EPS of $-0.17 increased by 407.5% from previous year
Gross margin of 73.1%
Net income of -22.22M
"Subodh Kulkarni: "we are thrilled that leading government agencies and national labs are beginning to choose Rigetti’s established fabrication capabilities to advance their quantum computing research and development."" - Subodh Kulkarni
In the third quarter of 2023, Rigetti Computing Inc (RGTI) reported revenues of $3.1 million, reflecting a 10.7% increase year-over-year but a 6.7% decrease from the prior quarter. This revenue fluctuation illustrates the variable nature of contract deliverables particularly with major government contracts. Management highlighted significant milestones during the quarter, including the expansion of their Quantum Processing Unit (QPU) sales and the securing of vital long-term contracts with the U.S. Air Force and DARPA, enhancing Rigetti’s positioning in the burgeoning quantum computing sector.
Despite witnessing a net loss of $22.2 million, up from a $18.8 million loss year-over-year, operational expenses decreased significantly due to reduction in stock compensation and workforce restructuring, resulting in a reduction of operating losses by nearly 46%. Rigetti’s strong gross profit margin of 73% underscores the company’s pricing power and operational efficiency amidst ongoing investments in R&D. As the industry moves closer to achieving quantum advantage, Rigetti’s expanding customer base and technological advancements position it favorably against competitors.
Key Performance Indicators
Revenue
3.11M
QoQ: -6.67% | YoY:10.73%
Gross Profit
2.27M
73.14% margin
QoQ: -16.81% | YoY:11.98%
Operating Income
-16.83M
QoQ: 3.67% | YoY:-46.26%
Net Income
-22.22M
QoQ: 30.94% | YoY:459.71%
EPS
-0.17
QoQ: 30.77% | YoY:407.46%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $3.1 million (YoY: +10.7%, QoQ: -6.7%)
**Gross Profit:** $2.27 million (Gross Margin: 73%)
**Operating Income:** -$16.8 million (YoY: -46.3% improvement)
**Net Income:** -$22.2 million (EPS: -$0.17, YoY: -$0.16)
**Operating Expenses:** $19.1 million, down from $33.4 million a year ago
Financial Highlights
### Revenue Performance
- Revenue: $3.1 million (YoY: +10.7%, QoQ: -6.7%)
- Gross Profit: $2.27 million (Gross Margin: 73%)
### Profitability Metrics
- Operating Income: -$16.8 million (YoY: -46.3% improvement)
- Net Income: -$22.2 million (EPS: -$0.17, YoY: -$0.16)
- Operating Expenses: $19.1 million, down from $33.4 million a year ago
### Cash Flow and Balance Sheet Strength
- Cash & Equivalents: $41.8 million, up from $21.7 million last quarter
- Available Cash Including Investments: $110.2 million
- Current Ratio: 5.06, signaling strong liquidity
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.11M
10.73%
-6.67%
Gross Profit
2.27M
11.98%
-16.81%
Operating Income
-16.83M
-46.26%
3.67%
Net Income
-22.22M
459.71%
30.94%
EPS
-0.17
407.46%
30.77%
Key Financial Ratios
currentRatio
5.06
grossProfitMargin
73.1%
operatingProfitMargin
-542%
netProfitMargin
-715%
returnOnAssets
-13.4%
returnOnEquity
-19.7%
debtEquityRatio
0.3
operatingCashFlowPerShare
$-0.03
freeCashFlowPerShare
$-0.05
priceToBookRatio
1.58
priceEarningsRatio
-2
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Key Management Insights
- Growth of QPU Sales: Subodh Kulkarni noted, “we continue to grow our QPU systems sales,” indicating robust demand from scientific and governmental sectors.
- Contractual Agreements: The Air Force Research Lab contract was emphasized with, “we expect it to be sizable, but we cannot quantify sitting here right now,” reflecting management's confidence in future revenues.
- Technological Advancement: On R&D, Kulkarni reiterated their commitment, stating “our plan continues to be to get to 98% median 2-qubit fidelity,” showcasing strong goals for technical growth.
- Market Expectations: Kulkarni remarked, “as we approach that quantum advantage in the next two to three years, we definitely expect commercial interest to grow,” underscoring the transformative potential of Rigetti’s technology.
Subodh Kulkarni: "we are thrilled that leading government agencies and national labs are beginning to choose Rigetti’s established fabrication capabilities to advance their quantum computing research and development."
— Subodh Kulkarni
Jeff Bertelsen: "Revenue variability is to be expected at this stage of the company's evolution given the variable nature of contract deliverables and timing with major government agencies."
— Jeff Bertelsen
Forward Guidance
Rigetti’s management projects continued revenue growth driven by increased sales of QPUs and advancements in their Quantum Cloud Services. With contracts already booked, expectations are set for substantial revenue streams particularly from government sectors. Management mentioned expectations of having between $88 million and $94 million in cash reserves by the end of 2023, which would ensure operational continuity as they transition towards profitability. Critical factors to monitor include developments in competitive technology, achievement of technical milestones, and expansions into commercial markets beyond governmental contracts.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
RGTI Focus
73.14%
-5.42%
-19.70%
-2.00%
QUBT
53.00%
-152.03%
-10.20%
-2.45%
IONQ
67.30%
-6.88%
-8.99%
-16.88%
DM
4.50%
-1.06%
-11.40%
-2.54%
QMCO
40.60%
-7.95%
9.68%
-84.70%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Rigetti Computing Inc presents a compelling investment opportunity within the quantum computing landscape given its pioneering technology, federal contracts, and strong strategic direction. While ongoing operational challenges and recent net losses pose risks, the company’s substantial cash reserves, and projected growth in QPU sales solidify a promising outlook for investors. Nevertheless, close monitoring of technological advancements and competitive positioning remains essential to foresee potential impacts on performance.
Key Investment Factors
Growth Potential
Rigetti's role as a pioneer in the quantum computing industry positions it well for growth, particularly given its expanding list of government contracts and technological advancements that may yield significant long-term gains.
Profitability Risk
The primary risks involve high operational costs, reliance on government contracts, and the long timelines associated with achieving commercial viability in quantum computing.
Financial Position
Rigetti's balance sheet remains robust, with a current ratio well above industry norms indicating good liquidity, though ongoing losses highlight the need for sustainable revenue generation.
SWOT Analysis
Strengths
Strong gross margins of 73% indicating healthy pricing power
Growth in QPU sales with contracts from government agencies
Established technology development capability with ongoing R&D investments
Weaknesses
Significant net losses reflecting operational inefficiencies
Reliance on government contracts introduces revenue variability
High operating expenses constrain profitability
Opportunities
Increasing interest in quantum computing across government and private sector
Potential for scalable solutions in quantum processing
Upcoming product launches, including the Ankaa-2 84 qubit system may attract new clients
Threats
Intense competition from other quantum computing firms such as IonQ and Quantum Machines
Technological risks associated with achieving quantum advantage
Market entry barriers in the commercial quantum cloud sector