Rigetti Computing, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter earnings report. Comparisons below are to FY2022. Financial amounts are in U.S. dollars.
Business context
Rigetti develops superconducting quantum computers, quantum processing units (QPUs) and cloud-based quantum computing services. FY2023 revenue came primarily from collaborative research, professional services and access to quantum systems; development contracts remained the principal revenue source. The company began QPU sales in 2023, launched its 9-qubit Novera QPU, and made its 84-qubit Ankaa-2 system available through its cloud platform.
Key financial metrics
| Metric | FY2023 / Dec. 31, 2023 | FY2022 / Dec. 31, 2022 |
|---|---|---|
| Revenue | $12.0 million | $13.1 million |
| Gross profit / gross margin | $9.2 million / 76.7% | $10.2 million / 78.1% |
| Operating loss | $(72.3) million | $(109.1) million |
| Net loss | $(75.1) million | $(71.5) million |
| Net loss per share, basic and diluted | $(0.57) | $(0.70) |
| Cash used in operating activities | $(50.6) million | $(62.7) million |
| Cash and cash equivalents | $21.4 million | $57.9 million |
| Available-for-sale investments | $78.5 million | $84.9 million |
| Outstanding debt principal | $22.4 million | $30.7 million |
| Total stockholders’ equity | $109.6 million | $150.2 million |
- Cash, cash equivalents and investments totaled approximately $99.9 million at year-end, down from $142.8 million a year earlier.
- Revenue declined 8%. Gross profit declined 10%; gross margin fell about 1.4 percentage points.
- Research and development expense was $52.8 million, down 12%; selling, general and administrative expense was $27.7 million, down 49%. Total operating expenses fell 32%, partly reflecting lower stock-based compensation and the workforce reduction.
- Operating cash use improved by $12.1 million. Investing activities provided $0.8 million, principally reflecting maturities and purchases of marketable securities; financing activities provided $13.2 million, including $20.5 million net proceeds from stock sales to B. Riley, partly offset by debt principal payments.
- FY2023 net loss was greater despite a substantially narrower operating loss. Results included noncash fair-value losses of $1.2 million on warrant liabilities and $0.9 million on earn-out liabilities; FY2022 included respective fair-value gains of $22.1 million and $19.2 million.
- Debt is secured by substantially all company assets and bears interest at the greater of 11% or prime plus 7.5%; the reported effective rate was approximately 22.5% at year-end. Scheduled principal payments include $12.9 million in 2024.
- Revenue was concentrated: U.S. government entities represented 80.9% of FY2023 revenue. Three customers each accounted for at least 10% and together represented 67% of revenue.
Changes, outlook and material risks
- Management estimated that existing cash, cash equivalents and investments would meet anticipated operating cash needs into early Q3 2025, based on its current business plan and assumptions. It expects to need additional capital by then; the estimate assumes no additional financing, and funding availability is not assured. Failure to raise capital could require delaying, limiting or substantially reducing development efforts.
- The February 2023 strategy and roadmap revision prioritized nearer-term development and narrow quantum advantage; a workforce reduction affected approximately 50 employees, or 28% of the then workforce. The company recorded $1.0 million in restructuring charges and a further $1.0 million in executive severance expense.
- Management’s roadmap targets at least 99% two-qubit gate fidelity on an anticipated 84-qubit Ankaa-3 by year-end 2024; if achieved, it plans to focus on a proposed 336-qubit Lyra system. These are targets, not guarantees. Ankaa-2 was reported at 98% median two-qubit fidelity and a 68-nanosecond two-qubit gate time.
- The company remains loss-making, with an accumulated deficit of $353.8 million, and expects continuing losses. Revenue timing can vary with development-contract milestones and QPU deliveries. Management expects development contracts and QPU sales to remain important revenue sources for several years.
- The B. Riley stock-purchase facility was fully used and terminated in February 2024; the company reported $12.8 million of additional net proceeds from sales under it after year-end. A $250 million shelf registration statement provides potential financing capacity, but does not assure that financing can be raised on acceptable terms.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at December 31, 2023 because of continuing material weaknesses in complex financial instrument accounting and the financial close and reporting process. Earlier weaknesses led to restatements of 2022 interim statements. Remediation is ongoing and has not been validated as effective.
- Other key risks include dependence on a small number of customers and government funding, reliance on cloud providers including AWS, supplier constraints, intense competition, technology-roadmap execution, and potential dilution from share issuance. The company reported no material legal proceedings.
Most important facts for investors to verify
- Whether the reported approximately $99.9 million of year-end cash and investments, after subsequent financing and spending, supports the stated runway into early Q3 2025.
- Available financing options and likely dilution, including the status and terms of any future equity or debt financing after the B. Riley facility ended.
- Progress against Ankaa-3 fidelity and Lyra scaling targets, and whether technical performance translates into customer demand and recurring revenue.
- Revenue concentration, government-contract renewals and funding, and the timing and value of remaining performance obligations, reported at approximately $3.0 million at year-end.
- Debt service requirements, the high effective borrowing cost and the lender’s security interest over substantially all assets.
- Management’s progress in remediating both material weaknesses, given the ineffective controls conclusion and prior interim-period restatements.