Quantum-Si Incorporated — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial figures below are in U.S. dollars; unless stated otherwise, amounts are converted from thousands to millions. Quantum-Si is a life-sciences company commercializing its Platinum next-generation protein-sequencing instrument, consumables, and Quantum-Si Cloud software.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0.223 million | None | $0.682 million | None |
| Gross profit / margin | $0.108 million / 48.4% | None | $0.310 million / 45.5% | None |
| Operating expenses | $27.283 million | $27.658 million | $83.598 million | $84.998 million |
| Operating loss | $27.175 million | $27.658 million | $83.288 million | $84.998 million |
| Net loss | $24.728 million | $31.713 million | $73.912 million | $99.302 million |
| Net loss per share | $0.17 | $0.23 | $0.52 | $0.71 |
- Revenue began with commercial shipments in January 2023 and consisted primarily of Platinum instruments and kits. Q3 product revenue was $216,000 and service revenue $7,000.
- At September 30, cash and cash equivalents were $93.8 million and marketable securities $180.8 million, or $274.6 million combined, down from $351.3 million at year-end 2022. Current assets were $284.8 million and current liabilities $11.0 million.
- Nine-month operating cash use was $73.1 million, versus $71.0 million in 2022. Investing provided $82.4 million, principally from $88.0 million of marketable-security sales; financing provided $0.2 million. Ending cash was $93.8 million.
- The filing presents no conventional borrowings. Operating lease liabilities totaled $15.5 million; undiscounted future lease payments were $32.2 million before incentives and imputed interest. The company reported $1.1 million in warrant liabilities.
Changes versus the prior comparable periods
- Revenue rose from zero as Platinum commercial shipments began; gross margin was 48.4% for Q3 and 45.5% year to date.
- Net loss narrowed year over year, partly reflecting improved marketable-securities marks and higher dividend income, as well as lower operating expenses. Nine-month R&D expense decreased 6.2% to $50.6 million; SG&A increased 6.2% to $33.0 million.
- Operating cash use increased modestly despite lower net loss. The company sold marketable securities to fund liquidity, and combined cash and securities declined by $76.7 million from December 31, 2022.
- The company recorded $4.1 million of restructuring costs in the first nine months, including $2.3 million in Q3, and had a $0.6 million restructuring liability at quarter-end.
Outlook, management commentary, and risks
- Management expects existing cash, cash equivalents, marketable securities, and product revenue to fund operations for at least the next 12 months, while anticipating negative operating cash flows for the foreseeable future. No specific revenue or earnings guidance is provided.
- Management paused Carbon sample-preparation instrument development, concluding it was not the most effective use of R&D resources; efforts are focused on Platinum, consumables, chips, and Cloud. The company describes a phased approach to future platform updates.
- Backlog was approximately $0.1 million at September 30. Management expects conversion in subsequent quarters but cautions customers may cancel or delay orders.
- An effective shelf registration and ATM program permits up to $75 million of Class A stock sales; no shares had been sold under the ATM as of the filing. Sales could dilute existing shareholders.
- After the company notified a Platinum and Carbon contract manufacturer in April that it intended to wind down the relationship, the manufacturer filed a breach-of-contract complaint in October seeking economic damages and attorney costs. The potential exposure is not estimable at this early stage; the company intends to defend the claim. The filing also describes a delayed transition involving a separate chip-component manufacturer and dependence on limited or sole suppliers.
- The company is litigating a dispute with its New Haven landlord over up to $9.1 million of lease-improvement reimbursements. It says the outcome and carrying-value impact cannot currently be estimated.
- Interest-rate movements affected fixed-income investments; the company reported a cumulative net unrealized loss of $12.9 million on those investments at September 30. It also cited inflation and supply-chain constraints, though it said the Russia-Ukraine conflict had not materially affected its business to date.
- Management reported effective disclosure controls as of September 30. It is implementing additional controls related to the commercial launch, including revenue recognition and inventory.
Important facts for investors to verify
- Whether Platinum sales, consumables demand, customer adoption, and backlog grow enough to support commercialization and reduce cash burn.
- Cash and securities balances, actual operating cash use, and the assumptions behind management’s at-least-12-month funding expectation.
- Manufacturing-transition progress, product supply continuity, and any financial or operational consequences of the former manufacturer’s complaint.
- Developments in the landlord reimbursement litigation and recoverability of the related lease-improvement amounts.
- Any ATM share sales and resulting dilution; also monitor restructuring execution and future operating costs.