Rigetti Computing, Inc.

Hello, and welcome to the Rigetti Company first quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to turn the call over to Siboh Kulkarni. You may begin.

Good afternoon, and thank you for participating in Rigetti's earnings conference call covering the first quarter ended March 31st, 2024. Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview. Our CTO, David Rivas, is also here to participate in the Q&A session. We will be pleased to answer your questions at the conclusion of our remarks. We would like to point out that this call and Regattie's first quarter ended March 31st, 2024 press release contains forward-looking statements regarding current expectations, objectives, and underlying assumptions regarding our outlook and future operating desires. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described and are discussed in more detail in our Form 10-K for the year ended December 31, 2023, our Form 10-Q for the three months ended March 31, 2024, and other documents filed by the company from time to time with the Securities and Exchange Commission. These findings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. We urge you to review these discussions of risk factors. Today, I'm pleased to report on a number of new developments at Rigetti Computing. First, on our technology roadmap and QPU performance. We have achieved a 99.3% median two-qubit gate fidelity on our nine-qubit AMCA-class quantum system. This development gives us confidence that we will reach 99-plus percent median two-qubit gate fidelity on our anticipated 84-qubit AMCA-3 system, which we plan to deploy by the end of the year. Rigetti plans to develop the 336-qubit LIRA system thereafter. On the business update front, I'm pleased to report that we are continuing to grow our on-premises quantum processor unit sales with the delivery of a Novera QPU to Horizon Quantum Computing in April 2024. The Novera QPU will be installed in Horizon Quantum Computing's new hardware testbed in Singapore and will be Horizon's first quantum computing system. This is our first QPU located in Singapore. We expect that the system will be installed by early 2025. We are witnessing the emergence of a vibrant, on-premises quantum computing market. Quantum computing researchers need hands-on access to quantum technology to gain a deeper understanding of how to work towards useful quantum computing. We launched the Novera QPU to address this need, and we are thrilled that our longtime partners at Horizon selected our hardware to advance their quantum computing journey. Our first NOVERA QPU sales were to leading U.S. government labs, the Superconducting Quantum Materials and Systems Center, SQMS, led by Fermilab, and the Air Force Research Lab, AFRL. This past April, we launched the NOVERA QPU Partnership Program to support on-premises quantum ecosystems. The Novera QPU Partner Program aims to enable high-performing, on-premises quantum computing by creating an ecosystem of quantum computing hardware, software, and service providers who build and offer integral components of a functional quantum computing system. Novera QPU customers can work with Novera QPU partners to build a quantum computer powered by the Novera QPU that satisfies their system requirements and quantum computing research objectives. The founding members of the Novera QPU Partner Program includes some of Rigetti's most long-term partners and are leaders in the respective areas of quantum computing technology. We intend to grow the Novera QPU Partner Program with additional partners on an ongoing basis. With the Novera QPU, we have a unique opportunity to develop the development of on-premises quantum computing capabilities worldwide. At Rigetti, We are experts at overcoming the challenges of building, installing, and supporting a quantum computing system. After a decade in the quantum computing industry, we have also forged long-lasting partnerships with world-leading quantum technology companies whose collaborations and expertise have helped us advance our capabilities even further. We want to empower Novara QPU customers with an ecosystem of our trusted partners to support their own quantum computing research pursuits and to help prepare us for a quantum-ready society. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subodh. Revenues in the first quarter of 2024 were $3.1 million, up 39% compared to $2.2 million in the first quarter of 2023. Gross margins in the first quarter of 2024 came in at 49%, compared to 77% in the first quarter of 2023. Revenue and gross margin variability is to be expected at this stage of the company's evolution, given the variable nature of contract deliverables and timing with major government agencies. In addition, our project to develop and deliver a 24 cubic quantum computing system to the UK's National Quantum Computing Center has a lower gross margin profile when compared to some of our other projects. On the expense side, total OPEX in the first quarter of 2024 was $18.1 million compared to $23.7 million in the same period of the prior year. The year-over-year decrease was primarily due to our February 2023 restructuring and reduction in workforce A reduction in public company costs as more activities are being brought in-house and savings from R&D-related IT systems rationalization. SG&A expense for the three months ended March 31, 2023 included $1.1 million of expense related to the Ampere Forward Agreement, which expired in October 2023. The Ampere agreement had no impact on our results for the three months ended March 31, 2024. Stock compensation expense for the first quarter of 2024 was $3 million, compared to $1.7 million for the first quarter of 2023. Stock compensation expense was favorably impacted in the first quarter of 2023 by forfeitures related to the February 2023 restructuring and reduction of workforce. Operating loss for the first quarter of 2024 was 16.6 million compared to an operating loss of 22 million for the same period of 2023. Net loss for the first quarter of 2024 was 20.8 million or 14 cents per share compared to a net loss of 23.4 million or 19 cents per share for the first quarter of 2023. The non-cash change in the fair value of derivative warrant and earn-out liabilities negatively impacted our net loss in the first quarter of 2024 by $4.2 million, compared to a negative impact of $1.2 million for the first quarter of 2023. Cash, cash equivalents and available for sale investments totaled $102.8 million as of March 31, 2024, compared with $0.99 3.9 million as of December 31, 2023. On March 15, 2024, we entered into an ATM sales agreement for shares of our common stock having an aggregate offering price of up to $100 million. Year-to-date through May 9, 2024, we have raised 32.9 million from the sale of 23 million shares under our prior common stock purchase agreement with B. Reilly and our current ATM program, including 23.9 million raised in the three months ended March 31, 2024. As disclosed in today's 10Q filing, we believe that our existing balances of cash, cash equivalents, and marketable security should be sufficient to meet our anticipated operating cash needs until midway through the fourth quarter of 2025. Based on our current business plan, and expectations and assumptions considering current macroeconomic conditions. Thank you. We would now be happy to answer your questions.