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 fourth quarter (“Q4”) and full year of fiscal year 2022 (“FY2022”), which ended March 31, 2022. 23andMe is the only company with multiple FDA authorizations for over-the-counter genetic health risk reports, and in particular the only company that is 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 made incredible progress this last year with several major milestones, including our entry into the public markets, raising $560 million, and our acquisition of Lemonaid Health. In addition, we increased the number of health reports in our Personal Genome Service to over 60, grew our customer base to 12.8 million genotyped customers and expanded our therapeutics pipeline to more than 50 active programs with two now in Phase 1 clinical trials. All of these accomplishments further our mission to help people access, understand and benefit from the human genome,” said Anne Wojcicki, CEO and Co-Founder of 23andMe. “Genomic information is enabling us to revolutionize the diagnosis, prevention and treatment of human disease. The 23andMe Consumer business is focused on building a genomic health service that focuses on prevention and wellness. Our clinical efforts started with the acquisition and integration of Lemonaid Health’s telehealth and digital pharmacy services and will continue as we roll out a number of new services this fiscal year. Just this month we started beta testing a genetic report consultation service with clinicians who are trained in genetic health concepts. This service can help customers better understand the potential impact of their genetic risk profile and discuss the next steps. This is just the start of our efforts in this area, and I’m excited about the broader suite of services we plan to introduce later this year.”
FY2022 Financial Results Summary
Achieved financial guidance
$272 million revenue [guidance: $268 to $278 million]
$217 million net loss [guidance: $(205) to $(220) million]
$151 million adjusted EBITDA loss [guidance: $(148) to $(163) million]
Solid balance sheet with cash of $553 million at year end.
Began offering clinician-led genetic consultations to 23andMe customers focused on risk of breast cancer, colon cancer or early onset of heart disease based on the company’s BRCA1/BRCA2, MUTYH-associated polyposis and familial hypercholesterolemia reports.
Enrolled patients in a Phase 1 study of the company’s first wholly owned immuno-oncology antibody, 23ME-00610 (23ME’610).
Presented data at the American Association for Cancer Research (AACR) 2022 Annual Meeting related to the company’s wholly-owned 23ME’610 immuno-oncology program.
Increased customer database to 12.8 million genotyped customers.
Expanded 23andMe+ availability to customers in the UK and Canada. 23andMe+ is a membership service that offers insights and features to give members even more actionable information to live healthier lives.
Launched four new reports for customers subscribed to 23andMe+ bringing total reports available to over 60. 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 fourth quarter were:
Skin cancer reports (2)
Irritable bowel syndrome report
Published three papers describing findings on how genetics influences depression and bipolar disorder Translational Psychiatry (2022) 12:121, educational attainment Nature Genetics (2022) 54, 437–449 and loss of smell and taste due to COVID-19 Nature Genetics (2022) 54, 121-124.
Made Comparably’s 2022 list of Best Places to Work in the San Francisco Bay Area.
“Our 2022 fiscal year was a pivotal year for 23andMe with our public listing in June 2021 followed by the strategically important acquisition of Lemonaid Health in November,” said Steve Schoch, Chief Financial Officer of 23andMe. “During that same time, our Personal Genome Service business increased by 1.5 million genotyped customers, or 13%, significantly extending our competitive data advantage. Our investments in our therapeutics portfolio have increased our pipeline to more than 50 active programs. Our Research Services business will be sustained by GSK’s election to remain our exclusive data partner for a fifth year for an opt-in cash payment of $50 million, double the average annual cash payment of the first four years. This extension is a clear sign of the value GSK sees in our data advantage.”
“This coming fiscal year we plan to take a more cautious overall approach to our use of cash, giving priority to the roll out of our next-generation genomic health service, and to advancing our therapeutics efforts. We believe that appropriate investments in these areas will provide our best opportunities for future growth,” added Schoch.
FY2022 Fourth Quarter and Full Year Financial Results
Total revenue for the three and twelve months ended March 31, 2022, was $101 million and $272 million, respectively, representing increases of 14% and 11%, respectively, for the same periods in the prior year. Fourth quarter revenue growth was primarily due to the addition of three months of telehealth business revenue from our Lemonaid Health acquisition and higher Research Services revenue. These increases were partially offset by lower Personal Genome Service (“PGS”) revenue. Full year revenue growth was primarily driven by five months of telehealth business revenue and higher subscription revenue.
Consumer services revenue represented approximately 83% and 82% of total revenue, respectively, for the three and twelve months ended March 31, 2022, and Research Services revenue, substantially all derived from the collaboration with GSK, accounted for approximately 17% and 18% of total revenue, respectively, for those same periods.
Operating expenses for the three and twelve months ended March 31, 2022 were $117 million and $387 million, respectively, compared to $112 million and $302 million for the same periods in the prior year. The increase in fourth quarter operating expenses was primarily attributable to increased sales and marketing expenses associated with the addition of telehealth marketing activities. The increase in full year operating expenses was primarily due to increased sales and marketing spending around holiday and promotional periods, the addition of telehealth sales and marketing expenses and therapeutics-related research and development expenses as programs advance in development.
Net loss for the three and twelve months ended March 31, 2022 was $70 million and $217 million, respectively, compared to net losses of $67 million and $184 million for the same periods in the prior year. The increase in net loss for the fourth quarter was primarily driven by higher operating expenses (as noted above). The increase in net loss in the full year was primarily driven by higher operating expenses (as noted above) offset by changes in fair value of warrant liabilities of $33 million and an income tax benefit of $3 million. In December 2021, the company redeemed all outstanding warrants.
Total Adjusted EBITDA (as defined below) for the three and twelve months ended March 31, 2022 was $(30) million and $(151) million, respectively, compared to $(11) million and $(77) 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. Adjusted EBITDA for the three and twelve months ended March 31, 2022 for the Consumer & Research Services segment was $3 million and $(30) million, respectively, compared to $18 million and $13 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.
23andMe ended Q4 FY2022 with cash of $553 million, compared to $282 million as of March 31, 2021. The increase was primarily 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.
FY2023 Financial Guidance
The company’s full year fiscal 2023 guidance is based on a conservative approach, recognizing the current uncertainties in the general economy and in financial markets. Within the existing consumer businesses of PGS and telehealth, the company is prioritizing the minimization of cash burn over top-line growth. For those business segments expected to drive future growth, which include the company’s new genomic health services and Therapeutics, the company plans to focus on the most strategically and financially valuable options and invest appropriately. Because the new genomic health service is not anticipated to fully launch until later in the fiscal year, the company does not foresee meaningful revenue contribution from these new consumer products and services within FY2023. As a reminder, our guidance includes the full-year impact of the consolidation of Lemonaid Health’s business into the company’s overall consumer business as well as the current and anticipated effects of general inflation on certain of our costs. Revenue guidance for FY2023, which will end on March 31, 2023, is projected to be in the range of $260 to $280 million, with a net loss in the range of $350 to $370 million. Full year adjusted EBITDA loss is projected to be in the range of $195 to $215 million for fiscal year 2023.
23andMe is a genetics-led consumer healthcare and therapeutics company empowering a healthier future. For more information, please visit investors.23andme.com.
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 December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 11, 2022 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 (provision) 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, litigation settlements not related to normal and continued business activities, 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.