Q2 2023 Rigetti Computing Inc Earnings Call
Good day and welcome to the Getty computing second quarter, something twenty-three financial results call. At this time, all participants are in listen only mode.
After the Speakers' presentation there'll be a question answer session.
This will be given at that time.
As a reminder, this call's being recorded.
I'd like to turn the call over to tobacco Carney you may begin.
Good afternoon, and thank you for participating in <unk> earnings conference call covering the second quarter of 2023.
Joining me today is Jeff Bertelsen, our CFO , who will review our results in some detail following my overview.
City or every two months is also here to participate in the Q&A session.
We'll be pleased to answer your questions at the conclusion of our remarks.
We would like to point out that this call aggregate as Q2, two integrated three press release contain forward looking statements regarding our current expectations objectives and underlying assumptions regarding our outlook and future operating results.
These forward looking statements are subject to a number of risks and uncertainties.
Could cause actual results to differ materially from those described and are discussed in more detail in our Form 10-K for the year ended December 31st 2022.
<unk> 10-Q for the three and six months ended June 30th 20 credit tea and.
Our subsequent filings with the SEC and other filings with the Securities and Exchange Commission.
We urge you to review these discussions of risk factors.
Turning now to the business of the second quarter of 2023 mm.
I'm pleased to report our belief that we remain on track to reach our year end technology milestones with our fourth generation system.
After having launched alcohol one internally we are excited to have our longtime partner remotely as opposed to external partner using the system to work on improving our collection techniques on argue architectures.
We also look forward to making our most innovative quantum system available to the general public in Q4 of this year.
As previously disclosed we are continuing to work to improve performance with a goal of reaching media into pubic fidelity of 98%.
Support anticipated on cartoon 84 cubic system.
Our Khartoum 84 cubic system with anticipated implementing design and performance is expected to be deployed and made available to external customers in the fourth quarter of 2023.
We remain committed to working to achieve median two cubic fidelity of 19, 9% with anticipated I've got two which we expect to be achieved in 'twenty 'twenty four and development of the 336 cubic lidar system thereafter.
We also recently announced that we signed a collaboration agreement with a D. I a lab to design build and execute and optimize a quantum computing solution intended to address the probability distribution classification problem, because many direct application to practical use cases in the investment industry.
Tackling real world computationally challenging problems like this is an important part of working towards narrow onetime advantage.
I'm also very pleased to announce that we recently completed our first GPU sales, which went to a national lab.
Delivered a nine cubic GPU and associated hardware to the lab, which features a square like I spoke to you never couplers that can perform entangling two pubic get operations.
We are starting to see positive impacts following the implementation of our updated business strategy, we announced in February 2023.
Is designed to improve our focus operating efficiency and preserve cash resources.
At our current stage of development, we believe that executing toward our roadmap and achieving our technology milestones are key to fueling our goal of achieving quantum advantage.
We remain focused on meeting our objectives.
And with that I'll now turn the call over to Jeff who will review, our second quarter financial performance.
Thanks Sue.
Revenues in the second quarter of 2023 were $3 3 million compared to $2 1 million in the same period of 2022.
Revenue variability is to be expected at this stage of the company's evolution, given the nature of contract timing with major government agencies.
Our development contracts also primarily consist of technical milestone based work or cost share arrangement with revenue recognition vary according to the timing of deliverables.
Gross margins in the second quarter of 2023 came in at 82%.
From gross margins in the second quarter of 2022 up 59%.
The improvement in total gross profit is primarily primarily due to the significant variability in the pricing in terms of our development contracts.
On the expense side total opex in the second quarter of 2023 was $19 million compared to $27 million in the same period in the prior year.
The year over year decrease was primarily due to a reduction in stock compensation expense.
Other decreases in the second quarter of 2023 included lower professional fees and lower employee wages and benefit costs, resulting from our February 2023 reduction in workforce.
The change in the fair value of the forward agreement for the Amp here warrant increased G&A expense by $44000 in the second quarter of 2023.
Paired with a $2 1 million reduction in G&A expense in the second quarter of 2022.
In the second quarter of 2023 stock compensation expense totaled $3 4 million and depreciation and amortization expense totaled $2 2 million.
Compared to $11 million and $1 $6 million in the second quarter of 2022, respectively.
Operating loss for the second quarter of 2023 was $16 2 million compared to an operating loss of $25 8 million for the same period of 2022.
Net loss for the second quarter of 2023 was $17 million 13 per share compared to a net loss of $12 3 million or <unk> 11 per share for the same period of 2022.
Net loss for the second quarter of 2022 was favorably impacted by changes in the liability for the earn out and derivative warrant liabilities of $6 6 million and $8 million respectively.
Cash cash equivalents and available for sale investments totaled $105 5 million as of June 32023.
Compared with $122 million as of March 31, 2023.
During the second quarter of 2023 2023, we've raised to three.
<unk> four 8 million from the sale of 186 9 million shares of common stock.
There are common stock purchase agreement with B Riley.
Based on our current operating plan, we expect to have cash cash equivalents and available for sale securities of between 65 and $75 million at the end of 2023.
At this time based on our current operating plan, we anticipate that forgetting you'll need to raise additional funding by late 2020 for early 2025 to continue its research and development efforts and achieve its business objectives.
We would now be happy to answer your questions.
Thank you if he would like to ask a question. Please press star one one.
If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Our first question comes from Quinn Bolton with Needham <unk> Company. Your line is open.
Hey, guys. Congratulations on the technical progress in the quarter, great to see Youre still on track for that 98%.
<unk> by year end, I guess, so but I wanted to ask.
Great to see the first <unk> sale in the second quarter wondering a couple of things first of the $3 3 million can you quantify how much of that was more development contracts versus the Q P. You sale and then perhaps the more important question looking forward are you now starting to see.
A greater interest from National Labs, and other government agencies, and perhaps even on the commercial side growing interest in the sale of complete systems and could that become a meaningful portion of the revenue stream for the business going forward. Thank you.
Thanks, Glenn excellent questions. So.
First question regarding the revenue breakdown majority answer it is still coming from research contracts.
Although the Gpus is obviously contributing.
We don't want to quantify the exact price of 92, the <unk> for obvious reasons, but suffices to say for customers, who have dilution refrigerators in deposition. The price for the 92 Big GPU is going to be under $1 million. So that gives you a frame of reference of what we are talking about here.
So the majority of the revenue still comes from.
<unk> type contracts.
Cloud service, obviously, AWS azure as well as our cloud.
They all contributed as well during the quarter.
Now for the more important and exciting part of your question as to what do we think will happen to the GPU sales.
Pipeline, if you will that's what you're getting at so let me be very excited to see the interim.
Two we saw some are the first thing we did with the National lab.
And the pipeline that seems to be coming along.
A lot of customers are expressing interest in the 92 Big GPU.
Particularly with the.
Two new bulk upload and.
And the performance you get nine cubic most of the applications of research applications. So for things like optimized controlling both design and material surcharge simple algorithmic research basic characterizations measurements to maintaining that kind of stuff so primarily research.
We certainly still are not anywhere close to.
Quanta macro arent HRT going medical into my current Hh, mostly being used what do you say purposes, but there are many customers who are interested in having a on premise GPU for various reasons security.
All.
Trying to see how the hybrid climate Woodson data environment and so on so certainly we are very excited to see the interest that seems to be emerging with the 19 began.
We definitely think it will be a good contributor to our sales and margins at the price points I mentioned, we make fairly healthy margins will be feel pretty comfortable that this will be a good potential revenue stream that could help us at all.
Cash situation hopefully that answers your questions.
Yes, no that was that was great I guess a couple of follow ons.
First you mentioned customers if they are buying to keep you to have to have their own deletion refrigerator I know deletion refrigerators are pretty expensive. So I'm assuming that this is just for the Q U.
The dilution refrigerator.
Is purchased directly by the customer.
That's not included in the sale.
Yeah in general.
Obviously sent them the whole system, if they want to but many many customers that we are talking about as I said, it's primarily for research purposes.
How about just the condition refrigeration system no point in trying to sell them the whole team when they already have it and you can.
Ship them a finished.
<unk> finished gpus your willingness Fedex or Upa stay box and it really just has to be plug and play kind of a sustained because they can immediately titrate to their existing deletions refrigeration system and get it working fairly quickly. So it's a fairly simple.
Our operation to ship and get it plugged into their environment and get it going.
If they want to buy the whole system from us, including Dr. Obviously, the price point to be hired roughly in that two to two five times in the range of nine cubic system.
The timely focus on customers, who already have it and are interested in just buying the GPU from us.
Got it.
My last question is you mentioned the nine qubit.
Gpus and a square lattice I guess.
Sort of begs the natural question, if youre doing a nine square Atlantis is there a roadmap in this business to do a 16 square lettuce or quantified COVID-19 or 36 skew it.
Kind of et cetera et cetera.
You keep us with greater capability to this customer base, so that they can do more complex.
Gates circuits.
Excellent question and we are we debated internally a lot as to the right way to go forward with our roadmap.
We have already described our uncalled one is not a square.
It's not a square structure, if you will it's 84 COVID-19.
But when we say a square that as it is the actual structure of the <unk>.
So I'm going to steal a square lattice just connect whereby seven <unk>.
Also and this is where it is.
Exactly and location of the nine cubic San Jose the square style up with each other.
Certainly.
If we can look at nine go into 16 going to 81 and.
That's an approach with debate internally should we be looking at back versus 84, but at this time do you want to see that the 84 cubic whereby 70 square pattern. The tunable couple of and by the way that is the more important part is there to enable upload more than the <unk>. It certainly leads to much higher performance than the fixed couple of others that some others are doing in the superconducting cubic.
And we actually published a blog today getting into the details of why we believe tunable customers are significantly better than fixed uplifts.
Other companies are trying to do so I certainly encourage you to take a look at that graph that is on our website right now.
So anyway. So our roadmap is get 84 cubic to 98% for delayed <unk> facility by the end of this year getting to 99% sometime next year and then scale up.
Going from 84 to $1 68, and 336 and so on but certainly if we can look at square that isn't just grew $96 81 and so on.
Open to that if that makes sense.
Got it thank you.
Thanks Glenn.
Thank you. Our next question comes from Stephen Chin with TD Cowen Your line is open.
Hi, Yeah. Thanks for taking my questions guys. This is Steven calling on behalf of Krish.
It's actually somewhat Philips as well on the GPU sales.
I guess in terms of the associated hardware that you're referring to in terms of the deals.
Overall, the overall keeping yourself.
I assume some of the the computing control hardware that's associated with a couple of years that that's part of the package and if so is there any I guess.
Follow on service or maintenance contract revenues that might be associated with that.
Just keeping you sell any future ones.
Similarly for the AIE labs Abu Dhabi.
Partnership.
Any comments on sort of the revenue profile over a longer term period and also the.
The profile for that.
So thanks for your questions are good questions. So regarding the Gpus sale itself.
Is a large national lab that we deal with it. So it's certainly they wanted to get a <unk> thats what the sale was about these two exciting opportunities as I mentioned with UBS.
Give you a sense of it other research organizations National Labs academic institutes and other other organizations are long term certainly we think service is a big contributor to that.
The revenue stream when you start selling gpus, because these are going to be complex systems, they will need.
This support so definitely expect a service stream to go with a <unk> seen long term I think it's too early to talk about short term because we are dealing with large national labs, who are one hundreds of researchers optimize on that location. Many of them are quite capable of doing service and in fact, they want to or Knowhow from us but.
I want to do their own optimizations, and tuning and stuff like that so we really are not discussing service to this national type customers in the short term, but long term definitely service is a significant portion of the revenue stream.
Second question was about Adi a lab and the collaboration we announced exciting partnership at Adi Adi as obviously, a larger organization focused on research on many different things one of them being the financial areas and in specific on the time series with the projected distribution functions.
Streaming complex problems as we mentioned in our press release today.
Armed with classical computations.
They approached us and they are giving us some money you haven't disclosed how much. It's again, it's small in the big scheme of change it's more of a strategic partnership that we are excited about.
Do you want to work with them do you want to show them that quantum computing make C. Diff.
With quantum computing, you get to a distinct advantage over classical computing in solving this context, our goal was really to demonstrate narrow quantum everyone to HR.
Our schools approximate your denial contract warranted as we can for this complex problems. It wasn't really done at all.
Service.
Revenue specifically in mind long term certainly Adi is an efficient.
Fantastic partner to build out partnership that long term.
And we hope they do.
Real opportunity comes from the financial vertical market not just organizations like Adi hopefully that answers your question.
It does thank you so much for that and then just as my follow up regarding the <unk>.
Yeah.
The announcement that we're billing.
As I said working with your systems for aircrafts and I guess can you talk about.
The longer term implications of that since I know internally you guys are more focused on ticket fidelity, but.
Riverlands efforts supplementing any of your own internal error correction.
Development efforts and our.
Are there any expectations that.
The range of mix.
The progress on the error correction front, whether or not that leaves.
Opens more doors for additional GPU system sales or additional development contract signings that.
With potentially more lab projects. Thanks.
Yes, certainly interconnection is a very important part of any computing system, even including classical <unk> routine.
Routinely use EDA corrections in any classical system today, so we definitely expect error correction to be a key component of.
Quantum computing system long term riverbend is an excellent company focused specifically on aerial correction.
Partnering with them in the past and definitely we are excited to partner with them right now with the ongoing system.
We are working on in general areas our sense.
But certainly that doesn't preclude us from looking at partnerships like with you and with others.
We are talking to others.
Any advanced named whether we do or they do.
In this area is generally will be received positively by the whole quantum computing community.
As I mentioned before when the facilities are much lower than 99% frankly error correction doesn't make that bigger difference. It does make some difference obviously, but the overall errors are dominated by the intrinsic fidelity off your system as you increase your fleet at 80% to 98% 99% of uncertainty.
99 point X percent range error correction start becoming a big.
Contributing factor in your overall performance of the system and Thats really why we have started the partnership only as we include the odd fertility from our site. They will obviously see the benefit in the final just asset to get.
So hopefully that answers your question.
Thank you so much for that and nice job on the question. Thank you. Thank you.
Thank you. Our next question comes from David Williams with the Benchmark Company. Your line is open.
Hey, good afternoon, and Thats about all I just wanted to extend my congratulations on your success.
Definitely I think a fantastic job turning things around and put it back on track. So congratulations on your progress. Thank you David.
I guess my first question is just around the interest that you're receiving just given the success and what you've been able to accomplish in a short order are you seeing that the interest level from customers has improved and maybe what youre hearing in terms of feedback from those customers.
Maybe pre arrival pre your arrival contracts and then what you've done since then.
But certainly we are getting more interest from customers as opportunities continue to increase.
Came in the company is dealing with.
Aspen empty sustaining the we're just about to launch on one system.
And if entities were on the lower side with Aspen and even when you started.
Due to inflow opportunities our customers see that.
As we approach 98% before the end of this year, we definitely expect interest to increase and certainly at 99% plus.
Next year, we definitely expect a lot more customers will be interested in all the gpus and so we see that firsthand right now I mean opportunities are in the mid to high nineties with one.
Continue to work on that all we are pretty confident with regard to as we mentioned in our press release, we will be at 98 plus percent range before the end of this year and that is directly co related to the interest from customers and using our Gpus. So we expect as we go answer to that is just.
Just from customers to use our quantum computers are.
Service are directly buy from us that can continue to go up there are definitely correlated.
Forward certainly we are excited to get the first started and executed on natural gas already sold on <unk> as we disclosed.
That's a huge accomplishment we are proud of what our team has accomplished in making that happen.
We are dealing with the pipeline right now is as the publish more reserves as the National Lab, who has who is a customer they publish waters notes and others.
And this nine cubic gpus at the tunable cutoffs and square lattice.
Expect more customers to be expressing interest going forward.
We will continue to increase both the.
Number a few bits as well as the quality of <unk>. So I think our two chip is 80 for Covid.
We are talking to some potential customers about 2004, cobalt and 84 cubic type systems.
That's more in the long term near term certainly we'll continue to talk to more customers or <unk> will just go ahead, <unk>, plus but anyway exciting to see the.
In the global community in using something like this right away.
We are definitely getting a lot of interest on a number of research our stores right now.
Okay.
Great color there.
And you mentioned this briefly but.
How much interest do you have I guess in terms of your latest generation are you seeing more interest around kind of that research phase or do you see others that are maybe have more interest and getting something closer to your latest.
84 bps.
I'll go to potentially at the end of the year are you seeing a lot of interest there and maybe what kind of price point would you be thinking about and is that something you'd be interested in maybe doing as this release of telling that right away.
Excellent questions I mean, right now certainly we are entertaining customers at nine cubic.
And maybe 2004 cubic type levels.
We will we want to bring our own system upfront.
Good facility with 84 Covid, so if he wants.
We want to be thoughtful.
Use it ourselves and that didn't happen before the end of this year. When we have 84 COVID-19 encore to system with 98 plus percent.
Media <unk> fidelity.
Beyond that we will certainly entertain a request.
Most customers will want to test it out in the cloud manner instead of this first.
Before they want to bring it on premise.
You can do a lot of good quality research between nine cubic.
Well couple of system today.
As you know this goes with explanation with 98 or 99% plus fidelity.
A lot of research projects can be handled with <unk> edge.
Because it's really too late to that number that is that is the level of the computational power you're getting such a huge amount of computing power you get you wanted nine.
<unk> certainly is the number goes up you are dealing with an exponential power. So we will be happy to entertain customers, but it has to make sense of that.
Just don't want to take on projects.
Difficult for customers to understand and for us to execute but we certainly will be talking to customers with higher number of <unk>.
Referring to there.
Early next year, hopefully that answers your question.
Okay. Thanks, so much and again congrats on the progress.
Thank you.
Thank you there are no further questions at this time I will turn the call over to Bob <unk> for any closing remarks.
Thank you for your interest and your questions. We look forward to updating you with our progress next quarter. Thank you again.
Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.
Okay.
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Okay.