Rigetti Computing, Inc. — Q3 2022 Form 10-Q
Business context and reporting period
Unaudited results cover the three and nine months ended September 30, 2022, compared with the same periods in 2021. Rigetti develops superconducting quantum processors and provides quantum computing access through its QCaaS platform, alongside development and research contracts. The March 2022 SPAC transaction was accounted for as a reverse recapitalization; historical comparisons reflect Legacy Rigetti’s financial statements and a retrospectively adjusted share structure.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $2.8m | $2.9m | $7.0m | $6.8m |
| Gross profit / margin | $2.0m / 72.3% | $2.5m / 84.7% | $5.0m / 70.7% | $5.7m / 84.1% |
| Operating expenses | $33.4m | $11.6m | $87.3m | $32.3m |
| Operating loss | $(31.3)m | $(9.2)m | $(82.4)m | $(26.5)m |
| Net loss | $(18.8)m | $(9.8)m | $(48.6)m | $(27.6)m |
| Net loss per share, basic and diluted | $(0.16) | $(0.43) | $(0.51) | $(1.25) |
Q3 revenue was approximately 71% collaborative research and professional services ($2.0m) and 29% quantum-system access ($0.8m). For the nine months, these categories were $5.0m and $2.1m, respectively. Government entities generated 77.3% of Q3 revenue and 74.1% of nine-month revenue. The three largest customers represented 64% of nine-month revenue.
At September 30, 2022, cash and cash equivalents were $73.8m and available-for-sale investments were $87.2m. Combined, these totaled approximately $161.0m in cash and short-term investments. Total assets were $212.7m and stockholders’ equity was $165.9m. Debt principal was $32.0m; the balance sheet reported $29.8m net of discounts, split between $6.8m current and $23.0m non-current. Current liabilities were $16.3m.
For the first nine months, operating cash use was $48.5m, investing cash use was $106.5m, and financing cash provided was $217.1m. Investing cash use included $87.2m of purchases of available-for-sale securities and $19.3m of property and equipment. Capital expenditures supported research and development infrastructure, including quantum-computing equipment and the chip-fabrication facility.
Material changes versus the prior comparable period
- Q3 revenue declined 4% year over year, while nine-month revenue increased 3%. Management attributed movements to changes in government-contract phases and timing, partially offset by new contract work and increased QCaaS usage.
- Q3 operating expenses increased 186% to $33.4m; nine-month expenses rose 171% to $87.3m. Increases reflected research and development investment, higher headcount, stock-based compensation, and public-company costs. Nine-month stock-based compensation was $37.6m, versus $1.6m in 2021.
- Q3 and nine-month gross margins fell year over year as cost of revenue rose faster than revenue. Cost of revenue increased 74% for Q3 and 90% for the nine-month period.
- Net losses worsened, despite substantial non-cash gains from remeasurement of warrant and earn-out liabilities: $13.0m combined in Q3 and $37.3m for the first nine months. These gains reduced reported net losses but did not represent operating cash inflows.
- Cash and investments increased substantially following the March business combination and PIPE financing, which generated $225.6m net proceeds before other cash uses. Nine-month operating cash use more than doubled from 2021.
Outlook, commentary, risks and unusual items
- Management stated existing cash and cash equivalents should fund anticipated operating needs for at least the next 12 months under its current plan and assumptions. It also cautioned that spending or adverse conditions could require capital sooner; additional financing may dilute shareholders or may not be available on acceptable terms.
- Management expects development contracts to remain the majority of revenue for at least several years while QCaaS grows. Revenue timing is variable, particularly for milestone-based contracts. Remaining performance obligations were approximately $9.3m at September 30, with about $3.3m expected in the remainder of 2022 and $6.0m during 2023–2024.
- Approximately $4.0m of anticipated government-contract revenue was subject to negotiations that had taken longer than expected. Management warned it could be deferred beyond 2022, reduced by less favorable terms, or not realized; some related work and costs had already been incurred.
- Rigetti disclosed an approximately $1.5m accrual for previously unrecognized Berkeley electricity costs from 2019–2021, plus additional accruals in 2022. Actual utility fees, penalties, or related costs could exceed estimates.
- The company restated its first- and second-quarter 2022 financial statements, citing material errors in Sponsor earn-out and private-warrant valuations and an immaterial Trinity warrant valuation error, as well as out-of-period utility expense recognition. The company said the errors increased net losses in the affected periods; the cumulative effect on first-half 2022 net loss was $9.5m. These corrections did not change operating cash used for those periods.
- Management concluded disclosure controls were ineffective at quarter-end because of a material weakness in review controls over complex financial instruments. Remediation work was underway, but the weakness was not yet remediated and further errors or restatements could occur.
- On November 12, 2022, the board accepted founder and CEO Chad Rigetti’s resignation, expected to take effect December 15. General Counsel Rick Danis was appointed interim CEO while the company searches for a successor.
- Risks include early-stage technology and uncertain commercialization, failure or delay in qubit-roadmap milestones, high customer and government-contract concentration, reliance on cloud providers and constrained suppliers, rising costs and supply-chain disruption, continuing losses, and potential dilution. The highest-qubit system deployed as of September 30 was 80 qubits; the filing cautions that roadmap milestones may be delayed or not achieved.
Most important facts for investors to verify
- Whether the prior-quarter restatements are completed and the material weakness is effectively remediated through tested controls.
- Whether the government contracts associated with the approximately $4.0m anticipated revenue are executed, on what terms, and when revenue and cash collection occur.
- Actual cash burn, capital spending, and liquidity relative to management’s stated 12-month runway, including the distinction between cash and investments.
- Progress on technical and commercialization milestones, QCaaS adoption, and diversification beyond concentrated government and major-customer revenue.
- Potential dilution and share supply from equity awards, registered resales, warrants, and the B. Riley facility, which permits up to $75m of share sales subject to contractual limits.
- Costs or liabilities related to electricity usage, CEO succession, debt service, leases, and continued public-company operations.