23andMe Reports FY2022 Third Quarter Financial Results
02/10/2022 - 04:04 PM
Third quarter revenue of $57 million Therapeutics group advances first wholly-owned immuno-oncology antibody into clinical trials Vision of genetics-based primary care offers potential for millions of people to live healthier lives
SUNNYVALE, Calif., Feb. 10, 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 third quarter (“Q3”) of its fiscal year 2022 (“FY2022”), which ended December 31, 2021. 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.
“We’ve made significant progress on both our consumer business and therapeutics efforts these last few months. On the consumer side, we acquired Lemonaid Health, which brings telehealth services that offer online access to healthcare professionals with e-prescribing, pharmacy and testing services to patients in all 50 states, the District of Columbia, and the United Kingdom. Combined with our Personal Genome Service, this positions us to achieve our vision of personalized, genetics-based primary care at scale. We also received FDA clearance for a direct-to-consumer genetic test on a hereditary prostate cancer marker, further expanding our ability to provide individuals with direct access to impactful health information that can help them make important life decisions,” said Anne Wojcicki, CEO and Co-Founder of 23andMe. “On the therapeutics side, we launched our first wholly-owned therapeutic, 23ME’610, into a Phase 1 clinical trial. This is our second immuno-oncology drug to enter clinical trials, following GSK’608, and marks an important milestone in our goal to find new medicines for people with serious unmet medical needs. We look forward to continuing to advance our pipeline of more than 40 programs across a range of disease areas, addressing targets that we have validated using human genetics.”
Recent Highlights
Initiated Phase 1 clinical trial for first wholly owned immuno-oncology antibody, 23ME’610, targeting CD200R1 Announced that GSK, our key collaborator in therapeutics, elected to extend the exclusive target discovery period under the collaboration agreement for a fifth year to discover and validate novel drug targets using 23andMe’s proprietary genetic and health survey database. 23andMe will receive a one-time payment of $50 million Elected for a royalty option on GSK’608, the joint collaboration program with GSK targeting CD96. 23andMe will be eligible to earn tiered worldwide royalties up to the low double digits if GSK’608 is successfully commercialized. Expanded customer database to 12.2 million genotyped customers Received FDA clearance for direct-to-consumer genetic test on a hereditary prostate cancer marker Launched two 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 third quarter were: Nearsightedness (myopia) report Severe acne report Added new ancestry analysis, including additional insights into some customers’ indigenous genetic ancestry from North America and ancestral connections to 25 African ethnolinguistic groups Received recognition from Inc. magazine as one of the “Best-Led Companies of 2021”; from Comparably, which listed Anne Wojcicki as one of the top CEOs among large companies and from Fast Company , which listed 23andMe as one of the “Brands that Matter” Completed the redemption of all outstanding warrants in December 2021 “We are working to integrate Lemonaid Health’s telehealth services and our personal genetics services with the goal of bringing a genetics-based primary care service to our customers. This unique offering would enable our medical professionals to take a prevention-based, genetically-informed approach with our customers to help them live healthier lives. Beginning this quarter, Lemonaid Health’s financial results are incorporated into our consolidated results,” said Steve Schoch, Chief Financial Officer of 23andMe. “On the Therapeutics side, we were also pleased with GSK’s election to renew for a fifth year, with its $50 million fee. This further validates the value of our database to genetically validate targets for drug development and the potential for this approach to increase the probability of success in bringing new therapies to patients.”
FY2022 Third Quarter Financial Results $57 million and $171 million , respectively, representing increases of 3% and 10% , respectively, for the same periods in the prior year. Third quarter revenue growth was primarily due to the addition of two months of Telehealth business revenue from the recent acquisition of Lemonaid Health and higher subscription revenue. These increases were partially offset by lower Personal Genome Service (“PGS”) revenue primarily due to the shift in a promotional channel partner’s event, which occurred in the second quarter of FY2022 as compared to the third quarter of FY2021. Nine-month revenue growth was primarily driven by higher PGS revenue, subscription revenue and the addition of two months of revenue from the Telehealth business.
Consumer services revenue represented approximately 81% of total revenue for the three and nine months ended December 31, 2021, and research services revenue, substantially all derived from the collaboration with GSK, accounted for approximately 19% of total revenue.
Operating expenses for the three and nine months ended December 31, 2021 were $124 million and $271 million , respectively, compared to $71 million and $191 million for the same periods in the prior year. The increase in operating expenses was primarily attributable to increased sales and marketing expenses, consistent with the seasonal promotion activities of the PGS business, therapeutics-related research and development expenses, one-time transaction costs associated with the acquisition of Lemonaid Health and incorporation of Telehealth operating expenses.
Net loss for the three and nine months ended December 31, 2021 was $89 million and $148 million , respectively, compared to net losses of $45 million and $117 million for the same periods in the prior year. The increase in net loss for the nine-month period ended December 31, 2021 was primarily driven by higher operating expenses (as noted above) offset by changes in fair value of warrant liabilities of $33 million . In December 2021, the company redeemed all outstanding warrants.
Total Adjusted EBITDA (as defined below) for the three and nine months ended December 31, 2021 was $(64) million and $(121) million , respectively, compared to $(25) million and $(65) million for the same periods in the prior year. The decrease in total Adjusted EBITDA was driven primarily by the increase in operating expenses listed above, excluding one-time transaction costs. Adjusted EBITDA for the three and nine months ended December 31, 2021 for the Consumer & Research Services segment was $(32) million and $(33) million , respectively, compared to $(2) million and $(5) million for the same periods in the prior year. The decrease in this segment was driven primarily by the increase in operating expenses listed above, excluding therapeutics-related research and development expenses and one-time transaction costs.
Balance Sheet $586 million , compared to $282 million as of March 31, 2021. The increase was attributable to the $560 million in gross proceeds from the completion of the business combination with the Virgin Group Acquisition Corp during the first quarter of FY2022. In Q3 FY2022, 23andMe paid approximately $102 million in cash consideration for the acquisition of Lemonaid Health, of which approximately $13 million was placed in escrow to cover a potential purchase price adjustment and to secure the indemnification obligations of the former equity holders of Lemonaid Health.
FY2022 Financial Guidance $250 t o $260 million to $268 t o $278 million . The increase in projected revenue is primarily due to the addition of telehealth services to 23andMe’s consumer business. The projected range for full year net loss has decreased from $210 t o $225 million to $205 t o $220 million . The decrease in projected net loss is primarily due to the favorable effect of the warrant fair value adjustment following warrant redemption offset by the inclusion of telehealth operating expenses, integration and merger-related transaction costs. The projected range for full year adjusted EBITDA loss has increased from $143 t o $158 million to $148 t o $163 million as we expect telehealth net losses to be partially offset by other beneficial effects in our operations.
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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 to other risks and uncertainties that are described in 23andMe’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the Securities and Exchange Commission (“SEC”) on November 10, 2021 and in the reports subsequently filed by 23andMe with the SEC. 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.
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23andMe Holding Co. Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except share and per share amounts)
Three Months Ended December 31, Nine Months Ended December 31, 2021 2020 2021 2020 (Unaudited) (Unaudited) (Unaudited) Revenue (related party amounts of $8,069 and $8,554 for the three months ended December 31, 2021 and 2020, respectively, and $29,281 and $30,221 for the nine months ended December 31, 2021 and 2020, respectively) $ 56,891 $ 55,477 $ 171,334 $ 155,338 Cost of revenue (related party amounts of $(54) and $59 for the three months ended December 31, 2021 and 2020, respectively, and $209 and $(592) for the nine months ended December 31, 2021 and 2020, respectively) 29,628 30,089 85,446 82,861 Gross profit 27,263 25,388 85,888 72,477 Operating expenses: Research and development (related party amounts of $6,300 and $4,238 for the three months ended December 31, 2021 and 2020, respectively, and $18,185 and $10,687 for the nine months ended December 31, 2021 and 2020, respectively) 50,298 41,684 139,053 114,260 Sales and marketing 41,979 12,258 70,987 31,242 General and administrative 31,687 16,589 60,547 45,094 Total operating expenses 123,964 70,531 270,587 190,596 Loss from operations (96,701 ) (45,143 ) (184,699 ) (118,119 ) Other (expense) income: Interest income 76 53 213 195 Change in fair value of warrant liabilities 3,695 — 32,989 — Other (expense) income, net 22 445 39 1,318 Loss before benefit for income taxes (92,908 ) (44,645 ) (151,458 ) (116,606 ) Benefit for income taxes 3,512 — 3,512 — Net loss $ (89,396 ) $ (44,645 ) $ (147,946 ) $ (116,606 ) Other comprehensive (loss) income (36 ) — (36 ) — Total comprehensive loss $ (89,432 ) $ (44,645 ) $ (147,982 ) $ (116,606 ) Net loss per share of Class A and Class B common stock attributable to common stockholders, basic and diluted: Basic and diluted $ (0.21 ) $ (0.46 ) $ (0.44 ) $ (1.23 ) Weighted-average shares used to compute net loss per share: Basic and diluted 426,591,111 96,974,875 334,491,905 95,185,171
23andMe Holding Co. Condensed Consolidated Balance Sheets (in thousands, except share and per share amounts)
December 31, March 31, 2021 2021 (Unaudited) ASSETS Current assets: Cash $ 586,204 $ 282,489 Restricted cash 1,599 1,399 Accounts receivable, net (related party amounts of $105 and nil as of December 31, 2021 and March 31, 2021, respectively) 23,560 2,481 Inventories 17,132 6,239 Deferred cost of revenue 16,112 5,482 Prepaid expenses and other current assets (related party amounts of $207 and nil as of December 31, 2021 and March 31, 2021, respectively) 25,253 15,485 Total current assets 669,860 313,575 Property and equipment, net 52,249 60,884 Operating lease right-of-use assets 57,390 63,122 Restricted cash, noncurrent 6,974 6,974 Internal-use software, net 8,410 6,889 Intangible assets, net 78,458 — Goodwill 351,598 — Other assets 1,376 654 Total assets $ 1,226,315 $ 452,098 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable (related party amounts of nil and $4,422 as of December 31, 2021 and March 31, 2021, respectively) $ 14,418 $ 12,271 Accrued expenses and other current liabilities (related party amounts of $12,480 and $7,065 as of December 31, 2021 and March 31, 2021, respectively) 46,297 31,953 Deferred revenue (related party amounts of $26,171 and $30,140 as of December 31, 2021 and March 31, 2021, respectively) 111,961 71,255 Operating lease liabilities 6,875 6,140 Total current liabilities 179,551 121,619 Operating lease liabilities, noncurrent 80,832 87,582 Other liabilities 4,758 1,165 Total liabilities $ 265,141 $ 210,366 Commitments and contingencies (Note 10) Redeemable convertible preferred stock Redeemable convertible preferred stock, $0.0001 par value per share, 10,000,000 shares authorized as of December 31, 2021, and $0.00001 par value per share, 209,512,070 shares authorized as of March 31, 2021; nil and 209,181,855 shares issued and outstanding as of December 31, 2021 and March 31, 2021, respectively; aggregate liquidation preference of nil and $874,107 as of December 31, 2021 and March 31, 2021, respectively — 837,351 Stockholders' equity (deficit) Common Stock - Class A shares, par value $0.0001, 199,176,879 shares issued and outstanding as of December 31, 2021, and par value $0.00001, 20,713,076 shares issued and outstanding as of March 31, 2021; Class B shares, par value $0.0001, 246,970,302 shares issued and outstanding as of December 31, 2021 and par value $0.00001, 103,816,708 shares issued and outstanding as of March 31, 2021 44 — Additional paid-in capital 2,086,350 381,619 Accumulated other comprehensive income (36 ) — Accumulated deficit (1,125,184 ) (977,238 ) Total stockholders’ equity (deficit) 961,174 (595,619 ) Total liabilities and stockholders’ equity (deficit) $ 1,226,315 $ 452,098
23andMe Holding Co. Condensed Consolidated Statements of Cash Flows (in thousands)
Nine Months Ended December 31, 2021 2020 (Unaudited) Cash flows from operating activities: Net loss $ (147,946 ) $ (116,606 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 15,345 13,969 Amortization and impairment of internal-use software 1,741 1,563 Stock-based compensation expense 37,473 37,222 Changes in fair value of warrant liabilities (32,989 ) — Loss (gain) on disposal of property and equipment 92 57 Gain on lease termination (15 ) (876 ) Changes in operating assets and liabilities: Accounts receivable (related party amounts of $(105) and nil for the nine months ended December 31, 2021 and 2020, respectively) (21,078 ) 1,259 Inventories (10,605 ) (2,127 ) Deferred cost of revenue (10,630 ) (5,831 ) Prepaid expenses and other current assets (related party amounts of $(207) and nil for the nine months ended December 31, 2021 and 2020, respectively) (7,697 ) 5,483 Operating lease right-of-use assets 5,265 8,496 Other assets (604 ) 37 Accounts payable (related party amounts of $(4,422) and $(4,231) for the nine months ended December 31, 2021 and 2020, respectively) (804 ) (215 ) Accrued expenses and other current liabilities (related party amounts of $5,416 and $749 for the nine months ended December 31, 2021 and 2020, respectively) 9,878 636 Deferred revenue (related party amounts of $(3,969) and $(5,221) for the nine months ended December 31, 2021 and 2020, respectively) 40,223 29,576 Operating lease liabilities (5,655 ) (6,693 ) Other liabilities (3,617 ) 64 Net cash used in operating activities (131,623 ) (33,986 ) Cash flows from investing activities: Purchases of property and equipment (2,421 ) (3,860 ) Purchases of intangible assets (patents) (5,500 ) — Proceeds from sale of property and equipment 1 838 Capitalized internal-use software costs (2,855 ) (2,725 ) Cash paid for acquisitions, net of cash acquired (94,165 ) — Net cash used in investing activities (104,940 ) (5,747 ) Cash flows from financing activities: Proceeds from issuance of redeemable convertible preferred stock — 82,500 Payments for issuance costs of redeemable convertible preferred stock — (232 ) Proceeds from exercise of stock options (related party amounts of nil and $34,710 for the nine months ended December 31, 2021 and 2020, respectively) 11,476 38,210 Payments of transaction costs (30,642 ) — Proceeds from issuance of common stock upon Merger 309,720 — Proceeds from PIPE (related party amounts of $25,000 and nil for the nine months ended December 31, 2021 and 2020, respectively) 250,000 — Proceeds from exercise of merger warrants 44 — Payment for warrant redemptions (116 ) — Net cash provided by financing activities 540,482 120,478 Effect of exchange rates on cash (4 ) — Net increase in cash and restricted cash 303,915 80,745 Cash and restricted cash—beginning of period 290,862 216,315 Cash and restricted cash—end of period 594,777 297,060 Supplemental disclosures of non-cash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued expenses 859 50 Stock-based compensation capitalized for internal-use software costs 745 501 Reclassification of transaction costs 3,971 — Vesting of related party early exercised stock options — 14,892 Assumption of merger warrants liability 75,415 — Conversion of redeemable convertible preferred stock to common stock 837,351 — Redemption/exercise of Class A common stock warrants 42,354 — Stock consideration in acquisition of businesses, including fair value of common stock issued and fair value of stock-based awards that were vested 322,842 — Reconciliation of cash and restricted cash within the consolidated balance sheets to the amounts shown in the consolidated statements of cash flows above: Cash 586,204 288,687 Restricted cash, current 1,599 1,399 Restricted cash, noncurrent 6,974 6,974 Total cash and restricted cash $ 594,777 $ 297,060
23andMe Holding Co. Total Company and Segment Information and Reconciliation of Non-GAAP Financial Measures (in thousands) (unaudited)
The Company’s revenue and Adjusted EBITDA by segment and for the total Company is as follows:
Three Months Ended December 31, Nine Months Ended December 31, 2021 2020 2021 2020 (in thousands) (in thousands) Segment Revenue Consumer & Research Services $ 56,891 $ 55,477 $ 171,334 $ 155,290 Therapeutics — — — 48 Total revenue $ 56,891 $ 55,477 $ 171,334 $ 155,338 Segment Adjusted EBITDA Consumer & Research Services Adjusted EBITDA $ (31,967 ) $ (2,468 ) $ (33,232 ) $ (4,925 ) Therapeutics Adjusted EBITDA (19,916 ) (15,051 ) (57,046 ) (38,886 ) Unallocated Corporate (12,129 ) (7,796 ) (30,692 ) (21,554 ) Total Adjusted EBITDA $ (64,012 ) $ (25,315 ) $ (120,970 ) $ (65,365 ) Reconciliation of net loss to Adjusted EBITDA Net loss $ (89,396 ) $ (44,645 ) $ (147,946 ) $ (116,606 ) Adjustments: Interest (income), net (76 ) (53 ) (213 ) (195 ) Other (income) expense, net (22 ) (445 ) (39 ) (1,318 ) Change in fair value of warrant liabilities (3,695 ) — (32,989 ) — Income tax benefit (3,512 ) — (3,512 ) — Depreciation and amortization 4,681 4,833 14,188 15,532 Amortization of acquired intangible assets 2,898 — 2,898 — Stock-based compensation expense 17,409 14,995 37,473 37,222 Acquisition-related costs 7,701 — 9,170 — Total Adjusted EBITDA $ (64,012 ) $ (25,315 ) $ (120,970 ) $ (65,365 )
23andMe Holding Co. Reconciliation of GAAP Net Income Outlook to non-GAAP Adjusted EBITDA Outlook (in thousands) (unaudited)
Outlook for the Year Ended March 31, 2022 as of February 10, 2021 Low High Reconciliation of estimated net loss to adjusted EBITDA GAAP Net Loss outlook $ (220,000 ) $ (205,000 ) Adjustments Estimated interest (income), net (285 ) (285 ) Estimated other (income) / expense, net (174 ) (174 ) Estimated change in fair value of warrant liabilities (32,989 ) (32,989 ) Estimated income tax benefit (3,505 ) (3,505 ) Estimated depreciation and amortization 19,712 19,712 Estimated amortization of acquired intangible assets 7,246 7,246 Estimated stock-based compensation expense 57,794 57,794 Estimated acquisition-related costs 9,168 9,168 Non-GAAP adjusted EBITDA outlook $ (163,033 ) $ (148,033 )
