QUBT - NASDAQ

Ladies and gentlemen, greetings, and welcome to the Quantum Computing Inc. Fourth Quarter 2025 Shareholder Update Call. [Operator Instructions] Please note this conference is being recorded. Following management's remarks, the call line will be opened for questions. It is now my pleasure to introduce your host, Ros Christian with IMS Investor Relations.

Thank you. And I want to welcome everyone to the Quantum Computing Inc. Fourth Quarter and Full Year 2025 Shareholder Update Call. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements based on our current expectations and projections regarding future events and are subject to change based on various important factors. In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this call. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission. On the call today, we have Dr. Yuping Huang, CEO and Chairman; and Chris Roberts, CFO. The team will provide an update on the business, followed by a question-and-answer session. With that, I would like to turn the call over to management. Please go ahead Yuping.

Good afternoon, and thank you for joining us for Quantum Computing, Inc.'s Fourth Quarter and Full Year 2025 Earnings Call. 2025 was a transformational year for QCi. We made meaningful progress advancing our strategy to build a vertically integrated photonics and Quantum optics platform capable of supporting scalable, commercial applications across AI, high-performance computing, cyber security and remote sensing. Over the course of the year, we achieved several key milestones. We completed and opened our Thin-film lithium niobate photonic chip fabrication facility marking an important step towards domestic scalable production of high-performance specialized photonic integrated circuits. We continue to expand our foundry services business, which has now begun to generate early revenue and a customer engagement, and we are in planning phase for our second fabrication facility, which is what we call Fab 2. We strengthened our leadership team and the Board, adding experienced director and executives with deep expertise in scaling advanced technology companies and driving both organic and inorganic growth. I was appointed CEO effective January 1, 2026, after serving as interim CEO since May 2025. And we welcomed Chris Roberts as our new Chief Financial Officer; and Eric Schwartz as a new independent Board member each brings deep expertise and executional focus as we scale the business. And importantly, we recently completed the acquisition of Luminar Semiconductor Inc. or LSI, which enhances our design, fabrication and packaging capabilities and accelerates our path to scalable manufacturing. LSI also contributes a established customer base and a steady revenue to the combined organization. Those accomplishments reflect the steady execution of our long-term strategy and position us well as demand for energy-efficient room temperature photonic and Quantum solutions continue to grow. Turning into the fourth quarter. Revenue in the quarter reflects early contributions from our foundry service business and increasing customer engagement across our product portfolio. As many of you know, QCi operates Fab 1 as a rapid prototyping facility dedicated to Thin-film lithium niobate photonic integrated circuits in support of our Quantum machine development road map. This facility is not intended to serve as a large-scale commercial production foundry. But it does generate revenue by providing foundry services to our customers, but many functions as an internal innovation engine that fits validated designs and process knowledge into downstream manufacturing partners as technologies mature. That one enables rapid design, fabrication, test iteration cycles for advanced photonic devices century to QCi Quantum architectures. It allows us to explore novel Thin-film lithium niobate-based components validated system level concept and derisk emerging designs ahead of volume manufacturing. Fab 2 is intended to provide a domestic vertically integrated processing capability to support QCi's internal technology road map, particularly the development and scaling of our photonic Quantum machines and Quantum-enabled systems. It will focus on producing specialized Quantum and nanophotonic chips and will complement not compete with the broader silicon photonic ecosystem. We expect to engage external foundries as partners as technologies scale. By combining internal vertical integration with external foundry partnerships, QCi and to strengthen supply chain resilience, accelerate innovation and support the responsible scaling of advanced photonic and Quantum technologies. In December 2025, we announced the acquisition of LSI, which closed in February 2026. This subsidiary brings existing customer base and additional semiconductor capabilities that expands our addressable market and strengthen our ability to deliver integrated photonic solutions at scale. Integration efforts are underway, and we are focused on aligning teams, processes and customer programs to accelerate growth in 2026 and beyond. From a product perspective, we continued advancing our Quantum authentication and networking technologies as well as our direct platform and the remote sensing initiatives, which remain areas of strong interest across government and commercial customers. In the fourth quarter, we also unveiled our photonic-based reservoir computing system Neurawave as Supercomputer 2025. Neurawave represents a significant milestone as it is designed to integrate with existing computing infrastructure and address emerging AI workloads with improved energy efficiency. We also announced a strategic collaboration with POET Technologies to develop next-generation high-speed thin-film lithium niobate-based modulator-based optical engines designed to support AI network infrastructure. Importantly, we continue to expand our global reach through continued industry engagement. We recently participated in many conferences, which just in the fourth quarter included OpticaQuantum Industry Summit supercompute and Q2B Silicon Valley. Finally, during the year, we formulized and communicated a focused multiyear technology road map, which is available on our website. This road map is centered on scalable room temperature photonic and Quantum products, systems and solutions. Our vision is to bring Quantum technology into real-world applications. That means putting the power of Quantum technology into the hands of people by moving it out of the laboratory and into enterprise, government, commercial and consumer environments through chip integrated, low-power deployable systems. At the core of our road map are three capabilities that define our platform, capture, compute, communicate. Capture information through Quantum sensing and photonic data acquisition, compute through photonic and Quantum processing systems, including our direct platform and photonic AI capabilities, communicate through Quantum secure networking authentication and encryption technologies. This framework aligns our product development manufacturing strategy and go-to-market efforts around delivering practical scalable Quantum enabled products and systems. Importantly, this road map represents our transition from a development stage company to a commercial manufacturing-driven platform business. We are evolving from a technology innovator into a company capable of delivering repeatable, high-performance photonic and Quantum hardware at industrial scale. Our differentiation remains clear. Unlike Cryogenic Quantum systems, our platform is built on thin-film lithium niobate photonics enabling room temperature operation, lower power consumption, smaller form factors and lower total cost of ownership, which we believe are critical for broad adoption. As we progress our chip manufacturing capabilities over time, we expect to support global deployment of chip integrated Quantum systems across high-performance computing, telecom, defense, space and enterprise markets. Our road map is designed to move QCi from innovation to industrial scale production, positioning us to deliver practical Quantum technologies that are accessible, scalable and commercially viable. Overall, we exited 2025 with a strong balance sheet supported by significant capital raised during the year, a growing commercial foundation through foundry services and product development. An expanded technology platform following the integration of LSI and a clear path towards scaling revenue through a combination of semiconductor services and Quantum-enabled products. Like many companies across the broader technology, AI and Quantum sectors, we have experienced recent volatility in our share price, which we believe reflects broader market conditions rather than any change in our underlying business performance or long-term outlook. Our focus remains squarely executing our strategy, advancing our technology road map and building a sustainable commercial business. We believe the long-term fundamentals for photonics, Quantum technology and AI infrastructure remains strong, and we are well positioned within these trends. With that, I will now turn the call over to our Chief Financial Officer, Chris Roberts.

Thank you, Yuping. Revenue for the fourth quarter totaled approximately $198,000 compared to $62,000 in the prior year quarter. The year-over-year increase was driven primarily by hardware sales and services associated with our Fab 1 facility, which began contributing revenue during the fourth quarter. As we previously mentioned, we completed the acquisition of Luminar Semiconductor, Inc. in February 2026. We expect this business to begin contributing revenue in the first quarter of '26. Operating expenses for the fourth quarter totaled $22.1 million compared to $8.9 million in the same quarter last year. The increase in operating expenses is the result of substantial growth in personnel for research and development, engineering, manufacturing and sales and marketing as we can position the company for long-term growth. M&A expenses in the fourth quarter also contributed to the higher expenses. We are scaling our organization across the Board to support this expansion, including all functional areas of the company. As a result, SG&A is expected to grow in the near term as we invest in the resources and personnel necessary to advance our technology and execution capabilities. The company reported a net loss of $1.6 million for the fourth quarter or $0.01 loss per share compared to a net loss of $51.2 million in the fourth quarter of 2024. The decrease in net loss this quarter was primarily due to a gain of $7 million from the mark-to-market of a derivative liability plus interest income of $13.6 million. For the year ended December 31, 2025, the company reported a net loss of $18.7 million or $0.11 per share compared to a loss of $68.5 million or $0.73 per share in the year ended December 31, 2024. As Yuping mentioned earlier, we continued to strengthen our balance sheet during the fourth quarter. In October, we announced that QCi entered into securities purchase agreements with a group of institutional investors for the purchase and sale of 37 million shares of common stock in a private placement, resulting in gross proceeds of $750 million, before deducting offering expenses. That brings the total capital raised in 2025 to $1.55 billion. As a result, we ended the year with cash and cash equivalents of $738 million and investments of $783 million on our balance sheet, roughly $1.52 billion in total. Our interest income for the 2025 year was $20.7 million, a substantial increase from $423,000 in 2024. As of December 31, 2025, total assets stood at $1.6 billion, up from $154 million at year-end 2024. The Stockholders' equity rose to $1.6 billion at 2025 year-end, reflecting our strengthened financial position. And now I'll turn the meeting back over to you, Yuping.

Thank you, Chris. As we look ahead to 2026, our priorities are clear. Scaling our foundry services business and increasing customer engagements, advancing our product portfolio toward broader commercialization successfully integrating LSI and capturing synergies across our platform and continue to execute with this plan while preserving capital. We are building a differentiated technology platform based on room temperature, low-power photonic and Quantum solutions. And we believe QCi is uniquely positioned to address growing demand for energy-efficient, computing secure communications and advanced sensing technologies. We appreciate the continued support of our shareholders, customers and partners, and we look forward to updating you on our progress through 2026. Thank you. With that, we will now open the call for questions. Operator, please go ahead.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. The first question comes from John McPeake with Rosenblatt Securities.

Thank you, Yuping and Chris. Congrats on closing the LSI acquisition. Okay. I just want to make sure you guys could hear me for a second there. Great. So you have a step function revenue change happening here. Could you just remind us of the LSI revenues, how we should think about that going forward? And also their expenses a little bit as we try to take a stab at updating our models here...

Chris, would you take this question?

Sure, I'd be happy to. John, I've seen a couple of analyst reports. I'll back up. As you know, we are not in the habit of giving revenue guidance. So I want to make clear that we're not doing that now. However, I understand the question. And there have been several analyst reports that have indicated that or projected that revenue would be in the $20 million to $25 million per year range. And I think that's a reasonable estimate right now. And in terms of costs, we have some work to do with LSI. This is a company we acquired out of the Luminar Technology bankruptcy, and they had a different shared services model. So we're reconstructing some things, probably not going to be profitable at this scale, but we're working on realigning and integrating the businesses. So we really don't want to be too specific at this point, but we're trying to grow both the core level side business and the QCi business and develop synergistic products. So there's a lot of spending that's going on around there. I think it's safe to say that we'll be investing a fair amount of money in growing the business. And we're not going to be trying to squeeze every nickel of our profitability in the near term.

Okay. That's fair. And if I just have a follow-up on TFLN #2. You got some fabs with LSI -- could you give us a sense, do you think you're going to be able to co-locate with one of those fabs? And when should we think about the expenses, the CapEx, et cetera, kicking in for TFLN #2? And maybe I don't know if you can gauge what that might be like typically of the size you're thinking about? And that's all I got.

That's a really good question, John. In terms of co-locating, the -- let me take some steps. The current facility we have for Fab 1 is about 9,000 -- 9,600 square feet. And it's not possible to put Fab 2 in the same area. The space isn't there. It's not really set up that way. So what we're looking for is a larger facility, whether we end up doing a build-to-suit or acquire an existing facility and modify it, we're exploring multiple options. We're not likely to incur large costs this year, because we got a lot of design and evaluation work to do. So the larger cost would be two and three years out. The cost really hard to estimate at this point in time. Obviously, it's going to be several hundred million dollars to build any kind of sizable fab. But it's too early right now to be able to give you a hard number. We're still in the design and development phase. We've engaged some experienced design firms. And we're just beginning the process. So I don't have a hard number for you at this point, but nothing substantial is likely to happen in terms of CapEx outlays this year.

The next question comes from Max Michaelis with Lake Street.

I just want to go back to the Luminar acquisition that was made -- so you mentioned $20 million to $25 million of revenue. I mean, can you help us out in terms of that 2026 revenue versus 2025? Is it at least growing? Or how should we think about that?

We are expecting some growth. It's a little early at this point to say how much, but we can say that the initial customer reaction to the acquisition has been positive. We -- QCi acquiring Luminar brings stability and substantial financial resources to the business, which their existing customer base greatly appreciate it. We have been working closely with the Luminar sales team to reassure their customers and drive some additional business. So we're hoping to at least stabilize and hopefully grow the business this year.

Okay. Yes. Max, if I may, I wanted to add that in fact, so right now, we're about four weeks into the acquisitions. So we have already seen very good momentum.

Okay. That's good to hear. And it doesn't sound like nothing really to do on Fab 2 in 2026. But if we look out this year, I mean, what are the critical or the crucial milestones you guys are looking to hit, if you can help share sort of maybe from an internal perspective from you guys?

Yes. So the first one is to successfully integrate Luminar semi. I think we have made a pretty good progress so far. So I'm actually very pleased with where we are now. As you know, Max, so we are a Quantum company, but all of our products and technology are based on optics and photonics. And what's nice is that our team members across the U.S. already speak the same language and synergies already high. In fact, these are areas, the synergies are higher than what I initially expected. Several cross-site collaborations are already underway. And the combined larger team is pursuing large-scale opportunities that would have not been possible without us join forces. So for 2026, the number one task is we successfully integrate the team now that with our head count doubled and with our product portfolio largely expanded. The second is that we will continue to push our Quantum product portfolio. As I said on the call, we're really focused on transitioning from a technology innovator to a company capable of scalable manufacturing of Quantum products based on photonics and our integrated circuits. And as we outlined in our road map that we have published online. So we do have a plan to roll out several products across computing, sensing, AI and our thin-film lithium niobate chips. And third would be that -- so we hope to continue to grow our team so that we can move up to the system level engineering for Quantum devices. We are very happy to have now lots of engineers and manufacturing technicians join us from the Luminar semi acquisition. The next step is -- so now we have the expertise in many aspects now in the same room. So how fast we can move to the manufacturing of Quantum products above the subsystem of above the component level.

The next question comes from Antoine Legault with Wedbush Securities.

You mentioned the various main potential addressable markets across -- you mentioned Quantum Computing, sensing, AI and thin-film lithium niobate. Where do you see the largest and the most immediately addressable market or use cases? And which market or submarket are you most excited about this year?

For this year, I think the thin-film lithium niobate is an area that I feel particularly excited -- as you may recall, we constructed our fab last year and then we commissioned all the tools last fall. And since then, we have made prototype chips. And we have also utilized our resources to develop and refine recipes and the fabrication processes. And now -- so we are really in the phase of locking down the processes and to -- and we are ready to ramp up the manufacturing. So all of our current products now are designed to utilize this integrated photonic chip technology, which will make our product smaller, powerful, ready to be produced at the scale. So I'm very excited to see what could happen with the thin-film lithium niobate production line in the meanwhile. So now we are ramping up our Quantum communications development and commercialization following on the sale of system to a top 5 U.S. bank last year. I believe that Quantum communications, because this technology really address a network security issue that concerns almost everybody. If we can lower the entrance point for this Quantum technology, so it could be one of the very first Quantum technology that can be adopted by large population.

That's very helpful. Last one for me, if I may. I know you recently completed the acquisition of LSI for just over $100 million. You clearly still have a lot of cash on the balance sheet and you have the ability to pursue strategic M&A. Are there any particular areas of interest or focus on the M&A front as you look ahead to 2026?

Yes. We have been following very disciplined approach to M&A. So our strategy has been that the acquisition should accelerate our road map as we publish on our website. And while being able to help build our customer base. So the Luminar semi acquisition has been moved along this direction because it really helped fill some technology gaps that we had. I think the next move is to accelerate our road map on the scalable manufacturing, so we hope to quickly establish mass production capabilities for some of our Quantum machines.

Okay. The next question comes from Ed Woo with Ascendiant.

Yes. Congratulations on the Luminar acquisition. My question is, is that going to make you guys much more exposed to international business.

Let me take this one. At the present time, the bulk of the customer base is domestic. There's a lot of U.S. government contracts. And business in the aerospace and defense field. But I think your larger point is that Photonics technology has a global market. We will look at opportunities overseas. We do source supplies parts from overseas. But in terms of pursuing a large overseas market, that will come in time. But in the near term, I would anticipate that the bulk of our revenue is going to be from domestic sources, certainly for the next few quarters.

The next question is from Troy Jensen with Cantor Fitzgerald.

Congrats on the great '25, just maybe question for you, my belief you guys are probably a couple of years away from commercializing a photonics-based kind of Quantum computer all-in. But near term, there's a lot of other cool applications and sensing, can you talk to us a little bit about what you're doing there? Is this an area that can inflect quicker? And maybe do you guys have exposure to security applications to Quantum.

Thank you, Troy. Yes, I believe that general purpose can computing is still some time further down the road and this applies to all the approaches in terms of the practical utilities. On the other hand, I believe that there are some applications where specialized Quantum computers can be -- can find significant utilities without having to construct a data-based large-scale can computers. And so this is actually an area that we have been working on in our direct series Quantum optimization machine where we have seen that in many use cases, we already established appreciable Quantum advantages there. In terms of the remote sensing at QCi, so we mainly commercialize our proprietary technology in single photon detection added by the noise rejection, by what we have developed over the past 10 years using non-optics and our way of using time-gated photon detection to reduce the background noise. So far, we have commercialized a photonic vibrometer, which can measure very small amplitude vibration remotely. And in the meanwhile, so we have worked with NASA, as we announced in the past, to explore some Quantum sensing technology suitable for space deployment and in some cases, for earth science applications. We are continuing such research and development. And now with the addition of LUMINA 17, we are looking at other optical sensing and Quantum sensing opportunities by utilizing their laser technology, their detector technology and their very strong optical packaging capabilities. This is what we are working on, on the sensing side.

I would now like to turn the floor back to management for any closing remarks.

Thank you, everyone, for joining and participating in today's call. I encourage you to follow us on our social media channels, where we regularly post updates and insights into our business and technology. Should you have any questions, please reach out to the Investor Relations team. Have a good rest of your day. Thank you.