NASDAQ:ME 23andMe Q4 2024 Earnings Report $0.50 -0.27 (-35.32%) Closing price 03/28/2025Extended Trading$0.50 0.00 (0.00%) As of 03/28/2025 08:00 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast 23andMe EPS ResultsActual EPS-$2.40Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/A23andMe Revenue ResultsActual Revenue$64.03 millionExpected Revenue$61.90 millionBeat/MissBeat by +$2.13 millionYoY Revenue GrowthN/A23andMe Announcement DetailsQuarterQ4 2024Date5/23/2024TimeN/AConference Call DateThursday, May 23, 2024Conference Call Time4:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfilePowered by 23andMe Q4 2024 Earnings Call TranscriptProvided by QuartrMay 23, 2024 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Hello, and welcome to 23andme's Fiscal Year 20 24 4th Quarter and Full Year Financial Results Conference Call. As a reminder, this call is being recorded. At this time, all participants are in a listen only mode. After the prepared remarks, there will be a question and answer session. I would now like to turn the call over to Ian Cooney, Senior Director of Investor Relations at 23andme to lead off the call. Operator00:00:24Thank you. Go ahead. Speaker 100:00:28Thank you. Before we begin, I encourage everyone to go to investors. 23andme.com to find the press release we issued earlier today reporting our financial results for the Q4 full year. A replay of today's webcast will also be available on our website. Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions for future periods are forward looking statements. Speaker 100:00:55These statements are based solely on information that is now available to us. We encourage you to review the section entitled Forward Looking Statements in our press release, which applies to this call. Also, please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance. We also discuss certain non GAAP measures. Important information on our use of these measures and reconciliation to U. Speaker 100:01:23S. GAAP may be found in our earnings release. Joining us on our call today are Ann Wojcicki, our Chief Executive Officer and Co Founder and Joe Selzavage, our Chief Financial and Accounting Officer. Jennifer Lo, our Head of Therapeutics Development will join us for Q and A. I'd now like to turn the call over to Joe. Speaker 200:01:43Thank you, Ian. Hello, everyone. I'd like to start by addressing the topic that is likely top of mind for everyone on this call. On March 28, 2024, the Board of Directors of 23andme formed a special committee comprised of independent directors to review strategic alternatives that may be available to 23andme to maximize shareholder value. On April 18, 2024, the company announced it has been made aware that Anne Wojcicki, Chief Executive Officer, Co Founder and Chair of the Board of Directors of 23andme was considering making a proposal to acquire all of the outstanding shares of 23andme that she does not currently own as she stated in an amendment dated April 17, 2024 to her Schedule 13b filing with the Securities and Exchange Commission. Speaker 200:02:35Ms. Wojcicki also indicated in our Schedule 13b filing that she wishes to maintain control of 23 and therefore will not be willing to support any alternative transaction. The special committee will carefully review Ms. Wojcicki's proposal when and if it is made available and evaluate it in light of other available strategic alternatives including continuing to operate as a publicly traded company. The special committee is committed to acting in the best interest of 23andme and its shareholders. Speaker 200:03:09There can be no assurances that the foregoing will result in any particular outcome and 23andme does not intend to comment further on these matters until 23 andMe determines that additional disclosure is appropriate or required by law. This call is focused solely on the company and its earnings release and we will not be addressing or responding to any questions regarding the aforementioned matters on this call. I'd now like to turn the call over to Anne. Speaker 300:03:36Thank you, Joe. Fiscal 2024 was a productive yet transitional year at 23andme. The conclusion in July of the exclusive period of our discovery and development collaboration agreement with GSK, combined with a more constrained capital markets and fundraising environment, necessitated a significant change in the strategic direction of the company. We refocused our business on our highest value programs in therapeutics and prioritized higher margin services in creating value for our membership programs in our consumer business. We also began to reimagine how to best leverage our data to create value for customers, partners and shareholders. Speaker 300:04:23The result is an operating model that will look different in the coming years, but it's designed to reflect a company that remains committed to our vision of improving the health of millions of people worldwide. As a first priority, we are focusing on driving profitable growth and high return uses of cash. This means prioritizing memberships in our PGS segment, driving growth in telehealth and leveraging our data assets to create a sustainably growing profitable research business. It also means that we are looking for ways to fund the continued development of our clinical assets while limiting the use of cash on our balance sheet. Starting with the PGS business. Speaker 300:05:05We are excited to announce that we have passed the $15,000,000 customer milestone. This is a testament to the hard work of our employees and to the power and value of genetic information. We continue to innovate in both our Ancestry and Health offerings to drive growth and add value to our platform, specifically in our membership services. We have a compelling pipeline of premium features planned for our Ancestry platform and recently rolled out an exciting new feature called historical matches, enabling premium plus members to learn about their genetic hundreds of interesting figures from history. We also added a number of new regions to bring our industry leading total to over 3,000. Speaker 300:05:51In health, a major component of our vision is to build a scalable preventive health service. We think this is best achieved through driving membership growth on our platform as it enables us to help our customers improve their health and manage risk over time. The membership model also enables a scalable, sustainable business model that will allow us to create value for shareholders while reinvesting in innovation to continue to improve the value of our offerings for customers. We are focused on the delivery of ongoing health value and accountability to customers, and our product development for our consumer products is largely centered in this area. We started with the recent rollout of personalized health features like Health Action Plan and Health Tracks and have begun integrating telehealth into our offering with the rollout of Total Health. Speaker 300:06:44In Q4, we announced the availability of 3 new genetic reports for 23andmeplus members on breast, colorectal and prostate cancer. The reports are based on statistical models known as polygenic risk scores developed by 23andme through our proprietary research database. Our new cancer PRS reports identify individuals with a higher likelihood of developing 3 of the most common cancers, the majority of whom are invisible to the healthcare system today. Those individuals are then matched to the appropriate next steps through health action plan. By empowering more people with this knowledge, we can help make cancer screening, prevention, early detection and treatment more effective. Speaker 300:07:33We continue to work to make the membership platform even more engaging and useful for customers in tracking and impacting their personalized health journeys. And I am pleased to report that our retention rates in Q4 improved from the previous 3 quarters, while membership revenue grew by 41% year over year to $20,000,000 We are also prioritizing growth in our Lemonade Telehealth business and have begun to make meaningful strides, while investing in a pipeline of future value drivers. Over the past few quarters, the telehealth business has generated positive gross margins while decreasing advertising spend at the same time, leading to improvements in our bottom line, and we expect this trend to continue. In Q4, we launched over the counter options and quarterly plans, which are contributing to a meaningfully improved LTV. We also just announced the launch of one of the industry's leading fast acting ED medications, INSTENDRA, and expect to further add to our offerings in the coming year. Speaker 300:08:36Overall, I'm very optimistic about the future of our consumer business. I believe we have only scratched the surface in delivering value and engaging with customers on their health journey. Moving to the Research business. Fiscal 2024 was a year of transition and learning for Research. We were very pleased to announce GSK extended our agreement on a nonexclusive basis in October, showing the ongoing value in drug discovery and development of engaging with the world's largest reconfectable DNA data engine. Speaker 300:09:06I'm extremely encouraged by the potential for this business and by the interest shown by potential partners throughout the drug discovery and development ecosystem and believe research will be a strong source of growth, profitability and innovation as market conditions improve. On the innovation front, we are excited by recent advances in deep learning that will eventually enable us to train DNA language models to study the grammar of the genome. We expect these methods to rapidly grow our ability to predict disease and provide compelling personalized health recommendations for customers. Using our database and AI, we are building features with the goal of becoming the world's best at genetic health risk prediction to help customers understand the impact of their lifestyle on disease prevention. 23. Speaker 300:09:55Me is actively developing AI models to enhance both its consumer and data partnership businesses. In the short term, the company is utilizing existing large language models to potentially expand support for clinicians. In the future, 23andme hopes to launch various AI models aimed at improving services for both customers and biotech partners. In the consumer space, this includes new predictive models for delivering personalized health recommendations more effectively. For biotech use cases, we are developing AI models that better predict the impact of genetic variation on cellular function. Speaker 300:10:35These initiatives utilize the company's unique database to accelerate target discovery and improve the probability of success in the drug discovery business. With recent breakthroughs in AI, we believe we are well placed to enable customers to explore potential health outcomes, understand how their lifestyle choices impact disease prevention and surface new therapeutic opportunities for our partners. Moving to the therapeutics business. We made significant progress in fiscal 2024. We are pleased to announce we've completed enrollment in the Phase 2a study for 23andme610 and also recently announced we've moved our second immuno oncology asset 23andme1473 into the clinic and begun dosing patients in Phase 1. Speaker 300:11:24For 610, we will be presenting safety, efficacy and biomarker data from 2 of our Phase 2 cohorts at ASCO on June 1 June 3. We expect to present additional data from the 6 10 Phase 2a at additional upcoming medical meetings and data from the 1473 Phase 1 in calendar year 2025. As I look towards the future, I'm excited about the opportunities for 23andme to grow and impact our customers. We are a leader in genetic and data based health and we continue to innovate and lead. The interest in data and AI combined with our world leading genetic and phenotypic data engine portend amazing opportunities for our research business. Speaker 300:12:12And in therapeutics, we are incredibly excited by the potential of our clinical assets and future value they may bring to patients and to the company. And with that, I'll turn the call over to Joe to review our financial results for the quarter. Speaker 200:12:26Thank you, Anne. I'd like to reiterate Anne's excitement about the future of precision healthcare at 23andme and I'm proud of our ability to execute while maintaining cost discipline amid our shift toward a more sustainable operating profile. Revenue for the quarter and the year was $64,000,000 $220,000,000 respectively, representing a 31% decrease and a 27% decrease respectively over the same periods in the prior year. Similar to the last few quarters, the year over year decrease in revenue was primarily due to the conclusion of the exclusive discovery term under our GSK collaboration in July, as well as lower consumer services revenue in our PGS kit and telehealth businesses. The decrease in consumer revenue was driven by our focus on marketing efficiency and membership sales, both of which have resulted in improved unit economics and customer lifetime value, but lower sales across the consumer offerings. Speaker 200:13:27We expect that these decisions will continue providing benefits to our margins over the short and longer term. These decreases were partially offset by continued growth in our subscription services. Looking at the composition of our revenue, consumer services revenue represented 99% 92% of total revenue for the quarter and the year respectively. And research services revenue, which was primarily derived from our other research partners accounted for approximately 1% 8% of total revenue respectively for those same periods. As a reminder, the new GSK's data license announced in Q3 is expected to have minimal impact on this year's results with the majority landing in fiscal year 2025 given the terms of the agreement. Speaker 200:14:17Our gross profit for the Q4 the year was $27,000,000 $99,000,000 respectively, representing a 32% decrease and 26% decrease respectively over the same periods in the prior year. The decreases were driven primarily by the decrease in research services revenue, while subscription revenue, higher ASPs on our PGS kits and improved telehealth margins following the August 23 disposition of Lemonade Health Limited in the UK. Turning to our expenses. Total operating expenses for the quarter and the year were $239,000,000 $781,000,000 respectively, compared to $109,000,000 $459,000,000 for the same periods in the prior year. The increase in operating expenses for the quarter the year was primarily due to $153,000,000 $352,000,000 dollars in non cash goodwill impairment charges taken in the quarter the year respectively and was partially offset by lower personnel related expenses following workforce reductions in the prior quarters and the disposition of the UK entity, along with lower therapeutics related R and D spend due to a significant reduction in the GSK collaboration programs. Speaker 200:15:39Looking at the bottom line, net loss for the quarter the year were $209,000,000 $667,000,000 respectively compared to net losses for the same period in the prior year of $64,000,000 $312,000,000 The increase in 4th quarter and full year net loss was driven mainly by the goodwill impairment charge mentioned previously. I would also like to point out that the full year fiscal 2024 results are preliminary. We are still completing our assessment of our impairment review of goodwill and long lived assets and our impairment expenses undergoing further evaluation. This could result in an adjustment to the impairment recorded in our operating expenses and impact our net loss. However, it is important to point out that any adjustment would be a non cash item and reflected in our annual report on Form 10 ks for the year ended March 31, 2024. Speaker 200:16:42Next, our adjusted EBITDA. For details on how we define adjusted EBITDA as well as the corresponding reconciliations to GAAP, please see our earnings release. Total adjusted EBITDA deficit for the 4th quarter was $33,000,000 compared to a $39,000,000 deficit for the same period in the prior year. Total adjusted EBITDA deficit for the year was $176,000,000 compared to a $161,000,000 deficit for the same period in the prior year. Despite the decline in revenue, we made meaningful progress in managing our expenses and we ended the year with $216,000,000 in cash and cash equivalents compared to $387,000,000 as of March 31, 20 23. Speaker 200:17:30We continue to be judicious with our cash usage and believe that the current level of cash supports 20 of BMEs plan for targeted investment and high ROI growth initiatives. We also announced on May 9th that the company received a notification letter from NASDAQ notifying the company that had been granted an additional 180 days or until November 4, 2024 to regain compliance with the minimum bid requirement for continued listing on the NASDAQ Capital Market. Turning to guidance. In light of the previously mentioned special committee review of strategic alternatives, the company is not providing financial guidance at this time. Propping up, we are pleased with the company's strategic progress and are looking forward to an exciting year ahead. Speaker 200:18:21We remain focused on realizing our vision, while maintaining operating discipline and a focus on high return investments. I am incredibly optimistic about the future of the company and our ability to help people access, understand and benefit from the human genome. With that, let's open up to questions. Operator00:18:53Our first question will come from the line of David Leibovitz with Citi. Speaker 400:18:59Thank you very much for taking my question. Would you be able to help frame expectations for the Phase 2 update that's coming at ASCO? Speaker 500:19:10Yes. Let me hand it over to Jennifer. Yes. We're excited to be able to present the first efficacy, safety and biomarker data on 2 of our cohorts, the neuroendocrine and ovarian cohorts, which enrolled more quickly last year. That data is embargoed until the presentation of the abstracts just before the study starts, but just before the conference starts. Speaker 500:19:38But we have released the titles and the time and we will present the posters on our investor website and the therapeutics website when they become available on the day of presentation. Speaker 400:19:55Thank you for that. And in terms of product mix at present and going forward, what do you see as the biggest drivers of margin expansion as the year proceeds? Speaker 500:20:10Joe, you want to take it? Speaker 200:20:11Sure. For us, it is a really focus on membership revenue. We've really seen improvements in our subscription revenue this year. As we increase the price from $29 to $69 on our 23 and E plus memberships, we've continued to see great retention rates and people really and we're continuing to add value in that subscription as well. So that recurring revenue will help us and its high margin dollars to add to our bottom line. Speaker 400:20:43At what point do you think you'll have a fair degree of, I guess, visibility the extent that the customer base is proceeding post the price increases? Speaker 500:21:00Sorry, say again. Can you explain all, Mark? Speaker 400:21:05I'm just asking about what point do you think you have a fair degree of visibility on retention of customers post price increases? Speaker 200:21:15Basically, we increased prices in mid-twenty 24. So we're seeing people renew at this basically coming up and basically from May forward. So I think we'll start to see these retention rates going forward in the next quarter and beyond. Speaker 400:21:35Got it. And I guess final question here and then I'll pass it on. How's the rollout of Total Health going at this point? Speaker 500:21:48The rollout on Total Health is one we haven't disclosed details on. But I think the thing to look for is really about when we launch this to existing customers, which we will launch sort of in that Q3 timeframe. Speaker 400:22:06Got it. Thank you very much for taking my question. Speaker 500:22:10I should be clear about. Speaker 400:22:13Excellent. Thank you. Operator00:22:17Thank you. Our next question will come from the line of Stephen Moff with TD Cowen. Speaker 600:22:26Cowen. Maybe a follow-up question on Total Health. The launch of existing customers, you said it's going to be in the 3rd quarter of, you're talking about calendar year quarter, right? Speaker 500:22:39Yes. Sorry, I was talking about calendar year. Speaker 600:22:42Yes. And then, I mean, maybe can you outline what still needs to be done before you roll out to existing customers? I'm just kind of curious, I think before you disclosed it was going to be rolled out to existing customers in spring? Speaker 500:22:58Yes. It's really it's an engineering issue. It's just about building it out and enabling that upgrade path. So we've just had our handful with other priorities. So it will be prioritized starting now through summer with that kind with the rollout to customers in Q3. Speaker 600:23:21Okay. Thanks for that. And last one for me. I appreciate your comments around managing the cash burn. But how should we think about the cash burn going forward, especially when you're funding the high value therapeutics business? Speaker 600:23:40I mean, just how should we think about those two things given the funding clinical trials is somewhat costly? Thank you. Speaker 200:23:50Sure. So as I've mentioned, we've continued to reduce expenses in our Consumer and Research segment through reductions in force and better cost management, which we announced last year. And we're committed to on MEAD-six ten to funding the Phase 2a portion of the study and for 1473 the Phase 1 portion of the clinical trial. Now for us it is really having cost discipline in the company and really making sure that we reduce our cash burn and extend our cash runway to the extent possible. Okay. Speaker 200:24:29Thank you. Operator00:24:32Thank you. Now I'll turn it over to Ian for any further questions. Speaker 100:24:38Yes. Thank you, Liz. I'll read a few of the top shareholder questions from our SAI Technologies Q and A platform. I would just like to acknowledge that the top upvoted question was will the company be going private? And as Joe mentioned at the beginning of the call, we can't comment any further beyond what we've already said. Speaker 100:24:58So I just wanted to acknowledge that, but we don't have any further comment. Next question would be for Anne. Are there any plans to team up further with pharmaceutical companies to utilize the data you've collected to treat or to create any products or use the data in any other ways to create value? Speaker 500:25:22Absolutely. That is definitely a priority for the company to do partnership with the therapeutics development industry to make sure that we're leveraging this data to help accelerate the development of therapeutic discoveries and development. So you should definitely see we will continue to engage Speaker 300:25:41in those conversations. We'll hope Speaker 500:25:42to have deals. We have been sort of understanding and analyzing what is that best use for us to do these types of partnerships. I just want to also highlight it's definitely been an environment where the entire industry has been cutting costs. But we are quite happy with the interest that we've had and we're optimistic about the ability for us to do deals. Speaker 100:26:10Great. Another one for Anne, kind of more of a general one. How what are the things that investors can look towards that are sort of the most exciting about the future of where Speaker 500:26:22the company is going? Great question. So 3 areas I think that people should really be thinking about. 1, this opportunity for us to be integrating Lemonade and really develop that consumer focused wellness prevention service that is founded on your genomics is really exciting. And this is an opportunity for people to learn about their genome, get blood, get access to advisors, healthcare professionals who are trained on genomics to look at all the various data sources and understand what are the things they can do to be as healthy as possible. Speaker 500:27:02I think we've seen a real enthusiasm in the wellness space in general and I think that we have this opportunity to create a really affordable, impactful service for customers. Total Health, is a fabulous product. I encourage everybody to try it if you have not. It really gives you access to the 23 me premium plus the entire exome plus access to blood care providers. It really, I think shows you sort of the future of where healthcare can go. Speaker 500:27:332nd, obviously, we've talked about the database and the opportunities with the database. It's an exciting world right now also because of the world of LLMs and the opportunity for us to leverage all this data in LLM models. It's really the first time where we've seen these tools are able to manage the amount of data that we have. So we see a lot of opportunity there both on the therapeutic side as well as on the consumer side. And last, obviously, most importantly, not most importantly, but one of our favorites is therapeutics, with our therapeutic program. Speaker 500:28:07And it is a real, privilege for us to be able to develop therapeutics and be impacting lives the way we are. So I am excited to see the data that comes out at ASCO and look forward to more data that's going to come out after. But developing therapies from all of this data and really impacting human lives is incredibly exciting for us. Speaker 100:28:33Thank you. Next one is for Joe. Now that you've received the 180 day extension from NASDAQ, what are the plans to comply with the Listeria Empire? Speaker 200:28:45We're pretty much focused on improving the stock price organically through continued execution and operating momentum. And we also mentioned that we would consider a reverse stock split under the right circumstances later in the year if we were unable to get the stock price over $1 per share noting that any reverse stock split would require Board and shareholder approval. Speaker 100:29:10Great. Thank you. Last one. And what plans beyond or maybe you can just reiterate a little bit what plans are to leverage our data with artificial intelligence model? Speaker 500:29:25Yes. I think it's a little bit of what I talked about before. I think that there is a really exciting opportunity for building out models and risk prediction. And by understanding, by collecting all this data, understanding it all, looking at events, helping consumers understand what their risks are and predicting what that next highest risk event is for them is one really exciting opportunity as well as in therapeutics and helping pick what is the right target, how is the right way to develop a drug, knowing that you can convert all of this data into either a consumer application or a therapeutics application and very exciting for us and those are the types of partnerships that we are focused on. Operator00:30:15Thanks for joining us. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference Call23andMe Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Annual report(10-K) 23andMe Earnings Headlines23andMe to close San Francisco office, warns 250 employees of possible layoffsMay 7 at 2:19 AM | msn.com23andMe to close San Francisco office, warns 250 employees of possible layoffsMay 7 at 2:19 AM | msn.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.May 7, 2025 | Brownstone Research (Ad)23andMe Expects Multiple Bids for Genetic Data, Lawyer SaysMay 7 at 2:19 AM | bloomberg.com23andMe Expects Multiple Bids for Genetic Data, Lawyer SaysMay 7 at 2:19 AM | bloomberg.comTech Talk: What happens to your data when 23andMe sells it to the highest bidder?May 3, 2025 | msn.comSee More 23andMe Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like 23andMe? Sign up for Earnings360's daily newsletter to receive timely earnings updates on 23andMe and other key companies, straight to your email. Email Address About 23andMe23andMe (NASDAQ:ME) Holding Co. operates as a consumer genetics testing company. The company operates in two segments, Consumer & Research Services and Therapeutics. The Consumer & Research Services segment provides a suite of genetic reports, including information on customers' genetic ancestral origins, personal genetic health risks, and chances of passing on certain rare carrier conditions to their children, as well as reports on how genetics can impact responses to medications. This segments also operates Lemonaid telehealth platform to access affiliated licensed healthcare professionals for medical consultation and treatment for various common conditions; and offers research services. The Therapeutics segment focuses on the drug development; and discovery and development of novel therapies to enhance patient lives across various therapeutic areas, including oncology, respiratory, and cardiovascular diseases, as well as offers out-licensing intellectual property associated with identified drug targets related to drug candidates under clinical development. The company's therapeutics product portfolio comprises 23ME-00610 (P006), a humanized monoclonal antibody, which is in phase 1/2a clinical trials to interfere with the ability of CD200R1 to interact with CD200 in cancer cells; and GSK6097608, an antibody that targets CD96 for attenuating T and NK cell anti-tumor immune responses. The company was incorporated in 2006 and is headquartered in South San Francisco, California.View 23andMe ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Palantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2 Upcoming Earnings Monster Beverage (5/8/2025)Coinbase Global (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Shopify (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Hello, and welcome to 23andme's Fiscal Year 20 24 4th Quarter and Full Year Financial Results Conference Call. As a reminder, this call is being recorded. At this time, all participants are in a listen only mode. After the prepared remarks, there will be a question and answer session. I would now like to turn the call over to Ian Cooney, Senior Director of Investor Relations at 23andme to lead off the call. Operator00:00:24Thank you. Go ahead. Speaker 100:00:28Thank you. Before we begin, I encourage everyone to go to investors. 23andme.com to find the press release we issued earlier today reporting our financial results for the Q4 full year. A replay of today's webcast will also be available on our website. Please note that certain statements made during this call regarding matters that are not historical facts, including but not limited to management's outlook or predictions for future periods are forward looking statements. Speaker 100:00:55These statements are based solely on information that is now available to us. We encourage you to review the section entitled Forward Looking Statements in our press release, which applies to this call. Also, please refer to our SEC filings, which can be found on our website and the SEC's website for a discussion of numerous factors that may impact our future performance. We also discuss certain non GAAP measures. Important information on our use of these measures and reconciliation to U. Speaker 100:01:23S. GAAP may be found in our earnings release. Joining us on our call today are Ann Wojcicki, our Chief Executive Officer and Co Founder and Joe Selzavage, our Chief Financial and Accounting Officer. Jennifer Lo, our Head of Therapeutics Development will join us for Q and A. I'd now like to turn the call over to Joe. Speaker 200:01:43Thank you, Ian. Hello, everyone. I'd like to start by addressing the topic that is likely top of mind for everyone on this call. On March 28, 2024, the Board of Directors of 23andme formed a special committee comprised of independent directors to review strategic alternatives that may be available to 23andme to maximize shareholder value. On April 18, 2024, the company announced it has been made aware that Anne Wojcicki, Chief Executive Officer, Co Founder and Chair of the Board of Directors of 23andme was considering making a proposal to acquire all of the outstanding shares of 23andme that she does not currently own as she stated in an amendment dated April 17, 2024 to her Schedule 13b filing with the Securities and Exchange Commission. Speaker 200:02:35Ms. Wojcicki also indicated in our Schedule 13b filing that she wishes to maintain control of 23 and therefore will not be willing to support any alternative transaction. The special committee will carefully review Ms. Wojcicki's proposal when and if it is made available and evaluate it in light of other available strategic alternatives including continuing to operate as a publicly traded company. The special committee is committed to acting in the best interest of 23andme and its shareholders. Speaker 200:03:09There can be no assurances that the foregoing will result in any particular outcome and 23andme does not intend to comment further on these matters until 23 andMe determines that additional disclosure is appropriate or required by law. This call is focused solely on the company and its earnings release and we will not be addressing or responding to any questions regarding the aforementioned matters on this call. I'd now like to turn the call over to Anne. Speaker 300:03:36Thank you, Joe. Fiscal 2024 was a productive yet transitional year at 23andme. The conclusion in July of the exclusive period of our discovery and development collaboration agreement with GSK, combined with a more constrained capital markets and fundraising environment, necessitated a significant change in the strategic direction of the company. We refocused our business on our highest value programs in therapeutics and prioritized higher margin services in creating value for our membership programs in our consumer business. We also began to reimagine how to best leverage our data to create value for customers, partners and shareholders. Speaker 300:04:23The result is an operating model that will look different in the coming years, but it's designed to reflect a company that remains committed to our vision of improving the health of millions of people worldwide. As a first priority, we are focusing on driving profitable growth and high return uses of cash. This means prioritizing memberships in our PGS segment, driving growth in telehealth and leveraging our data assets to create a sustainably growing profitable research business. It also means that we are looking for ways to fund the continued development of our clinical assets while limiting the use of cash on our balance sheet. Starting with the PGS business. Speaker 300:05:05We are excited to announce that we have passed the $15,000,000 customer milestone. This is a testament to the hard work of our employees and to the power and value of genetic information. We continue to innovate in both our Ancestry and Health offerings to drive growth and add value to our platform, specifically in our membership services. We have a compelling pipeline of premium features planned for our Ancestry platform and recently rolled out an exciting new feature called historical matches, enabling premium plus members to learn about their genetic hundreds of interesting figures from history. We also added a number of new regions to bring our industry leading total to over 3,000. Speaker 300:05:51In health, a major component of our vision is to build a scalable preventive health service. We think this is best achieved through driving membership growth on our platform as it enables us to help our customers improve their health and manage risk over time. The membership model also enables a scalable, sustainable business model that will allow us to create value for shareholders while reinvesting in innovation to continue to improve the value of our offerings for customers. We are focused on the delivery of ongoing health value and accountability to customers, and our product development for our consumer products is largely centered in this area. We started with the recent rollout of personalized health features like Health Action Plan and Health Tracks and have begun integrating telehealth into our offering with the rollout of Total Health. Speaker 300:06:44In Q4, we announced the availability of 3 new genetic reports for 23andmeplus members on breast, colorectal and prostate cancer. The reports are based on statistical models known as polygenic risk scores developed by 23andme through our proprietary research database. Our new cancer PRS reports identify individuals with a higher likelihood of developing 3 of the most common cancers, the majority of whom are invisible to the healthcare system today. Those individuals are then matched to the appropriate next steps through health action plan. By empowering more people with this knowledge, we can help make cancer screening, prevention, early detection and treatment more effective. Speaker 300:07:33We continue to work to make the membership platform even more engaging and useful for customers in tracking and impacting their personalized health journeys. And I am pleased to report that our retention rates in Q4 improved from the previous 3 quarters, while membership revenue grew by 41% year over year to $20,000,000 We are also prioritizing growth in our Lemonade Telehealth business and have begun to make meaningful strides, while investing in a pipeline of future value drivers. Over the past few quarters, the telehealth business has generated positive gross margins while decreasing advertising spend at the same time, leading to improvements in our bottom line, and we expect this trend to continue. In Q4, we launched over the counter options and quarterly plans, which are contributing to a meaningfully improved LTV. We also just announced the launch of one of the industry's leading fast acting ED medications, INSTENDRA, and expect to further add to our offerings in the coming year. Speaker 300:08:36Overall, I'm very optimistic about the future of our consumer business. I believe we have only scratched the surface in delivering value and engaging with customers on their health journey. Moving to the Research business. Fiscal 2024 was a year of transition and learning for Research. We were very pleased to announce GSK extended our agreement on a nonexclusive basis in October, showing the ongoing value in drug discovery and development of engaging with the world's largest reconfectable DNA data engine. Speaker 300:09:06I'm extremely encouraged by the potential for this business and by the interest shown by potential partners throughout the drug discovery and development ecosystem and believe research will be a strong source of growth, profitability and innovation as market conditions improve. On the innovation front, we are excited by recent advances in deep learning that will eventually enable us to train DNA language models to study the grammar of the genome. We expect these methods to rapidly grow our ability to predict disease and provide compelling personalized health recommendations for customers. Using our database and AI, we are building features with the goal of becoming the world's best at genetic health risk prediction to help customers understand the impact of their lifestyle on disease prevention. 23. Speaker 300:09:55Me is actively developing AI models to enhance both its consumer and data partnership businesses. In the short term, the company is utilizing existing large language models to potentially expand support for clinicians. In the future, 23andme hopes to launch various AI models aimed at improving services for both customers and biotech partners. In the consumer space, this includes new predictive models for delivering personalized health recommendations more effectively. For biotech use cases, we are developing AI models that better predict the impact of genetic variation on cellular function. Speaker 300:10:35These initiatives utilize the company's unique database to accelerate target discovery and improve the probability of success in the drug discovery business. With recent breakthroughs in AI, we believe we are well placed to enable customers to explore potential health outcomes, understand how their lifestyle choices impact disease prevention and surface new therapeutic opportunities for our partners. Moving to the therapeutics business. We made significant progress in fiscal 2024. We are pleased to announce we've completed enrollment in the Phase 2a study for 23andme610 and also recently announced we've moved our second immuno oncology asset 23andme1473 into the clinic and begun dosing patients in Phase 1. Speaker 300:11:24For 610, we will be presenting safety, efficacy and biomarker data from 2 of our Phase 2 cohorts at ASCO on June 1 June 3. We expect to present additional data from the 6 10 Phase 2a at additional upcoming medical meetings and data from the 1473 Phase 1 in calendar year 2025. As I look towards the future, I'm excited about the opportunities for 23andme to grow and impact our customers. We are a leader in genetic and data based health and we continue to innovate and lead. The interest in data and AI combined with our world leading genetic and phenotypic data engine portend amazing opportunities for our research business. Speaker 300:12:12And in therapeutics, we are incredibly excited by the potential of our clinical assets and future value they may bring to patients and to the company. And with that, I'll turn the call over to Joe to review our financial results for the quarter. Speaker 200:12:26Thank you, Anne. I'd like to reiterate Anne's excitement about the future of precision healthcare at 23andme and I'm proud of our ability to execute while maintaining cost discipline amid our shift toward a more sustainable operating profile. Revenue for the quarter and the year was $64,000,000 $220,000,000 respectively, representing a 31% decrease and a 27% decrease respectively over the same periods in the prior year. Similar to the last few quarters, the year over year decrease in revenue was primarily due to the conclusion of the exclusive discovery term under our GSK collaboration in July, as well as lower consumer services revenue in our PGS kit and telehealth businesses. The decrease in consumer revenue was driven by our focus on marketing efficiency and membership sales, both of which have resulted in improved unit economics and customer lifetime value, but lower sales across the consumer offerings. Speaker 200:13:27We expect that these decisions will continue providing benefits to our margins over the short and longer term. These decreases were partially offset by continued growth in our subscription services. Looking at the composition of our revenue, consumer services revenue represented 99% 92% of total revenue for the quarter and the year respectively. And research services revenue, which was primarily derived from our other research partners accounted for approximately 1% 8% of total revenue respectively for those same periods. As a reminder, the new GSK's data license announced in Q3 is expected to have minimal impact on this year's results with the majority landing in fiscal year 2025 given the terms of the agreement. Speaker 200:14:17Our gross profit for the Q4 the year was $27,000,000 $99,000,000 respectively, representing a 32% decrease and 26% decrease respectively over the same periods in the prior year. The decreases were driven primarily by the decrease in research services revenue, while subscription revenue, higher ASPs on our PGS kits and improved telehealth margins following the August 23 disposition of Lemonade Health Limited in the UK. Turning to our expenses. Total operating expenses for the quarter and the year were $239,000,000 $781,000,000 respectively, compared to $109,000,000 $459,000,000 for the same periods in the prior year. The increase in operating expenses for the quarter the year was primarily due to $153,000,000 $352,000,000 dollars in non cash goodwill impairment charges taken in the quarter the year respectively and was partially offset by lower personnel related expenses following workforce reductions in the prior quarters and the disposition of the UK entity, along with lower therapeutics related R and D spend due to a significant reduction in the GSK collaboration programs. Speaker 200:15:39Looking at the bottom line, net loss for the quarter the year were $209,000,000 $667,000,000 respectively compared to net losses for the same period in the prior year of $64,000,000 $312,000,000 The increase in 4th quarter and full year net loss was driven mainly by the goodwill impairment charge mentioned previously. I would also like to point out that the full year fiscal 2024 results are preliminary. We are still completing our assessment of our impairment review of goodwill and long lived assets and our impairment expenses undergoing further evaluation. This could result in an adjustment to the impairment recorded in our operating expenses and impact our net loss. However, it is important to point out that any adjustment would be a non cash item and reflected in our annual report on Form 10 ks for the year ended March 31, 2024. Speaker 200:16:42Next, our adjusted EBITDA. For details on how we define adjusted EBITDA as well as the corresponding reconciliations to GAAP, please see our earnings release. Total adjusted EBITDA deficit for the 4th quarter was $33,000,000 compared to a $39,000,000 deficit for the same period in the prior year. Total adjusted EBITDA deficit for the year was $176,000,000 compared to a $161,000,000 deficit for the same period in the prior year. Despite the decline in revenue, we made meaningful progress in managing our expenses and we ended the year with $216,000,000 in cash and cash equivalents compared to $387,000,000 as of March 31, 20 23. Speaker 200:17:30We continue to be judicious with our cash usage and believe that the current level of cash supports 20 of BMEs plan for targeted investment and high ROI growth initiatives. We also announced on May 9th that the company received a notification letter from NASDAQ notifying the company that had been granted an additional 180 days or until November 4, 2024 to regain compliance with the minimum bid requirement for continued listing on the NASDAQ Capital Market. Turning to guidance. In light of the previously mentioned special committee review of strategic alternatives, the company is not providing financial guidance at this time. Propping up, we are pleased with the company's strategic progress and are looking forward to an exciting year ahead. Speaker 200:18:21We remain focused on realizing our vision, while maintaining operating discipline and a focus on high return investments. I am incredibly optimistic about the future of the company and our ability to help people access, understand and benefit from the human genome. With that, let's open up to questions. Operator00:18:53Our first question will come from the line of David Leibovitz with Citi. Speaker 400:18:59Thank you very much for taking my question. Would you be able to help frame expectations for the Phase 2 update that's coming at ASCO? Speaker 500:19:10Yes. Let me hand it over to Jennifer. Yes. We're excited to be able to present the first efficacy, safety and biomarker data on 2 of our cohorts, the neuroendocrine and ovarian cohorts, which enrolled more quickly last year. That data is embargoed until the presentation of the abstracts just before the study starts, but just before the conference starts. Speaker 500:19:38But we have released the titles and the time and we will present the posters on our investor website and the therapeutics website when they become available on the day of presentation. Speaker 400:19:55Thank you for that. And in terms of product mix at present and going forward, what do you see as the biggest drivers of margin expansion as the year proceeds? Speaker 500:20:10Joe, you want to take it? Speaker 200:20:11Sure. For us, it is a really focus on membership revenue. We've really seen improvements in our subscription revenue this year. As we increase the price from $29 to $69 on our 23 and E plus memberships, we've continued to see great retention rates and people really and we're continuing to add value in that subscription as well. So that recurring revenue will help us and its high margin dollars to add to our bottom line. Speaker 400:20:43At what point do you think you'll have a fair degree of, I guess, visibility the extent that the customer base is proceeding post the price increases? Speaker 500:21:00Sorry, say again. Can you explain all, Mark? Speaker 400:21:05I'm just asking about what point do you think you have a fair degree of visibility on retention of customers post price increases? Speaker 200:21:15Basically, we increased prices in mid-twenty 24. So we're seeing people renew at this basically coming up and basically from May forward. So I think we'll start to see these retention rates going forward in the next quarter and beyond. Speaker 400:21:35Got it. And I guess final question here and then I'll pass it on. How's the rollout of Total Health going at this point? Speaker 500:21:48The rollout on Total Health is one we haven't disclosed details on. But I think the thing to look for is really about when we launch this to existing customers, which we will launch sort of in that Q3 timeframe. Speaker 400:22:06Got it. Thank you very much for taking my question. Speaker 500:22:10I should be clear about. Speaker 400:22:13Excellent. Thank you. Operator00:22:17Thank you. Our next question will come from the line of Stephen Moff with TD Cowen. Speaker 600:22:26Cowen. Maybe a follow-up question on Total Health. The launch of existing customers, you said it's going to be in the 3rd quarter of, you're talking about calendar year quarter, right? Speaker 500:22:39Yes. Sorry, I was talking about calendar year. Speaker 600:22:42Yes. And then, I mean, maybe can you outline what still needs to be done before you roll out to existing customers? I'm just kind of curious, I think before you disclosed it was going to be rolled out to existing customers in spring? Speaker 500:22:58Yes. It's really it's an engineering issue. It's just about building it out and enabling that upgrade path. So we've just had our handful with other priorities. So it will be prioritized starting now through summer with that kind with the rollout to customers in Q3. Speaker 600:23:21Okay. Thanks for that. And last one for me. I appreciate your comments around managing the cash burn. But how should we think about the cash burn going forward, especially when you're funding the high value therapeutics business? Speaker 600:23:40I mean, just how should we think about those two things given the funding clinical trials is somewhat costly? Thank you. Speaker 200:23:50Sure. So as I've mentioned, we've continued to reduce expenses in our Consumer and Research segment through reductions in force and better cost management, which we announced last year. And we're committed to on MEAD-six ten to funding the Phase 2a portion of the study and for 1473 the Phase 1 portion of the clinical trial. Now for us it is really having cost discipline in the company and really making sure that we reduce our cash burn and extend our cash runway to the extent possible. Okay. Speaker 200:24:29Thank you. Operator00:24:32Thank you. Now I'll turn it over to Ian for any further questions. Speaker 100:24:38Yes. Thank you, Liz. I'll read a few of the top shareholder questions from our SAI Technologies Q and A platform. I would just like to acknowledge that the top upvoted question was will the company be going private? And as Joe mentioned at the beginning of the call, we can't comment any further beyond what we've already said. Speaker 100:24:58So I just wanted to acknowledge that, but we don't have any further comment. Next question would be for Anne. Are there any plans to team up further with pharmaceutical companies to utilize the data you've collected to treat or to create any products or use the data in any other ways to create value? Speaker 500:25:22Absolutely. That is definitely a priority for the company to do partnership with the therapeutics development industry to make sure that we're leveraging this data to help accelerate the development of therapeutic discoveries and development. So you should definitely see we will continue to engage Speaker 300:25:41in those conversations. We'll hope Speaker 500:25:42to have deals. We have been sort of understanding and analyzing what is that best use for us to do these types of partnerships. I just want to also highlight it's definitely been an environment where the entire industry has been cutting costs. But we are quite happy with the interest that we've had and we're optimistic about the ability for us to do deals. Speaker 100:26:10Great. Another one for Anne, kind of more of a general one. How what are the things that investors can look towards that are sort of the most exciting about the future of where Speaker 500:26:22the company is going? Great question. So 3 areas I think that people should really be thinking about. 1, this opportunity for us to be integrating Lemonade and really develop that consumer focused wellness prevention service that is founded on your genomics is really exciting. And this is an opportunity for people to learn about their genome, get blood, get access to advisors, healthcare professionals who are trained on genomics to look at all the various data sources and understand what are the things they can do to be as healthy as possible. Speaker 500:27:02I think we've seen a real enthusiasm in the wellness space in general and I think that we have this opportunity to create a really affordable, impactful service for customers. Total Health, is a fabulous product. I encourage everybody to try it if you have not. It really gives you access to the 23 me premium plus the entire exome plus access to blood care providers. It really, I think shows you sort of the future of where healthcare can go. Speaker 500:27:332nd, obviously, we've talked about the database and the opportunities with the database. It's an exciting world right now also because of the world of LLMs and the opportunity for us to leverage all this data in LLM models. It's really the first time where we've seen these tools are able to manage the amount of data that we have. So we see a lot of opportunity there both on the therapeutic side as well as on the consumer side. And last, obviously, most importantly, not most importantly, but one of our favorites is therapeutics, with our therapeutic program. Speaker 500:28:07And it is a real, privilege for us to be able to develop therapeutics and be impacting lives the way we are. So I am excited to see the data that comes out at ASCO and look forward to more data that's going to come out after. But developing therapies from all of this data and really impacting human lives is incredibly exciting for us. Speaker 100:28:33Thank you. Next one is for Joe. Now that you've received the 180 day extension from NASDAQ, what are the plans to comply with the Listeria Empire? Speaker 200:28:45We're pretty much focused on improving the stock price organically through continued execution and operating momentum. And we also mentioned that we would consider a reverse stock split under the right circumstances later in the year if we were unable to get the stock price over $1 per share noting that any reverse stock split would require Board and shareholder approval. Speaker 100:29:10Great. Thank you. Last one. And what plans beyond or maybe you can just reiterate a little bit what plans are to leverage our data with artificial intelligence model? Speaker 500:29:25Yes. I think it's a little bit of what I talked about before. I think that there is a really exciting opportunity for building out models and risk prediction. And by understanding, by collecting all this data, understanding it all, looking at events, helping consumers understand what their risks are and predicting what that next highest risk event is for them is one really exciting opportunity as well as in therapeutics and helping pick what is the right target, how is the right way to develop a drug, knowing that you can convert all of this data into either a consumer application or a therapeutics application and very exciting for us and those are the types of partnerships that we are focused on. Operator00:30:15Thanks for joining us. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.Read morePowered by