Quantum-Si Inc Q3 FY2024 earnings call

Corporate Priorities - Accelerate Commercial Adoption: Made progress in Platinum commercial ramp-up; sales cycle lengthened in Q3; filled most open sales territories; appointed Todd Bennett as Chief Commercial Officer, who has streamlined sales process, bolstered training, and expanded commercial reach; expect full benefit of new sales professionals by early next year; potential budget flush in Q4. - Deliver on Innovation Road Map: R&D realignment jumpstarted new innovation cycle; next version of library preparation kit and barcoding kit on track for Q4 launch; honored by Frost & Sullivan with Technology Innovation Leadership Award; collaboration with UC Santa Cruz showcased. - Preserve Financial Strength: As of September 30, 2024, had $196.3 million in cash and cash equivalents and investments in marketable securities; adjusted operating expenses for full year 2024 expected at ~$100 million vs original guidance <$103 million, net cash usage ~$92 million vs original <$100 million.

In the third quarter of 2024, Quantum-Si reported revenue of $787,000. There is no detailed breakdown of revenue contribution by specific product segments provided in the transcript.

• Full year 2024 revenue likely will not achieve original guidance. - Expect sequential increase in Q4 revenue and surpass $1 million in quarterly revenue. - Adjusted operating expenses for 2024 expected at ~$100 million vs original <$103 million. - Net cash usage for 2024 expected at ~$92 million vs original <$100 million.

• Lengthening of the sales cycle in the third quarter. - Ramp-up period of around 90 days for new salespersons to become fully effective. - Potential variances in gross margin as the company moves forward. - Uncertainty regarding the significance of year-end capital spending uptick.

Q: Hey, guys. Thanks for the questions. Jeff, since it's been sometime since the kind of initial launch as well as the full commercial launch and then you're still -- you're putting up -- I guess, putting up numbers that aren't huge, but it's more measured still, it feels like. Can you talk about why the visibility wasn't quite there in the third quarter, maybe like excluding some of these macro headwinds? And maybe kind of going forward, why you're confident in some of the $1 million revenue -- quarterly revenue kind of guidance that you put out there?

A: Yeah. Thanks for the question, Kyle. So I'll start by saying, as we said in the prepared remarks, the revenue in the quarter was a bit below our expectations. And it really ties to the remark, which was a couple of sales that move in or out really are the difference. You're talking about an instrument with a list price around $85,000 and one or two of those moving in or out can be the difference between hitting that expectation and not. And in this case, we had -- we thought we had good line of sight to the timing. We were getting consistent feedback from the customer. But in the end, some of these deals are moving out by a month or so and that can really change the outcome from just a couple of deals. As we look at Q4, Kyle, I think we're really looking at the forecast from our commercial team. We're assessing those various headwinds and tailwinds. We're also really looking at the potential for some level of budget flush 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 deals that could materialize in such a way. And I think our -- on balance, we really look at it and we say, okay, what's the potential path here? Are there reasonable paths to get back to or very close to 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 $1 million. It's really the question of where in that range will we fall from sort of $1 million on the low end to hitting the low end of our guidance. And we have confidence there's plans to land us in that range, and we're going to push, of course, as hard as we can to get to the guidance.

Q: All right. That was helpful. And then maybe like just going a bit deeper from like an end-user perspective, what are some of the bottlenecks that still kind of exist given it's pretty early in the whole sequencing kind of paradigm? The bottlenecks that exist that are preventing people from -- or preventing you guys from having quarters where you're having double-digit placements or something like that. I mean, what is really -- what's out there -- what isn't out there yet that you kind of need? Is that the evidence? Is it locations? Or is it like your consumables, like the output range issues, yield, things like that?

A: Yeah. I think, Kyle, it's a good question. There's probably a mix of things that impact the rate, which we're 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 preprint that has been issued from the University of Virginia, I think those things will help. But I don't want to overlook the fact that we also have a very -- a reasonably new 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 are not yet fully ramped, as we discussed in our prepared remarks. They've been onboarded. They've been trained. They're out in the field, really building their pipelines and advancing deals 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 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 specific limitation 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.

Q: Got it. That's great. And on that point, have the sales -- the placements to date for Platinum, have they been primarily direct sales driven or like distribution partner driven?

A: We've had a mix of both. Obviously, we're direct in the United States and we're direct in some of the key markets in Western Europe. But we're, of course, also expanding our distribution network. So there's been a mix of both. And some of our early distribution partners that we 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 users. So there's a mix of directly placed boxes, our distribution partners directly selling to end users and then some of us selling to our new channel partners as well.

Q: Got it. Okay. And maybe I was curious about the version 3 kits and how that was sort of like ramping or any feedback you've gotten so far given that it was launched three months ago or so. Anything you could share on that?

A: Yeah. I think on the version 3 kit, similar to what we've seen in past releases, when we bring out a new release like this, given the increase in performance that customers see, we had a very smooth and rapid transition from the prior version to this version. So our customers have moved over to the version 3. I think what we're seeing is showing up in those posters and in that paper and in other presentations, which is that customers are capable of going after each of those new applications they want to pursue. They're seeing better output. They're seeing that consistent sort of reproducibility between the lots that they get. It's just that general lift and overall performance improvement opens up more applications and really makes their research move forward in a very smooth way.

Q: Okay. And I guess, maybe just a final one, looking again to next week. How -- what -- at this point, what are your thoughts or the company's thoughts on kind of the clinical potential of, I guess, protein sequencing, when that could occur. And that's kind of like it sort of overlaps with the therapeutic potential. I feel like it's kind of -- it's penetrating the biopharma world, it sounded like in past quarters. How do these two areas sort of like stand today and what's the most near-term opportunity for you?

A: Yeah, it's a good question, Kyle, and we'll save some of the discussion on that for the Investor Day. I will say that you're correct. We're continuing to see adoption in both smaller biotechs as well as larger pharmas. As we mentioned in our remarks, we had our first contract manufacturer 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 materialize. So what we've delivered so far is not the end. We're in many of those processes with other large pharma and biotech opportunities. So we feel good about the potential of our product in that market segment. Exactly when that intersects with a clinical stage program or intersects with a 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.