Good morning everyone and welcome to D-Wave’s fourth quarter and fiscal year 2024 earnings conference call. Today’s call is being recorded. At this time, I would like to turn the call over to Kevin Hunt of Investor Relations. Please go ahead.

Thank you and good morning. With me today are Dr. Alan Baratz, Chief Executive Officer, and John Markovich, our Chief Financial Officer. Before we begin, I’d like to remind everyone that this call may contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company’s most recent periodic SEC report. During today’s call, management will provide certain information that will constitute non-GAAP financial and operational measures under SEC rules, such as non-GAAP gross profit, non-GAAP operating expenses, adjusted EBITDA, and bookings. Reconciliations to GAAP financial measures and certain additional information are also included in today’s earnings release, which is available in the Investor Relations section of our company website at www.dwavequantum.com. I’ll now hand over the call to Alan.

Thanks Kevin. Good morning everyone and thank you for joining us today. It’s a remarkable time to be leading one of the world’s preeminent quantum computing companies, and it is incredible how much has happened since we spoke to you last quarter. Big companies like Google, Nvidia, Amazon, and Microsoft all made quantum headlines recently, fueling debate among quantum industry skeptics, enthusiasts, and undecideds as to when quantum will be able to solve real problems. At D-Wave, we are seeing firsthand the value that quantum is providing today for hundreds of companies. I’m not talking about 15 or 30 years from now, I’m talking about today. We recently laid out a framework to help people formulate an informed position on quantum. We call it Quantum Realized, and it’s very simple - first, does a quantum company have technology that can solve complex problems better or faster than classic computing alone? Second, are the quantum systems highly performant, reliable, and available; and third, does the quantum company have proven commercial customer successes in proofs of concept and in production application deployment? These are the criteria that customers need to see to realize real value today, and we believe that there is only one company that can meet all those criteria right now, and that is D-Wave Quantum. It’s a very exciting time for D-Wave. Our business momentum continues, and we have never been in a stronger position as a company. We are making tremendous progress with our technical development milestones and scientific achievements, most recently evidenced by yesterday’s peer-reviewed publication in Science of our demonstration of quantum supremacy on a real-world problem. We’re the only quantum company that can claim it has outperformed classical on a useful problem of relevance to business and science today. You can also see the momentum in our business results as we closed the first sale of an Advantage system to the Jülich supercomputing center, which led to record quarterly bookings of $18.3 million in the fourth quarter of 2024. The momentum is also reflected on our balance sheet, where we now have over $300 million in cash on hand, which we believe is enough to get us to sustained profitability. As previously stated, we expect to be the first pure-play quantum company to reach profitability and with less cash invested than any of our competitors. We truly are a market leader. We were the first to launch commercial quantum systems, the first to have quantum applications running in production for commercial customers, and now the first to achieve a demonstration of quantum supremacy on a real-world problem. D-Wave is quantum realized. Let me now walk you through some key business highlights, starting with technical achievements. We are proud to be the first in the world to demonstrate quantum supremacy on a useful real-world problem. This groundbreaking work was achieved using our 1,200 qubit Advantage 2 prototype annealing quantum computer, and it was published in a peer-reviewed paper in Science on March 12. Unlike other attempts, this achievement is the world’s first and only demonstration of quantum computational supremacy on a useful problem with relevance to customer problems today in material science. D-Wave’s quantum computer performed the complex simulation in minutes and with a level of accuracy that would take nearly one million years using one of the world’s most powerful supercomputers. In addition, it would require more than the world’s annual electricity consumption to solve this problem using the supercomputer, which is built with graphics processing unit, or GPU clusters. It’s a truly remarkable achievement. We encourage you to check out the paper today on science.org. Development of our sixth generation annealing quantum computer, Advantage 2, is rapidly progressing, and we recently announced the calibration of a third 4,400 qubit Advantage 2 processor. Compared with the current Advantage system, the Advantage 2 processor delivers significant performance gains with doubled qubit coherence time, which drives faster time to solution, a 40% increase in energy scale for higher quality solutions, and increased qubit connectivity from 15 way to 20 way, enabling solutions to larger and more complex problems. Next, let me turn to our commercial momentum. In February, we announced the first sale of a D-Wave Advantage annealing quantum computing system to the Jülich supercomputing center in Germany. The system has already been installed at Jülich, and we expect it will be connected to the Jupiter supercomputer, Europe’s first and only exascale high-performance computer. By owning the system, Jülich has full control over all aspects of the system, which will enable them to work on breakthroughs in AI and quantum optimization applications. I should also note that this is not an in-kind transaction or a research grant; it is the sale of a commercial-grade quantum computer. Jülich prepaid for the system in the fourth quarter, and this is a highly profitable sale for D-Wave. We have received substantial interest from other potential customers about purchasing an Advantage system as they recognize the significant benefits of owning a system outright. It enables them to tightly integrate with existing classical and high-performance computing systems, leverage and tune system parameters, and take advantage of new system innovations such as advanced analog digital features as they are developed. We see system sales as an important component in our go-to-market strategy moving forward. That said, it’s important to note that we expect to focus on the quantum compute as a service model with the vast majority of our commercial customers, who are most interested in running business applications. We continue to work with customers on developing a variety of quantum and hybrid quantum applications, including drug discovery with Japan Tobacco, insurance portfolio optimization with Leithà, the technology and data factory of Unipol, a leading Italian insurance company, and optimization of police vehicle deployment with North Wales Police. In addition, we recently announced a commercial hybrid quantum application built with our partner’s stack that simulates and optimizes movements of autonomous agriculture vehicles. We believe that this could have important benefits to farmers as they adopt autonomous agriculture machines in order to scale and increase the output of their fields, with quantum computing providing the analysis, speed, and accuracy to help maximize production and minimize cost. We’re also seeing increased interest from the broader industry in hearing about D-Wave and our technology’s near-term value at major events and conferences. Just yesterday, I was at the annual SXSW conference sharing the momentous news of our quantum supremacy result and discussing how organizations are realizing tangible benefits from our quantum computing systems. I talked about how our quantum computers are now providing faster, more accurate and less expensive solutions than classical computers for evolutionary applications such as optimizing mobile networks, creating more efficient workforce schedules, and streamlining automotive manufacturing. Next week, I will be at Nvidia’s GTC Quantum Day, where I will have the opportunity to educate people on the benefits of annealing quantum computing, D-Wave’s differentiated market position, and how we’re solving customer’s computational complex problems right now at scale while others remain stuck in research and development. On the heels of GTC Quantum Day, I invite you all to join us on March 31 at D-Wave’s annual Qubit User Conference in Scottsdale, Arizona. We are really excited about the line-up of company executives, customers, and industry thought leaders that will address the ways that D-Wave products are delivering value to customers now. You will hear from speakers including Charles Payne of Fox Business’ Making Money with Charles Payne, IDC, Davidson Technologies, Jülich, Japan Tobacco, NTT Docomo, Quantum Research Sciences, SAS, Pusan National University, and the University of Southern California, among others. We expect this event will be a powerful demonstration of quantum realized. Turning now on a couple of updates on our go-to-market growth strategy, we recently announced our quantum uplift program, offering incentives to organizations that have been disappointed with the results they’ve seen from competitors’ quantum systems. We hear a lot of dissatisfaction when talking to potential customers about the lack of reliability and uptime they experience with competitor systems, and more importantly those systems’ inability to solve practical real-world problems. For those customers, we believe that D-Wave can help them start to realize the benefits of quantum and hybrid quantum now. To accelerate adoption of our annealing quantum computing technology, we announced the Leap Quantum LaunchPad program, a three-month trial that provides access to D-Wave systems, our Leap real-time quantum cloud service, and our team of quantum experts for project support. We believe that this program can expand the universe of organizations using quantum to solve their complex problems today. We also continued to build out our management and leadership bench. In November 2024, we announced the appointment of Sharon Holt to our board of directors. Sharon adds significant experience in the technology sector as an executive investor and board member. She has worked with semiconductors, embedded technologies, and intellectual property, and has quickly become a very valuable addition to our board. Finally, let me close with some quick comments on our financials. As I noted, the signing of the Jülich deal drove $18.3 million in bookings for Q4 of 2024, and that’s a 502% increase over the fourth quarter of 2023. I also noted that we were paid for that deal during the fourth quarter, which brought in a substantial amount of cash. We also completed two separate ATM programs in the fourth quarter that brought in a total of $175 million in gross proceeds in 2024, which resulted in a record cash position of $178 million at year end. In January of this year, we raised an additional $150 million in gross proceeds from another ATM program, which led us to a current cash balance in excess of $300 million. I will reiterate that we believe that this is sufficient capital to get D-Wave to profitability, and we continue to believe we will reach that milestone faster than any other independent quantum company and with far less total investment. Last, in a few minutes, you will hear from John that we expect our fiscal year 2025 Q1 revenue to exceed $10 million. With that, I’ll hand it over to John to provide a review of the fourth quarter and fiscal year 2024 results.

Thank you, Alan, and thank you to everyone taking the time to participate in today’s call. In my review of the fiscal '24 and fourth quarter results, I’ll be providing non-GAAP operating metrics including bookings, as well as non-GAAP financial metrics that include non-GAAP gross profit, non-GAAP gross margins, adjusted net loss, and adjusted EBITDA loss, as we believe these metrics improve investors’ ability to evaluate our underlying operating performance. These measures are defined in the tables at the bottom of today’s earnings press release, with the non-GAAP financial metrics for the most part adjusting for non-cash and non-recurring expenses. Revenue for fiscal '24 was $8.8 million, essentially flat with fiscal '23 revenue of $8.8 million. As Alan highlighted previously, bookings for fiscal '24 were a record $23.9 million, which is an increase of 128% or $13.4 million from the fiscal 2023 bookings of $10.5 million. With respect to customers, we continue to broaden and diversify our customer base across commercial, government, and research customers. In comparing fiscal 2024 with fiscal 2023, D-Wave had a total of 135 customers in fiscal 2024 compared with a total of 133 customers in fiscal 2023, that includes 59 research institution and government customers in 2024 compared with 55 in fiscal 2023, and 76 commercial customers in fiscal 2024 compared to 78 in fiscal 2023, with the commercial customers including 28 Forbes Global 2000 customers in fiscal '24 compared with 27 in fiscal '23, with such customers constituting 37% of the total number of commercial customers in 2024. GAAP gross profit for fiscal ’24 was $5.6 million, an increase of $1 million or 20% over fiscal 2023 gross profit of $4.6 million, with the improvement primarily to an increase in higher margin QCaaS revenue and a decrease in stock-based compensation expense in the cost of sales. Non-GAAP gross profit for fiscal 2024 was $6.4 million, an increase of $300,000 or 5% from fiscal 2023 non-GAAP gross profit of $6.1 million. GAAP gross margin for fiscal 2024 was 63%, an increase of 10.2% from fiscal '23 GAAP gross margins of 52.8%. The non-GAAP gross margin for fiscal 2024 was 72.8%, an increase of 3% from the fiscal 2023 non-GAAP gross margin of 69.8%. Again, the difference between GAAP and non-GAAP gross profit and gross margin is limited to non-cash stock-based compensation and depreciation and amortization expenses that are excluded from the non-GAAP gross profit and gross margin measures. Net loss for fiscal 2024 was $143.9 million or $0.75 per share, compared with the fiscal 2023 net loss of $82.7 million or $0.60 per share. The increase was due primarily to a $68.3 million non-cash, non-operating charge related to the re-measurement of the company’s warrant liability, which materially increased as a result of the significant increase in the value of the company’s warrants that correlated with the price appreciation of D-Wave’s common stock. Excluding this re-measurement charge, the net loss for fiscal 2024 was $75.6 million or $0.39 per share, a decrease of $7.3 million or $0.21 per share from the fiscal 2023 net loss of $83 million or $0.60 per share. Adjusted EBITDA loss for fiscal 2024 was $56 million, an increase of $1.7 million or 3% from the adjusted EBITDA loss of $54.3 million in fiscal 2023, with the increase due primarily to higher operating expenses driven by our increased investment in our go-to-market and research and development organizations. With respect to the fourth quarter operating results, revenue in the fourth quarter of fiscal 2024 totaled $2.3 million, a decrease of approximately $600,000 or 21% from the fourth quarter of fiscal 2023 revenue of $2.9 million. Bookings for the fourth quarter were a record $18.3 million, an increase of $15.3 million or over 500% when compared to the fiscal 2023 fourth quarter bookings of $3 million. GAAP gross profit for the fiscal 2024 fourth quarter was $1.5 million, a decrease of approximately $500,000 or 25% from the fiscal 2023 fourth quarter gross profit of $2 million, with the decrease due primarily to lower professional services revenue that was partly offset by higher QCaaS revenue. Non-GAAP gross profit for the fourth quarter was $1.7 million, a decrease of approximately $600,000 or 28% from the fiscal 2023 fourth quarter non-GAAP gross profit of $2.3 million. GAAP gross margin for the fiscal 2024 fourth quarter was 63.8%, a decrease of 3.9% from the fiscal 2023 fourth quarter GAAP gross margin of 67.7%. Non-GAAP gross margin for the fourth quarter was 73%, a decrease of 7.2% from the fiscal 2023 fourth quarter non-GAAP gross margin. Net loss for the fourth quarter was $86.1 million or $0.37 per share, compared with a net loss of $16 million or $0.10 per share in the fourth quarter of fiscal 2023. Again, the increase was primarily due to the aforementioned $68.3 million non-cash, non-operating warrant liability re-measurement charge. Excluding this charge, the fourth quarter net loss was $17.8 million or $0.08 per share, an increase of $1.5 million and a decrease of $0.03 per share from the fiscal 2023 fourth quarter net loss of $16.4 million or $0.10 per share. Adjusted EBITDA loss for the fourth quarter was $15.3 million, an increase of $4.4 million or 41% from the fiscal 2023 fourth quarter adjusted EBITDA loss of $10.9 million, with the increase due primarily to lower revenue and higher operating expenses that were principally related to the company’s increased investment in our go-to-market and research and development organizations. Now I will address the balance sheet and liquidity. As of December 31, D-Wave’s consolidated cash balance totaled $178 million and as of today exceeds $300 million. As Alan highlighted earlier, during the fourth quarter we raised $161.3 million in equity through our ATM programs and our equity line of credit, the ELOC program, and during the current quarter we raised an additional $146.2 million under an at-the-market program for total net proceeds of $307 million since the beginning of the fourth quarter. $295.4 million, or 96% of this $307.5 million was raised over the course of 23 trading days under the ATM program at an average price per share of $4.30, which was $0.08 per share higher than the corresponding volume-weighted average price of $4.22 per share over these same 23 trading days. In addition, D-Wave paid off the remaining balance of our $50 million secured term loan with PSPIB Unitas Investments during the fourth quarter. At the end of December, D-Wave had 37.8 million remaining in issuance capacity under the ELOC with Lincoln Park Capital Fund, with the investment commitment running through October of this year. Our ability to utilize the ELOC is subject to a number of conditions, including having a sufficient number of registered shares and the stock price being above $1 a share. With respect to guidance, we are expecting fiscal 2025 first quarter revenue to exceed $10 million, with a significant portion of the first quarter revenue including revenue recognized from the sale of an Advantage annealing quantum computer. To conclude, as we have previously stated, we believe that D-Wave has the opportunity to be the first independent publicly held quantum computing company to achieve sustained profitability and achieve this milestone with substantially less cumulative funding than required by other independent publicly held quantum computing companies.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Our first question comes from Craig Ellis with B. Riley Securities. Please go ahead.

Hi, yes. It’s Mayur on for Craig. First of all, congratulations on yesterday’s announcement and a great quarter. I kind of wanted to just dig into that a little bit more. As Advantage 2 builds out that frontier of what’s capable with quantum annealing, do you see that forwarding engagements that you already have with your existing commercial customers?

Thank you for joining and for the question. Absolutely. The interesting thing about Advantage 2 versus Advantage is that when we started down the path of trying to demonstrate quantum supremacy, we began with our 5,000 qubit Advantage system and we actually were not able to get the result. However, when we finished calibrating a 1,200 qubit Advantage 2 processor, a quarter of the number of qubits, much smaller system, we were able to get the result. The reason is while it has fewer qubits, it’s more highly connected, it has twice as long coherence time, and it has a significantly higher energy scale. This means it can actually solve bigger problems faster and with higher precision results. Arguably at 1,200 qubits, Advantage 2 is significantly more powerful than Advantage at 5,000 qubits. We’ve now finished calibrating our third Advantage 2 system, and we plan to roll that out commercially, basically to make that system generally available over the course of this year, hopefully sooner rather than later, and we do believe that the increased power will allow not only new customers, but our current customers to see improved performance on their applications, so yes, this absolutely will make an impact.

Awesome, that’s great. Now kind of shifting gears to your first system sale with Jülich, first of all, congratulations on getting a system sale through and expanding the business in that way. I wanted to ask, is this something that you can expect to continue across 2025 with perhaps more of these system sales in the pipeline, and what could potential revenues there look like? Then kind of adding onto that, what are some of these margin mechanics that might go on with system sales as we balance against QCaaS?

Okay, that actually sounded like three follow-up questions, but let me try to respond. First of all, the work on quantum supremacy was closely linked to our system sale to Jülich and has contributed to the growing interest we're seeing in system sales. We posted the paper demonstrating quantum supremacy on the archive about a year ago, and it took around a year to go through peer review. While we could discuss it with customers, we couldn't share it with the press until yesterday. However, we have been engaging with various researchers at supercomputing centers and national labs globally, and this result has sparked significant interest in acquiring a system, connecting to high-performance classical computers, and using that to explore new workloads in key areas like AI. Besides the sale to Jülich, we are in discussions with three other institutions. I won't claim that we expect to see three additional system sales in the near term, but conversations are ongoing. I truly believe that system sales will become an important aspect of our sales, bookings, and revenue model moving forward, but this will not exclude quantum compute as a service, as many of our commercial customers are primarily focused on running their business applications. For those customers, quantum compute as a service is indeed the best model, and we anticipate continued growth in that area, while we expect to shift more towards system sales with research institutions and government labs. However, we can't provide guidance on what we anticipate system sales to look like in terms of bookings or revenue, but John may want to take a moment to discuss margins.

Sure, you can expect that the margins on our system sales will exceed our consolidated non-GAAP gross margins, which last year were 72.8%.

Thank you, and your next question comes from the line of Richard Shannon with Craig Hallum. Please go ahead.

Well great, Alan and John, thanks for taking my questions. I guess I wanted to follow up on the paper as well, and hearing your response to the last question, I’ll slightly modify it, but I’d love to get a sense of the degree to which this paper, both as you published in the archive a year ago and now published fully and publicly yesterday, has changed the opinion of both the academic community, that I think has had some resistance to annealing and its capabilities, and you’ve also talked about the headwind of quantum adoption just from big IT suppliers, like IBM have said that quantum is not ready. This seems to be a pretty strong statement, so I guess I’d love to get your sense, both from what you’re hearing from commercial entities and maybe some of the thought leaders in the quantum computing community about how much this is changing their opinions.

First of all, with respect to the academic community, keep in mind that quite a few academic institutions actually partnered with us on this result. We worked with 11 institutions around the world, and a number of the people from those institutions are actually co-authors on the paper. Yes, this has been a significant achievement relative to not just the impact on the quantum industry and the commercial market, but also on the academic community. Now, that having been said, not everybody is willing to readily accept reality, and so we still have some folks in the academic community that go down kicking and screaming, if you like. In fact, yesterday there were two papers that were put up on the archive preprint server that essentially said, oh, we can do this classically, which of course is a gross overstatement, if not absurd. We actually put up our own paper on the preprint server that pointed out exactly what they did, and there was some good work embedded in that, and how far away from being able to perform the computations that we performed on our quantum computer they actually were. This result that we published yesterday is a huge step forward for the quantum industry in that it truly is the first time that anybody has been able to demonstrate the ability to solve a problem on a quantum computer that cannot be solved classically. This is what everybody in the quantum industry has been aspiring to and working towards since the inception, and we’ve now achieved it, and that’s a very significant and important milestone for, as I said, the industry and the marketplace alike, and we’re quite proud. Yes, it is having an impact on the commercial side of our business. As I said, it’s opening up some very important opportunities to work more closely with research institutions and government research labs, and as you know, government has been a bit more challenging for us than commercial, but the dialog is absolutely changing at a rapid pace, and it generates even more interest from commercial businesses as it starts to melt away that rhetoric around annealing versus gate. It’s just about quantum computing and the ability to solve important problems that classical struggles with.

Wonderful. Alan, we’re looking forward to hearing more about that Qubits in a couple of weeks. My follow-on question is, and I’ll resist the temptation to do a three-parter and probably make it more of a two-parter here, but looking at a couple of numbers here, your bookings were $18 million in the quarter, and you’re talking about guidance in the first quarter of above $10 million. If we just kind of look at the run rate of revenues last year, people might assume there’s going to be roughly $8 million or a little bit more recognized from the Jülich contract here, which has $18 million in bookings here, so maybe you can help us understand, should we expect the sales in the first quarter to be meaningfully above $10 million, or alternatively, what was the other contribution for the strong bookings in the fourth quarter?

John, do you want to answer that question?

Sure. Obviously, the systems booking was a very significant portion of the fourth quarter bookings, and the guidance we provided with respect to revenue for the first quarter, as we’ve outlined, a very substantial portion of that will be related to the installation and the acceptance of the system, but we’ve not provided any additional details on the fourth quarter bookings above and beyond what we announced earlier, which was the $18.3 million, and we haven’t provided any additional breakdown on the first quarter revenue other than we expect the revenue to exceed $10 million.

Thank you. Your next question comes from the line of Quinn Bolton with Needham & Company. Please go ahead.

Congratulations on your achievements with cash flow and quantum supremacy. I wanted to follow up on Richard’s question. While I understand you don’t want to share too much about the $18.3 million in bookings, the revenue being around $10 million suggests a significant growth in QCaaS bookings. Can you comment on the trend for QCaaS excluding system bookings? Was there a notable rise in non-system sales bookings in the fourth quarter? I have a follow-up as well.

The QCaaS bookings in the fourth quarter, Quinn, were incrementally greater than they were in the third quarter.

Okay, perfect. As a follow-up on the system and sale, when that system is accepted by Jülich, you recognize the revenue for the hardware sale. Is there an ongoing maintenance or support contract where some of the fourth quarter bookings may be recognized over time in that maintenance or support, which would create a recurring revenue stream for some period of quarters or years?

There are three other revenue elements of that booking. One is that the contract includes an upgrade option for Advantage 2, also includes ongoing support and maintenance as well as some degree of access to Leap or QCaaS. Again, the bulk of the booking will manifest itself in the system sale, but there are some components that will go beyond the first quarter.

Got it, okay. Then the last question, just for Alan, on Advantage 2 - congratulations on the third 4,400 qubit processor calibration. As you look to bring Advantage 2 to the market, are you now anticipating bringing that to market at the 4,400 qubit level, or are there still plans to move to 7,000 qubits with that system over time? Just trying to think through the go-to-market on Advantage 2 as we look forward.

We are planning to launch the 4,400 qubit system. Currently, we have three calibrated Advantage 2 systems and have not yet released it in Leap as another processor, unlike with the 1,200 qubit prototype. When introducing a new processor, we must ensure all Leap systems and customer systems, such as the Jülich system, can be upgraded. It’s crucial to have enough calibrated processors to support the full rollout, which we anticipate will be generally available later this year. Regarding scaling to a larger Advantage 2 system, we are exploring a new approach. Historically, we've focused on increasing the number of qubits on a single chip, and we still have room for growth beyond 4,400 or even 5,000 qubits. Additionally, we are investing in research and development for multi-chip processors to scale not only through additional qubits but also by interconnecting multiple chips. We believe this will enable us to scale more quickly in the future and we are actively developing this capability.

Thank you, and your next question comes from the line of Suji Desilva with Roth Capital. Please go ahead.

Good morning Alan, good morning John. Congratulations on the progress here. The system sale you had, I’m wondering if the future ones you’ll have, would they generally have a similar upfront versus recurring percent breakout, or might there be different structures to future hardware sales versus the current one? Just want to understand that revenue model.

Yes Suji, these deals, at least on a sample size of one, tend to be structured to meet the specific needs of the customer, so there are a lot of elements that went into exactly how we structured this deal. In the case of Jülich, it was important to them that the upgrade to Advantage 2 be included, especially since we were so close to the Advantage 2 processor becoming available. That might not always be the case. Secondly, depending on who we’re selling to, they might be looking to use the system in different ways. Are they using it to support commercial applications or are they using it to support research, are they using it to support education, research and education? Depending on the exact nature of how they plan to use the system, that might also drive how the deal gets structured and what the cost components are. I think it’s not really possible for us to say this is the model. I think it will vary by customer.

Okay, great Alan. That’s very helpful. Then switching over to the results yesterday and the system, I understand that the connectivity intensity would help the performance. Can you just remind us in the quantum systems, what the higher power allows the system to do in terms of performance? Just remind us of that technical aspect.

Okay, when you say higher power, I’m not entirely sure what you mean.

I understand you mentioned that a combination of higher power and increased connectivity led to your achieved results.

Yes, okay. It was three elements - it was more connectivity, longer coherence times, and higher energy scale. More connectivity allows us to support larger and more complex problems. Longer coherence time allows us to get to optimal solutions faster, and higher energy scale allows us to specify the problem parameters with greater precision. This collectively means larger, more complex problems solved faster and with greater precision.

Thank you, and your next question comes from the line of David Williams with Benchmark. Please go ahead.

Hey, good morning, and congratulations on all the progress here. I guess maybe first, John, just thinking back to your balance sheet, now that you’re fully capitalized and you should have some pretty significant flexibility here, but does this change anything on your go-to-market strategy? It sounds like you’ve got some R&D efforts now that we haven’t really heard about before in terms of the scaling, but just wondering are there other areas of the business you can accelerate, or does the capitalization maybe change how you’re thinking about the business as you scale up and go forward?

David, there are elements of the business that we could scale at a faster pace, and given that our capital raise, or the magnitude of our capital raise has been so recent, we’re still in the process of evaluating where it may or may not make sense to increase the rate and nature of the investments.

Yes John, maybe I’ll just say a tiny bit more than that. Obviously I talked a few minutes ago about how we’re looking at introducing a new capability to scale the size of the processor more rapidly through multi-chip, in addition to continuing to grow the density of qubits on a single chip. A second area is gate model - I mean, we’ve been working on our gate model program for a couple of years now, and we do think that now represents an opportunity to look at how we might accelerate that program. And so that is an area of focus for us. As you said, go-to-market, we will operate this year with significantly more sales people, technical presales, and professional services than we had last year, which we are hopeful will allow us to grow the business faster.

Great, thanks for that. Then maybe Alan, just kind of thinking about some of the comments that we heard from the Nvidia CEO more recently at CES discounting the usefulness of quantum, and you’re going to be there on a panel participating, and then clearly you’ve shown these incredible results with the quantum supremacy, I’m just wondering how you’re thinking about maybe the paradigm shift that you’re hearing from customers. It sounds like you’re certainly getting that interest, but what else are you hearing and how do you think this changes the industry as we kind of move forward here and think about what you’ve already accomplished versus where maybe some of the less optimistic folks are out there in terms of how they’re thinking about quantum. Thank you.

Yes, David, while this groundbreaking result in quantum supremacy is vital for the industry, magnetic material simulation isn’t necessarily something everyone discusses, so it may not resonate with everyone as it does with us. We believe it's crucial because magnetic materials are used widely, especially in medical devices, which represents an opportunity to design new materials more quickly and cost-effectively, ultimately leading to better devices with sensors based on these materials. There are other application areas, like AI, that may attract more public interest. I'm looking forward to participating in the panel at Nvidia’s GTC conference, and I want to highlight that the quantum supremacy result has broader applicability beyond just magnetic material simulation. While I won't specify what that applicability is, I can say it has a wider public interest, and I encourage you to pay attention to Quantum Day on March 20 and what we have to say about it.

Thank you, and once again, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your next question comes from the line of Harsh Kumar with Piper Sandler. Please go ahead.

Yes, hey guys. Congratulations on a lot of good things that are going on. Alan, I had one for you, and then a follow-up. I wanted to ask about Jülich plus Jupiter. This is an outside institution that is going to couple one of your systems to traditional computing, potentially a large supercomputer. You’ve done these kind of projects before. What does this mean for validation, and what does this mean for opening up the market for other people to be able to solve super complex problems as demonstrated by an outside organization in Europe?

Yes, so actually, Harsh, we have not previously tightly integrated our quantum systems with a supercomputer or a high-performance computer. We do run hybrid algorithms and hybrid solvers that our customers can have access to, where we can use CPUs and GPUs together with a quantum computer, but that’s a modest scale. That’s not massively parallel systems like frontier at Oak Ridge Labs or the Jupiter exascale system that Jülich is building out. This will actually be the first time that our quantum system is tightly integrated with a supercomputer of that scale, and we’re very much looking forward to working with Jülich, and in fact, there will be a lot of joint collaborative research and investigation that goes on, on the applications that could be made possible through that integration. We do think that particularly in the area of AI and AI workflows, there could potentially be some very significant opportunity because remember, currently AI does require massive amounts of compute, and we’re really looking forward to understanding what happens when you integrate quantum into those workflows and how and if that might change, on the one hand, the time to do model training, the accuracy of the models and maybe the energy consumption, maybe we can reduce it and so on.

You have two businesses: one for selling systems, where there are already three interested parties, and another focused on services. What direction is Dr. Alan Baratz considering for D-Wave? I'm also curious if John has any financial insights on this as well. Selling these computers is obviously very lucrative, so I'd like to know where your interests truly lie.

Well, look - I think all my babies are beautiful. First of all, we have an amazing R&D team that continues to knock the ball out of the park, and so I’m really looking forward to delivering the Advantage 2 system. I’m looking forward to how we’re going to be able to scale that more rapidly going forward through both multi-chip and increased density on the chips. I’m looking forward to gate because I do think that gate and annealing are quite complementary and can enable collectively important use cases. I’m looking forward to continuing to support our customers in their use of quantum to help solve really hard optimization problems to improve their business operations, and I’m especially interested in the introduction of quantum into AI machine learning because I do think there’s a huge opportunity there to speed up training and to reduce energy consumption, and I do think that could be very transformative.

Thank you Alan, and I’ll get back in line.

Thank you, and we do have a follow-up question coming from the line of Harsh Kumar with Piper Sandler. Please go ahead.

Thank you for the opportunity to ask a question. I wanted to inquire about the system sales and their impact. I assume that most of the revenue from the system sales was recognized in the fourth quarter, John, yet you're predicting a significant revenue increase in the first quarter, attributed to your core business. I'm curious about what has suddenly driven this core business growth. Did you secure a couple of major customers, or is there a gradual effect from the system sales contributing to the first quarter as well?

Sure, so the systems booking took place in the fourth quarter, Harsh, and we were paid for that system in the fourth quarter. What we’ve outlined with respect to our first quarter guidance of revenue in excess of $10 million, a significant portion of that would be the installation and acceptance of the system.

Harsh, you said something that wasn’t quite accurate. You said that a portion of the system sale was recognized, revenue recognized in Q4 - that’s not the case. There was no revenue recognized in Q4 for the system sale.

It was just the booking.

Got it, so how many quarters do you think the process will take to set up and start the system, and how much support will you need to provide to Jülich? In other words, how many quarters can the revenue run for one system sale? You don’t have to be precise, just give a rough estimate.

The Advantage system is already set up and operational at Jülich, and they currently have access to it. They are using it today, which means everything was completed since we signed the agreement for the system sale in the fourth quarter. However, we have not yet upgraded the system with the Advantage 2 chip. As John mentioned, the revenue recognition has a couple of components. A significant portion is tied to when we install the system and hand it over to them, which we completed in the first quarter. Some revenue will be recognized once we upgrade that processor to Advantage 2, and additional revenue will be recognized through ongoing maintenance over several years into the future.

Thank you, and ladies and gentlemen, that concludes our question and answer session. I will now hand the call back to Dr. Alan Baratz for closing remarks.

Thank you. Thanks to all of you for taking the time to be here with us today. It’s been an amazing quarter for the company, and the future looks even more amazing. We believe that the company is in the strongest position in its history and is leading the quantum computing sector based on product performance, technical maturity, and commercial adoption. While others in the industry continue to make unsubstantiated claims around the performance and adoption of their technology, we continue to capitalize on our first mover advantage to further distance ourselves from the rest of the market. We’re a well-capitalized company with more than $300 million in cash and sufficient capital to reach profitability. We are the only quantum computing company that has demonstrated our system’s ability to outperform classical on a useful problem, which has now been published in an esteemed peer-reviewed journal. We have the largest quantum computers in the world with 5,000-plus qubits able to solve complex computational problems right now. We are the first quantum computing company to have customers move commercial applications into production, and we offer customers service-level agreements which means we stand behind the high levels of availability, reliability, and scalability of our Leap cloud service. Our customers are realizing the value of quantum right now. It’s a historic time for the company and for quantum computing as a whole. Thanks again for taking the time to join us today.

Ladies and gentlemen, this concludes today’s conference call. Thank you all for joining. You may now disconnect.