I recently introduced IONQ to the board. If you haven’t read my previous post, let me describe this business. IONQ is a very small company engaged in the design and manufacture of quantum computers. I previously stated that they are essentially without competition. I need to qualify that statement as there are several companies that are in the field, most notably IBM. Saul noted that this is a risky company when it comes to investing. He based this observation on the six quarters of revenues I posted.
While IONQ is likely a high risk investment, I want to dispel any thoughts that it is a “story stock.” This is not another Westport. For those not familiar with Westport, it is the company recommended by TMF which brought Saul notoriety. Saul posted his financial analysis of Westport on the TMF boards. Saul clearly demonstrated that if this company would never achieve profitability if they continued doing business in the same manner as they had previously. If I recall correctly, that was about 10 years ago when WPRT was trading for $200 or more. Today the stock is ~$7.50 and I believe the company is still losing money. But I digress.
Raw compute power of a quantum computer is measured in a unit called “quants.” However, the mere number of quants that a machine delivers is somewhat meaningless as the fidelity of the output product generally declines as the number of quants increases.
The Quantum Economic Development Consortium is an independent organization that has defined the algorithmic quant (AQ), as a unit of measure for quantum computers that does a much better job of capturing the real world usefulness of such a machine with respect to practical applications. The increase in computational ability of 1 AQ represents a doubling of computing power.
Should you desire to get into the weeds on this, let me suggest the article found here: Algorithmic Qubits: A Better Single-Number Metric.
As I was saying, IONQ is not a story stock. In October of 2021 IONQ made Aria, with a rating of 20 AQ, available via Azure and GCP. Shortly thereafter they added AWS to the list. IONQ has made a second Aria available in order insure 24x7x365 access.
Just last month IONQ announced the general availability of Forte, their most powerful machine yet with a rating of 29 AQ. Forte is the most powerful quantum computer available from any vendor.
IONQ has a goal of achieving 35 AQ this year. During the most recent conference call an analyst asked the CEO about his confidence in achieving the goal. The CEO responded with high confidence that they will meet that goal in the coming year. He also asserted that they will achieve 64 AQ by the end of 2025. A 64 AQ machine may be used to solve problems related to climate, chemistry and other subject areas of such complexity that they can’t be solved today on any platform. And of course, ML/AI will see a great deal of application with such a platform.
But financial performance is just as important as the technical accomplishments. During the most recent conference call the CFO asserted, “Turning now to our balance sheet, cash, cash equivalents and investments as of March 31 2023, were $525.5 million. We continue to believe that this cash position, which we believe is the strongest of any quantum pure player, gives us sufficient cash reserves to get to profitability without needing to raise additional funds, given our current roadmap.”
In addition, the CFO responded to question about the sale of a system with this, “We should also clarify that we did not actually specify that there would be a system sale in this calendar year, only that we expected one to happen in the next 12 to 24 months.” That clarification was made in response to a question about an assertion made during the 4Q22 conference call.
The highest quarterly revenue that IONQ has achieved to date was $4.29M as of 1Q23, reported on May 11. A full system sale represents revenue of “tens of millions of dollars.” In other words, this will be explosive growth if indeed the deliver in the next 12 to 24 months.
But, irrespective of whether or not this sale is made in that time period or a bit later, I think it’s clear that IONQ is real company with real products and a roadmap to profitability.