Ginkgo Bioworks Holdings Inc

Good afternoon. This is Anna Marie Wagner, SVP of Corporate Development at Ginkgo Bioworks. As usual, I'm joined by Jason Kelly, our co-founder and CEO, and Mark Dimitrick, our CFO. We thank you for joining us and look forward to providing you with an update on the last quarter. As a reminder, during the presentation today, we'll be making forward-looking statements which involve risks and uncertainties. Please refer to our filings with the Securities and Exchange Commission to learn more about these risks and uncertainties. We'll follow our standard agenda for these calls, providing an update on our financial progress while also taking time to dig deeper on our strategic priorities. We'll end with a Q&A session, and I'll take questions from analysts, investors, and the public. As usual, you can submit those questions to us in advance via Twitter, hashtag GinkgoResults, or email at investors at ginkgobioworks.com. All right, over to you, Jason.

Thanks, Annamarie. So we always start with this slide because our mission drives much of our long-term strategy and even many day-to-day decisions here at GACO. Very simply, we want to make biology easier to engineer. And we do that by scaling our platform for programming cells. I like this slide here as a summary of sort of the way our business works at Ginkgo. So our customers bring us ideas for what they want to sell to do. And we use our platform to engineer a sell that meets the customer specification. Our platform consists of two pieces, our foundry and our code base. Our foundry is an automated lab. And I'm sitting here in Boston in that lab today. And we believe the key value proposition for our customers is that we're able to turn What's typically an underutilized fixed cost investment for most companies, in other words, sort of a physical R&D lab in their facility, we can turn that into a highly efficient variable cost for them. And we can invest at Ginkgo in large scale infrastructure so that our customers can benefit from the scale economics we generate by having sort of one set of infrastructure serving many customers instead of just scaled for one. We'll spend some time today talking about our pending acquisition of Zymergen, which we believe will drive our foundry capabilities. The other asset is our code base. It's a learning asset that accumulates as we run more experiments. It includes physical strains, data, various tools for programming cells. These learnings can help us avoid having to reinvent the wheel on every new program. In other words, it can help keep us out of the lab in many cases from having to do that lab work if we have something we can put to work from a previous project that's relevant to a new one. That can also increase the probability of program success and reduce, like I said, the total amount of work and therefore cost of these programs. And for the potential customers tuning in today, our whole model is to make this platform available to you as fast as we can. So if you see a project we've done that's similar to what you're interested in or a technology we've acquired or highlighted, please do reach out. You can get access to these technologies and have them applied to your products in a matter of weeks. So I want to give a quick preview into some of our recent highlights before turning it over to Mark to walk through our detailed quarterly financials. So as we've described before, one of the most important metrics for our success is seeing new customers choose to work with Ginkgo for their R&D efforts. In the second quarter, we added 13 diverse new cell programs, including with Nova Nordis and Sumitomo Chemical. We're grateful for these customers' trust and believe these additions are further validations of the value of our cell programming platform. As a small aside, you'll note we're only disclosing here three customer names on this page compared to the 13 new cell program additions I mentioned. We often get asked whether we put out a press release for every new program. People want us to be doing that. The short answer is we don't do that. We end up following our customers lead here. And sometimes our customers choose not to announce what they may want to keep a program confidential because it's a new area they're moving into, or it might be a new program that's part of one of our ongoing collaborations. And they might not consider it enough of a big deal to announce it. The big utility of announcements is that they serve to help educate our potential customers on the kinds of work we do at Ginkgo. And it helps them realize that Ginkgo's platform is relevant in their markets. So basically, it's good marketing material. We do push for them when we can, these announcements, but it's not always possible with the customer. In biosecurity, we executed very well through the remainder of the school year and have achieved $247 million of year-to-date revenue. While our K-12 testing business has been quieter over the summer, just because many schools are closed, as expected, we're very excited to be seeing traction across longer-term biosecurity opportunities, including being awarded a contract from the CDC to expand our traveler-based COVID-19 monitoring services, with an overall potential to exceed $61 million to Ginkgo and its partners based on CDC program options and public health priorities. So really, really proud to see that coming in. It's really exciting. We'll talk more about it coming up. But biosecurity has been a core focus for us over many years and has a deep relationship with our self-programming business. And I'm becoming even more excited about our positioning in biosecurity well beyond what's happening in K-12. We've had several other significant updates since our last call. We received our third equity milestone payment from Kronos based on work we delivered to them. We're proud of our partnership with Kronos and ability to realize meaningful downstream value share from those programs. Of course, in July, we announced the pending acquisition of Zymergen and the Bayer Agricultural Biologicals assets. We'll talk a lot more about those transactions in just a moment. We also acquired certain assets from Bitome, which is developing a real time metabolite monitoring technology that we hope will help accelerate product development timelines across our cell programs. Finally, we are thrilled to have added Dr. Kathy Hopinka-Hannon to our board. She brings a wealth of experience and compliments our other board members quite nicely. So welcome, Kathy. So that's a quick overview of our recent highlights. And with that, I'll hand it off to Mark to walk through our second quarter financial performance.

Thanks, Jason. Our second quarter financial results reflect strong growth driven by solid execution in both our cell programming and biosecurity businesses. Total revenue in the second quarter of 2022 increased to $145 million, representing growth of over three times the second quarter of 2021. I'll start by discussing our self-programming business, which we describe as our Foundry. We added 13 new self-programs to the Foundry platform in the second quarter of 2022. As a reminder, our new self-program count is a KPI that we're particularly focused on. Adding more programs benefits us strategically by driving our scale economics, diversifying customers and programs, accumulating code base, and accumulating potential sources of downstream value share. We supported a total of 73 active programs in the second quarter of 2022 across 36 customers on our Foundry platform. This represents substantial growth and diversification in programs relative to the 46 active programs in the second quarter of 2021, with strong growth coming from the pharma and biotech industry, as well as the food and ag industry segments. Foundry revenue was $44 million in the quarter, more than double the second quarter of 2021. Foundry revenue benefited from downstream value share revenue related to the previously announced achievement of an equity milestone for Kronos. We recognize $18 million of revenue in connection with this milestone in the second quarter. As we have previously discussed, at our stage of business, we continue to expect this type of revenue lumpiness as milestones relating to various customer collaborations may be earned in certain quarters. Now, turning to biosecurity. Our concentric offering continued to perform extremely well in the second quarter of 2022, generating $100 million of revenue in the quarter. Biosecurity revenue consists primarily of product and service revenue from our end-to-end COVID testing offering, and the growth was driven primarily by K-12 pool testing, which was elevated in Q1 but continued to deliver strong volumes through the remainder of the school year. As expected, we have seen revenue for our K-12 programs decrease substantially through the summer vacation months starting in June. Biosecurity gross margin was 36% in the second quarter, an approximately six percentage point decline from the prior quarter performance. As volumes fell from Q1, the infrastructure we maintained to serve our clients, for example, nursing contracts that have minimum hour requirements, was less efficient, and result in this lower gross margin. We continue to be very pleased with our performance in biosecurity, and while we will continue to be conservative in our guidance, given the inherent uncertainty in this area, we are encouraged to see government investments being made in longer-term biosecurity infrastructure. And now I'll provide more commentary on the rest of the P&L. Where noted, these figures exclude stock-based compensation expense, which is shown separately. R&D expense excluding stock-based comp increased from $52 million in the second quarter of 2021 to $72 million in the second quarter of 2022. R&D expense related to the foundry increased as expected year over year, driven by expansion of foundry capacity and increased breadth of capabilities to support both current and future collaborations. G&A expense, excluding stock-based comp, grew to $48 million in the second quarter of 2022, compared to $20 million in the second quarter of 2021, as we invested in business development and all other G&A functions to support the growth of new customers and programs, higher level of foundry activity, and our biosecurity offering, along with our expenses incurred in becoming a public company. We also incurred significant legal and other professional fees relating to M&A, largely due to the two very significant transactions we announced in July. Net loss. It is important to note that our net loss includes a number of non-cash income and or expenses as detailed more fully in our financial statements. Because of these non-cash and other non-recurring items, we look to adjusted EBITDA as a more indicative measure of our profitability. Adjusted EBITDA in the quarter was negative $23 million compared to negative $38 million in the comparable prior year period. A full reconciliation of EBITDA is provided in the appendix to this presentation and in our earnings release. Just to deal with that, it was favorably impacted by the growth in our biosecurity business in the quarter. And finally, CapEx in the second quarter of 2022 was $10 million, reflecting foundry capacity and capability investments. CapEx has continued to be impacted by timing of equipment purchases and projects, and so we would expect to see significantly higher CapEx in the second half of this year. One final comment on stock-based compensation expense. As a reminder, we provided extensive disclosure in our Q4 earnings release relating to GAAP accounting for the modification of restricted stock units that had been issued prior to us becoming a public company. Our Q4 disclosures indicated that as of December 31, 2021, we expected a further $2.2 billion of stock comp expense to be booked in 2022 and beyond relating to this adjustment. the calculation of which was based on the stock price of $13.59 on November 17, 2021. Substantially, all of the $607 million stock compensation expense in the second quarter relates to this ongoing wind down, and we continue to expect most of the remainder to be booked in the rest of 2022 with a small tail that extends into 2023 and beyond. Now I'd like to provide some commentary on our revenue outlook for 2022. We continue to expect to add an incremental 60 new cell programs with diversity in end markets, as well as between new and existing customers in full year 2022. We are increasing our full year guidance for total revenue by $50 million over our prior outlook to a range of $425 to $440 million. We are reiterating our foundry revenue outlook to be in a range of $165 to $180 million for full year 2022. We continue to have line of sight to material downstream value share in the second half of the year. I do want to remind folks again that just as we saw in both our first and second quarter results, based on the specific technical progress achieved, stage of maturity of our programs, and timing of any milestone payments, we can see lumpy foundry revenue on a quarterly basis. And our annual guidance represents our current forecast of that timing for the remainder of the year. Based on our strong performance in biosecurity in the second quarter, we now expect biosecurity revenue to be at least $260 million for full year 2022, an increase of $50 million from our prior outlook. As was the case throughout 2021 and the first quarter of 2022, there still remains significant uncertainty in the biosecurity market in general. Although several state and government programs have elected to extend K-12 and community testing programs, there is uncertainty about the actual level of testing in the next fiscal school year. Ginkgo is actively working on new opportunities in biosecurity, including internationally, However, the timing and amount of revenue from these opportunities is uncertain. In summary, we are pleased with our overall progress. We are executing on a diverse range of existing programs and new program growth on the Foundry platform. Another strong quarter from biosecurity is contributing positively to cash flow. And the company's total cash position of approximately $1.4 billion remains strong. And now, Jason, back to you. Thanks, Mark.