Rigetti Computing, Inc.

Thank you for standing by. I am Magusto and I will be your conference operator today. At this time, I would like to welcome everyone to the Rigati Computing Second Quarter 2024 Financial Results. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keyboard. If you would withdraw your question, press star one again. Thank you. I would now like to turn the call over to Suat Kilgharani, CEO and President of Regate. Please go ahead.

Good afternoon and thank you for participating in Regate's earnings conference call covering the second quarter ended June 30th, 2024. Joining me today is Jeff Bertelsen, our CFO, who will review our results in some detail following my overview. We will be pleased to answer your questions at the conclusion of our remarks. We would like to point out that this call and Rigetti's second quarter ended June 30th, 2024 press release contain forward-looking statements regarding current expectations, objectives, and underlying assumptions regarding our outlook and future operating reserves. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described and are discussed in more detail in our Form 10-K for the year ended December 31st, 2023, our Form 10-Q for the three and six months ended June 30th, 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 this discussion of risk factors. Today, I'm pleased to provide an update and report on our progress at Rigetti Computing. First, on our technology roadmap and QPU performance. Brigitte remains on track to develop and deploy its anticipated 84-qubit ONCA-3 system with the goal of achieving a 99-plus percent median two-qubit gate fidelity by the end of 2024. We are seeing very promising results both with fidelity and speed on our current systems, which leverage the underpinning technology of our upcoming ONCA-3 system. Our 24-qubit system is performing in the 99% range for two-qubit fidelity. Our gate speeds are 60 to 80 nanoseconds, making our systems twice as fast as some other superconducting quantum computing players and three to four orders of magnitude faster than trapped ion and pure atom quantum computing systems. We are confident that we can translate this level of performance to our 84-qubit chip. In addition, we continue to demonstrate leadership in developing high-performing, scalable quantum processors. In May 2024, Rigetti's research introducing multi-chip cleanable couplers, floating cleanable couplers that can be used to entangle qubits on separate chips, was published in the peer-reviewed scientific journal, Physical Review Applied. We introduced the world's first modular chip architecture in 2021, unlocking the ability to connect multiple identical chips into a large-scale quantum processor. This modular approach exponentially reduces manufacturing complexity and allows for accelerated, predictable scaling. This architecture will allow for future ANCA systems to be tied together to create larger qubit-count processors without sacrificing gate performance. Furthering our work to improve the industry's understanding of the requirements needed for fault-tolerant quantum computers, in June 2024, we released preliminary research on the Resource Estimation Framework, which we developed in Phase 1 of the DARPA benchmarking program. Our manuscript represents the Resource Estimation Framework and a software tool that estimates the physical resources required to execute specific quantum algorithms compiled into their graph-shaped form. and laid out onto a modular superconducting hardware architecture. We will continue to work to optimize quantum algorithms for a variety of applications and improve the utility estimates to understand the value proposition of future quantum computers. The limited number of units available on current quantum computers is a challenge that must be overcome to deliver utility in quantum or combinatorial optimization. In July, we introduced a method to solve large combinatorial problems using a small number of qubits using Rigetti's ANCA 9Q3 system. This method introduces a qubit-efficient combinatorial solver which stores classical variables in an entangled wave function of fewer qubits. In summary, I'm pleased with our progress on the technology front. We remain on track to develop and deploy our 84 qubit ANCA III system with the goal of achieving a 99 plus percent median two qubit gate fidelity by the end of 2024. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subodh. Revenues in the second quarter of 2024 were 3.1 million compared to 3.3 million in the second quarter of 2023. Revenues in the second quarter of 2024 include the sale of the Novera QPU shipped to Horizon Quantum Computing in April. Gross margins in the second quarter of 2024 came in at 64%, compared to 82% in the second 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 recent contract to deliver a 24-qubit quantum system has a lower gross margin profile than most of our other revenue. On the expense side, total effects in the second quarter of 2024 was $18.1 million, compared to $19 million in the same period of the prior year. The year-over-year decrease in total effects was primarily driven by an increase in the amount of engineering time used to deliver revenue, resulting in a higher cost allocation to cost of revenue. IT costs also decreased in the second quarter of 2024 when compared to the same period of 2023, mainly due to savings from R&D-related IT systems rationalization. Stock compensation expense for the second quarter of 2024 was $3.3 million compared to $3.4 million for the second quarter of 2023. Net loss for the second quarter of 2024 was $12.4 million or $0.07 per share compared to a net loss of $17 million or $0.13 per share for the second quarter of 2023. The non-cash change in the fair value of derivative warrant and earn-out liabilities favorably impacted our net loss for the second quarter of 2024 by $3.4 million, compared to a negative impact of $355,000 in the comparable prior year period. Cash, cash equivalents, and available for sale investments totaled $100.5 million as of June 30, 2024. 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. For the period from April 1 to July 12, 2024, we raised $27.8 million from the sale of 24.1 million common shares under our current ATM program. including $15.8 million raised in the three months ended June 30, 2024. As disclosed in today's 10-Q filing, we believe that our existing balances of cash, cash equivalents, and marketable securities should be sufficient to meet our anticipated operating cash needs until midway through the first quarter of 2026. based on our current business plan and expectations and assumptions considering current macroeconomic conditions.