Quantum Computing Inc. Third Quarter 2026 Shareholder Update Call - VITRIA TECHNOLOGY INC

Financial Performance:

• Third Quarter 2026 revenue reached a record $9.5 million, a significant increase from $384,000 in Q3 2025, and exceeding the company's total revenue for the first half of 2026 ($9.2 million).
• Revenue was primarily driven by photonic products serving aerospace, government, and industrial markets, bolstered by recent acquisitions.
• Gross profit was $428,000, resulting in a gross margin of 4.5%; management expects margins to expand as manufacturing utilization and operational efficiency improve.
• Operating expenses totaled $29 million (up from $10.5 million year-over-year), driven by increased R&D, sales, marketing personnel costs, and approximately $1 million in acquisition-related expenses.
• Interest and other income rose to $13 million from $3.5 million due to higher cash and investment balances.
• The company reported a net loss of $15.1 million ($0.07 per share), compared to a net income of $2.4 million ($0.01 per share) in the prior year period, attributed to higher operating expenses and reduced mark-to-market gains on warrants.
• Balance sheet strength remains high with $1.3 billion in cash, cash equivalents, and investments; total assets were $1.6 billion and total liabilities $47.7 million.
• Contract backlog stood at $39.1 million as of quarter-end, with an estimated burn-off period of 12 to 18 months.
• Liquidity is sufficient to fund operations for at least 12 months.

Guidance and Future Outlook:

• Management is not providing specific quantitative financial guidance for future quarters due to the "lumpy" nature of order timing and deliveries.
• The company anticipates a strong finish to 2026 and a solid backlog leading into 2027.
• Priorities over the next 12 to 24 months include growing the commercial business, scaling manufacturing integration, and advancing the quantum portfolio.
• Direct3S quantum optimization machine shipments are expected to begin in Q4 2026, with immediate plans to improve the system post-release.
• The roadmap targets heterogeneous integrated photonic circuits within 12 to 18 months.
• Capital expenditures of $70–80 million are earmarked for the Enhaned acquisition and FAB2 facility, with significant spending anticipated between the current date and March 31, 2027.

Business Segments and Product Lines:

• Photonics & Commercial: Serves established markets in aerospace, government, and industrial sectors; acquisitions have added customer relationships and manufacturing capabilities essential for the quantum roadmap.
• Quantum Computing: The Direct3S system, capable of solving optimization problems with up to 9,980 variables, is entering the first customer shipment phase.
• Specific Deployments: Cloud access provided to Hamad Bin Khalifa University (Qatar); Direct3 optimization system installed at a global consulting firm; Neuron Wave Reservoir Computer agreement signed with Planck Dynamics for defense applications.
• New Collaborations: Partnership with EmuBio exploring direct optimization AI and conventional analytics for clinical research data, marking entry into the biotech/pharma sector.
• Manufacturing: Integration of operations across 11 facilities in 8 states; no facility consolidation planned, but rather a synergy-driven model moving work between specialized sites (e.g., chip fabrication in Tempe, testing in Hoboken, assembly in Princeton and North Carolina).
• FAB2 Acceleration: The acquisition of Enhaned has accelerated the FAB2 timeline from an expected 2028 greenfield completion to a faster rollout, leveraging advanced packaging capabilities.

Market and Competitive Landscape:

• The company differentiates its photonics approach by operating at room temperature with low power requirements, avoiding the cryogenic infrastructure costs associated with other quantum technologies.
• Benchmarking results for Direct3S show performance advantages over leading classical optimization solvers (including Hacksley) in terms of time to solution and solution quality for most tested problems.
• Potential market expansion into AI data center efficiency is being explored, with internal research suggesting quantum optimization could improve compute resource utilization without new infrastructure.
• Current revenue mix is approximately 70% government/aerospace (largely subcontracts); the long-term goal is a 50/50 split between government and commercial sectors as technology matures.
• Geopolitical factors and ITAR/export restrictions may complicate international sales, leading management to focus primarily on domestic growth in the near term.

Risks and Challenges:

• Financial discipline is required to balance scaling operations with the capital-intensive nature of the industry; management aims to avoid dilutive capital raises during low stock price periods.
• Revenue fluctuation is expected due to the complex, non-linear nature of delivering small-batch, technologically advanced products.
• The transition from technology innovation to scalable manufacturing presents operational hurdles regarding team integration and facility coordination.
• Market adoption speed varies; some customers require immediate photonic solutions while others wait for mature quantum systems.
• Potential export control restrictions (ITAR) could limit international market penetration.

Management Commentary and Tone:

• Management tone is optimistic yet pragmatic, emphasizing a shift from "what we can build" to "what we put to work for customers."
• CEO Dr. Yu-Ping Huang highlighted that the company has achieved all 2024-2026 portfolio roadmap objectives and is now entering a phase focused on commercial scaling and manufacturing integration.
• CFO Chris Roberts stressed financial discipline, noting that while the company has substantial cash reserves, capital allocation must be thoughtful to drive sustainable growth.
• Leadership expressed confidence in the photonics approach as a practical path to making quantum technology accessible and commercially viable.

Analyst Questions and Answers:

• Backlog & Political Environment: Analysts asked about the slight backlog decrease; management attributed this to revenue burn-off rather than a lack of demand, noting the potential for data center optimization opportunities in the new political climate.
• Direct3S Performance: Management confirmed positive customer feedback on the Direct3S, citing superior performance over classical solvers and a pipeline driven by upgrades from existing Direct3 customers and new commercial applications.
• Biotech Expansion: Confirmed the EmuBio partnership is the first pharma/biotech customer, with the technology now being applied to clinical trial studies and drug discovery.
• Manufacturing Integration: Clarified that "bringing operations together" refers to integrating accounting, backbones, and engineering workflows across 11 existing sites rather than consolidating physical facilities.
• OPEX Run Rate: Current operating expenses (~$29M) are expected to remain a stable run rate, with only natural increases from headcount growth rather than step-function spikes, excluding trailing M&A costs.
• Capital Allocation: Confirmed $70–80M capex investment for FAB2/Enhaned integration and reiterated a disciplined M&A strategy focused on accelerating the quantum roadmap.

Other Key Points:

• The company now employs over 330 people, up from roughly 320 in Q2 2026.
• Management emphasized that the "true measure of innovation" is enabling customer achievements, such as the EmuBio collaboration, rather than just technical specs.
• The company plans to release further benchmarking details and performance comparisons online, reinforcing the "quantum advantage" claims for Direct3S.
• QCI views the acquisition of LSI, Enhaned, and Nucrypt as integral to a unified platform rather than separate businesses, aiming to create a "commercial foundation" for future quantum growth.