Quantum-Si Incorporated

Ladies and gentlemen, thank you for standing by. Welcome to the Quantum SI first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After this presentation, there will be a question and answer session. To ask a question, you will need to press star 1 1 on your telephone. 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 Avendano, Head of Investor Relations for Quantum SI. Juan, please go ahead.

Good evening, everyone. Thank you for joining us. Today, after market close, Quantum SI released financial results for the first quarter ended March 31st, 2023. A copy of the press release is available on the company's website. Joining me today are Jeff Hawkins, 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 meaning of federal securities laws. 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 today, May 11, 2023. Except, as required by law, the company claims any intention or obligation to update or revise any forward-looking statements. 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, including adjusted EBITDA, a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures as included in the press release filed earlier today. With that, I will turn the call over to Jeff.

Thank you, Juan. 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. The goal of QuantumSI 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, enable the discovery of new biomarkers, and ultimately power the development of new therapies and diagnostic tests that will positively impact human health. In the first quarter of 2023, we started delivering on this mission with the initial shipments of our platinum protein sequencing system. As we have shared on previous calls, Quantum SI 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. 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. We reported revenue of $254,000 in the first quarter. This difference is due to a delay in the shipment of two international orders we received in the quarter, but were not able to ship until recently. 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. 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. In fact, our advanced sales funnel is made up of approximately 60% US and 40% European customers. By end market, most of our internal customers are in academic research centers, as expected. 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 and emerging interest in protein barcoding and antibody validation and QAQC through sequencing. Customer feedback continues to be positive. We are observing customers embrace our platinum system for its convenience, simplicity, accessibility, and the ability to enable deep and unbiased proteomic studies at the individual amino acid level. 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 proteoforms and post-translational modifications in their research. On the other end, there are customers who are new to proteomics, and only QuantumSI's protein sequencing platform can provide a convenient, accessible solution that is easy to use and affordable. Overall, we are encouraged by the level of customer interest in our technology and are pleased with the sales funnel we have been able to generate with a small commercial team and based largely from inbound customer interest and trade shows. 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. Given this, we expect Q2 orders to be similar to Q1, which is consistent with our internal plan entering the year. Over the next few months, we plan to turn on outbound marketing and increase our direct sales efforts, support revenue growth 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 and our existing sales funnel, we remain on track to further accelerate placements and revenue in the second half of this year. Our second priority is to lead with innovation. QuantumSI is the leader in the protein sequencing space, and we will continue to leverage our deep technical expertise and novel technology to transform and democratize the field of proteomics. Recently, we executed one of our proof of concept engagements with a major academic institution. The study demonstrated that we could sequence and distinguish spike proteins from various SARS-CoV-2 variants. 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. Finally, our carbon sample prep instrument is on track to enter beta testing in the second quarter of 2023. We also remain on track for the launch of carbon in the second half of this year. 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. Patrick will provide additional color on the efficiency initiatives our supply chain and operations teams are executing. Going forward, although there may be some fluctuations quarter to quarter, we expect full year 2023 gross margins to be similar to the level observed in the first quarter 2023. Lastly, with regards to operating expenses, we reiterate non-GAAP operating expense growth to be flat year over year in 2023. It is worth highlighting that we are keeping operating expenses flat while still making meaningful investments into building out the commercial teams and executing the marketing programs required to successfully drive adoption of our Platinum system. Before turning the call over to Patrick, I would like to briefly comment on the CFO transition we recently announced. Last week, we announced the appointment of a new Chief Financial Officer, Jeff Kite, who will join QSI on May 15th. Jeff brings more than 25 years of experience in senior financial positions, providing transformational leadership in both public and private companies. He has extensive experience managing public company requirements, including interacting with auditors, investors, and analysts. 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. We look forward to welcoming Jeff to the company on May 15th. 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. Claudia played a significant role in taking Quantum SI public. I want to thank Claudia personally for her contributions to QuantumSI over the past two years. I would now like to turn the call over to Patrick, our President and Chief Operating Officer, to discuss additional business updates. Patrick?