Rigetti Computing, Inc. (NASDAQ: RGTIW) is a leading provider of quantum computing systems and services, positioning itself at the forefront of a rapidly evolving industry. The company's innovative approach to quantum computing has garnered significant attention, as it continues to push the boundaries of what is possible in this transformative field.

Business Overview

Rigetti Computing is a vertically integrated company that designs, manufactures, and delivers quantum computing systems. The company's core focus is on developing breakthrough superconducting quantum processors, which serve as the foundation for its quantum computing offerings. Rigetti's full-stack approach, encompassing chip design, fabrication, and cloud-based delivery, allows it to maintain a competitive edge and deliver cutting-edge quantum computing solutions to its customers.

The company's revenue is primarily derived from development contracts with government agencies and commercial organizations, as well as the sale of quantum processing units (QPUs) and its Quantum Computing as a Service (QCaaS) platform. Rigetti has established strong partnerships with leading institutions, including national laboratories and research centers, further solidifying its position as a trusted provider of quantum computing technology.

Financials

Rigetti's financial performance has been marked by significant investments in research and development, as the company continues to push the boundaries of quantum computing. For the year ended December 31, 2023, the company reported annual revenue of $12,008,000, a net loss of $75,107,000, and annual operating cash flow of -$50,579,000. The company's annual free cash flow for the same period was -$59,638,000, reflecting the substantial resources required to fund its ongoing research and development initiatives.

In the first quarter of 2024, Rigetti reported revenue of $3,052,000, up 39% compared to the same period in 2023. Gross margins for the quarter were 49%, down from 77% in the first quarter of 2023, primarily due to the variable nature of contract deliverables and the company's project to develop and deliver a 24-qubit quantum computing system to the UK's National Quantum Computing Centre, which has a lower gross margin profile.

Operating expenses for the first quarter of 2024 were $18,085,000, a decrease of 24% compared to the same period in 2023. This reduction was driven by the company's February 2023 restructuring and workforce reduction, as well as a decrease in public company costs and savings from IT systems rationalization. The net loss for the first quarter of 2024 was $20,773,000, or $0.14 per share, compared to a net loss of $23,354,000, or $0.19 per share, in the first quarter of 2023.

Liquidity

As of March 31, 2024, Rigetti had cash, cash equivalents, and available-for-sale investments totaling $102,759,000. The company believes that its existing balances of cash, cash equivalents, and marketable securities should be sufficient to meet its anticipated operating cash needs until midway through the fourth quarter of 2025, based on its current business plan and expectations considering current macroeconomic conditions.

In March 2024, Rigetti entered into an At-The-Market (ATM) sales agreement, which allows the company to offer and sell up to $100,000,000 of its common stock. During the first quarter of 2024, the company raised $23,869,000 in net proceeds from the sale of common stock through the ATM program and a prior common stock purchase agreement.

Technological Advancements and Roadmap

Rigetti has made significant strides in advancing its quantum computing technology. The company recently announced that it has achieved a 99.3% median 2-qubit gate fidelity on its 9-qubit Ankaa class quantum system. This milestone gives the company confidence that it will reach 99% or higher 2-qubit gate fidelity on its anticipated 84-qubit Ankaa 3 system, which is expected to be deployed by the end of 2024. The company plans to further scale its quantum computing capabilities by developing the 336-qubit Lyra system thereafter.

Rigetti's focus on improving qubit count and fidelity is a critical component of its strategy to achieve narrow quantum advantage, a key milestone in the company's long-term roadmap. By continuously enhancing the performance of its quantum processors, Rigetti aims to position itself as a leader in the development of practical quantum computing applications.

Novera QPU and Partner Program

In addition to its technology advancements, Rigetti has also made significant strides in commercializing its quantum computing offerings. The company recently launched the Novera QPU, its first commercially available quantum processing unit, which features a 9-qubit chip, tunable couplers for fast 2-qubit operations, and a 5-qubit chip for testing single-qubit operations.

To further support the growth of on-premises quantum computing, Rigetti has established the Novera QPU Partner Program. This program aims to create an ecosystem of quantum computing hardware, software, and service providers who can work together to build and offer integral components of a functional quantum computing system. The founding members of the Novera QPU Partner Program include some of Rigetti's long-term partners, such as Riverlane, Quantum Machines, and Zurich Instruments, among others.

The Novera QPU has already found its first customer in Horizon Quantum Computing, a Singapore-based company funded primarily by the Singaporean government. Horizon Quantum Computing will be installing the Novera QPU in its new hardware testbed, marking Rigetti's first quantum computing system deployment in Singapore. This sale to Horizon Quantum Computing is expected to be recognized as revenue in the second quarter of 2024.

Risks and Challenges

While Rigetti's technological advancements and commercial progress are promising, the company faces several risks and challenges that investors should be aware of. The quantum computing industry is highly competitive, and Rigetti must continue to innovate and stay ahead of its competitors to maintain its market position. Additionally, the company's reliance on government contracts and a limited number of customers poses a concentration risk, as the loss or temporary loss of a major customer could have a material adverse effect on its financial performance.

Furthermore, Rigetti's ability to achieve its long-term goals, such as demonstrating broad quantum advantage, is subject to significant technological and engineering hurdles. The company's success will depend on its ability to overcome these challenges and deliver on its ambitious technology roadmap.

Macroeconomic Conditions

Rigetti's business and financial performance are not immune to the broader macroeconomic environment. The company has experienced and may continue to experience increases in the cost of raw materials, component parts, and labor, which it largely attributes to inflation, the U.S. Federal Reserve's interest rate hikes, high demand, and supply chain constraints. These factors have been further exacerbated by the ongoing military conflict involving Russia and Ukraine, as well as the state of war between Israel and Hamas.

Additionally, the worsening economic conditions in some parts of the world, including disruptions to and volatility in the credit and financial markets, could impact the company's ability to access additional capital or affect its liquidity. Rigetti is closely monitoring these macroeconomic developments and taking actions to enhance its operational efficiency, maximize R&D productivity through strategic collaborations, and be selective in hiring top-tier talent.

Conclusion

Rigetti Computing is at the forefront of the quantum computing revolution, leveraging its innovative technology and strategic partnerships to drive the industry forward. The company's focus on improving qubit count and fidelity, coupled with its commercialization efforts through the Novera QPU and Partner Program, position it well to capitalize on the growing demand for quantum computing solutions.

While the company faces significant risks and challenges, its strong liquidity position and continued technological advancements provide a solid foundation for long-term growth. As Rigetti navigates the evolving macroeconomic landscape, investors will closely monitor the company's ability to execute on its ambitious roadmap and deliver on its promise of transformative quantum computing capabilities.