Q3 2024 Quantum-Si Inc Earnings Call
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Speaker Change: Okay and thank you for standing by welcome to the 2024 type curve on I'm, sorry earnings call. At this time, all participants are in a listen only mode.
The speaker's presentation, there will be a question answer session.
Speaker Change: To ask a question during the session you raised superstar one or your telephone there than here at Hanmi message you're right in your hand, it's great to withdraw your question. Please press star one again please.
Speaker Change: Please be advised today's conference is being recorded I would like to hand, the conference over to your first speaker today, Doug Farrell Vice President Investor Relations. Please go ahead.
Doug Farrell: Good morning, everyone and thank you for joining US earlier today quantum ESI released financial results for the third quarter ended September 32024.
Doug Farrell: Copy of the press release is available on the company's website.
Speaker Change: Joining me today are Jeff Hawkins, our president and Chief Executive Officer, as well as Jeff <unk>, Our Chief Financial Officer.
Speaker Change: Before we begin I would like to remind you that management will be making certain forward looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially from those anticipated.
Speaker Change: Information regarding these risks and uncertainties appears in the section entitled forward looking statements of our press release.
Speaker Change: 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 November 12 2024.
Except as required by law the company disclaims any intention or obligation to update or revise any forward looking statements.
Speaker Change: During this call we will be referring to certain financial measures that are not prepared in accordance accordance with U S generally accepted accounting principles or GAAP.
Speaker Change: A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the press release filed earlier today.
Speaker Change: Additionally, I'd like to remind everyone that we'll be hosting an investor day in New York City next Wednesday November 20th.
Speaker Change: Can find the link to register for the event on the Investor Relations section of our website, we will also be.
Speaker Change: Participating in mechanical or conference in New York City on November 21.
Speaker Change: Look forward to having the opportunity to meet with investors at both of these events.
Speaker Change: With that let me turn the call over to Jeff Hawkins.
Jeff Hawkins: Good morning, and thank you for joining us on today's call. We will provide a business update review our operating results for the third quarter of 2024 and provide our guidance for the balance of the year. After that we will open the call for questions.
Jeff Hawkins: I will begin with an update on our three corporate priorities for 2024 to accelerate commercial adoption to deliver on our innovation roadmap and to preserve our financial strength.
Jeff Hawkins: Our first corporate priorities to accelerate commercial adoption.
During the third quarter of 2024, we made continued progress in the commercial ramp up of platinum.
Jeff Hawkins: We believe that we are well positioned to be an industry, leading company in the rapidly growing proteomics market.
Jeff Hawkins: Our confidence comes from our best in class Technology, first mover advantage and robust intellectual property portfolio.
Jeff Hawkins: We believe that our technology has the potential to create large new market opportunities that can drive our growth over the coming years.
Consistent with the commentary from many of our peers, we observed some lengthening of the sales cycle in the third quarter.
Jeff Hawkins: Our third quarter 2020 for revenue of $787000 was below our expectations.
Jeff Hawkins: While we did not lose any deals we did see customers that opted to push out their purchase of an instrument to a later date than originally communicated.
Jeff Hawkins: This early stage of commercialization, a small number of deals being delayed can be the difference between meeting our expectations or not.
Jeff Hawkins: As we look to the fourth quarter, they are both headwinds and <unk> to consider.
Jeff Hawkins: I am pleased to report that we have filled most of the open sales territories I mentioned on our last call.
Jeff Hawkins: That said there is a ramp up period in our industry of around 90 days for any new salesperson to become fully effective. So we expect a full benefit of these new sales professionals to positively impact our results by early next year.
Jeff Hawkins: Further in September we appointed Todd Bennett as our Chief Commercial Officer, Todd brings an outstanding track record with more than 30 years of experience in life Sciences, and diagnostics and his background includes commercial leadership roles at <unk> X Abbott Roche and Immucor.
Jeff Hawkins: Todd has already taken steps to streamline our sales process bolster our training programs and enable new channel partners to extend our commercial reach.
Jeff Hawkins: On the positive side, we are observing a rapid improvement in our sales force execution and an overall acceleration of our sales pipeline under Todd's leadership.
Jeff Hawkins: Additionally, our industry often sees an uptick in capital spending in the fourth quarter as customers look to deploy any remaining budget by year end.
Jeff Hawkins: While it is not yet clear how significant this uptick may be we are well positioned to benefit from any end of year capital purchasing given our instrument price point.
Jeff Hawkins: On balance it is likely that we will not achieve our full year revenue guidance that said, we are confident that we will generate a sequential increase in revenue in Q4 of 2024 and expect to surpass $1 million in quarterly revenue for the first time.
Jeff Hawkins: We are laser focused on commercial execution with clear strategies in place to try to get as close to our full year guidance as possible.
Jeff Hawkins: Beyond commercial execution, we've continued to push our scientific affairs initiatives, including adding resources to our scientific affairs group to help customers integrate platinum into their research programs as well as generate new publications that increase the awareness of the unique capabilities of platinum. These.
Jeff Hawkins: These efforts will result in customer data being released at industry conferences and through peer reviewed publications and are important proof points that help accelerate adoption of our technology in the broader market.
Jeff Hawkins: Last month, we had a very productive meeting at the human Proteome organization World Congress in Germany. This included poster presentations to highlight how platinum can address protein applications, such as detecting variance and post translational modifications as well as protein barcoding.
Jeff Hawkins: We also hosted a session in which researchers from northwestern University presented on integrating our platinum platform with top down mass spectrometry to enhanced Proteoform analysis.
Jeff Hawkins: Overall, we are making great progress on the commercial front given the commercial execution improvements being made under Todd's leadership are relatively recent the full impact of these changes is still in front of us my.
Jeff Hawkins: My optimism about our ability to expand adoption of our technology across all market segments is as high as it has ever been.
Jeff Hawkins: Our second priority is to deliver on our innovation roadmap.
Jeff Hawkins: Since realigning our R&D programs last fall, we have jumpstarted, an exciting new cycle of innovation I.
Jeff Hawkins: I don't want to preempt, our Investor day next week, but youll have the opportunity to learn more about exciting initiatives, we have taken on to expand our technology capabilities and really shaped our long term future of quantum ESI we.
Jeff Hawkins: We plan to demonstrate groundbreaking advances in hardware consumables chemistry and software that we believe puts us on a clear path to scale our output per sample to billions of reeds.
Jeff Hawkins: We believe these advancements will open large new market opportunities and will position us to become the clear overall front runner in proteomics.
Jeff Hawkins: In addition, we will also showcase important new partnerships that will help accelerate the delivery of this cycle of innovation to the market.
Jeff Hawkins: Next I am pleased to report that our next version of library preparation kits and our Barcoding kit are on track for launch during the fourth quarter the.
Jeff Hawkins: The New library prep kit is expected to reduce the starting sample input amount expand the range of proteins that are compatible with our system and increase the overall sample success rate.
Jeff Hawkins: The Barcoding kit is expected to provide customers a significant reduction in sample prep time prior to sequencing, while also improving the sensitivity and dynamic range of the application.
Our continued innovation has not gone unnoticed.
Jeff Hawkins: We were recently honored by Frost and Sullivan with their prestigious Technology Innovation leadership Award in.
Jeff Hawkins: Independent panel of experts selected <unk> based on our pioneering technology and contribution to advancing the field of proteomics research.
They also recognized our ongoing commitment to innovation and the robust portfolio of intellectual property that is foundational to our long term success.
Jeff Hawkins: Additionally, last week, we attended the American Society of Human Genetics Conference, where we showcased our collaboration with the University of California, Santa Cruz researchers from Dr. Felton lab demonstrated how they are using next generation protein sequencing with platinum to augment genomic and transcriptome mcdade's and better capture the full.
<unk> biology.
Jeff Hawkins: Overall, our innovation pipeline is on track and very exciting once we complete our investor day on November 20th we will be able to have deeper conversations on the details of our roadmap and how it is shaping up for the future.
Our third priority is to preserve our financial strength.
Jeff Hawkins: We continue to remain laser focused on financial discipline that balances maximum output of our innovation roadmap with preserving financial capital.
Jeff Hawkins: Jeff will provide more detail, but we are pleased with our progress and we remain committed to the sufficient use of our capital.
Speaker Change: I will now turn the call over to Jeff <unk> to review our financial results.
Thanks, Jeff now I will review the details of our operating results for the third quarter revenue.
Speaker Change: Revenue in Q3 of 2024 was approximately $787000, which consisted of revenue from our platinum instrument consumable kits and related services.
Speaker Change: Gross profit was 367000 in gross margin was 47%.
Speaker Change: As a reminder, our gross margin percentage will be somewhat variable for the near future as we work through our initial stages of commercialization.
Speaker Change: It may be impacted by the timing and mix of instruments versus consumable sales.
Speaker Change: Our margin May also be impacted in the near term by acquisition cost and any accounting adjustments to underlying inventory that predates the commercial launch of platinum.
Speaker Change: Our gross margin for the third quarter of 2024 includes approximately a 4% impact for inventory utilized during the quarter that was carried at low or no value and HVAC prior to the initial commercialization we.
Speaker Change: We do expect to see more variances that will flow through our gross margin as we move forward and I will highlight them if they are material.
Speaker Change: GAAP total operating expenses for the third quarter of 2024, or $28 5 million compared to $27 3 million in the third quarter of 2023.
Speaker Change: While adjusted operating expenses were $26 million for the third quarter of 2024 compared to $23 9 million for the third quarter of 2023.
Speaker Change: Overall operating expenses increased year over year for the quarter based on the continued ramp of our commercial operations.
Speaker Change: Year to date 2024, our total operating expenses were $78 9 million compared to $83 6 million in the prior year a decrease of about 6%.
Speaker Change: This includes R&D expenses of $42 7 million as compared to $50 6 million for the same period in 2023, a decrease of about 16%.
Speaker Change: You would recall, we initiated the R&D realignment in August 2023 that streamlined and focused our R&D efforts on focused product and leverage in the market.
Speaker Change: The year over year change reflects the impact of those changes.
Speaker Change: At the same time funding ramping up our commercial operations.
Speaker Change: Net loss for the third quarter of 2024, it was $25 3 million compared to $24 7 million in the third quarter of 2023, and our adjusted EBITDA for the third quarter of 2024 was negative $24 5 million.
Speaker Change: Compared to negative $22 6 million in the third quarter of 2023.
Speaker Change: Okay.
Speaker Change: Our dividend and interest income in the third quarter of 2024 was approximately $2 7 million compared to $2 6 million in the third quarter of 2023.
Speaker Change: As of September 32024, we had $196 $3 million in cash and cash equivalents and investments in marketable securities.
Speaker Change: Based on our financial discipline and focused efforts on capital allocation.
We expect our existing cash and cash equivalents and marketable securities will provide runway into the second half of 2026.
Speaker Change: Jeff already commented on full year 2020 for revenue and it will also like to add some color on adjusted operating expenses and cash guidance.
Speaker Change: For the full year 2024.
Speaker Change: We now expect adjusted operating expenses of approximately $100 million versus our original guidance of less than $103 million.
Speaker Change: Our net cash usage of about $92 million versus our original guidance of less than $100 million.
Speaker Change: Now I'll turn the call over to the operator to open the line for questions.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question press star one wondering if telephone and refer your name to be announced.
Your question. Please press Star one again, please standby were at coupons the Q&A roster.
Speaker Change: Our first question comes from the line of Carl Mixon of Canaccord Genuity. Your line is now open.
Carl Mixon: Hey, guys. Thanks for the questions.
Carl Mixon: Jeff participants Ben.
Carl Mixon: Sometimes it's the kind of initial launch as well as the full commercial launch and then your soul.
Carl Mixon: You're putting up.
Speaker Change: I guess placement numbers.
Carl Mixon: There aren't huge but.
Speaker Change: It's been more measured still it feels like can you talk about why the visibility wasn't quite there in the third quarter, maybe excluding some of these macro headwinds.
Speaker Change: And maybe kind of going forward why are your carbon and some of the one.
Speaker Change: Billion dollar revenue quarterly revenue.
Speaker Change: Kind of guidance that you put out there.
Speaker Change: Thanks for the question Kyle So I'll start by saying as we said in our prepared remarks.
Speaker Change: The revenue in the quarter was a bit below our expectations and it really.
Speaker Change: <unk> to the remark, which was a <unk>.
Speaker Change: Couple of sales that move in or out really are the difference you know youre talking about an instrument with a list price around.
Speaker Change: $85000 and one or two of those are moving in or out can be the difference between hitting that expectation.
Speaker Change: And not and in this case, we had we thought we had good line of sight to the timing you were getting consistent feedback from the customer but in the end.
Speaker Change: Some of these deals are moving out by a month or so and that can really change.
Speaker Change: The outcome from from just a couple of deals as we look at Q4.
Speaker Change: Kyle I think we're really looking at the forecast from our commercial team, we're assessing those various headwinds and tailwind.
Speaker Change: We're also really looking at the potential for some level of budget flush.
Speaker Change: To occur we're not expecting that to be a significant level, but we are seeing some indications that we might see a couple of <unk>.
Deals that that could materialize in such a way and I think are on.
Speaker Change: On balance, we really look at it and we say okay.
Speaker Change: What what's the potential pads here are there reasonable pads to get back to or very close to our our guidance. We think there are some ways to get very close to that number and we feel very confident that we'll surpass that million. It's really the question of where in that range will we fall from sort of a $1 million on the.
Speaker Change: Oh into hitting the low end of our guidance and we have confidence there is plans to land us in that range and we're going to push of course as hard as we can to get.
To the to the guidance.
Speaker Change: Alright, that's helpful and then maybe like to go.
Speaker Change: A bit deeper from like an end user perspective, what are some of the bottlenecks that still kind of exist given its pretty early in this operating people would say kind of paradigm.
Speaker Change: The bottlenecks that exist that are preventing equal or prevent us from having.
Speaker Change: Quarters, where youre having.
Speaker Change: Double digit placements or something like that I mean, what is really what's out there what isn't out there yet the economy does that the evidence that co locations or is it like consumables like the output that it brings issues.
Speaker Change: Yields look like that I mean, just.
Speaker Change: That's not the kind of them get too Nitty gritty with I know you have your Investor Day next week, but just kind of curious what silver and any just like that.
Speaker Change: Again.
Speaker Change: We've seen laguardia could prove the technology even further.
Speaker Change: Yes, I think Kyle its a good question, there's probably a mix of.
Speaker Change: Things that impact the rate, which we were bringing on new customers I would say.
That there's not sort of like one thing I would say that is the hang up for customers certainly to your point more evidence coming out, which I think you've seen more of our customers presenting at conferences posters in sessions and most recently with the pre print that has been issued from the University of Virginia.
Those things will help.
Speaker Change: But I don't want to overlook the fact that we also have a very.
Speaker Change: Reasonably new number.
Speaker Change: A number of sales professionals in the U S really we talked about that back in the second quarter earnings call that we were expanding that team we filled most of those roles during Q3 and those folks.
Speaker Change: Not yet fully ramped as we discussed in our prepared remarks, Dave they've been on board they've been trained they're out in the field you know really building their pipelines and advancing deals through the through the funnel. So I don't think we've seen their full capability to sort of contribute to that revenue either at this stage. So.
Speaker Change: I really think it's got a lot to do with just that scale of activity. The number of people that are out there and productive not some.
Speaker Change: Specific limitation and in technology or some missing piece of evidence. It really is just about getting those folks out there getting them trained working a larger number of opportunities at a time to see that acceleration in the revenue we can deliver every quarter.
Speaker Change: Got it that's great and on that point.
Speaker Change: The sale of the placements to date per platinum, primarily direct sales driven or like the distribution partner driven.
Speaker Change: We've had a mix of both.
Speaker Change: Obviously, we're direct in the United States and we're direct in some of the key markets in Western Europe, but work well.
Speaker Change: Of course also expanding our distribution network. So there's been a mix of both and some of our early distribution partners that we've talked about back at the start of the year. Some of those distribution partners have also started to place instruments and sell instruments into the end user. So there is a mix of directly placed boxes our.
Speaker Change: Distribution partners directly selling to end users and then some of us selling to our our new channel partners as well.
Speaker Change: Got it okay.
Speaker Change: Maybe I'm just curious on the <unk> III kits and how that was sort of like ramping or any <unk>.
Speaker Change: Now that you've gotten so far given how we've launched three months ago or so anything you can share on that.
Speaker Change: Yes, I think on the version three <unk>.
Speaker Change: Similar to what we've seen in past releases when we bring out a new release like this given the.
Speaker Change: The increase in performance that that customer see we have we had a very smooth and rapid transition from the prior version to this version so our customers have moved over to the version three <unk> I think what we're seeing is showing up in those.
Speaker Change: Posters and in that paper and in other presentations, which is that customers are.
Speaker Change: Capable of.
Speaker Change: After each of those new applications, they want to they want to pursue.
Speaker Change: Youre seeing better output theyre seeing that consistent sort of reproducibility.
Speaker Change: Between the lots that they get it's just that general lift in overall performance improvement opens up more applications and really makes their research move forward in a very smooth way.
Speaker Change: Okay, and I guess.
Speaker Change: Just a final one looking again next week.
Speaker Change: At this point what are your thoughts the company's thoughts on how the clinical potential of this program I think the thing when that could occur and thats kind of like.
Speaker Change: Sort of overlaps with the therapeutic perpetual I feel like you've kind of had.
Speaker Change: Trade in the Biopharma world It sounded like past quarters has these two areas sort of like.
Speaker Change: At stand today, and what's the most near term opportunity for you.
Speaker Change: Yes, it's a good question Collin, we'll save some of the discussion on that for the Investor Day, I will say that.
Speaker Change: You are correct, we're we're continuing to see adoption in both smaller biotechs as well as <unk>.
Speaker Change: Larger farmers as we mentioned in our remarks, we had our first <unk>.
Speaker Change: Contract manufacturer.
Speaker Change: Adopt the product that services that space. So we're very pleased with the traction there we've talked about on prior calls some of those opportunities they take longer to work through the funnel and materialized. So.
Speaker Change: What we've what we've delivered so far is not the end we're in many of those processes with other <unk>.
Speaker Change: Large pharma and biotech opportunity. So we feel good about the potential of our product in that market segment exactly when that intersects with our clinical stage program are intersects with a.
Our clinical diagnostics I think that's still out in the future a bit but we'll get into that in a little more detail at our investor day.
Speaker Change: Alright, great. Thanks.
Speaker Change: Thanks, a lot thank.
Speaker Change: Thank you.
Speaker Change: Thank you I'm showing no further questions at this time.
Speaker Change: Thanks to Jeff Hawkins for closing remarks.
Jeff Hawkins: Thank you everyone for attending today, we look forward to providing you more updates on our innovation pipeline at our November 20th Investor Day, and at future Conference calls.
Jeff Hawkins: You for participation in today's conference. This does conclude the program and you may now disconnect.
Jeff Hawkins: Okay.
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