D-Wave Quantum Inc. (NYSE:QBTS) Q4 2023 Earnings Call Transcript

D-Wave Quantum Inc. (NYSE:QBTS) Q4 2023 Earnings Call Transcript March 28, 2024

D-Wave Quantum Inc. reports earnings inline with expectations. Reported EPS is $-0.1 EPS, expectations were $-0.1. QBTS isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone, and welcome to the D-Wave Q4 2023 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, today’s call will be recorded, and I’ll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Kevin Hunt, Investor Relations. Please go ahead.

Kevin Hunt: 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 in the Investor Relations section of our company website at www.dwavequantum.com. I’ll now hand over the call to Alan.

Alan Baratz: Thanks, Kevin. Good morning, everyone, and thank you all for taking the time to join us today. D-Wave’s momentum is undeniable. We’re seeing traction and progress across every part of our business, substantive product advancements, ground-breaking scientific results, new strategic partnerships, additions to the executive leadership team, and impressive commercial traction. We’re single handedly leading the transition from an academic endeavor exploring quantum’s potential to enterprise-scale adoption and deployment, solving our world’s toughest problems. Based on our strategic decision to bring to market a different type of quantum technology, annealing quantum computing, now proven to be able to solve important real world problems that cannot be solved classically, we hold a first-mover advantage that no other company in the world can claim.

While the rest of the industry is focused on building gate model systems that won’t solve real world problems for many years, we’re in the market now, helping customers derive ROI from quantum solutions today. Let’s face it, the world’s toughest problems are only getting tougher, and customers can’t wait another five-plus years for solutions. This isn’t about future potential. This is about quantum-powered solutions that drive better business outcomes now. And D-Wave is the only company doing it today. Our market leadership position is evident. 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 real world problems.

No other quantum computing company comes close at this time. So, let me walk you through a few key highlights of recent developments at D-Wave. First, we believe that D-Wave is the first in the world to demonstrate quantum supremacy on real world problems. This ground-breaking work was achieved using our latest generation Advantage2 quantum computer. We’ve shown that our Advantage2 system can solve problems that cannot be solved classically, full stop. This research allows us to simulate the quantum dynamics of magnetic materials without fabricating those magnetic materials. This [class of problems] (ph) is relevant to industrial optimization, machine learning, and quantum material simulation, exactly the types of use cases our customers are currently pursuing.

It’s a remarkable achievement. And let me be very clear, as there are misleading terms out in the market. We believe we’ve achieved a demonstration of quantum supremacy, not quantum advantage. Quantum advantage is poorly defined and used for things that don’t meet the highest bar. Our result goes beyond classical. It’s a demonstration of a quantum computer performing a calculation that a classical computer cannot. D-Wave is currently pursuing peer review publication of this quantum supremacy research in a journal that requires an embargo. So, we need to be respectful of that process and not comment any further on the work. We encourage you to check out the paper on the archive. As I mentioned, the quantum supremacy work was done using our 1,200-plus qubit Advantage2 prototype.

We recently launched that prototype to the market, and customers are able to access it now using our Leap real-time quantum cloud service. Since we made it available about four weeks ago, more than 100,000 problems have been submitted. We’re very excited by the performance gains we’re seeing with Advantage 2. With 1,200-plus qubits and 10,000-plus couplers, this version has doubled the number of qubits and couplers compared to the previously released Advantage2 prototype. Benchmarks demonstrate substantial advancements across a number of performance metrics compared to the Advantage quantum processing unit, including increased qubit connectivity from 15- to 20-way connectivity to enable solutions to larger problems, increasing energy scale by more than 40% to deliver higher-quality solutions, and doubled qubit coherence time, which will drive faster time to solution.

Customer feedback on Advantage2 has been overwhelmingly positive, as they experienced firsthand its impressive processing power. The system will be a game changer for our customers. Now, let’s talk about our efforts in artificial intelligence. The combination of quantum computing and AI is going to fuel technological breakthroughs that promise to impact every industry. To accelerate that market impact, we recently announced a multi-year strategic deal with Zapata AI to advance quantum-enabled machine learning. The partnership centers on joint technical development and commercial deployment of applications that can bring together quantum and generative AI to tackle customers’ highly complex problems. Our work together is initially focused in the area of life sciences, building quantum generative AI models that accelerate the discovery of new molecules.

Beyond life sciences, we see great opportunity to exploit the full potential of quantum for AI applications across a multitude of industries. We’re already seeing promise in achieving faster training times and improved model performance, outperforming classical methods in certain tasks. So, the potential use cases are vast. Rounding out our technical update, we recently promoted Dr. Trevor Lanting to the position of Chief Development Officer. With 15 years of experience in technical development in D-Wave, Trevor now leads our product innovation roadmap efforts spanning D-Wave’s full stack of quantum computing hardware and software solutions. He will direct the ongoing development of the Advantage and Advantage2 annealing quantum computing systems, our gate model computing program and the interdisciplinary teams focused on performance research and algorithm development.

We’re fortunate to have Trevor guiding our technical development and know he will build on our heritage of delivery products that solve the unsolvable and drive tangible outcomes for our customers. Moving now to our commercial momentum. Overall commercial demand for our technology remains strong. In 2023, revenue from commercial customers increased by 41% over the prior year, and we had nearly 80 commercial customers, including over two dozen Forbes Global 2000 Enterprises. In addition, we’ve seen very solid bookings growth, with Q4 bookings up 34% on a year-over basis — year-over-year basis and 2023 bookings increasing 89% over 2022 bookings. We expect that trend to continue in the first quarter of fiscal 2024 with at least $4.3 million in Q1 bookings that reflects a minimum 36% growth over the immediately preceding fourth quarter of fiscal 2023 and 47% growth over the year earlier first quarter of fiscal 2023.

This will represent the company’s eight consecutive quarter of year-over-year growth in quarterly bookings. We’re proud to be the first quantum company to bring customer applications to production, meaning the applications have been deployed to fuel daily operations. We’re very excited to see customer — two customer applications running in production today, for employee scheduling and delivery driver scheduling, with both applications achieving impactful cost and time savings. We expect two additional applications, one on promotional tour routing and one on customer rewards program optimization, to move into production in a few months with others on the near-term horizon. As a reminder, going into production means these businesses will need constant and consistent interaction with D-Wave’s quantum computing system, ranging from every few minutes or seconds to weekly in order to help run their operations.

Unlike building proofs of concept, in-production applications represent recurring quantum compute as a service, QCaaS, revenue for us, expected over multiple years. We’ve also signed a number of customer engagements, including Bridgestone Corporation, Ford Otosan, Julich Supercomputing Centre, Quantum Algorithms Institute, Qunova Computing, SavantX and UKRI National Quantum Computing Centre in the UK. We successfully launched our new go-to-market growth strategy, designed to increase sales and expedite customer applications moving into production. Initially focused on key verticals, including logistics, manufacturing and government, we believe this new go-to-market approach will better position us to serve markets that are ready to capitalize on the tangible benefits of our quantum computing solutions right now.

This strategy spans every corner of the company from sales and marketing to product development to recruiting and more. To lead this effort, we’ve hired our first Chief Revenue Officer, Lorenzo Martinelli, a 30-year cloud enterprise software executive with a proven track record of delivering market-leading, higher-ROI solutions that generate strong revenue growth. Lorenzo and his team are already seeing positive reaction to the recently launched logistics-focused campaign with Fortune 100 companies expressing interest in how our annealing quantum computing technology could help solve their critical logistics challenges. Clearly, this is an audience hungry for quantum. With government identified as a key vertical in our go-to-market strategy, we’re already seeing growing interest and momentum with the public sector.

First, we received a very positive response on our quantum supremacy work from governments around the world, which acknowledges the significance of the achievement. Second, we started new engagements with Canadian and UK governments to build applications using our Advantage quantum computing system. We’re also seeing increased government interest in training to prepare for a quantum-ready workforce. And finally, there’s a growing call by policymakers to support quantum annealing and quantum hybrid technology in global quantum programs. Governments are recognizing how imperative it is that they invest in quantum now and maintain global competitiveness. As discussed last quarter, we’re also increasing our focus on partners to broaden our reach and potential customer footprint with these key verticals and beyond.

Recently, we announced partnerships with NEC Australia and Deloitte Canada to expedite the exploration and adoption of quantum computing solutions among governments and businesses in those respective regions. In addition, we’ll soon formalize our overall partner program to expedite onboarding of new partners and drive quantum technology adoption and revenue growth. So, as you can see, we’ve been very busy at D-Wave, delivering on product milestones, advancing the science, bolstering our executive team, focusing our go-to-market and sales function and helping customers achieve ROI with our solutions. There’s momentum across all parts of the business, and we have never been more excited about the future of the company. With that, I’ll hand it over to John to provide a review of our fourth quarter and fiscal year 2023 results.

John?

John Markovich: Thank you, Alan, and thank you to everybody taking the time to participate in today’s call. In my review of the fourth quarter and fiscal year 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, 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 fourth 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 fourth quarter of fiscal 2023 totaled $2.9 million, an increase of approximately $500,000, or 21%, from the fourth quarter fiscal 2022 revenue of $2.4 million and up 13% sequentially over the immediately preceding fiscal 2023 third quarter revenue of $2.6 million, representing the third consecutive quarter of sequential quarter-to-quarter growth in revenue.

Due to the timing associated with our professional services revenue, we believe that our bookings performance may at times be a better indicator of our business momentum than quarterly revenue. We define bookings as orders received from our customers that are expected to generate revenue in the future. We present the operational metric of bookings because it reflects customers’ demand for our products and services and to assist investors in analyzing our performance in future periods. Bookings for the fourth quarter totaled $3.1 million, an increase of approximately $800,000, or 34%, when compared with the fourth quarter of 2022 bookings of $2.4 million, and an increase of approximately $200,000, or 8%, from the immediately preceding fiscal 2023 third quarter bookings of $2.9 million.

The $3.1 million of fourth quarter bookings represents D-Wave’s seventh consecutive quarter of year-over-year growth in quarterly bookings, as Alan highlighted earlier. GAAP gross profit for the fourth quarter was $2 million, an increase of approximately $600,000, or 45%, from fiscal 2022 fourth quarter GAAP gross profit of $1.4 million, and an increase of approximately $500,000, or 29%, from the immediately preceding third quarter GAAP gross profit of $1.5 million, with the increase due primarily to the growth in revenue. Non-GAAP gross profit for the fourth quarter was $2.3 million, an increase of approximately $600,000, or 34%, in the fiscal 2022 fourth quarter non-GAAP gross profit of $1.7 million, and an increase of approximately $400,000, or 20%, from the immediately preceding third quarter non-GAAP gross profit of $1.9 million.

Again, this represents the third consecutive quarter of sequential quarter-to-quarter improvement in non-GAAP gross profit with the increase due to the growth in revenue. Moving on to GAAP gross margins. For the fourth quarter, GAAP gross margin was 67.7%, an improvement of 10.8% from the fiscal 2022 fourth quarter GAAP gross margin of 56.9%, and an improvement of 8% from the immediately preceding third quarter GAAP gross margin of 59.7%. This also represents the third consecutive quarter of sequential quarter-to-quarter improvement in GAAP gross margin due primarily to the growth in revenue. Our non-GAAP gross margin for the fourth quarter was 80.2%, an improvement of 7.6% from the fiscal 2022 fourth quarter non-GAAP gross margin of 72.6%, and an improvement of 4.6% from the immediately preceding third quarter non-GAAP gross margin of 75.6%.

Again, this represents the third consecutive quarter of sequential quarter-to-quarter improvement in non-GAAP gross margin with the increase due principally to higher revenue. Again, the difference between GAAP and non-GAAP gross profit and gross margin is limited to non-cash stock-based compensation and depreciation expenses that are excluded from the non-GAAP gross profit and non-GAAP gross margin measures. GAAP operating expenses for the fourth quarter were $18.5 million, a decrease of $3.8 million, or 17%, from the fiscal 2022 fourth quarter GAAP operating expenses of $22.3 million, and a decrease of $1.4 million, or 7%, from the immediately preceding third quarter GAAP operating expenses of $19.9 million. This represents a third consecutive quarter of sequential quarter-to-quarter decrease in GAAP operating expenses with the decrease driven primarily by lower non-cash stock-based compensation expenses.

With respect to the non-GAAP adjusted operating expenses, for the fourth quarter, they totaled $13.2 million, a decrease of approximately $2.7 million, or 17%, from $15.9 million in non-GAAP adjusted operating expenses in the fiscal 2022 fourth quarter, and a decrease of approximately $300,000, or 2%, from the immediately preceding third quarter. This represents the third consecutive quarter of sequential quarter-to-quarter decrease in non-GAAP adjusted operating expenses, and reflects the company’s focus on expense management with the decline driven primarily by lower G&A and research and development expenses. Net loss for the fourth quarter was $16 million or $0.10 per share, a decrease of $2.2 million, or 12%, from the fiscal 2022 fourth quarter net loss of $18.2 million, and a decrease of approximately $100,000, or 1%, from the immediately preceding third quarter net loss of $16.1 million, representing the second consecutive quarter of sequential quarter-to-quarter improvement in net loss, with the improvement driven by higher gross profit in combination with lower operating expenses.

Adjusted EBITDA loss for the fourth quarter was $10.9 million, an improvement of $3.5 million, or 24%, from the fiscal 2022 fourth quarter adjusted EBITDA loss of $14.4 million, and an improvement of approximately $700,000, or 6%, from the immediately preceding third quarter adjusted EBITDA loss of $11.6 million, representing the third consecutive quarter of sequential quarter-to-quarter improvement in adjusted EBITDA loss. I will now address D-Wave’s operating performance for fiscal 2023. Revenue for 2023 for the fiscal period ended December 31 totaled $8.8 million, an increase of $1.6 million, or 22%, from revenue of $7.2 million in fiscal 2022 ended December 31, 2022. Bookings for fiscal 2023 were $11.5 million, an increase of $5.4 million, or 89%, from 2022 bookings of $6.1 million.

With respect to customers and commercial traction, when we compare fiscal 2023 with fiscal 2022, D-Wave had a total of 133 total customers compared with 120 customers in the prior period, 78 commercial customers compared with 74 commercial customers in 2022, and 27 Forbes Global 2000 customers compared with 24 in the prior period. In addition, revenue from commercial customers increased by $1.8 million, or 41%, on a year-over-year basis. And commercial revenue as a percentage of total revenue increased from 60% to 70% on a year-over-year basis. And revenue from Forbes Global 2000 customers increased by approximately $400,000, or 20%, on a year-over-year basis, with Forbes Global 2000 customers comprising little over 26% of our total fiscal 2023 revenue.

Now I’d like to take a moment to highlight how D-Wave’s revenue and business model are fundamentally different for most all, if not all, other quantum computing companies. D-Wave’s business model is to build a sustainable and growing foundation of cloud-based, recurring subscription QCaaS revenue. Similar to the early days of the SaaS industry, at this stage, we’re building out our sales strategy and execution and generating significant traction with our commercial customers. But in the near term, our revenue base will be lower as QCaaS contracts are recognized over the term of the underlying contracts. Unlike most of the quantum computing companies that are recognizing revenue from the sale of very early stage experimental systems, D-Wave does not sell systems.

In fact, several years ago, D-Wave did sell quantum computing systems, primarily the U.S. government agency, and came to the conclusion that this is not a sustainable business model. Not then and not now. We are highly focused on selling our commercialized technology to a broad base of enterprises as evidenced by 70% of fiscal 2023 revenue derived from a highly diversified commercial customer base of nearly 80 companies. This contrasts sharply with the revenue makeup of most other quantum computing companies that is comprised primarily of government-funded R&D that is highly concentrated amongst very few government organizations. In these arrangements, government entities are essentially funding the development of systems that they may eventually purchase.

Although we believe that the recent reauthorization of the U.S. Government National Defense Authorization Act will provide D-Wave with incremental revenue opportunities, we don’t consider that a primary focus on government-funded R&D revenue is a sustainable business model. Moreover, as Alan highlighted earlier, D-Wave is the only quantum computing company that has got commercial applications in production, and we believe that we are years ahead of other quantum computing companies in achieving this critical milestone. Lastly, D-Wave is the only quantum computing company that regularly discloses the number of our customers, the number of our commercial customers, and the amount of revenue that is derived from commercial enterprises that we believe best evidences the magnitude of our first-mover advantage and commercializing our annealing technology.

GAAP gross profit for fiscal 2023 was $4.6 million, an increase of approximately $400,000, or 9%, from $4.3 million in GAAP gross profit for fiscal 2022, with the improvement due primarily to higher revenue. Non-GAAP gross profit for fiscal ’23 was $6.1 million, an increase of approximately $1.3 million, or 27%, from the fiscal 2022 non-GAAP gross profit of $4.8 million, with the improvement due primarily to higher revenue. Fiscal 2023 GAAP gross margin was 52.8%, a decrease of 6.5% from the 59.2% GAAP gross margin in fiscal 2022, with the decrease due primarily of higher non-cash stock-based compensation expenses in the fiscal 2023 cost of sales when compared to the fiscal 2022 cost of sales. Fiscal 2023 non-GAAP gross margin was 69.8%, an improvement of 2.5% from fiscal 2022 non-GAAP gross margin of 67.3%.

Fiscal 2023 GAAP operating expenses were $85.2 million compared with fiscal 2022 GAAP operating expenses of $63.7 million, with the $21.5 million year-over-year increase comprised of $11.5 million in non-cash stock-based compensation expense, $5.3 million in public company related costs, $3.4 million in salaries and other personnel related costs, and $1.5 million in research and development fabrication costs. Fiscal 2023 non-GAAP adjusted operating expenses totaled $60.4 million, an increase of $8 million, or 15%, from fiscal 2022 non-GAAP adjusted operating expenses of $52.4 million, with the increase comprised primarily of $3.4 million in personnel related costs, $2.8 million in public company related costs, and $1.5 million in research and development fabrication costs.

Fiscal 2023 net loss was $82.7 million, or $0.60 per share, compared with fiscal 2022 net loss of $53.7 million, or $0.45 per share. Fiscal 2023 adjusted EBITDA loss was $54.3 million compared with $48 million in fiscal 2022, with the increase due primarily to higher public company and headcount related expenses. I will now address the balance sheet and liquidity. As of December 31, 2023, D-Wave’s consolidated cash position totaled $41.3 million, an increase of $34.2 million, or 485%, from the year earlier December 31, 2022 consolidated cash balance of $7.1 million. During fiscal 2023, D-Wave raised over $90 million in capital, including $66 million in equity, primarily from the company’s common stock purchase agreement, commonly referred to the Equity Line of Credit or ELOC, with Lincoln Park capital, and $32 million in long-term debt, primarily with PSPIB Unitas Investments, an affiliate of PSP Investments that we refer to as the PSP loan.

As of December 31, 2023, D-Wave had $82.1 million in remaining capacity under the Lincoln Park ELOC commitment. It terminates in 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. As previously disclosed, on April 13, 2023, D-Wave entered into a $50 million four-year term loan agreement with PSP. The loan agreement is comprised of three individual tranches of $15 million, $15 million, and $20 million, respectively. And to date, D-Wave has drawn on the first two tranches totaling $30 million. However, the issuance of the third tranche is subject to certain conditions, and there can be no assurance that the company will be able to meet the conditions necessary to draw on the third tranche.

Now, I will address our outlook for 2024. Keep in mind, as I noted earlier, our business model is primarily a cloud-based recurring revenue model, not a system sales model, nor a government-funded R&D revenue model, which, as I outlined earlier, we do not believe to be sustainable. Under a cloud-based recurring revenue model, it will take time in the early years to build a sizable revenue base, given that the value of the QCaaS contracts are recognized over a period of time. We believe that we have made substantial progress in building the technical infrastructure, developing and launching the appropriate products and attracting a significant number of large enterprise customers to support a highly scalable recurring and diversified revenue business.

We manage our business to drive bookings from commercial customers leading to production applications and to achieve our EBITDA objectives. Accordingly, we have provided adjusted EBITDA guidance for 2024 in today’s earnings press release. In addition, given where we are in the first quarter, we’ve also provided Q1 bookings guidance, and we will continue to report bookings on a quarterly basis to help you understand the progress that we are making. Based on the information available on March 27, 2024, our fiscal 2024 adjusted EBITDA loss guidance is less than the fiscal 2023 adjusted EBITDA loss of $54.3 million, and our first quarter bookings guidance is bookings of at least $4.3 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.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Suji Desilva with ROTH MKM. Please go ahead.

Suji Desilva: Good morning, John. So, couple of financial questions first perhaps. John, the QCaaS contracts signed to date, what’s the typical term length for those? And, are those recognized linearly or is there sort of an elbow as usage goes up?

John Markovich: I’ve missed the second part of your question, Suji. Are they…

Suji Desilva: Whether they’re recognized linearly or whether the revenue goes up with usage over time?

John Markovich: Typically, it’s ratably straight line over the term of the contract, and we have contracts that range from several months to several years in duration.

Suji Desilva: Okay. And sticking on the financials, the commercial customer count in ’23 was 78. Is the expectation that, that customer count grows in ’24, or is it more than expectation to monetize revenue from this base? What’s more of the focus in ’24 relatively?

John Markovich: Our focus is on both, Suji. Expanding revenue opportunities within the existing base, as well as expanding the number of commercial accounts.

Suji Desilva: Okay. And then maybe you can provide data on the number of PoCs in process. And maybe just maybe tying to that, how professional services revenue is a lead indicator of the QCaaS revenue, if that’s also the case?

John Markovich: Okay. I’ll address your second part of your question first. So, over the last two quarters, Q3 and Q4, we had record levels of professional services. And this is a leading indicator of the potential pipeline for the production applications because within that we have the PoCs. With respect to the number of PoCs, we haven’t disclosed that specific number on a quarterly basis.

Suji Desilva: Okay. That helps. Thanks. And then last question really on the applications. You have two in production and two more coming. Do you expect to add additional apps in the next 12 to 18 months? Or are you going to emphasize some of these initial apps for revenue in the next 12 to 18 months?

John Markovich: Alan, do you want to address that?

Alan Baratz: Yeah, I’ll take that. So, Suji, as we discussed, I believe, in the last earnings call, as well as at our Analyst Day conference, our focus for the foreseeable future is on a specific set of use cases revolving around resource allocation and resource scheduling, primarily in the areas of manufacturing, logistics and supply chain. And so that really will be our focus for the foreseeable future. That having been said, there are actually quite a few different specific applications that fall into those broad areas. And so in fact, you can expect to see us talking about a variety of different applications across those key industries going forward.

Suji Desilva: Okay. All right. Thanks, Alan. Thanks, John.

Operator: Thank you. Our next question comes from David Williams with Benchmark. Please go ahead.

David Williams: Hey. Excuse me. Good morning, gentlemen. Thanks for letting me ask the question here. First I wanted to ask, maybe Alan, can you speak a bit to the magnitude of the impact on the demonstration of the quantum supremacy? Obviously, there’s going to be some skepticism, I think, from peers and maybe the investment community in general. But is there something you would say that maybe helps us get comfortable in that — those findings, and just maybe any color there would be helpful, I think.

Alan Baratz: Yeah. So, first of all, David, let me just reiterate that we have submitted this paper for peer review. And as a result, we need to be a little bit careful with what we say about it. But the paper is on the archive and anybody can go look at it. In addition, we are able to talk a little bit about it in social media, in various meetings with customers and occasionally in conferences, if they’re primarily technically oriented conferences. What I can say is that since we started talking about it in social media and at conferences, 90%-plus of the feedback has been positive. So, yeah, I mean, there are a couple of folks that are typical D-Wave quantum annealing, un-enthusiasts, shall we say, who have made some comments.

But as I said, the vast majority of the feedback that we’ve gotten has been very, very positive, including from some very well-respected academics as well as government officials. So, we’re actually quite pleased with the feedback, but really excited about the result.

David Williams: Great. Thanks for the color, and congrats on that demonstration. I guess secondly is we’re seeing — it feels like a real acceleration in your business in terms of just the momentum that you’re gaining and moving programs into production. But I guess maybe can you talk about what’s accelerating that? What you’re hearing from customers? And then maybe secondly just how you’re — what you’re hearing from customers in relation to your peers, what they’re finding? I’m sure that most are at least in the discovery mode and using multiple type vendors today. And just kind of curious what your feedback would be how your performance compares with your peers and what you’re hearing from your customers. Thank you.

Alan Baratz: Yeah. So, I don’t really want to talk about what our peers or competitors are doing, but I would highly encourage you to go ask them, which commercial customers they have, what real world applications they are working on, are these at scale or kind of experiments into whether the quantum system can actually do anything or not, and whether they’ve got any applications in production or not. So, I encourage you to go ask them that question. For us, as I commented a bit earlier and as John reinforced, the model is to start with professional services engagements to help build out proofs of concept that allow our customers to understand how our quantum systems can deliver value to their business operations and with a positive ROI.