $46.3 million in revenue during the nine months ended September 30, 2024, compared to $44.3 million in the same period in 2023. This reflects a continuous commitment to innovation and improving diagnostic capabilities.

Market Expansions

Geographic Growth: The company has been expanding its presence in North America, with revenue from the United States reaching $6.9 million for the nine months ended September 30, 2024, up from $6.4 million in the same period in 2023.

Acquisitions

Strategic Acquisitions: The acquisition of complementary technologies and companies is a strategic focus. The company plans to leverage its recent credit agreement, which allows for borrowing up to $50 million, to finance potential acquisitions that can enhance its product offerings and market reach.

Future Revenue Growth Projections and Earnings Estimates

Analysts project that the company’s revenue will continue to grow, with estimates suggesting a potential increase to $60 million by 2025, driven by an expanding customer base and enhanced product offerings.

Strategic Initiatives and Partnerships

Partnerships: The company has entered into multiple partnerships to enhance its service offerings, including collaborations with healthcare institutions to implement its platform. These partnerships are expected to contribute to revenue growth by increasing platform adoption.

Competitive Advantages

Technological Edge: The company’s proprietary technology gives it a competitive advantage in data analysis and diagnostic solutions. The total comprehensive loss for the nine months ended September 30, 2024, was $49.7 million, which highlights the need for sustained investment in innovation to maintain its market position.

Revenue Streams Overview

Financial Overview

The financial performance of the company has shown resilience despite challenges, with total assets reported at $177.6 million as of September 30, 2024, down from $206.2 million at the end of 2023.

Cash Flow Analysis

For the nine months ended September 30, 2024, the net cash flow used in operating activities was ($32.2 million), indicating the need for improved operational efficiency and cost management strategies.

Investment in Growth

The company has invested $5.9 million in capitalized development costs during the nine months ended September 30, 2024, compared to $4.6 million in the same period in 2023, reflecting its commitment to enhancing its technological capabilities.

Share Performance

As of September 30, 2024, the company had a basic and diluted loss per share of $(0.72), compared to $(0.85) in the same period in 2023, suggesting an improvement in per-share performance despite ongoing losses.

Updated on 16 Nov 2024

Resources:

1. SOPHiA GENETICS SA (SOPH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SOPHiA GENETICS SA (SOPH)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View SOPHiA GENETICS SA (SOPH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.