Ginkgo Bioworks Holdings Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
DNA$11.29+13.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0001628280-24-022229
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001628280-24-036231
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 172 previous paragraphs and 197 current paragraphs.
130 unchanged; 39 reworded; 24 added; 3 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
plus, when applicable,
Current report
Commencing in the second quarter of 2024, we announced changes in commercial terms, including new intellectual property terms in favor of customers, the removal of downstream value share from certain program types, and offering our Foundry capabilities on a lab-data-as-a-service (“LDaaS”) basis in addition to continuing our end-to-end Cell Engineering solutions offering where we will often maintain downstream value share. There has been no material impact on our revenue recognition policies to date from the announced changes in our new commercial terms and Cell Engineering offerings.
Current report
Goodwill Impairment
Current report
In the second quarter of 2024, we fully impaired the goodwill attributable to our Cell Engineering reporting unit. Refer to further discussion within “Critical Accounting Estimates”.
Current report
Restructuring Charges
Current report
Restructuring charges relate to our restructuring plan announced and commenced in the second quarter of 2024 and consist primarily of severance and other employee termination costs resulting from a reduction in force that commenced in June 2024 and an impairment of a right-of-use asset relating to facilities consolidation and the related sublease of certain facilities.
Current report
Additional details are included in Note 3, Restructuring, of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current report
The decreases in revenue between periods is attributable to the end of our COVID-19 testing in schools in the third quarter of 2023, partially offset by new expanded offerings of biomonitoring and bioinformatic support services in the 2024 periods.
Current report
Our research and development expenses principally relate to the development of new offerings and the operation, expansion and enhancement of our existing service offerings utilizing our proprietary platform, which includes our Foundry and Codebase assets, to our cell engineering customers. Our research personnel costs, including stock-based compensation, is our largest expense, aggregating $37.6 million and $76.5 million for the three and six months ended June 30, 2024, respectively, and $38.5 million and $81.1 million for the three and six months ended June 30, 2023, respectively. We also acquired and expensed in-process research and development through the issuance of our equity, aggregating $3.0 million and $19.8 million for the three and six months ended June 30, 2024, respectively, and $4.0 million for the three and six months ended June 30, 2023. Our remaining research and development costs are comprised primarily of rent and related facilities costs, information technology costs, depreciation pertaining to facilities and equipment, laboratory consumables, contract services and routine costs and fees.
Current report
General and administrative expenses decreased $36.1 million in the three months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily attributable to the deconsolidation of Zymergen ($34.3 million) and a decrease in stock-based compensation expense of $3.7 million (inclusive of employer payroll taxes). Further, there was a decrease in professional fees of $5.6 million, partially offset by increases in personnel-related compensation and benefits expense of $5.1 million and depreciation and amortization expense of $1.6 million.
Current report
Goodwill Impairment
Current report
During both the three and six months ended June 30, 2024, we recorded goodwill impairment expense of $47.9 million related to our Cell Engineering reporting unit, further discussed within “Critical Accounting Estimates” below.
Current report
Restructuring Charges
Current report
During both the three and six months ended June 30, 2024, we incurred restructuring charges of $17.1 million in connection with our restructuring plan announced and commenced in the second quarter of 2024, primarily in the Cell Engineering segment. These charges primarily consisted of $12.2 million in employee termination costs from the reduction in force commenced in June 2024 and $4.8 million in impairment of right-of-use asset relating to facilities consolidation.
Current report
Loss on equity method investments was $0.1 million and $1.5 million for the three and six months ended June 30, 2023, respectively. No loss on equity method investments was recognized in 2024.
Current report
Other income (expense), net decreased $4.9 million in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to a $4.7 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen and a $1.0 million increase in the net loss on the change in fair value of convertible notes.
Current report
Beginning in the second quarter of 2024, we updated our definition of Adjusted EBITDA to no longer exclude the impact of acquired in-process research and development expenses. The comparable periods in 2023 and the first quarter of 2024 have been recast to conform to the revised definition.
Current report
(2)Impairment expense includes $47.9 million related to goodwill impairment in the three and six months ended June 30, 2024 and $9.0 million related to lab equipment acquired as part of the Zymergen acquisition in the three and six months ended June 30, 2023.
Current report
(3)Restructuring charges include $12.2 million in employee termination costs from the reduction in force commenced in June 2024 and $4.8 million in impairment of right-of-use asset relating to facilities consolidation.
Current report
•implement our restructuring actions.
Current report
Goodwill
Current report
We assess goodwill for impairment at the reporting unit level on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill impairment assessments require a significant amount of management judgment and the use of estimates and assumptions that could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge.
Current report
During the three months ended June 30, 2024, due to a sustained decrease in the market price of our Class A common stock and market capitalization, we identified that a possible indicator of impairment was present as of June 30, 2024. As such, we completed a quantitative impairment test related to our Cell Engineering reporting unit. To conduct the impairment test of goodwill, the estimated fair value of the reporting unit was compared to its carrying value. The estimated fair value of the Cell Engineering reporting unit was determined using a weighted approach that considered a discounted cash flow (“DCF”) model under the income approach and the guideline public company (“GPC”) method under the market approach. Inputs used in the DCF model included the projected future operating results of the reporting unit and the applicable discount rate, while inputs used in the GPC method consisted of a revenue multiple. The projected future operating results were based on historical experience and internal annual operating plans reviewed by management, extrapolated over the forecast period. The discount rate was determined using a weighted average cost of capital adjusted for risk factors specific to the reporting unit. The revenue multiple was based on the GPC method using comparable publicly traded company multiples of revenue for a group of benchmark companies. The DCF method was weighted 75% and the GPC 25%. We reconciled the resulting fair value of the reporting unit to our market capitalization to corroborate the fair value estimate used in the impairment test.
Current report
The interim impairment test indicated that the estimated fair value of the reporting unit was less than its carrying value. As a result, we fully impaired goodwill and recorded an impairment loss of $47.9 million.
Removed paragraphs (3)
Previous report
plus,
Previous report
Other than as noted below, there have been no significant changes to our material cash requirements during the three months ended March 31, 2024 as compared to the material cash requirements disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.
Previous report
On May 9, 2024, in connection with our plans to reduce operational expenditures, we approved a plan for restructuring actions, including an expected reduction in labor expenses of at least 25% and a planned consolidation of certain of our facilities. Initial headcount reductions are expected to commence in the second quarter of 2024 and be substantially completed in 2025, subject to local laws. We expect a reduction in annualized run-rate operating expenditures of $200 million by mid-2025, with a substantial portion of such reduction occurring in 2024. The aggregate expected costs and overall timing for completion of the restructuring plan is not yet known.
Reworded paragraphs (39)
Previous wording
Our cell programming business model mirrors the structure of our platform and we are compensated in two primary ways. First, we charge usage fees for services, in much the same way that cloud computing companies charge usage fees for utilization of computing capacity or contract research organizations charge for services. Additionally, we negotiate a value share with our customers (typically in the form of royalties, milestones, and/or equity interests) in order to align our economics with the success of the programs enabled by our platform. As we add new programs, our portfolio of programs with this “downstream” value potential grows.
Current wording
Our cell programming business model mirrors the structure of our platform and we are compensated in two primary ways. First, we charge usage fees for services, in much the same way that cloud computing companies charge usage fees for utilization of computing capacity or contract research organizations charge for services. Additionally, we typically negotiate a value share with our customers (typically in the form of royalties, milestones, and/or equity interests) in order to align our economics with the success of the programs enabled by our platform. As we add new programs, our portfolio of programs with this “downstream” value potential grows. Commencing in the second quarter of 2024, we announced changes in commercial terms, including the removal of downstream value share from certain program types.
Previous wording
Our cell programming platform is a key enabling technology and source of intellectual property for our customers’ products. We earn Cell Engineering revenue for our R&D services as well as through a share of the value of products created using our platform.
Current wording
Our cell programming platform is a key enabling technology and source of intellectual property for our customers’ products. We earn Cell Engineering revenue for our R&D services as well as generally through a share of the value of products created using our platform.
Previous wording
Founded in 2018, Motif FoodWorks, Inc. (“Motif”) was formed to focus on the application of synthetic biology to reduce the reliance on animal products in the food industry. We entered into an intellectual property contribution agreement that granted Motif rights to our intellectual property, subject to mutually agreed upon technical development plans. In return for our contribution of intellectual property and access to our platform, we received shares of common stock in Motif. The initial fair value of our common stock investment in Motif was $65.1 million which has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under our accounting for equity method investments. Motif was capitalized through Series A preferred stock financings that raised approximately $119 million in gross proceeds from an investor group which included certain of our investors, Louis Dreyfus Company and Fonterra Co-operative Group Limited. In June 2021, Motif raised an additional $226 million through a Series B preferred stock financing. Ginkgo also entered into a Technical Development Agreement with Motif under which we provide R&D services in return for cash consideration on a fixed-fee or cost-plus fixed margin basis.
Current wording
Founded in 2018, Motif FoodWorks, Inc. (“Motif”) was formed to focus on the application of synthetic biology to reduce the reliance on animal products in the food industry. We entered into an intellectual property contribution agreement that granted Motif rights to our intellectual property, subject to mutually agreed upon technical development plans. In return for our contribution of intellectual property and access to our platform, we received shares of common stock in Motif. The initial fair value of our common stock investment in Motif was $65.1 million, which has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under our accounting for equity method investments. Motif was capitalized through Series A preferred stock financings that raised approximately $119 million in gross proceeds from an investor group which included certain of our investors, Louis Dreyfus Company and Fonterra Co-operative Group Limited. In June 2021, Motif raised an additional $226 million through a Series B preferred stock financing. Ginkgo also entered into a Technical Development Agreement with Motif under which we provide R&D services in return for cash consideration on a fixed-fee or cost-plus basis.
Previous wording
Structured Partnerships allow Ginkgo to: (i) partner with early stage synthetic biology product companies to adopt our Foundry as their cell programming R&D platform, in which we offer flexible commercial terms on the service fees including the ability to pay a portion or all of such upfront fees in the form of non-cash consideration (convertible financial instruments and/or equity securities), in addition to downstream value share consideration (“Startup Structured Partnership”); and (ii) partner with existing entities with complementary assets for high potential synthetic biology applications in a large-scale, multi-program collaboration (“Legacy Structured Partnership”). In the three months ended March 31, 2023, we entered into four Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments in the amount of $15.9 million that is recognized as revenue over our period of performance. In the three months ended March 31, 2024, we did not enter into any new Startup Structured Partnerships. Our Legacy Structured Partnerships are described below:
Current wording
Structured Partnerships allow Ginkgo to: (i) partner with early stage synthetic biology product companies to adopt our Foundry as their cell programming R&D platform, in which we offer flexible commercial terms on the service fees including the ability to pay a portion or all of such upfront fees in the form of non-cash consideration (convertible financial instruments and/or equity securities), in addition to downstream value share consideration (“Startup Structured Partnership”); and (ii) partner with existing entities with complementary assets for high potential synthetic biology applications in a large-scale, multi-program collaboration (“Legacy Structured Partnership”). In the three and six months ended June 30, 2023, we entered into two and six, respectively, Startup Structured Partnerships and received prepayments of service fees in the form of equity securities or convertible financial instruments totaling $1.1 million and $17.0 million, respectively, that is recognized as revenue over our period of performance. In the three and six months ended June 30, 2024, we did not enter into any new Startup Structured Partnerships. Our Legacy Structured Partnerships are described below:
Previous wording
Genomatica, Inc. (“Genomatica”) is a biotechnology company specializing in the development and manufacturing of intermediate and specialty chemicals from both sugar and alternative feedstocks. In 2016 and 2018, we acquired preferred stock in Genomatica with an aggregate investment value of $55.0 million in exchange for cash and committed R&D services. The carrying value of the investment was $11.9 million as of March 31, 2024, reflective of impairment losses recognized through that date.
Current wording
Genomatica, Inc. (“Genomatica”) is a biotechnology company specializing in the development and manufacturing of intermediate and specialty chemicals from both sugar and alternative feedstocks. In 2016 and 2018, we acquired preferred stock in Genomatica with an aggregate investment value of $55.0 million in exchange for cash and committed R&D services. The carrying value of the investment was $7.0 million as of June 30, 2024, reflective of impairment losses recognized through that date.
Previous wording
Synlogic, Inc. (“Synlogic”) is a publicly traded clinical-stage biopharmaceutical company focused on advancing drug discovery and development for synthetic biology-derived medicines. In 2019, we entered into several agreements with Synlogic whereby we purchased Synlogic common stock and warrants to purchase Synlogic common stock and agreed to provide R&D services to Synlogic. At inception, the fair value of Synlogic common stock and warrants was recorded at $35.8 million and $14.4 million, respectively. On February 8, 2024, Synlogic announced its decision to cease operations and evaluate strategic options for the company. As of March 31, 2024, the fair value of Synlogic common stock and warrants was $0.8 million and $0.3 million, respectively.
Current wording
Synlogic, Inc. (“Synlogic”) is a publicly traded clinical-stage biopharmaceutical company focused on advancing drug discovery and development for synthetic biology-derived medicines. In 2019, we entered into several agreements with Synlogic whereby we purchased Synlogic common stock and warrants to purchase Synlogic common stock and agreed to provide R&D services to Synlogic. At inception, the fair value of Synlogic common stock and warrants was recorded at $35.8 million and $14.4 million, respectively. On February 8, 2024, Synlogic announced its decision to cease operations and evaluate strategic options for the company. Effective in the second quarter of 2024, we no longer provide R&D services to Synlogic. As of June 30, 2024, the fair value of Synlogic common stock and warrants was $0.6 million and $0.3 million, respectively.
Previous wording
Cell Engineering revenue includes transactions with Platform Ventures and Legacy Structured Partnerships where, as part of these transactions, we received an equity interest in such entities. Specifically related to the Platform Ventures, in these transactions, we received upfront non-cash consideration in the form of common equity interests in these entities, while the Platform Ventures each received cash equity investments from strategic partners and financial investors. We view the upfront non-cash consideration as prepayments for licenses which will be granted in the future as we complete mutually agreed upon technical development plans. In these instances, we also receive cash consideration for the R&D services performed by us on a fixed fee or cost-plus basis. We are not compensated through additional milestone or royalty payments under these arrangements. Our transactions with Genomatica and Synlogic included the purchase of equity securities and the provision of R&D services. As we perform R&D services under the mutually agreed upon development plans, we recognize a reduction in the prefunded obligation on a cost-plus basis. These arrangements are further described in Notes 4,5, and 13 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Current wording
Cell Engineering revenue includes transactions with Platform Ventures and Legacy Structured Partnerships where, as part of these transactions, we received an equity interest in such entities. Specifically related to the Platform Ventures, in these transactions, we received upfront non-cash consideration in the form of common equity interests in these entities, while the Platform Ventures each received cash equity investments from strategic partners and financial investors. We view the upfront non-cash consideration as prepayments for licenses which will be granted in the future as we complete mutually agreed upon technical development plans. In these instances, we also receive cash consideration for the R&D services performed by us on a fixed fee or cost-plus basis. We are not compensated through additional milestone or royalty payments under these arrangements. Our transactions with Genomatica and Synlogic included the purchase of equity securities and the provision of R&D services. As we perform R&D services under the mutually agreed upon development plans, we recognize a reduction in the prefunded obligation on a cost-plus basis. These arrangements are further described in Notes 5,6, and 14 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Previous wording
Before the fourth quarter of 2023, cost of Biosecurity product revenue consisted of costs associated with the sale of diagnostic and sample collection test kits, which included costs incurred to purchase test kits from third parties.
Current wording
Prior to the fourth quarter of 2023, the cost of Biosecurity product revenue consisted of costs associated with the sale of diagnostic and sample collection test kits, which included costs incurred to purchase test kits from third parties.
Previous wording
We expense R&D costs as incurred. As we grow our active programs and customer base and invest in our Foundry and Codebase through organic and inorganic growth initiatives, we anticipate that our R&D expenses will continue to increase. The nature, timing, and estimated costs required to support our growth will be dependent on advances in technology, our ability to attract new customers and the rate of market penetration within our existing customer industries.
Current wording
We expense R&D expenses as incurred. We expect our R&D costs will be lowered as a result of our restructuring plan announced and commenced in the second quarter of 2024 as we rationalize our current development programs and prioritize our investments in our Foundry, Codebase, AI and new offerings. The nature, timing, and estimated costs required to support our growth will be dependent on advances in technology, our ability to attract new customers, and the rate of market penetration within our existing customer industries.
Previous wording
We anticipate that our G&A expenses attributable to organic business activities will either remain consistent or decline in 2024 as compared to 2023, reflecting a stabilization in our operational overhead. Conversely, we intend to maintain a strategic and opportunistic approach regarding inorganic G&A expenses arising from mergers, acquisitions, and other inorganic growth initiatives.
Current wording
We expect our G&A costs will be lowered as a result of our restructuring plan announced and commenced in the second quarter of 2024 as we begin to lower our operational overhead. Conversely, we intend to maintain a strategic and opportunistic approach regarding inorganic G&A expenses arising from mergers, acquisitions, and other inorganic growth initiatives.
Previous wording
Other income, net primarily consists of sublease rent income and changes in fair value of notes receivable that we elected to account for under the fair value option.
Current wording
Other income (expense), net primarily consists of sublease rent income and changes in fair value of notes receivable that we elected to account for under the fair value option.
Previous wording
Comparison of the Three Months Ended March 31, 2024 and 2023
Current wording
Comparison of the Three and Six Months Ended June 30, 2024 and 2023
Previous wording
Cell Engineering revenue decreased $6.2 million in the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily due to timing of programs completed prior to the current period partially offset by overall progress on Current Active Programs.
Current wording
Cell Engineering revenue decreased $9.1 million in the three months ended June 30, 2024 compared to the same period in 2023 and decreased $15.3 million in the six months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily due to timing of programs completed prior to the current period partially offset by overall progress on Current Active Programs.
Previous wording
As discussed above in Components of Results of Operations, Cell Engineering revenue comprises both cash and non-cash consideration. Cell Engineering revenue recognized relating to non-cash consideration decreased from $13.0 million in the three months ended March 31, 2023 to $3.8 million in the three months ended March 31, 2024 primarily due to a shift in focus on signing new programs with cash consideration.
Current wording
As discussed above in Components of Results of Operations, Cell Engineering revenue comprises both cash and non-cash consideration. Cell Engineering revenue recognized relating to non-cash consideration decreased from $16.8 million in the three months ended June 30, 2023 to $8.2 million in the three months ended June 30, 2024, and from $29.7 million in the six months ended June 30, 2023 to $12.1 million in the six months ended June 30, 2024, primarily due to a shift in focus on signing new programs with cash consideration.
Previous wording
In the first quarter of 2024, 17 New Programs commenced, compared to 13 New Programs in the first quarter of 2023. The number of Current Active Programs rose to 140, compared to 97 in the prior year period. Cumulative Programs increased to 259 from 177 over the same period. Additionally, the number of customers grew to 82, up from 60 in the prior year period.
Current wording
In the three months ended June 30, 2024, 10 New Programs commenced, compared to 21 New Programs in the same period in 2023. The number of Current Active Programs rose to 140, compared to 105 in the prior year period. Cumulative Programs increased to 269 from 198 over the same period. Additionally, the number of customers grew to 82, up from 63 in the prior year period.
Previous wording
Biosecurity revenue decreased $36.6 million in the three months ended March 31, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $11.7 million and a decrease in service revenue of $24.9 million.
Current wording
Biosecurity revenue decreased $15.3 million in the three months ended June 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $10.8 million and a decrease in service revenue of $4.5 million.
Previous wording
Since the end of the COVID-19 public health emergency in May 2023, we shifted our Biosecurity business focus to developing scalable biosecurity infrastructure and delivering global surveillance programs and analytics services. Biosecurity revenue in the first quarter of 2024 was comprised of our expanded offerings of biomonitoring and bioinformatic support services. Through our partnerships, we operate programs for collections, testing, sequencing, and insights delivery on pathogen samples in different countries.
Current wording
Since the end of the COVID-19 public health emergency in May 2023, we shifted our Biosecurity business focus to developing scalable biosecurity infrastructure and delivering global surveillance programs and analytics services. Biosecurity revenue in the first half of 2024 was comprised of our expanded offerings of biomonitoring and bioinformatic support services. Through our partnerships, we operate programs for collections, testing, sequencing, and insights delivery on pathogen samples in different countries.
Previous wording
Cost of Biosecurity product and service revenue decreased $13.2 million in the three months ended March 31, 2024 compared to the same period in 2023. The decrease was driven by the end of our COVID-19 testing in schools in the third quarter of 2023 and the transition of our Biosecurity business to global surveillance programs and analytic services.
Current wording
Cost of Biosecurity product and service revenue decreased $6.3 million and $19.5 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decrease was driven by the end of our COVID-19 testing in schools in the third quarter of 2023 and the transition of our Biosecurity business to global surveillance programs and analytic services.
Previous wording
Research and development expenses decreased $26.2 million in the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily attributable to a decrease in stock-based compensation expense of $23.4 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc. (“Zymergen”), in the fourth quarter of 2023 ($17.2 million). Further, there was a decrease in professional fees of $4.8 million and non-capitalized equipment purchases and maintenance costs of $2.0 million. This was partially offset by increases in acquired in-process research and development costs of $16.9 million, software and technology expense of $3.6 million and personnel-related compensation and benefits expense of $1.3 million. Increases in research and development expenses, excluding stock-based compensation expense and the Zymergen deconsolidation, supported the growth of Cell Engineering capabilities.
Current wording
Research and development expenses decreased $10.1 million in the three months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily attributable to a decrease in stock-based compensation expense of $18.8 million (inclusive of employer payroll taxes) and the deconsolidation of our former subsidiary, Zymergen Inc. (“Zymergen”), in the fourth quarter of 2023 ($11.3 million). Further, there was a decrease in professional fees of $3.8 million and acquired in-process research and development costs of $1.0 million. This was partially offset by an increase in rent and related facilities costs of $10.5 million, software and technology expense of $5.2 million, laboratory supplies expense of $4.5 million, personnel-related compensation and benefits expense of $3.0 million, and non-capitalized equipment purchases and maintenance costs of $2.1 million. Increases in research and development expenses, excluding stock-based compensation expense and the Zymergen deconsolidation, supported the growth of Cell Engineering capabilities.
Previous wording
General and administrative expenses decreased $41.1 million in the three months ended March 31, 2024 compared to the same period in 2023. The decrease was primarily attributable to the deconsolidation of Zymergen ($20.1 million) and a decrease in stock-based compensation expense of $9.4 million (inclusive of employer payroll taxes). Further, there were decreases in professional fees and litigation costs of $8.3 million, the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.1 million, and depreciation and amortization expenses of $1.7 million, partially offset by increases in personnel-related compensation and benefits expense of $5.0 million.
Current wording
General and administrative expenses decreased $77.2 million in the six months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily attributable to the deconsolidation of Zymergen ($55.4 million) and a decrease in stock-based compensation expense of $12.1 million (inclusive of employer payroll taxes). Further, there were decreases in professional fees and litigation costs of $13.9 million and the change in fair value of contingent consideration liabilities resulting from acquisitions of $6.2 million, partially offset by an increase in personnel-related compensation and benefits expense of $10.1 million.
Previous wording
Interest income, net decreased $2.8 million in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to lower average cash balances in interest bearing accounts.
Current wording
Interest income, net decreased $4.0 million and $6.9 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decrease was primarily due to lower average cash balances in interest bearing accounts.
Previous wording
Loss on equity method investments was zero and $1.4 million in the three months ended March 31, 2024 and 2023, respectively. The loss in the prior period was primarily due to a $1.5 million loss on our equity method investment in BiomEdit, representing our share of the investee’s losses under the HLBV method and the fair value of the additional equity we received in BiomEdit of $1.1 million in the first quarter of 2023, which was reduced to zero during the period as a result of the application of the HLBV method.
Current wording
In the six months ended June 30, 2023, we recorded a $1.5 million loss on our equity method investment in BiomEdit, representing our share of the investee’s losses under the HLBV method and the fair value of the additional equity we received in BiomEdit of $1.1 million in the first half of 2023, which was reduced to zero during the period as a result of the application of the HLBV method.
Previous wording
Loss on investments was $2.5 million and $6.4 million in the three months ended March 31, 2024 and 2023, respectively. The change of $3.8 million was due to fluctuations in the stock prices of marketable equity securities and a $3.4 million increase in impairment losses recognized on our non-marketable equity securities.
Current wording
Loss on investments was $6.8 million and $2.1 million in the three months ended June 30, 2024 and 2023, respectively. The change of $4.7 million was due to fluctuations in the stock prices of our marketable equity securities and a $4.9 million increase in impairment losses recognized on our non-marketable equity securities.
Previous wording
We recognized gains of $0.9 million and $1.2 million on the change in fair value of warrant liabilities in the three months ended March 31, 2024 and 2023, respectively. The change in fair value of warrant liabilities is primarily driven by changes in the value of our common stock. Increases or decreases in the value of our common stock results in a loss or gain, respectively, on the change in fair value of warrant liabilities.
Current wording
The change in fair value of warrant liabilities was $3.2 million gain and $4.5 million loss in the three months ended June 30, 2024 and 2023, respectively, and $4.2 million gain and $3.3 million loss in the six months ended June 30, 2024 and 2023, respectively. The change in fair value of warrant liabilities is primarily driven by changes in the value of our common stock. Increases or decreases in the value of our common stock results in a loss or gain, respectively, on the change in fair value of warrant liabilities.
Previous wording
Other income, net decreased $0.9 million in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to a $2.4 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen, offset by a $1.3 million increase in the gain on the change in fair value of convertible notes.
Current wording
Other income (expense), net decreased $4.0 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to a $2.3 million decrease in sublease rent income primarily as a result of the deconsolidation of Zymergen and a $2.3 million increase in the net loss on the change in fair value of convertible notes.
Previous wording
We define Adjusted EBITDA as EBITDA adjusted for stock-based compensation expense, gain or loss on equity method investments, gain or loss on investments, change in fair value of warrant liabilities, gain or loss on deconsolidation of subsidiaries, transaction and integration costs associated with planned, completed or terminated mergers and acquisitions, including related litigation costs, acquired in-process research and development expenses, impairment charges, costs associated with the bankruptcy filing of our former subsidiary, Zymergen (the “Zymergen Bankruptcy”), and other income and expenses. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends because it eliminates the effect of financing activities, investing activities, and certain non-cash charges and other items that are not related to our core operating performance or affect comparability period over period.
Current wording
We define Adjusted EBITDA as EBITDA adjusted for stock-based compensation expense, gain or loss on equity method investments, gain or loss on investments, change in fair value of warrant liabilities, gain or loss on deconsolidation of subsidiaries, transaction and integration costs associated with planned, completed or terminated mergers and acquisitions, including related litigation costs, restructuring and impairment charges (inclusive of impairments of goodwill and long-lived assets), costs associated with the bankruptcy filing of our former subsidiary, Zymergen (the “Zymergen Bankruptcy”), and certain other income and expenses. We believe that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends because it eliminates the effect of financing activities, investing activities, and certain non-cash charges and other items that are not related to our core operating performance or affect comparability period over period.
Previous wording
The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three months ended March 31, 2024 and 2023:
Current wording
The following table reconciles net loss to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:
Previous wording
(1)Includes $1.6 million and $2.2 million in employer payroll taxes for the three months ended March 31, 2024 and 2023, respectively.
Current wording
(1)Includes $1.1 million and $1.0 million in employer payroll taxes for the three months ended June 30, 2024 and 2023, respectively, and $2.7 and $3.2 million for the six months ended June 30, 2024 and 2023, respectively.
Previous wording
(2)Represents transaction and integration costs directly related to mergers and acquisitions, including: (i) due diligence, legal, consulting and accounting fees associated with acquisitions, (ii) post-acquisition employee retention bonuses and severance payments, (iii) the fair value adjustments to contingent consideration liabilities resulting from acquisitions, (iv) acquired intangible assets expensed as in-process research and development, and (v) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs, net of insurance recovery.
Current wording
(4)Represents transaction and integration costs directly related to mergers and acquisitions, including: (i) due diligence, legal, consulting and accounting fees associated with acquisitions, (ii) post-acquisition employee retention bonuses and severance payments, (iii) the fair value adjustments to contingent consideration liabilities resulting from acquisitions, (iv) costs associated with the Zymergen Bankruptcy, as well as securities litigation costs, net of insurance recovery. Not included in this adjustment are non-cash charges for acquired in-process research and development expenses, which totaled $3.0 million and $4.0 million in the three months ended June 30, 2024 and 2023, respectively, and $19.8 million and $4.0 million in the six months ended June 30, 2024 and 2023, respectively.
Previous wording
Upon the closing of our merger with SRNG in September 2021, we received net proceeds totaling approximately $1,509.6 million, inclusive of $760.0 million from investments from certain accredited investors for 76 million shares of our Class A common stock. As of March 31, 2024, we had cash and cash equivalents of $840.4 million, which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.
Current wording
Upon the closing of our merger with SRNG in September 2021, we received net proceeds totaling approximately $1,509.6 million, inclusive of $760.0 million from investments from certain accredited investors for 76 million shares of our Class A common stock. As of June 30, 2024, we had cash and cash equivalents of $730.4 million, which we believe will be sufficient to enable us to fund our projected operations through at least the next 12 months from the date of filing of this Quarterly Report on Form 10-Q.
Previous wording
•acquire and integrate companies, assets or intellectual property that advance our company objectives; and
Current wording
•acquire and integrate companies, assets or intellectual property that advance our company objectives;
Previous wording
•maintain, expand, and protect our intellectual property.
Current wording
•maintain, expand, and protect our intellectual property; and
Previous wording
Net cash used in operating activities for the three months ended March 31, 2024 consisted of net loss of $165.9 million, adjusted for net change in operating assets and liabilities of $0.3 million and non-cash charges of $76.3 million. The net change in operating assets and liabilities was primarily due to (i) a $6.8 million increase in accounts receivable, (ii) a $10.9 million increase in accounts payable, accrued expenses and other current liabilities, partially offset by (iii) a $2.9 million decrease in deferred revenue and (iv) a $4.1 million decrease in operating lease liabilities from rent payments. Non-cash adjustments primarily consisted of $12.9 million of depreciation and amortization, $40.8 million of stock-based compensation, $16.8 million of in-process research and development expense from asset acquisitions, and $5.6 million of non-cash lease expense.
Current wording
Net cash used in operating activities for the six months ended June 30, 2024 consisted of net loss of $383.1 million, adjusted for net change in operating assets and liabilities of $6.2 million and non-cash charges of $203.3 million. The net change in operating assets and liabilities was primarily due to a $10.9 million increase in accounts payable, accrued expenses and other current liabilities primarily due to restructuring-related accruals, a $14.4 million decrease in operating lease right-of-use assets from lease incentives received, partially offset by a $17.0 million decrease in deferred revenue and a $3.9 million decrease in operating lease liabilities from rent payments. Non-cash adjustments primarily consisted of $30.2 million of depreciation and amortization, $77.9 million of stock-based compensation expense, $9.4 million loss on investments, $13.1 million non-cash lease expense, $19.8 million in acquired in-process research and development expense, and $47.9 million of goodwill impairment.
Previous wording
Net cash used in operating activities for the three months ended March 31, 2023 consisted of net loss of $205.0 million, adjusted for net change in operating assets and liabilities of $1.5 million and non-cash charges of $112.9 million. The net change in operating assets and liabilities was primarily due to (i) a $7.4 million decrease in prepaid expenses and other current assets, (ii) a $19.1 million increase in accounts payable, accrued expenses and other current liabilities, partially offset by (iii) a $17.2 million decrease in deferred revenue and (iv) a $8.5 million decrease in operating lease liabilities from rent payments. Non-cash adjustments primarily consisted of $19.0 million of depreciation and amortization, $73.0 million of stock-based compensation expense, $7.8 million loss on investments including equity method investments, $5.2 million loss on the change in fair value of contingent consideration liability, partially offset by $1.2 million gain on the change in fair value of warrant liabilities.
Current wording
Net cash used in operating activities for the six months ended June 30, 2023 consisted of net loss of $378.3 million, adjusted for net change in operating assets and liabilities of $10.4 million and non-cash charges of $224.6 million. The net change in operating assets and liabilities was primarily due to a $15.4 million decrease in accounts receivable, a $12.1 million decrease in prepaid expenses and other current assets, a $4.1 million decrease in operating lease right-of-use assets from lease incentives, partially offset by a $4.0 million decrease in accounts payable, accrued expenses and other current liabilities, a $21.4 million decrease in deferred revenue, and a $13.3 million decrease in operating lease liabilities from rent payments. Non-cash adjustments primarily consisted of $36.6 million of depreciation and amortization, $134.5 million of stock-based compensation expense, $10.0 million loss on investments including equity method investments, $8.5 million loss on the change in fair value of contingent consideration liabilities, $16.3 million non-cash lease expense, and $9.0 million impairment loss on assets held for sale.
Previous wording
Net cash used in investing activities for the three months ended March 31, 2024 primarily consisted of purchases of property and equipment of $6.7 million associated with Foundry capacity and capability investments and $5.4 million paid for the acquisition of Zymergen.
Current wording
Net cash used in investing activities for the six months ended June 30, 2024 primarily consisted of purchases of property and equipment of $33.7 million associated with Foundry capacity and capability investments and $5.4 million paid for the acquisition of Zymergen.
Previous wording
Net cash used in investing activities for the three months ended March 31, 2023 primarily consisted of purchases of property and equipment of $19.4 million associated with Foundry capacity and capability investments.
Current wording
Net cash used in investing activities for the six months ended June 30, 2023 primarily consisted of purchases of property and equipment of $33.0 million associated with Foundry capacity and capability investments.
Previous wording
Net cash used in financing activities for the three months ended March 31, 2024 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.
Current wording
Net cash used in financing activities for the six months ended June 30, 2024 primarily consisted of principal payments on finance leases and payments of contingent consideration related to business acquisitions.
Previous wording
Net cash used in financing activities for the three months ended March 31, 2023 primarily consisted of principal payments on finance leases and payments of equity issuance costs.
Current wording
Net cash used in financing activities for the six months ended June 30, 2023 primarily consisted of principal payments on finance leases and payment of contingent consideration related to a business acquisition.
Previous wording
There have been no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.
Current wording
Except as described below, there have been no material changes to our critical accounting estimates as compared to the critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report on Form 10-K.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
In the six months ended June 30, 2024, 27 New Programs commenced, compared to 34 New Programs in the same period in 2023. The number of Current Active Programs rose to 151, compared to 118 in the prior year period. Cumulative Programs increased to 269 from 198 over the same period. Additionally, the number of customers grew to 88, up from 68 in the prior year period.
Current report — wording carried from elsewhere
Biosecurity revenue decreased $51.8 million in the six months ended June 30, 2024 compared to the same period in 2023 and was comprised of a decrease in product revenue of $22.5 million and a decrease in service revenue of $29.4 million.
Current report — wording carried from elsewhere
Research and development expenses decreased $36.2 million in the six months ended June 30, 2024 compared to the same period in 2023. The decrease was primarily attributable to a decrease in stock-based compensation expense of $40.8 million (inclusive of employer payroll taxes) and the deconsolidation of Zymergen ($30.0 million). Further, there was a decrease in professional fees of $8.6 million and temporary labor and contractors of $1.4 million. This was partially offset by increases in acquired in-process research and development costs of $15.9 million, rent and related facilities costs of $11.0 million, software and technology expense of $8.9 million, laboratory supplies expense of $4.8 million, and personnel-related compensation and benefits expense of $4.4 million. Increases in research and development expenses, excluding stock-based compensation expense and the Zymergen deconsolidation, supported the growth of Cell Engineering capabilities.
Current report — wording carried from elsewhere
Loss on investments was $9.4 million and $8.5 million in the six months ended June 30, 2024 and 2023, respectively. The change of $0.9 million was due to fluctuations in the stock prices of our marketable equity securities offset by an $8.3 million increase in impairment losses recognized on our non-marketable equity securities.