Q4 2024 Ginkgo Bioworks Holdings Inc Earnings Call

with our investor relations team, usually behind the scenes of these earning calls. And so it's exciting to be supporting you today in this more front-facing role. I'm joined by Jason Kelly, our co-founder and CEO, and Mark Dmytruk, our CFO. Thanks as always for joining us. We're really looking forward to updating you on our progress today.

Jason Kelly: Right over to you Jason Thanks, Joseph and thanks, everyone for joining us we always start with our mission of making biology easier to engineer and similar to last quarter.

Jason Kelly: Our focus for that mission is on these three key objectives first we want to reach adjusted EBITDA breakeven, while maintaining a cash margin of safety.

Jason Kelly: And we ended this quarter with $562 million in cash and no bank debt and significantly exceeded our original cost cutting target for 2024, Youre going to see this reflected in a dramatically reduced level of cash burn in Q4 versus Q3, and I'm really happy to see it as a cash margin of safety is what protects you can go from having to raise capital.

Jason Kelly: It'll in conditions that are favorable and we want to keep our cash war chest large, while reducing cash spending and expanding our sources of revenue.

Jason Kelly: This is a simple strategy right.

Jason Kelly: Just drive the cost down and keep expanding and we executed on it really well in the second half of 2024, and we will keep pushing on it in 2025 that is not changing a second while we cut costs, we need to keep serving our current customers and adding new customers.

Jason Kelly: You foresaw achieved a record number of technical milestones in a single quarter, showing our team's ability to continue to deliver great New science for our customers and I'm really proud of that delivery across the team.

Jason Kelly: Finally, we want to grow our solid year in revenue and continued to expand our tools offerings, which I'm going to talk a lot more about in the strategic section.

Jason Kelly: I'm excited to get into all of that but first I want to hand, it over to mark to discuss the financial results for the quarter.

Mark Dmytruk: Thanks, Jason I'll start with the cell engineering business.

Mark Dmytruk: Cell engineering revenue was $35 million in the fourth quarter of 2024 up 29% compared to the fourth quarter of 2023. This increase was primarily driven by growth with large biopharma customers and government accounts, partially offset by declines with smaller customers in the industrial biotech segments.

Mark Dmytruk: As we've discussed previously this customer mix shift has been a headwind to growth in prior quarters and so we're very pleased to announce to you the positive impact of the shift in this quarter's revenue.

Mark Dmytruk: On a full year basis sell engineering services revenue was $174 million in 2024.

Mark Dmytruk: As a reminder, in the third quarter of 2020 for Ginkgo recognized $45 million of noncash revenue from a release of deferred revenue relating to the mutual termination of a customer agreement, we had with motif food works one of our platform ventures exclude.

Mark Dmytruk: Excluding this impact cell engineering revenue was $129 million in 2020 for down 10% compared to the full year of 2023.

Mark Dmytruk: This decrease was driven by the customer mix shift discussed previously along with commercial changes related to the restructuring.

Mark Dmytruk: In the fourth quarter of 2024, we supported a total of 138 active programs across 85 customers on the cell engineering platform. This represents a 5% increase in active programs year over year.

Mark Dmytruk: As we discussed on our previous 2024 earnings calls the nature of the programs that we take on with our customers has evolved significantly following our adjustments to commercial terms and the launch of our tools offerings.

Mark Dmytruk: As such going forward, we are no longer going to report a new program metric. However, we are going to provide additional perspective on active programs in the quarter, which I will discuss in a moment.

Mark Dmytruk: Before I do that I will close out 2024 by noting that we added a total of 31, new programs and contracts in Q4 of 2024 of which 14 were generally comparable in size and scope to historically reported new programs and were included in the current active program counts on the prior slide.

Mark Dmytruk: In addition, we commenced 17 other customer contracts in the quarter that represent a variety of small deal archetypes.

Mark Dmytruk: These are generally much smaller in scope and shorter in duration.

Mark Dmytruk: We are very pleased that we've been able to continue the momentum with our biopharma customer base, including five new large pharma logos and seven new data points contracts.

Mark Dmytruk: Now going forward, we're going to provide you with a revenue generating active program count metric that we think will be more useful to analysts that are using this to model revenue.

Mark Dmytruk: This metric will include all programs that have generated revenue in the quarter, including smaller programs that I referred to as other contracts on this slide further in this metric. We will only include programs that were revenue generating in the quarter. So for example at any point in time, we have a significant number of programs that are either just starting or are wrapping.

Mark Dmytruk: And so they arent generating any meaningful revenue.

Mark Dmytruk: We will exclude those for you, which will give you a better indication of revenue per program in the quarter and you can measure how that trends over time in a more meaningful way in the appendix. We provided you with a preliminary look at this new metric for the past four quarters as a reference and we welcome your feedback.

Mark Dmytruk: Now turning to Biosecurity, our bio security business generated $9 million of revenue in the fourth quarter of 2024 at a gross margin of 17% revenue and gross margin were down quarter over quarter and as Youll know lumpy. During the course of the year due partly to the timing of signing of a customer contract in <unk>.

Mark Dmytruk: Q2 of this year.

Mark Dmytruk: On a full year basis security revenue for 2024 was $53 million down 51% from $108 million in 2023.

Mark Dmytruk: As a reminder, our K to 12 Covid testing contracts ended in the third quarter of 2023, and the business has now moved entirely towards building out both domestic and international infrastructure for Biosecurity.

Mark Dmytruk: Okay.

Mark Dmytruk: And now I will provide more commentary on key items for the rest of the P&L. We changed the presentation of this slide this quarter to align with our segment reporting disclosures. We believe this will give you more insight into the underlying profitability of our two segments and specifically it will give you more information on the cost structure and how that is.

Mark Dmytruk: Changing as we undertake our restructuring.

Mark Dmytruk: Reconciliation between segment operating loss adjusted EBITDA and GAAP net loss can be found in the appendix.

Mark Dmytruk: Okay.

Mark Dmytruk: Segment operating expenses, so starting with the more significant items and segment Opex in the fourth quarter of 2024 cell engineering R&D expense decreased 31% from $73 million in the fourth quarter of 2023 $250 million in the fourth quarter of 2024.

Mark Dmytruk: Cell engineering, G&A expense decreased 49% from $40 million in the fourth quarter of 2000 $23 million to $21 million in the fourth quarter of 2024.

Mark Dmytruk: These decreases were driven by our restructuring efforts.

Mark Dmytruk: On a full year basis sell engineering R&D expense decreased from $336 million in 2000 $23 million to $272 million in 2024 <unk>.

Mark Dmytruk: G&A expense decreased from $171 million in 2000 $23 million to $115 million in 2024.

Mark Dmytruk: Net loss. So 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 because of these noncash and other nonrecurring items. We believe adjusted EBITDA is a more indicative measure of our profitability.

Mark Dmytruk: And as noted we are now showing you adjusted EBITDA at the segment level. So that you can more clearly see the relative profitability of cell engineering and bio security the significant improvement in sell engineering segment operating loss in the fourth quarter of 2024 compared to the comparable prior year period was due to the previously discussed drivers.

Mark Dmytruk: Of improved revenue and reduced operating expenses.

Mark Dmytruk: Moving further down the page you'll note that total company adjusted EBITDA in the fourth quarter of 2024 was negative $57 million, which was up from negative $101 million in the fourth quarter of 2023.

Mark Dmytruk: The principle differences between segment operating loss and total company adjusted EBITDA in the fourth quarter relates to the carrying cost.

Mark Dmytruk: Of excess leased space, which you can see was $9 million in Q4 and $26 million in the year. This cost represents the base rent and other charges relating to lease space, which we are not occupying net of sublease income. We will continue to break that out for you going forward since that is.

Mark Dmytruk: Cash operating costs and it is not related to driving revenue right now and can be potentially mitigated through sub leasing.

Mark Dmytruk: On a full year basis total <unk> adjusted EBITDA was negative $293 million, which was up from negative $365 million in 2023.

Mark Dmytruk: This improvement in adjusted EBITDA can be attributed to the fact or the impact of the previously mentioned third quarter noncash deferred revenue release as well as the restructuring implemented over the last three quarters.

Mark Dmytruk: And finally, I'll just make one additional comment relating to cash burn in the quarter.

Mark Dmytruk: Cash burn in the fourth quarter of 2024 was $55 million down significantly from $114 million in the third quarter of 2024.

Mark Dmytruk: This significant decrease in cash burn sequentially. It was a result of the restructuring and it was further impacted positively by higher revenue, which was partly driven by the successful completion of a number of technical milestones in the quarter as mentioned by Jason.

Mark Dmytruk: We would further expect to reduce the cash burn run rate significantly from this level by the fourth quarter of 2025, though we expect some lumpiness in the progression during the year due to timing of working capital and onetime payments.

Mark Dmytruk: Jason will discuss our increased target for Opex reductions later in the presentation.

Mark Dmytruk: As we did last year, we'd also like to provide you with some updated data points relating to downstream value share.

Mark Dmytruk: On the left hand side of the chart you can see that as of the end of 2024, we have the potential to earn up to $1 $7 billion in milestone payments based on customer collaborations previously entered into with a majority of those payments dependent on successful commercialization of our product.

Mark Dmytruk: This figure does not include potential royalties. So on the right side of the page. We are showing you. The full total of programs for which we currently have downstream value share of potential including those with royalties.

Mark Dmytruk: It is harder to estimate the total potential value on royalty deals youll see the volume of programs there remains substantial.

Mark Dmytruk: You'll also see that the decrease in potential milestone payments was approximately $700 million when comparing 2024 to 2023.

Mark Dmytruk: We do expect reduction in milestones if a program doesn't meet a technical goal or a customer changes commercial direction.

Mark Dmytruk: Previously we've made up for these decreases with new milestone bearing programs, but as a result of the commercial changes we implemented in Q2 and our focus on tools offerings that generate near term revenue. We did not book a significant amount of new potential milestones in the year.

Mark Dmytruk: Now I'd like to provide some commentary on our outlook for the full year 2025.

Mark Dmytruk: Before I get into the cell engineering revenue numbers. There are two important points of context, firstly I want to reiterate that our primary objective is to reduce cash burn.

Mark Dmytruk: We'd like to <unk> competitive position and are very encouraged by what we're seeing with our tools offerings. However, we are still selling into a challenging biotech R&D market and are being diligent with respect to new business that we take on.

Mark Dmytruk: Secondly, the government segment has been a source of growth for us in the past year and our momentum there has been very strong. However, given current uncertainties. In this area, we are baking that risk into the low end of our guidance.

Mark Dmytruk: That said then our cell engineering revenue guidance is a range of $110 million to $130 million.

Mark Dmytruk: We believe we are taking a conservative approach in providing this guidance range, we could see potential upside to this range coming from our new tools offerings, where we have a solid BD pipeline and as discussed earlier closed a number of new biopharma deals in Q4.

Mark Dmytruk: Our bio security revenue guidance for 2025 is at least $50 million.

Mark Dmytruk: As we have in the past we are guiding to our approximate current level of contracted backlog for the year, including unexpected mid year a program renewal.

Mark Dmytruk: And have a pipeline of opportunities we are pursuing beyond that.

Mark Dmytruk: Also to clarify.

Mark Dmytruk: This business is almost entirely dependent on government funding, which is a risk we have been managing since we started operations in the bio security space and so we are providing guidance here under the assumption that our government contracts continue.

Mark Dmytruk: And finally, we expect total revenue for the year two.

Mark Dmytruk: 2025 to be in a range of $160 million to $180 million.

Mark Dmytruk: In conclusion, we're pleased with our overall execution of the restructuring thus far as evidenced by the reduction in cash burn in Q4, we are very encouraged by the early traction we're seeing in tools.

Mark Dmytruk: We also acknowledge that we continue to operate in a very uncertain macro environment.

Mark Dmytruk: We believe we are taking a prudent approach to managing our risks and growth opportunities along a path to adjusted EBITDA breakeven by the end of 2026 and maintaining a cash margin of safety.

Mark Dmytruk: And one final footnote on the financial reporting front I can confirm that we remediated our sox material weakness and wanted to express my appreciation to the team for all the work that went into addressing that.

Jason Kelly: So back over to you Jason.

Jason Kelly: Thanks, Mark similar to the last two quarters I'm going to use the first strategic section to focus on <unk> efforts to reduce costs and update you on our restructuring efforts.

Jason Kelly: Next I'll cover our expansion into life science tools and services. This is a big change we made last summer. We now have some data on how it is going well.

Jason Kelly: We're seeing a market trend in the biopharma industry towards needing more data for AI models, where customers haven't been well served by traditional life science tools companies and <unk> I think there's a nice openings, we're going to go there.

Jason Kelly: Finally, I'll share more details on the specific tools and service offerings in gingko data points and ginkgo automation, where we have been getting good traction with customers over the last six months.

Jason Kelly: Okay, let's get started alright, so when we announced our restructuring less than a year ago, We said $100 million spending cut target for 2024.

Jason Kelly: An additional $100 million reduction set for 2025, and our Q3 call last November we reiterated the targets, having achieved a considerably accelerated site consolidation and cost takeout.

Jason Kelly: Today, we've achieved $190 million annualized run rate reduction through Q4, when compared to Q1.

Jason Kelly: Partially offset by a headwind where we have increased rent charges related to the <unk> one facility and you can see that reflected in our quarterly cash burn in Q4, 2024 being reduced down to $55 million.

Jason Kelly: As I said, having a cash margin of safety is very important to me and that is how you avoid having to take on a dilutive fundraising when you don't want to and so I'm absolutely thrilled to see the progress on our cash burn here, while still having over 600 or $560 million in cash and cash equivalents with no bank debt at the end of Q4.

Jason Kelly: Our peers pursuing advanced technology and AI in biotech we're in a really strong position and we plan to keep it that way I want to thank the ginkgo team for the incredibly hard work in 2024, while undergoing a lot of change to get us to where we are today, there's still a lot of work to do it in 25%, but I do really like our position from here.

Jason Kelly: You can see also our progress reflected in between.

Between Q1, and Q4 of 'twenty 'twenty four but if I like this chart comparing total revenue to cash expenses and that's inclusive of the cost of sales. All in 2025 like I said is to keep this trend going at Mark mentioned, we are being conservative with our revenue guidance and twenty-five given uncertainty around government R&D funding, obviously a lot of changes there.

Jason Kelly: But we've already taken steps to further drop our cash expenses.

I'm hopeful, we'll do even better than the $60 million annual improvement that we have is our target shown there.

Jason Kelly: Honestly this is getting easier as.

Jason Kelly: As we see what is working and not working throughout the business based on the changes we made last summer. We can move very quickly I think we showed that in 2024 and we're on an even more solid footing now.

Jason Kelly: So the rate that we can make changes should only improve in following year.

Jason Kelly: I'm also really proud of the team for their quick work in spinning down and moving out of the various sites you see on this map in particular their work on the Lasalle acquisition of Alt or ensure that we retain critical access to technologies.

Jason Kelly: And overall the operational teams ability to maintain customer delivery, while moving equipment and people has been really impressive. So we were in too many sites those mistakes that we made over the past couple of years and being able to in the face of drawbacks in biotech move out of those quickly and consolidate around what was working again it's been.

Jason Kelly: Impressive.

Speaker Change: I will say, please don't hesitate to reach out if you are growing biotech looking for space in Cambridge, or Boston and the friendliest biotech landlord here, we've been making headway on sub leases, but we still have a lot of lab space available that we'd love to get your mine too.

Speaker Change: I want to note as well that despite our site consolidation, we still maintain technical and programmatic teaming and corporate entities in Europe that are at work and delivering on our European contracts, including a very exciting new one that I'll mention later today in the Ranger program. Okay, Alright, so let's move on to the next topic.

Speaker Change: Alright so.

Speaker Change: Mentioned giga has been expanding outside of sort of our original solutions business into tools and services. So I want to give a little more color on that.

Speaker Change: For.

Speaker Change: Where we are heading into 2025, so the first day here as you can see our our historic solutions activities, we're really selling to sort of the head of R&D of a large biopharma right and so this was a deal kind of like the deals you would see negotiated at JP Morgan. They took a long time to close they were large programs multi year big checks and included downstream value.

Speaker Change: In the form of milestones and royalties.

Speaker Change: Big change in 'twenty 'twenty four with in addition, we're still doing our solutions deals.

Speaker Change: Started selling tools and for tools the customer could it.

Speaker Change: Sort of not the head of R&D, but someone that reports are that our R&D or may it reports to the person that reports to the head of R&D.

Speaker Change: And this is really if you look on this chart that I quite like at the high end.

Speaker Change: We have sort of a lot of customization and technical risk taken on by a biotech company. So an extreme form of this will be a small biotech in Cambridge, developing a unique drug in helping it to license it to a large biopharma partners, so that sort of asset licensing model as at the high end of technical risk the high end of customization.

Speaker Change: You also get a lot of value for that right you can get out and get bought out for you can see these billion multibillion dollar deals for preclinical or at least clinically proven drug assets that are pre commercial as you go down that curve that you get to our solutions business. Again go. These are highly customized right. We knew these virtual that he feels that novo nordisk, and Merck and Pfizer and so on to <unk>.

Speaker Change: Port drug discovery or manufacturing R&D, we are getting larger milestones of royalties and mark sharp shared sort of the aggregate numbers there more than $1 $7 billion of milestones and then a whole bunch more royalties on top of that.

Speaker Change: However, again highly customized and we are taking on some technical risks, we met more technical milestones than ever in the last quarter, but sometimes you don't meet them and then that that hurts us on the revenue side and certainly we're dependent on customers to commercialize to feed the really big value in the downstream and so that's great I will talk about the high amount of secondhand just takes a while to get to.

Speaker Change: <unk>.

Speaker Change: That dotted line in the middle sort of represents where you go to the point, where you're not customizing as much youre not taking technical risk and so you lose that reads through into the customers.

Speaker Change: Revenues on their products.

Speaker Change: Get what amounts to a more easily scalable business and so we're going to talk about data points, which is our business. That's most akin to like a traditional CRO contract research organization generating large data assets for customers to order for Aten for AI model training and I can talk about as much today, but we've released AI models.

Speaker Change: On the web that book should should try out and then finally, the other business, where we're seeing a lot of traction as we're at equipment business. We are selling our automation platform here. It can go and that has been going really really well.

Speaker Change: So again on the left hand side, we've got larger but longer term potential upside, where we get a piece of a customer's products and we've got to show every technology that ginkgo rolled up to do that R&D project for a customer and on the right hand side is really the customer scientists driving we get nearer term fee revenue faster sales cycle.

Speaker Change: And in a much wider swath of customers. So I think these are very complementary us having the solutions business is really helping us sell tools.

But they are very different and so it was a it was a risk jumping into this last year and so I'm really happy to see that that has paid off so well for us and the reason. It has is that we're seeing customer interest.

Speaker Change: In large data assets to enable AI models in the biotech industry and if you go around and talk to heads of R&D or even the Ceos, a pharma company as youre going to hear that AI is sort of one and two on their priority list both internally to drive efficiency in the organization, but also to help them develop new products and this was really ladder.

Speaker Change: Kicked off by the partnership between Genentech and recursion of few years ago that sort of demonstrated the applicability of this in particular in the area of target discovery, which I'll talk about later and data points, but I think there's kind of a little bit of a kicking the but for the industry and you saw a lot more people getting interested in this and has the AI models have improved from the tech.

Speaker Change: The industry is only driving more of that.

Speaker Change: Want to frame like what does this mean for the life science tools industry. So I think on the left hand side you can see in the slide I showed you a couple of quarters ago as well.

Speaker Change: Traditional life science tools market right. It bring a scientist at the bench. It is maximally possible. So that scientists has a hypothesis about an experiment they want to run to answer a question that they have based on reading a lot of literature and previous results that I've seen in their work and they want to run that perfect experiment.

Speaker Change: And that perfect experiment, they want to run it tomorrow. So they need all these reagents to be able to show up on very short notice and they need to have a bunch of equipment and assets available to them right on site.

Speaker Change: And they want it to be exactly the experiment they want so.

Speaker Change: You have a huge catalog from the big tools providers with thousands and thousands of Skus. So that scientists can do exactly what they want.

Speaker Change: By the way I think this is a really important thing Brian I think we've developed all of our drug biotech.

Speaker Change: Biotech and biological learnings have come from this tools infrastructure.

Speaker Change: Just different than the infrastructure you need if you want to generate data for AI model training.

Speaker Change: And if you want to generate data for AI model training, what you really care about is the cost per data point generated because these models get a lot better if they see a lot more data and so in that case, you don't want to infinite flexibility, what you want it sort of infinite scale with less flexibility. In fact, you want a lot of the experiments to be done similarly.

Speaker Change: So that the data can be compared well and so I think that's sort of classic research approach versus what we're calling a data foundry research approach again, I think they're very complementary I don't think we're going to stop doing hypothesis, driven discovery Bay science, but I think youre going to have a complement to it where we really need at all the major Biopharma company as all.

The major buyout research institutes out there you need the ability to generate large sets of data in order to train models.

Speaker Change: Appropriately. This AI based approach. So I think are going to see a lot of energy in this direction. We think we're extremely well positioned for this I can't go but that is the underlying driver that's made adoption of our tools products go so well in the second half of last year.

Speaker Change: Okay. So now I want to talk a bit more about the specific the two products, where we've seen the most traction which is our data points product in our automation products. So if you go to data points here the very first thing.

Speaker Change: I'll point out is this is a different business model than we have in our solution. So when customers are seeing our data points offering they own all the intellectual property. There is no royalties. There's no milestones, we're really generating large data assets on a fee for service basis for those customers.

Speaker Change: There's going to be two data points products that are already launched the functional genomics and antibody develop ability.

Speaker Change: I'll talk about functional genomics first this is really exciting. So this is pretty similar in spirit to what I mentioned with that Genentech recursion partnership where you're really using AI models to do target discovery to find new targets to develop drugs against in disease models and often a customer will have for example, a cell type that they may be.

Speaker Change: In house.

Speaker Change: That's relevant to their disease or maybe they want to take a standard one that's used out in the academic literature, and they want to perturb that cell type and what I mean by perturb it they want to either hit it with a chemical library. So I think you know 10 or 30000 chemicals that they might have in a compound library or they want to procure but genetically in other words, they want to make CRISPR knockout.

Speaker Change: <unk>.

Speaker Change: <unk> thousand maybe 1000, maybe 10000 genes.

Speaker Change: Genes in that who sell and each time, you knock out one gene or hit it with a compound you would like that sell to be in a well and then you would like to read out.

Speaker Change: High complexity measurement on.

Speaker Change: On the performance of that sell them and we have a few different types of measurements, we can do but most popular so far has been transcriptome X and so we are able to give you a readout of the transcriptome profile, but we can also do high comp imagery both.

Speaker Change: Sell painting and bright field on that sell to give you back those sort of many thousands of cells with these high content outlets. We've done. This now in a 100 different human cell types that we've worked with our ginkgo, but you can see the ones that have already been on boarded for that high content transcriptome ex drug seek.

On the left there.

Speaker Change: We've been doing for customers.

Speaker Change: Skeletal myoblast normal skin fiberglass hela cells car T cells, so on and so forth and we don't really have an issue, bringing sales online and we've got a really good hit rate doing that so again, we are happy to work with our customer cells or cells that we have here I can go on.

Speaker Change: Also the thing that people have really liked as we've just gone ahead and put some dataset that we paid for and developed here at Kimco just online so that folks AI and ml teams can just work with them and see the format of data that you get out of data points and so I'll draw your attention to the GDP.

Speaker Change: X two datasets.

Speaker Change: It's our biggest data set we have launches nearly a terabyte.

Speaker Change: Data Theres 85, chemical compounds here, I think six or seven of them are sort of controls and the rest are drug compounds.

Speaker Change: Then hit four different cell types.

Speaker Change: Six different concentrations of these drugs and for replicate some of that.

Speaker Change: And 384, well plates and then we do a transcript helmick read out of that we put all of that data online for about 200 gigs per cell type across those cells and so download you can hit that QR code download and play around with it and Thats been a really good way to bring in new customers for that product as it shows people exactly what theyre going to get.

Speaker Change: Probably I'll talk about in data points is our antibody developed ability product here. The idea is you can send us.

101000 antibody sequences.

Speaker Change: Synthesize express those antibodies and then Ron a battery of develop ability assays on them and so you can see a list here, but these are things like thermal stability and heparin binding and poly specificity somebody at a really complex difficult to run the assays and so being able to get these at a throughput.

Speaker Change: Thousands and get that data back to you again in a very clean.

Speaker Change: I am now ready format over the cloud I think is a unique offering in the market. So we're really excited to have that out there and we've seen good uptake and to give you a sense of sort of timing and what programs look like these are just two example projects. The first would be on oncology target I'd project, where you could see the types of cells that we.

Speaker Change: We would go after there and this is 2000 compounds in five different cell lines in that 10 to 11, we project and you get that data right back.

Speaker Change: The next one over would be for an alzheimers target idea here.

Speaker Change: Interested in a genetic perturbations of doing those Christopher knockouts in this case, a 1000 genes across three cell types and that's a 9% to 10 week return on that data asset and you can see on the right hand side. The illustration of the different types of data formats I'll come back to you.

Speaker Change: So again really excited about that the only thing I will mention is I'm coming out next Dolby RNA data services and we also recently released.

Speaker Change: On RNA AI models, you can see the types of.

Speaker Change: Design tools that you can you can generate by using these types of data assets.

Speaker Change: Again, this is something that will be coming up and we encourage folks that are working in the RNA AI space or RNA drug discovery and they're interested to give us a call. It will be exactly the same as the other two offerings in terms of IP rights and no royalty is fee for service. So if youre looking for large datasets and our RNA also give us a call. In addition to the sort of puncture.

Speaker Change: Genomics and antibodies.

Speaker Change: Okay. So that's what I want to say on data point to move on next to Ginkgo automation I came in I guess the near the end of January in San Diego for the Society of lab automation and screening Slash conference and it was really exciting to be there because it is accurate a ton of interest in our reconfigure.

Speaker Change: Reconfigurable automation carts are rack technology, you might remember this came in through acquisition of Zymogen, a few years ago and this is one of the big reasons. We acquired that company was we felt that they had really unique automation assets that had been started.

Speaker Change: I want to say seven or eight years ago now and then they had a previous generation of these cards were available and we acquired Zymogen then over the last two and a half years a lot more work has gone into making it simpler easier to manufacture this new generation of the cards as we were really happy to launch them.

That's all I ask.

Speaker Change: The reception.

Speaker Change: <unk>.

Speaker Change: Just so you understand how these work.

Speaker Change: Inside the carts a piece of laboratory equipment. So this is coming from any lab vendor you want right. So as a piece of lab equipment. That's been developed at the lab bench for the lab bench and then Theres a robotic arm okay.

Speaker Change: And then there's a piece of magnetics called Magna motion track, which basically allows you to move a lab plate along a rail alright, and thats all in the cart.

Speaker Change: Including the rail and then what you can do is you can stitch parts together you can see three of them put together in this image.

Andy: Sure Andy.

Speaker Change: Samples can move to any one of the three arms on those three cards and then get delivered to the piece of equipment.

Speaker Change: Inside that part and then importantly, the equipment is connected there's a lot of electronics hardware in the bottom of the card and all of that goes back to our cloud software. So we can control both the delivery of the sample of the arm, putting the sample onto the equipment and the equipment itself is controlled by our software and you can see we are rapidly, adding new sort of off the shelf hardware integrations.

Speaker Change: Other words these are pieces of equipment that we've already put into racks, either based on customer interest or ginkgo interest that we are users of these systems.

Speaker Change: And theyre already plugged into the software, we're adding new things. So that's all the time, so if you're interested in integrated automation and a piece of equipment. You want is not on this list just let us know and we'll get it added.

Speaker Change: We did so prior.

Speaker Change: Prior to acquiring zymogen, they had actually started to sell this hardware.

Speaker Change: Infinite wisdom I stop them from selling.

Speaker Change: Go from selling that automation months, we acquired the company.

Speaker Change: Happy to be doing that now and then but in the meantime, it was actually sold to both the national lab and a.

Speaker Change: Pharma startup called Octant, and all kinds of good case study I mean this is I guess.

Speaker Change: It's about 80 person company 100 person company.

Speaker Change: And they have a very small automation teams like one automation engineer and a couple of operators.

Speaker Change: And they are running.

Speaker Change: Numbers that I've shared 400000 samples a month reasonably hitting 150000 samples a week. This is a seven X throughput increase over their manual processes and an 88% reduction in hands on time and its let that lean team really be able to generate a scale of automation are sort of scale of data generation that would traditionally require a pretty large.

Speaker Change: Dedicated automation team.

Speaker Change: And it works out that's designed to really do one very specific.

Speaker Change: Reaction and in this case to orchestrate all the user to do a number of different things you can also see our setup here in Boston unique among automation equipment vendors ginkgo uses our own automation, so because of our solutions business and because of the data points. We do a lot of biotech R&D here in our facility in Boston. So these you can see.

Speaker Change: Actually the older generation of the automation cards that we have been bringing into ginkgo Boston over the last couple of years since the XI emergent acquisition and this is now the schematic of what all the different pieces of equipment are in our setup here in Boston and what's really neat about it is we originally.

Speaker Change: Aimed to do Ngf's library prep that was the first thing that was running on the rack automation, but then we were able to add DNA Assembly and PCR, perhaps all of the same system.

Speaker Change: Adding more pieces of equipment Lego block style onto those rails and this is something that people are really excited about it flat because the traditional integrated automation vendors basically sell you a one off custom engineering project you are like I want a high throughput screening set up to look for whatever.

Speaker Change: A drug compound.

Speaker Change: This is the assay I want Iran. I went around 100000, a week okay. Great you need this equipment as a whole <unk> file there's a custom software a bill that everything is built to really do that one set up and then it rolls out six months later and then two years later say you change your mind and want a different protocol running on there.

Speaker Change: Basically our scrap and the thing to build a new one and so whereas with Iraq, we've been able to expand the system now several times to add new workflows onto one big system here in Boston and so that is a unique selling prop.

Speaker Change: Folks, we're really excited about and that's all I ask is you can see is our booth that is I'll ask one thing I'll mention it because you decided to like mid year to start selling the equipment directly we were like late signing up but that's all I ask our booth was like at the back next to the bathrooms and it was mobbed the entire time. So I do think people are really excited about this.

Speaker Change: Modularity built into the hardware itself.

Speaker Change: Okay. So this isn't isn't like as an improvement in software or something else. These carts took a ton of physical engineering effort for us to get them to the place. They are today, where we can just rapidly add them together and to give you a sense of how rapid up at the top right recursion had a party at JP Morgan and they were nice enough to.

Speaker Change: Right is to have our automation there and so there's a cocktail party, we actually set those railcars that afternoon and had the system running moving plates around getting picked up put onto the equipment. All of this in a few hours and so that type of speed of a build out is really enabled by the modular automation I don't think we will need to set up an automation system in three hours.

Speaker Change: But it's nice to know that you can.

Speaker Change: And importantly, it's nice to know and really economically impactful that you can expand and adjust and change it the idea I like to describe it as it's an automation or rather than an automation works out so sort of doing one thing, it's really an automation sites that youre going to expand and grow as you need new AI protocols or whenever you need to do and high throughput.

Speaker Change: Company or University.

Speaker Change: Speaking of selling systems.

Speaker Change: We just announced back at the end of January that we saw this isn't the great Lakes Bioenergy Research Center really excited about this super site to see the systems going out in a while we have a great pipeline both before but importantly after S. I asked a ton of people interested in evaluating these systems now so please reach out to us if you're interested in either.

Speaker Change: Later planning to currently build on automation Workstyle or this idea of automation of core is of interest to you.

Speaker Change: I'm not going to get into it today, but all of the software that operates the racks is cloud based we have a constraint based schedule or what you really think is leading in the industry. We have a form but we basically monitor with cameras all the systems and we can do a lot of.

Speaker Change: At a distance debugging not just of the tracks in the arms, but also of the equipment itself on the system, that's really neat and early customers of like that.

Speaker Change: And the last thing I'll say is look the big Dream here on this stuff is that this can become a horizontal platform that sort of standardizes integrated lab automation across the industry. So one of the things I'm seeing you have all these tech folks and I'm really excited about AI applying AI to science and biotechnology and they sort of run into this issue that theres not a lot of <unk>.

Speaker Change: Number one and so they want to be able to generate more data. They go look at how data is generated it is very expensive and done by hand, and they're immediately jumped to the idea that well why don't we use robots why don't we automate this.

Speaker Change: And the Big Challenge is there's just so much variability in the work of doing science and so I think as an industry, we need to start to come up with standards that allow us to sort of modularize equipment make it all be easy to connect yes at the software level that frankly software is easy it needs to be easy to connect at the hardware level.

Speaker Change: And that is what the racks do and I think that theyre going to be ahead, I'm really excited about it okay and the last thing I want to talk about is where I got to have a ton of time today to talk about biosecurity in general, but we are getting started on some very exciting bio security work funded by the European Health and digital Executive Agency Hardier.

Speaker Change: Through the EU for health program linked to the key priorities of the health emergency preparedness and response authority HERA.

Speaker Change: The European Commission will be leading up an international consortium offer of project work worth up to 24 million euros to make what I've been thinking of is sort of like a bit of a star Trek nerd.

Speaker Change: <unk> quarter for disease, and so the idea here is to have sort of point of care sequencing and met a genomic.

Speaker Change: Ngls available to look and say, hey, I'm sick, what virus do I have and the best way to do that would just be to look at the genome.

Speaker Change: And today, that's not really available there's too many steps between.

Speaker Change: That sample and you're actually getting the result, and so it's not really point of care and so the idea here is because we start to build out some of that those technologies. I think this is really neat and this is ultimately the direction that biosecurity needs to go in right like eventually bio security should feel almost like a smoke detector right like I would like to know if theres Ebola in this room right now that should set off alarm just as much.

Speaker Change: As I would like to know if there was smoke.

Speaker Change: So that really requires a lot of breakthroughs over time and being able to monitor.

Speaker Change: Circulating DNA viruses, and so on and I think.

Speaker Change: It is technically feasible that it has a lot of engineering work and I'm excited to be kicking off that project in Europe. Okay. So in conclusion I am extremely proud of our execution. This quarter as we continue to cut back our costs, while still delivering on our revenue targets, we continuously deliver for customers across all our offerings and I'm excited for the opportunity we have ahead.

Joseph: US as we continue to strive towards adjusted EBITDA breakeven by mid 2026, Alright, now I'm going to hand, it back to Joseph for Q&A.

Joseph: Thanks, so much Jason as usual for the Q&A, we will start with a question from the public I'll remind the analysts on the line that if you'd like to ask a question. Please raise your hand on zoom and I'll call on you and open up your line.

Joseph: Thanks, everybody.

Speaker Change: Alright, let's get started with a question from <unk>. So this was in <unk>.

Joseph: Responding to our post it comes from bus B.

Joseph: <unk> is what are the ideal customer persona is ginkgo needs to close for new client acquisition.

Joseph: Functional group is the ideal point of entry within these prospects I E C suite R&D strategy product development.

Speaker Change: With that I saw adjacent hand up first after that.

Speaker Change: Yeah happy to take that.

Joseph: Yes.

Joseph: A key strength of Ingo just given our experience in the solutions business we have.

Joseph: Gauge with kind of folks all around the R&D stack in these companies. So the short answer is it varies depending on what we're selling so a solutions deal itself basically our ideal customer persona. There is the head of R&D, It's a large.

Joseph: Biotech biopharma like I know of an artist or a Merck and if its a small biotech it's the CEO because we are doing basically in outsourced research project, we're almost like an outsourced R&D team for that R&D leader if were selling data points.

Joseph: Going to if it's a drug company really a lead for a drug program and so that means there's a lot more of those that heads of R&D. So that's exciting to me and it gives us kind of a wider set of folks to engage with them, there's still sort of like one or two levels below that head of R&D.

Joseph: And then finally bids automation, it's the kind of folks that are out that S. All I asked meaning it's really the kind of automation leads in these companies who are usually responsible for building out a new work seller integrated automation setup. That's why I think that's going to change over time like knock on wood I'm sort of optimistic that the racks are such an innovative.

Joseph: Asian in the industry that we could ultimately see.

Joseph: It just requiring the addition of a new cart to an automation corridor to bring online a whole new workflow and so then you might hear from just someone on the technical team who wants to automate something and they gave US a call to add that piece of equipment to their existing core but for today. When we're doing these first sales, it's really sort of at the head of R&D of automation at these various large.

Joseph: Mid sized companies.

Speaker Change: Thanks, So much Jason I have opened up your line for Morgan Stanley.

Jason Kelly: Hi, This is Jason on for changes. Thank you for taking my questions.

Jason Kelly: So I guess starting off maybe just a question on the 2025 guide what are your assumptions in the 2025 guide for some of the new offerings Kimco has launched.

Jason Kelly: Namely tools data points and ginkgo automation are you anticipating a material contribution from any of these offerings in 2025.

Mark Dmytruk: You want to hit that Mark.

Mark Dmytruk: So I'd be happy to take that so we are I think being relatively conservative in the guide with respect to the new offerings for context. It was in 2020 for your sort of baseline is single digit millions of contribution from that and so in the guide I think were and.

Mark Dmytruk: Dissipating at least.

Mark Dmytruk: Getting into double digit millions in terms of revenue contribution.

Mark Dmytruk: So what you should maybe think of is there is certainly upside opportunity from the tools offerings with that.

Mark Dmytruk: Within the guide, we're being relatively conservative there.

Mark Dmytruk: The other thing I'll add to that as you know we're coming from basically a standing start on that and mid 'twenty four and has gone well enough that you are seeing me direct more of our kind of sales and commercial effort in that direction. So we'll see I mean, I think Israel wind in the sails for data points, especially in the near term and in automation on a slightly longer term so.

Mark Dmytruk: Knock on wood again, but we are trying to be conservative given it's a new business.

Mark Dmytruk: Got it that was helpful.

Mark Dmytruk: And then maybe if I could ask a follow up question.

Mark Dmytruk: Reiterate expectations to reach adjusted EBITDA breakeven by year end 2026, where do we need to finish in 2025 from an EBITDA perspective for us to feel comfortable about reaching this target and then could you provide some color on somebody else assumptions that you havent better regarding that achieving this target so any assumptions regarding the range of revenue you need.

Mark Dmytruk: To achieve as a successor of either tools or data points or ginkgo automation of criteria to achieve this target and is the opex run rate once the current restructuring of the shifts completed a sufficient or do you need to pull on additional leverage on the Opex front. Thank you.

Mark Dmytruk: Yes, I'd be happy to take that one so I think a good way to frame. It is to look at where we finished in Q4 of 2024. So that was adjusted EBITDA of negative $57 million.

Mark Dmytruk: So we talked so the levers that we have are really revenue costs and then sublease. So on the cost front we.

Mark Dmytruk: <unk> talked about increasing the cost take out run rates by another $60 million.

Mark Dmytruk: By the end of this year and so on a sort of quarterly basis, Jayson you would see.

Speaker Change: At least a 15 million dollar contribution to adjusted EBITDA, just from that alone and I'll say largely speaking the actions that get US 60 have already been taken or are in motion.

Speaker Change: We will also continue to push on the cost lever. So we're not saying we're sort of done there and so through 2025 and 2026, but we think there would be additional opportunities on the cost front. So that's.

Speaker Change: The equation to get into adjusted EBITDA breakeven by the end of 'twenty six.

Speaker Change: And then you've got sort of revenue growth of course would be we would expect to be a contributor.

Speaker Change: And then you've got sublease.

Speaker Change: Sort of mitigating the $65 million on an annual run rate basis of excess space cost now.

Speaker Change: On an annual basis about $8 million of that just naturally expires in 2026.

Speaker Change: The rest of that we would have to deal with through sublease income, it's a challenging market and so we're not banking nest.

Speaker Change: Necessarily on being able to do that but that's another sort of piece of the equation.

Speaker Change: And then I guess, the only sort of final point.

Jason Kelly: Jason would be the downstream value share in 2026 is a real opportunity there there's a fairly significant amount of.

Jason Kelly: Of the programs that we have that would be in play in 2020. So again, we're not necessarily banking on that to get us to adjusted EBITDA breakeven, but that would be another opportunity that would be in play for 2026. So I hope that you know so hopefully that sort of frames. It for you.

Yep Yep.

Speaker Change: My only addition to that Jason is the.

Speaker Change: I think if you look at biotech market today, right generally like top Mark and you're having a hard time less investment in R&D and so on and so forth and we are we have launched these new products, which again I'm happy theyre going well, but they are new for us. So you see us being conservative on revenue guide because from my standpoint costs are under our control right. So as we marched our.

Speaker Change: Breakeven I'm going to be looking at that right. If we're doing better on revenue great. If we're not we'll take out costs.

Speaker Change: It's odd that that the equation, it's not more complicated than that and I do think we have plenty of levers.

Speaker Change: That's helpful. Thank you guys.

Speaker Change: Awesome, Thanks, Jason EV from Goldman Europe next your line's open.

Speaker Change: Hi, Thank you I'm filling in for Matt Tonight.

How should we think about the margin profile differences between the traditional foundry data points and automation I understand it's early days and revenue is limited at this point, but just trying to get a sense for where growth will help push you towards EBITDA breakeven.

Speaker Change: Yeah, so on the data points businesses or the tools offerings. We are really targeting the way we think about margins as we really target. What you would see in kind of a solid sort of CRO services markets, a 40% plus gross margins.

Speaker Change: I will just say the business is still not even close to being at a scale, where you can really understand sort of what's possible in terms of gross margin. We do think our offering there is pretty differentiated.

Speaker Change: We also think we have a way to sort of scale into growth in a cost effective way so.

Speaker Change: So that's generally how we're targeting.

Speaker Change: <unk>.

Speaker Change: Compared to the traditional solutions offerings, you'll remember that we were.

Speaker Change: Using to some extent downstream value share there as a.

Speaker Change: As part of the thesis in terms of getting to margins. So.

Speaker Change: And so we were willing to do business at a much lower gross margin profile.

Speaker Change: And that of course has evolved we're no longer sort of willing to do that and you see that kind of in the <unk>.

Speaker Change: In the cost structure coming down and so.

Speaker Change: But that's how we're thinking about the tools business.

Speaker Change: Okay. That's super helpful. And then what are you seeing in your sales funnel now that you've opened up your sales process towards more tools are you seeing the volume pick up are you sort of expected through the less customized less risky offerings.

Mark Dmytruk: Yeah. This is something I'm super excited about them and I think Mark mentioned it but you know we had like eight.

Mark Dmytruk: We're sorry, seven new data points deals in the last quarter, we had five new logos to again go right like that it what we found with the data points in fact, I had a customer.

Mark Dmytruk: Here today, who was like Oh, Yeah, I've talked to you all are a year ago or a year and a half ago and you know we kind of lap, saying like Wow, we can really get behind like the royalties and milestones where there's kind of a project.

And so I assume you've listened to us and that's why you've updated your business model.

Mark Dmytruk: Sounds great to me.

Mark Dmytruk: We have this.

Mark Dmytruk: These new interact with even when places we've talked to you before now we're like they're basically introducing us to procurement now and we were you know were treated much more like a straightforward kind of CR.

Mark Dmytruk: Crow interaction its way faster to close.

Mark Dmytruk: And then what we're finding with data points as we can do kind of a smaller group of concept people want to try it out like I encourage customers listening on the call you can do a relatively small project Hunter Kay here 200, K there to generate a dataset and see how it works in your area in your cell type and so on and then if it looks good you can generate a much larger dataset specifically for model fine tuning.

Mark Dmytruk: Our other M L and so that again it feels pretty good it feels very different than when we were selling solutions certainly than like wind and my commercial sales. So yeah.

Mark Dmytruk: Automation automation of the different group like I would say that that that is really it is more of a sales.

Mark Dmytruk: Sales cycle, where you're going through there they're planning to do a build out and at least for our first installs youll see US go in with kind of like a traditional automation sales cycle into like it works out well tie build however, I think again, what's unique about the racks and we aren't even seen as the companies like often.

Mark Dmytruk: You can just add to them in small batches after that right. So if we can just get in places I think then we'll have a much quicker sales cycle than is traditional in integrated automation.

Mark Dmytruk: Okay, Mark so yeah, Mark from BTG your line's open.

Great. Thanks, guys can you hear me.

Speaker Change: Yes again excellent.

Speaker Change: So I know the new administration has been in office not not terribly long here, but I'm just curious.

Speaker Change: In your bio security guidance, you assumed no change to any government contracts.

Speaker Change: Obviously, there could be some changes right so to help us to just better understand who these contracts.

Speaker Change: Which agencies, there with <unk> and <unk>.

Speaker Change: Give us a sense, maybe just remind us if you think there are synergies remaining between your bio security business and your core so engineering business.

Speaker Change: Yeah, and give a few comments there. So so so we do have government contracts both on the sell engineering side and the Biosecurity is you're mentioning the salaries union contracts are much more like traditional R&D contracts again in places like DARPA and ARPA and so on.

Speaker Change: And there I think you have seen with this administration coming in and making changes certainly the research universities are being impacted pretty quickly by changes to how they're approaching research funding I will say like and this is part of the reason why we're also were conservative on the guide for this year and we don't want like that.

Speaker Change: We don't count on things, we'll see what happens I will say I think we're in the Arrow with this administration certainly my interactions in D C where.

Speaker Change: The new leads have not there either just getting in or aren't even yet in for a lot of these agencies and certainly their deputies are not in place yet and so all you're seeing in advance of that is cutting.

Speaker Change: It's gonna be interesting about this administration is once those leads are in I think youre going to have some people that do have certain vision for thing is going to be potentially different visions of people that have come before and they're going to want to move on it just as aggressively and quickly as you've seen them move on the cuts and that represents an opportunity I'd say less of an opportunity on the on the research side and research will just be research.

Speaker Change: I do think research money will keep flowing in there. So maybe you can just question project by project, but on the bio security side that could really go.

Speaker Change: Just been wildly different directions, depending on what the administration's plans are obviously, we've gotten out of the WH Lv as big impact on CVC them on our contracts with Tc.

Speaker Change: Where do they go and all that Brian you know are they gonna have alternative GWA Joe.

Speaker Change: Some of the programs. We have these are even programs outside the U S. Like we.

Speaker Change: We do feel like we've mentioned before monitoring in airports and in Africa, and the middle East and so on those.

Those can be real assets.

Speaker Change: For some of the things that previously were being relied on just voluntary reporting from countries in the W. H O. We can now maybe monitor those with hard technology and I think that's something that could meet an appeal to this administration, but it's early days because we don't really have the leadership in place yet for in some of those.

Speaker Change: Okay, great and by the way you've done a nice job on the cash burn reduction clear.

Speaker Change: Clearly you've made a lot of changes to the company in the last several quarters.

Mark Dmytruk: But mark you talked about how you will no longer report in new program metric, maybe just remind us what we should be looking for obviously, we can track your cell engineering revenue.

Mark Dmytruk: But remind us how we can sort of what other ways can we track the health of your funnel and your business going forward. Yeah. So what you will get is a I would say an enhanced version of the current active program metrics and.

Mark Dmytruk: If you look at the appendix of the presentation Youll get a preliminary view for the last four quarters of what that metric looks like and we'd be happy to talk about it with you offline further and get your feedback on that but you'll get sort of an enhanced.

Mark Dmytruk: Current active program metric that we'll give.

Mark Dmytruk: Give you a better sense of what the real revenue per program that ginkgo is.

Mark Dmytruk: Because as I mentioned on the call.

Mark Dmytruk: Number.

Mark Dmytruk: The metric you get right now.

Mark Dmytruk: <unk> a lot of programs that are either starting or stopping and therefore arent contributing revenue and so when you try to take revenue divided by that program count and due to the I know the analytics that you all do.

Mark Dmytruk: You're not really getting a sense of what revenue per program is so this will give you a better sense of that and because youll have four quarters of history, you'll be able to see how that's trending over time and that's what I would use to model revenue, but we can talk about that.

Mark Dmytruk: And a little bit more detail offline.

Speaker Change: Okay. Thanks, guys. Thanks Mark.

Speaker Change: Thanks, Brian.

Speaker Change: I appreciate the comment on that and then I'll give a shout out to the team for an enormous amount of work to get that.

Speaker Change: Cash burn down and keyboards and it is top of mind and a lot of what you see I I showed that slide there, where we get the revenue up bring the cost down in the lineup and in there we go and I like it goes position as I mentioned in terms of from a technology basis of things we've accumulated the talent. We have here if you look across the industry, it's tough times.

Speaker Change: In general and I think if we can get to that point, where we were even close to breakeven in the near term that that allows us to be sort of like a port and that storm and so I do think that's a really important thing and that's why we're putting so much effort into the cost takeout.

Brendan.

Brendan: Yeah. Thanks, Mark Yeah rented from TD your line's open.

Speaker Change: Alright, great. Thanks for taking the questions guys, maybe just piggybacking on some of the AI commentary I actually wanted to ask how you're thinking about growth trajectory, if somebody's neuropathy rings I understand so I understand it's early days here.

Speaker Change: But just from a high level strategy perspective should we anticipate any shift in priority and maybe timing for kind of expanding these newer products just given all the headlines in recent months.

Speaker Change: And then I guess honestly related to that just wondering if you see any potential synergies with nearby our security offerings. There moving forward thanks very much.

Speaker Change: Yeah, So I think I mentioned it a bit in the talk about the.

Speaker Change: Interest in AI from the it's really the mid and large kind of Biopharma biotech companies is what's driving all the interest in data points and even like on a second order basis, a chunk of interest in the automation. So I do think that will keep going right.

Speaker Change: Not gone away.

Speaker Change: And and I think you're seeing the success of the models just in driving efficiency across things like clinical filings on all of this stuff, making it very obvious to leadership that it would be nice to see similar gains in their research outlets and so on so I think that's what that's kind of driving it I think then like I mentioned to you quickly run into this.

Speaker Change: Elevation that even if these large biopharma companies the existing data sets you have across the many hundreds of drug development programs you would have done over the years.

Speaker Change: We're all done and like slightly different ways with different controls and different data standards and then also they were done at the lab bench and so very smart science was done, but maybe not huge data assets were generated and so everyone. I think it was kind of originally hoping I'll. Just go mine all of this data we already have and surely that will let me train. These models and then the.

Speaker Change: Asian have set and that actually you mostly need to generate new data.

Speaker Change: So that I would say that like Hey, we're interested oh, we've done the nine month cycle to look at our existing data and realized we want to make new stuff are either new just relevant to our new drug programs.

Speaker Change: Kind of click through and that's why you're seeing this new demand.

Speaker Change: We think that will keep going.

Speaker Change: When it comes to the bio security I think yeah, I mean, one of the things that I look, but I cannot emphasize how or we are as sort of a species and establishing bio security. So far but you can absolutely imagine a future world, where you have basically a rapid at site DNA sequencing that sequencing is good.

Speaker Change: Sent up into the cloud and it is being analyzed across thousands of collection sites by AI models that are basically looking for things that look bad.

Speaker Change: And this is roughly the analogy would be like what you see with cyber security right places like Microsoft and others, who are monitoring across many many endpoints C C. An.

Speaker Change: Emily like Oh, that's a new virus and then are able to you try to contain it and then also push patches and update.

Speaker Change: We got to get to this place when it comes to viruses, it's just literally crazy and so I do think that type of infrastructure getting that in place is absolutely going to evolve AI analysis of the just the raw amount of genomic data, but the first step is to start collecting the genomic data and that's really what we've been putting in place to begin with so so I think theres a little bit of like you know I think that.

Speaker Change: The data collection is probably the driver initially.

Speaker Change: For this stuff.

Speaker Change: In both cases.

Speaker Change: Alright, great. Thanks, guys I appreciate it.

Matt: Yeah, Matt.

Speaker Change: William Blair Your line is open.

Speaker Change: Matt.

Speaker Change: Hey, good afternoon or evening Jason.

Speaker Change: A couple of times here.

Speaker Change: Yeah.

Speaker Change: We might have lost them.

Speaker Change: My lack of that as we see you again.

Speaker Change: And again, yes, sure do you have any yeah.

Speaker Change: Sure. So a couple of times, you've referenced in African and conservative with guidance and obviously a challenge for the last couple of years lists.

Speaker Change: Very long sales cycles, given the complexity of deals that you were.

Speaker Change: We're targeting thank you have a lot of work to simplify that and really work with customers to reduce sales cycle kind of where they are at can you just help us when you say more conservative does that just reflect shorter sales cycles. So more data on a close eye on what is kind of the early data points around the tools added to them.

Speaker Change: Data points offering in terms of close timing, how do you really arrive at toughness as a conservative guidance.

Speaker Change: So I'll start by saying, Matt on the solution side remember, we do programs and in many cases are multi year programs. So we're coming into 2025 with a pretty substantial backlog of business that we need to burn and and this is on the sort of commercial side of the company with lots of like.

Speaker Change: Good customers and longstanding customers, so theres sort of a base.

Speaker Change: Of business, that's already baked in.

Speaker Change: When we say conservative we're really talking about some uncertainty around the government side of solutions government has been a source of growth for us. When you just look at the numbers in 2024 and was expected to be a source of further growth in 2025 and just given.

Speaker Change: Sort of the current environment.

Speaker Change: Very specifically, we thought we should be conservative on that piece of solutions.

Then finally on tools.

Speaker Change: And 24 that was 115% 20% or something.

Speaker Change: Revenue. So you can look at the <unk>, you'll see it in the 10-K the percent of revenue Bye bye.

Speaker Change: By industry segment, but government was sort of roughly speaking about $20 million of revenue for us in solutions in 2024, and we would have expected that to grow in 2025. So.

Speaker Change: So that's really what we mean by conservative on the tool side.

Speaker Change: I think it is.

Speaker Change: You heard me say it in one of the earlier questions, but we.

Speaker Change: Starting from a base of effectively zero have sort of modeled in the guidance.

Speaker Change: Getting into kind of double digit millions of revenue, but not beyond that we.

Speaker Change: We do see potential just based on pipeline to do better than that in the year, but that's not in the guidance on the tools side.

Speaker Change: Okay. Thanks.

Speaker Change: And then Jason you know that.

Speaker Change: <unk>.

Speaker Change: It was a company that can accelerate and make R&D more efficient maybe it looks a little different today with data points and with tools, but that's still really where youre headed and I would think that.

Speaker Change: Over time there'll be a number of customers that work with quite a number of different ways.

Speaker Change: The automation side, maybe just some data points projects that are larger.

Speaker Change: Larger enterprise efforts do you have any of those examples yet is that something overtime, you think can get too and what's kind of the path forward there.

Speaker Change: Yeah, there is sort of like an interesting like flyer, so, yes, gigabit Michigan's Mcdonald's easier to engineer a data points and tools very clearly fit into that it's infrastructure. We built we can go to market with it quickly we can sell it in a new way all of that again was a hypothesis last summer that has now been proven true. So so I'm really excited about that.

Speaker Change: It takes something like robotics, right I mean that robotics infrastructure, obviously, it's robin.

Speaker Change: Biotech research, but its really connecting laboratory equipment into an integrated setup you can use it for other types of laboratory work as well certainly we expect demand and have already seen demand in our funnel from things like diagnostics companies and things like that I think you'll absolutely see that as a base of customers for us in automation, but you're also seeing some efforts.

Speaker Change: Unlike the large tech companies like.

Speaker Change: I was on a panel with the head of R&D for Microsoft and like they are doing like AI for science, Google who has a strong partner of ours. They just came out with a cool pilot for scientists, which is actually pretty amazing and so I think you are seeing the frontier Ala Eyelab say, what these reasoning models at the high end.

Speaker Change: One of the use cases could be changing how we do scientific and engineering discovery.

Speaker Change: In the World and if you want to do that then those models need to interact.

Speaker Change: With real World.

Speaker Change: They need to be on a run experiments and so again I feel like automation could be a really big part of that I know that's not a big part of my revenue plans and twenty-five although we do have some we have a contract or something just on data generation with major Tech company, but the but it is I think a thing to watch and if that becomes an actual big area of <unk>.

Speaker Change: Investment among the major Tech players you can expect are going to be right. There. So for example, we'll have our racks at the.

Speaker Change: But the big Nvidia events. So if you want if you are having to go to that you can do you can check them out in person there now.

Speaker Change: Very good thank you yep.

Jason: Thanks for bearing with me there, Matt Jason for Morgan Stanley. If you have any other questions happy to take the second one, but it's not all retail question.

Speaker Change: So the retail question this comes from Cabelas.

Speaker Change: Question is is ginkgo revenue impacted at all by avian flu potential pandemics et cetera matter of personal concerns. So I appreciate you guys answering that.

Speaker Change: So I think I mean.

Speaker Change: I've been one well here as I'll say about bio security it's.

We have been building out the infrastructure obviously to support.

Speaker Change: And pervasive surveillance in between.

Speaker Change: Certainly pandemic, but even in between various regional outbreaks like Theres something horrible thing that came out in like DRC I just saw today right. So you're going to have these.

Speaker Change: Regional stop that creates spot demand and then then the occasional larger more global bank I mean, H five N. One has pandemic potential like Endo story right. So it's just one of these things you have to watch that the human transmission level and if it does you should absolutely again expect us to be right. There like we were during COVID-19. It just lean right into that and grow.

Speaker Change: But then there is an interesting angle or I mean like.

Speaker Change: And prices are up right, there's a reason for that.

Speaker Change: So you know I do think there is also an angle there potentially with bio security just around.

Speaker Change: Preserving food security and food pricing, which I think is something that's of interest.

Speaker Change: This administration to say Oh, you know everyday folks and so I think that that's another angle for bio security in the future, but obviously, we pay the most attention to the human stuff.

Speaker Change: Thanks, so much thanks, everybody for joining us.

I remember the time for the questions.

Speaker Change: Questions.

Speaker Change: Yeah.