IonQ, Inc. Q3 FY2024 earnings call

• Exceeded revenue expectations in Q3, with $12.4 million recognized revenue, more than doubling year-over-year.
• Raised annual revenue guidance for 2024 to $38.5M-$42.5M and maintained bookings guidance of $75M-$95M.
• Announced new contracts, including a $54.5 million contract with the US Air Force Research Lab and a $9 million renewal with the University of Maryland.
• Formed partnerships with AstraZeneca for biopharmaceutical drug discovery and Ansys for computer-aided simulations.
• Announced acquisition of Qubitekk, a leader in quantum networking, to strengthen quantum networking leadership.
• Made progress in quantum networking, achieving the second milestone on the path to photonic interconnects and partnering with NKT Photonics and imec for technology advancements.

In the third quarter, IonQ exceeded its revenue expected range, with recognized revenue of $12.4 million (exceeding the prior range of $9 million to $12 million) and more than doubling year-over-year revenue. Annual revenue guidance for 2024 is raised to a range of $38.5 million to $42.5 million. Bookings for the third quarter were $63.5 million, and year-to-date bookings for 2024 stand at $72.8 million, within close range of the target guidance of $75 million to $95 million. The company's quantum computing and quantum networking segments are driving performance, with quantum networking being a key area of focus and growth.

• Raised full-year 2024 revenue guidance to a range of $38.5 million to $42.5 million.
• Projects Q4 2024 revenue to be between $7.1 million and $11.1 million.
• Maintained 2024 bookings guidance of between $75 million and $95 million.

Actual events or results could differ materially from forward-looking statements due to a number of risks and uncertainties, including those mentioned in IonQ's 10-Q filing with the SEC this week.

Q: Hi. Good afternoon, everyone, and thanks for taking my question. Lots of really interesting exciting things going on. It's hard to find a place to start. But maybe first, Peter, can you speak to just the Qubitekk acquisition? What that technology brings? And how does that kind of merge synergistically with what you've been doing internally?

A: Yes, I'd be happy, David. Several things here. One is that, as we've kind of talked about it in the past, the way that IonQ will get to scale is by photonically networking our quantum computers together. Qubitekk is doing something similar not exactly the same, but they have the same kind of rough skill sets in terms of people. The other side is, it gives us another product line as well to go after. It's a new market for us. So it's both complementary and also expands the TAM that we can go after.

Q: Okay, fantastic. And just kind of thinking about you have the networking efforts now and you also have the computing side. How do you think about the sensing pillar in terms of quantum and is that an area we should anticipate that you might be looking to enter at some point?

A: Yes. One of the nice things is that often sensing requires quantum networking, we'd be able to transport the quantum information. So again, it enables another piece of infrastructure in the three different markets that kind of makes up quantum. Its quantum sensing, quantum networking and quantum computing.

Q: Hi, guys. This is Tyler Anderson on for Richard Shannon. Congratulations on the quarter and M&A. I'm very surprised. It's amazing. And thank you for taking my questions. I was wondering, does the hardware from Qubitekk require distillation or node-to-node swap operations? And then also, will the chip-scale ion trap from the imec partnership be used within the AFRL contract? And could you describe the price of the Qubitekk acquisition and expected incremental OpEx?

A: Okay, I'll start. This is Dean. There's a lot to unpack on your question. The first piece is, with regards to the technology and regards to the swap and other things that we expect to need to use to basically generate two trap entanglement or two QPU entanglement. That is not part of the fundamental technology stack that we have with the Qubitekk and the QKD work that they have. There is similarity though associated with the milestone that we just actually announced with our photonic interconnects in terms of like the Bell state analyzer and the photon entanglement. There is analogies between the work that we're doing with the photonic interconnect as well as what's being done in those quantum networks. So there is parallel technology, some of it in the component technology is one and the same. But right now, they are operating at different frequencies. And so, what we need to do for our photonic interconnects is fundamentally different than what you would need is currently being done as state-of-the-art in many of the QKD solutions. Your second question was associated with imec and some of the PIC development and its relationship to our AFRL work. The overall AFRL work is focused on development of our particularly the most recent large item was first associated with frequency conversion. So, this goes back actually to relate to the Qubitekk acquisition, where we're looking at conversion of wavelengths from barium and other computing frequencies down to telecom frequencies to be able to push the entanglement over long distances. The second piece of that is the -- I would say photonic switching that work there, the prototypes there. And then the third is really component ruggedization. The imec work has the potential to play in all of those areas, but not in the near-term, but instead in far term. So as we think about our technology stack, as we think about putting optics down on to chip-scale devices, that is where we expect to see that. None of the activities right now within the period performance of our current AFRL contract. And then, there was one other question which was price. Yes. So the consideration for the acquisition is $22 million, which we have funded in cash from our balance sheet. The details are laid out in the quarterly disclosures. We evaluate the size and determined that the cash mix was manageable relative to the size of our cash position and we plan to close the transaction in the next six months. And I'll just add one other little piece which is that the Qubitekk purchase also, given their existing contracts, they have a relationship with real world telcos. And so, it kind of moves our efforts out of the laboratory and now starting -- allows us to start to test in the field so to speak. Great questions by the way.

Q: This is Shadi Mitwalli dialing in for Quinn Bolton. First off, congrats on an exciting quarter. Lots of unpack here. Earlier in the year, you guys knocked a major milestone in photonic interconnects and now with the partnership with, NKT Photonics. Its clear IonQ is making solid work on the photonics front. I just want to touch on how NKT Photonics systems will support the commercialization of IonQ's quantum computers?

A: You want to take it? I'll take first from the technology perspective and Peter can take it from the business perspective. On the technology side, NKT has a different kind of different sets of different lasers and there's different laser technology, diode lasers, pulse lasers, fiber based lasers. And so, what we're looking for from a technology perspective in our laser kind of vendors and suppliers our robust lasers that operate at the frequencies and the wavelengths that we're interested in and lasers that simply just work, right? And so, part of this represents us both trying to put in place larger scale manufacturing and larger scale kind of supplier agreements, as well as trying to down select to technology partners that can provide the wavelengths that we need, the cost points that we need and the robustness and stability that we need for really 24x7 operation of the systems. And I'll just add just a little bit on the business, which Dean kind of hinted at, which is, the question of the cost of these systems. Lasers are a significant portion of our overall cost. So when we sat down and said, look, we're going to be moving to production, one of the pieces to be able to reduce the cost also reduce the size. So this is investments that you see in both of these announcements today both with imec and also with NKT as us actually working towards that promise.

Q: Great, great. Thanks for all that. And then, maybe on OpEx, you guys announced a number of new partnerships and awards this quarter and earlier in the prepared remarks, you guys talked about expanding the team to support all this growth. Just curious on how we should think about OpEx going forward. And then maybe talk about how much the team needs to expand to support all this growth.

A: I think that where we are on OpEx for the rest of the year is already laid out in what we have discussed earlier. We're not making any change to OpEx right now, and we will be discussing the OpEx for next year on the Q4 call, which I look forward to seeing everybody call into as well. What we are focusing on is, we've gone through rapid growth and it's time for us to think about growth, where it really matters and start making sure that we are always investing in only the best just that matter and that we re-funnel capital to areas where they can be the most invested.