23andMe Holding Co. (Nasdaq: ME), a leading human genetics and preventive health company, reported its financial results for the second quarter of fiscal year 2025 (FY25), which ended September 30, 2024.
Key Results:
Recent Developments:
“We are making significant progress to ensure the long-term success of the business as we continue on our mission,” said Anne Wojcicki, CEO and Co-Founder of 23andMe. “We have been focused on growing our subscription business by adding more value and driving greater engagement, and as a result we’ve more than doubled our membership services revenue from the prior year quarter. We will continue to prioritize driving recurring revenue through our subscription business, in addition to growing our research partnership business as we look to the future.”
Q2 Fiscal 2025 Financial Results
Total revenue for FY25 Q2 was $44 million, compared to $50 million for the same period in the prior year, representing a decrease of 12%. The decrease was primarily driven by lower consumer services revenue driven mainly by lower PGS kit sales volume and telehealth orders, as well as lower research services revenue as the GSK collaboration exclusive discovery term concluded in July 2023. These decreases were partially offset by growth in membership services revenue, which represented 21% of total revenue versus 9% in the prior year quarter, as the Company continues focusing on higher margin recurring revenue streams.
Operating expenses for FY25 Q2 were $84 million, compared to $101 million for the same period in the prior year, a 17% decrease. The decrease in operating expenses for the quarter was driven by lower personnel-related expenses, including non-cash stock-based compensation expenses, following workforce reductions in the current and prior quarters, and the disposition of Lemonaid Health Limited in the UK in August 2023. The improvement also reflects lower Therapeutics-related R&D spend as we opted for a royalty on several GSK partnered programs, resulting in a significant reduction of GSK collaboration expenses compared to the prior year quarter.
GAAP Net loss for FY25 Q2 was $59 million, a 21% improvement compared to a net loss of $75 million for the same period in the prior year.
Adjusted EBITDA (as defined below) for FY25 Q2 was a loss of $33 million, a 26% improvement compared to a loss of $45 million for the same period in the prior year. The improvement in adjusted EBITDA was primarily due to lower R&D and personnel-related expenses, and improvements in consumer services gross profit, partially offset by lower research services gross profit. Please refer to the tables below for a reconciliation of U.S. GAAP to Non-U.S. GAAP financial measures.
Balance Sheet
23andMe ended September 30, 2024 with cash and cash equivalents of $127 million, compared to $216 million as of March 31, 2024. 23andMe has no debt on its balance sheet.
As announced yesterday, the Company is restructuring the business by streamlining operations, reducing costs and positioning the Company for long-term success in the future. In addition, the Company is exploring raising additional capital and continuing to grow the research partnership business. These efforts will improve its financial condition and liquidity position to extend our cash runway.
Conference Call Webcast Information
23andMe will host a conference call at 8:00 a.m. Eastern Time today, November 12, 2024, to discuss the financial results for Q2 FY2025 and report on business progress. The webcast can be accessed at https://investors.23andme.com/news-events/events-presentations. A webcast replay will be available at the same address.
23andMe is a genetics-led consumer healthcare company empowering a healthier future. For more information, please visit investors.23andme.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the future performance of 23andMe’s businesses in consumer genetics and therapeutics and the growth and potential of its proprietary research platform. All statements, other than statements of historical fact, included or incorporated in this press release, including statements regarding 23andMe’s strategy, financial position, financial projections, funding for continued operations, cash reserves, projected costs, database growth, plans, and objectives of management, are forward-looking statements. The words “believes,” “anticipates,” “estimates,” “plans,” “expects,” “intends,” “may,” “could,” “should,” “potential,” “likely,” “projects,” “predicts,” “continue,” “will,” “schedule,” and “would” or, in each case, their negative or other variations or comparable terminology, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are predictions based on 23andMe’s current expectations and projections about future events and various assumptions. 23andMe cannot guarantee that it will actually achieve the plans, intentions, or expectations disclosed in its forward-looking statements and you should not place undue reliance on 23andMe’s forward-looking statements. These forward-looking statements involve a number of risks, uncertainties (many of which are beyond the control of 23andMe), or other assumptions that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s filings with the Securities and Exchange Commission, including under Item 1A, “Risk Factors” in the Company’s most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, and as revised and updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The statements made herein are made as of the date of this press release and, except as may be required by law, 23andMe undertakes no obligation to update them, whether as a result of new information, developments, or otherwise.
Use of Non-GAAP Financial Measures
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, 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 not representative of underlying trends of our business, including but not limited to: 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. 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. Adjusted EBITDA is our best proxy for cash burn.
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