Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Further, this section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. For discussion related to 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K, please refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition
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and Results of Operations in our 2023 Form 10-K, filed with the United States Securities and Exchange Commission on February 29, 2024. 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 Annual Report on Form 10-K.
Overview
Our mission is to make biology easier to engineer.
Ginkgo sells services in two business segments: cell engineering, where we provide biological research and development (“R&D”) services for our customers across a range of industries, and biosecurity, where we provide services to government and commercial customers so they can work to identify, monitor, prevent, mitigate, and ultimately protect humanity from biological threats.
Cell Engineering
Ginkgo does not make end products; instead, we offer biological R&D services on our platform to enable our customers to bring their products to market. Historically, Ginkgo’s primary service offering has been end-to-end cell engineering R&D services ( solutions ). In 2024, Ginkgo expanded its service offering to also include services that provide our customers cell engineering tools for biological R&D, which are intended to provide more targeted and bespoke resources to customers that continue to conduct in-house R&D.
Compounding and mutually reinforcing improvements of our laboratory automation and software infrastructure—our Foundry—and our reusable data assets—our Codebase—enable us to improve our services with each successive project.
• Our Foundry is a flexible capability for large scale data generation; it powers generative artificial intelligence (“AI”) and machine learning (“ML”) tools that enable more successful biological R&D. We now offer services providing such data generation, AI and automation tools directly to Ginkgo customers.
• Our Codebase is a data asset comprising best practices for cell engineering, along with sequences and host cells that have been honed through dozens of programs and can be directly reusable for our end-to-end cell engineering solutions.
Our end-to-end cell engineering solutions are typically scoped and delivered as a program ranging in duration from several months to several years. A typical deliverable for the program would comprise an engineered strain or cell line and an associated bioprocess. For each of these programs, we generate economic value in two primary ways. 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 have historically negotiated a value share with our customers (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. Commencing in the second quarter of 2024, we announced changes in prospective commercial terms, including the removal of downstream value share from certain program types.
We charge customers fees for the services we provide in our cell engineering tools offerings. Typically, these fees are structured as a fixed fee for a fixed scope of work. Fees for our Datapoints services are typically earned over a shorter period of time (weeks to months) than for end-to-end cell engineering solutions which may be multi-year programs. Fees for our automation solutions are typically earned over a period that covers design, build, and deployment and range from six to twelve months. In addition, we offer support services with fixed fees covering the support periods.
Biosecurity
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. 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 rapidly and reliably identify, monitor, prevent, and mitigate 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 business.
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Our primary biosecurity customers are governments. We currently provide biosecurity services via two core offerings as introduced in early 2024:
• Canopy, which helps our customers generate high value genomic data from strategically positioned nodes (like airports and border checkpoints) via end-to-end biomonitoring programs; and
• Horizon, our digital surveillance, analytics and insights platform that detects and monitors biothreats worldwide.
Our recent strategic business and asset acquisitions are described in detail in Note 4 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Generating Economic Value Through Cell Programs
Our cell engineering 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 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:
• service fees, which may comprise cash and/or non-cash consideration, in the form of:
◦ upfront payments upon consummation of an agreement or other fixed payments that are generally recognized over our period of performance;
◦ reimbursement for costs incurred for R&D services;
◦ milestone payments upon the achievement of specified technical criteria;
plus, when applicable,
• downstream value share payments in the form of:
◦ milestone payments, which may comprise cash and/or non-cash consideration, upon the achievement of specified commercial criteria;
◦ royalties on sales of products from or comprising engineered organisms;
◦ royalties related to cost of goods sold reductions realized by our customers;
or,
• downstream value share in the form of equity interests in our customer.
◦ 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.
Customer arrangements which involve non-cash consideration generally fall into two categories: Platform Ventures and Structured Partnerships.
Platform Ventures
Platform Ventures enable Ginkgo to partner with leading multinationals and financial investors to form new ventures in identified market segments with potential to benefit from synthetic biology. In exchange for an equity position in the venture, we contribute license rights to our proprietary cell programming technology and intellectual property, while our partners contribute relevant industry expertise, other resources and venture funding. We also provide R&D services for which we receive cash consideration on a fixed-fee or cost-plus basis.
Structured Partnerships
Structured Partnerships allow Ginkgo to: (i) partner with early stage synthetic biology product companies to adopt our Foundry as their cell programming R&D platform, in which we offer flexible commercial terms on the service fees including the ability to pay a portion or all of such upfront fees in the form of non-cash consideration (convertible financial instruments and/or equity securities), in addition to downstream value share consideration (“Startup Structured Partnership”); 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 2024, we did not enter into
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any new Startup Structured Partnerships. In 2023, we entered into six Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments in the amount of $18.9 million that is recognized as revenue over our period of performance.
See Notes 6 and 16 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details of our investments in and the material terms of our agreements with our Platform Ventures and Structured Partnerships.
Key Business Metrics
In the past, we reported New Programs, Current Active Programs and Cumulative Programs as our key business metrics. We have undertaken a strategic review of these metrics, including in light of our new service offerings and our restructuring plan announced and commenced in the second quarter of 2024, and, beginning with the three months ending December 31, 2024, we no longer rely on New Programs, Current Active Programs and Cumulative Programs as key business metrics. We may in the future report on key business metrics, which metrics may change or be substituted for additional or different metrics as our business develops.
Components of Results of Operations
Revenue
Cell Engineering Revenue
We generate Cell Engineering revenue primarily through license and collaboration agreements, under which customers obtain rights to our proprietary technology and intellectual property for use in the development and commercialization of engineered organisms and derived products. Under these agreements, we typically provide R&D services for cell programming with the goal of producing an engineered cell that meets a mutually agreed specification. Our customers obtain license rights to the output of our services, which are primarily the optimized strains or cell lines, in order to manufacture and commercialize products derived from that licensed strain or cell line. Generally, the terms of these agreements provide that we receive some combination of: (1) service fees in the form of (i) upfront payments upon consummation of the agreement or other fixed payments, (ii) reimbursement for costs incurred for R&D services and (iii) milestone payments upon the achievement of specified technical criteria, plus (2) downstream value share payments in the form of (i) milestone payments upon the achievement of specified commercial criteria, (ii) royalties on sales of products from or comprising engineered organisms arising from the collaboration or licensing agreement and/or (iii) royalties related to cost of goods sold reductions realized by our customers. Royalties did not comprise a material amount of our revenue during any of the periods presented.
Beginning in the second quarter of 2024, we announced changes to the commercial terms applicable to some new customer contracts, including revised intellectual property terms more favorable to customers and, in many cases, the removal of downstream value share from certain program types.
In the third quarter of 2024, we launched several new cell engineering tools offerings, including Datapoints, an AI model API, and lab automation solutions. Datapoints' data generation products provide large, biological datasets for customers to train their AI models, synthesizing and testing the output of customer existing models, and generating datasets for lead selection, hit selection, or a variety of other data science applications. Our model API provides users with access to both publicly available models and Ginkgo’s own protein sequence LLM trained on Ginkgo’s proprietary datasets. Our lab automation solutions combine modular hardware, control software and managed support to provide customers the ability to automate their own lab workflows in house.
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.
Cell Engineering revenue includes transactions with Platform Ventures and Legacy Structured Partnerships where, as part of these transactions, we received an equity interest in such entities. Specifically related to the Platform Ventures, in these transactions, we received upfront non-cash consideration in the form of common equity interests in these entities, while the Platform Ventures each received cash equity investments from strategic partners and financial investors. We view the upfront non-cash consideration as prepayments for licenses which will be granted in the future as we complete mutually agreed upon technical development plans. In these instances, we also receive cash consideration for the R&D services
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performed by us on a fixed fee or cost-plus basis. We are not compensated through additional milestone or royalty payments under these arrangements. Our transactions with Genomatica and Synlogic included the purchase of equity securities and the provision of R&D services. As we perform R&D services under the mutually agreed upon development plans, we recognize a reduction in the prefunded obligation on a cost-plus basis. These arrangements are further described in Notes 6 , 7 , 16 and 20 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.Cell Engineering revenue also includes transactions with Startup Structured Partnerships where, as part of these transactions, we received upfront non-cash consideration in the form of current equity interests or financial instruments that are convertible into equity upon a triggering event. We issued the customer a prepaid Cell Engineering services credit in exchange for the upfront non-cash consideration, which can and has been drawn down as payment for R&D services performed under mutually agreed upon development plans.
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. Equity investments are accounted for under the equity method, cost method or are carried at fair value.
Biosecurity Revenue
We offer biosecurity services through our two core offerings: Canopy and Horizon. We are currently offering biomonitoring and bioinformatics support services domestically through our partnerships with the CDC and XpresCheck, and internationally through our international programs, including those in Qatar 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 bioinformatics support services. These service offerings generally consist of 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. Prior to 2024, 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, prior to 2024, upon delivery of diagnostic test kits. The timing of revenue recognition depends on the identified performance obligations but is generally recognized over time or as results are reported to the customer.
Costs and Operating Expenses
Cost of Biosecurity Service Revenue
The cost of Biosecurity service revenue consists of costs related to our biomonitoring and bioinformatics support 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 government and non-government customers. Additionally, the cost of Biosecurity service revenue includes direct labor cost associated with bioinformatics, lab network management, delivery logistics, and customer support.
Cost of Biosecurity Product Revenue
Prior to 2024, 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 Other Revenue
Cost of other revenue consists of costs related to our Cell Engineering tools offerings, including Datapoints and lab automation solutions. Such costs primarily include hardware, software, materials and labor.
Research and Development Expenses
The nature of our business, and primary focus of our activities, generates a significant amount of R&D expenses. R&D expenses represent costs incurred by us for the following:
• development, operation, expansion and enhancement of our Foundry and Codebase;
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• costs incurred to deliver our end-to-end cell engineering solutions offering to customers; and
• development of new offerings, such as Biosecurity.
The activities above incur the following expenses:
• personnel compensation and benefits;
• rent, facilities, depreciation, software, professional fees and other direct and allocated overhead expenses; and
• laboratory supplies, consumables and related services provided under agreements with third parties and in-licensing arrangements.
We expense R&D expenses as incurred. We experienced lower R&D costs in 2024 compared to 2023 primarily due to 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. We expect that our R&D expenses will either remain consistent or decline in 2025 as compared to 2024, reflecting the stabilization of our operational overhead and the impact of our restructuring actions. However, our R&D expenses could increase in 2025 due to employee incentive programs offered or additional costs and expenses arising from these restructuring actions. 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.
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 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 experienced lower G&A costs in 2024 compared to 2023 primarily due to our restructuring plan announced and commenced in the second quarter of 2024, as we began reducing our operational overhead. We expect that our G&A expenses will either remain consistent or decline in 2025 as compared to 2024, reflecting the stabilization of our operational overhead and the impact of our restructuring actions. However, our G&A expenses could increase in 2025 due to employee incentive programs offered or additional costs and expenses arising from these restructuring actions. Conversely, we intend to maintain a strategic and opportunistic approach regarding inorganic G&A expenses arising from mergers, acquisitions, and other inorganic growth initiatives.
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 exited leased facilities.
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 are related to our restructuring plan, which was announced and commenced in the second quarter of 2024. These charges primarily include severance and other employee termination costs from a reduction in force that commenced in June 2024, as well as the impairment of a right-of-use asset due to the subleasing of a facility as part of real estate consolidation. Reductions in force are expected to be substantially completed in 2025, subject to compliance with applicable laws. While we aim to complete the majority of our facility consolidation actions in 2025, the actual timing may vary, especially for subleasing unused or underutilized facilities, which may extend beyond 2025 or may not occur prior to
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termination of such lease, depending on market conditions. Additionally, restructuring expenses related to potential asset impairments or contract amendments or terminations for any facilities no longer in use or underutilized could be material.
Additional details are included in Note 3 , Restructuring, of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Interest Income
Interest income consists primarily of interest earned on our cash and cash equivalents.
Loss on Equity Method Investments
Loss on equity method investments includes our share of losses from certain of our equity method investments under the hypothetical liquidation at book value (“HLBV”) method.
Loss on Investments
Loss on investments includes the change in fair value of our marketable equity securities in publicly traded companies and impairment losses recognized on non-marketable equity securities in privately held companies.
Loss on Deconsolidation of Subsidiaries
Loss on deconsolidation of subsidiaries pertains to the deconsolidation of our former foreign subsidiary Altar SAS (“Altar”) in 2024 as a result of a sale and the deconsolidation of our former subsidiary Zymergen Inc. (“Zymergen”) in 2023.
Change in Fair Value of Warrant Liabilities
The change in fair value of warrant liabilities reflects adjustments to the fair value of private placement warrants (“Private Placement Warrants”) and warrants formerly publicly traded on the NYSE (“Public Warrants”). These warrants, classified as liabilities, were assumed as part of our merger with Soaring Eagle Acquisition Corp. (“SRNG”) on September 16, 2021, and were initially issued in connection with SRNG’s initial public offering. Warrant liabilities are remeasured at fair value at each balance sheet date and have substantially no value as of December 31, 2024.
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 , 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 audited consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all the deferred tax assets will not be realized. For all periods presented, we have recorded a valuation allowance against the deferred tax assets that are not expected to be realized.
We account for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position.
As of December 31, 2024, we had federal net operating loss carryforwards of approximately $1.2 billion, of which $139.2 million will begin to expire in 2029 and $1.1 billion can be carried forward indefinitely. As of December 31, 2024, we had state net operating loss carryforwards of approximately $1.2 billion, of which $991.7 million will begin to expire in 2030 and $162.3 million can be carried forward indefinitely. As of December 31, 2024, we had federal research and development tax credit carryforwards of approximately $37.7 million, which will begin to expire in 2029. As of December 31, 2024, we also had state research and development and investment tax credit carryforwards of approximately $30.2 million, which will begin to expire in 2030.
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Income taxes are determined at the applicable tax rates adjusted for non-deductible expenses, R&D tax credits and other permanent differences. Our income tax provision may be affected by changes to our estimates.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The following table presents our result of operations for the periods indicated:
Year Ended December 31,
(in thousands) 2024 2023 Change
Cell Engineering revenue $ 173,972 $ 143,531 $ 30,441
Biosecurity revenue:
Service 53,071 78,975 (25,904)
Product — 28,949 (28,949)
Total revenue 227,043 251,455 (24,412)
Costs and operating expenses:
Cost of Biosecurity service revenue 38,549 46,524 (7,975)
Cost of Biosecurity product revenue — 7,481 (7,481)
Cost of other revenue 5,999 — 5,999
Research and development (1)
424,061 580,621 (156,560)
General and administrative (1)
246,161 385,025 (138,864)
Impairment of lease assets — 96,210 (96,210)
Goodwill impairment 47,858 — 47,858
Restructuring charges 24,172 — 24,172
Total operating expenses 786,800 1,115,861 (329,061)
Loss from operations (559,757) (864,406) 304,649
Other income (expense):
Interest income 38,612 57,217 (18,605)
Interest expense (94) (93) (1)
Loss on equity method investments — (2,635) 2,635
Loss on investments (28,827) (54,827) 26,000
Loss on deconsolidation of subsidiaries (7,013) (42,502) 35,489
Change in fair value of warrant liabilities 5,701 5,168 533
Other income, net 3,870 9,138 (5,268)
Total other income (expense) 12,249 (28,534) 40,783
Loss before income taxes (547,508) (892,940) 345,432
Income tax benefit (479) (71) (408)
Net loss $ (547,029) $ (892,869) $ 345,840
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(1) The following table presents the allocation of stock-based compensation expense, inclusive of employer payroll taxes. Stock-based compensation expense during the year ended December 31, 2024 was partially offset by a $12.6 million expense reversal resulting from the forfeiture of RSUs related to our restructuring plan. Of the total reversal, $9.2 million was recorded to research and development expenses and $3.4 million was recorded to general and administrative expenses.
Year Ended December 31,
(in thousands) 2024 2023
Research and development $ 57,723 $ 148,861
General and administrative 57,576 86,047
Total $ 115,299 $ 234,908
Cell Engineering Revenue
Cell Engineering revenue was $174.0 million in 2024, compared to $143.5 million in 2023, an increase of $30.4 million. The increase was primarily due to the recognition of $45.4 million in non-cash revenue from the release of a deferred revenue balance associated with the terminated Motif FoodWorks, Inc. (“Motif”) contract in 2024 (see Note 16 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and an increase in revenue related to programs with large enterprise customers primarily in the pharmaceutical, biotechnology and U.S. government (healthcare and defense) industries, partially offset by decreases in revenue related to programs with early stage customers in the pharmaceutical, biotechnology and industrial biotechnology (food and nutrition, industrial and environmental, and consumer and technology) industries.
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 increased from $48.5 million in 2023 to $61.4 million in 2024. The increase was primarily due to the recognition of $45.4 million in non-cash revenue from the release of the deferred revenue balance associated with the terminated Motif contract in 2024, partially offset by lower non-cash revenue from other customers.
Biosecurity Revenue
Biosecurity revenue was $53.1 million in 2024, compared to $107.9 million in 2023, a decrease of $54.9 million. This total decrease consisted of a $25.9 million decline in service revenue and a $28.9 million decline in product revenue.
The decrease in Biosecurity revenue is primarily due to the end of our COVID-19 testing in schools in 2023, partially offset by new expanded offerings of biomonitoring and bioinformatics support services in 2023 and 2024.
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 2024 was comprised of our expanded offerings of biomonitoring and bioinformatics support services. Through our partnerships, we operate programs for collections, testing, sequencing, and insights delivery on pathogen samples in different countries.
Cost of Biosecurity Service and Product Revenue
Cost of Biosecurity service and product revenue was $38.5 million in 2024, compared to $54.0 million in 2023, a decrease of $15.5 million. This decrease was primarily due to the end of our COVID-19 testing in schools in 2023, partially offset by growth in our expanded offerings of biomonitoring and bioinformatics support services following the transition of our Biosecurity business to developing scalable biosecurity infrastructure and delivering global surveillance programs and analytics services.
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Cost of Other Revenue
Cost of other revenue was $6.0 million in 2024 and zero in 2023. These costs relate to our new Cell Engineering customer offerings, Datapoints and lab automation solutions, which were launched in 2024. Costs related to our end-to-end cell engineering solutions offering are included in research and development expenses.
Research and Development Expenses
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. Research personnel costs, including stock-based compensation, is our largest expense, aggregating to $184.9 million and $304.3 million for the years ended December 31, 2024 and 2023, respectively. We also acquired and expensed in-process research and development primarily through the issuance of our equity, aggregating to $19.8 million and $9.6 million for the years ended December 31, 2024 and 2023, respectively. 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 were $424.1 million in 2024, compared to $580.6 million in 2023, a decrease of $156.6 million. This decrease was primarily due to a reduction in stock-based compensation expense of $87.5 million (inclusive of employer payroll taxes) and research and development expenses of $50.5 million from the deconsolidation of Zymergen. Additionally, there were decreases in personnel-related compensation and benefits expense of $14.6 million, professional fees of $14.2 million, lab equipment impairment of $12.3 million, temporary labor and contractors of $3.1 million, allocated overhead expenses of $6.9 million from R&D to G&A, and other operating expenses of $8.6 million, primarily due to our restructuring plan announced and commenced in the second quarter of 2024. These decreases were partially offset by an increase in rent and related facilities costs of $19.4 million, acquired in-process research and development costs of $11.5 million, software and technology expense of $6.1 million, and depreciation of $4.2 million. Increases in research and development expenses supported the growth of cell engineering capabilities prior to the commencement of our restructuring plan.
General and Administrative Expenses
General and administrative expenses were $246.2 million in 2024, compared to $385.0 million in 2023, a decrease of $138.9 million. This decrease was primarily due to a reduction of $72.8 million in general and administrative expenses from the deconsolidation of Zymergen. Excluding this impact, the decrease was largely attributable to our restructuring plan announced and commenced in the second quarter of 2024, which resulted in reductions in professional fees of $49.1 million (including a $17.6 million decrease in litigation costs), stock-based compensation expense of $26.6 million (inclusive of employer payroll taxes), temporary labor and contractor fees of $7.5 million, the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.0 million, and other operating expenses of $2.2 million. These decreases were partially offset by an increase in personnel-related compensation and benefits expense of $10.1 million, rent and related facilities costs of $9.4 million from a new facility lease that commenced in 2024, and the impairment of construction in progress assets of $5.8 million.
Impairment of Lease Assets
In 2023, we recognized an impairment loss of $96.2 million related to a right-of-use asset and the associated leasehold improvements for an exited Zymergen leased facility. During 2023, Zymergen permanently 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.
Goodwill Impairment
In 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
In 2024, we incurred restructuring charges of $24.2 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 employee termination costs from the reduction in force commenced in June 2024 and the impairment of a right-of-use asset
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relating to facilities consolidation. See Note 3 of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
Interest Income
Interest income was $38.6 million in 2024, compared to $57.2 million in 2023, a decrease of $18.6 million. This 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 in 2024, compared to $2.6 million in 2023. The 2023 loss represented our share of losses from certain equity method investees resulting from the application of the HLBV method. Under the HLBV method, as a common unit holder, we absorb losses before preferred unit holders due to a substantive profit-sharing agreement that grants preferred unit holders preferential distribution rights. Since we have no obligation to fund the losses of our equity method investees beyond our initial investment, no additional losses were recognized in 2024, as the investments had already been reduced to zero prior to that year.
Loss on Investments
Loss on investments was $28.8 million in 2024, compared to $54.8 million in 2023, a decrease of $26.0 million. The higher loss in 2023 was due to greater impairment losses on our non-marketable equity investments in privately held companies compared to the corresponding period in 2024. We assess our non-marketable equity investments quarterly for potential impairment and remeasure to fair value when events or changes in circumstances indicate that the carrying value may not be recoverable.
Loss on Deconsolidation of Subsidiaries
In 2024, we recorded a $7.0 million loss on the deconsolidation of our former foreign subsidiary Altar as a result of a sale of this business.
In 2023, we recorded a $42.5 million loss on the deconsolidation of Zymergen following Zymergen's bankruptcy filing in October 2023.
Change in Fair Value of Warrant Liabilities
The change in fair value of warrant liabilities was a gain of $5.7 million in 2024, compared to a gain of $5.2 million in 2023, an increase of $0.5 million. The change in fair value of warrant liabilities is primarily driven by fluctuations in the value of our common stock. Increases or decreases in the value of our common stock result in a loss or gain, respectively, in the fair value of warrant liabilities. There was substantially no value related to these warrant liabilities as of December 31, 2024.
Other Income, Net
Other income, net was $3.9 million in 2024, compared to $9.1 million in 2023, a decrease of $5.3 million. This decrease was primarily due to reduced sublease rent income following the deconsolidation of Zymergen.
Non-GAAP Information
In addition to our results determined in accordance with GAAP, we use earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA internally to evaluate our performance and make financial and operational decisions. We believe these non-GAAP measures, when viewed with our GAAP results, may be helpful to investors in assessing our operating performance.
We define EBITDA as net loss attributable to Ginkgo Bioworks Holdings, Inc. 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, 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
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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.
In 2024, we updated our definition of Adjusted EBITDA to no longer exclude the impact of acquired in-process research and development expenses. Accordingly, the comparable 2023 period has 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 GAAP performance measures. These measures exclude significant expenses and income required by GAAP, which impacts their alignment with consolidated financial statements. They also rely on management's judgment to determine which items are included or excluded, making them inherently subjective. Additionally, non-GAAP measures lack uniform definitions and may differ from those used by other companies, limiting comparability. A reconciliation of EBITDA and Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure, is presented below:
Year Ended December 31,
(in thousands) 2024 2023
Net loss (1)
$ (547,029) $ (892,869)
Interest income (38,612) (57,217)
Interest expense 94 93
Income tax benefit (479) (71)
Depreciation and amortization 63,020 70,507
EBITDA (523,006) (879,557)
Stock-based compensation (2)
115,299 234,908
Impairment expense (3)
53,654 121,404
Restructuring charges (4)
24,172 —
Merger and acquisition related expenses (5)
4,417 61,189
Loss on equity method investments — 2,635
Loss on investments 28,827 54,827
Loss on deconsolidation of subsidiaries 7,013 42,502
Change in fair value of warrant liabilities (5,701) (5,168)
Change in fair value of convertible notes 2,014 2,295
Adjusted EBITDA $ (293,311) $ (364,965)
(1) All periods include non-cash revenue when earned, including $45.4 million in the year ended December 31, 2024, recognized pursuant to the termination of revenue contracts with Motif.
(2) For the years ended December 31, 2024 and 2023, includes $3.0 million and $5.0 million, respectively, in related employer payroll taxes.
(3) For 2024, includes $47.9 million related to goodwill impairment and $5.8 million related to lab equipment. For 2023, includes a $25.2 million impairment loss on lab equipment and a $96.2 million impairment loss on lease assets associated with an exited Zymergen leased facility.
(4) Restructuring charges consist of employee termination costs from the reduction in force commenced in June 2024, as well as the impairment of a right-of-use asset relating to facilities consolidation.
(5) 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, and (iv) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs, net of insurance recovery. Not included in this adjustment are acquired in-process research and development expenses, which totaled $19.8 million and $9.6 million for the years ended December 31, 2024 and 2023, respectively.
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Liquidity and Capital Resources
On August 19, 2024, with the approval of our board of directors and shareholders, we effected a one-for-forty (1:40) reverse stock split for our common stock. Accordingly, all common shares presented herein have been retrospectively adjusted to reflect the reverse stock split.
Sources of Liquidity
Upon the closing of our merger with SRNG in September 2021, we received net proceeds totaling approximately $1.5 billion, inclusive of $760.0 million from investments from certain accredited investors for 1.9 million shares of our Class A common stock. As of December 31, 2024, we had cash and cash equivalents of $561.6 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 Annual Report on Form 10-K.
Material Cash Requirements
We anticipate that our expenditures will exceed our revenue through at least the next 12 months from the date of filing of this Annual Report on Form 10-K, as we:
• continue our R&D activities under existing and new programs and further invest in our Foundry and Codebase;
• develop and expand our offerings, including Biosecurity;
• upgrade, expand or adapt our operational, financial and management systems and support our operations;
• potentially acquire and integrate companies, assets or intellectual property that advance our company objectives;
• maintain, expand, and protect our intellectual property; and
• continue our restructuring actions.
Leases
We have various noncancelable operating leases for office and laboratory space, with significant leases expiring between 2030 and 2036. As of December 31, 2024 , we have minimum rental commitments under noncancellable operating leases of $61.2 million in 2025 and $662.5 million thereafter. See Note 9 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information.
Purchase Obligations
In August 2023, we entered into a five-year strategic cloud and AI partnership with Google Cloud, which includes minimum annual commitments to purchase cloud hosting services. As of December 31, 2024, the remaining aggregate commitment was $279.3 million, with approximately $44.3 million payable in 2025 and $235.0 million thereafter.
In March 2022, we entered into a four-year noncancelable supply agreement with Twist for the purchase of diverse products including synthetic DNA. Under this agreement, we are obligated to spend a minimum of $58.0 million over the four-year term, with approximately $24.8 million payable in 2025 and $4.8 million thereafter.
Cash Flows
The following table provides information regarding our cash flows for each period presented:
Year Ended December 31,
(in thousands) 2024 2023
Net cash used in:
Operating activities $ (319,585) $ (295,500)
Investing activities (62,236) (80,693)
Financing activities (1,739) (3,216)
Effect of exchange rate changes (281) (588)
Net decrease in cash, cash equivalents and restricted cash $ (383,841) $ (379,997)
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Operating Activities
Net cash used in operating activities for the year ended December 31, 2024 consisted of a net loss of $547.0 million, adjusted for a net decrease in cash due to changes in operating assets and liabilities of $89.7 million and non-cash charges of $317.1 million. The net change in operating assets and liabilities was primarily driven by a $40.4 million decrease in accrued expenses and other current liabilities primarily due to the payment or release of restructuring-related accruals and litigation costs, a $68.6 million decrease in deferred revenue primarily from a one-time release of a deferred revenue balance associated with a terminated customer contract, and a $14.9 million decrease in operating lease liabilities from rent payments, partially offset by a $23.5 million decrease in operating lease right-of-use assets from lease incentives received and a $10.1 million decrease in prepaid expenses and other current assets, primarily driven by the derecognition of an insurance receivable and a reduction in contract renewals resulting from our restructuring actions. Non-cash adjustments primarily consisted of $63.0 million in depreciation and amortization, $112.3 million in stock-based compensation expense, $28.8 million loss on investments, $28.1 million non-cash lease expense, $19.8 million in acquired in-process research and development expense, and $58.5 million in various asset impairment charges.
Net cash used in operating activities for the year ended December 31, 2023 consisted of a net loss of $892.9 million, adjusted for a net increase in cash due to changes in operating assets and liabilities of $29.8 million and non-cash charges of $567.5 million. The net change in operating assets and liabilities was primarily driven by (i) a $50.1 million decrease in accounts receivable from collections of Biosecurity receivables and the end of COVID-19 testing in schools in 2023, (ii) a $10.5 million decrease in prepaid expenses and other current assets primarily from depletion of inventory coinciding with the reduction of Biosecurity product revenue plus the timing of directors and officers insurance payments in the prior year, (iii) a $9.3 million decrease in operating lease right-of-use assets from lease incentives received, (iv) a $16.9 million increase in accrued expenses and other current liabilities primarily from accrued litigation costs, partially offset by (v) a $35.9 million decrease in deferred revenue and (vi) a $22.8 million decrease in operating lease liabilities from rent payments. Non-cash adjustments primarily consisted of $70.5 million of depreciation and amortization, $229.9 million of stock-based compensation, $57.5 million loss on investments including equity method investments, $9.2 million loss on the change in fair value of contingent consideration liabilities, $28.3 million of non-cash lease expense, $121.4 million in impairments of long-lived assets, and $42.5 million loss on deconsolidation of Zymergen.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2024 primarily consisted of $62.5 million in purchases of property and equipment related to a build out of new office and laboratory space being developed near our headquarters, $5.4 million paid for the acquisition of certain Zymergen assets, offset by $4.5 million in proceeds from the sale of marketable securities.
Net cash used in investing activities for the year ended December 31, 2023 primarily consisted of purchases of property and equipment of $40.8 million associated with Foundry capacity and capability investments, relinquishment of $43.0 million in cash upon the deconsolidation of Zymergen, offset by $4.4 million in proceeds from the sale of equipment.
Financing Activities
Net cash used in financing activities for the year ended December 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 year ended December 31, 2023 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.
Critical Accounting Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, are reflected in our consolidated financial statements prospectively from the date of change in estimates.
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While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.
Revenue Recognition
Cell Engineering Revenue
For certain Cell Engineering revenue contracts, we recognize revenue over the period of performance using a measure of progress based on costs incurred to date relative to total expected costs (i.e., cost-to-cost method). A significant level of judgment is involved in estimating the total expected costs. When estimating total expected costs, we make assumptions and estimates regarding the contracted scope of work, tasks required to complete each project, technical and schedule risks associated with the science, the expected duration of each project, and the total amount of internal and external resources required.
Our collaboration and licensing agreements often include multiple promises, such as (i) licenses and assignments of intellectual property and materials and (ii) research and development services. We assess whether each promise constitutes a distinct performance obligation based on the specific terms of each agreement. Determining whether the promises within a customer contract should be accounted for separately as distinct performance obligations requires significant judgment. Therefore, we review customer contracts to identify all individual promises to transfer goods and services that qualify as performance obligations.
Options to acquire additional goods and services are evaluated to determine whether they provide a material right to the customer that would not otherwise be available without entering into the contract. Judgment is required to assess whether a customer option constitutes a material right. If a material right is identified, the option is treated as a separate performance obligation, and the revenue allocated to the option is deferred until the option is either exercised or expires.
We also evaluate contract modifications and amendments to determine whether any changes should be accounted for as a separate contract, prospectively or on a cumulative catch-up basis.
Certain customer contracts include payment in the form of equity securities or other financial instruments that convert into equity upon a triggering event. Any non-cash consideration is measured at its estimated fair value at contract inception. For equity securities and financial instruments that are not actively traded, we generally determine the estimated fair value by referencing a recent financing round or utilizing a scenario-based valuation model. Significant unobservable inputs are used in these valuations, including expectations regarding future financings of the customer, scenario dates and probabilities, expected volatility, discount rates, and recovery rates. Changes in these assumptions can materially affect the fair value of the non-cash consideration and, consequently, the total revenue recognized for the contract.
Impairment of Long-Lived Assets
We review our long-lived assets and asset groups for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Recoverability is measured by comparing the carrying value of the long-lived assets to the future undiscounted cash flows expected to be generated by the assets. In determining the expected future cash flows, we use assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future cash flows may differ from the estimates used in impairment testing. We recognize an impairment loss when and to the extent that the estimated fair value of the long-lived assets is less than their carrying value.
Goodwill
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 year ended December 31, 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
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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 in the second quarter of 2024 and for the year ended December 31, 2024.
Investments in Non-Marketable Equity Securities
We account for our non-marketable equity securities using the measurement alternative, where the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Determining whether an observed transaction is similar to the security owned by us requires judgment based on the rights and obligations of the investments.
We evaluate non-marketable equity investments for impairment on a quarterly basis, considering both qualitative and quantitative factors that may have a significant effect on the investment’s fair value. Qualitative factors considered include the companies’ financial and liquidity position, access to capital resources, adverse changes in the economic environment of the investee, and adverse changes in the business prospects of the investee, among others. When indicators of impairment exist, we prepare quantitative assessments of the fair value of our non-marketable equity securities using market and income approaches that require judgment and the use of estimates, including discount rates, assumptions around the investees' expected time to exit event, investee revenues and expenses, and comparable market data of guideline public companies, among others. When our assessment indicates that an impairment exists, we write down the investment to its fair value.
Recently Issued Accounting Pronouncements
See Note 2 , “Summary of Significant Accounting Policies,” of our consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements.