10-Q: Peraso Q3 Sees mmWave Growth Amidst Strategic Review, Going Concern Warning

Peraso Inc. reported improved net loss in Q3 2025 driven by mmWave growth and cost reductions, but faces a going concern warning and is evaluating a Mobix Labs acquisition proposal.

Summary

• Net loss significantly improved for both the three months ($1.21 million vs. $2.71 million) and nine months ($3.51 million vs. $9.17 million) ended September 30, 2025, compared to the same periods in 2024.
• Total net revenue decreased by 16% to $3.23 million for the three months and 14% to $9.32 million for the nine months ended September 30, 2025, primarily due to the end-of-life of memory IC products.
• mmWave ICs and modules revenue saw substantial growth, with mmWave ICs increasing from $67,000 to $2.28 million (Q3) and $272,000 to $4.57 million (9 months), and mmWave modules from $60,000 to $658,000 (Q3) and $817,000 to $2.10 million (9 months).
• Operating expenses decreased significantly, with R&D down 29% to $1.53 million (Q3) and 37% to $4.77 million (9 months), and SG&A down 37% to $1.48 million (Q3) and 32% to $4.50 million (9 months), due to cost reduction initiatives.
• The company's independent registered public accounting firm expressed substantial doubt about its ability to continue as a going concern, a sentiment echoed by management.
• Peraso is engaged in a strategic review process, including evaluating an unsolicited, non-binding acquisition proposal from Mobix Labs, Inc., which most recently offered $1.30 per share in cash.
• Cash and cash equivalents stood at $1.87 million as of September 30, 2025, down from $3.34 million at December 31, 2024.
• Net cash used in operating activities increased to $4.56 million for the nine months ended September 30, 2025, compared to $3.89 million in the prior year.

Sentiment

Score: 3

Explanation: While the company showed improved net loss and strong mmWave growth, the persistent net losses, increased cash burn, dwindling cash reserves, and explicit 'going concern' warning from both management and auditors indicate a highly precarious financial position. The ongoing strategic review and need for immediate capital raise underscore significant operational and financial challenges, despite efforts to cut costs and grow the mmWave segment.

Positives

• Significant improvement in net loss for both the three-month (down 55% to $1.21 million) and nine-month (down 62% to $3.51 million) periods ended September 30, 2025, year-over-year.
• Substantial growth in mmWave ICs revenue, increasing from $67,000 to $2.28 million for the three months and $272,000 to $4.57 million for the nine months ended September 30, 2025.
• Strong growth in mmWave modules revenue, rising from $60,000 to $658,000 for the three months and $817,000 to $2.10 million for the nine months ended September 30, 2025.
• Gross profit remained relatively flat despite a decrease in total net revenue, indicating improved product mix and contribution from royalty and other revenues, as well as sales of previously written-down mmWave inventory.
• Operating expenses significantly reduced due to cost reduction initiatives, including employee lay-offs and termination of consulting contracts, with R&D down 29% and SG&A down 37% for the three months ended September 30, 2025.
• Regained compliance with Nasdaq's minimum bid price requirement on September 19, 2025.
• Successfully raised $0.9 million in net proceeds from a warrant inducement offering in September 2025 and $2.27 million from at-the-market stock sales during the nine months ended September 30, 2025.

Negatives

• Total net revenue decreased by 16% to $3.23 million for the three months and 14% to $9.32 million for the nine months ended September 30, 2025, primarily due to the end-of-life of memory IC products.
• Memory IC product revenue significantly declined from $3.68 million to $72,000 for the three months and $9.49 million to $2.34 million for the nine months ended September 30, 2025, due to the discontinuation of the foundry process by TSMC.
• The company incurred net losses of $3.51 million for the nine months ended September 30, 2025, and has an accumulated deficit of $180.6 million.
• Net cash used in operating activities increased to $4.56 million for the nine months ended September 30, 2025, compared to $3.89 million in the prior year, indicating higher cash burn.
• Cash and cash equivalents decreased to $1.87 million as of September 30, 2025, from $3.34 million at December 31, 2024.
• Management and the independent registered public accounting firm expressed substantial doubt about the company's ability to continue as a going concern within one year.
• The company expects to continue incurring operating losses and cash burn for the foreseeable future, with existing cash only sufficient into the first quarter of 2026.
• The strategic review process, including the Mobix Labs proposal, creates uncertainty and may divert management's attention and resources.

Risks

• Inability to continue as a going concern due to recurring net losses and negative cash flows, with existing cash and expected receipts only sufficient into the first quarter of 2026.
• Uncertainty regarding the availability or acceptable terms of additional capital (debt or equity financing), which could lead to dilution for existing stockholders or restrictive debt covenants.
• The strategic review process, including the Mobix Labs proposal, may not lead to a favorable outcome, could create business disruption, and increase stock price volatility.
• Potential delisting from Nasdaq if the company fails to satisfy continued listing requirements, such as the minimum bid price or minimum equity requirements, which could adversely affect liquidity and investor interest.
• The discontinuation of memory IC product production by TSMC will negatively impact future revenues, results of operations, and cash flows, as memory ICs represented 25% of revenues for the nine months ended September 30, 2025, and 87% in the prior year.
• The reduction in force implemented in November 2023 may not achieve intended outcomes, could lead to unintended consequences like loss of institutional knowledge, decreased morale, and difficulty in pursuing new opportunities.
• International trade policies, including protectionist measures like tariffs and sanctions, could adversely affect business, increase costs of raw materials, reduce margins, and harm competitive position.
• Exposure to risks from competition, rapidly changing customer requirements, limited operating history, tariffs, pandemics, wars, acts of terrorism, and volatility of public markets.
• Significant non-cancelable purchase obligations for inventory (wafers and substrates) totaling approximately $2.7 million as of September 30, 2025.

Future Outlook

The company expects to continue incurring operating losses and cash burn for the foreseeable future as it secures additional customers and invests in mmWave product commercialization. Revenues need to increase substantially to generate sustainable operating profit and sufficient cash flows without additional capital raises. Existing cash and expected receipts are projected to meet capital needs only into the first quarter of 2026. Total R&D expenses are expected to decrease for the remainder of 2025 compared to 2024 due to cost reduction initiatives, while total SG&A expense is expected to remain flat or slightly decrease.

Management Comments

• Our strategy and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering integrated circuits, or ICs, antenna modules and related non-recurring engineering services.
• We have pioneered a high-volume mmWave IC production test methodology using standard, low-cost production test equipment. It has taken us several years to refine performance of this production test methodology, and we believe this places us in a leadership position in addressing the operational challenges of delivering mmWave products into high-volume markets.
• With our module, we can guarantee the performance of the amplifier/antenna interface and simplify customers radio frequency, or RF, engineering, facilitating more opportunities for customer prospects that have not provided RF-type systems, as well as shortening the time to market for new products.
• Our board of directors is evaluating the Company’s options to enhance stockholder value. Our board of directors and management team are committed to acting in the best interests of all stockholders.
• We do not intend to make further comments regarding potential transactions or provide any public updates regarding proposed or potential transactions, unless required by applicable law or a regulatory body.
• We believe that our existing cash and cash equivalents as of September 30, 2025 and expected receipts associated with forecasted product sales will enable us to meet our capital needs into the first quarter of 2026.
• If we are unsuccessful in these efforts [seeking additional financing], we will need to implement additional cost reduction strategies, which could further affect our nearand long-term business plan. These cost reduction strategies may include, but are not limited to, reducing headcount and curtailing business activities.

Industry Context

Peraso Inc. operates in the highly competitive fabless semiconductor industry, specializing in mmWave wireless technology, a growing segment for 802.11ad/ay and 5G applications. The company's focus on high-volume mmWave IC production test methodology and integrated antenna modules positions it to address operational challenges and simplify RF engineering for customers, potentially shortening time-to-market for new products. The discontinuation of its memory IC product line, due to TSMC discontinuing the foundry process, marks a strategic shift towards its core mmWave business. The ongoing strategic review and unsolicited acquisition proposal from Mobix Labs highlight the consolidation trends and competitive pressures within the semiconductor sector, particularly for smaller, specialized players facing liquidity challenges.

Corporate Governance

Legal Proceedings

• The company is not a party to any legal proceeding believed to have a material adverse effect on its financial position or results of operations.
• May be subject to legal proceedings and claims in the ordinary course of business, which could result in significant financial resources expenditure and diversion of management efforts.

Related Party Transactions

• Compensation expense of approximately $31,200 for the three months ended September 30, 2025, and $88,900 for the nine months ended September 30, 2025, was recorded for a family member of an executive officer employed by the company.

Stakeholder Impact

• Shareholders: Face significant dilution risk from potential future equity raises; uncertainty regarding the outcome of the strategic review process and Mobix Labs' acquisition proposal; potential for increased stock price volatility; risk of losing most or all investment if the company cannot continue as a going concern.
• Employees: Potential for further headcount reductions if additional financing is not secured; risk of decreased morale and loss of institutional knowledge due to past reductions in force.
• Customers: Potential for disruption if the company's financial instability impacts product development or supply chain, though mmWave product growth is positive.
• Creditors: Increased risk due to the "going concern" warning and the company's need for additional capital.
• Suppliers: Risk related to outstanding non-cancelable purchase orders ($2.7 million) if the company faces severe liquidity issues.

Next Steps

• Continue the strategic review process to evaluate options for enhancing stockholder value, including the Mobix Labs acquisition proposal.
• Seek additional financing through debt or equity arrangements to meet cash requirements beyond Q1 2026.
• Implement further cost reduction strategies, such as reducing headcount and curtailing business activities, if additional financing is unsuccessful.
• Evaluate the impact of the new FASB ASU No. 2024-03 on the presentation of consolidated financial statements.
• Continue to manage SG&A costs to keep them flat or slightly decreasing for the remainder of 2025.
• Pay remaining software license contractual liabilities of approximately $0.2 million by December 31, 2025.

Key Dates

Recommendation

The company faces severe liquidity challenges, explicitly stating a 'going concern' doubt from both management and its auditors, with current cash only projected to last into Q1 2026. While mmWave revenue growth is positive, it is insufficient to offset the overall revenue decline from the memory IC end-of-life and the high cash burn from operations. The ongoing strategic review and unsolicited acquisition proposals introduce significant uncertainty and potential for further dilution or unfavorable terms. Given the substantial financial risks, including recurring losses, negative cash flow from operations, and the urgent need for capital, a seasoned investor would likely recommend selling to mitigate exposure to a highly speculative and distressed asset.

Keywords

mmWave, semiconductor, wireless technology, 60 GHz, 5G, fabless, going concern, strategic review, Mobix Labs, acquisition, warrants, ATM offering, Nasdaq compliance, financial results, Q3 2025, Peraso Inc.