Ginkgo Bioworks (DNA -4.90%), a pioneer in cell engineering and biosecurity, released its first-quarter earnings on May 9. The company's earnings were in line with Wall Street's estimates, but it significantly missed analysts' revenue forecasts. The shortfall in revenue, primarily driven by declines in its biosecurity segment, marked a challenging start to the year.
| Metric | Q1 2024 | Q1 2024 Analyst Estimate | Q1 2023 | % Change |
|---|---|---|---|---|
| Earnings per share | ($0.08) | ($0.08) | ($0.11) | N/A |
| Revenue | $38 million | $46 million | $81 million | (53%) |
| Operating earnings | ($178 million) | N/A | ($216 million) | (17.5%) |
| Adjusted EBITDA | ($100 million) | N/A | ($100 million) | 0% |
Data sources: Company results from company. Analyst estimates from FactSet.
Company overview
Ginkgo Bioworks operates at the forefront of synthetic biology, employing a revolutionary cell engineering and biosecurity platform that allows for the rapid development and deployment of biological solutions for uses across multiple industries.
Central to Ginkgo's value proposition are its foundries and its code base, which enable scalable and cost-effective development of biotechnology. The diversity of its application areas, from pharmaceuticals to agriculture, underlines the potential breadth of its impact. However, financial sustainability remains a pressing challenge as Ginkgo streamlines operations to align with its long-term strategic goals.
Quarterly highlights
The quarter witnessed Ginkgo navigating through significant headwinds, particularly within its biosecurity segment. Its 53% drop in total revenue reflects the winding down of COVID-related testing services in schools, a headwind that was anticipated, yet stark in its fiscal impact. The cell engineering segment also reported an 18% decrease in revenue that was largely due to the fluctuating spending of early stage customers.
In response to its challenges, the company is streamlining operations and laying off staff, with the goal of cutting annualized expenses by $200 million by the middle of next year. That strategic recalibration aims to bring Ginkgo into financial stability and to the operational breakeven point by the end of 2026.
Notably, it cut its stock-based compensation expenses from $75 million in the prior-year period to $42 million this time.
Operational efficiency showed marginal improvement, with Gingko's operational loss narrowing from $216 million to $178 million. Yet adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) was flat year over year at $100 million, reflecting its persistent challenges in offsetting expenses with burgeoning revenue streams.
Material shifts in Ginkgo's business model, notably the transition toward a recurring-revenue framework through its biosecurity segment, represent a strategic pivot. This transition, however cumbersome, will be vital for sustainable growth.
Looking forward
Management's reduced guidance for 2024 revenue in the $170 million to $190 million range reflects a cautious yet optimistic outlook. This forecast, adjusted in light of Q1's performance and strategic cost-cutting measures, signals a major strategic pivot aimed at refining operations and prioritizing core growth areas.
Investors should closely monitor Ginkgo's progress on its operational efficiency initiatives and the effective implementation of strategic cuts to expenses. The company's ability to adapt to changing market demands while advancing its platform technology will be critical if it is to hit its revised financial targets and achieve long-term sustainability.
