Good day. Thank you for standing by and welcome to the Rigetti Computing First Quarter 2022 Earnings Conference Call and Webcast. At this time all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. I would now like to hand the conference over to your speaker today, Polly Pearson, Senior Vice President of Investor Relations at Sharon Merrill Associates. Please go ahead, ma'am.

Thank you, operator and good evening everyone. Today we'll be reviewing Rigetti's first quarter 2022 earnings results. With me here is Chad Rigetti, Founder and CEO of Rigetti Computing, and Brian Sereda, CFO. Before I turn the call over, I'd like to point out that this call and Rigetti's Q1 press release contain forward-looking statements concerning current expectations, objectives, and underlying assumptions regarding future operating results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Also in an effort to provide useful information to investors, comments today include non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect Rigetti's future operating results, please refer to today's earnings release on Rigetti's website at investors.rigetti.com or to the 8-K filed with the SEC earlier today. And now I'll turn it over to Chad. Chad?

Thank you, Polly and welcome everyone to our first quarter 2022 earnings call. As this is the first call we've held since our public debut, I'd like to first acknowledge the tremendous work from our team and support from our investors leading up to today. Thank you all. For those new to the Rigetti story, I will start out with some background on our leadership in the industry, followed by the current state of quantum, our technology progress, and our business model for driving adoption. At Rigetti, we are on a mission to build the world's most powerful computers to help solve humanity's most important and pressing problems. We envision a world where drug development takes a fraction of the current time and more lives are saved. Where affordable clean energy is abundant, and where supply chain routes are fully optimized through the power of Rigetti's Quantum Cloud Services platform. In the years ahead, we expect that it will be difficult to find an industry that quantum doesn't impact And we are laser focused on working to unlock this next frontier of economic opportunity. Today, we're getting offices in the United States, United Kingdom, and Australia, with more than 50 Technical PhDs from many of the world's most renowned universities. Our launch in 2013 marks the first ever pure play universal quantum computing startup and we have gone on to achieve many trailblazing quantum firsts and to help pioneer the quantum computing industry. In 2014, we patented a hybrid co-processing architecture, the combination of this architecture and our superconducting approach has enabled us to achieve industry leading speeds. Earlier this year, we demonstrated that our 80 qubit system is 18% faster than IBM's, comparable 65 qubit system using IBM zone CLOPS or circuit layer operations per second speed metric. In…

Thanks Chad. We continue to execute on our strategy this quarter leveraging net proceeds raised from our successful business combination close to advance in areas of key strategic importance for our business. The combination of this cash infusion and our near decade of experience in quantum to provide us with a solid foundation from which to launch into our next growth phase. With that as the backdrop, let me now turn to our quarterly results. In the first quarter, we generated revenue of $2.1 million compared to $2.4 million a year ago. This was due to the completion of the first phase of one large government agency project in the first quarter of 2021. The second phase of this project is expected to begin this fiscal year. The bulk of our revenues were derived from development contracts during the first quarter of 2022. We anticipate this trend to persist for at least the next few years as we ramp up our QCaaS business. Going forward as we advance along on our product roadmap and prove out a broader set of quantum use cases we expect our QCaaS revenue growth to outpace development contract revenue growth over time. Given QCaaS' potential to drive significant operating leverage, we expect that this transition will ultimately result in a margin profile similar to that of other cloud-based computing business models today. Turning to our expenses, total GAAP OpEx for the quarter was $25.5 million compared to $9.8 million a year ago. This was primarily due to significant higher stock compensation tied to the closing of the business combination; other public company costs including audit, insurance, and additional legal fees; as well as increased headcount in R&D and SG&A on a year-over-year basis. GAAP OpEx also included a $2 million expense related to one-time cash…

Thanks Brian. Rigetti's technology and partnerships success continues to compound and accelerate our business momentum. By leveraging quantum mechanics, we are building machines that process information in fundamentally new more powerful ways. Today, we are in a new phase of growth marked by our successful listing, continuing technology progress, and build out of our vision for Quantum Cloud Services. Now, let's open it up for questions. Operator?

Thank you. [Operator Instructions] Your first question comes from line of David Williams from Benchmark. Your line is open.

Hey, good afternoon and congrats on the progress and the public company listening here.

Hey, thanks, David.

Yes, thanks. And Chad, you provided some good color, but I've wondered kind of sit back and think just about the commercial viability and maybe any insight you can provide in terms of the customer mix between your academic and research, and how much is corporate do you think today? And you talked about that slowly growing, but how quickly does that ramp, I guess, in terms of that that mix of business between the different end markets or different customers?

Hi, David, great to hear from you. The business is heavily weighted towards development contracts and government customers today. For Rigetti, that is part of our long-term strategy and driving towards industry leadership in this arena. These contracts provide a blend of both revenue, but also technical expertise and partnerships, and also our pathway towards developing long-term relationships with key customers within the government and public sector space. DARPA, we've discussed our DARPA contracts. Previously, that's an example our partnership with SQMS under the United States Department of Energy is another such example, but we anticipate that within the Department of Defense and within the Department of Energy, these are going to be long-term major customers of quantum computing. And we're partnering with those agencies, organizations, and customers today to accelerate the growth and development of our technology. Now, with respect to the commercial growth, ultimately, we're seeing that unfold in what we anticipate to be unfolding in phases going forward. Today, we are seeing growing interest in demand for partnerships and engagements centered on our cloud services business model, typically coming with a degree of auxiliary services around pursuing quantum advantage, identifying use cases with those customers and partners, and working jointly with them over quarters or years to drive towards quantum advantage and getting those use cases into production. We expect to continue to invest in that model. I believe that's going to be the long-term path to ultimately building those commercial relationships. Now, tying it back to our government business and the partnerships we develop there, I think we've got real opportunities and we started to work on this to bring the expertise and the partnership capabilities that we have and the collaboration capabilities from the government relationships and the internal capabilities to apply those in the commercial sector. And so, we're going to continue with that progress and that approach down the road.

Great, thanks. And then maybe just on the Aspen-M system, can you kind of talk maybe how that’s progressing, what the feedback has been? And just any color around the Aspen-M launch?

Yes, the Aspen-M system has been performing very well, as we -- as I, kind of, discussed in the remarks, we're seeing high performance 15 qubits of lattices on that large Aspen-M system are performing very well, compared to -- directly comparing to other smaller -- just small systems of that size in the market. We're very pleased with the performance of Aspen-M. This is the platform that is the basis of many of our active kind of commercial and enterprise partnerships and collaborations in pursuit of quantum advantage today. We're going to continue to leverage that machine. It's also available now in AWS, it's a largest quantum computer available on AWS. And we're going to continue to leverage it through the course of this year as we drive towards our single chip, 84 qubit system that we're announcing today as well.

Great. And on that new system that -- the 84 qubit single chip, that's impressive result, just kind of given where you are they got the multi-chip for the 80, and you've got an 84 bit single system and then of course, you're going to put forward those together for the next system. But it seems like that is progressing much more quickly than what maybe we had expected. Has there been anything any changes, I guess, or maybe what is helping drive the scalability of the single chip solution?

Yes, our intention historically has been to prove out our scaling approach based on the multichip with the Aspen-M release. And then subsequently to drive our that single chip dye up to a larger qubit account. The Aspen-M is based on 40 qubit dyes. So, the next step on our roadmap is this 84 qubit single chip machine that we expect to be available in early 2023. That is a -- that is going to be based on our next-generation architecture designed for higher fidelity and higher connectivity as well. We've previously disclosed early results on that next generation architecture that are very promising and I alluded to them briefly earlier, showing high two qubit gate fidelities on that system. So, the 84 Q, we're developing the core dye that is then the tiling and scaling unit of subsequent larger systems. The 336 Q multi-chip that we're targeting to delivering -- expected to delivering in late 2023 will then combine the scaling technology of our Aspen-M that has already proven out in end market with this next-generation architecture targeting higher fidelities. And ultimately, the combination of those two things is what then underpins a longer term roadmap towards 1,000, 4,000 Q.

Okay, thanks for that color. And then maybe it's from a technical standpoint, there has been some discussion about of fidelity maybe gate systems to work in optimization type problems. And I guess how do you think about the different problem types that you can address? And are there any areas specific to the problem types that maybe the superconducting gate systems may not be best suited for, where you may have another type or another modality that would be better situated for that?

The strength of superconducting qubit systems centers on, in my view, and in our view, their scalability. This has been well-established in the industry, the scale that we've reached, at this stage is, is already quite impressive, in our view. They are also very fast. When we combine that with our core architecture of emphasizing hybrid quantum classical computing, in all aspects of the technology as well as our cloud services business model, that lends our platform and our approach to specific advantages, we believe in the area of quantum machine learning. And that's an area where we expect to continue to really double down into focus on driving quantum machine learning based capabilities and applications to quantum advantage.

Great. And then maybe one last one here for Brian, just kind of thinking about the balance sheet, you talked about the funding being a little bit lower than anticipated. What are the, I guess, the puts and takes there? If you kind of think about your model, has anything changed in terms of your roadmap or direction of the company based on a slightly smaller business combination proceeds? Or are there changes that we should be thinking about, I guess, going forward in terms of that?

Yes, no, there's no change to the technical roadmap. And, of course, we know what we have to deliver here in the near-term and long-term. So, we're going to continue to invest prudently in those areas and reallocate spending to those areas that we know that we've got sufficient funds to work with. So, no, we're continuing to challenge the CapEx decisions and marry that to the roadmap. And again, we're just going to be as prudent as possible. So, again, no overall change in our strategy. Some of the global macro conditions may affect the timing, but again, no change in the strategy.

Great. Thanks so much for the time. Certainly appreciate it and best of luck on the quarter.

Thanks David.

Your next question comes line of Sidney Ho from Deutsche Bank. Your line is now open.

Thanks and congrats on your first earnings call as a public company. So, I have a couple of questions. And the first one, there are a number of your peers, whether it's a standalone company or part of a bigger company that are addressing the quantum computing market in various ways. Chad, you talk a lot about Rigetti's approach in your prepared remarks, but can you talk about the few most important things how Rigetti differentiates from your competitors in terms of technology roadmap or go-to-market strategy? And do you see quantum computing as a market that can accommodate many, many winners?

First and foremost, we believe this is a very significant opportunity and it's an area where we anticipate there being multiple, very successful, big winners as quantum computing continues to develop. I think we've held the view that this is -- the industry is just getting started, and that there's room for a lot of very successful players in the space long-term on the hardware and software and application side, as well as on the cloud services side. Rigetti's particular strengths rely -- center on our vertical integration and our hybrid approach to quantum computing. As a vertically integrated player, we have the capability and the expertise to go from chip design and manufacturing here from our Fab-1 facility in the Bay Area, all the way through quantum processor development and technology integration, data cloud services and solutions delivered to the customer. The ability to put all those capabilities together under one roof is a, I believe, to be a very differentiating advantage within the industry today. It allows us to control or iteration time, our innovation cycles. And ultimately, in these research and development-driven industries and competitive challenges those iteration times become critical and ultimately, shaping the long-term outcome. The second thing is Sidney this is -- we believe it's a very long-term of substantial opportunity. There's going to be room for multiple, very big winners in the space. Our view is that we're all working together to build the industry. We're all working together and bring this technology to market and to unlock the technology for the broad commercial use cases that ultimately will provide that kind of world-changing opportunity. That's what we're focused on at Rigetti. That is baked into how we do things from, from a culture perspective and from a strategy perspective, we partner we collaborate, we work with public sector and private sector players to build the industry together. And ultimately, we believe that's a differentiated approach. Now, on the hybrid quantum class computing, this -- the emphasis that we place on that dovetails with the speed of our superconducting quantum processes, because our machines are very fast, the value we can get in application performance from type hybrid quantum class integration and unlocking those capabilities for our customers is substantial. And that leads to specific advantages we believe that we're going to see as certain applications like cross-machine learning, starts to mature and become real production ready for the industry.

Great, that's helpful. Maybe my follow-up question is the industry expects the different stages of quantum advantages, the narrow quantum advantage, the broad quantum advantage? Maybe we can first touch on what those timings you're looking at? But the question I have is one of the key performance metrics that investors should monitor when looking at Rigetti's and perhaps the industry's progress to was that broad quantum advantage? And just looking at your roadmap, to your 1,000 qubit system and 4,000 plus qubit systems seem to be aligned with narrow and broad quantum advantage, respectively. Are they the right milestones to monitor? Thanks.

Yes, thanks Sidney for the great follow up question. We continue to advance and make substantial progress towards quantum advantage. As we've talked about previously, we believe quantum machine learning is the application domain that is likely to reach advantage first. And we anticipate quantum machine learning having potential applications across a plurality of industry and application areas beyond the kind of fundamental computational process on machine learning that you're running in that case. So, we expect ongoing progress in QML and we're continuing to make deep investments within the company and in our partnerships and collaborations and developing that capability for the industry. Now, as we've also discussed, quantum -- reaching quantum advantage is going to be we anticipate a key inflection point or driver of growth of our cloud services business model. As we work towards that, you're going to see quantum advantage merge on an application-by-application basis, it's not going to happen all at once, within a single industry or within -- it's not going to happen at the same time, necessarily, but quantum machine learning is a key area where we are advancing our focus. Now, it's also empowered by and driven by progress on both the hardware and the technology side, as well as in partnership with customers. And this is why we continue to invest in those partnerships and collaborations. Ultimately, it's the application of quantum capabilities to high value customer problems that we're really pursuing that unlocked quantum advantage and becomes a growth driver for our QCS business.

Great, thank you very much. And congrats again.

Thank you.

Your next question comes from the line of Krish [indiscernible] from Cowen and Company. Your line is now open.

Yes, hi. Thanks for taking my question and Chad and Brian, congrats on your first call as a public company. Very impressive. I had a few questions, actually, the first one, Chad, given the strategic importance of quantum computing and your exposure to government contracts, do you think you or the quantum computing industry in general can tap a bit of the chips fab? Or is that mostly reserved for like pure classical computing at this point?

Hey, Krish, thanks so much for the question. I missed just the last part of it. If you could repeat this last part, please.

Yes, Chad, I was just trying to figure out if you can tap a piece of the $52 billion [indiscernible] or is it mostly for SaaS scale computing at this point?

So, thank you. If I understand the question, it's around the chip fab and manufacturing. And if we can compete with a very large, expensive semi industry fabs out there, is that correct?

No, actually I was trying to figure out if you can get a piece of the chip at the government funding, the $52 billion you're talking about?

Got it. Okay, I think I better understood. Thank you. We absolutely believe that there are opportunities to leverage our investment in the fab and the alignment of U.S., kind of, domestic leadership and chip manufacturing and in especially in kind of breakthrough advanced technologies like quantum. There's a high degree of alignment with government interests on that and we anticipate working with key partners and sponsors on the government side to continue to make those investments and bring more resources into the organization to continue to invest in our strategy of manufacturing leadership.

Got it. Got it. Thanks a lot for that Chad. And then a few other questions just wanted to follow-up. Number one also, I think in the past, you mentioned your contract or your $40 million, I'm kind of curious where it is now? And how much of that is already shipped? And what percentage gets shipped this year?

Hey Krish its Brian, Hey, yes, no, no, we still have a substantial portion of that sitting in backlog. And a lot of that is tied back to longer term development contracts, obviously. So, timing, when the next phases of these projects will kick-in is still in --, in various government agencies is underway. And being able to predict the timing of that is what causes some of the variability in terms of when we could expect revenue from the next project or what the milestones might look like in order for us to recognize revenue.

Yes [indiscernible].

Substantial bookings remains in backlog and we continue to make progress and growing the bookings as well. And so there's -- that's a metric that at this stage, we expect to report in the revenue and the bookings backlog is something we're tracking.

Got it. And then I have like three other quick questions. Number one is, how many production systems do you plan to ship this year? And can you give a color on how much the split is going to be between 40 and 80 qubits?

Yes, thanks for the question. We expect to grow the number of production systems available on our Quantum Cloud Services platform this year. We've currently got the 40 Q, Aspen 11, and the Aspen-M 80 qubit system. We do anticipate additional systems this year coming out and increasing the number of production systems. And as we drive towards the interim milestones discussed on the call here, the 84 qubit single chip next year, and then the 336 qubit single chip, we're going to continue to build out the production what we refer to as the production QBUs or production QBU infrastructure to best meet the demands of our customers in the market as the cloud services business matures.

Got it very helpful of it Chad and Brian. And also on the cloud business, when you have cloud customers, can multiple cloud customers use the same system or as you sign more cloud customers that has to scale up too?

We do anticipate a business model where multiple customers can be accessing different systems and that's something we're continuing to work through. Our systems are not dedicated to particular accounts or to particular customers. And there's a process we're working through to define kind of the timing by which different customers can switch back and forth between working on different systems. That's part of our Quantum Cloud Services product development. We continue to work with our partners under the existing accounts and in pursuit of new partnership opportunities to get customer feedback and input on the best way to implement all that.

Got it. Thanks. And then like my final question is, you mentioned the push out by a year or so of the 1,000 and the 4,000 plus qubit system. And you mentioned supply chain is one of the bottlenecks, supply chain is it specifically [indiscernible] or what exactly is the bottleneck for you in making the system?

Yes, thank you. The Krish, the considerations in in the roadmap update that there are the higher than anticipated costs that we've realized from labor, system inputs, the cost of building and developing the systems. There's also the timing -- really the timing, uncertainty, developing our QBUs and that really hits most of the hardware components. Fridges [ph] are a part of that, but it's not the totality of the impact that we're seeing. And ultimately, our ability to predict the availability and when we'll receive these parts to go into the roadmap is really the key thing where we're driving that update on timing. Now, we are very excited about the introduction of the single chip 84 qubit system based on our next-generation architecture. We anticipate in our targeting substantial improvements in fidelity and connectivity on that platform, and being able to put all those pieces together with our scaling technology and the 336 qubit system later in 2023 is we believe they're going to represent a really substantial step forward for the technology in a good way to track progress towards the longer term goals of 1,000 to 4,000 Q.

Awesome. Thanks a lot. And congrats again, Chad and Brian, congrats.

Yes, thanks Krish.

[Operator Instructions] Your next question comes from the line of Quinn Bolton from Needham & Company. Your line is now open.

Hey guys, thanks for letting me ask a question. I wanted to start -- I apologize, Chad, and Brian, as I missed part of the prepared comments, but on 84 bit next-generation QBU and then the multi-chip version of that. Can you talk about is that using sort of classical communications? Are they quantum links in that multi-chip architecture? I guess I'm trying to get a sense can you entangle qubits across those the four chips and the 336 qubit system?

Quinn, the answer is yes, that 336 qubit system is based on the inter-chip coupling technology that we have developed and demonstrated for the Aspen-M and its currently in production on the Aspen-M. This is based on direct qubit-to-qubit interactions across dye boundaries. It’s a technology we've pioneered and there's extensive IP around. So, in our multichip approach, this is not a networked solution and it's not classical communication between chips, it's direct two qubit gates mediated across dye boundaries. So, ultimately, the physical qubit lattice is extending across multiple pieces of silicon. Now, on the 84 Q, the 84 Q will become the titling unit of our future 336 qubit systems as well as subsequently, Quinn, the 1,000 Q and 4,000 qubit systems down the road. That 84 qubit chip is based on an updated out lattice architecture, a targeting higher conductivity. We're anticipating improvements in two qubit gate fidelity and stability on that system as well.

Got it that was my next question. It sounds like the 84 qubit will be the sort of the max size of a single chip and then you'll just scale through more and more multi-chip connections to get to the 1,000 Q and the 4,000 Q?

In terms of the plan horizon for our current roadmap, yes, we expect to leverage the 84 qubit single dye as the tiling unit for those larger systems down the road. To be clear, though, we don't see that has any sort of fundamental limit to our ability to scale the number of qubits on a single dye. However, that is that is within the planning horizon of the 336, 1,000, and 4,000, that is the current plan. We anticipate being able to continue -- longer term, we expect to be able to continue scaling the number of qubits per dye. If that is the most cost-effective and performance pathway to delivering ultimately, the higher end user performance that we're targeting. And we'll make those decisions as we gather more information in the coming years.

Got it. Thanks Chad. And my second question is you sort of launch the 84 qubit next-gen processor with higher gate fidelities and you look forward to 336 qubit and then the 1,000, the 4,000 beyond that. When do you expect to see quantum error correction sort of being implemented? Do you think the roadmap for either 336, 1,00Q or 4,000 Q incorporates quantum error correction or is that further out on the roadmap?

Quantum error correction is an emerging and accelerating focus for our engineering development teams. We are anticipating to begin testing on an internal basis. Early error correction capabilities over the next handful of years. The 1,000 qubit machine is likely the first machine where that is likely to become a production capability for our end customers. However, as we discussed our approach to developing this technology centers on partnerships with government and private sector, customers and partners. And through that we anticipate continuing to push on early tests and demonstrations of error correction on an R&D and scientific basis over the over the near-term -- over the next handful of years. Driving towards production systems with error correction requires ongoing progress in fidelities, which we feel like we're on a good path towards especially with the next generation 84 qubit dye. And it also requires a larger and larger qubit fabrics and the ability to put those pieces together with our multi-chip technology proven out in the Aspen-M and with a single chip, next-gen processor. We're really excited other prospects were beginning to test that internally and with our customers and partners over the next few years.

Great, thank you.

There are no further questions at this time. I would now like to turn the call back over to Chad Rigetti, Chief Executive Officer

Thank you operator. To close, I'd like to extend a warm congratulations and thank you to our team and partners whose support and belief in the future has powered Rigetti's progress thus far. At Rigetti, we believe wholeheartedly in embracing grand challenges to unlock transformative, positive change in the world. Our mission to build the world's most powerful computers to solve humanity's most important and pressing problems unites us. We look forward to keeping our investors and stakeholders updated on our progress. Thanks again everyone for joining today.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.