Peraso Inc. (NASDAQ:PRSO) is a fabless semiconductor company specializing in the development of millimeter wave (mmWave) wireless technology. The company derives revenue from selling its semiconductor devices and modules, as well as performing non-recurring engineering services. Peraso also manufactures and sells high-performance memory semiconductor devices and receives royalties from licensees of its memory technology.

Financials

In 2023, Peraso reported annual revenue of $13.7 million and a net loss of $16.8 million. The company's annual operating cash flow was negative $4.7 million, and its annual free cash flow was negative $4.8 million. These financial results reflect Peraso's ongoing investments in the development and commercialization of its mmWave products, as well as the end-of-life (EOL) of its memory IC product line.

For the first quarter of 2024, Peraso reported total net revenue of $2.8 million, which was above the midpoint of the company's guidance. Product revenue, which includes sales of memory ICs and mmWave ICs and modules, was $2.7 million, while royalty and other revenue was $0.1 million. The company's GAAP gross margin increased to 46.4% in the first quarter, up from negative 147.3% in the prior quarter, which was impacted by a $3 million inventory write-down. On a non-GAAP basis, Peraso's gross margin was 66.4% in the first quarter of 2024, compared to negative 116.6% in the prior quarter and 45.4% in the first quarter of 2023.

The improvement in Peraso's gross margin was primarily attributable to increased revenue contribution from the company's memory IC products. During the first quarter, Peraso shipped $2.4 million worth of memory ICs against its backlog of EOL orders, and the company received an additional $2.9 million in EOL orders late in the quarter, increasing its total remaining purchase order backlog to approximately $12.6 million as of March 31, 2024. Peraso expects to fulfill this memory IC backlog by the end of the first quarter of 2025, which will provide meaningful revenue and cash flow to support the continued execution of the company's growth initiatives in its mmWave business.

Business Overview

Peraso's strategic focus remains on building a larger and more diversified customer base for its mmWave products, both from a geographical perspective and in terms of end-market applications. The company has made progress on this front, securing several notable design wins and customer engagements in recent months.

Recent Developments

In April 2024, Peraso announced that Panasonic had adopted the company's X710 mmWave chipset in its newly introduced 60 GHz WLAN solution. This was a significant win for Peraso, as Panasonic's wireless LAN solution delivers high-speed, low-latency communications equivalent to wired LAN performance over distances of hundreds of meters, leveraging the interference-free 60 GHz unlicensed band and Peraso's narrow beam directional antenna control.

Peraso has also made inroads in other mmWave applications, including:

• Enabling a 60 GHz mmWave radio system for high-speed train-to-station communications in a Chinese rail system, utilizing the company's X720 chipset.

• Shipping proof-of-concept units of its DUNE platform, a Dense Urban Network Environment solution for fixed wireless access, to multiple wireless internet service providers (WISPs) in Africa.
• Securing a new fixed wireless product line with Miliwave, a South Korean equipment manufacturer, using Peraso's X720 chipset.
• Introducing new mmWave solutions for battlefield communications in defense applications, leveraging the technology's inherent stealthiness and low probability of interception.

These examples demonstrate Peraso's progress in expanding its mmWave market reach both geographically and by application. The company believes the 60 GHz unlicensed band provides significant opportunities in fixed wireless access, particularly in dense urban environments, as well as in defense and consumer electronics applications.

Outlook

Looking ahead, Peraso expects total net revenue for the second quarter of 2024 to be in the range of $3.7 million to $4 million, driven by continued shipments of memory ICs against its backlog and incremental ramp-up of its mmWave solutions with new and existing customers.

Risks and Challenges

While Peraso continues to face challenges in its mmWave business, including inventory corrections and supply chain disruptions, the company is encouraged by the progress it has made in diversifying its customer base and expanding its market reach.

Conclusion

The company's focus on 60 GHz mmWave technology, combined with the meaningful revenue and cash flow from its memory IC EOL shipments, positions Peraso for potential growth in 2024 and beyond.