Good day, welcome to Xanadu Quantum Technologies' second quarter 2026 earnings conference call. My name is Jericho, and I will be your conference moderator for today's call. All participants will be in listen-only mode. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Brett Harriss, Vice President of Investor Relations. Please proceed. Thank you, good afternoon, everyone. Welcome to Xanadu's second quarter earnings conference call. Joining me today are Dr. Christian Weedbrook, Founder and Chief Executive Officer, Michael Trzupek, Chief Financial Officer, and Rafal Janik, our Chief Operating Officer. This call is being webcast live and will be made available on Xanadu's investor relations website. This call contains time-sensitive information accurate only as of the date of this live webcast on this call, August 5th, 2026. This call may include forward-looking statements and information which are based on current expectations. These statements and information are subject to significant risks and uncertainties. Actual results may differ materially from the conclusions, forecasts, and projections in the forward-looking statements and information. Certain material factors and assumptions were applied in drawing the conclusions and making the forecasts and projections reflected in the forward-looking statements and information. These risks, factors, and assumptions are discussed in our periodic filings with the SEC and applicable Canadian securities regulators, including our most recent quarterly and annual reports, and should be reviewed by anyone considering an investment in our securities. Management disclaims any obligation to update these forward-looking statements and information except as required by law. Now I'd like to turn the call over to Dr. Christian Weedbrook, Founder and CEO of Xanadu. Christian? Thank you, Brett, good afternoon, everyone. At Xanadu, every decision we make is guided by a single mission: to build quantum computers that are useful and available to people everywhere. That means building a fault-tolerant quantum computer that can solve real-world problems. It's been an eventful few months, with steady progress on the technology, partnership, and fundraising fronts. I'll walk you through where things stand on our hardware, our software, and our partnerships, and then Michael will take you through the financials. On the hardware side, we made further progress on optical loss. This is one of the most important engineering challenges in photonic quantum computing and a critical driver of system performance on the path to fault tolerance. Specifically, this quarter brought a new milestone in ultra-low-loss photonic chip packaging, an average edge coupling loss of just 0.085 dB per facet. That's a meaningful step forward in our ability to deliver high-efficient, scalable quantum hardware. That's the product of several things coming together at once. Our internal advanced photonic chip packaging facility, which we brought online last year, a close collaboration with Corning on customized fiber and fiber array solutions, and with DISCO on wafer singulation. Behind that packaging work, we accelerated the pace of fabrication itself. Working alongside our foundry partners, we increased fabrication runs on our two core material platforms, thin-film lithium niobate, up roughly 75%, and silicon nitride, up roughly 50%. Higher tapeouts volume means we can iterate faster on the chip designs that feed directly into our qubit factory development and improve fabrication processes more quickly. At the same time, we continue investing in the infrastructure that will accelerate our development. In July, we announced a significant expansion of our U.S. operations, anchored by our growing presence in Albany, N.Y. Albany has become a real hub for quantum computing and semiconductor research, giving us a strategic base close to key partners and closer collaboration across teams. This is part of a broader U.S. build-out. Our workforce here has grown more than fivefold since 2023. We expect that headcount to grow significantly again by year-end. Albany also gives us direct access to established U.S. semiconductor and photonics supply chains. That's a real advantage of our photonic approach, and we believe it will help accelerate both our R&D and manufacturing timelines. On the software side, we continue finding ways to improve efficiency within the quantum computing stack. Our research team published an algorithmic breakthrough in quantum read-only memory, or QROM, the common subroutine found across algorithms that loads classical data onto a quantum computer, and it's a bottleneck that has not seen meaningful improvement in about seven years. By replacing iterative qubit swapping with more efficient copying methods and cutting unnecessary data unlocking steps, our approach cuts the Toffoli gate operations needed by roughly half, making quantum algorithms more efficient today or reducing the resource requirements on the fault-tolerant hardware of tomorrow. This breakthrough is protected by a patent filing as proprietary Xanadu IP. It's available today inside PennyLane. We're also pushing the boundaries of quantum machine learning. Our team published new work using Fourier-based methods to train a quantum model with over one million parameters. It's large enough to accurately learn the distribution of ribosomal RNA and serves as an example of quantum techniques scaling the problems of real scientific interest. We ship PennyLane version 0.45 and Catalyst version 0.15, which together make it easier for our users to assemble full quantum algorithms end to end. The foundational PennyLane white paper surpassed 2,000 citations, cementing a new industry standard. Every new researcher and developer who builds on PennyLane deepens both our commercial and our community mode. As we like to say, the people learning and building on PennyLane today are the partners and customers of 2029 and 2030. With Lockheed Martin, we're building on our existing research relationship with a joint initiative in quantum machine learning, tackling a key bottleneck across the industry, talent. We announced a new effort to scale quantum training through their quantum talent pipeline, giving engineers across the organization access to PennyLane, our educational resources, and dedicated workshops from our team. Together, these are building practical quantum skills for aerospace, defense, and advanced engineering. It's a case study in how a leading organization can build quantum readiness from within. We also deepened our work with Los Alamos National Laboratory, where we're engaged with their 2026 summer school in co-supervising student projects. We've joined the Unitary Fund as a member, formalizing a longstanding collaborative relationship in support of open source quantum software and PennyLane. On the high-performance computing front, we partnered with Oak Ridge National Laboratory to bring PennyLane onto the Frontier exascale supercomputer, one of the most advanced classical computing systems in the world. We added distributed computing support, our Lightning simulator, enabling multi-node quantum simulation across Frontier's AMD-powered hardware, and ran a hands-on workshop for Oak Ridge Leadership Computing Facility community. We continue to strengthen relationships across our partner ecosystem, renewing several longstanding collaborations while expanding our engagement with the financial services industry. We re-signed a multi-year collaboration with Rolls-Royce focused on quantum algorithms for computational fluid dynamics and aerodynamics to problems that sit at the core of their engineering work. This is a great example of where quantum computing can be transformative, because these are exactly the kinds of challenges that are central to modern aerospace design. We're also seeing growing opportunity in the financial sector. Our ongoing research collaboration with the Fidelity Center for Applied Technology, FCAT, has included jointly published work adapting the hidden subgroup problem for practical data analysis. Beyond FCAT, we're in advanced stage engagements with several major banks on quantum algorithms, and we continue to scout actively across the sector for high-value applications for modeling systematic risk, capturing multi-input correlations with quantum methods. With that, let me hand it to Michael to walk through the financials. Thanks, Michael. Thanks, Christian. I'll cover our financial position, the capital actions we took this quarter, and our operating results. Revenue was CAD 1.5 million in the quarter compared to CAD 2.8 million in Q1 2026 and CAD 1.1 million in the prior year quarter. Revenue this quarter was primarily driven by DARPA at Stage B. R&D expense was approximately CAD 19.7 million, an increase of CAD 2.4 million from Q1 of 2026. As we said last quarter, we continue to expect R&D spend to increase over time as we add engineering talent and accelerate wafer and chip production, that remains very much our expectation. The modest sequential increase this quarter reflects an increase in headcount and stock-based compensation associated with adding manufacturing and engineering teammates as we scale our R&D capabilities. We expect R&D growth to accelerate into Q3 as we continue to add to our team and increase tapeouts. G&A expense was approximately CAD 11.1 million as compared to CAD 9.8 million in Q1 of 2026. The sequential increase primarily reflected higher headcount, stock-based compensation associated with annual grants, synthetic ATM, capital market advisory fees, and other public company-related expenses. This quarter, we recognized CAD 2.3 million in non-recurring fees associated with our SPAC combination and launching our synthetic ATM program. Adjusted EBITDA loss was CAD 21.3 million compared to a loss of CAD 13.9 million in Q1 2026. The increase in loss mainly was driven by increased R&D, G&A, and lower grant revenue. CapEx investment increased to approximately CAD 6.4 million in the quarter, primarily reflecting investment in specialized equipment to test, refine, and scale our chip manufacturing capabilities. We expect CapEx to increase further in the second half of the year as we continue investing in R&D and manufacturing infrastructure. We ended the quarter with CAD 312.8 million of cash. In May, we entered into a standby equity purchase agreement with Yorkville Advisors, establishing a synthetic ATM equity facility for up to CAD 300 million, which gave us the ability, but not the obligation, to issue Class B Subordinate Voting Shares to Yorkville over a three-year term opportunistically based on market conditions and valuation. During the quarter, we raised CAD 67.2 million under the synthetic ATM facility, selling 5.5 million shares at an average net price of CAD 12.28. As we said when we announced this facility, we intend to be disciplined and only draw on it when we believe conditions are favorable to shareholders and net proceeds go directly to Xanadu's balance sheet as primary issuance. With that, I will turn the call over to the operator for question and answers. Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Tanu Chauhan from Rosenblatt. Please go ahead. Hey, guys. This is Tanu. Thanks for taking my question. I'm asking on behalf of John. You had published results on edge coupling losses, and you spoke about them today, too. Can you talk a little bit about the 16 other components that you were engineering to minimize losses? Thanks, guys. Yep. Yeah, for sure. Thank you for the question. There's, as you mentioned, 16, 17 major components. One of our biggest challenges is loss reduction. We look at the major components in reducing them and reducing the loss for them. We can come from an architectural point of view, where we're saying, well, originally we needed, say, X amount of beam splitters, as one example. We can now do away with half of them, for instance. That's one way to do it. Another way is the platform or the loss propagation of the actual substrate. We use three different types of substrates. In terms of the components that you mentioned, they really fill out this sort of end-to-end aspect of the computer. Wherever the laser travels through, there's going to be loss. There's the aspects of the qubit generation, the sort of the gates aspect, and the detector side of things. Beam splitters, that's a classic example. Phase shifters is another one. The ring resonators, which create as a light nonlinear, light medium, which allows us to create the squeezers. Fiber to chip coupling, the edge coupling you mentioned. Then a variety of different detectors, the detector efficiency. There's 16 or 17 of them. They're just a few examples of the components. Great. Okay. Thanks. Thanks, Christian. No problem. Your next question comes from Kingsley Crane from Canaccord Genuity. Please go ahead. Go ahead. Hi. Thank you. Great to speak with you all. I just wanted to check in on Project OPTIMISM and just if there was any update there on potential to secure that funding or the timing around that, or just any incremental understanding of the milestones there. Thank you. Yeah. The last bit of information we publicly mentioned is it's in final discussions now. We can't say too much more, but maybe the best way to describe it's final discussions now. Stay tuned over the next month or two. We hope to have more information for you. Okay. That's really helpful. Maybe just on the joint QML and workforce training that you're doing with Lockheed Martin, I'm kind of just curious how that came about, how excited you are about the program, and the potential to evangelize PennyLane, but also just quantum computing in general. Thanks. Yeah, absolutely. Lockheed Martin has been a long-time user of PennyLane. They've been quite excited to actually get involved with us, first on the QML side and recently on the workforce training side. Every year, they're looking to convert a number of their, whether it be AI developers or other research engineers, into actually people that are able to develop quantum algorithms. They're bottlenecked by the number of internal quantum experts that they have. They're actually leveraging our platform along with our educational resources and PennyLane itself to be able to accelerate that and democratize that at a quite rapid pace. For us, it's really exciting. We're able to get PennyLane into the hands of many, many more developers, push novel algorithm development with one of our key partners, and continue developing our educational resources. Your next question comes from Nehal Chokshi from Northland Capital Markets. Please go ahead. Thank you. Going on more on this optical loss reduction, the 0.085 dB per facet loss sounds like a really good number. Can you give some context as far as, where was it at before? How many facets are there across the system? Really what I'm trying to get at is understanding how big is this particular factor relative to other 16 factors that you're also looking to bring down? Is it proportional, or is it just proportionally much larger than all the other ones here? That's a good question. I would say it's one of the major ones, but it's not the only one. As we mentioned, there's 16 or 17 of them. As you know, we need to get to levels below fault tolerance that allows you to scale up, in principle, indefinitely. Some of these ones were already at the right amount of nines in terms of fidelity, which is really impressive by the team. It's hard to really say how impressive this one was in terms of the overall picture. When you look at the actual fiber to chip coupling in this specific example, it's world-class. In and of its own, it's, we believe, the lowest loss anywhere in the world. It's just another important building block in terms of the overall system. Another thing to mention, which we mentioned first when we went public, is we'll be having a detailed loss roadmap and hardware milestone roadmap coming at the end of summer. We're still on track for that. The reason I bring that up, if you remember our first earnings call and also our investor deck when we went public, we had loss reduction broken into two major paths. Really think of that as a summary of all the 17 elements kind of aggregated into two different paths or directions. We had that up to the point of when we went public, we hope to have that by the end of summer, extrapolating out to 2030, plus or minus, basically where we need to get to. Stay tuned for that, and that's a much better way to examine the context of how everything fits together. Okay, great. I got a couple other questions. R&D engineers, R&D talent is key to achieving this 2030 objective. Has this talent pipeline for R&D engineers changed materially since becoming public? That's a good question. I think it has, in a good way, though. We've made a number of hires that I think, the sort of awareness of Xanadu after going public has risen and we've had a lot more inbound. Just as important, more ability to attract even better talent to complement already the great talent we have. A lot of the reasons is now the compensation can change. You have the ability to offer RSUs and so forth, and ultimately liquidity. I would say overall, it's really helped us. Apart from the capital, the awareness that's led to things like improved hiring, even though we had really great people, we're seeing a larger pool of talent applying to our positions. Overall, I'd say yes, it has changed in a positive way. That's great. Is it fair to say that we can expect further acceleration in the rate of R&D engineers being onboarded to Xanadu? Yes, definitely. I also don't want to imagine that this is an easy thing. We try to pride ourselves on saying it the way it is, this is still a very difficult challenge. As many things that we can improve on, like hiring, getting more great people, it does reduce the risk. The answer is definitely yes. It's still a big challenge, but having more people and particularly more capital allows us to achieve our ultimate vision of a large-scale quantum computer. Okay. My last question is that, in your press release, you mentioned a seminal PennyLane paper that's been cited 2,000x. When was the seminal PennyLane paper actually published? 2,000 citations sounds really stunning if it's only been recently. Yeah, it was first put on the archive first. As you know, you can put things on the archive like a preprint, and that was around eight years or so ago. Probably published a year after that. In general, you can start generating citations as soon as it goes on the archive, so roughly eight years. Got it. Okay. Going to traceable metric that you had provided in the past, the number of 30-day active users, has that materially changed since the beginning of the year? Sorry, could you- I'm sure last time you had a metric on- Absolutely. Go ahead. This is a number that continues to increase. We're seeing growth not only in the number of active users, but also in the number of universities that we're engaging with, worldwide number of corporate entities as well, that we're able to work with. PennyLane continues to grow in terms of adoption. The exact numbers right now, we're not reporting on, but it's something that we'll be looking at as we move towards our analyst day. Thanks, Nehal. We appreciate talking to you as always. Our next question comes from Todd Coupland with CIBC. Please go ahead. Hi. Good evening, everyone. I was wondering if you could comment on the optical loss performance so far and rank that, I guess, against DARPA's Stage C expectations, and include in that an update on where you think you might get by year-end, when you expect an announcement on that. Thanks. Hey, Todd. Thanks for that. Maybe the last thing first. We're looking good for Stage C, we can't make any promises. I would say that we're hitting everything we need to. It's looking good, but no one knows until you know, so we'll definitely keep you updated on that. In terms of the loss, I think going back to, as I mentioned, the plot for L1 and L2, just think of them as two different quasi-independent paths where the light travels and, you're picking up loss every time it propagates through the paths. It's really a function of a loss gap more than anything. You think of it as a loss gap because you can actually reduce the loss through the physical implementation, so doing more and more chip runs. I think from the press release, you would've seen that we've increased by 50% and 75% two different foundry runs. Think of that as ultimately loss reduction and speeding that up, which is great. It's more of a gap where you improve the hardware, but also improve the balance through theoretical work. Given that you can think of it like a gap, the gap has actually decreased from the last four years up to 200x, I believe, down to where we are now. We're around 5 to 10x reduction left to get to the promised land. We're on track for that still, and we'll definitely, as mentioned, give you more details of where we stand in the analyst day call when we have it. Great. Thanks, Christian. My second question, it has to do with OpEx and CapEx growth expected in the second half of the year. How should that look versus what you just reported? Thanks very much. As we talked about last quarter, we're still not providing explicit guidance on that, but we are providing high-level guidance, which is we are certainly increasing, as we talked about on some of the other questions, our engineering talent, and we're also increasing the number of tapeouts. You're starting to see a little bit of that in the growth on our balance sheet this quarter, and I think you're going to see that grow substantially in the second half of the year. As we get to our Analyst Day, we hope to provide you more color at that time. Thanks. Operator, next question, please. Our next question comes from Paul Treiber from RBC Capital Markets. Please go ahead. Good afternoon, and thanks for taking the question. Just in regards to the fab runs, you mentioned the 50% increase and the 75% increase. What's the current run rate for the annual fab runs? Then what's the magnitude of increase do you expect from current levels? Yeah, that's a good question. We have what's known as a WIP corridor. We take two foundries. Basically, you have a minimum number of wafers at any point in time you can access. For instance, at NY Creates, they do our silicon nitride, which is primarily used to create our qubits. We did have around 100 wafers at the start of last quarter, and so that's gone up 50% to 150 wafers, and likely to go up more too, based on what Michael said too. We're spending more in order to bring that loss down. Another one with WaferTech, so they're a subsidiary of UMC in Taiwan. We also have around 100, a bit more, and that's gone up to 175 wafers per month now, and also likely to go up in the next quarter as well. Okay. Thanks for taking the question. No problem. There are no further questions at this time. I will now turn the call back over to Christian Weedbrook for closing remarks. Thank you, everyone. It's great to get those questions, and we always appreciate everyone attending these earnings call. Just a reminder, our mission is to build quantum computers that are useful and available to people everywhere. Very much defined by our photonic-based approach, along with our PennyLane software. Perhaps just a final reminder that we think long-term here at Xanadu. It's not judged by quarters, although we're happy to do the earnings and quarterly reports and update you on our great progress. It is something that we're aiming for end of this decade, as mentioned, 2029, 2030. I'm looking to stay in touch, and thank you for everyone's time. This concludes today's call. Thank you for attending. You may now disconnect.