Peraso Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 16, 2023

Key Takeaways

  • Positive Sentiment: Product revenue in Q1 reached $4.9 million, boosting total revenue by 29% sequentially and 48% year-over-year.
  • Positive Sentiment: Customer engagement pipeline grew from 60 to 75 active projects, with more designs moving into preproduction.
  • Negative Sentiment: TSMC will discontinue the memory IC fabrication process in H2 2024, triggering end-of-life notices and last-time buy orders.
  • Positive Sentiment: Cost-saving initiatives reduced non-GAAP operating expenses to $4.3 million in Q1, aiming for $5 million in annualized savings.
  • Positive Sentiment: Millimeter-wave fixed wireless access demand is accelerating globally, with U.S. subscribers expected to nearly double to 12.7 million by 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
Peraso Q1 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Good morning, and welcome to Pareso Inc. First 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, Tuesday, May 16, 2023. I would now like to turn the call over to the host for today's program, Jim Sullivan.

Operator

Please go ahead.

Speaker 1

Good morning, and thank you for joining today's conference call to discuss Pareto's Q1 2023 financial results. I'm Jim Sullivan, CFO of Pareso and joining me today is Ron Glibbery, our CEO. Yesterday, 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 Proraso's website at www.porasoinc.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.

Speaker 1

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. CorSo 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.

Speaker 1

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 Piras' 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 Parasto's public filings with the SEC. Qaso 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's statements during this conference call we'll include discussions of certain measures and financial information in terms of GAAP and non GAAP.

Speaker 1

Included in the company's press release issued yesterday our 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 Glibbery for his prepared remarks. Ron?

Speaker 2

Thank you, Jim. Good morning, and welcome to everyone joining today on the phone and via webcast. I'm pleased to report that Protaz 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 suite products. More specifically, total revenue in the Q1 increased 29% sequentially and 48% year over year with product revenue coming in at $4,900,000 Our near term focus remains on expanding Piraeus' 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 6,700,000 Whistlers in the U. S.

Speaker 2

According to the Carmel Group, which is expected to grow to 12,700,000 subscribers in 2025. Looking at the historical data, the trend suggests a doubling of subscribers every 5 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 continuing to capture a growing share of the broadband market. According to latest third party market research, fixed wireless access has we have consistently represented over 90% of the net adds by the top broadband providers in the U.

Speaker 2

S. Over the past three quarters. As discussed on previous calls, fixed wireless access is the natural extension of 5 gs 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 3,200,000 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 5 gs fixed wireless access service that has the potential to reach tens of millions of homes.

Speaker 2

Importantly, 5 gs millimeter wave fixed wireless access isn't unique to North America and is increasingly being recognized in ramp globally. Leading carriers in multiple countries, including Australia, Italy and India are either actively or have plans to deploy 5 gs 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 Q1. This growing interest also span the entire ecosystem from major OEMs and equipment vendors to 5 gs baseband providers and makers of frequency converted devices. Based in part on our conversations with several prospective customers and potential partners, we believe it's clear industry recognition that Parezza's 5 gs beam format is ideal for enabling cost effective and equipment needed Turning to Slide 7, I want to share something new to convey, the recent significant progress we've been we're making to expand our engagement pipeline. Keeping in mind that Pirazzo has historically 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.

Speaker 2

This included the appointment of Mark Lunsford, who is fundamental to our ongoing efforts to expand Pareto's new business pipeline. 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 Q1 to 75 as of May 2023. In addition, this slide shows the progression of customer engagement phases through the preproduction.

Speaker 2

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 preproduction. So not only do we see the overall level of customer engagement increasing, we also see an increase in 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, Parezzo acquired as part of the business combination with Moses we are in late 2021. The sole founding for our memory devices is TSMC. They recently informed us that the manufacturing process used to fabricate wafers memory ICs would be discontinued in the second half of twenty twenty four.

Speaker 2

Given these are legacy products and require 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 from 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 we will continue

Speaker 1

to expect to result in

Speaker 2

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 wave silicon business, which is poised to become the primary driver of Pirazzo'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 Piraza's existing leadership position in the unlicensed 60 gigahertz segment of the fixed wireless market positions us well for emerging opportunities in the licensed fixed wireless market as well, including 5 gs CPE applications and 5 gs millimeter wave in the carriers market. Longer term, we believe there's significant incremental opportunities for our technology next generation applications such as ARVR connectivity as well as future Wi Fi standards.

Speaker 2

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 Q1 financials and speak to our outlook for the Q2.

Speaker 1

Thank you, Ron, and good morning, everyone. It's great to speak with you again today. During my remarks, I'll make several references to non GAAP numbers. Unless otherwise indicated, referenced amounts exclude stock based compensation expense, amortization of reported intangible assets, impairments of goodwill and the change in fair value of warrant liability. These non GAAP financial measures and the reconciliation the differences between them and comparable GAAP measures are presented in our press release and related Form 8 ks, which was filed yesterday with the SEC.

Speaker 1

Turning to our Q1 2023 financial results. Total revenue in the Q1 increased to $5,000,000 from $3,900,000 in the Q4 of 2022 compared with $3,400,000 during the same quarter a year ago. Product revenue from the sale of our integrated circuits Enmillimeter Wave Integrated Antenna Solutions in the Q1 was $4,900,000 compared with $3,800,000 in the prior quarter and $3,200,000 in the Q1 of 2022. The sequential growth of 1st quarter product revenue was primarily attributable to increased sales of millimeter wave integrated solutions. This significant year over year growth was driven by increased shipments of both millimeter wave products and memory ICs.

Speaker 1

Royalty and other revenue comprised $100,000 royalty revenues from licensees of our memory technology in the Q1 of 2023. GAAP gross margin was 38.3% in the 1st quarter compared with 44.2% in the prior quarter 42.8% in the year ago quarter. On a non GAAP basis, excluding amortization of acquired intangible assets, gross margin for the Q1 was 45.4% compared with 53.4% in the prior quarter and 53.3% in the Q1 of 2022. Non GAAP product gross margin decreased to 43.8% in the Q1 compared with 52.6% in the prior quarter and 50.4% in the Q1 of 2022. The sequential and year over year decreases in GAAP and non GAAP gross margins for the Q1 we're primarily the result of revenue mix, reflecting increased revenue contribution from our millimeter wave integrated solutions.

Speaker 1

Although gross margin was lower in the Q1 of 2023, we continue to target a corporate non GAAP gross margin of approximately 50% through a combination of the benefits from increased scale and reduced production costs on our millimeter wave integrated solutions, as well as the contribution from sales of our higher margin memory IC products. GAAP operating expenses for the Q1 were $5,700,000 which included a $400,000 gain on a previously completed license and asset sale. This is compared with $16,200,000 in the prior quarter, which included a $9,900,000 non cash charge for the impairment of goodwill and $8,200,000 in the Q1 of 2022. Total operating expenses for the Q1 of 2023 on a non GAAP basis, which excludes stock based compensation amortization of reported intangible assets were $4,300,000 compared with $4,800,000 in the prior quarter $6,900,000 in the same quarter a year ago. In February 2023, we announced that we had implemented cost reduction initiatives to reduce operating losses and streamline operations, which collectively are expected to decrease our operating expenses by approximately $5,000,000 on an annualized basis.

Speaker 1

As reflected by our results, we began to realize the initial benefits from these targeted expense reductions during the Q1. We continue to anticipate realizing further benefit from these actions over the coming quarters. GAAP net loss for the 1st the Q3 was $3,100,000 or a loss of $0.15 per share compared with a net loss of $14,600,000 or $0.71 per share in the prior quarter and compared with a net loss of $6,800,000 or $0.34 per share in the same quarter a year ago. On a non GAAP basis, net loss for the Q1 of 2023 was $2,000,000 or a loss of $0.09 per share, which excludes stock based compensation, amortization of required intangibles and a recorded gain for the change in fair value of warrant liability. This compared with a non GAAP net loss of $2,800,000 or $0.13 per share in the prior quarter and a net loss of $5,100,000 or loss per share of $0.25 in the same quarter a year ago.

Speaker 1

The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non GAAP EPS for the Q1 of 2023 was 21,600,000 shares, Which excludes 1,800,000 shares of our common stock and exchangeable shares that are escrowed pursuant to the terms of an escrow agreement related to the December 2021 business combination between Piraso and Moses and subject to an earn out based on achievements of certain stock price targets. Adjusted EBITDA, which we define as GAAP net income or losses reported, excluding stock based compensation, amortization of reported intangibles, change in fair value of warrant liability, goodwill impairment charges, interest expense, depreciation and amortization and the provision for income taxes it was negative $1,800,000 in the Q1 compared with negative $2,500,000 in the prior quarter and negative $4,800,000 in the prior year period. From a balance sheet perspective, during the Q1 of 2023, we collected approximately $2,000,000 previously outstanding from the lead customer I recognized approximately $1,100,000 of revenue as a result of the collections. The company has no past due amounts from this customer. On March 31, 2023, we had approximately 23,400,000 shares of common stock and exchangeable shares outstanding.

Speaker 1

This amount includes 1,800,000 shares subject to escrow as noted previously. Regarding our business outlook, there are currently 2 unrelated customer sales transactions that we are actively working to close. The ultimate outcome and timing are uniquely difficult to predict either one or both of these pending agreements could potentially have a meaningful impact on anticipated revenue for the Q2. As such, today we are not in a position to provide

Speaker 2

we will conduct specific guidance

Speaker 1

for the current quarter. To the extent the outcome of 1 or both of these pending transactions becomes more certain, we will consider providing future potential updates regarding our expectations for the Q2. This concludes our prepared remarks. Operator?

Operator

Thank you. The first question today is coming from David Williams from Benchmark. David, your line is live.

Speaker 3

Hey, good morning. Thanks for taking the question and I apologize for the background noise. But I wanted to see there's a couple of things here that are definitely interesting that I wanted to touch on. One is on the memory pull forward, I know, Ron, you said it's too early to tell what the end of life potential pull forward could be. But As you kind of think about the working capital here in terms of that impact, how do you think that the revenue trajectory could be from this?

Speaker 3

Do you think that all of the revenue you would have

Speaker 2

Hi, Dave. Thanks for dialing in. The answer to your question is yes. I mean, that's the hope. We're just in the midst of that process now in terms of understanding from the customers, what those requirements are.

Speaker 2

But yes, essentially to fold you know that outline revenue into 2024 into 2024. From a capital perspective, this situation where we're looking to the customers to participate in that cash process, right? I mean, it's just the message is, hey, we are our foundry has discontinued this process. We're going to try to keep it going as long as possible. But in order to purchase the inventory necessary to satisfy your requirements, we'll need essentially a prepayment for that.

Speaker 3

Okay, very helpful. And then maybe secondly on the just the customers you talked about in Any more color around that? You talked about 2 of them, they're separate and distinct from one another. Is there anything is this related to the NRE? And maybe if you could give us any more color on that NRE if that's moving forward and maybe how what would be a portion that could be or it was?

Speaker 3

Thank you.

Speaker 4

Yes. No, absolutely, it involves the there is NRE licensing components. And as such, given the complexity of the revenue recognition rules around it and timing of payments, etcetera, we just felt it was very challenging to kind of put a number out there. Obviously, for example, $5,000,000 number in Q1. It doesn't take much to kind of move that and Create a miss or put us out of balance.

Speaker 4

So we just felt the prudent thing to do, particularly in this market with the inventory situation across the industry right now, even on the product side, because there is some potential for some push outs, pull ins right up to the last day of the 2nd month of the quarter. We just felt it was prudent Hold off on the guidance number at this time. We certainly, as we said in our comments, would like to provide an update when we can, albeit revenue recognition always has to be the company's conclusions need to be signed off by the auditors, etcetera, which can be tough to get ahead The timing of the quarterly review, which would happen in July. That said, these transactions and I think as we've you mentioned out there would have a meaningful impact on our liquidity, when you look at the balance sheet. So they will definitely key to our revenue and liquidity having these transactions closed.

Speaker 3

Okay. All right. Fantastic. Certainly appreciate the color there and understandable on the booking of that revenue. I guess maybe from a broader perspective, fixed wireless access just kind of the rest of the business and feel pretty comfortable with the design activity.

Speaker 3

And Ron, maybe you can speak to kind of if that's accelerator, kind of what you said outside, maybe a little more color from what you provided in the script. Thank you.

Speaker 2

Of course, Tate, my pleasure. Yes, so I think there's a theme moving forward for Terrazzo, which is Really, to last November, we were our theme is really to diversify So to eliminate this cost of cost of

Speaker 3

capital Hey, I'm here for something else.

Speaker 2

Yes. Can you hear me, Dave?

Speaker 3

I can, I can, sorry?

Speaker 2

Sorry. So our theme is really to diversify customer base and we really pretty limited in our ability to do that till last November. You brought Mark Lundsford on board. And Mark, Mark's goal is, as you can see from our pipeline, is to really diversify that customer base. And even from Q1 to Q2, we've seen a substantial increase, not only in the pipeline, but also the salient stages of the pipeline.

Speaker 2

So yes, we by our estimate right now, we've got About 75 engagements, up from about 60 in Q1. And so we're just really, really focused on the commercial of diversification of our customer base. And so, so far so good. Mark has done an amazing job. Well, frankly, the whole team is doing an amazing job and We're seeing that design activity increase substantially.

Speaker 2

But you know and again just to kind of maybe close that off, certainly fixed wireless It's a big part of that. But also we're seeing some kind of shades our progress in things like high speed video, so that market, we've built a lot of intellectual property for things like the low latency wireless video, be it VR or be it educational systems or be it docking stations, so more even though we've been of course fixed wireless is our focus, but we are starting to see some diversification in terms of the applications as well, which of course we're pleased with. So we're just really focused on really diversifying that customer base so that we're not really relying on a couple of customers, but really the whole industry.

Operator

Thank you. And the next question is coming from Kevin Liu from Keilu and Co. Kevin, your line is live.

Speaker 2

Hi, good morning. I wanted to also ask a question on the memory business first. Just In terms of the actual production, can you talk a little bit about when TSMC would actually stop producing any more product Give us kind of a sense for how far into 24 customers can wait for their orders. And then beyond that, when you look at your memory business today, just curious if the revenue due on kind of an annual or quarterly basis, how many months of inventory or years of inventory are your customers Do you want to speak to that Jim or do you would like me to?

Speaker 4

If you want to go first, Ron, I can chime in.

Speaker 2

Why don't I start and then hand over the inventory side of things. So basically, I guess at some level the TSMC timing is confidential proprietary information to TSMC, Kevin. So, but suffice it to say, we've got We've got in the order of, let's call it, 8, 6 quarters of flexibility there, not counting any inventory. So this is not going to happen overnight, but those are kind of the broad timeframes is kind of late 2024 for production and then presumably there'll be some carryover in terms of the inventory. So that's kind of the broad, I would say the broad timing of this situation, but we'd like to give our customers a lot of time.

Speaker 2

They've invested a lot of money in these products and so we want to make sure they get full value. I'm not as close to the inventory situation, Jim. Maybe you could step in on that side of the things.

Speaker 4

Yes, sure, Ron. Our customers, Like everyone, our peers out there, others in the industry, we always seek to ascertain exactly how much inventory the customers our holding certainly would make our forecasting a lot easier. Most customers keep that pretty tightly held. We generally ship direct to customers or in the case of one customer in Japan, we go to a local disty, although they do not stock inventory, so we don't have disties holding inventory out in the channel, But it's difficult to get a handle on inventory. I will say, the memory business is seeing the we are seeing the impact kind of Q2, Q3 of the inventory management issues everyone is having out there I have seen some push outs of orders, etcetera.

Speaker 4

So we are certainly not, even our size is not immune to that. But yes, hard to have visibility. I mean, as we announced, we expect to see the impact from the EOL in 2024, as we do expect customers, I think as Ron answered initially on David's question, we hope, expect, use in CERC forward looking verb to see pull ins as customers you don't need to pull in future demand to ensure they're adequately stocked.

Speaker 2

Yes, understood. And you mentioned kind of the industry wide From your perspective, are you guys seeing that only within your memory business here or is there any sort of correction that needs to happen on millimeter wave. Just wondering what you're seeing from an end customer standpoint across your products?

Speaker 4

We're seeing it on both sides of the business. Neither one is immune. We're definitely seeing some desire. In the case of our memory, the purchase orders we do have within a window push outs. We have not seen any cancellations on the memory side of purchase orders, we've seen some push outs, although we're optimistic they're pulled in.

Speaker 4

I mean, again, being Yes, a relatively smaller provider. It's meaningful to us, but the challenges, the Contract manufacturers, the algorithm says push out and it's machine driven and then we can get a pull in a couple of weeks later to bring it back. So very difficult to measure. We're also seeing it on the millimeter wave. I think there's been a little bit of a knee jerk.

Speaker 4

Yes, let's push things out and then just pull them back in later. There's not as much flexibility for our customers on the millimeter wave side, generally those POs are not rescheduled. So we will shift what we have and in some cases if it's to the mutual benefit kind of work with the customers on that. We are also seeing that customers are taking longer to pay on holding our usual issue where customers will hold the receivables at quarter end and Yes, we'll do quite well in collections in the first half of the first month of the subsequent quarter.

Speaker 2

Got it. And just on the 2 large customer transactions that you referenced, any sense you can give us in terms of how far along in the process this is? Are these both expected to close in Q2 and it's more just the revenue recognition that's kind of not as visible or would either of these potentially close later in the year?

Speaker 4

Expected to close in Q2 in case of one of them, it's taken a little longer than expected, but we do expect it to come in. And as I said, it's we'll have a beneficial impact on our balance sheet. Obviously, when you have different components involved, as I mentioned, the various deliverables, it's always tough to determine the revenue recognition and the impacts again at our side. We just felt it prudent to kind of hold off, but we do expect those to close. And certainly, we're always subject to customer confidentiality, etcetera, but would expect to press release at least 1, if not both, And give that kind of message out there that, hey, it's in the books.

Speaker 2

Great. And then you guys highlighted some of the fixed wireless access subscriber growth even for kind of the licensed 5 gs spectrum. Just on the license 5 gs side, could you talk about whether you guys expect to see more demand or more wins coming initially domestically or internationally there, any sort of update in terms of when you could start to see your first major customer win there? Well, that's a good question. I mean, I think the first message, Kevin, and as we all know, 5 gs fixed wireless millimeter wave it was slow in 2022 because of the mid band deployment.

Speaker 2

But what we're seeing, again, now we're seeing over the last few weeks months, just really a spike in activity in terms of our engagements. And I mean, we're talking We're not we're talking like top self partners, customers and partners here. So still a bit hard to judge. Like I think globally in terms of the deployments initially was Verizon and Verizon is still shipping, but there seems other signs of light like NBN in Australia has deployed basically countrywide. Well, Italy is more of a 28 gigahertz, there is substantial presence of fixed wireless, but probably what's driving a lot of activity right now is India.

Speaker 2

And I think we all know that India has licensed the low band 26 gigahertz and 28 gigahertz for fixed wireless Fiber is just not that popular in India. So it looks like mostly India is going to go fixed wireless. So we're seeing that's where we're really seeing momentum. I mean, again, very significant conversations going on there. And Specifically, what we're finding is that our thesis that the way fixed wireless is successful is with really cost effective equipment.

Speaker 2

And so unlike most of our competitors, we designed a 5 gs chip absolutely focused on reducing the cost of consumer premise equipment. And so there's some very, very strong interest in that chip. So we're thrilled with the progress there. Actually, we're even starting to see some activity in North America really and globally on Satcom, like 5 gs to Satcom. So that's a market that we're starting to see percolate as well.

Speaker 2

So we're involved in exact same premise, which is again the ground equipment or the end user equipment has to be cost effective. And Whereas initially all the millimeter wave, I think design wins mostly were in the base station. Now vendors are Who's got the right answer for the end equipment? And so we're definitely seeing some nice activity there. So I would summarize it for you, Kevin, as Kind of globally, the service providers that I suggested now, and starting to see some activity on the Satcom side of things as well.

Speaker 2

So I would say a theme for Q1 and now into Q2 is the 5 gs market, millimeter wave fixed wireless it's starting to heat up for us. So that's so we're pretty happy with that. All right. That's great to hear. And one last question for me.

Speaker 2

Just in terms of the OpEx savings, could you just talk about how much more you expect to be able to say kind of on a sequential basis heading into Q2?

Speaker 4

Sure, Kevin. We obviously announced that mid February and made the employee reductions, we had actually started weaning out expenses and some consultants kind of beginning in the 4th quarter, continuing through Q1 as contracts ended. We're looking to see kind of additional benefit Hopefully in the kind of the at least 10% range over where we were in Q1, obviously subject Yes, other movements and also subject to the these kind of revenue transactions and some cost that may be associated with those, which could offset that, but obviously would more than offset that. But obviously, it takes some time to have the full benefit kick in, particularly when there are no headcount reductions because obviously you have termination payments, etcetera.

Speaker 2

Understood. Appreciate you taking the questions and good luck here in the second quarter.

Speaker 4

Thanks, Kevin. Appreciate your time.

Operator

Thank you. And the next question is coming from Tim Savageaux from Northland Capital Markets. Tim, your line is live.

Speaker 5

Great. Thanks and good morning. I had a couple of questions. Wanted to follow-up on the kind of pending agreements that you mentioned and ask whether those are new or extended agreement with current customers and also trying to relate that to the pipeline slide That you put up, I think you showed 2 customers going into preproduction And a few more moving through the pipeline kind of above that. Should we relate those 2 developments or are those separate?

Speaker 5

I'll follow-up from there as well as the current or new customer question. Thanks.

Speaker 2

I can speak to that, Jim. So one of them is not related to that. It's an existing customer. So the thing to clarify, Tim, on the pipeline side is that it doesn't show customers in production already. It's like people pending production and then production is separate.

Speaker 2

So one of the customers It does not show up on that pipeline slide and the other one does. So that would be the summary those two customers relate to what's on the pipeline slide.

Speaker 5

Great. And I know you indicated you removed the economic value, but I wonder if you might have any color on kind of the whether in the aggregate or anything else, just from a total funnel perspective or for the ones that you're farther along on, what sort of market opportunity you see there? And given the uptick in the funnel, would you attribute that obviously, there's been a lot of company specific activity, but have you seen an uptick in overall activity across the Fixed wireless access market is contributing to some of that funnel expand.

Speaker 2

Well, definitely it's overall engagement, Blake, we're actually I'm calling from Washington today because we're actually in Washington with the wireless ISP organization speaking to Congress or congressional members about the benefits of fixed wireless is especially with regards to the $44,000,000,000 B funding. So, there's a lot of money there. And I think in parallel with that, so we're working on we're actually I've said in the past, we're working with WISPs to really promote millimeter wave technology in their market, kind of the key benefit that we're or the message that we're bringing to that market is Parasa Technology brings gigabit links, it's highly competitive with fiber. It's the symmetrical links, the low latency. So that's starting no pun intended, that's starting to resonate with those customers.

Speaker 2

And we have some early wireless ISPs are embracing that fully and just basically saying, look, fiber is a good solution, but fiber is expensive. It takes long. Just think about even The installation time, I mean, for millimeter wave devices less than an hour costs $30 So we're so a big part of our pipeline now is the fixed wireless opportunities, primarily at the OEM level, but even at the service provider level, where they're using our technology to get to gigabit links. I mean another kind of another message we received from Oasis, of course, people with 10 megabits are happy with 50 megabits, but our view is if you provide a gigabit, you're good for 10 years. I mean, nobody's that's like at least a 10 year cycle in terms of your in terms of your installation time, so or install time with that customer.

Speaker 2

So that's kind of the message we're bringing to Congress is that wireless is absolutely essential part of the B program because companies like Parazo are providing these gigabit links at a very, very aggressive price point under $200 for the box. So to speak specifically to your question, that constitutes a significant portion of the pipeline. Fixed wireless access from where we were back in November. But, and I think more broadly, I mean, the pipeline does include some indoor, high speed wireless also some quite a bit of defense and also some transportation. So we are just broadening our markets, but Certainly fixed wireless is, I would say, the cornerstone of the anchor.

Speaker 2

And by the way, in 5 gs, it's all that's all Thanks wireless. There's really that's really the sweet spot for 5 gs is that thanks wireless. So does that answer your question, Tim?

Speaker 5

Absolutely. Really helpful. Thanks very much.

Speaker 2

Great.

Operator

Thank you. There were no other questions in queue at this time. And this does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

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