Q3 2025 D-Wave Quantum Inc Earnings Call
Speaker #3: Good day . And welcome to the D-Wave . Third quarter 2025 Earnings Call . All participants will be in a listen only mode should you need assistance , please signal a conference specialist by pressing the star key , followed by zero .
Speaker #3: After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on your touchtone phone .
Speaker #3: And to withdraw your question , please press star . Then two . Please note this event is being recorded . I would now like to turn the conference over to Mr. Kevin Hunt , Senior Director of Investor Relations .
Speaker #3: Please go ahead , sir .
Speaker #4: Thank you and good morning . With me today are Doctor Alan Baratz , our chief executive officer , and John Markovich , our chief financial officer .
Speaker #4: Before we begin , I would like to remind everyone that this call may contain forward looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports .
Speaker #4: During today's call , management will provide certain information that will constitute non-GAAP financial and operational measures under SEC rules , such as non-GAAP gross profit , non-GAAP gross margin , adjusted EBITDA loss , adjusted net loss , adjusted net loss per share , and bookings .
Speaker #4: Reconciliations to GAAP financial measures and certain additional information are also included in today's earnings release , which is available in the Investor Relations section of our company website at .
Speaker #4: I'll now hand over the call to Alan .
Speaker #5: Good morning , everyone , and thank you for joining us today . I'm really pleased to share these third quarter 2020 results , which reflect the ongoing momentum we've seen across all key business metrics , including revenue , gross profit , bookings and a healthy cash balance .
Speaker #5: I will walk you through several of our recent business and technical highlights , starting with our continued commercial traction . The United Nations declared 2025 to be the International Year of Quantum Science and Technology , and it is evident that the world is watching the quantum industry in general , and D-Wave specifically .
Speaker #5: Our esteemed leadership team has been invited to speak at events across the globe in order to address the growing interest in quantum solutions from Tokyo to Berlin and Taiwan to Miami .
Speaker #5: Businesses , research institutions and governments around the world are eager to learn more about D-Wave , our incredibly powerful yet energy efficient technology and the impact it is starting to have for customers right now in solving complex computational problems that are outside the reach of classical computers .
Speaker #5: Just weeks ago , D-Wave announced this participation as a founder of the Q2 Alliance , an initiative designed to create a quantum hub in Italy that advances scientific discovery .
Speaker #5: Industrial transformation and digital sovereignty . In the country . A core objective of the alliance is the development of a state of the art quantum computing and research facility in Lombardy , Italy , in support of that effort , D-Wave announced a €10 million contract for a D-Wave advantage to annealing quantum computer in the region , ensuring accessibility for Italy's scientific community , academia and industry .
Speaker #5: In partnership with the Italian government and the Q Alliance . The agreement includes acquisition of 50% capacity of an advantage two system for five years , with the option to purchase the full system .
Speaker #5: We expect to deploy the system sometime in 2026 , while other quantum companies are telling investors that sales really don't matter , we beg to differ .
Speaker #5: Sales and customer success are key to business growth and driving shareholder value in the near and long term . Our market presence allows us to learn directly from customers and rapidly enhance our systems to address their needs .
Speaker #5: D-Wave offers the only quantum computers that have demonstrated advantage on a useful real world problem , and can support customer applications in production .
Speaker #5: To date . Our customer portfolio includes one of the world's largest airlines , one of the world's largest chemical companies , one of the world's leading mobile carriers , and one of the world's largest payment companies .
Speaker #5: So , as other quantum companies remain in R&D mode , we are laser focused on a path to profitability built on customer value .
Speaker #5: We signed a number of new and renewing customer engagements in the third quarter for both commercial and research applications . These engagements include one of the largest US based international airlines , Skywater , the nation's largest pure play semiconductor foundry .
Speaker #5: Japan Tobacco's pharmaceutical division , which is exploring new quantum AI applications in drug discovery . Yapi Kredi One is a leading banks in Turkey and Korea .
Speaker #5: Quantum computing , a company specializing in quantum computing , R&D , quantum security solutions , and AI infrastructure in Korea . We continue to work with a myriad of organizations on quantum computing applications across a diverse set of use cases , most notably in the past quarter , we worked with BASF , one of the world's leading chemical companies , completing a proof of concept project that used a hybrid quantum application to optimize manufacturing workflows in a BASF liquid filling facility .
Speaker #5: The hybrid quantum technology , sent a new benchmark for manufacturing efficiency , allowing a reduction of production scheduling time from ten hours to just seconds .
Speaker #5: One of their key operational challenges involves scheduling liquids , unloading onto filling lines for customer orders across several different products . While this may sound like a simple problem , it is in fact a very complex optimization problem that involves dozens of single chemical tanker trucks and hundreds of customer orders on fulfillment lines that require careful timing and coordination .
Speaker #5: The challenges often exceeded the capabilities of a classical only optimization approach , and our solution outperformed substantially with latency reduced by 14% . Set up time reduced by 9% , and tank unloading durations reduced by up to 18% .
Speaker #5: During our last earnings call , I spoke to you about a hybrid proof of technology with North Wales Police to optimize deployment of patrol vehicles .
Speaker #5: I'm pleased to report that the pot was successfully completed in the third quarter with a hybrid quantum application that significantly outperformed classical results .
Speaker #5: Our hybrid solution enabled North Wales Police to respond to over 90% of incidents within their target response time , reduced average incident response time by nearly 50% , and reduced police vehicle coordination time from four months to four minutes , which significantly improves real time adaptability .
Speaker #5: North Wales Police noted that the application could be scaled nationally . It is a valuable example of how our hybrid quantum computing solutions are beginning to show real world potential across private and public sectors .
Speaker #5: Earlier this year , we announced a successful completion of a proof of concept with Japan Tobacco's Pharmaceutical division that used D-Wave Quantum Inc. and AI to improve the drug discovery process .
Speaker #5: We are now taking that work a step further with a second proof of concept with Japan Tobacco for Molecular Discovery through quantum AI .
Speaker #5: They are running a significant number of problems to help expedite the drug discovery process , and they are receiving subsecond responses from the D-Wave quantum computer , which is leading to improved performance versus classical computing alone .
Speaker #5: For the large language model training . This work demonstrates that these hybrid LM models produce more valid generated molecules compared to classical only methods , and we believe that no other quantum computer on the market today can produce such results .
Speaker #5: This work could have a significant impact on speed to market for new drugs , which in turn could drive better patient outcomes . Our results show that quantum annealing is the most effective method of quantum optimization .
Speaker #5: A recent IBM study showed a family of multi-objective optimization problems where gate model , quantum optimization could compete with classical approaches . We threw this problem at our advantage two processor and found that it was 1000 times faster than all the classical and quantum approaches in the IBM study .
Speaker #5: In addition to finding higher quality solutions , you can read the full research paper on the archive . Against the backdrop of heightened global awareness around quantum computing and increasing exposure for D-Wave , we held our first ever qubits Japan User Conference in Tokyo in September .
Speaker #5: The response was fantastic . As Doctor Trevor Lanting , our chief development officer , and I addressed a very enthusiastic audience representing many of Japan's leading companies and academic institutions .
Speaker #5: We were also honored to welcome Hirotoshi Nishimura as a presenter . Hitoshi is widely recognized as the father of annealing quantum technology , and the first to propose the concept .
Speaker #5: Nearly 30 years ago . Given the success of qubits , Japan , we are exploring hosting qubits events in other regions going forward , and our global qubits 2026 conference will take place on January 27th and 28th , 2026 .
Speaker #5: In just a couple of months in Boca Raton , Florida . Registration is now open and I hope to see many of you there in person .
Speaker #5: Let me now turn to technology . As we drive important development work that is focused on helping customers realize the value of quantum computing , now and in the future .
Speaker #5: Before I get to some specific product updates , I want to take a moment to discuss the underlying technologies or modalities that implement both of the two primary architectural approaches to quantum computing systems .
Speaker #5: That is , annealing and gate model . As I believe there's a lot of misinformation and lack of understanding in this area , these technologies relate to how qubits are implemented .
Speaker #5: There are four primary methods for implementation , whether for gate or annealing . These implementation technologies are superconducting ion trap , neutral atom and photonics .
Speaker #5: We believe that one will clearly emerge victorious in the long run , and that approach is superconducting . There are few reasons why we believe superconducting will win .
Speaker #5: The speed with superconducting gates estimated to be 1000 to 10,000 times faster compared to the other major technologies . While approaches like ion trap or neutral atom may hold some near-term advantages in terms of qubit fidelity .
Speaker #5: We believe that the gap will substantially close over time. We do not believe that the gate speed advantage will change materially. So, over the long term, superconducting is expected to have a massive performance advantage over competing approaches.
Speaker #5: When when one looks at the speed fidelity trade off . We recently heard an ion trap company spend hours discussing their technology advantages at an analyst first is gate event , but not once did they mention gate speed with a potential performance disadvantage of up to 10,000 times .
Speaker #5: I can see why they might have forgotten to discuss that key metric . The second advantage for superconducting involves scalability and the role that manufacturing will play .
Speaker #5: Superconducting builds upon 50 years of integrated circuit manufacturing and packaging technology development that supports classical computing technology . Superconducting leverages these established supply chains , which we believe will provide the ability to scale faster and at a much lower cost .
Speaker #5: Other approaches require entirely new supply chains , which will likely require massive investments , extensive technological challenges , and long timelines . Until maturity as they attempt to scale .
Speaker #5: Those are the primary reasons why D-Wave chose superconducting technology for both our annealing and our gate model development programs . Unlike gate model systems , which require error correction and thus are probably five plus years away from being truly commercial ready , our annealing systems are available for commercial use today .
Speaker #5: It is also worth noting that much of the proven superconducting technology we developed for annealing systems will likely also provide a competitive advantage for our gate model system .
Speaker #5: More than 60% of our patent portfolio relates to superconducting technology that we believe could apply in either annealing or gate systems . The cryogenic control I discussed last quarter is a perfect example of a patented technology that , to our knowledge , no other gate model company has today .
Speaker #5: And will almost certainly need to compete effectively with future gate model systems . So now I'll turn to specific product development milestones . We're making solid progress in a number of areas , including our gate model , program .
Speaker #5: As you are aware , D-Wave is the only company in the world building both annealing and gate model quantum computers . That's the only company that is currently positioned to address the entire market opportunity for quantum .
Speaker #5: We see this as a competitive advantage that will give our customers quantum solutions that can address the full spectrum of their computational problems .
Speaker #5: As part of our Gate model development initiative , we recently completed the fabrication of complex qubit chips and Dwa's superconducting control chips , and we are now bonding the two to .
Speaker #5: Demonstrate scalable control of gate model qubits . This is a very important D-Wave D-Wave advantage . Sorry , this is a very important advantage that D-Wave has over any of our competitors , as we believe this work will enable the first ever scalable gate model system with cryogenic control .
Speaker #5: And why is that important ? Well , to provide any real computational utility with a superconducting gate model system , you need scale .
Speaker #5: And we believe cryogenic control provides the fastest path to large scale gate model technology on the annealing quantum computing side of our business .
Speaker #5: Earlier this week , we announced that the advantage two system installed at Davidson Technology headquarters in Huntsville , Alabama , is now operational .
Speaker #5: This is a significant step in advancing the US government's near-term use of D-wave's quantum computing technology . The system is capable of addressing mission critical computational problems that are beyond the reach of classical computers .
Speaker #5: Together with Davidson , we are already exploring quantum use cases in areas such as radar detection , resource deployment , military logistics optimization , material science , and AI , and look forward to continuing our collaborative work focused on national security and defense .
Speaker #5: The advantage two system , which we made commercially available earlier this year , is an engineering marvel . Our most highly performant quantum computer yet .
Speaker #5: And the only quantum computer that has demonstrated quantum supremacy on a useful real world problem , a testament to its technical achievements . D-Wave was recently named as winner in Fast Company's 2025 Next Big Things in Tech Awards .
Speaker #5: This is a very prestigious award that recognizes , recognizes emerging technologies with the potential to profoundly impact industries . D-Wave was acknowledged for showing what quantum computing can do right now .
Speaker #5: This is something we have been highlighting for several years . Given the production readiness of our technology compared to others and is gratifying to see industry recognition that unlike all other quantum companies , D-Wave has commercial solutions capable of solving real world problems .
Speaker #5: Today , not 5 or 10 years from now , but today . Finally , turning to our annealing roadmap , fabrication of our advantage three prototype chips is nearing completion , and we expect circuits for testing this quarter .
Speaker #5: As a reminder , our work on advantage three is focused on innovation and scaling , including increased connectivity and coherence . Next generation addressing and Multi-chip processor fabric to accelerate our path to 100,000 qubits .
Speaker #5: In summary , the first nine months of 2025 have been remarkable for D-Wave . We demonstrated quantum supremacy , sold our first advantage system , introduced the advantage two system to market .
Speaker #5: Further development of our gate model program , advanced the exploration of quantum and AI , worked with research and commercial customers on a variety of groundbreaking applications that go beyond the reach of classical , increased our cash position by over $650 million and much more .
Speaker #5: Our pipeline remains strong , with large opportunities for both system sales and quantum compute as a service deals . And with more than $800 million in cash on our balance sheet , we remain well positioned to expand our business .
Speaker #5: Both organically and through M&A . We look forward to seeing many of you at upcoming investor conferences and in January in Boca Raton at qubits , 2026 .
Speaker #5: But before I hand it over to John , there's one more thing that I want to say . We recently had a fair amount of chest pounding from quantum leaders .
Speaker #5: Let me be clear . Anyone who characterizes quantum annealing as not real quantum is either intellectually incapable of understanding the physics and science , or has chosen to put their head in the sand because they worried about the competitive threat .
Speaker #5: Let's look at the facts . There is only one quantum computer in the world that is demonstrated the ability to solve an important , useful problem that can't be solved classically .
Speaker #5: Not a synthetic problem , but a useful problem . And that's our D-Wave advantage two system . When we announced this breakthrough work , there were research teams that tried to downplay the significance .
Speaker #5: Significance , but they never computed anything classically that we hadn't already computed classically . And included in our science paper . Moreover , their scaling claims were ridiculous , and we have demonstrated that they are totally flawed to experimental results using their code .
Speaker #5: And this has been published on the arXiv . But it's not just that we are the only are ones that have demonstrated true advantage .
Speaker #5: We are the only ones that have shown that we can do better than classical at all . Think about that . There is no other quantum computer that has been able to demonstrate anything better than classical , let alone supremacy .
Speaker #5: For example , a quantum company that I mentioned previously recently touted multi optimization results claiming as good as classical , not better , but as good as we have run those same problems .
Speaker #5: 1000 times faster than than both quantum computer and their classical approaches . You can find that on the arXiv as well . And it's not just about power .
Speaker #5: It's also about availability . Our systems are online with high uptime , providing subsecond response times . Other systems are frequently down , and when they are up , they regularly have multi-hour queuing delays .
Speaker #5: So with ask this question which systems are the real deal and which are toys and noisy toys at that ? Only D-Wave is the real deal .
Speaker #5: With that , I'll hand the call over to John to provide a review of our third quarter and first nine months of 2025 results .
Speaker #5: John .
Speaker #6: Thank you , Alan , and thank you to everyone for taking the time to participate in today's third , third quarter earnings call .
Speaker #6: In my review of the third quarter results , I will be providing non-GAAP operating metrics , including bookings , as well as non-GAAP financial metrics , including non-GAAP gross profit , non-GAAP gross margins , adjusted net loss , adjusted net loss per share , and adjusted EBITDA loss .
Speaker #6: As we believe these metrics improve , investors ability to evaluate our underlying operating performance . These measures are defined in the tables at the bottom of today's third quarter earnings .
Speaker #6: Press release . With the non-GAAP financial metrics , for the most part , adjusting for non-cash and non-recurring expenses , revenue in the third quarter of fiscal 2025 totaled 3.7 million , an increase of approximately 1.8 million , or 100% , from the third quarter of fiscal 2024 .
Speaker #6: Revenue for the third quarter was $1.9 million. This revenue was comprised of $1.8 million in systems revenue associated with the upgrade of the Advantage system to an Advantage 2 system.
Speaker #6: 1.4 million . In revenue and $500,000 in professional services revenue . Bookings for the third quarter totaled 2.4 million , an increase of approximately 100,000 , or 3% , when compared to the third quarter of 2020 .
Speaker #6: Four . Bookings of 2.3 million and an increase of 1.1 million , or 80% , compared to the immediately preceding fiscal 2025 . Second quarter bookings .
Speaker #6: As Alan previously noted, after the close of the quarter, we signed a €10 million agreement to place a D-Wave Advantage two system in Europe, which will be reflected in our fourth quarter bookings that, to date, have totaled over $12 million.
Speaker #6: This agreement is for one half the capacity of an advantage two system over a five year period , with an option to purchase the entire system at any time at a price that is within the range of our targeted system .
Speaker #6: Pricing of 20 to $40 million in terms of revenue recognition , the €10 million will be recognized readily over five years . Commencing when the system becomes operational , which we expect to be sometime next year .
Speaker #6: I would like to also reiterate my comments from the last two quarters earnings calls . With respect to the composition of our sales pipeline , incorporating incrementally larger average deal sizes than what we saw at this point last year .
Speaker #6: Two recent examples of this are the third quarter high six figure booking with a major US based international airline , as well as the fourth quarter €10 million European agreement booking .
Speaker #6: We continue to see increased activity from larger enterprises with more complex transaction structures . And as I have previously indicated , these deals typically take longer to close .
Speaker #6: That said , we remain confident in the outlook for booking activity going forward with respect to customers over the most recent four quarters , D-Wave had an excess of 100 revenue generating customers , including approximately two dozen Forbes Global 2000 companies .
Speaker #6: GAAP gross profit for the third quarter of fiscal 2025 was 2.7 million , an increase of 1.7 million , or 156% , from the fiscal 2024 third quarter .
Speaker #6: Gross profit of 1 million , with the increase due primarily to the growth in revenue as well as the higher margin systems upgrade revenue .
Speaker #6: non-GAAP gross profit for the third quarter of fiscal 25 was 2.9 million , an increase of 1.6 million , or 131% , from the fiscal 2024 third quarter .
Speaker #6: non-GAAP gross profit of 1.3 million GAAP gross margin for the third quarter of fiscal 25 was 71.4% , an increase of 15.6% from the fiscal 2024 third quarter .
Speaker #6: GAAP gross margin of 55.8% . With the year over year improvement primarily driven by the growth in revenue and the higher margin Ulic systems upgrade revenue .
Speaker #6: non-GAAP gross margin for the third quarter of fiscal 25 was 77.7% , an increase of 10.5% from the fiscal 2024 third quarter . non-GAAP gross margin of 67.2% .
Speaker #6: The difference between GAAP and non-GAAP gross profit and gross margin is limited to non-cash stock based compensation and depreciation , and amortization expenses that are excluded from the non-GAAP measures .
Speaker #6: Net loss for the third quarter was $140.8 million , or $0.41 per share , compared with a net loss of $22.7 million , or $0.11 per share , in the fiscal 2024 third quarter .
Speaker #6: The increase is due primarily to 121.9 million in non-cash , non-operating charges related to the remeasurement of the company's warrant liability , as well as realized losses stemming from warrant exercises .
Speaker #6: Both of which increase materially due to the significant increase in the price of the company's common stock and warrants . Adjusted net loss for the third quarter was $18.1 million , or $0.05 per share , a decrease of $5.1 million , or $0.07 per share , compared with an adjusted net loss of $23.2 million , or $0.12 per share , in the fiscal 2024 third quarter .
Speaker #6: The difference between net loss and adjusted net loss is primarily the non-cash , non-operating warrant related charges . The adjusted EBITDA loss for the third quarter of fiscal 25 was $20.6 million , an increase of 6.8 million , or 49% , compared with the adjusted EBITDA loss of 13.8 million in the fiscal 2024 third quarter .
Speaker #6: The increase was primarily due to higher operating expenses, partially offset by higher gross profit. I'll now address Dewar's operating performance for the first nine months of fiscal 2025.
Speaker #6: Revenue for the nine months ended September 30th , 2025 was 21.8 million , an increase of 15.3 million , or 235% from revenue of 6.5 million for the nine months ended September 30th , 2020 .
Speaker #6: For the year over year increase is largely due to the system's sale to Ulik that has been recognized over the first three quarters of fiscal 2025 .
Speaker #6: Year to date, revenue was comprised of $15.5 million in revenue from the sale of an advantaged annealing system to Ulik, along with the associated Advantage 2 processor upgrades.
Speaker #6: 4.2 4.2 million in cash revenue and 2.1 million in professional services revenue . Bookings for the nine months ended September 30th , 2025 were 5.3 million , a decrease of approximately $300,000 , or 7% , from bookings of 5.6 million for the nine months ended September 30th , 2024 .
Speaker #6: GAAP gross profit for the nine months ended September 30th was 18.5 million , an increase of 14.4 million , or 353% , from 4.1 million in GAAP gross profit for the nine months ended September 30th , 2024 .
Speaker #6: With the increase due primarily to the recognition of the higher margin Ulic system sale during the first nine months of fiscal 2025 , non-GAAP gross profit for the nine months ended September 30th , 2025 was 19.2 million , an increase of 14.5 million , or 304% from the non-GAAP gross profit of 4.7 million for the nine months ended September 30th , 2024 .
Speaker #6: Moving on to gross margins , GAAP gross margin for the nine months ended September 30th , 2025 was 84.8% , an increase of 22.1% from the 62.7% GAAP gross margin for the nine months ended September 30th , 2024 .
Speaker #6: With the increase due primarily to the higher margin nature of the system , sale . non-GAAP gross margin for the nine months ended September 30th , 2025 was 87.8% , an increase of 15.1% from the 72.7% non-GAAP gross margin for the nine months ended September 30th , 2024 .
Speaker #6: Net loss for the nine months ended September 30th , 2025 was $312.7 million , or $1.01 per share , compared with a net loss of $57.8 million , or $0.32 per share , in the fiscal 2024 nine month period .
Speaker #6: The increase is due primarily to $260 million in non-cash , non-operating charges related to the remeasurement of the company's warrant liability , as well as realized losses stemming from warrant exercises .
Speaker #6: Adjusted net loss for the nine months ended September 30th , 2025 was 52.8 million , or $0.17 per share , a decrease of 5.1 million , or 8.7% , when compared to the fiscal 2024 nine month period .
Speaker #6: Net loss of $57.8 million , or $0.32 per share . Adjusted EBITDA loss for the nine months ended September 30th , 2025 was 46.7 million , an increase of 6.1 million , or 15% , from an adjusted EBITDA loss of 40.6 million for the nine months ended September 30th , 2020 .
Speaker #6: For the increase is due primarily to higher operating expenses , partially offset by higher gross profit . Now , a few comments on how Dewar's revenue and business model are fundamentally different from most all , if not all , other quantum computing companies .
Speaker #6: Our revenue model now consists of three primarily primary synergistic components . Quantum computing is a service or shkas professional services and system sales .
Speaker #6: Our quantum computing as a service consists of cloud based , recurring subscription revenue derived by providing customers with access to our own cloud service .
Speaker #6: While we have over 100 customers , nearly 48% of which are commercial organizations , we believe that we still at a very early stage in developing the Shkas business , with are most of the revenue base still comprised of smaller deal sizes .
Speaker #6: Moreover , with four production systems now supporting the Leap cloud service , we have over $100 million in annual revenue capacity that inherently provides us with significant operating leverage .
Speaker #6: Our professional services revenue typically involves relatively straightforward , fixed priced , short term engagements to assist customers with proof of concepts of applications that will help solve their business problems .
Speaker #6: Our objective is to transition these applications into longer term production applications where customers access our systems on an ongoing basis to solve their computational problems .
Speaker #6: D-Wave is the only quantum company with applications in production system sales is our newest revenue stream , and it is worth noting that our system sales are quite different from the systems being sold by most other quantum computing companies .
Speaker #6: Our Advantage systems are highly scalable , commercial grade systems being used to solve real problems , whereas most other quantum computing systems are development stage , low qubit count systems that are being used for research , experimentation .
Speaker #6: While our systems may be used for research in areas like AI , these are not experimental or R&D systems . Year to date , we have sold a system to the Supercomputing center in Germany , entered into a memorandum of understanding to sell a system to Yonsei University in Incheon Metropolitan City in South Korea , signed a €10 million contract for an D-Wave advantage to annealing quantum computer to be located in Europe in partnership with the Italian government and the CU Alliance , and earlier this week , we announced that an advantage to quantum computer is now operational at Davidson Technologies headquarters in Huntsville , Alabama , to support US Department of Defense and Aerospace customers .
Speaker #6: Dua's revenue model contrasts sharply with the revenue makeup of most other independent quantum computing companies . That is typically comprised of concentrated , government funded research and development that is recognized under GAAP as revenue , and these arrangements , government entities are essentially funding the development of systems that they may or may not eventually purchase .
Speaker #6: This government funded R&D revenue is typically low margin , and the systems involved are not commercial grade , scalable production systems capable of solving real world problems .
Speaker #6: They are experimental R&D systems . While we believe that increased government funding and quantum could provide D-Wave with incremental revenue opportunities and could speed up development in certain areas , we don't believe that a primary focus on government funded R&D revenue is a sustainable business model .
Speaker #6: We will continue to focus on highly providing access to our commercial grade systems , either through our Leap Cloud service or via on premises sales , as well as providing the suite of professional services frequently necessary to transition applications into production .
Speaker #6: Now I will move on to address the balance sheet and liquidity . As of September 30th , 2025 , D was consolidated cash balance totaled $836.2 million , representing a 2,700% increase from the year earlier .
Speaker #6: Fiscal 2024 third quarter consolidated cash balance of $29.3 million and a 2% increase from the fiscal 2025 second quarter . Consolidated cash balance of 819.3 million .
Speaker #6: During the quarter , the company received $40.3 million in proceeds from the exercise of warrants . On October 20th , we announced the redemption of all the company's approximately 5 million outstanding warrants that , if fully exercised before the redemption date , would provide approximately an additional $58 million in cash .
Speaker #6: Subsequent to the end of the third quarter and through November 4th , we have received $21.3 million from the exercise of warrants to conclude our business momentum continues to build , and as we have previously stated , we believe that D-Wave has the opportunity to be the first independent , publicly held quantum computing company to achieve sustained profitability and to achieve this milestone with substantially less funding than required by any other independent , publicly held quantum computing company .
Speaker #6: With that operator , please open the call for questions .
Speaker #3: Thank you . We will now begin the question and answer session . To ask a question , you may press star , then one on your touchtone phone .
Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .
Speaker #3: Please limit yourself to one question and one follow up . And if you have further questions , you may reenter the question queue .
Speaker #3: And at this time , we'll pause momentarily to assemble our roster .
Speaker #5: Actually . Operator , just one thing . It's one question . Because of the number of analysts that are now on the call .
Speaker #5: And then you can get back in the queue if you want to ask a second question .
Speaker #3: Thank you . Our first question will come from Harsh Kumar with Piper Sandler . Please go ahead .
Speaker #7: Yeah . Hey , Alan . And John . First of all , congratulations on the Italy Lombardy deal . And then also the very substantial 100 customer number that you mentioned on this call .
Speaker #7: And the press release . I my question is , I see that you're now finally getting some attention slash love from the US government .
Speaker #7: This has been something that that that has not happened in the past . You were getting attention from foreign governments , but not the US government .
Speaker #7: I saw a deal where you're part of an alliance for national security work . Obviously , I won't ask about what you're doing , but can you talk about the significance here ?
Speaker #7: And is this a shift towards towards some attention , towards annealing by the US government .
Speaker #5: So harsh the key point that I want to make relative to the US government is that our approach is quite different from the other quantum computing companies that are engaged with the US government .
Speaker #5: We are not looking for R&D funding to aid in the development of our quantum computers . Our annealing quantum computers are at scale today and capable of solving important government problems .
Speaker #5: And so our work with the US government is all about identifying areas where our systems can actually provide value to the government . Whether it's in areas like , you know , military logistics or research placement or equipment maintenance .
Speaker #5: Those are the sorts of things we're focused on . And I think , you know , they're starting to become a realization in key areas of the government that our systems are capable of delivering value .
Speaker #5: And that's what's starting to open up some opportunity for us .
Speaker #3: The next question will come from Troy Jensen with Cancer Fitzgerald , please go ahead .
Speaker #8: Hey , good morning gentlemen . Congrats on all the progress here . And great milestones . A quick question for Alan and I love the passion here .
Speaker #8: And I . All about excuse me when you're speaking earlier , but can you just give us more details on the gate model product and the superconducting computer you're working on ?
Speaker #8: It's specifically timeline of launch and kind of what the fidelity and qubit count would be .
Speaker #5: Yeah . So first of all , we are using superconducting for our gate model quantum computer . We are not using the types of qubits that most of the other superconducting gate model companies are pursuing .
Speaker #5: They're pursuing what are known as transmon qubits or voltage controlled qubits . We are pursuing flux qubits that are controlled with magnetic flux .
Speaker #5: We're doing this because our annealing quantum computers use flux based qubits . And so we've got a lot of experience with them . And we think they have some very significant advantages over the transmon qubits when it comes to scaling .
Speaker #5: And then of course , you know , we are the only company that has been able to use cryogenic control with their quantum computers .
Speaker #5: I talked about this last quarter . That's why , for example , we can control 4000 qubits in our annealing system with only 200 I o lines , rather than needing three to 5IO lines per qubit .
Speaker #5: And we're bringing that into the gate model space . Our first will be what I discussed a bit earlier in the call , which is that we have now fabricated high quality oxonium qubit chips , and we have fabricated cryogenic control chips , and we will be bonding those together through a bump bond process to demonstrate scale .
Speaker #5: Basically cryogenic control of gate model demonstration qubits . From there , we will be moving on to developing basically logical qubit structures , starting with small surface code .
Speaker #5: But developed in a scalable fashion . And then building up from there and over the course of the coming year , we expect to have the first of this kind of capability , demonstrable .
Speaker #5: And then that is on the path to scaling the logical qubits and the number of qubits on the chip to , you know , on the path to a scaled , error corrected gate model system .
Speaker #5: But the timeline for scaled error corrected gate model system is still a number of years out . It's pretty much the same timeline as you'll hear from any other quantum computing companies who are being honest with you .
Speaker #5: You know, in the 5 to 10 year timeframe.
Speaker #3: The next question will come from David Williams with benchmark . Please go ahead .
Speaker #9: Hey , good afternoon gentlemen . Thanks for taking the question . I wanted to ask a little bit on your and you talked about this earlier , but the Davidson relationship that you have and I know you've been working on several projects there , but as we kind of think about the national security and defense initiatives and things like the Golden Dome , how do you think you can play into that ?
Speaker #9: Just kind of given your heritage there ? And you've been working on this for a long time . It seems like you'd have a good opportunity .
Speaker #9: So just any color around that would be very helpful, I think. Thank you.
Speaker #5: Yeah . So look , we're just as interested in Golden Dome as every other quantum computing company . We participate in . The various government forums to kind of talk about this .
Speaker #5: You know , we're doing exploratory work and application areas that could could be of benefit . But but this really does fall right into the category of solving hard problems .
Speaker #5: Today . That can deliver value to the US government as opposed to , you know , trying to play with research systems and do research experimentation .
Speaker #5: You know , our work with Davidson cuts across a number of different application areas , as , as I previously mentioned , and very interestingly , the next step in that relationship , now that our system is fully calibrated , operational and online at Davidson , the next step is to secure the system so that we can run classified versions of applications on the system , which would make it what we believe would be the very first quantum computer certified for classified government applications .
Speaker #3: Your next question will come from Quinn Bolton with Needham and Company . Please go ahead .
Speaker #10: Hey guys . Congratulations on the momentum . I just wanted to follow up on the Alliance transaction and SKT where they have the option to purchase the system .
Speaker #10: John or Alan , can you sort of talk to the extent that they want to , you know , make that purchase ? How would that work ?
Speaker #10: You know , you've got a $10 million contract for half of the system over a five year period . Would they get credit for money spent if they converted , say , in year one or year two ?
Speaker #10: Or would it be sort of a full 20 to $40 million purchase price and , you know , anything that had been , you know , recognized on the €10 million contract , you know , you would you would keep and then you would get the full system sale to the extent that they move in that direction .
Speaker #10: Thanks .
Speaker #5: Yeah . Sorry . I'm sorry , Quinn , but , you know , we haven't disclosed closed any of the details around how the purchase would occur .
Speaker #5: The only thing I will say is that , you know , you should certainly not assume that 10 million for half the capacity of a system means double that , or 20 million for the full purchase of a system .
Speaker #5: There are many benefits that a customer gets when they purchase the system , and we pass title to them , including the ability to do things that this isn't that can't be done when the system is online and shared .
Speaker #5: And so as a result , there's a premium on the pricing for the actual purchase of a system . But the relationship with the alliance and the Italy government is for 50% capacity of the system .
Speaker #5: Over the course of the next five years . And they do have the option to purchase the full system , which would then put them into a different category where title would actually pass .
Speaker #5: .
Speaker #3: The next question will come from Kingsley Crane with Canaccord Genuity . Please go ahead .
Speaker #11: Just to double click on on that . Q Alliance . Deal . It sounds like somewhat of a innovative deployment and procurement model .
Speaker #11: So I believe that 50% of the capacity would then be available to Shkas customers. Could this just become a blueprint for future deals and establishing points of presence across the world?
Speaker #11: Just curious your thoughts on that structure .
Speaker #5: It absolutely could . And in fact , it's not entirely new for us . We did something like this with the supercomputing center .
Speaker #5: Initially , they had a system on site . And they had a portion of the capacity of that system , and the rest was , you know , available for other customers .
Speaker #5: But then they chose to purchase the system . And so this is a really interesting model for a kind of building out presence around the world and be , you know , taking it one step at a time toward the purchase of the system .
Speaker #5: Of course . Then there are other companies that just outright want to purchase a system , which is the nature of the discussion that we're having .
Speaker #5: For example , in Korea . And we have actually a few others of those that have now become quite , quite advanced as well .
Speaker #3: The next question will come from Craig Ellis with B Riley Securities . Please go ahead .
Speaker #12: Yeah . Thanks for taking the question . And congratulations on progress with large customers and advantage to engagement . The question I wanted to ask goes back to an expectation that was set three months ago , which was that the company would increase investment moderately about 15% , half on half in R&D and sales and marketing .
Speaker #12: As it looks to accelerate technology and and its go to market capability . Can you just talk about how that's going ? What we should expect in the fourth quarter with respect to operational things , increased capability and what should we expect as we look at the first half of 26 more stable expenses are further uptick .
Speaker #12: Thanks , guys .
Speaker #5: John , do you want to talk about the the numbers . And then I can maybe provide a little color on the use of the funds ?
Speaker #6: Sure . So as we outlined in the second quarter earnings call , we outlined that our operating expenses for the balance of the year will increase approximately 15% of sequential basis , with the majority of that incremental spend in R&D area .
Speaker #6: Craig , with respect to your your question , the first half of next year , we're not going to provide any guidance beyond what we have provided for the balance of this year in terms of the growth in opex .
Speaker #6: .
Speaker #5: And , Craig , just to give a little color on you . So I think that it won't be a surprise to anybody if I say that , you know , given the fact that , you know , we have significantly more cash now than in the past .
Speaker #5: And so we do have the ability to start making some modest investments in R&D . One of the key areas that we will be accelerating is our gate model program .
Speaker #5: We believe that we've got some unique , valuable technology in the gate space that's going to allow us to move in a fairly short footed fashion .
Speaker #5: And so , you know , that is a target for a bit of increased investment . And then from a go to market perspective , now that we have the system sales model , you know , we are you know , we've got a portion of the team that's now focused on system sales .
Speaker #5: And a portion that's focused on professional services . And qcat . So we've made a bit of an investment to kind of facilitate both of those go to market motions .
Speaker #5: And then we're starting to see something that is actually pretty exciting . It's still early with respect to exactly when and how this will materialize .
Speaker #5: But you know , we've talked a lot about proofs of concept and the value that we're seeing . And the move to production .
Speaker #5: And , you know , we've started to have the first conversations along the lines of , well , hey , you know , this application is looking really good .
Speaker #5: We want to move it into production , but we've got a few other applications now that we're interested in . Could we do a deal that gives us the ability to support multiple proofs of concept and multiple applications in production ?
Speaker #5: You know , I'm not entirely sure what to call it , but , you know , you could think of it as , you know , maybe something like an enterprise license that bundles a number of production apps and a number of proofs of concept to to really start accelerating the professional services and sales and revenue .
Speaker #5: That's just getting started . I mean , you know , I mean , that's happened literally within the last few months where we started getting inquiries about that .
Speaker #5: But , you know , that's that's that could be an important inflection point for us on the business .
Speaker #3: The next question will come from suji da Silva with Roth Capital . Please go ahead .
Speaker #13: Good morning Alan . John , congrats on the progress here . I wanted to ask a question about in the in the quantum market .
Speaker #13: There's a lot of discussion of ancillary quantum opportunities , communications , timing , memory , security keys and so forth . I just want to understand Qubit's position on these .
Speaker #13: Are you laser focused on your core opportunity ? Are you able to internally develop these inorganic or maybe the markets are not as mature as people think ?
Speaker #13: Just any thoughts there would be helpful ?
Speaker #5: We are laser focused on quantum computing . First of all , our systems for the foreseeable future don't need the quantum interconnect that you hear about on .
Speaker #5: You know , quantum networking . You know , the other the other modalities , the other approach is due , for example , you know , when it comes to interconnecting traps , whether they be neutral atom or ion traps , you need that kind of interconnect and you're going to need to interconnect the traps to scale .
Speaker #5: But for our systems , that's not that's not a critical technology . And , you know , we don't do sensing as central to what we're doing .
Speaker #5: We don't view quantum key distribution as central to what we're doing . We are focused on quantum computing .
Speaker #3: The next question will come from Richard Shannon with Craig-Hallum. Please go ahead.
Speaker #14: Hi everyone . This is Tyler on for Richard . Thank you for taking my questions . So I wanted to double click on some of the things that your customers are doing .
Speaker #14: You mentioned Skywater is using your Qpu . Is this for magnetic materials simulation or for the simulation of quantum devices ? And does this help improve the chips that you're getting from them ?
Speaker #14: And then also for the airline tech airline company , are they using your technology for for scheduling or traveling salesman . And then if you could have a comment on how often BASF has to run your program , if that is in production , I'd be interested in that .
Speaker #14: Thank you .
Speaker #5: Okay , I'm not sure whether to call that one question or three question . So here's what I will say . In the case of Skywater , there are new customer as of this quarter , and it is really all about looking into , you know , kind of optimization problems in their operations .
Speaker #5: And , you know , in the case of this very large airline , we have not disclosed the the applications that we are working on .
Speaker #3: The next question will come from John Mcpeake with Rosenblatt Securities . Please go ahead .
Speaker #15: Thank you . Thanks , Alan . John and Kevin , it's good to hear things are tracking well . I just have a question on optimization .
Speaker #15: You know , there's a lot of publicity around quantum , a lot of of feverish commentary that you you were referring to . And I'm curious , relative to trial to conversion to production on the optimization side , new logos , maybe you could just talk a little bit about what the the tone is like there because , you know , that's that's real business .
Speaker #5: Yeah . I'm not entirely sure what you mean by the tone , but what I can tell you and we , we , we started to see this maybe a quarter or two quarters ago .
Speaker #5: We are now being engaged by much larger companies interested in addressing larger and more challenging optimization problems . And , you know , that's why we can talk about , you know , one of the largest airlines , one of the largest chemical companies , one of the largest payment processing companies .
Speaker #5: That's why I commented that we're now with , you know , successful initial proofs of concept starting to get inquiries about , okay , you know , if I wanted to do a deal that bundled in multiple proofs of concept and , you know , assuming assuming they're all successful , multiple production applications , could I , you know , what would what would it be like that look like ?
Speaker #5: So , you know , I think , as I said before , we're getting close to an inflection point on the professional services and business where we're seeing now better and better results with our customers , due in large part to the fact that we're now on the advantage to platform .
Speaker #5: We now have our really NL hybrid solver . You know , and so the results are in and speaking for themselves . And allowing us to move forward more aggressively .
Speaker #3: This concludes our question and answer session . I would like to turn the conference back over to Doctor Alan Baratz for any closing remarks .
Speaker #3: Please go ahead .
Speaker #5: Okay . Thank you . Operator . Momentum is clearly building at D-Wave , and we believe that our first mover advantage is increasingly evident in our business results .
Speaker #5: And our technical innovation . As Fox Business's Charles Payne remarked earlier this week , we are the real deal in a sea of quantum hype .
Speaker #5: Our position is clear . We're helping customers realize the value of quantum powerful today , and I think our 2025 results to date demonstrate that we're making consistent progress toward the service of that mission .
Speaker #5: So thanks for your time today . Thanks for your support . And I look forward to updating you again in January at Qubits 2026 .
Speaker #5: We'll see you all in Boca Raton . Thank you .