IonQ, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Financial statements are unaudited. Amounts are in U.S. dollars; financial figures below are in millions unless noted.
Business context
IonQ develops trapped-ion quantum computing systems and sells cloud access, consulting and related services, and specialized systems. It operates as one reporting segment and offers access through AWS, Microsoft Azure, Google Cloud Marketplace and direct channels. The company says it remains in an early commercial stage and has not yet produced a scalable quantum computer or achieved broad quantum advantage.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $5.5 | $2.6 | $9.8 | $4.6 |
| Operating costs and expenses | $38.6 | $21.5 | $70.9 | $41.8 |
| Loss from operations | $(33.1) | $(18.9) | $(61.1) | $(37.2) |
| Net loss | $(43.7) | $(1.7) | $(71.1) | $(5.9) |
| Basic and diluted loss per share | $(0.22) | $(0.01) | $(0.35) | $(0.03) |
| Net cash used in operating activities | — | $(29.9) | $(16.9) |
- Revenue rose 111% year over year in Q2 and 115% in the first half, primarily from new customer contracts. Cost of revenue, excluding depreciation and amortization, increased 156% in Q2 and 124% in the first half; research and development rose 106% and 112%, respectively.
- Q2 operating expenses included $19.9 million of research and development and $10.9 million of general and administrative costs. Management attributed much of the expense growth to higher headcount and related compensation, including stock-based compensation.
- Net loss includes non-cash warrant-liability fair-value losses of $15.5 million in Q2 and $19.1 million for the first half, versus gains of $16.1 million and $29.5 million in the comparable 2022 periods. Interest income was $4.9 million in Q2 and $9.1 million for the first half, reflecting higher rates on cash and investments.
- At June 30, cash and cash equivalents were $14.0 million; short- and long-term investments totaled $495.2 million. The company reported $509.2 million of cash, cash equivalents and available-for-sale securities, excluding $2.1 million restricted cash. Management said these resources should cover working capital and capital expenditures for at least 12 months.
- Operating cash use was $29.9 million in the first half. Investing activities used $0.9 million net, primarily reflecting purchases and maturities of investments; financing provided $0.5 million. The filing lists no borrowings or conventional debt balance. Total liabilities were $53.6 million, including $23.0 million of warrant liabilities.
- Current assets were $391.3 million and current liabilities $23.6 million. Stockholders’ equity was $523.2 million. Operating lease obligations totaled $15.7 million, including $1.1 million due within 12 months.
Changes versus the prior comparable period
- Revenue more than doubled, but operating expenses also increased substantially, and operating loss widened to $33.1 million for Q2 and $61.1 million for the first half.
- Net loss increased sharply versus 2022, when warrant remeasurement produced gains; the 2023 warrant remeasurement produced losses. These non-cash fair-value movements materially affected reported earnings.
- Operating cash use increased by $13.0 million year over year for the first half, which management attributed principally to increased research and development, compensation and public-company costs.
- Cash and cash equivalents declined from $44.4 million at December 31, 2022 to $14.0 million at June 30, 2023, while the company continued to hold substantial investment securities.
Outlook, risks and unusual items
- Management expects significant losses and higher operating expenses for the foreseeable future while investing in research, development and commercialization. It says significant production and delivery of quantum computers are not expected before 2025 at the earliest, and may occur later or not at all.
- IonQ stated an intention to achieve an #AQ 64 system by the end of 2025 and said it expected to publish a more detailed technical roadmap and product specifications in September 2023. These are forward-looking targets, not guaranteed outcomes.
- As of June 30, 2023, remaining performance obligations were approximately $49.1 million, including funded and unfunded orders; the company expected about 40% to be recognized within 12 months. Future recognition and funding depend on contract performance and customer appropriations.
- Key risks include technical and manufacturing scalability, uncertain demand and timing of quantum advantage, competition, supply-chain dependence, reliance on cloud platforms and licensed university intellectual property, customer concentration, cybersecurity, and potential future capital needs. Inflation and higher interest rates may raise costs or constrain financing.
- A consolidated securities class action against the company, certain officers and other defendants remained pending; motions to dismiss had been briefed and a hearing had not been scheduled. The company said it could not reasonably estimate a possible loss. Management described a separate Glatt-related matter as not expected to have a material adverse effect.
- IonQ said its disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023. It also reported that it expected to become a large accelerated filer and lose emerging-growth-company status at December 31, 2023, bringing additional compliance requirements and costs.
Most important facts for investors to verify
- Whether revenue growth converts into durable customer demand, funded contracts and cash collections; note that three customers each represented more than 10% of revenue in the periods reported, but customer-level shares are not provided here.
- Progress against the #AQ 64 end-2025 target, including independently verifiable performance, system scalability, reliability and commercial use cases.
- Cash burn and investment liquidity relative to the company’s stated 12-month liquidity outlook and planned research, capital expenditure and commercialization needs.
- The composition and timing of the $49.1 million of remaining performance obligations, particularly unfunded orders and conditions for recognition.
- Potential dilution from equity compensation and securities: 23.7 million options and 14.8 million RSUs were outstanding at June 30, in addition to warrants and shares reserved under employee plans.
- Developments in the securities class action, as well as the possible costs of transition to large-accelerated-filer reporting and auditor attestation requirements.