Peraso Inc.

Good afternoon and welcome to Perazzo Inc.' 's second quarter 2024 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, August 12, 2024. I would now like to turn the call over to your host for today's conference call, Mr. Jim Sullivan. Please go ahead.

Good afternoon, and thank you for joining today's conference call to discuss Perasso's second quarter 2024 financial results. I'm Jim Sullivan, CFO of Perasso, and joining me today is Ron Glivery, 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 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 webpage. 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 Parasso on the date hereof. These statements involve known and unknown risks, uncertainties, and other factors that may cause Parasso'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 PARASA's public filings with the SEC. PARASA 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, severance costs, 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 gap measures are presented in our press release and related Form 8K, 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 page of our website. Now, I would 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 taking the time to join us today. Jumping right in, we're very pleased by our continued progress during the second quarter. As reported in today's press release, total revenue of $4.2 million exceeded the high end of our original guidance and represented growth over 50% sequentially and more than 70% year-over-year. Strong growth was driven by increased shipments of our end-of-life memory IC products, coupled with revenue contribution from a new volume production order for our millimeter wave antenna modules. Gross margin also expanded, and although reported operating expenses were up slightly due to certain charges incurred during the quarter, we continue to closely manage expenses in support of improving operating results and reducing our cash burn. Turning to slide four, I want to briefly highlight the status of the end of life with our memory IC products. As anticipated, second quarter shipments against our backlog increased sequentially to approximately $3.4 million compared to $2.4 million in the prior quarter. Net of the most recent $2.9 million end-of-life order purchase order that we received at the end of Q1, we ended the second quarter with total remaining purchase order backlog of approximately $9.1 million. We currently expect third quarter shipments of our IC memory products to be comparable to shipments in the second quarter. Additionally, there have been no significant changes to our original timeline for completing the end of life of our memory IC products, and we maintain on schedule to fulfill the total remaining backlog by the end of the first quarter of 2025. As discussed on previous calls, these shipments against remaining backlog will continue to contribute meaningful revenue and cash flow over the next few quarters as we work aggressively to further expand and ramp customers for our millimeter wave products. Next on slide five, this is an updated snapshot of our global engagement pipeline for new RF millimeter wave business as of the end of July. As a reminder for those who might be newer to our story, Perazzo has been a leading innovator of millimeter wave technology for more than a decade. We have a multi-year track record of commercial shipments and our technology has been field proven extensively. Until more recently, our millimeter wave business was exclusively focused on serving a small number of strategic fixed wireless access customers. Over roughly the last year and a half, we have put in place a growth strategy with the goal of establishing a larger and more diversified customer base for our millimeter wave business. We initially set out to achieve this objective primarily focused on the rapidly growing fixed wireless access market in North America. However, our current efforts and engagements are now equally focused on expanding market reach across diverse geographies and end market applications. We first introduced this pipeline slide in early 2023, and we believe it continues to represent a helpful leading indicator of our progress, not only in terms of customer diversification, but also the expanding growth of potential of our millimeter wave business. To highlight a few of the key takeaways from this year-to-date view of the pipeline. First, taking the top number that represents new funnel opportunities and combining it with those across the four progressive stages of active engagement, Our pipeline comprised 95 total engagements at the end of July. For context, we are consistently pruning our account of funnel opportunities if either activity on an engagement stalls or we choose not to pursue it for commercial reasons. Additionally, once a program engagement converts to being in production, we no longer include it as part of our current pipeline. Even after accounting for both of these variables, our current number of total engagements is up more than 25% compared to this time last year. Turning to slide six, as briefly mentioned in my opening remarks, during the quarter we secured and shipped the first volume production order for our DUNE platform. First introduced earlier this year, DUNE is our dense urban network environment platform solution for fixed wireless access. We specifically designed the solution to overcome the challenges associated with delivering reliable and high-speed network access in densely populated areas, such as urban neighborhoods. This new volume production order for our millimeter wave antenna modules was from a South African service provider that is leveraging Perazzo's DUNE platform solution for its initial deployment. It would be difficult to imagine a better form of commercial validation for our DUNE platform and its unique ability to deliver gigabit speed fixed wireless access in dense urban environment applications. As a newly established service provider in the region, we anticipate their first initial deployment will take at least several months However, we do expect additional incremental orders from this customer as they progress on extending their deployment in the coming quarters. In addition to this lead customer, we are currently engaged with several other prospective customers targeting future deployments in denser environments. This includes our shipment of DUNE proof of concepts to multiple WISPs in Africa with whom we are supporting ongoing evaluations. We also continue to believe that millimeter wave technology solutions uniquely position us to potentially participate in planned North American deployments announced by one of our long-time WISC customers. As such, we remain very optimistic about the recent commercial validation and strong expressed interest in our DOOM platform, which we believe represents the leading commercially proven fixed wireless solution for dense urban environments. Moving to slide seven, I want to take a moment to highlight the recent emerging development that we believe could potentially encourage expanded customer adoption and market opportunities for our millimeter wave solutions. For those not already familiar, BEAD is a federal grant program funded through the United States Department of Commerce. BEAD stands for Broadband Equity Access and Deployment, and the program was established with the purpose of allocating $42.45 billion in direct support of broadening access to high-speed Internet. Although a majority of the program's funding was initially thought to be prioritized for internet delivery over fiber optic cable, the head of NTIA, which is the agency that oversees the BEAT program, very recently stated the agency is planning to provide further guidance on the types of internet delivery that are eligible for potential funding. More specifically, the NTIA has anticipated to provide guidance that makes funding eligible for the deployment of high-speed internet using unlicensed spectrum fixed wireless access, including millimeter wave bands. I would emphasize that this anticipated new guidance from the NTIA has yet to be formally announced. However, to the extent that internet access delivered via unlicensed fixed wireless access does become eligible for funding, This would likely motivate and benefit a large number of WIS deployment across America, which in turn could potentially result in significant expanded market opportunity for Perazone. In closing, we're encouraged by the continued customer ramp of our mmWave solutions during the second quarter. We aim to gain further traction in the coming quarters as we remain focused on advancing and converting existing customer engagements into production orders for mmWave products and platform solutions. We will also expect our ongoing shipments to fulfill remaining backlog orders for our end-of-life memory IC products will continue to contribute meaningful revenue and cash flow throughout the early next year. Taken together, we anticipate total revenue for the second half of 2024 to increase over the first half of the year, while also representing revenue growth year over year. With that, I'll turn the call back to Jim to review the second quarter financials, as well as our revenue outlook for the third quarter of 2024. Over to you, Jim.