Earnings Call Transcript - DNA Q4 2025

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Good evening. I'm Daniel Marshall, Senior Manager of Communications and Ownership. I'm joined by Jason Kelly, our Co-Founder and CEO; and Steve Coen, our CFO. Thanks, as always, for joining us. We're looking forward to updating you on our progress. As a reminder, during the presentation today, we will 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-K. Today, in addition to updating you on the quarter results, we're going to provide insight into the autonomous lab, how we believe it will transform biotechnology and how we plan to commercialize autonomous labs going forward. As usual, we'll end with a Q&A session, and I'll take questions from analysts, investors, and the public. You can submit those questions to us in advance via X, #ginkgoresults or through email, investors@ginkgobioworks.com. All right. Over to you, Jason.

Jason Kelly, Co-Founder and CEO

Thank you, Daniel. Q4 marked a significant quarter for us in establishing and leading the autonomous labs category. You'll hear more about this in the future. Our mission is to simplify biological engineering, and in 2026, we will focus on investing in autonomous labs. This aligns with the growing trend of robotics, AI, and autonomy across various sectors, and we are well-positioned to capitalize on this in the field of laboratory research. So, how will we achieve this in 2026? First, we'll concentrate our investments in our platform on this area. We recently announced our decision to divest our Biosecurity business, which will allow us to channel Ginkgo's funds into autonomous labs and attract new investors for Biosecurity. This is a targeted investment strategy. Internally, we plan to showcase the capabilities of our large autonomous lab in Boston. We'll begin to systematically phase out our traditional lab setups and transition all our R&D services to this software-controlled autonomous lab. This move will demonstrate to major pharmaceutical companies the feasibility of conducting open-ended research in an autonomous lab setting, which is our key focus this year. Additionally, we aim to secure sales of autonomous labs. Recently, we signed a $47 million deal with the Pacific Northwest National Labs, and we plan to extend our sales to other National Labs, biopharma companies, and research universities in 2026. Regarding the divestiture of Biosecurity, we invested heavily in this area over the past five years, primarily in response to the COVID crisis, where we aimed to aid in reopening schools across the U.S. Our efforts contributed to the opening of 5,000 schools while integrating monitoring to manage outbreaks effectively. This work continues in collaboration with the CDC at airports, focusing on virus detection through wastewater analysis. We’ve observed an increase in interest from investors in the defense sector, particularly for next-generation biodefense companies. While we are excited about this interest, our focus for Ginkgo in 2026 is clearly on autonomous labs. By spinning off the Biosecurity unit and partnering with these investors, Ginkgo can retain a minority stake and refocus our financial resources on autonomous labs. Finally, I recognize the remarkable efforts of the Ginkgo biosecurity team throughout the pandemic, which has positioned us to establish a successful venture in the defense sector. Before I hand it over to Steve, I want to highlight our achievements over the past two years. We've successfully reduced our spending as our customers scaled back on large outsourced R&D projects, leading to a 55% decrease in our annual cash burn last year. As we look ahead, we will continue to manage our cash position wisely while investing in autonomous labs. Now, I’ll turn it over to Steve to discuss the financials in more detail.

Steven Coen, CFO

Thanks, Jason. I'll start with the Cell Engineering business. Cell Engineering revenue was $26 million in the fourth quarter of 2025, down 26% compared to the fourth quarter of 2024. In the fourth quarter of 2025, we supported a total of 109 revenue-generating programs. This represents a 4% decrease year-over-year, primarily attributed to ongoing program rationalization as part of our restructuring activities. Turning to the next slide. On a full year basis, Cell Engineering revenue was $133 million in 2025 as compared to $174 million in 2024. As previously disclosed, revenue in the first quarter of 2025 includes $7.5 million of noncash revenue from a release of deferred revenue relating to the mutual termination of the BiomEdit agreement. In the third quarter of 2024, Cell Engineering revenue included $45 million of noncash revenue from a release of deferred revenue relating to the mutual termination of the Motif FoodWorks agreement. Excluding these impacts, Cell Engineering revenue was $125 million in 2025 and $129 million in 2024. This decrease was primarily driven by customer program rationalization related to the restructuring, as all discussed previously. The Biosecurity business generated $7 million of revenue in the fourth quarter of 2025 and $37 million of revenue in the full year 2025. 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. Because of these noncash and other nonrecurring items, we believe adjusted EBITDA is a more indicative measure of our profitability. A full reconciliation between segment operating loss, adjusted EBITDA and GAAP net loss can be found in the appendix. Cell Engineering R&D expense decreased 44% from $50 million in the fourth quarter of 2024 to $28 million in the fourth quarter of 2025. For the full year 2025, Cell Engineering R&D expense decreased 42% from $272 million in 2024 to $159 million in 2025. As reported last quarter, the full year 2025 period, R&D expenses included a $21 million shortfall obligation related to our multiyear strategic cloud and AI partnership with Google Cloud. In October 2025, we amended and reset the annual commitments for future years and settled the shortfall obligation for $14 million. Resetting the commitment reduced our future minimum commitments by more than $100 million, compared to the original terms and extended the commitment term from 3 to 6 years. Cell Engineering G&A expense decreased 40% from $20 million in the fourth quarter of 2024 to $12 million in the fourth quarter of 2025. For the full year, Cell Engineering R&D expense decreased 51% from $115 million in 2024 to $56 million in 2025. These decreases were all driven by our restructuring efforts. Cell Engineering segment operating loss was $17 million in the fourth quarter of 2025 compared to a loss of $38 million in the 2024 period. For the full year 2025, Cell Engineering segment operating loss was $96 million compared to a loss of $219 million in 2024. The lower loss was directly related to our restructuring efforts, while partially impacted by the matters previously mentioned. The Biosecurity segment operating loss improved 60% in the fourth quarter of 2025 compared to the 2024 period. And the Biosecurity segment operating loss improved 38% in the full year 2025 compared to 2024. Moving further down the page, you'll note that total adjusted EBITDA in the fourth quarter of 2025 was negative $36 million, which was down from negative $57 million in the fourth quarter of 2024. Total adjusted EBITDA for the full year 2025 was negative $167 million, which was down from negative $293 million in 2024. Again, the period-over-period declines can be attributed to our restructuring efforts, while partially impacted by the matters previously mentioned. Turning to the next slide. We show adjusted EBITDA at the segment level to show the relative profitability of our segments. The principal differences between segment operating loss and total adjusted EBITDA relates to the carrying cost of excess lease space, which was $54 million in 2025, and this carrying cost was $15 million in Q4. The cost represents the base rent and other charges related to leased space, which we are not occupying net of sublease income. This is a cash operating cost that is not related to driving revenue right now and can be potentially mitigated through subleasing. And finally, turning to cash burn. Cash burn in the fourth quarter of 2025 was $47 million, down from $55 million in the fourth quarter of 2024, a 15% decrease. Cash burn for the full year 2025 was $171 million, down from $383 million in 2024, a 55% decrease. Cash burn does not include the proceeds from the ATM issuances or certain cash restrictions. The significant decrease in cash burn was a direct result of the restructuring. Turning to guidance. In terms of the outlook for 2026, as Jason has mentioned and we will go into further, 2026 is about continuing to be cost-efficient while investing in our AI, robotics, and software to bring autonomous labs to our bioscience customers, including the build-out of our frontier autonomous lab in Boston. We have turned the page on our pure focus on restructuring actions for the last 2 years to focus this year not only on cost efficiency, but on investing in what we see as our opportunities while continuing to provide our customers the advanced services they have come to expect. We will also close our transaction for the Biosecurity business as announced and disclosed. For these reasons, in 2026, we will not be providing revenue guidance as we believe cash burn best reflects our continuing services and tools and further investments in autonomous labs. For 2026, our overall expected cash burn guidance is to be in the range of $125 million to $150 million. This range reflects a firm balance amongst cost efficiency, continuing services and tools and the further investments we are making. In conclusion, we are pleased with the continued improvements in cash burn and cost reductions in 2025 and are excited for what will come in 2026. And with that, I'll hand it back over to you, Jason.

Jason Kelly, Co-Founder and CEO

Thank you, Steve. Before I start my section, I want to take a moment to elaborate on Steve's comments regarding our guidance for the year, specifically our approach to reporting cash burn instead of revenue, and the reasoning behind it. This aligns with my key theme for this earnings call, which is Ginkgo's focus. We aim to invest in the right areas and it is crucial for our investors to understand how we're managing our cash, how quickly we are spending it, and on what. Our emphasis is on making deliberate investments in autonomous labs while controlling our spending. We expect our cash burn to be significantly lower than what we experienced last year, and our current cash position is strong, giving us a solid margin of safety for our investment in autonomous labs as we move forward. Additionally, we need to keep our internal focus sharp. Most of our revenue currently comes from our R&D services, and we value serving those customers. I'm optimistic about the potential for growth in those services. However, I want the team's focus for 2026 to be on transitioning all lab work at Ginkgo to our autonomous lab rather than on meeting short-term revenue targets or trying to predict our revenue over the coming year. The goal is to demonstrate to our customers that autonomous labs can replace the significant expenditures incurred in traditional manual labs in biotechnology and academic science. Maintaining a focus on revenue targets could distract us from this vital mission and detract from our long-term vision, which is essential for Ginkgo. That's the rationale behind our decision, and I'm happy to discuss it further during the Q&A. As I mentioned before, our mission is to simplify biology engineering. Last quarter, we celebrated three significant achievements. First, we announced a collaborative project with OpenAI that we’ve been working on for six months. Their blog post detailed how we connected GPT-5 as an AI scientist to design experiments, which would then be executed in our autonomous lab in Boston. Over six rounds, we managed to outperform state-of-the-art results in a complex scientific challenge in cell-free protein synthesis by 40%. This highlights the excitement surrounding the integration of reasoning models in real-world applications, similar to how Waymo has brought them into transportation. We aspire to bring AI into the physical spaces of the lab as well. Second, I had the privilege of participating in a press conference with the Secretary of Energy at Pacific Northwest National Labs, where we announced an initial deployment of 18 robots as part of the Genesis project, which integrates AI into science, particularly at national labs. Additionally, we revealed a new $47 million contract with the Department of Energy to construct a 97-robot autonomous lab at PNNL in the future. This demonstrates the federal government’s interest in autonomous labs, which is significant given their substantial funding for research. Lastly, I attended the Society for Laboratory Automation and Screening Conference, where we showcased our Nebula lab to 590 visitors. They observed real scientific work being conducted, which reinforced our belief in the right direction of focusing on expanding our lab capabilities. Our goal is to scale from 50 to 100 RACs in the first half of the year, and this progress will be crucial as it directly impacts our clients in pharma, national labs, and academic research. Now, I want to dive deeper into autonomous labs, as they are a primary focus for Ginkgo in 2026 and the technological foundation for our future. I'll discuss how our autonomous lab will revolutionize biotechnology, the specific capabilities required to support biotech R&D, and our market strategy. We're pursuing two paths: building custom labs for clients and offering lab services via our autonomous lab in a cloud model. To illustrate my point about autonomy in the lab, I draw an analogy with the transportation industry: if you consider a subway as a highly automated but inflexible option, and a car as flexible but requiring manual operation, we're developing a solution akin to Waymo's autonomous driving. Our RAC hardware and integrated software is designed to provide the flexibility of a lab bench along with the automation of traditional work cells, making it distinct and appealing across a larger market. Our key technical challenge lies in achieving both high automation and flexibility without relying on human intervention in the lab. This requires addressing tasks like reliable liquid handling, material transport, and parameterized control of devices. A traditional lab accommodates various protocols and equipment but relies heavily on human oversight, while our autonomous lab needs to manage a diverse range of devices efficiently and simultaneously. We are implementing systems capable of handling these tasks seamlessly. Our RAC automation carts facilitate sample transportation among devices, and we've curated an efficient scheduling algorithm that manages multiple protocols and users concurrently—an essential aspect of lab operations that traditional work cells cannot provide. The value proposition for our customers is compelling: by transitioning to autonomous labs, they can significantly reduce their overhead costs by consolidating their traditional lab footprints, enhance research productivity by maximizing data outputs, and leverage AI-driven experiments to yield faster results. We plan to sell autonomous labs through both direct placements and managed cloud services, with anticipated markets originating from pharmaceutical, governmental, and diagnostic sectors. These opportunities are vast, as most research spending is currently channeled through manual labs. Lastly, I'm proud of the groundwork we’ve laid in our Solutions business and our ability to create data that fuels pharmaceutical AI needs. Our partnerships and ongoing growth in this sector position us well to expand our offerings and facilitate broader engagement with our autonomous labs. Thank you for your attention, and I look forward to answering any questions you have.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Thanks, Jason. As usual, I'll start with a question from the public and remind the analysts on the line that if you'd like to ask a question, please raise their hands on Zoom, and I'll call on you and open up your line. Thanks, everyone. Thanks, everybody. All right. Let's get started. So the first question that we have is from BBAGGUE, and this is on X. With the planned expansion of RACs capacity from roughly 50 to 100 units at the Boston facility, could you help us understand how this increased capacity is expected to translate into 2026 revenue? Specifically, what portion of that contribution do you anticipate will be recurring in nature, for example, software, operations, consumables versus project-based services?

Jason Kelly, Co-Founder and CEO

Certainly. To start, the RAC expansion is partly aimed at optimizing our extensive lab automation capabilities. We have different levels of automation, including walk-up automation where a person interacts with a liquid handler for automated tasks, as well as work cell automation and traditional lab benches. Our goal is to transition this work to the Nebula system, increasing the RAC capacity to 100 units over the next year. This system will enable us to offer various services, like our data point service, the upcoming cloud lab service, and our Solution service. In terms of repeatability, the Solutions deals typically involve multiyear R&D contracts, allowing for some continuity within a project—like our ongoing collaboration with ARPA-H and Bayer Crop Science, which has lasted for about 5 or 6 years. With new contracts, we're always looking for new opportunities. Meanwhile, data points are becoming more consistent as we establish trust with around 10 of the top 20 to 30 pharma companies, turning into repeat business as they rely on us for data generation. The cloud lab service is uncharted territory for us; we're targeting smaller batch work from lab scientists. In the realm of more specialized CROs, there's often a lot of repeat work once a vendor earns trust. We're aiming for flexibility, and I'm optimistic that our platform will also yield repeat business. Among the three services, Solutions requires more effort to establish new research partnerships, while the other two have more potential for repeat business. Additionally, regarding our system in Boston, we're also selling it to various partners, including pharma companies, which involves an initial capital expenditure, followed by ongoing service and software licensing that functions similarly to a SaaS model. If we include specialized reagents and high-throughput components, that could also contribute to repeat business, but the initial capital outlay is a one-time expense.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Thanks, Jason. Our next question is from Brendan at TD. He actually has 2 questions. And so I'll start with the first one. The first one is, how should we think about U.S. onshoring of manufacturing as a potential tailwind to RACs revenue growth? And what do you think Ginkgo will need to do to maximize share of this trend over the next couple of years?

Jason Kelly, Co-Founder and CEO

We have been noticing interest in manufacturing quality control. In a typical manufacturing setting, production occurs in larger tanks while our systems integrate laboratory benchtop equipment. Manufacturing plants often utilize this type of equipment for quality control across batches, and it sometimes plays a role in semi-diagnostic work related to monitoring patients over time for various drugs. There is a significant amount of lab work associated with post-clinical processes that continue once a drug is launched. Our advantage lies in managing multiple quality control protocols within one system, as our strength is in navigating complicated, multistep protocols. Typically, this work happens at lab benches where members of the manufacturing team—rather than open-ended research scientists—are involved. The capability to implement the latest assays as part of a quality control step opens opportunities with our systems. We are currently in discussions with some customers regarding the integration of our automation into manufacturing sites, which could provide a boost for us.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

Cool. Next question is, how is Ginkgo's Datapoints offering being received among customers? Are there any material tailwinds that you expect for this part of the business over the next 12 months?

Jason Kelly, Co-Founder and CEO

Yes, things are going really well. I believe we are discovering the right approach in our AI initiatives. There are two main aspects of how AI is influencing the biotech industry. The first aspect involves reasoning and coding models, which are similar to models utilized across various sectors of information technology. These models enhance scientists' capabilities to utilize autonomous labs and robotics. The second aspect pertains to bio AI models, notably AlphaFold, developed by Google, which focuses on biological language, specifically analyzing amino acid sequences and protein structures. There is considerable progress being made in this area. To create these bio AI models, it's essential to compile extensive data sets that showcase a variety of proteins and their structures, as well as other elements like functional genomics and antibody development. Pharmaceutical companies have been requesting our assistance in building these large data sets for their machine learning teams. This segment is experiencing positive momentum. For instance, at the JPMorgan conference this year, companies like Chai Bio announced collaborations with Lilly and others. Numerous startups are now partnering with major pharmaceutical firms due to their impressive bio AI models, which stem from their proprietary data and extensive data set generation. This development is raising awareness and seems to be creating a positive trend. We believe we are at the forefront of providing data sets to major pharma and biotech ML teams, which are prepared for training and additional tasks. We handle both the robotics aspect and data management, allowing them to concentrate on biological modeling. Overall, it's looking good, and I'm enthusiastic about our progress this year.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

The next question is about X. It focuses on not just the utilization of RACs, but also the manufacturing and deployment of RACs. The question asks if Ginkgo is exploring any specific strategies, technologies, or methods to significantly enhance the production efficiency and scalability of RACs, similar to how Tesla used the giga press to improve manufacturing efficiency.

Jason Kelly, Co-Founder and CEO

Yes, we are beginning to consider this. Primarily because these processes take time to implement. We've made some solid choices over the past four years since acquiring Zymergen, where this technology originated. We performed a generational update on the RAC hardware, which was not about making it compatible with our old RACs but about reducing the number of components. This redesign aimed for manufacturability for this specific purpose. We currently manufacture them in San Jose, conducting final assembly in partnership and then integrating third-party equipment at our Emeryville, California site. As we scale up production and sell more, we plan to invest in larger partners to replicate this manufacturing approach. Even with our current setup, we can scale effectively. While we want to prepare for future needs, it's not an immediate concern right now.

Daniel Waid Marshall, Senior Manager of Communications and Ownership

All right. I think that that's all that we have for tonight. So of course, if anyone has any questions in general, they can always email us at investors@ginkgobioworks.com. Jason also put his personal email up there earlier, so you can message him. And yes, thank you, and have a great night, and I hope everyone has a great quarter.

Jason Kelly, Co-Founder and CEO

Thanks, everybody.