Peraso Inc.

Good afternoon and welcome to Peraza Link's fourth 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, Wednesday, March 19th, 2025. 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 Parasso's fourth quarter and full year 2024 financial results. I'm Jim Sullivan, CFO of Parasso, and joining me today is Ron Glibury, our CEO. Today, after the market closed, we issued a press release on related Form 8K, which was filed with the SEC. 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 statements of historical fact could be deemed as forward-looking. Ferrazzo advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross margin, non-GAAP gross profit, 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 Thrasso 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 Parasso's public filings with the SEC. Parasso 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 GAAP 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 Ron. Ron?

Thank you, Jim. Good afternoon, and welcome to everyone on the phone and webcast. We appreciate you taking the time and joining us on today's conference call. We closed out 2024 with continued progress across several of our key business initiatives. Fourth quarter revenue was within our expected range and represented 100% growth year-over-year as we continued to execute on end-of-life shipments of our memory IC products. Favorable product mix continued to expand gross margins, and we also realized further benefits from our previous cost reduction actions and ongoing efforts to drive higher operational efficiencies. In fact, fourth quarter operating expenses decreased 20% year over year, even with revenue doubling from fourth quarter of 2023. Taken together, we delivered significant improvement in our overall operating performance for the quarter and the full year. More importantly, we recently began seeing renewed and growing momentum of our MMWave technology, including increasing production orders from our lead customers. Turning to slide four, I want to provide a brief status update on the end of life of our memory IC products. During the fourth quarter, we completed $3.4 million in shipments against remaining backlog, bringing total memory IC product shipments for the full year 2024 to approximately $12.9 million. As previously outlined and anticipated, these end-of-life orders have been significant contributors to our financial performance over the last several quarters, as we work past the inventory correction impacting several of our fixed wireless access customers. At year end, our remaining backlog of memory IC purchase orders was approximately $2.3 million. We will complete shipments in fulfillment of these final orders during March. Flipping to slide five, we have worked aggressively over the past year to establish a growing and more diversified customer base for our MMOA-based solutions. In addition to broadening our existing penetration of the fixed wireless access market in North America, we've also focused considerable efforts towards expanding market reach across numerous new geographies and end-market applications. On the left portion of the slide is a year-over-year comparison of our new business funnel and engagement pipeline as of November, which clearly demonstrates our progress in terms of both sourcing and advancing an increasing number of product engagements. Taking the number of new funnel opportunities at the top and adding the four progressive stages of active engagement, including from formal evaluation to advanced design and engineering and prototypes, our pipeline approaching this year-end comprised over 100 total engagements. Although the size and market potential of each engagement is unique, this still represents more than 20% increase in the number of identified commercial opportunities over the prior year. Also keep in mind that these pipeline measures do not include prior program engagements that have converted to customer production. In fact, today Peraza's MMWave solutions are enabled at least 60 different commercial products that are now in production across 11 different customers. Pictured on the right side of the slide are a series of these customer end products that are currently in production and incorporate our industry-leading MMWave technology. Turning to slide six, I want to briefly highlight the most recent and projected ongoing momentum that is underway across the broader fixed wireless access market. As the demand for high-speed internet connectivity continues to grow, especially in underserved areas, fixed wireless access is increasingly becoming the go-to alternative over legacy wireline and cable internet. With the advancements and improved reliability of 5G technology, Fixed wireless access can now offer comparable performance to traditional fiber, yet also have the advantage of being significantly cheaper to deploy. This slide highlights several excerpts from a recently published report by Ericsson, which validates and further emphasizes these current market dynamics. First, not only is the total number of FWA connections globally projected to increase dramatically over the next five years to 280 million connections, But 5G fixed wireless access is forecast to represent the lion's share of the market by 2028. Equally notable is the graph on the bottom left, which clearly shows that North American fixed wireless access has already become the majority of all broadband net ads. And since 2021, the three largest carriers in the U.S. have collectively added an estimated 10.4 million FWA connections. The one key takeaway here is the current market momentum and 5G PIX wireless access is poised to capture a significant and growing share of the market over the next five years. Next, on slide seven, I want to provide an update on the current market dynamics that we are seeing, as well as speak to a few notable recent business highlights. For those of you that have been following Perazzo, we have been candid about the extended inventory correction impacting our PIX wireless access customers. Today, I'm pleased to report that we're seeing indications that the tide may finally be turning back in our favor, most notably in the form of renewed customer demand and purchase orders in support of the existing FWA deployments. Although a large portion of this positive shift can be attributed to market cycles, I would be hesitant not to mention that Perazzo now also has the broadest portfolio of MMOA solutions in the company's history. Looking back, we introduced our new FWA solution designed for dense urban network environments around this time last year, which was likely near the peak of the broader market inventory correction. Today, however, we are seeing our unique Dune MMOA platform for dense urban applications gaining meaningful traction with both existing and new prospective customers. As a reminder, our Dune platform was specifically designed to overcome the challenges associated with delivering reliable, and high-speed connectivity in densely populated areas, such as urban neighborhoods. As a fully integrated hardware and software solution, incorporating Peraza's prospective series of MMOA modules, the platform offers low-cost deployment, low power, long range, and point-to-multipoint capabilities. These distinct benefits are equally important to wireless internet service providers, or WISPs, whether they are deploying a fixed wireless access network in Los Angeles, rural North America, or densely populated urban centers in South Africa. In addition to the growing traction of our DUNE platform, we are seeing a renewed demand for our other M&A solutions. Most notable, earlier this week, we announced receipt of a $3.6 million purchase order from a longtime strategic customer and leading provider of networking systems used for fixed wireless access. This new and significant purchase order, which we expect to fulfill during calendar 2025, serves as further validation of Peraza's MMWave technology while also signifying the improving dynamics and expanding momentum across the broader FWA market. Consistent with these observations, our MMWave solutions are currently being utilized in ongoing proof of context by numerous WISPs targeting future FWA compliance across diverse geographies. Turning to slide eight, it has become almost impossible to have a conversation about delivering high-speed internet in North America without talking about BEAT. As a brief recap for those who might be less familiar with BEAT, BEAT is a U.S. government program that was initially established with the goal of improving access to high-speed Internet by providing grants of up to $42 billion to fund new infrastructure and consumer adoption initiatives. Although technically funded by the U.S. Department of Commerce, the National Telecommunications and Information Administration, or NTIA, is responsible for management and oversight of the program. As discussed on our previous conference call late last year, the latest emerging development was that the NTIA had formally updated its guidance to make high-speed Internet using unlicensed spectrum fixed wireless access, including the MMOA bands, eligible for program funding, keeping in mind that the NTIA's original guidance strongly favored broadband Internet access via fiber-based deployments, So, at that time, we view this as an indirect win and potentially expanded opportunity for alternative technologies such as MMWave and, in turn, Perazo. As we have seen following the newly elected administration in the U.S., government policy has and continues to change and evolve rapidly. However, despite certain elements of ongoing uncertainty related to how the BE program will be handled, the most recent indications appear to be an incremental positive for fixed wireless access and, in turn, MMWave solutions. More specifically, the newly nominated leader of the NTIA, Ariel Roth, has publicly conveyed support for technology-neutral BID funding. Additionally, Howard Lutnick, the newly confirmed Chief of Commerce Department, was recently quoted as saying, The department is revamping the BID program to take a tech-neutral approach that is rigorously driven by outcomes, so states can provide Internet access for lower costs. Acknowledging that the future direction and resulting impacts of B programs still remain to be seen, we continue to believe that a decisive technology-neutral approach that also emphasizes low-cost deployments could contribute to meaningful expansion and acceleration of use of the MMWave spectrum and customer adoption of Peraza's MMWave solutions. Turning to slide 9. I wanted to shift to the other exciting and rapidly expanding opportunity for our MMOA technology, which is tactical defense and military applications. As a result of the proliferation of new technologies on the modern battlefield, including smart weapons, advanced drones, and other forms of digital surveillance, there's an obvious need for secure communications. However, perhaps less obvious is the simple awareness of a signal that could allow for an enemy to triangulate precise locations from which signals are being sent or received. Increased recognition of this major vulnerability has led to growing demand for tactical communication platforms that are both highly secure but also very difficult to detect. Not only is mmWave bandwidth more inherently stealthy than other frequently used spectrum for communications, but we have now demonstrated through an extensive series of customer-led trial and evaluations that Peraza's 60 GHz mmWave technology is fully capable of meeting the unique demands of mission-critical comms and defense applications. As further recent evidence, during the fourth quarter, one of our lead military defense customers upsized a previously secured initial production order for our prospective module products. We expect to commence initial cements and recognize revenue associated with these orders towards the middle of the year. Keeping in mind that it was less than a year and a half ago when we secured our first commercial engagement for our military defense application, we are pleased with the pace of our progress and initial success in the market. Today, we now have additional active engagements underway on tactical communication applications with other prospective customers. Moving to slide 10, prior to 2024, we viewed tactical communications as a potential adjunct but mostly niche application for MMOA technology. However, our early success demonstrated over the past year on our initial customer engagement has since opened the door to what we believe is a significant and complementary market opportunity for Perazzo. I wanted to share this slide as a high-level overview of what we now view to be full potential breadth and scope for MMOA applications across this market vertical. For additional context, the customer and production orders that I spoke about on a previous slide are primarily targeted at enhancing situational awareness and communications for deployed soldiers engaged in combat operations. However, this represents only a single application and use case. As outlined on the slide, there are numerous other mission-critical applications spanning both military infrastructure and transportation-related communications that can benefit from high bandwidth, low latency, and directional beamforming capabilities of Peraza's MMWave technology. Needless to say, we are excited about several of these future incremental market opportunities and their potential to contribute towards increased diversification of our customer base and market applications. In conclusion, we are pleased with our continued growth and encouraged by the growing momentum for our MMWave technology. With the renewed demand and increasing purchase orders from our fixed wireless access customers, we anticipate significant growth of our MMWave revenue throughout 2025, driven by increasing order backlog and ramping customer production. Most notably, we currently expect MMWave revenue for the first quarter of 2025 to exceed comparable revenue for the full year of 2024. With that, I'll turn the call back to Jim to review the financials as well as provide our revenue outlook for the first quarter of 2025.