10-Q: D-Wave Quantum Inc. Reports Q3 2024 Results: Revenue Mixed, Focus Remains on Growth and Liquidity

D-Wave Quantum Inc. reported a decrease in revenue and a net loss for Q3 2024, while also highlighting ongoing efforts to secure funding and manage its financial position.

Summary

• D-Wave Quantum Inc. reported a revenue of $1.9 million for the three months ended September 30, 2024, a decrease from $2.6 million in the same period of 2023.
• The company's net loss for the quarter was $22.7 million, compared to a net loss of $16.1 million in Q3 2023.
• For the nine months ended September 30, 2024, revenue was $6.5 million, an increase from $5.9 million in the same period of 2023.
• The net loss for the nine months ended September 30, 2024, was $57.8 million, compared to a net loss of $66.7 million for the same period in 2023.
• The company's cash balance was $29.3 million as of September 30, 2024.
• D-Wave has an accumulated deficit of $540.9 million as of September 30, 2024.
• The company has been actively raising capital through a purchase agreement with Lincoln Park Capital and an at-the-market sales agreement, generating $32.2 million and $20.7 million respectively during the nine months ended September 30, 2024.
• The company fully repaid its Term Loan on October 22, 2024.

Sentiment

Score: 3

Explanation: The document presents a mixed picture with some positive developments, such as increased revenue for the nine-month period and reduced losses, but the overall sentiment is negative due to the significant net loss, decreased Q3 revenue, the going concern warning, and the material weakness in internal controls. The company's reliance on external funding and the need for additional capital also contribute to the negative sentiment.

Positives

• Revenue for the nine months ended September 30, 2024, increased by 11% compared to the same period in 2023, driven by growth in QCaaS revenue.
• The net loss for the nine months ended September 30, 2024, decreased compared to the same period in 2023.
• The company successfully raised capital through the Lincoln Park Purchase Agreement and the ATM Agreement.
• The company fully repaid its Term Loan on October 22, 2024.
• Operating expenses decreased by 8% for the nine months ended September 30, 2024, compared to the same period in 2023.

Negatives

• Q3 2024 revenue decreased by 27% compared to Q3 2023.
• The net loss for Q3 2024 increased compared to Q3 2023.
• The company has a significant accumulated deficit of $540.9 million.
• The company's liquidity condition raises substantial doubt about its ability to continue as a going concern.
• The company has a material weakness in its internal control over financial reporting.

Risks

• The company's liquidity condition raises substantial doubt about its ability to continue as a going concern.
• The company has incurred significant operating losses since inception and expects to continue to do so.
• The company has a material weakness in its internal control over financial reporting.
• The company's share price must remain above $1.00 to continue sales to Lincoln Park under the Purchase Agreement.
• The company may not be able to raise additional capital when needed or under acceptable terms.
• Unfavorable macroeconomic conditions could negatively affect the company's business and results of operations.

Future Outlook

The company expects to continue to incur significant losses for the foreseeable future as it continues to invest in research and development programs and go-to-market initiatives. The company's ability to continue as a going concern is dependent on obtaining additional capital.

Management Comments

• Management has determined that the Company's liquidity condition raises substantial doubt about the Company's ability to continue as a going concern.
• Management will be required to obtain additional capital through the issuance of debt and/or equity, or other arrangements.
• Management is devoting significant time, attention, and resources to remediating the material weakness in internal control over financial reporting.

Industry Context

The quantum computing industry is still in its early stages, with companies like D-Wave focused on developing and commercializing their technology. The company's financial results reflect the high costs associated with research and development in this emerging field, as well as the challenges of generating revenue from early-stage products and services. The company's focus on securing funding and managing its financial position is typical of companies in this sector.

Comparison to Industry Standards

• D-Wave is a pioneer in the quantum computing space, particularly in annealing quantum computing, making direct comparisons challenging.
• Unlike some competitors focusing solely on gate-model quantum computing, D-Wave is developing both annealing and gate-model systems, which diversifies their approach but also increases development costs.
• The company's revenue is primarily derived from QCaaS and professional services, which is a common model for early-stage quantum computing companies.
• The company's significant net losses and negative cash flows are not uncommon in the quantum computing industry, where substantial R&D investments are required.
• The company's reliance on external funding through equity and debt is also typical of companies in this sector, which are often pre-profitability.

Related Party Transactions

• The company entered into a Term Loan with PSPIB Unitas Investments II Inc., a related party to the company's largest shareholder.
• The company had related party transactions with affiliates of DPCM for promissory notes.

Stakeholder Impact

• Shareholders face the risk of dilution due to the issuance of additional equity.
• Employees may be impacted by potential scaling back or discontinuation of operations if sufficient financing is not obtained.
• Customers may be affected by potential disruptions in service if the company's financial situation does not improve.
• Creditors face the risk of non-payment if the company is unable to continue as a going concern.

Next Steps

• The company will continue to focus on expanding its commercial operations and research and development programs.
• The company will need to secure additional capital to continue operations.
• The company will continue to work on remediating the material weakness in its internal control over financial reporting.

Key Dates

Keywords

quantum computing, QCaaS, revenue, net loss, liquidity, financial results, Term Loan, Lincoln Park, ATM Agreement, going concern