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    IONQ Inc (IONQ)

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    Business Description

    IonQ, Inc. is a leading quantum computing company that develops advanced quantum computing systems to solve complex problems and drive innovation across industries. The company provides access to its quantum computers through cloud platforms, sells specialized hardware, and offers professional services to help businesses leverage quantum technology. IonQ is committed to advancing quantum computing capabilities and achieving quantum advantage through its proprietary technology and strategic partnerships.

    1. Quantum-Computing-as-a-Service (QCaaS) - Provides access to quantum computing systems via major cloud platforms like Amazon Web Services, Microsoft Azure Quantum, and Google Cloud Marketplace, as well as through IonQ's own cloud service.
    2. Quantum Computing Systems - Develops proprietary quantum hardware, firmware, and operating systems to enhance computational capabilities, including higher qubit stability and fidelity.
    3. Hardware Sales and Support - Sells specialized quantum computing hardware along with maintenance and support services.
    4. Professional Services - Offers consulting and support to help customers integrate quantum computing into their business operations.
    5. Future Full-System Sales - Plans to sell enterprise-grade quantum computing systems for cloud-based or local deployment, including models like IonQ Forte Enterprise and IonQ Tempo.

    Q3 2024 Summary

    Initial Price$7.07July 1, 2024
    Final Price$8.17October 1, 2024
    Price Change$1.10
    % Change+15.56%

    What went wrong

    • IonQ's reliance on government contracts suggests limited near-term commercial revenue from enterprise customers, as the company admits that "in the near term, it's been a good portion, which is towards government," and enterprise adoption is "starting to switch over to enterprise" but is still progressing.
    • Challenges in scaling up production due to high costs, specifically that "lasers are a significant portion of our overall cost," and they need to "reduce the cost, also reduce the size" before moving to production.
    • Uncertainty around the timing of commercial applications, as partnerships with AstraZeneca and ANSYS are "not completed yet," having been in development for only "6 or 8 months," indicating that meaningful revenue from applications may still be some time away.

    Q&A Summary

    1. Qubitekk Acquisition Details
      Q: What's the price of the Qubitekk acquisition and its impact on IonQ?
      A: IonQ is acquiring Qubitekk for $22 million, funded in cash from the balance sheet. This acquisition helps IonQ scale by photonically networking quantum computers and expands into new markets. It also allows IonQ to move efforts out of the lab to test in the field due to Qubitekk's telco relationships.

    2. Shift from Government to Enterprise
      Q: How is IonQ's focus shifting between government and commercial sectors?
      A: While the near-term focus has been towards government, IonQ is now shifting towards enterprise customers with new application projects. This aligns with their plan to take off as applications come online.

    3. Operating Expenses and Growth
      Q: How should we think about OpEx given new partnerships and growth?
      A: IonQ is not making any changes to OpEx right now and has laid out OpEx for the rest of the year. They will discuss OpEx for next year on the Q4 call. The company is focusing on investing where it matters and refunneling capital to areas for best use.

    4. Cost Reduction via NKT Photonics Partnership
      Q: How does the NKT Photonics partnership support commercialization?
      A: NKT Photonics provides robust lasers that operate at needed wavelengths and simply work. Since lasers are a significant portion of overall cost, this partnership helps reduce costs and size of systems as IonQ moves to production.

    5. Focus on Production Applications
      Q: How is IonQ developing applications with partners like ANSYS and AstraZeneca?
      A: IonQ is focusing on applications that will be the first to enter production, timing software development with hardware readiness. They've been working on prototypes for 6–8 months, moving beyond one-off R&D projects to production-focused engagements. Engagements with Hyundai are also moving into production.

    6. imec Partnership and AFRL Contract
      Q: Will the chip-scale ion trap from imec be used in the AFRL contract?
      A: The imec work has potential in photonic switching and component ruggedization but not within the current AFRL contract period. It's expected to play a role in the future as optics are integrated into chip-scale devices.

    Key Metrics

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    Questions to Ask Management

    1. Can you provide more clarity on how the Qubitekk acquisition will impact your operating expenses going forward, and how much incremental OpEx should we expect from integrating their team and technology?

    2. Given your recent expansion of partnerships and awards, as well as plans to grow your team, how should we think about your operating expenses in the coming quarters, and what measures are you taking to ensure efficient scaling?

    3. With a significant portion of your recent bookings coming from government contracts, can you quantify the near-term government spending opportunity at both national and international levels, and how do you plan to balance this with growing commercial revenues? ,

    4. Regarding your focus on quantum applications with partners like AstraZeneca and ANSYS, can you elaborate on how these applications differ from previous one-off projects, and how they will contribute to your revenue and commercialization strategy over time?

    5. Considering your substantial investments in R&D and the expectations for profitable growth and positive free cash flow, can you provide more details on your timeline for achieving these goals, and what milestones we should look for in the coming quarters?

    Past Guidance

    Here is the guidance provided by IonQ in the last four earnings calls, including the issued period, guided period, and the exhaustive list of metrics guided for:

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024 and Q4 2024
    • Guidance:
      1. Full Year 2024 Revenue Guidance: Raised to a range of $38.5 million to $42.5 million.
      2. Fourth Quarter 2024 Revenue Guidance: Expected to be between $7.1 million and $11.1 million.
      3. 2024 Bookings Guidance: Reaffirmed at $75 million to $95 million.

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024 and Q3 2024
    • Guidance:
      1. Full-Year 2024 Revenue Guidance: Raised to a range of $38 million to $42 million.
      2. Q3 2024 Revenue Guidance: Expected to be between $9 million and $12 million.
      3. Full-Year 2024 Bookings Guidance: Reaffirmed at $75 million to $95 million.

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue Guidance:
        • Full-year 2024 revenue guidance is being maintained (specific full-year revenue figure not provided in the documents).
        • Q2 2024 revenue is expected to be between $7.6 million and $9.2 million.
      2. Bookings Guidance:
        • Full-year 2024 bookings guidance was raised to a range of $75 million to $95 million, up from the previous range of $70 million to $90 million.
      3. Adjusted EBITDA Loss:
        • Projected adjusted EBITDA loss for the full year 2024 is $110.5 million.
      4. Timing of Bookings:
        • Majority of bookings are expected to occur in the back half of the year, particularly considering the end of the U.S. government’s fiscal year in September.

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024 and FY 2024
    • Guidance:
      1. Q1 2024 Revenue: Target range of $6.5 million to $7.5 million.
      2. Full Year 2024 Revenue: Target range of $37 million to $41 million.
      3. Full Year 2024 Bookings: Target range of $70 million to $90 million.
      4. Full Year 2024 Adjusted EBITDA Loss: Projected at $110.5 million at the midpoint of revenue guidance.