Ginkgo Bioworks Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results compare with the three months ended March 31, 2023. Ginkgo operates Cell Engineering, which provides cell-programming research and development services, and Biosecurity, which provides biomonitoring and bioinformatic services.
Financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $37.9 million | $80.7 million |
| Operating loss | $178.0 million | $215.7 million |
| Net loss | $165.9 million | $205.0 million |
| Net loss per share, basic and diluted | $0.08 | $0.11 |
| Cash used in operating activities | $89.3 million | $90.6 million |
| Adjusted EBITDA, non-GAAP | $(100.1) million | $(100.0) million |
Revenue comprised $27.9 million from Cell Engineering (down 18% year over year) and $10.1 million from Biosecurity services. Biosecurity product revenue was zero, compared with $11.7 million a year earlier. Biosecurity service revenue was $10.1 million versus $34.9 million. The filing attributes the Biosecurity decline primarily to the end of COVID-19 testing and a shift toward surveillance programs and analytics. Overall revenue fell $42.8 million, while lower operating expenses narrowed the operating and net losses.
Biosecurity service costs were $9.2 million, compared with $17.8 million; the filing does not present a consolidated gross margin. R&D expense was $136.5 million, down $26.2 million, and G&A was $70.3 million, down $41.1 million. Reductions included lower stock-based compensation and the 2023 deconsolidation of Zymergen; Q1 2024 also included $16.8 million of acquired in-process R&D expense. Stock-based compensation was $40.8 million, down from $73.0 million.
Liquidity, cash flow, and balance sheet
- At March 31, cash and cash equivalents were $840.4 million, down from $944.1 million at December 31, 2023. Cash, cash equivalents, and restricted cash totaled $887.2 million.
- Operating cash use was $89.3 million; investing cash use was $12.1 million, including $6.7 million of property and equipment purchases and $5.4 million for the Zymergen acquisition. Financing cash use was $0.8 million. Cash, cash equivalents, and restricted cash decreased $102.4 million during the quarter.
- Current assets were $903.0 million and current liabilities were $169.0 million. Total assets were $1.582 billion, total liabilities $594.5 million, and stockholders’ equity $987.3 million.
- The balance sheet reports no conventional borrowings. It does include operating lease liabilities of $234.5 million non-current, plus finance-lease payments and contingent consideration; the filing does not provide a separate conventional debt balance.
Management stated that cash and cash equivalents were expected to fund projected operations for at least 12 months from the filing date, while expenditures were expected to exceed revenue over at least that period.
Material changes, outlook, and risks
- Cell Engineering activity grew despite lower revenue: New Programs increased to 17 from 13; Current Active Programs rose to 140 from 97; cumulative programs rose to 259 from 177; and customers increased to 82 from 60. Management attributed lower segment revenue mainly to timing of completed programs and lower non-cash consideration.
- Restructuring announced after quarter-end: On May 9, 2024, management approved actions targeting at least a 25% reduction in labor expense and facility consolidation. Ginkgo expects $200 million of annualized run-rate operating expense reductions by mid-2025, with a substantial portion expected in 2024. Initial headcount reductions were expected to start in Q2 2024 and be substantially complete in 2025. Total costs and completion timing were not yet known; savings are not assured and restructuring could disrupt operations.
- Acquisitions and unusual items: Ginkgo completed the Zymergen asset acquisition in January for a $6.2 million cash purchase price. It also issued shares for assets that did not qualify as a business and expensed $16.9 million as in-process R&D. On April 10, it acquired AgBiome assets for stock; accounting was not complete at filing. The quarter included $5.2 million of SAFE investment impairment losses, partly offset by gains on marketable equity securities.
- Commercial and investment uncertainty: Cell Engineering revenue includes non-cash consideration and may depend on customer commercialization and future milestones, royalties, or equity proceeds; the timing and amount of downstream value are uncertain. Synlogic announced it would cease operations and evaluate strategic options; Ginkgo’s Synlogic common stock and warrants were valued at $0.8 million and $0.3 million, respectively, at quarter-end.
- Controls: Management concluded disclosure controls were not effective at March 31, 2024 because a previously reported material weakness remained. Remediation was ongoing and expected to continue through 2024; the weakness would persist until remediation was implemented and tested as effective.
- Management said pending litigation was not believed to be material. Other cited risks include competition, customer demand and commercialization, financing and covenant compliance, lease consolidation and subleasing, investment volatility, regulation, and rapid technological change, including AI.
Important facts for investors to verify
- Whether the announced restructuring achieves the targeted $200 million run-rate savings, and its ultimate costs, timing, and effects on staffing and execution.
- Cash burn relative to the stated 12-month liquidity outlook, including the pace of cash use and restricted-cash availability.
- Whether Cell Engineering program growth converts into revenue and cash consideration, and whether Biosecurity can replace revenue lost from COVID-19 testing.
- Progress in remediating the material weakness and the effect of substantial stock-based compensation and equity issuance on dilution. As of May 2, 2024, the filing reports 1.709 billion Class A, 382.2 million Class B, and 120.0 million non-voting Class C shares outstanding.
- The commercial and fair-value outcomes for SAFEs, customer notes, and other investments, and the accounting and share-price protection terms for the AgBiome asset acquisition.