23andMe Holding (ME) 11 Nov 212021 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the 23andMe's Fiscal Year 2022 Second Quarter Earnings Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Wade Walke, Vice President of Investor Relations. Sir, you may begin.

you. Thank

A to I release for These is solely go reporting website matters within predictions applies hours that future not historical We the including, on are we results periods a to the begin, discussion event. limited are future numerous find in investors.XXandme.com our after impact everyone available forward-looking statements. Also, webcast filings, our made performance. for to are during press SEC on encourage today's that limited which time the statements found may our certain information refer issued which entitled to quarter. but encourage we release, be to to review to forward-looking financial will of for outlook note and Before section not be also this of available the that statements website our a website on replay us. earlier you or to, call. this for the based now our XX our Please factors call management's statements regarding that SEC's facts can press today please

on certain found U.S. our discuss important reconciliation release. our of non-GAAP also and measures, earnings GAAP these measures We in use be information to may

will over Head Therapeutics and turn the and us to our Joining of our And to Wojcicki, be Chief Hillan, on now Anne. our for call Steven Q&A. Schoch, Co-Founder; our like Officer; Anne Executive Officer joining today call Chief I'd are Financial us Kenneth also

people them. fully understands human recent progress provide this more acquisition talk from to mission and to benefit genetic information believe closer announced helping today of us We we've to that benefit genome. Health. Wade. completed recently We the to our the we I'm we our Lemonaid about you, excited gets Thank customers from made our on access, acquisition the help you

want are that most they integrate know more now be mission change provided opportunity to genetics through but don't in customers the the information trained heard from them have that their expand to We physicians to with do genetics. not able to the help on to information. have reports, and our We we believe our people from how benefit and to health our

Our consumer I will professionals as a this an telling making consumers and digital services care forward transforming on business, our our taking and health provide our telemedicine to online a and with to shape. personalized, by be develop Health care plans in we Lemonaid focus look important primary its its convenient take proactive that are to with access now more you primary the genetically-based to developing integration platform, in goal pharmacy and We including medical of plan believe combining team step traditional care. reality. the personalized experience about accomplish

to a Each genotype report of insights. condition. insights developing likelihood an XX are X numbers. course included machine of service health The We health the launched subscription, our estimate to With new of deeper features and into them giving second provides our a billions in these reports points, million that and the for subscribers new positioned person's provide gallstone their customers new a our through report. their database cholesterol data content subscription XXandMe+ customers specific reports a HDL we and health. our of also uniquely with with is even report, reports over premium quarter diabetes health-related uses gestational learning XXandMe+ report

subscription. addition of the of we now part reports, these XXandMe+ reports have With new XX as over our

these you subscriber, website are can If reports learn our about XXandMe+ more on at you not a blog.XXandme.com.

progress pleased the therapeutics We pipeline. of our also with are

CDXX GSK, in clinical report to expects the from data partner, Our XXXX.

with our trial In of a addition, start year program wholly-owned we by the fiscal end PXXX clinical XXXX. expect to

I'm Finally, a member. welcome new Board XXandMe pleased to

our that, Sandra's the believe an review primary our personalized has out nonprofit over all will have perspective Hernandez guidance financial philanthropy may improving to is our California's Dr. to healthcare individuals call in care And that quarter. Steve can dedicated so be they for new Board. to a yesterday, we affordable and delivers asset the the especially independent accessible from great you as system release way. a low preventative digital Sandra experience to press As seen the Californians, those and Sandra that Healthcare an care roll I'll with of with turn us President results need. California the I get joined Foundation, CEO to incomes and care

Thanks, Anne.

excited are Consumer our Research pursuing Therapeutics Services both vision on progress our the our and We across about segment we're segment. making

acquisition of the one Consumer genetically-focused Research is make this continuing by care. reality. that investment our One we're Health model made upon providing believe and Services combined polygenic a database. innovative example this significantly doing for we services of such research by On unmatched enhancements what in our new our our our side, to just taking of on health proprietary several customer-centric, with internal we're genetic We're is Lemonaid possible recent capabilities scores. traditional risk model improve care health a the wellness, and with individualized product also delivering prevention scale of The steps can focus

side, move as the invest genetic million premier distinct XX.X development we and data our and our of database development. points advancing through we phenotypic discovery of will continue our from clinical in insights discovery therapeutic programs unique On our genotype customers they therapeutics from a believe approximately the advantage give We obtained billions pipeline. to therapeutics that

the order continue of As human believe in invest one of of best continue our very unique new opportunities increasing health and in invest. development and this discovery We understanding drive the to data, have to our associated is and therapeutics. genetic database we genetics biology grow we the we and will to to

quarter performance. us let turn Now financial second to our

X% September over in respectively, Genome period XXXX, both our product revenue growth the due subscription to ended This XX, representing our million, months X or was and and $XX and increases XX%, $XXX and same prior X the Personal years. product. in higher volume PGS for revenue primarily sales million Our the Services was of respectively,

have we portion our of from out As consumer a comes pointed revenue business. overall our significant previously,

due many revenue the fluctuates economic competitive patterns seasonal promotional, year-to-year. PGS factors, during to year vary and Additionally, and those can

represented that X GSK from revenue. collaboration, of ended Research and note for has XX, Services total we accounted X historically composition was which for of at revenue the all our the approximately fiscal September and Consumer low total one months approximately substantially of XXXX, look revenue, seasonally quarter Services our XX% Finally, second revenue When the of we quarters. revenue, revenue been XX%

increased in to attributable in were marketing business. months $XX expenses and research in and increase XX% was as over profit $XXX for expenses grow and $XX X gross September related X prior The $XX our million periods to the increases PGS and prior to XX, the X $XX ended months and million revenue the periods This for ended compared respectively, in was costs. the with Our the sales million, a expenses intended was year. and Operating same XXXX, increase million above-mentioned the service and representing million increase for programs, lower increase primarily driven by subscription the processing X along operating development lab to XXXX, the September well respectively, therapeutics year. $XXX and XX% and same primarily the as million, XX, expenses consumer

there The and Looking and ended million loss the for XX, operations compared and loss XX, that offset $XX September losses warrant fair months September respectively, quarter-to-quarter. of fair $XX was X in months by from of net improvement of $XX million value liabilities million, and warrant at in $XX X net those X respectively, driven bottom the million net the for noncash value line, $XX there period the was We could loss could primarily changes by in be in liabilities to ended and higher changes for same a of year. $XX be significant the prior from million XXXX, periods. XXXX, the anticipate for -- million, X

adjusted at look Let's EBITDA.

The research and increase the XX, define we to and for marketing Total growing therapeutics our please the in and of periods $XX million million same loss an driven EBITDA, our press programs million sales business. consumer expenses and to in for year. release. adjusted compared of loss and total September increased see related EBITDA adjusted prior a $XX million, was loss development the on details ended earnings $XX XXXX, $XX by EBITDA For X expenses at X primarily respectively, months how the in and adjusted aimed a was

million seasonal year. prior $X.X just as at compared Consumer million timing adjusted a over our will $X.X adjusted X-month Services Looking Quarterly the time. $X.X and pattern, for loss to for of be for will Research periods segment, periods the and spending we consumer EBITDA a has Services same and saw and Consumer Research of have by respectively, the variation X- of the does segment line loss million, the gain impacted the the a for of million specifically varied and in which $X.X media top further EBITDA the segment and

year For performance. focus on adjusted our this EBITDA full managerially reason, we

to pursuing secure purchase which million which Lemonaid former continue the included we cover in quarter, strong in paid potential for strategic indemnification objectives. our approximately of we Services sheet, Lemonaid the and substantial the acquisition segment end which Subsequent Health. the mentioned quarter escrow Health, the economically obligations consideration growth time. capital the of approximately $XXX to focus was a We placed holders I've and us of of cash the in of second efficient with gives aim million As for Consumer ended to the on adjustments over cash, equity million of Research previously, balance price of to $XX $XXX

Turning topic guidance. of the now to

year acquisition the quarter of Updated provided including the of guidance, be full excluding with third guidance, acquisition our effects the XXXX previous Our fiscal Lemonaid the is will update. effects XXXX Lemonaid fiscal unchanged.

the fair I'll our And For year net the call to net value of due our now nature guidance to of Anne. no change the of the warrant assumed in over our have market-driven warrant liability turn back purposes in unpredictable we changes liability, loss within guidance. for

Thanks, we of toward strategic demonstrates and health taken the of our steps continued therapeutics reports advancements personalized services, and health efforts Steve. goal have the I acquisition our believe new new significant the we've recent making are healthcare. the we made with progress

up Now let's for questions. it that, open with

Instructions]. [Operator

Your first Daniel of from Citi. Grosslight question comes line from the

have in, Any these that you details discounting you Father's in quarter. you in are you may sold this season expecting some in start see to that And coming demand that if to come Can kits have can to year holiday And and is process I seasonally this up. typically some share Day you of come you're XQ taking maybe but XQ? to taken the during holidays. saw start should more Day Day, during what revenue holidays. from Mother's relate Steve, we this longer so just then assumed revenue mentioned around Prime light, see would you if these would and for

Yes.

I'd So with said start is unchanged. think guidance I that the we've

which full of why -- of over that marketing our our guidance. look within exactly next And thinking in about the which a and We And really up a media seasonality pretty time haven't of guidance spending where And in of the quarter, our little current in So to we quite had talked running full spend usual, the quarter this would about didn't year's spending pick we've other is cost. was be. money and year-to-year. start probably this particular, affect as we're our quarter expectations it's summer. We budget at we of some that, quiet of changed or its as that changes I bit the it in. kind that pattern the we September, -- we before, this in bit that the in this money spending, year, estimation, represents. our in than in And we'll quarter would thought quarter, say pattern were

see. to think of were are what business we the line have All the all ASPs healthy. parameters business the in I the parameters would of So expected with

So view, there any -- our point of surprises. from really they really weren't

Got it.

be you about maybe next but Or can that quarterly, around we should guideposts I guide sequentially? should us give in current details think -- up this we don't you how understand Should think some quarter? directionally about some around revenue just And how Okay. if revenue?

them helpful. to I it's actually They fiscal would that constantly money because point of in business of would their I just we've seasonality spending of including again, of numbers point different mean variability our out way, we because the to that the things. in we are we're how last way really that. because parts stay to number our recognized. on the we last that why of the provided even timing the X Yes. But years. X some point try and the and the promotions, too factors -- we spent for shift in exactness Those moving quarterly in gets how don't quarters patterns doing have price One, doing in revenue X, years. we I we the years, to up X how money we kind hung business annual media we're those because run number the And get we're way of marketing

way the run because of So the we'll business probably we literally individual the out talking about of just not stay business. quarters the it's

you much esynchronously? how that visit care as visit Yes. business of provide telephonic done more do On into And informing you Lemonaid, model? visits details if with data, or that towards you'll around you those think move anticipate are a more Fair type move primary and genetic video you and enough. can some

Yes. then I talk let can of Anne start flow to how the with think vision. about and about kind information

to overall quarter in. talked next of of of that guidance about within for sure, performance we'll total say that So the coming give business a lot company have we kind context we'll business as with about our more

the will talk about So and for annual product environment. let KPIs a largely certainly of them an of bit into we kind quarterly and But much of on a detailed lot the like on basis. the get vision own little not not our product Anne business, I'll a a basis lot

answer quarter, there. asynchronous Yes. I then questions on think breakdown we want to I but integration next don't a more think and have -- again, we do more have nonasynchronous, happy more a can versus specific call plans, sort I to talk of when we in-depth about the some for

opportunity to aspect to able is And you care can future lot I I on Paul, both very a been the to that do actually that show without continue we pioneer a think health deliver really to is as important there of that of And that one and care think envisioning that deliver of been a Lemonaid customers has to how focused whole able that that's a I is healthcare focused we I in are and we've genetics, great to the XXandMe think we on are primary team I having have scale. asynchronous. aligned be really information can have professional. think

care how And so I the others that think needed deliver at you can imagine, we the are thinking conference a we and more and high-quality video is or a and the individuals as number [indiscernible] more for teleconference times. have chat scale at of appropriate can really

going definitely be it's to a balance. So

Very helpful.

details know last forward X excited next Looking And call to then I very that me. hear for everyone to more quarter. PXXX. is about

more color trial. you of when You the mentioned curious that you're to But give kind on if program. was initiate I going

share about to been of how we that's when that's going kind might more progressing and target additional actually willing after. information you're if that curious hear any PXXX, the Just about

can It's make respond. nice to Kenneth, Yes. with take maybe [indiscernible] that. to really Yes, PXXX. progress I we Happy continue

so the As before antibody target -- ready we we've March year. and more And end between planning biology in to the also then we're would having now and communicated, of excited be to why about this. be the anticipate the petition talk of and we I'd in next and about

the I continued -- we with it's make program. So nice to to sharing have forward And that. looking we're very as progress said,

from the from Kim of Swiss. Your next question Credit comes line Dan

Dan Tiago. is This on for

you the of And bar disclose pipeline? of validated to sort in like area? you number the set end success can see would help new what fiscal the for expectations year, the in of and to to ahead targets you plan programs and of do the Looking this frame

you do Steve, to take... want

You can can PAUSE I and follow start up?

Yes.

talked I about I there. year think earlier macro think on the SPAC of this process, progress we in update last kind -- disclosed we information once when a and an the or doing year year

we think annually. to along kind And progress is of just go as at basic plan that's note point so the I this

no call I at time to Speakers, are Mr. over back phone questions there you. from lines. Walke, the turn the further this

much. very you, Thank

from questions, We top through some we'd read -- then of portal our answering team have member a shot online at some I'll like questions submitted questions shareholders. and address the a management this point. were the that take to And the take a them. of will at

products? with you Health on genetics The plan first have do is, XXandMe we Lemonaid question how integrating

Lemonaid strategic role very question. our us, a a really customers do more. plays role in Excellent and for plays helping it strategic

they that it they and integrate So we've care. but information, their health it, like get actually understand with our make like health genetic actionable learned to from it would to with their customers more they

Lemonaid, a first really care have having the to really prevention. going by that think how we do will heavy to about integrating think we the you And ability on areas really is and genetic with about have really start genetics-based is to primary be of one So pharmacogenetics in able have information to emphasis pharmacy.

next XXandMe than business what other considered? are And models near being we is The charging question kits, for there tested or is launch? any have

customers the XXandMe. a been more along Yes. that have been they have We our also service, clear actually very with from testing subscription that want going theme

content XXandMe+ that launched the we subscription specifically providing is a customers is last so to on service additional regular And fall our about basis.

how all that area that think as on I about we opportunities expand as we'll evolve. of able -- you and learn is stay be we And to to in that a future. So think key update of continue to kinds we the we'll

horizon question next the is most XXXX? what on is, The thing exciting the for

XXXX. in coming things many So

-- I'm continuing so very be coming lot with excited on of Also, from to Lemonaid. at have perspective, therapeutics. we will least it it now excited about about PXXX, in the thick I'm exciting going to both my integration time obviously watch with a very the definitely -- of progress CDXX. we we're it's those. think an have of I be

So is and we million-plus really my going able what to to enthusiasm lives. for their customers out able our to customers to be various are really services are XX our about the be roll impact

question research what next is being is prioritized? Our genetic

do that? Great. take to Kenneth, want you

I do My mute. was Yes, I'm sorry, that. on to apologies. happy just Yes.

therapeutic done to diseases within What programs including we've islemoratory-based therapeutics are database immune have power genetic to cardiometabolic or concept believe our then specifically medical signals where speed. we our within and therapeutic to we've in there is novel research, with those have potential therapeutic where identify need candidates oncology, areas, we prioritized we on indications able parenting we've clinical that can So unmet new we across diseases others not and -- clinical also speed to is of identify, where multiple diseases. areas, considerable proof advance

those therapeutic the data So are yield -- and areas, and and insights. new continues database focused new the to

Okay.

X-part question. a Our next question is

First research or you are have that license is, you to other data or you X to companies? currently the do have plans sell biopharmaceutical

Yes, take I that. can

commercialization we consider collaboration. thing out, though, beyond have universities target The may the So the we GSK is And after that GSK exclusivity, pursue would our our the well for programs data companies, exclusive purposes in the you'll is we research exclusivity collaborations year. have Certainly, expiration we have of collaboration I our of in drug as also term. for one extend fifth at other information done target full with GSK pharma end that right terms that the development databases, past partnering year of to the And of point with recall the discovery. that of some and and discovery, a for we may institutions.

pharma today other or GSK the with period the the as we during So partners the collaboration. target continue of even can partners use discovery area collaborate of of academic with we outside to

question in part things the of excited there pipeline you're about about? the new Are research And second that is about? what Great. you're the exciting excited

for question or risk tumors. signature, our program program drive which the about Yes. the immuno-oncology predicts a based on immune this wholly-owned XXandMe. response identified answered genetic We we that I a important already against genetic from believe target it's factors PXXX,

and soon, March next of out antibody this of really targeting certainly about we have before target PXXX entering, end talk talk excited to studies the we're reasonably an the antibody about the hope to biology. be we'll come talk more And the about year. We to clinical and

and in share So forward that excited being look really about something future. to the to able I'm not-too-distant

does XXandMe plan companies Thank you. on The next moving genetic forward? acquiring question is

the with buy. where in same areas in thick the with integration But number vision, want want definitely it Lemonaid. are different evaluate a where to of time, potentially we big We absolutely or we ourselves at we build and to we of have to continue a

enthused are see that definitely there. quality out the various we to So are opportunities are out there, we're that of companies of mindful and

your share? The of next the stream current this subscription is metrics growth revenue and what to important revenue question, and trajectory how can plans size around you

You take Anne? want me that,

Yes.

all that's Steve, Sorry, you.

Okay. Great.

is you'll couple expand XXX% in to that relative to the in revenue get matter into will become of numbers top our particular, individually company. in said, really size bigger. the factor a material notice continue we current an more prepared margins it's to That full actually company's line gross of margins activities not talk referred The to as Lemonaid's base, margin continue era that it's and we our help to business, even pronounced the consolidation of times because a it into be So enough quarter, subscription our remarks the as will and the expand. to about a absolute for does

relationships now soon, anticipate of a lot platform we talking it's anytime what And about a enabling important talked the that it's on so platform what have the wouldn't margin we important front, just for of the but I as comes time way the built. beyond recurring of that, about in future in revenue spending specifics

makes of you the would think from most you your question, companies? stand out by And next do other business part what successful be you The do think XXXX?

started that different get also their And what what's so individuals of human about the is give exciting. company we we company direct I about really them And reason genome. genetic empower in what potential we really think research. the transparency that and to of the I mean was the why -- I participating think Well, can XX information. is is access about And to the component unlocking the direct-to-consumer choice that mean years, overall. think or years as that the does it's we And whether years as for absolutely X well individual XX there's a mean better X or I data-driven what research -- for in healthcare world out both condition key how genetics there really manage be also healthy. that. I helping but will health about a And play component that to is about think you of a going what you're

world think our that we're always different it is is and than with to anything really is genetics. this companies type customers of different other the of it's have your to translate based the better I it So -- our else. on go have And we customers one, and themselves. very that It there a this -- we is world out insights into recontactable helping opportunity unlike or our scale translate customer back second, a data directly direct of therapeutics either size it's and set in has in and because again, customers, have access very into first;

for can question, testing next you Our cancer add all markers?

help do we we X And have absolutely breast mutations BRCA affordable are because test right very their traditional found I'm insurance. about to have, paid we qualified our X access, for and thing is and information. the we cancer are that -- of customers colon for for we BRCA out of who and screening X authorizations access cancer-related the very just proud personally, cancer I but they FDA never we markers say proud think would resin for customers meaningful to We for [indiscernible] it's of can for cancer. would X hereditary otherwise positive have have by thousands are We ways not that more now, all that get direct

enabling part XXandMe of mission is for the really people. again, broad access for So

we we lots are individuals don't screening. while everything, gotten find any of have would finding of test So for who never otherwise kind we that

GSK. to the the your guys is, medicines working bring the And what's with you relates are next Great. what latest question patients? assess The partnership on transformational question on? status the And have to to plans drug been

the that. Yes, again Kenneth, question. for I take Thanks can

So the it itself. speaks been from the for had the the years, in less clinic than before that as X PXXX We've in the anti-CDXX come our That's as very program It's X more partnership collaboration program anticipate have with the well antibody, really that programs GSK of I productive. think database and we the another clinic. than In from March. working we've XX that that we and on. collaboration end come doesn't being been GSK,

Sometimes and targets those own. are their working on unilateral it's GSK

to but the Sometimes collaboration, of ultimately clinic. part they're those advancing the

XXXX. biological also deck fact the from We the That pack which gone spoke December they've in validation antigenetic validated. database, have come our had XX the that about XX, was targets the that through means we've been as of end of

it's been So productive. very

nonclinicaltrials.gov indications, has which targets seen a X would or I spoken GSK this I the now thing in point GSK out, X an antibody It's might about they've may years of one about IL-XX. genetic of program. they but clinic, right indication really you signal. and the our were identify had been an able the what for other have And wasn't antibody, XXXXXXX, think, for things exciting tested in but The is a clear to had be database unique that number it

of unique Eczema. And atopic So in proof clinicaltrials.gov, initiation antibody Phase recently of a patients they've with trial posted also I of study, atopic in dermatitis, or known on X-arm the XXandMe concept. that to dermatitis as

on we just Advanced not it's think therapeutics ability that human targets and discover Therapeutics, based to repurpose that about it's the I so existing on genetics. to that potential And the indications right

you. Thank

since research for be they of from? time doing XXandMe come extensive main group we who that question is today where last well, Our here's about question. have know not are Will do African-Americans African the the people about genetics

that African-American the composition the that how since been everybody. beginning whether Africa, priority which done That report that can as just are of take studies associations from program gave replicating XX,XXX we was to I they the understand sure we've make some We we studies not research us improve replication into think replicate we future, find all, parts to African-Americans, they with that well of a actually I'll features, launched better genetic one. to research information is meaning or kits as for our of called Roots studies that of our ancestry helping XXandMe applicable gone to XXXX, into was a And initiatives have in population. days, people where and really last number do specifically and has research. always XXandMe away it -- as in and to done, of plans around additional can And well experience earliest the a the as came the we've

recently, we did in partnership actually better new led that now to doing -- have looking at for most genetic ago sequencing from reference that analysis in African-American a a base a African-Americans has did population we that a years So research. we NIH will grant enable

is So applicable would everybody that it's that sure to a all and definitely genetic serves out everybody. say I research that XXandMe for for a is us. make them product priority communities to and there

it we're Thanks. to with over Q&A up. to done it And you And session. our that, with I'll wrap turn

Great.

we to a is hear and updating about pleasure future investors, a to for we how it our you from and It's to customers. forward doing, pleasure enjoy As our we're hear always, from look future calls.

wonderful call. day. you. concludes Thank and Thank you today's conference have participating, for This a

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