IonQ, Inc.

Greetings, and welcome to IMQ's second quarter 2024 earnings call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jordan Shapiro. Please go ahead, sir.

Good afternoon, everyone, and welcome to INQ's second quarter 2024 earnings call. My name is Jordan Shapiro, and I'm the Vice President of Financial Planning and Analysis and Head of Investor Relations here at INQ. I'm pleased to be joined on today's call by Peter Chapman, INQ's President and Chief Executive Officer, Thomas Kramer, our Chief Financial Officer, and Dr. Dean Kastman, our Senior Vice President of Engineering and Technology. By now, everyone should have access to the company's second quarter 2024 earnings press release issued this afternoon, which is available on the investor relations section of our website at investors.inq.com. Please note that on today's call, management will refer to adjusted EBITDA, which is a non-GAAP financial measure. While the company believes this non-GAAP financial measure provides useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. You are directed to our press release for reconciliation of adjusted EBITDA to its closest comparable gap measure. During the call, we will discuss our business outlook and make forward-looking statements. These comments are based on our beliefs as of today. Actual events or results could differ materially from the outlook and other forward-looking statements due to a number of risks and uncertainties, including those mentioned in our 10-Q filing with the SEC this week. We undertake no obligation to revise any statements to reflect changes that occur after this call, except as required by law. Now, I will turn it over to Peter Chapman, President and CEO of INQ. Peter?

Thanks, Jordan, and thank you to everyone joining today's call. There are a lot of exciting announcements to share today. We will discuss our recent technical breakthroughs that we believe bring the quantum error closer than it has ever been, and our compelling commercial momentum that demonstrates how we're working with customers. Let's dive straight in. First, I am excited to say that we have once again exceeded the high end of our revenue range for the quarter, delivering $11.4 million in recognized revenue, which was well above the range of $7.6 to $9.2 million for the quarter. We also booked $9 million this quarter and are very confident about meeting our bookings goal for the year. Thomas will discuss our financials in more depth. you have likely heard there is a space race in quantum computing. But what does that really mean? It's a race between different companies, qubit modalities, and countries to produce a quantum computer that can outperform classical computing. The technical problem that bedevils the industry is noise or fidelity in its qubits. This noise can come from the qubits themselves, the environment, or any hardware like the control electronics that interact with the qubits. Key to the accuracy of a quantum computer is to increase the fidelity of its qubits and their ability to run more computational gates and larger applications. When any company can achieve enough fidelity and run applications in a production environment, significant application revenue can start. With this context, I'm excited to announce that INQ has achieved a two qubit native gate fidelity of 99.9% or three nines in barium. We chose to move to barium because science suggests it enables higher fidelities than uterbium. And the better the native gate fidelity, the less error correction in all forms is required. So today's announcement is an important milestone towards even better gait fidelities ahead. To get to better gait fidelity beyond native gait fidelity, other techniques are required. In the past, you've heard us describe quantum error correction, the technique of using additional qubits grouped together to correct each other and produce more reliable results. Error correction is promising, but particularly on non-trapped ion platforms requires a large volume of qubits. think tens, hundreds, or even thousands of physical qubits per error-corrected qubit. It also requires many extra gates as overhead, the ratio of which is correlated with the native fidelity of the qubits. So error correction is out of reach for meaningful use in the quantum industry today. Another technique you've heard about from us is error mitigation. which uses software techniques to improve results without generally requiring additional qubits. Error mitigation is commonly used by the quantum computing companies, but poses difficulties for scaling given that it often incurs ever-increasing sampling costs that can lengthen the time to solution. Today, I am thrilled to announce INQ has invented a new industry-first partial error correction technique for an important class of quantum gates used with many different applications. The technique which reduces the errors for Clifford gates within circuits offers the potential to supercharge the accuracy of near-term quantum computers, bringing us much closer to commercial advantage. This Clifford error reduction technique allows for more accurate quantum algorithms but requires a ratio of only about three physical qubits per one error-reduced qubit and a modest doubling of gates in the algorithms used. We plan to offer this feature in our INQ Tempo system. With a combination of hardware and software improvements, we believe that we can extend our achievement of three nines to production systems in 2025 and bring that to five nines in 2025 and six nines in 2026 using error correction. This, along with a combination of much larger numbers of physical qubits and improved gate speeds, gives us more confidence about near-term quantum applications and application revenue for INQ. For some time now, we have been investigating applications where we can deliver significant value and generate significant revenue. At our next earnings call, we will discuss the first of these application areas. While this has been a tremendous quarter for INQ's technical development, it has been equally exciting on the commercial side of the business. First, I am delighted to announce that ARLIS, the Applied Research Laboratory for Intelligence and Security, selected INQ through a competitive bidding process to design two quantum networking node systems for blind quantum computing. Blind quantum computing is a process where quantum computers remain blind to what information is being processed through them and is a key achievement target for the U.S. national security apparatus. In fiscal 2023 and 2024, Congress funded this research for a total of $40 million. The initial phase of the contract is a $5.7 million award for the design of the quantum computers based on IonQ trapped ion processors. We expect to complete this work by the end of this year. In the next phase of the project, Arliss plans to have two systems built based on the initial IonQ design. We feel confident on our bookings guidance for the year and we're working on several large additional sales for hardware and otherwise, in addition to the ARLIS agreement. What makes us confident is the strength of our repeat customers and our sales team's focus in closing large multi-year deals. Next, we have started final assembly of our first Forte enterprise system at Quantum Basel, and we now have officially begun construction of two more Forte enterprise systems in our Seattle, Washington manufacturing facility. Our investment in our manufacturing is already paying off, now enabling us to build multiple production systems at a time while not tying up significant engineering resources. I'm also pleased to announce that we've extended our contract with AWS to continue to offer our world-class quantum computers via Amazon Bracket, the quantum computing service of AWS, to developers everywhere who want to leverage the power of quantum computing. Alongside the AWS contract extension, we have launched an exciting new cloud feature set that includes 24-7 global operations, a new and improved queuing engine, and exclusive reservation windows. These features make it easier than ever for our customers to benefit from INQ's cutting edge quantum computers. In summary, This quarter has been another strong success for INQ. We have proven that our Barium CUBA technology can achieve three nines of fidelity. We have developed an industry-changing partial error correction technique for error reduction that could bring production applications for quantum even sooner. We have factored those advancements into an aggressive new roadmap for our continued leadership in the industry. And we are working with customers like Arliss and AWS to build the next generation of quantum networking and quantum computing applications. And with that, I'd like to pass the call over to Thomas.