Ginkgo Bioworks Holdings Inc

Good evening. I'm Megan LeDuc, Manager of Investor Relations at Ginkgo Bioworks. I'm joined by Jason Kelly, our co-founder and CEO, and Mark Dimitrick, our CFO. Thanks, as always, for joining us. We're looking forward to updating you on our progress. As a reminder, during the presentation today, we will be making forward-looking statements, which involve risks and uncertainties. Please refer to our filings with the SEC to learn more about these risks and uncertainties. Today, in addition to updating you on the quarter, we are going to provide updates on our path towards adjusting you to break-even, as well as customer progress in our cell engineering business and our latest H5N1 offerings. As usual, 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 X at hashtag GinkgoResults or email investors at GinkgoBioworks.com. All right, over to you, Jason.

Thanks, Megan, and thanks, everyone, for joining us. We always start with our mission of making biology easier to engineer. Here at Ginkgo, and similar to last quarter, we continue to focus on three key objectives. First, we want to reach a justity but to break even while maintaining a cash margin of safety. And we ended this quarter with $616 million in cash and no bank debt and have already exceeded our cost-cutting target for 2024. In other words, we've hit the target we were trying to hit by the end of the year. At the rate we were dropping costs, that makes for a nice cash margin of safety, in my opinion. Second, while we cut costs, we need to keep serving our current customers and adding new customers. I'll dive into this in the strategic section, but I'm very happy about achieving the $9 million technical milestone with Merck that we just announced this morning. That's a great indication of Ginkgo delivering R&D solutions to blue-chip customers in biopharma. Finally, we want to grow our revenue in solutions while also expanding into selling tools. And I'll cover this more in the strategic section, but we're excited by the traction we are seeing in our newly launched data points business with a couple recent wins with top 25 biopharmas that are new customers to Ginkgo. As a reminder, in last quarter's call, we talked about how we expect to see $100 million of costs taken out on an annualized run rate basis this year, with an additional $100 million coming out by mid-25. I am happy to report we're not just in line to reach those goals. But we are actually ahead on those metrics. You'll see later in the deck that our Q3 results indicate we're ahead of schedule in cost cutting with $125 million annualized run rate cash OpEx improvement relative to Q1. Okay. I'm excited to get into all of that more in the strategic section. But before that, I want to hand it over to Mark to discuss the financial results for the quarter.

Thanks, Jason. I'll start with the cell engineering business. I'll start by noting that during the quarter, Ginkgo recognized $45 million in non-cash revenue from a release of deferred revenue relating to the mutual termination of a customer agreement we had with Motif Foodworks, one of our platform ventures. We have no further obligations to perform services under this agreement, and hence the accounting for the deferred revenue release. Excluding this impact, cell engineering revenue was $30 million in the quarter, down 20% compared to the third quarter of 2023. Similar to prior quarters of this year, this decline was driven primarily by the continued shift from small early-stage customers to large enterprise customers, along with the changes we've made as part of the restructuring. In the quarter, we supported a total of 136 active programs across 81 customers on the cell engineering platform. This represents a 17% increase in active programs year over year with the largest amount of growth coming from food and ag and government customers. As we discussed in our Q1 and Q2 earnings calls, the nature of programs that we take on with our customers has evolved following our recent adjustments to commercial terms and the launch of our data points offering. While still very early days, this slide gives you some detail on how the nature of programs is changing. We added a total of 25 new programs and contracts in Q3 2024, of which 11 were generally comparable in size and scope to historically reported new programs and were included in the current active program count on the prior slide. Importantly, you'll note that of those, nine out of the 11 deals were either government or biopharma programs. In addition, we commenced 14 other customer contracts in the quarter that represent a variety of small deal archetypes. These are generally much smaller in scope and shorter in duration and include two data points deals as well as seven other biopharma deals. The current sales pipeline for both categories of deals is strong, and we are encouraged that we've been able to execute on existing customer programs while converting new opportunities, which Jason will talk more about in the strategic section of the presentation. Now, turning to biosecurity. Our biosecurity business generated $14 billion of revenue in the third quarter of 2024 at a gross margin of 28%. Revenue and gross margin were down quarter over quarter, and as you'll note, lumpy during the course of the year, due partly to the timing of signing of a customer contract in Q2 of this year. 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. And we are also breaking out M&A and restructuring-related expenses to provide you with additional comparability. A full reconciliation of the M&A and restructuring-related costs can also be found in the appendix. Starting with OpEx, R&D expense, excluding stock-based comp and M&A and restructuring costs, decreased from $108 million in the third quarter of 2023 to $74 million in the third quarter of 2024. This decrease was primarily driven by our restructuring efforts. G&A expense, excluding stock-based comp and M&A and restructuring costs, decreased from $49 million in the third quarter of 2023 to $42 million in the third quarter of 2024, which also reflects cost reduction actions we've taken this year. Stock-based comp. So again, you'll see a significant drop in stock-based comp this quarter, similar to what we have seen over the past year as we complete the roll-off of the original catch-up accounting adjustment related to the modification of restricted stock units when we first went public. Additional details are provided in the appendix. 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 believe adjusted EBITDA is a more indicative measure of our profitability. We've also included a reconciliation of adjusted EBITDA to net loss in the appendix. Adjusted EBITDA in the quarter was negative $20 million, which was down from negative $84 million in Q3 2023. This significant improvement in adjusted EBITDA can be attributed to the impact of the previously mentioned non-cash deferred revenue release, as well as the major cost-cutting initiatives implemented over the last two quarters. And finally, I'll just make one additional comment relating to cash burn in the corridor as compared to Q2. The cash burn in Q3 was impacted by some non-recurring items, including a litigation settlement and employee severance related to the restructuring. Those two items together resulted in cash payments of approximately $23 million in the quarter. So if you factor that in along with some working capital timing impact in Q3, that will help explain why the cash burn was relatively high in the quarter despite the OPEX reduction. We would, therefore, expect to see a significant decrease in cash burn in Q4 as a result of the restructuring. In terms of outlook for the full year, we previously issued guidance for total revenue of $170 to $190 million, cell engineering services revenue of $120 to $140 million, and biosecurity revenue of at least $50 million. We update this previously issued guidance solely to reflect the impact of the previously mentioned $45 million non-cash deferred revenue release in the third quarter. With this impact in mind, we now expect our total revenue to be $215 to $235 million, cell engineering services revenue to be $165 to $185 million, and biosecurity to remain the same of at least $50 million. In conclusion, we're pleased with our overall execution of the restructuring thus far as we navigate substantial cost reductions and commercial changes, which we see as foundational to our path to adjusted EBITDA breakeven. Back over to you, Jason.