D-Wave Quantum Inc. Q3 FY2024 earnings call

• Product advancements: Completed calibration of 4,400 qubit Advantage 2 processor with improved coherence, energy scale, and connectivity. Announced partnerships with Staque and Chicago Quantum Exchange. Joined the Chicago Quantum Exchange as a corporate partner.
• AI and software: Progress on generative AI architectures, introduced SLAs for Leap quantum cloud service, improved performance of a hybrid quantum solver.
• Customer and market: Broadened customer base across commercial, government, and research; NTT DOCOMO pilot moving to production; new partnerships and board appointments; up-leveling of go-to-market organization.
• Financial: Paid off $50 million secured term loan, had nearly $30 million in cash as of September 30.

In Q3 2024, revenue totaled $1.9 million, a decrease of ~$700,000 or 27% from Q3 2023. QCaaS revenue was $1.6 million, an increase of $500,000 or 41% from Q3 2023. Professional services revenue was $300,000, a decrease of $1 million or 80% from Q3 2023. Bookings for Q3 2024 were $2.3 million, a decrease of $600,000 or 22% from Q3 2023. For the first nine months of 2024, revenue was $6.5 million, an increase of $600,000 or 11% from the prior year. QCaaS revenue was $5.1 million, an increase of $1.8 million or 52% from the prior year. Professional services revenue was $1.3 million, a decrease of about $900,000 or 42% from the prior year. Bookings for the first nine months were $5.6 million, a decrease of $1.8 million or 24% from the prior year.

• Reiterated fiscal 2024 adjusted EBITDA loss guidance of less than $54.3 million.
• Expect fourth quarter revenue to improve over third quarter revenue.
• Expect fourth quarter bookings to improve over third quarter bookings.

• Potential impact of government budget tightening on competitors more than D-Wave, but need to monitor. - Need to tighten access to quantum systems for self-service sign-up in certain regions due to potential access by restricted entities.

Q: Quinn Bolton asked about NTT DOCOMO's production timeline for their quantum application and QCaaS revenue range.

A: Alan Baratz said applications moving into production generate high hundreds of thousands or more in recurring QCaaS revenue, but NTT DOCOMO hasn't disclosed the exact timeline for rollout into production.

Q: David Williams asked about the China encryption research and its impact.

A: Alan Baratz said the research was interesting but growth from 17 bits to 22 bits is still far from breaking current cryptographic systems, and steps are being taken to tighten access to the quantum system for self-service sign-up.

Q: Richard Shannon asked about Advantage 2's impact on inbound customer interest and commercialization timeline.

A: Alan Baratz said Advantage 2's benefits are generating excitement, especially in materials, and the system is not yet in Leap but will be sooner rather than later.

Q: Craig Ellis asked about go-to-market up-leveling productivity and geos.

A: Alan Baratz said it's early days, with 11 positions filled, more to fill by mid-Q1, and Europe is seeing most activity in research.

Q: Suji Desilva asked about AI service instance and cross-selling with hyperscalers.

A: Alan Baratz said it's currently end customer-driven, but will change as quantum value is demonstrated.

Q: Robert Aguanno asked about TAM for annealing and near term budget impact.

A: Alan Baratz said annealing is well-suited for optimization, and government budget tightening impacts gate model providers more than D-Wave currently.