SEC Filing | 23andMe, Inc.

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me-20231231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

____________________________________________

(Mark One)

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

For the quarterly period ended December 31, 2023

o 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 x No o

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 x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. o

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

As of January 31, 2024, there were 315,436,358 shares of Class A common stock, $0.0001 par value per share, and 167,480,278 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.

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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	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	40
Item 6.	Exhibits	41

SIGNATURES		42

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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,” “23andMe,” “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, 2023 filed with the Securities and Exchange Commission (the “SEC”) on May 25, 2023, 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.

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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, 2023		March 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	242,418	$	386,849
Restricted cash	1,399		1,399
Accounts receivable, net	18,154		1,897
Inventories	15,666		10,247
Deferred cost of revenue	12,222		5,376
Prepaid expenses and other current assets	20,100		19,224
Total current assets	309,959		424,992
Property and equipment, net	30,270		38,608
Operating lease right-of-use assets	50,738		56,078
Restricted cash, noncurrent	6,974		6,974
Internal-use software, net	19,827		15,661
Intangible assets, net	35,234		45,520
Goodwill	152,944		351,744
Other assets	2,265		3,021
Total assets	$	608,211	$	942,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable (includes related party amounts of $7,064 and $3,186, respectively)	$	13,166	$	12,924
Accrued expenses and other current liabilities (includes related party amounts of $8,780 and $8,738, respectively)	42,124		66,430
Deferred revenue (includes related party amounts of $5,000 and $11,753, respectively)	80,468		62,521
Operating lease liabilities	8,381		7,541
Total current liabilities	144,139		149,416
Deferred revenue, noncurrent (includes related party amounts of $15,000 and nil, respectively)	15,000		—
Operating lease liabilities, noncurrent	70,441		77,763
Other liabilities	1,443		1,480
Total liabilities	231,023		228,659
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock - par value $0.0001, 10,000,000 shares authorized as of December 31, 2023 and March 31, 2023; zero shares issued and outstanding as of December 31, 2023 and March 31, 2023	—		—
Common stock, par value $0.0001 - Class A shares, 1,140,000,000 shares authorized, 315,073,368 and 293,020,474 shares issued and outstanding as of December 31, 2023 and March 31, 2023, respectively; Class B shares, 350,000,000 shares authorized, 167,480,278 and 168,179,488 shares issued and outstanding as of December 31, 2023 and March 31, 2023, respectively	48		46
Additional paid-in capital	2,341,394		2,220,897
Accumulated other comprehensive loss	—		(620)
Accumulated deficit	(1,964,254)		(1,506,384)
Total stockholders’ equity	377,188		713,939
Total liabilities and stockholders’ equity	$	608,211	$	942,598

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

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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,
	2023		2022		2023		2022
Revenue (includes related party revenue of nil and $13,068 for the three months ended December 31, 2023 and 2022, respectively, and $11,753 and $36,258 for the nine months ended December 31, 2023 and 2022, respectively)	$	44,747	$	66,940	$	155,610	$	207,112
Cost of revenue (includes related party cost of nil and $231 for the three months ended December 31, 2023 and 2022, respectively, and $295 and $(279) for the nine months ended December 31, 2023 and 2022, respectively)	24,811		36,189		83,265		112,598
Gross profit	19,936		30,751		72,345		94,514
Operating expenses:
Research and development (includes related party expenses of $2,781 and $3,251 for the three months ended December 31, 2023 and 2022, respectively, and $10,989 and $9,517 for the nine months ended December 31, 2023 and 2022, respectively)	41,720		57,270		158,637		161,877
Sales and marketing	27,683		39,879		68,669		98,148
General and administrative	31,446		30,702		107,476		89,226
Restructuring and other charges	1,497		—		8,368		—
Goodwill impairment	198,800		—		198,800		—
Total operating expenses	301,146		127,851		541,950		349,251
Loss from operations	(281,210)		(97,100)		(469,605)		(254,737)
Other income (expense):
Interest income, net	3,230		3,671		11,289		5,307
Other income (expense), net	23		855		501		(267)
Loss before income taxes	(277,957)		(92,574)		(457,815)		(249,697)
Provision for (benefit from) income taxes	19		(613)		55		(2,139)
Net loss	(277,976)		(91,961)		(457,870)		(247,558)
Other comprehensive income (loss), net of tax	—		(1,943)		620		(490)
Total comprehensive loss	$	(277,976)	$	(93,904)	$	(457,250)	$	(248,048)
Net loss per share of Class A and Class B common stock attributable to common stockholders:
Basic and diluted	$	(0.58)	$	(0.20)	$	(0.97)	$	(0.55)
Weighted-average shares used to compute net loss per share:
Basic and diluted	480,809,546		453,407,202		472,683,220		449,949,829

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

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23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
Balance as of March 31, 2023	461,199,962	$	46	$	2,220,897	$	(620)	$	(1,506,384)	$	713,939
Issuance of common stock upon exercise of stock options	180,718	—		85		—		—		85
Issuance of common stock upon release of restricted stock units	1,812,802	—		—		—		—		—
Issuance of common stock upon release of restricted stock units under the 2022 Annual Incentive Plan	8,961,053	1		18,629		—		—		18,630
Net share settlements for stock-based minimum tax withholdings	(58,985)	—		(121)		—		—		(121)
Stock-based compensation expense	—	—		47,915		—		—		47,915
Other comprehensive loss	—	—		—		(334)		—		(334)
Net loss	—	—		—		—		(104,624)		(104,624)
Balance as of June 30, 2023	472,095,550	$	47	$	2,287,405	$	(954)	$	(1,611,008)	$	675,490
Issuance of common stock upon exercise of stock options	828,561	—		388		—		—		388
Issuance of common stock upon release of restricted stock units	4,358,378	1		(1)		—		—		—
Issuance of common stock upon release of restricted stock units under the 2022 Annual Incentive Plan	57,996	—		102		—		—		102
Net share settlements for stock-based minimum tax withholdings	(19,022)	—		(22)		—		—		(22)
Issuance of common stock under employee stock purchase plan	1,509,536	—		1,411		—		—		1,411
Stock-based compensation expense	—	—		22,198		—		—		22,198
Other comprehensive income	—	—		—		954		—		954
Net loss	—	—		—		—		(75,270)		(75,270)
Balance as of September 30, 2023	478,830,999	$	48	$	2,311,481	$	—	$	(1,686,278)	$	625,251
Issuance of common stock upon exercise of stock options	508,238	—		217		—		—		217
Issuance of common stock upon release of restricted stock units	3,230,939	—		—		—		—		—

Net share settlements for stock-based minimum tax withholdings	(16,530)	—		(15)		—		—		(15)

Stock-based compensation expense	—	—		29,711		—		—		29,711

Net loss	—	—		—		—		(277,976)		(277,976)
Balance as of December 31, 2023	482,553,646	$	48	$	2,341,394	$	—	$	(1,964,254)	$	377,188

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	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount
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 restricted stock units	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 restricted stock units	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 restricted stock units	1,631,315	—		—		—		—		—
Net share settlements for stock-based minimum tax withholdings	(19,311)	—		(58)		—		—		(58)
Stock-based compensation expense	—	—		25,585		—		—		25,585
Other comprehensive income	—	—		—		(1,943)		—		(1,943)
Net loss	—	—		—		—		(91,961)		(91,961)
Balance as of December 31, 2022	457,161,483	$	45	$	2,193,544	$	(311)	$	(1,442,286)	$	750,992

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

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23ANDME HOLDING CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Nine Months Ended December 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(457,870)	$	(247,558)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	19,171		24,918
Amortization and impairment of internal-use software	4,374		3,214
Stock-based compensation expense	101,198		93,768
(Gain) loss on disposal of property and equipment	(5)		—
Loss on disposition of Lemonaid Health Limited	2,026		—
Impairment of long-lived assets	—		10,126
Goodwill impairment	198,800		—
Other operating activities	(504)		(1)
Changes in operating assets and liabilities:
Accounts receivable, net (includes related party amounts of $19 and $(3,636) for the nine months ended December 31, 2023 and 2022, respectively)	(16,257)		(23,428)
Inventories	(5,420)		(1,172)
Deferred cost of revenue	(6,846)		(6,636)
Prepaid expenses and other current assets	(4,490)		3,772
Operating lease right-of-use assets	5,341		5,570
Other assets	755		(711)
Accounts payable (includes related party amounts of $3,879 and $(12,567) for the nine months ended December 31, 2023 and 2022, respectively)	669		(23,305)
Accrued expenses and other current liabilities (includes related party amounts of $42 and $4,090 for the nine months ended December 31, 2023 and 2022, respectively)	(5,906)		4,265
Deferred revenue (includes related party amounts of $8,247 and $13,762 for the nine months ended December 31, 2023 and 2022, respectively)	32,948		45,996
Operating lease liabilities	(6,483)		(6,708)
Other liabilities	(36)		(2,539)
Net cash used in operating activities	(138,535)		(120,429)
Cash flows from investing activities:
Purchases of property and equipment	(850)		(2,854)
Proceeds from sale of property and equipment	6		—
Capitalized internal-use software costs	(6,636)		(5,163)
Net cash used in investing activities	(7,480)		(8,017)
Cash flows from financing activities:
Proceeds from exercise of stock options	687		3,933
Proceeds from issuance of common stock under employee stock purchase plan	1,411		3,238
Payments of deferred offering costs	(356)		—
Payments for taxes related to net share settlement of equity awards	(158)		—
Net cash provided by financing activities	1,584		7,171
Effect of exchange rates on cash and cash equivalents	—		694
Net decrease in cash, cash equivalents and restricted cash	(144,431)		(120,581)
Cash, cash equivalents and restricted cash—beginning of period	395,222		561,755
Cash, cash equivalents and restricted cash—end of period	$	250,791	$	441,174
Supplemental disclosures of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses	$	213	$	472
Stock-based compensation capitalized for internal-use software costs	$	2,927	$	2,239
Reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	242,418	$	432,801
Restricted cash, current	1,399		1,399
Restricted cash, noncurrent	6,974		6,974
Total cash, cash equivalents and restricted cash	$	250,791	$	441,174

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

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23ANDME HOLDING CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

23andMe Holding Co. (the “Company” or “23andMe”) is dedicated to helping people access, understand, and benefit from the human genome. The Company is building the leading direct-to-consumer precision medicine platform that powers its genetics-driven therapeutics and research business. The Company is dedicated to empowering customers to live healthier lives by providing consumers direct access to their genetic information and digital access to affordable, personalized healthcare through the Lemonaid Health, Inc. (“Lemonaid Health”) platform.

The Company pioneered direct-to-consumer genetic testing, giving consumers unique, personalized information about their genetic health risks, ancestry, and traits. It was the first company to obtain Food and Drug Administration (“FDA”) authorization for a direct-to-consumer genetic test, and it is the only company to have FDA authorization, clearance, or an exemption from premarket notification for all of the carrier status, genetic health risk, cancer predisposition, and pharmacogenetics reports that the Company offers to customers.

Through the Lemonaid Health telehealth platform, the Company connects patients to licensed healthcare professionals to provide affordable and direct online access to medical care, from consultation through treatment, for a number of common conditions, using evidence-based guidelines and up-to-date clinical protocols. When medications are prescribed by Lemonaid Health’s affiliated healthcare professionals, patients can use Lemonaid Health’s online pharmacy for fulfillment. Patients also can access telehealth consultations for certain 23andMe genetic reports through Lemonaid Health.

23andMe, Inc., the Company’s accounting predecessor, was incorporated in Delaware in 2006. The Company is headquartered in South San Francisco, California. The Company’s predecessor, VG Acquisition Corp. (“VGAC”), was a blank check company originally incorporated in 2020 as a Cayman Islands exempted company. On June 16, 2021 (the “Closing Date”), VGAC and Chrome Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of VGAC (“Merger Sub”), consummated a merger with 23andMe, Inc. (the “Merger”), whereby Merger Sub merged with and into 23andMe, Inc., with 23andMe, Inc. being the surviving corporation and a wholly owned subsidiary of the Company. In connection with the Merger, VGAC changed its jurisdiction of incorporation from the Cayman Islands to the State of Delaware and changed its name to 23andMe Holding Co. (the “Domestication” and, together with the Merger, the “Business Combination”).

The Company has evaluated how it is organized and managed and has identified two reporting segments: (1) Consumer and Research Services, and (2) Therapeutics.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principle of Consolidation

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly owned subsidiaries, and variable interest entities in which it holds a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation.

For the three and nine months ended December 31, 2023 and 2022, the Company’s operations were primarily in the United States. The Company had immaterial operations in the United Kingdom (“U.K.”) prior to the disposition of its U.K. subsidiary on August 1, 2023.

There have been no material changes to the Company’s significant accounting policies during the nine months ended December 31, 2023, as compared to the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying interim condensed consolidated financial statements as of December 31, 2023 and for the three and nine months ended December 31, 2023 and 2022 and accompanying notes, are unaudited. These unaudited interim condensed consolidated financial statements (the “condensed consolidated financial statements”) have been prepared in

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accordance with GAAP applicable to interim financial statements. These financial statements are presented in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. As such, the information included herein should be read in conjunction with the consolidated financial statements and accompanying notes as of and for the fiscal year ended March 31, 2023 (the “audited consolidated financial statements”) that were included in the Company’s Annual Report on Form 10-K filed with the SEC on May 25, 2023. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, which include only normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of December 31, 2023 and its condensed consolidated results of operations and cash flows for the nine months ended December 31, 2023 and 2022. The results of operations for the three and nine months ended December 31, 2023 are not necessarily indicative of the results expected for the year ending March 31, 2024 or any other future interim or annual periods.

Fiscal Year

The Company’s fiscal year ends on March 31. References to fiscal 2024 refer to the fiscal year ending March 31, 2024 and references to fiscal 2023 and fiscal 2022 refer to the fiscal years ended March 31, 2023 and March 31, 2022, respectively.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period and the accompanying notes. Significant items subject to such estimates and assumptions include, but are not limited to the determination of standalone selling price for various performance obligations; the estimated expected benefit period for the rate and recognition pattern of breakage revenue for purchases where a saliva collection kit (“Kit”) is never returned for processing; the capitalization and estimated useful life of internal use software; the useful life of long-lived assets; fair value of intangible assets acquired in business combinations; the fair value of reporting units relative to the carrying amount of goodwill; the incremental borrowing rate for operating leases; stock-based compensation including the determination of the fair value of stock options, annual incentive bonuses payable in the form of restricted stock units (“RSUs”), as well as the Company’s common stock prior to the Closing Date of the Merger; and the valuation of deferred tax assets and uncertain tax positions. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from these estimates, and such differences could be material to the condensed consolidated financial statements.

The Company is not aware of any specific event or circumstance that would require revisions to estimates, updates to judgments, or adjustments to the carrying value of assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and will be recognized in the condensed consolidated financial statements as soon as they become known.

Concentration of Supplier Risk

Certain of the raw materials, components, and equipment associated with the deoxyribonucleic acid (“DNA”) microarrays and Kits used by the Company in the delivery of its services are available only from third-party suppliers. The Company also relies on a third-party laboratory service for the processing of its customer samples. Shortages and slowdowns could occur in these essential materials, components, equipment, and laboratory services due to an interruption of supply or increased demand in the industry. If the Company were unable to procure certain materials, components, equipment, or laboratory services at acceptable prices, it would be required to reduce its laboratory operations, which could have a material adverse effect on its results of operations.

A single supplier accounted for 100% of the Company’s total purchases of microarrays and a separate single supplier accounted for 100% of the Company’s total purchases of Kits for the three and nine months ended December 31, 2023 and 2022. One laboratory service provider accounted for 100% of the Company’s processing of customer samples for the three and nine months ended December 31, 2023 and 2022.

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Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk include cash, cash equivalents, and accounts receivable. The Company maintains a majority of its cash and cash equivalents with a single high-quality financial institution, the composition and maturities of which are regularly monitored by the Company. The Company’s revenue and accounts receivable are derived primarily from the United States. See Note 3, “Revenue,” for additional information regarding geographical disaggregation of revenue. The Company grants credit to its customers in the normal course of business, performs credit evaluations of its significant customers on an as-needed basis, and does not require collateral. Concentrations of credit risk are limited as the Company’s trade receivables are primarily related to third parties, which collect its credit card receivables, and large multinational corporations. The Company regularly monitors the aging of accounts receivable balances.

Significant customer information is as follows:


	December 31, 2023		March 31, 2023
Percentage of accounts receivable:
Customer C(1)	86	%	69	%
Customer F	*		27	%

*less than 10%

(1)Customer C is a reseller.


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
Percentage of revenue:
Customer C(1)	19	%	22	%	20	%	20	%
Customer B	—		20	%	8	%	18	%

(1)Customer C is a reseller.

Restructuring

The Company defines restructuring expenses to include costs directly associated with exit or disposal activities, such as severance payments, benefits continuation, and non-cash stock-compensation charges associated with the modification of certain stock awards. In general, the Company records involuntary employee-related exit and disposal costs when it communicates to employees that they are entitled to receive such benefits and the amount can be reasonably estimated.

Goodwill

Goodwill represents the excess purchase price of acquired businesses over the fair values attributed to underlying net tangible assets and identifiable intangible assets. The Company tests goodwill each fiscal year on January 1st for impairment at the Consumer and Research Services reporting unit level. Goodwill is also tested for impairment whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Performance of the qualitative impairment assessment requires judgment in identifying and considering the significance of relevant events and circumstances, including external factors such as macroeconomic and industry conditions and the legal and regulatory environment, as well as entity-specific factors, such as actual and planned financial performance or sustained market declines, that could impact the fair value of the Consumer and Research Services reporting unit. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company will perform a quantitative impairment test in which the fair value of the reporting unit is compared with its carrying amount, and an impairment charge will be recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. For results of the Company's goodwill impairment analysis performed as of December 31, 2023, see Note 8, “Balance Sheet Components — Goodwill.”

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Contingencies

Liabilities for loss contingencies arising from claims, disputes, legal proceedings, fines and penalties, and other sources are recorded when it is probable that a liability has been or will be incurred and the amount of the liability can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of such legal costs from insurance policies are recognized when realization becomes probable and estimable.

Liquidity

The Company’s operations have been financed primarily through the sales of equity securities and revenue from sales of PGS, telehealth, and research services. During fiscal 2022, the Company received gross proceeds of $309.7 million from the Merger and $250.0 million from the PIPE investment consummated in connection with the Merger. The Company expects to continue to incur operating losses and negative cash flows from operations for the foreseeable future due to the investments it intends to continue to make in research and development to capitalize on market opportunities and drive long-term growth, as well as operating expenses incurred within general and administrative, and sales and marketing. The Company may require additional financing to fund operations to meet its business plan. The Company’s ability to obtain additional financing depends on a number of factors, including, but not limited to, the market price of the Company’s Class A common stock, the availability and cost of additional equity capital, the Company’s ability to retain the listing of its Class A common stock on The Nasdaq Stock Market, and the general economic and industry conditions affecting the availability and cost of capital.

On November 10, 2023, the Company received a deficiency letter (the “Nasdaq Letter”) from the Nasdaq Listing Qualifications Department, notifying the Company that it is not in compliance with Nasdaq Listing Rule 5450(a)(1), which requires the Company to maintain a minimum bid price of at least $1 per share for continued listing on The Nasdaq Global Select Market (the “Minimum Bid Requirement”). The Company’s failure to comply with the Minimum Bid Requirement was based on its Class A common stock per share price being below the $1 threshold for a period of 30 consecutive trading days. Pursuant to the Nasdaq Letter, the Company has 180 calendar days from the date of the Nasdaq Letter to regain compliance, and may be eligible for up to an additional 180 days in accordance with applicable Nasdaq rules. If the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the compliance period (or the second compliance period, if applicable), its common stock will become subject to delisting. The Company intends to monitor the closing bid price of its common stock during the compliance period(s) and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, including initiating a reverse stock split. However, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules.

Neither the Nasdaq Letter nor the Company’s noncompliance with the Minimum Bid Requirement have an immediate effect on the listing or trading of the Company’s Class A common stock, which will continue to trade on The Nasdaq Stock Market under the symbol “ME.”

As of December 31, 2023, the Company had cash and cash equivalents of $242.4 million. Based on current cash resources and the implementation of the previously-disclosed reductions in force in June and August 2023, the Company believes its cash and cash equivalents will be sufficient to fund estimated operating expenses and capital expenditure requirements for at least 12 months from the date of the issuance of these condensed consolidated financial statements. Management considers that there are no conditions or events in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least one year from the date the condensed consolidated financial statements are issued.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Updated (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. We are currently evaluating the impacts of the new standard.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and income taxes paid information. This ASU is effective for fiscal years beginning after December 15, 2024 and may be adopted on a

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prospective or retrospective basis. Early adoption is permitted. We are currently evaluating the impacts and method of adoption.

3. Revenue

Disaggregation of Revenue

The following table presents revenue by category:


	Three Months Ended December 31,								Nine Months Ended December 31,
	2023				2022				2023				2022
	Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue

	(in thousands, except percentages)
Point in Time (1)
PGS	$	29,241	65	%	$	37,499	56	%	$	95,202	61	%	$	117,300	57	%
Telehealth	5,894		13	%	8,592		13	%	21,051		14	%	27,124		13	%
Consumer services	35,135		78	%	46,091		69	%	116,253		75	%	144,424		70	%
Research services	1,506		3	%	—		—		3,859		2	%	—		—
Total	$	36,641	81	%	$	46,091	69	%	$	120,112	77	%	$	144,424	70	%

Over Time (1)
PGS	$	5,835	13	%	$	5,100	7	%	$	16,505	11	%	$	14,316	7	%
Telehealth	1,928		4	%	2,451		4	%	6,350		4	%	7,471		3	%
Consumer services	7,763		17	%	7,551		11	%	22,855		15	%	21,787		10	%
Research services	343		1	%	13,298		20	%	12,643		8	%	40,901		20	%
Total	$	8,106	18	%	$	20,849	31	%	$	35,498	23	%	$	62,688	30	%

Revenue by Category (1)
PGS	$	35,076	78	%	$	42,599	64	%	$	111,707	72	%	$	131,616	63	%
Telehealth	7,822		18	%	11,043		16	%	27,401		17	%	34,595		17	%
Consumer services	42,898		96	%	53,642		80	%	139,108		89	%	166,211		80	%
Research services	1,849		4	%	13,298		20	%	16,502		11	%	40,901		20	%
Total	$	44,747	100	%	$	66,940	100	%	$	155,610	100	%	$	207,112	100	%

(1)There was no Therapeutics revenue for the three and nine months ended December 31, 2023 and 2022.

The following table summarizes revenue by region based on the shipping address of customers:


	Three Months Ended December 31,								Nine Months Ended December 31,
	2023				2022				2023				2022
	Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue

	(in thousands, except percentages)
United States	$	39,217	88	%	$	46,770	70	%	$	124,728	80	%	$	147,425	71	%
United Kingdom	2,139		5	%	16,194		24	%	20,657		13	%	47,198		23	%
Canada	2,382		5	%	2,866		4	%	7,110		5	%	8,744		4	%
Other regions	1,009		2	%	1,110		2	%	3,115		2	%	3,745		2	%
Total	$	44,747	100	%	$	66,940	100	%	$	155,610	100	%	$	207,112	100	%

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Breakage Revenue

The Company sells through multiple channels, including direct-to-consumer via the Company’s website and through online retailers. If the customer does not return the Kit for processing, services cannot be completed by the Company, potentially resulting in unexercised rights (“breakage”) revenue. The Company recognized breakage revenue from unreturned Kits of $4.4 million and $6.8 million for the three months ended December 31, 2023 and 2022, respectively, and $13.4 million and $17.8 million for the nine months ended December 31, 2023 and 2022, respectively.

Contract Balances

Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts associated with contractual rights related to consideration for performance obligations and are included in prepaid expenses and other current assets on the condensed consolidated balance sheets. The amount of contract assets was immaterial as of December 31, 2023 and March 31, 2023.

Contract liabilities consist of deferred revenue. As of December 31, 2023 and March 31, 2023, deferred revenue for consumer services was $74.7 million and $48.6 million, respectively. Of the $48.6 million of deferred revenue for consumer services as of March 31, 2023, the Company recognized $5.3 million and $36.8 million as revenue during the three and nine months ended December 31, 2023, respectively.

As of December 31, 2023 and March 31, 2023, deferred revenue for research services was $20.7 million and $14.0 million, respectively. As of December 31, 2023 and March 31, 2023, deferred revenue for research services included $20.0 million and $11.8 million, respectively, of related party deferred revenue. Of the $14.0 million of deferred revenue for research services as of March 31, 2023, the Company recognized $0.1 million and $13.7 million as revenue during the three and nine months ended December 31, 2023, respectively, which included related party revenue amounts of nil and $11.8 million for the three and nine months ended December 31, 2023, respectively.

Remaining Performance Obligations

The transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that are expected to be billed and recognized as revenue in future periods. The Company has utilized the practical expedient available under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”) to not disclose the value of unsatisfied performance obligations for PGS and telehealth as those contracts have an expected length of one year or less. As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations for research services was $21.6 million. The Company expects to recognize revenue of approximately 28% of this amount over the next 12 months and the remainder thereafter. During the three and nine months ended December 31, 2023 and 2022, the Company did not recognize any revenue for performance obligations satisfied in prior periods.

4. Collaborations

GlaxoSmithKline Agreement and Subsequent Amendments

In July 2018, the Company and an affiliate of GlaxoSmithKline (“GSK”) entered into a four-year exclusive drug discovery and development collaboration agreement, amended in 2019 and 2021, respectively (collectively the “original GSK Agreement”) for collaboration on identification and development of therapeutic agents with a unilateral option for GSK to extend the term for an additional year. In January 2022, GSK elected to exercise the option to extend the exclusive target discovery term for an additional year to July 2023. In October 2022, the Company received a one-time payment of $50.0 million from GSK in consideration of the exercise of the option pursuant to the original GSK Agreement. The exclusive drug discovery period under the original GSK Agreement expired on July 23, 2023.

The Company has concluded that GSK is considered a customer. Therefore, the Company applied the guidance in ASC 606 to account for and present consideration received from GSK related to research services provided by the Company. The Company’s activities under the original GSK Agreement, which included reporting, drug target discovery, and joint steering committee participation, represented one combined performance obligation to deliver research services. The Company recognized research services revenue related to the original GSK Agreement as the respective performance obligations were satisfied using an input method to measure progress. In addition, the original GSK Agreement, provided GSK the right to include certain identified pre-existing Company programs in the collaboration at GSK’s election, each of which was considered distinct from the research services.

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Prior to the expiration of the original GSK Agreement, drug targets were identified for inclusion in the collaboration during the performance of research services. Cost sharing related to the performance of research services was recorded when incurred within cost of revenue in the Consumer and Research Services segment.

For the drug targets that had been identified for inclusion in the original collaboration, the Company and GSK continue to equally share in the costs of further research, development, and commercialization of identified targets under the GSK Agreement, subject to certain rights of either party to opt-out of funding at certain predetermined development milestones. These cost-sharing charges for the program costs incurred subsequent to the identification of drug targets have been included in research and development expense on the condensed consolidated statements of operations and comprehensive loss during the period incurred. The Company may also share in the net profits or losses of products that are commercialized pursuant to the collaboration or receive royalties on products which are successfully commercialized.

In October 2023, the Company entered into an amendment to the original GSK Agreement (the “2023 GSK Amendment”) to provide GSK with a non-exclusive license to certain new, de-identified, aggregated data included in the Company’s database (the “New Data”), as well as access to certain Company research services with respect to such New Data in return for a $20.0 million data access fee, which the Company received during the three months ended December 31, 2023. The license to the New Data will expire one year from the date GSK provides the Company with a notice that GSK is ready to use the New Data (notice is anticipated no later than September 30, 2024 and had not yet been received as of December 31, 2023), unless the parties enter into a separate extension agreement. Pursuant to the 2023 GSK Amendment, the Company opted-out of cost-sharing and other research and development obligations with respect to three programs initiated by GSK and the Company under the original GSK Agreement. The Company will retain rights to receive low to mid-single digit royalties on net sales of products developed in these three programs.

The Company recognized research services revenue related to the original GSK Agreement of nil and $13.1 million during the three months ended December 31, 2023 and 2022, respectively, and $11.8 million and $36.3 million during the nine months ended December 31, 2023 and 2022, respectively. The Company did not recognize research services revenue related to the 2023 GSK Amendment during the three or nine months ended December 31, 2023.

As of December 31, 2023, the Company had deferred revenue of $20.0 million, related to the 2023 GSK Amendment. As of March 31, 2023, the Company had deferred revenue related to the original GSK Agreement of $11.8 million. Cost-sharing amounts incurred prior to the identification of targets included in cost of revenue were immaterial for the three months ended December 31, 2022 and each of the nine months ended December 31, 2023 and 2022. There were no cost-sharing amounts incurred prior to the identification of targets included in cost of revenue for the three months ended December 31, 2023. Cost-sharing amounts incurred subsequent to the identification of targets, included in research and development expenses, were $2.8 million and $3.3 million during the three months ended December 31, 2023 and 2022, respectively, and $11.0 million and $9.5 million during the nine months ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and March 31, 2023, the Company had $15.8 million and $11.9 million, respectively, related to balances of amounts payable to GSK for reimbursement of shared costs included within accounts payable and accrued expenses and other current liabilities on the condensed consolidated balance sheets.

GSK’s affiliate, Glaxo Group Limited, held shares of the Company’s Class B common stock representing approximately 19.9% and 20.1% of the Company’s combined voting power as of December 31, 2023 and March 31, 2023, respectively; therefore, GSK is considered as a related party to the Company.

5. Segment Information

The Company currently operates in two reporting segments: (1) Consumer and Research Services, and (2) Therapeutics. The Consumer and Research Services segment consists of revenue and expenses from PGS and telehealth, as well as research services revenue and expenses from certain collaboration agreements (including the GSK Agreement). The Therapeutics segment consists of revenues from the out-licensing of intellectual property associated with identified drug targets and expenses related to therapeutic product candidates under clinical development. Substantially all of the Company’s revenues are derived from the Consumer and Research Services segment. See Note 3, “Revenue — Revenue Recognition,” for additional information regarding revenue. There are no inter-segment sales.

Certain department expenses such as Finance, Legal, Regulatory and Supplier Quality, Corporate Communications, Corporate Development, and CEO Office are not reported as part of the reporting segments as reviewed by the CODM (as defined below). These amounts are included in Unallocated Corporate in the reconciliations below. The chief operating decision-maker (“CODM”) is the Chief Executive Officer (“CEO”). The CODM evaluates the performance of each segment based on Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure that is defined as net income (loss) before net interest income (expense), net other income (expense), income tax expenses (benefit), depreciation and amortization, impairment charges, stock-based compensation expense, and other items that are considered unusual or

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not representative of underlying trends of our business, including but not limited to: changes in fair value of warrant liabilities and litigation settlements, gains or losses on dispositions of subsidiaries, transaction-related costs, and cyber security incident expenses, net of probable insurance recoveries, if applicable for the periods presented.

Adjusted EBITDA is a key measure used by the Company’s management and Board of Directors to understand and evaluate the Company’s operating performance and trends, to prepare and approve the annual budget, and to develop short-term and long-term operating plans.

The Company’s revenue and Adjusted EBITDA by segment is as follows:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2023		2022		2023		2022
	(in thousands)
Segment Revenue: (1)
Consumer and Research Services	$	44,747	$	66,940	$	155,610	$	207,112
Total revenue	$	44,747	$	66,940	$	155,610	$	207,112
Segment Adjusted EBITDA:
Consumer and Research Services Adjusted EBITDA	$	(20,620)	$	(8,313)	$	(32,895)	$	(22,986)
Therapeutics Adjusted EBITDA	(16,528)		(21,471)		(73,890)		(58,599)
Unallocated Corporate (2)	(10,587)		(13,488)		(35,803)		(41,057)
Total Adjusted EBITDA	$	(47,735)	$	(43,272)	$	(142,588)	$	(122,642)
Reconciliation of net loss to Adjusted EBITDA:
Net loss	$	(277,976)	$	(91,961)	$	(457,870)	$	(247,558)
Adjustments:
Interest income, net	(3,230)		(3,671)		(11,289)		(5,307)
Other (income) expense, net	(23)		(855)		(501)		267
Provision for (benefit from) income taxes	19		(613)		55		(2,139)
Depreciation and amortization	4,921		5,257		13,873		15,512
Amortization of acquired intangible assets	2,397		4,265		9,673		12,847
Impairment of acquired intangible assets	—		9,968		—		9,968
Stock-based compensation expense	26,357		34,338		101,198		93,768
Loss on disposition of Lemonaid Health Limited and transaction-related costs (3)	—		—		2,375		—
Litigation settlement cost	—		—		98		—
Goodwill impairment (4)	198,800		—		198,800		—
Cyber security incident expenses, net of probable insurance recoveries (5)	1,000		—		1,000		—
Total Adjusted EBITDA	$	(47,735)	$	(43,272)	$	(142,588)	$	(122,642)

(1)There was no Therapeutics revenue for the three and nine months ended December 31, 2023 and 2022.

(2)Certain department expenses such as Finance, Legal, Regulatory and Supplier Quality, Corporate Communications, Corporate Development, and CEO Office are not reported as part of the reporting segments as reviewed by the CODM. These amounts are included in Unallocated Corporate.

(3)Refer to Note 17, “Disposition of Subsidiary” for additional information.

(4)Refer to Note 8, “Goodwill” for additional information.

(5)Refer to Note 11, “Cyber Security Incident” for additional information.

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Customers accounting for 10% or more of segment revenues were as follows:


	Three Months Ended December 31,								Nine Months Ended December 31,

	2023				2022				2023				2022

	(in thousands)
Consumer and Research Services Segment Revenue:
Customer C (1) (2)	$	8,681	19	%	$	14,680	22	%	$	31,432	20	%	$	41,365	20	%
Customer B (3)	—		—		$	13,068	20	%	$	11,753	8	%	$	36,258	18	%

(1)Customer C is a reseller.

(2)Customer C revenues are primarily in the United States.

(3)Customer B revenues are in the U.K.

Revenue by geographical region can be found in the revenue recognition disclosures in Note 3, “Revenue.” Substantially all of the Company’s property and equipment, net of depreciation and amortization, was located in the United States during the periods presented. The reporting segments do not present total assets as they are not reviewed by the CODM when evaluating their performance.

6. Variable Interest Entities

In providing telehealth services that include professional medical consultations, the Company maintains relationships with various affiliated professional medical corporations (“PMCs”). Additionally, with respect to its telehealth services involving the sale of prescription products, the Company maintains relationships with affiliated pharmacies (collectively, the “Affiliated Pharmacies”) to fill prescriptions that are ordered by the Company’s patients. The Company determined that the PMCs and Affiliated Pharmacies are variable interest entities (“VIEs”) due to the respective equity holders having nominal capital at risk, and the Company having a variable interest in each of the PMCs and Affiliated Pharmacies. The Company consolidated the PMCs and Affiliated Pharmacies under the VIE model since the Company has the power to direct activities that most significantly impact the VIEs’ economic performance and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIEs. Under the VIE model, the Company presents the results of operations and the financial position of the VIEs as part of the condensed consolidated financial statements of the Company.

Furthermore, as a direct result of the financial support the Company provides to the VIEs (e.g., loans), the interests held by holders lack economic substance and do not provide them with the ability to participate in the residual profits or losses generated by the VIEs. Therefore, all income and expenses recognized by the VIEs are allocated to the Company’s stockholders.

The aggregate carrying value of total assets and total liabilities included on the condensed consolidated balance sheets for the VIEs after elimination of intercompany transactions were not material as of December 31, 2023 and March 31, 2023. Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the VIEs after elimination of intercompany transactions was $7.8 million and $10.0 million for the three months ended December 31, 2023 and 2022, respectively, and $25.3 million and $31.1 million for the nine months ended December 31, 2023 and 2022, respectively. Net loss attributable to the VIEs included on the condensed consolidated statements of operations and comprehensive loss was $3.2 million and $3.8 million for the three months ended December 31, 2023 and 2022, respectively, and $9.1 million and $5.9 million for the nine months ended December 31, 2023 and 2022, respectively.

7. Fair Value Measurements

Recurring Fair Value Measurements

The fair value of cash, restricted cash, accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date as of December 31, 2023 and March 31, 2023.

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The following table presents information about the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2023 and March 31, 2023:


	December 31, 2023								March 31, 2023
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3

	(in thousands)
Financial Assets:
Money market funds	$	237,000	$	237,000	$	—	$	—	$	372,000	$	372,000	$	—	$	—
Total financial assets	$	237,000	$	237,000	$	—	$	—	$	372,000	$	372,000	$	—	$	—

Cash equivalents consist primarily of money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

The Company had no transfers between levels of the fair value hierarchy of its assets and liabilities measured at fair value during the nine months ended December 31, 2023 and the fiscal year ended March 31, 2023.

Nonrecurring Fair Value Measurements

Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. Certain of the Company’s assets, including intangible assets and goodwill, are measured at fair value on a nonrecurring basis. During fiscal 2023, the Company recorded a $10.0 million impairment charge to write down the value of the U.K. partnership acquired intangible asset to its estimated fair value. During the three and nine months ended December 31, 2023, the Company recorded a $198.8 million impairment charge to write down the value of its goodwill to its estimated fair value. See Note 8, “Balance Sheet Components — Goodwill.”

8. Balance Sheet Components

Prepaid Expense and Other Current Assets

Prepaid expense and other current assets consisted of the following:


	December 31, 2023		March 31, 2023
	(in thousands)
Prepaid expenses	$	11,454	$	13,244
Other receivables	5,867		3,003
Other current assets	2,779		2,977
Prepaid expenses and other current assets	$	20,100	$	19,224

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Property and Equipment, Net

Property and equipment, net consisted of the following:


	December 31, 2023		March 31, 2023
	(in thousands)
Computer and software	$	9,580	$	10,376
Laboratory equipment and software	52,803