Good day, and thank you for standing by. Welcome to the Quantum SI third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Risa Lindsay. Please go ahead.

Good afternoon, everyone, and thank you for joining us. Earlier today, Quantum SI released financial results for the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. Joining me today are Jeff Hawkins, our President and Chief Executive Officer, as well as Jeff Kies, our Chief Financial Officer. Before we begin, I would like to remind you that management will be making certain forward-looking statements within the meaning of the 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 date today, November 5, 2025. Except as required by law, the company disclaims 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 for GAAP, the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure is included in the press release files earlier today. With that, let me turn the call over to Jeff Hawkins.

Good afternoon, and thank you for joining us. On today's call, we will provide a business update and review our operating results for the third quarter of 2025. After that, we will open the call for questions. I will begin with a reminder of our three corporate priorities, to accelerate commercial adoption, to deliver on our innovation roadmap, and to preserve our financial strength. Our first corporate priority is to accelerate commercial adoption. Our revenue for the third quarter was $552,000, as top-line results continue to be impacted by the capital sales headwinds in the market. As a reminder, during the second quarter, we announced the launch of an expanded set of instrument acquisition options that allow customers to have our instrument in their lab and purchase and run consumables without having to find the capital dollars to acquire the instrument up front. Since launching this initiative, we have had 12 new customers implement our platform and all have made their initial reagent purchases. Importantly, more than half of these new customers are in academic labs, a segment that has been very difficult for us to access in 2025 due to the NIH funding challenges. We are very pleased with these early results and expect to continue to offer these alternative options going forward since we view our growing install base not just as a revenue driver but as a strategic moat. We continue to believe that with every new lab that implements our platform, we will see increasing consumable sales, scientific validation, and customer advocacy. We also believe that many of these customers will be strong sales opportunities for our future Proteus platform. One example of the strategic value of the placement program is the initiative we announced in June of 2025 with the Broad Institute. The goal of this placement was to enable researchers access to our single molecule protein sequencing technology both within Broad Institute and across the greater Boston life science ecosystem. I'm pleased to report that this initiative is progressing well. We have two active projects underway now and another two in the final stages of study design. We would expect those two studies to be initiated soon. In addition, we have executed on educational seminars with local researchers to build a funnel of additional research study opportunities that can leverage this instrument placement in the coming quarters. Turning now to scientific affairs, during the second half of 2024, we communicated that we were increasing our investments in scientific affairs with the core focus being to build our scientific advisory board and develop a pipeline of publications to demonstrate the value of our technology. Developing a publication pipeline takes focus and effort over an extended period of time before it yields results. During 2025, we have had five manuscripts submitted for publication. Two of those have been published in peer-reviewed journals, and the remaining three are in the review process. Additionally, we have a strong pipeline of activity with more than five manuscripts being drafted now, and another eight studies actively generating data that will fuel the pipeline of publications well into 2026. Beyond these initiatives, we continue to monitor and evaluate several partnership opportunities that may assist in accelerating certain components of our development activities, spanning from new customer applications to sample preparation and enrichment, and applications of artificial intelligence tools that could extract deeper insights from the protein sequencing data our system generates. We remain very confident in the long-term market opportunity in proteomics, the initiatives we are executing on commercially to accelerate awareness and increase the size of our installed base, and the technology roadmaps we are executing against to capitalize on the market opportunity in front of us. Our second priority is to deliver on our innovation roadmap. We continue to make solid progress across all of our development programs. Most importantly, today, we announced that we have successfully completed sequencing runs on a prototype Proteus system. We communicated this goal at the start of the year as it represented the single most important milestone for the program to achieve in 2025. And it is not just a single prototype. We have multiple prototype systems performing sequencing and are excited about the quality of the data we are seeing at this stage of the program. As we continue to mature the platform and work through the optimization of our sequencing chemistry on Proteus, we expect the data quality to continue to improve. We look forward to sharing more of the early sequencing data in addition to other Proteus program updates at our Investor and Analyst Day on November 19th. Turning now to our version 4 sequencing kit, we are pleased to share that we achieved the commercial launch of this new kit in early September and completed our first shipments to customers during the third quarter. As a reminder, this new kit includes increased amino acid detection capabilities and the addition of a new enzyme that is engineered specifically to provide high-efficiency cutting of the amino acid directly preceding a proline. This is important because proline is abundant in many vital proteins, such as membrane proteins, antibodies, and transcription factors, and proline-rich proteins are well-known to be difficult to analyze by mass spectrometry. In addition, as part of the Version 4 Sequencing Kit launch, we released an expanded set of 24 barcodes that allow customers to increase the multiplexing level of their experiments while maintaining the same level of analytical performance they have experienced to date with the original set of eight barcodes. Moving now to library preparation, our Version 3 Library Preparation Kit has entered our internal validation process and remains on track for launch by the end of 2025. We are pleased to share that this kit remains on track to lower the sample input quantity requirement by at least 100-fold as compared to our current library prep kit. This lower input concentration requirement is expected to allow our customers to be able to process a broader range of biological samples and to study biologically relevant proteins that are at much lower concentrations than our current library prep kit can accommodate. When combined with the In the V4 sequencing kit, we believe that customers will experience a meaningful level of improvement in overall system performance and be able to pursue some of the more complex biological sample work that to date has been difficult to do with our technology. Finally, I would like to update you on our Amino Acid Recognizer Development Program. As we have previously shared, our Recognizer Development Program has designed and screened millions of candidates over the past few years. As part of that process, we have amassed what we believe may be the richest set of data in the industry about how mutations inserted into engineered proteins affect their binding to N-terminal amino acids, the kinetic properties of those binding interactions, binder specificity, stability, and many other features. We are very excited about our ability to leverage this proprietary dataset in combination with advanced artificial intelligence tools to efficiently scale up the Recognizer Development Program and significantly shorten the timeline to full proteome coverage as compared to our historical trajectory. We look forward to sharing more about this topic at our Investor and Analyst Day on November 19th. Our third priority is to preserve our financial strength. While the capital headwinds in the market are expected to continue to impact short-term commercial results, we are optimistic about the early traction we are seeing with our placement program and the opportunity to continue to grow our customer base using this approach. We firmly believe that a large and small base of active users is a strategic advantage that will position us well for the future launch of Proteus and ultimately create long-term value for our shareholders. Finally, we believe that the current capital market has and will continue to impact otherwise good companies and product lines. We believe our strong balance sheet positions us well to execute on strategic opportunities that may arise based on the current market environment. We will continue to monitor and review all potential options that could accelerate or be additive to our long-term strategic initiatives, including opportunities that could broaden our participation in the overall multi-omics marketplace. I'll now turn the call over to Jeff to review our financial results. Thanks, Jeff.

Now I'll review the details of our operating results for the third quarter of 2025. Revenue in Q3 2025 was $552,000, which consisted of revenue from our proponent line of instruments, consumable kits, and related services. Gross profit was $194,000, and gross margin was 35%. As I've said in the past, our gross margin percentage will be somewhat variable for the foreseeable future, as we work through our continued commercialization efforts and may be impacted by the timing and mix of instruments versus consumable sales. Our margin has also been impacted and may continue to be impacted by the acquisition costs and accounting adjustments to underlying inventory, some of which predates the commercial launch of the Platinum line of instruments. For the nine months ended September 30, 2025, revenue was $2.0 million and gross profit was $1.0 million and gross margin was 52%. Adding to what Jeff mentioned earlier, our year-over-year revenue was impacted in the third quarter by continued capital market headwinds driven by uncertainty in NIH funding affecting the macro market. We were impacted partially in the first quarter by this concept, but have felt the full effect in the second quarter and third quarters. By introducing the alternative capital acquisition models, including the placements Jeff referred to, we will continue to broaden our installed bays. While these placements do not generate instrument revenue associated with the delivery of the unit, the underlying consumable volume creates revenue, and more importantly, awareness in customer data as volume increases. Turning to operating expenses, GAP total operating expenses for the third quarter of 2025 was $40 million compared to $28.5 million in the third quarter of 2024, while adjusted operating expenses were $21.4 million for the third quarter of 2025 compared to $26.0 million for the third quarter of 2024. For the nine months ended September 30, 2025, GAAP total operating expenses were $96 million compared to $78.9 million in the same period in 2024, and adjusted operating expenses were $68.1 million compared to $72.3 million for the same period in 2024. Overall, adjusted operating expenses decreased year over year. This decrease continues to highlight our very tight cost controls we have for the organization while still funding innovation and significant development progress of our Proteus platform and other programs that did not exist in the same period of 2024. Of note, included in our GAAP total operating expenses for the third quarter is an expense of approximately $13.6 million that represents the accounting adjustment of a net termination payment and related asset write-off associated with the lease facility in New Haven, Connecticut that would have originally expired in 2032. In September, we settled our previously disclosed dispute with the landlord regarding unreimbursed tenant improvement funds and as a part of this settlement terminated the lease. The net incremental cash outlay associated with this termination was $10.2 million. By terminating this lease now, we saved over $24 million of future operating expense associated with the lease. Next, our dividend and interest income in the third quarter of 2025 was $2.6 million compared to $2.7 million in the third quarter of 2024, and $7.4 million in the nine months ended September 30, 2025, compared to $9.1 million in the same period in 2024. Overall, this change is reflecting lower interest rates year over year, as well as relative lower invested balances. As of September 30, 2025, we had $230.5 million in cash, cash equivalents, and investments in marketable securities. Regarding 2025 guidance, we expect adjusted operating expenses will be $96 million or less, and total cash use will be $103 million or less. Previously, we had indicated that we would utilize $95 million of cash, which was before we completed our termination and settlement agreement related to our New Haven facility. This updated number of $103 million is inclusive of the net $10.2 million payment under the lease termination agreement, meaning outside the lease termination, we are falling below the previously communicated $95 million of cash, highlighting our continued focus on most efficient use of our cash possible. This lease termination payment is not expected to affect our long-term cash position or runway because, as I mentioned, we will now avoid over $24 million of operating expenses associated with this terminated lease. In late September, we filed a Form S-3 shelf registration statement for $300 million total capacity and also an at-the-market facility, or ATM, that utilizes $100 million of that shelf capacity. These two vehicles are intended to provide capital capacity for the company to support business and strategic initiatives and are ultimately appropriate good housekeeping to have in place. Going forward, we will continue to ensure the company is appropriately capitalized to execute on strategic plans and maximizing value for our shareholders. As a company, we are fortunate to have broad ownership of our stock, which includes, at present, roughly 38% retail ownership. Having this broad ownership is one of our strengths, and we appreciate the interest and support in Quantum SI. I do monitor major retail message boards to understand what new or compelling concepts might be important to our retail holders, and we'll do our best to address these questions and concepts in future calls and presentations. Two comments that have come up periodically surround overall company ownership of management and directors and why certain management team members have recently sold stock in relation to Form 4 filings. First, as of the most recent look, our management and board collectively held approximately 18% of the total outstanding stock of Quantum SI, showing our continued deep investment in the success of the company. regarding share sales as you know part of the management team's total compensation is provided via equity grants including restricted stock to continue to align management incentive with shareholder value and return as these restricted shares experience scheduled vesting events a certain number of vested shares are mandatorily sold as part of our stock plan design to cover estimated withholding taxes, which is the reporting that can be seen via Form 4s. Looking back for 2023, 2024, and 2025 year-to-date, no ongoing reporting management team member has sold company stock outside these mandatory redemptions to cover taxes for vested restricted shares. Again, we appreciate the broad ownership and interest in the company, and I am always available to have discussions regarding the company strategy development programs or anything else to more educate our shareholders now i'll turn the call over to the operator to open the line for questions thank you at this time we will conduct the question and answer session as a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw your question please press star one one again please stand by while we compile the Q&A roster.

First question comes from Kyle Mixon with Canaccord Genuity. Please go ahead.

Hi, this is Alex, your case number one for Kyle Mixon. Thanks for taking our questions today. So to start, could you elaborate on what you'll discuss the investor data in November? And importantly, we provide some key updates on the development of the Proteus sequencer. And when might we see some data generated from this instrument? Moreover, do you think that the enhanced performance and throughput of this instrument should unlock new applications that increase the utility of protein sequencing across multiple end markets?

Yeah, thanks, Alex, for the question. So, you know, at the IR day coming up here on November 19th, in our prepared remarks, we said, you know, we'd provide more of an update on Proteus, including some of that early sequencing data. So, to your point, that'll be your first look at the data we're generating that we mentioned today we'll provide an update on our recognizer development program and very specifically where are we at with that program where do we think we'll be in terms of our proteome coverage at the launch of Proteus and you know when do we think we'll get to all 20 amino acids so you know a few big sort of data points out there that we expect to provide more clarity on how we're thinking about getting to those key milestones and i think to your last point part of our investor day we would expect to provide sort of a view of the milestones that we would achieve and be able to talk about throughout 2026 so some of those could be r d oriented in terms of progress with proteus and others of those will be more commercially oriented things like early access sites list pricing of the machine, those types of milestones. So we'll give sort of a good calendar of milestones for 2026 sort of on that road to launch of Proteus at the investor day as a way to give you sort of a way to measure where we're at and how we're progressing against that launch.

Great. Thank you.

Switching gears a bit, the Delta has initiated the PROS program to demonstrate molecular leaders can accurately read a broad range of amino acids and ptms in sequence for unknown protein samples just curious if you're able to comment on any level of involvement plus interest you have in this program thanks yeah so we're aware of the program alex we've participated in some of the industry and academia um sort of uh interactions advisory boards sort of roundtables whatever you might want to call them um on the topic you know darpa has a if you've read the the pros program it has a pretty heavy tilt towards trying to build a micro system which is essentially some very sort of portable uh sort of approach um you know that's not really what we're building so we're we're certainly engaged with um darpa and have engaged in that process, but I'm not sure that our approach, which is really seeking to have the sort of throughput and capabilities that you need in research and translational labs, that doesn't really perfectly match that sort of microsystem strategy. I think the other important thing to remember, we've talked on previous calls, we have instruments in the major Department of Defense labs right now. Those are in military labs that do proteomics research. Those folks have been leveraging our technology to work on, you know, their initiatives. I suspect some of those are, they underlie what, you know, perhaps DARPA is trying to achieve with pros. And we are aware that, you know, those customers are looking to, over time, release some of the data and findings that they're getting with our technology so you know we might not be a perfect fit for the pros project as as described but you know very importantly and and where we're really focused is supporting those existing department of defense installed machines and really supporting those customers who are doing the work of really looking at how to apply these technologies you know in their areas of sort of strategic importance.

And one last one for me, on placements this quarter, can you break down just either quantitatively or qualitatively where the bulk of them went, biopharma, academia, and then just in terms of end markets and customer types, were you seeing some bright spots and where are you continuing to experience, I guess, continued pressure? Thanks.

Yeah, so I think, you know, as we mentioned in our prepared remarks, The one advantage of opening up sort of the different ways to acquire our platform is it really did give us access to some of those key academic centers, both here in the U.S. and in key areas in Western Europe that we had more challenges getting into recently, certainly the ones here in the U.S. with the NIH funding. So, you know, more than half of those placements went into academic labs. The other half were sort of split across a mix of pharma and biotech and even into ag or agricultural sort of testing. So, you know, a good mix, but, you know, a little more than half of those in the academic setting. I'd say what we're seeing in the market is, you know, hasn't changed dramatically. You know, biotech and pharma is still moving forward and making capital purchases, albeit on a longer sales cycle. We see a sales cycle in that segment that's, you know, around nine to 12 months. It's a pretty long cycle, but once in, you know, they're a good sort of routine user of the technology. I'd say academia has been sort of the slowest area with, you know, with the challenges around the capital side. Again, placement sort of opening up that opportunity, but amongst our install base and this placement base, people do have consumable budgets. So, as I mentioned in the remarks, all of our placements, those customers have purchased their initial kit. So, we are seeing consumable budgets there. It's really more the capital side, and we're going to keep using the placements to drive, you know, more penetration into all the segments, but obviously a pretty heavy focus on getting, you know, deeper and deeper into the academic setting. you know the big advantage in that setting if we think about sort of those the bigger goal right to really show the validation of the tech and build the momentum into Proteus is academic labs you know our prolific publishers and some of your pharma and biotech customers you know don't tend to publish as much of their findings so that placement program really is key to getting to those customers not only for them to get comfortable with the tech but to really have that flow of data into the market through publications.

Great, Colin. Thanks.

Thank you. Our next question comes from Scott Henry with AGP. Please go ahead.

Thank you. Good afternoon. A couple questions, if I could. First, you know, historically, fourth quarter has been an up quarter over third quarter, but a lot of different variables this year. I don't know if the shutdown impacts some of your customers. But I just want to get your sense of how we should think about that typical seasonal trend from third quarter to fourth quarter.

I would say if you think industry sort of historical, I think your sort of analysis is correct. actually tend to see some improvement in the fourth quarter. I think in what we might call normal years, where we haven't had some of the geopolitical challenges, the NIH funding uncertainties, you know, sometimes Q4 can really be a healthy step up for businesses. I think this year, based on everything we're hearing from, you know, our colleagues in other companies, what we're hearing from customers, you know, I think we're not going to see that huge upswing. I think we might see a modest improvement in Q4 as maybe a few people who have budgets are able to use them, but I don't expect it to be as sort of a significant of a step up as maybe we've even seen historically, you know, Q3 to Q4.

Okay, great.

And on the political front, I know we were waiting to to get an NIH budget uh do we have any updates there and you know how does the shutdown impact uh that funding well i mean the where it last left off that we saw was you know the the proposals that were routing on the congressional side um certainly looked to retain NIH funding at, you know, sort of a flat to more marginally down from the prior year, certainly a much better potential outlook than what was proposed by the administration. But obviously with the shutdown, there hasn't really been any progress moving those resolutions forward through Congress. Obviously the focus is clearly on, you know, some sort of way to reopen the government uh through a continuing resolution so you know not really any more to to say other than you know at least what was moving through the congressional committees was more positive i think the other item um scott that we've talked about before and i know others have talked about the other thing that's out there that no one really has a good feed on yet is what will you know once that budget's in place you know how will the administration and and sort of payments of those grants go will we see a more steady consistent sort of set of behaviors there or will we continue to see some of the rescissions that we have observed earlier this year in 2025 some of those rescissions you know sort of create a chilling effect on academic customers so I think that's still something to be seen but you know first we need to get through this shutdown process, so those bills that were moving through the process that looked to retain, you know, a better level of funding than originally thought, you know, get actually enacted into law and can move forward.

Okay, thank you for that color. Just the final question, certainly great milestone as far as running sequencing runs on the Proteus. The question is, what are the hurdles left, the key hurdles between where we are now in getting to market launch?

I'll give you a little flavor here. We'll get into it in more depth at our analyst day, and we'll have some of our key R&D leaders there, Scott, and you're more than welcome, obviously, to ask questions, and they can answer that from their perspective. You know, I would say the first thing to say is, you know, we announced this program in November of 2024, and we said we would launch it by the end of 26. So, you know, it's slightly more than two-year program, which in our industry, you know, it should not go unsaid that that is sort of an extraordinarily aggressive timeline for such a big sort of platform evolution. I think it's a testament to the quality of R&D teams, leaders, sort of processes that we have here that we've achieved this milestone on time. And we laid this milestone out, you know, almost a year ago now and hit this milestone. So we're very excited about the milestone. I think as you look forward, you know, we have to now scale from prototypes into, you know, fully integrated systems. you have to harden those systems off and move those through into the manufacturing you know sort of sort of processes and bring up so you can do this at scale you have the integration with the chemistries um and optimization for that platform so you know a lot of what i would call um you know integration um you know manufacturing bring up optimization and really then intersecting the hardware and consumable with all the work we're doing you know in in library prep and with sequencing so we'll talk about some of these different uh sort of parallel streams that we were looked to have um you know all intersect at the launch of proteus but um i think the this milestone is important because it says you know we have an architecture that works we have the ability to use our current chemistry on that so i think that takes a big risk off the table, you know, as compared to brand new platforms that haven't yet demonstrated dysfunctional level of performance.

Okay, great. Thank you for taking the questions.

Thanks, Scott.

Next question comes from Charles Wallace with HG Wainwright. Please go ahead.

Hi, this is Charles done for RK.

Sorry I missed it on the call, but could you share how many academic centers have enter the placement program and is there an internal target that you guys are trying to reach in this program so you know as the the data we gave was of the 12 placements we made in the quarter you know a little more than half of those were academic in terms of a target we don't really have a target Charles for you know how many accounts you know we want to try to access I think our view has been you know be in the market with our with our sales folks you know when there's opportunities to sell capital we do it but where we where we think it's a very important center you know an opportunity to generate you know great data and get it published we can leverage this placement program we expect to continue to do that in the fourth quarter and I think in terms of you know if you flash forward what are we going to do in 2026 I think we're still sort of pulling our plans together there for exactly you know how far would we continue to push this placement program during 2026 I suspect we'll continue to do it in some fashion but we haven't really set a sort of a ceiling or a target number really what we're focused on are those you know high valued you know important sort of academic centers or even into other segments in in biotech you know that that pipeline of publications and really trying to look for the for the folks that with experience with our tech would be good targets for proteus you know we want this to also really help us build a pipeline as we go into the proteus launch um later this year so continuing with the program as is and um you know as we get into early 26 we'll be able to provide a little more color on you know if there's any sort of caps we're going to put on that or how we're thinking about it you know throughout 26.

Fantastic thanks for the color.

Thank you. I'm showing no further questions at this time. I'd now like to turn it back to Jeff Hawkins for closing remarks.

Thank you for joining us today. We look forward to sharing more updates on our Proteus program to recognize the development program and other R&D pipeline initiatives at our Investor and Analyst Day on November 19th in New York City. Thank you.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect