Rigetti Computing, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unaudited results; amounts below are in U.S. dollars unless noted. Rigetti develops superconducting quantum processors and quantum computing services (QCaaS). Much of its current revenue comes from development contracts.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $3.1m | $2.8m | $8.6m | $7.0m |
| Gross profit / margin | $2.3m / 73.1% | $2.0m / 72.3% | $6.7m / 77.5% | $5.0m / 70.7% |
| Operating expenses | $19.1m | $33.4m | $61.8m | $87.3m |
| Operating loss | $(16.8)m | $(31.3)m | $(55.1)m | $(82.4)m |
| Net loss | $(22.2)m | $(18.8)m | $(62.5)m | $(48.6)m |
| Basic and diluted loss per share | $(0.17) | $(0.16) | $(0.48) | $(0.51) |
| Cash used in operating activities | — | $(38.2)m | $(48.5)m |
- Q3 revenue rose 11% year over year; nine-month revenue increased 23%. Development contracts and related services generated $6.6m of nine-month revenue; access to quantum systems generated $2.1m.
- Operating expenses declined substantially, principally reflecting reduced stock-based compensation and the February 2023 workforce reduction. Lower operating losses did not translate into lower net losses: 2023 included fair-value losses on warrants and earn-out liabilities, while 2022 included fair-value gains.
- Interest income increased to $3.7m for the first nine months, from $1.2m, while interest expense rose to $4.5m from $3.8m.
Liquidity, debt and capital
- At September 30, cash and cash equivalents were $41.8m and short-term available-for-sale investments were $68.5m, totaling $110.2m. Current assets were $116.7m; current liabilities were $23.0m.
- Outstanding debt principal was $25.3m, including $12.4m of scheduled current principal. The debt is secured by substantially all assets, carries variable interest, and had a stated effective interest rate of approximately 22.5%. The company reported compliance with loan covenants.
- Rigetti received $15.1m during the first nine months from B. Riley share sales under its purchase agreement, issuing 8.2m shares. It reported 140.2m shares outstanding at September 30 and 140.6m as of November 7.
- Property and equipment purchases were $7.5m during the first nine months. Cash and cash equivalents declined $16.1m from year-end 2022.
Changes, outlook and risks
- In February 2023, Rigetti announced a revised strategy and reduced its workforce by about 50 employees, or 28% of the then workforce. The company recorded a $1.0m restructuring charge and a further $1.0m in executive contractual severance expenses; no additional restructuring charges for the action were expected.
- Management said existing cash, cash equivalents and investments should fund anticipated operating needs for at least 12 months from the financial statement issuance date. It also expects to need additional capital by early 2025 to pursue its current plan; financing is not assured, and failure to raise funds could delay or reduce development efforts.
- The roadmap centers on improving the externally launched Ankaa-1 84-qubit system, with goals of at least 98% two-qubit gate fidelity, followed by an anticipated Ankaa-2 84-qubit system targeting at least 99%, and then a planned 336-qubit Lyra system. These are targets, not guarantees. Ankaa-1 had been made available to one select customer for error-correction research.
- Revenue remains concentrated: government entities represented 77.3% of Q3 revenue and 77.7% for the first nine months. Two customers accounted for 49% of Q3 revenue. Contract timing may cause material quarter-to-quarter revenue fluctuations, and management noted possible near-term revenue reduction as the strategy is implemented.
- Disclosure controls were deemed ineffective at quarter-end because of material weaknesses in complex financial-instrument accounting and the close and reporting process. Prior 2022 quarterly statements were restated for errors involving warrant and earn-out valuations. Remediation was underway but not yet validated as effective.
- Other notable risks include continuing losses, dependence on additional financing, technical and commercialization uncertainty, supplier and cloud-provider dependencies, variable-rate debt, potential shareholder dilution, macroeconomic and supply-chain uncertainty, and Nasdaq listing compliance. The company reported no material legal proceedings.
Key facts for investors to verify
- Whether operating cash use and investment balances support management’s stated liquidity runway, and the timing and terms of any required financing.
- Remaining availability and conditions under the B. Riley purchase agreement, including its share-price threshold and the dilution from further sales.
- Debt repayment schedule, variable-rate exposure and the stated effective borrowing cost.
- Progress against Ankaa fidelity targets and whether the anticipated Ankaa-2 and Lyra milestones remain achievable on management’s timeline.
- Customer and government-contract concentration, remaining performance obligations ($6.0m at September 30), and future contract renewals or awards.
- Whether remediation controls operate effectively for a sufficient period, given the disclosed material weaknesses and prior restatements.