8-K: Peraso Inc. Reports Third Quarter 2024 Financial Results, Highlights Cost Reductions and New Customer Orders

Peraso Inc. announced its third quarter 2024 financial results, showcasing a reduction in operating expenses and new customer orders, despite a slight decrease in revenue compared to the previous quarter.

Summary

• Peraso Inc. reported a total net revenue of $3.8 million for the third quarter of 2024, down from $4.2 million in the previous quarter and $4.5 million in the same quarter of the previous year.
• Product revenue was $3.8 million, compared to $4.1 million in the prior quarter and $4.3 million in the same quarter last year.
• The sequential decrease in revenue was primarily due to reduced shipments of mmWave IC products.
• The company's GAAP gross margin was 47.0%, down from 55.5% in the prior quarter, but up from 45.4% in the same quarter last year.
• Non-GAAP gross margin was 61.7%, compared to 68.8% in the prior quarter and 58.0% in the same quarter last year.
• The decrease in gross margin was mainly due to a $0.3 million write-down of mmWave inventory and lower royalty revenue.
• GAAP operating expenses were $4.5 million, a decrease from $6.8 million in the prior quarter and $5.6 million in the same quarter last year.
• Non-GAAP operating expenses were $3.3 million, down from $4.9 million in the prior quarter and $4.0 million in the same quarter last year.
• The reduction in operating expenses is attributed to cost reduction initiatives.
• GAAP net loss was $2.7 million, or ($0.98) per share, compared to a net loss of $4.4 million, or ($1.88) per share, in the prior quarter and a net loss of $0.6 million, or ($0.87) per share, in the third quarter of 2023.
• Non-GAAP net loss was $0.9 million, or ($0.34) per share, compared to a net loss of $2.1 million, or ($0.88) per share, in the prior quarter and a net loss of $1.1 million, or ($1.56) per share, in the third quarter of 2023.
• Adjusted EBITDA was negative $0.8 million, compared to negative $1.9 million in the prior quarter and negative $0.9 million in the same quarter last year.
• The company expects fourth quarter 2024 revenue to be between $3.6 million and $4.0 million.
• Peraso had approximately $5.7 million of remaining order backlog for its memory IC products at the end of the third quarter, expected to be fulfilled over the next two quarters.
• The company raised approximately $2.9 million through the exercise of Series B warrants on November 5, 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture with positive cost reductions and new orders, but also declining revenue and gross margins. The company is making progress but faces challenges.

Positives

• Operating expenses decreased by almost 20% year-over-year, indicating successful cost management.
• The company secured significant follow-on and initial orders from wireless internet service providers in South Africa and Kenya, respectively.
• Peraso obtained a new purchase order from a military customer, highlighting growth in the tactical communications sector.
• The company expects revenue growth in the second half of 2024 compared to the first half, with double-digit growth over the prior year.
• The exercise of Series B warrants resulted in $2.9 million in gross proceeds for the company.

Negatives

• Total net revenue decreased to $3.8 million in Q3 2024, down from $4.2 million in the previous quarter and $4.5 million in the same quarter last year.
• Product revenue also decreased sequentially, primarily due to reduced shipments of mmWave IC products.
• GAAP gross margin decreased to 47.0% from 55.5% in the prior quarter.
• Non-GAAP gross margin decreased to 61.7% from 68.8% in the prior quarter.
• The decrease in gross margin was primarily due to a $0.3 million write-down of mmWave inventory.
• The company reported a GAAP net loss of $2.7 million, or ($0.98) per share, for the quarter.

Risks

• The company's ability to continue as a going concern is a risk.
• The company's ability to raise additional capital to fund its operations is a risk.
• The timing of customer orders and product shipments can impact financial results.
• Pandemics, wars, and terrorist activities may adversely affect the company's business and financial results.
• Inflationary risks could impact the company's costs and profitability.
• Customer concentrations and lengthy billing cycles could be impacted by a global recession.
• The company faces risks related to the lengthy sales cycle and the need to enhance existing technologies.
• There are risks associated with the production, testing, and marketing of the company's products.
• The company relies on manufacturing partners, which introduces supply chain risks.
• The end-of-life of the company's memory products poses a risk.
• The company faces risks related to intellectual property protection and litigation.

Future Outlook

The company expects total net revenue for the fourth quarter of 2024 to be in the range of $3.6 million to $4.0 million and anticipates total revenue for the second half of 2024 to increase over the first half of the year, with double-digit growth over the comparable prior year period.

Management Comments

• Ron Glibbery, CEO of Peraso, stated that third quarter revenue was within their range of expectations.
• Ron Glibbery highlighted a meaningful improvement in operating performance.
• Ron Glibbery noted that cost reduction and efficiency efforts underpinned the improvement in operating performance.
• Management is focused on converting engagements into incremental design wins and production orders.

Industry Context

Peraso's focus on mmWave technology aligns with the growing demand for high-speed wireless solutions in areas like fixed wireless access, tactical military communication, and transportation. The company's success in securing orders from WISPs in Africa and a military customer indicates a growing market for its technology in these sectors.

Comparison to Industry Standards

• Peraso's gross margin of 47.0% (GAAP) and 61.7% (non-GAAP) is within the range of other semiconductor companies, but the sequential decrease indicates potential challenges in pricing or cost management.
• Companies like Qualcomm and Broadcom, which also operate in the wireless technology space, typically have higher gross margins due to their scale and diversified product portfolios.
• The operating expense reduction of almost 20% year-over-year is a positive sign, but the company's net loss indicates that further improvements are needed to achieve profitability.
• Compared to other small-cap technology companies, Peraso's revenue growth is modest, and the company needs to demonstrate consistent growth to attract investors.

Stakeholder Impact

• Shareholders may be concerned about the decrease in revenue and gross margin, but encouraged by the cost reductions and new customer orders.
• Employees may be impacted by the previous layoffs, but the company's focus on growth may provide future opportunities.
• Customers may benefit from the company's focus on new design wins and production orders.
• Suppliers may be impacted by the company's cost reduction initiatives.

Next Steps

• The company will focus on converting engagements into incremental design wins and production orders.
• Peraso expects to fulfill its $5.7 million memory IC product backlog over the next two quarters.
• The company will host a conference call and webcast on November 12, 2024, to discuss the results.

Key Dates

Keywords

mmWave, wireless technology, fixed wireless access, tactical communications, 5G, net revenue, gross margin, operating expenses, net loss, EBITDA, warrants, cost reduction, design wins