Rigetti Computing, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Rigetti develops superconducting quantum computers and processors, including its QCaaS platform and 9-qubit Novera QPU. Most revenue currently comes from development contracts.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $3.1 million | $2.2 million; up 39% |
| Gross profit / margin | $1.5 million / 49.1% | $1.7 million / 76.8% |
| Operating expenses | $18.1 million | $23.7 million; down 24% |
| Operating loss | $16.6 million | $22.0 million |
| Net loss | $20.8 million; $0.14 per share | $23.4 million; $0.19 per share |
| Operating cash used | $13.1 million | $15.5 million |
- Cash and cash equivalents were $35.1 million; available-for-sale investments were $67.7 million. Combined, these totaled $102.8 million, compared with $99.9 million at December 31, 2023.
- Cash from investing activities was $6.2 million, including $5.5 million of property and equipment purchases. Financing activities provided $20.7 million, primarily from equity sales, partly offset by $3.0 million of debt principal repayments.
- Debt principal outstanding was $19.3 million ($12.8 million current carrying amount and $6.5 million long-term carrying amount). The secured loan has an approximately 22.5% effective interest rate; scheduled principal payments are $9.9 million in 2024 and $9.0 million in 2025. Total liabilities were $46.5 million. Operating lease liabilities totaled approximately $8.1 million.
- Current assets were $110.0 million and current liabilities $24.9 million. Accumulated deficit was $374.5 million.
Changes versus the prior comparable period
- Revenue rose $0.9 million, reflecting timing variability in development-contract revenue. Collaborative research and related services generated $2.8 million; access to quantum systems generated $0.2 million.
- Gross margin fell substantially: cost of revenue increased 204% to $1.6 million, partly because a new 24-qubit system contract had higher costs and a lower-margin profile.
- Research and development expense declined 16% to $11.5 million and selling, general and administrative expense declined 27% to $6.6 million, primarily reflecting the 2023 workforce reduction and lower related costs. No restructuring charge was recorded in Q1 2024, versus $1.0 million in Q1 2023.
- Net loss improved by $2.6 million, although fair-value losses on warrant and earn-out liabilities increased to a combined $4.2 million from $1.2 million.
- Equity financing raised $12.8 million through the B. Riley purchase agreement and $11.0 million net through the ATM offering. The purchase agreement was fully used and terminated. Shares outstanding increased from 147.1 million at year-end to 165.3 million at March 31; 171.9 million were outstanding as of May 6, 2024.
Outlook, risks and other notable items
- Management estimates existing cash, cash equivalents and investments can fund the current plan until midway through the fourth quarter of 2025, and expects to need additional capital by then. This estimate assumes no additional financing; there is no assurance financing will be available. April ATM sales provided a further $9.0 million net.
- The ATM agreement permits up to $100 million of stock sales, subject to limitations and market conditions. Equity financing may dilute shareholders; failure to obtain capital could force delays or reductions in research and development.
- Technology roadmap: Rigetti reported that its Ankaa-2 84-qubit system achieved 98% median two-qubit fidelity. It targets at least 99% on an anticipated Ankaa-3 84-qubit system by year-end 2024; if achieved, it plans to shift focus toward the anticipated 336-qubit Lyra system. These are targets, not assured milestones.
- Revenue is concentrated: government entities accounted for 97.4% of Q1 revenue, up from 82.1%. Four customers each contributed at least 10%, together accounting for 84% of revenue. Remaining performance obligations were approximately $9.0 million, expected to be recognized over the next 12 months.
- Management expects continued losses and increased R&D investment. It cites technology-development and commercialization risks, customer and government-contract concentration, competition, supply-chain and inflationary cost pressures, and uncertain capital-market access. No material legal proceedings were reported.
- Disclosure controls and procedures were deemed ineffective at March 31 because a material weakness remains in the overall close and financial-reporting process, including account reconciliations, segregation of duties, IT access/change controls and timely review. Management is implementing remediation; the weakness is not considered resolved. A separate material weakness for complex financial instruments was reported as remediated.
- Warrant and earn-out liabilities are remeasured at fair value and can cause earnings volatility. Q1 fair-value losses totaled $4.2 million. Potential shares from warrants, options and RSUs also represent possible dilution.
Investor verification priorities
- Track quarterly operating cash use, total liquid resources and the timing and terms of any additional financing relative to management’s stated runway.
- Monitor equity issuance and dilution, including ATM usage and shares outstanding after quarter-end.
- Assess whether revenue growth translates into improved gross margins, given the low-margin 24-qubit contract and variable contract timing.
- Verify progress against the Ankaa-3 fidelity target and subsequent 336-qubit roadmap milestones.
- Review customer and government revenue concentration, contract backlog conversion, and progress remediating the financial-reporting material weakness.