Q3 2023 23andMe Holding Co. Earnings Call
Good day and welcome to the 23 in the fiscal year 2023 third quarter financial results Conference call.
As a reminder, this call is being recorded at this time all participants are in a listen only mode.
The paired remarks, there will be a question and answer session I would now like to turn the call over to make Huntington at Argot partners to lead off the call. Thank you. Please go ahead.
Thank you Justin.
Before we begin I encourage everyone to go to the investors got 23, <unk> Dot com to find the press release, we issued this afternoon reporting our financial results for the quarter.
A replay of today's webcast will also be available on our website for a limited time within 24 hours after the event.
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.
Statements are based solely on information that is now available to us.
We encourage you to review the section titled 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.
A discussion of numerous factors that may impact our future performance.
We will also discuss certain non-GAAP measures important information on our use of these measures and a reconciliation to U S. GAAP maybe found in our earnings release.
Joining us on our call today are Anne <unk>, our Chief Executive Officer, and co founder and Joseph Savage, Our interim Chief financial and accounting Officer.
Kenneth Cohen, our chief therapeutic officer will join us for Q&A.
And with that I'll turn the call over to Ann.
Thank you.
Made significant progress in both our consumer and therapeutics business. This past quarter as we continue to focus on leveraging our genetic database the world's largest re contactable database for genetic research to unlock the potential of the human genome to treat and prevent disease like no other company.
Starting with the consumer business, we made significant progress this quarter and continue to enhance our efforts to provide our customers with a leading genetic health service that focuses on prevention and wellness.
We added two new genetic health reports for our 23 in the plus subscribers on asthma, and husky noticed disease and autoimmune disorder.
The reports are generated using data and insights gathered for millions of customers, who have consented to participate in our research.
As a reminder, 23 and me as the only company with multiple SBA authorization for a direct to consumer genetic health report.
And the only company that the FDA has authorized to provide genetic cancer risk report and medications insights without physician involvement.
In total we have over 60 health reports and our personal genome service that estimate a person's genetic likelihood of developing a specific condition.
We also added finer ancestry composition detail for people of Ashkenazi Jewish ancestry.
Our product to now enabled members to trade their family connections back to seven genetic groups corresponding to regions within eastern and Central Europe .
During the past quarter. We also celebrated the one year anniversary of our acquisition of Lemonade Pal.
We are continuing the integration of the telemedicine and online pharmacy platform into 23 and me to enhance our genetic health survey and we look forward to continuing to create new customer experiences that combined genetics with our telemedicine and pharmacy services.
Turning to our therapeutics business.
In November we announced that twenty-three me 610 will be evaluated as a monotherapy and tumor indication specific expansion cohort.
These include clear cell renal carcinoma.
<unk> ovarian cancers.
Neuro endocrine cancers.
Small cell lung cancer and microsatellite instability high.
Or tumor mutational burden high cancers that have progressed on standard therapies.
We also intend to present, an update from the phase one dose escalation portion of the study at a scientific conference later this year.
In addition, we presented seven scientific posters at the American Society of Human Genetics conference, including new insights into conditions such as cataract.
Systemic sclerosis, Pericarp guide us and others.
We also presented preliminary data from what we believe is now the largest and most diverse genetic study of sickle cell trial ever conducted at the American Society of Hematology Conference the largest annual medical conference dedicated to Hematological malignancies.
The consumer and therapeutics team have again made great progress this last quarter and I look forward to the enhanced personalized health offerings, we are working to deliver for our customers.
And with that I'll turn the call over to Joe to review, our financial results for the quarter.
Thanks, Anne I'm pleased to report continued solid revenue growth in our consumer business in the last quarter that puts us on track to exceed our previously disclosed full year financial guidance for fiscal 2023.
I am pleased to report on our performance in Q3, which is typically our busiest of the year operationally on the consumer side.
We had good execution on the consumer side as we maintained focus on improving profitability.
Despite the challenging macroeconomic environment consumer demand remained strong during the holiday season, we carefully controlled discounting or promotional spending which led to improved contribution margin versus the prior year.
All of which gives us confidence in raising our full year guidance, which I will talk about more shortly.
Along with our current cash position and an opportunity to sell additional shares.
Our recently announced ATM program, we are sufficiently positioned to continue our plans to enhance our genetic health service and advance our therapeutics programs for 23 and me.
Our revenue for the three and nine months ended December 31, 2022 was $67 million and $207 million, respectively, representing an increase of 18% and 21% respectively over the same periods in the prior year.
Third quarter revenue growth was primarily due to an increase in telehealth services revenue from the Lemonade acquisition last November .
Growth in our subscription services revenue and personal genome service PGS revenues.
And an increase in research services revenue primarily related to the GSK collaborations.
Nine month revenue growth was primarily due to an increase in telehealth services revenue higher research services revenue from the GSK collaboration and research contract with third parties.
And growth in our subscription services revenue, partially offset by lower <unk> revenue.
Looking at the composition of our revenue consumer services revenue represented approximately 80% of the total revenue for both the three and nine months ended December 31 2022.
Driven primarily by the previously discussed increase in revenue offset by lower margins from the telehealth revenues as well as increase supply chain logistics and labor costs.
Operating expenses for the three and nine months and December 31st 2022.
$128 million and $349 million, respectively <unk>.
Compared to $124 million and $271 billion for the same period in the prior year.
The increase in the three at nine month periods was primarily attributable to increased personnel related expenses driven by increased salaries and related taxes as a result of inflation and growth and head count.
Along with an impairment charge for intangible assets and the addition of sales and marketing expenses from the previously acquired telehealth business.
Looking at the bottom line is that loss of a three at nine months ended December 31st 2022 was $92 million and $248 million, respectively compared to net losses for the same period in the prior year of $89 million and $148 million.
The increase in the three at nine month period was primarily attributable to the increase in operating expenses previously noted and a benefit from the changes in the fair value of weren't my abilities of $3 million and $33 million respectively recorded in the prior year.
Next are adjusted EBITDA for details on how we define adjusted EBITDA as well as the corresponding reconciliations to get please see our earnings press release.
Total adjusted EBITDA for the three months ended December 31, 2022 improved to a deficit of $43 million compared to a deficit for the same period in the prior year of $64 million.
Total adjusted EBITDA deficit for a nine month period with comparable to the same period for the prior year.
We ended the quarter with $433 million in cash and cash equivalents compared to $553 million as of March 31 2022.
As we recently announced we now have an ATM program, providing us with the option to sell an aggregate of up to 150 million shares of class a common stock from time to time subject to market conditions.
We are increasing our full year guidance following our fiscal year 2023 third quarter financial results.
Four year revenue for fiscal 2023, which will end on March 31, 2023 is now projected to be in the range of $290 million to $390 million.
With a net loss in the range of $325 million to $335 million.
It's a four year adjusted EBITDA deficit is projected to be in the range of $170 million to $180 million for fiscal year 2023.
As a reminder, this guidance includes the full impact of the consolidation of the company's acquired telehealth business into its overall consumer segment as well as the current and anticipated effects of general inflation uncertain of our cost.
And now I'll turn the call back over to Ann.
Thank you Joe we continued to make significant strides in our mission to help people access understand and benefit from the human genome.
We are continuing to see consumer demand as we offer more personalized and actionable genetic report and.
An innovative customer experiences that are helping to drive growth in revenue and profit margin.
Our proprietary genetic database is also directly translating into the development of personalized medicine, and we look forward to providing more updates in the future as we advance our clinical trial at twenty-three me six Tom and advanced solid tumors.
We're making great progress in our efforts with genetics based health care and therapeutic as we strive towards delivering on the promise of true personalized healthcare <unk>.
23 is the year for DNA powered health and we're excited to be kicking it off with these exciting update.
Thank you now, let's open up the call for questions.
And thank you.
As a reminder to ask a question.
Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
Again that is star one one and we ask that you limit yourself to one question and one follow up.
Before we go into questions I'd like to just making sure that one thing was clear and.
When I was getting for your guidance.
Revenue for the fiscal year 2023, which will end on March 31, 2023 is now projected to be in the range of 292 $300 million with a net loss in the range of $325 million to $335 million I think I may have misspoke. So I just wanted to make sure that was clear.
Thank you.
One moment of our first question.
And our first question comes from Daniel gross like from City. Your line is now open.
Hi, guys. Thanks for taking the question and congrats on a strong quarter here I I just wanted to kind of dig into guidance you real quick.
So you you beat.
My expectations for the quarter, but you raised guidance, even more than the beat for the full year. So I I'm. Just curious if you are seeing some outsized demand in any one of your core consumer products.
And if this kind of reflects a stronger than expected holiday season, given that you'll recognize most of the revenue in your your fourth fiscal quarter from the holidays.
Thank you Daniel.
We were seeing strong demand and strong revenue growth and prior quarters, and we were conservative before and raising you've got before he raised guidance and last quarter's earnings call.
We did see our holiday sales in that manner expectations, and we were expecting that with inflationary and other macroeconomic conditions that they may have been.
We could have saw some degradation there, but we did not see that and we saw strong demand and in addition, we're able to hold on discounting and promotions. So we also saw revenue growth there because we are doing less discounting unless promotions.
Yep got it in on the on the cost side of the equation I noticed that your advertising and brand expense has come down nicely. This quarter year over year, what's driving that decrease are you seeing <unk> come down have you changed your advertising federal and strategy at all and related to that.
Full year got Instyle implies a bit of a increase in EBITDA loss. So perhaps costs are increasing in in the fourth quarter curious, what's driving that increase in EBITDA loss for the fourth quarter.
Okay. So on the marketing spend.
Actually changed and we're really being very cautious in how we actually deployed marketing throughout fiscal year 2023, we actually we were looking to shut off all inefficient channels and really making sure that our marketing spend was efficient, which really has helped our bottom line.
And there was no really another big change in Q4.
Q3, and nothing really big exchanges and cute coming in Q4 Q for as well.
The heat of the standpoint, we.
We actually consists continued to really know.
No additional large expenses coming in queue for this is just a result.
Just the expectations for revenue and expenses and keyboard.
Got it thanks for the color.
And thank you.
And one moment of our next question.
And our next question comes from Stephen Moslem Cowan. Your line is now open.
Oh, great. Thanks, Thanks for taking the questions and congrats on the corner.
I had a question on the the telehealth services revenue strength is that a reflection on the lemonade acquisition and the <unk>.
Fact that the integration is is fully complete now.
And you know if so can you provide any color on the genetic space primary care service when would should we expect to launch or or details on that new product offerings.
Ooh I'll take the first part of that question Steven the first.
With telehealth revenue, we stood still continue continued to see growth in telehealth revenue. However, we also had a calm because we actually did the lemonade acquisition in November 1st of last year. So we basically have additional revenue this fiscal year, one month additional and telehealth.
And then we are continuing to look and work on the integration of eliminate as of 2022 23 and me and.
And we will actually be launching in discussing more our products in the summer.
Calendar year 2023.
Yeah, I would say Stephen just the integration is not.
It's not complete yet.
Sort of defined as the integration is still underway in terms of definitely putting all of those various services on the 23 and me my platform.
You can expect a more material update from us in the summer.
That's when we hope to be able to at least.
In more detail about the plans, what we Wanna do and what that could look like and I hope also at that time, probably to have Nora who I don't think we have had on any cause I don't think he's matter, yet, but knew where I can be able to talk more detailed announcement.
The clinical genomics in the direction Leno.
Okay. No I appreciate that color and then maybe on a similar note on the 23 me plus subscription.
Services revenue you know I I appreciate you said, you're only giving annual updates but.
Could you give us any sort of color on how the twenty-three me plus subscription businesses going in any sense for uptake rates by existing customers or or retention rates of our customers already subscribing. Thank you.
Sure, we only give guidance on our subscriptions on an annual basis. So what are we talking more about that in our queue for earnings growth and we did note in this quarter and the earnings release that we are we are seeing increased subscription revenues and that is really helping our revenue line. So we're pleased with growth and retention in that.
Product, but let me also just made clear it like it is.
This subscription.
<unk> physician of lemonade.
It's definitely like that full combination is is the future that we are building Tori how you actually have the genomic experience, where you can get access to services like pharmacy, or a cure and putting that into a subscription products. Just apply to you you should expect our subscription product as it is today to a ball.
Relatively substantially over the next.
12 months.
Okay. Thank you that makes sense.
Yeah, Yeah. It makes sense I guess I was just trying to dig in to see if it's.
If the subscription was coming more from existing customers or people that are buying the kit dinovo, just signing up for the subscription.
That in there.
It's a combination is a combination of new <unk>, new kit sales as well as existing renewals as well as up cells into the subscription.
Okay, alright, perfect. Thanks for that.
And thank you.
And one moment our next question.
And our next question comes from Gaurav.
Global regime from Bamberg capital markets. Your line is now open.
Hello can you hear me okay.
Yeah, perfect just to kind of big picture trend questions for me.
You know the first on the consumer side right. I mean have you seen any correlation between members who leverage their.
PGS platform with those who leveraged telehealth platform basically you know are entirely new twenty-three me users tending to adopt both PGS and telehealth services or does it seem to be one versus the other.
Mmm has an mentioned we're really looking to integrate.
But with the talent no health and genomic health services and to just nervous system XL services and so we will be seeing cross population between those two customer bases over time.
Mmm.
Okay got it and then just I mean right now it's still two different log in so I think that at some point it will definitely become that experience where you can go you can.
Have different ways of entering and cross over to the other groups.
Got it got it thanks for the clarification and then the last thing for me <unk> I mean should we expect any new future partnership announcements.
Before the GSK exclusive period occurs or is that just something that you know we should just kind of remain on standby until the July days.
We cannot announce any new partnerships until the exclusivity in July of 2023 so.
We will need to just hold on any announcements until that time.
Got it thanks.
And thank you.
And I'm showing no further questions.
Thank you.
We have a few questions from investors that came in through our Q&A platform that we use Thursday technologies and now going to ask those questions that we got on the platform for the management team to answer.
My first question is what is a top priority for management for the year 2023.
I'll take that this is Anne.
So I would divide us into three sections. So first.
Consumers side.
Humor, we are focused on it fully integrating lemonade, making sure that there's a you know a single experience for our customers that they can get access to the genome. They can get access to care pharmacy potentially lab. Other features in the future. So that is a single experience and and we can really help.
Amount and enhance our customer's experience when they learned about their genome and they want to do more with that.
Secondly, I am definitely thinking without the last question just about when is that an Apple JFK world. It is definitely a top priority to make sure that we are always doing.
Doing what we can on behalf of our customers to make sure that we are making discoveries and that we are advancing therapeutic opportunities. So we will absolutely be evaluating different opportunities to partner in the database that can taken a number of different types of forms. We definitely think about programs that we want to be able to own and how we're going to move that forward.
But thinking about adverse JFK world and also top priority.
Lost or therapeutic programs are in the Holy own programs are incredibly exciting and I am very eager to continue to support those and look forward to the time goes on we're gonna have more clinical data on it.
Okay.
Second question is what is your plan to a better market DNA test.
This is and I'll take that one as well and very excited about our opportunities for marketing a DNA test and I have to just call out here that it is the year in 2003 is a year that is absolutely made for US we do have a new chief marketing Officer, John Ward, who.
Who has.
It makes them in.
A number of people who have been here for awhile as well as the new players. It is an incredibly exciting time to think about how we are going to market right now with a fully integrated experience between 23, and the plus lemonade additional services and just to remind people. We are the only platform out there that has the SDA cleared.
Cats, where they can go without a clinician without a healthcare provider intervening either in the beginning on the end. So there is a huge opportunity for John didn't seem to be able to market and I am very excited about the year of 23.
Had things like R.
Times square near the evening, you'll see various moving at 23 and me.
Pop up experiences coming around the country.
Alright.
Next question is do you plan on other collaborations with pharmaceutical companies are from other industry.
Maintained that the Kenneth.
Yeah happy to take that thank you have so in terms of new partnerships B exclusive target discovery period with GSK will be ending in July if we said of course, we're still focusing fulfilling the obligations.
Collaboration through that and date, but.
But I'll also very excited.
Preparations were making in terms of.
Pursuing other opportunities as Joe said that we could potentially and islands towards.
Towards the second half of the year, if we're successful with that.
Currently a top priority for me and for the team to really think about those partnerships and collaborations that will help us to continue to leverage the twenty-three database.
Bring real value to our customers in sufficient so we will obviously look to provide further information.
Well those are announced.
Okay.
And next question.
What kind of add ons up sales do you have in the works to help raise profits.
You can take that one for consumer business, we've made significant progress this quarter and continuing to enhance our efforts to provide customers with a leading genetic health service that focuses on prevention and wellness.
Added two new account reports for 23, plus members on asthma and <unk> disease.
Immune disorder.
We also added finer ancestry composition detail for people of Ashkenazi Jewish ancestry.
Our products now enable customers to trace their family connections back to seven genetic groups corresponding to regions with in the eastern and Central Europe .
Can we continue to expand on these offerings and it's a key objective for a consumer team and as Dan mentioned earlier will be announced talking a little bit more of the summer about our expanded offerings, combining both genetics and the telemedicine business.
Last question is in terms of the workforce have there been any cost synergies realized after the lemonade deal.
Just a reminder that both of these businesses 23, and me and lemonade very complimentary and since the integration of eliminates telemedicine platform. Our focus has really been on enhancing our genetic health service and going forward will continue to create new customer experiences and looking to increase lifetime value for every customer.
I'm.
Alright.
That's our last question I will turn it back to you and to wrap up the call.
Great just wanted to say thanks for joining and we look forward to updating you on our progress on both the consumer business and our therapeutic standards.
Forward to talking to this plan.
This concludes today's conference call. Thank you for participating you may now disconnect.
Goodbye.
The conference will begin shortly to raise and lower your hand during Q&A you can dial 911.
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Yes.
Good day and welcome to <unk> 23 in the fiscal year 2023 third quarter 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 Mei Cunnington at Argot partners to lead off the call. Thank you. Please go ahead.
Thank you Justin.
Before we begin I encourage everyone to go to the investors got 23, <unk> Dot com to find the press release, we issued this afternoon reporting our financial results for the quarter.
A replay of today's webcast will also be available on our website for a limited time within 24 hours after the event.
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. These statements are based solely on information that is now available to us.
We encourage you to review the section titled 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 will also discuss certain non-GAAP measures important information on our use of these measures and a reconciliation to U S. GAAP maybe found in our earnings release.
Joining us on our call today are Ann <unk>, our Chief Executive Officer, and cofounder and Joseph Savage, our interim Chief financial and accounting Officer Ken.
Kenneth Cohen, our Chief Therapeutics Officer will join us for Q&A.
And with that I'll turn the call over to Ann.
Thank you we made significant progress in both our consumer and therapeutics business. This past quarter as we continue to focus on leveraging our genetic database.
As the largest re contactable database, but genetic research.
Block the potential of the human genome to treat and prevent disease like no other company.
Starting with the consumer business, we made significant progress this quarter and continue to enhance our efforts to provide our customers with a leading genetic health service that focuses on prevention and wellness.
We added two new genetic health reports for our 23 in the plus subscribers on asthma, and hashing notice disease and autoimmune disorder.
The reports are generated using data and insights gathered from millions of customers, who have consented to participate in our research.
As a reminder, 23 and me as the only company with multiple FDA authorization for direct to consumer genetic health report.
And the only company that the FDA has authorized to provide genetic cancer risk report and medications insight without physician involvement.
In total we have over 60 health reports in our personal genome service that estimate a person's genetic likelihood of developing a specific condition.
We also added finer ancestry composition detail for people of Ashkenazi Jewish ancestry.
Our product and now enabled members to trade their family connections back to seven genetic groups corresponding to regions within eastern and Central Europe .
During the past quarter. We also celebrated the one year anniversary of our acquisition of Lemonade Pal.
We are continuing the integration of the telemedicine and online pharmacy platform into 23 and me to enhance our genetic health service and we look forward to continuing to create new customer experiences that combined genetics with our telemedicine and pharmacy services.
Turning to our therapeutics business.
In November we announced that 23 and me 610 will be evaluated as a mono therapy and tumor indication specific expansion cohorts.
These include clear cell renal carcinoma.
<unk> ovarian cancers.
Neuro endocrine cancers.
Small cell lung cancer and microsatellite instability high.
Or tumor mutational burden high cancers that have progressed on standard therapies.
We also intend to present, an update from the phase one dose escalation portion of the study at a scientific conference later this year.
In addition, we presented seven scientific posters at the American Society of Human Genetics conference, including new insights into conditions such as cataract.
<unk>.
Doses per carton guide us and others.
We also presented preliminary data from what we believe is now the largest and most diverse genetic study of sickle cell trait.
Ever conducted at the American Society of Hematology Conference the largest annual medical conference dedicated to Hematological malignancies.
The consumer and therapeutics team have again made great progress this last quarter and I look forward to the enhanced personalized health offerings, we are working to deliver for our customers.
And with that I'll turn the call over to Joe to review, our financial results for the quarter.
Thanks, Anne I'm pleased to report continued solid revenue growth in our consumer business in the last quarter that puts us on track to exceed our previously disclosed full year financial guidance for fiscal 2023.
I am pleased to report on our performance in Q3, which is typically our busiest of the year operationally on the consumer side.
We had good execution on the consumer side as we maintained focus on improving profitability.
Despite the challenging macroeconomic environment consumer demand remained strong during the holiday season, we carefully controlled discounting and promotion spending which led to improved contribution margin versus the prior year.
All of which gives us confidence in raising our full year guidance, which I will talk about more shortly.
Along with our current cash position and an opportunity to sell additional shares through our recently announced ATM program. We are sufficiently positioned to continue our plans to enhance our genetic health service and advance our therapeutics programs for 23 and me.
Our revenue for the three and nine months ended December 31, 2022 was $67 million and $207 million, respectively, representing an increase of 18% and 21% respectively over the same periods in the prior year.
Third quarter revenue growth was primarily due to an increase in telehealth services revenue from the Lemonade acquisition last November .
Growth in our subscription services revenue and personal genome service PGS revenues.
An increase in research services revenue primarily related to the GSK collaboration.
Nine month revenue growth was primarily due to an increase in telehealth services revenue.
Our research services revenue from the GSK collaboration and research context with third parties.
And growth in our subscription services revenue, partially offset by lower <unk> revenue.
Looking at the composition of our revenue consumer services revenue represented approximately 80% of the total revenue for both the three and nine months ended December 31, 2022 and.
And research services revenue, which was primarily derived from the GSK collaboration accounted for approximately 20% of total revenue for those same periods.
Our gross profit for the three and nine months ended December 31, 2022 was $31 million and $95 million, respectively, representing a 13% and 10% increase over the same periods in the prior year.
The three and nine months year over year increase was driven primarily by the previously discussed increase in revenue offset by lower margins from the telehealth revenues as well as increased supply chain logistics and labor costs.
Operating expenses for the three and nine months ended December 31, 2000, $20 million to $128 million and $349 million respectively.
Compared to $124 million and $271 million for the same periods in the prior year.
The increase in the three and nine months periods was primarily attributable to increased personnel related expenses driven by increased salaries and related taxes as a result of inflation and growth in head count.
Along with an impairment charge for intangible assets and the addition of sales and marketing expenses from the previously acquired telehealth business.
Looking at the bottom line net loss for the three and nine months ended December 31, 2022 was $92 million and $248 million, respectively compared to net losses for the same period in the prior year of $89 million and $148 million.
The increase in the three and nine months periods was primarily attributable to the increase in operating expenses previously noted and the benefit from the changes in the fair value of warrant liabilities of $3 million and $33 million respectively recorded in the prior year.
Next our adjusted EBITDA for details on how we define adjusted EBITDA as well as the corresponding reconciliations to GAAP. Please see our earnings press release.
Total adjusted EBITDA for the three months ended December 31, 2022 improved to a deficit of $43 million compared to a deficit for the same period in the prior year of $64 million.
Total adjusted EBITDA deficit for the nine months period with comparable to the same period for the prior year.
We ended the quarter with $433 million in cash and cash equivalents compared to $553 million as of March 31 2022.
As we recently announced we now have an ATM program, providing us with the option to sell an aggregate of up to 150 million shares of class a common stock from time to time subject to market conditions.
We are increasing our full year guidance following our fiscal year 2023 third quarter financial results.
Full year revenue for fiscal 2023, which will end on March 31, 2023 is now projected to be in the range of 290 million to $390 million.
With a net loss in the range of 325 million to $335 million.
The full year adjusted EBITDA deficit is projected to be in the range of 170 million to $180 million for fiscal year 2023.
As a reminder, this guidance includes the full year impact of the consolidation of the companies acquired telehealth business and so it's overall consumer segment as well as the current and anticipated effects of general inflation on certain of our costs.
And now I'll turn the call back over to Ann.
Thank you Joe we continue to make significant strides in our mission to help people access understands and benefit from the human genome.
We are continuing to see consumer demand as we offer more personalized and actionable genetic report.
Innovative customer experiences that are helping to drive growth in revenue and profit margin.
Our proprietary genetic database is also directly translating to the development of personalized medicine, and we look forward to providing more updates in the future as we advance our clinical trial of 23 six.
In advanced solid tumors.
We're making great progress in our efforts with genetic based health care and therapeutics as we strive towards delivering on the promise of true personalized healthcare.
2023 is the year for DNA powered health and we are excited to be kicking it off with these exciting updates.
Thank you now, let's open up the call for questions.
And thank you.
As a reminder to ask a question.
Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Again that is star one and we ask that you limit yourself to one question and one follow up.
Before we go into questions I'd like to just making sure that one thing was clear.
Thanks.
When I was giving full year guidance the full year revenues for fiscal year 2023, which will end on March 31, 2023 is now projected to be in the range of $290 million to $300 million with a net loss in the range of 325 million to $335 million I think I may have misspoke. So I just wanted to make sure that was clear.
Thank you.
One moment for your first question.
And our first question comes from Daniel gross like from Citi. Your line is now open.
Hi, guys. Thanks for taking the question.
And congrats on a strong quarter here.
I just wanted to kind of dig into guidance real quick.
So you beat.
My expectations for the quarter, but you raised guidance, even more than the beat for the full year. So I'm just curious if youre seeing some outsized demand.
One of your core consumer products and.
Is this kind of reflects a stronger than expected holiday season, given that you'll recognize most of the revenue in your your fourth fiscal quarter from the holidays.
Thank you Daniel.
We were seeing strong demand and strong revenue growth in prior quarters, and we were conservative than before in raising capital already raised guidance in last quarter's earnings call.
We did see our holiday sales.
It met our expectations and we were expecting that with inflationary and other macroeconomic conditions that they may have been.
We could have saw some degradation there, but we did not see that and we saw strong demand and in addition, we were able to hold on discounting and promotions. So we also saw a revenue growth there because we're doing less discounting and promotions.
Got it and on the on the cost side of the equation I noticed that your advertising and brand expense has come down nicely this quarter year over year.
What's driving that decrease or are you seeing <unk> come down have you changed your advertising funnel in strategy at all and related to that the full.
Full year guidance now implies a bit of a.
The increase in EBITDA loss, so perhaps costs are increasing in the fourth quarter I'm curious, what's driving that increase in EBITDA loss for the fourth quarter.
Okay. So on the marketing spend.
Actually changed and we're really being very cautious in how we actually deployed marketing throughout fiscal year 2023, we actually were looking to shut off all inefficient channels and really making sure that our marketing spend was deficient, which really has helped our bottom line.
And there was no really other big change in Q4.
Q3, and nothing really big changes in queue come into Q4, Q4 as well on the EBITDA at some point.
Actually continued to really.
No additional large expenses coming in Q4. This is just a result.
Just the expectations for revenue and expenses in Q4.
Got it thanks for the color.
And thank you.
And one moment our next question.
Okay.
And our next question comes from Steven Mah from Cowen. Your line is now open.
Great. Thanks, operator, thanks for taking the questions and congrats on the quarter.
I had a question on the <unk>.
Telehealth services revenue strength is that a reflection on the the eliminate acquisition and the fact that that integration is it's fully complete now and if so can you provide any color on the genetic space primary care service when would should we expect to launch or are details on that new product.
Offering.
So I'll take the first part of that question Steven the first.
With telehealth revenue, we still continue to see growth in telehealth revenue. However, we also had a comp because we actually did eliminate acquisition in November one of last year. So we basically had additional revenue this fiscal year, one months of additional and telehealth.
And then we are continuing to look and work on the integration of eliminate into 2020 into 23 and me.
And we'll actually be launching and discussing more of our products in the summer.
Calendar year 2023.
Yes, I would say Stephen just the integration is not.
It's not complete yet.
As you sort of defined as the integration is still underway in terms of definitely putting all of those various services on the 23 in the platform.
I think you can expect a more material update from us in the summer.
That's what we hope to be able to at least talk more and more detail about the plans that we want to do and what that could look like and I hope also at that time, probably to have Nora I don't think we have had on any color. There I don't think you've matter, yet, but nor is being able to talk more details about sort of the clinical genomics in the direction we're going.
Okay. No I appreciate that color and then maybe on a similar note on the 20 <unk> plus subscription.
Services revenue I appreciate you said, you're only giving annual updates but.
Could you give us any sort of color on how that 20, <unk> plus subscription business is going and any sense for uptake rates by existing customers or our retention rates of customers already subscribing. Thank you.
Im sure we only give guidance on our subscriptions on an annual basis. So we'll be talking more about that in our Q4 earnings call and we did note in this quarter in the earnings release that we are we are seeing increased subscription revenue. So that is really helping our revenue line. So were pleased with growth and retention in that.
Product, but let me also just make clear lake.
The subscription and the ACA.
Acquisition of Lemonade.
It's definitely like that full combination is the future that we are building toward how you actually have a genomic experience where you can get access with services like pharmacy or care and putting that into a subscription product just applied to you you should expect our subscription product as it is today to evolve.
Relatively substantially over the next.
12 months.
Okay.
Yeah.
Okay. Thank you that makes sense.
Yes, yes that makes sense I guess I was just trying to dig in to see if that's.
If the subscription was coming more from existing customers or people that are buying the kit de novo and signing up for the subscription then and there.
It's a combination it's a combination of new <unk>, new kit sales as well as existing renewals as well as up sells into the subscription product.
Okay, alright, perfect. Thanks for that.
And thank you all right.
And one moment our next question.
And our next question comes from Gaurav Global regime from bamboo capital markets. Your line is now open.
Hello can you hear me okay.
Yes perfect.
Two kind of big picture trend questions for me.
The first on the consumer side right I mean have you seen any correlation between members who leverage third PGS platform with those who leverage the telehealth platform basically are entirely new 23, and me users turning to adopt both PGS and telehealth services or does it seem to be one versus the other.
As Ann mentioned, we're really looking to integrate both the talent.
Hello, and genomic health services.
Next health services, and so we will be seeing.
Cross population between those two customer bases overtime.
Okay got it and then.
Right now its still two different login.
I think that at some point it will definitely E comm that experience, where you could do you could you could have different ways of entering and crossover to the other groups.
Got it got it thanks for the clarification and then the last thing from me Rich I mean should we expect any new future partnership announcements.
Before the GSK exclusive period occurs or is that just something that we should just kind of remain on standby until the July data.
We cannot announce any new partnerships until the exclusivity ends in July of 2023.
We will need to just hold on any announcements until that time.
Got it thanks.
And thank you.
And I'm showing no further questions.
Thank you.
We have a few questions from investors that came in through our Q&A platform that we use Thursday technologies and now going to ask those questions that we got on the platform for the management team to answer.
Our first question is one is a top priority for management for the year 2023.
I'll take that this is ann.
So I would divide this into three sections. So first.
The consumer side.
Consumer we are focused on fully integrating lemonade, making sure that there is a a single experience for our customers that they can get access to the genome. They can get access to care pharmacy potentially line other features in the future.
A single experience and and we can really help.
And enhance our customers experience when they learned about their genome and they want to do more with it.
Secondly.
I am definitely thinking we've got the last question just about what is that in a post GSK world. It is definitely a top priority to make sure that we are always.
Doing what we can on behalf of our customers to make sure that we are making discoveries and that we are advancing therapeutic opportunities.
We will absolutely be evaluating different opportunities to partner in the database that can take a number of different types of forms. We definitely think about programs that we want to be able to own and how we're going to move that forward, but thinking about at post GSK World is also a top priority and last our therapeutic programs are wholly owned programs or <unk>.
Credibly exciting and I'm very eager to continue to support those and look forward to the time periods and I'm not going to have more clinical data on it.
Okay.
Second question is what is your plan to better market DNA test.
This is Andy I'll take that one as well.
We're excited about our opportunities for marketing and DNA test and I have to just call out here that it is the year in 2003 is a year that is absolutely made for US we do have a new chief marketing Officer John Ward.
Who has.
It makes oven.
A number of people who've been here for a while as well as some new players. It is an incredibly exciting time to think about how we are going to market right now with a fully integrated experience between 23, and the plus lemonade additional services.
Just to remind people we are the only platform out there that has these SBA cleared.
That's where they can go without a clinician without a health care provider intervening either into the Indian Army and so there is a huge opportunity for John and his team to be able to market and I am very excited about the year of 'twenty three we have things like our <unk>.
Times square near the and you'll see various moving at 23 and me.
Pop up experiences having around the country.
Alright.
Next question is do you plan on other collaborations with pharmaceutical companies or from other industry.
Manhattan Kenneth.
Yes happy to take that yes, so in terms of new partnerships.
The exclusive target discovery period with GSK will be ending in July . We said of course, we are still focused on fulfilling the obligations OPEC collaborations through that end date.
But I'm also very excited by preparations, we're making in terms of.
We're seeing other opportunities as Joe said that we could potentially announce towards.
Towards the second half of the Europe , we're successful with that.
Certainly a top priority for me and for the team.
Do we think about those partnerships and collaborations that will help us to continue to leverage the 'twenty three database to bring real value to our customers into patient so.
Just.
We'll obviously look to provide further information.
Those were announced.
Okay.
And next question.
What kind of add ons of sales do you have in the works to help raise profits.
I can take that one for a consumer business. We've made significant progress this quarter and continue to enhance our efforts to provide customers with a leading genetic health service that focuses on prevention and wellness. We added two new accounts reports for our 23 million plus members on asthma and <unk> disease and autoimmune.
Disorder.
We also added finer ancestry composition detail for people of Ashkenazi Jewish ancestry.
Our products can now enabled customers to treat their family connections back to seven genetic groups corresponding to regions with.
Eastern and Central Europe .
And we continue to expand on these offerings and is a key objective for our consumer team and as Dan mentioned earlier, we will be announcing talking a little bit more of a summer about our expanded offerings, combining both genetics and the telemedicine business.
Okay.
Last question is in terms of the workforce have there been any cost synergies realized after the lemonade deal.
Just a reminder, but both of the businesses grew 23, and me and eliminate or a very complementary but since the integration of eliminates telemedicine platform. Our focus has really been on enhancing our genetic health service and going forward. We will continue to create new customer experiences and looking to increase lifetime value for every customer.
Overtime.
Alright.
That's our last question.
I'll turn it back to you and to wrap up the call.
Great just wanted to say thanks for joining and we look forward to updating you on our progress on both the consumer business and our therapeutic efforts further.
Talking to you next time.
This concludes today's conference call. Thank you for participating you may now disconnect.