Conference Transcript - XNDU 2026-08-12

Kingsley Crane, Analyst — Canaccord

Hi everyone, thanks for joining. I'm Kingsley Crane, technology analyst here at Canaccord. Really pleased to have with us here today, Xanadu, quantum technologies, and Michael Chrupak as CFO. Thanks for being with us. Thank you, I appreciate it. Michael, maybe just to set the stage, you've been CFO of a number of different companies, a GPU, IPU company, you've helped companies come public through various means.

Speaker 1

What got you so excited about Xanadu, and what did you see in the team and the technology? great question I've been involved taking a couple companies public and when you do that you get exciting opportunities I could put in front of you Xanadu stood out for a couple reasons one was the space I think is really exciting even before I started the company I thought I have history with quantum computing I thought that quantum was going to change the world I still think that's the case As I started to meet the team, one of the things that stood out for me was is that a lot of people can throw out claims, but Christian and the team, Christian's our CEO, have done a number of nature articles that have been peer reviewed. They're the only company that we know of in quantum that has networked their computers together and that was in a nature paper and that stood out as not just something that someone was claiming but that it was real. The second thing was as I dug in the physics is largely resolved we're now down to engineering issues and so from a long career in technology when you're past the underlying technology and it's not to say that there's not refinement that doesn't need to be done but when you're starting to work on the engineering that's a really good space to be at and then finally for those you know there's probably many of you who have met Christian I think Christian has a phenomenal reputation in the industry he's a truth teller and I would say that was what I perceived from the outside and six months seven months whatever it is at this point I would say it's exactly the same way so it's just a great company culture yeah one of you mentioned how he's a truth teller

Kingsley Crane, Analyst — Canaccord

And so I think one of the things that he does that's maybe more candid than other quantum CEOs is he says, well, you know, there could be multiple modalities. We respect some of our competitors and we're really convicted of what we're doing in terms of maybe let's translate some of the benefits of photonics kind of into what investors can understand or what you can, what gets you excited about it.

Speaker 1

So something like room temperature, maybe like why that could make this approach cheaper or access to existing semiconductor. fabrication yeah just like you know why this could be financially a better approach amazing you almost answered the question for me so I appreciate that you know the lovely thing about photonics is that photons are just light we are being bombarded with photons as we speak here photons if you think about the optical industry telecommunications industry it's we're building upon the backbone of that industry we're using the same fabs that the telecommunications industry uses but we're you know we're using the same interconnects but we're pushing the boundaries so the margins in order to get to the tolerances that we need for a commercial grade quantum computer beyond what's there today but we're not having to reinvent since that's you know that's a very strong starting point but you hit on a couple of the the big points one is that photons are light nothing travels faster than the speed of light. The other modalities are using electrons, ions, those travel at two to three percent of the speed of light. So what that translates to down the road is faster operations, faster gate speed, so you have faster compute. You talked about the room temperature. The very beginning of our process we have to super cool in order to and isolate a photon, but beyond that the rest of our process that is at room temperature if you were to come to the 29th floor of our building you would see exactly what I just described you would see our networks computers all in room temperature you can touch it you're not going to burn your hand or freeze your hand whichever way you want to look at it so that's a big advantage and then going back to my original point the scaling is a huge advantage because you have photons that are talking to photons you don't have to convert an electron to a photon a photon back to electron for them to talk and so that enables you as you network the computers to take

Kingsley Crane, Analyst — Canaccord

advantage of that scale and in a very powerful way so there's a couple road blocks that we want to get through into quantum as a whole yeah photonics as a whole and then one of those was you know could we even build modular connected systems and network them together in quantum and that was something that that Xanadu approved um with Aurora and that was a big step for the company so like how did that accelerate the roadmap and then how did that help the team get conviction that you know we want to be more aggressive and we think we can you know now reach fault tolerance in more of that 2030 time frame just like thinking about that roadmap yeah if you if you think about it from a CFO perspective and you think about like the investment that you have to make um Christian you know he's

Speaker 1

our CEO but also our CTO he's the you know the technical leader behind all this he would say there's two challenges one is you have to get your computer to enterprise grade where you have the computational power and then the second is you have to get them to talk to each other when you solve one of those two problems that means you've narrowed it down to just having to work on the other one and so Christian and the team now have the ability to take our quantum some computers and networking as far as they want, as many computers that they want. It allows us now to just focus on our biggest issue, and I think that what you're talking about, specific to quantum is loss, and it's the loss of a photon that happens. Like loss is, if the fact that we can see light means it's lost, it's hit our eyes, and in a quantum computer, when you have that in a state that you now are transmitting information and then that gets lost that's why it's unreliable and so what Christian and the team are working on over the next couple years is how do you reduce that loss and they have 17 different levers that they're pulling to work on that and then there's also error correction algorithms that you work in combination and so those two things are the roadmap to getting to our enterprise grade commercial data center down the

Kingsley Crane, Analyst — Canaccord

road and I would just throw in a shameless plug here which is on the 31st of August Christian is having a company's having a analyst day and Christian's actually going to lay out in more detail his vision for the loss roadmap and what are in our data center so if you're interested at all I encourage you to watch our webcast or attend in person in New York that will be really looking forward to that there'll be a big moment for the company for investors as you know given the commercial state of quantum and where you know the commercial state of Xanadu and thinking about that path maybe you could help us think very very broad strokes about how you invest in front of that primarily R&D but then thinking about talent capital equipment and then

Speaker 1

of course like going public was a big moment like how has that changed the ability to to acquire talent or just interest in the company yeah there's a lot to unpack there I would say if you just think about from the simplest in terms of investment Christian and the team even before we got there have been very disciplined they want to prove out before they go on and spend money in the next space so we're currently in the stage where we are investing in talent but in a different way than we have in the past we're still hiring some PhDs physics PhDs but as I said a lot of the a lot of the physics is is done at this point we're now hiring engineers that are packaging engineers fabrication engineers network connectivity engineers so we're getting we're now solving engineering problems and to the last part of your question when you have a stock that's tradable you know that's a tool that you could use for recruiting so it's certainly helped from that perspective and being a public company of course gives any company credibility so it helps with people coming into the company it's part of the reason I'm here is because of the credibility of it being a publicly traded company but the other thing that going public enabled is it you know we raised over 300 million dollars in the transaction it's allowed us one of the big things that we need to do is get iterations wafer runs tape outs to optimize our processors and so it's enabled us to accelerate that and that's the way as we engineer it as the engineers work through this problem and reduce the loss that's the method it's really that not any more complicated than that is just continue to iterate until you reduce that loss and end up with a pot of gold at the end if you've done it successfully.

Kingsley Crane, Analyst — Canaccord

I'm Marty. So I'd be remiss not to mention software. Pot of gold somehow made me think of the pieces too. But great name. But so that's such an important part of the platform and 35,000 active users, I think 200,000 monthly downloads. I was just in Waterloo a couple weeks ago and got to see some of the software in action with real users and they were excited about it. But just how much of an asset is that for you? Is it a latent asset? Is it something that you could monetize? Or just like how does that complement the hardware path?

Speaker 1

Yeah, I think it's a tremendous asset for a couple. One is obviously I haven't, the company's 10 years old. It just celebrated its birthday over the weekend. I obviously haven't been there the entire time. But it was an important tool because the software enables human beings to interact, engage with the quantum computer the same way that like Windows OS did or CUDA does it's and it's the us and IBM had the two largest more used software in the industry it was from a very practical standpoint something needed by the company in order to run quantum computers but it also serves a couple other values is our software can work on any modality we know that it's being used on other modalities we hear this but it's also been a great vehicle because potential partners are working on Penny Lane with or without you know our modality and it's brought them in and it's been a great way for people to know about Xanadu and then the other thing is is we're it's being taught at over 150 universities around the world and so we have the next generation of quantum scientists that are learning to use the software and it's becoming you know just part of how they get their job done so in the short run it's I don't think we've made it clear it's you know it's open source anyone can download it at some point as you get to an enterprise grade data center you know fortune 500 companies if they're gonna be in your data center they're gonna to probably want an enterprise grade software so you could see a path at some point that it could become a some something you can monetize but for the time being we're very happy with it being open source we're very happy with the partnerships that helps create and we're really happy that it's training another generation of quantum scientists as they're right you know through their you know through their training and so as a point of reference the lab that we visited they were working with Trapped Ion so it definitely has used with multiple hardware modalities I mean you mentioned training at universities there's also kind of training at the corporate level there's a partnership with Lockheed Martin you've had a good relationship with them for quite some time but they made the decision that they'd like to you know help use Penny Lane to train the workforce so maybe just think about like the corporate opportunity there as well and like where that could go yeah I'll kind of answer that is generally it's it's broader than just Xanadu so any quantum company if you you know pick your favorite AI tool and ask it the question and there's verticals that people can see financial services pharmaceuticals materials automotive where the algorithms what makes a quantum computer different is they can solve these really complicated algorithms really complicated problems that would take the world's fastest supercomputer like seven million years and now could be done in minutes on a quantum computer this is really interesting to companies in these different verticals because they can now attack problems that they haven't been able to do before and the reason why we're very focused on partnerships is is the development of those algorithms and how they're leveraged when you have the at scale the commercial data center having those in place enables the benefit of those computers and so we're very focused you name some of those there's others that are on our website you can look them up but we're very excited with these partnerships because

Kingsley Crane, Analyst — Canaccord

it's enabling what's around the corner once again that pot of gold that's how you enable it that's gonna happen on top of our penny line software and it's gonna happen on our hardware so you know we're quite excited about the about the future here so certainly capital markets that's why a lot of us are here right now but there's also government funding and there's a vast landscape out there right now and then there's you know a well-vetted program with DARPA QBI yeah participate in there's Canada's project optimism there's various other Canadian programs and more coming I mean we saw chips act like it was a big big event for the space but maybe just how you view funding as part of your capital

Speaker 1

stock and then you know like how they could fund that the total build out towards 2030 yeah obviously there's conventional funding as you know as many people are aware and we're always exploring that what's in the best interest for shareholders and for the company but the governments you know governments it's not just in the United States and Canada governments around the world are understanding the importance and what can happen with quantum technology. We've been very successful working with both Canadian and the US governments. We've been very open that on our latest earnings call Christian talked about being in the final final stages with the Canadian government so something may or may not be imminent there and we also talked Christian talked on the call about DARPA stage C. We've been very engaged with the DARPA program are in B at this point we're about to have a another big meeting with them so the company is quite optimistic that we could move into DARPA stage C and if that were happen you know that could be up to another 300 million dollars so I think between a mixture of conventional financing and government you know financing I think that there's a number of avenues for the company to support the capital that's required to get to the to the commercial data center maybe just a quick comment on that too like how maybe talk about the milestones that may or may not need to be hit for different types of funding and like how you if if there are milestones how you balance achieving those and proving the milestone versus maybe proving what you think your roadmap needs to prove yeah without getting into gross detail there like i i think that they're they're synonymous like okay uh at the end of the day the goal is to get to a functioning high fidelity quantum computer so both goals like the company goal and the government goals are are tied I don't know I think it certainly helps us become sharper anytime you're working with others and people are looking at you from the outside it sharpens the tool of course but I think that there's just a natural alignment because the goal Christian at the end of the day If he does not deliver a high-fidelity, enterprise-grade commercial data center to the world, I think that he will go to his grave thinking that his life is a failure. He's one of those personalities that's just so passionate about what he does.

Kingsley Crane, Analyst — Canaccord

The governments are great to work with, but I don't think anyone needs to motivate Christian to get to the finish line here, or the starting line, whichever way you want to look at it. right yeah certainly no motivation needed it's all intrinsic but we've had an expansion into Albany recently and there's a deep rich history of talent in northern New York or in upstate New York relative to quantum so you know Canadian company primarily but maybe just talk about the strategy there what that's opening up for you just plans for that region yeah I'll answer that question kind of a little bit more more broadly many of you may not know my history I've spent a lot of time at the beginning of my career at Intel and

Speaker 1

Microsoft 17 years between those two companies you know one of my learnings because I was always on the hard work side even at Microsoft and ironically I was there at the Genesis when Microsoft started working on quantum computers I kind of back in the late to 2000 zeros however you say that you know I started getting involved and here I am back in it but one of the things I learned from that experience is we used a lot of outsource manufacturing and the biggest mistake people made was just throwing stuff over the wall where outsource manufacturing worked really well is this when you actually treat it like your factory and you really collaborate and that's where you get the best outcomes what's going on in Albany is a good example that we have people on premise they're sitting by side by side with the employees and they're working to really push the boundaries here and if you just you know you go back to my my life experience here that's how you really solve problems that's not throwing stuff over the wall not throwing a statement of work that you want someone to work on it's actually working together and this is truly one of the things that's great about working at Xanadu is we are a tractor of talent we have we pull people in from around the world and I I think you'll continue to see these type of collaborations because this is really how things get solved so Xanadu not entirely pre-commercial but early in revenue

Kingsley Crane, Analyst — Canaccord

generation and it would help us to understand why I mean give it the vast opportunity that's in front of us that why revenue is not the primary metric? Because some quantum companies say that. Not all do. And some have acquired various quantum adjacent assets and are selling systems to government buyers. But yeah, just maybe help us decompose that.

Speaker 1

Yeah, I think it's, you know, it's, we've been here for a day and half met with a number of investors. I've certainly gotten this question a few times. I've gotten this question from you in private many times. I think it's first and foremost that the opportunity and you can you can look this up there's various sources and you know the billions and billions of dollars once you get to that commercial data center that's there I tend to believe that and everyone has their own investment thesis but I think a lot of people are investing in Xanadu and other quantum companies because I call it the pot of gold but That's such a huge opportunity, and you have a finite amount of time in the day, a finite amount of resources, and Christian's been very focused on making sure that we realize that data center at the end. It's not to say, you know, we have some revenue, not a lot compared to, you know, some of our competitors. It's not to say that we wouldn't pursue the right revenue, but it has to be synergistic. It has to be something that solves the loss issue, that helps us with error correction, that gets us to that commercial data center. If it's synergistic, we'll certainly pursue it. The other thing is that, my opinion, is that not all revenue is indicative that you're actually on the path to delivering an enterprise-grade data center. and in an industry where the underlying technology is probably confusing to the majority of the people in this room. I've been around the quantum physicists for seven months and I still feel relatively dumb. I can't even imagine if I'm only touching it every now and then. People look at things that they understand historically and revenue growth is something that they look at historically. um it's not necessarily the right indicator that the company a company is on the path and that's why we're spending a lot of time talking about our tech overall map because we think that's the part that matters but history is filled with a lot of companies that started one way and ended up somewhere else so some of these and you know side businesses ancillary businesses could turn into real businesses for some of these companies i just talking to someone today i mean intel started off as a memory company and ended up as a microprocessor company so history is filled with these examples but that's why we're focused and trying to take a valuable partnership and monetize it too soon takes potentially away that opportunity to go deeper on algorithm and algorithm development and collaboration and at some point obviously that tipping point is going to happen but if you get the timing wrong you miss out on those opportunities to learn together yeah so a bit of an awful question here but so you've been through a number of technology cycles and there's a lot of excitement on AI right now we're talking about a quantum data center is the vision that it would be you know we're gonna have CPU GPU GPU and route between those is that this photonics fit seamlessly into that and then like if that happens could this AI capex super cycle pull forward quantum in a way that it may not have otherwise been able to yeah I certainly think to your first part the premise I like I've heard Christian say this I believe it myself like the GPU didn't replace the CPU as many of you know the GPU is we had to visually see what's happening computer so that's what was originally designed for and lo and behold parallel processing turns out to be amazing for AI and so it takes on an entire life of its own Christian would say I would say that the quantum, the QPU, I don't know, that doesn't roll off the tongue, I don't know what it's gonna be, I don't know if it's gonna be QPU, but it's not going to replace either of those. It can solve these algorithms, these very complex algorithms, solve problems that can't be, so they're all going to coexist. The question is, where is that coexistence between quantum and AI? They're solving very different, they're approaching it differently, they're solving very different problems having I just spent three and a half years with a GPU company I know one of the issues that these large learning models are going to have eventually is enough organic date data and so then synthetic data is going to become a thing which is kind of mind-blowing that you're gonna have to create fake data in order to train models maybe that's a place that quantum there's an overlap but I think I think if it's a universe where all three of them coexist and have their space where they add value add value okay really hopeful I mean we 30 seconds so give a chance for questions from the audience if it I mean if there's one all right any any parting words for the audience this has been really insightful yeah I say you know I was excited when I took this job as I've been in here for seven months I believe more than I did when I started that quantum computing in general is going to change the world I encourage people to go deeper learn the space we happen to think that we're going to be one of the winners we think multiple people will win in this space but however it all shakes out anytime you can take something that takes seven million years and do it in million I'm sorry in minutes there's lots of opportunity there big opportunity thanks so much Michael all right thank you