QUBT - NASDAQ

Ladies and gentlemen, greetings, and welcome to the Quantum Computing, Inc. Second Quarter 2025 shareholder update call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the call, please note this call is being recorded. Following management's remarks, the call line will be open for questions. It is now my pleasure to introduce your host, Rosalyn Christian, with IMS Investor Relations. Thank you. I want to welcome everyone to the Quantum Computing, Inc. Second Quarter 2025 Shareholder Update Call.

Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements.

As part of our efforts in the quantum computing space, we are not chasing theoretical performance. Instead, we are delivering purpose-built machines and the components that customers are deploying today. Our growth strategy is centered on two complementary revenue streams. First, our quantum machines, which tackle complex optimization, machine learning, and sensing challenges across areas like biomedical research, transportation, and national security. And second, our syncing niobate photonic funding, which delivers essential components for next-generation communication, AI, and quantum applications. These two key areas uniquely position us to serve both the present and future needs of the quantum economy, supporting long-term growth. We are operating in a space that is entering a period of rapid acceleration. The world is increasingly aware of the critical role quantum technologies will play in enabling breakthroughs in areas like climate science, defense, drug discovery, and secure communications. In parallel, there is strong momentum around domestic semiconductor and photonic manufacturing, opening up new commercial opportunities for our foundry. This is a period of time for the industry, and the Q SaaS business is scaling to meet the demand. Importantly, QSight stands apart with a quantum architecture that offers significant SWaP-C advantages, including the ability to operate at room temperature thanks to our integrated photonic platform. At a time when energy consumption has become a major constraint on the growth of AI and digital infrastructure, our room temperature, energy-efficient approach offers a timely and compelling solution to one of the most pressing challenges facing the tech industry today. Now I will walk through some of the key milestones we have achieved this quarter. First, we continue to see encouraging signs of commercial traction across both our quantum and photonic production lines. During the quarter, we secured an order for our quantum photonic vibrometer from the Department of Aerospace Structures and Materials at Delft University of Technology in The Netherlands, one of the world's top technical research institutes. This system will advance their work in nondestructive testing and structural health monitoring. We also shipped our first commercial entangled photon source to a leading research institution in South Korea. This system enables secure quantum communication experiments over conventional fiber networks and marks an important step in bringing our lab-developed quantum networking technologies into commercial deployment. This quarter, we saw new traction in our Quanti AI portfolio. During the quarter, a major global automotive manufacturer purchased one of our EMUCORE reservoir computing systems, which will be used to explore edge-based machine learning applications such as time series prediction and image recognition. This is an important proof point for the real-world use of our reservoir computing platform. Subsequent to the quarter, in July 2025, we announced a new commercial order from a top five US bank, marking the first domestic commercial sale of our Quantum cybersecurity solution, underscoring recent demand for Quantum's secure data protection. We also advanced our work with strategic government partners. During the quarter, we were awarded a subcontract valued at over $400,000 to support NASA's Langley Research Center. Under this contract, we are applying our direct three quantum optimization machine to develop a quantum-based technology for removing solar noise from space-based LiDAR data, an issue that has historically limited NASA's ability to collect reliable atmospheric observations. This builds on our prior work with NASA and highlights the real-world value of our quantum systems for scientific applications. Continuing to be a significant partner to government institutions remains a key goal for us. We continued to make progress subsequent to this quarter, announcing a thin film chip contract from the US Department of Commerce National Institute of Standards and Technology last week. Turning to our foundry, developing those chips, we announced on our last call that construction of our state-of-the-art quantum photonic chip facility in Tempe, Arizona, was completed in March. In May, we celebrated the grand opening with a ribbon-cutting ceremony alongside Mayor Corey Woods and regional industrial stakeholders. The facility is now fully operational, fulfilling customer preorders and positioned to scale production of thin film lithium niobate chips for use across telecom, advanced sensing, and quantum computing. As we scale the foundry, we expect revenue to slowly grow, targeting a significant revenue contribution in the next twelve to eighteen months as we ramp. We look forward to providing more updates on our foundry strategy later this year. We also made several key leadership appointments during this quarter to support our next phase of execution. I was honored to step into the role of interim CEO. We welcome Chris Roberts as our new Chief Financial Officer. In addition, we promoted MiLai Begley Bakeoff to Chief Operating Officer and Puya Diana to Chief Revenue Officer. Each of these individuals brings deep expertise and a focused leadership team, and they are already making meaningful contributions as we scale the business. Finally, we are proud to be added to the 3,000 and 2,000 indices at the conclusion of their annual reconstitution in June. This inclusion increases our visibility across institutional investors and reflects growing recognition of QSight's progress and potential in delivering commercially relevant quantum and photonic technologies. With that, I will turn the call over to our CFO, Chris Roberts, to walk through our financials.

Thank you, Yuping. It's my pleasure to present the results of our second quarter. Revenue during our second quarter totaled approximately $61,000 compared to $183,000 in the prior year second quarter. Our gross margin for the second quarter increased to 43% from 32% in 2024. However, it's important to keep in mind that gross margin continues to be variable at our current revenue level. We substantially strengthened our capital position during the second quarter, closing on a $200 million financing in June. As a result, we ended the second quarter with cash and equivalents of $349 million on our balance sheet. This gives us the resources to make strategic investments in key growth areas to advance both our quantum machine program and our thin film lithium niobate chip foundry initiatives. Operating expenses for the second quarter totaled $10.2 million compared to $5.3 million in the same quarter last year. Employee-based expenses were the main driver of the year-over-year increase. The company reported a net loss attributable to common stockholders of $36 million for the second quarter, or $0.26 per share, compared to a net loss of $5 million in 2024. The increase in net loss this quarter was primarily due to a $28 million non-cash loss on the value of our company's warrant-related derivative liability, which comes from our merger with Q Photon in June 2022. For the six months ended June 30, 2025, the company reported a net loss of $19.5 million or $0.14 per share, compared to a loss of $11.6 million or $0.13 per share in the first six months of 2024. As of June 30, 2025, total assets stood at $426 million, up from $154 million at the year-end 2024. Cash and equivalents increased by $270 million in the first six months of 2025, bolstered by net proceeds of $188 million raised in the second quarter through an offering of common stock. Total liabilities at the end of the second quarter were $30 million, which is a decrease of approximately $16 million compared to year-end 2024. This decrease is driven primarily by the previously mentioned non-cash mark-to-market adjustment for the Q Photon warrant derivative liability. Finally, stockholders' equity rose to $396 million as of June 30, 2025, again reflecting our strengthened capital position. Now I will turn the meeting back over to Yuping.

Thank you, Chris. In closing, I wanted to thank our team, partners, and shareholders for their continued support as we execute on our vision. We have made significant progress in the first half of the year, particularly in translating our technology into commercial traction across quantum sensing, AI communications, and photonic chip manufacturing. As the broader quantum ecosystem continues to evolve, we believe QSA is well-positioned with differentiated technologies and a focused strategy to deliver real-world solutions. I look forward to what we will accomplish in the second half of 2025 and beyond. With that, we will now open the call for questions. Operators, please go ahead.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, while we poll for questions. Your first question for today is from Troy Jensen with Cantor.

Hey, gentlemen. Congrats on all the traction here. Maybe first off for Yuping. I guess, I'd be curious, you know, to me, revenues aren't really important. They won't be for several years to meet the technical milestones. So could you just kind of lay out, you know, what are the two or three most important milestones that we need to see from you guys over the next one to three years?

Thank you, Troy. Over the next two to three years, in fact, our focus would be to integrate our quantum machines with our nanophotonic chips. So that has been our technology roadmap, and as you have seen, over the past three years, we have really pushed to testing and to demonstrate the quantum machine using discrete optical components. And then in much of 2025, this year, we have finished our template written by the foundry, and then now that gives us another platform for us to translate our quantum photonic technology that we have demonstrated with discrete optical components to on-chip. So over the next two years, we are going to use our same thing based on the bay nine bay nanophotonic chips in our direct machine, and use it to enhance the performance of our photonic reservoir system. And also to use for our quantum sensing system, and in particular, the quantum photonic vibrometer. So with the integration of nanophotonics chips, we can expect to significantly reduce the size, weight, power, and also the cost of our quantum machines. And we will also be able to boost the performance. Meanwhile, our foundry can not only support the further development of our quantum machines but also offer services to others. In fact, we have received preorders and orders for our foundry services. So this is going to be a pretty fun ramp-up journey for us over the next two years.

Yep. Understood. Good answers. Maybe a follow-up here for Chris. Just curious on OpEx. I mean, obviously, you guys have a much larger balance sheet now. And is there any intention to accelerate spending or do M&A, or just kind of maybe give us some color on what you think the second half R&D and G&A expenses might look like?

Well, it's a good question, Troy. We are certainly hiring additional people. You can see from the results we've announced that our labor costs have grown quite a bit since last year. We're bringing on additional engineers and sales staff and moving to accelerate the development of our technology. We do not have anything to announce relating to acquisitions, but as we previously stated, looking at strategic opportunities is part of the plan, and we're in the process of talking with bankers and looking for opportunities that will enable us to fill out our technology roadmap, as well as accelerate revenue generation.

Yeah. Understood. Okay. So keep up the good work.

Thank you.

Thank you, Troy.

As a reminder, if you would like to ask a question, please press 1. We have reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.

Thank you, everyone, for joining and participating in today's call. I encourage you to follow us on our social media channels, including LinkedIn, where we regularly post updates and insights into our business and the technology. Should you have any questions, please do not hesitate to reach out to investor relations. Have a great rest of your day. Thank you.