Q1 2024 Rigetti Computing Inc Earnings Call
Okay.
Operator: Hello, and welcome to the Rigetti Company first quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Subodh Kulkarni. You may begin.
Hello, and welcome to the Righetti company first quarter, 'twenty 'twenty, four and natural results conference call.
Operator: At this time all participants are in a listen only mode.
Subodh K. Kulkarni: The speaker's presentation, there will be a question and answer session.
Operator: Ask the question during the session you will need to press star one on your telephone.
Speaker Change: But then her automated message advising your hand, it's rice.
Operator: To withdraw your question. Please press star one again.
Subodh K. Kulkarni: I would now like to turn the call, but usable Kulkarni you may begin.
Subodh K. Kulkarni: Good afternoon, and thank you for participating in Rigetti's earnings conference call covering the first quarter ended March 31st, 2025. Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview. Our CTO, David Rivas, is also here to participate in the Q&A session.
Subodh K. Kulkarni: Good afternoon, and thank you for participating in <unk> earnings conference call covering the first quarter ended March 31st 2024.
Subodh K. Kulkarni: Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview.
Subodh K. Kulkarni: Our CTO David Ross is also here to participate in the Q&A session.
Speaker Change: We will be pleased to answer your questions at the conclusion of our remarks.
Subodh K. Kulkarni: We will be pleased to answer your questions at the conclusion of our remarks. However, we would like to point out that this call and Rigetti's first quarter ended March 31st, 2024, press release contain forward-looking statements regarding 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 that 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, 2023, our Form 10-Q for the three months ended March 31st, 2024, and other documents filed by the company from time to time with the Securities and Exchange Commission. These filings identify and address important risks and uncertainties that could cause actual events We urge you to review these discussions of risk factors.
Subodh K. Kulkarni: We would like to point out that this call aggregate. Its first quarter ended March 31st 2024 press release contains forward looking statements regarding current expectations objectives, and underlying assumptions regarding our outlook and future operating results.
Subodh K. Kulkarni: These forward looking statements are subject to a number of risks and uncertainties that 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 31 2023.
Subodh K. Kulkarni: Form 10-Q for the three months ended March 31 2024.
Subodh K. Kulkarni: And other documents filed by the company from time to time with the Securities and Exchange Commission.
Subodh K. Kulkarni: These filings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward looking statements.
Subodh K. Kulkarni: All of you to review these discussions of risk factors.
Subodh K. Kulkarni: Today, I am pleased to report on a number of new developments at Rigetti Computing, first on our technology roadmap and QPU performance. We have achieved a 99.3% median 2-qubit gate fidelity on our 9-qubit AMCA-class quantum system. This development gives us confidence that we will reach 99 plus percent median two-qubit gate fidelity on our anticipated 84-qubit AMCA3 system, which we plan to deploy by the end of the year. Rigetti plans to develop the 336-qubit LiDAR system thereafter.
Subodh K. Kulkarni: Today I am pleased to report a number of new developments aggregating computing.
Subodh K. Kulkarni: First on our technology roadmap and GPU performance.
Subodh K. Kulkarni: Achieved a 99, 3% median two cubic gateway <unk>.
Subodh K. Kulkarni: 90, a bit on car class quantum system.
Subodh K. Kulkarni: This development gives us confidence that we will reach 99 plus percent median two qubit gates reality.
Subodh K. Kulkarni: Anticipated 84, Kilobit I've got three system, which we plan to deploy by the end of the year.
Subodh K. Kulkarni: Because he plans to develop the 336 cubic lidar system thereafter.
Subodh K. Kulkarni: On the business update front, I'm pleased to report that we are continuing to grow our on-premises quantum processor unit sales with the delivery of a Nowera QPU to Horizon Quantum Computing in April 2025. The Nowera QPU will be installed in Horizon's new hardware testbed in Singapore and will be Horizon's first quantum computing system. This is our first QPU located in Singapore. We expect that the system will be installed by early 2025.
Subodh K. Kulkarni: On the business a big strength I am pleased to report that we are continuing to grow our optimized sales quantum processor unit sales.
Subodh K. Kulkarni: The delivery of innovator GPU to horizon quantum computing in April 2024.
Subodh K. Kulkarni: <unk> will be installed in horizon.
Subodh K. Kulkarni: In term computing, new hardware Testbed in Singapore, and will be horizons first quantum computing system.
Subodh K. Kulkarni: This is our first GPU located in Singapore.
Subodh K. Kulkarni: We expect that the system will be installed by early 2025.
Subodh K. Kulkarni: We are witnessing the emergence of a vibrant, on-premises quantum computing market. Quantum computing researchers need hands-on access to quantum technology to gain a deeper understanding of how to work towards useful quantum computing. We launched the Novera QPU to address this need, and we are thrilled that our longtime partners at Horizon selected our hardware to advance their quantum computing journey. Our first NOVERA QPU sales went to leading U.S. government labs, the Superconducting Quantum Materials and Systems Center, SQMS, led by Fermilab, and the Air Force Research Lab, AFRL.
Subodh K. Kulkarni: We are witnessing the emergence of a vibrant <unk> quantum computing market.
Subodh K. Kulkarni: Quantum computing researchers need hands on access to quantum technology to gain a deeper understanding of how to work towards useful quantum computing.
Subodh K. Kulkarni: We launched a brand new radar GPU to address this need and we are too that our longtime partners at horizon selected our hardware to advance their quantum computing journey.
Subodh K. Kulkarni: Our first nowhere I'll keep you safe well to leading U S government labs, the superconducting quantum materials and system centers SQL.
Subodh K. Kulkarni: Led by Formula and the Air Force Research lab.
Subodh K. Kulkarni: This past April, we launched the Novera QPU partnership program to support the on-premises quantum ecosystem. The Novera QPU Partner Program aims to enable high-performance, on-premises quantum computing by creating an ecosystem of quantum computing hardware, software, and service providers who build and offer integral components of a functional quantum computing system. Nowera QPU customers can work with Nowera QPU partners to build a quantum computer powered by the Nowera QPU that satisfies their system requirements and quantum computing research objectives.
Subodh K. Kulkarni: Ed.
Subodh K. Kulkarni: This past April we launched elevate our GPU partnership program to support <unk> Quanta ecosystems.
Subodh K. Kulkarni: The Nevada GPU partner program aims to enable high performing optimize this quantum computing by creating an ecosystem of quantum computing hardware software and service providers, who build and offer integral components of a functional quantum computing system.
Subodh K. Kulkarni: The way to keep your customers can work with Nomura <unk> partners to build a quantum computer powered by the Nevada, <unk> that satisfies their system requirements and quantum computing research objectives.
Subodh K. Kulkarni: The founding members of the Novera QPU Partner Program include some of Rigetti's most long-term partners and are leaders in the respective areas of quantum computing technology. We intend to grow the NOVERA QPU Partner Program with additional partners on an ongoing basis. With the Nowera QPU, we have a unique opportunity to develop the development of on-premises quantum computing capabilities worldwide. At Rigetti, we are experts at overcoming the challenges of building, installing, and supporting a quantum computing system.
Subodh K. Kulkarni: The founding members of the Nevada <unk> partner program includes some obligated most long term partners and are leaders in their respective areas of quantum computing technology.
Subodh K. Kulkarni: We intend to grow the Nevada, GPU partner program with additional partners on an ongoing basis.
Subodh K. Kulkarni: With the lower acuity you, we have a unique opportunity to develop the development of <unk> quantum computing capabilities worldwide.
Subodh K. Kulkarni: Aggregating we are experts at overcoming the challenges of building installing and supporting a quantum computing system.
Subodh K. Kulkarni: After a decade in the quantum computing industry, we have also forged long-lasting partnerships with world-leading quantum technology companies, whose collaborations and expertise have helped us advance our capabilities even further. We want to empower Novera QPU customers with an ecosystem of our trusted partners to support their own quantum computing research pursuits, and to help prepare us for a quantum ready society. Jeff will now make a few remarks regarding our recent financial performance.
Subodh K. Kulkarni: After a decade in the quantum computing industry. We are also forged long lasting partnerships with world, leading quantum technology companies with collaborations and expertise have helped us advance our capabilities even further.
Jeff: We want to empower Nomura <unk> customers with an ecosystem of our trusted partners to support their own quantum computing research pursuits.
Jeff: And to help prepare us for a quantum ready society.
Subodh K. Kulkarni: Jeff will now make a few remarks regarding our recent financial performance.
Jeffrey A. Bertelsen: Revenues in the first quarter of 2024 were $3.1 million, up 39% compared to 2.2 million in the first quarter of 2023. Gross margins in the first quarter of 2024 came in at 49%, compared to 77% in the first quarter of 2023. Revenue and gross margin variability is to be expected at this stage of the company's evolution given the variable nature of contract deliverables and timing with major government agents. In addition, our project to develop and deliver a 24-cubic quantum computing system to the UK's National Quantum Computing Centre has a lower gross margin profile when compared to some of our other projects.
Jeff: Thanks <unk>.
Jeff: Revenues in the first quarter of 2024 were $3 1 million.
Jeffrey A. Bertelsen: Up 39% compared to $2 2 million in the first quarter of 2023.
Jeffrey A. Bertelsen: Gross margins in the first quarter of 2024 came in at 49% comp.
Jeffrey A. Bertelsen: Compared to 77% in the first quarter of 2023.
Jeffrey A. Bertelsen: Revenue and gross margin variability is to be X is to be expected at this stage of the companys evolution, given the variable nature of contract deliverables and timing with major government agencies.
Jeffrey A. Bertelsen: In addition, our project to develop and deliver our 2004 qubit quantum computing system to the Uk's National Quantum Computing Center has a lower gross margin profile when compared to some of our other projects.
Jeffrey A. Bertelsen: On the expense side, total OPEX in the first quarter of 2024 was $18.1 million, compared to $23.7 million in the same period of the prior year. The year over year decrease was primarily due to our February 2023 restructuring and reduction in workforce. A reduction in public company costs as more activities are being brought in-house and savings from R&D-related IT systems rationalization. SG&A expense for the three months ended March 31, 2023 included $1.1 million of expense related to the Ampere Forward Agreement, which expired in October 2023. The Ampere Agreement had no impact on our results for the three months ended March 31, 2024.
Jeffrey A. Bertelsen: On the expense side total opex in the first quarter of 2024 was $18 1 million compared to $23 7 million in the same period of the prior year.
Jeffrey A. Bertelsen: The year over year decrease was primarily due to our February 2023 restructuring and reduction in workforce.
Jeffrey A. Bertelsen: A reduction in public company cost as more activities are being brought in house and savings from R&D related it systems rationalization.
Jeffrey A. Bertelsen: SG&A expense for the three months ended March 31, 2023 included $1 $1 million of expense related to the Amp here forward agreement, which expired in October 2023.
Jeffrey A. Bertelsen: The <unk> agreement had no impact on our results for the three months ended March 31 2024.
Jeffrey A. Bertelsen: Stock compensation expense for the first quarter of 2024 was $3 million, compared to $1.7 million for the first quarter of 2023. However, compensation expense was favorably impacted in the first quarter of 2023 by forfeitures related to the February 2023 restructuring and reduction of the workforce. Operating loss for the first quarter of 2024 was $16.6 million, compared to an operating loss of $22 million for the same period of 2023. Net loss for the first quarter of 2024 was $20.8 million, or $0.14 per share, compared to a net loss of $23.4 million, or $0.19 per share, for the first quarter of 2023.
Jeffrey A. Bertelsen: Stock compensation expense for the first quarter of 2024 was $3 million compared to $1 7 million for the first quarter of 2023.
Jeffrey A. Bertelsen: Stock compensation expense was favorably impacted in the first quarter of 2023 by forfeitures related to the February 2023 restructuring and reduction in workforce.
Jeffrey A. Bertelsen: Operating loss for the first quarter of 2024 was $16 6 million compared to an operating loss of $22 million for the same period of 2023.
Jeffrey A. Bertelsen: Net loss for the first quarter of 2024 was $20 8 million or <unk> 14 per share compared to a net loss of $23 4 million or <unk> 19 per share for the first quarter of 2023.
Jeffrey A. Bertelsen: The non-cash change in the fair value of derivative warrants and earn-out liabilities negatively impacted our net loss in the first quarter of 2024 by $4.2 million, compared to a negative impact of $1.2 million for the first quarter of 2023.
Jeffrey A. Bertelsen: The noncash change in the fair value of derivative warrant and earn out liabilities negatively impacted our net loss in the first quarter of 2024 by $4 2 million.
Jeffrey A. Bertelsen: Compared to a negative impact of $1 2 million for the first quarter of 2023.
Operator: Cash, cash equivalents, and available for sale investments totaled $102.8 million as of March 31, 2024, compared with $99.9 million as of December 31, 2023. On March 15, 2024, we entered into an ATM sales agreement for shares of our common stock having an aggregate offering price of up to $100 million. Year to date through May 9, 2024, we have raised $32.9 million from the sale of 23 million shares under our prior common stock purchase agreement with B Reilly and our current ATM program, including $23.9 million raised in the three months ended March 31, 2024.
Jeffrey A. Bertelsen: Cash cash equivalents and available for sale investments totaled $102 8 million as of March 31, 2024, compared with $99 nine.
Operator: <unk> 9 million as of December 31, 2023.
Operator: On March 15th 2024, we entered into an ATM sales agreement for shares of our common stock, having an aggregate offering price of up to $100 million.
Operator: Year to date through May nine 2024, we have raised $32 9 million from the sale of 23 million shares under our prior common stock purchase agreement with B Riley and our current ATM program, including $23 9 million raised in the three months ended March 31 2020.
Operator: As disclosed in today's 10-Q filing, we believe that our existing balances of cash, cash equivalents, and marketable security should be sufficient to meet our anticipated operating cash needs until midway through the fourth quarter of 2025, based on our current business plan and expectations and assumptions considering current macroeconomic conditions. Thank you. We would now be happy to answer your question.
Operator: Four.
Operator: As disclosed in today's 10-Q filing we believe that our existing balances of cash cash equivalents and marketable securities should be sufficient to meet our anticipated operating cash needs until midway through the fourth quarter of 2025 based on our current business plan and expectations and assumptions.
Operator: <unk> considering current macroeconomic conditions. Thank you we would now be happy to answer your questions.
Operator: Ladies and gentlemen, as a reminder to ask the question, please press star 11 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone.
Operator: Good to hear your name announced.
Operator: So let's draw your question. Please press star one again.
Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Quinn Bolton with Needham and Company. Your line is open.
Operator: Please standby, while we compile the Q&A roster.
Operator: Our first question comes from the line of Quinn Bolton with Needham and company. Your line is open.
Neil Young: Hi, this is Neil Young. I'm for Quinn Bolton.
Operator: Hi, This is Neil on for Quinn Bolton. Thanks for letting me ask a question.
Neil Young: Thanks for letting me ask a question. So you sold Novera to Horizon Quantum Computing. I was just wondering if you could elaborate further on that sale.
Neil Young: So you sold no Vera horizon quantum computing I was just wondering if you could elaborate further on that sale.
Subodh K. Kulkarni: So Horizon Computing is a company based in Singapore, funded primarily by the government of Singapore. Their goal is to establish a hardware testbed where they will experiment with different kinds of different modalities of quantum computing and evaluate the performance of different modalities. This was their first purchase for quantum computing, and it started with superconducting, and we are really thrilled that they chose us over some of our other competitors for superconducting quantum computing.
Neil Young: So sure so horizon computing is a company based in Singapore funded primarily by the government of Singapore are their goal is to establish a hardware testbed Dave.
Subodh K. Kulkarni: Dave the experiment with different kinds of different modalities of quantum computing and evaluate the performance of different modalities.
Subodh K. Kulkarni:
Subodh K. Kulkarni: This was their first operators for quantum computing think started with superconducting and we are thrilled that they chose us toward some of our other competitors for superconducting quantum computing, we expect them to purchase other kinds of modalities as they mature and become available.
Speaker Change: It could be an interesting Brian.
Subodh K. Kulkarni: For those to see how superconducting says.
Subodh K. Kulkarni: Other modalities, and what kind of users and benefits and applications, they develop but that system.
Subodh K. Kulkarni: We expect them to purchase other kinds of modalities as they mature and become available, but it will be an interesting project for us to see how superconducting fares with other modalities and what kind of uses and benefits and applications they develop with that system. But overall, this is a government of Singapore initiative, and Horizon is, is scaling up quantum computing in Singapore right now. Hopefully, that answers your question.
Subodh K. Kulkarni: Overall this is a government of Singapore initiative and whereas in the system.
Subodh K. Kulkarni: Yes, getting a quantum computing in Singapore right now.
Neil Young: Yeah, it does. Great, thank you. I had a follow-up question. In the release, there was a list of founding members of the Novera QPU partner program. I was wondering if you could maybe go into detail on that partnership program, and then also, given that you've already made a sale to one of the partners, what's the likelihood that the other partners are potential customers for a sale similar to the Horizonsail... Sashoof Kinstlinger.
Subodh K. Kulkarni: Hopefully that answers your question.
Speaker Change: Yes that was great. Thank you I had a follow up so in the release there was a list of founding members of the <unk>.
Neil Young: On the partner program I was wondering if you could maybe go into detail on that partnership program and then also given that you've already made a sale to one of the partners. What's the likelihood the other partners are potential customers for.
Neil Young: Our sales similar to that.
Subodh K. Kulkarni: So, sure. Thanks, Neil.
Neil Young: Horizon sale. Thank you.
Sashoof Kinstlinger: Thanks, Neil So first.
Subodh K. Kulkarni: No.
Sashoof Kinstlinger: We believe our open modular approach to developing quantum computing systems is a key.
Subodh K. Kulkarni: Enabler for the growth of quantum computing industry.
Subodh K. Kulkarni: So first, we believe our open modular approach to developing quantum computing systems is a key enabler for the growth of the quantum computing industry. So, if you notice, we have chosen various partners in different parts of the stack. So even though we can and have developed a full stack quantum computer, we fundamentally believe the open modular approach is the right way to allow innovation to come in faster. So we are allowing other partner companies to develop what they are good at. For instance, we have partnered with Riverlin in Cambridge, UK, who is very good at error correction.
Subodh K. Kulkarni: You notice we have chosen.
Subodh K. Kulkarni: Various partners in different parts of the stack, so even though we can and have developed a full stack quantum computers.
Subodh K. Kulkarni: We believe fundamentally believe open modular approach is the right way to allow innovation to.
Subodh K. Kulkarni: Come in faster. So we are allowing other partner companies to develop what they're good at for instance via partner delivered in Cambridge UK.
Subodh K. Kulkarni: And we have partnered with Quantum Machines in Israel and Zurich Instruments in Switzerland, who are very good at control systems. So we are allowing our QPU to interface with other parts of the stack from other companies. We think that's the right approach to develop a quantum computing system in a faster and more efficient manner.
Subodh K. Kulkarni: Who is very correct interconnection and then we have partnered with quantum machines in Israel and sort of instruments since his return.
Subodh K. Kulkarni: Very good in control systems.
Subodh K. Kulkarni: Allowing <unk> to interface with other parts of the stack from other companies meeting that's the right approach.
Subodh K. Kulkarni: <unk> developed.
Subodh K. Kulkarni: Quantum computing system in a in a faster and more efficient manner.
Subodh K. Kulkarni: Regarding your second part of the question, yes, one of the partners is Horizon, and they have purchased Novera. We certainly hope some of the other partner companies start looking into purchasing Novera as well. But there's no commitment, per se. We are not insisting that they have to purchase a Novera to be a partner company. If it makes sense for them to have a hardware platform within their facility, they will purchase it. If it doesn't, then we are not insisting on that. The overall goal of the program is to enable the development of a quantum computing system fast. Let me add something there, Subodh. Go ahead, David. Yeah, so the other one...
Speaker Change: Regarding your second part of the question, Yes, one of the partners as horizon and they have purchased Nomura.
David: Certainly some of the other partner companies start.
David: Looking into bulk purchasing on the radar, but there is no commitment.
David: Insisting that they have to purchase a new radar to be a partnered company. If it makes sense for them to have one hardware.
David: Platform within this facility they will purchase it if it doesn't then we are not interesting on that though.
David: <unk> goal is to prove Demonstratable development of quantum computing system fasteners.
David: Let me add something go.
David Neil Williams: Yeah, so the other thing to think about here is that most of these partners here in the business are selling complementary. In fact, all of them are selling complementary to the QPU product. And so there's an expected and likely channel opportunity here with most of these folks as they engage with customers and try to put together systems themselves, which we're pretty good at.
David: Go ahead David.
David: Yes, so the one other thing to think about here is most of these partners here in the business of selling complementary in fact, all of them are selling complementary to the <unk> product and so theres there as.
David Neil Williams: Expected unlikely channel opportunity here with most of these folks as they engage with customers and trying to put together systems themselves, which we're pretty excited.
Speaker Change: Thank you.
Operator: Please stand by for our next question. Our next question comes from Ilana Brant Kinstlinger with Alliance Global Partners. Ilana, it's open.
David Neil Williams: Please standby for our next question.
Speaker Change: Our next question comes from the line of Brian <unk> Slinger with Alliance Global Partners. Your line is open.
Brian David Kinstlinger: Great. Thanks so much, guys. Can you talk about the pipeline first within the US and UK countries where you've already sold QPUs to the top national labs? Do you expect additional sales given that early penetration coupled with your fidelity rates this year in 2024?
Speaker Change: Great. Thanks, So much guys can you talk about the pipeline first within the U S and the UK countries, where you've already sold to be used to the top national labs.
Speaker Change: Additional sales given that early penetration coupled with your fidelity rates this year in 2024.
Subodh K. Kulkarni: So, yes, we definitely feel very good that we were the first ones to sell working quantum computers to DOE and DOD and also were the ones to win the competition set by the UK government. Certainly, it gives us a jumpstart with those national laboratories and many other national laboratories in those countries. As you know, there are multiple DOE labs in the U.S. and multiple DOD labs, but they also sponsor a lot of university research, and many other fundamental research labs follow the lead from DOE and DOD.
Brian David Kinstlinger: Okay.
Speaker Change: So yes, we definitely feel very good that delivered the first ones to sell looking quantum computers still.
Subodh K. Kulkarni: <unk> and <unk> and also the ones to window competition set by U K government.
Subodh K. Kulkarni: Certainly it gives us a jumpstart the dose session lapse and many of the National labs in those countries. As you know there are multiple <unk> labs in the U S and multiple EOD lab.
Subodh K. Kulkarni: But also they sponsored a lot of University research and many others are fundamental research and that's followed the lead from <unk>. So certainly.
Subodh K. Kulkarni: So certainly, we believe that the early entry into DOE and DOD labs sets us with a good foundation to enable future QPU sales with other national labs and universities that those national labs sponsor. Same in the UK.
Subodh K. Kulkarni: We.
Subodh K. Kulkarni: Believe that the early entry into <unk> labs.
Subodh K. Kulkarni: Sets us with a good foundation to enable the future.
Subodh K. Kulkarni: I mean, NQCC is the foundational lab for the UK government. That's where they would build their first quantum system, but there are other labs and universities in the UK geography who are interested in potentially purchasing on-premise QPUs. So it does give us a great jumpstart to pursue those opportunities. So overall, we feel pretty good about our pipeline of on-premise QPU sales. It seems to be a healthy growing ecosystem. We are still very early in the development of the on-premise QPU business or market, but certainly we are quite excited about the potential opportunities with the US and UK, and we are certainly talking to other countries as they start looking into setting up their own quantum infrastructure.
Operator: [inaudible]
Subodh K. Kulkarni: GPU sales with other national labs, and universities that those national AD sponsor same in the U K <unk> as the.
Operator: Foundational labs for the UK government.
Operator: They would build their first quantum system, but there are other labs and universities in the U K.
Operator: Geography, who will who are interested in potentially purchasing on <unk>. So it does give us a great jumpstart to pursue those opportunities. So what other pipeline, we feel pretty good about our pipeline of <unk> sales it seems to be a healthy growing ecosystem. We are still very early in the in the development of optimized <unk>.
Operator: Business off market opportunities.
Operator: But certainly we are quite excited about the potential opportunities with U S and UK and we certainly are talking to other countries as they start looking into setting up their own quantum infrastructure.
Brian David Kinstlinger: Yeah, mostly, and I'm sure you can't give the exact number, nor do I expect you to, but specifically in the US and secondarily in the UK. Are you talking to dozens of labs who want to get their hands on it, potentially, to test and evaluate what.., you know, that power is for them, or is that overstating how many you're in discussions with?
Speaker Change: Yes, I guess.
Speaker Change: Yes, mostly.
Brian David Kinstlinger: And Im sure you cant give the exact number nor do I expect you to but.
Brian David Kinstlinger: Specifically in the U S SEC.
Brian David Kinstlinger: Generally in the U K.
Brian David Kinstlinger: Are you talking to dozens of labs, who wanted to get their hands on it potentially to test and evaluate what.
Brian David Kinstlinger: That power is for them or is that overstating, how many you're in discussions with.
Subodh K. Kulkarni: We are certainly talking to a handful of labs. I wouldn't call them dozens, though. Overall, if you look at the number of customers, we have active discussions going on right now. It's in the neighborhood of 10 to 15 customers. We also make sure that a. they are funded, b. they are serious, and they understand where quantum computing is. Clearly, we are not at a point where quantum computers can demonstrate superiority over classical computers today.
Speaker Change: We are certainly talking to a handful number of labs I wouldn't call them dozens overall, if you look at the number of customers. We have active discussions going on right now it's in the neighborhood of 10 to 15 customers.
Subodh K. Kulkarni: So I'll make sure that Adi funded B Theyre Cts the understand their quantum computing is clearly we are not at a point where.
Subodh K. Kulkarni: Can demonstrate superiority over classical computers today. So these are primarily for research purposes. So we can make sure that the customer understands what exactly they're going to get and they are going to get value out of it before the purchase foreseeing every single lead to actually get some.
Subodh K. Kulkarni: So these are primarily for research purposes. So we make sure that the customer understands what exactly they are going to get and they are going to get value out of it before pursuing every single lead that we get. So we narrow the funnel quite a bit when we look at who's interested and for what reasons. Having said that, I think we are pursuing about 10 to 15 leads right now worldwide.
Subodh K. Kulkarni: Narrow the funnel quite a bit when we look at.
Subodh K. Kulkarni: Who is interested in spot what reason having.
Subodh K. Kulkarni: Having said that.
Subodh K. Kulkarni: We are pursuing about 10 to 15 lead site now worldwide.
Subodh K. Kulkarni: Great.
Brian David Kinstlinger: My second question would be... Has anything changed in terms of your technology roadmap? Do you still believe? Is there anything that's happened that changes your belief that you'll accomplish your goal this year and, more importantly, next year?
Subodh K. Kulkarni: And then.
Speaker Change: My second question would be.
Brian David Kinstlinger: Has anything changed.
Brian David Kinstlinger: In terms of.
Brian David Kinstlinger: Your technology roadmap do you still believe.
Brian David Kinstlinger: Is there anything that's happened at <unk>.
Brian David Kinstlinger: Changing your belief that Youll accomplish your goal of this year and more importantly next year.
Subodh K. Kulkarni: Well, as we mentioned in our press release, we are certainly excited to announce that we have accomplished 99.3% 2-qubit gate fidelity with our 9-qubit device. That gives us confidence that before the end of this year, we should be able to demonstrate more than 99% or higher 2-qubit gate fidelity on our 84-qubit device. So that's consistent with what we have said, and we feel pretty good about executing on that roadmap. Once we hit 99, we will embark on scaling up the qubit count, but we will also continue to work on fidelity. I mean, this is going to be an ongoing evolution.
Brian David Kinstlinger: But as we mentioned in our press release, we are certainly excited to announce that we have accomplished 99, 3%.
Subodh K. Kulkarni: <unk> inhibitors nine cubic device that gives us confidence that before the end of this year. This should be really demonstrate more than 99% or higher to cubic yard facility on our 84 tier device. So that's consistent with what we have said and we feel pretty good about executing to that roadmap once we hit 99.
Subodh K. Kulkarni: Embark on scaling up the cubic count, but we will also continue to work consolidated I mean, this is going to be an ongoing evolution ultimately long term a decade from now we expect quantum computers to hit 99, 9% or even higher facility. So we will continue to improve both futility and pubic cloud.
Subodh K. Kulkarni: Ultimately, long-term, a decade from now, we expect quantum computers to hit 99.9% or even higher fidelity. So we will continue to improve both fidelity and qubit count. We feel really good about where we are right now with our 9-qubit device and the 84-qubit device. So we certainly feel that we are executing well on the roadmap. And before the end of this year, we will have 84 qubits at 99% or better 2-qubit gate fidelity.
Subodh K. Kulkarni: We feel really good about where we are right now with our 90 with device into 80 sawtimber device. So we certainly feel that we are executing well on the roadmap and before the end of this year, we'll have to wait at 99% or better <unk> and.
Subodh K. Kulkarni: And before the end of next year, we should be able to improve both the qubit count and fidelity significantly from that point on. So overall, we feel very good about the roadmap and where we are, and also the overall benefits of superconducting quantum computing and the overall roadmap of that modality.
Subodh K. Kulkarni: Before the end of next year, we should be able to improve both the cubic continental at a significantly subtype breakdown. So overall, we feel very good about our roadmap and where we are and also the overall.
Subodh K. Kulkarni: Benefits of superconducting quantum computing and overall roadmap offset modality.
Brian David Kinstlinger: Great. Thank you so much. Thanks, Brian.
Speaker Change: Great. Thank you so much thanks Brent.
Operator: Will you stand by for our next question? Our next question comes from the line of Chris Sankar with TD Cohen. Your line is open.
Speaker Change: Please standby for our next question.
Chris Sankar: Our next question comes from the line of Chris <unk> with TD Cowen Your line is open.
Chris Sankar: Hi, thanks for taking my questions. This is Stephen, calling on behalf of Chris.
Chris Sankar: Hi, guys. Thanks for taking my questions. This is Steven calling in behalf of Krish.
Chris Sankar: Yeah, the first question I had was regarding the Horizon QP sale. I was just wondering, first of all, like for that transaction, was the revenue recognized during the quarter, or is that potentially a later REVREC date based on installation? And I had a couple of follow-ups as well.
Stephen: The first question I had was.
Chris Sankar: Guarding the horizon on CPE sale I'm, just wondering first of all like for that.
Jeffrey A. Bertelsen: [inaudible]
Jeffrey A. Bertelsen: The transaction was the revenue recognized during the quarter or.
Jeffrey A. Bertelsen: Is that potentially a later Rev. Rec date based on inflation and in a couple of follow ups as well.
Speaker Change: Sorry go ahead.
Jeffrey A. Bertelsen: I was going to say, yeah, we anticipate that Brev Rec for that would be in Q2.
Speaker Change: So I was going to say, yes, we anticipate that Rev. Rec for that would be in Q2.
Jeffrey A. Bertelsen: Okay, got it. Thanks, Jeff. And, more broadly speaking, for these announcements related to sales to research labs where the installation may be further out in the future. In general, is the red brick at the time of shipment, or is that during, potentially during, the time of installation?
Jeffrey A. Bertelsen: Okay got it thanks for that Jeff and I guess more broadly speaking for the.
Speaker Change: These announcements.
Jeffrey A. Bertelsen: Related to sales too.
Jeffrey A. Bertelsen: To research labs, where the installation may be further out in the future in general is the Rev Rec.
Jeffrey A. Bertelsen: At the time of shipment or is that potentially during the time of installation.
Jeffrey A. Bertelsen: I'll take that one too, Subodh. It does depend somewhat on the terms of the contracts and and what acceptance criteria might be in them. But generally, we would expect to recognize revenue for the QPUs when we ship them to Novera.
Jeff: I'll take that one too so <unk> I mean, it does depend somewhat on the terms of the.
Speaker Change: The contracts.
Jeff: And what acceptance criteria might be and but generally we would.
Jeff: Expect to recognize revenue for the Q1, we shipped out.
Speaker Change: For November.
Chris Sankar: Okay, great. And just lastly, Subodh, maybe a kind of bigger picture question for you. And it's sort of related to the trade-off of hardware sales and Novera QP sales in the near and medium term versus sort of longer-term revenue opportunities from your quantum computing services. I know like in the near term here, these incremental Novera sales are great for cash generation, but just kind of wondering, for these research labs and other contract-based labs that are selling GPUs to, is there sort of a potential longer-term revenue opportunity that Thank you.
Speaker Change: Okay great.
Speaker Change: And just lastly.
Chris Sankar: Kind of a bigger picture question for you.
Chris Sankar: And then sort of related to the tradeoff of hardware sales in their GPU sales.
Chris Sankar: Near medium term.
Chris Sankar: Some sort of longer term.
Chris Sankar: Revenue opportunities from your quantum computing services.
Chris Sankar: I know like in the near term here.
Chris Sankar: The incremental <unk> sales are a great for cash generation.
Chris Sankar: Kind of wondering.
Chris Sankar: Mr <unk> labs and other <unk>.
Chris Sankar: Contract based labs that sounds Gpus too.
Chris Sankar: Is there sort of a potential longer term revenue opportunity is being tradeoff for and.
Subodh K. Kulkarni: It's a good question, Stephen. I don't believe there is a trade-off involved here. The national labs who are purchasing the nine-qubit, or in the UK's case, the 24-qubit quantum computing system, are doing it primarily for research purposes. They want to get their hands on the system. They want to experiment with it.
Chris Sankar: So the near term hardware sale. Thank you.
Subodh: So great question, Steven I don't believe that her tradeoff and wanted to hear the National Labs, who are purchasing at a 92 bed honors in UK schemes. The Twentyfold qubit quantum computing system Theyre doing it primarily for research purposes, they want to get their hands on the system. They want to experiment with it they want to see what kind of.
Subodh K. Kulkarni: They want to see what kind of pulses they should be using, the optimization of pulses, and the fundamental understanding that their researchers understand how quantum computers work and how they should improve the parts of the system that they are working on. When we enable quantum advantage, which we think will happen in a couple of years when we are at a few hundred qubits at 99.5% or higher two-qubit gate fidelity, they will start using them for applications and getting practical benefits.
Subodh K. Kulkarni: Also as they should be using an optimization of bonuses and fundamental understanding that the researchers understand how quantum of this work and how they should improve.
Subodh K. Kulkarni: The system that they are working on.
Subodh K. Kulkarni: Then enable quantum advantage, which we think will happen in a couple of years. When we are at a few hundred cubic set 99, 5% or higher.
Subodh K. Kulkarni: <unk> facility.
Subodh K. Kulkarni: Dave will start using them for applications and getting practical benefits.
Subodh K. Kulkarni: We don't think the current purchases of the research systems are going to be hurting future opportunities with QCAS because by that time, quantum advantage will be demonstrated, or what we call narrow quantum advantage will be demonstrated. And the applications they'll be running on will be more commercial kinds of applications or practical problems. Right now, it's mostly research-type work that they are doing, so I don't believe there's a trade-off. I view it as a first and a necessary step for national laboratories and researchers to understand quantum computing.
Subodh K. Kulkarni: We don't think the current purchases of the research systems is going to be hurting futures.
Subodh K. Kulkarni: <unk> it.
Subodh K. Kulkarni: Q cash.
Subodh K. Kulkarni: Because by that time quantum advantage will be demonstrated what we call narrow continental vantage will be demonstrated and the applications that will be running on will be more commercial kind of applications are practical problems right now, it's mostly see search.
Subodh K. Kulkarni: That they are doing so I don't really there's a tradeoff I view it as a.
Subodh K. Kulkarni: First and a necessary step for national large entities, such as to understand quantum computing I mean, it is a very different form of computing.
Subodh K. Kulkarni: I mean, it is a very different form of computing. They really need to understand how it works, what the firmware looks like, and what kind of application software and user interfaces they need to develop. So it's a good way to get their hands dirty, if you will, and understand the system at a fundamental level.
Subodh K. Kulkarni: Really need to understand how it works.
Subodh K. Kulkarni: Further it looks like what kind of application software and user interfaces they need to develop such a good way to get that hands Dirty if you will and understand the systemic a fundamental level. Once we enable narrow quantum advantage. They will move more into the application and so on so I don't think it is a tradeoff going on I think this alternative.
Subodh K. Kulkarni: Once we enable narrow quantum advantage, they will move more into the application, and so on. So I don't believe there's a trade-off going on. I think these are cumulative opportunities. So when we enable narrow quantum advantage, I do believe existing customers will come back and want to start either buying bigger devices or start using QCAS services. And they're not going to offset that against current purchases. Hopefully, that answers your question.
Subodh K. Kulkarni: Cumulative opportunities so lindsay enable another quantum advantage I do believe that existing customers will come back and want to start either buying bigger devices on start using <unk> services and they are not going to offset that against current purchases hopefully that answers your question.
Chris Sankar: Yes, it does. Thank you so much, and nice job on the education. Thanks, Stephen.
Speaker Change: Yes. It does thank you so much and nice job on the.
Speaker Change: Execution. Thanks.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of David Williams with the Benchmark Company.
Speaker Change: Thanks Steven.
Speaker Change: Thank you please.
David Neil Williams: Please standby for our next question.
Operator: Our next question comes from the line of David Williams with Benchmark Company. Your line is open.
Operator: Your line is open. Check to see if you're on mute. David Williams, your line is open.
Operator: There's no response. We'll go to the next question. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Subodh for closing remarks.
Operator: Secondly, if you're on mute David Williams Your line is open.
Speaker Change: There are no response.
Operator: We'll go to the next person.
Operator: Ladies and gentlemen, I'm showing no further questions in the queue I would now like to turn the call back over to Paul for closing remarks.
Subodh K. Kulkarni: Thank you for your interest and questions. We look forward to updating you after our Q2 earnings.
Subodh: Thank you for your interest and questions. We look forward to updating you after our Q2 earnings call. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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