Peraso Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 13, 2023

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to Parezzo, Inc. 3rd Quarter 2023 Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference call is being recorded today, Monday, November 13, 2023. I would now like to turn the call Over to the host for today's program, Mr.

Operator

Jim Sullivan. Please go ahead.

Speaker 1

Thank you, operator. Good afternoon.

Speaker 2

Thank you all for joining today's conference call to discuss Parasto's Q3 2023 Financial Results. I'm Jim Sullivan, CFO of Pareto, and joining me today is Ron Glibbery, our CEO. Today, after the market closed, We issued a press release and related Form 8 ks, which was filed with the SEC. The press release and Form 8 ks are available on Parasso's website atwww.parasoinc.com under the Investor Relations section. There is also a slide presentation that we will be using in conjunction with today's Call.

Speaker 2

This is accessed through the webcast link on the IR 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. Proraso 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 loss, cash flows or other financial items, including anticipated cost savings.

Speaker 2

Also, any statements concerning the expected development, performance and market share or competitive performance of our products and technologies. All forward looking statements are based on information available to Pareto on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Pareto'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 Proraso's public filings with the SEC. Proraso expressly disclaims any obligation to alter its forward looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Speaker 2

Additionally, the company's press release and management statements during this conference call We'll 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 and the change in fair value of warrant liability. These non GAAP financial measures, definitions and the reconciliation of the differences between them and comparable GAAP measures I'll present in our press release and related Form 8 ks, which was filed today with the SEC, which provides additional details. For those of you who are 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 would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks.

Speaker 2

Ron?

Speaker 3

Thank you, Jim. Good afternoon and welcome. We appreciate you joining us on today's call. I'm pleased to report that our Q3 financial results marked Significant improvement over the prior quarter with total revenue increasing 87% sequentially and 36% year over year. Although our MMOA business continued to reflect lower customer demand due to the ongoing industry inventory correction, during the quarter, we commercially commenced initial shipments Against the large order backlog associated with the end of life for our memory IC products.

Speaker 3

This increased revenue contribution from our higher margin memory IC products, Combined with the sequential increase in sales of our MMA products drove solid gross profit expansion as well as improvement in our bottom line results. Looking at Slide 4, I want to begin with an update on the end of life of our memory IC products, Significant positive contribution to our Q3 results. As a reminder, in May of this year, we notified our memory customers At the end of life, after learning that our family partner would be discontinuing the manufacturing process used to fabricate wafers for these products. The response from customers thus far has been very strong. To date, we received purchase orders for last time buyers from multiple customers totaling $11,300,000 We commenced initial shipments in the 3rd quarter resulting in revenue of $3,100,000 with the majority of these initial order shipments being fulfilled from existing inventory.

Speaker 3

Our remaining backlog of these end of life orders was approximately $8,200,000 at quarter end, and we also have an additional $2,500,000 of backlog Associated with production orders. Based on current manufacturing schedules at our foundry partner, we expect to complete shipments fulfillment of all outstanding backlog by second half of twenty twenty four. The deadline for customers place final purchase orders for end of life products is late December of this year, and we continue to expect total EOL orders to amount between $15,000,000 to $20,000,000 Importantly, these collective end of life orders and shipments are anticipated to contribute meaningful revenue and cash flow over the next several quarters. As we continue to focus on expanding the customer base for our MMA products. Turning to Slide 5 and an update on our MMA business.

Speaker 3

With demand from our largest existing customers continue to be impacted by the ongoing industry inventory correction, a large portion of our team's energy and efforts have been centered around our engagement Since August, we have increased the combined number of engagements from 80 to 87, primarily reflecting the sales of additional new funnel opportunities. The number of active engagements as of October remained about the same. However, I want to highlight this is in part reflective of our recent decision to place Small number of previous engagements on hold and therefore we exclude them from these metrics. As we continue to source and evaluate new potential opportunities, We are putting an even greater emphasis on prioritizing the highest quality engagements in terms of both projected economic value and anticipated time to market. We are also diligently allocating our design and engineering resources coupled with enhancing workflow efficiencies in support of maximizing our expected near term return on investment.

Speaker 3

As stated in the past, we view our overall pipeline as a leading indicator of progress toward a more diversified customer base, And I continue to be encouraged by our expanding number of high quality active engagements. Within our Wave business, I'd like to highlight one of the new markets we're seeing activity in, which is aerospace and defense. MmWave provides some distinct advantages over traditional wireless technologies. MmWave delivers the standard benefits, including high data rates and low latency. However, as compared to traditional radio signals that radiate in all directions, Purrazzo is able to create very narrow focus beams that are more difficult to detect.

Speaker 3

MmWave provides an inherently stealthy protocol, low probability of interception, low probability of detection and anti jamming, all of which are quite desirable for military communications. To these ends, we recently secured our first commercial engagement We are in a customer funded proof of concept stage now and we'd like to be shipping in volume in the second half 2024. In the meantime, we've engaged on other defense oriented opportunities, and we hope to be speaking to those on future conference calls. Moving to Slide 7. There continues to be strong evidence for accelerating market adoption of 60 gigahertz fixed wireless access.

Speaker 3

In the past 2 months, members of Parazzo's team have participated in 3 wireless industry trade shows, all of which Feature recognition of the growing momentum around 60 gigahertz and millimeter wave solutions for fixed wireless access applications. In September, we had multiple business development and product executives attend Mobile World Congress in Las Vegas, where they showcased Parrazzo's latest NN solutions for fixed wireless access and customer premise equipment. Also in September, Ferrazzo's Senior Director of Product Marketing, Doctor. Nadine Hato, Was invited to participate on a Q and A panel at WiFi World Congress in North America. In addition to be joined on the panel by representatives from Airline and Cambium Networks, Doctor.

Speaker 3

Haddo's participation served as a great opportunity to elevate awareness of the multi gigabit performance of Pirazzo's NM wave solutions for 60 gigahertz fixed wireless More recently, our team hosted meetings with current and prospective customers and partners at Whistopalooza Show in Las Vegas. Parazo also participated in a vendor spotlight session, which provided a unique opportunity to highlight the growing number of 60 gigahertz unlicensed wireless utilizing our solutions to enable multi gigabit connectivity. Separately, also notable at Whispapalooza was Ubiquiti's significant presence, Given they are the leading fixed wireless access equipment vendor, sorry, Using a 10 nanometer multi gigabit connectivity separately also noted about Wispeluzum is Ubiquiti's significant presence given they are the leading fixed wireless equipment vendor to the WISP market. In fact, Ubiquiti showcased 7 different 60 gigahertz products at its boot, including its newest Wave Pro Point to Point 60 gigahertz radio That enables speeds of up to 3.2 gigabits per second. This increase in commercial availability of products that support multi gigabit connectivity Make 60 gigahertz a reliable and lower cost competitive alternative to fiber.

Speaker 3

Turning to Slide 8. I want to briefly discuss another new emerging market opportunity that we're seeing and how mmWave solves the challenges faced by other technologies in dense urban environments. Take for example, the densely concentrated centers found in emerging markets such as India, Southeast Asia and parts of Africa. There is rapidly growing demand for Internet connectivity in these areas. However, the population density presents a unique set of technology challenges.

Speaker 3

First, the costs associated with deploying and then also physically securing infrastructure make fiber uneconomical and unrealistic in many of these markets. Additionally, the sheer number and density of connections contribute to significant wireless congestion interference, exceeding the capable tolerances that are suitable for WiFi. Lastly, these emerging geographies frequently have less reliable electricity service, making it important for deployed equipment to sustain operation on low power sources such as Solar and battery power. Inherently, Wave provides a solution to each of these challenges. Its beamforming capability minimizes and overcomes the density of wireless connection points, enabling more reliable and high bandwidth service.

Speaker 3

MmWave solutions can also be implemented with much lower upfront costs, making deployments more economical Additionally, the higher power efficiency of the mmWave solutions enables longer operation on temporary power sources, resulting in reduced service interruptions. During the Q3, we formally introduced the Parazo PRM-two thousand one hundred and forty four X As the latest addition to our Perspecta series of mmWave modules, utilizing our X720 60 gigahertz chipset, the new PRM-2144X Incorporates 128 element phased array antenna that provides high gain and narrow beamwidth, making it an ideal solution Looking at Slide 9, I wanted to share this updated overview of the whisks that are currently utilizing ParaZo enabled hardware today as part of the 60 Gigahertz deployments. To date, we've identified over 25 WISPs spanning 14 states in the U. S. And at least 4 WISPs in Canada.

Speaker 3

Additionally, we've recently confirmed more than one planned 60 gigahertz deployment utilizing our technology outside of North America. We view this growing list of WISP deployments as further validation of both the growing market traction for 60 gigahertz technology as well as PIRASO's leading position As demonstrated on the right side The slide, the overall trend and outlook continue to be favorable for fixed wireless access market. In addition to third party research forecasting the sustained growth With subscribers over the next several years, the U. S. Federal Communications Commission or SEC recently published a notice of inquiry For an increase to the standard minimum benchmark for fixed broadband.

Speaker 3

As a first step, the FCC has proposed an increase from an existing 25.3 megabits 2nd benchmark to 120 megabits per second. Moreover, they are also soliciting comment on a potential longer term goal of 1 gigabit per second, 500 megabits per second in the future. We believe this and other growing support for gigabit connectivity will serve as strong drivers for expanded adoption of As a reminder, Pareto's existing mmWave solutions already fully support and enable multi gigabit connectivity. In closing, we continue to believe there's a substantial market opportunity for Purellsm and Mwave technology spanning both unlicensed 60 gigahertz and 5 gs fixed wireless access. Although we expect the recent headwinds and inventory correction in this area of our business to extend into 2024, We remain encouraged by the continued expansion of our sales engagement pipeline.

Speaker 3

We are committed to advancing these engagements for our NMOA solutions in support of building a more diversified customer base and achieving sustained future revenue growth. With that, I'll turn the call back to Jim to review Q3 financials and speak to the outlook.

Speaker 2

Thank you, Ron. Turning to the results. Total revenue in the 3rd quarter increased to $4,500,000 a significant increase from the $2,400,000 in the prior quarter and $3,300,000 during the same quarter a year ago. Product revenue from the sale of our memory integrated circuits And millimeter wave integrated antenna solutions in the 3rd quarter was $4,300,000 compared with $2,200,000 in the prior quarter and $3,100,000 in the Q3 of 2022. The sequential and year over year increase in 3rd quarter product revenue was driven by increased shipments of memory IC products, primarily reflecting the initial fulfillment of purchase orders for last time buys.

Speaker 2

Royalty and other revenue for the Q3 of 2023 comprised $200,000 of royalties from licensees of our memory technology and other revenues from performance of non recurring engineering services for millimeter wave customers. GAAP gross margin increased to 45.4% in the 3rd quarter compared with 25.3% in the prior quarter and 39.3% in the year ago quarter. On a non GAAP basis, excluding amortization of acquired intangible assets, gross margin for the 3rd quarter was 58% compared with 45.9% in the prior quarter and 50.2% in the Q3 of 2022. The higher gross margin for the Q3 was attributable to revenue mix, reflecting increased revenue contribution from Memory IC Products. GAAP operating expenses for the Q3 were $5,600,000 Consistent with the $5,600,000 in the prior quarter and compared with $5,300,000 in the Q3 of 2022, which reflected a $2,600,000 gain from the license and asset sale transaction.

Speaker 2

Total operating expenses for the Q3 of 2023 on a non GAAP Which excludes stock based compensation and amortization of reported intangible assets were $4,000,000 Compared with $4,100,000 in the prior quarter and $3,700,000 in the same quarter a year ago, which reflected a 2 $600,000 gain from the license and asset sale transaction. The decreases in operating expenses reflect the incremental benefits in the cost reduction initiatives Another previous actions we began implementing during the second half of twenty twenty two to streamline operations, including the license and asset sale transaction for Memory technology closed in the Q3 of 2022. In addition to these previous initiatives, earlier this week, we took further action to reduce operating And implemented an employee layoff and terminated certain consulting positions to further reduce the company's operating expense and cash burn As the company continues to prioritize business activities and projects that it believes will have a higher return on investment. The reductions impacted 19 full time equivalent positions or approximately 28% of the company's workforce. As part of the reductions, the company implemented a temporary layoff that impacted its Canadian subsidiary and the company will determine in 2024 whether the company's financial and business conditions will permit the recall of the impacted employees.

Speaker 2

The initial cost reduction benefits in these most recent actions will be realized beginning in the Q4 with total annualized savings of up to approximately $2,200,000 if the company does not recall the impact of employees. GAAP net loss for the Q3 of 2023 was $600,000 or loss of $0.02 per share compared to the net loss of $4,100,000 or $0.17 per share in the prior quarter and a net loss of $4,000,000 or $0.20 per share in the same quarter a year ago. On a non GAAP basis, net loss for the Q3 of 2023 Was $1,100,000 or loss of $0.04 per share, which excluded stock based compensation, amortization of acquired intangibles and change in fair value of warrant liability. This compared with a non GAAP net loss of $3,000,000 or $0.12 per share in the prior quarter And a net loss of $2,000,000 or loss per share of $0.10 in the same quarter a year ago. The weighted average number of basic and diluted shares outstanding for Calculating both GAAP and non GAAP EPS for the Q3 of 2023 is approximately 28,600,000 shares, which excludes 1,800,000 shares of our common stock and exchangeable shares that are currently escrowed.

Speaker 2

Adjusted EBITDA, which we define as GAAP net income or loss as reported, excluding stock based compensation, amortization of required intangibles, Change in fair value of warrant liability, interest expense, depreciation and amortization and the provision for income taxes Was negative $900,000 in the 3rd quarter compared with negative $2,800,000 in the prior quarter and negative $1,800,000 in the prior year period. From a balance sheet perspective, as of September 30, 2023, the company had cash and cash equivalents of approximately $700,000 Subsequent to September 30, 2023, we collected approximately $3,700,000 of Memory and the Life proceeds, Including $2,200,000 included in accounts receivable at September 30, dollars 400,000 related to October shipments As discussed in my earlier remarks, we recently implemented steps to meaningfully reduce the company's near term operating expenses and cash burn. However, due to our expectation for continued operating losses and cash burn, the company will need to raise additional capital through equity or debt arrangements As described in our quarterly report on Form 10 Q for the quarterly period ended September 30, 2023. With respect to our business outlook, our near term visibility continues to be impacted by multiple factors that make it difficult to confidently forecast the full range of potential outcomes specific These factors primarily include the general and uncertainty associated with the broader macro environment and end market demand as well as the yet to be determined duration of the ongoing inventory correction.

Speaker 2

As such, today, we are not in a position to provide specific guidance for the current quarter. To the extent that 1 or more of these factors become more certain, we will consider providing future potential updates relating to our near This concludes our prepared remarks. And I'll now turn the call back over to the operator to assist us with the Q and A session. Operator?

Operator

Thank you. At this time, we will be conducting a question and answer The first question comes from Kevin Liu with K. Liu and Company. Please proceed.

Speaker 4

Hi, good afternoon guys and congrats on the improved results this quarter. First point question I had was just on the memory I see end of life. In terms of the backlog that you see currently and the purchase orders you anticipate, do you expect the shipments against those To be fairly consistent, as you make your way through this year and next year, or are there going to be periods where those shipments are more heavily concentrated?

Speaker 2

Yes, I would say at the current, on September 30, we had $8,000,000 of backlog, just over $8,000,000 of backlog still sitting there. We expect that to ship through the Q3 of 2024. Obviously, we are projecting additional orders To be received there in late December, ideally prior to the holidays. Right now, we currently see that shipping into Kind of the first half of twenty twenty five. It's really going to pick up.

Speaker 2

I would say there's definitely an increase In the starting in the Q2 of 2024, part of it was obviously for the Q1 of 2024, We were waiting orders, so we didn't build the inventory. We basically shipped everything we could in this Q3, and we're in the process of building additional product, But we really don't ramp until the Q2 of 'twenty four and that continues kind of second and right now, second and third quarters of 'twenty four are probably the heaviest and then it starts So, reduced, but not in an extreme slope.

Speaker 4

Understood. That's helpful. And just on the inventory position, how much of the build sequentially was this tied to the memory business versus millimeter wave? And then more generally, as we look forward and you start to build up the additional orders, should we expect that inventory to continue to build through kind of the middle Next year or do you think you're at a fairly healthy level now where you can kind of ship based on the orders coming in?

Speaker 2

Right now, we the majority of the inventory at September 30 was on our millimeter wave products. We did have an increase during the quarter ended September 30 as we had commitments for wafers, which were shipped to us by our foundry until we were able to cancel some of those orders or at least delay them Starting in the Q3, so the inventory increase was primarily there. On the memory side, we've as I said, basically shipped what we could And it was obviously work in process or for our Bandwidth Engine 3 products where we are waiting orders, we expect to come from 2 customers there. We've had that inventory and frankly don't need to build anymore unless the orders really exceed our expectations. I think we'll see some increases In memory inventory in the Q4 as we're in place of regular wafer orders, and in some cases, maybe some substrates too.

Speaker 2

And hopefully, that will be offset by reductions in millimeter wave. We see our millimeter wave customers beginning to get Back on track, particularly in early 2024.

Speaker 4

Got it. And just turning to millimeter wave for 2nd, you guys talked about some interesting kind of new markets for you, aerospace and events as well as the dense urban environment. Maybe Give us a sense for how significant the initial customers you're talking to could be in terms of revenue next year. And then in general, how you're thinking about the overall market sizing relative to kind of the fixed wireless access market?

Speaker 3

Sure, Kevin. Thanks for the question. Like on the so the dense urban environment It's obviously a commercial environment, not a military environment. And it's actually The customer forecast equal anything we've seen so far in terms of the volume. So but We need to the proof is in the pudding obviously, but the nice thing about the market is the TAM, like the opportunity It's significant, right?

Speaker 3

I mean, there's like a 1,000,000,000 people that live in dense urban environments around the world. And it's kind of interesting because over the last Few months, we realized, I mean, millimeter wave, the challenge and maybe we went through it quickly in the call, but The real advantage we bring here is there's a couple of really important advantages, just the ability to service dense environments. I mean, very, very dense environments and we're talking customers who are 10, 15 feet apart. But the other one that's actually quite interesting is our ability to transmit And again, this is in our deck, but I mean to transmit at full rates under 10 watts. So basically, these Many of these places have run on battery like have very poor electricity infrastructure, so they run out battery power.

Speaker 3

So it was vital that we were able to run out that batteries for probably half the time. So our ability to run it at Full performance with reduced battery with reduced power consumption was critical. So we actually I think for 2024, It's going to be a ramp year, but we should see it. We're hoping later this year into early Q1. But obviously, we'd like to floor, other opportunities globally for this market.

Speaker 3

So it's something that We do really well. We were exposed to this opportunity over the last few months, and it's something we're going to expand on. That's great to take

Speaker 4

the call. The second part of it was So on the AMD side of the equation and this can be opportunity there?

Speaker 3

Yes, that's more exploratory, I would say. I guess it's a proof of concept. Like I think that again on the military side of things, I mean, whether the value proposition is, one of the keys there is the stealth We're still exploring that in terms of what the volumes look like. Dense urban is really More of an opportunity like a shorter term higher volume opportunity that we can get our arms around right now.

Speaker 4

Sounds good. Good luck again for those initiatives and I'll turn it over.

Speaker 3

Thanks. Thanks, Kevin. Thanks, Kevin.

Operator

The next question comes from David Williams with Benchmark. David, please proceed.

Speaker 1

Hey, good afternoon, gentlemen, and thanks for the let me ask a question here. Just kind of wanted to touch on The funnel that you have in your presentation. And can you just kind of walk through that and help us understand? I mean, you're getting some really nice growth here in terms of the funnel and things are moving through. Just hoping for maybe a little more color on how you're seeing the funnel, how things are developing, if there's anything that's moving there that's either in line or maybe out of line with what your expectations are?

Speaker 3

Well, for sure, Dave, the way the markets are shaping up is and again, I think the theme generally It's congestion of WiFi, right? And so basically, obviously, the market that we've talked about for several quarters is let's call it North American fixed wireless access, right? And that's more suburban rural and that's the list that we've been talking about. And so That constitutes a certain segment of the pipeline. We are now starting to see some consumer electronics.

Speaker 3

And the value again, kind of the same value proposition is that high data rates, but again, in a congested environment. And I think we obviously realize now that no minimum wage does a great job in a congested environment. And so we're seeing some actually Quite nice volume opportunities in consumer electronics. So that's constituting a certain portion of our pipeline. Other opportunities are in transportation.

Speaker 3

We're seeing some opportunities in transportation, mostly in Asia, I would say, specifically. So that's Part of that pipeline. And then of course, the aerospace and military. So I would say those are kind of the main drivers for the We've also got I mean, this is public information. We also have a very good relationship with Richardson RFPD And that relationship is really paying off and really uncovering some terrific opportunities for us.

Speaker 3

So that helps with our pipeline as well, both in North America as well as around the world. So that's been a great relationship as well for our sales pipeline.

Speaker 1

Okay, fantastic. Thanks. And then if you think about your millimeter wave inventory, that's either in house or maybe sitting at your customers. What is it going to take do you think to get through this? How much is sitting out there?

Speaker 1

And you said that you think maybe 1st part of the year, is there anything that gives you hope maybe that we See something kind of kick in at the end of this year. And I guess, you're trying to understand that the inventory impact and how long it's going to take to really digest that.

Speaker 3

We were at Las Vegas Wispapalooza 3 weeks ago, and I think that so the good news is that Guys like Ubiquiti, who are the market leaders in fixed wireless, had 7 or 8 Products are on display and so that was and I mean the feedback we did get from WISP was that those 60 gigahertz products are They call them bulletproof, right? I mean, they worked really, really well, and probably exceeded expectations. The problem is there's more of an education process plan that's going on in that market. And so Ubiquiti has done a fantastic job of starting to promote it. In fact, we've done some kind of videos with their distributors now.

Speaker 3

So I would say really more into Q1, Q2 is when we're going to start The new orders come online, right, because it's taken a little longer for them to reach their volumes than they were hoping. And obviously, The whole inventory correction where people were already ahead of the curve, we've got to bleed through that. So I'd say Hard to imagine over the next 8 weeks, we're going to see a lot of orders, but hopefully into later Q1 or Q2, we'll start to see that shift. Okay. Does that make sense to you?

Speaker 1

It does. Very helpful. Thank you. And then maybe, Jim, just thinking about the balance sheet. Obviously, you're a little on cash there, but you've got some nice build up in inventory in the working capital.

Speaker 1

So it will be good to see that get freed up. But I guess in the near term, What do you think are the I guess, how are you feeling about your liquidity here? And are there any puts and takes things that we should be thinking about as we

Speaker 2

Yes, sure. No, I mean, it's an important question here. Yes, cash flow is low at the end of the quarter. But fortunately, as I highlighted in my script, about $3,700,000 came in from the EOL alone Between the end of the quarter and I think up to last week. So that's definitely given us A lot more breathing room and visibility and particularly the prepayment to fund wafer purchases, which we have been making, Which I think speaks to our confidence in our business.

Speaker 2

We didn't we had held off on some back in the summer, but I turned the faucet back on there. Right now, it's a function of building inventory to ship to memory orders both we kind of look at them internally as DOL and then There's still regular production running as well. So like I said, we shipped what we could in the Q3 To fulfill orders, our customers have been very supportive of taking inventory. And in addition, accelerating payment terms to generally pay within 10 to 14 days, which is huge to improve our working capital. We are expecting to bring the burn down there and Obviously, we talked about some of the painful cost reduction actions we took specifically last week, which was Difficult, but unfortunately, we had to reduce OpEx and burn, but we remain Optimistic about prospects and are still chasing, I think a quarter or 2 had talked about opportunities for funded development, etcetera.

Speaker 2

The current macroeconomic environment uncertainties have really slowed those down, but we are still looking to chase one of those down and You don't have a need to business need to bring folks back to support those. But looking out here, I think I will say in our 10 Q, we're funded into the Q1. We're obviously taking actions to address that. But EOL, Having the visibility of those orders here in the next kind of 6 to 10 weeks or 6 to 8 weeks will be critical as we assess it. We are always alert to financing opportunities as well, as any company in our position should be.

Speaker 1

Okay, great. Thanks so much, gentlemen. Certainly appreciate the time.

Speaker 3

Thank you, Dave.

Operator

Okay. We have reached the end of the question and answer session. There are no further questions in queue. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • Parasso reported an 87% sequential and 36% year-over-year increase in Q3 revenue to $4.5 million, driven primarily by initial shipments of end-of-life memory IC products.
  • The company has an $8.2 million backlog of end-of-life memory orders at quarter end, with total EOL demand now expected to reach $15 million–$20 million and shipments to continue into H2 2024.
  • Despite an industry inventory correction in its MMA business, Parasso is expanding its pipeline into aerospace/defense and dense urban markets, securing its first defense proof-of-concept and launching the high-gain PRM-2144X mmWave module.
  • Gross margins improved to 45.4% on a GAAP basis and 58% on a non-GAAP basis in Q3, reflecting a favorable mix shift toward higher-margin memory IC shipments.
  • To reduce cash burn, Parasso cut approx. 28% of its workforce, targeting $2.2 million in annualized savings; as of Sept. 30, cash was $0.7 million, with ~$3.7 million of subsequent memory receipts, though additional financing will be needed beyond Q1 2024.
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Earnings Conference Call
Peraso Q3 2023
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