23andMe Reports FY2023 First Quarter Financial Results

August 8, 2022

First quarter revenue grew 9% to $64.5 million
Consumer revenue grew 17% year over year due to the addition of telehealth revenue
On 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.”

Recent Highlights

  • 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 report
    • Psoriasis report
    • Rosacea report
  • Added 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.

Forward-Looking Statements

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.


Investor Relations Contact: investors@23andMe.com
Media Contact: press@23andMe.com

23andMe Holding Co.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)

  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 
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 
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)

  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)

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)
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)

  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) 
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) 

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