10-K: Peraso Inc. Reports 2023 Annual Results, Navigates Memory Product Discontinuation

Peraso Inc.'s 2023 annual report details a year of strategic shifts, including the end-of-life of its memory products and a focus on mmWave technology, alongside financial challenges and a need for additional capital.

Summary

• Peraso Inc., a fabless semiconductor company, released its 2023 annual report, highlighting a transition from memory products to mmWave technology.
• The company experienced a net loss of $16.8 million in 2023, compared to a $32.4 million loss in 2022, and has an accumulated deficit of $166.4 million.
• A significant portion of the company's revenue, over 60% in 2023, came from memory IC products, which are being discontinued due to a supplier issue.
• The company is focusing on mmWave technology, including both licensed and unlicensed applications, with a particular emphasis on fixed wireless access (FWA) and military communications.
• Peraso has secured $14 million in end-of-life purchase orders for its memory products, with $3.7 million shipped in 2023 and the remainder expected through 2024.
• The company's gross profit decreased to $1.87 million in 2023 from $5.95 million in 2022, primarily due to inventory write-downs and reduced mmWave product shipments.
• Research and development expenses decreased to $14.4 million in 2023 from $19.8 million in 2022 due to cost reductions.
• The company's cash and cash equivalents stood at $1.6 million as of December 31, 2023, and it raised approximately $3.4 million in a public offering in February 2024.
• Peraso acknowledges the need to raise additional capital and achieve sustainable revenues to continue as a going concern.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there are positives such as the company's technology and market position, the financial challenges, the discontinuation of a major product line, and the need for additional capital raise significant concerns. The overall sentiment is cautiously negative.

Positives

• The company is a leading supplier of semiconductors in the mmWave point-to-point and point-to-multipoint markets.
• Peraso has developed a high-volume mmWave production test methodology using standard low-cost equipment.
• The company has a strong intellectual property portfolio with 96 US patents and 67 foreign patents.
• Peraso has a collaboration with pSemi for the development of a 5G customer premise receiver.
• The company has a proof-of-concept license and technology development contract for mmWave-based military communications.
• The company has a proprietary user arbitration protocol called DUNE to optimize network performance in dense urban environments.

Negatives

• The discontinuation of memory IC products will negatively impact future revenues, results of operations, and cash flows.
• The company has a history of losses and will need to raise additional capital.
• The company's revenue is highly concentrated among a small number of customers.
• The company relies on third-party vendors for manufacturing, assembly, and testing.
• The company's products have a lengthy sales cycle, making it difficult to predict future revenue.
• The semiconductor industry is cyclical and subject to periodic downturns.
• The company has experienced disruptions in its global semiconductor supply chain.
• The company may not be able to achieve the intended cost savings from workforce reductions.

Risks

• The company may not be able to continue as a going concern without raising additional capital.
• The company's failure to generate significant capital or raise additional capital could reduce its ability to compete.
• The company may fail to achieve the intended cost savings from workforce reductions and temporary lay-offs.
• The company's failure to successfully market its products could harm its ability to execute its business strategy.
• The company's revenue is highly concentrated among a small number of customers, and the loss of a key customer could harm results.
• The company relies on independent foundries and contractors for manufacturing, and their failure to perform could damage customer relationships.
• The company may face claims that its products or technology infringe third-party IP rights.
• The company may not be able to protect and enforce its IP rights.
• The company may experience difficulties in transitioning to new wafer fabrication process technologies.
• The company may experience disruptions in its supply chain due to shortages in the global semiconductor supply chain.
• The company may be subject to cyber security threats and attacks.
• The company may be unable to satisfy the continued listing requirements of the Nasdaq.

Future Outlook

The company expects revenues to increase in 2024 due to increased sales of memory IC products based on EOL purchase orders and increased sales of mmWave products as new customers commence production. The company also expects R&D and SG&A expenses to decrease in 2024 due to cost reduction initiatives.

Management Comments

• The company believes it is a leader in addressing operational challenges of delivering mmWave products into high-volume markets.
• The company believes its mmWave technology can be deployed quickly and cost-effectively in rural and suburban environments.
• The company believes its mmWave technology has certain characteristics that are ideal for VR applications.
• The company believes it is currently the only pure-play, 5G vendor to offer a dual-band (28/39 GHz) RF solution for the FWA market.

Industry Context

The document highlights the growing demand for wireless bandwidth and the shift towards mmWave spectrum as an additional source of wireless capacity. It also notes the increasing adoption of FWA services by mobile service providers and the potential for mmWave technology in various applications, including VR, military communications, and dense urban environments.

Comparison to Industry Standards

• Peraso competes with Qualcomm in the IEEE802.11ad/ay market, differentiating itself by supporting higher frequency bands (66 GHz to 71 GHz) for longer signal propagation.
• In the 5G market, Peraso positions itself as a pure-play vendor offering a dual-band RF solution for FWA, while competitors like Qualcomm aggregate their mobile RF solutions.
• The company's mmWave technology is compared to traditional WiFi, highlighting its advantages in data rates, latency, and handling congestion in dense environments.
• The company's mmWave technology is compared to traditional wireless technology, highlighting its advantages in stealth and low power consumption for military applications.
• The company's mmWave technology is compared to fiber access, highlighting its advantages in cost and speed of deployment for WISPs.

Related Party Transactions

• A family member of one of the company's executive officers is employed by the company, receiving approximately $111,400 in 2023 and $101,000 in 2022.
• A family member of one of the company's executive officers previously served as a consultant to the company, receiving approximately $162,000 in 2022.

Stakeholder Impact

• Shareholders face the risk of dilution and potential loss of investment due to the company's need for additional capital.
• Employees may be affected by workforce reductions and temporary lay-offs.
• Customers may experience disruptions in supply due to the discontinuation of memory IC products and supply chain issues.
• Suppliers may be impacted by the company's financial challenges and potential changes in purchasing patterns.
• Creditors face the risk of non-payment if the company is unable to raise sufficient capital.

Next Steps

• The company intends to continue to devote substantially all of its research and development efforts toward further expanding its mmWave technology portfolio and expanding its product offerings.
• The company expects to ship additional EOL orders of approximately $10.3 million over the 12 to 15 month period commencing January 1, 2024.
• The company is seeking additional financing to meet its cash requirements for the foreseeable future.

Key Dates

Keywords

mmWave, semiconductor, wireless technology, fixed wireless access, FWA, memory IC, 5G, beamforming, antenna modules, reverse stock split