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10-Q

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


☐	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.

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.

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.

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	)		—		(