Ginkgo Bioworks Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Ginkgo hit its $250 million annual run-rate cost savings target a quarter early, leaving it with a $474 million cash cushion and no debt for strategic flexibility.
  • Positive Sentiment: Adjusted EBITDA improved by 72% year-over-year to negative $28 million and cash burn fell to $38 million, advancing toward the goal of breakeven by 2026.
  • Neutral Sentiment: The company reaffirmed full-year revenue guidance of $167 million–$187 million, including $117 million–$137 million from cell engineering and at least $40 million from biosecurity.
  • Positive Sentiment: Growth initiatives are ramping with reconfigurable automation carts integrating 50+ instruments, expanded “Data Points” CRO services, and a new cell-free protein synthesis reagent launch.
  • Negative Sentiment: Ginkgo incurred $12 million in Q2 costs for unoccupied leased space, creating sublease and real estate market risks if capacity remains underutilized.
AI Generated. May Contain Errors.
Earnings Conference Call
Ginkgo Bioworks Q2 2025
00:00 / 00:00

There are 3 speakers on the call.

Operator

Good evening. I'm Daniel Marshall, Senior Manager of Communications and Ownership. I'm joined by Jason Kelly, our Co Founder and CEO and our new CFO, Steve Cohen. Thanks as always for joining us. We're looking forward to updating you on our progress.

Operator

As a reminder, during the presentation today, we'll be making forward looking statements, which involve risks and uncertainties. Please refer to our filings with the SEC to learn more about these risks and uncertainties, including our most recent 10 ks. Today, in addition to updating you on the quarter results, we're going to provide updates on our path towards adjusted EBITDA breakeven and dive deeper into the new deals and launches in Ginkgo's tools businesses, which continue to establish themselves as critical tools in AI powered bioengineering. As usual, we'll end with a Q and A session and I'll take questions from analysts, investors and the public. You can submit those questions to us in advance via xGinkoSults or e mail investorsginkobioWorks dot com.

Operator

All right. Over to you, Jason.

Speaker 1

All right. Thanks, Daniel. We always start with our mission here at Ginkgo, which is to make biology easier to engineer. Our objectives are very similar to what you've heard from me over the last few earnings calls. We're trying to reach adjusted EBITDA by the end breakeven by the 2026 while maintaining a cash margin of safety, and I'm gonna update on that in just a sec.

Speaker 1

We're cutting costs while serving our current customers. And then very importantly, we're expanding from an r and d solutions business into the life science tool space. And and and the strategic section, you're gonna hear a lot about that from me today. Before I get to that, I do want to touch on that maintaining a cash margin of safety and the cost cutting. So you can see our numbers here for the quarter, really happy about this.

Speaker 1

We've been aiming, and I told you this about a year ago, to get to a $250,000,000 annual run rate cost savings, by Q3 of this year or 2025. I'm happy to say we hit that target a quarter early. This was a tremendous amount of very painful work, by the team at Ginkgo. And so I want say thank you to folks folks and sort of congratulate them on that progress and getting there early. That that is very strategically important for us.

Speaker 1

So because the earlier we do it, as you can see, you know, we have $474,000,000 in cash and cash equivalents with no bank debt. And that's where that margin of safety comes from. Having that, large cash position, while also getting burned under control, means that we don't get, pushed into needing to, you know, raise, in a situation we don't want to or from someone we don't want to. We can be strategic about engaging with capital markets, which is really important. And then it also means we can start to take our focus from just purely cost cutting to which we are still going to be cutting costs, but from purely cost cutting to also just really how we want to grow the business into 2026.

Speaker 1

And so you're going to hear a bunch from me today on that in the strategic section. Before that, I do want to hand it to Steve to go through the numbers. And I want to say congratulations to Steve, our new CFO. We mentioned this when we announced it, but Steve's been with the company over the last two years. He worked very closely with Mark throughout that time, particularly over the last several months to really shadow and be a part of everything that Mark was doing.

Speaker 1

And so it made that transition super smooth. And so really delighted. We're very lucky to have Steve in the CFO seat, and I'll pass it to him to go through the numbers.

Speaker 2

Thanks, Jason. I'll start with the cell engineering business. Cell engineering revenue was $39,000,000 in the 2025, up 8% compared to the 2024. In the 2025, we supported a total of 120 revenue generating programs. This represents a 10% increase year over year.

Speaker 2

Turning to biosecurity. Our biosecurity business generated $10,000,000 of revenue in the 2025 at a segment gross margin of 18%. As a reminder, segment gross margin excludes stock based compensation. Turning to the next slide. It is important to note that our net loss includes a number of noncash and other nonrecurring items as detailed more fully in our financial statements.

Speaker 2

Because of these noncash and other nonrecurring items, we believe adjusted EBITDA is more indicative of our profitability. A full reconciliation between segment operating loss, adjusted EBITDA and GAAP loss or GAAP net loss can be found in the appendix. Now that we've completed a year of restructuring, you can see the very substantial cost reductions and improvements in profitability compared to the 2024. In the 2025, cell engineering R and D expenses decreased 63 from $84,000,000 in the 2024 to $31,000,000 in the 2025. Cell engineering G and A expense decreased 57% from $33,000,000 in the 2024 to $14,000,000 in the 2025.

Speaker 2

These decreases were all driven by our restructuring efforts. The significant improvement in cell engineering segment operating loss in the 2025 compared to the same prior year period was due to the previously discussed drivers of improved revenue and reduced operating expenses. Biosecurity segment operating loss was impacted by the timing of programs in the second quarter. Moving further down the page, you'll note that total adjusted EBITDA in the 2025 was negative $28,000,000 which was improved from negative $99,000,000 in the 2024, a 72% improvement. We show adjusted EBITDA at the segment level to show the relative profitability of each.

Speaker 2

The principal difference between segment operating loss and total adjusted EBITDA in the second quarter relates to the carrying cost of excess lease space, which you can see was $12,000,000 in the second quarter of this year. This cost represents the base rent and other charges relating to lease space, which we are not occupying, net of subleasing. This is a cash operating cost that is not related to driving revenue right now and can be potentially mitigated through subleasing. And finally, cash burn in the 2025 was $38,000,000 down from $110,000,000 in the 2024. This significant decrease in cash burn was a direct result of the restructuring.

Speaker 2

Now turning to guidance. In the terms of the outlook for the full year, we are reaffirming our total revenue guidance for 2025 totaling 167,000,000 to $187,000,000 with cell engineering revenue to be $117,000,000 to $137,000,000 and biosecurity revenue expected to be at least $40,000,000 In conclusion, we're pleased with the substantial improvements in cash burn and cost reductions when looking back over the past year, where we achieved our targeted $250,000,000 run rate cost takeout three months earlier than planned. In the third quarter, we will continue to execute against our core objectives while navigating continued uncertainty in the macro environment. And with that, I'll hand it back to you, Jason.

Speaker 1

Thanks, Steve. The three topics we're going to cover today in the deep dive is: one, our continued restructuring and the cost takeout And then in sections two and three, I wanna go through automation and data points and our newly launched reagent product, which are really our three big motions into the life science tool space. So really excited about this today. So okay. So let's dive in.

Speaker 1

So first, you know, I I mentioned this already. I'm really excited to see these numbers. That $250,000,000 cost reduction getting that done ahead of schedule, is very strategically important for the company. So the whole reason we've been focusing on this and the the team has put in an absolutely enormous amount of work and pain, around this is we wanted to be able to to do this motion of moving into life science tool space, with a margin of safety. In other words, with enough cash in the bank and and no bank debts, to allow us to not be forced to take money for people we don't want to or, raise in in circumstances where we weren't happy.

Speaker 1

And so having that large cash balance relative to our cash burn, is really a critical piece of putting us in a good position when and if we engage with capital markets. And so really happy that we're there on that. You can see here our burn rates getting down to $28,000,000 if you go to the next slide, of adjusted EBITDA for this quarter. So really, again, a testament to the team and strategically important to Ginkgo. Okay.

Speaker 1

All right. So now I want to talk a little bit about our automation and data points offerings, and then we'll talk at the end about reagents. So to give you some macro context, I spoke about this before, but Ginkgo's business over the last decade has really been what we call solutions. So in other words, selling to the head of R and D of a large company or the CEO of a small or a midsized company and basically being an outsourced research team, Ginkgo scientists using Ginkgo tools to deliver them a research product. Alright.

Speaker 1

That was the solutions business. Last year, about a year ago, alongside of restructuring in the company, we started to offer Gingko's tools and services that we had previously had in house just for our scientists directly to the scientists at our customers. And that has been going really, really well. And so, again, I wanna give a little more context on that. So if you go to the next slide, can see, you know, on the y axis here, we have what I'll say is, like, our customization and technical risk we're taking for the customer.

Speaker 1

When that is high, like it is in research solutions, in other words, we'll have a big milestone that will only get paid if we're technically successful. The the customer is willing to give us downstream value share. In other words, a share of the future value of their products, either a royalty or success based milestones like that technical milestone that I mentioned and so on. That's really in exchange for the level of customization and risk we're taking. So as we go down that y axis, we go to the right hand side of this chart where we're not able to get royalties and and downstream value share.

Speaker 1

So that's a downside. Okay? But the upside is we're selling something much more off the rack. In other words, a more standard scalable product to the customer. And if you go to the next slide, you know, what we're seeing here is the solutions business has that big upside.

Speaker 1

It takes a while to get to it. So I think there's a really nice complement here where our tools, offerings are able to give us near term revenue, smaller batches, wider customer set, opening new markets. We're going to talk about the reagents. This first kit is a $2,000 kit. Scientists can order it with a credit card.

Speaker 1

So that is really allowing us to have a faster cycle time going to market. It's a good complement for the solutions business, and it's the right time to do it. Alright. So I'm gonna jump in and talk a little bit about our automations offering, and then we'll get to our data points, which is more of traditional CRO, and then finally, reagents. Alright.

Speaker 1

So when I, talk to customers about automation, I like to show this slide, which is that, you know, Ginkgo, in addition to selling automation, has been a user, and builder of automation over the last decade as we've been doing these solutions partnerships. And this is where that solutions business really complements life science tools. We're almost unique among life science tools vendors in really being primarily doing high end science using our tools over the last decade, which means we have an enormous amount of familiarity with what's out there in the market, what works and what doesn't. And we built a lot of our in house tools to fill gaps in what we couldn't get from vendors on the market today, which is what makes our tools business so exciting. Because when we launch these things, they're immediately stepping into a gap in the market because if it hadn't been a gap, we would have been buying it already from the life science tools companies.

Speaker 1

And so if you go to the next slide, this is what I think is the core challenge if you look across the industry today. So when we talk to life science leaders, heads of R and D and so on, the number one thing you're hearing is there's a demand, for more output from the same R and D resources. And this is a combination of factors, sort of economic pressure in the industry, you know, over the last three or four years with interest rates up. But it's also competition from biotech companies in China, where you're seeing lower cost labor, sort of lower cost infrastructure and so on, creating pressure on the research infrastructure here in The United States and in Europe and others. And and so how do you solve that problem?

Speaker 1

Well, part of the issue from my standpoint is the majority the overwhelming majority, 95% plus of the research work done in the sciences and in commercial biotech and and agriculture is done at the lab bench. And that picture on the left is basically what every lab bench looks like if you go into any one of these companies, right? So there's pipettes at the bench. I did my PhD in bioengineering. That's five years of picking up one of those pipettes and moving liquids around, working by hand at the bench, buying things from the Thermo Fisher catalog, reagents.

Speaker 1

Very it's very variable. Like, you can do almost anything you want, but you do it at low throughput. And as you do more of it, it does not get cheaper. Right? It's not, like making cars or making semiconductor chips, whereas you do more, the cost falls per unit.

Speaker 1

As you do more research, it's just as expensive as the last unit as you do more because it's being done by hand. So sort of the obvious thing, like, you're a tech person is like, well, it's just automated. Right? Like, if we automate it, like, semiconductors and automobiles, you you'll get a much lower cost per unit operation in the lab. And this is even more acute because you're seeing demand around AI for these large datasets.

Speaker 1

And I'll I'll point out, we are not the only ones thinking this way. Like, let's automate it. Right? So so, you know, president Trump put this out just last week, winning the race, America's AI action plan. And I would really recommend you read this document.

Speaker 1

It's great. It's very focused on the actual things to do in order for The United States to make strategic choices in AI. And one of the categories is invest in AI enabled science. And you should read the doc, but I'll just call out one specific part where it says, you know, through NSF and DOE and so on, and other federal partners, there should be an investment in automated cloud enabled labs. Okay?

Speaker 1

And what they're saying there with cloud enabled is think like a data center. Right? When we say cloud computing, we think of a big data center that can do lots of different stuff, and it's and it's accessible and and gets cheaper with scale and improves with technology. Can we make the Labbench more like the data center cloud? That's that's the provocation from, this sort of AI action plan.

Speaker 1

And I think we can. And and and if you go to the next slide, I'll show you why it's been hard historically in the industry. So, on the y axis here and this is gonna be my, like, automation nerd out slides, so bear with me. So on the y axis here, is a term of art in automation called mix. Okay?

Speaker 1

So a low mix environment is like an automobile plant. Alright? You're making the same car over and over again. It's a low mix of output. A high mix of output is like a fine chef at a restaurant.

Speaker 1

Alright? Lots of different orders coming in from the menu, variations, people are requesting all kinds of stuff. You have a common set of tools, but you use it in very different ways to produce different high mix of outputs. Okay. That chef is very analogous to the scientists at the lab bench today.

Speaker 1

Very analogous. Alright? There's a common set of tools, common set of equipment on those benches. They're using their hands, and they're doing a very high mix of of work. And they are very well served by Thermo Fisher, Danaher, and a long tail of equipment and reagent vendors over the last fifty years that are selling them all kinds of stuff, to work at that bench.

Speaker 1

Alright? It actually works pretty good. It just doesn't scale. Okay? It really does not get cheaper with scale, and that's what we're seeing with the increasing price for new drug discovered and everything else.

Speaker 1

Alright. On the other hand, on the low mix side, more like an auto plant and a high throughput on the x axis, okay, we have what we call automation work cells, and I'll show you a picture of one in a second. But these are where automation has been used in life sciences today. Things like high throughput screening and compound management, places where, you know, diagnostics, where you're doing the same protocol over and over and over again. And there, automation does work great in the lab.

Speaker 1

And there's companies like Thermo Fisher and High Res BioSolutions that'll sell you these customized work cells. The trouble is they just do those one or two protocols. They don't have anywhere near the flexibility of the bench. And so the question is, can we get to high mix, high throughput, or at least, like, medium mix, medium throughput? Something that's closer to the bench but sees a scale economic.

Speaker 1

Alright? And that's what we're trying to achieve with Ginkgo Automation, and we believe it's possible with our reconfigurable automation carts, our racks, and our software on top of them. And so I'm gonna talk a little bit more about that. So to give you some context, on the slide here, you can see a picture of, if you go to the next slide, a work cell. And so this is that traditional low mix, high throughput automation work cell.

Speaker 1

This is actually one that we got built for Ginkgo. Okay? Right? And those two white towers in the middle are robotic arms. They can pick up a plate and move it to all the various lab benchtop lab equipment that's jammed into that thing.

Speaker 1

You can see everything kinda stuck in there and on top of each other and everything else. If it's not obvious, that is a very custom object. Okay? It is not standardized. It is built just for you.

Speaker 1

Alright? And it has a relatively low return on investment because the entire value of that work cell has to be justified by the one or two lab protocols that it's able to conduct. Alright? And that means that, back to my comment earlier, 95% of the lab work is happening at the bench, and less than 5% is happening on work cells like this because it's only the most repeatable work that can justify that return on investment. So if you go to the next slide, this is our solution to that.

Speaker 1

They're reconfigurable automation carts. Alright. This is technology invented at Dinko. We've been building this up over the last ten years. There is a in this box, basically, is a piece of lab equipment.

Speaker 1

You can see an orange centrifuge there inside the box in the cart. There's a robotic arm, and there's a piece of MagnaMotion track. And what this track does, it allows you to deliver a plate, a 96 or three eighty four well plate to that robotic arm. The robotic arm picks up the plate, puts it onto the piece of lab equipment, and we have I'll show you in a minute. Now 50 plus lab equipment integrated, puts it on the equipment, and the software tells the equipment, run your experiment.

Speaker 1

And when it's done, the arm picks up the plate and puts it onto the track. And what's great about this is once that custom piece of equipment is inside this box and we integrate directly with the equipment to our software, it's now basically like a standard unit. Alright? And if if you go to the next slide, you can see we can stitch these together. We put unit, unit, unit, and we've now connected three pieces of lab lab equipment all into one setup, and we can move the plates among those equipment on that magnetic track.

Speaker 1

And with the arms, we can deliver the the samples to the equipment, and it all just works if it's on that integrated setup. And we have now, you know, like I said, 50 plus pieces of equipment. They're not all shown here integrated into these setups, and we're adding more every day. If a customer wants a new piece of bench equipment inside our setup, we do that at our cost, and then have it integrated in the future for future customers. Okay?

Speaker 1

And you can put together many of these. There's a picture of our lab, if you have the next slide here in Boston. And, again, unique among automation vendors, we use our own automation in a BSL two lab. So this is a 20 plus rack setup. And inside it, you have all these different pieces of equipment.

Speaker 1

And you can, again, run protocols that connect any piece of equipment to any other piece of equipment in that setup. You go to the next slide. This modularity is really exciting. Customers are loving it. This is just us at a few vendor trade shows.

Speaker 1

I really like the picture up in the top right. Recurgeon had an event at JPMorgan. They invited us to come, and we actually set our rack system up with, a five part system in an in an afternoon and had it running for the cocktail party. Alright? So the ability to quickly, build the system and then, very importantly, expand the system is unique to our hardware.

Speaker 1

If you're building that, you know, kind of Rube Goldberg machine with the arms in the middle and everything else, that is a custom job, that takes a long time to do, and it's, again, built one off for the customer. With this, we can really print these cards, and allows customers to quickly scale their infrastructure. And if you go to the next slide, we have a great existence proof of this, which is our setup that we've been using at Ginkgo, to do research work for customers over the last several years. So, you can see here, highlighted in blue, a number of pieces of equipment that were originally put on our setup for next gen sequencing prep of samples. Okay?

Speaker 1

And so having all those on that setup, allows the sample to get prepared and go on to our sequencers. That was the original investments. That was the ROI. We were going do tons of next gen sequencing, so that justified it. But then very importantly, our scientists came along and if you go to the next slide, they requested a protein quantification assay.

Speaker 1

It's a high bit assay from made by a company called Promega. And they wanted to run this at high throughput instead of at the bench. And so we developed a protocol that would be, you know, 7,600 samples in six hours, like a very, you know, high throughput protocol. And if you look, and we wanted to now add this to the racks on the next slide, we were able to reuse now the blue on here, our our machines from the NGS protocol that are relevant to the high bit protocol. So we don't need to buy those again.

Speaker 1

They're already on the setup. In fact, in order to add this hybrid protocol, we only had to add the FerroStar. That one pink highlighted piece of equipment at the top was added in order to enable a whole new protocol. So that that's the ROI. Right?

Speaker 1

Like, we had to just add one piece of equipment and all this existing investment and these things these work cells and things can cost a million dollars plus when you make the the one off and you can't expand it. By adding just one cart to this, we're able to have it do a whole another protocol. And then importantly, as you add enough carts, you're it it costs no more to do more protocols. It's just software changes because you have enough equipment in one big setup in order to make that possible. And this is if you go to the next slide, what I'm really excited I think this is the direction that the US government is headed with these cloud enabled labs.

Speaker 1

This is the direction that I think heads of r and d absolutely have to have on their radar if they're looking to reduce research costs, which is to have many, many, many pieces of equipment all in one big setup that can basically do whatever protocol you want in the future. And this is a setup we just announced, a week ago that we had, nearly complete for Pacific Northwest National Labs. It's an 18 piece of equipment setup. And what's really amazing about this, if you go to the next slide, it is all of our car our our sort of, like, arms and tracks are inside of anaerobic chambers for this system. So this is an environment that humans can't go in.

Speaker 1

You know, it's air free. So it's really difficult. You see those, like, arm things. Normally, people are doing experiments with their hands in glove boxes and all this crazy stuff. Instead here, those arms are really just to service the equipment that you see on this setup, and all the samples that are gonna move among the equipment are gonna run through our automation.

Speaker 1

And if you go to the next slide, we believe this is the largest automated anaerobic system in the world now. I'm really excited about Department of Energy investing in this. I think this is exactly what the president's looking for in their in the next slide, in their in this sort of cloud enabled labs initiatives. And so I I think you will see more of this. I'm really excited about this.

Speaker 1

I think Ginkgo's technology is perfect for this. And by the way, I think 18 instruments in one setup is gonna be looked at as small in the future. Really, we should have a hundred, two hundred instruments all in one big setup that allows you to ultimately submit protocols to do anything you could do at the bench. And and that ultimately know, we're not there yet. There's a there's a lot of technology between here and there, but that's really the dream here is to be able to have that same level of flexibility or something near it, but with the scale economic of automation.

Speaker 1

And that is absolutely essential, if we're going to have AI enabled science, without question. It's just not gonna happen at the lab bench. Alright. One more thing on this. The software side, I'm not gonna be able to dig in today, but I'm excited to tell you more about it into the future.

Speaker 1

I will just say for customers that are tuning in, Ginkgo's been doing lab in the loop AI enabled science, having reasoning models, interacting with this robotics, really, really cool stuff. We'd love to share it with you. And we have the whole both the obviously, the hardware I spoke a lot about today, but importantly, the software stack, the modern APIs, cloud based software, everything, that makes that all really feasible, you know, MCP servers accessing all these equipments. So if you're really, you know, ahead of AI looking to bring, that into your biotech company, you should give us a call both for the hardware, and the software layer. Okay.

Speaker 1

So that's much I wanna say about automation, but I really see that as being extremely strategic for Gingko going into 2026. And as we've gotten our costs more under control, you're gonna hear me go more in this direction. Right? It's gonna be more about what can we invest in for growth in the future, and one of those big areas is going to be automation and AI. Alright.

Speaker 1

Beyond that, I wanna talk about our push into the CRO services market. We call them Stinko data points. We have a number of different services now, perturbation response profiling, specialized high throughput screening, antibody developability, which I've talked about before, but we just launched our small molecule developability or ADME service. And, you know, you can do, you know, lots of different things with these services. They are available.

Speaker 1

Just to be clear, there's no royalty. There's no milestone. It's just like engaging with a CRO like a WuXi or whoever fee for service basis. You own all the IP and data as the customer. But we're able to do this at very large scale because of our automation expertise.

Speaker 1

And so one of the things I'm really excited about, we announced this in the in the press release of of the ADME service, is if you have a quote from another vendor in the CRO space, like, for example, you know, a Chinese vendor and you wanna onshore that back here to The United States, just send us a quote. We're happy to meet it. And that goes for Admi, but generally, you should send us the quote anyway. We're we're happy to see it across any of our services, and meet vendors. And so, please do keep that in mind if you're looking at, data points.

Speaker 1

This is why I'm excited about data points in the long run. I think it is exciting to go after the traditional CRM market. I think there's good business there. It's also not that high throughput. You know, a lot of, like, places like WuXi have done is basically gotten cheaper hands at the bench and then offer that as a service.

Speaker 1

So, like, that buys us, you know, whatever 40% cost reduction on the big problem of reducing r and d and getting scalability, but then it kinda runs out because it's just not getting cheaper. I think across the board, if we want to get cheaper, the answer is automation. And so Ginkgo has been doing this work really in an automated fashion, and that allows some unique offerings to customers. So I'll just highlight this funnel here where this is traditional drug discovery. You're gonna identify its targets.

Speaker 1

Then you're gonna run some high throughput screen, maybe on a robotic setup, maybe in a some sort of pooled assay in the lab. Either way, you're gonna screen a bunch of lab work to pick a few hits. And then you're gonna take those hits into a much more expensive series of experiments, in order to validate if they're good drugs. Alright? And it's those set of more expensive experiments that we've been focusing on trying to make high throughput on our automation at Ginkgo and offer as a service through data points.

Speaker 1

And what's exciting about that, for example, say, antibody developability, you find these binders, which you can do at high throughput really cheap, but then you get to developability, and it's expensive. Is it soluble? Is it immunogenic? These are things that you have to do these more expensive experiments. And so you only try them on your top hips, and you kinda cross your fingers.

Speaker 1

What we are able to do with our throughput is let you apply those developability assays back much earlier in your hit finding so that you look at a much wider range of potential candidates against not just whether they bind, but also are they developable. And if you generate enough of this data, maybe we can even have computational models and AI that can predict developability. And so that's where we're seeing a lot of excitement. That's kind of our niche to get off the ground in the CRO space. And this is the DPMTA, the design, predict, make, test, analyze cycle in pharmaceuticals.

Speaker 1

We're really focusing on scaling up that test step for these high complexity assays. And I think that's something we're very, very good at at Ginkgo. So you should expect us to launch more products. And this is just that add me service kind of start to finish, project scoping, chemical library, so on. I will highlight we're using echo m s, echo mass spec to do that sort of high quality, but also high throughput assay.

Speaker 1

That's what allows us to get cost that can really compete with doing it with low cost labor overseas. Alright. Last but not least, I wanna talk about reagents. I'm super excited about this. I'm always excited when I see Ginkgo move into a new market area because if we do pick up traction there, there's sort of like a lot of clear vistas in front of you to get into.

Speaker 1

So this is our first reagent product. And and just so you understand kind of the theory here. Again, over the last decade, Ginkgo has been a big, big consumer of life science tools. We have bought various services. We have bought a ton of equipment like those custom work cells I mentioned, and we bought a lot of reagents.

Speaker 1

And where we can get something great on the market, we'll use it. But what we found is there are certain gaps in areas that were important, maybe, you know, very important to us for our cell engineering that weren't, widely available or the products weren't really up to our level that we needed on the market. And so in those areas over the last decade, we developed our own stuff. We just never sold it to anyone because it was part of our solutions offering, and we kinda wanted to keep it proprietary. So what's really fun here in Rage is we're getting to launch a bunch of these, what had previously been in house assets at Ginkgo.

Speaker 1

And in fact, we had Ginkgo employees who left, went to other companies and were like, hey. Will you just, like, give me that, you know, reagent or thing we used to have at Ginkgo because I want it. And so we we heard that enough times that we decided we might as well try to sell it. And so this is our first product, the cell free protein synthesis. So cell free protein synthesis is basically instead of if you wanna produce a lot of protein, taking your gene of interest and moving it into a live cell, like an E.

Speaker 1

Coli or a yeast, and then growing that live cell, producing the protein, and extracting it. Instead, you start with the live cells, like the E. Coli, and you grow a bunch up, you pop them open, you lyse them, you take the contents out. You make that into your reagent. Then you add the DNA straight to that reagent mix, and it's got all the components of the cell.

Speaker 1

It's just not alive. And so it'll make protein. Now there's some downside that the cell keeps everything in a little, you know, small container, it has, a high density, which is helpful for production. But we don't have this extra step of growing the cells and everything else. So for a number of applications, cell free really does stand out, and we had a lot of those applications at Ginkgo.

Speaker 1

So we have you know, our our product here has twice the yields for half the cost compared to market leaders for certain protein constructs. And you can get, you know, $2,000. You can get a 10 mil kit, which is a a great offer on the market today. And in fact, we launched this just last week. We've already got some early sales, which makes me very excited.

Speaker 1

But importantly, we also had a, like, a free sample. So we have, you know, over a 100 people have requested samples. And what I think is just I wanted to highlight was a large fraction of that was actually in the academic research market. This is a market that Gingko has basically never sold anything to until selling a kit recently because we haven't had anything to offer. They're obviously not gonna outsource research to us.

Speaker 1

That's really, like, all they do for a living. So our solutions business never made sense. And then we had, you know, a certain scale of CRO services with data points that were really pointed at the commercial market. So I'm pretty excited to see see this. I I think the academic research market has been a huge market for life science tools companies like the sequencing companies and companies like Thermo Fisher.

Speaker 1

So us being able to get into that market here with reagents is very exciting. Okay. So that was kind of what I wanted to walk through. Again, big takeaways. We're coming in a quarter early on that cost takeout target.

Speaker 1

That's very strategically important. We've done that with a good amount of cash and margin of safety still in the bank, that $474,000,000 in cash equivalents and no bank debt. That sets us up very well to look to the future, and we are doing that. So you will see and hear more from us on the life science tool space. I shared some of that today, but expect Ginkgo to really be focused on growing into 2026 from here on out.

Speaker 1

So super excited to hear your questions, and thanks very much for your time.

Operator

Great. Thanks, Jason. As usual, I'll start with a question from the public and remind the analysts on the line that if they'd like to ask a question to please raise their hands on Zoom, and I'll call on you and open up your line. Thanks, everyone. All right.

Operator

Getting started, we'll start with a question from x.com. I confess I'm not sure how to pronounce it, so I'll read the whole username out for you, YEPINY471. And so this question is about automation. Could you please share whether Ginkgo Automation is expected to become a primary driver of the company's revenue? May I ask if Ginkgo is considering acquiring additional companies in the near future, could you elaborate on the strategic significance of Ginkgo RNA solutions for the company?

Speaker 1

Sure, I can take that one. So yes, I was going ask about automation. Obviously, I spent a lot of time about this on the earnings call. I do think automation is going be a huge part of our future business. And I tried to convey this idea that what we're really trying to solve for with our technology is general purpose automation.

Speaker 1

Right? And the market for general purpose automation, we think ultimately is something like the market for the LabBench. Right? The LabBench has been the general purpose kind of, like, platform for doing laboratory work. And there's obviously lots of ways to sell things into the LabBench as reagents, consumables, benchtop equipment, services, so on.

Speaker 1

And so the real question is, we able technologically to make automation as general as the lab bench or even, you know, somewhere along that arc? If if so, then, yeah, it it'll be the majority of our business in the future if we can pull that off because the lab bench has been such a huge market in the life science tool space. So that that's what we're gonna see. I'm certainly optimistic that we could pull that off. But yes.

Speaker 1

So absolutely. Like, automation writ large when it is that generic absolutely would be, I think, ultimately, like, majority of the revenue of the company would flow through something like that automated bench. Yes. About acquisitions also, we don't have anything immediately planned. It's it's a tough market for life science right now, life science tools in particular as well.

Speaker 1

So there are things kind of popping up on the market all the time. If something was a really great fit and a good opportunity, you might see us do it, but nothing nothing immediately planned. And then what was the last thing is RNA solutions. Is that right, RNA solutions. Yes.

Speaker 1

We announced I didn't talk about this on the on the earnings call. We announced a product called RNA solutions. Best way to think about this is taking some of our expertise in the solution space. So, like, a solutions project, again, is a customer outsources a whole usually like a six month, a three year r and d partnership. Our scientists are doing the work using all the tools available at Ginkgo to deliver ultimately a scientific result to the customer.

Speaker 1

Maybe it's a better drug candidate or a new agricultural product, whatever. As part of that, we have a whole bunch of kinda capabilities in there. And some of them, like I was mentioning, we can turn into a reagents. Some of them are turning into hardware products, and some of them we can turn into services. And so with data points, we're doing that in a in a a few specific areas.

Speaker 1

But RNA solutions is an example of us offering a service like that radiating out of our work doing RNA discovery. You might remember we had partnerships with places like Pfizer and others doing that. So that's just us turning that into a kinda off the shelf service. So I'm excited to see that. Yeah.

Speaker 1

I think there's more things like that in the solutions business at Ginkgo. So expect expect to see more things like that.

Operator

Cool. Thanks, Jason. And for our callers, you can just raise your hand, and I'll open your line. I have another email question, which I can get to in the meantime while we're waiting. So this is from Brendan with TD Cowen.

Operator

There's two questions.

Speaker 1

Yeah, know folks, there's like a whole bunch of earnings calls today. We had some folks tell us that they were not going to be able to make it. We apologize for scheduling it on top of everyone else. We'll try to do better next quarter. But yeah, go ahead.

Speaker 1

Big idea for brother.

Operator

Sure, sure. Yes. Okay. So the first question is, could you provide some more color into your ADME data generation software? And are you planning to develop any of your own models on the generated ADME data as a separate build out for customers?

Operator

And how does the meter beat pricing work in terms of licensing over the course of a contract's lifetime? And are you pushing the service to any partners that house their own RAC systems?

Speaker 1

Okay, so maybe I'll go in reverse order and then maybe you'll give me that first one again that will help me out. So on the rack systems, yes, mean one of things I'm excited about is having us demonstrating capabilities through our service offerings on the rack hardware at Ginkgo in Boston. And then if a customer wanted to have that infrastructure in house, and and there can be a lot of reasons for that. Maybe they want to apply, you know, the technology against a cell line that's very proprietary that they don't like to leave the building or whatever. There's lots of reasons you could imagine it.

Speaker 1

We would have kind of proven that technology out on the on the rack modular automation hardware. And the great thing about that hardware is I can then just install those systems at your site and the and the protocols should run the same as they run for me. Right? And this is the advantage of Bingo having a bio lab where we run our own automation and we do these hyper put services. It does mean that we can actually kinda lift and shift those services right onto your premises if you want them.

Speaker 1

So I think there's an opportunity for us to do work as a service, show people it's valuable, install racks that do that work so that we have, you know, that business in the future with a customer. As far as we're concerned, whatever makes the most sense for our biopharma, bioag, industrial biotech customers, If they wanna do it in house or through services, it's fine with us. So I think you will see that crossover between automation and data points in the future. The meter beats. Yeah.

Speaker 1

So I think the key I mean, idea here is very simple. Like, there's a lot of, you know, vibes, I would say, around, hey. We need to have these CRO services in China because they're so cheap. And if you take them away, we won't have these cheap services. And we just wanna try to take that off the table and offer CRO services that cost the same thing.

Speaker 1

So now there's not really an excuse to not have it on short in The United States. And so that that that's the whole point with the with the meter bead. It's really to send that signal to the industry that there will be providers here in The United States that can, you know, match prices with WuXi and other CROs overseas. And the first question sorry. The Admin one, Daniel.

Operator

Yeah. The first question was whether we're planning to develop any of our own models on the generated Admin data

Speaker 1

as a separate build out for Yeah.

Speaker 2

So you you are seeing

Speaker 1

folks working on this problem. It's a few startups right now. They're like a liver tox one and some others. Like, the the basic idea is if you're gonna generate all this data, like the admin data, a lot of it is around, you know, like, kind of developability of a small molecule. Could you then turn that dataset into an AI model that is then just available as a model to customers that they can include that in their design of drugs in the first place?

Speaker 1

I mean, I think it's a great idea. I think it's a tough like, the business model for that has not really been worked out well in the biopharma space. That sort of history of software. There's been places here and there. I'm sorry, I'm just spacing on the name.

Speaker 1

There's a well known sort of like drug modeling company that has made an okay business out of this. But it's generally been tough to be, a pure play software type service. So I think it is like an add on we could add, but the primary activity, the thing we think customers do have a willingness to pay for is generating data. And so, you know, if it's data for their proprietary molecules, for their libraries, and whatnot, like, that's, you know, that's data they need. And if we cannot generate that data for them more efficiently or at a scale they can't do it in house, that it's data they'll pay for.

Speaker 1

So so we like that just as a business model. But I do think there's an opportunity as those big datasets kinda get produced, whether we do them with partners, whether we do them in house that you could develop models. And the one thing I will say is we do release datasets. We do these data drops where we'll post I'll actually put them up on Hugging Face now. So you go to Hugging Face and, you know, Google for data sets.

Speaker 1

We have antibody developability. We have functional genomics, terabyte size data sets. So if you're tuning in from a customer, again, on the AI side or high throughput biology, you should go download those data sets. It'll let you see the kind of data that we make from the data point service in a nice clean format, and you can play around with it. And if you like it, then you can just order more for your specific areas of interest.

Speaker 1

So I think you'll see us do data drops, and then maybe depending on the market over time, we could we could do models. But we're also happy to enable other people that want to do models, right? If they want to generate a huge dataset and make an awesome AI model and then sell that model, we are here for it. So I think there'll be an ecosystem in the market.

Operator

Cool. There was one more question from TD Cowen and that was about biosecurity. So on the lowered biosecurity guide, are you seeing any areas that are particularly exposed to geopolitical pullback or tensions? Are there any end markets that are seeing particular exposure as well?

Speaker 1

Yes, sorry, I meant to mention this in my talk. Steve had mentioned and shown in the numbers, we've gone from a $50,000,000 plus to a $40,000,000 plus on biosecurity, brought that down. This is in this is basically because investor, we've always tried to guide to, like, what we had in the bank as much as possible. We try to be conservative about it. We were still like it's based on the international side is the short answer to this question.

Speaker 1

So we're seeing certain contracts that we were hoping to have in place by now, not be in place. I don't think we're they're not like totally off the table, but at this point, I always wanted to be more conservative because that had been kind of the attitude we've taken with the markets on biosecurity. Whether that's like a macro trend or an anecdote, not totally clear. I think I I think we are certainly seeing a lot more focus in The US on, like, defense technology. And I think biodefense, you know, and this is like the companies like the Andoros and the Palantirs of the world.

Speaker 1

I think there's, like, little question that there should be sort of like a biodefense prime. Right? Like, that that's a thing that should exist in the market. How that gets built and what are the first types of contracts and so on, I think are still like open questions. But I think think this biosecurity business is well positioned to lean into that.

Speaker 1

But we have to kind of just see the market as it develops.

Operator

Cool. Thanks, Jason. Alright. Any questions? I have another one from online, if if you'd like for me to go that direction.

Speaker 1

Yeah. Sure. Go ahead. Wanna do one more. And if no one else is there, busy earnings deck.

Speaker 1

Go ahead.

Operator

Yes. So this question is from treap90501x.com. Regarding your target of adjusted EBITDA profitability next year, could you walk us through the key levers you're focused on to bridge the gap from today? Specifically, where do you see the most significant impact coming from? Is it increased foundry automation, AI driven efficiencies or disciplined SG and A management?

Speaker 1

Steve, do want to touch on that?

Speaker 2

Yes, I can start it. Maybe you speak to maybe some trends, Jason. If you just level set what we just accomplished in four quarters, we've succeeded in taking $250,000,000 out of our cost run rate. And we have effectively six quarters to go before we get to our target goal. So just looking at what we've done in the last four quarters, that's going to move forward positively for the next six.

Speaker 2

In addition to that, we still have some cost levers to take out. We need to be strategic about that as not as company wide and holistic as we just accomplished, but there's absolutely more opportunities in the cost side. And then we have to drive revenue. A lot of the drivers of revenue are what we've been talking about all along. We need to see solutions, contributions from tools and we really see you know, a lot of what Jason talked about is going to roll in in some in some successful way in revenue.

Speaker 2

That said, you know, our biggest risk and opportunity is still remains the sublease situation that we have. We we have a significant amount of unutilized underutilized rent space, lease space. And so you've seen that we've taken out of the segment adjusted EBITDA, the unused space because we're not using it to contribute revenue right now. So, you know, the most important element of that is we've succeeded in doing what we said we were going to do. We were going to shrink our footprint as far as our, you know, work level, revenue production level.

Speaker 2

Now we've done that successfully and we're out marketing. The tough side and the risk side is the fact that the Boston market and the other markets around are just soft at this moment, but we're continuing to focus on that. Jason, don't know if you have any views on, you know, revenue drivers.

Speaker 1

No. I mean, I think the big one is just a continued shift into tools. So, you know, I I think we'll watch how fast we can get to pick up on the automation in particular and data points. It could be very swingy. I mean, we're seeing a lot of interest because of the AI work in beginning to automate labs.

Speaker 1

And I do think we have the sort of best technology in the market for that. If you're really talking about general purpose lab automation and connecting it to AI reasoning models and this lab in the loop concept and all these types of things, I I really think we're well ahead on that. And so we'll see. That that would be the one that's the most swingy where we could really get ahead on things. But it is a new area for us and so I don't want to overstate it.

Speaker 1

But I'd say that's the place where I see the most like upside potential on revenue in 2026.

Operator

Cool. Thanks, Jason. All right. Not seeing any other questions right now. I know folks are on other calls as well.

Operator

So just a reminder that you can always reach us at investorsginkobioworks dot com and we'll get back to you

Speaker 1

as soon as

Operator

we can. I want to thank everyone for tuning in today.

Speaker 1

Yes. Appreciate it, Ray. Thanks for the questions.

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