Quantum-Si Incorporated — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are to Q1 2022 unless otherwise noted. Quantum-Si develops a single-molecule detection platform for protein sequencing. It began commercial shipments of its Platinum instrument in January 2023; products are for research use only.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Revenue | $0.254 million | $0 | First commercial-period revenue, primarily Platinum instruments and kits; $0.251 million product and $0.003 million service revenue. |
| Cost of revenue / gross profit | $0.130 million / $0.124 million | $0 / $0 | Gross margin was approximately 49%, based on a small initial revenue base. |
| Research and development | $18.167 million | $18.771 million | Down 3.2%. |
| Selling, general and administrative | $11.178 million | $8.369 million | Up 33.6%, primarily reflecting higher stock-based compensation. |
| Operating loss | $29.221 million | $27.140 million | Loss increased despite lower R&D, as total operating expenses rose. |
| Net loss | $23.611 million | $35.175 million | Loss narrowed, principally due to improved investment-related results; loss per share was $0.17 versus $0.25. |
| Net cash used in operating activities | $28.698 million | $23.229 million | Operating cash use increased. |
| Cash and cash equivalents | $81.660 million | $84.319 million at Dec. 31, 2022 | Marketable securities were $240.432 million; combined cash and securities were $322.1 million. |
At March 31, 2023, total assets were $365.0 million, total liabilities $26.0 million, and stockholders’ equity $339.0 million. The filing reports no borrowings; liabilities primarily include operating leases and warrant liabilities. Operating lease liabilities totaled $16.7 million, with $34.1 million of undiscounted future lease payments before incentives.
Material changes and cash resources
- Commercial sales began in Q1 2023, while the comparable 2022 quarter had no revenue. Backlog was approximately $0.2 million at quarter-end; management expected conversion during Q2, but customers may cancel or delay orders.
- Net loss improved year over year, but operating loss widened. Q1 2023 included $3.0 million of other income, largely reflecting marketable-security valuation results, versus $11.5 million of other expense in Q1 2022. Investment gains and losses can make net loss less representative of operating performance.
- Investing activities provided $26.0 million, mainly from $29.5 million of marketable-security sales; property and equipment purchases and capitalized software costs were $2.6 million and $0.9 million. Financing activities provided no cash.
- Management expects existing cash, cash equivalents and marketable securities, together with revenue, to fund operations for at least the next 12 months. It expects negative operating cash flows for the foreseeable future and says future capital needs depend in part on commercialization progress.
Outlook, commentary, risks and unusual items
- Management planned a Carbon product launch in 2023 and anticipated increased spending on sales and marketing, product development and inventory. No quantified revenue or earnings guidance was provided.
- In Q1, the company substantially completed a restructuring affecting approximately 12% of its workforce and recorded $0.813 million in severance and related costs. It said the restructuring was intended to reduce costs and streamline the organization.
- In April 2023, the company said it intended to wind down its Platinum and Carbon contract-manufacturing relationship and transition to a different manufacturer. It expected to place a last-time-buy order and negotiate for certain parts and components; this transition creates manufacturing and supply-continuity execution risk.
- The company is disputing a landlord’s refusal to reimburse up to $9.104 million of New Haven facility improvement costs. It says it believes it is entitled to the incentives, but cannot determine the litigation outcome or estimate its impact on carrying values.
- A Delaware Court of Chancery order in March 2023 validated the company’s amended charter and specified securities retroactively, addressing uncertainty about prior corporate authorization matters.
- Jeffry Keyes was appointed CFO and Treasurer, expected to begin by May 15, 2023; outgoing CFO Claudia Drayton was to assist with the transition through June 30.
- Management identifies risks including early-stage commercialization and customer adoption, product development and manufacturing execution, reliance on third parties, supply constraints and inflation, competition, and the possibility that additional financing may not be available on acceptable terms. It reported no material impairment from COVID-19 and no material legal proceedings, while disclosing the landlord dispute.
Most important facts for investors to verify
- Whether Platinum shipments, customer adoption, recurring consumables and service revenue grow beyond the initial $0.254 million quarterly base.
- Whether the approximately $0.2 million Q1 backlog converted to Q2 revenue, and how cancellations or delays affect reported sales.
- Operating cash burn and the duration of the stated liquidity runway, including the impact of planned commercialization spending and any need for financing.
- Execution, timing and costs of the contract-manufacturer transition, inventory arrangements, and the planned Carbon launch.
- Outcome and potential financial effect of the landlord lease-incentive dispute, and any resulting changes to lease or asset accounting.
- How recurring operating performance compares with net results affected by marketable-security gains or losses and stock-based compensation.