Last Updated on August 8, 2022 by GlobeNewsWire
First quarter revenue grew 9% to $64.5 millionConsumer revenue grew 17% year over year due to the addition of telehealth revenueOn track to achieve FY2023 financial guidance
SOUTH SAN FRANCISCO, Calif., Aug. 08, 2022 (GLOBE NEWSWIRE) — 23andMe Holding Co. (Nasdaq: ME) (“23andMe”), a leading consumer genetics and research company with a mission to help people access, understand, and benefit from the human genome, today reported its financial results for the first quarter (“Q1”) of its fiscal year 2023 (“FY2023”), which ended June 30, 2022. 23andMe is the only company with multiple FDA authorizations for over-the-counter genetic health risk reports, and in particular the only company FDA authorized to provide, without physician involvement, genetic cancer risk reports and medication insights on how individuals may process certain commonly prescribed medications based on their genetics. The Company has also created the world’s largest crowdsourced platform for genetic research, which it is using to pursue drug discovery programs rooted in human genetics across a spectrum of disease areas.
“During our first fiscal quarter, we continued to make progress in both our consumer and therapeutics businesses. In the consumer business, we continue to work on developing a genetic health service designed to integrate genetic health risk information into primary care with the goal of preventing or better managing disease,” said Anne Wojcicki, Chief Executive Officer and Co-Founder of 23andMe. “In our therapeutics efforts, we’ve used our research platform to create a pipeline of more than 50 programs, backed by human genetic data, with two now in Phase 1 clinical trials. We believe the new therapeutics that come out of our discovery engine will eventually play a significant role in helping people benefit from the human genome.”
Began offering genetic report consultations with a Lemonaid Health clinician that can help customers better understand the potential impact of their genetic risk profile and discuss potential next steps.Expanded customer database to approximately 13.1 million genotyped customers.Launched three new reports for customers subscribed to 23andMe+, a membership service that offers insights and features to give members even more actionable information to live healthier lives. These new reports use machine learning to create a statistical model that estimates a person’s likelihood of developing a specific condition using thousands of genetic markers, along with a person’s ethnicity and birth sex. The new reports released in the first quarter were: Glaucoma reportPsoriasis reportRosacea reportAdded an update to 23andMe’s Nonsyndromic Hearing Loss and Deafness, DFNB1 (GJB2-Related) Carrier Status report that adds six variants that improve the coverage of the test for people with East Asian, Southeast Asian, and South Asian ancestry.Published results from studies that provide further insights into long COVID, sarcoidosis and bipolar disorder.
“Our first fiscal quarter results were consistent with our expectations and keep us on track to achieve our previously-disclosed full-year financial guidance,” said Steve Schoch, Chief Financial Officer of 23andMe. “We continue to focus our efforts on creating a new consumer experience with our genetic health service and advancing our therapeutics programs, which we believe will provide our best opportunities to fuel future growth and progress towards profitability.”
FY2023 First Quarter Financial Results Total revenue for the three months ended June 30, 2022, was $65 million, compared to $59 million for the same period in the prior year, representing an increase of 9%. First quarter revenue growth was primarily due to the inclusion of a full quarter of telehealth services and an increase in subscription revenue. These increases were partially offset by lower revenue in the other areas of Consumer & Research Services.
Consumer Services revenue represented approximately 87% of total revenue for the three months ended June 30, 2022, and Research Services revenue, substantially all derived from the collaboration with GSK, accounted for approximately 13% of total revenue.
Operating expenses for the three months ended June 30, 2022 were $115 million, compared to $72 million for the same period in the prior year. The increase in operating expenses was primarily attributable to increased labor costs and the addition of sales and marketing expenses from the previously acquired telehealth business. These were partially offset by lower R&D expenses due to decreased spending on the GSK6097608 (GSK’608) program following the company’s election to adopt the royalty option for the program from the previous cost sharing arrangement on development costs.
Net loss for the three months ended June 30, 2022 was $90 million, compared to a net loss of $42 million for the same period in the prior year. The increase in net loss for the three-month period ended June 30, 2022 was primarily driven by higher operating expenses (as noted above).
Total Adjusted EBITDA (as defined below) for the three months ended June 30, 2022 was a deficit of $50 million, compared to a deficit of $27 million for the same period in the prior year. The increase in total Adjusted EBITDA deficit was driven primarily by the increase in operating expenses, discussed above. Adjusted EBITDA for the three months ended June 30, 2022 for the Consumer & Research Services segment was a deficit of $17 million, compared to a deficit of $1 million for the same period in the prior year. The decrease in this segment was driven primarily by the increase in operating expenses listed above.
Balance Sheet 23andMe ended Q1 FY2023 with cash of $479 million, compared to $553 million as of March 31, 2022. The decrease was primarily attributable to the Company’s overall operating cash flow deficit.
FY2023 Financial Guidance 23andme reconfirmed its full year guidance following Q1 FY2023 results. Full year revenue for fiscal 2023, which will end on March 31, 2023, is projected to be in the range of $260 to $280 million, with a net loss in the range of $350 to $370 million. The full year adjusted EBITDA deficit is projected to be in the range of $195 to $215 million for fiscal year 2023. As a reminder, this guidance includes the full-year impact of the consolidation of the company’s acquired telehealth business into its overall consumer business as well as the current and anticipated effects of general inflation on certain of our costs.
Conference Call Webcast Information 23andMe will host a conference call at 4:30 p.m. Eastern Time on Monday, August 8, 2022 to discuss the financial results for Q1 FY2023 and report on business progress. The webcast can be accessed on the day of the event at https://investors.23andme.com/news-events/events-presentations. A webcast replay will be available at the same address for a limited time within 24 hours after the event.
About 23andMe 23andMe is a genetics-led consumer healthcare and therapeutics company empowering a healthier future. For more information, please visit investors.23andme.com.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the future performance of 23andMe’s businesses in consumer genetics and therapeutics and the growth and potential of its proprietary research platform. All statements, other than statements of historical fact, included or incorporated in this press release, including statements regarding 23andMe’s strategy, financial position, funding for continued operations, cash reserves, projected costs, plans, and objectives of management, are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “predicts,” “continue,” “will,” “schedule,” and “would” or, in each case, their negative or other variations or comparable terminology, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are predictions based on 23andMe’s current expectations and projections about future events and various assumptions. 23andMe cannot guarantee that it will actually achieve the plans, intentions, or expectations disclosed in its forward-looking statements and you should not place undue reliance on 23andMe’s forward-looking statements. These forward-looking statements involve a number of risks, uncertainties (many of which are beyond the control of 23andMe), or other assumptions that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the Securities and Exchange Commission, including under Item 1A, “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and in its subsequent reports on Forms 10-Q and 8-K. The statements made herein are made as of the date of this press release and, except as may be required by law, 23andMe undertakes no obligation to update them, whether as a result of new information, developments, or otherwise.
Use of Non-GAAP Financial Measure
To supplement the 23andMe’s unaudited condensed consolidated statements of operations and unaudited condensed consolidated balance sheets, which are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), this press release also includes references to Adjusted EBITDA, which is a non-GAAP financial measure that 23andMe defines as net income before net interest expense (income), net other expense (income), changes in fair value of warrant liabilities, income tax benefit, depreciation and amortization of fixed assets, amortization of internal use software, amortization of acquired intangible assets, non-cash stock-based compensation expense, acquisition-related costs, and expenses related to restructuring and other charges, if applicable for the period. 23andMe has provided a reconciliation of net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA at the end of this press release.
Adjusted EBITDA is a key measure used by 23andMe’s management and the board of directors to understand and evaluate operating performance and trends, to prepare and approve 23andMe’s annual budget and to develop short- and long-term operating plans. 23andMe provides Adjusted EBITDA because 23andMe believes it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry and it facilitates comparisons on a consistent basis across reporting periods. Further, 23andMe believes it is helpful in highlighting trends in its operating results because it excludes items that are not indicative of 23andMe’s core operating performance. In particular, 23andMe believes that the exclusion of the items eliminated in calculating Adjusted EBITDA provides useful measures for period-to-period comparisons of 23andMe’s business. Accordingly, 23andMe believes that Adjusted EBITDA provides useful information in understanding and evaluating operating results in the same manner as 23andMe’s management and board of directors.
In evaluating Adjusted EBITDA, you should be aware that in the future 23andMe will incur expenses similar to the adjustments in this presentation. 23andMe’s presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by these expenses or any unusual or non-recurring items. Adjusted EBITDA should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. Other companies, including companies in the same industry, may calculate similarly-titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of Adjusted EBITDA as a tool for comparison. There are a number of limitations related to the use of these non-GAAP financial measures rather than net loss, which is the most directly comparable financial measure calculated in accordance with GAAP. Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. When evaluating 23andMe’s performance, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss and other GAAP results.
23andMe Holding Co. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share amounts) (Unaudited)
Three Months Ended June 30, 2022 2021 Revenue (related party amounts of $8,265 and $11,209 for the three months ended June 30, 2022 and 2021, respectively) $64,513 $59,239 Cost of revenue (related party amounts of $(239) and $448 for the three months ended June 30, 2022 and 2021, respectively) 39,023 28,542 Gross profit 25,490 30,697 Operating expenses: Research and development (related party amounts of $3,549 and $6,022 for the three months ended June 30, 2022 and 2021, respectively) 52,009 44,232 Sales and marketing 33,434 15,419 General and administrative 29,643 12,596 Total operating expenses 115,086 72,247 Loss from operations (89,596) (41,550)Other income (expense): Interest income, net 245 44 Change in fair value of warrant liabilities — (534)Other income (expense), net (435) 14 Loss before income taxes (89,786) (42,026)Benefit from income taxes 254 — Net loss $(89,532) $(42,026)Other comprehensive income 624 — Total comprehensive loss $(88,908) $(42,026)Net loss per share of Class A and Class B common stock attributable to common stockholders: Basic and diluted $(0.20) $(0.25)Weighted-average shares used to compute net loss per share: Basic and diluted 446,505,329 168,191,762
23andMe Holding Co. Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts)
June 30, March 31, 2022 2022 (Unaudited) ASSETS Current assets: Cash $479,398 $553,182 Restricted cash 1,599 1,599 Accounts receivable, net 2,920 3,380 Inventories 11,461 10,789 Deferred cost of revenue 6,546 7,700 Prepaid expenses and other current assets 17,883 25,139 Total current assets 519,807 601,789 Property and equipment, net 46,914 49,851 Operating lease right-of-use assets 53,745 55,577 Restricted cash, noncurrent 6,974 6,974 Internal-use software, net 10,294 9,635 Intangible assets, net 69,393 73,905 Goodwill 351,744 351,744 Other assets 3,356 2,593 Total assets $1,062,227 $1,152,068 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable (related party amounts of nil and $12,567 as of June 30, 2022 and March 31, 2022, respectively) $18,054 $37,930 Accrued expenses and other current liabilities (related party amounts of $9,082 and $5,772 as of June 30, 2022 and March 31, 2022, respectively) 52,041 44,588 Deferred revenue (related party amounts of $935 and $9,181 as of June 30, 2022 and March 31, 2022, respectively) 49,823 62,939 Operating lease liabilities 7,893 7,784 Total current liabilities 127,811 153,241 Operating lease liabilities, noncurrent 76,236 78,524 Other liabilities 3,984 4,647 Total liabilities $208,031 $236,412 Commitments and contingencies (Note 8) Stockholders’ equity Common Stock – Class A shares, par value $0.0001, 1,140,000,000 shares authorized as of June 30, 2022 and March 31, 2022, 258,952,446 and 228,174,718 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively; Class B shares, par value $0.0001, 350,000,000 shares authorized as of June 30, 2022 and March 31, 2022, 192,373,071 and 220,637,603 shares issued and outstanding as of June 30, 2022 and March 31, 2022, respectively 45 45 Additional paid-in capital 2,137,608 2,110,160 Accumulated other comprehensive income 803 179 Accumulated deficit (1,284,260) (1,194,728)Total stockholders’ equity 854,196 915,656 Total liabilities and stockholders’ equity $1,062,227 $1,152,068
23andMe Holding Co. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
Three Months Ended June 30, 2022 2021 Cash flows from operating activities: Net loss $(89,532) $(42,026) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 8,360 4,093 Amortization and impairment of internal-use software 1,052 545 Stock-based compensation expense 30,462 9,637 Changes in fair value of warrant liabilities — 534 Gain on sale of fixed assets 9 — Gain on lease termination — (15) Changes in operating assets and liabilities: Accounts receivable 460 (6,923) Inventories (673) (9,033) Deferred cost of revenue 1,154 (638) Prepaid expenses and other current assets 7,259 (1,057) Operating lease right-of-use assets 1,833 1,812 Other assets (765) 101 Accounts payable (related party amounts of $(12,567) and $2,182 for the three months ended June 30, 2022 and 2021, respectively) (19,154) 5,721 Accrued expenses and other current liabilities (related party amounts of $3,310 and $(134) for the three months ended June 30, 2022 and 2021, respectively) 2,454 (286) Deferred revenue (related party amounts of $(8,246) and $(11,209) for the three months ended June 30, 2022 and 2021, respectively) (13,116) (5,152) Operating lease liabilities (2,179) (1,868) Other liabilities (664) 22 Net cash used in operating activities (73,040) (44,533) Cash flows from investing activities: Purchases of property and equipment (1,614) (666) Capitalized internal-use software costs (1,286) (721) Net cash used in investing activities (2,900) (1,387) Cash flows from financing activities: Proceeds from exercise of stock options 1,533 2,720 Payments of deferred offering costs — (29,071) Proceeds from issuance of common stock upon Merger — 309,720 Proceeds from PIPE (related party amounts of nil and $25,000 for the three months ended June 30, 2022 and 2021, respectively) — 250,000 Net cash provided by financing activities 1,533 533,369 Effect of exchange rates on cash 623 — Net increase (decrease) in cash and restricted cash (73,784) 487,449 Cash and restricted cash–beginning of period 561,755 290,862 Cash and restricted cash–end of period 487,971 778,311 Supplemental disclosures of non-cash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued expenses 28 777 Stock-based compensation capitalized for internal-use software costs 573 168 Reclassification of deferred offering costs — 3,971 Assumption of merger warrants liability — 75,415 Deferred offering costs during the period included in accounts payable and accrued expenses — 1,571 Conversion of redeemable convertible preferred stock to common stock — 837,351 Reconciliation of cash and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above: Cash 479,398 769,938 Restricted cash, current 1,599 1,399 Restricted cash, noncurrent 6,974 6,974 Total cash and restricted cash $487,971 $778,311
23andMe Holding Co. Total Company and Segment Information and Reconciliation of Non-GAAP Financial Measures (in thousands) (Unaudited)
The Company’s revenue and Adjusted EBITDA by segment and for the total Company is as follows:
Three Months Ended June 30, 2022 2021 Segment Revenue Consumer and Research Services $64,513 $59,239 Total Revenue (1) $64,513 $59,239 Segment Adjusted EBITDA Consumer and Research Services Adjusted EBITDA $(16,997) $(505)Therapeutics Adjusted EBITDA (18,465) (18,303)Unallocated Corporate(1) (14,253) (8,467)Total Adjusted EBITDA $(49,715) $(27,275) Reconciliation of net loss to Adjusted EBITDA Net Loss $(89,532) $(42,026)Adjustments: Interest (income) expense, net (245) (44)Other (income) expense, net 435 (14)Change in fair value of warrant liabilities — 534 Income tax benefit (254) — Depreciation and amortization 5,104 4,638 Amortization of acquired intangible assets 4,315 — Stock-based compensation expense 30,462 9,637 Total Adjusted EBITDA $(49,715) $(27,275)
(1) Certain expenses such as Finance, Legal, Regulatory and Supplier Quality, Corporate Communications and CEO Office are not reported as part of the reporting segments as reviewed by the CODM. These amounts are included in Unallocated Corporate.
23andMe Holding Co. Reconciliation of GAAP Net Income Outlook to non-GAAP Adjusted EBITDA Outlook (in thousands) (Unaudited)
Outlook for the Year Ended March 31, 2023 as of August 8, 2022 Low High Reconciliation of estimated net loss to adjusted EBITDA GAAP Net Loss outlook $(370,000) $(350,000) Adjustments: Estimated interest (income) expense, net (217) (217) Estimated other (income) expense, net (286) (286) Estimated income tax benefit — — Estimated depreciation and amortization 20,605 20,605 Estimated amortization of acquired intangible assets 17,393 17,393 Estimated stock-based compensation expense 117,505 117,505 Non-GAAP adjusted EBITDA outlook $(215,000) $(195,000)