Insider Brief
- D-Wave reports 2023 Q3 revenue of $2.6 million, a 51% year-over-year increase.
- Company reports net Loss for the third quarter of fiscal 2023 was $15.8 million, or $0.12 per share.
- Deal Size per booking increased by 172% for commercial customers and 178% for all customers.
PRESS RELEASE — D-Wave Quantum Inc., (NYSE: QBTS) (“D-Wave” or the “Company”) a leader in commercial quantum computing systems, software, and services, today announced financial results for its fiscal third quarter ended September 30, 2023.
“We believe that this is a pivotal moment in quantum computing, as D-Wave leads the industry’s transformative shift from research and developmental experimentation to true delivery of quantum’s enterprise value and utility. Our annealing quantum computing solutions are driving real business impact today, and we believe that our third quarter results reflect a growing recognition that D-Wave is leading the enterprise quantum wave,” said Dr. Alan Baratz, CEO of D-Wave. “Once again, we experienced quarter-over-quarter and year-over-year growth in the number of customer bookings, commercial revenue, and the size of commercial deals. We’re also seeing customers moving from development to deployment of applications, as they are seeing first-hand the business impact and near-term advantage that can be achieved using D-Wave’s annealing quantum computing solutions. That growing commercial success, coupled with our ongoing world-class product development and scientific advancements, reflect, in our opinion, impressive progress across all facets of our business.”
Recent Commercial / Business Highlights
Signed a number of new and expanded existing customer engagements in the third quarter, including agreements with financial services giant BBVA, European quantum innovation hub QuantumBasel, Japanese mobile phone company NTT Docomo, e-infrastructure development leader Poznan Superconducting and Networking Center, and European fintech unicorn Satispay.
Worked with commercial customers on a variety of new quantum and quantum-hybrid applications spanning customer rewards optimization, radar scheduling for national security, HVAC system design optimization, 6G satellite network optimization and much more.
Initiated exploration of our quantum technology’s integration with new machine learning areas, including prompt optimization and model training, to bring the power of quantum to artificial intelligence/machine learning for our customers.
Grew third quarter Bookings (as defined below) by 53% on a year-over-year basis, representing the Company’s sixth consecutive quarter of year-over-year growth in Bookings; YTD Bookings totaled $8.4 million, an increase of $4.6 million, or 125% from the same period of 2022.
Grew third quarter Revenue by 51% on a year-over-year basis, and 50% on a sequential quarter-to-quarter basis.
The Average Deal Size per booking increased by 172% for commercial customers and 178% for all customers when comparing the most recent four quarters with the immediately preceding four quarters.
Substantially improved the Company’s liquidity position with a quarter-end cash balance of $53.3 million, the highest quarter-end cash balance in the Company’s history.
Recent Technical Highlights
Announced notable progress in the development of high coherence qubits, which are qubits capable of doing quantum computations for a longer period of time without errors; D-Wave has designed, manufactured, and operated fluxonium qubits that have demonstrated quantum properties that are comparable to the best seen to date in peer-reviewed scientific literature, which is expected to have significant impact on our future quantum technologies.
Successfully demonstrated quantum error mitigation, an important technique for reducing errors in quantum computation, on the upcoming Advantage2TM annealing quantum system prototype, extending the coherent annealing range by nearly an order of magnitude.
Introduced new algorithmic updates to our Constrained Quadratic Model hybrid solver that deliver increased performance for existing binary problem classes, which can include offer allocation, portfolio optimization, and satisfiability. These hybrid solver enhancements are particularly impactful to our customers in the financial services industry.
Introduced new administration features that give customers the ability to manage their own organization and associated projects, an important feature given the rapid growth of our reseller and partner programs.
Released new “zero downtime deployment” features that allow us to deploy new software enhancements within our LeapTM real-time quantum cloud service without service interruption, streamlining and expediting our ability to bring innovative new solutions to customers faster while maintaining production-grade service and stability.
Entered the final stages of securing SOC 2 Type 2 compliance, an important initiative that will help ensure the protection of customer data as well as streamline and speed up procurement for companies that require data compliance.
Third Quarter Fiscal 2023 Financial Highlights
Revenue: Revenue for the third quarter of fiscal 2023 was $2.6 million, an increase of $0.9 million, or 51%, from fiscal 2022 third quarter Revenue of $1.7 million, and an increase of $0.9 million, or 50%, from the immediately preceding fiscal 2023 second quarter Revenue of $1.7 million. Given the nature of our professional services engagements, the timing of Revenue recognition associated with our professional services contracts may vary from period to period.
Bookings1: Bookings for the third quarter of fiscal 2023 were $2.9 million, an increase of $1.0 million, or 53%, from fiscal 2022 third quarter Bookings of $1.9 million, and an increase of $0.4 million, or 16%, from the immediately preceding fiscal 2023 second quarter Bookings of $2.5 million. This represents D-Wave’s sixth consecutive quarter of year-over-year growth in Bookings.
Average Deal Size: In comparing the most recent four quarters with the immediately preceding four quarters, the Average Deal Size per booking increased by 172% for commercial customers and 178% for all customers.
Commercial Traction: In comparing the last four fiscal quarters with the immediately preceding four fiscal quarters:
- revenue derived from commercial customers increased by $2.2 million, or 62%;
- average revenue per commercial customer increased by 68%;
- commercial revenue as a percentage of total revenue increased to 70% from 50%; and
- we had 73 commercial customers compared to 76 commercial customers, including nearly two dozen Forbes Global 2000 companies.
Customers: Over the last four quarters, we had a total of 123 revenue producing customers compared with 121 revenue producing customers in the immediately preceding four quarters, with total customers including commercial, educational and government accounts.
GAAP Gross Profit: GAAP Gross Profit for the third quarter of fiscal 2023 was $1.5 million, an increase of $0.5 million, or 47%, from the third quarter of fiscal 2022 GAAP Gross Profit of $1.0 million, and an increase of $0.8 million, or 117%, from the immediately preceding fiscal 2023 second quarter GAAP Gross Profit of $0.7 millionwith the increase due primarily to the growth in revenue.
GAAP Gross Margin: GAAP Gross Margin for the third quarter of fiscal 2023 was 59.7%, representing the second consecutive quarter of sequential quarter-to-quarter improvement in GAAP Gross Margins due primarily to the growth in revenue. The 59.7% GAAP Gross Margin for the third quarter of fiscal 2023 was 1.7%lower than the 61.4% GAAP Gross Margin for the third quarter of fiscal 2022 with the decrease due entirely to higher non-cash stock-based compensation expense in the third quarter of fiscal 2023 cost of sales.
Non-GAAP Gross Profit: Non-GAAP Gross Profit for the third quarter of fiscal 2023 was $1.9 million, an increase of $0.8 million, or 72%, from the third quarter of fiscal 2022 Non-GAAP Gross Profit of $1.1 million,and an increase of $0.9 million, or 95%, from the immediately preceding fiscal 2023 second quarter Non-GAAP Gross Profit of $1.0 million with the increase due primarily to higher revenue. 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 Margin: Non-GAAP Gross Margin for the third quarter of fiscal 2023 was 75.6%, an increase of 9.2% from the third quarter of fiscal 2022 Non-GAAP Gross Margin of 66.4% and an increase of 17.5% from the immediately preceding fiscal 2023 second quarter Non-GAAP Gross Margin of 58.1% with the increase due primarily to higher Revenue. 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 third quarter of fiscal 2023 were $19.9 millioncompared with $16.2 million in the third quarter of fiscal 2022 with the increase due primarily to higher non-cash stock-based compensation expense and higher public company and headcount-related expenses. On a sequential quarter-to-quarter basis, the $19.9 million in fiscal 2023 third quarter GAAP Operating Expenses represents the second consecutive quarter of sequential quarter-to-quarter decreases in GAAP Operating Expenses driven primarily by lower general and administrative expenses.
Non-GAAP Adjusted Operating Expense3: Non-GAAP Adjusted Operating Expenses for the third quarter offiscal 2023 were $13.5 million compared with $14.2 million in the year earlier fiscal 2022 third quarter. On a sequential quarter-to-quarter basis, the $13.5 million in fiscal 2023 third quarter Non-GAAP Adjusted Operating Expenses represents the second consecutive quarter of sequential quarter-to-quarter decreases in Non-GAAP Adjusted Operating Expenses across all of the operating expense categories. The difference between GAAP and Non-GAAP Adjusted Operating Expenses is primarily non-cash stock-based compensation expense, non-recurring one-time expenses, and amortization and depreciation expense.
Net Loss: Net Loss for the third quarter of fiscal 2023 was $15.8 million, or $0.12 per share, compared with a Net Loss of $13.3 million, or $0.11 per share, in the third quarter of fiscal 2022. On a sequential quarter-to-quarter basis, the $15.8 million in fiscal 2023 third quarter Net Loss represents the second consecutive quarter of sequential quarter-to-quarter improvement in Net Loss that was driven by higher gross profit in combination with lower operating expenses.
Adjusted EBITDA Loss3: Adjusted EBITDA Loss for the third quarter of fiscal 2023 was $11.6 million, a decrease of $1.4 million, or 11%, compared with the $13.0 million Adjusted EBITDA Loss in the fiscal 2022third quarter. On a sequential quarter-to-quarter basis, the $11.6 million in fiscal 2023 third quarter Adjusted EBITDA Loss represents the second consecutive quarter of sequential quarter-to-quarter improvement in Adjusted EBITDA Loss.
Financial Results for the Nine Months of Fiscal Year 2023
Revenue: Revenue for the nine months ended September 30, 2023, was $5.9 million, an increase of $1.1 million, or 22%, from Revenue of $4.8 million in the nine months ended September 30, 2022.
Bookings1: Bookings for the nine months ended September 30, 2023, were $8.4 million, an increase of $4.6 million, or 125%, from Bookings in the nine months ended September 30, 2022.
GAAP Gross Profit: GAAP Gross Profit for the nine months ended September 30, 2023, was $2.7 million, a decrease of $0.3 million, or 9%, from $2.9 million in GAAP Gross Profit for the nine months ended September 30, 2022, with the decrease due primarily to higher stock-based compensation expenses in fiscal 2023 cost of sales.
GAAP Gross Margin: GAAP Gross Margin for the nine months ended September 30, 2023, was 45.4%, a decrease of 15.7% from the 61.1% GAAP Gross Margin for the nine months ended September 30, 2022, with the decrease due primarily to higher stock-based compensation expenses in fiscal 2023 cost of sales.
Non-GAAP Gross Profit3: Non-GAAP Gross Profit for the nine months ended September 30, 2023, was $3.8 million, an increase of $0.7 million, or 21%, from the Non-GAAP Gross Profit of $3.1 million in the nine months ended September 30, 2022. 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 nine months ended September 30, 2023, was 64.6%, a decrease of 0.7% from the 65.3% Non-GAAP Gross Margin in the nine months ended September 30, 2022. 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 nine months ended September 30, 2023, were $66.7 million compared with $41.3 million in the nine months ended September 30, 2022, with the year-over-year increase including $13.1 million in non-cash stock-based compensation expense and higher public company and headcount-related expenses.
Non-GAAP Adjusted Operating Expense3: Non-GAAP Adjusted Operating Expenses for the nine months ended September 30, 2023, were $47.2 million compared with $37.2 million in the nine months ended September 30, 2022, with the difference between GAAP and Non-GAAP Adjusted Operating Expenses being primarily non-cash stock-based compensation expense, non-recurring one-time expenses, and amortization and depreciation expense.
Net Loss: Net Loss for the nine months ended September 30, 2023, was $66.3 million, or $0.50 per share, compared with a Net Loss of $38.7 million, or $0.32 per share, in the nine months ended September 30, 2022.
Adjusted EBITDA Loss3: Adjusted EBITDA Loss for the nine months ended September 30, 2023, was $43.4 million, compared with $34.0 million in the nine months ended September 30, 2022, with the increase due primarily to higher public company and headcount-related expenses.
Balance Sheet and Liquidity
As of September 30, 2023, D-Wave’s consolidated cash balance totaled $53.3 million, an increase of $45.8 million, or 610%, from the $7.5 million consolidated cash balance at the end of the immediately preceding fiscal 2023 second quarter ended June 30, 2023. The $53.3 million cash balance represents the Company’s largest quarter-end cash balance in its history.
During the nine months ended September 30, 2023, D-Wave raised over $94.0 million in debt and equity including $63.5 million in equity, primarily from the Company’s common stock purchase agreement (“Equity Line of Credit” or “ELOC”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), and $30.5 million in debt, primarily with PSPIB Unitas Investments II Inc., an affiliate of PSP Investments.
As previously disclosed, on June 16, 2022, D-Wave entered into the ELOC with Lincoln Park 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. As of September 30, 2023, D-Wave has $84.4 million in remaining capacity under the ELOC with just over two years remaining under the Lincoln Park ELOC commitment. D-Wave’s ability to raise funds under the ELOC is subject to a number of conditions including having a sufficient number of registered shares and having D-Wave’s stock price above $1.00 per share.
As previously disclosed, on April 13, 2023, D-Wave entered into a $50 million four-year term loan agreement (the “PSP Loan”) with PSPIB Unitas Investments II Inc., an affiliate of PSP Investments. The loan agreement is comprised of three individual tranches of $15 million, $15 million, and $20 million respectively and, to date, D-Wave has drawn the first two tranches totaling $30 million. However, the issuance of the third tranche is subject to certain conditions and, there can be no assurance that the Company will be able to meet the conditions necessary to draw on the third tranche.
Fiscal Year 2023 Outlook
Based on the information available on November 8, 2023, guidance for the full year 2023 is as follows and our guidance is subject to various cautionary factors described below:
Revenue
We expect fiscal 2023 revenue to be in a range of $10 million to $11.5 million.
We expect fiscal 2023 Adjusted EBITDA Loss[4] to be less than $56 million.
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