Quantum-Si Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2025

There are 7 speakers on the call.

Operator

Day, and thank you for standing by. Welcome to the Quantum SI First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press 11 on your telephone.

Operator

You will then hear an automated message advising your hand is raised. To answer your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to today's speaker, Katherine Atkinson. Please go ahead.

Speaker 1

Good afternoon, everyone, and thank you for joining us. Earlier today, Quantum SI released financial results for the first quarter ended 03/31/2025. A copy of the press release is available on the company's website. Joining me today are Jeff Hawkins, our President and Chief Executive Officer, as well as Jeff Kies, our Chief Financial Officer. Before we begin, I would like to remind you that management will be making certain forward looking statements within the meaning of federal security laws.

Speaker 1

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward Looking Statements of our press release. For a more complete list and description of risk factors, please see the company's filings made with the Securities and Exchange Commission. This conference call contains time sensitive information that is accurate only as of the live broadcast date today, 05/15/2025. Except as required by law, the company disclaims any intention or obligation to update or revise any forward looking statements.

Speaker 1

During this call, we will also be referring to certain financial measures that are not prepared in accordance with U. S. Generally Accepted Accounting Principles or GAAP. A reconciliation of these non GAAP financial measures to the most directly comparable GAAP financial measures is included in the press release filed earlier today. With that, let me turn the call over to Jeff Hawkins.

Speaker 2

Good afternoon and thank you for joining us. On today's call, we will provide a business update and review our operating results for the first quarter of twenty twenty five. After that, we will open the call for questions. I will begin with a reminder of our three corporate priorities: to accelerate commercial adoption, to deliver on our innovation roadmap, and to preserve our financial strength. Our first corporate priority is to accelerate commercial adoption.

Speaker 2

During the first quarter, we launched the Platinum Pro system and completed our first customer sales. Our first quarter revenue of $842,000 is an 84% increase over the first quarter of twenty twenty four, though this result was slightly below our expectations. During the quarter, we observed a significant slowdown in new instrument purchases in The U. S. Academic market due to the ongoing market uncertainties related to NIH funding and indirect cost caps.

Speaker 2

We expect these uncertainties to continue to impact new instrument sales in The US academic market until at least the fall of twenty twenty five when a federal budget is estimated to be approved by Congress. That said, our existing US academic customers continued to purchase consumables during the first quarter, and we have no indication from customers that this pattern will change. Turning to other segments in The US market, we continue to believe that pharma, biotech and government laboratories represent a good opportunity for continued growth in terms of both new instrument sales and ongoing consumable sales. With the NIH funding uncertainties expected to persist for the foreseeable future, we are putting greater emphasis on the pharma and biotech opportunity with our US commercial team and distribution partner. To that end, we are pleased to report that we have recently completed the training of Avantor, our North American distribution partner.

Speaker 2

We are working closely with the Avantor sales team as they build their sales funnels and begin progressing opportunities through the sales process. Turning now to international markets, we exited the first quarter with 23 international distribution partners. Overall, our international business performed well during the first quarter, and we are pleased with the continued interest we are seeing from potential customers across all international distribution partner territories. We continue to believe that our low capital cost, simplified workflow, and automated data analysis is a compelling option for researchers in these regions looking to integrate an advanced proteomics platform into their research. While the NIH uncertainty may impact short term commercial results, we are optimistic about the opportunity to continue to grow our customer base in pharma and biotech and across the countries covered by our international distribution network.

Speaker 2

Additionally, we remain confident in the long term market opportunity in proteomics and the technology roadmap we are executing on to capitalize on that opportunity. Our second priority is to deliver on our innovation roadmap. We continue to have high confidence in our technology roadmap and our R and D team's ability to deliver on that roadmap as they have done over the past two years. As a commercial stage company, we interact with customers, prospective customers, and distribution partners every day and consistently receive feedback that confirms our view that whole proteome sequencing is the long term future in proteomics. Our Version four sequencing kit remains on track for a third quarter twenty twenty five launch.

Speaker 2

We expect that this kit will further increase proteome coverage via increased amino acid detection and the addition of a new enzyme that is engineered specifically to provide high efficiency cutting of the amino acid directly preceding a proline. We believe this combination of improvements will allow customers to analyze more peptides per protein and detect more amino acids within the peptides present, especially those positioned behind a proline. Turning now to library preparation. We are pleased to share that we have made great progress in our innovation program aimed at enhancing library preparation performance, and now expect to be able to release a version three of our library preparation kit by the end of twenty twenty five. While we are still early in the development program, the initial data gives us confidence that there is a clear path to reduce the sample input requirement for our kit.

Speaker 2

We believe that our ability to lower the protein input requirement will enable our customers to pursue an even greater range of biological samples and proteins of interest, and the early data suggests that we will be able to make a very meaningful improvement in this area. Next, I would like to provide an update on the Proteus development program. As a reminder, Proteus incorporates a new instrument and consumable architecture that will offer significantly more reads per sample, more samples per run, and greater workflow automation than our current platforms. We are pleased to report that we remain on track to successfully perform protein sequencing on a prototype Proteus system by the end of twenty twenty five. Hitting this milestone in 2025 sets us up well to deliver on the launch of Proteus in the second half of twenty twenty six.

Speaker 2

In terms of interim milestones of the Proteus development program, we achieved two important milestones since our last call. First, we have been able to successfully demonstrate the full fabrication process from raw material to finished wafer. This was an important step as it provides us with confidence that we can produce the quantity of consumables we need to support the ongoing development efforts. Second, we have demonstrated a set of fluorescent dyes that are compatible with the new technology architecture, and we have enough distinct dyes to support moving our current sequencing chemistry over to the Proteus platform. In addition, we are in the late stages of completing the delivery of additional dyes that proactively position us for an expanded set of amino acid recognizers that we anticipate bringing to market as part of the Proteus platform launch in the second half of twenty twenty six.

Speaker 2

Finally, I would like to spend a few minutes updating you on the broader opportunity for our core technology beyond protein sequencing. During our November 2024 Investor and Analyst Day, we shared data from our research initiatives that showed the vast capabilities of our core technology to be extended into other areas of proteomics beyond protein sequencing. Based on the data presented, we believe our core technology is the only commercially available technology that can enable single molecule, top down, and bottoms up proteomics methods. Because of this, we believe that our Proteus platform and core technology will be capable of addressing the broadest range of proteomics analysis methods of any technology in the market today. To accelerate the realization of that opportunity and in response to customer and partner interest, today we released additional information about the application of our core technology to ultrasensitive protein detection.

Speaker 2

With only a modest amount of investment to date and using off the shelf affinity reagents, we have demonstrated sensitivity in the low femtomolar range, working directly from serum and generating results in about two hours. This is all enabled on our low cost Platinum Pro instrument and does not require any additional readout using PCR or NGS. Through partnerships and collaborations with organizations that have highly optimized affinity reagents, we believe the assay performance would only improve from here. We are sharing this information today to make our capabilities more visible to the broader market and thereby accelerate the path to unlocking this capability via strategic partnerships and collaborations over the coming quarters. Our third priority is to preserve our financial strength.

Speaker 2

While the current market uncertainty may impact short term commercial results, we remain confident in the long term market opportunity in proteomics and the technology roadmap we are executing on to capitalize on that opportunity. We believe that we are the clear technology leader with the only commercially available next generation protein sequencing platform, and we expect to continue to build upon that leadership position going forward. We have a strong balance sheet, and we'll continue to invest our capital in an efficient manner that maximizes long term shareholder value. I will now turn the call over to Jeff to review our financial results.

Speaker 3

Thanks, Jeff. Now I'll review the details of our operating results for the first quarter of twenty twenty five. Revenue in Q1 twenty twenty five was $842,000 which consisted of revenue from our platinum line of instruments, consumable kits, and related services. Gross profit was $486,000 and gross margin was 58%. As I have said in the past, our gross margin percentage will be somewhat variable for the foreseeable future as we work through our continued commercialization efforts and may be impacted by the timing and mix of instruments versus consumable sales.

Speaker 3

Our margin has also been impacted and may continue to be impacted by the acquisition costs and any accounting adjustments to underlying inventory, some which predates the commercial launch of the platinum line of instruments. Our gross margin for Q1 twenty twenty five includes approximately a 7% benefit for inventory utilized during the quarter that was carried at low or no value. Turning to operating expenses. GAAP total operating expenses for the first quarter of twenty twenty five were $25,600,000 compared to $23,600,000 in the first quarter of twenty twenty four, while adjusted operating expenses were $22,900,000 for the first quarter of twenty twenty five compared to $21,900,000 for the first quarter of twenty twenty four. Overall, we have continued to manage our operating expenses tightly while continuing to fund our investment in our commercialization efforts and funding our various development programs, including our Proteus development program, which was launched in November of twenty twenty four.

Speaker 3

Our dividend and interest income for the first quarter of twenty twenty five was $2,500,000 compared to $3,600,000 in the first quarter of twenty twenty four. Overall, 2024 benefited year over year from higher interest rates relative to our overall cash, cash equivalents and marketable securities position. As of 03/31/2025, we had $232,600,000 in cash and cash equivalents and investments in marketable securities. At a broader market level, we are tracking the potential impacts that evolving tariffs enacted by The United States and other countries throughout the world may have on our operations. Tariffs have the potential to impact us from both the acquisition costs for our inventory and from import tariffs that could impact our sales channels outside of The United States.

Speaker 3

Regarding inventory acquisition costs, we have completed a preliminary analysis and have determined the tariff impacts would not have a material impact on our inventory acquisition costs in the near term. In addition, for much of our underlying materials, we have supply available for several months and up past a year, limiting our near term exposures. However, to reduce any impact in the long term, we have several mitigation strategies in play, including but not limited to sourcing raw materials and supplies from lower tariff countries or within The United States directly, as well as potential commitments to higher volume purchases that reduce our overall cost per unit, balancing the cost of materials with the added tariff. Regarding the import tariffs related to other countries we sell into, to date, we have not seen an impact or not anticipating any impact as scientific and medical devices have historically been exempted for import tariffs. As Jeff mentioned earlier, the NIH funding environment and the related proposed indirect reimbursement rate cost caps are causing uncertainty in The United States academic market.

Speaker 3

Given the current environment, we are working to mitigate any potential impact by focusing on market segments and geographies that are not impacted by this NIH uncertainty, including biotech and pharma, as well as customers outside The United States, either directly or through our 23 international channel partners. While we are confident in the long term proteomics market and the value Platinum Pro plays in delivering value to the market, the current environment makes it challenging to provide any clarity around top line financial guidance. As we get more information and certainty in relation to the NIH funding and indirect cost caps, We hope to be able to provide more transparency in future quarters. From an adjusted operating expense and cash perspective, we're still anticipating adjusted operating expenses to be $103,000,000 or less for 2025 and total cash used for 2025 to be $95,000,000 or less. And finally, we remain confident that our current level of cash, cash equivalents and marketable securities will provide runway into the second half of twenty twenty seven.

Speaker 3

Now I'll turn the call over to the operator to open the line for questions.

Operator

Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. And the first question will come from the line of Kyle Miksen of Canaccord. Your line is open.

Speaker 4

Hey guys, thanks for the questions. So I guess good to hear that you are pretty confident in the biopharma side of your business just given the issues on The U. Academic research side. However, there has been talk of potential tariffs over there on the pharma side as well as the most favorite nations, potential as well on the pricing there. So just in general, it seems like spending and budgets and so forth in the biopharma world are a little bit pressure or at least uncertain right now.

Speaker 4

So could you just walk through what in your recent conversations with those partners have given you confidence that you'll be able to continue to successfully penetrate that end market as well as maybe accelerate a bit too and make up for the lost research revenue? Thanks.

Speaker 2

Yeah, thanks for the question, Kyle. I think our I'd say a couple of things. The first is some of the various policy related items that are being discussed, those relate a lot to on market drugs or therapeutics and the cost of those and such. And it's obviously a complex topic that goes well beyond just the pricing from the individual pharma company. But in general, we're not seeing any trickle through right now to where there are changes being made to sort of R and D priorities or funding.

Speaker 2

I think a lot of the funding levels and areas of focus for at least the biotech and pharma companies that we're speaking with, they've sort of been set in motion. Some of those have been adjusted historically to the levels they were comfortable with. So we're not seeing any of the headlines sort of trickle through to a change in the engagement from those partners. So that's what really gives us the confidence that we're solving for a problem that does fit something they're focused on, which is how do they work more efficiently and more cost effectively.

Speaker 4

All right. That's great. And then with the Troponin Pro launch and I know it's super early, but some of these early adopters. What's the feedback been like and how is that different from maybe like initial kind of almost like beta or alpha use of the product? As you think about that feedback, I mean, how locked down the platform, I guess, until you kind of get the Proteus later on?

Speaker 2

Yeah, I think the Platinum Pro system is we would consider that locked down. That was certainly not a what I would consider an early access or some sort of minimal commercial release sort of approach. We released we're making the device with our contract manufacturing partner. We've had great success producing it. We've been able to deliver it.

Speaker 2

And installations and usage sort of reliability has been fine. As we've talked about on prior calls, the customers adopting it right now tend to be customers who either want access to the open mode or what we call pro mode of the device or perhaps want access to the ability to do some level of data analysis on the device. Perhaps they have institutional policies around the access to the cloud and other things. And then you always have some number of people who just prefer to have the newest device. And to be clear, we still are selling some platinum devices.

Speaker 2

We had some inventory of those coming out of the end of twenty twenty four. And we are continuing to sell those. And we expect to be able to sell through that inventory over the course of the coming months.

Speaker 4

Got it. And maybe just going a step further, could you talk about what's going to happen, I guess, with the cost of goods and the gross margin profile going forward given this almost like transition as well as you have this installed base of over 50 units out there already. I would imagine that utilization has sort of like ramped up over time. And at this point, some people are probably relatively comfortable leveraging and using these instruments. So how should that progress this year as we think about what happened in the first quarter and some of the challenges and pressures that are happening from a macro perspective?

Speaker 2

Yeah, let me start and talk a little bit about utilization, then I'll turn it to Jeff to talk more about gross margin and what we're doing to manage cost of goods in the current landscape. On the utilization front, I would say a couple of things. The first is, as we said in our prepared remarks, our US academic customers are continuing to purchase consumables. So we haven't seen some sort of change in their ability to purchase consumables and continue to perform experiments. We certainly do see utilization rates that vary across different customers or different segments.

Speaker 2

But I would say the overall trend we're seeing is consistent with what we would expect, which is an increasing level of utilization of consumables by existing customers as they adopt the platform, get it into their workflow, and sort of get comfortable with its capabilities and how to apply it. The other thing I would say is we have a very focused effort from our application scientists, both in our direct channels, but also in support of our international partners, to really make sure that we're there to help customers as they want tackle different types of applications or analysis to really make sure we're doing everything we can to proactively help the lower utilizers increase their utilization and help those who utilize it at a higher rate, make sure they're unlocking sort of every application they would like to do. And maybe Jeff, you want to speak to cost of goods and margin.

Speaker 3

So, Kyle, our historical margin has been hovering between that 40% to 50% range. Obviously, we had 58% this quarter, but I commented that 7% of that was from low or no cost parts that predated commercialization. We generally expect that we're going to be in that same range going forward. And obviously, that's a mix of consumables and hardware. We're still ramping up commercially.

Speaker 3

So there's going to be just variability on a quarter by quarter basis on hardware consumable units. But I would say the cost of goods sold for the new Platinum Pro is fairly consistent with our existing Platinum. Obviously, it's got some more features and things that we've added to it, but it's in the same general ballpark. And then finally on tariffs and things like that in my prepared remarks, I talked about that a bit. We're managing that.

Speaker 3

I wouldn't say the number is zero, but it's really not material that we can see from a forward standpoint, but we're going to continue to manage through that. And obviously, the part that we don't know is what the administration's going to do, and we closely watch that and adjust as needed.

Speaker 4

All right, great. And then maybe sticking on that side, the financial side. So I understand you guys have cash until, I guess through 2027, so a solid runway. However, the top line is relatively like a moderate base, let's call it, and even straight estimates are just above $50,000,000 for revenue in 2027. So it sounds like given your burn, it sounds like beyond 2027, it could be you're going have to layer onto the balance sheet.

Speaker 4

And then in there, have the Proteus kind of like upgrade cycle as well probably and if that freezes things too for a bit. So how do you think about maybe like pulling back on R and D or marketing or SG and A, let's say sales in that event, I guess, and just comfortability on from a cash perspective given, again, some of these macro issues?

Speaker 2

Yeah, Kyle, think so first, yes, we have cash. You know, we said we have cash that carries us out into the second half of twenty twenty seven. We feel comfortable with that guidance, even in light of what's happening in the macro environment. You know, the way we think about this is sort of a twofold. One is I think we've taken a lot of steps in our commercial strategy to strike that balance between where to make the direct investments and have our own employees doing certain activities, some level of sales, some marketing, some of the application support, but have also been very proactive in the utilization of channel partners.

Speaker 2

We have our international distribution network with 23 partners. And we have our North American distribution partner, Avantor. And I think those are good examples of gaining footprint in terms of the number of people out talking about our product every day without us having sort of the direct carrying costs of those folks in the event revenues are choppy or the macroeconomic picture was the change. So I think in that regard, we're being very thoughtful. We don't have significant plans to expand our investments.

Speaker 2

They're very sort of targeted investing in those areas and really leveraging those partners. From an R and D perspective, I feel like we've done a lot there over the last two years to really get the R and D investment and priorities really aligned, get the right roadmaps in place, and really deliver the innovations to the market. I think at the end of the day, us continuing to keep our technology leadership and deliver on the Proteus launch and the various improvements to the library prep and chemistry are key to succeeding in the market. They're key to having the most competitive product. And we're playing the long game.

Speaker 2

We think the current challenges are short term in nature. They're going to at some point resolve. And we're going to continue to invest in the business. I think our view on cash is simply we are capitalized out into the second half of 'twenty seven. We're going to invest wisely.

Speaker 2

We think there'll be a lot of value creation opportunities between here and the end of 'twenty six, nonetheless none the least of which is the launch of the Proteus platform. And I think we'll sort of evaluate when we get there what are the various strategic options and what's the best way to capitalize the company to the extent we need additional capital to carry us out. So I think we're really focused on what we do between here and there to really add value and get to that launch and then really look at the strategic options and what's the best thing for the company and the best thing for our shareholders.

Speaker 4

All right, perfect. And finally, last one on your international presence. I think you said you have 23 partners. And recently, saw that was 18 partners, so you're kind of increasing that. That's Could you just clarify how many, let's say, countries or maybe like more detailed regions, let's say, that gives you access to?

Speaker 4

And then maybe just a little bit of like a flavor tariff situation, I guess, and how you see it in those areas.

Speaker 2

Yes. So first on tariff situation, as Jeff said in his prepared remarks, we haven't seen any impact to date in terms of importation related tariffs that would increase the cost for those partners to bring our product into country. We seen that happen. And that's pretty consistent with historical practices, which are scientific and medical instrumentation has largely been exempted from those things in the past. So we're watching it closely, but nothing to report at this point.

Speaker 2

In terms of the partners themselves, most of our partners cover more than one country. You have some instances where it's a more significant country in terms of size. And perhaps they cover a single country. They cover Singapore maybe as an example, or Japan as an example. But when you get into some areas of the world like Eastern European, you might see one distributor have three, four, or five countries.

Speaker 2

So there is some mix in terms of the number of countries each partner covers. You are correct that we expanded that network a bit to 23. We think we're largely complete with that build out. There are a couple of countries left that we think represent good proteomics opportunities and have existing established markets that we could tap into. So, we may, you know, add a few more partners to that mix over the coming quarters.

Speaker 2

But we think we're, you know, largely complete with that build out.

Speaker 4

All right, great. Thanks so much, guys.

Speaker 2

Thank you.

Operator

Thank you. One moment for the next question. And the next question will come from the line of Scott Henry of AGP. Your line is open.

Speaker 5

Thank you and good afternoon. A big picture question. You may have mentioned it already, but I think it's worth doubling down on it. When you think about your total market, U. S, OUS, all segments, what percent do you think of your target market falls in that kind of NIH slash academic US based market?

Speaker 5

Just trying to get a sense of the magnitude, because I know you do a lot overseas as well.

Speaker 2

Yeah. So maybe I can give a couple of data points that help to elucidate that. I think maybe one general comment I would make, Scott, is that obviously at the current commercial scale we're at, the market is very large. So we're not in a situation where we've maximized penetration. And even the slightest change in a market size is going to, in some way, constrain us.

Speaker 2

So I think from a macro perspective, obviously large markets with fairly modest penetration, so a lot of upside to go tackle. A couple data points we can give you. One is if you think about our customer mix. So like maybe just think about it in terms of instrument installations. Where are those at?

Speaker 2

So at the end of the quarter, we're at about 60% of our instrument installations are in laboratories outside of The US, And about 40% of those are in The US. So that gives you a little flavor for the diversification of the base of installed instruments today. And in terms of The US market, the data point we can give you is around 20% of the total business we have is in The US academic market. So if you think about all machines placed globally, about 20% of those are in US academic markets. Again, those people are still buying consumables.

Speaker 2

But if you want to have a way to think about the instrument distribution today, think those two data points give you a couple of ways to think about it.

Speaker 5

Yes, that's really helpful. Appreciate that. And then spending patterns, certainly Q1 was lower sequentially from R and D and SG and A. The question is, do you think is that a seasonality? Or might we be seeing some lower cost structure?

Speaker 5

And I know the Avantor situation helps on that front.

Speaker 3

Hey, Scott, this is Jeff. Well, there's always a little variability quarter to quarter on how spend goes out, probably more in the R and D bucket as we go through development stages of our products. And so that's why we provide guidance for the full year on what we're going to do from a total OpEx spend of that 103,000,000 or less. But I can say, as we went through the end of last year, we did a restructuring of our R and D department and really overall organization to really focus resources to development of the Proteus project. We kind of right sized everything and fully funded that Proteus development spend to be within that $103,000,000 So there may be some variability on a quarter to quarter, but for the full year, we're well on the track to kind of hit that number or below.

Speaker 3

But always some variability just depending on the stage and the activities that are going on in the R and D department. Great. Thank you.

Speaker 5

Final question just on the Avantor relationship. I mean, it looks like training is complete. Any comments on the progress there? Is it matching up with your expectations? Just any kind of feedback on the early returns to that.

Speaker 2

Sure, yeah. So as you said, the training and onboarding of their team has been completed. We'll continue to obviously provide continuing education assistance where they need it. But they are trained. They're out now building those sales funnels.

Speaker 2

We have regular calls both at what I would call more of a regional level between one of our sales professionals and smaller number of theirs, but also at the executive level between our company and the folks over there that lead their broader teams. As part of those interactions, they share with us their activity metrics. And we have visibility to that on a regional level. And I would say, while it's early days, we've been quite pleased with the activity level we're seeing across all the regions. And it's just something we have to stay on top of and continue to make sure we're both monitoring it, but also providing the support.

Speaker 2

And I think we're starting to see our teams work together to progress opportunities through the sales funnel. So we're not Avantor is no less immune to that there is a sales cycle and a sales process than anybody else. So I think we'll work through those processes. But right now, the early data says we're seeing a nice level of activity engagement and pretty uniformly across all the different regions they have.

Speaker 5

Okay, great. Thank you for taking the questions.

Speaker 2

You're welcome.

Operator

Thank you. The next question will come from the line of Swampakula Ramakanth of HCW. Please go ahead.

Speaker 6

Thank you. This is RK from H. C. Wainwright. Good afternoon, Jeff and Jeff.

Speaker 6

On the next version of the sequencing kit, you know, that you plan to release in the coming quarter, what you know, the the I'm I'm trying to understand, like, how how do you make it I mean, first of all, do these sequencing kits are they different in terms of efficiency or the speed with which the the I know you have a separate one for for making the sample as well. When when when you when somebody thinks through for an industry or biopharma use versus academic use. Is there any differential at all, first of all? And then two, as you improve these versions, so what are people getting in the next version and the next version?

Speaker 2

Yes, I would say two things. One is there is not a different kit in terms of sequencing that let's say an academic researcher would use than a biopharma or government lab might use. I think when we go through these sequencing kit evolutions, there's ultimately a period where both the current version and the new one are offered. But then reasonably short after the launch of a new kit, we tend to phase out the prior kit and all customers move over to the new one. So in that regard, sort of uniform kit used across all the segments.

Speaker 2

A very similar sort of explanation about library prep as well. I think when we move between these kits, what we really look at, RK, is when do we have enough individual changes that when combined together lead to a meaningful improvement in performance? And when I say meaningful improvement in performance, what we're really looking at is, are customers going to be able to get more information when they sequence? Will they see more peptides? Will they see more amino acids?

Speaker 2

We're also obviously, as we're out in the market, we know what applications or proteins people maybe have wanted to try to sequence. And perhaps an older version of the KIP wasn't capable of that. We add new capabilities. We can also see how many of those additional applications or proteins of interest would now be accessible to customers. So we look for things like that.

Speaker 2

And as an example, the addition of the cutter discussed in the prepared remarks to cut through the amino acid directly before proline, that really opens up a lot of amino acids that sit downstream of that proline. As an example, antibody QC, the antibodies tend to be fairly rich in proline. So having an ability to cut through those and sequence the remainder of those peptides should help us in that example be able to cover more of the types of QC applications people might want to do with antibodies. So that's just sort of one example. But that's sort of how we look at it.

Speaker 2

It's really what additional applications or proteins or capabilities would customers get and when do we have enough of those to put into a kit. And for us, that's been sort of on that cadence of about every nine months or so, we've been able to make enough improvements that we really think there's a meaningful lift for customers, and therefore, it's worth the R and D investment.

Speaker 6

Okay. The last time when we were talking, you know, you were you are you're you're you're telling or we were discussing that you always want to keep, you know, a distance between yourself and the next competitor and, you know, in a in a market like this, since you have the little bit of the cushion that you have on the financial side, you always want to maintain the distance or even try to increase the distance, you know, artificially if the other competitor doesn't have enough financing. But having said that, you know, as this was about a month and a half ago, and now it's a it's it's you know, probably you have a little bit more insight into how, you know, your various customers are behaving. Does that still resonate with between you and the board and and everybody in the company in terms of keeping that couple steps ahead of the competition? Or do you see that at some point, you might also have to slow down a bit just to conserve cash and maintain the runway.

Speaker 2

Yeah, I think, RK, it's a fair question. I think consistent with what I said to Kyle on a similar thread, I think our view is one is our view is that yes, we are still well ahead of other technologies attempting to do something very similar to us, trying to sequence proteins at the amino acid level. We have technology roadmaps. While we're investing in a healthy way in R and D, I can tell you that we have more ideas than we do programs. So we are making decisions every day on where to apply that investment in an effort to continue to extend that market leadership, but not spend above what we think is prudent for the stage of the business, the market dynamics, cash balance, etcetera.

Speaker 2

So this is something we, as a management team, closely sort of watch and talk about. We have mechanisms in place to really monitor the way we're allocating that R and D investment across those maybe longer term investments in research or innovation versus the product development efforts that will directly lead to product launches in the nearer term and can be capitalized on commercially. So we're very careful with those allocations. And these are all things we discuss very openly and candidly with our board and get great counsel and advice from those folks. And I think right now, collectively are comfortable with the way we're investing.

Speaker 2

We're comfortable with where our runway is. But we are taking in data and watching the markets and the trends just as everybody else is. And if things were to deteriorate in the macro economy in some way, I think we've shown a willingness in the past to be proactive here and make changes when they're called for. But at this point, we think we've done some of that hard work, really have the investments focused the right way, and believe we've got it allocated to the most high value programs. And we're sort of continuing with that approach at this time.

Speaker 2

But always monitoring, watching, and prepared to react if indeed, you know, sort of it's required.

Speaker 6

Okay. Thanks for that. And then, you know, for this morning, there was a webinar by one of your one of the academicians who has been using your system. And, you know, how are such conversations by the academicians to other academicians, how is that helping out? And, you know, is that is that the sort of thing that you're trying to do in terms of, you know, soft in softer manner, how to propagate the utility of your systems?

Speaker 2

Yeah, I think the way to think about it is we see peer to peer as a very powerful sort of medium to gain awareness and interest in the technology. I think in this case, you're talking about a webinar that a customer did. But we also, RK, have hosted what we call user group meetings where we invite both current and prospective customers to virtual events where they're able to hear about the type of research our customers around the world are doing with the technology, hear what other people are doing, ask questions about how the technology has performed, what it's been like to implement it in their laboratories. I think that adds on top of the posters that get presented at meetings or the papers that get published. So I think it's a to me, it's a collective of activities that are about customers and researchers sharing their experiences and trying to provide people with their perspective and really just build that peer to peer sort of those linkages.

Speaker 2

I think it's nice complement to the direct selling activities you do. And I think it's an important part of bringing new technologies to market and doing so in a very high integrity, high scientific sort of focus.

Speaker 6

Thank you. Thank you, Jeff, for taking my questions. Talk to you soon. Yep. You're welcome.

Operator

Thank you. And this does conclude today's Q and A session. I would like to turn the call back to Jeff Hawkins for closing remarks. Please go ahead.

Speaker 2

Thank you for attending our call today. We look forward to providing more business updates during our next earnings call.

Operator

Thank you for participating in today's conference call. You may now disconnect.

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Key Takeaways

  • Quantum SI reported Q1 revenue of $0.84 M, an 84% YoY increase but slightly below expectations. Gross margin was 58%, and the company holds $232.6 M in cash, expecting runway into H2 2027 while targeting ≤$103 M adj. OpEx for 2025.
  • After launching the Platinum Pro system and completing initial sales, US academic instrument purchases slowed due to NIH funding uncertainties, prompting a strategic pivot toward pharma, biotech and government labs. The company is also bolstering global reach through a 23-partner international distribution network.
  • The innovation roadmap remains on track with a Version 4 sequencing kit slated for Q3 2025 to boost proteome coverage and a library preparation v3 due by end-2025 to lower sample inputs. The Proteus next-gen platform is set to prototype protein sequencing by end-2025 ahead of an H2 2026 launch.
  • Quantum SI demonstrated a new application of its core technology for ultrasensitive protein detection, achieving low-femtomolar sensitivity directly from serum in about two hours on the Platinum Pro. This capability may unlock strategic partnerships beyond traditional sequencing markets.
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Earnings Conference Call
Quantum-Si Q1 2025
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