23andMe's Q2 2024 Earnings Call: A Deep Dive into Subscription Growth and Cost-Cutting Strategies

23andMe Holding Co. (Nasdaq: ME) reported its financial results for the second quarter of fiscal year 2025 (FY25), which ended September 30, 2024, on November 12, 2024. The earnings call highlighted the company's strategic shift towards higher margin recurring revenue streams and cost-cutting measures, leading to improved financial performance. This article delves into the key takeaways from the Q2 2024 earnings call, focusing on subscription growth and cost-cutting strategies.

23andMe's subscription business has been a significant driver of growth in recent quarters. The company expanded its Total Health longevity service to all customers, combining whole exome genetic sequencing with bi-annual lab tests for 55+ key blood biomarkers, and expert clinicians trained in genetics-informed preventive care and health action plans. This comprehensive service has enhanced the value proposition for subscribers, encouraging higher retention rates and increased engagement.

The launch of a GLP-1 weight loss telehealth membership on the Lemonaid Health platform has also attracted new subscribers seeking convenient and personalized health solutions. This service, along with the introduction of a new genetic report on Emotional Eating for 23andMe+ Premium subscribers, further enriches the subscription experience, fostering greater engagement and retention.



The integration of the first AI chatbot available to 23andMe customers, "DaNA," highlights key health and other important results for customers, making actionable insights easier to identify. This innovative feature enhances the user experience, fostering greater engagement and retention among subscribers.

By focusing on these strategies, 23andMe has successfully grown its membership services revenue, which represented 21% of total revenue in Q2 2024, compared to 9% in the prior year quarter. This shift towards higher margin recurring revenue streams has contributed to the company's improved financial performance, with GAAP Net Loss improving by 21% and Adjusted EBITDA loss improving by 26% compared to the same period in the prior year.

Workforce reductions and the disposition of Lemonaid Health Limited have been significant contributors to 23andMe's cost-cutting efforts. In the second quarter of fiscal year 2025, the company reported a 17% decrease in operating expenses compared to the same period in the prior year, primarily driven by lower personnel-related expenses. This reduction can be attributed to workforce cuts in the current and prior quarters, along with the disposition of Lemonaid Health Limited in the UK. Additionally, opting for a royalty on several GSK partnered programs has led to a significant reduction in GSK collaboration expenses.

These cost-cutting measures, along with the shift in revenue mix towards higher margin recurring revenue streams, have helped 23andMe improve its financial performance. The company's focus on subscription growth and cost-cutting strategies has positioned it for long-term success in the competitive consumer genetics and preventive health market.

In conclusion, 23andMe's Q2 2024 earnings call highlighted the company's strategic shift towards higher margin recurring revenue streams and cost-cutting measures. By expanding its subscription offerings and reducing expenses, 23andMe has improved its financial performance and positioned itself for long-term growth in the consumer genetics and preventive health market. As the company continues to innovate and adapt to market demands, investors should monitor its progress and consider the potential for further growth and value creation.