QSI Q3 2025 Earnings Call Summary

1Key Financial Results and Metrics:

Revenue: $552,000 for Q3 2025, impacted by capital sales headwinds.

Gross Profit: $194,000 with a gross margin of 35%.

Year-to-Date Revenue: $2.0 million with a gross profit of $1.0 million and a gross margin of 52%.

Operating Expenses: GAAP total operating expenses were $40 million, up from $28.5 million in Q3 2024. Adjusted operating expenses were $21.4 million, down from $26.0 million in the same period last year.

Cash Position: As of September 30, 2025, QSI had $230.5 million in cash and marketable securities.

Guidance: Adjusted operating expenses expected to be $96 million or less for 2025, with total cash use projected at $103 million, including a $10.2 million lease termination payment.

2Strategic Updates and Business Highlights:

Commercial Adoption: 12 new customers implemented the platform under a new instrument acquisition model, primarily in academic labs, which have been difficult to access due to NIH funding challenges.

Scientific Affairs: Five manuscripts submitted for publication, with two already published, indicating progress in building a publication pipeline.

Innovation Roadmap: Successful sequencing runs completed on multiple prototype Proteus systems, marking a significant milestone. The commercial launch of the version 4 sequencing kit occurred in early September.

Partnerships: Ongoing evaluation of partnerships to accelerate development activities and broaden market participation.

3Forward Guidance and Outlook:

Market Expectations: Anticipated modest improvement in Q4 2025, but not a significant upswing compared to historical trends due to ongoing market challenges.

Investor Day: Upcoming updates on the Proteus program and recognizer development program are expected on November 19, 2025, including early sequencing data and future milestones.

4Bad News, Challenges, or Points of Concern:

Capital Sales Headwinds: Continued impact from capital market uncertainties and NIH funding challenges affecting revenue.

Operating Expenses: Significant increase in operating expenses, including a $13.6 million adjustment related to a lease termination, although this is expected to save over $24 million in future operating costs.

Market Conditions: The academic sector remains slow due to capital constraints, and the overall funding environment is uncertain due to the government shutdown affecting NIH budget approvals.

5Notable Q&A Insights:

Investor Day Expectations: Management will provide updates on the Proteus system, including data generation timelines and potential applications across various markets.

Placement Program Success: More than half of the new placements were in academic labs, indicating a strategic focus on this segment to drive future growth and publication output.

Market Dynamics: The sales cycle for biotech and pharma remains lengthy (9-12 months), and while there are pressures in academia, consumable budgets are still being utilized by new customers.

NIH Funding Outlook: Uncertainty persists regarding NIH funding due to the government shutdown, with expectations for a flat or marginally reduced budget compared to the previous year. This summary captures the essential elements of the earnings call, providing a clear overview of QSI's financial performance, strategic initiatives, and the challenges faced in the current market environment.