Q1 2022 Ginkgo Bioworks Holdings Inc Earnings Call

May 16, 2022

Mark Dmytruk, our CFO.

So thanks again for joining us and we look forward to providing you with an update on our last quarter.

Thanks again for joining us.

We look forward to providing you with an update on our last quarter.

As a reminder, during the presentation today, we'll be making some forward-looking statements which involve risks and uncertainties.

As a reminder, during the presentation today, we'll be making some forward looking statements, which involve risks and uncertainties. Please refer to our filings with the securities and Exchange Commission to learn more about these risks and uncertainties.

Please refer to our filings with the Securities and Exchange Commission to learn more about these risks and uncertainties.

Well follow our standard agenda for these calls will provide an update on our financial progress off of taking an opportunity to dive deeper into an area of strategic importance as folks continue to develop a deeper understanding of what we're building.

We'll follow our standard agenda for these calls.

As I said before if theyre topics you'd like to see in a future deep dive just let us know we'd love to include that in the future as usual will end with a Q&A session and I will take questions from analysts investors and the public you can submit those questions to us in advance, including right now via Twitter that hashtag is ginkgo results or via email at Investor <unk> Dot Com and now I'll hand, it over to Jason.

We'll provide an update on our financial progress, while also taking an opportunity to dive deeper into an area of strategic importance as folks continue to develop a deeper understanding of what we're building.

As I've said before, if there are topics you'd like to see in a future deep dive, just let us know.

Thanks, Anna Murray as a reminder, <unk> mission is to make biology easier to engineer.

And this sort of focus on the tools and technologies and it's been better biology is really what led to the platform business model.

We're really pushing here at kimco and the way that works is the customer brings ideas to ginkgo for a cell that they want to engineered to do something.

We use our platform to the engineered to program that sell for them to meet their specification.

We'd love to include those in the future.

And the reason customers want to work with US is there are two core assets in that in that platform. The first is our foundry right. So this is a highly automated lab.

The sort of key value proposition for our customers as we can take what is typically an underutilized fixed cost investment I E. Their internal R&D labs at their sites and turn that into a highly efficient variable costs for them. If they instead engaged we think those boundary as a service provider of that sort of <unk>.

Activity in the analogy here is something similar to what you saw where companies made the choice to outsource on Prem servers in it too.

<unk> cloud server providers that sort of transition is a similar in spirits.

And then those scale economics also similar in spirit to what we're trying to achieve with the foundry.

Second asset we have at the company is what we call our code base and the code base is the data assets and it's basically as we do these projects for customers. We're accumulating physical strains data genetics various learnings we're training models machine learning models and so on that we can then make available so.

So that we don't need to reinvent the wheel for every new cell program when a customer comes to us we get to leverage the experience of our previous work and so for the potential customers that might be tuning into the call today. Our whole model is to make that platform available for your project as fast as possible. So if you see something we've done.

As usual, we'll end with a Q&A session, and I'll take questions from analysts, investors, and the public.

In your industry or related project, and you say Oh thats similar to something I'm interested in that means that's the type of things.

Getting better at you might be a good opportunity to reach out if you see a technology, we've acquired will talk today about.

Sure.

The acquisition of <unk> is really interesting tech that's of interest to you for your project, we can make that available quickly specifically for your for your work and so.

It is an idea of making these things available fast so that you don't have to make those investments yourself.

One of the most important metrics for our success.

You can submit those questions to us in advance, including right now via Twitter, that hashtag is GinkgoResults, or via email at investors at ginkgobioworks.com.

Coming up and we've had a great quarter here is seeing new customers choose to work with ginkgo for their R&D efforts. So in this first quarter. We added 11 diverse new cell programs, including some that will push us deeper into new areas of engineering for the company. One I think is really exciting is a company called <unk> engineering.

And now I'll hand it over to Jason to kick things off.

Thanks, Anna-Marie.

Plants to glow and so this is a project where we're working to improve the brightness of these petunias they have.

There is a project in anaerobic bacteria for microbiome applications, so being able to work with cells that grow without the presence of oxygen right and so that requires a different types of investments on our platform that we've been making our bio security efforts, which we view as a critical component of our platform and we will talk about continued to grow well in the first quarter of 2022.

As new variance threatened to disrupt schools opening after the holidays with omicron <unk>.

Concentrix, our bio security and public health business has continued to build real trust in the market is now serve well over 5000 organizations and generated $147 million in the first quarter alone.

We spent a lot of time in our last earnings call talking about the many challenges of building a business on the back of hard technology like what we are developing here.

As a reminder, Ginkgo's mission is to make biology easier to engineer, right?

We're fortunate to have a strong financial foundation with about $1 billion $5 in cash which gives us the runway, we believe will need to achieve our mission in the process. We will aim to become the obvious partners for the world.

<unk> cell programming.

One opportunity that our financial position unlocks as M&A, we're ramping up our M&A activities in 2022 and since our last call. We closed our acquisition of <unk> as I mentioned and welcome that team led by Andreas Meyer to ginkgo.

<unk> also announced a series of planned transactions with bear, including the acquisition of their west Sacramento R&D team and facility in a large new collaborations with them without which is super exciting.

And this sort of focus on the tools and technologies of synthetic biology is really what led to the platform business model that we're really pushing here at Ginkgo. And the way that works is a customer brings ideas to Ginkgo for a cell that they want to engineer to do something.

And we use our platform to engineer, to program that cell for them to meet their specification, right?

I'm excited to talk about that transaction and we'll spend a fair bit of time coming up talking about that so with that I'm going to hand, it off to mark to walk through our first quarter financial performance.

And the reason customers want to work with us is there are two core assets in that platform.

Thanks, Jason our first quarter financial results reflect strong growth driven by continued execution of our Biosecurity business. We also continue to see an UCL program growth and diversification in our foundry.

The first is our foundry, right?

So this is a highly automated lab.

Total revenue in the first quarter of 2022 increased to $168 million representing growth of nearly four times the first quarter of 2021.

I'll start by discussing yourself programming business, which we also describe as our foundry. We added 11, new cell programs to the boundary platform in the first quarter of 2022 as a reminder, our new cell program counts as a key kpis that we're particularly focused on adding more programs benefits us.

And the sort of key value proposition for our customers is we can take what is typically an underutilized fixed cost investment, i.e. their internal R&D labs at their site, and turn that into a highly efficient variable cost for them if they instead engage with Ginkgo's foundry as a service provider of that sort of lab activity.

And the analogy here is something similar to what you saw where companies made the choice to outsource on-prem servers and IT to cloud server providers.

That sort of transition is similar in spirit, and those scale economics also similar in spirit to what we're trying to achieve with the foundry.

Strategically by driving our scale economics, diversifying customers and programs accumulating codebase accumulating.

The second asset we have at the company is what we call our code base, and the code base is a data asset.

And it's basically, as we do these projects for customers, we're accumulating physical strains, data, genetics, various learnings. We're training models, machine learning models and so on that we can then make available so that we don't need to reinvent the wheel for every new cell program when a customer comes to us. We get to leverage the experience of our previous work.

Emulating potential sources of downstream value share, we only counter program that has a certain expectation of scale and are often doing several proof of concept programs as well, which could ultimately lead to larger paid programs.

And so for the potential customers that might be tuning in on the call today, our whole model is to make that platform available for your project as fast as possible.

So if you see something we've done, you know, in your industry or related project, you say, oh, that's similar to something I'm interested in.

That means that's the type of thing Ginkgo's, you know, getting better at.

We supported a total of 64 active programs in the first quarter of 2022 across 32 customers on our foundry platform.

That might be a good opportunity to reach out.

If you see a technology we've acquired, we'll talk today about, you know, we completed an acquisition of FGen, it's really interesting tech.

You know, if that's of interest to you for your project, we can make that available quickly, specifically for your work.

And so it is an idea of making these things available fast so that you don't have to make those investments yourself.

This represents substantial growth and diversification in programs relative to the 44 active programs in the first quarter of 2021 with strong growth coming from the pharma and biotech industry in particular.

You know, one of the most important metrics for our success coming up, and we've had a great quarter here, is seeing new customers choose to work with Ginkgo for their R&D efforts. So in this first quarter, we added 11 diverse new cell programs, including some that will push us deeper into new areas of engineering for the company.

One I think is really exciting is a company called LightBio that's engineering plants to glow.

Foundry revenue was $21 million in the quarter, a decrease of 5% when compared with the first quarter of 2021.

When compared to the prior sequential quarter or the year over year comparable quarter.

Foundry revenue was impacted by the timing of downstream value share and the mix shift driven by new programs still ramping up versus certain large programs completing in 2021.

It typically takes some time for new programs to reach mature run rate and due to our contract structures. We often recognized an outsized portion of the contract revenue in the later stages of the contract.

As expected we also see some impact from our active decisions to tune deal structures to optimize for future downstream value share in our customer collaborations sometimes in exchange for lower upfront usage fees to be clear. This type of volatility is not unexpected at our stage and as will share later, we are re.

Reiterating our full year foundry revenue guidance.

Also as a reminder, in the third and fourth quarters of 2021, we recognized sizable milestone payments relating to our collaboration with Kronos in the first quarter of this year, we did not recognize revenue from any material milestones and so this is an example of where timing of downstream value share and can affect trend lines again, something we consider.

And so this is a project where we're working to improve the brightness of these petunias they have.

There's a project in anaerobic bacteria for microbiome applications, so being able to work with cells that grow without the presence of oxygen, right?

And so that requires a different types of investments on our platform that we've been making.

And our annual guidance.

And one additional comment on related party versus third party revenue mix related parties represented 63% of foundry revenue in the first quarter of 2022 compared to 56% in the first quarter of 2021.

This mix shift primarily represents the timing of revenue related to certain program, who is not a reversal in the general trend that we saw last year with related.

The revenue mix decreasing as a reminder, though we do not manage the business around related party revenue mix or particular targets for this metric as related party revenue simply highlighting certain companies in which we are granted a significant equity position in lieu of royalties as compensation for downstream value.

And as we've discussed in the past this type of transaction as a part of our business model, which we view as strategic and which we intend to continue now turning to Biosecurity. Our concentrix offering continued its strong upward momentum in the first quarter of 2022 generating $147 million of revenue in the quarter.

Our biosecurity efforts, which we view as a critical component of our platform and we'll talk about, continue to grow well in the first quarter of 2022, particularly as new variants threaten to disrupt schools opening after the holidays with Omicron.

Bio security revenue consists primarily of product and service revenue from our end to end Covid testing offerings and the growth was driven primarily by <unk> to 12, <unk> testing, which continued ramping up in Q1 due to the omicron Marriott and the demonstrated benefits of pool testing in schools.

Concentric, our biosecurity and public health business, has continued to build real trust in the market, has now served well over 5,000 organizations and generated $147 million in the first quarter alone.

Bio security gross margin was 42% in the first quarter consistent with the prior fourth quarter performance.

We're extremely proud of what we've accomplished thus far in Biosecurity, which marketable what our team has built in such a short time and it's a privilege to be able to provide the service and help communities soon but in this nascent market. We've been consistently cautious about projecting forward revenue due to uncertainties youll.

We spent a lot of time in our last earnings call talking about the many challenges of building a business on the back of hard technology, like what we're developing here.

You know, we're fortunate to have a strong financial foundation with about a billion and a half dollars in cash, which gives us the runway we believe we'll need to achieve our mission.

In the process, we will aim to become the obvious partners for the world's cell programming.

Youll see that Youll see that conservatism reflected in our updated guidance and.

One opportunity that our financial position unlocks is M&A. We're ramping up our M&A activities in 2022.

And we will continue to provide regular updates as the business evolves.

And since our last call, we closed our acquisition of FGEN, as I mentioned, and welcomed that team, led by Andreas Meyer, to Ginkgo.

We also announced a series of planned transactions with FAIR, including the acquisition of their West Sacramento R&D team and facility, and a large new collaboration with them, which is super exciting.

Jason will talk in more detail about we're doing to build on the foundation, we have in <unk> securities.

And now I will provide more commentary on the rest of the P&L.

So I'm excited to talk about that transaction, and we'll spend a fair bit of time coming up talking about that.

These figures exclude stock based compensation expense, which is shown separately.

So with that, I'm going to hand it off to Mark to walk through our first quarter financial breakdown.

Also I wanted to draw your attention to our new segment reporting schedule that we're including in our financials going forward.

Which is replicated in the appendix to this presentation.

R&D expense, excluding stock based comp declined from $60 million in the first quarter of 2000 $21 million to $56 million in the first quarter of 2022, we incurred a significant amount of R&D expense relating to our bio security operating in the first quarter of last year approximately <unk> <unk>.

Thanks, Jason.

Our first quarter financial results reflect strong growth driven by continued execution of our biosecurity business.

We also continue to see new cell program growth and diversification in our found, Total revenue in the first quarter of 2022 increased to $168 million, representing growth of nearly four times the first quarter of 2021.

I'll start by discussing our cell programming business, which we also describe as our boundary. We added 11 new cell programs to the boundary platform in the first quarter of 2022.

$3 million, which was substantially phased out by the second half of 2021.

R&D expense related to the foundry increased as expected year over year, driven by expansion of foundry capacity and increased breadth of capabilities to support both current and future collaborations.

As a reminder, our new cell program count is a key KPI that we're particularly focused, Adding more programs benefits us strategically by driving our scale economics, diversifying customers and programs, accumulating code base and accumulating potential sources of answering value share. We only count a program that has a certain expectation of scale and are often doing several group of concept programs as well, which can ultimately lead to larger paid programs. We supported a total of 64 active programs in the first quarter of 2022 across 32 customers on our Foundry platform. This represents substantial growth and diversification in programs relative to the 44 active programs in the first quarter of 2021, with strong growth coming from the pharma and biotech industry in particular.

Foundry revenue was $21 million in the quarter, a decrease of 5% when compared with the first quarter of 2021. When compared to the prior sequential quarter or the year over year comparable quarter, boundary revenue was impacted by the timing of downstream value share, and the mix shift driven by new programs still ramping up versus certain large programs completing in 2021. It typically takes some time for new programs to reach mature run rates, and due to our contract structures, we often recognize an outsized portion of a contract's revenue in the later stages of a contract.

As expected, we also see some impact from our active decisions to tune yield structures to optimize for future downstream value share in our customer collaborations, sometimes in exchange for lower upfront usage fees.

To be clear, this type of volatility is not unexpected at our stage.

G&A expense, excluding stock based comp grew to $42 million in the first quarter of 2022 compared to $18 million in the first quarter of 2021, as we invested in business development and all other G&A functions to support the growth of new customers and programs.

Higher level of foundry.

<unk> and our bio security offerings.

With our.

Our very extensive public company readiness efforts.

It is important to note that our net loss includes a number of noncash income <unk> expenses as detailed more fully in our financial statements, including one stock based compensation.

To mark to market adjustments on equity investments, where we have elected the fair value option three.

<unk> reductions in the carrying value of those platform ventures accounted for as equity method investments, which we typically record in the quarter that equity is issue to us.

And for <unk>.

Mark to market adjustments on public and private placement warrants inherited as part of the destock that are now classified as a liability on our balance sheet.

Because of these noncash and other nonrecurring items, we look to adjusted EBITDA is a more indicative measure of our profitability.

Adjusted EBITDA in the quarter was negative $2 million compared.

Compared to negative $51 million in the comparable prior year period.

A full reconciliation of EBITDA is provided in the appendix to this presentation and in our earnings release adjust.

Adjusted EBITDA was favorably impacted by the growth in our bio security business in the quarter.

And finally capex in the first quarter of 2022 was $4 million.

Reflecting foundry capacity and capability investments.

Capex was impacted by timing of equipment purchases and projects and so we would expect to see significantly higher capex in future quarters. This year.

One final comment on stock based compensation expense.

As a reminder, we provided extensive disclosure in our Q4 earnings release relating to GAAP accounting for the modification of restricted stock units issued prior to <unk>, becoming a public company.

Our Q4 disclosures indicated that as of December 31, 2021, we expected a further $2 $2 billion of stock comp expense to be booked in 2022.

And beyond relating to this adjustment.

The calculation of which was based on the stock price of $13 59 on November 17 2021.

Substantially all of the $659 million stock compensation expense in the first quarter.

Related to this wind down and we would expect most of the remainder to be booked in the rest of 2022 with a small tail that extends into 2023 and beyond.

Now I'd like to provide some commentary on our revenue outlook for 2022.

And as we'll share later, we are reiterating our full year foundry revenue.

We continue to expect to add an incremental 60, new cell programs with diversity in end markets as well as between new and existing customers in full year 2022.

We are increasing our full year guidance for total revenue to $375 million to $390 million.

Also, as a reminder, in the third and fourth quarters of 2021, we recognize sizable milestone payments relating to our collaboration with Pronos.

An increase of $50 million from our prior outlook.

We are reiterating our foundry revenue outlook to be in a range of $165 million to $180 million for full year 2022.

We have line of sight to material downstream value share in the latter half of the year, which we expect to drive significant growth versus the prior year in.

In the first quarter of this year, we did not recognize revenue from any material milestones. And so this is an example of where timing of downstream value share can affect trend lines.

Again, something we consider in our annual guidance.

In addition, we have launched over 30, new cell programs in the past three quarters.

And one additional comment on related party versus third party revenue mix.

And as those programs ramp up we expect to see a higher contribution of revenue from foundry usage fees.

Related parties represented 63% of boundary revenue in the first quarter of 2022, compared to 56% in the first quarter of 2021. This makeshift primarily represents the timing of revenue relating to certain programs, and it's not a reversal in the general trend that we saw last year with related party revenue mix decrease.

As a reminder, though, we do not manage the business around related party revenue mix or set particular targets for this metric. As related party revenues simply highlight certain companies in which we are granted a significant equity position in lieu of royalties as compensation for downstream value.

And as we've discussed in the past, this type of transaction is a part of our business model, which we view as strategic, and which we intend to continue.

And of course, we expect our strong pipeline to contribute a significant number of new programs to be launched during the course of the year.

Based on our strong performance in Biosecurity and the first quarter. We now expect bio security revenue to be at least $210 million for full year 2022.

Now turning to biosecurity, our concentric offering continued its strong upward momentum in the first quarter of 2022, generating $147 million of revenue in the quarter. Biosecurity revenue consists primarily of product and service revenue from our end-to-end COVID testing offerings. And the growth was driven primarily by K-12 school testing, which continued ramping up in Q1 due to the Omicron variants and the demonstrated benefits of school testing in schools. Biosecurity gross margin was 42% in the first quarter, consistent with the prior fourth quarter performance.

An increase from our prior outlook of at least $160 million.

We're extremely proud of what we've accomplished thus far in biosecurity.

It's remarkable what our team has built in such a short time.

And it's a privilege to be able to provide this service and help communities save.

As was the case throughout 2021.

But in this nascent market, we've been consistently cautious about projecting forward revenue due to uncertain, You'll see that you'll see that conservatism reflected in our updated guidance, and we'll continue to provide regular updates as the business evolves.

Still remains significant uncertainty in the bio security market in general.

Any of the states 10 to 12 testing contracts, we're supporting our funded through the end of the school year.

And there is uncertainty about the funding available and level of testing in the next fiscal school year.

<unk> is actively working on new opportunities and bio security, including internationally. However, the timing and amounts of revenue from these opportunities is also uncertain.

In summary, we are pleased with our overall progress we are executing on new program growth on the foundry platform to drive scale Economics program diversity accumulation of code base, the accumulation of potential future downstream value share.

Another strong quarter from Biosecurity is contributing positively to cash flow and providing further signals that we are well positioned to capitalize on our longer term business opportunity.

And the company's total cash position of $1 5 billion.

Remains strong and provides us with a multi year runway to execute on our ambitious growth plans.

And now Jason back to you.

Jason will talk in more detail about what we're doing to build on the foundation we have in, And now I'll provide more commentary on the rest of the PNL, where noted these figures exclude stock based compensation expense, which is shown separately.

Thanks Mark.

This was a great quarter for ginkgo, our strategy at the company right now is actually pretty simple we want to maintain a strong cash margin of safety and as Mark mentioned ending the quarter with about 1 billion or $5 in cash Australia does that for us right now.

Also, I want to draw your attention to a new segment reporting schedule that we are including in our financials going forward, and which is replicated in the appendix to this presentation.

Add new programs from a diverse range of markets and customers and we want to keep increasing the scale of our platform, which is I talked about earlier improves the economics of the work we do for customers right as our scale goes up.

Lower costs and then ultimately we can provide that back to customers over time, if we keep doing that in the coming years, then well I think foundry revenue will be a little lumpy in other words, we'll see more or less quarter to quarter based on when programs finish and provide that downstream value share, which ultimately is a bit out of our control.

Because many of those things are dependent on customer activities at.

It should position us quite nicely to keep growing year over year and so I think this is an important strategic point for us as a company and to stay focused on making the investments that allow us to grow that platform with a good margin of safety and add a wide and diverse range of customers. So I'm thrilled we're doing that.

R&D expense, excluding stock-based comp, declined from $60 million in the first quarter of 2021 to $56 million in the first quarter of 2022. We incurred a significant amount of R&D expense relating to our biosecurity operating in the first quarter of last year, approximately $23 million, which was substantially phased out by the second half of 2021.

Okay.

<unk>.

We spoke on the strategic session that we spent a lot of time kind of level setting about the current market environment I'm talking about both the difficulty in what we do at <unk> as well as our strong footing to accomplish that big mission and so today I wanted to go over a few topics first as Mark just described we are wrapping up now.

Other extremely strong quarter in our bio security business, we will talk about the impact we've been having there and some of the new technologies, we're piloting to continue to expand that offering.

I wanted to spend the most time today talking about our recent announced transaction with there are this is a great opportunity for us in AG biologicals and a signal of what we expect to come in other areas.

And finally, I hate to say it but the market hasnt changed a ton since our last call. We said at that and we'll say it again, it's not fun to live through a bear market, but we think it's valuable for ginkgo, we're careful about maintaining a comfortable margin of safety in this kind of market environment and our balance sheet will allow us to accelerate our leadership, while others in the sector may need to.

Paul back Alright, so let's dive in.

G&A expense, excluding stock-based comp, grew to $42 million in the first quarter of 2022, compared to $18 million in the first quarter of 2021, as we invested in business development and all other G&A functions to support the growth of new customers and programs, higher level of foundry activity, and our biosecurity offering, along with our very extensive public company readiness.

As Mark mentioned, we did over $140 million in revenue just in Q1 and in bio security.

Ginkgo, we tend to make.

Bold decisions and lean in when we think we're right and leaning into Biosecurity in the early days of the pandemic was no exception and but frankly the team continues to astonish me with their ability to execute here. It has not been easy to do this in this environment. If you play back the tape to January for example, Oswald runner enormous amount of pressure on me.

It is important to note that our net loss includes a number of non cash income and or expenses as detailed more fully in our financial, including one stock based compensation to mark to market adjustments on equity investments where we have elected the fair value option.

<unk> was taken off completely and the team again I wanted to publicly give credit to an enormous amount of effort by the team at <unk> and bio security to deliver there for our customers and their communities.

So the biotech securities we built to date is a.

Very strong foundation and it's also got US a seat at the table to help shape. The solutions that we hope will prevent future Pandemics right. We expect to continue to support local communities and keep children's safely and small for these statewide case, while testing programs and we are expanding our offerings over time to actually include less disruptive method six you can see here.

Reductions in the carrying value of those platform ventures accounted for as equity method investments, which we typically record in the quarter that equity is issued to us, and four mark to market adjustments on public and private placement warrants inherited as part of the DSPAC that are now classified as a liability on our balance, Because of these non-cash and other non-recurring items, we look to adjust the EBITDA as a more indicative measure of our profitability.

Adjusted EBITDA in the quarter was negative $2 million compared to negative $51 million in the comparable prior year period. The full reconciliation of EBITDA is provided in the appendix to this presentation and in our earnings release.

Justin Ibiza was favorably impacted by the growth in our biosecurity business in the course.

Sure.

Announced that one of the it demonstrates we are doing in wastewater testing as a way to do testing in schools as it stands today, we do in most places group pool testing sort of dip in the nose and Theyre, all being collected and run at a nearby lab could we make that even lighter weight on schools through things like looking at wastewater. We've also continued our collaboration with the CDC.

<unk> and express check to provide testing services for travelers and utilizing our sequencing capacity to help identify and track new variants. So our program. We're quite proud of what was the first in the U S to identify omicron sub bearing SBA to MBA, three and among the pursuit of <unk> VA for at our country's ports of entry.

April 2022, and then we do this work we share these samples with the CDC laboratories for further characterization and Thats been a really nice engagement with.

Public health leaders and the government I think that's actually quite important in the long term for these technologies.

And finally, CapEx in the first quarter of 2022 was $4 million, reflecting boundary capacity and capability. CapEx was impacted by timing of equipment purchases and projects. And so we would expect to see significantly higher CapEx in future quarters.

Finally, we are launching pilots across several new modalities new ways to do this that we believe will support a more preventative approach to bio security right because thats really the future here is making sure things like Covid don't happen again, and as far as that identifying novel pathogen and less disruptive way as I mentioned in wastewater is also technologies like about paths of air monitoring and collect in the air and <unk>.

One final comment on stock based compensation expense.

Having that get on a filter and doing a test today back in the lab and maybe in the future right. There in that device thing kind of like a smoke detector right.

And again I'd highlight either.

But when you bought it for a pandemic thrown at us.

Arent expecting that and we sort of way.

Went to battle with the technologies, we had with some time.

Modern synthetic biology, and biotech tools, we can do a lot better.

And it's not on this page, but we're also seeing a real traction in our work with international organizations and countries biology does not respect waters, we've seen that in the pandemic and so our bio security.

Here in the U S, but frankly needs to be global bio security, that's the only way we get this right.

But we're looking forward to sharing more details with you on our emerging international efforts in upcoming calls.

Before I move off bio security.

Do you want to mention that although I'm I'm very proud of the value.

<unk> commercial value of bio security is trading for ginkgo is a business as we said before one of them.

One of our cultural tenets here that we care how our platform is used in other words the technology, we're developing here at kimco.

Wanted to have a positive impact in the world and I think what we've been doing in K 12 schools is a great example of that I wanted to share just a few of the many comments.

From our partners there so.

Dr. Mark Daily Secretary of California, Health and Human Services Agency.

Gave a presentation showed that chart there I'm talking about California was among the lowest pediatric hospitalizations compared to other states. This is in part about the important mitigation tools that we've equipped schools with throughout this year, we built and put a lot of energy into building up testing capacity last year Governor Sununu, and New Hampshire talks about the flexibility and scalability of the.

Of the state testing program and that you see there.

The communities there can scale these programs up or down based on testing data about transmissibility in that school and I think this is actually a really important point as this.

As you see these things come in waves, so having the technology there and the events you needed again keep your school open which very much was a big part of the story with omicron in many states.

Do you want to have them available.

And from clearly our Hirsch executive director for Covid response of Baltimore City public schools, instead of just having to make blanket district wide decisions, we actually have lifetime data right.

That idea of sort of like a weather map like what's the weather like today I ask that you can make local decisions I think is an important way to think about things in the future for bio security I do want to highlight Clio and the Baltimore City public schools. They were one of the earliest adopters of the sort of regular school testing in the entire country right thing that we are now doing.

Thousands of schools really in many ways has pioneered with the folks at Baltimore's IP public schools and her team have been leaders route.

To keep our community schools opened in safe through the waves of this pandemic and works by excited to expand on these efforts as the bio security industry works in close concert with public health leaders rights does not is it private sector as a public sector. Both together is going to be the best way to do this.

Due to the impact of infectious disease, and as I mentioned with monitor in biotech. We can just do a lot better than the tools. We had when this whole thing started and so I'm heartened that governments in the U S and worldwide I will step up after this kind of a wakeup call up COVID-19 to invest in this infrastructure and we are seeing that and we're quite proud to be playing a role.

Here.

Okay.

As a reminder, we provided extensive disclosure in our Q4 earnings release relating to GAAP accounting for the modification of restricted stocks units issued prior to Ginkgo becoming a public company. Our Q4 disclosures indicated that as of December 31, 2021, we expected a further $2.2 billion of stock comp expense to be booked in 2022 and beyond relating to this adjustment. The calculation of which was based on the stock price of $13.59 on November 17, 2021.

To use most of my time today with you to chat about the planned transaction that we just announced with bear.

As a reminder, this earlier ginkgo is a horizontal platform in other words, we want to serve.

Any application of engineered cell or in any market, whether it's a small company or a large company we think ultimately.

All of those customers best by putting them on the same platform and so we as a result of work on diverse programs across a variety of industries and technical approach as you can see some of our customers here in the consumer <unk> industrial and environment add food and nutrition pharma and biotech and I do think this breath as one of the things that remains one of the more unique things about above.

We can go in the industry, but today I do want to kind of laser us and focus on one of those segments in particular agriculture. Okay. So we recently announced our plans to acquire bears agricultural Biologicals R&D facility and I'll talk about what I mean by that and their team in West Sacramento, California, and also our planned.

Substantially, all of the $659 million stock compensation expense in the first quarter relates to this wind down, and we would expect most of the remainder to be booked in the rest of 2022, with a small tail that extends into 2023 and beyond.

Now I'd like to provide some commentary on our revenue outlook for 2022. We continue to expect to add an incremental 60 new cell programs with diverse city and end markets as well as between new and existing customers in full year 2022.

We are increasing our full year guidance for total revenue to 375 to $390 million, an increase of $50 million from our prior out, We are reiterating our Foundry Revenue Outlook to be in a range of $165 to $180 million for full year 2022.

We have line of sight to material downstream value share in the latter half of the year, which we expect to drive significant growth versus the prior year. In addition, we have launched over 30 new cell programs in the past three quarters. And as those programs ramp up, we expect to see a higher contribution of revenue from foundry usage fees.

And of course, we expect our strong pipeline to contribute a significant number of new programs to be launched during the course of the year.

Based on our strong performance in biosecurity in the first quarter, we now expect biosecurity revenue to be at least $210 million for full year 2022, an increase from our prior outlook of at least $160 million.

Follow on multi year strategic collaboration with bare okay. So as a customer so I wanted to chat with you about that transaction and the opportunities we see in agriculture. Because I think this is this is going to be a critical market for ginkgo coming up as we continue to grow alright, So just to state the obvious and sometimes I think people.

As was the case throughout 2021, there still remains significant uncertainty in the biosecurity market in general.

Many of the state K-12 testing contracts we are supporting are funded through the end of the school year. And there is uncertainty about the funding available and level of testing in the next fiscal school year.

Ginkgo is actively working on new opportunities in biosecurity, including internationally. However, the timing and amounts of revenue from these opportunities is also uncertain.

In summary, we are pleased with our overall progress. We are executing a new program growth on the Foundry platform to drive scale economics, program diversity, accumulation of code base, and accumulation of potential future downstream value.

I forgot about the agriculture industry. It is a major backbone of society.

Another strong quarter from biosecurity is contributing positively to cash flow and providing further signals that we are well positioned to capitalize on a longer term business opportunity, and the company's total cash position of $1.5 billion remains strong and provides us with a multi-year runway to execute on our ambitious growth.

And now, Jason, back to you.

Thanks, Mark.

This is a great quarter for Ginkgo.

Our strategy at the company right now is actually pretty simple. We want to maintain a strong cash margin of safety. And as Mark mentioned, ending the quarter with about a billion and a half dollars in cash surely does that for us right now.

It's where your food comes from but also things like give you a a cotton shirt on that's a product of the agriculture industry or getting a hamburger if its meat or plant based agriculture industry.

We want to add new programs from a diverse range of markets and customers. And we want to keep increasing the scale of our platform, which, as I talked about earlier, improves the economics of the work we do for customers, right? As our scale goes up, we have lower costs.

And then ultimately, we can provide that back to customers over time.

If we keep doing that in the coming years, then, well, I think boundary revenue will be a little lumpy. In other words, we'll, you know, see more or less quarter to quarter based on when programs finish and provide that downstream value share, which ultimately is a bit out of our control because many of those things are dependent on customer activities.

It should position us quite nicely to keep growing year over year.

And so, you know, I think this is an important strategic point for us as a company and to stay focused on making the investments that allow us to grow that platform with a good margin of safety and add a wide and diverse range of customers.

Going into into fuel blend that's coming from the agriculture industry.

And the inputs that enable that this industrial AG sector are huge right you have hundreds of billions of dollars going to help farmers grow larger and healthier plants every year.

So I'm thrilled we're doing.

If you want understand it's sort of like two big areas of technology development and act. So first is the biology itself right. So take <expletive> like the genetics of the corn plants.

Okay, so the last time we spoke on this strategic session, we spent a lot of time kind of level setting about the current market environment and talking about both the difficulty in what we do at Ginkgo, as well as our strong footing to accomplish that big mission.

And so today, I wanted to go over a few topics.

First, as Mark just described, we're wrapping up another extremely strong quarter in our biosecurity business.

We'll talk about the impact we've been having there, and some of the new technologies we're piloting to continue to expand that offering.

Have been being improved.

Literally thousands of years people have been breeding right mixing Oh. This is a toll plazas the tall plant, let's let's read them together like that process has been improving the underlying biology itself.

Frankly interpreters preindustrial times okay.

And then second is all the technologies wrapped around that biology, so chemical fertilizers pesticides herbicides for killing weeds automated and farm equipment drones to map that all these other things that are sort of wrapped around that that plant and the upcoming story is that in my view that the tools of biotechnology.

<unk> and synthetic biology, as those improve more and more of these adjacent tax of kind of wrapped around the biology will become part of the biology itself, Okay and that was a little bit the story of the first era of biotech, which really launched in earnest in the 19 nineties Roundup ready was that was a very valuable genetic tradeoffs and spilt Monsanto.

That was approved in 1996, so that that first round of biotech people are most familiar with back in the area of seeds and traits in other words, putting genetics into a corn plant itself and in the case of like around up to try to enable a more efficient herbicide and so however, the other biology that's out in the field.

Are all the microbes that live in the soil and on the plant itself. Okay. And these are also important contributors to the output of that field of plants and this is what it's called biologics agricultural biologicals or biologics in the AG industry and today there are products on the market like this and they are sold.

Using wild microbes, so microbes that have been identified in the field that okay. This particular microbe.

Our nutrient or provide some defense against the past and so it can be applied as a seed treatment like coated on our seed so that when you plant the seed the microbes grow along with it that's one of the things that we can also apply to the soil or our foliar, but theres a market for biologicals in the industry. Today. However, these in this sort of first generation of biotech were.

Passed over as targets for genetic engineering that was really focused on the plants and that's what's behind the change in the last few years and so I'll give you my favorite example of this.

Hi.

I really like to give this one because this was around nitrogen fertilizer production I was actually a chemical engineer my original training at M. I T and sort of the pride of chemical engineering as a process called behavior box process and it's how we make synthetic nitrogen fertilizer you basically Paul Knight.

Nitrogen out of the air right lot of nitrogen in the atmosphere you pulled out are to a big chemical plant you burn natural gas, but that nicely together with hydrogen you get ammonia.

You back that up you ship it out the field size is $80 billion worth of this goes to the farmers those on the crop right a chunk of it actually ends up in run off going into local water supplies, creating environmental issues around algae blooms and things like that and also.

About 4% of global natural gas is a huge greenhouse gas emitter, but.

We got to eat right.

That's it thank fertilizer is absolutely necessary to our food supply today. It is also unsustainable right in a in a carbon neutral future.

The amount of greenhouse gas, we're producing to do this it's something that we need to.

Get off and so one of the most exciting new solutions to this problem coming up is to leverage biology to produce that nitrogen fertilizer and what's cool is we know biology can already do that so.

You might remember like in elementary school learning about crop rotation.

Laguna right like a soybean for example, and lagoons have on their routes microbes that are effectively running haver Bosch right Theyre pulling Nigeria, IV are and they're making it available to the crop right, but they're doing this for free and so as a result lagoons use a lot less fertilizer and the reason we did that crop rotation was that these would help revitalize the soil.

For a different crops like corn that does not have those nitrogen fixing are collecting microbes and so we've had a joint venture with their joint over the last few years working on moving that pathway that nitrogen fixation from these other microbes that like live on Laguna into microbes that would would live on corn and I'm excited.

Second, I wanted to spend the most time today talking about our recent announced transaction with Bayer. This is a great opportunity for us in ag biologicals, and a signal of what we expect to come in other areas.

And finally, I hate to say it, but the market hasn't changed a ton since our last call.

That is part of the planned transaction coming up bear will be taking those biological assets forward for further development from our joint venture in this sort of out licensing to a commercial partner with follow on downstream value coming back to Gainesville. Upon commercial success that is the hope for outcome across all our self programming projects right as you know.

We said it then, we'll say it again. It's not fun to live through a bear market, but we think it's valuable for Ginkgo.

And so we'd love to see this.

Nitrogen fixation succeed at scale it will be a big commercial opportunity. It's also the sort of product that highlights how synthetic biology can have transformational impacts as we march towards a carbon neutral economy right. I mean, this is the sort of thing that.

AI and machine learning and computers, just don't help right.

Salt fundamentally a problem it because it is a physical problem out in the real world, we need things like synthetic biology has certainly enabled by the tools of machine learning and that but at the end of the day you need actual physical object in the field in biology, and my opinion is one of the key technologies here from.

From my perspective, this couldn't be in better hands from Hereon out then with there to work to commercialize it.

Okay. So it's not just nitrogen fertilizer, though that's one piece of this for the upcoming.

Upcoming.

Partnership there are enormous opportunities to impact greenhouse gas emissions across all of agriculture.

And we should create more sustainable solutions solutions that are resilient to changing climate and in tactically Youre seeing this now unstable global supply chain that currently support the AG industry are really being tested right. We've seen this recently with fertilizer prices. We've just been talking about here, but also via regulation in places like the <unk>.

We're careful about maintaining a comfortable margin of safety in this kind of market environment.

<unk> that are regulating out a number of chemical pesticides in the coming years, where there is not at the moment a great replacement for that pesticide and farmers are going to need something right to resist those past to maintain efficiency and so I think this is really an opportunity for biological solutions in agriculture, probably better than there has ever been.

Dan.

But the reason that to date, we've used chemistry as the stuff works really well right. So there's been a high bar on these technologies to really beat those synthetic chemicals and so that's where we think bringing the tools of synthetic biology into AG Biologicals is really critical right. If we shouldnt be limiting the tools in our toolkit when attacking these big societal.

<unk> and engineered biology will be a significant part of the solution.

Cross fertilizers for sure, but also pest control disease control all of these areas I think biologicals have a shot at developing new products. Okay. So one of the things we've learned and I'll talk a little bit about our work in industrial biotechnology, like making things like flavors and fragrances in foods no type of projects for customers.

And our balance sheet will allow us to accelerate our leadership while others in the sector may need to pull back.

All right, so let's dive in.

So, as Mark mentioned, we did over $140 million in revenue just in Q1 in biosecurity.

Is that ginkgo needed to have a strong understanding of sort of how customers go end to end when they work with us and so that includes sort of the beginning of a process around sort of like doing the cell engineering and working with our foundry and coach base, but it also means we need to invest in understanding fermentation and scale out downstream.

At Ginkgo, we tend to make, you know, big, bold decisions and leaning, when we think we're right, and leaning into biosecurity in the early days of the pandemic was no exception.

<unk> purification and formulation and things like that to help our customers be able to ultimately bring that product all the way to market and transfer them or process.

It can go in scale and you've seen US do that for example, with our partner Kronos in Canada recently.

And, but frankly, the team continues to astonish me with their ability to execute here.

It has not been easy to do this in this environment. If you play back the tape to January, for example, schools were under an enormous amount of pressure, Omicron was taking off completely, and the team, again, I want to just publicly give credit to an enormous amount of effort by the team at Ginkgo in biosecurity to deliver for our customers and for their communities.

Agricultural biologicals is theirs.

Difference in that value chain compared industrial biotech some parts are similar but some parts are very different.

And we need to have different capabilities that we're going to also offer end to end biologicals to anybody in the AG industry that wants to develop it.

And so you will see us.

Getting better at things like formulation and downstream verification and also things like greenhouse.

Myles.

So as part of this transaction, but there I'm very excited that we'll be bringing in a lot of those assets into <unk> and we believe this transaction will dramatically accelerate the innovation thats possible and AG biologicals and so to quickly summarize the three parts of the transaction first we plan to acquire bears West Sacramento agricultural.

So the biosecurity we've built to date is a very strong foundation, and it's also got us a seat at the table to help shape the solutions that we hope will prevent future pandemics, right?

We expect to continue to support local communities and keep children safely in school through these statewide K-12 testing programs.

And we are expanding our offerings over time to actually include less disruptive methods, which you can see here, you know, announced one of the demonstrations we're doing in wastewater testing as a way to do testing in schools. As it stands today, we do, in most places, group pool testing, sort of q-tip in the nose, and they're all being collected and run at a nearby lab.

Could we make that even lighter weight on schools through things like looking at wastewater?

We've also continued our collaboration with the CDC and Express Check to provide testing services for travelers and utilizing our sequencing capacity to help identify and track new variants.

So our program, we're quite proud, was the first in the U.S. to identify Omicron's sub-variants, BA2 and BA3, and among the first to detect BA4 at a country's ports of entry in April 2022.

And then we do this work, we share these samples with the CDC laboratories for further characterization, and that's been a really nice engagement with public health leaders in the government.

Nichols' R&D facility and team you can see a picture of it off to the right.

And I think that's actually quite important in the long term for these technologies.

Absolutely incredible facility, it's got Great lab space and also an amazing strain collection. So these are wild strains that have been collected from nature. They are a great source of both kind of host cells that you could use to put new genetics into but also their genomes contain interesting genetic code that might be relevant to put into a different cell as we develop these.

Finally, we're launching pilots across several new modalities, new ways to do this that we believe will support a more preventative approach to biosecurity, right?

Because that's really the future here is making sure things like COVID don't happen again. And as part of that, identifying novel pathogens in less disruptive ways.

I mentioned wastewater.

There's also technologies like passive air monitoring, collecting the air in a room, having that get on a filter and doing a test today back in a lab and maybe in the future right there in that device.

Think kind of like a smoke detector, right?

And again, I'd highlight these are, you know, we got a pandemic thrown at us.

We weren't expecting that.

So really having that as a as a code base asset is very valuable for us.

We have a whole strained banking system. They have pilot fermentation scale to be able to grow. These AD biologicals up to then go into.

Trials on feels right and so and they have greenhouse capacity to do those sort of early greenhouse trials before they would go to wider field trials, but the team is absolutely terrific. They have been leaders in this space with several large product innovations in biologicals coming from this team over the past couple of decades. So that's actually a really nice asset.

For us as we go to let's say, you're a startup customer and AG Biologicals and you had a great idea.

<unk> that would help fixed carbon well, we have a team here.

Thought about.

Aspects of how natural microbes do that over the last year as they understand what types of things have sort of a historically tactically been able to actually work in the field when it got to brass tacks and Thats all available that sort of consultation.

Services are available by engaging with Ingo you got access to that team second.

Second as part of building this unique AD platform, we plan to integrate the R&D platform of joined bio which is our 50 50 JV with leaps by Bayer the team at join is fantastic and they've been at the forefront of applying synthetic biology to AG biologicals.

And we sort of went to battle with the technologies we had with some time and sort of modern synthetic biology and biotech tools.

We are thrilled to sort of supercharge them by in this transaction.

We can do a lot better.

And last but not least bear land as I mentioned at the start of large new collaboration with us.

And it's not on this page, but we're also seeing a real traction in our work with international organizations and countries.

Biology does not respect orders.

We've seen that in the pandemic.

And so our biosecurity here in the US, frankly, needs to be global biosecurity.

That's the only way we get this right.

Go across multiple programs in multiple years and so this significantly we believe de risks the investment for US is we have a very large anchor customer to help baseload demand on this sort of end to end AG platform as we make it bigger this collaboration will focus on several different areas, including nitrogen fixation like I mentioned building.

And so we're looking forward to sharing more details with you on our emerging international efforts in upcoming years.

On the work join has done as well as new programs in crop protection. This is also a great trend, we hope to see more of over time, where companies are choosing to outsource R&D to platform providers like Kimco, Brian again, I mentioned it earlier, but the analogy here is the move from on Prem servers and it departments.

Cloud computing, we expect we want to see more of this right. There's this move by bear as a step in that direction. After the AG industry and we hope its an indication of where that industry is headed so I'm Super excited about this deal to get itself and the team and what we'll be able to do together in agriculture.

Before I move off biosecurity, I do want to mention that, you know, although I'm very proud of the value, you know, biosecurity, commercial value, biosecurity is creating for Ginkgo as a business.

Big move for Tycho and it's great.

I want to give one last bit of detailed for Denver for potential customers that are listening on the call.

So the new capabilities, we expect this transaction to bring US and then we can offer customers listen I will call. You can see here, we plan to be able to support customers end to end and AG biologicals and that allows us to work with both small and large customers as you can see that well.

As we said before, you know, one of our cultural tenets here is that we care how our platform is used. In other words, the technology we're developing here at Ginkgo, we want it to have a positive impact in the world.

And I think what we've been doing in K-12 schools is a great example of that.

Obviously, you can get access to our code base and foundry like anything else, but we also have these sort of capabilities that our AG specific translational implant. The studies for early screening, helping translate research in our labs, the greenhouse deeper expertise in formulation for different applications right like you need expertise to know what's the right mixture to put.

I wanted to share just a few of the, you know, many comments from our partners there.

So, Dr. Mark Gailey, Secretary of California Health and Human Services Agency, you know, gave a presentation, showed that chart there, and talked about how California was among the lowest pediatric hospitalizations compared to other states.

This is in part about the important mitigation tools that we've equipped schools with throughout this year.

We built and put a lot of energy into building up testing capacity last year.

Governor Sununu in New Hampshire talks about the flexibility and scalability of the state testing program and that the communities there can scale these programs up or down based on testing data about transmissibility in that school. And I think this is actually a really important point.

As you see, these things come in waves, right?

So, having the technology there in the event you need it again to keep your school open, which very much was a big part of the story with Omicron in many states, you know, you want to have them available.

And from Cleo Hirsch, Executive Director for COVID Response at Baltimore City Public Schools, instead of just having to make blanket district-wide decisions, we actually have lifetime data.

And we're excited to expand on these efforts as the biosecurity industry works in close concert with public health leaders, right?

And, you know, that idea of sort of like a weather map, you know, like, what's the weather like today so that you can make local decisions, I think is an important way to think about things in the future for biosecurity.

So it's not a, is it private sector, is it public sector?

And I do want to highlight Cleo and the Baltimore City Public Schools.

You know, both together is going to be the best way to do this, to reduce the impact of infectious disease.

They were one of the earliest adopters of this sort of regular school testing in the entire country, right?

And as I mentioned, with modern biotech, we can just do a lot better than the tools we had when this whole thing started.

This thing that we're now doing in thousands of schools really, in many ways, has pioneered with the folks at Baltimore City Public Schools.

And so I'm heartened that governments in the US and worldwide will step up after this kind of wake-up call of COVID-19 to invest in this infrastructure, and we are seeing that, and we're quite proud to be playing our role.

Her team have been leaders throughout this to keep their community schools open and safe through the waves of this pandemic.

To put it with your live microbes that that allow us to survive in packaging for a year before it's going to end up on our seed and so on we have those assets now coming in through the transaction when it closes and depending on the size and capabilities of the customer we can be flexible. So if you're a startup you might use every part of this that you see on the slide but if we're looking at a large.

Okay, so I wanted to use most of my time today with you to chat about the planned transaction that we just announced with BEHR.

You know, as a reminder to this earlier, Ginkgo is a horizontal platform.

Company, maybe some of the tail end assets you'd want to use your in house infrastructure in house formulation Thats fine right, where we want to make sure that we have a full suite of solutions. So whoever needs. Those front end things sell engineering, we have all of the end to end to offer them. So that they don't have any barriers to signing up.

In other words, we want to serve any application of engineers themselves in any market, whether it's a small company or a large company. We think ultimately we serve all those customers best by putting them on the same platform.

And so we, as a result, work on diverse programs across a variety of industries and technical approaches.

You can see some of our customers here in consumer and tech, industrials and environment and ag, food and nutrition, pharma and biotech.

And I do think this breadth is one of the things that remains one of the more unique things about Ginkgo in the industry.

And our goal would be to have every developer of AG biologicals engage with our platform somewhere around this value chain right. We we believe we have the pieces in place and are excited for the commercial team I can go to have the opportunity to find new customers for us in agriculture.

But today, I do want to kind of laser us in and focus on one of those segments in particular, agriculture. OK, so we recently announced our plans to acquire BEHR's Agricultural Biologicals R&D facility.

And I'll talk about what I mean by that and their team in West Sacramento, California.

And also our planned fall on multi-year strategic collaboration with BEHR.

OK, so as a customer.

Okay. So I wanted to just and on another quick check in on the market our investor call answer.

So I wanted to chat with you about that transaction and the opportunities we see in agriculture, because I think this is this is going to be a critical market for Ginkgo coming up as we continue.

All right, so just to state the obvious, because sometimes I think people forget about the agriculture industry. It is a major backbone of society. It's where your food comes from. But also things like if you have a cotton shirt on, that's a product of the agriculture industry.

You're getting a hamburger if it's meat or plant based agriculture industry.

Ethanol going into fuel blends, that's coming from the agriculture industry.

And the inputs that enable this industrial ag sector are huge, right?

You know, you have hundreds of billions of dollars going to help farmers grow larger and healthier plants every year.

And if you want to understand this industry, there's sort of like two big areas of technology development in ag.

Folks focus here so in our last call I shared this float from Amazon 2000 shareholder letter, where bezos references Ben Graham famous quote that sort of in the short term stock market is a voting machine in the long term, it's a weighing machine and the general idea here is that eventually stocks value tracks to the intrinsic.

So first is the biology itself, right?

So take corn, like the genetics of the corn, have been being improved for literally thousands of years, right? People have been breeding, right? Mixing, oh, this is a tall plant, this is a tall plant, let's breed them together.

Like that process has been improving the underlying biology itself, you know, frankly, into pre-industrial times, okay?

And then second is all the technologies wrapped around that biology.

And so I'll give you my favorite example of this.

So chemical fertilizers, pesticides, herbicides for killing weeds, automated farm equipment, drones to map it, all these other things that are sort of wrapped around that plant, okay?

And the upcoming story is that, in my view, that the tools of biotechnology and synthetic biology, as those improve, more and more of these adjacent tech that's kind of wrapped around the biology will become part of the biology itself, okay?

And that was a little bit the story of the first era of biotech, which really launched in earnest in the 1990s.

Roundup Ready was a very valuable genetic trade, obviously it was built Monsanto, you know, that was approved in 1996.

So that first round of biotech, people are most familiar with that in the area of seeds and traits. In other words, putting genetics into the corn plant itself, and in the case of like a Roundup, to try to enable a more efficient herbicide.

And so, however, the other biology that's out in the field are all the microbes that live in the soil and on the plant itself, okay?

And these are also important contributors to the output of that field of plants.

And this is what is called biologics, agricultural biologicals or biologics in the ag industry.

And today, there are products on the market like this, and they're sold using wild microbes. So microbes that have been identified in the field that, okay, this particular microbe, you know, provides, you know, a nutrient or provide some defense against a pest. And so it can be applied as a seed treatment, like coated on a seed, so that when you plant the seed, the microbes grow along with it.

That's one example, you can also apply it to the soil or foliar.

But there's this market for biologicals in the industry today.

However, these in this sort of first generation of biotech were passed over as targets for genetic engineering, that was really focused on the plants.

And that's what's begun to change in the last few years.

<unk> value as they described of the company, which is really the discounted future free cash flows right like that's it that's how corporations work.

And in the near term, though a $1 million and while on external events, whether it's interest rates awards or anything else I can drive or exuberance can drive stocks up or down right and so we're careful to message to the team and efforts of the team listening to this as well it can go.

That really the giggles orientation is around making or have your company right. We want to make the right long term moves that drive free cash flow and then we want to make sure. We keep a margin of safety in cash to not be influenced by short term moves in the market to then make bad long term decisions you won't see us do that and.

And we've tried to be very clear about that.

Investors, we want to get on our cap table. So again just to summarize we have a great cash position and we will definitely continue to manage our business to maintain that margin of safety. So we don't need to raise capital at an opportune time, we continue to see strong demand with increased interest from customers that frankly, we wouldn't have gotten in the door with three years ago.

Due to our increased brand and scale.

We expect to add new programs across diverse customers in industries, ranging from large multinationals the brand new startups and in this market. There are also more opportunity for M&A right. We have a deep pipeline, which we expect to open up many more valuable opportunities for us going forward. Finally, our bio security business has proven to not only be a strong source of cash.

Flows that support our cell engineering business, but remains a strategically important.

Out of our platform.

So once again I don't want to end on this slide people forget that when they invest it influences how the world develops right and if we want to see breakthrough technologies come into the world, we will need to be careful.

In this environment and look for companies that have the runway to make it to scale, but what sort of rising interest rates in the environment. I think investors will have the opportunity of sort of a breakthrough technology and long dated growth companies at a discount in the near term now.

Now, while we should be thoughtful we should also invest in the world we want to see exist.

Happy to take your questions and I'm really excited for the sort of long term minded investors, you'll see on our cap table coming up here I think al. Thanks, so much.

I like I really like to give this one, because this is around nitrogen fertilizer production.

Great. Thanks, Jason.

I was actually a chemical engineer, my original training at MIT, and sort of the pride of chemical engineering is a process called the Haber-Bosch process.

And it's how we make synthetic nitrogen fertilizer, you basically pull nitrogen out of the air, right, a lot of nitrogen in the atmosphere, you pull that air through a big chemical plant, you burn natural gas, you put that nitrogen together with hydrogen, you get ammonia, and you bag that up, you ship it out to fields, it's about, you know, $80 billion worth of this goes to the farmers, goes on the crop, right, a chunk of it actually ends up, you know, in runoff, going into local water supplies, creating environmental issues around algae blooms and things like that.

Q&A in a few moments as usual I'll start with a question from the public and then remind just reminding the analysts on the line that if you'd like to ask a question just raise your hand on zoom out and then I'll call on you and then open up your lines, Thanks, Alethia and in fact.

And also, you know, it's about 4% of global natural gas is a huge greenhouse gas emitter.

But, you know, we got to eat, right, and, you know, that synthetic fertilizer is absolutely necessary to our food supply today.

It is also unsustainable, right, in a carbon neutral future, you know, the amount of greenhouse gas we're producing to do this is something that we need to get off of.

And so one of the most exciting new solutions to this problem coming up is to leverage biology to produce that nitrogen fertilizer.

And what's cool is we know biology can already do this.

So, you know, you might remember like an elementary school learning about crop rotation, where you plant legumes, right, like a soybean, for example, and legumes have on their roots, microbes that are effectively running Haber Bosch, right, they're pulling nitrogen out of the air, and they're making it available to the crop, right.

Okay.

But they're doing this for free. And so as a result, legumes use a lot less fertilizer.

We're all here.

Well I'll take the first question from retail and then I will be turning it over to the analysts who are on the line.

And the reason you did that crop rotation was that these would help revitalize the soil for a different crop like a corn that does not have those nitrogens fixing or collecting microbes.

And so we've had a joint venture with BayerJoin over the last few years, working on moving that, pathway that nitrogen fixation from these other microbes that like live on legumes into microbes that would live on corn.

And I'm excited that as part of the planned transaction coming up, Bayer will be taking those biological assets forward for further development from our joint venture.

And this sort of out licensing to a commercial partner with fall on downstream value coming back to Ginkgo upon commercial success, that is the hope for outcome across all our self programming projects, right, as you know, and so, you know, we'd love to see this sort of nitrogen fixation succeed at scale, it will be a big commercial opportunity.

It's also the sort of product that highlights how synthetic biology can have transformational impacts as we march towards a carbon neutral economy.

Right?

<unk> it looks like you are at <unk>.

I mean, this is the sort of thing that, you know, look, AI and machine learning and computers just don't help, right?

Raise your hand, so and stay tuned.

Your line in a second but the.

First question is going to come from Twitter.

The rabbit.

We have discussed on the call as to why our foundry revenue with a light this quarter hemostat analysts' estimates quite a bit and revenue was down from the year ago quarter. Despite 11, new clients are you lowering the upfront fees for higher back end economics.

Yeah, I can take that.

You know, they don't solve fundamentally the problem, because it is a physical problem and out in the real world, we need things like synthetic biology, certainly enabled by the tools of machine learning.

And that but at the end of the day, you need an actual physical object in the field.

So mark spoke to us in the financials section of the <unk>.

And biology, in my opinion, is one of the key technologies.

But I'll expand on it a bit so so the short answer is that quarters can be lumpy.

Which I'll explain why in a second and Thats why we havent been providing quarterly guidance.

From my perspective, this couldn't be in better hands from here on out than with Bayer to work to commercialize.

Okay, so it's not just nitrogen fertilizer, though.

Analysts will take their best swing at it and as Mark mentioned on the call. We reiterated our full year guidance, but to give you a bit of a longer answer the sort of three considerations when comparing foundry revenue either quarter over quarter or sort of year over year. So so first is the timing of downstream value. So as you understand.

That's one piece of this for this upcoming partnership.

As part of our business, we're going to get some amount of fees where customers are paying us as we are developing an organism for them and then.

There are enormous opportunities to impact greenhouse gas emissions across all of that.

At the end of that project, there will be some type of often downstream value share based on a commercial or manufacturing milestone, okay and the key the key feature of that is that is dependent on the customer doing things right. So if it's a royalty on sales that customer has gotten got customers and sell if it's.

And we should create more sustainable solutions, solutions that are resilient to changing climate.

Key manufacturing milestone that customer needs to go to scale and hit that manufacturing milestone right and so there is a fundamental.

Lack of our control on that process that just baked into the business model right. Now I don't think there is also different than sort of like App store economic models, where youre, where youre, taking royalty on an app or an app store again, it depends on which apps go to market I think the issue is we are at the beginning of this right and so I think this could get smoother over time as we have more.

And tactically, you're seeing this now.

On the market and you have sort of a base of royalty is.

And then new additions are sort of small relative to the base, but for a while while things are coming in for the first time I think you should expect it to be lumpy like this because of downstream value share.

Unstable global supply chains that currently support the ag industry are really being tested, right?

Or why is this question of why is this trending relative to us, adding a good number of new clients in the last quarter. So an.

An important thing to understand is if you look at how our structures collaboration structures work often most of the revenue during the lifecycle of our program is recognized in its later stages right. So there is some sort of mix as we grow as new programs are ramping up and as a reminder, we signed 32 new programs in just the last three quarters, we'll see those contribute more revenue.

And that will offset some of the mature deals completing enrolling ASO, even though youll see a lot of new programs in a quarter, that's not going to immediately show up.

That foundry revenue and then third.

Two other question noted.

We do have the ability here to flex our deal structures to optimize for downstream value share versus upfront fees and so on.

We can make that decision based on a number of reasons right.

That could be based on customer interest and so on and so.

It can also affect existing deals just to help you understand this a little better and let's say, we have a flat fee deal with a customer in other words, we are getting a certain amount of fees regardless of how much lab work, we do and we haven't number of collaborations like this.

Let's say, we're getting close to the end of the project and we see a big downstream value share milestone waiting for us we might very rationally choose to spend more effort and our foundry relative to the flat fee, we're getting to get to that milestone right and so that's an example, where it can even affect what we do have historical programs and that balance of sort of.

<unk> versus downstream value share could be reflected there as well so for all these reasons I think quarterly volatility and foundry revenues is not unexpected for us and we do take that into consideration when we set the annual guidance.

Okay. Thanks, Jason Alright.

Thanks from Goldman Sachs Your line.

<unk>.

Great.

We've seen this recently with fertilizer prices, what we've just been talking about here, but also via regulation in places like the EU that are regulating out a number of chemical pesticides in the coming years, where there's not, at the moment, a great replacement for that pesticide.

Everyone. Thanks for taking my questions.

Two quick ones.

Ill just mentioned both upfront.

Just on the last quarter call you talked about and Jason you just referred to it kind of being able to tune the types of contracts, you're signing and just looking at the number of programs you've put up each quarter.

Should we be thinking about.

Maybe youre introducing a lot more selectivity in terms of the number of programs you are taking on or.

Certain agreements too in your ability to tune those contracts and then the second question is just on the bare color.

Collaboration I think in the release you mentioned that.

Portion of the operating expenditures would be offset by some of the fees generated from the collaboration could you just talk about how much that offset is if this collaboration changes your opex profile going forward.

Yes, well I'll take the first one Mark do you want to take the second.

And farmers are going to need something, right, to resist those pests to maintain efficiency.

So it's a so so.

So with regard to how we choose which programs to take on.

One of the things, we do I do caution that our commercial team is not to try to pick winners in the market in other words, we don't really see ourselves as an end product developer Euro ginkgo in other words I'm not.

A therapeutic drug developer I'm, not a fragrance marlborough not a.

AG Biologicals X.

And so I think this is really an opportunity for biological solutions in agriculture, probably better than there's ever been.

Expert in terms of what's the right next product in that market our customers ultimately are.

But the reason that to date we've used chemistry is the stuff works really well, right?

So what we're looking for when we're choosing.

Who to get on the platform is often appetite right like how excited are they.

Basically take this transition which is a shift from how the market works today right. The status quo. If you wanted to do is sell engineering project and you launched the company Tomorrow, the expectation from your Vcs and others would be.

You start running lab space, you buy a bunch of equipment and hire some signs that we get to work and so one of the questions like that a customer who has got the appetite to push a lot and believes in this sort of outsourced R&D and Thats why I am excited about the verity of where you see that happening with really a large customer in that case for a whole category of work for them and then by the way have been the only work with Diego.

So there's a high bar on these technologies to really beat those synthetic chemicals.

But they've decided to sort of outsource that work.

Our to the wider market of providers right.

And so I think that's one of the big ones.

And then secondly, just quality of deals right.

The opportunity for downstream value share fees, and so on but there's a lot more to it than that we're not we're not really again trying to over fed through either a certain market or things like that sort of we take it as it comes.

Mark do you want to address the Bayer transaction, Yeah sure Matt So.

As you know and we've talked about the deal and we disclose and we did say, we're bringing on some operating expenses.

Collaboration with Bayer itself and the new programs with their base load demand.

Pretty well and largely offset the acquired brands such that I wouldn't look at the Bayer transaction is in any way materially changing our opex profile and certainly it wouldn't change any.

Significant way, our sort of cash runway.

Thank you Jos Abad from Morgan Stanley it'll be up next I'm going to mute your line now.

Hey, guys good evening and thanks for taking the questions here.

And so that's where we think bringing the tools of synthetic biology into ag biologicals is really critical, right?

We shouldn't be limiting the tools in our toolkit when attacking these big societal problems.

And engineered biology will be a significant part of the solution across fertilizers, for sure, but also pest control, disease control, all these areas, I think biologicals have a shot at developing new products.

So Jason one follow up on the on the beer partner shipyard.

But it doesn't sound like it but can you just clarify to the extent to which this is exclusive in the sense that you do now have an anchor tenant who clearly has.

Strong interest in the field business sort of preclude you or perhaps sort of make other potential customers, especially the larger ones a little bit where you are engaging with ginkgo and then.

As a as a sort of unrelated follow up there.

Any color that you can share on those or U S opportunities on the bio security front I know you mentioned funding uncertainty beyond July 1st in the past, but outside the U S. If you can help us sort of.

Prioritize our size some of the opportunities that might come into focus for Biosecurity in the next 12 months that would be helpful. Thank you.

Yes.

OK, so one of the things we've learned, and I'll talk a little bit about our work in industrial biotechnology, like making things like flavors and fragrances and foods and doing those kinds of projects for customers, is that Ginkgo needed to have a strong understanding of sort of how customers go end to end when they work with us.

So one of the things we think about on the so to answer your question about the bear transaction just to repeat it right. It's sort of like Hey, if you're taking a large customer in a certain category does it prevent you from working with other companies in that sector right and so I think one of the things we tried to be clear about when customers broadly again is that the model here is to be like an Amazon web services right compete.

Right.

<unk> companies leveraging Amazon Web services, it's a net business.

<unk>.

Benefit to the entire industry, because everybody is getting better economics on one piece of the stack needed to get our product to market and there is plenty of other places to compete above that sort of base.

Platform in this case of delivering.

Web services and data centers and all of that okay, and so so that is very much the model and we're very clear about that with partners. We do are always arguing right any customers going to try to lock us into an exclusivity and just.

We're pretty sure we have not we haven't instead of signing the Bayer deal. So I certainly can't comment on exactly how it's going to work, but what I can say is our intent here and the reason, we're acquiring a large team and platform.

And so that includes sort of the beginning of a process around sort of like doing the cell engineering and working with our foundry and code base.

In West Sacramento is to make that broadly available right and I do think both large.

Companies in the space and startups in the space will be excited to get access to our platform. When the deal is concluded.

But it is always a discussion with our partners on that on that but that's our that's our philosophy when it comes to how we want to work in market.

But it also means we need to invest in understanding fermentation and scale up downstream purification and formulation and things like that to help our customers be able to ultimately bring that product all the way to market and transfer them a process that can go and scale.

And the second question is about outside of the U S opportunities or Io Securities. Yes, I mean, so we don't have any anything.

And you've seen us do this, for example, with our partner Kronos in Canada.

Agricultural biologicals is, you know, there's a difference in that value chain compared to industrial biotech.

Some parts are similar, but some parts are very different.

Specific there yet to us.

What I would say is.

We have a core belief.

And, and we need to have different capabilities that we're going to also offer end to end biological to anybody in the ag industry that wants to develop it.

And so you will see us getting better at things like formulation and downstream purification and also things like greenhouse trials.

That biology doesn't respect borders we think COVID-19 is a just existence proof of that fact, and so if you are the U S. Government for example, and you're trying to enable U S. Biosecurity I think the right framework to think of as global bio security.

And I think COVID-19 was a wakeup call that there were a lot of cracks.

Our current system of global Bio security.

Youre going to see and you're hearing people talk about this from 18 different direction. I think bill gave so is that a thing out about his idea for a certain.

Type of organization to be able to jump in into hotspot areas and things like that look I don't actually know what that ultimately this will look like but what I will say is our expectation.

I think with the bio security Arena is that we do need to operate globally. If we want to be really the preeminent provider of bio security technology is that the right way to think about the business. So that was really what we're getting out there with that comment.

Got it. Thank you guys appreciate the color. Thanks.

Max macro William Blair.

Your line you are at Max.

Hey, Jason Anne Marie and Mark Thanks for taking our question. So just wanted to get an update on how funding dynamics and the volatile markets.

And the rate and maybe you are bringing on new customers or new programs on your platform and whether or not you've seen these factors drive a slowdown in company decision, making and just exactly how much of an impact that had on the number of programs that you added it added in the quarter and then a bit of a follow up is just in terms of the new customers and the new programs that you're adding have you seen this impact in terms of the volatile markets.

Funding Amex, maybe slow down new customers coming onto the platform or are you also seeing some existing customers that may hold off on adding new programs at a rate that you would've expected maybe a few months ago.

Yes.

Yes, I'll jump in on this because I find it fascinating, but so I think jury is out a little bit.

There's different dynamics that can either favor us or hurt us right. So obviously.

Companies being flushed and giant pool, the venture capital should drive money to service businesses, providing services to those companies right like that feels obvious the only the only caveat is the normal mental models they raise those piles of money.

Oriental lab by a bunch of equipment and hire scientists to do the work right. So they're actual mental model to date has not to outsource it to service providers is to use all that money to build an R&D team to do cell engineering and so we are trying to effect. This like again thats mentality shift, which is what I'm. So excited about being in the Bayer deal well.

And so as part of this transaction with Bayer, I'm very excited that we'll be bringing in a lot of those assets into Ginkgo.

Cash pressure.

Small biotechs can help change People's lives right. So you might look at that and say well I don't know if I want that big lease cost and Kendall square right I don't know if I want to buy there is several million dollars worth of equipment ran in the first weeks of the company right. So so there is an interesting trade off there.

I think it remains to be seen and obviously just to flag. It also though the private funding markets lag a bit but I think there is and you're reading a lot about this now is a lot of the V. CS are starting to.

Crack down there too, but it's been a little lagging so I think maybe in the next quarter, we'll see a little more of it play out.

That makes sense.

Yeah very helpful. Thanks, Jason Yeah.

Thanks Max.

Rahul from Raymond Raymond James M&A AG on mute.

Your line your Max.

Perfect. Thanks, Steve I appreciate you taking our questions. So clearly there is a heart of interest around the Bayer deal and as our question. So one of the things we talked about nearly.

And we believe this transaction will dramatically accelerate the innovation that's possible in ag biologicals. And so to quickly summarize the three parts of the transaction. First, we plan to acquire Bayer's West Sacramento Agricultural Biologicals R&D facility and team. You can see a picture of it off to the right.

It is absolutely incredible facility, it's got great lab space, and also an amazing strain collection. So these are wild strains that have been collected from nature.

They're a great source of both kind of host cells that you could use to put new genetics into, but also their genomes contain interesting genetic code that might be relevant to put into a different cell as we develop these biologics.

So really having that as a code based asset is very valuable for us.

These days.

Well, Jason Mark was that a way to get to the anticipated 500 projects in 2025 wants to sign up these anchor partners and of course. They are we seeing this first we will anchor partner. So my question is two parts one how how should we see this partnership as you consummate the deal.

Lend to.

Essentially greater rate of new Onboarding of projects and second how does this partnership corten.

Similar anchor partnerships and other sectors, particularly biopharma.

Yes. So this is a very good question.

So, yes, I mean, I would say that the general two interesting things here. So in general any large customer for <unk> and like I think a good example of this is b like Jim it on in the fragrance industry right, where if we initially do.

Initial indicators are very small pilot project many years ago, but any first projected that then goes well can lead to more business right. So I think that's just one very generic frame here is like taking a large company customer building a relationship proving it out and then expanding from there and that because of the size of their R&D budgets and the scale of their needs they actually can.

Many future projects. Okay. So that's all still true and we're doing that across many many customers. If that was the definition of anchor customer I think we haven't many other anchor customers as well I do think what's unique in this case is really a strategic choice bears making to actually just do this work externally and I think in therapeutics.

Kind of see this where like a lot of the large pharma companies that really focus.

Overwhelmingly overwhelmingly in many cases on really their skills and development kind of past research off into what is ultimately like a small biotech ecosystem.

So I think that kind of model youre, starting to see a little bit a taste of it and AG biologicals, that's a really exciting trend for a platform like us.

And they have a whole strain banking system, they have pilot fermentation scales to be able to grow these ag biologicals up to then go into trials on fields, right?

And so, and they have greenhouse capacity to do those sort of early greenhouse trials before they would go to wire field trials.

So I will flag of theirs that extra element, but other than that I mean, yes, we do good work with them and this will kick off with it all closes with.

Multi year partnership that we should be able to keep doing more and more I mean, that's really the idea behind Google.

Terrific. Thanks for taking my question.

Thanks Ralph.

Alright.

Massaro at ATI.

Your line Europe next.

Great can you hear me.

Yes.

So the team is absolutely terrific. They've been leaders in this space with several large product innovations in biologicals coming from this team over the past couple decades.

Terrific.

Wanted to ask one of your partners is.

Berkeley lights, and I believe they are scheduled to deliver one or more workflows over to your facility in Boston later this year if not already did recently can you just speak to what type of capability.

So that's actually a really nice asset for us as we go to a, let's say you were a startup customer in ag biologicals and you had a great idea for a biological that would help fix carbon.

So, you know, we have a team here that's, that's thought about, you know, different aspects of how natural microbes do that over the last year, they understand what types of things have sort of historically tactically been able to actually work in a field when it got to brass tacks, and that's all available that sort of consultory services are available by engaging with INCO, you get access to that team.

Second, as part of building this unique ag platform, we plan to integrate the R&D platform of JoinBio, which is our 50-50 JV with Leaps by Bayer.

The team at Join is fantastic.

Berkeley can deliver to your foundry and whether or not that can enable the potential for new for new customers or new capabilities.

Yeah sure though.

And they've been at the forefront of applying synthetic biology to ag biologicals, and we are thrilled to sort of supercharge them by this transaction.

And last but not least, Bayer plans, as I mentioned, to start a large new collaboration with us, Ginkgo, across multiple programs and multiple years. And so this significantly, we believe, derisks the investment for us as we have a very large anchor customer to help baseload demand on this sort of end-to-end ag platform as we make it bigger.

This collaboration will focus on several different areas, including nitrogen fixation, like I mentioned, building on the work Join has done, as well as new programs in crop protection.

I would just expand a little bit on unlike how we drive improvement in our foundry right. So you saw share when we gave the <unk>.

This is also a great trend we hope to see more of over time, where companies are choosing to outsource R&D to platform providers like Ginkgo, right?

And again, I mentioned this earlier, but the analogy here is the move from on-prem servers and IT departments, you know, to like cloud computing.

We expect, you know, we want to see more of this, right?

This move by Bayer is a step in that direction for the ag industry, and we hope it's an indication of where that industry is headed.

I want to give one last bit of detail just for again, for for potential customers that are listening on the call.

So I'm super excited about this deal, if you can't tell, and the team and what we'll be able to do together in agriculture.

So the new capabilities we expect this transaction to bring us, and then we can offer to customers listening on this call, you can see here, we plan to be able to support customers end-to-end in ag biologicals, and that allows us to work with both small and large customers.

It's a big move for Ginkgo.

As you can see that, well, you know, Obviously, you can get access to our code base and foundry like anything else.

But we also have these sort of capabilities that are ag specific, translational in plant studies for early screening, helping translate research in the labs, the greenhouse, deeper expertise and formulation for different applications, right?

Year end update.

Like you need expertise to know what's the right mixture to put to put it with your live microbes that that allow it to survive in packaging for a year before it's going to end up on a seed and so on.

We have those assets now coming in through the transaction when it closes.

Sort of are we would call nights law, which is a sort of goal to triple the output of our foundries and roughly half the cost of the metric that we track all strained test.

And depending on the size and capabilities of the customer, we can be flexible.

Well, we want to make sure that we have a full suite of solutions.

So if you're a startup, you might use every part of this that you see on the slide.

So whoever needs those front end things, cell engineering, we have all the end to end to offer them so that they don't have any barriers to sign up.

But if we're working at a large company, maybe some of the tail end assets, you want to use your in-house infrastructure, your in-house formulation.

And our goal would be to have every developer of ag biologicals engaged with our platform somewhere on this value chain, right?

That's fine, right?

We believe that we have the pieces in place and are excited for the commercial team at Ginkgo to have the opportunity to find new customers for us in agriculture.

Okay, so I wanted to just end on another quick check in on the market, our investor call lots of folks focus here.

So, you know, in our last call, I shared this quote from Amazon's 2000 shareholder letter, where Bezos references Ben Graham's famous quote that sort of in the short term, the stock market is a voting machine and in the long term, it's a weight.

Right, and the general idea here is that eventually, stocks value tracks to the intrinsic value, as they describe it, of the company, which is really, you know, the discounted future free cash flows, right?

Like, that's it.

That's, you know, that's how corporations work.

And in the near term, though, a million and one external events, whether it's interest rates or wars or anything else, can drive or exuberance, can drive stocks up or down, right?

How do we continue to drive that underlying technology improvement at the company.

And so, you know, we're careful to message to the team, I know folks on the team listening to this, to as well at Ginkgo, that really Ginkgo's orientation is around making a heavier company, right?

You know, we want to make the right long term moves that drive free cash flow.

And then we want to make sure we keep a margin of safety in cash, to not be influenced by short term moves in the market to then make bad, long term decisions.

You won't see us do that.

And we've tried to be very clear about that with the type of investors we want to get on our campaign.

So again, you know, just to summarize, we have a great cast position and we'll carefully continue to manage our business to maintain that margin of safety so we don't need to raise capital at an inopportune time.

And so some of the things are like automation right. So if you come into our new facility as you see more and more sophisticated automation. Some of the things are the the biology and biochemistry like are inventing new better ways to do the experiments we do although the third area is really in liquid handling.

We continue to see strong demand with increased interest from customers that, frankly, we couldn't have gotten in the door with three years ago due to our increased brand and scale.

We expect to add new programs across diverse customers and industries, ranging from large multinationals to brand new startups.

And in this market, there are also more opportunities for M&A, right?

Not to nerd out too much on this but like the size of the droplet of liquid that you can manipulate and the lab as that shrinks you actually use less reagents right. So it helps to reduce that to help us continue that cost drop as we're doing this work and so the reason, we like the Berkeley lights machines.

We have a deep pipeline, which we expect to open up many more valuable opportunities for us going forward.

Finally, our biosecurity business has proven to not only be a strong source of cash flows that support our cell engineering business, but remains a strategically important part of our platform.

So, you know, once again, I want to end on this slide, you know, people forget that when they invest, it influences how the world develops, right?

Is there using our Microfluidic technology that really allows us to continue to.

And if we want to see breakthrough technologies come into the world, we will need to be careful in this environment and look for companies that have the runway to make it to scale.

But with sort of rising interest rates in the environment, I think investors will have the opportunity of sort of a breakthrough technology and long dated growth companies at a discount in the near term.

Now, but while we should be thoughtful, we should also invest in the world we want to see exist.

Happy to take your questions, and I'm really excited for the sort of long term minded investors we'll see on our cap table coming up here at Geico.

Thanks.

As usual, I'll start with a question from the public, and then remind, just reminding the analysts on the line that if you'd like to ask a question, just raise your hand on Zoom, and I'll call on you and then open up your line.

Substantially shrink the reaction volumes that were working with whom we're doing not everything like those machines aren't.

Great, thanks, Jason.

Thanks all, we'll see you in a sec, think we're, we're all here.

We'll switch to Q&A in a few moments.

They're not really they are not general purpose liquid handlers, but for the type of work they're doing a certain.

<unk> class of assays that are roughly based on what you can see with a high powered microscope.

And so as usual, I'll take the first question from retail.

Pretty neat.

So that's why we like them. We think is ultimately a very flexible platform and that's why we have.

The relationship that we do but that's a category that's in it's in that sort of continuing to shrink the volume of liquid we can work with to help us drive nice law, which we ultimately think sort of the whole industry by helping to reduce the laboratory cost of cell engineering.

Great and just as a follow up to that.

I know you got the question from Twitter.

The revenue came in a little bit light of our estimate I guess should we expect your.

Related party revenue.

Kick back up later this year and maybe can you give us a sense for how you expect to end the year.

As related party and third party as a percentage of foundry revenue for the year.

Yes, so Margaret I talked about sort of what we would say about a year and then I can maybe speak to unrelated parties generally.

Yes, so mark I mean, we don't break out sort of guidance in that kind of sub segments, but just.

Maybe reiterate some comments we've made in the past unrelated party. So first of all generally speaking, we're not expecting related parties to be a sort of a significant or outsized source of growth when you compare 2022 versus 2021.

And the sort of uptick in related party as a percent of total revenue that you saw this quarter is not sort of a general shift in trend as you know last year. The general trend was mix was declining and it has more to do with just timing and even if you look at the base of $20 million of revenue a couple million bucks here or there.

It could actually swing a mix shift so I wouldn't really read into the kind of uptick this quarter in some kind of a trend and I would just reiterate what we said in the past which is the.

Related party revenue, which isn't something that I would expect to be sort of an outsized contributor to growth for the year.

Okay. Thank you, but my only addition, there Mark mentioned this on the call but it.

It's not something we manage too right.

Related party fallout of basically type of deal structure that will offer word again, depending on the company. They may prefer in lieu of a royalty yesterday equity in the company as an example, that's one of the deal structures that end up with us holding equity right theres, others too but like.

It did generally us using equity as a dealmaking tool thats, creating related parties and as far as I'm concerned.

It's a sale weapon for US right. So I'm happy to keep doing it but it is something again that we're not managing towards I want to highlight that interesting case whichever way. It goes at the end of the day.

Okay, great. Thank you.

Our next question will be from Steve Matt.

And then I will be turning it over to the analysts who are on the line.

Matt Sykes, it looks like you are first raise your hand.

So stay tuned.

Cowen embargo on mute your line now.

Okay, great. Thanks for the questions a lot of ground already covered but maybe a follow up question on new partner ads.

I'll unmute you unmute your line in a second.

Jason you talked about using ginkgo can ultimately save partners money versus buying their own infrastructure infrastructure, but have you seen a trend where there is a push towards more back end loaded deals.

Smaller partners try to conserve cash and if so can you see any read through to ginkgo in the short term, yes. That's a good question, yes, I would say you will you will see certainly amongst smaller company is more cash sensitivity in this environment I think that's a truism right like I was saying earlier you might see at least more interest in outsourcing.

But the first question is going to come from Twitter from the rabid.

Please discuss on the call as to why a foundry revenue was so light this quarter.

You know, I've been reading this analyst estimates quite a bit and revenue was down from the year ago quarter despite 11 new clients.

Which I think is true right.

That dynamic I feel again I don't have the data on this yet.

Because I think the sweet hasnt come as much on the private companies, but it will.

So you should see a change in their interest in outsourcing, but then they are certainly going to I think be.

More cost sensitive in a startup even typically yes. So yes, you would see some of that trade that also can be a trader and <unk> and.

Are you lowering the upfront fees for higher back end economics?

I was taking equity again, right and little cash and things like that so again, we have tools in our toolbox to help there, but I would say that that is a sensitivity for the smaller companies.

Yeah, I can, I can take that.

For the larger companies not as much right often there.

The mental model for those companies like I'd love to.

I don't want to do <unk> I'd, rather pay cash.

It depends on the partner, but that's pretty common and therapeutics for example, right.

So so.

I think it could affect the different size customers differently Steven Okay. Yes. Thanks for the color and then a quick one <unk> seven when is that going to be completed and are you going to have enough capacity for the expected 60, New program adds this year.

<unk>.

Mark I don't view of information on what we said about completion Yeah go ahead.

So, you know, Mark spoke to this in the financial section of the talk, but I'll expand on it a bit. So, so the short answer is that quarters can be lumpy at Ginkgo, which I'll explain why in a second.

And that's why we haven't been providing quarterly guidance.

Yep.

Oh, you're muted.

Yes, I don't know if I can.

Felicia day, I will say relatively low capex.

In Q1 is not indicative of the actual efforts that we're putting into that build out and so there's just a lot of theres timing of kind of.

Project expenditures equipment lead times et cetera, and so but I actually don't know the completion date.

It's not something that is a.

Major driver to capacity that we need this year in order to.

This year's revenue.

Okay. Thank you.

Analysts will take their best swing at it.

Alright, it looks like last analyst question here is going to come from Derek Brown over.

And as Mark mentioned on the call, we've reiterated our full year guidance.

Eric.

Yeah.

But to give you a bit of a longer answer, the sort of three considerations when comparing foundry revenue, either quarter over quarter or sort of year over year.

Great Hey, thanks, So just some questions.

So you've talked about adding <unk> programs for the year I'm just sort of curious on what's then.

So, so first is the timing of downstream value.

So as you understand, as part of our business, we're going to get some amount of fees where customers are paying us as we are developing an organism for them.

And then at the end of that project, there will be some type of often downstream value share based on a commercial or manufacturing milestone.

In terms of how to think about active programs right. Because if you looked at I mean, if you look at this quarter you ended Q4 with 60.

Okay, and the key, the key feature of that is that is dependent on the customer doing things, right? So if it's a royalty on sales, the customer has to go out and get customers and sell.

If it's a key manufacturing milestone, the customer needs to go to scale and hit that manufacturing milestone, right?

You finished it was you ended <unk> was <unk> 64, so that you added 11, so that basically means you had seven that went away.

Included can you talk about how you sort of think about the net new program ads and also just I know we've talked a lot about how you sort of thinking about this but how many of these programs are concluded can do you think will add downstream valued or somebody is going to come out with or things that were just sort of like research projects and <unk>.

And so that there's a fundamental sort of lack of our control on that process that's just baked into the business model right now.

I don't think there's also different than sort of like app store economic models where you're where you're taking royalty on an app in an app store.

Again, it depends on which apps go to market.

I think the issue is we're at the beginning of this, right?

And so I think this could get smoother over time, as we have more products on the market, and you have sort of a base of royalties. And then new additions are sort of small relative to the base. But for a while, while things are coming in for the first time, I think you should expect it to be lumpy like this because of downstream value share.

The second, sort of why this question of why is this trending relative to us adding a good number of new clients in the last quarter.

So an important thing to understand is, if you look at how our structures, our collaboration structures work, often most of the revenue during the life cycle of a program is recognized in its later stages, right?

Basically it's like how do we sort of model the revenue per active program, because I know, it's sort of like a moving target and it's lumpy, but it's sort of matters for the model.

So there's some sort of mix as we grow, where as new programs are ramping up, and as a reminder, we signed, you know, 30 new programs in just the last three quarters. We'll see those contribute more revenue, and that'll offset some of the mature deals completing and rolling off.

So even though you'll see a lot of new programs in a quarter, that's not going to immediately show up, you know, in that foundry revenue.

Yes, yes, well said.

And then third, you know, as the Twitter question noted, you know, we do have the ability here to flex our deal structures to optimize for downstream value share versus upfront fees and so on. And so, you know, we can make that decision based on a number of reasons, right?

So a couple of them, maybe and again, if I could restate. So how do we think about net new program ads neuberger.

Are things sort of research projects versus.

Commercial so I'll take the second one first so when we're talking about a new program that is something Thats got commercial intent and our intent there is to have downstream value share and so on so so so pure research.

<unk> without an intent to get to a product.

We might do something like that but it ended up in the programs.

You know, that could be based on, you know, customer interest and so on.

And so, you know, it could also affect existing deals, just to help you understand this a little better.

So that's my first point on that now that doesn't mean.

Any stretch that every program is going to be successful right I mean, and that's the nature I think of sort of biotechnology today right. So this is also not the customer expectation right in other words, if you're a startup biotech company you want to take the best shot you can with the dollar you house by far.

Apart from guaranteed for example that your therapeutic is going to go to market right and so so theres sort of and that varies by industries or in other industries that are having a more contained problem would have a higher expectation of likelihood of any given program, succeeding probably a lower value in that program right and so so we have that sort of dynamic.

What I like about it was we have a nice portfolio alright, now net program ads right is basically a function of again new programs launching and then old programs, finishing and either waiting on downstream value sharing are just ending if they werent successful.

Let's say we have a flat fee deal with a customer. In other words, we're getting a certain amount of fees, regardless of how much lab work we do. And we have a number of collaborations like this. Well, let's say we're getting close to the end of the project, and we see a big downstream value share milestone waiting for us, we might very rationally choose to spend more effort in our foundry relative to the flat fee we're getting to get to that milestone, right?

And so, that's an example where it can even affect what we do with historical programs and that balance of sort of fees versus downstream value share could be reflected there as well.

And so so at the end of the day My view on it is kind of like the.

The most important thing is adding new programs and then doing the best job, we can with the infrastructure we have for the customers that the customer walks away, saying this was better than what I would've done myself alright.

Alright.

If the program works I think we tend to get extra credit probably than we deserve.

Like some of that is going to be some random chance based on the biology and if it fails, we probably get knocked a little harder than we deserve but in the end of the day the customer wants to see that we've done a better job than I think they could have done for the dollars that that I think is what returns repeat business to us. So the short answer is I don't look at that too much the net new program at I do look at.

Are we keeping up with nice law right or we are we bringing in demand and scaling our foundry and I'm very focused on that and I'm focused on are we getting programs out the door, where the customer is happy with the work, but then downturn value share will come as it comes right again, I try not to over a bit to that because its not under our control and a number of them won't work for.

So, for all these reasons, you know, I think quarterly volatility and foundry revenue is not unexpected for us.

And we do take that into consideration when we set the annual guide.

Thanks, Jason.

Just because of biology is biology today still.

No not at the most satisfying answer but thats the reality of how we think about it. It remains unpredictable is the short answer there got it got it and just as a follow up on this one I mean, when you sort of go back and you look at your <unk>.

Analyst day documents that you've put out way back on interest, which is basically a year ago.

On this one.

Your how do you sort of think about visibility in terms of the programs that you put out there I mean, I think you had 136 in the model for <unk>.

2023, 268 or something like that in the model for 2024, how do you how should we think about how should we think about your view on this now that youre in youre into this and I think the questions that asked about the volatility in the markets interesting going on my bad I mean, what's your what's your confidence level on those out year projections that you put out there.

Yes, I don't know if you had any specific views on sort of.

Beyond 'twenty three in terms of guidance numbers.

What I will say is again I think what we are trying to effect is a shift in the status quo of how this work is done so overwhelmingly everybody is still doing it themselves.

Alright, so yes market conditions are or a little worse, but it's not like I'm in an existing outsource cell engineering market I'm again affecting that change in the market and making the amount of difference I need to make even with the number of programs. We're talking about there is still small compared to the the total amount of cell engineering projects going on across every biotech company from AG materials.

Food pharma right and so and again I don't know, which way that capital tightening will drive it might mean less total programs happening across the industry, but higher percentage outsource.

Which again goes current scale or where we're barely penetrated is great right.

All right.

I just don't know today, how that's going to play out I think we have to watch the next couple of quarters, especially.

Got it and final note one final question.

How should we think about.

The bear bear program and sort of like that and that should bring it out. So how should we think about revenues from that program and when we could potentially see something materialize.

Mark I'll, let you answer that thinking.

Finishes off.

Yes, sorry on the Bayer revenues on it there yes sure.

I guess, yes darrin.

Pretty complicated transaction and the GAAP accounting for that is still very much TBD.

So yes.

I just can't really.

Comment on that right now.

Got it.

Okay. Thank you very much.

All right, Matt Sykes from Goldman Sachs.

And on Q Aloha video.

Yeah.

This is Jim telling us that we said we should end the call. Thank you for all that thanks for all the.

I will unmute your line.

Great.

Good afternoon, everyone.

Great questions everybody and.

Thanks for taking my questions.

I think that that concludes that cameras are back I've got it.

Two quick ones.

Jamie.

But I think that wraps up our call today, Jason any final words.

And I'll just mention both up front.

Just on the last quarter call you talked about and Jason, you just referred to it, kind of being able to tune the types of contracts you're signing.

And just looking at the number of programs you've put up each quarter, Should we be thinking about maybe you're introducing a little bit more selectivity in terms of the number of programs you're taking on or certain agreements to your ability to tune those contracts?

All right, Max Mack from William Blair.

Yes.

And then the second question is just on on the Bayer collaboration.

I'm going to unmute your line.

I think in the release, you mentioned that, you know, portion of the operating expenditures would be offset by some of the fees generated for the collaboration.

Research on their expansionary I wanted to just correct something on <unk> question with the roll forward of the programs just because I know we have a lot of listeners and it's kind of a nuance, but there are just so you know the <unk>.

You're up next.

Could you just talk about how much that offset is and if this collaboration changes your APEX profile going forward?

Yes, I'll take the first one.

Hey Jason, Anna Marie, and Mark.

And Mark, do you want to take the second?

So, so, so, so yeah, with regard to how we choose, you know, which programs to take on, you know, one of the things we do, I do caution the commercial team is, you know, not to try to pick winners in the market.

In other words, you know, we don't really see ourselves as, you know, an end product developer here at Ginkgo.

In other words, you know, I'm not, you know, a therapeutic drug developer, I'm not a fragrance developer, I'm not a, you know, ag biologicals, you know, expert in terms of what's the right next products in that market, you know, our customers ultimately are.

Thanks for taking our question.

And so what we're looking for, when we're choosing, you know, who to get on the platform is often appetite, right?

So, just wanted to get an update on how funding dynamics and the volatile markets that we see are impacting the rate, and maybe you are bringing on new customers or new programs on your platform, and whether or not you've seen these factors drive a slowdown in company decision making, and just exactly how much of an impact that had on the number of programs that you added in the quarter.

Like, how excited are they to, you know, basically take this transition, which is a shift from how the market works today, right?

And then a bit of a follow-up is just in terms of the new customers and the new programs that you added, have you seen this impact in terms of the volatile markets and funding dynamics maybe slow down new customers coming onto the platform, or are you also seeing some existing customers maybe hold off on adding new programs at a rate that you would have expected maybe a few months ago?

The status quo, if you wanted to do a cell engineering project, and you launch the company tomorrow, the expectation from your VCs and others would be, you know, you'd start running lab space, you'd buy a bunch of equipment, you'd hire some scientists and get to work.

Yeah, I'll jump in on this, because I find this fascinating.

Yeah, so this is a good Oh, sorry.

And so one of the questions is like, where, you know, is it a customer who's got the appetite to push a lot and believes in this sort of outsourced R&D.

So I think juries out a little bit. There's there's different dynamics that that can either favor us or hurt us, right.

And that's why I'm excited about the bear deal, because you see that happening with really a large customer in that case, you know, for a whole category of work for them.

So obviously, you know, companies being flushed in giant pools of venture capital should drive money to service businesses providing services to those companies, right?

And that, by the way, that'd be the only work with Ginkgo, right, but they've decided to sort of outsource that work, you know, out to the wider market of providers, right.

Like that, that feels obvious.

Current active program kind of CFC was not the 12 31 balance.

And so I think like that, that's one of the big ones.

The only only caveat is the normal mental model is they raise those piles of money, rent a lab, buy a bunch of equipment, and hire scientists to do the work, right?

And then second is just, you know, quality of deals, right?

So their actual mental model to date is not to outsource it to service providers, it's to use all that money to build an R&D team to do cell engineering.

You know, what's the, what's the opportunity for downstream value share fees and so on.

And so we are trying to affect this, like, again, this mentality shift, which is what I'm so excited about seeing in the Bear Deal.

But there's not more to it than that.

Well, you know, cash pressure, you know, on small biotechs can help change people's minds, right?

We're not, we're not really, again, trying to overfit to either a certain market or things like that.

So you might look at that and say, well, you know, I don't know if I want that big, you know, lease cost, you know, in Kendall Square, right?

It's sort of, we take it, Mark, you want to address the Bayer transaction?

All right, Rahul from Raymond James.

I don't know if I want to buy, you know, this several million dollars worth of equipment right on the first weeks of the company, right?

An active program is a program that was active at any time in the quarter. So youre kind of roll forward math would be a bit off it doesn't change. The point you were making but I know, we just have a lot of listeners on this call I didn't want to leave that sort of point unaddressed.

Yeah, sure, Matt.

I'm going to go ahead and unmute your line.

You know, so there's an interesting trade off there, where I think what remains to be seen, and obviously, just to flag it also, the private funding markets lag a bit, you know, but I think there is and you're reading a lot about this, you know, now, it's a lot of the Unknown Attendee, Jason Kelly, Poon Mah, Rahul Sarugaser, Shyam Sankar, Megan LeDuc, Barry Canton, Iya Khalil, Deborah Marks, Ena Cratsenburg, Ginkgo Bioworks, Does that make sense?

So as you know, when we talked about the deal, when we disposed, and we did say we're bringing on some operating expenses, but that the collaboration with Bayer itself, and the new programs with Bayer would baseload demand pretty well and largely offset the acquired burden.

You're up next.

Yeah, very helpful.

So I wouldn't look at the Bayer transaction as in any way materially changing our OPEX profile.

Perfect.

Thanks, Jason.

And certainly it wouldn't change in any significant way our sort of cash runway.

Yep.

Thank you.

Thanks, Max.

Thanks all.

Tejas Savant from Morgan Stanley, you'll be up next.

I'm going to unmute your line now.

Hey, guys.

Good evening.

And thanks for taking the questions here.

So Jason, one one follow up on the on the BR partnership here.

It doesn't sound like it.

But can you just clarify to the extent to which this is exclusive in the sense that you do now have an anchor tenant, who clearly has, you know, a strong interest in the field?

Some of those programs that are terminated in the in the actual fourth quarter not after Q.

Does this sort of preclude you or perhaps sort of make other potential customers, especially the larger ones, a little bit wary of engaging with Ginkgo?

And then, as a sort of unrelated follow up there, any color that you can share on those OUS opportunities on the biosecurity front?

I know you mentioned, you know, funding uncertainty beyond July 1st in the past, but outside the US, if you can help us sort of prioritize or size some of the opportunities that might come into focus for biosecurity in the next 12 months, that'll be helpful.

Thank you.

Yeah, happy to do that.

So, you know, one of the things we think about on the, to answer your question about the bear transaction, just to repeat it, right, it's sort of like, hey, if you're taking a large customer in a certain category, does it prevent you from working with other, Right.

And so I think one of the things we try to be clear about with customers broadly at Ginkgo is that the model here is to be like an Amazon.

Not after 12 31, it's just choppy they tend to take it offline.

Right, you know, you have competing companies leveraging Amazon Web Services, it's a net business, you know, a net benefit to the entire industry, because everybody's getting better economics on one piece of the stack needed to get a product to market.

And there's plenty of other places that compete above that sort of base, sort of platform, in this case of delivering web services and data centers and all that, okay.

And so, so that is very much the model.

And we're very clear about that with partners, we are always arguing, right, like any customer is going to try to lock us into an exclusivity.

And just as I'm pretty sure we have now, we haven't even finished signing the bear deals, I certainly can't comment on exactly how it's going to work.

But what I can say is, our intent here, and the reason we're acquiring, you know, a large team and platform in West Sacramento is to make that broadly available, right.

And I, you know, and I do think both large companies in the space and startups in the space will be excited to get access to our platform when the when the deal is concluded.

T's crossed and I's dotted okay, alright, well. Thanks again, everybody. We appreciate your time today and Thats My last clarification Mark.

Thanks, Dean.

But it is always a discussion with partners on that.

Appreciate you taking taking our questions.

But that's our philosophy when it comes to how we want to work in the market.

And the second question was about outside of the U.S. opportunities around biosecurity.

Yeah, I mean, you know, so we don't have any anything specific there yet to ask, but you know, what I would say is.

So clearly, there's a lot of interest around the Bayer deal as our question.

We have a core belief that biology doesn't respect borders. We think COVID-19 is a just existence proof of that fact.

So one of the things we talked about nearly, you know, early days, both Jason and Mark was that a way to get to the anticipated 500 projects in 2025 was to sign up these anchor partners.

And so if you're the US government, for example, and you're trying to enable US biosecurity, I think the right framework to think of is global biosecurity. And I think COVID-19 was a wake-up call that there were a lot of cracks in our current system of global biosecurity.

And of course, with Bayer, we're seeing this first real anchor partner.

Take care, everyone.

I think you're going to see, and you're hearing people talk about this from 18 different directions, Bill Gates just had a thing out about his idea for a certain type of organization to be able to jump in into hotspot areas and things like that.

So my question is two parts.

Look, I don't actually know what ultimately this will look like, but what I will say is our expectation at Ginkgo, the biosecurity arena, is that we do need to operate globally if we want to be really the preeminent provider of biosecurity technologies.

One, how should we see this partnership as you consummate the deal, you know, lend to a potentially greater rate of new onboarding a project?

Thanks.

That's the right way to think about the business.

And second, how does this partnership portend similar anchor partnerships in other sectors, particularly biopharma?

That was really what we were getting at there with that comment.

Yeah, so it's a very good question.

Got it.

So yeah, I mean, I would say that the general two interesting things here.

Thank you guys.

So in general, any large customer for Ginkgo and like, I think, you know, a good example of this is be like Gividon.

Appreciate it.

Right, where if we initially do a initial, in that case, it was a very small pilot project many years ago, but any first project that then goes well, can lead to more business, right.

Thanks, Tejas.

So I think that's like just one very generic frame here is like taking a large company customer, building a relationship, proving it out, and then expanding from there.

And that because of the size of their R&D budgets and the scale of their needs, they actually could be many future projects.

Okay, so that's all still true.

And we're doing that across many, you know, many customers.

If that was the definition of anchor customer, I think we have many other anchor customers as well.

I do think what's unique in this case, is really a strategic choice bears making to actually just do this work externally.

And I think in therapeutics, you know, you kind of see this, where like a lot of the large pharma companies have really focused, you know, overwhelming, overwhelmingly, in many cases on really their skills and development and kind of pass research off into what is ultimately like a small biotech ecosystem.

You know, so, so, you know, I think that kind of model, you're starting to see a little bit a taste of it and ag biologicals, that's a really exciting trend for a platform like us.

And so, so I will flag that there's that extra element.

But other than that, I mean, yeah, we, you know, if we do good work with them, and we go, this will kick off if it all closes with a, you know, multi year partnership, that we should be able to keep doing more and more.

I mean, that's really the idea behind Ginkgo.

Terrific.

Thanks for taking the question.

Yeah.

Thanks Rahul.

All right, Mark Massaro at BTIG.

I'm going to unmute your line.

You're up next.

Great.

Can you hear me?

Yep.

Terrific.

So yeah, I wanted to ask, you know, one of your partners is, is Berkeley Lights.

And I believe they're scheduled to deliver one or more workflows over to your facility in Boston later this year, if not already did recently.

Can you just speak to what type of capability Berkeley can deliver to your foundry and whether or not that can enable the potential for new for new customers or new, Yeah, sure.

So, so maybe I'll just expand a little bit on on like, how we drive improvement in our foundry, right?

So you saw a share when we gave the year end update, sort of our we call it Knight's Law, which is the sort of goal to triple the output of our foundries and roughly half the cost of this metric that we track called strain test.

So like, how do we continue to drive that underlying technology improvement at the company?

And so some of the things are like automation, right?

So if you come into our newer facilities, you see more and more sophisticated automation, some of the things are the biology and biochemistry, like are we inventing new, better ways to do the experiments we do.

But the third area is really in liquid handling.

You know, not to nerd out too much on this, but like the size of the droplet of liquid that you can manipulate in the lab, as that shrinks, you actually use less reagents, right?

So it helps to reduce that to help us continue that cost drop as we're doing this work.

And so the reason we like the Berkeley Lights machines is they're using a microfluidic technology that really allows us to continue to substantially shrink the reaction volumes that we're working with when we're doing not everything like those machines aren't, you know, they're not really they're not general purpose liquid handlers, but for the type of work they're doing the certain wide class of assays that are roughly based on what you can see with a high powered microscope, pretty neat.

And so so that's why we like them.

We think it's ultimately a very flexible platform.

And that's why we have, you know, the relationship that we do.

But that's the category it's in.

It's in that sort of continuing to shrink the volume of liquid we can work with to help us drive night fly, which we ultimately think serves the whole industry by helping to reduce the laboratory costs of cell engineering.

Great.

And just as a follow up to that, you know, I know you got the question from Twitter, the Foundry revenue came in a little bit light of our estimate, I guess, should we expect your related party revenue to kind of kick back up later this year?

And maybe can you give us a sense for how you expect to end the year, both as related party and third party as a percentage of Foundry revenue for the year?

Yeah, so Mark, you want to talk about sort of what we would say about the year and then I can maybe speak to related parties generally.

Yeah, so Mark, I mean, we don't break out sort of guidance in that kind of a sub segment.

But just to maybe reiterate some comments we've made in the past and related parties.

So first of all, we generally speaking, we're not expecting related parties to be a sort of a significant or outsized source of growth when you compare 2022 versus 2021.

And the sort of uptick in related party as a percent of total revenue that you saw this quarter is not sort of a general shift in trend.

As you know, last year, the general trend was that mix was declining, and it has more to do with just timing. And, you know, even if you look at a base of 20 million in revenue, a couple million bucks here or there can actually swing a mix shift.

So I wouldn't really read into the kind of uptick this quarter as some kind of a trend.

And I would just reiterate what we said in the past, which is that the related party revenue mix isn't something that I would expect to be sort of an outsized contributor to growth for the year, whichever way it goes at the end of the day.

Okay, great.

Thank you.

Next question will be from Steve Mah at Calend.

Please go ahead and unmute your line now.

Okay, great.

Thanks for the questions.

A lot of ground already covered.

But maybe a follow up question on new partner ads.

Jason, you know, you talked about using Ginkgo, you know, can ultimately save partners money versus buying their own infrastructure.

But, you know, have you seen a trend where there's a push towards more back end loaded deals as smaller partners try to conserve cash?

And if so, can you see any read through to Ginkgo in the short term?

Yeah, that's a good question.

Yeah, I would say you will you will see, certainly among smaller companies, more cash sensitivity in this environment, right?

Like, I think that's a truism, right?

Like I was saying earlier, you might see at least more interest in outsourcing, which I think is true, right?

Like, so that that dynamic, I feel, again, I don't have the data on this yet.

But you know, because I think the squeeze hasn't come as much on the private companies, but it will, you know, but I think you can see a change in their interest in outsourcing.

But then they're certainly gonna, I think, be more cash sensitive than a startup even typically is.

So yeah, so you would see some of that trade that also could be a trade in us taking equity again, right, you know, in lieu of cash and things like that.

So again, we have tools in our toolbox to help there.

But I would say that that is a sensitivity for the smaller Uh, you know, for the for the larger companies, not as much, right, often they're the mental model for those companies is like, I'd love to, you know, they're like, I don't want to do downstream value share, I'd rather pay cash upfront, right?

Like, like, again, it depends on the partner.

But that's that's pretty common in therapeutics, for example, right?

So, so it's, I think it's gonna affect the different size customers, different, Okay, yeah, thanks for the color.

And then a quick one, Bioworks 7, when is that going to be completed?

And are you going to have enough capacity for the expected 60 new program ads this year?

Thanks.

Mark, I don't know if you have information on what we've said about completion.

Go ahead.

Oh, you're muted, though.

Yeah, I don't have a completion date. I will say that the relatively low capex that you see in Q1 is not indicative of the actual efforts that we're putting into that build out. And so there was just a lot of, like, there's timing of kind of project expenditures, equipment lead times, etc.

And so yeah, but I actually don't know the completion date.

That said, it's not something that is a major driver to capacity that we need this year in order to meet this year's revenue.

Okay, thank you.

Thank you.

All right.

Looks like last analyst question here is going to come from Derik DeBruin over at BofA.

Derik, I've unmuted your line.

Great.

Hey, thanks.

So just some questions.

So you've talked about adding 60 programs for the year.

I'm just sort of curious on what's the, what, you know, in terms of how to think about active programs, because if you looked at, I mean, if you look at this quarter, you ended Q4 with 60, you know, you finished it with, you ended 4Q with 60, you did 64, so that you added 11, so that basically means you had seven that went away or concluded.

Can you talk about how you sort of think about the net new program ads?

And also just, I know we've talked a lot about how we're sort of thinking about this, but how many of these programs are concluded?

Can, do you think will add downstream value?

There's something that's going to come out with, there are things that were just sort of like research projects and.

Basically, it's like, how do we sort of model the revenue for active program?

Because I know it's sort of like a moving target and it's lumpy, but it sort of matters in the model.

Yep, yeah, well said.

Um, so yeah, so a couple that maybe, and again, if I could restate, so how do we think about net new program ads, new program ads, and then, I think sort of research projects versus, you know, commercial.

So I'll take the second one first.

So when we're talking about a new program, you know, that is something that's got commercial intent.

And, you know, our intent there is to have downstream value share, and so on.

So, so, you know, pure research projects without an intent to get to a product.

You know, like, we might do something like that, but it wouldn't end up in the programs.

So that's my first point on that.

Now, that doesn't mean, you know, by any stretch that every program is going to be successful, right?

I mean, and that's the nature, I think, of sort of biotechnology today, right?

This is also not the customer expectation, right?

In other words, if you're a, you know, startup biotech company, you want to take the best shot you can with the dollars you have.

But, you know, you are far from guaranteed, for example, that your therapeutic is going to go to market, right?

And so, so there's sort of, and that varies by industry, certain other industries that are having a more contained problem would have a higher expectation of likelihood of any given program succeeding, probably a lower value in that program, right?

And so, so we have that sort of dynamic.

And we, and what I like about Ginkgo is we have a nice portfolio, all right?

Now, net program ads, right, is basically a function of, again, new programs launching, and then old programs finishing and either waiting on downstream value share or just ending if they weren't successful.

And so, so, you know, at the end of the day, my view on it is kind of like, The most important thing is adding new, and then doing the best job we can with the infrastructure we have for the customers and the customer walks away saying, this was better than what I would have done myself.

Right.

If the program works, I think we tend to get extra credit probably than we deserve in the sense that like some of that's going to be, you know, some random chance based on the biology.

And if it fails, we probably get knocked a little harder than we deserve.

But in the end of the day, the customer wants to see that we've done a better job than I think they could have done for the dollars.

That I think is what returns repeat business to us.

So the short answer is I don't look at that too much, the net new program at.

I do look at, you know, are we keeping up with Knight's Law?

Right.

Are we are we bringing in demand and scaling our foundry?

And I'm very focused on that.

And I'm focused on, you know, are we getting programs out the door where the customer is happy with the work?

But then downstream value share will come as it comes. Right.

Again, I try not to overfit to that because it's not under our control.

And a number of them won't work for, you know, just because biology is biology today still.

So I know not the most satisfying answer, but that's the reality of how we think about it.

It remains unpredictable is the short answer.

Got it, got it.

And just as a follow up on this one, I mean, when you sort of go back and you look at your, Analysts Day documents that you put out, you know, way back, basically a year ago on this one, you know, your how do you sort of think about visibility in terms of the programs that you put out there?

I mean, I think you had 136 in the model for, 2023, you know, 268 or something like that in the model for 2024.

How do you, you know, how should we think about how should we think about your view on this now that you're you're into this?

And I think the question has been asked about the volatility in the markets and just been going on with it.

I mean, what's your what's your confidence level on those out your projection?

Yes, I don't think we shared any specific views on sort of beyond 23 in terms of guidance and numbers.

What I will I will say is, again, I think what we are trying to affect is a shift in the status quo of how this, So overwhelmingly, everybody is still doing it.

Right, so yeah, you know, market conditions are a little worse, but it's not like I'm in an existing outsourced cell engineering market.

I'm again affecting that change in the market and making, you know, the amount of difference I need to make, even with the number of programs we're talking about there is still small compared to the total amount of cell engineering projects going on across every biotech company from ag to materials to food to pharma, right?

And so, and again, I don't know which way that capital tightening will drive.

It might mean less total programs happening across the industry, but higher, which at Ginkgo's current scale where we're barely penetrated is great, right?

So like, you know, but I just don't know today how that's going to play out.

I think we have to watch the next couple quarters.

Got it.

And final note, final question.

And how should we think about.., you know, the the bear, you know, the bear program and sort of like that and that you bring it out.

So how should we think about revenues from that program and when we could potentially see something materialize?

Mark, I'll let you answer that.

Yeah, sorry, on the Bayer.

Revenues on the Bayer.

Yeah.

Yeah, I guess.

Yeah, Derek.

So it's a pretty complicated transaction.

And the gap accounting for that is still very much kind of TBD.

And so, yeah, yeah, I just can't really comment on that right now.

Got it.

Okay, thank you very much.

And on cue all of our video cameras.

This is Zoom telling us that we should we should end the call.

But thanks for all the things for all the great questions, everybody.

And I think that that concludes our cameras are back.

I've got an IG genius here in the room with me.

But I think that wraps up our call today.

Jason, any final words?

and research.

Sorry, on Derik's question, sorry, I wanted to just correct something on Derik's question with the roll forward of the programs, just because I know we have a lot of listeners, and it's kind of a nuance.

But Derik, just so you know, the current active program count of 60 was not the 1231 balance.

An active program is a program that was active at any time in the quarter, so your kind of roll forward math would be a bit off.

It doesn't change the point you were making, but I know we just have a lot of listeners on this call, I didn't want to leave that sort of point unaddressed.

And so some of those programs would have terminated in the actual fourth quarter, not after 1231.

It's just a new one, I'm happy to kind of take it offline, keys crossed and I've dotted.

Okay.

All right.

Well, thanks again, everybody.

We appreciate your time today.

And thanks for that last clarification, Mark.

Q1 2022 Ginkgo Bioworks Holdings Inc Earnings Call

Request a DemoDemo

DNA

Ginkgo Bioworks

Earnings