Ginkgo Bioworks Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The financial statements are unaudited. Unless stated otherwise, amounts below are in U.S. dollars; financial statement amounts are shown in millions.
Business context
Ginkgo operates a cell-programming platform through its Foundry and Codebase, providing research and development services and negotiating potential downstream value sharing. In Q1 2022, it began reporting two segments: Foundry and Biosecurity. Biosecurity principally comprises COVID-19 testing products and services. The quarter’s results reflect substantial COVID-19 testing revenue and a large stock-based compensation charge following modifications to employee awards.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $168.4 | $44.1 |
| Operating loss | $(674.5) | $(57.1) |
| Net loss | $(592.6) | $(74.8) |
| Net loss attributable to Ginkgo stockholders | $(590.5) | $(73.6) |
| Net loss per share, basic and diluted | $(0.37) | $(0.06) |
| Net cash used in operating activities | $(19.9) | $(48.1) |
| Adjusted EBITDA, non-GAAP | $(2.0) | $(51.1) |
- Revenue mix: Foundry revenue was $21.5 million, down from $22.5 million. Biosecurity revenue was $146.9 million, up from $21.6 million, comprising $13.9 million of product revenue and $133.0 million of service revenue.
- Costs and segment results: Biosecurity product and service costs totaled $85.4 million. Biosecurity reported segment operating income of $47.7 million; Foundry reported a segment operating loss of $52.5 million. Segment measures exclude stock-based compensation, depreciation and amortization, and specified fair-value changes; they are not GAAP operating income.
- Margins: The filing does not present a consolidated gross margin. The Biosecurity revenue and cost figures imply $61.5 million before other expenses, but this is not a reported company-wide gross-profit measure.
- Stock compensation and unusual items: Stock-based compensation was $652.8 million, or $659.0 million including employer payroll taxes. The charge largely reflects modified RSUs and related earnout awards. Other income included an $85.0 million gain from the decrease in warrant-liability fair value and a $15.9 million gain on Verb’s deconsolidation; equity-method investment losses were $20.9 million.
- Cash and liabilities: Cash and cash equivalents were $1,493.0 million at March 31, down from $1,550.0 million at year-end. Cash, cash equivalents and restricted cash totaled $1,535.8 million. Total liabilities were $443.7 million, including a $27.3 million lease financing obligation. The filing presents no material conventional borrowing balance.
- Cash flow: Cash used in investing activities was $36.0 million, including $28.8 million of cash removed upon Verb’s deconsolidation; financing activities used $1.2 million. Cash and restricted cash decreased by $57.1 million overall.
- Other balance-sheet measures: Total assets were $2,057.7 million and total stockholders’ equity was $1,614.0 million. Current liabilities were $159.2 million.
Changes versus the prior comparable period
- Total revenue increased $124.3 million, driven primarily by a $117.2 million increase in Biosecurity service revenue and an $8.2 million increase in product revenue. Foundry revenue decreased $1.0 million.
- Current Active Programs rose to 64 from 44; Ginkgo started 11 New Programs versus 4, and Cumulative Programs increased to 116 from 78. Management said newer programs may need ramp-up time before generating meaningful revenue.
- Research and development expense rose to $322.7 million from $59.6 million, and general and administrative expense to $434.8 million from $17.9 million. The increases were chiefly associated with stock-based compensation expense.
- Operating cash use improved from $48.1 million to $19.9 million. The company nevertheless reported a substantially larger GAAP net loss, primarily reflecting the non-cash award-related compensation charge.
Outlook, commentary and risks
- Liquidity outlook: Management said cash and cash equivalents were expected to fund projected operations for at least 12 months from the filing date; elsewhere it said cash, cash equivalents, short-term investments and investment income were expected to fund operations for several years. These are estimates, not a guarantee of future funding sufficiency. No specific revenue or earnings guidance is provided.
- Biosecurity uncertainty: Management said COVID-19 testing demand beyond the period was uncertain and subject to seasonality, including reduced school testing during breaks. Demand also depends on public funding, pandemic conditions, competition, and testing capacity.
- Customer concentration: Three customers each represented more than 10% of Q1 revenue and together accounted for 40%. Revenue concentration, including related-party activity, could make results vulnerable to the loss or reduced activity of a major customer.
- Commitments: A four-year Twist Bioscience supply agreement requires at least $58.0 million of purchases, including $10.0 million in the first contract year. Approximately $84.0 million remained in minimum purchase commitments under the Berkeley Lights agreement through 2026.
- Subsequent events: On April 1, 2022, Ginkgo acquired FGen for $17.5 million in shares, subject to adjustments, plus up to $25.0 million of contingent consideration. In April, it launched BiomEdit with investors; BiomEdit raised approximately $32.5 million and Ginkgo received 3.9 million voting common units.
- Risks and governance: The filing highlights continued losses, the need for capital, growth-management challenges, customer and supplier concentration, reliance on customers to commercialize products, volatile or illiquid equity investments, evolving regulation, and biosecurity and intellectual-property risks. Class B shares carry ten votes each; Class C shares have no voting rights. Management reported disclosure controls were effective as of March 31, 2022. The company said it was not party to material legal proceedings.
Important facts for investors to verify
- Whether Biosecurity testing demand and revenue can be sustained as pandemic conditions and school funding change.
- The size, timing and potential dilution or cash impact of remaining equity-award compensation, including $1,534.4 million of unrecognized RSU compensation expense reported at quarter-end.
- Revenue exposure to the three largest customers, related parties, and the collection of the $167.3 million of accounts receivable.
- Cash runway assumptions against planned Foundry investment, operating losses, supply commitments, and acquisition-related spending.
- The valuation assumptions and liquidity of investments, loans receivable and other fair-value items, and the commercial prospects of Ginkgo’s programs and venture investments.
- Share-class voting concentration and potential dilution: as of May 9, 2022, the company reported 1,093,522,711 Class A, 395,114,230 Class B and 288,000,000 Class C shares outstanding.