Q1 2023 Quantum-Si Inc Earnings Call
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Speaker 2: Ladies and gentlemen, thank you for standing by. Welcome to the QuantumSI first quarter 2023 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. Question and Answer Session
Speaker 2: you will then hear an automatic message advising your hand is raised. Please be advised today's conference is being recorded. I would now like to turn the conference over to Juan Abendano, head of investor relations for Quantum SI. Juan, please go ahead.
Speaker 3: Good evening, everyone. Thank you for joining us today after market close, one of the site released financial results for the first quarter and that March 31st, 2023. A copy of the press release is available on the company's website.
Speaker 3: Joining me today are Jeff Hathins, Chief Executive Officer, Patrick Schneider, President and Chief Operating Officer, and Claudia Creighton, Chief Financial Officer. Before we begin, I'd like to remind you that management will be making certain forward-looking statements within the meeting of Federal Security's laws.
Speaker 3: These statements involve material grids and uncertainties that could cause actual results or events to materialy differ from those anticipated. Additional information regarding the purchase grids and uncertainties appears in the section entitled for looking statements of our press release.
Speaker 3: For a more complete list and description of RIS factors, please see the company's filings made with the Securities and Exchange Commission.
Speaker 3: This conference call contains time sensitive information that is accurate only as of the live broadcast today, May 11th, 2023.
Speaker 3: Except, as required by law, the company claims any intention or obligation to update or revise any forward-looking statements.
Speaker 3: During this call, we will also be referring to certain financial measures that are not prepared in accordance with US generally accepted accounting principles or GAP, including a gestate EBITDA. A reconciliation of non- GAAP financial measures to the most directly comparable GAAP financial measures is included in the press release filed earlier today.
Speaker 3: With that, I will turn the call over to Jeff.
Speaker 4: Thank you one. Good evening everyone and thank you for joining us. In today's call we will provide a business update, present our first quarter financial performance and provide an outlook for 2023. We will then open the line for questions.
Speaker 4: The goal of Quantum SI is to bring next generation protein sequencing to every lab, everywhere. Our proprietary technology delivers deeper, unbiased proteomics insights that we believe will accelerate scientific research.
Speaker 4: enable the discovery of new biomarkers and ultimately power the development of new therapies and diagnostic tests that will positively impact human health.
Speaker 4: In the first quarter of 2023, we started delivering on this mission with the initial shipments of our platinum protein sequencing system.
Speaker 4: As we have shared on previous calls, John Tommesai has established three corporate priorities for 2023. I would like to provide an update on our progress in the quarter against each of these priorities.
Speaker 4: Our first priority is to commercialize platinum, carbon, and the 2M chip. We were pleased with customer orders in the first quarter of 2023, which totaled $449,000 and were slightly above our internal plan.
Speaker 4: We reported revenue of $254,000 in the first quarter.
Speaker 4: This difference is due to a delay in the shipment of two international orders. We received them a quarter, but we're not able to shift until recently.
Speaker 4: To provide a bit more color, to ship these international orders, we needed to obtain specific import codes and engage with an international logistics partner, which we have since done, and these two orders were successfully shipped in the current quarter.
Speaker 4: I would also like to provide more insights from our commercialization activities in the first quarter. Geographically, we have been pleasantly surprised by the level of customer interest from potential European customers.
Speaker 4: In fact, our advanced sales funnel is made up of approximately 60% US and 40% European customers.
Speaker 4: By end market, most of our internal customers are in academic research centers as expected.
Speaker 4: However, looking closer into how the sales funnel is evolving, we are pleased to see interest from a wide range of end markets including academia, biotech, pharma, industrial, and government. By application, we are seeing the most interest in proteoform and PTM analysis followed by protein identification.
Speaker 4: an emerging interest in protein barcoding and antibody validation and QAQC through sequencing.
Speaker 5: customer feedback continues to be positive.
Speaker 4: We are observing customers and greats our platinum system for convenience, simplicity, accessibility, and the ability to enable deep and unbiased proteomic studies at the individual amino acid level.
Speaker 4: On one end of the spectrum, these customers are proteomic researchers looking to do more in-depth, unbiased proteomic studies with a technology such as ours. They value single molecule sensitivity and individual amino acid resolution as it unlocks the novel analysis of proteophores and post-translational modifications in their research. On the other end, there are customers who are new to proteomics and own-
Speaker 4: customer interest and trade shows.
Speaker 4: That said, we expect to continue to be deliberate with our rollout in this early phase of commercialization to ensure customers have the best possible experience.
Speaker 4: Given this, we expect two two orders to be similar to Q1, which is consistent with our internal plan entering the year.
Speaker 4: Over the next few months, we plan to turn on outbound marketing and increase our direct sales efforts.
Speaker 4: Support revenues grow in the second half of the year. To facilitate this, we have added talent to our commercial team across marketing, sales, and customer support. Based on these initiatives in our existing sales funnel, we remain on track to further accelerate placements and revenues in the second half of this year. Our second priority is to lead with innovation.
Speaker 4: Quantum SIs leader in the protein seeking to stay and we will continue to leverage our deep technical expertise and novel technology to transform and democratize the field of proteomics.
Speaker 4: Recently, we executed one of our proof of concept engagement with a major academic institution.
Speaker 4: The study demonstrated that we could sequence and distinguish psychrosis from various SARS-CoV-2 variants.
Speaker 4: Later in the fall, Patrick will provide more details about this study, as well as highlight some of the other data that has been recently presented at industry conferences.
Speaker 4: Our third priority is to preserve financial strength. As I stated on previous calls, we are committed to continuously improving our fiscal discipline. In a similar way, we are laser focused on supply chain and operations, and our first quarter gross margin at 48.8% is a reflection of that effort. We are pleased with this result as we are far from operating at scale. Patchable provided additional color on the efficiency initiatives are supply chain and operations teams are executed.
Speaker 4: going forward, although there may be some fluctuations for the deporter, we expect four years, 2023 gross margins to be similar to the level observed in the first quarter, 2023.
Speaker 4: Lastly, with regards to operating expenses, we reiterate non-gape operating expenses to be flat year over year in 2023.
Speaker 4: It is worth highlighting that we are keeping operating expenses flat while still making meaningful investments in the building out the commercial teams and executing the marketing programs required to successfully drive adoption of our flatman system. Before turning the call over to Patrick, I would like to briefly comment on the TFO transition we recently announced. Last week, we announced the appointment of a new chief financial officer.
Speaker 4: In addition to leading the typical functions within the CFO scope, Jeff has also led operations, legal and HR at various points in his career, giving him a unique perspective and understanding of company operations and strategy.
Speaker 4: We look forward to welcoming Jeff for the company on NETA team.
Speaker 4: Claudia will continue to serve as our CFO until then. Upon Jeff's start date with the company, Claudia will transition into a senior advisor role through the end of June to ensure a smooth transition.
Speaker 4: Claudia played a significant role in taking quantum SI public. I want to thank Claudia personally for her contributions to quantum SI over the past two years.
Speaker 4: I would now like to turn the call over to Patrick, our President and Chief Operating Officer, to discuss additional business updates. Patrick?
Speaker 4: Thank you, Jeff, starting with product development. As I've explained before, we have a world-class team in the area of protein engineering and directed evolution.
Speaker 4: Our internal team generates high quality differentiated amino acid recognizers.
Speaker 4: and aminopeptidases that result in our ability to sequence proteins with a small set of recognizers that bind to multiple amino acids with different affinity.
Speaker 4: This is a major advantage over other approaches that require a specific recognizer for each of the 20 amino acids.
Speaker 4: Our R&D pipeline continues to make advancements on all aspects of the technology. Stay tuned for more to come later this year.
Speaker 4: We continue to develop our strategic partnerships with key opinion leaders to help seed the market and support our internal development efforts. As Jeff mentioned, we've been collaborating with a large institution on SARS-CoV-2 variants.
Speaker 4: We published an application note describing our ability to sequence and distinguish spike protein from three variants, Omicron, Alpha, and Beta. This is an important capability for researchers when RNA is not accessible, but proteins are still present.
Speaker 6: The ability to simply and affordably discern these variants from COVID and other diseases could be highly impactful for human health.
Speaker 6: We view these ongoing efforts to generate additional data as an important element of our strategic growth plan.
Speaker 6: You can find more details of this work in our application note published on our website this week.
Speaker 6: Whether a researcher wants to validate that their antibody is specific to its intended target, or they just want to determine what proteins are in their sample, they can use next-generation protein sequencing to achieve their objectives. Often researchers send their samples to a mass-spec contract lab or core facility for an identification of the protein in their samples. This can be costly and time-consuming. Our platinum next-generation sigle molecule protein sequencing instrument can often provide the same level of protein identification without sending a sample out or buying an instrument that can cost 5 to 10 times more than our platinum.
Speaker 6: To demonstrate that capability, we took a protein sample and sent half of the sample to a mass-spec core facility, and we sequenced the other half. And the results show that both set methods identified the same protein.
Speaker 6: This will be a game changer for protein identification as we continue to advance the technology with respect to coverage and throughput.
Speaker 6: You can find this mass spec comparison to protein sequencing using our platinum in application note on the website.
Speaker 6: I want to pause here and express my appreciation for the team's effort in generating all of this new sequencing data. I'm honored to work with such a dedicated and passionate group of professionals that is discovering new insights along with our collaborators and customers.
Speaker 6: The volume of sequencing data being generated every day is impressive. To keep up, we started a weekly post on social media.
Speaker 6: Our protein of the week. This is where we've been showcasing examples of the protein sequence every week. We've been showcasing examples of the protein sequence every week.
Speaker 6: On the supply chain front, although we remain in a good position, we are conducting a thorough review of our supply chain and manufacturing operations as we look to the future.
Speaker 6: Even though we are pleased with our gross margin performance in Q1 at almost 50%, which is very strong for a newly launched product offering, we're being diligent in looking for operational efficiencies and economies of scale as commercialization continues to ramp up.
Speaker 6: Our engineering team designed the Platinum instrument with simplicity and margin in mind, and now we're seeing the results of that early effort. We've established initiatives in other areas including procurement, automation, and a picked-off a strategic review of some outsourced contract manufacturing arrangements versus outsourcing.
Speaker 6: Our objective is to remain in a strong supply chain and margin position as we roll out our technology and increase its availability in the market globally.
Speaker 6: Moving on to commercialization, we're driving a controlled commercial rollout that will allow us to be reactive to early customer feedback.
Most of our leads are currently coming from inbound organic activity, trade shows, and the science paper.
Our funnel is developing on track to our expectations. A key element of progressing our funnel is our proof of concept program.
which allows customers to send a protein for analysis to our lab for a modest fee prior to purchase.
This has been an attractive offering for some of our customers.
In line with our internal plans, we are looking to place instruments in the first half of 2023 with a select number of key opinion leaders in order to manage early placements with customers diligently and collect customer feedback for new applications and development opportunities.
In April , we attended the American Association for Cancer Research AACR where we exhibited the platform system and presented posters entitled Detection of Arginine PTMs by single molecule protein sequencing on the quantum SI platinum platform.
This week, our commercial team attended the Association of Biomolecular Resource Facilities, ABRF, where we presented a poster titled, Advances in Single Molecular Protein Sequencing on the Quantum SI Platinum Platform.
In addition, we presented at the booth an application to demonstrating the ability to identify by protein sequencing an important biomarker and a biological sample. Albumin is one of the most abundant proteins in your blood and whether it accumulates in urine it's an indication of potential kidney damage. We demonstrated the ability to identify Albumin in urine by protein sequencing, which opens up the possibility to detect other protein biomarkers in a liquid biopsy.
sales of our Q1 2023 financial performance. The annual in the first quarter of 2023 was $254,000.
This was the first time you recognized by the company on the sale of platinum instruments in KIPP.
Gross profit in the first quarter of 2023 was $124,000 resulting in a gross margin of 48.8%.
The gross margin was primarily driven by the platinum instrument product mix.
Operating expenses in the first quarter of 2023 were $29.3 million compared to $27.1 million in the first quarter of 2022.
The increase was primarily due to higher selling in general and administrative expenses, and an increase of 4.6 million in stock price compensation.
Net law for the first quarter of 2023 was 23.6 million compared to 35.2 million in the first quarter of 2022.
Adjusted EVDA for the first quarter of 2023 was a loss of 23.7 million compared to a loss of 27.4 million in the first quarter of 2022.
A reconciliation table of adjusted EVA DA to Gap Net Law is provided in a press release filed earlier today.
As of March 31, 2023, we had $322.1 million in cash and cash equivalents in investments in marketable securities.
expect to be in a better position to provide quantitative revenue guidance later in the year.
However, as Jeff mentioned earlier in the call, we expect Q2 orders to be similar to Q1.
Relative to the first half of the year, we expect revenue to accelerate in the second half based on our business fund visibility and as outlaw marketing and sales activities ramp up. With regards to margins, we expect growth margin in 2023 to be similar to the level of served in Q1 2023. Lastly, we reiterate non-gap operating experience.
Our business funnel is robust. We have a strong team in place, and we believe we are well positioned to accelerate commercial momentum in the second half of the year. Operator, please open the line for questions. Finally, ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To enjoy a question, press star 11 again. Please send by when we compile the Q&A roster. Now first question coming from the line up, Kyle Mixon with Canacorn, Dylan, is open. Hey guys, thanks for taking questions. Congrats on the launch and the revenue and the margins. Great to see. Maybe just starting with the funnel and an act.
customers, you know, what we expected would be the, you know, the target and where the initial interest to be, you know, a solid portion of the fund was also those academic researchers, but we're beginning to make our traction into other segments of the market. So we mentioned some of those, so pharma biotech, some industrial applications.
in areas like antibody, QHC or antibody validation. And even some government related accounts both here in the US as well as in Europe . So getting a more diverse funnel as we get out there with some people in direct selling and attend more of those trade shows.
Application wise, maybe Patrick, you want to provide some insights on the application? Sure.
Yeah, so we continue to refine the applications with customer feedback for example. We had the proteoform characterization with the SARS-CoV-2 spike protein as an example of identifying...
through sequencing differences at the amino acid level. So, this is now beginning to take form as an application, the proteoform characterization. Certainly continuing with protein identification, moving into protein mixtures.
and certainly some early customer feedback from that, like the Arginine modifications is an example. So really continuing to develop those applications, it's a big focus of ours to work with the key opinion leaders to continue to build out and strengthen those applications. Awesome. Great. Thanks so much guys for that. Yeah, just got a couple more here, sorry for that. I think I heard something about discounting and sort of pricing, Gross Market and things like that were kind of the rainy day situation there sort of
Can you guys walk through how you're thinking about pricing for Platinum right now? I think the list is 7K, and I know you don't want to provide what you're actually selling this for and everything. We don't have to go over the actual placement number, because I understand that's kind of confidential, but how are you thinking about pricing, given such a novel platform?
And I'm actually curious how our customers are sort of purchasing the initial batch of chips. Are you seeing any trends in utilization so far either? I know there's a lot of questions there. I can repeat myself if need be. Thanks. No, you're okay, Kyle. I think we've got them, and if we miss one, we can come back to it. So on the first point, we're not
seeing a lot of pricing pressure in the market. So both on our instrument as well as our consumables, we've been able to do most of the transactions, you know, at or very close to list pricing. So we're not seeing any significant pricing pressure.
in that regard. I think we're continuing to evaluate if there could be opportunities to increase the price, especially of the instrument given its capabilities and how unique it is in the market. Right now, we're not gonna make any of those changes, but it is something we're monitoring if we believe the market would bear that out. And then in terms of buying what we tend to see Kyle is that somebody who purchases the platinum instrument will buy.
some number of kids to get going into whatever their research or what study they have sort of in mind. It's obviously early in the commercialization cycle, but we can tell you that one of our early implementation has recently.
repurchase consumables. So it gives us sort of some confidence that people in those initial orders aren't necessarily taking a big stocking order and are going to be sitting on consumables for a long period of time. That they're ordering sort of what they need, they're moving forward, they're making progress and continuing to remain interested in
in using our platform for the intended research.
Just two more questions for me. Maybe first on the second half lift that you were describing, I mean, sounds interesting and thanks for the kind of the guidance for the second quarter to topple.
I guess I'm curious how significant that will be in the second half and how much pent-up demand is there and how secure is the demand?
the difference between the booked revenue and the orders we received really had to do with that international demand. And that was very early in our commercialization sort of a history here. And we just needed to check off the two boxes that I mentioned in my prepared remarks and any future orders coming in from.
the European Union would be easily executed on now in a more real time basis like we have with US orders. So I think the concept of sort of building up a huge backlog, I don't believe will be a key part of the story. We'll look to fill orders as we get them as quick as we can.
In terms of the funnel, obviously we're not giving out guidance yet as to how we think that will accelerate. Some of this is seeing what those older patterns are seeing, the utilization, but also we brought in new people to our team. And those folks really are just now hitting the ground, have been trained and are out working every day.
Perfect and one last one for me.
Just reproducibility out there in the field with the first few systems. I'm sure it's not perfect and there probably will be some time where you kind of pause. Maybe you pause shitting it and re-evaluate how the technology is being run and things like that and the best way to run that in the workflow and such. Could you just kind of talk about and comment on what you're seeing out there in the field right now compared to what was running in your facilities? I don't know what it is.
And yeah, like any plans forward there with kind of improving performance, I suppose, and maybe how carbon kind of factors in there as well.
Yeah, so so far Kyle, we have not seen, you know, a lot of variation in the field. What what customers are experiencing is very similar to what we experience here in R&D. So we've been fortunate in that regard, but obviously, you know, very close to the customers, making sure that that trend continues. You know, some of the early customers have given us.
suggestions for, you know, improvements we can make to say our cloud analytic tool or some of the data visualization. So things we're working on and we'll implement to continue to evolve. The features of the cloud analytic tool with their their soft and mind, so really more just send more enhancement state like to see or those little tweaks we haven't seen any significant variation in performance.
across the market. I lost your second question, Ocail, if you can repeat that.
Sure, sure. So maybe this could be another fifth question potentially. Maybe how much of a game changer is Carbon going to be once that is launched? Will that move the needle in, I think it was later this year, as it is launched. And then maybe it will be a catch rate for Carbon on Platinum, because I feel like that's super useful to have that automation. I'm just curious what you think about that.
Yeah, and Kyle, I think that's really what that beta study We're gonna kick off here in the current quarter will help us define you know for sure Carbon's gonna bring an additional level of automation over you know the current workflow of the product
I think what we're hoping to learn from customers are sort of twofold. One is, how valuable is that automation in terms of hands-on time reductions? Does it help them achieve higher run success rates? Do they see better, do they see more reads from the consumables? So we'll be looking at these various metrics to see what other
the higher that attach rate will be. But I think you know when we get through data, we'll have the quantitative data we need here, and I think we'll be able to really project or at least provide you a perspective on what we think that attach rate will look like, you know with that data in mind. So stay tuned on that. I'm gonna get this data going in this quarter.
expect to get some data from that and be able to provide more quantification. Got it. We've stared, but thanks for the time guys and congratulations we've come. Thank you, Koff. Thank you. And our next question coming from the line up. One thing would be Riley, Yelena Sultin.
Hi, this is Brian and Clineon for you on. Thanks for taking our question and congratulations on the launch. Just one from us. You're just wondering if you could elaborate on a particular user case where the customer leveraged or was planning on leveraging a platinum for post-translational modification research.
notes out and you can give a little more color. Yeah, yeah. So one particular user case, and this is a very interesting one. Some post-translational modifications are extremely difficult to see by traditional methods like mass spec.
For example, modifications of arginine, which has implications in aging and various other diseases. And so what we've done is, in working with KOL, we've identified various forms of post-translation modification on the arginine.
So, asymmetric versus symmetric dimethylation, so it's like the same molecule but just in a different form. Extremely difficult to detect with mass spec. Also, other modifications on arginine-like citrulation.
again, extremely difficult. So, I would say that's probably one major use case for some of this post-translational modification.
And then there are various others as well. Okay, thanks. Appreciate the code on it.
and various others as well. Thanks, appreciate the quote on it. You're welcome.
Thank you. And I'm sure no further questions in the queue at this time. I will now turn the call back over to one for any closing remarks.
Thank you all for your participation today. We look forward to updating you on our progress in the next quarterly earnings call. Have a good evening.
Thank you for your participation. You may now disconnect. Thank you for your participation.
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