Rigetti Computing, Inc.

Thank you for standing by and welcome to Regetti's fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Subodh. Kakani, President and CEO, please go ahead.

Good morning, and thank you for participating in Rigetti's earnings conference call covering the fourth quarter and year ended December 31st, 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 fourth quarter and year ended December 31st, 2024 press release contain forward looking statements regarding current expectations, objectives, and underlying assumptions regarding our outlook and future operating results. This 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 nine months ended September 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 these discussions of risk factors. Today, I'm pleased to provide an update and report on our progress at Rigetti Computing. Rigetti recently entered into a strategic collaboration agreement with Quanta Computer Inc. a Taiwan-based global Fortune 500 company, and a global leader of computer server manufacturing with the goal of accelerating the development and commercialization of superconducting quantum computing. Digeti and Quanta have committed to investing more than $100 million each over the next five years pursuant to the collaboration agreement, with both sides focusing on their complementary strengths to develop superconducting quantum computing technologies. In addition, Quanta will also invest $35 million to purchase shares of Rigetti common stock subject to regulatory clearance. Quanta's collaboration with Rigetti is designed to strengthen our position in this flourishing market. Our company's complementary strengths, Rigetti as a pioneer in superconducting quantum technology with open modular architecture, enabling integration of innovative solutions across the stack, and Quanta as the world's leading notebook server manufacturer with $43 billion sales, will support us in our goal to be at the forefront of the quantum computing industry. On the sales front, I'm pleased to report that we sold a Novara QPU to Montana State University in December 2024, which was our first QPU sale to an academic institution. The NOERA will be located at MSU's Q-CORE to educate and train scientists and engineers on quantum computing technologies, in addition to being used to create a testbed for quantum computing R&D. MSU's Q-CORE is a new center of excellence for quantum enabling technologies established to accelerate workforce development and the regional quantum innovation ecosystem. I should also note that in addition to the MSU sale, there was an additional Novera sale in the fourth quarter to the UK government. On the technology front, we launched our 84-qubit ANCA III system in December 2024. ANCA III features an extensive hardware redesign that enables superior performance. We achieved major two-qubit gate fidelity milestones with ANCA III. successfully having the error rates in 2024 to achieve a 99.0% median ISWAP gate fidelity and demonstrating 99.5% median fidelity with F-SIM gates. Our newest flagship quantum computer continues to feature Regate's scalable, industry-leading chip architecture with 3D signal delivery while incorporating major enhancements to key technologies. ANCA III is available to Regate's partners via Rigetti quantum cloud services platform and to the general public via Microsoft Azure and Amazon Bracket. In other developments, AI power tools from quantum elements and crews remotely automated the calibration of a Rigetti QPU integrated with quantum machines control system. This work was part of the AI for Quantum Calibration Challenge hosted at the Israeli Quantum Computing Center. The two companies participating in the challenge, Quantum Elements and Cruise, automated the calibration of a 9-qubit Regattino Vera QPU, integrated with Quantum Machines' advanced OPX1000 control system, and NVIDIA DGX Quantum, a unified system for quantum classical computing that NVIDIA built with Quantum Machines. This achievement showcases the potential of AI in quantum computer calibration and also highlights the growing collaboration within the quantum computing ecosystem. Quantum Elements crews and quantum machines are members of Rigetti's Nowhere RQPU partner program, an ecosystem of quantum computing hardware, software, and service providers who build and offer integral components of a functional quantum computing system. We believe that another advantage we leverage is our modular approach to developing our technology. By enabling our partners to integrate their technology with ours, we can explore and advance creative and flexible ways to improve quantum computing capabilities. In summary, we believe that superconducting qubits are the winning modality for quantum computers, given their fast speeds and scalability. We have developed critical IP to scale our systems and remain confident in our plans to scale to 100-plus qubits by the end of the year with a targeted 2x reduction in error rates from the error rates we achieved at the end of 2024. We believe our leadership in superconducting quantum computing continues to be reinforced as we push the boundaries of our system performance, as evidenced by the success of AMCA III. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subodh. Revenues in the fourth quarter of 2024 were $2.3 million, compared to $3.4 million in the fourth quarter of 2023. Revenue is an important part of our strategy to fund our ongoing research initiatives. Renewal of the U.S. National Quantum Initiative, sales to U.S. and foreign governments, and NOVERA are all important to future sales. Gross margins in the fourth quarter of 2024 came in at 44% compared to 75% in the fourth quarter of 2023. The lower gross margins on a year-over-year basis were due to ongoing revenues from our contract with the UK's NQCC to deliver a 24-qubit quantum system, which has a lower gross margin profile than most of our other revenues. On the expense side, total OPEX in the fourth quarter of 2024 was 19.5 million compared to 19.7 million in the same period of the prior year. Stock compensation expense for the fourth quarter of 2024 was 3.4 million compared to 3.7 million for the fourth quarter of 2023. Net loss for the fourth quarter of 2024 was $153 million, or 68 cents per share, compared to a net loss of $12.6 million, or 9 cents per share, for the fourth quarter of 2023. The non-cash change in the fair value of derivative warrant and earn-out liabilities negatively impacted our net loss for the fourth quarter of 2024 by 135.1 million. compared to a favorable impact of $4.6 million in the comparable prior year period. The derivative warrant and earn out liabilities are non-cash in nature and Regetti will never be required to pay cash to settle these obligations. Cash, cash equivalents and available for sale investments totaled $217.2 million as of December 31, 2024. During the fourth quarter of 2024, we received net proceeds of 153.3 million from the sale of 88.1 million common shares through a registered direct offering and completion of our at-the-market equity offering. We also prepaid in full all of the remaining amounts owed under our loan agreement with Trinity Capital Inc. We believe that our existing balances of cash, cash equivalents, and marketable security should be sufficient to meet our anticipating operating cash needs for at least the next three years 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.