D-Wave Quantum Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparison is with FY2022. This is an annual report, not a standalone Q4 earnings release. Amounts are U.S. dollars unless stated otherwise.
Business context and reporting period
D-Wave sells cloud access to its annealing quantum computers and hybrid solvers through its Leap QCaaS platform, alongside professional services for developing and implementing customer applications. It is also developing gate-model systems, which are not yet commercialized. The company reported one operating segment. Approximately 70% of FY2023 revenue came from commercial customers.
Key financial metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $8.8 million | $7.2 million |
| Gross profit / gross margin | $4.6 million / 52.8% | $4.3 million / 59.3% |
| Operating expenses | $85.2 million | $63.7 million |
| Operating loss | $80.5 million | $59.5 million |
| Net loss | $82.7 million | $53.7 million |
| Net loss per share, basic and diluted | $0.60 | $0.45 |
| Cash used in operating activities | $60.6 million | $45.2 million |
| Cash at year end | $41.3 million | $7.1 million |
| Working capital | $35.8 million | Not stated here |
Revenue mix in FY2023 was $4.9 million QCaaS, $3.8 million professional services, and $0.05 million other revenue. Revenue grew 22%: professional services increased $2.3 million, while QCaaS declined $0.7 million following several customer non-renewals. Gross margin contracted as cost of revenue rose faster than revenue.
At December 31, total liabilities were $83.8 million, including $64.2 million of loans payable and $8.4 million of operating lease liabilities. Loans included the $32.1 million SIF balance, a $31.4 million fair-value carrying amount for the term loan, and $0.8 million of TPC loans. The term loan had $30 million advanced; a further $20 million tranche remained conditional. Total liabilities exceeded total assets by $24.5 million. The company reported an accumulated deficit of $483.1 million.
Material changes versus FY2022
- Revenue rose 22%, but the mix shifted toward professional services as QCaaS revenue fell.
- Gross profit increased modestly, while gross margin declined by about 6.5 percentage points.
- Operating expenses increased $21.5 million, including a 72% increase in general and administrative expense, largely reflecting public-company costs, stock-based compensation, professional fees, and insurance.
- Net loss widened by $29.0 million and operating cash use increased by $15.4 million.
- Financing activities provided $95.6 million, including $63.7 million from issuing shares to Lincoln Park and $29.0 million of debt proceeds; year-end cash increased to $41.3 million.
Outlook, risks, contingencies, and unusual items
- Going concern: Management and the auditor state that substantial doubt exists about the company’s ability to continue as a going concern for one year from issuance of the financial statements. Management says additional financing is needed for the next 12 months; failure to obtain it could require scaling back or discontinuing operations. No quantified revenue or earnings guidance is provided.
- Funding and dilution: The $50 million term loan from PSPIB is secured by substantially all company assets and carries 10% cash or 11% payment-in-kind interest, at the company’s election. The remaining $20 million tranche depends on specified conditions, including $25 million of non-dilutive financing acceptable to the lender. The Lincoln Park equity facility is subject to a $1.00 floor price and other limits; share issuances can dilute holders and pressure the stock price. Term-loan provisions also require certain equity proceeds to be applied to repayment, with a premium.
- Debt and covenant exposure: The lender waived minimum-revenue covenant breaches for Q2 and Q3 2023. The company reported compliance with term-loan covenants at year end. The SIF loan’s revenue-based repayment formula is capped at 150% of principal; repayment commencement depends on reaching $70 million of annual revenue.
- Financial reporting: A material weakness in financial statement close and review controls remained unremediated at year end, and management concluded disclosure controls and internal control over financial reporting were ineffective. Prior financial statements for 2020–2022 and 2023 interim periods were restated. The company attributes the weakness to insufficient accounting personnel and expertise in complex GAAP and SEC reporting. Remediation includes hiring, training, and external support.
- Restatement and auditor change: The 2023 restatement mainly affected non-cash/non-operating items and balance-sheet classifications and, according to the filing, did not affect key business metrics or financial covenant compliance. PwC declined to stand for re-election in 2023; Grant Thornton was engaged for FY2023. The auditor’s FY2023 opinion was unqualified but included a going-concern emphasis.
- Technology and market risks: The quantum market is nascent and highly competitive; customer adoption, production deployments, technical milestones, and quantum advantage are uncertain. D-Wave’s claimed real-world quantum-supremacy result was still being pursued for peer-reviewed publication. Gate-model systems are not commercialized.
- Other developments: In 2024, D-Wave reported an Advantage2 experimental prototype with more than 1,200 qubits; its longer-term roadmap describes a system expected to exceed 7,000 qubits. In February 2024, it announced a generative-AI and quantum-computing collaboration with Zapata and invested $1 million in secured convertible notes. The NYSE confirmed compliance with its minimum share-price requirement on March 1, 2024 after earlier deficiency notices.
- The filing reports no pending or threatened legal proceeding expected to have a material adverse effect. It identifies potential customer indemnities and other ordinary-course legal exposures but provides no material quantified contingency.
Most important facts for investors to verify
- Available liquidity, forecast cash needs, and whether the company can secure financing sufficient to address the stated going-concern uncertainty.
- Whether conditions for the remaining $20 million PSPIB tranche are met, and the term loan’s cash or PIK interest, covenants, collateral, and equity-proceeds repayment terms.
- Whether the internal-control remediation is completed and tested, and whether future filings require further corrections or restatements.
- Customer renewals and concentration: three customers each represented 11%–12% of FY2023 revenue; confirm the durability of QCaaS demand and conversion of services projects into production subscriptions.
- Share dilution and potential supply: Lincoln Park issuances, resale registrations, exchangeable shares, and warrants. At March 28, 2024, 116.8 million common shares and 44.9 million exchangeable shares were outstanding; warrants may add further dilution.
- Evidence and timing for Advantage2 performance claims, peer review of the quantum-supremacy result, and progress toward commercial gate-model systems.