D-Wave Quantum Inc.

Good morning, ladies and gentlemen, and welcome to the D-Wave second quarter 2024 earnings call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during the call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 8, 2024. I would now like to turn the conference over to Kevin Hunt from Investor Relations. Please go ahead.

Thank you and good morning. With me today are Dr. Alan Barrett, our Chief Executive Officer, and John Markovich, our Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC report. During today's call, Management will provide certain information that will constitute non-GAAP financial and operational measures under SEC rules, such as non-GAAP gross profit, non-GAAP gross margin, non-GAAP adjusted operating expenses, adjusted EBITDA loss, and bookings. Reconciliations to GAAP financial measures and certain additional information are also included in today's earnings release, which is available in the investor relations section of our company website at www.dwavequantum.com. I will now hand over the call to Alan.

Good morning, everyone, and thank you for joining us today. I'm excited to share our Q2 business results with you as we continue to see positive momentum across the business. The world is waking up to the fact that annealing quantum computing is here now, and it's driving measurable outcomes for our commercial, government, and research customers. We believe that D-Wave is single-handedly, and I've said this before, single-handedly creating the market for commercial, quantum computing. Let me illustrate our momentum with a quote from IDC analyst Heather West, who recently wrote, and I quote, because V-Wave Quantum's quantum annealer is specifically built for solving optimization problems, some may argue that the quantum annealer is limited in the type of problem that it can be used to solve. However, optimization problems are one of the most prevalent problems found in all industries. Hence, D-Wave Quantum's technology provides an access point for all end users that are interested in using quantum computing to gain business value both today and into the future. Again, that's from IDC analyst Heather West. So there is rapidly growing recognition of the value and potential of D-Wave and its unique annealing quantum computing solutions to, one, streamline and optimize business processes, including applications like workforce scheduling, vehicle routing, and resource allocation. And two, fuel important research breakthroughs in areas like material science. And there is a growing realization that annealing quantum computing can deliver results in these areas today, not five or seven years from now, but today. For example, we're being invited to engage in an increasing number of government meetings and conferences to provide government personnel with a better understanding of the capabilities of quantum computing technologies today and in the future. We're also seeing an increase in third-party scientific papers highlighting our annealing quantum computing technology and its capabilities. Lastly, we're hearing from more and more customers from both the private and public sectors that they've tried quantum computing solutions but need to work with D-Wave. the quantum vendor that has real, scalable and production-grade commercial solutions today. Customers have indicated that abysmal availability and reliability from other quantum vendors are huge pain points and a block for accelerated adoption. We believe that only D-Wave is able to provide the commercial-grade systems and services to solve real-world, large-scale problems at the speeds needed right now. I'd like to now walk through a few key business highlights, starting with product and technical advancements. Last week, we announced a quantum AI product development roadmap that extends D-Wave's LEAP quantum cloud service to incorporate AI and machine learning. Our efforts will focus on helping customers address AI ML workloads, including pre-training optimization, more accurate and efficient model training, and opening new AI business use cases that require the integration of AI and business optimization. This effort is in direct response to growing demand from our customers as the broader industry is confronting a computing crunch. The amount of compute and the associated energy costs needed to satisfy a growing set of AI and ML use cases is rapidly escalating. Our quantum AI solutions aimed to leverage annealing quantum computing's ability to solve optimization problems to help customers achieve better, faster, cheaper, and more energy efficient AI and ML solutions. The opportunity for D-Wave could be massive, and more importantly, the benefit to our customers could be transformative. As part of the Quantum AI Product Roadmap Initiative, we recently announced a significant expansion to our commercial partnership with Zapata AI. Our extended collaboration is designed to accelerate the development and delivery of integrated quantum and generative AI solutions in D-Wave's Leap cloud platform. The extended agreement leverages Zapata's universal generative AI software for rapid development and builds on D-Wave's Leap real-time quantum cloud service to support quantum, hybrid quantum, and even pure classical AI solutions. Together, our joint development work will focus on improved and more energy-efficient model training, more performant models, and the synergistic use of generative AI and quantum optimization. It is an important piece of our overall quantum AI strategy. On the system side of our business, we shared that we are placing a second-advantage quantum computer in the U.S. This will mark the fourth production quantum computer in the LEAP quantum cloud service. We're thrilled that the system will reside at Davidson Technologies' new global headquarters in Huntsville, Alabama. I was actually just down in Alabama with Dale Moore and his team from Davidson at the space and missile defense symposium event, talking about the significance of this system placement, especially to the U.S. government. The system will eventually be housed in a secure facility that could run sensitive applications using our quantum technology. This is an important development in our partnership with Davidson as we collaborate to accelerate quantum computing adoption among government agencies, especially in the areas of national security. We're also making noteworthy progress on our path toward delivering the 7,000 plus qubit Advantage 2 product. We are nearing completion of calibrating a 4,800 plus qubit Advantage 2 processor. following the launch of the 1,200-plus Qubit Advantage 2 prototype earlier this year, which is available for customer use now in our lead quantum cloud service. We are also furthering our ongoing development of new control protocols that should help customers perform expanded and richer quantum computations on our QPUs. I'll highlight a few examples. The first is Fastenil. As discussed during our Q1 earnings call, we introduced our powerful new fast anneal feature in April to help users perform quantum computations at unprecedented speeds, thereby reducing the impact of external disturbances such as thermal fluctuations that can hinder quantum calculations. Customer response has been incredible as they have now submitted 2.5 million problems using this feature. The second is cyclic annealing. Research and development of cyclic and iterative annealing protocols are underway. We could extend the coherent regime across multiple cycles. This means that the system could potentially provide the same performance benefits that would result from much longer coherence times. Truly exciting work is happening here. The final is Bell inequality violation. By leveraging novel QPU control protocols, we have been able to show a violation of Bell's inequality, which is a widely recognized signature of quantum behavior in the fabric of our annealing QPUs. We are able to produce targeted qubit expectations and analyze and read out qubit state in arbitrary bases midway through the annealing process. This enables us to explore both digital and analog quantum computing protocols in the same processing fabric and potentially opens up important new applications opportunities, such as much richer quantum distributions for generative AI architectures. Now turning to software. We launched a new non-linear program hybrid quantum solver in June. This new solver enables customers to tackle real-world problems of growing complexity, supporting up to 2 million variables and constraints, which represents a tenfold increase in problem size capacity over other D-Wave solvers for certain applications. We also introduced new demos of applications built with this new hybrid solver addressing vehicle routing and flow shop scheduling. These were introduced at our annual Qubits user conference in June. The new hybrid solver is part of our expanding set of commercial quantum optimization offerings, supporting the aggressive go-to-market growth strategy that we announced earlier this year. During the quarter, we also continued to expand our extensive patent portfolio, totaling over 240 issued U.S. patents with more than 60% of our patents covering both annealing and game model technologies. DOA's patent portfolio is ranked as the third largest quantum computing patent portfolio in the world, behind only IBM and Google. So as you can see, we've been remarkably busy with technology and product development, delivering new solutions that are 100% focused on providing customer value. It's not innovation for innovation's sake, but rather development that helps our customers solve problems of even greater complexity in ways that are better, faster, less costly, and more energy efficient. And speaking of customers, let's switch gears and discuss commercial momentum. Our second quarter 2024 bookings mark our ninth consecutive quarter of year-over-year growth in quarterly bookings. In comparing the most recent four quarters with the immediately preceding four quarters, our customer count rose from 114 to 130, commercial customers went up from 70 to 77, and we counted 26 Forbes Global 2000 companies as customers, constituting 33% of total commercial customers and 26% of total revenue. We are working with customers on a wide range of quantum optimization applications, including body shop scheduling and vehicle routing. Let me highlight a couple of examples. First, we are working with Ford Autosan, an automotive manufacturing company based in Turkey that is equally owned by Ford Motor Company and Koch Holding. Together, we have built a solution to generate a sequencing schedule that maximizes vehicle production for the body shop. The quantum optimization application was able to schedule 1,000 vehicles per run in under five minutes compared to 30 minutes using their current process. Next up, Hermes Germany, a leading logistics service provider in Germany, is working with us and our partner, Quantum Basel, to explore a vehicle routing quantum optimization application to route trucks from 50 depots to a network of 17,000 parcel shops throughout Germany. The project aims to understand quantum's ability to better optimize these routes in terms of time, distance, and CO2 emissions. And as you can see, this falls right in the sweet spot of the verticalization strategy we've talked about previously with our focus on manufacturing and supply chain logistics. All are very exciting projects spanning a diverse set of quantum optimization problems. Just as exciting was the quantum industry's interest and participation in our 10th Qubits user conference in June. More than 600 attendees representing 452 organizations from 50 countries participated live or virtually. An incredible turnout for the ecosystem of D-Wave and annealing quantum computing supporters. This year's theme was fittingly success powered by quantum. And we were excited to see an impressive group of organizations on stage sharing their stories of impact using D-Wave technology. This included Los Alamos National Lab, MasterCard, SAS, Davidson Technologies, Quantum Basel, Zapatum AI, Unisys, and more. The energy was palpable with attendees inspired by these real-world successes and expressing their excitement for what we are building in our D-Wave quantum computing. quantum community. I think everyone was equally inspired by my dramatic reading of a reimagined version of the tortoise and the hare as I donned a smoking jacket and shared the story of D. Wade serving as the measured, unflappable turtle winning the quantum race. If you haven't seen it, check out my Qubits keynote on YouTube. So we are clearly witnessing growing awareness and interest in our solutions in the commercial sector, but that's not all. We're also seeing similar traction in the government sector. This quarter, we saw an uptick in D-Wave interest from a number of major government organizations and companies that service the public sector to build applications that showcase how quantum computing can address critical public sector and national security challenges. policymakers continue to expand government programs to encompass near-term applications, as well as support for quantum annealing and quantum classical technologies. Additionally, Congress is beginning to move policy which supports establishing testbed programs exploring the intersection of AI with other emerging technologies like quantum computing. Let me highlight another sign of increasing interest in our technology. We've seen double-digit enrollment growth for our quantum training courses in the first six months of 2024 compared to the same period in 2023. Enrollment in the quantum programming core course increased by 53% and combined enrollments for our core plus foundations for quantum programming increased by 85%. We believe this underscores a growing global movement to train workers to keep pace with the rapidly increasing adoption of quantum computing and specifically D-Wave's technology. John will walk you through the financials in just a minute, but there are two financial related items that I wanted to call out. First, D-Wave has joined the Russell 3000 Index. As you all know, Russell indices are used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies. Our inclusion in this group is an honor and will greatly increase visibility among the global investor community for the innovative quantum solutions we are bringing to market. And second, we are pleased to share that we ended the quarter with more than $50 million in cash, one of the company's highest quarter-end cash balances in history. It's been a solid quarter with impressive product innovations and customer adoption of these new products. Customers are clamoring to put these solutions to use in their operations. That appetite is evident in our commercial traction, government public sector interest, and market position. With that, I'll hand the call over to John to provide a review of our second quarter and first half 2024 results. John?