On August 8, 2024, 23andMe Holding Co (ME, Financial) released its 8-K filing detailing the financial results for the first quarter of fiscal year 2025, which ended June 30, 2024. 23andMe Holding Co is a consumer-facing healthcare technology company, primarily involved in the sale of direct-to-consumer personal genome services (PGS) through DNA collection kits shipped via mail. The company provides users access to reports summarizing estimated genetic ancestry breakdown, phenotypic trait reports, and various health predisposition and disease carrier reports. Its segments include Consumer and Research Services and Therapeutics, with the majority of revenue generated from the Consumer and Research Services segment.
Performance Overview
For the first quarter of fiscal 2025, 23andMe reported total revenue of $40 million, a significant decrease of approximately 34% compared to $61 million in the same period of the prior year. This decline was primarily attributed to lower research revenue following the conclusion of the GSK collaboration exclusivity term in July 2023, as well as reduced consumer revenue from decreased PGS kit volumes and telehealth orders.
Despite the revenue decline, the company announced several strategic initiatives, including the launch of a large-scale genetic research study to identify genetic mechanisms affecting GLP-1 medications and the introduction of a GLP-1 weight loss telehealth membership on the Lemonaid Health platform. Additionally, 23andMe continued to enhance its Total Health offering with a new Biological Age feature and expanded its genetic Polygenic Risk Score reports for 23andMe+ members.
Financial Achievements and Challenges
Operating expenses for Q1 FY25 were $92 million, down from $140 million in the same period of the prior year. This reduction was driven by lower personnel-related expenses following workforce reductions and decreased R&D spending in the Therapeutics segment. The company also benefited from a $22 million reduction in non-cash stock-based compensation expenses due to the departure of a former Lemonaid officer.
Net loss for Q1 FY25 was $69 million, an improvement from the net loss of $105 million in the prior year. Adjusted EBITDA for the quarter was a loss of $35 million, compared to a loss of $50 million in the same period last year. The improvement in adjusted EBITDA was primarily due to lower R&D and personnel-related expenses, partially offset by lower research services gross profit.
Key Financial Metrics
| Metric | Q1 FY25 | Q1 FY24 |
|---|---|---|
| Total Revenue | $40 million | $61 million |
| Operating Expenses | $92 million | $140 million |
| Net Loss | $69 million | $105 million |
| Adjusted EBITDA | -$35 million | -$50 million |
23andMe ended the quarter with cash and cash equivalents of $170 million, down from $216 million as of March 31, 2024. This decrease was primarily due to net cash used in operating activities amounting to $43 million.
Analysis and Outlook
The decline in revenue and continued net losses highlight the challenges 23andMe faces in transitioning its business model and scaling its new initiatives. However, the reduction in operating expenses and improvement in adjusted EBITDA indicate that the company is making progress in managing costs and optimizing its operations. The strategic focus on expanding its genetic research capabilities and enhancing its consumer health offerings could position 23andMe for future growth, provided these initiatives gain traction in the market.
Overall, while the financial results for Q1 FY25 reflect ongoing challenges, the company's strategic initiatives and cost management efforts offer a cautiously optimistic outlook for value investors considering the long-term potential of 23andMe in the healthcare technology sector.
Explore the complete 8-K earnings release (here) from 23andMe Holding Co for further details.
