Ginkgo Bioworks Holdings Inc

Good evening. I'm Joseph Fridman, Director of Communications and Corporate Affairs here at Ginkgo, where it's my fifth year. During that time, I've had the pleasure and the privilege of working with our investor relations team, usually behind the scenes of these earning calls. And so it's exciting to be supporting you today in this more front-facing role. I'm joined by Jason Kelly, our co-founder and CEO, and Mark Dimitrick, our CFO. Thanks as always for joining us. We're really looking forward to updating you on our progress today. As a reminder, during the presentation today, we will be making forward-looking statements. These involve risks and uncertainties. So please refer to our filings with the SEC to learn more about these risks and uncertainties, including in our most recent 10-K. Today, in addition to updating you on the quarter and the full year results, we're going to provide updates on our path towards adjusted EBITDA breakeven, as well as customer progress in our cell engineering business across both our services and tools offerings. and the latest offerings in our biosecurity business. As usual, we'll end with a Q&A session, and I'll take questions from analysts, investors, and the public. You can submit questions for that to us in advance via X. Please tag your post with the hashtag GinkgoResults, or email us, our inbox is investors at ginkgobioworks.com. I'll be checking that throughout the call.

All right. Over to you, Jason. Thanks, Joseph. And thanks, everyone, for joining us. We always start with our mission of making biology easier to engineer. And similar to last quarter, our focus for that mission is on these three key objectives. First, we want to reach adjusted EBITDA breakeven while maintaining a cash margin of safety. And we ended this quarter with $562 million in cash and no bank debt and significantly exceeded our original cost-cutting target for 2024. You're going to see this reflected in a dramatically reduced level of cash burn in Q4 versus Q3. And I'm really happy to see this. A cash margin of safety is what protects Ginkgo from having to raise capital in conditions that aren't favorable. And we want to keep our cash war chest large. while reducing cash spending and expanding our sources of revenue. This is a simple strategy, right? You know, like just drive the cost down and keep expanding. And we executed on it really well in the second half of 2024, and we will keep pushing on it in 2025. That is not changing. Second, while we cut costs, we need to keep serving our current customers and adding new customers. Q4 saw us achieve a record number of technical milestones in a single quarter, showing our team's ability to continue to deliver great new science for our customers. I'm really proud of that delivery across the team. Finally, we want to grow our cell engineering revenue and continue to expand our tools offerings, which I'm going to talk a lot more about in the strategic section. Okay, I'm excited to get in all that. But first, 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. Cell engineering revenue was $35 million in the fourth quarter of 2024, up 29% compared to the fourth quarter of 2023. This increase was primarily driven by growth with large biopharma customers and government accounts, partially offset by declines with smaller customers in the industrial biotech segments. As we've discussed previously, this customer mix shift has been a headwind to growth in prior quarters, and so we're very pleased to now see the positive impact of the shift in this quarter's revenue. On a full year basis, cell engineering services revenue was $174 million in 2024. As a reminder, in the third quarter of 2024, 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. Excluding this impact, cell engineering revenue was $129 million in 2024, down 10% compared to the full year of 2023. This decrease was driven by the customer mix shift discussed previously, along with commercial changes related to the restructuring. In the fourth quarter of 2024, we supported a total of 138 active programs across 85 customers on the Cell Engineering platform. This represents a 5% increase in active programs year over year. As we discussed on our previous 2024 earnings calls, the nature of programs that we take on with our customers has evolved significantly following our adjustments to commercial terms and the launch of our tools offerings. As such, going forward, we are no longer going to report a new program metric. However, we are going to provide additional perspective on active programs in the quarter, which I will discuss in a moment. Before I do that, I will close out 2024 by noting that we added a total of 31 new programs and contracts in Q4 of 2024, of which 14 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. In addition, we commenced 17 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. We are very pleased that we've been able to continue the momentum with our BioPharma customer base, including five new large pharma logos and seven new data points contracts. Now going forward, we're going to provide you with a revenue generating active program count metric that we think will be more useful to analysts that are using this to model revenue. This metric will include all programs that generated revenue in the quarter, including smaller programs that I refer to as other contracts on this slide. Further, in this metric, we will only include programs that were revenue generating in the quarter. So, for example, at any point in time, we have a significant number of programs that are either just starting or are wrapping up, and so they aren't generating any meaningful revenue. We'll exclude those for you, which will give you a better indication of revenue per program in the quarter, and you can measure how that trends over time in a more meaningful way. In the appendix, we've provided you with a preliminary look at this new metric for the past four quarters as a reference, and we welcome your feedback. Now, turning to biosecurity. Our biosecurity business generated $9 million of revenue in the fourth quarter of 2024 at a gross margin of 17%. 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. On a full year basis, biosecurity revenue for 2024 was $53 million, down 51% from $108 million in 2023. As a reminder, our K-12 COVID testing contracts ended in the third quarter of 2023, and the business has now moved entirely towards building out both domestic and international infrastructure for biosecurity. And now I'll provide more commentary on key items for the rest of the P&L. We've changed the presentation of this slide this quarter to align with our segment reporting disclosures. We believe this will give you more insight into the underlying profitability of our two segments. And specifically, we'll give you more information on the cost structure and how that is changing as we undertake our restructuring. A full reconciliation between segment operating loss, adjusted EBITDA, and gap net loss can be found in the appendix. Segment operating expenses. So starting with the more significant items in segment OPEX, in the fourth quarter of 2024, cell engineering R&D expense decreased 31% from $73 million in the fourth quarter of 2023 to $50 million in the fourth quarter of 2024. Cell engineering G&A expense decreased 49% from $40 million in the fourth quarter of 2023 to $21 million in the fourth quarter of 2024. These decreases were driven by our restructuring efforts. On a full year basis, cell engineering R&D expense decreased from $336 million in 2023 to $272 million in 2024. G&A expense decreased from $171 million in 2023 to $115 million in 2024. Net loss, so 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. And as noted, we are now showing you adjusted EBITDA at the segment level so that you can more clearly see the relative profitability of cell engineering and biosecurity. The significant improvement in cell engineering segment operating loss in the fourth quarter of 2024 compared to the comparable prior year period was due to the previously discussed drivers of improved revenue and reduced operating expenses. Moving further down the page, you'll note that total company adjusted EBITDA in the fourth quarter of 2024 was negative $57 million, which was up from negative $101 million in the fourth quarter of 2023. The principal differences between segment operating loss and total company adjusted EBITDA in the fourth quarter relates to the carrying cost of excess leased space which you can see was nine million dollars in q4 and 26 million dollars in the year this cost represents the base rent and other charges relating to lease space which we are not occupying net of sublease income we will continue to break that out for you going forward since that is a cash operating cost that is not related to driving revenue right now and can be potentially mitigated through subleasing On a full year basis, total Ginkgo adjusted EBITDA was negative $293 million, which was up from negative $365 million in 2023. This improvement in adjusted EBITDA can be attributed to the impact of the previously mentioned third quarter non-cash deferred revenue release, as well as the restructuring implemented over the last three quarters. And finally, I'll just make one additional comment relating to cash burn in the quarter. Cash burn in the fourth quarter of 2024 was $55 million, down significantly from $114 million in the third quarter of 2024. This significant decrease in cash burn sequentially was a result of the restructuring, and it was further impacted positively by higher revenue, which was partly driven by the successful completion of a number of technical milestones in the quarter, as mentioned by Jason. We would further expect to reduce the cash burn run rate significantly from this level by the fourth quarter of 2025, though we expect some lumpiness in the progression during the year due to timing of working capital and one-time payments. Jason will discuss our increased target for OpEx reductions later in the presentation. As we did last year, we'd also like to provide you with some updated data points relating to downstream value share. On the left-hand side of the chart, you can see that as of the end of 2024, we have the potential to earn up to $1.7 billion in milestone payments based on customer collaborations previously entered into, with a majority of those payments dependent on successful commercialization of a product. This figure does not include potential royalties. So on the right side of the page, we are showing you the full total of programs for which we currently have downstream value share potential, including those with royalties. While it is harder to estimate the total potential value on royalty deals, you'll see the volume of programs there remain substantial. You'll also see that the decrease in potential milestone payments was approximately $700 million when comparing 2024 to 2023. We do expect reduction in milestones if a program doesn't meet a technical goal or a customer changes commercial direction. Previously, we made up for these decreases with new milestone-bearing programs. But as a result of the commercial changes we implemented in Q2 and our focus on tools offerings that generate near-term revenue, we did not book a significant amount of new potential milestones in the year. Now I'd like to provide some commentary on our outlook for the full year 2025. Before I get into the cell engineering revenue numbers, there are two important points of context. Firstly, I want to reiterate that our primary objective is to reduce cash burn. We like Ginkgo's competitive position and are very encouraged by what we're seeing with our tools offerings. However, we are still selling into a challenging biotech R&D market and are being diligent with respect to new business that we take on. Secondly, the government segment has been a source of growth for us in the past year, and our momentum there has been very strong. However, given current uncertainties in this area, we are baking that risk into the low end of our guidance. That said, then, our cell engineering revenue guidance is a range of $110 to $130 million. We believe we are taking a conservative approach in providing this guidance range. We could see potential upside to this range coming from our new tools offerings where we have a solid BD pipeline and, as discussed earlier, close a number of new biopharma deals in Q4. Our biosecurity revenue guidance for 2025 is at least $50 million. As we have in the past, we are guiding to our approximate current level of contracted backlog for the year, including an expected mid-year program renewal, and have a pipeline of opportunities we are pursuing beyond that. Also to clarify, This business is almost entirely dependent on government funding, which is a risk we have been managing since we started operations in the biosecurity space. And so we are providing guidance here under the assumption that our government contracts continue. And finally, we expect total revenue for the year 2025 to be in a range of $160 to $180 million. In conclusion, we're pleased with our overall execution of the restructuring thus far, as evidenced by the reduction in cash burn in Q4. We are very encouraged by the early traction we are seeing in tools. However, we also acknowledge that we continue to operate in a very uncertain macro environment. We believe we are taking a prudent approach to managing both our risks and growth opportunities along a path to adjusted EBITDA breakeven by the end of 2026 and maintaining a cash margin of safety. And one final footnote. On the financial reporting front, I can confirm that we remediated our SOX material weakness and wanted to express my appreciation to the team for all the work that went into addressing that. So back over to you, Jason.