| Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Significant Accounting Policies The Company’s significant accounting policies, which are disclosed in the audited financial statements for the year ended December 31, 2022, and the notes thereto are included in the Company’s Annual Report on Form 10-K Basis of Preparation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP as determined by the Financial Accounting Standards Board (“FASB”). Such condensed consolidated financial statements include the accounts of IonQ and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Unaudited Interim Financial Information The interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q 10-Q Emerging Growth Company The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The Company remains an emerging growth company until the earliest of (i) December 31, 2025, (ii) the last day of the fiscal year in which the Company has total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which the Company is deemed to be a large accelerated filer, which means the market value of the Company’s common stock that is held by non-affiliates non-convertible Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP and the rules and regulations of the SEC requires management to make estimates and assumptions that affect the amounts reported in these condensed consolidated financial statements and accompanying notes. Significant estimates and judgments are inherent in the analysis and measurement of items including, but not limited to: revenue recognition, capitalization of internally developed software and quantum computing costs, useful lives of long-lived assets, and fair value of available-for-sale Fair Value Measurements The Company evaluates the fair value of certain assets and liabilities using the fair value hierarchy. Fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
• Level 1—Observable inputs, which include quoted prices in active markets;
• Level 2—Observable inputs other than the quoted prices in active markets that are observable either directly or indirectly, such as quoted prices in markets that are not active, or other inputs such as broker quotes, benchmark yield curves, credit spreads and market interest rates for similar securities that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;
• Level 3—Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined using pricing models, discounted cash flow methodologies or similar techniques. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. For assets that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability. Assets and liabilities that are measured at fair value on a non-recurring Due to their short-term nature, the carrying amounts reported in the Company’s condensed consolidated financial statements approximate the fair value for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash in banks, checking deposits, money market funds, and commercial paper. The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents. Restricted cash collateralizing letters of credit is included in other noncurrent assets in the condensed consolidated balance sheets. The Company issues letters of credits in the ordinary course of business, including for lease arrangements. As of both March 31, 2023 and December 31, 2022, letters of credit totaling The following table provides a reconciliation of cash and restricted cash included in the condensed consolidated balance sheets to the amounts included in the condensed consolidated statements of cash flows (in thousands):
March 31, December 31,
2023 2022
Cash and cash equivalents $ 51,901 $ 44,367
Restricted cash 2,000 2,000
Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows $ 53,901 $ 46,367
Accounts Receivable and Allowance for Credit Losses Accounts receivable are non-interest
March 31, December 31,
2023 2022
Billed accounts receivable $ 1,001 $ 1,150
Unbilled accounts receivable 836 2,142
Total accounts receivable $ 1,837 $ 3,292
On a periodic basis, management evaluates its accounts receivable and determines whether to provide an allowance for credit losses. This assessment is based on management’s evaluation of relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the receivable. The Company did not have any allowance for credit losses as of either March 31, 2023 or December 31, 2022. Materials and Supplies Materials and supplies are carried at average cost and recorded in prepaid expenses and other current assets in the condensed consolidated balance sheets. Materials and supplies used in the production of quantum computing systems to be made commercially available are capitalized to property and equipment when installed. Materials and supplies used for maintenance or research and development efforts are expensed when consumed. The Company capitalized $0.8 million of materials and supplies to property and equipment for the three months ended March 31, 2023. Investments Management determines the appropriate classification of investments at the time of purchase based upon management’s intent with regard to such investments. The Company primarily invests in debt securities and classifies its investments as available-for-sale re-evaluated March 31, 2023 The Company performs periodic evaluations to determine whether any declines in the fair value of investments below amortized cost are credit losses or impairments. The evaluation consists of qualitative and quantitative factors regarding the severity of the unrealized loss, as well as the Company’s ability and intent to hold the investments until a forecasted recovery occurs. Declines in fair value are considered to be credit losses if they are related to deterioration in credit risk or are considered impairments if it is likely that the underlying securities will be sold prior to a full recovery of their cost basis. Credit losses and impairments are determined based on the specific identification method and are Property and Equipment, Net Property and equipment, net is stated at cost less accumulated depreciation. Historical cost of fixed assets is the cost as of the date acquired. Hardware and labor costs associated with the building of quantum computing systems are capitalized. Costs to Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Useful lives are as follows:
Computer equipment and acquired computer software 3 – 5 years
Machinery, equipment, furniture and fixtures 5 – 7 years
Quantum computing systems 3 years
Leasehold improvements Shorter of the lease term or the estimated useful life of the related asset Effective October 1, 2022, the Company revised the accounting useful life of quantum computing systems, which was determined to be a change in accounting estimate and is being applied prospectively. This change in accounting estimate is not material for the three months ended March 31, 2023. The estimated useful life for quantum computing systems was previously 2 years. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use The Company records a ROU asset and lease liability in connection with its operating leases. The Company’s lease portfolio is comprised primarily of real estate leases, which are accounted for as operating leases. The Company elected the practical expedient to not separate lease and non-lease ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments, including the impact of any lease incentives, as applicable, over the lease term. Amendments to a lease are assessed to determine if it represents a lease modification or a separate contract. Lease modifications are reassessed as of the effective date of the modification using an incremental borrowing rate based on the information available at the commencement date. For modified leases the Company also reassesses the lease classification as of the effective date of the modification. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate, because the interest rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The Company’s lease terms include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company considers contractual-based factors such as the nature and terms of the renewal or termination, asset-based factors such as physical location of the asset and entity-based factors such as the importance of the leased asset to the Company’s operations to determine the lease term. The Company generally uses the base non-cancelable Capitalized Internally Developed Software Capitalized internally developed software, which is included in intangible assets, net, consists of costs to purchase and develop internal-use software, which the Company primarily uses to provide services to its customers. The costs to purchase and develop internal-use software are capitalized from the time that the preliminary project stage is completed, and it is considered probable that the software will be used to perform the function intended, until the time the software is placed in service for its intended use. Any costs incurred during subsequent efforts to upgrade and enhance the functionality of the software are also capitalized. Once this software is ready for its intended use, these costs are amortized on a straight-line basis over the estimated useful life of the software, which is typically assessed to be three years. During the three months ended March 31, 2023 and 2022, the Company capitalized $ internal-use Impairment of Long-Lived Assets Long-lived assets, such as property and equipment and other long-term assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying amount of the underlying asset exceeds its fair value. No impairment loss was recognized for the three months ended March 31, 2023 or 2022. Warrant Liabilities The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued classified as non-current liabilities as Revenue Recognition The Company derives revenue from providing access to its quantum-computing-as-a-service (“QCaaS”), consulting services related to co-developing To support this core principle, the Company applies the following five step approach:
1. Identify the contract with the customer
2. Identify the performance obligations
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognize revenue when (or as) the entity satisfies a performance obligation The Company has determined that its QCaaS contracts represent a combined, stand-ready performance obligation to provide access to its quantum computing systems together with related maintenance and support. The transaction price may consist of a variable fee based on usage of its quantum computing systems or a fixed fee for a minimum volume of usage to be made available over a defined period of access. Fixed fee arrangements may also include a variable component whereby customers pay an amount for usage over contractual minimums contained in the contracts. The Company has determined that contracts that contain consulting services related to co-developing quantum Certain of the Company’s contracts contain multiple performance obligations, most commonly in contracts for specialized quantum computing systems together with related maintenance and support. Such contracts may also include access to the Company’s QCaaS. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. When there are multiple performance obligations in a contract, the Company allocates the transaction price to each performance obligation based on its standalone selling price when available. We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers. When the standalone selling price is not known, due to it being either highly variable or uncertain, the Company allocates the transaction price using the residual approach. Performance obligations are satisfied over time if the customer receives the benefits as we perform the work, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and we have a contractual right to payment for performance to date. Revenue is recognized on performance obligations satisfied over time based on the efforts incurred to date relative to the total expected effort. For the three months ended March 31, 2023 and 2022, all of the revenue recognized by the Company was recognized based on transfer of service over time. There were no revenues recognized at a point in time. In arrangements with cloud service providers, the cloud service provider is considered the customer and IonQ does not have any contractual relationships with the cloud service providers’ end users. For these arrangements, revenue is recognized at the amount charged to the cloud service provider and does not reflect any mark-up The Company may enter into multiple contracts with a single counterparty at or near the same time. The Company will combine contracts and account for them as a single contract when one or more of the following criteria are met: (i) the contracts are negotiated as a package with a single commercial objective; (ii) consideration to be paid in one contract depends on the price or performance of the other contract; and (iii) goods or services promised are a single performance obligation. Consideration payable to a customer includes cash amounts that an entity pays, or expects to pay, to the customer. For arrangements that contain consideration payable to a customer, the Company uses judgment in determining whether such payments are a reduction of the transaction price or a payment to the customer for a distinct good or service. The variable fees associated with the QCaaS are generally billed a month in arrears. Customers also have the ability to make advance payments. If a contract exists under ASC 606, advance payments are recorded as a contract liability until services are delivered or obligations are met and revenue is earned. Contract liabilities to be recognized in the succeeding 12-month non-current As of March 31, 2023, approximately $30.4 million of revenue is expected to be recognized from remaining performance obligations that are unsatisfied (or partially unsatisfied) for non-cancelable The following table summarizes the changes in unearned revenue for the three months ended March 31, 2023 (in thousands):
Total
Balance as of December 31, 2022 $ 9,930
Revenue recognized (3,446 )
New deferrals, net 764
Balance as of March 31, 2023 $ 7,248
For contractual arrangements where consideration is paid up-front, up-front Assets Recognized from Costs to Obtain a Contract Sales commissions paid to employees and third parties are considered incremental costs to obtain a contract with a customer. These costs are capitalized in the period a customer contract is executed and are amortized as an expense consistent with the transfer of the goods or services to the customer. Capitalized costs are recorded in prepaid expenses and other current assets and other noncurrent assets in the condensed consolidated balance sheets. Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets is one year or less. As of March 31, 2023 and December 31, 2022, total capitalized costs were $0.9 million and $1.0 million, respectively. Amortization expense was $0.1 million and zero for the three months ended March 31, 2023 and 2022, respectively. Stock-Based Compensation The Company measures and records the expense related to stock-based awards based on the fair value of those awards as determined on the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period and uses the straight-line method to recognize stock-based compensation. The Company uses the Black-Scholes-Merton (“Black- Scholes”) option-pricing model to determine the fair value of stock awards and the estimated fair value for stock options. The Black-Scholes option- pricing model requires the use of subjective assumptions, which determine the fair value of share-based awards, including the fair value of the Company’s common stock, the option’s expected term, the price volatility of the underlying common stock, risk-free interest rates, and the expected dividend yield of the common stock. The assumptions used to determine the fair value of the stock awards represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. The Company records forfeitures as they occur. Stock-based compensation cost for restricted stock units is measured based on the fair value of the Company’s common stock on the grant date. For awards with a performance-based vesting condition, the Company records stock-based compensation cost if it is probable that the performance condition will be achieved. The Company records stock-based compensation expense for incentive compensation liabilities based on estimated payments to employees for which the Company expects to settle the liability by granting restricted stock units. For these awards, stock-based compensation expense is accrued commencing at the service inception date, which generally precedes the grant date, through the end of the requisite service period. The Company obtained third-party valuations to estimate the fair value of its common stock for awards granted prior to the Business Combination, for purposes of measuring stock-based compensation expense. The third-party valuations were prepared using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants (“AICPA”) Accounting &Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, investments, and trade accounts receivable. The Company maintains the majority of its cash, cash equivalents, restricted cash and investments with two financial institutions. The Company’s deposits routinely exceed amounts guaranteed by the Federal Deposit Insurance Corporation. While the Company has not experienced any losses in such accounts, the recent failure of Silicon Valley Bank (“SVB”), at which the Company held cash and cash equivalents in multiple accounts, exposed the Company to limited credit risk prior to the completion by the Federal Deposit Insurance Corporation of the resolution of SVB in a manner that fully protected all depositors. The Company’s accounts receivable are derived from customers primarily located in the U.S. The Company performs periodic evaluations of its customers’ financial condition and generally does not require its customers to provide collateral or other security to support accounts receivable and maintains an allowance for credit losses. Credit losses historically have not been material. Significant customers are those that represent more than 10% of the Company’s total revenue. The Company’s revenue was primarily from three significant customers for the three months ended March 31, 2023, and from two significant customers for the three months ended March 31, 2022. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding for the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock during the period, plus common stock equivalents, outstanding during the period. If the Company reports a net loss, the computation of diluted loss per share excludes the effect of dilutive common stock equivalents, as their effect would be antidilutive. The following table sets forth the computation of basic and diluted loss per share attributable to common stockholders (in thousands, except share and per share data):
Three Months Ended
2023 2022
Numerator:
Net loss attributable to common stockholders $ (27,338 ) $ (4,227 )
Denominator:
Weighted average shares used in computing net loss per share attributable to common stockholders—basic and diluted 200,112,855 196,183,247
Net loss per share attributable to common stockholders—basic and diluted $ (0.14 ) $ (0.02 ) In periods with a reported net loss, the effect of anti-dilutive stock options, unvested restricted stock units, unvested common stock (including unvested restricted common stock) and warrants are excluded and diluted loss per share is equal to basic loss per share. The following is a summary of the weighted average common stock equivalents for the securities outstanding during the respective periods that have been excluded from the computation of diluted net loss per common share, as their effect would be anti-dilutive:
Three Months Ended
2023 2022
Common stock options outstanding 24,499,968 21,108,390
Warrants to purchase common stock 8,301,202 8,301,202
Public warrants 5,231,486 5,232,471
Unvested restricted stock units 9,077,343 1,310,471
Unvested common stock 842,454 1,351,261
Total 47,952,453 37,303,795
Recently Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13, Recently Issued Accounting Standards Not Yet Adopted In August 2020, the FASB issued ASU 2020-06, 470-20) 815-40) |
