Peraso Inc. is a fabless semiconductor company that has established itself as a global leader in the development and commercialization of millimeter wave (mmWave) wireless technology solutions. Founded in 1991 and reincorporated in Delaware in 2000, the company has a rich history of innovation, navigating the evolving landscape of the semiconductor industry with a steadfast focus on delivering cutting-edge products and services.
Company History and Evolution
The company's origins can be traced back to its initial focus on the development of high-performance memory semiconductor devices. Originally known as MoSys, Inc., Peraso started as a fabless semiconductor company specializing in high-performance memory semiconductor devices for various markets. In its early years, the company derived revenue from selling semiconductor devices and receiving royalties from licensees of its memory technology. This foundation in memory technology would later inform the company's transition into the millimeter wave sector.
In September 2021, Peraso entered into an Arrangement Agreement to acquire Peraso Technologies Inc., a corporation based in Ontario, Canada. This acquisition was completed in December 2021, marking a significant turning point for the company. Following the acquisition, MoSys, Inc. changed its name to Peraso Inc. and began trading on the Nasdaq Stock Market under the symbol PRSO. Interestingly, for accounting purposes, Peraso Technologies was treated as the accounting acquirer, with Peraso Inc. (formerly MoSys) as the legal parent being treated as the accounting acquiree. This strategic move effectively pivoted the company's core business towards the burgeoning millimeter wave technology market.
Business Objectives and Expertise
Peraso's primary business objective is to establish itself as a profitable, IP-rich fabless semiconductor company, offering integrated circuits, antenna modules, and related non-recurring engineering services. The company's expertise lies in the development of mmWave semiconductors, primarily in the unlicensed 60 GHz spectrum band for 802.11ay-compliant devices and in the 28-39 GHz spectrum bands for 5G-compliant devices.
Financials and Liquidity
The company's financial performance has been marked by recurring challenges, as evidenced by its net losses of approximately $6.5 million for the six months ended June 30, 2024, and $16.8 million for the year ended December 31, 2023. These losses have resulted in significant negative cash flows, requiring the company to raise substantial amounts of additional capital through various equity and debt financing arrangements.
For the fiscal year 2023, Peraso reported revenue of $13.75 million, with a net income of -$16.80 million. The company's operating cash flow (OCF) was -$4.69 million, and free cash flow (FCF) stood at -$4.78 million.
In the most recent quarter (Q2 2024), Peraso's revenue reached $4.24 million, representing a significant increase of over 70% year-over-year. This growth was primarily driven by increased shipments of the company's end-of-life memory IC products and initial production orders for its millimeter-wave antenna modules. However, the company still reported a net income of -$4.42 million for the quarter, with an OCF and FCF of -$0.66 million each.
Peraso's liquidity position as of June 30, 2024, showed cash and cash equivalents of $1.87 million. The company's debt-to-equity ratio stood at 0.14, with a current ratio of 1.20 and a quick ratio of 0.74. It's worth noting that Peraso does not have any disclosed available credit lines.
In terms of geographic revenue distribution, the United States accounted for 78% of total revenue in Q2 2024, followed by Hong Kong (10%) and Taiwan (4%).
Innovation and Product Portfolio
Despite these financial headwinds, Peraso has remained steadfast in its commitment to innovation. The company has pioneered a high-volume mmWave IC production test methodology using standard, low-cost production test equipment, placing it in a leadership position in addressing the operational challenges of delivering mmWave products into high-volume markets. Additionally, Peraso manufactures and sells complete mmWave antenna modules, providing customers with the advantage of integrated mmWave ICs and antennas in a single device.
Peraso's product portfolio is divided into two main segments:
1. Memory IC Products: This segment includes the Bandwidth Engine IC products, which integrate the company's proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol. However, the company has recently initiated an end-of-life (EOL) process for these memory IC products, as its sole foundry, Taiwan Semiconductor Manufacturing Corporation (TSMC), has informed Peraso of its decision to discontinue the foundry process used to produce the necessary wafers. As of June 30, 2024, Peraso had a non-cancelable purchase order backlog of $9.1 million for its memory IC products and expects to complete final shipments by March 31, 2025.
2. mmWave Products: This segment focuses on the development of millimeter wave semiconductors, primarily in the unlicensed 60 GHz spectrum band for 802.11ad-compliant devices and in the 28-39 GHz spectrum bands for 5G-compliant devices. Peraso derives revenue from selling its mmWave integrated circuits (ICs) and complete mmWave antenna modules.
Challenges and Strategic Initiatives
The company's financial position has been further strained by the discontinuation of its memory IC products, which represented over 60% of its revenues for the year ended December 31, 2023, and over 80% of its revenues for the six months ended June 30, 2024. This development has had a significant impact on the company's future revenues, gross margins, results of operations, and cash flows.
In an effort to address these challenges, Peraso implemented a series of cost-reduction initiatives in 2023, including a temporary layoff and the termination of certain consulting positions. These actions resulted in severance charges of approximately $446,000 for the six months ended June 30, 2024, as well as charges of $1.6 million for non-cancelable software license obligations.
On November 7, 2023, Peraso implemented a reduction in force, including a temporary layoff and termination of certain consulting positions, to reduce operating expenses and cash burn. As a result, the company recorded severance charges of $0.42 million and $1.62 million in charges for non-cancelable software license obligations during Q2 2024.
Market Expansion and Customer Engagement
Despite these setbacks, Peraso remains focused on expanding its market reach and diversifying its customer base for its millimeter wave business. The company has reported a growing pipeline of customer engagements for its mmWave solutions, with 95 total engagements at the end of July 2024, representing a more than 25% increase compared to the same period last year.
Peraso's millimeter wave product offerings have garnered significant attention, particularly in the rapidly growing fixed wireless access (FWA) market. The company's DUNE platform, a dense urban network environment solution for FWA, has secured a volume production order from a South African service provider, marking a significant commercial validation of Peraso's technology and its ability to deliver reliable and high-speed network access in densely populated areas.
Moreover, the company has seen increased interest in its millimeter wave technology from the military and defense sectors, where its phased-array technology and pencil-beam capabilities provide unique advantages in terms of low probability of detection and stealth operations.
The company believes it is well-positioned to potentially benefit from the U.S. government's BEAD program, which is expected to provide $42.45 billion in funding to support broadband access, including potentially making funding eligible for the deployment of high-speed internet using unlicensed spectrum fixed wireless access technologies like mmWave.
Future Prospects and Risks
Looking ahead, Peraso's financial performance and growth prospects are closely tied to its ability to successfully navigate the discontinuation of its memory IC products and drive increased adoption of its millimeter wave solutions. The company's management remains optimistic about the potential for its mmWave business, particularly in the areas of fixed wireless access and military/defense applications.
For Q3 2024, Peraso currently expects total net revenue to be in the range of $3.8 million to $4.2 million. The company also expects total revenue for the second half of 2024 to increase over the first half of the year, while also representing revenue growth year-over-year. It's worth noting that Peraso's actual Q2 2024 total revenue of $4.2 million exceeded the high end of its original guidance range for that quarter.
However, Peraso's future success is not without its risks. The company faces intense competition in the semiconductor industry, as well as challenges associated with rapidly changing customer requirements, limited operating history, and the volatility of public markets. Additionally, the company's ability to access capital markets and secure additional funding on favorable terms will be crucial in determining its long-term viability.
Conclusion
In conclusion, Peraso Inc. is a pioneering force in the millimeter wave wireless technology space, with a rich history of innovation and a steadfast commitment to delivering cutting-edge products and services. Despite the financial challenges it has faced, the company remains focused on expanding its customer base, diversifying its revenue streams, and capitalizing on the growing demand for its mmWave solutions in key market segments. As Peraso navigates the complexities of the semiconductor industry, its ability to overcome the discontinuation of its memory IC products and successfully execute its millimeter wave growth strategy will be crucial in determining its long-term success and shareholder value.