Quantum Computing Q3 2026 Earnings Call Transcript

Quantum Computing (NASDAQ:QUBT) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Access the full call at https://www.webcaster5.com/Webcast/Page/3051/54638

Summary

Quantum Computing Inc. reported Q3 2026 revenue of $9.5 million, a significant increase from $384,000 in Q3 2025, with growth primarily driven by photonic product sales.

Strategic initiatives include the release of the Direct 3S quantum optimization machine and collaborations for defense applications and clinical research data insights.

The company is focusing on three priorities over the next 12-24 months: commercial growth, scaling manufacturing, and advancing its quantum portfolio.

Net loss for the quarter was $15.1 million, attributed to increased operating expenses and integration costs from recent acquisitions.

Management emphasized the shift from technology innovation to scalable manufacturing and integration of acquired businesses to support long-term growth.

The company holds $1.3 billion in cash and investments, providing flexibility for future operations and strategic investments.

Backlog at quarter-end was approximately $39.1 million, with expectations for it to remain strong despite fluctuations.

Future outlook involves expanding international sales, while the domestic market remains the primary revenue source due to geopolitical and regulatory considerations.

Full Transcript

OPERATOR

Good day, ladies and gentlemen, and welcome to the Quantum Computing Inc. third quarter 2026 shareholder conference call. At this time, all participants are in a listen-only mode. Following today’s prepared remarks, the line will be open for questions. It is now my pleasure to introduce your host, David Moskowitz, Head of Investor Relations at Quantum Computing. David, please go ahead.

David Moskowitz (Head of Investor Relations)

Thank you, operator, and welcome to Quantum Computing’s third quarter 2026 financial results and business update conference call. Before we begin, please note that today’s remarks include forward-looking statements, including statements about our expected results, plans, strategy, and market opportunities. These statements are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially. These risks are described in today’s press release and in our SEC filings, including our most recent Forms 10-K and 10-Q. These statements speak only as of today, and we undertake no obligation to update them, except as required by law.

On the call today we have Dr. Yuping Huang, Quantum Computing’s Chairman and Chief Executive Officer, and Chris Roberts, our CFO. The team will provide an update on the business, followed by a question-and-answer session. I’ll now turn the call over to Yuping. Please go ahead.

Yuping Huang (Chief Executive Officer)

Thank you, David. Good afternoon, everyone, and thank you for joining us. Looking at our third quarter and the year so far, I believe Quantum Computing is entering an important new stage. We have spent years building photonics-based quantum technology designed for the real world. Now we are beginning to see our investments come together, and our attention is shifting from what we can build to what we can put to work for customers. That means getting our technologies into customers’ hands, delivering on our commitments, and building a business that can grow sustainably.

Execution matters more than ever. Our third quarter results reflect progress in that direction. In Q3 we generated record revenue of 9.5 million, led primarily by our expanded photonics business, which serves customers across a range of established markets. The acquisitions completed this year added established products and customer relationships, as well as manufacturing capabilities essential to our quantum roadmap. That gives us commercial opportunities to grow revenue today while supporting the technologies we are developing for the future.

During the quarter, we provided cloud access to our Direct 3 system to Hamad Bin Khalifa University in Qatar, supporting the research, education, and adoption of quantum computing and networking. That builds on early progress, including the installation of a Dirac 3 optimization system at a leading global consulting firm and an agreement with Planck Dynamics for our neural wave reservoir computer in defense applications. More recently, we announced our next-generation Direct 3S quantum optimization machine, which is designed to solve optimization problems with up to 9,980 variables, an important step in our quantum computing roadmap.

We expect the first customer shipment during the fourth quarter. As a part of the announcement, we published benchmarking results involving problems with up to 9,980 variables, comparing the system’s performance with leading classical optimization solvers. We are encouraged by these results and what they tell us about the progress in developing increasingly capable quantum systems. There’s still work to do as we evaluate performance across different applications, but advances like these bring us closer to solving larger, more complex problems for customers.

These are encouraging developments for sure, but what matters most is what customers can ultimately do with our quantum technology. Our recently announced collaboration with Immobio is a good example. Our collaboration with Immobio is exploring how direct optimization, AI, and conventional analytics could potentially identify new insights for clinical research data. It is early work, but it reflects what matters most to me: that the true measure of innovation is not just what a technology can do, but what it enables others to achieve.

That’s exactly the thinking behind the broader platform we are building. Our quantum photonics platform extends beyond computing into sensing and communications as well. Some applications are commercial today, while others need further development and validation. Our manufacturing capabilities connect these opportunities. By combining photonics design, chip manufacturing, and advanced packaging at our North Carolina facility and our thin-film lithium niobate facility in Arizona, we gain greater control over development and production.

This infrastructure serves two important roles: supporting our proprietary quantum systems and serving established photonics markets. The task now is to integrate it effectively and deliver for customers. With that in mind, we are focused on three priorities over the next 12 to 24 months. The first is growing our commercial business. We have an opportunity to build on the established businesses and customer relationships we have added while expanding the market for our quantum and advanced photonics systems. Our photonics and advanced packaging businesses provide a commercial foundation we can grow today while supporting the development of our quantum technologies.

As those technologies mature, we see opportunities to introduce them to a broader range of customers. Our goal is to turn growing interest in Quantum Computing into orders, a stronger backlog, deployments, and lasting customer relationships. Second is to scale manufacturing. We are bringing operations together, expanding capacity, and improving efficiency. Reliable, repeatable production matters as our quantum technologies mature. Our third priority is advancing our quantum portfolio. We have achieved all the objectives outlined in our 2024–2026 portfolio roadmap, so we are moving into the new phase to scale our manufacturing and product lines. Our goal is to make quantum systems smaller, more capable, and easier to deploy. A major part of that work involves integrating more of our technology onto photonic chips, which brings us closer to the compact, practical systems we envision for the future.

These three priorities are closely connected. Our quantum roadmap guides the technologies we develop, our manufacturing capabilities help us bring those technologies into production, and our commercial efforts help us understand where customers see value and where we should focus our resources. It is how we move from building the technology to building a sustainable business around it. That brings me back to something fundamental about Quantum Computing and why we have chosen photonics as our approach. I have believed for many years that light offers one of the most promising paths to making quantum technology practical and accessible. There are several approaches to quantum computing, as we all know, each with its own strengths and challenges. We chose photonics because we believe it offers important advantages in bringing quantum technology into broad real-world use.

Our Direct systems, for example, operate at room temperature, with relatively low power requirements and without the specialized cryogenic infrastructure required by many other approaches. That can make a meaningful difference in terms of cost and complexity. Photonics also allows us to build on decades of advances in optical technology and semiconductor manufacturing, and with the capabilities we have assembled at Quantum Computing, we are bringing more of that process under our own control.

There is still considerable work ahead, but I believe this approach gives us a strong foundation for the future. My ambition has always been to make quantum technology useful and accessible on a much broader scale, and I believe light offers a practical, near-term path toward that goal. We’re taking the journey one step at a time, and I’m encouraged by the progress we have made, with our solid Q3 results as evidence. With that, I will turn the call over to Chris to review our third quarter financial results and how we are managing our resources to support the work ahead. Chris,

Christopher Roberts (Chief Financial Officer)

Thank you, Yuping, and good afternoon, everyone. I’ll now review our third quarter financial performance, our balance sheet, and how we’re approaching capital allocation as we move into the next phase of Quantum Computing’s development. Starting with revenue, we generated $9.5 million in the third quarter, up from $384,000 in the same period last year. To put that growth in perspective, our third quarter revenue exceeded the $9.2 million of revenue generated during the entire first half of 2026. Revenue was primarily driven by sales of photonic products serving aerospace, government, and industrial applications. The businesses we acquired earlier this year have expanded our commercial foundation and are contributing to our financial performance while also supporting our longer-term quantum technology roadmap.

We generated $428,000 in gross profit during the quarter for a gross margin of 4.5%. While margins remain modest, we’re encouraged by the progress. As revenue grows, we see opportunities to improve manufacturing utilization, increase operating efficiency, and expand margins over time. Turning now to expenses, our operating expenses totaled $29 million during the quarter, compared with $10.5 million in the same period last year. The increase is largely due to higher personnel and related costs associated with our expanded R&D, sales, and marketing activity, as well as approximately $1 million in acquisition-related expenses. Interest and other income totaled $13 million during the third quarter, compared with $3.5 million a year ago, primarily reflecting interest earned on our larger cash and investment balances.

For the third quarter, we reported a net loss of $15.1 million, or $0.07 per basic share, compared with net income of $2.4 million, or $0.01 per basic share, in the prior-year period. The change from net income to net loss is largely due to higher operating expenses as we’ve expanded the business and smaller mark-to-market gains on a warrant derivative, partially offset by increased revenue and interest income. Turning now to the balance sheet, we ended the third quarter with approximately $1.3 billion in cash, cash equivalents, and investments. Consistent with our position at the end of Q2, total assets were approximately $1.6 billion at quarter end, while total liabilities were $47.7 million. We also ended the quarter with approximately $39.1 million in contract backlog, providing a foundation of business contracts as we expand customer relationships and convert opportunities into revenue.

As of September 30, 2026, we had approximately $174.3 million in cash and cash equivalents, approximately $1.1 billion in investments, and approximately $916.9 million in working capital. As a result, we believe our liquidity is sufficient to fund our operations for at least the next 12 months, giving us flexibility to support both our current operations and our longer-term technology development plans. At the same time, we’re mindful of financial discipline as we move from building our capabilities to scaling the business. The acquisitions completed earlier this year were designed to strengthen our technology and manufacturing foundation while adding established commercial operations. Our focus now is on integrating those businesses effectively, investing where we see opportunities for growth, and improving operating efficiency over time. We will continue to evaluate opportunities, including potential acquisitions that can advance our strategy, but any future investment must support our priorities and make sound financial sense.

We believe we have the resources and capabilities to execute on our plans and the responsibility to deploy our capital thoughtfully to drive sustainable growth and long-term shareholder value. With that, I’ll turn the call back to you, Yuping.

Yuping Huang (Chief Executive Officer)

Thank you, Chris. Before we go to questions, I wanted to return to an important point: how we are moving from building our capabilities to putting them to work in the real world. I believe quantum technologies offer tremendous potential, but it is a young industry and adoption will develop differently across markets and applications. Some customers need photonic technologies today, while others are exploring what quantum systems can enable as they become more capable and practical.

We need to understand these differences and be thoughtful about where we invest. As Chris outlined, our financial position gives us considerable flexibility, particularly in an industry where technology takes time to mature. But having the resources to invest does not change our responsibility to use them wisely. We need to focus on where our technology can have the greatest impact, where customers see value, and where we can build a business that performs over time.

I’m proud of what our team has accomplished. We have brought together a remarkable group of people and their capabilities, and I believe we are in a much stronger position today than we were just one year ago. But there is plenty of work ahead. I have always believed that being early creates opportunity, but execution is what makes the opportunity last for us. That means advancing the science while building products customers can depend on. It means growing commercial relationships, improving manufacturing, and following through on our roadmap.

And it means being ambitious about what we can achieve while remaining realistic about what it takes to get there. I believe we are moving in the right direction. We are starting to see the results of our investments and we have a clear understanding of where Quantum Computing can create value. Thank you for your continued interest. We are ready to take questions.

OPERATOR

Certainly. The floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star one. We do ask, if listening on a speakerphone, that you please pick up your handset while asking your question to provide optimal sound quality. Once again, please press star one on your phone at this time to join the queue to ask a question. Please hold for just a few moments while we poll for questions. Your first question is coming from John McPeek with Rosenblatt.

Please pose your question. Your line is live.

John McPeek (Analyst)

Thank you. Thanks, Yuping. Chris and Dave, good work getting the company scaled here. You have some real revenues now. I have a few. The first one on the Dirac 3S. Congrats on the first customer shipment in 4Q. Can you comment at all, or elaborate more, on what the reception of the product has been like? Any initial feedback from potential users here with the 10x variable count?

Yuping Huang (Chief Executive Officer)

Yeah, we received some very positive feedback not only on the largely expanded capacity of the variables that the machine can support, but also on the quality of the solutions. In fact, John, as you probably have seen in our published results, we actually got very good benchmarking results comparing with best-in-class solvers using classical methods. And our online customers have also started to see the performance; actually some feel pleasantly surprised.

So I’m very pleased with that. Of course our development will not stop here. Immediately after we released our Dirac 3S, the team started to further improve it. Our goal is always to develop the quantum value to give our customers a high return on investment. I’m very happy with the first steps we have taken and look forward to reporting our continued progress.

John McPeek (Analyst)

Great. And I have one for Chris, if I could just have a quick follow-up. The backlog was down just slightly from the June quarter. Any view as to how that might develop? And related, there’s the flip in Washington—I shouldn’t say Washington; some of the jobs are in Washington—but in the midterm states. Do you think that might change the outlook for the pipeline at all and affect your backlog going forward, or how should I think about that?

Christopher Roberts (Chief Financial Officer)

Guys, that’s a really good question. There’s a lot to pack in there. Let me take it one piece at a time. Our business revenue and contract awards tend to be lumpy, so I don’t think there’s much you can read into the fact that our backlog was down about $2 million from where we were—$3 million from where we were—in the last quarter. I’m confident that we will, over the next few months, continue to bring in additional work. The backlog is going to fluctuate, and backlog is essentially the difference between contracted orders and revenue.

So I think it’s a good sign that backlog continues to be high, but we certainly generated a lot of revenue out of the backlog that we had at the end of the last quarter. In terms of the impact of the political environment, it’s a little early to really know where the majority of a new majority wants to go. I don’t think they figured that out themselves. One thing that seems to be a consensus target is AI and particularly data centers, and I think that actually presents an opportunity for Quantum Computing because we’ve done some analysis on our own looking at the application of the Dirac optimization to improving the efficiency of the utilization of compute resources in data centers, and we think we can provide some advantages and some improvements.

If that bears out, then we may have a real market on the existing data centers because we can provide more compute resource without building new data centers. Again, we’ll have to see, but initial research internally has been rather encouraging. So I think this will present some opportunities. It may also present some challenges. But it’s a little early to make any predictions, and I leave the predictions to Kalshe.

John McPeek (Analyst)

All right, thanks team.

OPERATOR

Thank you, John. Your next question is coming from Max Michaelis with Lake Street Capital Markets. Please pose your question. Your line is live.

Max Michaelis (Analyst)

Hey guys, thanks for taking my questions, and congrats on the solid quarter. Question from me, kind of on your priorities going forward around commercial growth and manufacturing scale. I mean, what kind of milestones should we be looking for on the commercial growth side maybe over the next 12, 24 months? And then, I guess, what are some of the bigger hurdles on the manufacturing scale side of the priority list here that we should be paying attention to?

Yuping Huang (Chief Executive Officer)

Thanks, Max. I will take a first cut and Chris will chime in later. Over the next 12–18 months, our priorities, as I outlined in the call, right, we will continue to grow our business opportunities and revenue, continue to expand our manufacturing rate, and also we will continue to push our tech. As I said last time in the earnings call, Quantum Computing is really transitioning from a tech innovation company to a scalable manufacturing company. It is very interesting and it is the pathway that we have to take for us to grow big. And the entire team is undertaking this challenge, and also there’s a lot of opportunities there.

The acquisitions that we have made so far in this year have been going very well for us, and the integration progress has been very well. So we are actually developing high synergy on a very deep engineering level as of now. So I’m very confident on delivering on those priorities over the next 12 to 18 months. Chris, do you have anything to add?

Christopher Roberts (Chief Financial Officer)

Yeah, sure, Max, appreciate the question. And to pick up on what Yuping was saying. As we transition from the technology innovation phase to commercialization, you’re going to see some lumpiness. We’re not giving guidance at this time because timing of orders and deliveries, it’s just difficult to predict. So quarter over quarter, likely to see some lumpiness and bumpiness. But over, say, 12, 15 months, we are confident that we’ll have a strong finish to this year and we will have a solid backlog leading into 27.

And I think that in terms of maybe not milestones, but signs of progress, growing our backlog and bringing in additional orders from a broader range of customers is something that you should be looking for. That will be signs that the market is validating our technology and that we’re on the right track.

Max Michaelis (Analyst)

All right, perfect. Thanks for taking the—

OPERATOR

Thanks, Max. Your next question is coming from Scott Buck with Titan Partners. Please pose your question. Your line is live.

Scott Buck (Analyst)

Hi, good afternoon, guys. Appreciate the time, Chris. I just want to follow up on backlog. How much of that converts over the next 12 months, and how does it split between government, aerospace, and commercial?

Christopher Roberts (Chief Financial Officer)

Okay, that’s a good question, Scott. The backlog typically will burn off between 12 to 18 months. So most of that will be used up or is likely to be converted to revenue in the next 12 months. But there’s a bunch that will take longer to materialize and deliver. That is just the nature of the business. When you’re building small numbers of technologically very complex products, it’s hard to know whether it’s going to be ready this week or, you know, a couple weeks from now.

And that can change when you recognize the revenue. Sorry, I forgot the second part of your question.

Scott Buck (Analyst)

Oh, the split there between government, aerospace, and commercial.

Christopher Roberts (Chief Financial Officer)

Yes. We’re still largely aerospace and government, probably 70-ish percent. Most of that subcontracts over time. We’re expecting that to balance out, be closer to 50/50. But in the near term, a lot of the advanced products in photonics and quantum—the market is government R&D-ish. So over time we expect to see, as technologies mature and the market develops more confidence in the return on investment, that you’ll see more commercial sales. Right now we think that the mix is going to be predominantly government, and this is consistent with every other company in the quantum sector.

Scott Buck (Analyst)

Great, that’s helpful. And then I wanted to ask, the release refers to bringing manufacturing operations together. Does that mean consolidating sites or just moving work between fabs?

Christopher Roberts (Chief Financial Officer)

I think it has more to do with the integration of the company, although I defer to Yuping on exactly how to rephrase that. We have operations, as you know, in eight states, 11 facilities. So we are a bit spread out. And we’re working on the integration of our accounting and manufacturing backbones so that we can move people, technology, subsystems smoothly between facilities. For example, we do a lot of the chip fabrication and design work in Tempe, but we do a lot of the advanced testing in Hoboken.

And that’s the way we’re integrating the teams. And we invest in having people travel to other sites to make sure that with all the new people that have come into the company over the last year, there’s good working relationships between the teams. I think that’s really what we’re referring to. We’re not looking to consolidate facilities. We’re really trying to make sure that the team we have thinks and acts with a broad envelope that goes coast to coast and includes all of the sites and all the resources. And the best way to get people to understand what resources are available in the organization is to have people move around and coordinate and get to know each other.

Yuping Huang (Chief Executive Officer)

Yes, Scott, just as Chris said, there’s no need and no plan for consolidation. In fact, from the beginning, we have very strategically acquired those sites so that each would fill in a gap that we need for our scalable manufacturing. And each site actually brings pretty complementary equities and capabilities to our quantum roadmap. So instead of consolidating, just as Chris said, what we are doing now is to build very strong synergy from bottom to top—right?—so at all levels.

For example, one project that our team has been working on is that we fabricate parts in our Santa Barbara site and some parts in our Boston site. Then we bring them to our Princeton site, and the Princeton site is actually working with our North Carolina site. So it is such teamwork, it is such synergy, that we are building up very quickly.

Scott Buck (Analyst)

Okay, I appreciate the added color, guys. That’s very helpful. And if I could squeeze one last quick one in. Absent additional M&A, the current level of OpEx, is that a fair run rate moving forward, Chris? Or are there some material OpEx increases expected into 2027?

Christopher Roberts (Chief Financial Officer)

The current—I think it’s a reasonable number. We’re continuing to hire. I think at the end of the second quarter, we had a little over 300, 310, 320 people. We’re 330-plus right now. So we’re continuing to hire, but that OpEx level is a pretty good estimate of where we are right now. There’s about a million dollars of trailing M&A-type costs that are in there. But if you take that out, that number is about where we are in terms of burn rate. The main cost, main driver, is payroll, followed by supplies, parts, laboratory stuff, and then facilities rent.

So as we increase our headcount, we can expect to see some increase in the OpEx run rate, but not dramatic. So I think the third quarter number is probably a pretty good predictor of the next quarter.

Scott Buck (Analyst)

Okay, perfect. Sounds like a more natural increase than any kind of step function coming. So that’s great. I appreciate the time, guys. This has been very helpful. Thank you.

OPERATOR

Thank you, Scott. Once again, if you do have any questions or comments, please press star-one on your phone now. Your next question is coming from Mahal Chokshi with Northland Capital Markets. Please pose your question. Your line is live.

Mahal Chokshi (Analyst)

Great, thank you. Fantastic to see the Dirac 3s be released. Could you compare that to other analog-based quantum computing systems out there from a performance perspective?

Yuping Huang (Chief Executive Officer)

We compare that with the best solvers that we can possibly find as offered by the industry, by the market. So, as you know, most other quantum platforms don’t provide comparable or close-to-comparable performance to the best classical solvers. So we have focused only on comparing with the best solvers, which are currently by non-quantum methods. So my short answer to you is no, because we compare with the best.

Mahal Chokshi (Analyst)

Understood. I’m sorry, what is the classical solver that you compare to? What’s the best classical solver algorithm that you compare to?

Yuping Huang (Chief Executive Officer)

Chris, do you think that we can provide the name?

Christopher Roberts (Chief Financial Officer)

I think we can. We’ve—it’s a commercial product. We can certainly say we tested it.

Mahal Chokshi (Analyst)

I’m sorry, I could not hear you.

Christopher Roberts (Chief Financial Officer)

Yes, yes, sorry. We can certainly—yes, we can disclose.

Mahal Chokshi (Analyst)

Okay, yeah. What we’re benchmarking against—

Yuping Huang (Chief Executive Officer)

Okay, sure, sure. Yes. And we compared with Hexaly, which is a very well-known specialized optimization software company. And in the meanwhile, for the specific benchmark problems that we have tested, we dug into the literature results and we compared with those best algorithms that our team could find in the literature.

Mahal Chokshi (Analyst)

And how did it actually compare, in terms of the actual performance, and how are the benchmarks done in terms of performance?

Yuping Huang (Chief Executive Officer)

As we reported in our paper that we posted online, overall we are better. There are, of course, some problems that the machine is either comparable or less optimal in terms of getting the solutions. But for most problems we do see a clear advantage of our machine in terms of both the time to solution and the quality of solution.

Mahal Chokshi (Analyst)

All right, that’s really helpful. And then, given this differentiation even relative to a classical solver, could you give some details around the pipeline that you’re seeing for the Dirac 3s, either as a cloud computing instance or as on‑premise orders?

Yuping Huang (Chief Executive Officer)

Yep, we support both. And as reported in the call earlier, we are shipping out our first Dirac 3s to a customer. In the meanwhile, we also have partners across the country, and we are looking at opportunities of upgrading the existing system with this Dirac 3s. And in the meanwhile, we can continue to provide cloud access so that people can access our Dirac 3s from anywhere they like. And it looks like customers are pretty happy with the performance because it is indeed a much more powerful machine, with performance that, oftentimes, we can see better than the classical solvers.

I don’t want to make a bold claim that we now have achieved the quantum supremacy—and it is not a good word anyway—but I think, as of now, with Dirac 3s there is certainly quantum advantage that customers can access today.

Mahal Chokshi (Analyst)

Any color—maybe this pipeline relative to the prior generation of the Dirac?

Yuping Huang (Chief Executive Officer)

Yeah. So Dirac 3s has just been released, right? So we are still in the process of finding out how big the pipeline can grow. But I think a lot of customers that use Dirac 3 would be very happy to switch to Dirac 3s because of the much higher capacity and much higher performance in the quality of solutions. We should be expecting some significant growth in the pipeline and to turn those into revenue in the future.

Mahal Chokshi (Analyst)

Okay, so to be clear, sounds like the majority of the pipeline is coming from Dirac 3 customers—existing Dirac 3 customers.

Yuping Huang (Chief Executive Officer)

As I said, I think it’s natural for the Dirac 3 customers to switch to Dirac 3s. But because of the much higher performance and much larger capacities, we should be able to attract more and more customers, and probably in other application areas that we have not seen in Dirac 3.

Mahal Chokshi (Analyst)

Okay, thank you for that clarification.

Yuping Huang (Chief Executive Officer)

Thank you.

OPERATOR

Your next question is coming from Karen McCabe with Cantor. Please pose your question. Your line is live.

Karen McCabe (Analyst)

Great. Thank you for taking my question. It’s Karen McCabe on for Troy Jensen. My first question is on the ImmunoBio announcement. You mentioned that it was the first customer in the pharma and biotech industry. And I noticed last quarter you had announced a new Chief Revenue Officer, Susan Hunt. And so I was just kind of wondering, sort of the strategy going forward. Are you looking at other industries outside of your traditional aerospace, defense areas like biotech and pharma to expand into?

And then when you kind of get into areas like biotech and pharma, are you looking to get deeper within organizations or kind of spread within those vertical markets? And I have a follow-up.

Yuping Huang (Chief Executive Officer)

Yes, definitely. So in the past, before working with ImmunoBio, we have already found applications in the areas of drug discovery and patient scheduling. And now with ImmunoBio, we actually realize that our Dirac 3s can also significantly contribute to clinical trial studies. And as you know, drug discovery itself is complex, and the trial studies even more so. And there’s a lot of data linking to biomarkers, for example, and there are phase one, phase two, phase three studies.

And I’m excited and also curious to see what Dirac 3s can contribute to the biotech sector from the clinical trial study angle.

Karen McCabe (Analyst)

Thank you. And my follow-up is on the Enhanced Semiconductor acquisition. I believe the rationale for that was really to accelerate the timeline for Fab 2. Provide any more details on the integration of Enhanced and the acceleration of that timeline. How’s that proceeding? Any kind of color you can provide on that?

Yuping Huang (Chief Executive Officer)

Yes, and that’s a very good question. If you recall last year when we first published our roadmap. Right. So our initial plan for Fab 2 was to use a greenfield approach. And in that approach actually we expected to complete our SEP2 maybe at the end of 2028 and now with enhancement. So we have accelerated that roadmap quite a lot and Enhanced really launched our Fab 2. But we will not stop here. And so what we are going to do is to build upon Enhanced’s very unique and leading-edge capabilities in advanced packaging and expand that to increase the manufacturing capacity while turning some of those capabilities into direct support of our quantum products.

And to that end, our internal peak engineering team has worked with the Enhanced manufacturing team very closely on developing heterogeneously integrated photonic circuits for our quantum technology. And we have been making very fast, very fast progress on that front. Thank you.

OPERATOR

Your next question is coming from Ed Wu with Ascendient Capital. Please pose your question. Your line is live.

Ed Wu (Analyst)

Yeah, congratulations on the quarter. My question is on the pipeline. How much of that is US business versus international and what do you think the long term revenue potential pipeline potential could be for your business? Thank you.

Christopher Roberts (Chief Financial Officer)

Thank you for the question. At the present time, bulk of our sales are domestic. We’re certainly looking at international opportunities. We have made a few small sales overseas, we’re continuing to market there, but the bulk of the backlog and our revenue is still really domestic. In terms of if you’re asking how big is the potential market, I’m not sure that was quite your question. I have to refer you to a number of very well-written market studies by big consulting firms. We’re really not in the business of doing market studies of that sort.

Ed Wu (Analyst)

What I meant was like right now it’s mainly domestic, but going forward, do you see yourself maybe a 50/50 type business or do you see yourself focused on domestic for the next several years?

Christopher Roberts (Chief Financial Officer)

I think we’re going to be. We’re certainly trying to generate sales around the world. As a practical matter, it’s easier to sell domestically than it is overseas. And with the geopolitical climate and the fact that we’re dealing, our technology is very advanced and arguably cutting-edge. There is a possibility that there could be export restrictions later on, ITAR and other things that could complicate the process of doing international sales. So I want to stay away from making precise predictions of where our revenue could come from in the future when I don’t know what the rules are going to be. 50/50 sounds aggressive certainly in the near term, but we’re certainly looking to expand our international footprint as much as possible to the extent that we’re able to support the customers that we sell to.

Ed Wu (Analyst)

Great. That’s a great answer to my question and I wish you guys good luck. Thank you.

Christopher Roberts (Chief Financial Officer)

Thank you. Good to hear from you.

OPERATOR

Next question is coming from Jesse Sobelson with BTIG. Please pose your question. Your line is live.

Jesse Sobelson (Analyst)

Hi everyone. Thanks for taking my questions this afternoon. A lot’s been run through but I do think maybe on the bigger picture here, I think most of the investment world still see the various acquisitions across LSI, Enhanced, New Crypt alongside the core business. I think a lot of investors see them as four separate businesses but. So you’ve discussed integrating the teams on the back end. But can you help investors understand what like the first wave of maybe flagship products or first integrated system on the roadmap is and what potential timeline there is to combine these technologies and providing an update for investors?

Yuping Huang (Chief Executive Officer)

Thank you, Jesse. Yes, those are quite facilities. So they actually serve two important purposes here. So one is of course to support our quantum roadmap. And this is well underway and our team actually has been working closely together across all the sites to make some prototypes that are only possible after we have acquired and integrated those facilities. And on that front we do hope that we can demonstrate some heterogeneous integrated circuits in the time frame of 12 to 18 months and it could be shorter and.

We will report the progress on that front. The second important contribution of the sites are to contribute to our near-term revenue based on those quantum-enabling circuits and services. This is important because we believe that a sizable number of customers of our quantum technology actually in the future will come from our existing customers already using our, for example, photonic components foundry services. And we do hope to see that we will be able to tap onto the existing pipelines not directly in the field of quantum, but eventually we will turn those into turn at least some of those into our quantum technology and the product pipeline.

And that is also happening. And I think the third important is that as I said earlier, we are really looking to volume production of our quantum devices and we have already spent over 20 years in the quantum technology R and D and now it is really the time for us to solve the scalable manufacturing challenge so that we can mass produce quantum product and to put quantum into the hands of many, many customers and to create a broad impact in multiple application field. I’m not sure if I answer your question or you.

Jesse Sobelson (Analyst)

Yeah, I mean it sounds like there’s a lot underway to enhance the quantum computers that you offer today with the technology you’ve acquired. It sounds like we can expect an update over the next 12 to 18 months. And then, I mean maybe just to wrap up here, you mentioned on the next phase of capital allocation with over, you know, a billion in cash. If there’s any idea on if you could disclose, is there a timeline for spending that or guidance on how you’re going to spend that or at least is there a timeline for explaining to investors what the plan is going to be in the near future?

Yuping Huang (Chief Executive Officer)

Let me quickly tell you our strategy and then I will turn the podium to Chris for some details. Our strategy has always been that we make acquisitions to accelerate our quantum roadmap. And this is a very disciplined approach that we have followed for all the acquisitions that we have made. And in the meanwhile we understand that this is a competitive industry and we have to move really fast. So we will always be optimistically looking at opportunities.

But all would be needed to pass our fundamental test, which is to accelerate our quantum roadmap. With that, so Chris, please chime in.

Christopher Roberts (Chief Financial Officer)

Yes, Jesse, you’re asking a really good question. And as I said in previous calls, we earmarked several hundred million dollars for capital CapEx and the investment we’re planning to make in the Enhanced Fab 2, if you want to call it that, it is in the ballpark of 70 to 80 million dollars. We’ve already begun ordering equipment. A lot of that spend will take place between now and March 31st of next year into the second quarter. We are continuing to evaluate capital or equipment needs and as Yuping said, we’re constantly reviewing deal flow and acquisition opportunities, recognizing that this is a capital intensive business.

And while we’re very much interested in growing, we want to grow in a focused manner and make sure we have sufficient working capital to ride through any periods of time when raising capital would be highly dilutive, when our stock price is down. So we’re looking to protect the investors and deploy the capital wisely. We’ve already done three acquisitions in the last eight months, so I think we’re doing a pretty good job of putting the money to work and we’re going to continue to follow this path.

Jesse Sobelson (Analyst)

All right. Thank you.

Yuping Huang (Chief Executive Officer)

Thank you, Jess.

Christopher Roberts (Chief Financial Officer)

You’re welcome. Thanks for your interest, Jess.

OPERATOR

There are no questions in queue at this time. I would now like to turn the floor back over to management for any closing remarks.

Yuping Huang (Chief Executive Officer)

Thank you, operator, and thanks to everyone who joined us today. I appreciate your interest in Quantum Computing and look forward to updating you again next quarter. Thank you and have a great day.

OPERATOR

Thank you, everyone. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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