What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-08 · 129 added, 215 removed, 268 unchanged (56% of the section changed)

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This discussion contains forward-looking statements that reflect our plans, estimates and beliefs that involve risks and uncertainties.

Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in Item 1A “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Quarterly Report on Form 10-Q.

Our mission is to make biology easier to engineer.

Ginkgo is the leading platform for cell programming, providing flexible, end-to-end services that solve challenges for organizations across diverse markets, from food and agriculture to pharmaceuticals to industrial and specialty chemicals.

Ginkgo’s biosecurity and public health unit, Concentric by Ginkgo, is building a global infrastructure for biosecurity to empower governments, communities, and public health leaders to prevent, detect and respond to a wide variety of biological threats.

Ginkgo is the leading horizontal platform for cell programming, providing flexible, end-to-end services that solve challenges for organizations across diverse markets, from food and agriculture to pharmaceuticals to industrial and specialty chemicals.

Ginkgo’s Biosecurity business is building a global infrastructure for biosecurity to empower governments, communities, and public health leaders to prevent, detect and respond to a wide variety of biological threats.

We use our platform to program cells on behalf of our customers.

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our Foundry and our Codebase.

• Our Foundry wraps proprietary software and automation around core cell engineering workflows— designing DNA, writing DNA, inserting that DNA into cells, testing cells to measure performance—and leverages data analytics and data science to inform each iteration of design.

The software, automation and data analysis pipelines we leverage in the Foundry drive a strong scale economic that we refer to as “Knight's Law.” We expect Foundry output, which we currently measure by daily strain tests, to increase year over year, while the cost per strain test decreases.

We expect to be able to pass these savings along to our customers, allowing them to take more “shots on goal” with their programs.

• Our Codebase includes both our physical (engineered cells and genetic parts) and digital (genetic sequences and performance data) biological assets.

Codebase accumulates as we execute more cell programs on the platform.

Every program, whether successful or not, generates valuable Codebase and helps inform future experimental designs and provides reusable genetic parts, making our cell program designs more efficient.

Historically, we have augmented our Codebase via acquisition of assets such as microbial strains, sample collections, and sequence data.

In 2022, our Codebase grew to over two billion proprietary protein sequences as a result of recent acquisitions.

• Our Foundry is a highly automated, yet flexible, lab powered by proprietary automation and software to enable flexibility and scale.

The Foundry automates lab workflows at high levels of abstraction, enabling users to generate potentially valuable datasets labeling broad genetic sequence design space with a wide range of functional data through modular design-build-test-learn cycles or campaigns.

Our scale economic means that the Foundry’s capacity to perform more and more diverse campaigns grows while the cost per campaign decreases.

We call this scaling factor Knight’s Law.

• Our Codebase is a data asset which accumulates as we operate our Foundry in service of customer projects.

Our Codebase includes vast amounts of data at different levels of characterization and usability in engineering projects, including:

proprietary libraries of genetic sequence data that can be used for pretraining large language models via unsupervised learning, experimental data for fine tuning task-specific generative artificial intelligence (“AI”) models, as well as sequences and optimized host cells that can be directly reusable for different applications of cell engineering.

As the platform scales, we have observed a virtuous cycle between our Foundry, our Codebase, and the value we deliver to customers.

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we believe that as we scale, the platform improves.

We believe that this in turn yields better program execution and customer outcomes, ultimately driving more demand, which drives further investments in scale and platform

improvements, and so on.

We believe this positive feedback loop has the potential to drive compounding value creation in the future, as new programs typically contribute to both near-term revenues and have the potential to add significant downstream economics and more positive impact.

We believe that this in turn yields better program execution and customer outcomes, ultimately driving more demand, which drives further investments in scale and platform improvements, and so on.

We believe this positive feedback loop has the potential to drive compounding value creation in

the future, as new programs typically contribute to both near-term revenues and have the potential to add significant downstream economics and more positive impact.

Our cell programming business model mirrors the structure of our platform and we are compensated in two primary ways.

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We are building the future bioeconomy with our customers and partners, and we envision the future of biosecurity as a global immune system equipped with the capabilities to prevent, detect, and respond to biological threats.

The first, critical step in realizing this future is to build a robust early warning system for biological threats—this is the primary focus of Ginkgo’s biosecurity and public health unit, Concentric by Ginkgo.

In 2020, in response to the COVID-19 pandemic, we launched our commercial offering of COVID-19 testing products and services for businesses, academic institutions, and other organizations in which we generate product and service revenue.

In 2021, we launched our pooled testing initiative which focuses on providing end-to-end COVID-19 testing and reporting services to public health authorities.

During the second half of 2022, Concentric by Ginkgo expanded to offer biomonitoring and bioinformatic support services internationally as well as domestically.

We are currently offering biomonitoring and bioinformatic support services domestically through our partnership with the CDC and XpresCheck, and internationally such as through our partnerships with Qatar Airways and Rwanda Biomedical Centre.

Following the announcements from the White House and World Health Organization regarding the end of the public health emergency in May 2023, demand for COVID-19 testing in schools significantly diminished, and during the third quarter of 2023, our COVID-19 testing in schools ended completely.

In summary, we operate in two reportable business segments:

The first, critical step in realizing this future is to build a robust early warning system for biological threats—this is the primary focus of Ginkgo’s Biosecurity business.

Our biosecurity offering includes biomonitoring and bioinformatic support services internationally as well as domestically.

We are currently offering biomonitoring and bioinformatic support services domestically through our partnership with the Centers for Disease Control and Prevention (“CDC”) and XpresCheck, and internationally such as through our international programs, including those in Qatar, Rwanda and Ukraine.

We operate in two reportable business segments:

• Cell Engineering:

Consists of research and development services performed under collaboration and license agreements relating to our cell programming platform.

Consists of research and development (“R&D”) services performed under collaboration and license agreements relating to our cell programming platform.

Our cell programming platform includes two core assets:

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• Biosecurity:

Consists of biomonitoring and bioinformatic testing products and services primarily provided to public health authorities.

Biosecurity revenue is derived from sales of test kits and end-to-end biomonitoring and bioinformatic support services.

Consists of our end-to-end biomonitoring and bioinformatic support services primarily provided to public health authorities.

Biosecurity revenue is derived from fees for data, analytics, and services.

Before the fourth quarter of 2023, Biosecurity revenue was also derived from sales of test kits.

Generating Economic Value Through Cell Programs

Our cell programming platform is a key enabling technology and source of intellectual property for our customers’ products.

We earn Cell Engineering revenue for our research and development (“R&D”) services as well as through a share of the value of products created using our platform.

We earn Cell Engineering revenue for our R&D services as well as through a share of the value of products created using our platform.

We typically structure Cell Engineering revenue to include some combination of the following:

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In June 2021, Motif raised an additional $226 million through a Series B preferred stock financing.

Ginkgo also entered into a Technical Development Agreement with Motif under which we provide R&D services in return for cash consideration on a cost-plus fixed margin basis.

Motif launched its first product, HEMAMI, in 2021.

Ginkgo also entered into a Technical Development Agreement with Motif under which we provide R&D services in return for cash consideration on a fixed-fee or cost-plus fixed margin basis.

Allonnia, LLC

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The initial fair value of our common units received in Allonnia was $24.5 million, subsequently increased by $12.7 million in 2021, all of which has been reduced to a carrying value of zero as a result of the allocation of losses under our accounting for equity method investments.

Allonnia was capitalized through Series A preferred unit financings that raised approximately $52 million in

gross proceeds from an investor group which included certain of our investors and Battelle Memorial Institute.

Allonnia was capitalized through Series A preferred unit financings that raised approximately $52 million in gross proceeds from an investor group which included certain of our investors and Battelle Memorial Institute.

In 2023, Allonnia raised an additional $30 million through a Series A extension.

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Upon the closing of the Series A preferred unit financing in July 2021, we received an additional 5.2 million common units in Arcaea.

The fair value of our Arcaea common units received in July 2021 of $35.5 million has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under our accounting for equity method investments.

The fair value of our Arcaea common units received in July 2021 of $35.5 million has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under

our accounting for equity method investments.

Ginkgo also entered into a Technical Development Agreement with Arcaea under which we provide R&D services in return for cash consideration on a fixed fee or cost-plus basis.

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Founded in April 2022, BiomEdit, LLC (“BiomEdit”) was formed to discover, design and develop novel probiotics, microbiome derived bioactives and engineered microbial medicines in the animal health industry.

BiomEdit was capitalized through a Series A preferred unit financing that raised approximately $32.5 million in gross proceeds from an

investor group which included one of our investors.

BiomEdit was capitalized through a Series A preferred unit financing that raised approximately $32.5 million in gross proceeds from an investor group which included one of our investors.

In April 2022, we entered into an intellectual property contribution agreement that granted BiomEdit rights to our intellectual property, subject to mutually agreed upon technical development plans and, in return, we received 3.9 million voting common units in BiomEdit.

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and (ii) partner with existing entities with complementary assets for high potential synthetic biology applications in a large-scale, multi-program collaboration (“Legacy Structured Partnership”).

In the nine months ended September 30, 2023 and 2022, we entered into 6 and 7 Startup Structured Partnerships, respectively, and received prepayments of service fees in the form of equity securities or convertible financial instruments in the amount of $17.0 million and $12.9 million, respectively, that is recognized as revenue over our period of performance.

In the three months ended March 31, 2023, we entered into four Startup Structured Partnerships and received prepayments of service fees in the form

of equity securities or convertible financial instruments in the amount of $15.9 million that is recognized as revenue over our period of performance.

In the three months ended March 31, 2024, we did not enter into any new Startup Structured Partnerships.

Our Legacy Structured Partnerships are described below:

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(“Genomatica”) is a biotechnology company specializing in the development and manufacturing of intermediate and specialty chemicals from both sugar and alternative feedstocks.

In 2016 and 2018, we entered into separate preferred stock purchase agreements in which we offered cash and R&D services to Genomatica in exchange for its preferred shares.

The initial cost of the investment in Genomatica’s preferred stock was $55.0 million.

As of September 30, 2023, the carrying value of the investment is $11.9 million and reflects the historical cost less impairment losses recognized through September 30, 2023.

In 2016 and 2018, we acquired preferred stock in Genomatica with an aggregate investment value of $55.0 million in exchange for cash and committed R&D services.

The carrying value of the investment was $11.9 million as of March 31, 2024, reflective of impairment losses recognized through that date.

Synlogic, Inc.

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At inception, the fair value of Synlogic common stock and warrants was recorded at $35.8 million and $14.4 million, respectively.

As of September 30, 2023, the fair value of Synlogic common stock and warrants was $1.2 million and $0.5 million, respectively.

See Notes 4 and 12 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details of our investments in and the material terms of our agreements with our Platform Ventures and Structured Partnerships.

On February 8, 2024, Synlogic announced its decision to cease operations and evaluate strategic options for the company.

As of March 31, 2024, the fair value of Synlogic common stock and warrants was $0.8 million and $0.3 million, respectively.

See Note 4 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details of our investments in and the material terms of our agreements with our Platform Ventures and Structured Partnerships.

Key Business Metrics

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In the near-term, programs typically deliver multi-year revenue from service fees.

Over the long-term, program growth drives a physical infrastructure scale economic

through our Foundry, a data and learning scale economic through our Codebase and accumulation of potential downstream value share.

Over the long-term, program growth drives a physical infrastructure scale economic through our Foundry, a data and learning scale economic through our Codebase and accumulation of potential downstream value share.

Our key business metrics comprise New Programs, Current Active Programs, and Cumulative Programs.

Three Months Ended September 30, Nine Months Ended September 30, LTM (1)

Three Months Ended March 31, LTM (1)

2024 2023 2024

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Cumulative Programs 259 177 259

(1) Last twelve months ended September 30, 2023.

(1) Last twelve months ended March 31, 2024.

New Programs represent the number of unique programs commenced within the reporting period.

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We view this metric as an indication of our competitive advantage and as a leading indicator of the mid- to long-term potential economic value derived from downstream value share arrangements.

The cumulative number of programs also contributes to Codebase, which accumulates with each additional program we conduct over time and drives better experimental direction and improves the odds of technical success in current and future programs.

The cumulative number of programs also contributes to Codebase,

which accumulates with each additional program we conduct over time and drives better experimental direction and improves the odds of technical success in current and future programs.

We believe the preceding metrics are important to understand our current business.

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For example, as our program mix changes, our data gathering abilities expand or our understanding of key business drivers develops, we anticipate updating these metrics or their definitions to reflect such changes.

Zymergen Bankruptcy

On October 3, 2023, Zymergen and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the U.S.

Bankruptcy Court for the District of Delaware.

Neither we nor any of our other subsidiaries filed for bankruptcy protection, and we and our other subsidiaries will continue to operate our businesses as usual.

Zymergen has been operated as a distinct legal entity, separate and apart from us, since it was acquired in October 2022.

Shortly after its acquisition, we entered into an arms-length non-exclusive license with Zymergen with respect to Zymergen’s intellectual property, including its databases, automation, and software capabilities.

The Zymergen Bankruptcy will not impact this non-exclusive license, and our rights under this license will not be affected.

Following Zymergen’s bankruptcy filing, we entered into an asset purchase agreement with Zymergen as the stalking horse bidder under Section 363 of the U.S.

Bankruptcy Code to acquire exclusive rights to substantially all of Zymergen’s intellectual property assets and certain other assets.

Our accounting for the Zymergen Bankruptcy is not yet complete, but we expect to deconsolidate Zymergen effective October 3, 2023, and, accordingly, Zymergen’s consolidated balance sheet, statement of operations and cash flows will be removed from our consolidated financial statements.

See Note 15, Subsequent Event, of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Modification of Equity Awards in Connection with SRNG Business Combination

Prior to our merger with Soaring Eagle Acquisition Corp.

on September 16, 2021 (the “SRNG Business Combination”), our restricted stock units (“RSUs”) were granted with both a service-based vesting condition and a performance-based vesting condition.

We had historically not recognized any stock-based compensation expense associated with these awards as the achievement of the performance condition required a change in control or an initial public offering (both as defined in the underlying award agreement) that was not deemed probable of occurring.

The SRNG Business Combination did not meet the performance condition required for vesting of our RSUs.

On November 17, 2021 our board of directors modified the vesting terms of RSUs to allow 10% of the RSUs that met the service condition as of the closing of the SRNG Business Combination to vest with respect to the performance condition, effective as of November 19, 2021, the date on which the Form S-8 registration statement covering such shares became effective.

The remaining RSUs vested in full with respect to the performance condition on or before March 15, 2022.

The change to the vesting terms was accounted for as a modification in accordance with ASC 718 and the awards were remeasured using the fair value as of the modification date.

RSU earnout shares were also modified as they were subject to the same performance condition as the underlying RSUs, in addition to achieving certain target stock price thresholds.

The first target stock price of $12.50 per share was achieved on November 15, 2021.

During the three months ended September 30, 2023 and 2022, we recognized $27.6 million and $548.9 million , respectively, of stock-based compensation expense related to the modified RSUs and RSU earnout shares.

During the nine months ended September 30, 2023 and 2022, we recognized $112.3 million and $1,793.0 million , respectively, of stock-based compensation expense related to the modified RSUs and RSU earnout shares.

Components of Results of Operations

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Downstream value share in the form of equity interest appreciation is not recognized as revenue but is expected to contribute to future cash flows upon liquidation, the amount and timing of which is inherently unpredictable.

Equity investees are accounted for as equity method investments, cost method investments or carried at fair value.

The initial fair market value of the equity interests received may also decrease after contract inception and the amount of cash proceeds eventually realized may be less than the revenue recognized.

Equity investments are accounted for under the equity method, cost method or are carried at fair value.

Biosecurity Revenue

In 2021, we launched our pooled testing initiative which focuses on providing end-to-end COVID-19 testing and reporting services to public health authorities.

During the second half of 2022, Concentric by Ginkgo expanded to offer biomonitoring and bioinformatic support services internationally as well as domestically.

We are currently offering biomonitoring and bioinformatic support services domestically through our partnerships with the CDC and XpresCheck, and internationally through our partnerships with Qatar Airways and Rwanda Biomedical Centre.

From the above offerings, we generate product revenue through the sale of lateral flow assay (“LFA”) diagnostic test kits, polymerase chain reaction (“PCR”) sample collection kits and pooled test kits, all of which we sell to our customers on a standalone basis.

We offer biomonitoring and bioinformatic support services internationally as well as domestically.

We are currently offering biomonitoring and bioinformatic support services domestically through our partnerships with the CDC and XpresCheck, and internationally through our international programs, including those in Qatar, Rwanda and Ukraine.

We are also engaged in a series of smaller partnerships that generate revenues through biosecurity services and R&D.

We generate service revenue through the sale of our end-to-end biomonitoring and bioinformatic support services.

Each of these service offerings generally consist of multiple promised goods and services including, but not limited to, sample collection, sample storage and transportation, outsourced laboratory analysis, access to results reported through a web-based portal, analytical reporting of results, and overall program management.

Generally, the terms of these agreements provide that we are entitled to compensation:

(i) upon delivery of diagnostic test kits for product revenue and (ii) as services are performed for service revenue, which is dependent on the identified performance obligations but generally recognized evenly over-time or when results are reported to the customer.

These service offerings generally consist of multiple promised goods and services including, but not limited to, sample collection, sample storage and transportation, outsourced laboratory analysis, access to results reported through a web-based portal, analytical reporting of results, and overall program management.

Before the fourth quarter of 2023, we generated product revenue by selling lateral flow assay (“LFA”) diagnostic test kits, polymerase chain reaction (“PCR”) sample collection kits, and pooled test kits associated with COVID-19 tests to customers on a standalone basis.

In general, these agreements stipulate that we are entitled to compensation for service revenue as services are performed and for product revenue upon delivery of diagnostic test kits.

The timing of revenue recognition depends on the identified performance obligations but is generally recognized ratably over time or as results are reported to the customer.

Costs and Operating Expenses

Cost of Biosecurity Product Revenue

Cost of Biosecurity product revenue consists of costs associated with the sale of diagnostic and sample collection test kits which includes costs incurred to purchase test kits from third parties.

Before the fourth quarter of 2023, cost of Biosecurity product revenue consisted of costs associated with the sale of diagnostic and sample collection test kits, which included costs incurred to purchase test kits from third parties.

Cost of Biosecurity Service Revenue

Cost of Biosecurity service revenue consists of costs associated with the provision of our end-to-end COVID-19 testing services, which includes costs incurred to provide sample collection kits, physician authorizations, onsite test administration, outsourced laboratory analysis, access to results reported through our proprietary web-based portal and reporting of results to public health authorities.

Cost of Biosecurity service revenue also includes direct labor cost associated with bioinformatics, lab network management, delivery logistics and customer support.

The cost of Biosecurity service revenue consists of costs related to our end-to-end pathogen testing, sequencing, and analysis services.

This includes costs incurred for sample collection equipment and materials, outsourced laboratory analysis, access to results reported through our proprietary web-based portal, and reporting of results to public health authorities.

Additionally, the cost of Biosecurity service revenue includes direct labor cost associated with bioinformatics, lab network management, delivery logistics, and customer support.

Research and Development Expenses

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The nature, timing, and estimated costs required to support our growth will be dependent on advances in technology, our ability to attract new customers and the rate of market penetration within our existing customer industries.

Beginning in the fourth quarter of 2021, R&D expenses included a significant charge for stock-based compensation expense as a result of the modification of vesting terms of RSUs and the vesting of certain earnout shares (as further described above in “Modification of Equity Awards in Connection with SRNG Business Combination”).

General and Administrative Expenses

General and administrative (“G&A”) expenses consist primarily of costs for personnel in executive, business development, finance, human resources, legal and other corporate administrative functions.

G&A expenses also include legal fees incurred relating to corporate, intellectual property and patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, insurance costs, facility-related costs not otherwise included in R&D expenses, and asset impairments.

We expect our G&A expenses will continue to increase as we pursue organic and inorganic growth initiatives.

The increases will likely relate to additional personnel, system costs and increased costs related to business development, finance and legal matters, along with increased expenses related to operating as a publicly traded company, such as fees related to audit, legal and tax services, regulatory compliance programs and investor relations.

Beginning in the fourth quarter of 2021, G&A expenses included a significant charge for stock-based compensation expense as a result of the modification of vesting terms of RSUs and the vesting of certain earnout shares (as further described above in “Modification of Equity Awards in Connection with SRNG Business Combination”).

Impairment of Lease Assets

Impairment of lease assets relates to impairment losses recognized on a right-of-use asset and the related leasehold improvements associated with an exited Zymergen leased facility.

G&A expenses also include professional legal services fees and costs incurred relating to litigation, corporate, intellectual property and patent matters, professional fees incurred for accounting, auditing, tax and administrative consulting services, insurance costs, facility-related costs not otherwise included in R&D expenses, and asset impairments.

We anticipate that our G&A expenses attributable to organic business activities will either remain consistent or decline in 2024 as compared to 2023, reflecting a stabilization in our operational overhead.

Conversely, we intend to maintain a strategic and opportunistic approach regarding inorganic G&A expenses arising from mergers, acquisitions, and other inorganic growth initiatives.

Interest Income, Net

Interest income, net primarily consists of interest earned on our cash and cash equivalents.

Interest income, net consists primarily of interest earned on our cash and cash equivalents.

Loss on Equity Method Investments

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Warrant liabilities are marked to market at each balance sheet date.

Gain on Deconsolidation of Subsidiaries

Gain on deconsolidation of subsidiaries relates to our deconsolidation of variable interest entities, Verb and Ayana, in the first and third quarters of 2022, respectively.

The deconsolidation resulted in the removal of Verb and Ayana's assets, liabilities, and non-controlling interest balances from our balance sheet and the recognition of our retained interest in each entity measured at fair value as of the deconsolidation date.

Other Income (Expense), Net

Other income (expense), net primarily consists of sublease rent income and loss on disposal of equipment.

Other Income, Net

Other income, net primarily consists of sublease rent income and changes in fair value of notes receivable that we elected to account for under the fair value option.

Provision for Income Taxes

Income taxes are recorded in accordance with ASC 740 , Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

Income taxes are recorded in accordance with ASC 740 , Income Taxes , which provides for deferred taxes using an asset and liability approach.

We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns.

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Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

Comparison of the Three Months Ended March 31, 2024 and 2023

The following table presents the result of operations for the periods indicated:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands) 2023 2022 (as adjusted)*

2023 2022 (as adjusted)*

Three Months Ended March 31,

(in thousands) 2024 2023 Change

Cell Engineering revenue $ 27,889 $ 34,096 $ (6,207)

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70,287 111,433 (41,146)

Impairment of lease assets 96,210 — 96,210 96,210 — 96,210

Total operating expenses 215,946 296,447 (80,501)

Loss from operations (178,002) (215,745) 37,743

Other (expense) income:

Other income (expense):

Interest income, net 11,711 14,545 (2,834)

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Change in fair value of warrant liabilities 940 1,204 (264)

Gain on deconsolidation of subsidiaries — 15,989 (15,989) — 31,889 (31,889)

Other income (expense), net 2,893 (676) 3,569 9,045 1,473 7,572

Total other (expense) income, net (16,520) (15,221) (1,299) 5,241 44,537 (39,296)

Other income, net 2,015 2,928 (913)

Total other income (expense) 12,122 10,858 1,264

Loss before income taxes (165,880) (204,887) 39,007

Income tax (benefit) provision (22) (28) 6 127 (257) 384

Income tax expense 31 82 (51)

Net loss $ (165,911) $ (204,969) $ 39,058

Loss attributable to non-controlling interest — — — — (3,833) 3,833

Net loss attributable to Ginkgo Bioworks Holdings, Inc.

stockholders $ (302,891) $ (670,131) $ 367,240 $ (681,175) $ (1,929,461) $ 1,248,286

* As adjusted to reflect the impact of the adoption of Accounting Standards Codification Topic 842, Leases (“ASC 842”) as of January 1, 2022.

See Note 1 to the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of the adjustments.

(1) R&D and G&A expenses included a significant charge for stock-based compensation expense as a result of the modification of the vesting terms of RSUs and all related earnout shares (as further described above in “Modification of Equity Awards in Connection with SRNG Business Combination”).

(1) Total stock-based compensation expense, inclusive of employer payroll taxes, was allocated as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2023 2022 2023 2022

Three Months Ended March 31,

Research and development $ 24,120 $ 47,541

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Cell Engineering Revenue

Cell Engineering revenue increased $12.5 million and $26.1 million in the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

The increase was primarily due to progress of Current Active Programs with existing and new customers.

Additionally, revenue increased due to the launch of New Programs and was partially offset by the completion of certain programs.

Programs typically require a ramp-up period and/or the achievement of technical milestones before contributing in a meaningful way to revenue.

Cell Engineering revenue decreased $6.2 million in the three months ended March 31, 2024 compared to the same period in 2023.

The decrease was primarily due to timing of programs completed prior to the current period partially offset by overall progress on Current Active Programs.

As discussed above in Components of Results of Operations, Cell Engineering revenue comprises both cash and non-cash consideration.

Cell Engineering revenue recognized relating to non-cash consideration was $16.9 million in the three months ended September 30, 2023 compared to $10.3 million in the three months ended September 30, 2022, and $46.6 million in the nine months ended September 30, 2023 compared to $47.2 million in the nine months ended September 30, 2022.

In the third quarter of 2023, 21 New Programs commenced compared to 15 New Programs in the prior year period.

The total number of Current Active Programs increased to 116 from 85 in the three months ended September 30, 2023 and 2022, respectively.

Cumulative Programs increased to 219 from 144 in the three months ended September 30, 2023 and 2022, respectively.

The number of customers increased to 76 from 43 in the three months ended September 30, 2023 and 2022, respectively.

In the nine months ended September 30, 2023, 55 New Programs commenced compared to 39 New Programs in the prior year period.

The total number of Current Active Programs increased to 139 from 92 in the nine months ended September 30, 2023 and 2022, respectively.

Cumulative Programs increased to 219 from 144 in the nine months ended September 30, 2023 and 2022, respectively.

The number of customers increased to 84 from 45 in the nine months ended September 30, 2023 and 2022, respectively.

Cell Engineering revenue recognized relating to non-cash consideration decreased from $13.0 million in the three months ended March 31, 2023 to $3.8 million in the three months ended March 31, 2024 primarily due to a shift in focus on signing new programs with cash consideration.

In the first quarter of 2024, 17 New Programs commenced, compared to 13 New Programs in the first quarter of 2023.

The number of Current Active Programs rose to 140, compared to 97 in the prior year period.

Cumulative Programs increased to 259 from 177 over the same period.

Additionally, the number of customers grew to 82, up from 60 in the prior year period.

While the majority of Cell Engineering revenue today is made up of service fees, as we increase Cumulative Programs and to the extent our customers successfully commercialize products built on our platform, downstream value share is expected to comprise a larger proportion of Cell Engineering revenue.

The initial fair market value of the equity interests received may also decrease after contract inception and the amount of cash proceeds eventually realized may be less than the revenue recognized.

Biosecurity Revenue

Biosecurity revenue decreased $23.5 million in the three months ended September 30, 2023, compared to the same period in 2022 and was comprised of an increase in product revenue of $1.3 million and a decrease in service revenue of $24.8 million.

Biosecurity revenue decreased $188.9 million in the nine months ended September 30, 2023 compared to the same period in 2022 and was comprised of an increase in product revenue of $5.9 million and a decrease in service revenue of $194.8 million.

The amount and components of Biosecurity revenue were primarily dependent on the demand for COVID-19 testing products and services, which ended in the third quarter of 2023, following the announcements from the White House and World Health Organization regarding the end of the public health emergency in May 2023.

The amount and components of Biosecurity revenue in future periods are expected to be comprised of our expanded offerings of biomonitoring and bioinformatic support services provided through our domestic and international partnerships.

Biosecurity revenue decreased $36.6 million in the three months ended March 31, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $11.7 million and a decrease in service revenue of $24.9 million.

Since the end of the COVID-19 public health emergency in May 2023, we shifted our Biosecurity business focus to developing scalable biosecurity infrastructure and delivering global surveillance programs and analytics services.

Biosecurity revenue in the first quarter of 2024 was comprised of our expanded offerings of biomonitoring and bioinformatic support services.

Through our partnerships, we operate programs for collections, testing, sequencing, and insights delivery on pathogen samples in different countries.

Cost of Biosecurity Product and Service Revenue

Cost of Biosecurity product and service revenue decreased $17.7 million and $126.6 million in the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

The decrease was driven by decreased demand for our COVID-19 testing products and services.

Cost of Biosecurity product and service revenue decreased $13.2 million in the three months ended March 31, 2024 compared to the same period in 2023.

The decrease was driven by the end of our COVID-19 testing in schools in the third quarter of 2023 and the transition of our Biosecurity business to global surveillance programs and analytic services.

Research and Development Expenses

Research and development expenses decreased $104.8 million in the three months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $153.0 million (inclusive of employer payroll taxes) due to vesting of RSUs and certain earnout shares that were modified

in the fourth quarter of 2021 (refer to above section “Modification of Equity Awards in Connection with SRNG Business Combination”), and decreases in professional fees of $3.6 million and laboratory supplies of $2.0 million, partially offset by increases in rent and facilities expense of $14.5 million, personnel-related compensation and benefits expense of $14.1 million, impairment of lab equipment of $12.3 million, depreciation and amortization expense of $10.7 million, and software and technology expense of $2.5 million.

Increases in research and development expenses not attributable to stock-based compensation expense supported the growth of Cell Engineering revenue and the integration of prior year acquisitions.

Research and development expenses decreased $411.5 million in the nine months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $548.6 million (inclusive of employer payroll taxes) due to vesting of RSUs and certain earnout shares that were modified in the fourth quarter of 2021 (refer to above section “Modification of Equity Awards in Connection with SRNG Business Combination”), and decreases in laboratory supplies of $4.1 million and professional fees of $2.7 million, partially offset by increases in personnel-related compensation and benefits expense of $60.6 million, rent and facilities expense of $32.6 million, depreciation and amortization expense of $27.1 million, impairment of lab equipment of $12.3 million, software and technology expense of $8.3 million, equipment expenses of $2.1 million, and travel and entertainment expenses of $1.6 million.

Increases in research and development expenses not attributable to stock-based compensation expense supported the growth of Cell Engineering revenue and the integration of prior year acquisitions.

Research and development expenses decreased $26.2 million in the three months ended March 31, 2024 compared to the same period in 2023.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $23.4 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc.

(“Zymergen”), in the fourth quarter of 2023 ($17.2 million).

Further, there was a decrease in professional fees of $4.8 million and non-capitalized equipment purchases and maintenance costs of $2.0 million.

This was partially offset by increases in acquired in-process research and development costs of $16.9 million, software and technology expense of $3.6 million and personnel-related compensation and benefits expense of $1.3 million.

Increases in research and development expenses, excluding stock-based compensation expense and the Zymergen deconsolidation, supported the growth of Cell Engineering capabilities.

General and Administrative Expenses

General and administrative expenses decreased $353.2 million in the three months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $356.7 million (inclusive of employer payroll taxes) due to vesting of RSUs and certain earnout shares that were modified in the fourth quarter of 2021 (refer to above section “Modification of Equity Awards in Connection with SRNG Business Combination”), and decreases in professional fees of $3.4 million, marketing expenses of $1.2 million and other direct and allocated expenses of $1.2 million, partially offset by impairment of lab equipment related to prior year acquisitions of $3.9 million and increases in depreciation and amortization expense of $1.5 million, fair value adjustments to contingent consideration liabilities resulting from acquisitions of $2.0 million, and personnel-related compensation and benefits expense of $1.9 million.

Increases in general and administrative expenses not attributable to stock-based compensation expense supported the growth of Cell Engineering and Biosecurity revenue and the integration of prior year acquisitions.

General and administrative expenses decreased $1,012.6 million in the nine months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $1,089.8 million (inclusive of employer payroll taxes) due to vesting of RSUs and certain earnout shares that were modified in the fourth quarter of 2021 (refer to above section “Modification of Equity Awards in Connection with SRNG Business Combination”), and decreases in other operating expenses, including software and technology, business taxes, marketing, and other direct and allocated overhead expenses of $1.8 million, partially offset by increases in personnel-related compensation and benefits expense of $24.4 million, rent and facilities expense of $14.7 million, impairment of lab equipment related to prior year acquisitions of $12.9 million, professional fees of $10.5 million primarily for audit and accounting services and consulting costs, the fair value adjustments to contingent consideration liabilities resulting from acquisitions of $10.2 million, depreciation and amortization expense of $3.7 million and travel and entertainment expenses of $2.6 million.

Impairment of Lease Assets

Impairment of lease assets increased $96.2 million in the three and nine months ended September 30, 2023 compared to the same periods in 2022 due to impairment losses recognized on a right-of-use asset and the related leasehold improvements associated with an exited Zymergen leased facility.

During the third quarter of 2023, Zymergen ceased use of and vacated the leased space, which triggered an impairment analysis and resulted in a write down of the carrying value of the assets to their estimated fair value.

General and administrative expenses decreased $41.1 million in the three months ended March 31, 2024 compared to the same period in 2023.

The decrease was primarily attributable to the deconsolidation of Zymergen ($20.1 million) and a decrease in stock-based compensation expense of $9.4 million (inclusive of employer payroll taxes).

Further, there were decreases in professional fees and litigation costs of $8.3 million, the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.1 million, and depreciation and amortization expenses of $1.7 million, partially offset by increases in personnel-related compensation and benefits expense of $5.0 million.

Interest Income, Net

Interest income, net increased $8.6 million and $35.1 million in the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

The increase was primarily due to increases in interest rates on cash held in money market accounts.

Interest income, net decreased $2.8 million in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to lower average cash balances in interest bearing accounts.

Loss on Equity Method Investments

Loss on equity method investments decreased $22.7 million in the three months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily attributable to our equity method investments in Ayana and Joyn Bio, LLC (“Joyn Bio”).

Upon the deconsolidation of Ayana in the third quarter of 2022, we recorded a $16.0 million loss on our retained investment in Ayana due to a basis difference associated with in-process research and development identified as part of the initial accounting for the equity method investment.

Additionally, in the third quarter of 2022, we recorded a $5.2 million loss on our equity method investment in Joyn Bio, a joint venture which was subsequently terminated in the fourth quarter of 2022.

Loss on equity method investments decreased $52.2 million in the nine months ended September 30, 2023 compared to the same period in 2022.

The decrease was primarily attributable to our equity method investments in Verb, Ayana, Joyn Bio, and BiomEdit.

Upon the deconsolidation of Verb and Ayana during the nine months ended September 30, 2022, we recorded an aggregate $31.9 million loss on our retained investment in Verb and Ayana due to a basis difference associated with in-process research and development identified as part of the initial accounting for the equity method investments.

In the nine months ended September 30, 2023, we recorded a $15.6 million loss on our equity method investment in Joyn Bio, a joint venture which was subsequently terminated in the fourth quarter of 2022.

Our share of BiomEdit's losses under the HLBV method decreased by $4.4 million in the nine months ended September 30, 2023 compared to the same period in 2022.

Loss on equity method investments was zero and $1.4 million in the three months ended March 31, 2024 and 2023, respectively.

The loss in the prior period was primarily due to a $1.5 million loss on our equity method investment in BiomEdit, representing our share of the investee’s losses under the HLBV method and the fair value of the additional equity we received in BiomEdit of $1.1 million in the first quarter of 2023, which was reduced to zero during the period as a result of the application of the HLBV method.

Under the HLBV method, we absorb losses as a common unit holder prior to preferred unit holders due to a substantive profit-sharing agreement where the preferred unit holders receive preferential distribution rights.

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Loss on Investments

Loss on investments increased $34.6 million in the three months ended September 30, 2023 compared to the same period in 2022 primarily due to impairment losses recorded on our non-marketable equity securities.

Loss on investments increased $4.8 million in the nine months ended September 30, 2023 compared to the same period in 2022.

The increase was driven by a $26.1 million increase in impairment losses related to our non-marketable equity securities, offset by fluctuations in the stock prices of marketable equity securities and a $12.6 million mark-to-market adjustment on equity securities received as downstream value share payments upon the achievement of a commercial milestone in the nine months ended September 30, 2022.

Non-cash consideration from customers is initially measured at the fair value of the non-cash consideration at contract inception.

Loss on investments was $2.5 million and $6.4 million in the three months ended March 31, 2024 and 2023, respectively.

The change of $3.8 million was due to fluctuations in the stock prices of marketable equity securities and a $3.4 million increase in impairment losses recognized on our non-marketable equity securities.

Change in Fair Value of Warrant Liabilitie s

We recorded a $1.9 million gain on the change in fair value of warrant liabilities in the three months ended September 30, 2023 compared to a $12.4 million loss in the three months ended September 30, 2022.

We recorded a $1.4 million loss on the change in fair value of warrant liabilities in the nine months ended September 30, 2023 compared to a $96.1 million gain in the nine months ended September 30, 2022.

We recognized gains of $0.9 million and $1.2 million on the change in fair value of warrant liabilities in the three months ended March 31, 2024 and 2023, respectively.

The change in fair value of warrant liabilities is primarily driven by changes in the value of our common stock.

Increases or decreases in the value of our common stock results in a loss or gain, respectively, on the change in fair value of warrant liabilities.

Gain on Deconsolidation of Subsidiaries

Gain on deconsolidation of subsidiaries in the three and nine months ended September 30, 2022 relates to our deconsolidation of Verb and Ayana and consisted of $15.9 million and $16.0 million retained interests in Verb and Ayana, respectively, measured at fair value as of the deconsolidation date.

Other Income (Expense), Net

Other income (expense), net increased $3.6 million and $7.6 million in the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to an increase in sublease net income and a decrease in loss on disposal of equipment.

Other Income, Net

Other income, net decreased $0.9 million in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to a $2.4 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen, offset by a $1.3 million increase in the gain on the change in fair value of convertible notes.

Non-GAAP Information

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stockholders before the impact of interest income, interest expense, provision for income taxes and depreciation and amortization.

We define Adjusted EBITDA as EBITDA adjusted for stock-based compensation expense, loss on equity method investments, loss on investments, change in fair value of warrant liabilities, gain or loss on deconsolidation of subsidiaries, acquired in-process research and development assets in connection with asset acquisitions, impairment charges, costs associated with the Zymergen Bankruptcy and other income and expenses.

In the second quarter of 2022, we redefined Adjusted EBITDA to exclude transaction and integration costs associated with planned, completed or terminated mergers and acquisitions.

The prior year non-GAAP financial measures presented below have been recast accordingly to conform to the new presentation for comparability.

We define Adjusted EBITDA as EBITDA adjusted for stock-based compensation expense, gain or loss on equity method investments, gain or loss on investments, change in fair value of warrant liabilities, gain or loss on deconsolidation of subsidiaries, transaction and integration costs associated with planned, completed or terminated mergers and acquisitions, including related litigation costs, acquired in-process research and development expenses, impairment charges, costs associated with the bankruptcy filing of our former subsidiary, Zymergen (the “Zymergen Bankruptcy”), and other income and expenses.

We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends because it eliminates the effect of financing activities, investing activities, and certain non-cash charges and other items that are not related to our core operating performance or affect comparability period over period.

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We compensate for these limitations by providing a reconciliation of EBITDA and Adjusted EBITDA to their most directly comparable GAAP financial measure.

The following table reconciles net loss attributable to Ginkgo Bioworks Holdings, Inc.

stockholders to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands) 2023 2022 (as adjusted)*

2023 2022 (as adjusted)*

Net loss attributable to Ginkgo Bioworks Holdings, Inc.

stockholders $ (302,891) $ (670,131) $ (681,175) $ (1,929,461)

The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(in thousands) 2024 2023

Net loss $ (165,911) $ (204,969)

Interest income, net (11,711) (14,545)

Income tax (benefit) provision (22) (28) 127 (257)

Income tax expense 31 82

Depreciation and amortization 12,869 18,958

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Loss on equity method investments — 1,449

— 22,711 1,516 52,927

Loss on investments 2,544 6,370

Change in fair value of warrant liabilities (940) (1,204)

Gain on deconsolidation of subsidiaries — (15,989) — (31,889)

Merger and acquisition related expenses (2)

19,265 18,662

Impairment of long-lived assets (4)

112,403 — 121,404 —

Change in fair value of convertible notes 1,326 (44)

Adjusted EBITDA $ (100,130) $ (100,041)

* As adjusted to reflect the impact of the adoption of ASC 842 as of January 1, 2022.

See Note 1 to the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of the adjustments.

(1) Includes $1.1 million and $0.2 million in employer payroll taxes for the three months ended September 30, 2023 and 2022, respectively, and $4.3 million and $7.2 million in employer payroll taxes for the nine months ended September 30, 2023 and 2022, respectively.

(2) Represents losses on equity method investments under the HLBV method, net of losses attributable to non-controlling interests.

(3) Represents transaction and integration costs directly related to mergers and acquisitions including (i) due diligence, legal, consulting and accounting fees associated with acquisitions, (ii) post-acquisition employee retention bonuses and severance payments, (iii) the fair value adjustments to contingent consideration liabilities resulting from acquisitions, (iv) acquired intangible assets expensed as in-process research and development associated with asset acquisitions and (v) costs associated with the Zymergen Bankruptcy.

(4) For the three months ended September 30, 2023, includes $16.2 million impairment loss on lab equipment and $96.2 million impairment loss on a right-of-use asset and the related leasehold improvements associated with an exited Zymergen leased facility.

For the nine months ended September 30, 2023, includes $25.2 million impairment loss on lab equipment and $96.2 million impairment loss on a right-of-use asset and the related leasehold improvements associated with an exited Zymergen leased facility.

(1) Includes $1.6 million and $2.2 million in employer payroll taxes for the three months ended March 31, 2024 and 2023, respectively.

(2) Represents transaction and integration costs directly related to mergers and acquisitions, including:

(i) due diligence, legal, consulting and accounting fees associated with acquisitions, (ii) post-acquisition employee retention bonuses and severance payments, (iii) the fair value adjustments to contingent consideration liabilities resulting from acquisitions, (iv) acquired intangible assets expensed as in-process research and development, and (v) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs, net of insurance recovery.

Liquidity and Capital Resources

Sources of Liquidity

Upon the closing of the SRNG Business Combination in September 2021, we received net proceeds totaling approximately $1,509.6 million, inclusive of $760.0 million from investments from certain accredited investors for 76 million shares of the Company’s Class A common stock at a price of $10.00 per share.

As of September 30, 2023, we had cash and cash equivalents of $1,049.2 million which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.

Upon the closing of our merger with SRNG in September 2021, we received net proceeds totaling approximately $1,509.6 million, inclusive of $760.0 million from investments from certain accredited investors for 76 million shares of our Class A common stock.

As of March 31, 2024, we had cash and cash equivalents of $840.4 million, which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.

Material Cash Requirements

We anticipate that our expenditures will increase significantly in connection with our ongoing activities, as we:

We anticipate that our expenditures will exceed our revenue through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q, as we:

• continue our R&D, activities under existing and new programs and further invest in our Foundry and Codebase;

• hire additional personnel and secure facilities to support our expanding R&D efforts;

• develop and expand our offerings, including Biosecurity;

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• maintain, expand, and protect our intellectual property.

• incur additional costs associated with operating as a public company.

Other than as noted below, there have been no significant changes to our material cash requirements during the nine months ended September 30, 2023 as compared to the material cash requirements disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report on Form 10-K.

As a result of the Zymergen Bankruptcy, we expect to deconsolidate Zymergen from our consolidated financial statements effective October 3, 2023;

accordingly, Zymergen’s consolidated balance sheet, statement of operations and cash flows will be removed from our consolidated financial statements, inclusive of Zymergen’s cash balance.

The removal of Zymergen’s cash balance is not expected to have a material impact on our liquidity, and we believe we are well capitalized to execute on our long-term strategy.

Other than as noted below, there have been no significant changes to our material cash requirements during the three months ended March 31, 2024 as compared to the material cash requirements disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.

On May 9, 2024, in connection with our plans to reduce operational expenditures, we approved a plan for restructuring actions, including an expected reduction in labor expenses of at least 25% and a planned consolidation of certain of our facilities.

Initial headcount reductions are expected to commence in the second quarter of 2024 and be substantially completed in 2025, subject to local laws.

We expect a reduction in annualized run-rate operating expenditures of $200 million by mid-2025, with a substantial portion of such reduction occurring in 2024.

The aggregate expected costs and overall timing for completion of the restructuring plan is not yet known.

The following table provides information regarding our cash flows for each period presented:

Nine Months Ended September 30,

(in thousands) 2023 2022 (as adjusted)*

Three Months Ended March 31,

(in thousands) 2024 2023

Net cash used in:

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Net decrease in cash, cash equivalents and restricted cash $ (102,371) $ (110,913)

▪ As adjusted to reflect the impact of the adoption of ASC 842 as of January 1, 2022.

See Note 1 to the condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a summary of the adjustments.

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 consisted of net loss of $681.2 million, adjusted for net change in operating assets and liabilities of $12.2 million and non-cash charges of $455.7 million.

The net change in operating assets and liabilities was primarily due to a $21.2 million decrease in accounts receivable, a $13.6 million decrease in prepaid expenses and other current assets, a $9.3 million decrease in operating lease right-of-use assets from lease incentives received, partially offset by a $29.4 million decrease in deferred revenue and a $18.3 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $57.7 million of depreciation and amortization, $187.0 million of stock-based compensation, $46.3 million loss on investments including equity method investments, $10.2 million loss on the change in fair value of contingent consideration liabilities, $24.6 million non-cash lease expense, and $121.4 million in impairments of long-lived assets.

Net cash used in operating activities for the nine months ended September 30, 2022 consisted of net loss of $1,933.3 million, adjusted for net change in operating assets and liabilities of $29.0 million and non-cash charges of $1,814.7 million.

The net change in operating assets and liabilities was primarily due to a $20.5 million decrease in accounts receivable due to timing of collections on our Biosecurity contracts, a $5.2 million decrease in prepaid expenses and other

current assets, partially offset by a $11.9 million decrease in accounts payable and other current liabilities and a $35.4 million decrease in deferred revenue.

Non-cash charges primarily consisted of $26.9 million in depreciation and amortization expense, $1,822.5 million in stock-based compensation expense, $93.7 million loss on investments including equity method investments, partially offset by $18.1 million of non-cash equity consideration received from a customer upon achievement of a milestone, $96.1 million gain on the change in fair value of warrant liabilities, and $31.9 million gain on the deconsolidation of Verb and Ayana.

Net cash used in operating activities for the three months ended March 31, 2024 consisted of net loss of $165.9 million, adjusted for net change in operating assets and liabilities of $0.3 million and non-cash charges of $76.3 million.

The net change in operating assets and liabilities was primarily due to (i) a $6.8 million increase in accounts receivable, (ii) a $10.9 million increase in accounts payable, accrued expenses and other current liabilities, partially offset by (iii) a $2.9 million decrease in deferred revenue and (iv) a $4.1 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $12.9 million of depreciation and amortization, $40.8 million of stock-based compensation, $16.8 million of in-process research and development expense from asset acquisitions, and $5.6 million of non-cash lease expense.

Net cash used in operating activities for the three months ended March 31, 2023 consisted of net loss of $205.0 million, adjusted for net change in operating assets and liabilities of $1.5 million and non-cash charges of $112.9 million.

The net change in operating assets and liabilities was primarily due to (i) a $7.4 million decrease in prepaid expenses and other current assets, (ii) a $19.1 million increase in accounts payable, accrued expenses and other current liabilities, partially offset by (iii) a $17.2 million decrease in deferred revenue and (iv) a $8.5 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $19.0 million of depreciation and amortization, $73.0 million of stock-based compensation expense, $7.8 million loss on investments including equity method investments, $5.2 million loss on the change in fair value of contingent consideration liability, partially offset by $1.2 million gain on the change in fair value of warrant liabilities.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2023 primarily consisted of purchases of property and equipment of $37.4 million associated with Foundry capacity and capability investments and $3.0 million in proceeds from sale of equipment.

Net cash used in investing activities for the nine months ended September 30, 2022 primarily consisted of purchases of property and equipment of $26.6 million associated with Foundry capacity and capability investments, investment in equity securities of $3.7 million, relinquishment of $55.7 million in cash upon the deconsolidation of Verb and Ayana, and $10.0 million convertible note financing provided to Joyn.

Net cash used in investing activities for the three months ended March 31, 2024 primarily consisted of purchases of property and equipment of $6.7 million associated with Foundry capacity and capability investments and $5.4 million paid for the acquisition of Zymergen.

Net cash used in investing activities for the three months ended March 31, 2023 primarily consisted of purchases of property and equipment of $19.4 million associated with Foundry capacity and capability investments.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2023 and 2022 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.

Net cash used in financing activities for the three months ended March 31, 2024 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.

Net cash used in financing activities for the three months ended March 31, 2023 primarily consisted of principal payments on finance leases and payments of equity issuance costs.

Critical Accounting Estimates

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Recently Issued Accounting Pronouncements

See Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of our condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements.

See Note 1 , “Basis of Presentation and Summary of Significant Accounting Policies,” of our condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis