23andMe (ME) - 2025 Q1 - Quarterly Report

PART I Item 1. Financial Statements Q2 2024 financials report total assets of $368.0 million, liabilities of $224.5 million, revenue of $40.4 million, and a net loss of $69.4 million Condensed Consolidated Balance Sheets Total assets decreased to $368.0 million, liabilities increased to $224.5 million, and equity declined as of June 30, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (Unaudited) | March 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $169,971 | $216,488 | | Total current assets | $232,954 | $255,309 | | Total assets | $368,047 | $395,167 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $152,857 | $127,331 | | Total liabilities | $224,543 | $206,647 | | Accumulated deficit | $(2,242,488) | $(2,173,088) | | Total stockholders' equity | $143,504 | $188,520 | | Total liabilities and stockholders' equity | $368,047 | $395,167 | Condensed Consolidated Statements of Operations and Comprehensive Loss Q2 2024 revenue decreased 34% to $40.4 million, resulting in a net loss of $69.4 million, improved by lower operating expenses Quarterly Operating Results (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total revenue | $40,414 | $60,864 | | Gross profit | $20,514 | $30,680 | | Loss from operations | $(71,955) | $(109,264) | | Net loss | $(69,400) | $(104,624) | | Net loss per share (Basic and diluted) | $(0.14) | $(0.23) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities improved to $43.3 million, with total cash and equivalents at $180.4 million as of June 30, 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(43,270) | $(69,355) | | Net cash used in investing activities | $(1,156) | $(2,695) | | Net cash provided by (used in) financing activities | $9 | $(114) | | Net decrease in cash, cash equivalents and restricted cash | $(44,417) | $(72,498) | | Cash, cash equivalents and restricted cash—end of period | $180,444 | $322,724 | Notes to the Condensed Consolidated Financial Statements The notes detail business structure, accounting policies, and key events like a go-private proposal, supplier risks, Nasdaq delisting, and a cybersecurity settlement - A Special Committee was formed to review strategic alternatives, receiving a preliminary non-binding proposal from CEO Anne Wojcicki on July 29, 2024, to acquire all outstanding shares she doesn't own for $0.40 per share[14] - The company relies on a single supplier for 100% of its microarrays, another for 100% of its kits, and one laboratory service provider for 100% of sample processing, indicating significant supplier concentration risk[22][23] - The company received a Nasdaq deficiency notice for its stock price falling below $1.00, with a deadline of November 4, 2024, to regain compliance, and is proposing a reverse stock split to stockholders[32][33][35] - On July 15, 2024, the company reached an agreement in principle to settle class action lawsuits related to the October 2023 cybersecurity incident for an aggregate cash payment of $30.0 million[76][77] Revenue by Category (in thousands) | Category | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | PGS | $32,506 | $37,029 | | Telehealth | $6,647 | $10,523 | | Research services | $1,261 | $13,312 | | Total | $40,414 | $60,864 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 34% revenue decline, improved net loss from expense cuts, liquidity challenges, Nasdaq delisting, and a go-private proposal Results of Operations Q1 FY2025 revenue decreased 34% to $40.4 million due to lower services, with operating expenses cut 34% to $92.5 million - Total revenue decreased by $20.5 million (34%) YoY, driven by a $12.1 million decrease in research services revenue and an $8.4 million decrease in consumer services revenue[168] - Research and development expenses decreased by $17.7 million (28%) YoY, mainly due to a $12.1 million reduction in lab-related services for therapeutics programs[172] - General and administrative expenses decreased by $18.4 million (36%) YoY, primarily due to a $27.5 million reduction in non-cash stock-based compensation, partially offset by an $11.7 million increase in outside services[175] Adjusted EBITDA Total Adjusted EBITDA improved to a loss of $35.2 million, driven by the Therapeutics segment's loss narrowing to $12.4 million Adjusted EBITDA by Segment (in thousands) | Segment | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Consumer and Research Services Adjusted EBITDA | $(8,841) | $(5,602) | | Therapeutics Adjusted EBITDA | $(12,417) | $(31,138) | | Unallocated Corporate | $(13,904) | $(13,060) | | Total Adjusted EBITDA | $(35,162) | $(49,800) | - The improvement in total Adjusted EBITDA was primarily driven by the Therapeutics segment, where the loss narrowed by $18.7 million due to decreased lab-related research services[185] Liquidity and Capital Resources The company holds $170.0 million in cash, believes it has sufficient liquidity for 12 months, and addresses Nasdaq delisting via a reverse stock split - The company's principal source of liquidity is its cash and cash equivalents balance of $170.0 million as of June 30, 2024[187] - Management believes its current cash will be sufficient to fund operations and capital expenditures for at least 12 months from the filing date[187] - The company has until November 4, 2024, to regain compliance with Nasdaq's minimum bid price requirement of $1.00 per share and is proposing a reverse stock split to achieve this[190][191] Quantitative and Qualitative Disclosures About Market Risk Market risk from interest rate and foreign currency fluctuations is minimal due to short-term cash and USD-denominated transactions - The company's exposure to interest rate risk is considered immaterial due to the short-term nature of its cash equivalents ($170.0 million in money market accounts)[205] - Foreign currency risk is currently minimal as substantially all revenue and expenses are denominated in U.S. dollars[206] Controls and Procedures As of June 30, 2024, CEO and CFO concluded disclosure controls were effective, with no material changes to internal controls - The CEO and CFO concluded that as of June 30, 2024, the company's disclosure controls and procedures were effective at the reasonable assurance level[209] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[210] PART II. OTHER INFORMATION Legal Proceedings Legal proceedings are detailed in Note 11, covering the settlement of class action lawsuits from the 2023 cybersecurity incident - Information regarding legal proceedings is detailed in Note 11, which covers the settlement of class action lawsuits arising from the 2023 cybersecurity incident[211][76] Risk Factors No material changes have occurred to the risk factors previously disclosed in the Fiscal 2024 Form 10-K - No material changes have been made to the risk factors disclosed in the Fiscal 2024 Form 10-K[211] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the quarter ended June 30, 2024 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter ended June 30, 2024[211]