23andMe: Liquidity Pressures And Operational Instability Pose Significant Risks

seekingalpha10-27

23andMe posted yet another disappointing quarter with revenues declining by 34% YoY. Operating margins worsened due to increased R&D spending, now 113% of sales.The company continues to face ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2478134775?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1343072576/image_1343072576.jpg","is_english":true,"pubTime":"2024-10-27 11:44","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2478134775","market":"us","top_or_hot":-1,"title":"23andMe: Liquidity Pressures And Operational Instability Pose Significant Risks","media":"seekingalpha","content":"<div>\n<p>23andMe posted yet another disappointing quarter with revenues declining by 34% YoY. Operating margins worsened due to increased R&D spending, now 113% of sales.The company continues to face ...</p>\n\n<a href=\"https://seekingalpha.com/article/4729906-23andme-liquidity-pressures-and-operational-instability-pose-significant-risks\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>23andMe: Liquidity Pressures And Operational Instability Pose Significant Risks</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\n23andMe: Liquidity Pressures And Operational Instability Pose Significant Risks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-27 11:44 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4729906-23andme-liquidity-pressures-and-operational-instability-pose-significant-risks><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>23andMe posted yet another disappointing quarter with revenues declining by 34% YoY. Operating margins worsened due to increased R&D spending, now 113% of sales.The company continues to face ...</p>\n\n<a href=\"https://seekingalpha.com/article/4729906-23andme-liquidity-pressures-and-operational-instability-pose-significant-risks\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4196","symbol_name":"保健护理服务","start_time":0,"source_url":"https://seekingalpha.com/article/4729906-23andme-liquidity-pressures-and-operational-instability-pose-significant-risks","article_id":"2478134775","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1343072576/image_1343072576.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2478134775","pubTimestamp":1730000640,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"23andMe posted yet another disappointing quarter with revenues declining by 34% YoY. Operating margins worsened due to increased R&D spending, now 113% of sales.The company continues to face challenge","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4196":"保健护理服务","BK4121":"生命科学工具和服务","ME":"23andMe, Inc."},"translate_title":"23andMe：流动性压力和运营不稳定构成重大风险","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ME":0.9},"content_text":"23andMe posted yet another disappointing quarter with revenues declining by 34% YoY. Operating margins worsened due to increased R&D spending, now 113% of sales.The company continues to face challenges in maintaining its revenue and captures growth. Deterioration in the consumer and research segment shows no signs of abating.Apart from its revenue woes, the company's recent developments such as the resignation of the entire board indicate that the company is unable to maintain operational stability.ME's liquidity profile suggests that the company may not have enough runaway. Liquidity analysis suggests that the company's cash will not last more than 7 quarters.   JasonDoiyIntroduction 23andMe (NASDAQ:ME) is a consumer genetics and research company that operates in three business verticals: (1) Consumer, (2) Research, and (3) Therapeutics. In the consumer segment, the company offers ancestry and DNA services, personalized health insights, and also telehealth services. In the research segment, the company leases its genetic database to pharmaceutical companies for research purposes. Finally, in the therapeutics segment, the company uses its genetic database to develop drugs to target genetic related diseases. 23andMe Consumer Segment Breakdown (Investor Presentation)Recently, ME had seen multiple developments, causing its share price to fall from $7.77 to $4.67, representing a decline of 39.89%. Naturally, as an investor who loves turnaround situations, I was curious to see whether this plunge represents an opportunity. Unfortunately, in this report, I will demonstrate why investors should avoid ME entirely in their portfolio. Latest Developments On 8th August 2024, ME reported its 1Q25 financial results. During the quarter, the company generated $40 million in revenues, indicating a 34% year-on-year decline. The fall in revenues is primarily due to: (1) the end of the exclusive collaboration with GSK plc (GSK) and (2) lower consumer revenues due to decreased kit sales and telehealth orders. Gross margin improved from 51% the same period last year to 53%. However, operating margins deteriorated due to higher R&D spending. In 1Q25, the company's R&D as percentage of sales soared from 102% the same period last year to 113%. Struggling to Capture Growth as a Growth Company Ever since March 2023, the company has been struggling to maintain its revenue and consistently experienced year-on-year deterioration. For the past five quarters, the company has seen a revenue decline of 24% year-on-year on average, indicating that there is a clear inability to maintain revenues and capture growth. There are two major reasons why ME is unable to maintain and capture growth: (1) misalignment with market needs and (2) lack of growth strategy to diversify and secure new partnerships.   Historical Revenue Growth (Company Filings)Firstly, based on ME's attempt to maintain its sales over last few quarters, it is clear that the company is misaligned with the market needs. Since 1Q24, the company's consumer services revenue experienced a slew of failures. Initially, in 1Q24, ME's decision to focus on higher product margins through price hikes and marketing efficiency led to declining overall sales. In 3Q24, the company focused on retention and subscription services instead of new kit sales. After more than four quarters, there is still no indication of any improvements, suggesting that the company had misunderstood the market severely. Moreover, the issue will be exacerbated by poor consumer sentiment. Secondly, ME's poor performance in the research segment suggests that the company either does not have a growth strategy to secure new partnerships or does not have the executional capabilities to leverage and capitalize on their research assets. Ever since the exclusive deal with GlaxoSmithKline ended, the company has not announced any major partnerships even though ME's Chief Executive Officer, Anne Wojcicki, stated that there is an \"explosion of interest\" in 1Q24's earnings call. Unfortunately, as of today, the company has not revealed any new official developments or indications that a turnaround in either segment will be likely. As of the company's latest performance, total revenues have plunged to $40 million, the lowest since the past 17 quarters (i.e., ever since the company went public). Unable to Maintain Operational Stability Apart from the company's revenue woes, there are several indicators that suggest ME is facing structural and operational difficulties. To put it simply, it seems that the company is no longer able to keep it together and is falling apart. ME's Historical R&D as % of Revenue (Company Filings)On 9th August 2024, after millions of R&D spending, ME shuts down its in-house drug development effort as the company shifted strategy again to a telehealth membership for people trying to lose weight. The frequent strategic shifts and constant pivots of the company suggests that ME lacks strategic focus and a clear long-term strategy. Over the past four quarters, ME had spent $189 million in R&D but only generated $199 million in sales. On 13th September, the company finally lost its data breach lawsuit and has agreed to settle for $30 million. More importantly, the company has failed in protecting the privacy of more than 6.9 million customers whose information was exposed in a data breach last year. According to ME, the breach had lasted across a span of five months. For a company that possesses genetic data of individuals, the inability to detect such a protracted intrusion is appalling. Think about all the potential problems that can arise from having the knowledge of an individual's genetic predisposition to certain diseases. Finally, on 17th September, ME's entire board of seven people, in a mass resignation, resigned on the same day. According to the official letter, the independent directors resigned because of disagreements on how Anne Wojcicki is taking the company private. Specifically, the directors indicated that Wojcicki's initial proposal is not beneficial to non-affiliate shareholders and the board has yet to receive a \"fully financed, fully diligence, actionable proposal\" after \"months of work\".  Poor Liquidity Profile Suggests Company Has Less Than 7 Quarters of Runway Although ME is facing issues with revenue and is showing signs of operational instability, the biggest challenge for ME is none other than the company's liquidity profile. ME's cash flows from operations indicate that the company is burning an excessive amount of cash. In the past four quarters, the company's cash flows from operations are losing approximately $35 million per quarter on average. Based on ME's current cash level of $242 million, the company only has about 7 more quarters before the company wipes out its cash position entirely. ME's Quarterly Reserves & Cash Burn (Company Filings)It is important to note that the company is no longer open to take third-party takeover proposals. In a recent statement, Anne Wojcicki, Chief Executive Officer of ME, stated, \"In the interim period, based on subsequent developments, it has become even clearer to me that the best path forward for the Issuer is for me to take the company private.\" At this stage, I would also like to reiterate and highlight that the recent board resignation was because Anne Wojcicki's proposal before the reverse stock split did not offer a premium on the previous market value of 40 cents per share (i.e., It will be worth about $8 as of current shares outstanding). Hence, given that the current share price is $4.67, almost 60% of its original value, it will be unrealistic for investors to expect Anne Wojcicki to offer more than $4.67 if she intends to push through with the takeover. As the board had previously emphasized, non-affiliate shareholders should not expect to benefit from any potential takeover by ME's Chief Executive Officer. Closing Remarks ME is scheduled to report its earnings on 13th November 2024. Investors should closely monitor the following: (1) ME's plans on extending the cash runway and enhancing its liquidity profile, (2) any new agreements or deals in the research segment, and (3) performance in its consumer segments. If ME has positive developments in the consumer segment or a breakthrough in the research segment, there is a possibility that the company can preserve its cash reserves, turning around the situation for ME.  Unfortunately, based on current developments, ME is facing a slew of internal problems and does not have enough liquidity to sustain itself beyond 7 quarters. There is a high possibility that the company will empty its cash reserves before we see any signs of operational recovery. Moreover, if share prices plunged further, ME may not fulfil its requirements and may be delisted.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2478134775"}