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Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from

 

to

 

 

Commission file number 001-39587

23ANDME HOLDING CO.

(Exact name of registrant as specified in its charter)

 

Delaware

87-1240344

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

349 Oyster Point Boulevard

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

 

(650) 938-6300

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

ME

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No

As of January 31, 2023, there were 288,746,230 shares of Class A common stock, $0.0001 par value per share, and 168,502,918 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.

 


Table of Contents

 

23ANDME HOLDING CO.

TABLE OF CONTENTS

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

4

Condensed Consolidated Balance Sheets

4

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

Condensed Consolidated Statements of Stockholders’ Equity

6

Condensed Consolidated Statements of Cash Flows

8

Notes to the Condensed Consolidated Financial Statements

10

 

 

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

44

Item 4. Controls and Procedures

45

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

47

Item 1A. Risk Factors

47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3. Defaults Upon Senior Securities

47

Item 4. Mine Safety Disclosures

47

Item 5. Other Information

47

Item 6. Exhibits

48

Signature

49

 

 


Table of Contents

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including, without limitation, statements under the headings “Management's Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Generally, statements that are not historical facts, including statements concerning 23andMe Holding Co.’s (the “Company,” “we,” “us,” or “our”) possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. In some instances, these forward-looking statements can be identified by the use of forward-looking terminology, including, without limitation, words like “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations.

The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs, which we believe to be reasonable, concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control), and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, without limitation, those factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on May 27, 2022, as amended by Amendment No. 1 on Form 10-K/A filed with the SEC on August 9, 2022 (the “Fiscal 2022 Form 10-K”) and our subsequent reports filed with the SEC. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition, and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

3


Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

December 31,

 

 

March 31,

 

 

 

2022

 

 

2022

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

432,801

 

 

$

553,182

 

Restricted cash

 

 

1,399

 

 

 

1,599

 

Accounts receivable, net (includes related party amounts of $3,636 and zero, respectively)

 

 

26,808

 

 

 

3,380

 

Inventories

 

 

11,960

 

 

 

10,789

 

Deferred cost of revenue

 

 

14,336

 

 

 

7,700

 

Prepaid expenses and other current assets

 

 

21,367

 

 

 

25,139

 

Total current assets

 

 

508,671

 

 

 

601,789

 

Property and equipment, net

 

 

40,791

 

 

 

49,851

 

Operating lease right-of-use assets

 

 

49,987

 

 

 

55,577

 

Restricted cash, noncurrent

 

 

6,974

 

 

 

6,974

 

Internal-use software, net

 

 

13,823

 

 

 

9,635

 

Intangible assets, net

 

 

49,362

 

 

 

73,905

 

Goodwill

 

 

351,744

 

 

 

351,744

 

Other assets

 

 

3,302

 

 

 

2,593

 

Total assets

 

$

1,024,654

 

 

$

1,152,068

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable (includes related party amounts of zero and $12,567, respectively)

 

$

13,984

 

 

$

37,930

 

Accrued expenses and other current liabilities (includes related party amounts of $9,862 and $5,772, respectively)

 

 

69,036

 

 

 

44,588

 

Deferred revenue (includes related party amounts of $22,943 and $9,181, respectively)

 

 

108,934

 

 

 

62,939

 

Operating lease liabilities

 

 

8,159

 

 

 

7,784

 

Total current liabilities

 

 

200,113

 

 

 

153,241

 

Operating lease liabilities, noncurrent

 

 

71,441

 

 

 

78,524

 

Other liabilities

 

 

2,108

 

 

 

4,647

 

Total liabilities

 

 

273,662

 

 

 

236,412

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Common Stock, par value $0.0001 - Class A shares, 1,140,000,000 shares authorized, 288,629,645 and 228,174,718 shares issued and outstanding as of December 31, 2022 and March 31, 2022, respectively; Class B shares, 350,000,000 shares authorized, 168,531,838 and 220,637,603 shares issued and outstanding as of December 31, 2022 and March 31, 2022, respectively

 

 

45

 

 

 

45

 

Additional paid-in capital

 

 

2,193,544

 

 

 

2,110,160

 

Accumulated other comprehensive income

 

 

(311

)

 

 

179

 

Accumulated deficit

 

 

(1,442,286

)

 

 

(1,194,728

)

Total stockholders’ equity

 

 

750,992

 

 

 

915,656

 

Total liabilities and stockholders’ equity

 

$

1,024,654

 

 

$

1,152,068

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


Table of Contents

 

23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
December 31,

 

 

Nine Months Ended
December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue (includes related party revenue of $13,068, $8,069, $36,258 and $29,281, respectively)

 

$

66,940

 

 

$

56,891

 

 

$

207,112

 

 

$

171,334

 

Cost of revenue (includes related party costs of $231, $(54), $(279) and $209, respectively)

 

 

36,189

 

 

 

29,628

 

 

 

112,598

 

 

 

85,446

 

Gross profit

 

 

30,751

 

 

 

27,263

 

 

 

94,514

 

 

 

85,888

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (includes related party expenses of $3,251, $6,300, $9,517 and $18,185, respectively)

 

 

57,270

 

 

 

50,298

 

 

 

161,877

 

 

 

139,053

 

Sales and marketing

 

 

39,879

 

 

 

41,979

 

 

 

98,148

 

 

 

70,987

 

General and administrative

 

 

30,702

 

 

 

31,687

 

 

 

89,226

 

 

 

60,547

 

Total operating expenses

 

 

127,851

 

 

 

123,964

 

 

 

349,251

 

 

 

270,587

 

Loss from operations

 

 

(97,100

)

 

 

(96,701

)

 

 

(254,737

)

 

 

(184,699

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

3,671

 

 

 

76

 

 

 

5,307

 

 

 

213

 

Change in fair value of warrant liabilities

 

 

 

 

 

3,695

 

 

 

 

 

 

32,989

 

Other income (expense), net

 

 

855

 

 

 

22

 

 

 

(267

)

 

 

39

 

Loss before income taxes

 

 

(92,574

)

 

 

(92,908

)

 

 

(249,697

)

 

 

(151,458

)

Benefit from income taxes

 

 

613

 

 

 

3,512

 

 

 

2,139

 

 

 

3,512

 

Net loss

 

$

(91,961

)

 

$

(89,396

)

 

$

(247,558

)

 

$

(147,946

)

Other comprehensive loss, net of tax

 

 

(1,943

)

 

 

(36

)

 

 

(490

)

 

 

(36

)

Total comprehensive loss

 

$

(93,904

)

 

$

(89,432

)

 

$

(248,048

)

 

$

(147,982

)

Net loss per share of Class A and Class B common stock attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.20

)

 

$

(0.21

)

 

$

(0.55

)

 

$

(0.44

)

Weighted-average shares used to compute net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

453,407,202

 

 

 

426,591,111

 

 

 

449,949,829

 

 

 

334,491,905

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


Table of Contents

 

23ANDME HOLDING CO.

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Redeemable Convertible
Preferred Stock

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2022

 

 

 

 

$

 

 

 

448,812,321

 

 

$

45

 

 

$

2,110,160

 

 

$

179

 

 

$

(1,194,728

)

 

$

915,656

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

1,065,784

 

 

 

 

 

 

1,533

 

 

 

 

 

 

 

 

 

1,533

 

Issuance of common stock upon release of RSUs

 

 

 

 

 

 

 

 

1,461,448

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net share settlements for stock-based minimum tax withholdings

 

 

 

 

 

 

 

 

(14,036

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,915

 

 

 

 

 

 

 

 

 

25,915

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

624

 

 

 

 

 

 

624

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(89,532

)

 

 

(89,532

)

Balance as of June 30, 2022

 

 

 

 

$

 

 

 

451,325,517

 

 

$

45

 

 

$

2,137,608

 

 

$

803

 

 

$

(1,284,260

)

 

$

854,196

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

1,430,629

 

 

 

 

 

 

2,498

 

 

 

 

 

 

 

 

 

2,498

 

Issuance of common stock upon release of RSUs

 

 

 

 

 

 

 

 

1,580,591

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net share settlements for stock-based minimum tax withholdings

 

 

 

 

 

 

 

 

(14,038

)

 

 

 

 

 

(86

)

 

 

 

 

 

 

 

 

(86

)

Issuance of common stock under employee stock purchase plan

 

 

 

 

 

 

 

 

1,130,337

 

 

 

 

 

 

3,238

 

 

 

 

 

 

 

 

 

3,238

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,710

 

 

 

 

 

 

 

 

 

24,710

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

829

 

 

 

 

 

 

829

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(66,065

)

 

 

(66,065

)

Balance as of September 30, 2022

 

 

 

 

$

 

 

 

455,453,036

 

 

$

45

 

 

$

2,167,968

 

 

$

1,632

 

 

$

(1,350,325

)

 

$

819,320

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

96,443

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

49

 

Issuance of common stock upon release of RSUs

 

 

 

 

 

 

 

 

1,631,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net share settlements for stock-based minimum tax withholdings

 

 

 

 

 

 

 

 

(19,311

)