IonQ, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; unaudited. IonQ develops trapped-ion quantum computers and earns revenue primarily from quantum-computing-as-a-service and related consulting. It remains an early-stage business with limited revenue. Comparisons with 2021 should be read in light of the September 30, 2021 business combination.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $2.8 million | $0.2 million | $7.3 million | $0.5 million |
| Operating loss | $24.9 million | $10.5 million | $62.1 million | $27.9 million |
| Net loss | $24.0 million | $14.8 million | $29.9 million | $32.1 million |
| Net loss per share | $0.12 | $0.12 | $0.15 | $0.27 |
| Operating cash used | — | $29.8 million | $21.9 million |
- Revenue grew sharply from a small base, primarily due to new customer contracts and increased services under the University of Maryland agreement. Cost of revenue, excluding depreciation and amortization, was $0.7 million in Q3 and $2.0 million year to date.
- Operating expenses rose substantially: R&D was $13.3 million in Q3 and $30.3 million year to date; general and administrative expense was $10.1 million and $26.9 million, respectively. Growth in payroll, stock-based compensation, headcount, public-company costs and insurance contributed.
- Nine-month net loss improved despite a higher operating loss, largely because of a $28.4 million non-cash gain from the change in fair value of warrant liabilities and $3.9 million of interest income. Q3 included a $1.2 million warrant fair-value expense and $2.1 million of interest income.
- At September 30, cash and cash equivalents were $57.2 million, short-term investments $348.4 million and long-term investments $150.2 million: $555.8 million combined. Total assets were $606.6 million, total liabilities $31.0 million and stockholders’ equity $575.6 million. The balance sheet reports no borrowings.
- Available-for-sale investments had $9.1 million of net unrealized losses in accumulated other comprehensive loss, attributed primarily to interest-rate fluctuations. The company did not consider them other-than-temporarily impaired.
- Year-to-date investing cash outflow was $314.2 million, primarily reflecting investment purchases net of maturities and sales, alongside $8.4 million of property and equipment purchases. Financing provided $2.2 million; the prior-year period included $579.9 million from the business combination and PIPE.
Changes, outlook and risks
- Remaining performance obligations were approximately $32.9 million, including funded and unfunded orders; IonQ expected to recognize $3.3 million in the remainder of 2022, $21.0 million in 2023 and $8.6 million thereafter. These amounts are not equivalent to guaranteed future revenue because some orders are unfunded.
- Management said cash, cash equivalents and investments should cover working-capital and capital-expenditure needs for at least 12 months, while noting this depends on projections and market and business conditions. It expects continued losses and higher operating expenses for the foreseeable future.
- Management stated significant production of quantum computers was not expected before 2025 at the earliest, and could occur later or never. No quantified full-year revenue or earnings guidance is provided in the supplied filing text.
- Business and technical updates included Aria reaching #AQ 25, about four times its prior computational power and the company’s stated 2022 technical milestone; a $13.4 million multi-part U.S. Air Force Research Laboratory contract; an Oak Ridge National Laboratory research project; a Dell collaboration; and a next-generation multilayered glass trap chip announcement.
- Key risks include the technical and manufacturing challenge of scaling quantum systems and achieving broad quantum advantage; competition; dependence on cloud providers and specialized suppliers; customer concentration; and possible effects from inflation, interest rates, COVID-19 and supply-chain disruptions.
- Disclosure controls were deemed ineffective as of September 30 because a material weakness in the financial close process remained. IonQ described remediation steps, including additional accounting resources, approval policies and a new financial accounting system, but said remediation requires successful operation and testing over time.
- Two consolidated securities class actions against the company and certain officers allege Exchange Act violations and seek damages. IonQ said it could not reasonably estimate any possible loss. A separate legacy dMY-related Glatt matter remains pending; management did not believe its resolution would materially adversely affect the company.
Important facts for investors to verify
- Customer concentration and the funded versus unfunded composition, timing and cancellation terms of the $32.9 million remaining performance obligations.
- Cash burn, investment maturities and unrealized losses, and whether liquidity remains adequate as research, hiring and commercialization costs rise.
- Progress against technical and manufacturing milestones, including the distinction between the reported #AQ 25 milestone and commercially useful, scalable quantum advantage.
- Status and testing of the material-weakness remediation, and any updates to disclosure controls or financial reporting.
- Developments in the securities litigation, including potential exposure, and any other legal or regulatory inquiries disclosed in subsequent filings.
- Potential dilution from equity compensation and outstanding warrants; the filing lists substantial outstanding equity awards and warrants.