Ginkgo Bioworks Holdings Inc

Good morning, everyone. This is Anna Marie Wagner. I'm the SVP of Corporate Development at Ginkgo. I'm joined today by Jason Kelly, our co-founder and CEO, and Mark Dimitrick, our CFO. We're honored that you chose to start your week with us, and we're looking forward to updating you on our tremendous progress so far this year. Needless to say, it's been an exciting quarter. And to help warm up the crowd, I just wanted to remind you that during the presentation today, we'll be making forward-looking statements. Those involve risks and uncertainties. So please refer to our filings with the Securities and Exchange Commission to learn more about those risks and uncertainties. During our quarterly earnings call, we will, of course, be updating you on our financial progress. But we also want to use these opportunities to continue to build a deeper understanding of what we're doing at Ginkgo. And so after our financial updates, we'll always feature a strategic deep dive each quarter, which today will be led by Jason. If there are topics you'd like to see in a future deep dive, please let us know. We'll end with a Q&A session, and I'll take questions from analysts, investors, and the public. You can submit those questions to us in advance via Twitter, use the hashtag GinkgoResults, or via email at investors at ginkgobioworks.com. And now, without further ado, I'll hand it over to Jason to kick things off. Jason?

Thanks, Anna-Marie. So just do a quick intro, and you'll hear from me later in the deep dive. So our mission here at Ginkgo is to make biology easier to engineer. We do that by operating as a horizontal platform. And I think this is a key idea about Ginkgo. We want to program sales for customers across a range of industries on this common platform. And then we monetize that platform similar to how a tech company would, but by capturing a portion of the value of the applications that are developed on top of that platform. And myself and the founders at Ginkgo have been working on this mission since we met at MIT almost 20 years ago now. And the technical progress and tangible results that we've seen over the past year feels like a real inflection point at Ginkgo, but honestly across the synthetic biology industry in general. And I could not be more excited to share our results with you today. One of the most important things for us is new program additions on the platform. That's one of our most important KPIs. And you might remember this summer, we updated our expectation for the year from 23 to 30 of those new programs. We remain on pace to hit that. In fact, we added 10 new programs in Q3. Ultimately, Ginkgo's success is measured by our customer success. And we saw some awesome progress in our customer sell programs. And so I'm excited to be able to announce today that just last week, Kronos confirmed the performance of a second strain following on from one we announced earlier this year. This one will be producing CBGB. We delivered that strain and it has paid a second equity milestone in that program, which will be included in our Q4 financials. So again, this is one of the things I get the most excited about is seeing Organisms go out the door to customers, customers excited to be commercializing those, and then value flowing back to Ginkgo. Additionally, Aldevron has commenced commercial operations for vaccinia capping enzyme, VCE. This is one of the ingredients used in the manufacturing process for mRNA vaccines, and it's produced from a strain that we delivered in Q3 that yielded an over tenfold improvement in yield compared to Aldevron's previous process. So really excited about this. It's an opportunity for an impact in the world and also a chance to see value come back to Genco again from our customer success. And finally, just last week, Synlogic announced that it's a big week, that they're advancing a Ginkgo engineered strain for the treatment of homocystinuria to IND enabled studies. I'm so excited about this, right? So we've seen Ginkgo's organisms on a path to going to patients in therapeutics. It's been a long time goal for the company, to be honest, and it's something we hope to see a lot more of in the future. On the biosecurity side, this has really picked up steam with now 10 state-sponsored K-12 contracts, over 1,500 schools being served by our biosecurity brand, Concentric. As of the week of November 1st, we were collecting over 220,000 samples per week. I could not be prouder of how the team came together to respond really to a crisis here, and it's truly a privilege to be building really part of the world's biosecurity infrastructure. And I think this is You know, I've talked about this previously, this I think is an absolutely critical thing in a post COVID world, as we are building out the tools to make it easier and easier to program and engineer cells, we have to build this type of security biosecurity globally, and I'm proud that that Ginkgo is a part of that. Finally, we capped off the quarter with our official listing on the New York Stock Exchange with the ticker DNA. You know, we stand on the shoulder of giants with that ticker that, you know, we hope to do the prior owners Genentech proud. And finally, we are thrilled to be able to see many of you at our conference, our annual meeting for Mint just a couple of weeks ago, over 700 people. You know, that was a real thrill to see everyone. And we're hopeful that more of you will come back and join us next year. And so now I'm going to hand off to Mark to share the details on our financial performance this quarter.

Great. Thank you, Jason. Now, before we get into the financial slides for some context, we are very pleased to report a strong quarter in terms of revenue. Total revenue in the third quarter of 2021 increased to $78 million, representing growth of nearly six times the third quarter of 2020. Year to date, total revenue grew to $165 million, up from $45 million in the comparable prior year period. This quarter's financial results highlight the tremendous progress and growing diversity in our business model as we receive significant revenue contributions from Foundry services, downstream value share, and biosecurity. So now moving to cell programming highlights. We added 10 new cell programs to the Foundry platform in the third quarter of 2021, bringing the total number of new programs to 21 year to date. As a reminder, our new SEL program count is a key KPI that we're focused on as this metric drives both near-term foundry revenue and potential future downstream value share. We only count a program that has a certain expectation of scale and are typically doing several proof of concept programs in addition to the reported numbers, which can ultimately lead to larger paid programs. The 21 new programs we added year to date compares to 15 new programs added in the comparable period last year representing 40% growth. We supported a total of 61 active programs in the year to date period across 30 customers on our Foundry platform. We continue to see good industry diversification and new programs, as well as further proof points in therapeutics and newer field for us with six of the 21 new customer programs being from the pharma and biotech industry and the rest diversified across the many other industries in which we participate. Ben Hovlander, Foundry revenue increased to $35 million in the third quarter of 2021 from $12 million in the third quarter of 2020 representing over 200% growth similarly. Ben Hovlander, Foundry revenue for the year to date period increased to $79 million representing growth of 84% over the comparable period last year. Importantly, foundry revenue in the third quarter includes an equity payment we received for achieving a commercial milestone with Kronos, the first time that Ginkgo has received significant downstream value share. And as Jason mentioned, Kronos has also just confirmed that we hit their spec for a second molecule, which triggers the payment of a second equity milestone, which will be reflected in our Q4 financials. And then finally, just to make a comment on related party revenue. So related parties represented 38% of Foundry revenue in Q3 2021 and 47% of year-to-date Foundry revenue. This compares to 63% of Foundry revenue in Q3 2020 and 70% of Foundry revenue in the 2020 year to date period. So this mixed shift toward more third party revenue was due to both the downstream value share received from Kronos, which is not a related party, as well as just general diversification in the business. So if we could now turn to biosecurity, Our biosecurity offering generated $43 million of revenue in the third quarter and $86 million of revenue year-to-date. This tremendous growth has now exceeded our recently expanded full-year target in just the first nine months of the year. Biosecurity revenue consists primarily of product and service revenue from our end-to-end COVID testing offering, and the growth is being driven primarily by K-12 pooled testing. We have now been awarded state-sponsored K-12 testing programs in 10 states, and as of last week are collecting over 200,000 samples weekly. Biosecurity gross margin was 48% in the quarter, a significant improvement versus prior quarters, and this is primarily due to maturation of the business and the benefits of larger scale. Now, if we could turn to the detailed P&L, I'm going to provide a little bit more commentary on the other line items. So starting with R&D expense, R&D expense grew to $53 million in the quarter, driven by expansion of foundry capacity and increased breadth of capabilities to support both current and future collaborations, along with further development of our biosecurity offering. G&A expense grew to $29 million in the quarter as we invested significantly in business development and all other G&A functions to support the higher level of foundry activity and our biosecurity offering, along with our very extensive public company readiness efforts. Now, to provide a quick comment on the net loss line item, it is important to note that our net loss includes a number of non-cash expenses as detailed more fully in our financial statements. And these include, just by way of example, mark to market adjustments on equity method of investments where we have elected the fair value option. It includes reductions in the carrying value of those platform ventures that we account for under the equity method. and we take those reductions in the quarter that the equity is issued to us. And then thirdly, it also includes mark-to-market adjustments on the storing EGLE public and private placement warrants that came onto our balance sheet as a result of the merger. Those are all reflected as a liability. Because of these non-cash expenses, we look to adjust it even as a more accurate measure of our profitability. Adjusted EBITDA in the quarter was negative $18 million, and for the year-to-date period was negative $107 million. A full reconciliation of EBITDA is provided in the appendix to this presentation and in our MD&A. Adjusted EBITDA was favorably impacted by gross profits in biosecurity this quarter and by downstream value share, which typically drops straight to the bottom line. CapEx in the year-to-date period was $51 million, reflecting foundry capacity and capability investments. Examples of this include the substantial completion of our new broad-use foundry, Biowork 6, which is located in our Boston headquarters, as well as foundry space build-out in Cambridge, Massachusetts. And so now if we could turn to outlook, I'd like to provide some brief commentary on revenue outlook for the rest of the year. We expect to add an incremental nine new cell programs in Q4 for a total of 30 new programs in 2021. We expect foundry revenue to exceed $100 million for the full year 2021, inclusive of both downstream value share and services revenue. And then with respect to biosecurity, as a reminder, in August, we updated our biosecurity revenue outlook to be at least $75 million for the full year. Given our strong third quarter result, we expect to significantly exceed this revenue target for the full year. While we're not providing a point estimate on revenue, as there's still significant uncertainty in the K-12 testing market in general and the facts and circumstances of the pandemic change regularly, we are confident that Ginkgo is positioned well in this market. We expect biosecurity revenue of at least $110 million for the full year. We further believe our performance in building an offering of this scale from scratch in such a rapid timeframe is indicative of a strong execution capability on future opportunities as the biosecurity market further evolves. And before I wrap, I'd like to make a comment on how we're thinking about guidance and breaking out of foundry revenue in future time periods. We are internally evaluating this right now, but we do not anticipate that it will make sense for us to either guide to or break out foundry services revenue and downstream value share revenue as separate components. As we are now reaching the phase of company maturity where we are seeing downstream value share hit the top line, we are seeing in real time that there are customer confidentiality considerations as well as situations in which it will be a smart business decision for us to make trade-offs between the two. And so just to conclude, in summary, we think this quarter demonstrates the strength in the business model. We're seeing an increase in diversity of customers operating in many industries, developing a wide array of different products on the platform. Downstream value share is a tangible commercial proof point, and it typically drops straight to the bottom line. And the progress in our biosecurity offering is truly impressive. And so now, Jason, back to you.