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Nov 12, 2021

23andMe Reports FY2022 Second Quarter Financial Results

The following is the press release from 23andme discussing the company’s latest financial results:

Second quarter revenue of $55 million

Recent addition of telemedicine platform further advances vision of individualized primary care that empowers consumers to live healthier lives

SUNNYVALE, Calif., Nov. 10, 2021 — 23andMe Holding Co. (ME) (“23andMe”), a leading consumer genetics and research company, today reported its financial results for the second quarter (“Q2”) of its fiscal year 2022 (“FY2022”), which ended September 30, 2021.

“With the addition of telemedicine and pharmacy services to our Personal Genome Service products and services, we significantly advance our efforts to provide consumers with convenient access to personalized, proactive and genetically-based health services,” said Anne Wojcicki, CEO and Co-Founder of 23andMe. “We are also pleased with the progress of our therapeutics pipeline. Our partner, GSK, expects to report clinical data from the CD96 program in 2022. In addition, we expect to start a clinical trial with our wholly owned P006 program by the end of fiscal year 2022.”

Recent Highlights

Completed the acquisition of Lemonaid Health, Inc (“Lemonaid Health”), an on-demand platform for accessing medical care and pharmacy services online

Expanded customer database to 11.9 million genotyped customers

Launched three 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. The new reports released in the second quarter were:

A gallstones report that uses 6,950 genetic markers, along with a customer’s ethnicity and sex, to estimate a person’s likelihood of developing gallstones

An HDL cholesterol report that uses 15,825 genetic markers, along with a customer’s ethnicity and sex, to estimate the likelihood of an individual having low HDL (or “good”) cholesterol

A gestational diabetes report that uses a person’s ethnicity and more than 6,000 genetic variants associated with developing gestational diabetes mellitus to estimate a person’s likelihood of developing this condition.

Reported on key genetic research findings in Q2, including findings regarding COVID-19 vaccines reactions, health implications of e-cigarette use and genes associated with longer reproductive lifespan in women

Added a new ancestry analysis, which offers additional insights into some customers’ indigenous genetic ancestry from North America.

Added a new board member: Sandra R. Hernández, President and CEO of the California Health Care Foundation

“We made good progress on advancing our consumer health services segment with product enhancements, such as new genetic health risk reports and the acquisition of Lemonaid Health. These additions are aimed at extending our personalized and customer-centric philosophy to help people live healthier lives,” said Steve Schoch, Chief Financial Officer of 23andMe. “While we will be updating guidance next quarter to include the effects of the Lemonaid Health acquisition, currently, our prior full-year guidance for 23andMe, excluding the consolidation of Lemonaid Health, is consistent with our current view of expected performance.”

FY2022 Second Quarter Financial Results
Total revenue for the three- and six-months ended September 30, 2021, was $55 million and $114 million, respectively, representing increases of 7% and 15%, respectively, for the same periods in the prior year. This revenue growth was primarily due to higher Personal Genome Service (“PGS”) kit sales and subscriptions, a service that is still in its first year post launch.

Consumer services revenue represented approximately 81% of total revenue for the three and six months ended September 30, 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 six-months ended September 30, 2021 were $74 million and $147 million, respectively, compared to $61 million and $120 million for the same periods in the prior year. The increase in operating expenses was primarily attributable to the increase in research and development expenses related to our therapeutics programs along with sales and marketing expenses intended to grow the consumer business.

Net loss for the three- and six-months ended September 30, 2021 was $17 million and $59 million, respectively, compared to net losses of $36 million and $72 million for the same periods in the prior year. The improvement in net loss was primarily driven by changes in fair value of warrant liabilities of $30 million and $29 million, respectively, for the three and six months ended September 30, 2021. It is anticipated that there could be significant changes in the fair value of the warrant liabilities from quarter to quarter.

Total Adjusted EBITDA (as defined below) for the three and six months ended September 30, 2021 was $(30) million and $(57) million, respectively, compared to $(20) million and $(40) million for the same periods in the prior year. The decrease in total Adjusted EBITDA was driven primarily by an increase in research and development expenses related to our therapeutics programs and sales and marketing expenses designed to grow the consumer business. Adjusted EBITDA for the three- and six-months ended September 30, 2021 for the Consumer & Research Services segment was $(0.8) million and $(1.3) million, respectively, compared to $1.8 million and $(2.5) million for the same periods in the prior year.

Balance Sheet
23andMe ended Q2 FY2022 with cash of $701 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 during the first quarter of FY2022. Subsequent to the end of Q2 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
Our previous full-year FY2022 guidance, excluding the effects of the Lemonaid Health acquisition, is unchanged. Updated FY2022 guidance, including the effects of the Lemonaid Health acquisition, will be provided with our third quarter update. For purposes of our net loss guidance, due to the unpredictable nature of market-driven changes, we have assumed no net change in the fair value of warrant liability for the year.

Conference Call Webcast Information
23andMe will host a conference call at 4:30 p.m. Eastern Time on Wednesday, November 10, 2021 to discuss the financial results for Q2 FY2022 and report on business progress. The webcast can be accessed on the day of the event at https://investors.23andme.com/news-events/events-presentations. A webcast replay will be available at the same address for a limited time within 24 hours after the event.

About 23andMe
23andMe, headquartered in Sunnyvale, CA, is a leading consumer genetics and research company. Founded in 2006, the company’s mission is to help people access, understand, and benefit from the human genome. 23andMe has pioneered direct access to genetic information as the only company with multiple FDA authorizations for genetic health risk reports. The company has created the world’s largest crowdsourced platform for genetic research, with approximately 80 percent of its customers electing to participate. The 23andMe research platform has generated more than 180 publications on the genetic underpinnings of a wide range of diseases, conditions, and traits. The platform also powers the 23andMe Therapeutics group, currently pursuing drug discovery programs rooted in human genetics across a spectrum of disease areas, including oncology, respiratory, and cardiovascular diseases, in addition to other therapeutic areas. More information is available at www.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, 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 June 30, 2021 filed with the Securities and Exchange Commission (“SEC”) on August 13, 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, depreciation and amortization of fixed assets, amortization of internal use software, 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.