Peraso Inc. (PRSO) Earnings Call Transcript & Summary

Good day, and welcome to the IAccess Alpha Virtual Best Ideas Fall Investment Conference 2025. The next presenting company is Peraso Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Ron Glibbery, CEO of Peraso Inc. Ron, the floor is yours.

Thank you very much. Good afternoon, and welcome to the Peraso Q3 2025 Investor Presentation. Jumping to a quick summary. Peraso is a fabless semiconductor company focused on high-speed wireless communications. We were incorporated in 2008 and went public on NASDAQ in December of 2021. There are 4 main markets we focus on, including fixed wireless access, tactical communications, transportation and video. [ Roxy ] shipped over 2 million devices since 2016 and have become the dominant player in our market, which is 60 gigahertz. We have a strong patent portfolio. We've issued or obtaining over 50 patents, so very strong intellectual property, and we have 9 essential claims in what we call the 802.11ay standard. We've secured and are expanding our design wins across diverse market applications, including fixed wireless access, defense, transportation and advanced video delivery. Now to get a little technical. Millimeter wave is a very high frequency band, typically from the 24 gigahertz to the 300 gigahertz spectrum. So the really key advantages of millimeter wave is that it can carry more data and has very low latency. But something I'd like to talk about is what we call beamforming. And this is really what provides our key advantages. And you can see in this diagram, the kind of the pictures of our beamforming capability. There's probably 2 major advantages that the beamforming kind of provide to our customer base. It can support many users at the same time. So it's ideal for fixed wireless access. And also, it's very hard to detect. So in a battlefield environment, i.e., for military applications, it's really turned out to be a very important technology for the company. So we're focused on the 24 gigahertz to 71 gigahertz spectrum. And specifically, what I'm going to talk today about is our 60 gigahertz technology, which is in the 57 gigahertz to 71 gigahertz of spectrum. Millimeter wave is forecast to be one of the most important highest growth opportunities in communications. Here, we're showing a couple of snapshots on the market opportunity. The first is the overall market growth from $5 billion this year to about $30 billion in 2033. This represents a growth rate of 25% compounded annually. Taking -- peeling back the onion a little bit, we look at the defense aspect of our growth. And the second chart underscores the opportunity for millimeter wave in military applications. This goes back to our stealth nature of our technology. And in defense, the growth rate on this marketplace is projected to be 42% compounded annually. So very high growth rate opportunities for us. And again, Peraso from a technology perspective is a key -- is a leader and a key player in this marketplace. So participating in very high growth opportunities in the marketplace. Our initial opportunity is in an area called fixed wireless access. So our lead customer in this space is a company called Ubiquiti. Ubiquiti is a leader in this equipment supplier of this marketplace and now achieved about a $30 billion valuation. So a very, very important first customer for the company. As you can see from the picture at the bottom of the slide, Ubiquiti actually has 8 products based on our chips. And basically, this is at a recent trade show, you can see that most of the display, in fact, it's about all of the entire display was based on silicon from Peraso. The thing about Ubiquiti is that they are dealing into the what we call the rural market. So basically, they've been doing this since about 2020. And basically, what that means is that, again, providing high-speed Internet to kind of low-density applications and marketplace. But of course, Ubiquiti has made a terrific business out of that achieving, has a $30 billion valuation. So they were our lead customer. And obviously, we're very proud to have them as a lead customer. And so the thing about the rural market is that it's a bit of a lower volume market, but it was a terrific opportunity for us to actually really start to work on all of the kinks of our technology. And over the years, we've had an opportunity to really, throughout our engagement, improve and perfect our core product offering. So that's how we really got started in fixed wireless access. Again, to underscore fixed wireless access is the ability to provide customers with very high speed and low latency Internet access. But what we found over the last couple of years is that our technology is actually able to -- because of this beamforming capability that I talked about earlier, move into more, what we call dense urban environments. So the enabler of this is this beamforming technology that I talked about earlier. So we've announced some very, very important design wins around the world. Actually, just last week, we announced our relationship with a company called WeLink, and they've announced a major deployment in Los Angeles. And as a matter of fact, on the press release, what you'll find is it's not just Los Angeles, it's also Las Vegas and Phoenix as well. So in America, we're seeing this move from this Ubiquiti kind of based opportunities in the rural environment moving towards more urban environments in America like Los Angeles and Las Vegas. We call this technology DUNE for dense urban network environment. And the idea here is to use our beamforming technology to actually reach many users simultaneously. If you look at a market like South Africa, for example, and you can look at the picture that was shown on this slide, it's an extremely high-density environment. And so again, our beamforming technology allows us to really address this market, which traditional wireless technology cannot because it just -- it doesn't have the beamforming capability. So beamforming is an important part of our technology process moving forward. I'm going to move now to Slide 8. Before I move on to slide -- this is Slide 8, but basically, a very important development over the last year or 2 has been the announcement of what we call the BEAD program by the U.S. government. So this is providing all Americans with high-speed Internet, and it's a $42.45 billion program. And the idea here is to provide whatever technology is necessary to give the American public high-speed telecommunications. So the important development here is that the -- even though there are many ways to do this, the NTIA as leadership has said, look, we just want people to have high-speed Internet. And this is $42 billion. And what this means is that the $42 billion goes to service providers across all 50 states and basically on a case-by-case basis, use whatever means necessary to get your customers' high-speed Internet. Of course, we -- that's exactly what we provide. So basically, we're optimistic certainly as we move into 2026 that this will help our business. And we haven't really handicapped, I think, specifically what that looks like. But certainly, it's going to help our business. So we feel this is a very, very positive development in our marketplace, particularly in the Continental U.S. So this has been confirmed. This was actually started by the Biden administration, but it's actually been even more widespread with the Trump administration. So we're really thrilled to be taking part of the BEAD process, and we look forward to helping -- having this help our business in 2026 and moving forward. A new market opportunity for Peraso that's emerged over the last couple of years is the idea of tactical communications, and this is basically defense. So the idea here is that, again, going back to my first slide, the second slide where I talked about beamforming, one of the most important aspects of beamforming is that it's almost impossible to detect on a battlefield. In a battlefield environment. So it's almost -- not only is it difficult to detect, it's almost impossible to jam as well. So this is becoming a very important aspect of military communications. So the beauty of our technology is in the 60 gigahertz, it can be used really anywhere around the world. And we are finding that we're now talking to many customers about mission-critical applications. But the good news is that this is not just talk. We actually now have a major design win that we announced in April with the Middle East military contractor. And the idea here is that, again, this is the #1 criteria by this military organization was the fact that this technology could not be detected in the battlefield. And so we see the military application is a key aspect beyond fixed wireless in terms of our growth. So usually, people when we tell them about military applications, they say, oh, this takes years and years. But in this case, the opportunity is actually a safety mechanism to really reduce casualties on the battlefield. And it's not just casualties of soldiers, by the way, it could be casualties of anybody who's on the battlefield like medical personnel, journalists and so on. So the good news is that we announced this collaboration in April, and we actually started shipping our first volume products in June, and the military in the Middle East is testing as we speak today. So this is a very important -- so in general, military is an important application for us. And very specifically, this opportunity is an opportunity that we see not just in the Middle East, but really going global for all Western militaries in terms of the opportunity to provide this safety mechanism for military personnel. So moving on to Slide 10. Transportation is an important opportunity for us. The idea here is that basically, in a train or a bus or a plane, we provide real-time high-performance Internet access. The key here is that, again, going back to our beamforming technology, the beams are dynamic. Not only are the beams narrow, but they're also dynamic and they move in real time. So these applications are quite ideal for our technology in terms of providing high-speed Internet to all modes of transportation. And really, there's even now we're speaking to some customers in the space of autonomous cars. So it turns out in autonomous cars, for example, they spend the entire day collecting data. And when they go back to the recharging sites, they have to upload and download data extremely fast. And so our technology is quite ideal for that application. So transportation is becoming an important opportunity to Peraso. Another opportunity for Peraso is professional video delivery. So this historically has been a VR application. So we still have some customers on VR. But now we're seeing generally in headset applications where people actually have a camera on their headset, and they want that information to be downloaded very quickly. There's only one way to do that, especially in a congested environment, and that's using our technology. Another broad area of application for us is in the medical industry. So you can see on this picture, the idea here is that we're actually in an operating room, and this is actually a customer of ours, whereby they're doing orthoscopic surgery, need real-time video information going back to the monitors and using our technology to facilitate that. So these are two more application areas that we think are very important as we move forward with our business. Now I'm going to skip to Slide 12. So we think what's really important is what we call pipeline. So really having a look at what our future business looks like. So you can see the company is in significant growth mode. In Q4 of 2023, we had 11 -- 7 customers in production. Now we have 14 customers in production as of Q2 2025, and we're growing that pipeline significantly. So basically, you can see originally, we had companies like Ubiquiti, Radwin tacking on networks, and we're moving to companies like 8devices, Zeno and JaguroWave. One thing that I would say that I think is really important for investors to really understand is that in the unlicensed fixed wireless space, we've become a dominant player, significantly. And a lot of people have tried and failed. We had a lot of competition. But as time goes by, we're finding ourselves more and more unique in that regard. And basically, it's -- I don't really dwell on it here, but this is an extremely difficult technology to execute on. We've had a lot of battle scars. But again, early relationship with companies like Ubiquiti have made it very important for us to tweak and fine-tune our technology to make it what it is today and really put us in a position now in the 60 gigahertz space where we've become the dominant supplier. And I think what you'll see over the coming quarters is more and more customer engagements as we continuously convert people to our technology. But we think the pipeline is a very important metric in terms of trying to assess what our business looks like moving forward, and we're very thrilled with the opportunities that we're seeing to present themselves. I always like this next slide because this slide is actually showing like some of the customers -- some of the products in the marketplace. So right now, we've got actually what we refer to as 59 separate SKUs or different types of devices in the marketplace. So you can go to all these websites and you can look up these products. So we've been -- we're shipping in the order of 59 separate products. This is growing again, and you'll see more and more of these products hit the marketplace. But basically, in my opinion, the proof is in the pudding. So we can talk all day long about the potential. But what you're seeing on this slide is customers who have actually executed and put products in the marketplace, and you can go buy them, you can put your hands on them, you can test them. So we've got a real business on our hands. And again, from a pipeline perspective, even over the course of -- since Q4 2023, over the course of 6 months, our funnel has gone from 70 customers to 83 customers. But most importantly, the SKUs in production have gone from 31 up to 59, almost double the SKUs in production. So we're very, very proud of that metric. And again, we think customers -- Peraso is a company that investors should have a look at in terms of just what are the real growth opportunities for our business. So as I move on to the summary, we are the premier supplier of what we call 60 gigahertz semiconductor devices and there's an extremely significant barrier to competition. I can't stress that point enough in terms of what our barrier to competition is. It's taken us several years. But over the last 5 or 6 years, we had several competitors who have kind of fallen by the wayside. And it will be very, very difficult for any new players to come on to the marketplace. We're shipping into high-growth markets like fixed wireless, like military, like transportation, like video, and we have over 100 distinct customer engagement opportunities in the pipeline. And our original business thesis actually was that wireless spectrum is getting saturated and it's driving the need for millimeter wave spectrum. You can basically see this with things like our opportunities in fixed wireless where traditional wireless technology cannot hold up to the demands of high-density environments. And so we feel that our original thesis -- now mind you, it has been over a decade, but we feel that's a very, very important thesis that's coming through in our marketplace. So we feel that Peraso is a terrific investment. We've got a lot on the marketplace and significant growth opportunities. Just looking at this slide, our revenue in 2024 was $14.6 million. Our revenue to date is -- but millimeter wave revenue was only $1.5 million but that was a slow year for the technology, mostly because there was a hangover from kind of a COVID over inventory. And this is just like a broad issue in the semiconductor marketplace, and we got hit with that. But this year, the revenue to date is $6.1 million for the company, but our specific millimeter wave revenue in the first 6 months has actually increased to $3.8 million, and we see that growing. So our revenue in Q2 was $2.2 million on our last earnings call. We increased our guidance for Q3 to $2.8 million to $3.1 million. So we feel we're on track to do that. So whereas 2024 was a slow year for us just because of the inventory correction, we think 2025 is a much better year for millimeter wave revenue. And again, you're starting to see the fruits of those efforts. I will pass on that. And so basically, from my perspective, that pretty much brings us to the conclusion of the presentation. Okay. So I've got several questions. Operator, so we just proceed to answer the questions?

Yes, that's right.

Okay. Can you expand on the opportunities in drone applications and how beamforming technology differentiates for us in our market? Very good question. The idea -- well, right off the bat, it's the same thesis, which is that on drone applications, it sell. So it's actually -- there's 2 main advantages. One advantage is that you cannot detect the drone. And I think a lot of people are starting to use -- actually, what we've seen in the battlefield is people are actually using like fiber to control the drone. So we're more or less you can view us as kind of wireless fiber. So it's very directed. So for drones, it's actually controlling the drones from using a millimeter wave beam is a very stealthy way to operate a drone in the marketplace. So basically, that's one way we're using beamforming in the drone marketplace. The other way is actually, again, the safety mechanism that we're using on the ground with infantry soldiers can be applied to drone applications as well. And as a matter of fact, that's actually in process and being tested right now, again, in the Middle East. But the idea there is now you have a drone, that drone makes -- when it's a target -- addressing the target, it needs to make damn sure that you're targeting someone who is on the other -- is an enemy target and not on your same side. So we have really 2 opportunities for drones. And one is basically the idea of controlling the drones with the stealth technology and the other is actually applying the safety mechanism to drones so that the drones do not shoot their own soldiers on the ground. So those are the 2 applications. Second question, you delivered initial production for tactical defense system. What is the time frame scaling to larger [indiscernible] Good question. So we're going through trials the rest of this year. So basically, over the course of September, October, November, our trials. And so we really expect -- so two key things we're doing on our side in terms of the initial production. We have to shrink the system so that it can go on a soldier gun or helmet. And we also have to -- so you can imagine in the battlefield, we need -- everything is obviously battery operated. So we need to get the power consumption down. Right now, the time line for, I would say, full-scale large production is Q3 2026. And so that's the timeline we're on based on basically revising our Boards to make sure that they can meet the for requirements, the battery life and also the testing in the preliminary battlefield environment. So Q3 2026 is the timeline we're targeting on that. As far as the strategic review process and how investors should interpret the recent Mobix Lab's proposal, I mean, all I can say on that front is all I can share is what's public, basically, but to be quite frank, what's public is what we know as well. So I don't have a lot to share on that front, except to say that we obviously feel that the process -- the integrity of the process needs to -- our position in general is that the integrity of the process needs to be maintained from a fiduciary responsibility, and we intend to do exactly that. So that's my comment on that. But obviously, from a public perspective, everything that's in the public domain is fundamentally our position at the moment. So GAAP gross margin declined from 48%. The normalized margin that we feel -- sorry?

Ron, I was just going to hop in and take that.

Yes.

The decline was really driven by the drop-off in memory IC revenue. As we previously announced, we end of life the memory products. Q1 '25 was the completion of the end of life. Albeit that said, we still have some left as someone comes knocking. But those products traditionally garnered margins in the high 60% range. The millimeter wave products are lower margin given the applications, et cetera. And we're targeting kind of a gross margin there of approximately 50%. We were quite pleased with the 48%. It's obviously hard to achieve your margin profiles at these revenue levels. But now that we've got some consistency and visibility to our backlog, as we commented on our last earnings call, we see a path to hit that 50% target.

Thanks for jumping in, Jim. I wasn't sure what the process was, but thank you. I would pass it over as well. So I guess from our perspective, that's kind of a wrap if there's no other questions. There's only 4 minutes on our time line. Is that it for today's speaker, Moderator?

Yes. Are you ready to wrap the call?

Yes. Thank you very much. I would like to thank everyone on the call today for paying attention. And hopefully, the Peraso's story is interesting to you. Thank you very much.

Thank you very much, everybody. This does conclude Peraso Inc.'s presentation. You may now disconnect. Please consult the conference agenda for the next presenting company. Thank you.