Rigetti Computing, Inc.

Good day. Thank you for standing by. Welcome to Regetta's third quarter 2024 earnings conference call. At this time, all participants on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker, Dr. Subodh Gulakarni, President and CEO, please go ahead, sir.

Good morning, and thank you for participating in Rigetti's earnings conference call covering the third quarter ended September 30, 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 third quarter ended September 30, 2024 press release contain forward-looking statements regarding current expectations, objectives, and underlying assumptions regarding our outlook and future operating results. 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. are Form 10Q for the three and nine months ended September 30th, 2024, and other documents filed by the company from time to time with the Securities and Exchange Commission. These filings 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 provide an update and report on our progress at Rigetti Computing. I'm excited to announce that we plan to introduce a new modular system architecture at Rigetti. By mid-year 2025, we expect to release a 36-qubit system based on four 9-qubit chips tied together with a targeted 99.5% median 2-qubit gate fidelity. By the end of 2025, we expect to release a system with over 100 qubits with a targeted 99.5% median two qubit gate fidelity. We plan to develop the 336 qubit LiDAR system thereafter. Rigetti remains on track to develop and deploy its anticipated 84 qubit ANCA3 system with the goal of achieving a 99 plus percent median two qubit gate fidelity by the end of 2024. We believe superconducting qubits have many advantages over other qubit modalities, including that they are fabricated using well-established semiconductor design and manufacturing techniques. Superconducting qubits also perform faster gate operations than other qubit modalities. Our system gate speeds consistently achieve an active duration of 60 to 80 nanoseconds, which is four orders of magnitude faster than other modalities such as ion traps and pure atoms. System speed is an important factor to enable hybrid computing with current CPUs and GPUs. After spending years optimizing the performance of our larger scale 84-qubit Anka chips and honing our multi-chip scaling technology, We are manufacturing 9-qubit chips at 99.4% median 2-qubit gate fidelity. And in Q3 of this year, we demonstrated tiling of 9-qubit chips without deterioration in performance. We believe the anticipated 4-chip 36-qubit system will be the most ambitious multi-chip QPUs architecture in the market and a significant milestone for the company and the quantum computing industry. Our approach to scalability mirroring multi-chip architectures for advanced applications with CMOS is supported by our recently announced alternating bias assisted annealing, or ABAA, technique for precisely targeted qubit frequencies. ABAA allows us to consistently manufacture high-performance QPUs with the frequency precision necessary for high fidelities. The combination of our ABAA technique and a multi-chip architecture is the cornerstone of our scaling strategy as we move into developing higher qubit count systems. In addition, quantum error correction will be essential to achieve the accuracy needed for quantum computers to realize their full potential. Together with Riverlane, we are working to advance our understanding of how to build fault tolerant quantum computers using quantum error correction technology. Recently, We published a paper with Riverlane that demonstrates how integrating Riverlane's quantum error decoder into the control system of our 84-qubit ANCA2 system enabled the achievement of real-time, low-latency quantum error correction, a critical process for developing fault-tolerant quantum computers. We believe that our 9-qubit NOVERA QPU is ideal for experimentation across a variety of research areas, including qubit characterization and hybrid quantum algorithms. We are excited to share that a Nowhere RQPU has been co-located at the Israeli Quantum Computing Center, IQCC, with Quantum Machines' OPX1000 control system and NVIDIA's Grace Hopper Superchip servers, which was made available to partners for research and experimentation. The setup was recently leveraged for a reinforcement learning project, which was presented at IEEE Quantum Week 2024 in September. The demonstration entailed optimizing single qubit operations on the Novera QPU and is an exciting use case for using a Novera QPU for quantum machine learning development. Finally, the UK's National Quantum Computing Center, or NQCC, officially opened the doors of its landmark facility, on Harwell campus on October 25, 2024. The facility will support world-class quantum computing research and provide state-of-the-art laboratories for designing, building, and testing quantum computers. The state-of-the-art facility includes our fully operational 24-qubit Anka-class system that will be made available to NQCC researchers for testing, benchmarking, and exploratory applications development. In summary, I'm excited about our 2025 roadmap and progress on the technology front. We believe the combination of our ABAA technique and a multi-chip architecture will serve as the cornerstone of our scaling strategy as we move into developing higher qubit count systems with improved fidelities. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subodh. Revenues in the third quarter of 2024 were $2.4 million, compared to $3.1 million in the third quarter of 2023. Revenue is an important part of our strategy to fund our ongoing research initiatives. We have added to our sales and marketing staff and have expanded our lobbying efforts to help grow our revenue in the future. Gross margins in the third quarter of 2024 came in at 51%. compared to 73% in the third 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 our 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 OPEX in the third quarter of 2024 was $18.6 million, compared to $19.1 million in the same period of the prior year. The year-over-year decrease in total OPEX was primarily driven by $1.1 million of expense recognized in the third quarter of 2023 for the Ampere-Ford Agreement, which expired in October 2023. Stock compensation expense for the third quarter of 2024 was $3.4 million compared to $3.7 million for the third quarter of 2023. Net loss for the third quarter of 2024 was $14.8 million or $0.08 per share compared to a net loss of $22.2 million or $0.17 per share for the third 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 third quarter of 2024 by 2 million compared to a negative impact of 5.2 million in the comparable prior year period. Cash, cash equivalents and available for sale investments totaled 92.6 million as of September 30, 2024. During the third quarter of 2024, we raised 12 million from the sale of 11.3 million common shares under our current ATM program. As of September 30, 2024, up to 60.2 million of common stock remains available for sale under our current ATM program. As disclosed in today's 10-Q 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 first quarter of 2026, 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.