Business Overview and History
Peraso Inc. (NASDAQ:PRSO) is a pioneering fabless semiconductor company specializing in the development of innovative millimeter wave (mmWave) wireless technology solutions. The company's mission is to revolutionize the way the world connects by delivering high-performance, cost-effective mmWave ICs and modules that enable secure, ultra-fast, and low-latency wireless communications.
Peraso's journey began in 1991 when it was incorporated in California as MoSys, Inc., a memory semiconductor company. In 2000, the company reincorporated in Delaware. MoSys initially focused on developing and selling high-performance memory semiconductor devices for various markets. The company's product line included Bandwidth Engine IC products, which integrated proprietary 1T-SRAM high-density embedded memory and an efficient serial interface protocol.
In September 2021, MoSys entered into an Arrangement Agreement to acquire Peraso Technologies Inc., a Canadian corporation specializing in mmWave technology. The acquisition was completed in December 2021, marking a significant turning point for the company. Following the transaction, MoSys changed its name to Peraso Inc. and began trading on the Nasdaq Stock Market under the symbol PRSO. For accounting purposes, Peraso Technologies was treated as the accounting acquirer, while the former MoSys business was considered the accounting acquiree.
This strategic acquisition shifted the company's focus towards becoming a leading player in the rapidly growing mmWave market. Peraso's business model evolved to derive revenue from selling semiconductor devices and modules, as well as performing non-recurring engineering services. The company had developed a pioneering high-volume mmWave IC production test methodology using standard, low-cost production test equipment, positioning itself as a leader in addressing operational challenges of delivering mmWave products to high-volume markets.
In May 2023, Peraso announced the end-of-life for its legacy memory IC products due to the discontinuation of the necessary manufacturing process by the sole foundry producing the required wafers. This decision further solidified the company's commitment to its mmWave technology focus.
Peraso's product portfolio includes a range of mmWave integrated circuits and antenna modules designed for diverse applications, including fixed wireless access (FWA), 5G networks, and mission-critical military communications. The company's proprietary IC design and advanced beamforming capabilities have allowed it to overcome key technical challenges in the mmWave space, such as efficient high-volume production testing and seamless integration of RF amplifiers and antennas.
Financial Snapshot
For the fiscal year ended December 31, 2023, Peraso reported total revenue of $13.75 million, a 7.7% decrease from the prior year. Net loss for the year was $16.80 million, compared to a net loss of $32.40 million in 2022. The company's cash and cash equivalents stood at $1.58 million as of December 31, 2023, down from $5.89 million at the end of 2021.
For the third quarter of 2024, Peraso reported revenue of $3.84 million, representing a 14.4% decrease year-over-year. The net loss for the quarter was $2.71 million. The decrease in revenue was primarily attributed to reduced shipments of mmWave ICs and antenna modules, partially offset by increased shipments of memory IC products.
Peraso's financial performance has been impacted by the ongoing global supply chain challenges and macroeconomic uncertainties, which have affected both its mmWave and legacy memory product lines. The company has been proactively implementing cost-cutting measures, including headcount reductions, to align its operations with the current market environment.
Liquidity
As of September 30, 2024, Peraso's cash and cash equivalents stood at $1.32 million, reflecting a significant decrease from $5.89 million at the end of 2021. This reduction in liquidity highlights the company's need to carefully manage its financial resources and explore potential funding options to support its ongoing operations and growth initiatives.
The company's debt-to-equity ratio was 0.20 as of September 30, 2024. The current ratio stood at 1.08, while the quick ratio was 0.56, indicating potential challenges in meeting short-term obligations.
Peraso has incurred substantial net losses, with an accumulated deficit of $175.6 million as of September 30, 2024. These losses have necessitated raising additional capital to finance operations. The company will need to significantly increase revenues from its mmWave products to generate sustainable operating profits and cash flows without requiring further capital raises.
Product Segments
Peraso operates in two primary product segments: Memory ICs and mmWave ICs and Modules.
1. Memory ICs: This segment integrates Peraso's proprietary 1T-SRAM high-density embedded memory with an efficient serial interface protocol, resulting in optimized memory bandwidth and transaction access performance. Memory IC products represented over 60% of Peraso's revenues for the year ended December 31, 2023, and over 80% of revenues for the nine months ended September 30, 2024. However, due to the discontinuation of the necessary foundry process by TSMC, Peraso initiated an end-of-life process for these products in May 2023. As of September 30, 2024, the company had a non-cancelable purchase order backlog of $5.7 million for memory ICs, expected to be fulfilled by March 31, 2025.
2. mmWave ICs and Modules: This segment focuses on developing mmWave 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. For the nine months ended September 30, 2024, mmWave ICs and modules represented $3.69 million, or 40%, of total net revenue of $10.89 million, compared to $2.89 million, or 24%, of $11.92 million in total net revenue for the same period in 2023. The company expects sales of mmWave products to increase over the next 12 months as production shipments to new customers commence.
Operational Highlights and Strategic Initiatives
Despite the challenges, Peraso has made significant progress in expanding its customer engagements and design win pipeline for its mmWave solutions. As of September 30, 2024, the company had 82 active customer engagements, with 23 in advanced design and evaluation stages. Peraso has successfully converted 9 prior design engagements into production wins with customers.
The company's innovative mmWave technologies have gained traction in several key market segments:
1. Fixed Wireless Access (FWA): Peraso's Perspectus mmWave modules and DUNE platform are enabling wireless internet service providers (WISPs) to deploy high-speed, low-latency connectivity in dense urban environments. The company has secured several orders from WISPs in Africa and Asia, with a recent $1.4 million follow-on order from a prominent South African WISP.
2. Tactical Military Communications: Peraso's 60 GHz mmWave technology has proven to be well-suited for mission-critical military applications, providing secure, high-speed data transfer and stealth communication capabilities. The company recently announced a significant purchase order from a military customer for its Perspectus module products.
3. Transportation: Peraso's High-Velocity Roaming (HVR) technology is designed to provide uninterrupted high-speed internet connectivity to passengers on fast-moving trains and subways. The company has received an initial purchase order for this application in South Korea.
Geographic Performance
While Peraso does not provide detailed breakdowns of performance by geographic market in its filings, it appears that the majority of revenue is generated in the United States. The company also reports international sales to Hong Kong, Taiwan, and other global markets.
Guidance and Future Outlook
For the fourth quarter of 2024, Peraso expects total net revenue to be in the range of $3.6 million to $4 million. The company anticipates that its meaningful backlog of non-cancelable purchase orders for end-of-life memory IC products will contribute to revenue in the near term.
Peraso is optimistic about converting its robust pipeline of 82 customer engagements for millimeter-wave solutions into production orders, with expectations for this to begin in Q1 2025. The company anticipates total revenue for the second half of 2024 to increase over the first half and represent double-digit growth compared to the prior year period.
Looking Ahead
As Peraso navigates the current macroeconomic landscape, the company remains focused on expanding its customer base, converting design engagements into production wins, and driving the adoption of its mmWave solutions across a diverse range of end markets. The company's innovative technology, strategic partnerships, and ongoing cost-optimization efforts position it well to capitalize on the growing demand for high-speed, low-latency wireless connectivity.
Despite the challenges, including the discontinuation of its memory IC products and the need to significantly increase revenues from mmWave products, Peraso's management team is confident in the long-term growth prospects of the business. The company's pipeline of design wins, coupled with the increasing global adoption of mmWave technology, suggest that Peraso is poised to play a pivotal role in shaping the future of wireless communications.
However, Peraso faces risks from intense competition, financing and liquidity challenges, rapidly changing customer requirements, limited operating history in the mmWave market, and the volatility of public markets. The company's ability to successfully transition from its legacy memory business to a focus on mmWave technology will be crucial for its future success and financial stability.