What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 133 added, 69 removed, 328 unchanged (38% of the section changed)

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First, we charge usage fees for services, in much the same way that cloud computing companies charge usage fees for utilization of computing capacity or contract research organizations charge for services.

Additionally, we negotiate a value share with our customers (typically in the form of royalties, milestones, and/or equity interests) in order to align our economics with the success of the programs enabled by our platform.

Additionally, we typically negotiate a value share with our customers (typically in the form of royalties, milestones, and/or equity interests) in order to align our economics with the success of the programs enabled by our platform.

As we add new programs, our portfolio of programs with this “downstream” value potential grows.

Commencing in the second quarter of 2024, we announced changes in commercial terms, including the removal of downstream value share from certain program types.

With a mission to make biology easier to engineer, we have always recognized the need to invest in biosecurity as a key component of our platform.

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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 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 generally 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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◦ milestone payments upon the achievement of specified technical criteria;

plus, when applicable,

• downstream value share payments in the form of:

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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 fixed-fee or cost-plus fixed margin basis.

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 basis.

Allonnia, LLC

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Founded in 2021, Arcaea, LLC (“Arcaea”) was formed to focus on the application of synthetic biology in the beauty and personal care products industry.

In March 2021, we entered into an intellectual property contribution agreement that granted Arcaea rights to our intellectual property, subject to mutually agreed upon technical development plans.

In March 2021, we entered into an intellectual property contribution agreement that

granted Arcaea rights to our intellectual property, subject to mutually agreed upon technical development plans.

In return for our contribution of intellectual property and access to our platform, we received common units in Arcaea with a right to additional units subject to additional closings of Arcaea’s Series A preferred units.

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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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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 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.

In the three and six months ended June 30, 2023, we entered into two and six, respectively, Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments totaling $1.1 million and $17.0 million, respectively, that is recognized as revenue over our period of performance.

In the three and six months ended June 30, 2024, we did not enter into any new Startup Structured Partnerships.

Our Legacy Structured Partnerships are described below:

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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.

The carrying value of the investment was $7.0 million as of June 30, 2024, reflective of impairment losses recognized through that date.

Synlogic, Inc.

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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.

Effective in the second quarter of 2024, we no longer provide R&D services to Synlogic.

As of June 30, 2024, the fair value of Synlogic common stock and warrants was $0.6 million and $0.3 million, respectively.

See Note 5 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.

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

Three Months Ended March 31, LTM (1)

Three Months Ended June 30, Six Months Ended June 30, LTM (1)

2024 2023 2024 2023 2024

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Cumulative Programs 269 198 269 198 269

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

(1) Last twelve months ended June 30, 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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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.

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.

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.

Commencing in the second quarter of 2024, we announced changes in commercial terms, including new intellectual property terms in favor of customers, the removal of downstream value share from certain program types, and offering our Foundry capabilities on a lab-data-as-a-service (“LDaaS”) basis in addition to continuing our end-to-end Cell Engineering solutions offering where we will often maintain downstream value share.

There has been no material impact on our revenue recognition policies to date from the announced changes in our new commercial terms and Cell Engineering offerings.

Biosecurity Revenue

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Cost of Biosecurity Product Revenue

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.

Prior to the fourth quarter of 2023, the 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

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• rent, facilities, depreciation, software, professional fees and other direct and allocated overhead expenses.

We expense R&D costs as incurred.

As we grow our active programs and customer base and invest in our Foundry and Codebase through organic and inorganic growth initiatives, we anticipate that our R&D expenses will continue to increase.

We expense R&D expenses as incurred.

We expect our R&D costs will be lowered as a result of our restructuring plan announced and commenced in the second quarter of 2024 as we rationalize our current development programs and prioritize our investments in our Foundry, Codebase, AI and new offerings.

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.

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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.

We expect our G&A costs will be lowered as a result of our restructuring plan announced and commenced in the second quarter of 2024 as we begin to lower 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.

Goodwill Impairment

In the second quarter of 2024, we fully impaired the goodwill attributable to our Cell Engineering reporting unit.

Refer to further discussion within “Critical Accounting Estimates”.

Restructuring Charges

Restructuring charges relate to our restructuring plan announced and commenced in the second quarter of 2024 and consist primarily of severance and other employee termination costs resulting from a reduction in force that commenced in June 2024 and an impairment of a right-of-use asset relating to facilities consolidation and the related sublease of certain facilities.

Additional details are included in Note 3 , Restructuring, of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Interest Income, Net

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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.

Other income (expense), 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

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Results of Operations

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

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 Change

2024 2023 Change

Cell Engineering revenue $ 36,205 $ 45,283 $ (9,078) $ 64,094 $ 79,379 $ (15,285)

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Cost of Biosecurity service revenue 11,807 16,062 (4,255) 21,009 33,896 (12,887)

Cost of other revenue 1,914 — 1,914 1,914 — 1,914

Research and development (1)

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66,285 102,341 (36,056) 136,572 213,774 (77,202)

Goodwill impairment 47,858 — 47,858 47,858 — 47,858

Restructuring charges 17,066 — 17,066 17,066 — 17,066

Total operating expenses 279,151 264,719 14,432 495,097 561,166 (66,069)

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Change in fair value of warrant liabilities 3,233 (4,482) 7,715 4,173 (3,278) 7,451

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

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

Other income (expense), net (766) 3,224 (3,990) 1,249 6,152 (4,903)

Total other income 5,954 10,903 (4,949) 18,076 21,761 (3,685)

Loss before income taxes (216,991) (173,248) (43,743) (382,871) (378,135) (4,736)

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Research and development $ 20,693 $ 40,569 $ 44,814 $ 88,110

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Cell Engineering Revenue

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

Cell Engineering revenue decreased $9.1 million in the three months ended June 30, 2024 compared to the same period in 2023 and decreased $15.3 million in the six months ended June 30, 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 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.

Cell Engineering revenue recognized relating to non-cash consideration decreased from $16.8 million in the three months ended June 30, 2023 to $8.2 million in the three months ended June 30, 2024, and from $29.7 million in the

six months ended June 30, 2023 to $12.1 million in the six months ended June 30, 2024, primarily due to a shift in focus on signing new programs with cash consideration.

In the three months ended June 30, 2024, 10 New Programs commenced, compared to 21 New Programs in the same period in 2023.

The number of Current Active Programs rose to 140, compared to 105 in the prior year period.

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Additionally, the number of customers grew to 82, up from 63 in the prior year period.

In the six months ended June 30, 2024, 27 New Programs commenced, compared to 34 New Programs in the same period in 2023.

The number of Current Active Programs rose to 151, compared to 118 in the prior year period.

Cumulative Programs increased to 269 from 198 over the same period.

Additionally, the number of customers grew to 88, up from 68 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.

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Biosecurity Revenue

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.

Biosecurity revenue decreased $15.3 million in the three months ended June 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $10.8 million and a decrease in service revenue of $4.5 million.

Biosecurity revenue decreased $51.8 million in the six months ended June 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $22.5 million and a decrease in service revenue of $29.4 million.

The decreases in revenue between periods is attributable to the end of our COVID-19 testing in schools in the third quarter of 2023, partially offset by new expanded offerings of biomonitoring and bioinformatic support services in the 2024 periods.

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.

Biosecurity revenue in the first half 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 $13.2 million in the three months ended March 31, 2024 compared to the same period in 2023.

Cost of Biosecurity product and service revenue decreased $6.3 million and $19.5 million in the three and six months ended June 30, 2024, respectively, compared to the same periods 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 $26.2 million in the three months ended March 31, 2024 compared to the same period in 2023.

Our research and development expenses principally relate to the development of new offerings and the operation, expansion and enhancement of our existing service offerings utilizing our proprietary platform, which includes our Foundry and Codebase assets, to our cell engineering customers.

Our research personnel costs, including stock-based compensation, is our largest expense, aggregating $37.6 million and $76.5 million for the three and six months ended June 30, 2024, respectively, and $38.5 million and $81.1 million for the three and six months ended June 30, 2023, respectively.

We also acquired and expensed in-process research and development through the issuance of our equity, aggregating $3.0 million and $19.8 million for the three and six months ended June 30, 2024, respectively, and $4.0 million for the three and six months ended June 30, 2023.

Our remaining research and development costs are comprised primarily of rent and related facilities costs, information technology costs, depreciation pertaining to facilities and equipment, laboratory consumables, contract services and routine costs and fees.

Research and development expenses decreased $10.1 million in the three months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $18.8 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc.

(“Zymergen”), in the fourth quarter of 2023 ($11.3 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.

Further, there was a decrease in professional fees of $3.8 million and acquired in-process research and development costs of $1.0 million.

This was partially offset by an increase in rent and related facilities costs of $10.5 million, software and technology expense of $5.2 million, laboratory supplies expense of $4.5 million, personnel-related compensation and benefits expense of $3.0 million, and non-capitalized equipment purchases and maintenance costs of $2.1 million.

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

Research and development expenses decreased $36.2 million in the six months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to a decrease in stock-based compensation expense of $40.8 million (inclusive of employer payroll taxes) and the deconsolidation of Zymergen ($30.0 million).

Further, there was a decrease in professional fees of $8.6 million and temporary labor and contractors of $1.4 million.

This was partially offset by increases in acquired in-process research and development costs of $15.9 million, rent and related facilities costs of $11.0 million, software and technology expense of $8.9 million, laboratory supplies expense of $4.8 million, and personnel-related compensation and benefits expense of $4.4 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 $41.1 million in the three months ended March 31, 2024 compared to the same period in 2023.

General and administrative expenses decreased $36.1 million in the three months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to the deconsolidation of Zymergen ($34.3 million) and a decrease in stock-based compensation expense of $3.7 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.

Further, there was a decrease in professional fees of $5.6 million, partially offset by increases in personnel-related compensation and benefits expense of $5.1 million and depreciation and amortization expense of $1.6 million.

General and administrative expenses decreased $77.2 million in the six months ended June 30, 2024 compared to the same period in 2023.

The decrease was primarily attributable to the deconsolidation of Zymergen ($55.4 million) and a decrease in stock-based compensation expense of $12.1 million (inclusive of employer payroll taxes).

Further, there were decreases in professional fees and litigation costs of $13.9 million and the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.2 million, partially offset by an increase in personnel-related compensation and benefits expense of $10.1 million.

Goodwill Impairment

During both the three and six months ended June 30, 2024, we recorded goodwill impairment expense of $47.9 million related to our Cell Engineering reporting unit, further discussed within “Critical Accounting Estimates” below.

Restructuring Charges

During both the three and six months ended June 30, 2024, we incurred restructuring charges of $17.1 million in connection with our restructuring plan announced and commenced in the second quarter of 2024, primarily in the Cell Engineering segment.

These charges primarily consisted of $12.2 million in employee termination costs from the reduction in force commenced in June 2024 and $4.8 million in impairment of right-of-use asset relating to facilities consolidation.

Interest Income, Net

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.

Interest income, net decreased $4.0 million and $6.9 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

The decrease was primarily due to lower average cash balances in interest bearing accounts.

Loss on Equity Method Investments

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.

Loss on equity method investments was $0.1 million and $1.5 million for the three and six months ended June 30, 2023, respectively.

No loss on equity method investments was recognized in 2024.

In the six months ended June 30, 2023, we recorded 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 half 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 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.

Loss on investments was $6.8 million and $2.1 million in the three months ended June 30, 2024 and 2023, respectively.

The change of $4.7 million was due to fluctuations in the stock prices of our marketable equity securities and a $4.9 million increase in impairment losses recognized on our non-marketable equity securities.

Loss on investments was $9.4 million and $8.5 million in the six months ended June 30, 2024 and 2023, respectively.

The change of $0.9 million was due to fluctuations in the stock prices of our marketable equity securities offset by an $8.3 million increase in impairment losses recognized on our non-marketable equity securities.

Change in Fair Value of Warrant Liabilitie s

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 was $3.2 million gain and $4.5 million loss in the three months ended June 30, 2024 and 2023, respectively, and $4.2 million gain and $3.3 million loss in the six months ended June 30, 2024 and 2023, respectively.

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

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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.

Other income (expense), net decreased $4.0 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to a $2.3 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen and a $2.3 million increase in the net loss on the change in fair value of convertible notes.

Other income (expense), net decreased $4.9 million in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to a $4.7 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen and a $1.0 million increase in the net loss 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, 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 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, restructuring and impairment charges (inclusive of impairments of goodwill and long-lived assets), costs associated with the bankruptcy filing of our former subsidiary, Zymergen (the “Zymergen Bankruptcy”), and certain 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.

Beginning in the second quarter of 2024, we updated our definition of Adjusted EBITDA to no longer exclude the impact of acquired in-process research and development expenses.

The comparable periods in 2023 and the first quarter of 2024 have been recast to conform to the revised definition.

Our non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

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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 to EBITDA and Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

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38,226 62,477 80,623 137,677

Impairment expense (2)

47,858 9,001 47,858 9,001

Restructuring charges (3)

17,066 — 17,066 —

Merger and acquisition related expenses (4)

4,512 12,212 6,906 30,874

Loss on equity method investments — 67 — 1,516

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Change in fair value of warrant liabilities (3,233) 4,482 (4,173) 3,278

Merger and acquisition related expenses (2)

19,265 18,662

Change in fair value of convertible notes (480) (152) 846 (196)

Adjusted EBITDA $ (99,199) $ (79,737) $ (216,200) $ (179,778)

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

(1) Includes $1.1 million and $1.0 million in employer payroll taxes for the three months ended June 30, 2024 and 2023, respectively, and $2.7 and $3.2 million for the six months ended June 30, 2024 and 2023, respectively.

(2) Impairment expense includes $47.9 million related to goodwill impairment in the three and six months ended June 30, 2024 and $9.0 million related to lab equipment acquired as part of the Zymergen acquisition in the three and six months ended June 30, 2023.

(3) Restructuring charges include $12.2 million in employee termination costs from the reduction in force commenced in June 2024 and $4.8 million in impairment of right-of-use asset relating to facilities consolidation.

(4) 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.

(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) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs, net of insurance recovery.

Not included in this adjustment are non-cash charges for acquired in-process research and development expenses, which totaled $3.0 million and $4.0 million in the three months ended June 30, 2024 and 2023, respectively, and $19.8 million and $4.0 million in the six months ended June 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

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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.

As of June 30, 2024, we had cash and cash equivalents of $730.4 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

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• maintain, expand, and protect our intellectual property;

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.

• implement our restructuring actions.

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

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2024 2023

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Operating Activities

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.

Net cash used in operating activities for the six months ended June 30, 2024 consisted of net loss of $383.1 million, adjusted for net change in operating assets and liabilities of $6.2 million and non-cash charges of $203.3 million.

The net change in operating assets and liabilities was primarily due to a $10.9 million increase in accounts payable, accrued expenses and other current liabilities primarily due to restructuring-related accruals, a $14.4 million decrease in operating lease right-of-use assets from lease incentives received, partially offset by a $17.0 million decrease in deferred revenue and a $3.9 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $30.2 million of depreciation and amortization, $77.9 million of stock-based compensation expense, $9.4 million loss on investments, $13.1 million non-cash lease expense, $19.8 million in acquired in-process research and development expense, and $47.9 million of goodwill impairment.

Net cash used in operating activities for the six months ended June 30, 2023 consisted of net loss of $378.3 million, adjusted for net change in operating assets and liabilities of $10.4 million and non-cash charges of $224.6 million.

The net change in operating assets and liabilities was primarily due to a $15.4 million decrease in accounts receivable, a $12.1 million decrease in prepaid expenses and other current assets, a $4.1 million decrease in operating lease right-of-use assets from lease incentives, partially offset by a $4.0 million decrease in accounts payable, accrued expenses and other current liabilities, a $21.4 million decrease in deferred revenue, and a $13.3 million decrease in operating lease liabilities from rent payments.

Non-cash adjustments primarily consisted of $36.6 million of depreciation and amortization, $134.5 million of stock-based compensation expense, $10.0 million loss on investments including equity method investments, $8.5 million

loss on the change in fair value of contingent consideration liabilities, $16.3 million non-cash lease expense, and $9.0 million impairment loss on assets held for sale.

Investing Activities

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.

Net cash used in investing activities for the six months ended June 30, 2024 primarily consisted of purchases of property and equipment of $33.7 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 six months ended June 30, 2023 primarily consisted of purchases of property and equipment of $33.0 million associated with Foundry capacity and capability investments.

Financing Activities

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.

Net cash used in financing activities for the six months ended June 30, 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 six months ended June 30, 2023 primarily consisted of principal payments on finance leases and payment of contingent consideration related to a business acquisition.

Critical Accounting Estimates

There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.

Except as described below, there have been no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.

We assess goodwill for impairment at the reporting unit level on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Goodwill impairment assessments require a significant amount of management judgment and the use of estimates and assumptions that could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge.

During the three months ended June 30, 2024, due to a sustained decrease in the market price of our Class A common stock and market capitalization, we identified that a possible indicator of impairment was present as of June 30, 2024.

As such, we completed a quantitative impairment test related to our Cell Engineering reporting unit.

To conduct the impairment test of goodwill, the estimated fair value of the reporting unit was compared to its carrying value.

The estimated fair value of the Cell Engineering reporting unit was determined using a weighted approach that considered a discounted cash flow (“DCF”) model under the income approach and the guideline public company (“GPC”) method under the market approach.

Inputs used in the DCF model included the projected future operating results of the reporting unit and the applicable discount rate, while inputs used in the GPC method consisted of a revenue multiple.

The projected future operating results were based on historical experience and internal annual operating plans reviewed by management, extrapolated over the forecast period.

The discount rate was determined using a weighted average cost of capital adjusted for risk factors specific to the reporting unit.

The revenue multiple was based on the GPC method using comparable publicly traded company multiples of revenue for a group of benchmark companies.

The DCF method was weighted 75% and the GPC 25%.

We reconciled the resulting fair value of the reporting unit to our market capitalization to corroborate the fair value estimate used in the impairment test.

The interim impairment test indicated that the estimated fair value of the reporting unit was less than its carrying value.

As a result, we fully impaired goodwill and recorded an impairment loss of $47.9 million.

Recently Issued Accounting Pronouncements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis