Earnings call transcript Q1 2023

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Operator

Hello and welcome to the D-Wave Q1 2023 Earnings Call and Webcast. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Kevin Hunt, Investor Relations. Please go ahead.

Kevin Hunt

morning. good and you, Thank With me and Chief Officer; Baratz, are Markovich, our Alan John our Chief Executive today Financial Officer.

I'd forward-looking be most recent Before call our earnings cautionary begin, like SEC the everyone in remind we company's and that statements may contained contain in report. statements considered should periodic release, and conjunction with to this

and During non-GAAP operating SEC measures under as section non-GAAP additional financial expenses at to website today's adjusted certain rules; release, call, Reconciliations www.dwavesys.com. available company in management will also today's provide certain the are measures information that Investor will EBITDA. and included Relations constitute information earnings our is such of GAAP in which

Alan. call I'll now the hand over to

Alan Baratz

about good Thanks, But morning, a to really of ‘XX. everyone. pleasure Kevin, is here it momentum. business we apprised again keep and you talking and and so QX D-Wave’s quickly connect feels FY it like Well, were just

investors quantum computing as the That us in quantum, and and first technology. computing reminder D-Wave the types to a And only unlike company quantum the unique those a offering in the other market overall advantage in quantum As world is are adoption annealing following mover market commercial accelerating development. industry we in gives focus in the on while of a customers commercial others category, modalities, of annealing with quantum today. the position research

of its the a is optimization to technology and for value annealing valuable awareness is complex Quantum quickly solving enterprise growing. problems

advertising Companies report nearly These global computing like sector. and are optimization many in quantum as detection, computationally most quantum annealing automation, In fundamental that their factory more. the information industry, things employee to solutions system and the turning market business to are complex recognized fraud IDC taxonomy annual a fact, technology are process problems. technology optimization every problems increasingly scheduling, earlier find to this to intelligence month, firm its core on

a navigate and growth key continues in and emerging commercial strategy robust. increase here finding a quantum interest better businesses, D-Wave seemingly Customer customers. producing The of our unsolvable by transformation. today and for computing new customer revenue disruption the that and the accelerate is steady seen grow commercial We've build fact remains portfolio solving as to already in is to ways

four derived to our increased Over the last quarters. from compared four customers by has revenue immediately quarters, commercial when preceding the XX%,

Government welcomed number saw a This Group, the expanded others, new with Interpublic as Institute. well the we and Algorithms POLARISqb agreements Unisys, quarter, non-U.S. or Quantum customers agency, of including a renewed as large and

earlier recognition our down revenue professional quarters, year revenue momentum. the are to due technicalities we While to was with from related engagements, services sales pleased

consecutive by bookings fourth bookings to compared of of $X.X the first QX quarter-to-quarter up quarter represented bookings our sequential growth. million, growth of quarter and fifth First consecutive XXX%, XXXX. of quarter were the year-over-year also quarter

In increased percent for addition, a Professional by average to on deal sequential the QCaaS QX XXX year-over-year size and Services XX% basis. QX combined and a on bookings basis

the the growth. revenue This momentum uptick sequentially size both the that this and of in the accelerating we're point means average size of for of and deal deals. seeing our solutions each believe an quarters. number last With our we in customer adoption And increasing to five

production helps streamline help which is readiness. we ensure audit, important commercial addition, execute data. compliance. that will continue This X and the Type that procurement up companies speed that customer D-Wave’s initiatives SOC require of to the In support recently protection on and X data We an for completed effort

journals. one preeminent a scientific this we quarter, publishing achievements, peer-reviewed most of results milestone the quantum Turning us on achieved now scientific technical very led which coherent nature annealing, to significant to in the

the theory problems. power quantum and advantage system's an complex important a annealing. The up up the quantum speed over computational coherence and coherent class classical a of proved research of of use the matches delivers core annealing between of Our that for direct D-Wave observed shows quantum connection speed

terms, This Layman's significantly solutions shows second, quantum industry, First, a superior solve to that in the faster technology's unequivocally annealing system can it hard rate performance utility problems shows our put to identify our problems; than at milestone classical a marks optimization two uses scale large and research for compute. our To complex things: proving and quantum for our quantum mechanics problems. system

the our research are multiple seeing systems, be Advantage of in with where and increase including system implications celebrate process. optimization. coherence the to breakthrough times this on X obvious the for early increase significance X, quick on fabrication an not to may version developed fronts already is has our generation these will with While competitors important of a achievement our a new we Moreover, future benefits experimental reasons,

I offerings. remind quarter, quantum power the of everyone designed selection new also first the intelligence in new want introduced machine and a to through learning that bring to feature we initiative artificial to

the adoption companies By approaches, helping ways that and understand AI with together detection learning advertising machine fraud feature optimize have computing to positive our has machine innovation. of hybrid enterprise come problem A fuel commercial to it's solve. and key and practical early areas AI models used feature can optimization. and results selection, customers to learning our struggled important TV for quantum address like today intensifies, classical to As selection quantum we're using AI already number in a in tool and

continuing generation expecting and And as system, and to on next plus X, to previously XX-way connectivity annealing I qubits develop which mentioned, coherence. our finally, we're is quantum work X,XXX higher feature Advantage

qubit X of program working systems. on remain and fabrication also benchmarking and our while gate We larger on track circuits model X Oxonium qubit with continue

over turn first John? our to XXXX to I'll review it quarter of provide results. that, John a With

John Markovich

to a fiscal thank XXXX X.X% the and the XXXX. call Thank for our of first you, participate of in in or Revenue you $X.X taking of time Alan, everybody first $XXX,XXX million, decrease was quarter quarter to today.

basis. revenue services professional timing our some revenue Given services of recognition the quarter-to-quarter vary engagements, professional may causing our a nature on of the lumpiness

recognition revenues over ratably QCaaS revenue with straightforward the to the associated the quite term general, recognition respect of of recognize D-Wave's given in component underlying revenue the contract. typically our With that is predictable and revenue QCaaS

associated with our more involved, for phases, variables that recognition many updates phase of complex specifically are defined with given specific is including number starts, and a revenue each multiple professional contracts engagements services However, deliverables. there

However, recognition we professional the the are revenue the generally in advance completion of corresponding of paid services and timeframe.

of as quantum revenue earlier of $X.X of respect This With or quarterly in revenue. total total mix, first $X.X computing quarter revenue XX% to XX% revenue. million that service based the subscription QCaaS quarter QCaaS the revenue the representing million year quarterly our to compares a total represented

profit, are be gross expenses, and bottom operating for bookings, the adjusted adjust most non-cash the investor's in providing tables gross at these margins, first evaluate and non-recurring release earnings These non-GAAP, part, measures expenses. and for improve believe to operating as of EBITDA today's performance. the defined underlying will ability press our we I metrics quarter

services of in customers the revenue to indicator demand associated services quarterly to bookings may the for products our and We investors Due performance revenue, that of performance a business as and at our be professional momentum timing future. with to the than that from metric future our operational customers present expected better analyzing because reflects received our assist times in we bookings periods. believe We in it our bookings revenue. orders generate our define are

the for increase million, quarter-to-quarter consecutive $X.X first And bookings of quarter first As fourth Alan compared or consecutive to $X.X million quarter in of fiscal the sequential the quarter represent in our XXX%, bookings highlighted, in quarter bookings. growth XXXX. fifth first year-over-year an growth previously the of were bookings quarter

revenue two producing XX commercial revenue Over to the commercial immediately XX last quarters preceding commercial those between had four increasing XX% customers, we in periods. four the customers by quarters, compared with

and last to total commercial, revenue XXX quarters customers of a producing customers including had total the four total the compared we immediately government accounts. XXX with preceding quarters, Over in educational four customers,

a non-cash gross profit that With higher decrease first expense respect of a a first $X.X and revenue fiscal quarter significantly XXXX the compensation with total million to totaled the due XXXX $XXX,XXX, sales. from our XX% of the cost quarter $XXX,XXX quarter, the lower decrease stock-based being to of of first fiscal or the for of in principally GAAP

or a gross stock-based profit compensation $XXX,XXX $X.X first between are quarter XXXX gross of GAAP Our to $XXX,XXX, expenses fiscal the the non-GAAP non-GAAP quarter and non-cash of and was difference of The first gross that limited profit million. for non-GAAP for XX.X% is the non-GAAP decrease depreciation from profit. profit gross excluded

of decrease With stock-based XX.X% of first sales. the fiscal fiscal quarter respect XX% lower revenue quarter XXXX and compensation a GAAP the significantly cost to primarily due margin first non-cash the in a to XXXX from in gross gross was of first margins, our gross higher decrease for ’XX XX.X%, fiscal margin quarter of with expense the GAAP of

from the measures. With gross between it respect non-GAAP of stock-based is and was depreciation the limited, margin, the earlier gross a difference the of to the margin margin from non-GAAP the decrease non-cash are or non-GAAP and expenses margin that gross gross year GAAP XX.X%. excluded XX.X%, compensation the non-GAAP Again, XX.X%

difference first expenses. $X.X quarter compensation fiscal non-cash GAAP fiscal $XX.X in $XX.X in public our first million with period stock-based $XX million, including compensation non-cash million, the expense, expenses non-GAAP were compared the and were company operating million depreciation. with compared the to respect in increase quarter headcount expenses, With The in operating XXXX with expenses operating the related higher the along XXXX and million $XX.X with for the first of the expense earlier stock-based with being quarter year

or $XX.X quarter with the first quarter EBITDA to a first a for $XX.X expenses. compared with quarter million first net million in negative or headcount increase related compared $X.XX loss million public fiscal XXXX. quarter share, was fiscal and per was company fiscal per share The primarily of the $X.X loss adjusted of due with million, in negative XXXX the the higher Net for the of $XX.X XXXX first a $X.XX

end million and to ended the million on with the of in $X up move I'll cash, Now from quarter year. at balance $X liquidity. sheet the D-Wave

a the Capital As Lincoln in to $XXX the to June of shares issue obligation of right, a not to stock previously is known conditions subject up has certain over its ELOC to and into of wherein stock Park common This period. three-year disclosed, also million common Park. agreement agreement and of with as the satisfaction but company purchase Lincoln the XXXX, certain entered we limitations sell

the to $XX.X quarter first and ELOC, million shares raised price registration approximately XXXX. additional raise including has being ELOC under share. is million of D-Wave’s per to under of the the during D-Wave's our funds $X stock $XX ability additional above To-date, subject

$XX of The four-year Also was million was Unitas there terms of as $XX and PSP under third million, received affiliate Investments, term and million million agreement secured loan an advance which XX April on are Investments. $XX loan a subject D-Wave XX to and and on entered the advances previously conditions. into second certain initial with $XX disclosed, respectively PSPIB term April

reiterate I will XXXX. now our for fiscal financial guidance

subject our based current and as Our factors cautionary important filings. expectations forth in conditions earnings earlier quarter and guidance first press is is release to today SEC market on issued our set various in and

full of from the XX% revenues, to million quarter. be $XX Based representing range XXXX is for year-over-year the XX, on XX% and million the sequentially the fiscal $XX guidance information as increase revenue to year in second of is of to May to available XXXX, quarter expected is of in first expected which growth

we So earnings. the with provided quarter that we're fourth essentially guidance reaffirming our

year. adjusted maintained the guided, which the million EBITDA, same to the a negative $XX respect we level previously also is is that on at With this

business have significant and expenses operating providing previously is we incorporates to of capital efficient flexibility pace outlined, the of with very a operating respect that us D-Wave's magnitude, with associated and As the timing, It believe high we leverage. impact. model cash degree

that funding by to required this add believe first opportunity the quantum substantially has computing D-Wave publicly company. any independent computing less we with to achieve publicly like sustained and would I milestone to the other held independent company to profitability that quantum be Lastly, held achieve than

meeting With that, a I wrap hand to for will over up. back the Alan

Alan Baratz

Actually, I think we're to questions. it going over to hand

Operator

a first Company. coming be question David question-and-answer Instructions] Benchmark now Williams [Operator Our from is you. from Thank conducting session. We'll

Your now live. line is

David Williams

lumpiness there that around things pro way me letting and the bookings there? the really And that think given trends. here. for about the have the first, through of drivers we but haven't the services have a I year. guess the very recognizing demand are kind about? the Hey, revenue trending different changed Is there previously I what of appreciate we and that good questions thinking so it's helpful any of, kind that revenue that you the changed milestones? morning that understanding anything that’s, I you're revenue, side as or should you guess recognition much about thanks on Are the changed couple in be ask clarity pro services and guess the the of that, talked number,

Alan Baratz

John, do take you want that? to

John Markovich

Sure.

the different. of there's optimizing that variables is So of in are is get David, there's issue historically our been can that the in timeline and each -- complexity -- and milestones dependent essence But any of delayed experienced lot with a a we’re the not a terms agreements from nature not it's the in changes cases, of lot of fundamental that upon be client and sometimes associated agreement, process. can the been some The work with little structured. what bit how these we've feedback

Alan Baratz

duration are professional and agreements when it’s we agreements. the one kind I'll maybe straightforward just on. lumpy, it comes to so whereas the factors between David, done, to And revenue revenue services is all to said agreements John the just dates, the with of, work previously ratably add dates, And to had, a nature clean start agreement, separation deliverables quite QCaaS QCaaS and more agreements recognition thing. And had as associated agreement, various QCaaS services of that other recognition, be be the of the stop professional over on the due tend the

However, in more recently, QCaaS services. and both professional combined customers where agreements is have been some interested it

do good when us, when we they're trying much we services than Now for help professional organization themselves. with faster our this customers they're really move working is -- because move development to

done. the for be in. recognition across to moving it's actually putting impacting feel is starts we single we're those a like direction into this and the good elements But different as agreement, company So way start it a by encouraged the higher revenue agreement

that sort impact And element started exactly of, has we to recognition. so that's, do how another revenue

David Williams

especially the the the the we hallucinations. particularly it of, about could talk ask seeing learning terms an within on And really I mid-optimization intelligence. And and too AI that what area of from that really quantum color talked really or ML machine trends Fantastic. in lot the things like you're seeing in working I have on AI's the there. issues the a that side, hallucinations Can towards an those with then issue. But it big a AI want developing customers in you we're of and demand solution? fix Okay. and appreciate generative like artificial been to seems about it seems is

Alan Baratz

Okay.

data. what model are selection superfluous the to is So do machine proof let into most you're of that the, identify of can learn work yes. give to to separate can't doing different me, is that you in two we answer of I kind the that hallucination? are representative questions. feature the you're you you can that One of, that in mitigate what area while to AI I elements the out definitive tell trying like, learning help the filter space help is of this the data trying And what and to if we

train higher it model trying Condensing that gives makes and you're to what that way accuracy and relative easier to faster you also actually it the in the learn. to much dataset is

the that evidence, mitigate And a of a some removing so hallucinations. But you or might think the proof help superfluous data, hallucination specific or to would not that's by some this you of kind is perspective, possible. just of

had is work I on progressing. customer worked tell we customers one were kind initially in services of, following and that is problem that financial will same more that you we in then interested interested And were, in how two the arena, AI you solution. with understanding Second, what the that, this

in and in drug one development. one services Another actually financial

is us services a that professional so selection offering, caused a feature which offering. to currently define And

of a that interest can offering. we'll a can services you interested feature proof-of-concept a specifically you services have we buy help and application actually in help lot will professional specifically generic you you're you where develop to either proof-of-concept if So buy And of to with where in we engagement or a you selection. selection particular interest feature

cloud have doing exploring of so possibility software-as-a-service a that I that to on you, on exploring I are the that. that. much, caution we report we're actually service. our So specific making nothing But lead

David Williams

Color.

Okay, little you term about in And can tranche lastly color. talk maybe the the milestones just Thank you. second a that’s the or the hurdles excellent John, loan? for maybe

John Markovich

happy to, we'd Yes, be David.

are way, multiyear One financial there and So the the by this got deliverables: is, updated in three principal has all set an been forth Board is filed, agreement with provide that we've plan. the to

advisor portfolio. the had an our our reviewed of to of complete and findings financial independent we've IP property to intellectual have valuation We

David Williams

in all to are hurdle? are feel get Okay, to or to like great. to you And that -- of place that those do achievable things XX get

John Markovich

Yes, do. we

David Williams

much. so Thanks

Operator

Thank Sandler. Instructions] Our [Operator Kumar is from next coming Harsh you. question from Piper

now is line Your live.

Harsh Kumar

had just customers very then guys. Yes. Hey, question, seeing. could very a year-over-year and is I up Obviously, curious down they deal saying. your very, tell noticed you are the like they're size nicely they're that sequentially even quick and putting what us I what dollars I'm impressively, if

generally, was you customers might talk can look that So the out? number up be where to about and curious this you to go I as the Alan, color as picking you

Alan Baratz

customers to is kind to to computational it's to that go the the previously look help can And I not for that a use are said, to average as of, problems. I to to recognizing those best growing. it's system solve the increasingly computing solve us problems, can how quantum their only is them to understand hard as with comment that as number size the size to But could annealing work predict insight deal future, how does why relative become. So me hard into provide large some, the we made where deal

proof-of-concept, try can plus proofs-of-concepts QCaaS, even that a to so are computing multiple to that see down understanding incorporates of broadly path them move their more to deal more not maybe we're but help quantum improve not rather starting a how aggressively just deals the just And businesses. annealing QCaaS

Harsh Kumar

one professional to for revenue like I of with The manner I recognition think and want get peel like you that there any John dollars mentioned the you fundamental? accounting was line. that with back or I'll and again, actually in associated And did in all you just have revenues off see I shenanigans is revenues services. in was ask falloff was

John Markovich

this Well, wouldn't as characterize I Harsh, a first, shenanigan.

may of you ASC number them. rules services outlined there's the of called moving a professional very, familiar our of some set And composition rev agreements a So have to previously, complex as very with that rec we be pieces of XXX. fair

So I where think services headed we on because have the pretty significantly in a bookings bookings indicative we're of particularly is year-over-year basis. best professional increased here, the

So PS will perspective, services or bookings. respect of the we issue portion principally a is from this with those recognize our timing when to professional

Harsh Kumar

Understood. much. you so Thank

Operator

Thank you.

is Shannon from Next coming question from Craig-Hallum. today Richard

Your line is now live.

Richard Shannon

deal Hi or here. for of sense a follow I earlier get I well. still question Thanks size to questions guys. the the quickly the whether length are as same contracts from the my taking of on here. just might want timeframe

deal per of time deal well? the period size So or is increasing is there lengthening as size a period

Alan Baratz

Oh, go John. ahead, sorry, Yes.

John Markovich

Yes. Richard, we basis are seeing term as in deals a average of a sequential increase, a gradual on the increase our well.

Richard Shannon

Maybe, on to a Thank year line for you Helpful and for the to the getting hear. question on EBIT the here. down two-part kind both sales Okay. guidance here of, that.

thinking on about the here So sales I element linearity. question is guess the my here

into the second sequential about just talked growth quarter. You

us something what and accelerating that's bit could And into that how elements characterize margins the obviously rec here we gross half the well? gross for -- EBITDA low of that is greatly looking that's of understanding If get reiterated you. the the guidance year the here the you've margin think dynamics throughout growth on that the versus level the year? to back year that services it about within rev little as then here, a you at helped Thank do is

John Markovich

Sure.

all the organization. outlined XX% exceeded QX. with changed we respect gives We in seen achieving that influx on backlog, So expanded with decent of a call renewal I That will some in we've those us to basis, earlier, on our as pretty the pretty our the And the bookings magnitude the revenue haven't have year entered in services. like qualifications mentioned numbers. the the shift for inquiries this also rates we the of dramatic in growth plus confidence level of guidance inbound size year. we've last with our and sales we also a year-over-year add, the

be of carries towards -- on expect all that higher expansion a going mix significant revenue, given those outlined positive us gross increase to expect as started the be as going is quarter-to-quarter basis professional margin that, the gives margin top we we've year. numbers as the margin with trend of have lot numbers. the of obviously from to be the confidence But achieving a a these a impact a with on services. the respect exit the earlier higher where the the component with being we the a to fairly year to year, gross on margins. there's can will So going function general is well to gross you line to that QCaaS a QCaaS The of And

Richard Shannon

Perfect, guys. on much. you the Okay. line. I'll very jump Thank

Operator

Thank you.

Kevin coming question Next from from WestPark Capital. Garrigan is

now Your line is live.

Kevin Garrigan

you still for tough guys because initially started quantum environment list? Hey, that are good guys. their either question. priority is talking that Thanks seeing or of morning, any waiting companies are on Yes, their macro you sidelines, to my taking a on

Alan Baratz

sales in started I to is number a short There what And commercially cycle that's true close say that a to little a selling think, and close. deals months I are or So are shorten. do since year there we think that is XX-months that over are ago. starting variable. that take XX-months cycles would the of deals I been our sales

have to get try year with closed. a still taking customer might to a we whereas we're ago, to that started So working

lot Now inbounds. of when a customers, times it's we engage

they want -- those because we faster. close kind inbounds us more to they've many than they're understand start the working research, us, have John faster, as close tend out sales and to with some because We to those tend to they have. pointed already deals contacting of value, now done used they're And

least out with a awareness of But a approach the awareness. lot for And to good that like the because we've to of And be which we customers vehicles modalities whether quantum is does or as do a through what of was do. seem And the even that reach there able the quantum for it's technical helps customers, us in time one message this D-Wave analyst to just more been IDC at different report when to put computing. can getting PR raise a to just that greater actually referenceable generally puts first job part, out, then of prime as helps get -- awareness. to raise we out

-- So is that to shorten. cycle sales starting cycle that

to seeing not or cycle not seeing not on away the hold reasons. really environment for I'm customers impacting are, walking or sales not, you It's know, whether economic economic that. is putting their the discussions feet I'm that. that Relative or dragging

left And that's still not experimenting behind. it. it's yet us, the commercial, understand small or saying ready else. of because fact the really be we only it today everybody workforce in being fact can in commercial system, that. ends with is your and to for quantum the must world else up today, quantum the available awareness are ones business for Everybody building to time able deliver start on just to move to fine that the we're for us, the But that that industry a For continue raise today benefit is computing start

Kevin Garrigan

your that. that [Technical Yeah. a a ton sense. you makes your rate as customers? of No, quick then just of And retention us for Difficulty] remind Thank Okay. for

John Markovich

in Kevin historically consistently of Our renewals has business been on our XX%. QCaaS excess

Kevin Garrigan

guys. Thanks, Perfect.

Operator

you. Thank

(ph). from Suji [Capital question Next Desilva from coming Partners] is Roth

is line Your live. now

Suji Desilva

here. the Hi, on John. Congrats progress

quick million in $XX quarter, is the to the a cash current million on that thinking of $XX I run million, cash so take way, your real way just that million, came that’s and of with $XX about correct? would the rough the $X Just end clarify after the

John Markovich

Suji. That's correct,

was commitment, the the $XX So funded the on of it of we tranche first XXth million April. loan closed

Suji Desilva

Great.

presenting you lead was now to a no elements. your channel generation, versus sense want lot from And out channel curious how you partners of generation trying then get sure to make had Just January, partners direct program? I the there's channel when of a -- lead What percent had your your partners coming that's is working other there.

Alan Baratz

Yes.

the some in I talked really We've with think in presented All got Pacific with our been market that be got them qubit. regional the majority I region got are that us NEC exact having like or great kind Europe. of new to of The at and the would that vast said, add our percentage know of, Asia how looking channel the those number. partners. of, Deloitte now a We've grow channel in is that Sigma-i business say business help have is but We've to, and in Multiverse we've exact still about Japan partner, direct. don't to some still actually majority understand as Europe. working direct say partners the partners I'd partners. in successful that you John, maybe it, as we now, kind I

with still channel. out it's early building So the to respect

Suji Desilva

there. to good competitors a efficient funding through more opportunity real last why a the lowest And Alan, capital two That's mentioned from you how and the quick, walk perspective competitors? be it. reasons or grow. something us kind funded, about of you're three just kind question Got Can then of, you'll you business versus

Alan Baratz

that that Yes, made actually was comment. it John

Suji Desilva

Sorry.

Alan Baratz

business, mind has the that drive thing commercial and The today, to over in production, so commercial that future, It's the are many quantum business. less to R&D R&D in the and the D-Wave to in in as this the But are business today look, we that invest last today. everybody commercial become we some to kind ahead it's for our get We're R&D I'll product have share we keep was supporting to need in drive before may we and is where it. want our investment what that driving money to customers have not heavy invested weigh very to like a of, where us applications of positive allowed ROI we piece the point for the and that's that's systems we, of a computers look come. -- capable build top business for us years XX-years that number that John else unlike as then line on thoughts of years means

able said that evidence of what There's that will where without many pursuing, associated think I very challenging just the in difficult, error is is despite which that you going else a correction. believe. to evidence that's fact, no there's be in to and In technology all gate would the in there. is R&D model this heavy there's I And a very value what years be system, ever list everybody past, deliver at away people industry like get to space correction no working error to commercial

the uniquely kind ability to our that's know, you So, of, drive and the on that perspective profitability. business drive we to have

if there's And you'd John, to anything don't like I know add.

John Markovich

No, captured you've I think it, Alan.

Suji Desilva

Great.

Sorry wrong there. for Thanks, the attribution guys.

Operator

you. Thank

Needham is coming question from Bolton Quinn Company. from Next &

is now live. Your line

Quinn Bolton

taking me thank -- let for my question. guys, Hey

XX increase the only several customers prior question, obviously size increased wanted customers, a Just period. sort the to to XX of over in number follow-up seen months I deal just quarters, XX very but on versus latest size the month versus number last of modestly strong the deal the of XX sort in of,

the you of you it's sort of in you if that Quantum the revenue? wondering you're so Do whom comment customers generating engaged customers? Are any in provide in Thanks. support? number customers limiting could of just a so number just can interest have the adequate lack of on number the on And think with thoughts of you you trends

Alan Baratz

Yes.

to maybe weigh a John in. then that pass and at wants take me Let

So words, our to and to all, evaluate predictable as their what a allows are now in production. mentioned compute of, component other the customers day, develop I into growth, start right with what get that is that's have and really simplicity of to we us focused first very end John recognition the working to moving QCaaS fuels build service really production. of really And on the the yes, that quantum in Because then revenue In the helping in of as backlog customers kind because the focus and the at on revenue both applications, to, past. proofs-of-concept to business.

do heavy now, upselling includes current to So that emphasis a right have on very which customers. we our

in upselling a customers. he also And working about this Conference and from And we're moving focused past, to we at drive other with heavy very that Mastercard right that on and to then great is example of do helping path customers optimization, about the team on. production a that. but presented which applications, very think Mastercard then down the so is Qubit’s sales I've I on so And our they're focus talked loyalty the have them Steve -- move those Flinter now mentioned rewards well upsell. customer to talked several

of, absolutely of, that customers. kind relative a the on component So in what's is going to of number increase

Quinn Bolton

revenue that about side we of to for like you expect the Thanks, tracking you're through gross down increasing a that Alan loss, just discretionary I if Thanks. -- John, guess down $XX is of lower. for that into spending your target the brings million year perspective. also loss. looks one loss I or EBITDA guidance Obviously, may do that $XX just sort EBITDA Is for quarter margins on it anything more a million come expense sort the the or quickly EBITDA function be And it year? factored of annualize first $XX EBITDA million reducing ramping, to limit to as loss then

John Markovich

Sure.

Quinn, first in the costs not So recurring we are incurred nature. some that in have quarter,

that example, of of cost the trailing audit, the are have For obligations year. course the also off over some the we

it, over from the our the of that -- growth the expect gross course in the will side as year do essentially the side we that's of help profit expense of top well. that it on So offset

Quinn Bolton

Got it. Thank you.

Operator

[Operator you. I'd like session. or We over the closing for comments. the any Thank end of Instructions] our turn floor further to back question-and-answer reached

Alan Baratz

all, with taking Well Okay. us of first all time today. thank for the you be to here

our journey technology with a that left commercial increased infrastructures is and ready now today. seeing number we're of recognizing I momentum their quantum practical and with of computer-as-a-service commercial behind in quantum sequential customers, the are and today's computing biggest quantum into of their get by started start solutions Companies quarter-over-quarter positive our traction adoption think D-Wave evidenced commercial engaging or the exploring annealing engagements. that should with call technology compute growth they're services quantum quantum incorporating and professional size be and to they bookings as from takeaway and

So with of quarter. end that, again, the I forward look to thank we'll you all for your time and with at talking next you

Operator

today's does That conclude webcast. teleconference you. and Thank

for time have a today. your this We thank participation you You may wonderful your disconnect at day. and line

D-Wave Quantum (QBTS) 19 May 232023 Q1 Earnings call transcript