10-Q: Rigetti Computing Reports Q1 2024 Results, Revenue Up 39% Year-Over-Year

Rigetti Computing's Q1 2024 results show a 39% increase in revenue compared to the same period last year, alongside ongoing efforts to improve quantum computing technology.

Summary

• Rigetti Computing reported a net loss of $20.8 million for the first quarter of 2024, compared to a net loss of $23.4 million for the same period in 2023.
• Revenue for the quarter was $3.1 million, a 39% increase from $2.2 million in the first quarter of 2023.
• The company's cost of revenue increased to $1.6 million, up from $0.5 million in the prior year.
• Operating expenses decreased to $18.1 million, down from $23.7 million in the first quarter of 2023.
• Research and development expenses were $11.5 million, a decrease from $13.7 million year-over-year.
• Selling, general, and administrative expenses decreased to $6.6 million, down from $9.0 million in the prior year.
• The company believes its current cash, cash equivalents, and marketable securities will fund operations until midway through the fourth quarter of 2025.
• Rigetti expects to need additional capital by midway through the fourth quarter of 2025 to fund research and development and business objectives.

Sentiment

Score: 4

Explanation: The document presents mixed signals. While revenue growth is positive, the continued losses, need for additional capital, and material weakness in internal controls temper the overall outlook. The company is making progress but faces significant challenges.

Positives

• Revenue increased by 39% year-over-year, indicating growth in the company's business.
• Operating expenses decreased by 24%, showing improved cost management.
• The net loss improved by $2.6 million compared to the same quarter last year.
• The company has secured additional funding through an at-the-market offering and a common stock purchase agreement.

Negatives

• The company continues to operate at a loss, with a net loss of $20.8 million for the quarter.
• Cost of revenue increased significantly, impacting gross profit.
• The company expects to need additional capital by midway through the fourth quarter of 2025.
• A material weakness in internal control over financial reporting persists.

Risks

• The company has a limited operating history and a history of operating losses.
• The company is in the early stages of development and faces significant barriers in producing quantum computers.
• The quantum computing industry is competitive and volatile.
• The company depends on a limited number of customers for a significant portion of its revenue.
• A significant portion of the company's revenue depends on contracts with the public sector.
• The company has identified a material weakness in its internal control over financial reporting.
• The company may be unable to maintain compliance with Nasdaq listing standards.
• Unstable market and economic conditions could have serious adverse consequences on the business.

Future Outlook

The company believes its existing cash, cash equivalents, and marketable securities should be sufficient to meet its anticipated operating cash needs until midway through the fourth quarter of 2025, and expects to need additional capital by that time to fund research and development and business objectives.

Management Comments

• The company continues to plan to improve the performance of its QPUs with the goal of reaching at least 99% 2-qubit gate fidelity on an anticipated Ankaa-3 84 qubit system by the end of 2024.
• If the above target is achieved, the company plans to shift focus to scaling to develop Lyra, an anticipated 336-qubit system.
• The company also plans to continue to pursue sales of Novera, its first commercially available QPU launched in 2023.

Industry Context

The company is operating in the emerging quantum computing industry, which is characterized by rapid technological advancements and intense competition. The company's focus on improving qubit fidelity and scaling its systems aligns with the industry's overall goals.

Comparison to Industry Standards

• Rigetti's focus on superconducting quantum processors is a common approach in the industry, with competitors like IBM and Google also pursuing this technology.
• The company's goal of achieving 99% 2-qubit gate fidelity is a key benchmark in the industry, as higher fidelity is crucial for practical quantum computing.
• The development of a 336-qubit system would place Rigetti among the leaders in qubit count, although other companies are also working on similar or larger systems.
• Rigetti's vertical integration, including its own fabrication facility, is a differentiating factor compared to some competitors that rely on third-party manufacturers.

Corporate Governance

Legal Proceedings

• The company is not currently a party to any material legal proceedings that, if determined adversely to the company, would individually or taken together have a material adverse effect on the company's business, financial position, results of operations or cash flows.

Stakeholder Impact

• Shareholders may be concerned about the company's continued losses and need for additional capital.
• Employees may be affected by the company's restructuring and workforce reduction.
• Customers may be interested in the company's progress in improving qubit fidelity and scaling its systems.
• Creditors may be concerned about the company's ability to repay its debt.

Next Steps

• The company plans to continue working to improve the performance of its QPUs, targeting 99% 2-qubit gate fidelity on an anticipated Ankaa-3 84 qubit system by the end of 2024.
• The company plans to shift focus to scaling to develop Lyra, an anticipated 336-qubit system, if the 99% fidelity target is achieved.
• The company plans to continue to pursue sales of Novera, its first commercially available QPU.

Key Dates

Keywords

quantum computing, quantum processors, QCaaS, revenue, net loss, operating expenses, research and development, financial results, capital raise, internal controls