Q1 2025 IonQ Inc Earnings Call
Speaker Change: Hello, and welcome to the ONQ First Quarter 2025 earnings call. All participants will be in listen only mode. Should you need assistance, please send over conference specialists for addressing the starkey followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star then one on your telephone keypad. To withdraw your question, please press the star then two. Please note, this event is being recorded.
Jessica Hawken-Allen: Good afternoon, everyone, and welcome to IonQ's first quarter of 2025 earnings call. My name is Jessica Hakenallen and I'm a member of the investor relations team here at IonQ.
Speaker Change: I'm pleased to be joined on today's call by Niccolo Dimasi, I am Q's Chief Executive Officer. Peter Chapman, our Executive Chairman [inaudible]
Jessica Hawken-Allen: Thomas Kramer, our Chief Financial Officer, Jordan Shapiro, our President and General Manager of Quantum Networking, and Dean Kassmann, our Senior Vice President of Engineering and Technology.
Jessica Hawken-Allen: Please note that on today's call, management will refer to the adjusted EBITDA, which is a non-GAAP financial measure. While the company believes that non-GAAP financial measure provides useful information for investors, the presentation of this information is not intended to be considered in isolation. [inaudible]
Speaker Change: or as a substitute for the financial information presented in accordance with GATE.
Speaker Change: You are directed to our press release for a reconciliation of adjusted EBITDA to its close as comparable gap measure.
Speaker Change: During the call, we will discuss our business outlook and make forward-looking statements. These comments are based on our prediction and expectations as of today. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in our 10Q that we have filed with the SEC today.
Speaker Change: We undertake no obligation to revise any statement to reflect changes that occur after this call, except as required by law.
Peter Chapman: I'd like to begin today's call by covering some of the high-level scenes
Speaker Change: First, allow me to say that I've been delighted with the sweet most transition to Niccolo as our CEO .
Speaker Change: We have been able to divide and conquer this quarter to accomplish a tremendous amount, precisely as I had hoped, and our board envisaged.
Speaker Change: I was delighted to represent I&Q in both Japan and Korea for World Quantum Day. We signed an MOU with G-Quat, a division of AIST in Japan, to work towards bringing our quantum compute to this great new market.
Speaker Change: We also signed an MOU to begin an exciting partnership with Toyota Susho and with Intelian in Korea to begin work on quantum networking in space.
Speaker Change: At NVIDIA's GTC, we showcase progress with AstraZeneca in ANSI's, where we demonstrated a 12% simulation time improvement using their engineering design software.
Speaker Change: and Q's path to tens of thousands and ultimately millions of qubits is to fatonically interconnect qubits across the network to run applications across multiple QPUs acting as one large single quantum computer.
This has been our plan since the company's inception.
Speaker Change: Quantum computers offer potentially game-changing solutions to many of today's largest problems.
Speaker Change: But like many new technologies, there is a dark side too.
Speaker Change: With a large enough quantum computer, one of the earliest known quantum applications is factoring prime numbers.
Speaker Change: Factoring prime numbers, or more specifically, the difficulty for classical computers to do so is the basis for much of today's technical infrastructure to encrypt data widely used to secure the Internet and other digital systems.
Speaker Change: Computers are used in the books and records for modern life and quantum computers will put that all at risk
Speaker Change: As we work towards building such a quantum computer, we have the responsibility to provide solutions to protect society from the negative aspects of quantum.
Speaker Change: With our previous acquisitions of entangle networks, cuvetech, and a majority stake of ID Quantique we announced our attention to be the leading player in quantum networks and to build the next generation of the internet that is quantum safe.
Speaker Change: Our interest in distributed quantum computing using photonic interconnects is highly synergistic with our plans for quantum networking and the quantum internet.
Speaker Change: and our interesting quantum networking is highly synergistic with quantum computing.
Speaker Change: To build the next generation of the internet, all the same pieces of hardware need to be developed.
From building inter-satellite communications, from satellite to the ground
Frequency Down Conversion to a commercial fiber across the ground
Speaker Change: routed by quantum optical switches to their final destination and in military applications, all the way over the air to drones on a battlefield.
This is our vision [inaudible]
Speaker Change: Under Nikolo's leadership, we have today decisively accelerated our quantum computing roadmap as well as our capabilities to create the quantum internet.
Speaker Change: I infuse architecture and ecosystem allow unique synergies with today's addition of what I believe is the world's leading quantum memory solution
Speaker Change: I am proud of the pace at which Niccolo has commenced his tenure as CEO and his ability to bring out the best of our leadership, the board, and indeed I.N.Q. as a rapidly growing public company.
Speaker Change: It's with this context that I will give before over to Niccolo to discuss today's latest announcements.
Niccolo: Thank you, Peter, and thank you all for joining us today. Let me begin by saying I've had a fantastic first 70 days at INQ. I want to sincerely thank all of our shareholders, customers, and team members for their warm welcome and enthusiastic support.
Niccolo: I've now completed my listening tour of all stakeholders and I'm pleased with the reinforcement of our technical and commercial priorities. This is provided.
Niccolo: In short, INQ is focused on being the leading quantum computing and networking company [inaudible]
Niccolo: Our top two priorities in 2025 are delivering on revenue expectations for the year and delivering AQ64 AQ64
Niccolo: We have some amazing people at I.N.C. globally in all functions but particularly our physicist and engineers who have worked hard on our systems and are now reaching the inflection point they have always envisioned.
Niccolo: We will always prioritize and ensure that at all times the world's greatest quantum talent makes a tone that I on cue.
Niccolo: I want to warmly welcome our news colleagues in Geneva, Switzerland and Seoul, South Korea at ID Quantique.
Niccolo: We closed our purchase of our majority stake on April 30th, and we are excited to have the I.D. Quantique pioneers and leading practitioners of quantum networking headed up by Greg Warrer-Ribbordi as part of the I.N.Q family.
Niccolo: In order to coordinate our roadmap and global quantum internet strategy, we today congratulate our colleague Jordan Shapiro on his promotion to become I&Q's first president and general manager at Quantum Networking.
Niccolo: Jordan has been instrumental in both our Cube Attack and ID quantique acquisitions and we look forward to his continued strategic contributions to our growth
Niccolo: We are indeed in the business of quantum and believe that running applications and delivering commercial advantage for our customers is our North Star.
Niccolo: As many of you have seen, we've had a busy quarter expanding our ecosystem and delivering on yet more global firsts.
Speaker Change: Peter outlined our expanding traction in Asia this quarter. I would add that these achievements are selection by DARPA for its Quantum Bankmarking Initiative.
Niccolo: We are all proud in Q1. We sold a forte enterprise system to EPB of Chattanooga, Tennessee.
Niccolo: EPB and its visionary CEO , David Wade, have been pioneers of bringing new technologies to their constituents to their constituents.
Niccolo: Most well-known perhaps as their blisteringly fast fiber, which was well ahead of its time and continues to provide the local accounting with a foundation for growth
Speaker Change: EPV already has a quantum network powered by our tuba tech team
Speaker Change: Last month, the EPP purchased half of the compute capacity of a four-day enterprise system for $22 million bringing our latest quantum computer to their city and customers.
Speaker Change: This makes the EPV the first commercial customer with both the Quantum Network and Computer.
Speaker Change: We look forward to working with EPB and their broader ecosystem, including Oak Ridge National Laboratory, the Pioneer Energy Grid Distribution Optimization, as well as support entrepreneurs building their startups in Chattanooga, an I&Q's Quantum Computer and Quantum Network.
Speaker Change: We celebrated National Quantum Day at the New York Stock Exchange last month and unveiled two corner machine learning breakthroughs from our applications teams for the industrial AI sector.
Speaker Change: Our own internal research in Quantum AI is showing very encouraging signs of improving prediction accuracy in large language models as well as using quantum data analysis with sports data to highlight performance gaps
Speaker Change: Today, we're also proud to announce two exciting acquisitions that accelerate our commercial quantum computing roadmap, extend our leadership in quantum networking, and position INQ to play a key role in creating the quantum internet.
Speaker Change: I consider today's acquisitions to fundamentally evolve the chessboard in quantum even more in our favor increasing I incuse leadership in the business of quantum.
Speaker Change: We laid out a road laugh when we went public to become the leader in quantum computing by scaling our systems using our unique quantum network to multi-core architecture.
Speaker Change: Our organic investments in this interconnect led to our AFRL contract last year, an expansion worldwide in quantum networking, buying cube attack and ID Quantique [inaudible]
Speaker Change: We're delighted today to announce the proposed acquisition of Boston-based lighting of Boston-based lighting.
Speaker Change: Licing Sounders built the first-ever quantum repeater capable of extending the range of quantum networks, a key technology enabling the quantum internet.
Speaker Change: Lighting's core mission is to use the same memory technology to build the world's best quantum interconnects that link INQ's quantum processors at high speed.
Speaker Change: Light Sync was spun out of Harvard University Research and AWS by its remarkable co-founders. We hear Baskar barks, mockulasy, and David Levonian.
Speaker Change: The team is deeply impressive and will make an immediate contribution towards achieving our technical milestones by its quantum memory IP expertise and architecture and architecture.
Speaker Change: Life Sync owns a control over 25 patents and patent applications which will add to I&Q's robust patent portfolio upon closing of the transaction of the transaction.
Speaker Change: A key synergy for INQ is that license technology is expected to accelerate INQ's existing photonic interconnect activities and enable our commercial systems to scale to tens of thousands and eventually millions of tubers.
Speaker Change: The life thing architecture is uniquely powerful and will underwrite our quantum computing leadership for decades to come
Speaker Change: The parallels are strong, so I would not be surprised if in the fullness of time, life think becomes as accretive for I&Q as Melanox has been for video.
Speaker Change: Equally excited and importantly, life-sync technology will also power the future quantum internet by allowing repeaters to ultimately be spaced over 100 kilometers apart.
Speaker Change: Last year a pioneering paper of theirs was published demonstrating over one second storage time and over 35 kilometers of deployed fiber [inaudible]
Speaker Change: Our commitment to creating the Quantum Internet underlies our second announcement today.
Speaker Change: As Peter previewed in his opening remarks, today we unveiled the continued expansion of our networking vision to incorporate the most vulnerable portions of our world's modern communications communications.
Speaker Change: Our QBITEC team members began forging a path for us in this direction organically once they formally became part of I&Q Peter signed a pioneering MOU with Intelian last month to begin work on quantum key distribution, also known as QKD in space
Speaker Change: Having seen the tremendous reception from our government agencies, researchers, and commercial customers, we recognize the need to accelerate our quantum computing capabilities in the vital frontier of satellite communications
Speaker Change: China has announced progress on QQD in space and is imperative for economic and national security that we lead in all-dimensioned theaters and segments of quantum networking.
Speaker Change: To accelerate organic plans for quantum networking and some day also quantum computing in space, we announced the planned acquisition of Colorado-based signals platform Capella.
Speaker Change: This acquisition will bring INQ a platform of capabilities for signals, communications, payloads, and top secret contracting expertise Thank you, please.
Speaker Change: Capella's well-known leader, Frank Bakas, will head up by and choose Quantum Space Initiatives as well as bring an injection of top secret, cleared personnel, a facility security clearance and strong three-letter agency relationships around the globe.
Speaker Change: INQ systems are already leading the world in manufacturability and cloud access.
Speaker Change: Today's expansion brings I&Q new growth vectors for our customers to benefit from, as well as complimentary expertise and world-class team members.
Speaker Change: I couldn't be more proud of our team's effort in my first 70 days and the speed at which we've been able to bring these unique networking and computing accelerants into the fold [inaudible]
Speaker Change: Moving on now to Q1 financials at a high level, we're pleased to have delivered a solid quarter and starched to 2025, above the midpoint of our revenue guidance range for Q1. Thomas will cover our results and details in our guidance in a few minutes, but we'll say it in front of the geopolitics of our age are a net benefit to I&Q.
Thomas: We ended the quarter with just shy of $700 million in cash equivalents [inaudible]
Thomas: We have a fortress basket sheet and are investing to win and truly become the leader of quantum.
Thomas: Our investments are not only to accelerate our quantum computing and quantum internet roadmaps [inaudible]
Thomas: but to ensure that I&Q is the only ecosystem any customer needs in the business of quantum.
Thomas: Every commercial customer, researcher, student and government lab that learns on INQ, we expect to start. We'll stay in INQ.
Thomas: Our early mover advantage will compound as our ecosystem breadth and depth grows relentlessly.
Thomas: I look forward to updating you later in the year as we close and integrate today's acquisitions
Thomas: Whether on the ground or in space, I&Q solutions are poised to be there and lead. We believe our now near boundless, photonic interconnect scalability provides I&Q customers with the winning quantum computing and internet ecosystem. Not just this decade, but we expect for the entire 21st century.
Speaker Change: I'm pleased to now hand you over to my colleague, Jordan Shapiro, to say a few words about our quantum networking plans. Thank you, Nikolo. I look forward to taking on a larger role in shaping the future of INQ and the quantum industry as a whole.
Speaker Change: We have a fundamental strength in quantum networking at I&Q, being the only quantum computing company that planned on utilizing it to scale from day one, which has led to a clear advantage as we recognize the early commercial potential of this field.
Speaker Change: Quantum Networking will naturally be the foundation of the Quantum Internet, which will be a watershed achievement in creating a worldwide, ultra secure communications grid .
Speaker Change: We've made several crucial acquisitions of some of the most advanced quantum networking companies in the world.
First, Intingle Networks
followed by Cuba Tech, then a majority stake in IDQ. [inaudible]
Now, Light Sync and Capella.
Speaker Change: I was involved in the conception and execution of each acquisition .
Speaker Change: Now I am excited to take the next steps towards the quantum internet by connecting our customers quantum computers and data centers together to transmit secure communications and allow for massively powerful blind quantum and distributed compute.
Speaker Change: Now I'd like to hand the call over to our CFO , Thomas Kramer [inaudible]
Thomas Kramer: Thank you, Jordan PRN, Niccolo. It has been a truly exciting quarter on the commercial front and our financials on no exception. Let's walk through this quarter's financial results in more detail.
Thomas Kramer: As Nicola mentioned, we had a solid quarter, recognizing revenue of $7.6 million, beats the midpoint of the guidance we previously provided.
Thomas Kramer: Moving down the inconstatement, our total operating costs and expenses for the first quarter were $83.2 million, up 38% from $60.5 million in a prior year period But within our plan for the year, to raise this down further
Thomas Kramer: Our research and development costs for the first quarter were $40 million, up 23% from $32.4 million in the prior year period [inaudible]
Thomas Kramer: Recall that we are investing heavily in R&D and growing our R&D headcount to support a road map and customer commitments [inaudible]
Thomas Kramer: Our sales and marketing costs in the first quarter were $8.6 million, up 28% from $6.7 million in a prior year period. This increase was due to us growing both our marketing and our sales teams as we continue investing into our commercial efforts.
Thomas Kramer: These increases were primarily driven by an increase in payroll-related expenses.
Thomas Kramer: All of this resulted in a net loss of $32.3 million in the first quarter, compared to $40 million net loss in a part of your period.
Thomas Kramer: The counting foot warrants can be confusing, so we have always pointed out the impact to have on our results [inaudible]
Thomas Kramer: This Q1 loss includes a non-cash gain of $38.5 million for the first quarter related to the fair value of our anti-bodies
Thomas Kramer: This is a pure accounting artifact that is not represented by the operating performance of our business.
Thomas Kramer: These results also include growth in stockbed's compensation expense related to our head count growth, which was $33.3 million for the first quarter compared to $22.1 million in the
Thomas Kramer: He saw an adjusted EBITDA loss for the first quarter of $35.8 million compared to $27 million loss in the prior period.
Thomas Kramer: As Niccolo mentioned, we are making additional investments to accelerate our roadmap as well as entering new segments of the market and we expect to continue to invest in the ecosystems that support our customers.
Thomas Kramer: All of this means we expect to see an increase to our cost basis for the year.
Thomas Kramer: We envision this increasing our just $1,000, previously projected $120 million, by approximately 35%
Thomas Kramer: Turning now to our balance sheet, Cash, Cash Equipment and Investment as of March 31st, with $697.1 million.
Thomas Kramer: Continuing on to our financial outlook, we are reaffirming our revenue guidance for the full year 2025 and expect revenue for the second quarter of between $16 and $18 million.
Next to you, Niccolo.
Nicola: Thanks, Thomas. Weird I&Q have begun 2025 with strong momentum.
to recap.
Nicola: We announced a fantastic accelerant to both our quantum networking and quantum computing road maps. The proposed acquisition of Boston-based Light Think, whose quantum memory is leading globally and whose team are almost all Harvard researchers.
Nicola: We announced a proposed acquisition of Colorado-based Capella, bringing INQ a platform of capabilities for QKD in space, top secret contracting expertise, and building the quantum internet.
Nicola: We've successfully sold another cutting edge 40 enterprise system which will be used to establish the first quantum computing and networking hub and partnership with EPB.
Nicola: and we have moved on to the first stage of DARPA's Quantum Bankmarking Initiative.
Nicola: 4K Enterprise now offers global access and increased quantum computing capacity through AWS.
Empowering customers of real-world business oriented solutions.
Nicola: Our technical excellence shined at NVIDIA's GTC where our collaboration with Ancesth outperformed classical methods for real-world applications, while our AstraZeneca partnership advances drug discovery, demonstrating quantum's impact in multi-billion dollar markets.
Nicola: Closing our acquisition of ID Quantique solidifies our global dominance in quantum networking.
Speaker Change: I'm privileged to lead INQ with the support of our talented team as we advance the quantum revolution and our commercialization leadership .
Speaker Change: I'm also highly confident the acquisitions announced today will evolve the chess board of quantum significantly even more in I&Q's favor, ensuring a long-term leadership in both quantum computing and creating the quantum internet.
Speaker Change: I inc you now benefit from an accelerated path to tens of thousands of cubits and a clear path to millions of cubits [inaudible]
Long-distance quantum repeaters allow the quantum internet to be built [inaudible]
Operator, please hand the call of her now for Q&A.
Speaker Change: Yes, thank you. We will now begin the question and answer session. Do I ask a question? You may press star them on in a telephone keypad. If you're using a speaker phone, please pick up your hands up before pressing the keys. Any time your question has been addressed, and you would like to drive, please press star them too.
This time we will pause momentarily to assemble the roster of the roster.
And today's first question comes to David Williams with Benchmark
David Williams: Good afternoon, everyone. Thanks for taking my questions and congratulations on the all of the success here this quarter for the entire team there.
Up!
David Williams: Maybe first if we're kind of thinking about these acquisitions that you've made and that you're
David Williams: The re-snack position, but also the ones that you just closed. Can you maybe give us any update on in terms of the revenue we should expect from that or maybe any of the across the cockroaches that we should think about for our models there?
So, um...
David Williams: We believe that all of these moves that we have made will fundamentally strengthen our ability to grow our revenue into the future in manners that are similar to what we've already seen.
David Williams: And we will also believe that we are going to do this in a manner that is creative. We have good gross margins.
David Williams: In an interim period, of course, when we make investments, we will have to continue to fund them in some cases where they're when they have expenses to exceed revenues.
David Williams: But at the same time, this is a relatively modest amount compared to these three great companies that we have announced that we will be acquired.
David Williams: We did say on the previous call that the revenue guidance for the year included organic and inorganic sources, but we expect that these will be fundamental to delivering revenue into the future as well.
Speaker Change: Great, thanks. Appreciate the color there. And then maybe secondly, if you can just kind of help me understand that the quantum internet and how you maybe envision that playing out longer term into the future, thanks.
Yeah, so...
Iii
Speaker Change: At the moment, EPV in Chattanooga, and also with SK Telecom, there's existing quantum networks which are being used commercially. The problem with those networks, if you will, is that they didn't have a repeater, they don't have the technology at the moment to go more than roughly 20 miles.
Speaker Change: And then after 20 miles due to signal loss, then what you need to do is to build a repeater That's where the quantum memory comes in.
So the quantum memory from light sink
will allow us to build networks.
that extend over great distances.
Speaker Change: Like as an example, our hope would be to connect up Chattanooga to Oak Ridge National Labs. That's about a hundred miles away. So with today's technology, you would need roughly, you know, four or five repeaters to be able to hit that distance.
Speaker Change: So lightning suddenly will allow that to happen in the near future
Speaker Change: So that was a critical piece of the puzzle. The other one is in the other acquisition, which is space-based.
Speaker Change: So, you know, ultimately what you need to do and you're seeing this now in China and also
Speaker Change: The EU has announced a project to start to build this as well, which is to build quantum networks in space from satellite to satellite, and ultimately from satellite to ground station.
Speaker Change: And so with in protecting that with the QKD network as well [inaudible]
Speaker Change: If you will, to be able to get the hardware working there. Obviously in space it's in a very different environment than in your average data center.
Speaker Change: So it's a harsh environment and making sure in Capella has the experience for building hardware that works in that environment [inaudible]
Speaker Change: And with the goal ultimately to take our experience there and then to sell it to other communications out like companies that want to protect their communication for the infrastructure.
Speaker Change: So in some sense, the ID Quantique gave us access to real-world environments
Speaker Change: in South Korea with SK Telecom, with Cuba Tech he gave us access to EPV's network in a real-world environment and now with Capella giving us access to a real-world environment in space.
Speaker Change: And so all these things, it's one thing to get it working in a lab It's another thing to get it working in a busy city with trucks driving over your fiber and all the rest of that So all these things are about building out the capability and making sure they work in the real world
Speaker Change: Great. Thanks so much for the help and all the color and the best luck on that order. Thanks.
Thanks, David.
Speaker Change: Thank you, and the next question comes from Quinn Bolton with Neum [inaudible]
Speaker Change: Hey guys, this is Shadi Onprequin. Thanks for taking my questions and congrats on all the exciting announcements. Starting with the light-sync announcement, you guys highlighted the importance of the quantum repairs, but just curious if there was any other technology or IP that drove that acquisition.
Speaker Change: So there's actually multiple aspects here, which is we said it was synergistic to the quantum compute side in the things that we've done with photonic interconnects before required two photons to come together at exactly the same time
Speaker Change: And with this, with quantum memory, it allows the photon to be held for some period of time and to be matched up with the other photon to be able to do entanglement [inaudible]
Speaker Change: and so this will also not only for quantum repeaters, but also for our compute strategy and doing distributed quantum computing.
Speaker Change: So we'll increase the throughput of the connectivity of the systems and the error rates that we get there in. So it's significant kind of from both sides of the house, both from the quantum networking and also from the quantum computer side.
Speaker Change: I'd say it's all sides of the house, it works on the ground, it works above the ground, helps our computing road map, helps our quantum internet road map. So it's really quite a remarkable synergistic fit for us.
Got it. Yeah, lots of interesting stuff there.
And when I follow up, it's on the development with ETB.
Speaker Change: Sounds like the two of you having established Quantum Network which ultimately led to the development of the Quantum Center. So just curious if I can you can quantify the number of Quantum Networks that currently has. And then if you're able to talk about who or how many different providers these networks spend. Thank you very much.
Yeah, this is Jordan.
Speaker Change: We today have four quantum networks including VR acquisition of ID Quantique and these are serving
Speaker Change: Defense, the US Air Force that we're building, they're serving EPB in the enterprise and energy sector . . . . . . . .
Speaker Change: They're serving FK Telecom and Sing-Tel in South Korea and Singapore respectively, both in the Telecom sector. So a diverse set of customers
Speaker Change: and a diverse set of use cases building on top of these quantum networks. Those are commercial quantum aspects. Obviously, the company itself has other quantum networking up and running internally as well.
Speaker Change: Awesome, thanks for all the color and congrats on the progress
Thank you
Speaker Change: Thank you, and the next question comes from Tyler Anderson with Craig Howell and Gapittle.
Speaker Change: Hi guys, this is Tyler Anderson on for Richard Shannon, and congrats on the quarter. So...
Speaker Change: I know Light think has really good diamond quality and error correction capabilities and I believe they can connect to neutral atoms and ion traps
Speaker Change: Could you highlight which modalities they're able to connect to and for which capability you plan on integrating your picks for?
Speaker Change: Is this the frequency conversion and then with the error correction capability with your capabilities, is this going to be a gen 2 device when it comes out?
Speaker Change: Great question. This is Dean Kassmann. Hi, Dean. The diamond kind of memory is based off
Speaker Change: Those vacancies have long coherence times which is what makes them kind of attractive for both the computing as well as the networking side [inaudible]
Speaker Change: They have been able to mature that technology over the last, I would say, you know, three to five years to where they have been, as you said, been able to look at integrations with multiple modalities. So any modality that needs a photon?
Speaker Change: Overall, quantum memory can be used with and so there is a frequency conversion component to make that work.
but
Speaker Change: Frequency Conversion, Technology that they have is very well matured to very robust and very performant.
Speaker Change: And so, at this point we're looking to leverage both the frequency conversion technology as well as the core quantum memory capabilities
Speaker Change: into all of our product work, our computing, our photonic interconnects, as well as the networking side.
Speaker Change: And if you remember, last year at ARPL, we won a contract to go do a free conversion piece and also the optical switch.
Speaker Change: So just other pieces of the story. And those two were one of the things that we that we would do with that is to make it work with multiple modalities.
Speaker Change: So obviously with pions and in our modality but also other modalities as well [inaudible]
Speaker Change: All I would add to that is you raised a strategic question, obviously, behind, I guess, the question upfront, which is, you know...
Speaker Change: Lighting Stanley on a business plan is obviously probably different than what it is as part of I&Q. So we're going to be prioritizing, of course, our machines and our technical road map.
Speaker Change: You know, I think it's sort of probably one and two will be that, probably three or four, you know, we'll discuss whether or not [inaudible]
Speaker Change: We want partnerships with other modalities, but most interestingly would like to think beyond our own quantum computing roadmap as of course.
Speaker Change: Some of their existing customer partnerships on the networking side and quantum inter at side.
Speaker Change: And a number of those is car confidential, but you should assume that they run into the same sort of customers
Speaker Change: that Jordan just mentioned a few seconds ago with I.D. Pontique. They also run into some of the three-letter agency players from Capella, so really quite happy with their strategic flexibility. We're getting from the steel as well as the optionality and acceleration we're getting from as well.
Speaker Change: Awesome, and then just very quickly, so I can ask a follow-up, is this going to be a Gen 1 or 2 device?
Robert Peter
Speaker Change: I'm not right now ready to kind of speak to the kind of the generation of the hardware. Right, we have to go through integration activity of their technology with ours. We already have worked internally and so it's not something I'm speaking to at the moment.
How are you defining Gen 1 and Gen 2?
Error Correction [inaudible]
Can you guys hear me? Error correction.
Speaker Change: Understood. I think we're still communicate that larger product component in the different generations and our upcoming discussion on our networking roadmap.
Great.
And then could you highlight how the pellets signals signals?
Improve your platform and just noting, I've seen…
Speaker Change: Deployments with IDQ in the EU. I'm not sure if you highlighted that one as well, but...
Speaker Change: I believe those are ground stations and then just noting that the hearing today highlighted the need for these space capabilities. Can you describe the size and the growth of space space network opportunity? [inaudible]
Speaker Change: We'll defer, Mrs. Jordan, we'll defer to kind of how we described last quarter the networking opportunity, which we believe, and McKinsey believes if you'd rather recent McKinsey report and quantum networking is just as large as quantum compute. And so we expect some of that to be, you know.
Speaker Change: Land based, some of that to be space based. And I'll just add a little bit too, which is Capella has an application today, which is revenue generating.
Speaker Change: and it's commercial, but it's also military. And the military side would like to have secure communications. That would be an added benefit to their capability.
Speaker Change: So, our first kind of not only will this give us an access to an environment to get the hardware to work in space [inaudible]
Speaker Change: But it also gives us our first application and first customers to actually validate this in our world application. That's where we're in huge energy.
Speaker Change: I think you're spot on the geopolitics of today's world favor everything IQ is doing, right? People need sovereign systems, they need local systems [inaudible]
Speaker Change: And that's true, you know, across all oceans with all friendly governments that we're working with. License is going to help, by the way, our business, you know, I think, from my perspective, as you defined it,
Speaker Change: and throughout Gen 1 and Gen 2. They're going to be an integral part of our scaling system, henceforth, and you can assume that there is a detailed integrated tentacle road map that exists behind the scenes, and we'll be revealing more of InduCourse.
Speaker Change: Awesome, thank you guys, I'm going to hop back in the care [inaudible]
Thank you.
Speaker Change: Thank you, and once again, please press star then one if you would like to ask a question.
Speaker Change: And the next question comes from Alex Platt with the A-Davidson [inaudible]
Alex Flatt: Yeah, thanks for taking my questions and congrats Jordan on the new role. So I just had two. I guess first, just any updates, you could sort of give us on tempo and around the technical roadmap.
Alex Flatt: So this is Dean, so the temple design and development is continuing right now.
Alex Flatt: We're actively working on our performance metrics that Niccolo alluded to at the very beginning of the call, our definite work on AQ and fidelity to try to
Alex Flatt: Hit those internal targets on those platforms. We're going through engineering design and build of the tempo system and right now we're on target for our current delivery plans that we have out there in the market.
Speaker Change: Okay, great. That was great. Thank you. And then I guess, just secondly, if you could just maybe expand more on the light syncing, Capella acquisitions, maybe how they help accelerate the timeline on some of your sort of longer-term ambitions beyond what you've already mentioned. I mean, quantum networking, Internet, I guess, should we view this as you?
Alex Flatt: splitting focus on that and quantum computing, or I guess is like the networking and internet side, maybe the largest opportunity that's sort of achievable in the near term and that's sort of where the majority of focus is right now. So, let's go ahead and see what we're going to do.
Alex Flatt: Alex, this is Jordan, and thanks for the kind words and for the question. The story here is...
Speaker Change: Everything is coming together and converging, which is the interesting thing about these acquisitions. The synergies are between compute and networking on ground and space, right? And that is this vision of the quantum internet that we're working towards.
Speaker Change: So, it's this idea that you can connect your quantum computers and have the computer technology have the computers to take those over large distances, to take them into space as needed.
Speaker Change: And that's the story that we're looking towards and it's a balance between both compute and networking which we view to be incredibly strong markets and we're making headway in both [inaudible]
Speaker Change: And I'll have to admit, it's a little confusing and we haven't done a great job at this. Last year we announced that we were doing quantum networking but it required two quantum computers to be built.
Speaker Change: So we announced it as a networking project, but we actually built two quantum computers to network the two quantum computers together. So you're busily pushing the compute side so that you can do the networking.
Speaker Change: and so networking in this case sometimes means distributed quantum computing across multiple QPUs
Speaker Change: Or in QKD where you don't need a quantum computer at either end and you're doing key distribution.
Speaker Change: So, sometimes we talk about it and you know, you might not give enough detail that it says, we'll put it under the label of networking but actually requires us to build quantum computers sometimes depending on the customer [inaudible]
Speaker Change: Yeah, so all I add to that is look, I mean the business is focused on corner computing computing.
Remains, so we are determined to be the...
Speaker Change: You know, ultimate ecosystem there. We've expanded our ecosystem to do quantum networking.
Speaker Change: Obviously, organically and organically. As Jordan mentioned, the quantum internet requires pretty much all the pieces that we have assembled, right? So you need the nodes to be computers, you need repeaters. [inaudible]
Speaker Change: to have any kind of, you know, distance between the nodes [inaudible]
Speaker Change: You need QKD to be able to actually send information securely, and of course you need to do that as an integrated communications network
Speaker Change: on the ground and in the heavens. And so, we continue to lead in our breadth and depths of quantum as a business, and we see growing opportunities and computing and growing opportunities and networking, both short-term, medium-term and long-term.
That was a great thanks guys and I congrats on the quarter
Thank you.
Speaker Change: Thank you, and we have a follow-up question from Tyler Anderson with Craig Hallemgapelo.
Tyler Anderson: Thanks for taking my follow-up again. The Pulled in Acquisition of IDQ, does that benefit your guidance for the year?
So, I'll guide you. I'll record September .
Sorry, do you repeat that?
So, um...
Our guidance for the year has...
Tyler Anderson: Included both organic and inorganic growth. We continue to think that we have abilities to both outperform over time but also that what we're doing right now is fundamentally making us stronger for what's going to be 2026 revenue picture.
And this is Jordan, I just had...
Tyler Anderson: September was our latest date that we thought the acquisition closed and we had baked it in our internal estimates.
Tyler Anderson: as a weighted average of what we expect a company like ID2Q to contribute. And so this is always basically to plan for INQ.
Okay, and then...
Tyler Anderson: I may have heard you wrong, I'm not sure if I'm wrong [inaudible]
Tyler Anderson: But did I hit a UPB purchased half of the computing power?
Tyler Anderson: Is that correct? Just the rationale I'm following up [inaudible]
Tyler Anderson: Okay, and so then so with that and we're talking about the quantum network and they're purchasing a computer so then would that be another computer to be purchased to be connected over the network and if so do you have a timeline on that?
Tyler Anderson: So, you know, you have insightfully, you know, to have a quantum network for quantum computing, not QJD, you need to have two.
Tyler Anderson: So, Chat Nougat now has won and it'd be nice if somebody else had a second one within distance of Chat Nougat, you know, within distance now within repeaters. Up till today that distance had to be roughly 20 miles.
but now it could be several hundred miles away.
Tyler Anderson: So, I don't have a timeline for that, but clearly, I think there's lots of people, us included, who would like to see the United States have a demonstration of...
Tyler Anderson: Quantum Network, using quantum computing and doing distributed quantum computing. And so both locally and nationally and many government agencies.
Tyler Anderson: I think would like to see that. China has already made great progress there.
Tyler Anderson: both in space and in the ground and we're in the middle of doing ketchup so we don't have an announcement today but it's a great insight just like anything else to do quantum networking for compute you need to have a computer at either end [inaudible]
So
Tyler Anderson: Having one phone is not useful. Two phones is very useful.
Tyler Anderson: Hey, Tyler, this is Thomas. What this also does is that it's part of our distributed data center strategy. It means that we can service our customers from our data center in College Park, Maryland or in Seattle, or we can now also do it out of Tennessee. This gives us additional failover. [inaudible]
Support and Capacity [inaudible]
Tyler Anderson: And we have been traditionally constrained on capacity because we have not had enough compute available for customers so it's exciting to be able to bring on not only here but also in basil to bring on new systems
Tyler Anderson: Sorry, and then just one last follow up and I'll let you guys be so for this.
Tyler Anderson: Quantum Network Opportunity, would you agree that this is going to be mainly labs, academics and critical infrastructure to start before we see broader adoption?
Tyler Anderson: Now we're now starting to see some of the leading companies in the world to start seriously looking at building networks with QKD to secure them.
Tyler Anderson: You know, as you saw in my introductory note is as we get closer to breaking encryption
Tyler Anderson: This will become something that everyone will have to do. What we have seen and we're not very good at this as a species is sometimes being able to predict how quickly something pops into existence.
Tyler Anderson: I don't think many people expected OpenAI to do what they did, and suddenly it was here. And so my guess is that, you know, there will be a breakthrough in breaking encryption, and then everyone will be like, oh my gosh, what am I going to do? So leading companies now are starting to invest.
in kind of building out a quantum network.
Speaker Change: And so we see great potential there. And Tyler, this is Jordan of the Four.
Deployments of quantum networks that I mentioned.
Three of those are Enterprise
So that should give you some impression of it.
Speaker Change: Yeah, I'm looking just in general, we're not in the business of sort of theory and R&D here on its own to the sake of it, right? So everything we do here is commercial and we do here has customer demand
Speaker Change: We announce significant contracts, we announce what we can, obviously we don't announce what we can't and what is confidential or protected for national security reasons or otherwise, but I think it's safe to say that
Speaker Change: What we're building at INQ doesn't exist anywhere else, even though pieces might [inaudible]
Speaker Change: from about 35 people when I first met Peter to, you know, around about 800 today, right? And so as a balance she grows, her head count grows, of course the vision is expanded a long way.
Speaker Change: But we're excited about the inbound interest that we receive, or also, of course, watching moves.
Speaker Change: of big tech companies and bigger tech companies like as they watch what we are building here turning to a reality that will pressure core business lines for some of them and create new markets for all of us that we intend to lead in.
Speaker Change: Awesome, well thank you guys, I'm very happy we're saying repeat around the call. Congratulations on everything and congratulations, Jordan.
Thank you. We'll see you at the next launch
Looking forward to it
Speaker Change: Thank you, and this concludes the question and answer session. I would like to turn the conference back over to Nicola Dimasi for any closing remarks.
Nicola DeMasi: Thank you. Well let me thank everyone for joining us on our call today, and of course I want to thank our team for all of their hard work and our shareholders for their support. We look forward to speaking with you soon and updating the entire financial community on our next earnings call. Thank you and have a good afternoon.
Speaker Change: Thank you. The conference is also included. Thank you for attending today's presentation. I made out of snatch your lines.
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