BURNABY, B.C. & PALO ALTO, Calif. – May 19, 2023 – D-Wave Quantum Inc., (NYSE: QBTS) (“D-Wave” or the “Company”) a commercial quantum computing systems, software and services company, today announced financial results for its first quarter ended March 31, 2023. “Our first quarter results reflect our continued measured progress across key business initiatives including commercial customer adoption, production-readiness efforts, product development and scientific advancements,” said Dr. Alan Baratz, CEO of D-Wave. “We continue to expand our business with commercial customers with the percentage of our revenue derived from commercial customers increasing by 30% when comparing our last four quarters with the immediately preceding four quarters. First quarter bookings of $2.9 million were up by 297% on a year-over-year basis, representing the fifth consecutive quarter of sequential quarter-to-quarter increases in bookings. On the technical front, we achieved a significant scientific milestone, published in Nature, proving that the D-Wave Advantage system’s use of quantum delivers a speedup over classical for an important class of complex problems, 3D spin glasses. The observed speedup matches the theory of coherent quantum annealing and shows a direct connection between coherence and the core computational power of quantum annealing. We believe this research has important implications to optimization and the benefits will increase with future generation systems, including Advantage2.”
Recent Commercial / Business Highlights
- Signed a number of new and expanded existing customer engagements with Forbes Global 2000 companies as well as industry leaders such as Interpublic Group, Unisys US, POLARISqb, and Quantum Algorithms Institute
- Grew first quarter bookings by 297% on a year-over-year basis, representing the fifth consecutive quarter of sequential quarter-to-quarter growth in bookings and the fourth consecutive quarter of year-over-year growth in bookings
- Expanded average deal size comprised of both QCaaS and Professional Services bookings by 430% on a year-over-year basis and by 68% on a sequential Q4 to Q1 basis with the average deal size increasing sequentially for each of the last five quarters
- Completed the SOC 2 Type 1 audit, an important initiative in support of D-Wave’s commercial and production readiness, which helps ensure the protection of customer data
Recent Technical Highlights
- Published significant research findings in Nature that show coherent quantum annealing can improve solution quality faster than classical for a specific problem set, 3D spin glasses. It is a significant achievement not only for D-Wave, but for the industry as a whole, as evidence of quantum technology’s proven superior performance and utility for larger-scale optimization problems
- Introduced a new hybrid solver plug-in for feature selection as part of the company’s focus on helping companies leverage quantum technology to streamline development of machine learning (ML) applications.
First Quarter Fiscal 2023 Financial Highlights
- Revenue: Revenue for the first quarter of fiscal 2023 was $1.6 million, a decrease of $130,000, or 7.6%, from fiscal 2022 first quarter revenue of $1.7 million. Given the nature of our professional services engagements, the timing of the booked revenue may vary from period to period resulting in some degree of variability in the timing of the corresponding revenue recognition.
- Bookings1: Bookings for the first quarter of fiscal 2023 were $2.9 million, an increase of $2.2 million, or 297%, from fiscal 2022 first quarter bookings of $733,000. This represents D-Wave’s fifth consecutive quarter of sequential quarter-to-quarter growth in bookings and the fourth consecutive quarter of year-over-year growth in bookings.
- Average Deal Size1: During the first quarter of fiscal 2023, D-Wave’s average deal size (comprised of both QCaaS and Professional Services bookings) increased by 430% when compared to the first quarter of fiscal 2022. On a sequential quarter-to-quarter basis, the average size deal increased in each of the last five quarters and increased by 68% from the fourth quarter of fiscal 2022 to the first quarter of fiscal 2023
- Customers: Over the last four quarters, we had 65 revenue producing commercial customers compared with 63 commercial customers in the immediately preceding four quarters with commercial revenue increasing by 30% between the two periods. Over the last four quarters, we had a total of 109 revenue producing customers compared with 106 total customers in the immediately preceding four quarters, with total customers including commercial, educational and government accounts.
- GAAP Gross Profit: GAAP gross profit for the first quarter of fiscal 2023 was $421,000, a decrease of $676,000, or 61.6%, from the first quarter of fiscal 2022 GAAP gross profit of $1.1 million, with the decrease due primarily to lower revenue and significantly higher non-cash stock-based compensation expense in the first quarter of fiscal 2023 cost of sales.
- GAAP Gross Margin: GAAP gross margin for the first quarter of fiscal 2023 was 26.6%, a decrease of 37.4% from the 64.0% GAAP gross margin for the first quarter of fiscal 2022 with the decrease due primarily to lower revenue and significantly higher non-cash stock-based compensation expense in the first quarter of fiscal 2023 cost of sales.
- Non-GAAP Gross Profit2: Non-GAAP gross profit for the first quarter of fiscal 2023 was $852,000, a decrease of $317,000, or 27.1%, from the first quarter of fiscal 2022 non-GAAP gross profit of $1.2 million. The difference between GAAP and non-GAAP gross profit is limited to non-cash stock-based compensation and depreciation expenses that are excluded from the non-GAAP gross profit.
- Non-GAAP Gross Margin3: Non-GAAP gross margin for the first quarter of fiscal 2023 was 53.8%, a decrease of 14.4% from the first quarter of fiscal 2022 non-GAAP gross margin of 68.2%. The difference between GAAP and non-GAAP gross margin is limited to non-cash stock-based compensation and depreciation expenses that are excluded from the non-GAAP gross margin.
- GAAP Operating Expenses: GAAP operating expenses for the first quarter of fiscal 2023 were $25.1 million compared with $12.0 million in the first quarter of fiscal 2022 with the year-over-year increase including $5.6 million in non-cash stock-based compensation expense and higher public company and headcount-related expenses.
- Non-GAAP Adjusted Operating Expenses4: Non-GAAP operating expenses for the first quarter of fiscal 2023 were $17.8 million compared with $10.9 million in the year earlier fiscal 2022 first quarter with the difference between GAAP and non-GAAP operating expenses being primarily non-cash stock-based compensation expense and depreciation.
- Net Loss: Net loss for the first quarter of fiscal 2023 was $24.6 million, or $0.20 per share, compared with a net loss of $11.7 million, or $0.09 per share, in the first quarter of fiscal 2022.
- Adjusted EBITDA5: Adjusted EBITDA for the first quarter of fiscal 2023 was negative $16.9 million, compared with a negative $9.8 million in the fiscal 2022 first quarter with the increase due primarily to higher public company and headcount-related expenses.
We are providing non-GAAP gross profit, non-GAAP gross margin, adjusted operating expenses and Adjusted EBITDA as we believe these metrics improve investors’ ability to evaluate our underlying performance. Non-GAAP measures do not have any standardized meaning under GAAP, and therefore may not be comparable to similar measures employed by other companies.
1 “Bookings” is a non-GAAP financial measure that is defined as customer orders received that are expected to generate net revenues in the future. We present the operational metric of bookings because it reflects customers’ demand for our products and services and to assist readers in analyzing our performance in future periods2 “Non-GAAP gross profit” is a non-GAAP financial measure. For a description of non-GAAP gross profit and a reconciliation to gross profit, the closest comparable GAAP financial measure, refer to “Non-GAAP Financial Measures” below and the reconciliation table at the end of this release.3 “Non-GAAP gross margin” is a non-GAAP financial measure. For a description of non-GAAP gross margin and a reconciliation to gross margin, the closest comparable GAAP financial measure, refer to “Non-GAAP Financial Measures” below and the reconciliation table at the end of this release.4 Adjusted operating expenses is a non-GAAP financial measure. For a description of adjusted operating expenses and a reconciliation to operating expenses, the closest comparable GAAP financial measure, refer to “Non-GAAP Financial Measures” below and the reconciliation table at the end of this release.5 Adjusted EBITDA is a non-GAAP financial measure. For a description of Adjusted EBITDA and a reconciliation to net loss, the closest comparable GAAP financial measure, refer to “Non-GAAP Financial Measures” below and the reconciliation table at the end of this release.
Balance Sheet and Liquidity
As of March 31, 2023, D-Wave’s consolidated cash balance totaled $9 million. On April 13, 2023, D-Wave entered into a $50 million four-year term loan agreement with PSPIB Unitas Investments II Inc., an affiliate of PSP Investments. The initial advance under the term loan was $15 million with second and third advances of $15 million and $20 million respectively, subject to certain terms and conditions. The initial $15.0 million tranche is expected to provide the Company with sufficient cash runway until the second $15.0 million tranche. However, there can be no assurance that the Company will be able to meet the conditions necessary to draw on the second and third tranches.As previously disclosed, D-Wave entered into a common stock purchase agreement (Equity Line of Credit or “ELOC”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) on June 16, 2022, wherein the Company has the right, but not the obligation, to issue and sell up to $150 million of shares of its common stock to Lincoln Park, subject to certain limitations and satisfaction of certain conditions, over a 3-year period. Since the agreement was entered into, D-Wave has raised approximately $20 million under the ELOC. D-Wave’s ability to raise additional funds under the ELOC is subject to registration of additional shares and our stock price being above the $1.00 per share.
Fiscal Year 2023 Outlook
We are reiterating the full year 2023 financial guidance provided in our 2022 fourth quarter earnings release dated April 14, 2023 based on current market conditions and expectations. Our guidance is subject to various cautionary factors described below. Based on the information available on May 18, 2023, guidance for the full year 2023 is as follows:
Revenue
- Revenue is expected to be in a range of $12 million to $13 million representing growth of 67% to 80% over the fiscal 2022 revenue. Revenue is expected to increase sequentially in the second quarter from the first quarter.
Adjusted EBITDA
- Adjusted EBITDA is expected to be less than negative $62 million.
1. We are not able to reconcile guidance for Adjusted EBITDA to its most directly comparable GAAP measure, net loss, and cannot provide an estimated range of net loss for such period without unreasonable efforts because certain items that impact net loss, including foreign exchange and stock-based compensation, are not within our control or cannot be reasonably predicted.
