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Item 2. Management’s Discussion and Analysis

2025-05-06 compared with 2024-11-12 · 173 added, 360 removed, 134 unchanged (80% of the section changed)

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

Actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in Item 1A “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Quarterly Report on Form 10-Q and in our 2023 Annual Report on Form 10-K.

Our mission is to make biology easier to engineer.

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

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

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

These “cell programs” are designed to enable biological production of products as diverse as novel therapeutics, key food ingredients, and chemicals currently derived from petroleum.

Biology did not evolve by end market.

All of these applications run on cells which have a common code—DNA—and a common programming platform can enable all of them.

Because of this shared platform, we are able to drive scale and learning efficiencies while maintaining flexibility and diversity in our program areas.

Ultimately, customers come to us because they believe we maximize the probability of successfully developing their products.

The foundation of our cell programming platform includes two core assets that execute a wide variety of cell programs for customers according to their specifications:

our Foundry and our Codebase.

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

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

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

We call this scaling factor Knight’s Law.

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

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

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

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

We believe this virtuous cycle sustains Ginkgo’s growth and differentiated value proposition.

As we take on more work in the Foundry, we benefit from scale economics, which over time may lead to lower program costs.

We expect that these lower costs, in turn, will drive additional demand for our cell programming capabilities.

Cell programs also generate Codebase, which can drive better experimental direction and improve the odds of technical success, further increasing our customer value proposition, which we believe will result in additional demand.

we believe that as we scale, the platform improves.

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

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

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

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

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 tools that enable more successful biological R&D.

We now offer services providing such data generation 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 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.

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 data generation products (“Datapoints”), which 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, 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.

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 prevent, detect, and respond to biological threats.

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.

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

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

We operate in two reportable business segments:

• Cell Engineering:

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

Our cell programming platform includes two core assets:

the Foundry, highly efficient biology lab facilities, enabled by investment in proprietary workflows, custom software, robotic automation, and data science and analytics, which is paired with our Codebase, a collection of biological “parts” and a database of biological data used to program cells.

The Cell Engineering segment includes costs incurred for the development, operation, expansion and enhancement of the Foundry and Codebase.

Cell Engineering revenue is derived from service fees and downstream value share in the form of milestone payments, royalties or equity interests.

• Biosecurity:

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

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

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

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;

• Horizon, our digital surveillance, analytics and insights platform that detects and monitors biothreats worldwide.

Generating Economic Value Through Cell Programs

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

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:

We typically structure customer contracts for Cell Engineering services to include some combination of the following:

• upfront payments upon execution of an agreement or other fixed payments, which are generally recognized over the period of performance;

• reimbursement of costs incurred for R&D services;

• milestone payments upon achievement of specified technical criteria;

• downstream value share payments for certain program types.

We have legacy customer arrangements, entered into prior to 2024, under which we may continue to provide services.

These arrangements may include a combination of cash and/or non-cash consideration, as well as, when applicable, downstream value share payments which may take one or more of the following forms:

• milestone payments, which may comprise cash and/or non-cash consideration upon the achievement of specified commercial criteria;

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• royalties related to cost of goods sold reductions realized by our customers.

• 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.

Our legacy customer arrangements offered 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).

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.

Platform Ventures include:

Motif FoodWorks, Inc.

Founded in 2018, Motif FoodWorks, Inc.

(“Motif”) was formed to focus on the application of synthetic biology to reduce the reliance on animal products in the food industry.

We entered into (i) an Intellectual Property Contribution Agreement (“IPCA”) with Motif that granted Motif a license to certain of the our intellectual property and (ii) a Technical Development Agreement (“TDA”) that established the terms under which the we provided technical development services.

In return for our contribution of intellectual property and access to our platform, we received shares of common stock in Motif.

The initial fair value of the common stock investment in Motif was $65.1 million, which has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under the accounting for equity method investments.

The initial non-refundable fair value of the equity received, totaling $65.1 million and considered non-cash consideration under ASC 606, was accounted for as material rights under ASC 606.

The material rights pertained to Motif's license rights for a set of ingredients that Motif intended for us to develop within the first two years.

This amount was recorded as deferred revenue for the future license rights and recognizable as revenue as we performed qualifying services for Motif, or when such rights expire upon termination of the agreements.

As of December 31, 2023, we had a remaining deferred revenue balance of $45.4 million with Motif under this arrangement.

Effective in August 2024, the Motif IPCA and the TDA agreements were mutually terminated with no adjustment to the original consideration.

As a result, we have no further obligation to perform services for Motif and, accordingly, the remaining $45.4 million in deferred revenue under this arrangement has been recognized in full as revenue in the three and nine months ended September 30, 2024.

We separately disclose all the non-cash portion of our revenue in the results of operations section below.

Allonnia, LLC

Founded in 2019, Allonnia, LLC (“Allonnia”) was formed to focus on the application of synthetic biology in the waste bioremediation and biorecovery industries.

We entered into an intellectual property contribution agreement that granted Allonnia 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 Allonnia with a right to additional units subject to additional closings of Allonnia’s Series A preferred units.

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

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

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

Ginkgo also entered into a Technical Development

Agreement with Allonnia under which we provide R&D services in return for cash consideration on a fixed fee or cost-plus basis.

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 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.

The initial fair value of our common units received in Arcaea was $11.9 million, which 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.

Arcaea was capitalized through a Series A preferred unit financing that raised approximately $77 million in gross proceeds from an investor group which included certain of our investors, CHANEL and Givaudan.

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.

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.

Ayana Bio, LLC

Founded in September 2021, Ayana Bio, LLC (“Ayana”) was formed to identify and design new bioactive compounds for use as complementary medicine to support human health and wellness.

Ayana was capitalized through a Series A funding that raised $30 million in gross proceeds from an investor group comprising certain of our investors.

We hold an interest in 9.0 million common units (representing 100% of common units at inception) of Ayana and have also provided Ayana with certain licenses to our intellectual property for use in the development or production of products that we have agreed to research and develop under technical development plans.

Prior to the third quarter of 2022, we consolidated Ayana as a variable interest entity.

In the third quarter of 2022, we deconsolidated Ayana and began accounting for our retained investment in Ayana as an equity method investment.

The initial carrying value of the equity method investment in Ayana was equal to the fair value of our retained interest of $16.0 million as of the deconsolidation date, which has been subsequently reduced to a carrying value of zero due to a basis difference associated with in-process research and development identified as part of the initial accounting for the equity method investment.

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

Verb Biotics, LLC

Founded in September 2021, Verb Biotics, LLC (“Verb”) was formed to identify and design new strains of probiotic bacteria with advanced properties for human nutrition, health, and wellness.

Verb was capitalized through a Series A funding that raised $30 million in gross proceeds from an investor group comprising certain of our investors.

We hold an interest in 9.0 million common units (representing 100% of common units at inception) of Verb and have also provided Verb with certain licenses to our intellectual property for use in the development or production of products that we have agreed to research and develop under technical development plans.

Prior to the first quarter of 2022, we consolidated Verb as a variable interest entity.

In the first quarter of 2022, we deconsolidated Verb and began accounting for our retained investment in Verb as an equity method investment.

The initial carrying value of the equity method investment in Verb was equal to the fair value of our retained interest of $15.9 million as of the deconsolidation date, which has been subsequently reduced to a carrying value of zero due to a basis difference associated with in-process research and development identified as part of the initial accounting for the equity method investment.

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

BiomEdit, LLC

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

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

In April 2022, we entered into an intellectual property contribution agreement that granted BiomEdit rights to our intellectual property, subject to mutually agreed upon technical development

plans and, in return, we received 3.9 million voting common units in BiomEdit.

In addition, Elanco Animal Health also contributed intellectual property in exchange for 3.9 million non-voting common units in BiomEdit.

The initial fair value of our common units received in BiomEdit was $8.9 million, subsequently increased by $1.1 million in the first quarter of 2023, all of which has been reduced to a carrying value of zero as a result of the allocation of losses under our accounting for equity method investments.

Ginkgo also entered into a Technical Development Agreement with BiomEdit under which we provide R&D services in return for 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 the three and nine months ended September 30, 2023, we entered into zero and six, respectively, Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments totaling $17.0 million that is recognized as revenue over our period of performance.

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

Our Legacy Structured Partnerships are described below:

Genomatica, Inc.

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

In 2016 and 2018, we 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 $7.0 million as of September 30, 2024, reflective of impairment losses recognized through that date.

Synlogic, Inc.

(“Synlogic”) is a publicly traded clinical-stage biopharmaceutical company focused on advancing drug discovery and development for synthetic biology-derived medicines.

In 2019, we entered into several agreements with Synlogic whereby we purchased Synlogic common stock and warrants to purchase Synlogic common stock and agreed to provide R&D services to Synlogic.

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

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

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

As of September 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.

Key Business Metrics

A cell program (or “program”) is the work we do for our customers to enable their product(s) of interest.

Programs are defined by a technical development plan or objective.

We generally exclude proof-of-concept projects and other exploratory work undertaken on a customer’s behalf from the program count.

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

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

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

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

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

2024 2023 2024 2023 2024

New Programs 11 21 38 55 61

Current Active Programs 136 116 162 139 169

Cumulative Programs 280 219 280 219 280

(1) Last twelve months ended September 30, 2024

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

As new programs typically have multi-year durations, we view this metric as an indication of future Cell Engineering revenue growth.

Current Active Programs

Current Active Programs represent the number of unique programs for which we performed R&D services in the reporting period.

We view this metric as an indication of current period and future Cell Engineering revenue.

Cumulative Programs

Cumulative Programs represent the cumulative number of unique programs Ginkgo has commenced.

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.

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

These metrics may change or be substituted for additional or different metrics as our business develops.

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

For a full description of these arrangements, refer to the Overview section of Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Part II, Item 7 of our 2024 Annual Report.

Components of Results of Operations

Cell Engineering Revenue

We generate Cell Engineering revenue through the execution of license and collaboration agreements whereby customers obtain license rights to our proprietary technology and intellectual property for use in the development and commercialization of engineered organisms and derived products.

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.

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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.

(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 new cell engineering tools offerings, including Datapoints 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 lab automation solutions combine modular hardware, control software and managed support to provide customers the ability to automate their own lab workflows in house.

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.

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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

performed by us on a fixed fee or cost-plus basis.

In these instances, we also receive cash consideration for the R&D services performed by us on a fixed fee or cost-plus basis.

We are not compensated through additional milestone or royalty payments under these arrangements.

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These arrangements are further described in Notes 6 , 7 , and 15 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

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 grant the customer a prepaid Cell Engineering services credit in exchange for the upfront non-cash consideration, which can be drawn down as payment for R&D services performed under mutually agreed upon development plans.

Cell Engineering revenue also includes transactions with early stage synthetic biology product companies 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.

Commencing in the second quarter of 2024, we announced changes in commercial terms applicable to some customer contracts, including new intellectual property terms in favor of customers and the removal of downstream value share from certain program types in many circumstances.

Our end-to-end Cell Engineering solutions offering is expected to continue to maintain downstream value share.

In the third quarter of 2024, we launched several new customer offerings, including Ginkgo Datapoints, an artificial intelligence (AI) model application programming interface (API), and lab automation solutions.

Ginkgo Datapoints' data generation products provide large, biological datasets for customers to train their AI models.

Our model API provides users with access to both publicly available models and Ginkgo’s own protein sequence large language model (LLM) trained on Ginkgo’s proprietary datasets.

Our lab automation solutions combines 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.

The initial fair 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, the cost method, or are carried at fair value.

Biosecurity Revenue

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

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

We 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 U.S.

Centers for Disease Control and Prevention 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 bioinformatic support services.

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

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

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

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

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

These offerings typically include, but are not limited to, sample collection, sample storage and transportation, outsourced laboratory analysis, access to results via a web-based portal, analytical reporting, and overall program management.

In general, our agreements specify that we are entitled to compensation as services are performed.

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

Costs and Operating Expenses

Cost of Biosecurity Product Revenue

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

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

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

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

Cost of Biosecurity Revenue

The cost of Biosecurity revenue consists of costs related to our biomonitoring and bioinformatics support services.

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

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

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• development, operation, expansion and enhancement of our Foundry and Codebase;

• development of new offerings, such as Biosecurity.

• costs incurred to deliver our end-to-end cell engineering solutions offering to customers;

• development of new offerings.

The activities above incur the following expenses:

• laboratory supplies, consumables and related services provided under agreements with third parties and in-licensing arrangements;

• personnel compensation and benefits;

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

We expense R&D expenses as incurred.

We experienced lower R&D costs in the third quarter of 2024 compared to the first two quarters of 2024 and comparable 2023 periods primarily resulting from 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.

• laboratory supplies, consumables and related services provided under agreements with third parties and in-licensing arrangements.

We expense R&D costs as incurred.

Our R&D expenses were lower in the first quarter of 2025 compared to the first quarter of 2024, 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 and cell engineering tools 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.

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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 experienced lower G&A costs in the third quarter of 2024 compared to the first two quarters of 2024 and comparable 2023 periods primarily resulting from our restructuring plan announced and commenced in the second quarter of 2024 as we commenced lowering our operational overhead.

Our G&A expenses were lower in the first quarter of 2025 compared to the first quarter of 2024, 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 an exited Zymergen leased facility.

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 initiated in the second quarter of 2024.

These charges primarily consist of 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 facilities consolidation, including sublease of certain facilities.

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 have substantially completed the majority of our facility consolidation actions with excess space available for sublease, the actual timing for subleasing unused or underutilized facilities may extend beyond 2025 or may not occur prior to 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 condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Interest Income, Net

Interest income, net 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.

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

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 Subsidiary

Loss on deconsolidation of subsidiary pertains to our deconsolidation of our former foreign subsidiary Altar SAS (“Altar”) in the third quarter of 2024 as a result of a sale.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities includes the change in fair value of private placement warrants (“Private Placement Warrants”) and publicly traded warrants (“Public Warrants”), which are classified as liabilities and were assumed as part of the SRNG Business Combination.

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

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.

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.

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 March 31, 2025.

Other Income (Expense), Net

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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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

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.

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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 significantly affected by changes to our estimates.

Our income tax provision may be affected by changes to our estimates.

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

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

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

Comparison of the Three Months Ended March 31, 2025 and 2024

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

Three Months Ended March 31,

(in thousands) 2025 2024 Change

2024 2023 Change

Cell Engineering revenue $ 38,230 $ 27,889 $ 10,341

Biosecurity revenue 10,088 10,055 33

Product — 6,495 (6,495) — 28,949 (28,949)

Service 13,957 11,759 2,198 44,013 71,196 (27,183)

Total revenue 48,318 37,944 10,374

Costs and operating expenses:

Cost of Biosecurity product revenue — 906 (906) — 7,481 (7,481)

Cost of Biosecurity service revenue 9,987 6,017 3,970 30,996 39,913 (8,917)

Cost of Biosecurity revenue (1)

7,957 9,202 (1,245)

Cost of other revenue (1)

4,090 — 4,090

Research and development (1)

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49,043 70,287 (21,244)

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

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

Restructuring charges 5,273 — 5,273

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Interest income, net 6,081 11,711 (5,630)

Loss on equity method investments — — — — (1,516) 1,516

Loss on investments (3,693) (2,544) (1,149)

Loss on deconsolidation of subsidiary (7,013) — (7,013) (7,013) — (7,013)

Change in fair value of warrant liabilities — 940 (940)

Other income, net 1,572 2,893 (1,321) 2,821 9,045 (6,224)

Other income (expense), net (4,289) 2,015 (6,304)

Total other income (expense) (1,901) 12,122 (14,023)

Loss before income taxes (90,869) (165,880) 75,011

Income tax expense (benefit) (375) (22) (353) (154) 127 (281)

Income tax expense 88 31 57

Net loss $ (90,957) $ (165,911) $ 74,954

(1) The following table presents the allocation of stock-based compensation expense, inclusive of employer payroll taxes.

Stock-based compensation expense during the three months ended September 30, 2024, was partially offset by a $10.9 million expense reversal

resulting from the forfeiture of RSUs related to our restructuring plan.

Of the total reversal, $8.8 million was recorded to research and development expenses and $2.1 million was recorded to general and administrative expenses.

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

(in thousands) 2024 2023 2024 2023

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

Three Months Ended March 31,

Research and development $ 9,184 $ 24,120

General and administrative 9,912 18,277

Cost of Biosecurity revenue 735 —

Cost of other revenue 969 —

Total $ 20,800 $ 42,397

Cell Engineering Revenue

Cell Engineering revenue increased by $37.9 million and $22.6 million in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023.

The increase was primarily attributable to the progress of Current Active Programs with existing and new customers, including 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 the third quarter of 2024.

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

Cell Engineering revenue was $38.2 million in the three months ended March 31, 2025, compared to $27.9 million in the three months ended March 31, 2024, an increase of $10.3 million.

This increase was primarily due to the recognition of $7.5 million in non-cash revenue from the release of a deferred revenue balance associated with the terminated BiomEdit, Inc.

(“BiomEdit”) contract in the first quarter of 2025 (see Note 1 5 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

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 $16.9 million in the three months ended September 30, 2023 to $48.0 million in the three months ended September 30, 2024, and from $46.6 million in the nine months ended September 30, 2023 to $60.1 million in the nine months ended September 30, 2024.

The increase was 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 the third quarter of 2024, partially offset by lower non-cash revenue from other customers.

In the three months ended September 30, 2024, 11 New Programs commenced, compared to 21 New Programs in the same period in 2023.

The number of Current Active Programs rose to 136, compared to 116 in the prior year period.

Cumulative Programs increased to 280 from 219 over the same period.

Additionally, the number of customers grew to 81, up from 76 in the prior year period.

In the nine months ended September 30, 2024, 38 New Programs commenced, compared to 55 New Programs in the same period in 2023.

The number of Current Active Programs rose to 162, compared to 139 in the prior year period.

Cumulative Programs increased to 280 from 219 over the same period.

Additionally, the number of customers grew to 91, up from 84 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.

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 of these equity interests, 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.

Cell Engineering revenue recognized relating to non-cash consideration increased from $3.8 million in the three months ended March 31, 2024 to $8.7 million in the three months ended March 31, 2025, primarily due to the

recognition of $7.5 million in non-cash revenue from the release of the deferred revenue balance associated with the terminated BiomEdit contract in the first quarter of 2025, partially offset by lower non-cash revenue from other customers.

Biosecurity Revenue

Biosecurity revenue decreased $4.3 million in the three months ended September 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $6.5 million offset by an increase in service revenue of $2.2 million.

Biosecurity revenue decreased $56.1 million in the nine months ended September 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $28.9 million and a decrease in service revenue of $27.2 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 nine months ended September 30, 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 increased $3.1 million in the three months ended September 30, 2024 compared to the same period in 2023.

The increase was driven by growth in our expanded offerings of biomonitoring and bioinformatic support services since the conclusion of our COVID-19 testing in schools in the third quarter of 2023.

Cost of Biosecurity product and service revenue decreased $16.4 million in the nine months ended September 30, 2024 compared to the same period in 2023.

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

Biosecurity revenue was $10.1 million in both of the three months ended March 31, 2025 and 2024.

Cost of Biosecurity Revenue

The cost of Biosecurity revenue was $8.0 million in the three months ended March 31, 2025, compared to $9.2 million in the three months ended March 31, 2024, a decrease of $1.2 million.

This decrease was primarily due to cost reductions implemented during the first quarter of 2025 as well as timing of revenue recognition.

Cost of Other Revenue

The cost of other revenue was $4.1 million in three months ended March 31, 2025 and zero in the three months ended March 31, 2024.

These costs relate to our cell engineering customer offerings, Datapoints and lab automation solutions, which began in the second quarter of 2024.

Costs associated with 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.

Our research personnel costs, including stock-based compensation, is our largest expense, aggregating $31.2 million and $152.5 million for the three and nine months ended September 30, 2024, respectively, and $70.5 million and $239.8 million for the three and nine months ended September 30, 2023, respectively.

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

Research personnel costs, including stock-based compensation, is our largest expense, totaling $30.7 million and $62.2 million for the three months ended March 31, 2025 and 2024, respectively.

We also acquired and expensed in-process research and development primarily through the issuance of our equity, aggregating to zero and $16.9 million for the three months ended March 31, 2025 and 2024, 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 decreased by $79.7 million in the three months ended September 30, 2024, compared to the same period in 2023.

This decrease was primarily due to a reduction in stock-based compensation expense of $29.7 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc.

(“Zymergen”), in the fourth quarter of 2023 ($20.5 million).

Additionally, there were decreases in lab equipment impairment of $12.3 million, personnel-related compensation and benefits expense of $4.8 million, software and technology expense of $2.9 million, professional fees of $2.8 million, and laboratory supplies of $1.4 million.

Research and development expenses decreased by $115.9 million in the nine months ended September 30, 2024, compared to the same period in 2023.

This decrease was primarily due to a reduction in stock-based compensation expense of $70.4 million (inclusive of employer payroll taxes) and the deconsolidation of Zymergen ($50.5 million).

Additionally, there were decreases in professional fees of $11.4 million, lab equipment impairment of $12.3 million, and temporary labor and contractors of $2.2 million.

These decreases were partially offset by an increase in acquired in-process research and development costs of $15.9 million, rent and related facilities costs of $11.4 million, software and technology expense of $6.0 million, laboratory supplies of $3.3 million, and outside service costs of $3.1 million.

Increases in research and development expenses supported the growth of Cell Engineering capabilities prior to the commencement of the restructuring.

Research and development expenses were $70.9 million for the three months ended March 31, 2025, compared to $136.5 million for the three months ended March 31, 2024, a decrease of $65.5 million.

This decrease was primarily driven by reductions in stock-based compensation expense of $14.9 million (inclusive of employer payroll taxes), $16.9 million in acquired in-process research and development, $16.6 million in personnel-related compensation and benefits expenses, $6.6 million in rent and facilities expenses, $5.7 million in information technology expenses, $5.2 million in laboratory supplies, $2.3 million in allocated overhead expenses (reclassified from R&D to G&A and cost of sales), and $3.5 million in other operating expenses.

These decreases were partially offset by an increase of $6.2 million in outside services, primarily due to a loss recorded under a supply agreement related to a shortfall in meeting a minimum annual purchase commitment.

General and Administrative Expenses

General and administrative expenses decreased $29.7 million in the three months ended September 30, 2024, compared to the same period in 2023.

The decrease was primarily due to the deconsolidation of Zymergen ($17.4 million) and a reduction in stock-based compensation expense of $8.7 million (inclusive of employer payroll taxes).

Additionally, there were decreases in professional fees of $8.8 million and temporary labor and contractors of $2.4 million.

These decreases were partially offset by an increase in rent and related facilities costs of $8.3 million from a new facility lease that commenced in the second quarter of 2024.

General and administrative expenses decreased $106.9 million in the nine months ended September 30, 2024, compared to the same period in 2023.

The decrease was primarily due to the deconsolidation of Zymergen ($72.8 million) and a reduction in stock-based compensation expense of $20.7 million (inclusive of employer payroll taxes).

Additionally, there were decreases in professional fees of $22.7 million and the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.5 million, partially offset by an increase in personnel-related compensation and benefits

expense of $11.0 million and rent and related facilities costs of $8.3 million from a new facility lease that commenced in the second quarter of 2024.

Impairment of Lease Assets

In the three and nine months ended September 30, 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 the third quarter of 2023, Zymergen ceased use of and vacated the leased space, which triggered an impairment analysis and resulted in a write-down of the carrying value of the assets to their estimated fair value.

Goodwill Impairment

During the nine months ended September 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.

General and administrative expenses were $49.0 million for the three months ended March 31, 2025, compared to $70.3 million for the three months ended March 31, 2024, a decrease of $21.2 million.

This decrease was primarily driven by reductions in stock-based compensation expense of $8.4 million (inclusive of employer payroll taxes), $12.3 million in professional fees, $5.7 million in personnel-related compensation and benefits expenses, $2.3 million in temporary labor and contractors, and $4.1 million in other operating expenses.

These decreases were partially offset by an increase of $11.6 million in rent and facilities expenses primarily due to a new lease that commenced in the second quarter of 2024 and remains unoccupied.

Restructuring Charges

During the three and nine months ended September 30, 2024, we incurred restructuring charges of $2.9 million and $20.0 million, respectively, 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 relating to facilities consolidation.

See Note 3 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

In the three months ended March 31, 2025, we incurred restructuring charges of $5.3 million in connection with our restructuring plan, which was announced and commenced in the second quarter of 2024, primarily affecting the Cell Engineering segment.

These charges primarily consisted of employee termination costs from the reduction in force.

Note 3 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details.

Interest Income, Net

Interest income, net decreased $5.8 million and $12.6 million in the three and nine months ended September 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 $1.5 million for the three and nine months ended September 30, 2023, respectively.

No loss on equity method investments was recognized in 2024.

In the nine months ended September 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.

Because we have no commitment to fund the losses of our equity method investees, no further losses on these investments were recognized during the periods presented.

Interest income, net was $6.1 million in the three months ended March 31, 2025, compared to $11.7 million in the three months ended March 31, 2024, a decrease of $5.6 million primarily due to lower average cash balances invested in money market funds and marketable debt securities.

Loss on Investments

Loss on investments was $6.9 million and $36.3 million for the three months ended September 30, 2024 and 2023, respectively, and $16.3 million and $44.8 million for the nine months ended September 30, 2024 and 2023, respectively.

In the 2023 periods, we recorded higher impairment losses on our non-marketable equity securities compared to the comparable 2024 periods.

Loss on Deconsolidation of Subsidiary

In the third quarter of 2024, we recorded a $7.0 million loss on our deconsolidation of our former foreign subsidiary Altar as a result of a sale.

Loss on investments was $3.7 million and $2.5 million in the three months ended March 31, 2025 and 2024, respectively.

The $1.1 million increase was primarily driven by fluctuations in the stock prices of marketable equity securities, partially offset by lower impairment losses on our non-marketable equity investments in privately held companies compared to the same period in 2024.

We assess our non-marketable equity investments quarterly for potential impairment and remeasure them to fair value when events or changes in circumstances indicate that their carrying value may not be recoverable.

Change in Fair Value of Warrant Liabilities

The change in fair value of warrant liabilities was a gain of $1.5 million and $1.9 million for the three months ended September 30, 2024 and 2023, respectively, and a gain of $5.7 million and a loss of $1.4 million for the nine months ended September 30, 2024 and 2023, respectively.

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.

Other Income, Net

Other income, net decreased by $1.3 million and $6.2 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023, primarily due to a decrease in sublease rent income as a result of the deconsolidation of Zymergen.

The change in fair value of warrant liabilities was zero for the three months ended March 31, 2025, compared to a gain of $0.9 million for the three months ended March 31, 2024.

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

An increase or decrease in the value of our common stock results in a loss or gain, respectively, in the fair value of warrant liabilities.

As of March 31, 2025, these warrant liabilities had substantially no value.

Other Income (Expense), Net

We recorded a net other expense amount of $4.3 million in the three months ended March 31, 2025, compared to a net other income amount of $2.0 million in the three months ended March 31, 2024, a decrease of $6.3 million.

This decrease was primarily due to a loss on the change in fair value of a note receivable accounted for under the fair value option recorded in the first quarter of 2025.

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, 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 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 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.

In addition, our presentation of these measures should not be construed as an inference that our future results will be unaffected by future income or future expenses similar to those excluded when calculating these measures.

Our computation of these measures, especially Adjusted EBITDA, may not be comparable to similarly titled measures of other companies because not all companies calculate these measures in the same way.

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 and nine months ended September 30, 2024 and 2023:

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

Accordingly, the first quarter of 2024 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:

Three Months Ended March 31,

(in thousands) 2025 2024

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Interest income, net (6,081) (11,711)

Income tax expense (benefit) (375) (22) (154) 127

Income tax expense 88 31

Depreciation and amortization 15,366 12,869

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20,800 42,397

Impairment expense (3)

— 112,403 47,858 121,404

Restructuring charges (3)

2,949 — 20,015 —

Merger and acquisition related expenses (5)

(796) 12,253 6,110 43,127

Loss on equity method investments — — — 1,516

Loss on investments 3,693 2,544

Loss on deconsolidation of subsidiary 7,013 — 7,013 —

Change in fair value of warrant liabilities — (940)

Merger and acquisition related expense (income) (4)

Change in fair value of convertible notes 5,285 1,326

Adjusted EBITDA $ (47,451) $ (117,001)

$ (20,014) $ (83,820) $ (236,216) $ (263,598)

(1) All periods include non-cash revenue when earned, including $45.4 million in the three and nine months ended September 30, 2024, recognized pursuant to the termination of revenue contracts with Motif (see Note 14 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

(2) Includes $0.2 million and $1.1 million in employer payroll taxes for the three months ended September 30, 2024 and 2023, respectively, and $2.9 million and $4.3 million for the nine months ended September 30, 2024 and 2023, respectively.

(3) For 2024, includes $47.9 million related to goodwill impairment.

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

For the nine months ended September 30, 2023, includes a $25.2 million impairment loss on lab equipment and a $96.2 million impairment loss on lease assets associated with the 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.

(1) All periods include non-cash revenue when earned, including $7.5 million recognized in the three months ended March 31, 2025, pursuant to the release of deferred revenue related to the mutual termination of a customer agreement.

(2) Includes $0.4 million and $1.6 million in employer payroll taxes for the three months ended March 31, 2025 and 2024, respectively.

(3) Restructuring charges primarily consist of employee termination costs from the reduction in force commenced in June 2024.

(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) 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 $19.8 million and $4.0 million in the nine months ended September 30, 2024 and 2023, respectively.

(i) legal, consulting, and accounting fees associated with acquisitions;

(ii) post-acquisition employee retention bonuses;

(iii) (gain)/loss from changes in the fair value of contingent consideration liabilities resulting from acquisitions;

and (iv) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs.

Not included in this adjustment are acquired in-process research and development expenses, which totaled zero and $16.9 million for the three months ended March 31, 2025 and 2024, respectively.

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.

Accordingly, all common shares presented herein relating to periods prior to this date 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 $1,509.6 million, inclusive of $760.0 million from investments from certain accredited investors for 1.9 million shares of our Class A common stock.

As of September 30, 2024, we had cash and cash equivalents of $616.2 million, which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.

Upon the closing of our merger with SRNG in September 2021, we received net proceeds totaling approximately $1.5 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 March 31, 2025, we had cash and cash equivalents and marketable securities of $516.9 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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• 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 and expand our operational, financial and management systems and support our operations;

• develop and expand our offerings;

• 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;

2 unchanged sentences

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2025 2024

6 unchanged sentences

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024 consisted of a net loss of $439.5 million, adjusted for a net decrease in cash due to changes in operating assets and liabilities of $91.8 million and non-cash charges of $254.2 million.

The net change in operating assets and liabilities was primarily driven by a $31.1 million decrease in accounts payable, accrued expenses and other current liabilities primarily due to the payment or release of restructuring-related accruals and litigation costs, a $67.8 million decrease in deferred revenue primarily from a one-time release of a deferred revenue balance associated with a terminated customer contract, and a $11.4 million decrease in operating lease liabilities from rent payments, partially offset by a $19.2 million decrease in operating lease right-of-use assets from lease incentives received.

Non-cash adjustments primarily consisted of $47.4 million in depreciation and amortization, $91.8 million in stock-based compensation expense, $16.3 million loss on investments, $20.6 million non-cash lease expense, $19.8 million in acquired in-process research and development expense, and $47.9 million in goodwill impairment.

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

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

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

Net cash used in operating activities for the three months ended March 31, 2025 consisted of a net loss of $91.0 million, adjusted for net change in operating assets and liabilities of $11.6 million and non-cash charges of $51.0 million.

The net change in operating assets and liabilities was primarily due to (i) a $12.5 million decrease in deferred revenue primarily from a one-time release of a deferred revenue balance associated with a terminated customer contract, (ii) a $4.8 million decrease in operating lease liabilities from rent payments, and (iii) a $4.7 million increase in accounts receivable due to timing of customer billings, partially offset by (iv) a $6.4 million increase in accounts payable, accrued expenses and other current liabilities primarily due to a loss accrual associated with a minimum purchase obligation under a supplier agreement, and (v) a $3.7 million decrease in operating lease right-of-use assets from lease incentives received.

Non-cash adjustments primarily consisted of $20.4 million of stock-based compensation expense, $15.4 million of depreciation and amortization, $7.4 million non-cash lease expense, a $4.0 million change in fair values of various assets and liabilities, and a $3.7 million loss on investments.

Net cash used in operating activities for the three months ended March 31, 2024 consisted of a net loss of $165.9 million, adjusted for a 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 $10.9 million increase in accounts payable, accrued expenses and other current liabilities and (ii) a $6.8 million increase in accounts receivable, partially offset by (iii) a $4.1 million decrease in operating lease liabilities from rent payments and (iv) a $2.9 million decrease in deferred revenue.

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

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 primarily consisted of $48.8 million in purchases of property and equipment related to Foundry capacity and capability investments, $5.4 million paid for the acquisition of certain Zymergen assets, and $4.0 million in proceeds from the sale of investment securities.

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

Net cash used in investing activities for the three months ended March 31, 2025 primarily consisted of purchases of marketable debt securities of $191.2 million and purchases of property and equipment of $7.6 million related to the build-out of new office and laboratory space near our headquarters.

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.

Financing Activities

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

Net cash used in financing activities for the three months ended March 31, 2025 primarily consisted of principal payments on finance leases.

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.

Critical Accounting Estimates

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 nine months ended September 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 for nine months ended September 30, 2024.

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 2024 Annual Report.

Recently Issued Accounting Pronouncements

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis