Good day, everyone, and welcome to the D-Wave First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call may be recorded and I will be standing by should you need any assistance.
It is now my pleasure to turn the conference over to Kevin Hunt, Investor Relations. Please go ahead..
Thank you, and good morning. With me today are Dr. Alan Baratz, our Chief Executive Officer, and John Markovich, our Chief Financial Officer.
Before we begin, I would 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 at the Investor Relations section of our company website at www.dwavequantum.com. I will now hand over -- the call to Alan..
Thank you, Kevin. Good morning, everyone, and thank you all for joining us today. It feels like we were just together discussing our remarkable FY '23 results and now we're back again to share Q1 highlights.
We provided a thorough business update back in March and today's presentation will build upon many of the same themes we touched upon during our FY '23 call. The bottom-line is that our progress continues.
First, we're hitting all our major product milestones and delivering on our track record of innovation and execution, especially with our Advantage2 system. This is all about getting even greater quantum processing power into the hands of customers as soon as possible. Second, we're furthering the science of quantum computing.
Our recent research demonstrating what we believe is an example of quantum supremacy, meaning our system's ability to solve important real-world problems that cannot be solved classically, is now going through the peer review process with an esteemed scientific publication. Third, our commercial traction is growing.
We have new customers spanning government, healthcare, research institutions and consulting firms signing on to explore and adopt quantum-powered optimization solutions.
And finally, while others remain firmly entrenched in R&D, we're building an infrastructure that supports production-grade commercial quantum and hybrid quantum application deployments.
All of our key financial and business metrics, including revenue, bookings, total customers, commercial customers, profit and liquidity, they are all moving up as we usher in the next era of computing. Now, let me walk you through a few key highlights of our progress. Last month, we introduced the powerful new Fast Anneal feature.
This important technology helps users perform quantum computations at unprecedented speeds, greatly reducing the impact of external disturbances such as thermal fluctuations and noise that often hinder quantum calculations.
Fast Anneal was key to our recent quantum supremacy research as well as our work published in Nature in 2023 showing a scaling advantage of annealing quantum computing over several classical heuristics. Now we are bringing that same level of speed and extended control that led our supremacy result to academic researchers and commercial customers.
It's thrilling to bring that level of performance to customers. They will now be able to reproduce landmark results in quantum simulation using full-scale coherent annealing quantum computing to build world-class applications, as well as expand benchmarking studies and connect increased coherence to better performance.
Initial customer response has been fantastic with customers submitting more than 530,000 problems using Fast Anneal since it launched in mid-April.
Leading industry analyst firm IDC noted that D-Wave's launch of the Fast Anneal feature should be considered just as significant as recent logical qubit and error mitigation announcements from gate-based quantum hardware developers. It's a remarkable feature and we're very proud to get it into the hands of customers.
Let me also take a minute to remind everyone about our work on quantum supremacy. As I stated in our Q4 call, we believe D-Wave is the first in the world to demonstrate quantum supremacy on real-world problems.
This groundbreaking research was achieved using our latest generation Advantage2 quantum computer, showing that our quantum processes can solve problems that cannot be solved classically.
And it bears repeating, as there continues to be misinformation in the market, we believe we've achieved a demonstration of quantum supremacy, not quantum advantage or quantum utility, as commonly understood in the community. Our result goes beyond classical computation.
We believe it is a demonstration of a quantum computer performing calculations of practical interest that a classical computer cannot achieve. Unlike other attempts to show quantum supremacy, mostly around random number generation with no practical application, our research is based on interesting and important quantum simulation problems.
It was made public two months ago and we are not aware of any challenges to our results. We encourage you to check out the preprint paper on the archive. The article is currently going through peer review by a highly respected journal.
During our Q4 2023 earnings call, I shared details about progress with our Advantage2 prototype, including the launch of the 1,200+ qubit version and its availability to customers in our Leap quantum cloud service.
Growing customer demand for D-Wave's latest annealing quantum computing technology is clear from the usage of the two next-generation Advantage2 experimental prototypes, which together have solved nearly 8 million customer problems since they were made available in 2022 and 2024.
Today, I'm thrilled to share with you that another key milestone towards the delivery of our full Advantage2 system has been achieved. That is, we have very recently yielded 4,800+ qubit processors for Advantage2.
Currently under calibration, the yielding of these 4,800+ processors marks an important milestone in our Advantage2 product delivery roadmap. Our goal for the full Advantage2 system is 7,000+ qubits and the yielding of these 4,800+ qubits chips is a significant step toward that achievement. Turning now to commercial traction.
Customer demand remains strong and growth rates accelerated in the first quarter. As expected, our first quarter 2024 bookings were up significantly.
Q1 2024 bookings totaled $4.5 million, a 54% year-over-year increase over Q1 FY '23 bookings and a 43% increase sequentially over 4Q '23, representing our eight consecutive quarter of year-over-year growth in quarterly bookings.
Our growth rate for total revenue accelerated to 56% year-over-year, while on a trailing four quarter comparison basis, revenue from commercial customers increased by 51%, the total number of our commercial customers increased and the total number of Forbes Global 2000 customers increased.
We continue to help customers drive new use cases for quantum to solve real business problems today. We are working with an increasing number of customers on quantum-powered optimization solutions.
We're seeing growing interest in applications related to scheduling labor, production, transportation and inventory resources across verticals such as manufacturing, logistics, retail, services and government, which are regularly impacted by variable demand and supply conditions.
New customer use cases in development for Q1 2024 include optimizing solar panel usage in buildings, body shop scheduling for commercial vehicle production, and optimizing schedules for crude oil tanker unloading at refineries, just to name a few.
The applicability of our hybrid quantum technologies across a multitude of optimization problems remains high, with customers seeing measurable performance improvements.
Following the release of our supremacy results, we are also seeing growing interest in using the unique capabilities of annealing quantum computing by government and university research labs worldwide to power their pure and applied research activities to solve problems not previously addressed due to the limitations of classical computing.
On the partner front, we're thrilled to announce that we've renewed our multi-year partnership with the University of Southern California.
USC's prestigious Viterbi School of Engineering will continue to house the D-Wave state-of-the-art Advantage quantum computer, facilitating ongoing exploration and adoption of annealing quantum computing solutions for businesses, researchers and government. USC currently houses the only D-Wave system physically located in the United States.
The university is an important strategic partner to us and we're excited that our critical work together continues. We've seen further progress in terms of educating governments around the world about the value of the quantum computing and particularly annealing quantum computing, the value that can bring to businesses and society today.
In the United States, the passage of the FY '24 National Defense Authorization Act last December created a pilot program for quantum computing near-term applications.
Now, Congress has introduced the National Defense Quantum Acceleration Act, which would further accelerate the Department of Defense's adoption of quantum computing technology, including annealing quantum computing and quantum hybrid technologies.
It creates an office with programmatic authorities to drive adoption of quantum, compute and others to build near-term applications and further educate about the different types of quantum technologies.
This legislation, combined with the earlier passage of the FY '24 NDAA, continues to show the push from Congress that the administration needs to start using quantum computing technology today, not just research it.
The Pentagon and others can now begin using quantum technologies to help solve national security challenges and problems facing our military in areas such as logistics, transportation and emergency response.
In addition, earlier this month, D-Wave joined others in the quantum industry to showcase quantum technology's potential impact to policymakers in the U.S. Senate.
We also responded to media requests for perspectives on how our annealing quantum computing technology could potentially help address some of the transportation infrastructure challenges faced by the City of Baltimore as it works to address the impact from the recent bridge collapse.
Beyond the United States, we're also now working on exciting application development for other FVEY countries. We hope to provide additional details on a future earnings call. On our last call, I spoke about the launch of our new go-to-market growth strategy to increase sales and expedite customer applications moving into production.
This company-wide initiative is now in full swing as we apply an enterprise-wide focus on delivering customer value, especially in near term in key vertical markets like supply chain, logistics, manufacturing and government.
In support of our aggressive go-to-market efforts, we also recently announced our tenth Qubits quantum computing conference, which will take place on June 17 and 18 in Boston.
Themed, "Success, Powered by Quantum," the conference will demonstrate how D-Wave, our partners and our customers such as Davidson Technologies, Los Alamos National Lab, Mastercard, Momentum Worldwide, a part of Interpublic Group, Pattison Food Group, QuantumBasel, SavantX, Unisys and Zapata AI are using D-Wave's innovative annealing quantum computing technology to solve real-world problems.
We hope to see you all in Boston on June 17 and 18. It's clear that D-Wave's momentum has remained strong since we spoke just two months ago.
We continue to propel the business forward, hitting critical product performance milestones, working with our customers to build proofs of concept and applications that address real-world challenges now and educating governments around the world about the critical role annealing quantum computing can play today.
And we're doing all of this while running an efficient, cost-conscious business, never losing sight of our goal to be the first profitable pure play quantum computing company in the world. With that, I'll hand the call over to John to provide a review of our first quarter 2024 results.
John?.
Thank you, Alan, and thank you to everyone taking the time to participate in today's call.
In my review of the first quarter results, I will be providing non-GAAP operating metrics, including bookings, as well as non-GAAP financial metrics, including non-GAAP gross profit, non-GAAP gross margins, non-GAAP operating expenses 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 first quarter earnings press release with the non-GAAP financial metrics for the most part adjusting for non-cash and non-recurring expenses.
Revenue in the first quarter of fiscal 2024 totaled $2.5 million, an increase of approximately $900,000 or 56% from the first quarter of fiscal year 2023 revenue of $1.6 million, and down sequentially from the fourth quarter of fiscal 2023 revenue, in line with our typical Q4 to Q1 seasonality.
The 56% year-over-year growth in revenue represents the highest year-over-year quarterly revenue growth percentage for the company over the last two years.
Bookings for the first quarter totaled $4.5 million, an increase of $1.6 million or 54% from the first quarter of 2023 bookings of $2.9 million, and an increase of $1.4 million or 43% from the immediately preceding fiscal 2023 fourth quarter bookings of $3.1 million.
The $4.5 million in first quarter bookings represents D-Wave's eighth consecutive quarter of year-over-year growth in quarterly bookings. In comparing the most recent four quarters with the immediately preceding four quarters, D-Wave had a total of 128 customers compared with a total of 113 customers.
Within the 128 customers, we had 75 commercial customers that compares with 69 commercial customers in the prior period and 25 Forbes Global 2000 customers compared with 22 Forbes Global 2000 customers that constituted 33% of the total number of commercial customers.
In comparing the most recent four quarters with the immediately preceding quarters with respect to commercial traction, revenue from commercial customers increased by 51% or $2.2 million, commercial revenue as a percentage of total revenue increased from 63% to 69%, and revenue from Forbes Global 2000 customers increased by 50% or approximately $900,000, with Forbes Global 2000 customers constituting 27% of total revenue.
Moving on to gross profit. GAAP gross profit for the first quarter of fiscal 2024 was $1.7 million, an increase of $1.3 million or 294% from the first quarter of fiscal 2023 GAAP gross profit of approximately $400,000, with the increase due primarily to the growth in revenue and increased operating efficiencies.
Non-GAAP gross profit for the first quarter of fiscal 2024 was $1.9 million, an increase of $1 million or 122% from the first quarter of fiscal 2023 non-GAAP gross profit of approximately $900,000. Again, with the increase due primarily to the growth in revenue and increased operating efficiencies.
The difference between GAAP and non-GAAP gross profit and gross margin is limited to non-cash stock-based compensation and depreciation expenses that were excluded from the non-GAAP gross profit and non-GAAP gross margin measures.
With respect to margins, the GAAP gross margin for the first quarter of fiscal 2024 was 67.3%, an improvement of 40.7% from the first quarter of fiscal 2023 GAAP gross margin of 26.6%. Non-GAAP gross margin for the first quarter fiscal 2024 was 76.6%, an improvement of 22.8% from the first quarter of fiscal 2023 non-GAAP gross margin of 53.8%.
With respect to operating expenses or GAAP operating expenses for the first quarter of fiscal 2024 were $19.2 million, a decrease of $5.9 million or 24% from the first quarter fiscal 2023 GAAP operating expenses of $25.1 million, with the decrease driven primarily by a decrease of $3 million in non-cash stock-based compensation expense, $2.2 million in professional services and approximately $500,000 in marketing expenses.
Non-GAAP adjusted operating expenses for the first quarter of fiscal 2024 were $14.8 million, a decrease of $3 million, or 17%, from the first quarter of fiscal 2023 non-GAAP adjusted operating expenses of $17.8 million.
That reflects the company's continued focus on expense management with the decline driven primarily by a decrease of $2.2 million in professional services and approximately $500,000 in marketing expenses.
The difference between GAAP and non-GAAP operating expenses is primarily non-cash stock-based compensation expenses, appreciation and non-recurring expenses.
Net loss for the first quarter of fiscal 2024 was $17.3 million or $0.11 per share, a decrease of $7.1 million or $0.09 per share from the first quarter of fiscal 2023 net loss of $24.4 million or $0.20 per share with the improvement driven by higher gross profit in combination with lower operating expenses.
Adjusted EBITDA loss for the first quarter of fiscal 2024 was $12.9 million, an improvement of $4 million, or 24%, from the first quarter of fiscal 2023 adjusted EBITDA loss of $16.9 million, with the improvement again driven by higher gross profit in combination with lower operating expenses. Now I will address the balance sheet and liquidity.
As of March 31, 2024, D-Wave's consolidated cash position totaled $27.3 million, an increase of $18.3 million or 204% from the first quarter of fiscal 2023 cash balance of $9 million. As of May 10, 2024, D-Wave's consolidated cash balance was $33 million.
On April 12, 2024, D-Wave's $175 million S3 shelf registration statement was deemed effective by the SEC. On the same date, the company's equity line of credit, that we commonly refer to as the ELOC, S3 registration statement with Lincoln Park Capital Fund also went effective.
As of the effective date, the company had $82.1 million in availability under the ELOC with the investment commitment running through October of 2025. D-Wave's ability to raise funds under the ELOC is subject to a number of conditions, including having a sufficient number of registered shares and D-Wave's stock price being above $1 per share.
We are reiterating the full year 2024 financial guidance set forth in our March 28th fiscal 2023 fourth quarter and full year earnings press release. Our guidance is subject to various cautionary factors described below. Based on the information available on May 10, 2024, guidance for the full year 2024 is as follows.
We expect the fiscal 2024 adjusted EBITDA loss to be less than the fiscal 2023 adjusted EBITDA loss of $54.3 million.
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 to achieve this milestone with substantially less funding than required by any other independent publicly-held quantum computing company.
With that, we will now open the call for questions..
[Operator Instructions] We'll take our first question from Harsh Kumar with Piper Sandler. Please go ahead..
Yeah. Hey, guys. Congratulations again. Looks like the traction is happening. Alan, I had maybe one for you. Actually, two for you. Maybe one for John first. Let's go to John first. So John, bookings were pretty strong this time, and big numbers coming up there on a percentage basis.
Were the bookings pretty broad in your opinion, or were they kind of just something that you can call out, maybe one particular customer stepping up and batting more than normal, or were they pretty spread out, pretty broad, kind of the business that you want to see?.
It was fairly broad-based with a fair number of individual customer bookings, Harsh, and we had two substantial bookings during the quarter, both of which are multi-year in nature..
That's fantastic. And then maybe, Alan, if I go to you, you talked a little bit about the National Quantum Defense Acceleration Act. And could you maybe just give us the significance of it? You mentioned it a little bit. You talked about the significance a little bit.
But I was hoping that you could maybe encapsulate for us what it might do for your business or your quantum company or other -- the field of quantum in general as the government starts to get excited about this technology..
Yeah. So, Harsh, it's actually fairly straightforward. The National Defense Authorization Act essentially encouraged defense to look at all forms of quantum computing, including quantum annealing and quantum hybrid. The new Acceleration Act really forces the issue in some sense by actually driving the programs to make that happen..
Okay. That's good. I'll get back in line, guys, and give the other fellows a chance. Congratulations again, guys..
Thank you..
Thank you, Harsh..
Our next question comes from Quinn Bolton with Needham. Please go ahead..
Hey, guys. Let me echo my congratulations. I guess I wanted to follow-up on Harsh's question just about the new Quantum Acceleration Act. And Alan, you said it sort of is forcing the issue by driving the programs to make that happen.
I guess are you seeing now better activity from government and academia? I know you guys are commercial first and 69% of your revenue came from commercial customers.
But wondering if you could talk about the opportunity to kind of add another leg to the stool with defense and academia maybe contributing more revenue in the future as a result of these acts?.
Yeah, absolutely. And it's not just the NDAA and the Acceleration Act, it's also the quantum supremacy result. So, I think that, when we got together last time and also back at Analyst Day, we talked about some of tailwinds.
And the combination of the legislation that has passed and is moving through Congress with the supremacy work has really gotten a number of government and academic institutions interested in one area that our quantum systems is very, very good at and that the quantum supremacy result was based on [indiscernible] materials simulation and materials design.
And so, we've actually got several opportunities that we're working on right now to build out platforms for materials designed based on that type of simulation.
And so, the combination of the legislation and the supremacy work, which really was all about annealing quantum computing for material simulation, has come together quite nicely to start opening up some real opportunities for us..
Great. And I'm not sure if it's for Alan or John, but you mentioned renewing the relationship with USC, where they're hosting the D-Wave Advantage system in the United States. Two questions there.
One, would you anticipate that migrating to an Advantage2 system over time, would that be under the existing contractor relationship? Would that require a new relationship? And then, the second question is, I assume that there's a commercial component to that.
I don't know if you're willing to kind of give us numbers, but I assume that there's revenue component that comes in from USC as part of that relationship..
So, the answer to the second question is yes. There is a commercial relationship that's a part of that engagement. And the answer to the first question is yes as well. We will be providing the Advantage2 upgrade as soon as the system becomes production ready..
Excellent. Thank you..
Our next question comes from David Williams with Benchmark. Please go ahead..
Hey, good morning, and thanks for letting me ask the question here. I guess, Alan, the first one is something we've talked about before, but just curious how if anything has changed kind of in your thinking in terms of hardware sales, especially given some of the National Defense Authorization Act and some of the things you talked about there.
But it seems like there's more money available and more research and development being brought in-house. Just kind of curious how you think about that today and if your position is any different than maybe previously in terms of your hardware sale potential moving forward..
Yeah. I don't think -- well, my thinking on this hasn't changed. But, the answer to your question is never say never.
So, we do continue to focus on optimization and key use cases in key verticals, as we've talked about in the past, basically resource allocation, resource scheduling and supply chain, logistics, manufacturing as the near-term commercial opportunity areas.
And then we've talked about how new use cases get layered in with generative AI coming next and the fact that we think that, that one is moving faster than we actually originally expected. However, we are now with the supremacy result also opening up significant opportunities in the research arena with both government and academic institutions.
And as we engage in those discussions, if there's interest in systems, we are certainly open to it..
Okay. Fair enough. I certainly appreciate that.
And then maybe secondly here, just how do you think about the ecosystem developing? And maybe if you could just talk to how you collaborate with other vendors that are part of that ecosystem? And maybe just the stack and how open you are there in terms of others that are looking to facilitate maybe on the error correction front or those types of things, are you open to that? Are you doing that currently? And then, how do you think that drives ecosystem longer term in terms of the pace of development? Thanks..
Yeah. So, David, as you know, we are quite different from every other quantum computing company, not just because we're the only commercial quantum computing company, but because we're the only quantum computing company currently providing annealing quantum computers. Everybody else is focused on R&D for gate model systems.
As a result, the technologies and many of the elements in the stack are quite different for us than for everyone else. There's some commonality. For example, the refrigerator that we use is common with all the other superconducting quantum companies, although we do heavily modify those refrigerators for reliability and longevity.
But nonetheless, we buy off-the-shelf refrigerators as a starting point. And similar to what others like Rigetti in the superconducting gate model space would do. However, when we start talking about things like error correction, error correction on annealing quantum computers is quite different from error correction on gate model quantum computers.
When we start talking about the software stack, the software stack and how you program annealing quantum computers is quite different from gate model quantum computers. And so, while there are elements that are common and where we can kind of work with others to ensure a strong supply chain, there are also many, many elements that are unique to us..
Thanks for the help. I certainly appreciate it..
We will move next with Richard Shannon with Craig-Hallum. Please go ahead..
Hi, Alan, John. Thanks for taking my questions. I'm going to follow-up on the topic of bookings here on a prior question, I think it's interesting. You had an excellent bookings number in the first quarter here, and I think based on your prior answer here maybe had a couple of decent size bookings within that.
So, I guess, my question here is on sustainability of seeing bookings at this level or even higher going forward.
I know you want to set expectations to specifically negotiate against yourself with -- in the near term here, but how do we think about sustainability? Are we at a new level here and can go higher, or how would you characterize the outlook for the next few quarters, Alan?.
I'm going to let John answer that..
Okay. Richard, as you're aware, the only guidance that we have provided for fiscal 2024 is the adjusted EBITDA. We have not provided guidance for bookings nor for revenue..
And I knew that was going to be the answer..
I'm not going to say I knew that was going to be the answer, but I thought I'd try anyway. Thanks for that one..
Of course..
Follow-up question is related to the dynamic you described with your Forbes Global 2000 customers here. A good number of these guys in the funnel in the pipeline generating, I would call it, modest to moderate revenues. I suspect these guys can be sizable customers when they emerge into production.
So maybe you can characterize how you're doing with those sets of customers that can really take your revenues up a noticeable level here? How can you describe, Alan, where you're sitting with those guys? Have you seen a visibility on them getting to bigger contracts or even into production in the next half year or year?.
Yeah. Look, I think it's more or less the same as what we've said in the past, which is that, it does take time to move from even a complete proof of concept to getting an application into production.
A lot of the work that goes on post proof of concept really is related to the customers' infrastructure and the customers' processes and the ability to pull data from the right sources in real time and push it back out again. And it just takes time to set that all up.
So, our goal is to shorten that timeline, and our belief is that as we do this kind of over and over again for the same use cases in the same verticals, we will be able to take what we learn with one customer and bring it to another customer and another customer to help them move faster.
But while that's what the verticalization strategy and plan is all about, as I mentioned at Analyst Day, it just takes some time..
Okay. Fair enough. Thanks, guys..
Our next question comes from Suji Desilva with ROTH MKM. Please go ahead..
Hi, Alan. Hi, John. Congrats on the progress here. Maybe a question on the commercial customer base.
I'm just wondering, the traction and uptake in the larger customers you have, the larger Forbes 2000s versus the smaller ones, which one do you think, Alan, goes faster? I would think both the larger ones have the bigger revenue opportunity, but might have offsetting kind of the administrative effort to get into the -- get started there.
So, I'd be curious which ones kind of get going quicker in your estimation..
You said it exactly right. Obviously, the smaller companies and the midsized companies that we work with do move a bit faster and are able to go into production more quickly. It takes more time with the larger customers, but they represent the greater long-term revenue opportunity..
Okay. And then, on the OpEx side, I was wondering how you're able to kind of manage OpEx or do sit in the face of trying to grow your customer base and outreach effort. I'm wondering how the efficiencies are being gained there..
John, do you want to take that?.
Suji, can you repeat your question..
Sure. You guys seem to be able to increase efficiency in operating expenses. I'm curious how you're doing that in the face of having to kind of grow your outreach in customer marketing efforts..
Sure. So, on a year-over-year basis, when we compare the operating expenses, we incurred a lot of non-recurring expenses associated with the going public process. We used a lot of outside resources in a number of functional areas that, one, we either don't need anymore, or two, we have brought that functionality in-house.
So, those are the principal drivers of the year-over-year reduction in operating expenses. We have previously provided guidance with respect to kind of order of magnitude of the areas of spend in OpEx, Suji. We are going to spend heavily on our go-to-market functions this year in relationship with last year.
We expect our G&A OpEx to actually be down on a year-over-year basis and a slight overall increase in R&D.
Does that help?.
Yes, it does, John. Thanks. Thanks, John. Thanks, Alan..
Our next question comes from Kevin Garrigan with Westpark Capital. Please go ahead..
Yeah. Hey, Alan and John, thanks for taking my questions. The first one, just going off the previous government questions and comments, more governments and institutions are kind of doing more research.
So, do you still expect most of the government greenfield opportunities to kind of kick in more in the 2025 timeframe?.
So, the easy answer is yes, but I will tell you there are some opportunities that are moving faster than I expected. So, I think, as I commented a bit earlier, the supremacy work and the basis for that ends up being in an area that is important to a number of government entities and labs as well as academic labs.
And so that's really started to generate some significant interest that I think could move relatively quickly. But that having been said, there was no government in our plan for 2024.
We view that as all upside with 2025 being more the year in which we might start to actually see some more significant government opportunity materialize, but it may happen a bit faster..
Okay. Perfect. Thank you for that. And then just as a follow-up, so you launched the 1,200+ qubit prototype a little while ago and now you yielded over 4,800 qubits.
What kind of lab you guys hit these higher qubits in such a short time? And then, can we maybe expect another significant jump in qubits when we get an update in about three months as you approach 7,000 qubits?.
So, it's essentially all about the fabrication process. As the number of qubits grows, the density of the layout increases. And so, yielding chips with higher density is a bit more challenging. We need to ensure that there are no opens, no shorts, no crosstalk.
This is the kind of normal process of scaling that -- we go through with each generation of system. We are really excited about the fact that we've been able to move so quickly from 1,200 to 4,800. And we kind of hope to have that available for customers to start playing within the relatively near future.
I don't really want to speculate on the final 7,000+ qubit system, but the R&D is going well..
Okay. Perfect. Thanks, Alan..
And our next question comes from Craig Ellis with B. Riley Securities. Please go ahead..
Yeah, thanks for including me, and congratulations on the progress, guys. I wanted to follow-up on a couple of things. The first was, Alan, in your prepared comments, you talked about, I think, 0.5 million problems submitted thus far in response to Fast Anneal capability.
Can you just comment further on what you're seeing there, whether it be by customer type or type of problem, any indication that helps us understand a little bit more about what's in such a high volume number of problems being submitted?.
Yeah. I do want to -- thank you for asking the question. It's the first time anybody -- it's the first time any of you all have asked about Fast Anneal. And since you did ask it and we have a few minutes, I do want to say that this is an extremely important capability.
And the reason why it's so important is because we have demonstrated that our system does do coherent quantum annealing, and it does it as long as we anneal within a timeframe that is close to the coherence time of our qubits. It doesn't have to be equal to it. It can be longer, but close to the coherence time of our qubits.
And so, Fast Anneal is really that capability, allowing problems to be solved with an annealing schedule that runs very, very quickly. And so, what this means is that we are able to solve problems roughly within the coherence time of the processor, and when we're doing that, we are converging to the optimal solution, very fast.
And we've shown that we are converging polynomially faster than with classical heuristics. So, that makes this a very important capability.
There are some other things that we have in the R&D pipeline that I don't want to spend time talking about today, but that will essentially, with that Fast Anneal, give us the effect of even longer coherence times without the need to increase the actual coherence times on the qubits. And it's a very interesting and compelling technology.
It's still in the lab. We've got a fair amount of work to do on it.
But the Fast Anneal is what is not only enabling the ability to solve problems in the coherent regime today, but it will also potentially give us the ability to get -- to have the effect of even longer coherence times without actually increasing the coherence time on the qubits, which is very, very exciting.
Now that having been said, most of the work going on around Fast Anneal right now is basically customers that are tech savvy.
So, these are not the business people that just care about getting the answer, but rather the quantum researchers or scientists within our commercial customer base that really want to kind of see for themselves how much better the Fast Anneal does in solving the problem than the previous annealing schedules that we were using.
So, currently, it's primarily experimentation to understand the benefits. But we expect that, that will begin to transition to actually just being used to solve problems..
That's interesting. And certainly, 0.5 million shows that there's a lot of people that are testing capabilities.
The second question I wanted to pose is something I think a few of the other folks have touched on and it relates to your comments that you're seeing new customers across government, healthcare and research institutions as well as consulting firms.
Just any texture on where you might have seen something that might be either a new development away from the vertical focus that company has had or an incremental use case that might be particularly promising? Thank you, Alan..
Look, our focus really does continue to be on the key verticals and the key use cases that we've already talked about and now starting to kind of transition to incorporate machine learning and generative AI into that, although it's still very, very early days with respect to that.
And so, no, I don't think that it's opening up to significant other use cases. It really is staying the course, but maybe with the addition of AI and machine learning..
Thank you for that..
[Operator Instructions] And we will move next with [indiscernible]. Please go ahead. And we show no further questions at this time. I will turn the call back to Alan Baratz for closing remarks..
Okay. Well, again, thank you all for taking the time to be here with us today. I will also tell you that we focused hard on ensuring that we didn't run over on time today as we did the last time. I'll apologize again for running along last time. But I think we're maybe starting to figure out how to dial in the timing on this.
In any case, all I'll say is the results are clear. Customer demand for our solutions is growing, technical progress is accelerating, and the health of the business is strong. We're delivering customer value by solving their increasingly complex optimization problems today with the most commercially proven quantum solutions.
We're really excited about where we are and we'll look forward to talking to you again in a few months. Thank you all..
And this does conclude today's program. Thank you for your participation. You may disconnect at any time..