Peraso Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2023

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to Pareso Inc. 2nd 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, August 14, 2023. I would now like to turn the call over The host for today's program, Mr.

Operator

Jim Sullivan. Please go ahead.

Speaker 1

Thank you. Good afternoon, and thank you all for joining today's conference call To discuss Parraso's 2nd quarter 2023 financial results, I'm Jim Sullivan, CFO of Parraso and joining me today is Ron Glibbery, our CEO. Today, after the market close, we issued a press release and related Form 8 ks, which was filed with the Securities and Exchange Commission. The press release and Form 8 ks are available on Parso's website at www.parsoinc.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 IR 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. 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 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 Parasto in the date hereof. These statements involve known and Uncertainties and other factors that may cause Process'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 in Parasto's public filings with the SEC. Parasto 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.

Speaker 1

With respect to remarks on today's call involving non GAAP, Unless otherwise indicated, referenced amounts exclude stock based compensation expense, amortization of reported intangible assets 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 8 ks, which was filed today with the SEC, 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 IR section of our website. With that, I will start today's call with an overview of the company's financial results for the quarter and then turn the call over to Ron to provide his update. Now turning to the results. Total revenue in the 2nd quarter decreased to $2,400,000 from $5,000,000 in the prior quarter and $4,300,000 during the same quarter a year ago.

Speaker 1

Product revenue from the sale of our memory and discrete circuits and millimeter wave integrated antenna in the Q2 was $2,200,000 compared with $4,900,000 in the prior quarter and $4,100,000 in the Q2 2022. The sequential and year over year decrease in 2nd quarter product revenue was primarily attributable to lower shipments of both millimeter wave products and memory ICs, which we primarily attribute to the inventory correction that has been underway in the market. Royalty and other revenue for the Q2 of 2023 comprised $200,000 of royalty revenues from licenses of our memory technology and other revenues from performance of non recurring engineering services for our millimeter wave customer. GAAP gross margin was 25.3% in the 2nd quarter compared with 38.3% in the prior quarter and 34.7% in the year ago quarter. On a non GAAP basis, excluding amortization of acquired intangible assets, Gross margin for the 2nd quarter was 45.9% compared with 45.4% in the prior quarter 43% in the Q2 of 2022.

Speaker 1

The higher non GAAP gross margins for the Q2 were primarily the result of revenue mix, reflecting increased revenue contribution from memory IC products. As stated in previous quarters, we continue to target a corporate non GAAP gross Margin of approximately 50% through a combination of the benefits from the pre scale and reduced production costs in our millimeter wave products as well as the contribution from sales for our higher margin memory IC products. GAAP operating expenses for the 2nd quarter were $5,600,000 This compared with $5,700,000 in the prior quarter, which included a $400,000 gain on a previously completed license and asset sale And $8,500,000 in the Q2 of 2022. Total operating expenses for the Q2 of 2023 on a non GAAP basis, which excludes stock based compensation and amortization of reported intangible assets, were $4,100,000 compared with $4,300,000 in the prior quarter And $6,600,000 in the same quarter a year ago. The sequential and year over year decrease in operating expenses reflects the incremental benefits From cost reduction initiatives and on the previous actions we began implementing during the second half of twenty twenty two to streamline operations, including the license and asset sale for certain memory technology that closed in the Q3 of 2022.

Speaker 1

We continue to expect these collective actions will result in lowering our operating expenses by approximately $5,000,000 on an annual basis as we realize the full anticipated benefits over the next 3 quarters. GAAP net loss for the Q2 of 2023 was $4,100,000 or loss of $0.17 per share compared with a net loss of $3,100,000 or $0.15 per share in the prior quarter and compared with a net loss of $7,000,000 or $0.33 On a non GAAP basis, net loss for the Q2 of 2023 was $3,000,000 or loss of $0.12 per share, which excludes stock based compensation, amortization of acquired intangibles and the change in fair value of warrant liabilities. This compared with a non GAAP net loss of $2,000,000 or $0.09 per share in the prior quarter and a net loss of $4,800,000 or loss per share of $0.03 in the same quarter a year ago. The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP And non GAAP EPS for the Q2 of 2023 was 24,300,000 shares, which excludes 1,800,000 shares of our common stock and exchangeable 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, interest expense, depreciation and amortization And the provision for income taxes was negative $2,800,000 in the 2nd quarter compared with negative $1,800,000 in the prior quarter And negative $4,500,000 in the prior year period.

Speaker 1

From a balance sheet perspective, as of June 30, 2023, the company had cash, cash equivalents And short term investments of approximately $2,700,000 which includes the remaining proceeds in the company's registered direct offering And concurrent private placement completed at the beginning of June 2023. As a result of the company's expected operating losses and cash burn And recurring losses from operations. The company will need to raise sufficient capital through additional equity or debt arrangements as further described in the company's quarterly report on Form 10 Q For the period ended June 30, 2023, as filed with the Securities and Exchange Commission. Regarding our business outlook, similar to last quarter, our near term continues to be impacted by multiple unrelated factors to make it difficult to confidently forecast the full range of potential outcomes specific to the Q3. In addition to the more general uncertainty associated with the broader macro environment and end market demand in the second half of the year, The 2 customer transactions that we discussed last quarter are still pending and have yet to close, and we may commence additional end of life shipments to our customers As early as this current quarter, although the difficulty of predicting the timing and probability of these potential transactions and shipments prevents us from being in a position To provide specific guidance for the current quarter, we remain optimistic about closing 1 or more or both of these pending transactions by the Q4 of 2023.

Speaker 1

To the extent this occurs, we will consider providing future updates regarding our expectations for the Q3. With that said, I'll now turn the call over to Ron to provide a

Speaker 2

business update. Ron? Thank you, Jim. Good afternoon and welcome. We appreciate you joining us on today's conference Without question, it was a uniquely challenging quarter.

Speaker 2

As Jim discussed, our lower revenue during the Q2 was primarily attributed to a significant and ongoing inventory correction across our customers. Although we're disappointed with the reduced shipments during the quarter, We've continued to make progress on expanding the customer base for our millimeter wave products. Additionally, despite the headwinds in our business, we remain encouraged by the continued positive momentum Observed in the broader fixed wireless market, particularly as wireless Internet service providers or WISPs Expand deployments of multi gigabit connectivity in the unlicensed 60 gigahertz spectrum to a growing number of subscribers. Turning to Slide 5. As discussed in recent quarters, one of our primary strategies has been to leverage Piraza's historical success with a relatively small group of leading millimeter wave fixed wireless customers to meaningfully expand and diversify our existing customer base.

Speaker 2

As it turns out, the current inventory correction has only further emphasized the importance of increased customer diversification. With this fundamental objective top of mind, I want to provide an update on the engagement pipeline metrics that we introduced last quarter. As a reminder, due to certain prior constraints, we only began executing on the strategic initiative to the extent our commercial reach and broaden to extend our commercial reach and broaden the customer base in late 2022. This slide shows the progression of Piraza's pipeline of new business engagements Over just the past few months, not only has our combined number of funnel and active engagements increased from 75 at the time of our last conference call in May Total of 80 in mid August. But during this period, we also advanced several previous funnel opportunities to current active engagements.

Speaker 2

In addition to using these metrics internally to measure the projected economic value of our existing pipeline, they also view them as a Leading indicator of our progress towards achieving a broader and more diversified customer base. Moving to Slide 6, as demonstrated proof points of converting active pipeline engagements into a new customer adoption and expansion, Expanded commercial opportunities. I want to highlight a few of our recently announced customer wins. First, in June, we jointly announced the commercial production Tachyon Networks' new TNA 30X product family and leveraging Piraeus' prospective 60 gigahertz millimeter of antenna modules And you need point to point and point to multipoint capabilities for fixed wireless access applications. In July, together with Jaguar Wave, we announced the commercial production of its new Point to Point 6,15051 product family incorporating Piraza's millimeter wave technology, Also positioned as a point to point and point to multipoint solution for 60 gigahertz unlicensed fixed wireless access networks, This new Jaguar Wave product was specifically designed to target and withstand applications in harsh outdoor environments.

Speaker 2

And most recently, earlier this month, ZYNWEL, a leading Taiwan based manufacturer of consumer broadband and enterprise grade networking products, Launched its new 2.5 Gigabit Ethernet Bridge Radio Incorporating Paraza's X120 Chipset, designed as a solution to provide lower cost wireless connectivity between buildings and other geographical obstacles. This wireless networking bridge is Inmall's first 60 gigahertz enabled product And they chose Pirazzo's millimeter wave solution with our phased array antenna technology for its unique ability to cover overcome the challenges of fixed wireless applications in Advanced urban environments. Lastly, I want to acknowledge one of the potential customer transactions that was pending At the time of our last conference call, we continue to be actively engaged with this opportunity despite late taking longer than previously anticipated to formalize. This specific opportunity is envisioned by both parties to comprise of a multiphase co development agreement to create a customized solution for fixed Fixed Wireless Access Applications, with the customer then purchasing production volume units of the resulting product from Parrazzo, We remain optimistic and continue working towards a completed contractual agreement in the coming months. From a broader perspective, we continue to believe that Paraza is the market leader in 60 gigahertzmillimeter wave solutions for fixed wireless access.

Speaker 2

Given that a majority of the wireless ISPs or WISPs that utilize our millimeter wave technology don't buy directly from Parazo, We recently initiated an internal project to better understand where and how broadly our millimeter wave technology is being deployed by wisps across North America. On the left side of Slide 7 is a snapshot of our findings to date. This includes 15 of the WISPs we've identified as utilizing Paraza enabled hardware and a map of their collective geographical deployments. Based on third party market research, The impressive growth of wireless ISP subscribers in the United States is forecast to continue to grow through at least 2025. With our market leading millimeter wave technology and portfolio solutions for 60 gigahertz fixed wireless access, We are well positioned to further capitalize on this sizable market trend.

Speaker 2

Also, and although still in the earlier stages, I would add that we do have and are working on to expand current active engagements targeting planned geographical deployments outside of North America. Now turning to Slide 8. We continue to view 5 gs Mail Midway fixed wireless access as a massive and incremental market Over the medium term, although deployments in the mid band spectrum temporarily slowed down the urgency among carriers to aggressively pursue 5 gs millimeter wave, We've started seeing renewed interest and focus on the inevitable adoption of millimeter wave by carriers to maximize the bandwidth capacity. During the quarter, we achieved major milestone with PIRASA's announcement collaboration with P Semi, a subsidiary of Mirada And a recognized global leader in the development and integration of high performance RF solutions. This cooperation resulted in the Successful integration of Pirazzo's 5 gs millimeter wave beamformer IC and key synergies high performance up down converter to create a cost effective RF solution for 5 gs fixed wireless access customer premise equipment or CPE.

Speaker 2

This joint solution directly addresses one of the keys To unlock a broadband fixed wireless access adoption, which is the availability of a low cost customer terminal. We also demonstrated the integrated RF module Together with PCMA at the International Microwave Symposium in June, where it received strong interest and feedback from a combination of future prospective customers and partners. More generally, the ability of Piraeus' 5 gs beamformer to enable more cost effective solutions and faster deployments For both 5 gs CPE applications as well as 5 gs millimeter wave in the carrier market has contributed to a growing number of Switching gears to an update on our memory IC business. As discussed on our previous call, we have noticed customers We have notified customers of the end of life of our memory devices due to our foundry partner discontinuing the manufacturing process used to fabricate wafers for these products. We received initial forecast from our memory customers, which thus have been very encouraging.

Speaker 2

Based on these initial indications, we currently expect that customer purchase orders Last time by will be $15,000,000 to $20,000,000 The associated shipments and revenue are anticipated Possibly begin this year with the majority of POs being fulfilled throughout next year and potentially ending in 2025. Looking ahead, we remain focused on further expanding Piraza's leadership in millimeter wave fixed wireless. As shipments related to the end of life of our legacy memory products initially ramped and come to an end over the next handful of quarters, Our millimeter wave silicon will increasingly become the primary driver of our future business. The market opportunity for millimeter wave Both unlicensed 60 gigahertz and licensed 5 gs fixed wireless access is substantial and it continues to demonstrate growing momentum. In terms of our leading millimeter wave technology and product portfolio, we believe Pirazo is well positioned Today and with the future roadmap to meaningfully capitalize on our growth of the fixed wireless access market.

Speaker 2

That said, we also acknowledge the headwinds we're facing today in our business, including an extended industry wide inventory correction As well as general uncertainty related to the current macro environment macroeconomic environment. Specific to our balance sheet, We are pursuing a wide variety of potential funding arrangements to address the company's short term cash needs and the working capital necessary to support existing operations. At the same time, we're conserving cash by delaying or deferring certain expenditures. In addition, we recently engaged an investment bank to assist with exploring potential options alternatives, which could include a potential M and A, the sale of certain assets or other similar transactions. We believe it's prudent given the circumstances to connect this exploration process in order to identify 1 or more potential alternative path forward.

Speaker 2

That said, we expect any strategic alternatives as well as the optimal path forward will take additional time to fully materialize. Finally, I want to emphasize that our team's near term focus is on day to day operation of the business. This includes continuing to advance our Active engagements to drive renewed and more predictable revenue growth as well as expanding our pipeline of prospective engagements in support of establishing a more diversified customer base. That concludes our prepared remarks, and we would be glad to take a few questions. Operator, Could you please assist with the Q and A session?

Operator

Certainly. At this time, we will be conducting a question and answer session. And one moment please while we poll for questions. The first question today is coming from Kevin Liu from K. Liu and

Speaker 3

Announcements on the 60 gigahertz side of things. So I was hoping you could give us a little bit of an update on kind of the competitive landscape out there. Who are you beating in some of these transactions? Why do you think you're being so successful within the market? As you look towards the next few quarters here, how much more of your pipeline would you expect to convert into production customers?

Speaker 2

Well, thank you very much, Kevin, for joining in today, and I appreciate the question. Well, In my humble opinion, I mean, our position on 60 gigahertz is very strong competitively. I mean, we've had historically Qualcomm And a company in Sweden called Sivers, Renish's combination, I mean, we As you know, our lead customer is kind of the leader in the field of Ubiquiti. We've got several product design wins there. We have a key feature with compared to Qualcomm, which is we support a wider frequency range, and that's Kind of a showstopper in terms of from a competitive perspective.

Speaker 2

So that's really kind of the main reason we're winning business. My guess is we will just continue to do so. I'm very optimistic in terms of our pipeline, in terms of closing deals and really Marching towards a very, very significant market share in 60 gigahertz. In terms of what we are converting, I mean, we would we've announced Yes, it's redesign wins, I guess, over the last month or 2. We just really believe we're going to continue to announce those design wins.

Speaker 2

And I just I hope that this clear message we're getting out there today is, yes, there has been an inventory correction, but obviously, We're particularly exposed with very concentrated customer base and our key objective here is to fix that problem. I think we're making good progress to do that in 60 gigahertz and we will continue I'm very optimistic in terms of our ability to And really get to this diversified customer base that will really help us To overcome these inventory corrections in the future.

Speaker 3

Understood. And just on the topic of inventory correction, How far along in the cycle do you think you guys are at this point? For instance, do you expect it to commute throughout the back half of Year or with some of the new wins, be able to allow you to offset that and start to show more sequential growth towards the back half?

Speaker 2

That's a good question. I mean, I will not I'm pretty sure realistically that Q4 is when we're going to really start to see those come back on Like 2 vectors there. One vector is existing customers, but the next vector is new customers. So really we're targeting Q4. And I think in terms of just overall when you look at the big picture, we started really when Mark came on board late last year.

Speaker 2

Normally, it really takes a good year to get people in production. So I'm confident we'll see New design win announcements every quarter, but really I think Q4 is a quarter we're going to start to see really that shift start.

Speaker 3

That's helpful. And then just on the memory side of the business, I wanted to clarify the $15,000,000 to $20,000,000 in orders that you guys are talking about now, Is that kind of the full amount you expect through the end of life? Or is that just the initial indication and you could see more potentially come in? And then the other part of the question is just with some of these expected orders in hand, can you talk about any sort of upfront deposits or cash That you may receive from these customers related to these orders?

Speaker 2

I'll take the first part of that and then we'll give it to Jim to answer The financial part, but no, that's our the 15 to 20 is kind of lifetime and it's going to be over the course of We expect it to start in 2023, the bulk of it in 2024 and then some residual in 2025. But In terms of some of the specific financial arrangements, maybe Jim, you could speak to what we're looking at there?

Speaker 1

Yes. No, the $15,000,000 to $20,000,000 is specifically EOL. We still have a backlog of production orders From the primary customers, but given the inventory correction and we had seen this coming on the memory side given Our lead times, we kind of had could tell that Q3 was going to be a dip from memory, but the 15% to 20% comprises what I see from the EOL, fingers crossed, it's higher, but we're obviously pretty comfortable with that number to put it out there. There's still another, I'll just say $1,500,000 plus of orders sitting on the backlog. And given this pervasive Inventory correction, we've seen them push out.

Speaker 1

We're possible. A lot of these are through our larger customers, contract manufacturers and The algorithm splits push out. So, I think that answers your question on quantifications. Obviously, we announced this in May. It's a tough market out there with the inventory correction.

Speaker 1

So the customers have definitely had Yes. Some concerns over kind of when they're trying to manage their own inventory, putting up orders and prepayments. So like anything, it's taking a little bit longer to round those up. But As one I think I mentioned in my script, Dylan just reiterated, we are expecting orders to start moving Here as early as here in the Q3. But that's taken a little bit longer Been planned as far as getting the orders in hand and then addressing the upfront, not surprising.

Speaker 1

It's We're not the only ones doing an NOI, probably in the case it was forced by our supplier. But there's enough of these going on and it's tough to get folks We don't issue orders right now.

Speaker 3

Understood, Heather. Thanks for taking the questions. I'll get back in queue.

Speaker 1

Thanks, Kevin.

Speaker 2

Thank you, Kevin. Thank you.

Operator

And the next question is coming from David Williams from Benchmark. David, your line is live.

Speaker 4

Hey, good afternoon, gentlemen, and congrats on navigating a challenging macro here.

Speaker 2

Thanks, Dave.

Speaker 1

I think I jumped on

Speaker 4

the call a little bit late, So forgive me if I ask something that's already been asked. But one, I wanted to touch on maybe just from a larger kind of a T Mobile type thinking, but your T Mobile, they've been very enthusiastic about the growth of their fixed wireless access customer base. And I certainly understand the differentiation between those and what you're Just kind of where they're operating. But it feels like we should start to see some pull in over time, as they transition in a limited way, just kind of given the Spectrum constraints, can you maybe talk a little bit about what you're seeing from the service provider side and maybe the operators? And just are you seeing any movement there, any traction and maybe what are you thinking

Speaker 2

Well, thanks, Dave, for that question. Well, actually, the kind of the news I would say the news of the day in millimeter wave is that Reliance Jio in India has announced rolling out they've done completed all their testing and are rolling out 26 Gigahertz Milliman wave in 22 Cities in India. So I really think that's One of the most important opportunities in the market right now. So it's great to see. And I think India is a special case because Fiber is very difficult to run there and there's other factors that make wireless more compelling.

Speaker 2

So we're pleased to see that there's, I think very serious traction there in terms of 26 millimeter wave. I think in America, We're seeing this like the slow steady increase of millimeter wave, but I just continue we continue To believe in our thesis, which is that the very expensive Mid band or even sub-six gigahertz spectrum for the carrier such as T Mobile and by the way, T Mobile has now Started to deploy some millimeter wave for exactly that reason. I mean, they've actually increased their fixed wireless rates, by the way, over the Last few weeks and it's because they really are, we believe, running out of spectrum And that will be the real transition to the limited wave as they need to really utilize that spectrum For their mobile customers and put their fixed wireless customers on fixed wireless, like in terms of timing for that one, Dave, it's a bit more difficult and we believe it's going to be More of a kind of 12 to 18 month situation, but we do believe that the thesis is valid, which is That the expensive mid band, low band spectrum is getting used by the carrier customers.

Speaker 2

The carrier customers are much more lucrative and we're going to see that shift the millimeter wave For fixed wireless with T Mobile and the Verizons and the AT and Ts. Does that answer your question?

Speaker 4

Yes, yes. Very helpful. Thank you. And if you kind of look out across your customers and your engagements now, is Transition from just a simple design into an actual revenue producing product on the shelf?

Speaker 2

Yes. That's an important question. I mean, I would Say right now, so we have, of course, 2 different markets. We have the 60 gigahertz market and the 5 gs fixed wireless market. On the 60 gigahertz side, we control the entire system.

Speaker 2

We have the baseband, we have the antenna, we have the radio, We have modules. It really and this is actually real time information. I mean, we're really looking, I think, at a Best case of 6 months, realistic case of like 6 to 9 months. 6 to 9 months would be best case. But really, I think we're down to 9 months just because we've also by the way, we have a very, very strong manufacturing partner with a company called 8 Devices In Europe, there and we've also got some Jaguar Wave as a manufacturing partner in China.

Speaker 2

But having these manufacturing parts is so critical in terms of time to market. They're just very these guys are specialized in how to build millimeter wave products. Obviously, our module products accelerate time to market. So I think we've got, let's call it, 9 months From engagement to full deployment on the millimeter wave, 5 gs is frankly longer just because it's 5 gs, It's carrier oriented. I would say that's more of a 12 to 18 month cycle from kind of design start to production.

Speaker 2

Just because it's a more complex product, the carriers do a lot more testing, we don't control the whole process. We're working with baseband partners. So I think realistically, you're looking at 12 to 18 months on a 5 gs moon wave design.

Speaker 4

Okay, great. And then if you can ask where your enthusiasm lies in terms of Just what you're seeing or maybe what's improved over the last quarter relative to your prior quarter, What would you say has you most upbeat and what is maybe not moving along as well as you would have expected?

Speaker 2

I would say 2 points there. Again, so if you I don't know if you saw the slide presentation, Dave, but there was a slide that was showing the carriers that are picking up with the WISPs So we've got there's at least 15, but every quarter we're going to update that slide. And what's really driving that business is we're really driving our like the price So right now it's $200 We believe that we can get it below $150 So, and on top of that, we provide gigabit solutions. So now these risks can go to the customers and By the way, I can provide you for very, very cost effective price, 1 gigabit solution, these people. So it's actually quite phenomenal.

Speaker 2

So I'm always a big believer I've always been a big believer in reference accounts. I I mean, these risks really primarily communicate through chat, you can go to any chat group and you see very, very positive Momentum and very positive support for 60 gig, not only 60 gig, but 60 gig based on Ferrazzo specifically. We're kind of all in on the West market, and I think you're really going to see that chart grow, Not just in North America, by the way, on a worldwide basis. The other point I'd like to make, Dave, on that on the 60 gigahertz side of things is, We're actually starting to see like a lot of the business we were seeing was more outside the city, rural, suburban. But now we're seeing real traction in what we call dense urban environment.

Speaker 2

So this is really a great Great situation for 60 gigahertz because traditional Wi Fi is a very as you know, a very broad signal, But it's very difficult to isolate a network. And now with our technology, we can address dense urban opportunities With our beamforming technology to really provide services within a city as opposed to outline areas, We're seeing some momentum there as well. So that's been great progress. I think the 5 gs side of things is definitely taking longer, but Than we'd hoped, frankly. I think this announcement in India today was significant.

Speaker 2

I mean, it's a very Significant amount of customers that they're addressing, but we're just really kind of standing by on the 5 gs side of things To really see the meaningful momentum there. So we've taken kind of an opportunistic approach from an R and D perspective and For perspective, we're pretty focused on 60 gig, but obviously, we're ready if 5 gs takes off, but 5 gs millimeter away. But as Kevin asked earlier, the Timing on that is still a

Speaker 4

bit unclear. Okay. Very helpful there. And then just Maybe lastly for Jim, if you kind of think about and I'm sure you touched on this on the call and I may have missed it, but can you just talk about the balance sheet and kind of the puts and takes there? What you may be working on and just kind of how we should think about the cash flow and balance sheet for the next few quarters?

Speaker 1

Yes. So as I mentioned in the script in the prepared remarks, we have a couple of transactions that have been Looming out there, certainly the current environment has not helped bringing those to closure, but they are still alive and in play. I think right now, we're looking at the more possibly one in September, the other one in Q4. So those are kind of out there in play. We are I think as I answered in response to Yes.

Speaker 1

One of Kevin's questions and I think as Ron highlighted in his prepared remarks, we're pleased with Yes. The initial forecast orders from the customers that have come in on the memory side and to me, I've been on a few of those calls supporting our Chief Revenue Officer, and particularly I have relationships with one of the customers going back a while. It's a timing thing of how we kind of manage this. Obviously, in this environment, We're a component for a product line of a much larger organization and they're Dealing with mandates not to put more purchase commitments on the books, cut down inventory, etcetera, and we're looking for them to go the other way. Do You know what I mean?

Speaker 1

Yes, someone upstream on that regard. So it's really kind of managing the timing on that. And I think We're working through it. As I said, as I said, we expect to start making some initial shipments Yes, this quarter, but yes, we are in alert to funding opportunities. We obviously did our financing there in early June, as I cited.

Speaker 1

So we're continuing to kind of manage that. But from the positive side, we do have deals we're working. The EOL is A highly profitable albeit 1 and done over the next, let's call it, longest case, call it 2 years. But we're talking even just taking the low end of the range, dollars 15,000,000 of revenue. As I said in response to Kevin, we still have regular production.

Speaker 1

That's That's 65% to 70% gross margin. We just need to get navigate some timing And start moving that product out and then that will certainly assist our balance sheet.

Speaker 4

Okay. Are there places, brokers or distribution networks that typically hold in some of this end of life Type of components, is that an opportunity or do you think they're willing to carry a little more and maybe bridge to when some of your larger customers may begin to place those orders?

Speaker 1

We're having those we have it's a good question. And there is some opportunity there. We have had Some discussions, but one of the challenges is you're a middle pardon the use of that, maybe it's a Middleman is a historic term there and it can complicate negotiations, etcetera. And the person in the middle Once a piece of the pie, which maybe doesn't benefit either of us, but we're looking at those opportunities as a way for The customer to get it taken care of, but not have the metrics, but Still in play. Also, obviously, a slower time of the year to be catching people, people on vacation, etcetera, This summer after, I think, is the 1st kind of full summer, we're seeing a lot of people with what's happened post pandemic, etcetera.

Speaker 1

So, Yes. So we are exploring those opportunities as well.

Speaker 4

Okay. All right. Very good. And one more, if I may, here. Just kind of Looking out on the demand trends, clearly what these products are going into, we'll have a return to growth at some point if you start seeing carrier CapEx or telco CapEx begin to Do you think that that's an early 2024?

Speaker 4

Are you getting any indications on what those are kind of thinking about your backlog and just where the inventory is? And then is there a sense of how much excess in Channel Now to be burned through before you start seeing orders accelerate?

Speaker 1

Unfortunately, most parties won't share their inventory levels. So they're not giving you the visibility. You think like, hey, what's the big deal to show me what you got, but they don't do that. I'll let Ron send like even frame the answer there.

Speaker 2

Well, no, I think we did mention on the call and we're thinking Q4 is when we're going to start to see that and into Q1, right? So I mean, we definitely there's a combination of things, not just well, when we say inventory correction, it's not Yes. I mean, one of the issues was that because of the long lead times, people were just ordering too much, right? So, yes, we expect to see that

Speaker 4

Okay. All right. Very good. Certainly appreciate it. Thanks so much for the color gentlemen and looking forward to seeing the progress.

Speaker 1

Thanks, David.

Speaker 2

Our pleasure.

Operator

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

Speaker 2

Thank you.

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Key Takeaways

  • Total revenue fell to $2.4 M in Q2 2023 from $5 M in Q1 and $4.3 M a year ago, as inventory correction led to lower shipments of millimeter-wave and memory IC products.
  • Non-GAAP gross margin was 45.9% in Q2, up from 45.4% in Q1 and 43% last year, driven by a favorable product mix, but still below the long-term ~50% target.
  • Q2 non-GAAP net loss widened to $3.0 M ($0.12 per share) from $2.0 M ($0.09) in Q1, and cash on hand of $2.7 M will require the company to secure additional capital to fund operations.
  • The millimeter-wave pipeline expanded from 75 to 80 engagements since May, with new design wins announced alongside Tachyon, Jaguar Wave and Zynwel for 60 GHz fixed-wireless products.
  • Memory IC end-of-life shipments are expected to generate $15–20 M in orders from 2023 through 2025, providing a one-time revenue boost as legacy products wind down.
AI Generated. May Contain Errors.
Earnings Conference Call
Peraso Q2 2023
00:00 / 00:00