Peraso Inc.

Good morning and welcome to Perasso Inc's first quarter 2023 conference call. At this time, all participants are in a listen-only mode. If anyone needs assistance at any time during the conference call, please press the star key followed by the zero key on your touchtone phone. As a reminder, this conference call is being recorded today, Tuesday, May 16th, 2023. I would now like to turn the call Over to the host for today's program, Jim Sullivan. Please go ahead.

Good morning, and thank you for joining today's conference call to discuss Perasso's first quarter 2023 financial results. I'm Jim Sullivan, CFO of Perasso, and joining me today is Ron Glibury, our CEO. Yesterday, after the market closed, we issued a press release and related Form 8K, which was filed with the SEC. The press release and Form 8K are available on Perasso's website at www.perassoinc.com under the investor relations section. There is also a slide presentation that we will be using in conjunction with today's call that may be accessed through the webcast link on the investor relations website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements, other than statements of historical fact, could be deemed as forward-looking. PRASO advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows, or other financial items, including anticipated cost savings. Also, any statements concerning the expected development, performance, and market share or competitive performance of our products or technologies. All forward-looking statements are based on information available to Perasso and the date hereof. These statements involve known and unknown risks, uncertainties, and other factors that may cause Perasso's actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in the company's business. More detailed information about these risk factors and additional risk factors are set forth in PRASO's public filings with the SEC. PRASO expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in terms of GAAP, and non-GAAP. Included in the company's press release issued yesterday are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. For those of you unable to listen to the entire call at this time, a recording will be available on the investor relations section of our website. Now, I'd like to turn the call over to our CEO, Ron Glibury, for his prepared remarks. Ron?

Thank you, Jim. Good morning, and welcome to everyone joining today on the phone and via webcast. I'm pleased to report that Peraza had a strong start to the year, highlighted by continued growth driven by record product revenue from a combination of our millimeter wave solutions for the fixed wireless access market, as well as our memory IC salute products. More specifically, total revenue in the first quarter increased 29% sequentially and 48% year over year, with product revenue coming in at $4.9 million. Our near-term focus remains on expanding Peraza's leadership in millimeter-wave fixed wireless access as wireless ISPs seek to aggressively deploy multi-gigabit connectivity in the unlicensed 60 gigahertz spectrum to secure market share of a rapidly growing subscriber base. Today, there are approximately 6.7 million WISP subscribers in the U.S., according to the Carmel Group, which is expected to grow to 12.7 million subscribers in 2025. Looking at the historical data, the trend suggests a doubling of subscribers every five years. Multiple large government programs designed to support universal broadband access are also helping to fuel the market's growth, especially in rural communities. In addition to the momentum with WISPs, fixed wireless access is continuing to capture a growing share of the broadband market. According to latest third-party market research, fixed wireless access has consistently represented over 90% of the net ads by the top broadband providers in the US over the past three quarters. As discussed on previous calls, fixed wireless access is a natural extension of 5G deployments, enabling carriers to maximize available bandwidth capacity while also offering faster, lower latency and symmetrical connectivity to customers. As further validation, T-Mobile and Verizon collectively added nearly 3.2 million fixed wireless subscribers in 2022 which represented 300% growth over 2021. The market opportunity across just these two leading carriers is truly substantial, with each having 5G fixed wireless access service that has the potential to reach tens of millions of homes. Importantly, 5G millimeter-wave fixed wireless access isn't unique to North America and is increasingly being recognized and ramped globally. Leading carriers in multiple countries including Australia, Italy, and India are either actively or have plans to deploy 5G fixed wireless access in the 28 and 26 gigahertz bands. We are seeing this ramp in the form of prospective engagements, which increased meaningfully during the first quarter. This growing interest also spanned the entire ecosystem from major OEMs and equipment vendors to 5G baseband providers and makers of frequency converter devices. Based in part on our conversations with several prospective customers and potential partners, we believe there's clear industry recognition that Peraza's 5G beam format is ideal for enabling cost-effective end equipment needed for deployment of high-speed fixed wireless access. Turning to slide seven, I want to share something new to convey, the recent significant progress we've been making to expand our engagement pipeline. Keeping in mind that Peraza historically has been focused on supporting a very constant group of core customers, Late last year, we began a strategic initiative to extend our commercial reach and diversify our customer base. This included the appointment of Mark Lunford, who is fundamental to our ongoing efforts to expand Perazzo's new business pipeline. And this slide is a simplified version of one of the tools we use internally to measure both the breadth and projected economic value of our existing pipeline. Although we've removed the implied economic values that we use internally, The number of engagements indicated on this slide represent our current pipeline. Therefore, this shows that our combined funnel and active engagements have grown from 60 in the first quarter to 75 as of May 2023. In addition, this slide shows the progression of customer engagement pages through to pre-production. As of May 2023, you can see that an increasing number of customers in the technical design process, which includes schematic capture, layout, design prototyping, test verification, and early pre-production. So not only do we see the overall level of customer engagement increasing, we also see an increasing level of the status of those engagements as well. Switching gears, I want to review an important update related to our memory IC business, which as a reminder, Perazzo acquired as part of the business combination with Moses in late 2021. The sole foundry for our memory devices is TSMC. They recently informed us that the manufacturing process used to fabricate wafers for our memory ICs would be discontinued in the second half of 2024. Given these are legacy products and require a unique non-standard process, which is not easily transferable to another foundry, we've begun notifying customers of end of life of our memory devices. As part of the EOL, we requested our customers to provide us with a forecast and purchase orders for last time buys by the end of 2023. We currently expect to fulfill last time buy POs for our memory ICs through next year, 2024. That said, the timing of EOL shipments will ultimately depend on both delivery timelines from our suppliers as well as the scheduling requested by our customers. Although it is too early to forecast the size and linearity of customers' last-time purchase orders, we do anticipate the implemented EOL to result in a potential pull-forward of future demand and revenue related to our Memory IC products as we fulfill customers' POs during 2024. We now turn back to our core millimeter-wage silicon business, which is poised to become the primary driver of Peraza's growth. As I previously mentioned, the resilient growth of the fixed wireless access market has been impressive, especially considering the ongoing macroeconomic uncertainty. Our near-term focus for 2023 is to further capitalize on Peraza's existing leadership position in the unlicensed 60 gigahertz segment of the fixed wireless market, where WISPs are aggressively growing subscribers for multi-gigabit connectivity. In addition, our highly integrated 5G beamformer product positions as well for emerging opportunities in the licensed fixed wireless market as well, including 5G CPE applications and 5G millimeter wave in the carriers market. Longer term, we believe there's significant incremental opportunities for our technology next generation applications, such as AR, VR connectivity, as well as future Wi-Fi standards. In closing, we believe we are well positioned with leading technology and a strong product portfolio in our millimeter wave business, and we continue to be encouraged by the sustained momentum in the fixed wireless market. Acknowledging the current macro environment, we continue to prudently manage expenses and cash as we begin to realize the benefits from previously taken actions to streamline our organization. Looking ahead, we are focused on driving an expanding pipeline of new business engagements, both domestically and abroad, as well as diversification of our customer base in support of future growth. With that, I'll turn the call back to Jim to review the first quarter financials and speak to our outlook for the second quarter.