IonQ, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Quarterly Report on Form 10-Q contains statements that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believes,” “expects,” “intends,” “estimates,” “projects,” “anticipates,” “will,” “plan,” “may,” “should,” or similar language are intended to identify forward-looking statements. It is routine for our internal projections and expectations to change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter or year. Readers of this Quarterly Report on Form 10-Q are cautioned not to place undue reliance on any such forward-looking statements. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Risks and uncertainties are identified under “Risk Factors” in Item 1A herein and in our other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements included herein are made only as of the date hereof. Unless otherwise required by law, we do not undertake, and specifically disclaim, any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise after the date of such statement. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, and our audited consolidated financial statements and related notes for the year ended December 31, 2022, filed with the SEC on March 30, 2023. Unless the context otherwise requires, the terms “IonQ,” “Legacy IonQ” “we,” “us,” “our” and similar terms refer to IonQ Quantum, Inc. prior to the consummation of the Business Combination and IonQ, Inc. and its wholly owned subsidiaries after the consummation of the Business Combination. References to “dMY” refer to the predecessor company prior to the consummation of the Business Combination. Overview We are developing quantum computers designed to solve some of the world’s most complex problems, and transform business, society and the planet for the better. We believe that our proprietary technology, our architecture, and the technology exclusively available to us through license agreements will offer us advantages both in terms of research and development, as well as the commercial value of our intended product offerings. Today, we sell access to several quantum computers of various qubit capacities and are in the process of researching and developing technologies for quantum computers with increasing computational capabilities. We currently make access to our quantum computers available via three major cloud platforms, Amazon Web Services’ (“AWS”) Amazon Braket, Microsoft’s Azure Quantum and Google’s Cloud Marketplace, and also to select customers via our own cloud service. This cloud-based approach enables the broad availability of quantum-computing-as-a-service (“QCaaS”). We supplement our QCaaS offering with professional services focused on assisting our customers in applying quantum computing to their businesses. We also expect to sell full quantum computing systems to customers, either over the cloud or for local access. We are still in the early stages of commercial growth. Since our inception we have incurred significant operating losses. Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and further commercialization of our quantum computing systems. Our net losses were $27.3 million and $4.2 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of $221.6 million. We expect to continue to incur significant losses for the foreseeable future as we prioritize reaching the technical milestones necessary to achieve an increasingly higher number of stable qubits and higher levels of fidelity than presently exists—prerequisites for quantum computing to reach broad quantum advantage. 22 Table of Contents Business and Technical Highlights • We signed a contract with the United Emirates Quantum Research Center - Technology Innovation Institute to explore how quantum computing can give the nation a competitive edge. • In collaboration with Fidelity Center for Applied Technology, or FCAT, we were proud to announce new work in the field of Quantum Monte Carlo. This newest accomplishment focuses on speeding up Monte Carlo simulations, a widely-used statistical analysis method in finance, science, and engineering. • We launched a partnership with BearingPoint, a global management and technology consulting firm, to bolster their growing quantum team in Europe. • We achieved 29 #AQ on IonQ Forte, our latest world-class quantum system, reaching our most significant 2023 technical goal seven months ahead of our technical roadmap. This is a 16x increase in computational power, measured by useful computational space for running algorithms, compared to IonQ Aria with 25 #AQ. • We completed construction of IonQ Aria 2, a second Aria-class quantum computer. This new machine will join IonQ Aria 1 on the public cloud this quarter. • We published research results on modeling human cognition using quantum hardware in the peer-reviewed scientific journal, Entropy . This is the first output of work we initiated a year ago on quantum artificial intelligence, or quantum AI. • We hired Pat Tang as Vice President of Research and Development. Pat brings over 23 years of technology experience, most recently as Vice President of Engineering at Amazon’s Lab126. Impact of the Macroeconomic Climate on Our Business The recent trends towards rising inflation may materially adversely affect our business and corresponding financial position and cash flows. Inflationary factors, interest rates and overhead costs may adversely affect our operating results. Rising interest and inflation rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates continue to rise) on our operating costs, including our labor, due to supply chain constraints, consequences associated with bank failures and the Russia-Ukraine war, and employee availability and wage increases, which may result in additional stress on our working capital resources. The Merger Agreement On March 7, 2021, Legacy IonQ, dMY and Ion Trap Acquisition Inc. (the “Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, at the closing, the Merger Sub was merged with and into Legacy IonQ, with Legacy IonQ continuing as the surviving corporation following the merger, being a wholly owned subsidiary of dMY and the separate corporate existence of the Merger Sub ceased (the “Business Combination”). Commensurate with the Business Combination, dMY changed its name to IonQ, Inc. and Legacy IonQ changed its name to IonQ Quantum, Inc. IonQ became the successor registrant with the SEC, meaning that Legacy IonQ’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. Key Components of Results of Operations Revenue We have generated limited revenues since our inception. We derive revenue from providing access to QCaaS, consulting services related to co-developing algorithms on our quantum computing systems, and from contracts associated with the design, development, and construction of specialized quantum computing systems together with related services. In arrangements with the cloud service providers, the cloud service provider is considered the customer and we do not have any contractual relationships with the cloud service providers’ end users. We have determined that our QCaaS contracts represent a combined, stand-ready performance obligation to provide access to our quantum computing systems together with related maintenance and support. The transaction price generally includes a variable fee based on usage of our quantum computing systems and may include a fixed fee for a minimum volume of usage to be made available over a defined period of access. Fixed fee arrangements may also include a variable component whereby customers pay an amount for usage over contractual minimums contained in the contracts. We have determined that contracts that contain consulting services related to co-developing quantum computing algorithms and the ability to use our quantum computing systems to run such algorithms represent a combined performance obligation that is satisfied over-time with revenue recognized based on the efforts incurred to date relative to the total expected effort. Certain of our contracts contain multiple performance obligations, most commonly in contracts for specialized quantum computing systems together with related maintenance and support. Such contracts may also include access to our QCaaS. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. When there are multiple performance obligations in a contract, we allocate the transaction price to each performance obligation based on its standalone selling price when available. We determine standalone selling price based on the observable price of a product or service when we sell the products or services separately in similar circumstances and to similar customers. When the standalone selling price is not known, due to it being either highly variable or uncertain, we allocate the transaction price using the residual approach. For contracts with a fixed transaction price, the fixed fee is recognized on a straight-line basis over the access period or associated measure of progress for our consulting services contracts. For contracts without fixed fees, variable usage fees are billed and recognized during the period of such usage. Performance obligations are satisfied over-time if the customer receives the benefits as we perform the work, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and we have a contractual right to payment for performance to date. Revenue is recognized on performance obligations satisfied over time based on the efforts incurred to date relative to the total expected effort. We are currently focused on marketing our QCaaS and consulting services and have entered into, and are continuing to enter into, new contracts with customers. We have also engaged with certain prospects who are interested in purchasing entire quantum computers, either over the cloud or for local access. Operating Costs and Expenses Cost of revenue Cost of revenue primarily consists of expenses related to delivering our services, including personnel-related expenses, allocated facility and other costs for customer facing functions, and costs associated with maintaining our in-service quantum computing systems to ensure proper calibration as well as costs incurred for maintaining the cloud on which the QCaaS resides. Cost of revenue also includes hardware costs for construction of specialized quantum computing systems. Personnel-related expenses include salaries, benefits, and stock-based compensation. Cost of revenue excludes depreciation and amortization related to our quantum computing systems and related software. 23 Table of Contents Research and development Research and development expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our research and development functions. Unlike a standard computer, design and development efforts continue throughout the useful life of our quantum computing systems to ensure proper calibration and optimal functionality. Research and development expenses also include purchased hardware and software costs related to quantum computing systems constructed for research purposes that are not probable of providing future economic benefit and have no alternate future use as well as costs associated with third-party research and development arrangements. Sales and marketing Sales and marketing expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, costs for direct advertising, marketing and promotional expenditures and allocated facility and other costs for our sales and marketing functions. We expect to continue to make the necessary sales and marketing investments to enable us to increase our market penetration and expand our customer base. General and administrative General and administrative expenses consist of personnel-related expenses, including salaries, benefits and stock-based compensation, and allocated facility and other costs for our corporate, executive, finance, and other administrative functions. General and administrative expenses also include expenses for outside professional services, including legal, auditing and accounting services, recruitment expenses, information technology, travel expenses, certain non-income taxes, insurance, and other administrative expenses. We expect our general and administrative expenses to increase for the foreseeable future as we scale headcount with the growth of our business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, NYSE, legal, audit, additional insurance expenses, investor relations activities, and other administrative and professional services. As a result, we expect that our general and administrative expenses will increase in absolute dollars but may fluctuate as a percentage of total revenue over time. Depreciation and amortization Depreciation and amortization expense results from depreciation and amortization of our property and equipment, including our quantum computing systems, and intangible assets that are recognized over their estimated lives. Nonoperating Costs and Expenses Change in fair value of warrant liabilities The change in fair value of warrant liabilities consists of mark-to-market fair value adjustments recorded associated with the public warrants assumed as part of the Business Combination. Interest income, net Interest income, net consists of income earned on our money market funds and other available-for-sale investments. Other income (expense), net Other income (expense), net consists of realized losses on our available-for-sale investments and certain other expenses. 24 Table of Contents Results of Operations The following table sets forth our statements of operations for the periods indicated: Three Months Ended March 31, 2023 2022 (in thousands) Revenue $ 4,285 $ 1,953 Costs and expenses: Cost of revenue (excluding depreciation and amortization) (1) 1,036 568 Research and development (1) 16,233 7,338 Sales and marketing (1) 2,667 1,871 General and administrative (1) 10,581 9,194 Depreciation and amortization 1,791 1,266 Total operating costs and expenses 32,308 20,237 Loss from operations (28,023 ) (18,284 ) Change in fair value of warrant liabilities (3,610 ) 13,448 Interest income, net 4,231 608 Other income (expense), net 64 1 Loss before benefit for income taxes (27,338 ) (4,227 ) Benefit for income taxes — — Net loss $ (27,338 ) $ (4,227 ) (1) Cost of revenue, research and development, sales and marketing, and general and administrative expenses for the periods include stock-based compensation expense as follows: Three Months Ended March 31, 2023 2022 (in thousands) Cost of revenue $ 349 $ 104 Research and development 5,280 1,698 Sales and marketing 764 73 General and administrative 3,875 4,797 Comparison of the Three Months Ended March 31, 2023 and 2022 Revenue Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Revenue $ 4,285 $ 1,953 $ 2,332 119 % Revenue increased by $2.3 million, or 119%, to $4.3 million for the three months ended March 31, 2023, from $2.0 million for the three months ended March 31, 2022. The increase was primarily driven by new revenue contracts under which we provided services during the three months ended March 31, 2023. Cost of revenue Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Cost of revenue (excluding depreciation and amortization) $ 1,036 $ 568 $ 468 82 % Cost of revenue increased by $0.5 million, or 82%, to $1.0 million for the three months ended March 31, 2023, from $0.6 million for the three months ended March 31, 2022. The increase was driven primarily by the increase in labor costs to service contracts for the three months ended March 31, 2023. 25 Table of Contents Research and development Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Research and development $ 16,233 $ 7,338 $ 8,895 121 % Research and development expense increased by $8.9 million, or 121%, to $16.2 million for the three months ended March 31, 2023, from $7.3 million for the three months ended March 31, 2022. The increase was primarily driven by a $7.7 million increase in payroll-related expenses, including an increase in stock-based compensation of $3.6 million, as a result of increased headcount and a $0.6 million increase in professional service costs to support research and development initiatives. Sales and marketing Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Sales and marketing $ 2,667 $ 1,871 $ 796 43 % Sales and marketing expense increased by $0.8 million, or 43%, to $2.7 million for the three months ended March 31, 2023, from $1.9 million for the three months ended March 31, 2022. The increase was primarily due to an increase of $0.6 million of payroll-related expenses as a result of increased headcount, and increased costs to promote our services and other marketing initiatives of approximately $0.2 million. General and administrative Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) General and administrative $ 10,581 $ 9,194 $ 1,387 15 % General and administrative expenses increased by $1.4 million, or 15%, to $10.6 million for the three months ended March 31, 2023, from $9.2 million for the three months ended March 31, 2022. The increase was primarily driven by an increase of $2.3 million in payroll-related expenses, including an increase in stock-based compensation of $1.3 million, due to increased headcount, offset by a decrease of $2.2 million in one-time stock-based compensation costs incurred in the three months ended March 31, 2022. The remaining increase is primarily due to an increase of $1.2 million in professional services fees as we scale our business as a public company. Depreciation and amortization Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Depreciation and amortization $ 1,791 $ 1,266 $ 525 41 % Depreciation and amortization expenses increased by $0.5 million, or 41%, to $1.8 million for the three months ended March 31, 2023, from $1.3 million for the three months ended March 31, 2022. The increase was primarily driven by an increase of $0.2 million due to amortization of capitalized internally developed software and an increase of $0.1 million in depreciation expense associated with capitalized quantum computing system costs. Change in fair value of warrant liabilities Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Change in fair value of warrant liabilities $ (3,610 ) $ 13,448 $ (17,058 ) (127 )% The change in fair value of warrant liabilities decreased by $17.1 million, or 127%, to a loss of $3.6 million for the three months ended March 31, 2023, from a gain of $13.4 million for the three months ended March 31, 2022. The decrease was primarily due to mark-to-market adjustments based on changes in the trading price for the public warrants. 26 Table of Contents Interest income, net Three Months Ended March 31, $ Change % Change 2023 2022 (in thousands) Interest income, net $ 4,231 $ 608 $ 3,623 596 % Interest income, net increased by $3.6 million, or 596%, to $4.2 million for the three months ended March 31, 2023, from $0.6 million for the three months ended March 31, 2022. The increase was primarily driven by interest income earned on our cash equivalents and available-for-sale investments due to higher interest rates. Liquidity and Capital Resources As of March 31, 2023, we had cash, cash equivalents and available-for-sale securities of $525.5 million. Excluded from our available liquidity is $2.0 million of restricted cash, which is recorded in other noncurrent assets in our condensed consolidated balance sheets. We believe that our cash, cash equivalents and investments as of March 31, 2023, will be sufficient to meet our working capital and capital expenditure needs for the next 12 months. We believe we will meet longer term expected future cash requirements and obligations through a combination of cash flows from operating activities and available funds from our cash, cash equivalents and investment balances. However, this determination is based upon internal projections and is subject to changes in market and business conditions. We have incurred significant losses since our inception and as of March 31, 2023, we had an accumulated deficit of $221.6 million. During the three months ended March 31, 2023, we incurred net losses of $27.3 million. We expect to incur significant losses and higher operating expenses for the foreseeable future. Future Funding Requirements We expect our principal sources of liquidity will continue to be our cash, cash equivalents and investments and any additional capital we may obtain through additional equity or debt financings. Our future capital requirements will depend on many factors, including investments in growth and technology. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, and technologies, which may require us to seek additional equity or debt financing. Our primary uses of cash and investments are to fund our operations as we continue to grow our business. We require a significant amount of cash for expenditures as we invest in ongoing research and development and commercialization of our products. Until such time as we can generate significant revenue from commercializing our quantum computing technology, if ever, we expect to finance our liquidity needs through our cash, cash equivalents and investments, as well as equity or debt financings or other capital sources, including potential collaborations and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Rising interest and inflation rates present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our quantum computing technology on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our quantum computing development efforts. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled “Risk Factors.” Other than operating expenses and our continued investment in our quantum computers, cash requirements for fiscal year 2023 are expected to consist primarily of capital expenditures for corporate facilities. Our material cash requirements as of March 31, 2023, include operating lease commitments, including the lease of our headquarters in College Park, Maryland and our manufacturing and office space in Bothell, Washington. As of March 31, 2023, we have total operating lease obligations of $15.9 million, with $0.9 million payable within 12 months. Cash flows The following table summarizes our cash flows for the period indicated: Three Months Ended March 31, 2023 2022 (in thousands) Net cash used in operating activities $ (13,815) $ (8,324 ) Net cash provided by (used in) investing activities 21,315 (304,098 ) Net cash provided by financing activities 34 148 27 Table of Contents Cash flows from operating activities Our cash flows from operating activities are significantly affected by the growth of our business, primarily related to research and development, sales and marketing, and general and administrative activities. Our operating cash flows are also affected by our working capital needs to support growth in personnel-related expenditures and fluctuations in accounts payable and other current assets and liabilities. Net cash used in operating activities during the three months ended March 31, 2023, was $13.8 million, resulting primarily from a net loss of $27.3 million, adjusted for non-cash activity, primarily related to the loss recorded as a result of mark-to-market activity for our public warrants, stock-based compensation and other working capital activities. The increase in net cash used in operations from the prior year period was primarily related to increased research and development activities, increased compensation costs as a result of hiring personnel and increased costs incurred as a public company. Net cash used in operating activities during the three months ended March 31, 2022, was $8.3 million, resulting primarily from a net loss of $4.2 million, adjusted for non-cash activity, primarily related to the loss recorded as a result of mark-to-market activity for our public and private warrants, stock-based compensation and offering costs associated with warrants, as well as other working capital activities. The increase in net cash used in operations from the prior year period was primarily related to increased research and development activities, increased compensation costs as a result of hiring personnel and increased costs incurred as a public company. Cash flows from investing activities Net cash provided by investing activities during the three months ended March 31, 2023, was $21.3 million, primarily resulting from cash received from sales and maturities of available-for-sale investments of $88.1 million, offset by purchases of available-for-sale securities of $64.4 million and additions of $1.2 million to property and equipment primarily related to the development of our quantum computing systems. Net cash used in investing activities during the three months ended March 31, 2022, was $304.1 million, primarily resulting from purchases of available-for-sale securities of $311.2 million, additions of $2.7 million to property and equipment primarily related to the development of our quantum computing systems, offset by cash received from maturities of available-for-sale investments of $10.4 million. Cash flows from financing activities Net cash provided by financing activities during the three months ended March 31, 2023, was less than $0.1 million, primarily resulting from proceeds from stock options exercised. Net cash provided by financing activities during the three months ended March 31, 2022, was $0.1 million primarily resulting from proceeds from stock options exercised. Critical Accounting Estimates This discussion and analysis of financial condition and results of operations is based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. We also make estimates and assumptions on revenue generated and reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. There have been no material changes to our critical accounting estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report. Critical accounting estimates are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions. Within our Annual Report on Form 10-K, we have disclosed our critical accounting estimates that we believe to have the greatest potential impact on our consolidated financial statements. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results. Recently Issued and Adopted Accounting Standards See Note 2, Summary of Significant Accounting Policies, in the notes to our condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements. Emerging Growth Company Status and Smaller Reporting Company Status Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. During the extended transition period, it may be difficult or impossible to compare our financial results with the financial results of another public company that complies with public company effective dates for accounting standard updates because of the potential differences in accounting standards used. 28 Table of Contents We will remain an emerging growth company under the JOBS Act until the earliest of (a) December 31, 2025, (b) the last date of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (c) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th or (d) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three-year period. We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. 29 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk related to changes in interest rates and concentration of credit. For a discussion of quantitative and qualitative disclosures about market risk, see Item 7A of Part II of our Annual Report. No material changes related to our market risks have occurred since December 31, 2022.