Rigetti Computing, Inc.

standing by and welcome to the Rigetti Computing First Quarter 2025 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Subodh Kulkarni, President and Chief Executive Officer. Please go ahead, sir.

Good afternoon, and thank you for participating in Rigetti's earnings conference call during the first quarter ended March 31st, 2025. 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 Regatta's first quarter ended March 31st, 2025 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 31st, 2024, our Form 10-Q for the three months ended March 31st, 2025, 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. risk factors. Today, I'm pleased to report on a number of new developments at Rigetti Computing. As previously disclosed, we have been selected to participate in DARPA's Quantum Benchmarking Initiative. Rigetti will advance to Stage A, a six-month performance period focused on our utility-scale quantum computer concept. Our proposed concept to design and build a utility-scale quantum computer combines our proprietary multi-chip architecture with scalable quantum error correction, or QEC codes. Our long-time partner and leader in QEC code technology, River Lane, will collaborate with us on this project to help refine our proposed utility-scale quantum computer concept and validate the underlying technology. I'm also very excited about our recent AFOSR award. to further develop our breakthrough chip fabrication technology, alternating bias assisted annealing, or ABAA. We will lead a $5.48 million consortium consisting of Iowa State University, the Royal Milburn Institute of Technology, the University of Connecticut, and Lawrence Livermore National Laboratory to develop a detailed understanding of how ABAA impacts a chip on a microscopic level which aims to shed light on defects in superconducting qubits and open new avenues for understanding and mitigating them. We have also been awarded three Innovate UK Quantum Mission Pilot Awards to advance superconducting quantum computing. We will collaborate with River Lane and the National Quantum Computing Center, or NQCC, superconducting circuits team to advance quantum error correction capabilities on superconducting quantum computers. The consortium will conduct ambitious QEC tests that advance state-of-the-art metrics and demonstrate real-time QEC capabilities, a requirement for universal fault-tolerant quantum computing. As part of the project, we will also upgrade our existing quantum computers currently deployed at the NQCC. The upgrades will include deploying a larger 36-qubit quantum processing unit and integrating Rigetti's latest generational control system, enabling improved qubit control and a fully programmable low-latency interface with RiverLynx QEC stack. We were also awarded two additional quantum missions pilot competition projects. We will collaborate with CQC to integrate its digital chip-based technology with our nine-qubit Novera QPU hosted at the NQCC with the goal of identifying and understanding the key components needed for scalable QEC. We will also collaborate with TREC, Q-Roos, Q-Control, and Oxford Ionics to create an open architecture quantum computing testbed and deliver an open specification for quantum workflows, creating a common interface between quantum software and hardware. On the technical update front, our joint paper with Harvard University Massachusetts Institute of Technology, and University of Chicago, coherent control of a superconducting qubit using light has been published in Nature Physics. Power-tolerant quantum computing will likely require 10,000 to a million physical qubits. Scaling these systems is challenging because they require bulky microwave components with high thermal loads that can quickly overwhelm the cooling power of a dilution refrigerator. Optical signals have a considerably smaller footprint and negligible thermal conductivity. The team successfully demonstrated the integration of a hybrid microwave optical quantum transducer with a fabricated superconducting qubit. This hybrid setup enables optical control of the qubit, removing the need for coax lines, and provides a promising approach to scaling to higher qubit count systems. We also recently leveraged our new quantum optimization algorithm, quantum preconditioning, to address a power energy grid problem. Using a public data set representing South Carolina's energy grid, the problem was to compute the maximum power exchange section, a metric that informs on the health and power delivery capability of the energy network. Using Rigetti's 84-qubit ANCA-3 system, quantum preconditioning was used to boost best-in-class classical optimizers. A relative advantage against the classical baseline was achieved along with a high solution accuracy, highlighting the potential for quantum preconditioning to achieve quantum utility for solving practical optimization problems. Finally, I'm pleased to report that Rigetti has closed its previously announced investment by Quanta Computer Inc. related to our strategic collaboration agreement. In connection with the closing in late April, Quanta purchased approximately $35 million worth of Rigetti common stock at roughly $11.59 per share. Thank you. Jeff will now make a few remarks regarding our recent financial performance.

Thanks, Subodh. Revenues in the first quarter of 2025 were 1.5 million, compared to 3.1 million in the first quarter of 2024. 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 first quarter of 2025 came in at 30%, compared to 49% in the first quarter of 2024. 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 revenue. On the expense side, total OPEX in the first quarter of 2025 was 22.1 million compared to 18.1 million in the same period of the prior year. The increase in total OPEX was due to annual salary increases, new hires, higher FICA taxes related to the vesting of RSUs and the increase in our stock price, and a reduction in the amount of engineering time used to deliver revenue. Higher stock compensation expenses for employee spot bonuses also contributed to the increase. Stock compensation expense for the first quarter of 2025 was $4.2 million compared to $3 million for the first quarter of 2024. Our operating loss for the first quarter of 2025 came in at $21.6 million compared to $16.6 million in the prior year period. We recorded $42.6 million of net income for the first quarter of 2025 compared to a net loss of $20.8 million in the prior year period. Our net income for the first quarter of 2025 was driven by the non-cash changes in the fair value of our derivative warrant and earn-out liabilities which had a $62.1 million favorable impact on net income for the quarter. Derivative warrant and earn-out liabilities had a $4.2 million unfavorable impact on our net loss for the first quarter of 2024. As of April 30, 2025, following the closing of the previously announced share purchase by Quanta Computer, cash equivalents and available for sale investments totaled $237.7 million. Thank you. We would now be happy to answer your questions.