Peraso Inc.

Good afternoon and welcome to Perazzo Inc.' 's fourth 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 on your touchtone phone. As a reminder, this conference call is being recorded today, Monday, March 18, 2024. I would now like to turn the call over to the host for today's program, Mr. Jim Sullivan. Please go ahead.

Good afternoon, and thank you for joining today's conference call to discuss Parasso's fourth quarter and full year 2023 financial results. I'm Jim Sullivan, CFO of Parasso, and joining me today is Ron Glibery, our CEO. Today, after the market closed, we issued a press release and related Form 8K, which was filed with the Securities and Exchange Commission. The press release and Form 8K are available on Parasso's website at www.parassoinc.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 the statements of historical fact could be deemed as forward-looking. Perasso 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 PRASO on the date hereof. These statements involve known and unknown risks, uncertainties, and other factors, that may cause PRASO'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. With respect to remarks on today's call involving non-GAAP numbers, unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets, goodwill impairment charges, and the change in fair value of warrant liabilities. These non-GAAP financial measures, definitions, and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related Form 8K, which was filed today with the SEC, which provides additional details. All share and per share amounts disclosed during this call reflect the retroactive impact of a 1 for 40 reverse split of our common stock, as applicable, that became effective after market close on January 2nd, 2024. 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 afternoon and welcome to everyone on the phone and webcast. We appreciate you joining us. I want to start with a few brief comments on the fourth quarter and our current outlook. Then I'll get into more detail on the key management and developments and progress that we've been making since our last conference call. Consistent with our prior expectations, multiple headwinds contributed to lower revenue for the quarter. In our MMOA business, our customer demand reflected the continued impact of the industry-wide inventory correction. Separately, while total order backlog for our memory IC products increased sequentially, revenue was lower in the fourth quarter due to the timing of production and shipment schedules. Since the beginning of the new year, both of these headwinds have began to moderate. We anticipate revenue growth to resume in the current quarter ending March 31st and also expect double-digit growth for the full year. These growth expectations are based upon two key drivers. First is the overall $12 million of total order backlog for our memory IC products. And second, our new orders we've recently begun receiving for our MMOA products targeting fixed wireless access applications, including from our largest customers. Based on this initial return of orders and customer demand, we believe the prolonged inventory correction in fixed wireless is clearing. Turning to slide four, I want to provide a brief update on the end of life of our current memory IC products. Since notifying our memory customers of the planned end of life in May of 2023, we've received purchase orders for the last time buys totaling $14 million. We've commenced initial shipments against these orders in the third quarter of 2023, which were largely fulfilled from existing inventory. Shipments against backlog orders slowed in the fourth quarter, primarily due to the manufacturing lead times required by foundry partners to fabricate additional wafers in its memory products. In total, for the second half of 2023, we completed end-of-life shipments of approximately $3.7 million. As of year-end, we had remaining end-of-life order backlog of approximately $10.3 million. We also had an additional $1.8 million of backlog for regular production orders. Based on current manufacturing schedules at our Foundry partner, we expect shipments of our MemoryIC products to ramp again in the first quarter, and we expect to fulfill the majority of the combined remaining backlog over the next 12 months. As previously discussed on our last conference call, We anticipate these collective end-of-life orders and shipments of memory IC products contribute significant revenue and cash flow throughout 2024. Flipping to slide five and an update on our MMOA business. One of our key strategic initiatives continues to be building a larger and more diversified customer base for Peraza's MMOA technology. Having historically served as a relatively small number of fixed wireless customers in North America, In 2023, we set out to expand our market reach in terms of customers, geographies, and end market applications. Our team's ongoing engagement efforts are continuing to drive tangible results, contributing to a steady funnel of new opportunities and expanded number of active engagements. Over roughly the past six months, or since October, we've increased active engagements from 18 to 25. We continue to put an emphasis on prioritizing the highest quality engagements, in terms of both projected economic and anticipated time to market. Today, we believe we have more existing funnel opportunities than our position to transition to active hardware evaluation engagements as compared with our last quarterly update. Consistent with the past, we continue to view our engagement pipeline as a leading indicator to measure our progress towards expanded reach and a more diversified business. With that in mind, one additional highlight related to our current active engagements Compared with our last quarterly update, they now comprise a larger number of prospective customers and targeted applications outside of North America. Turning to slide six, we believe the value proposition of our 60 gigahertz MMWave solutions for fixed wireless access is continuing to resonate across an expanding number of equipment manufacturers, as well as directly with WISPs or wireless internet service providers. The left side of the slide reflects only a sample of the WISC that we've identified with 60 GHz fixed wireless deployments enabled by Peraza's hardware. The total number of WISC deployments utilized in our technology is difficult to track as we don't have the visibility with regards to the ultimate end customers. Another way to look at the market traction we're getting with our 60 GHz MMWave solutions On the right side of the slide is a list of equipment manufacturing with commercial fixed wireless access products powered by Parasa hardware. In addition to each of them having multiple products using our technology, I want to point out that collectively they are targeting a mix of rural and urban market applications. Keeping in mind that early tracks with our MMWave solutions were primarily in rural fixed wireless applications in North America, this really highlights our accelerating expansion into urban market applications as well. Additionally, we are increasingly seeing many of the urban deployments targeting geographies outside of North America. Now looking at slide seven, it's important to understand part of what is driving the expanded market opportunity in urban applications. Although there are shared challenges and needs between rural and urban fixed-water applications, NMWave offers a unique value proposition for solving a series of challenges encountered in dense urban environments. Demand for Internet connectivity is ubiquitous. However, many technologies simply weren't designed to work well in densely concentrated population centers, especially those found in emerging markets such as India, South America, and Africa. In addition to significant upfront infrastructure and deployment costs, Wi-Fi technology, for example, struggles with the wireless congestion and interference resulting from high numbers and density of connected devices. Another critical consideration in many dense urban environments is electricity, which can often be limited and less reliable in emerging markets. In order to avoid service interruptions, infrastructure equipment must be able to remain operational for extended periods on alternative sources such as solar and battery power. Leveraging the inherent advantages of MMWave, Peraza's technology provides a proven solution to WISPs targeting deployments in these dense urban environments. At the core of our solutions, the newest addition to our prospective series MMWave modules, the PRM2144X, incorporates a 128-element phased array antenna that provides high gain and narrow beam width, which coupled with excellent power efficiency make it ideal for achieving reliable connectivity in dense urban environments. Now turning to slide eight. Building on the positive initial feedback from WISC following our introduction of the PRM2144X, In January, we announced the commercial availability of Peraza's DUNE platform for fixed wireless access. Designed specifically for dense urban environments, this integrated hardware and software platform provides WISP with a cost-effective turnkey solution. In addition to multi-gigabit connectivity comprising a full suite of capabilities, including dynamic traffic management and adaptive load balancing, Peraza's DUNE platform employs network isolation to enable coexisting overlapping networks This feature is absolutely critical for successful deployments in dense urban environments. The introduction of this platform was a result of first-hand dialogue with numerous operators to understand the specific deployment challenges they face in these environments. We recently announced our first commercial win utilizing the platform, which was important third-party validation of the solution, and we have commenced proof-of-concept engagements with multiple additional service providers. Shifting to slide nine, I want to briefly touch on aerospace and defense. Although still a relatively new end market for Peraza, we continue to see expanded opportunities for MMWave technology in various military defense applications. In addition to MMWave's ability to support multi-gigabit connectivity with low latency, as well as utilize unlicensed unused frequency bands, our advanced integrated antenna technology allows for communication using uniquely narrow and focused beams. Unlike other traditional wireless technology, this directional beamforming capability makes it more difficult to intercept or even detect insensitive data communications. On our previous conference call, I mentioned having secured our first commercial engagement in this area in the form of a customer-funded proof of concept. This initial engagement is progressing well and continues to be in the customer evaluation phase. Over the last several months, we have sourced additional new opportunities for our MMWave solutions and defense applications. We have conservative expectations with respect to any material near-term contribution from these opportunities. However, they serve as evidence that defense applications represent an incremental future market opportunity. In closing, with our expanding engagement pipeline for MMWave solutions across an increasingly diverse customer base and market applications, as well as initial indications of renewed customer demand for fixed wireless access, we're very optimistic about the company's outlook for 2024. As we continue to execute on our strategic efforts to grow the customer base from our MMOA products, we believe there's a large opportunity to realize growth over the coming quarters and beyond. With that, I'll turn the call back to Jim to review the fourth quarter and full year financials, as well as our revenue expectation for the first quarter of 2024. Thank you, Ron.