Peraso Inc. (PRSO) Earnings Call Transcript & Summary

Good afternoon, and welcome to Peraso Inc.'s Third Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Monday, November 10, 2025. I would now like to turn the call over to your host for today's conference call, Mr. Jim Sullivan. Please go ahead.

Good afternoon, and thank you for joining today's conference call to discuss Peraso's third quarter 2025 financial results. I'm Jim Sullivan, CFO of Peraso and joining me today Ron Glibbery, our CEO. Today, after the market closed, we issued a press release and related Form 8-K, which was filed with the Securities and Exchange Commission. The press release and Form 8-K are available on Peraso's website at www.perasoinc.com under the Investor Relations section. There is also a slide presentation that we will be using in conjunction with today's call that can also be accessed through the webcast link on the Investor Relations website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. Peraso advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows or other financial items, including anticipated cost savings as well as any statements concerning the expected development, performance and market share or competitive performance of our products and technologies as well as any potential statements related to prospective future financing arrangements or capital transactions and the evaluation of pursuit of strategic alternatives. [Audio Gap] actual results to differ materially from those implied by the forward-looking statements, including unexpected changes in the company's business. More detailed information about these risk factors and additional risk factors are set forth in Peraso's public filings with the Securities and Exchange Commission. Peraso also expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP. With respect to remarks on today's call involving non-GAAP numbers, unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of intangible assets, severance costs and the change in fair value of warrant liabilities. These non-GAAP financial measures, definitions and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related Form 8-K, which provides additional details. For those of you unable to listen to the entire call at this time, a recording will be available on the Investor Relations page of our website. Now I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks.

For the webcast, we appreciate you joining today's conference call. We had a notably strong third quarter, highlighted by growing orders and shipments of Peraso's industry-leading 60 gigahertz wireless solutions. Total revenue increased more than 45% sequentially, driven by record quarterly revenue from our mmWave products. Gross margin also increased significantly in the previous quarter, achieving our targeted gross margin level in the mid-50% range. Consistent with prior recent quarters, we continue to exercise prudent cost management and drive operational efficiencies across the organization. Collectively, these metrics contributed to improved operating and bottom line results as well as reduced cash burn from operations in the third quarter. Turning to Slide 4. Beyond [Audio Gap] 60 gigahertz mmWave solutions. As such, we have welcomed the steady recovery throughout the year in market demand and customer orders, both of which are reflected in our third quarter results. We believe that fixed wireless access markets renewed momentum is sustainable, particularly for our 60 gigahertz wireless solutions. As there continues to be growing, we recognize mmWave's ability to enable reliable, high-speed and low latency broadband connectivity to homes and businesses without the time and cost burdens associated with fiber infrastructure. For further evidence of fixed wireless access and mmWave broadening market traction, I would encourage our investors to take a look at Verizon, a fixed wireless access service provider with a strong background in mmWave technology. Good quarterly revenue from mmWave products were multiple prominent wins in fixed wireless access. The first of these wins was one of our leading partners, Tachyon Networks, which we announced in early July and covered on a previous conference call. To briefly recap, Tachyon Networks chose to incorporate one of our prospective series modules with an integrated 16-element phased array antenna to power its latest outdoor 60 GHz fixed wireless solution. On conference call, we announced a renewed collaboration with WeLink Communications to accelerate the deployment of high-speed broadband access across dense urban areas and multiple major U.S. cities in the U.S. More specifically, WeLink's mesh-based fixed wireless access architecture is leveraging Peraso's 60 gigahertz technology for both businesses and consumers in dense urban neighborhoods. Also notable, they are successfully rolling out this high-speed wireless broadband service at a fraction of the cost and implementation time of typical fiber deployments. Most recently, in September, we secured an initial volume order market. I want to highlight that this order for our prospectus mmWave modules was not only received from a first-time OEM customer, but they are a well-established equipment supplier to service providers. As a result, this new OEM customer has the potential to facilitate broader use of our mmWave solutions by an expanded number of fixed wireless service providers, many of which may not have previously been aware of or experienced the benefit of Peraso's industry-leading technology. In addition to these recent wins, we are continuously supporting a broad number of proof of concepts with wireless Internet service providers utilizing Peraso's mmWave technology. With the majority of customers at or approaching more normalized inventory levels, we expect to see additional production orders as successful proof of concepts are completed. Together with our ongoing efforts to convert other existing customer engagements into production, year growth. Turning to Slide 5. As discussed on previous quarterly update calls, we are continuing to see increased market awareness of 60 gigahertz technology that extends beyond fixed wireless to access completely new markets. The most notable among these new emerging markets for Peraso's mmWave solutions has been what we refer to as tactical communications, which includes diverse mission-critical military defense applications. During the course of exploring inbound interest and prospective engagements with potential customers and ecosystem partners, the substantial value proposition of 60 gigahertz wireless for tactical communications has become unmistakably clear. The everyday performance benefits that have made mmWave the go-to technology in fixed wireless access such as high data rates, ultra-low latency and power efficiency are also ideal for enabling next-generation solutions for tactical communications. Additionally, mmWave's inherently stealthy attributes and low probability of intercept represents a unique and unmatched advantage over potential wireless technologies. While [Audio Gap] communication challenges encountered in tactical defense environments. This included securing a strategic contact with a specialized defense contractor who we've subsequently continued to collaborate with on a jointly developed system solution that leverages Peraso's 60 gigahertz technology for a first-of-its-kind tactical defense application. This new mobile system solution is designed to provide heightened communications, situational awareness to help save military personnel and noncombatants such as medics and humanitarian responders operating in high-risk environments. As a reminder, we announced the delivery of initial production shipments of our advanced 60 gigahertz wireless solutions in support of this jointly developed solution in the June time frame. Today, I'm pleased to report the recent and successful completion of initial field trials of this innovative solution. Upon the completion of additional trials, we expect the jointly developed solution with our lead customer to represent a significant long-term revenue opportunity for Peraso. In addition to the successful initial field trial validating the robust capabilities of Peraso's mmWave technology, we believe it represents and will serve as a foundation for further commercial expansion into the tactical defense communications market over the coming quarters. In fact, despite our lead customers' understandable sensitivity to being named or publishing additional details about our jointly developed solution, we are confident that this engagement is contributing to the increased dialogue and engagement that we are fielding within the tactical communications market. Moving to Slide 6. On our previous conference call, I addressed how [Audio Gap] secured production order to incorporate our 60 gigahertz technology in a customer's video system targeted for use in the educational market. Although the revenue contribution from these adjacent market opportunities is often smaller relative to our fixed wireless business, the purpose of my commentary around adjacent markets last quarter was to demonstrate the true versatility of Peraso's mmWave technology, in fact the future customers about potentially utilizing our 60 gigahertz technology in various markets. I wanted to circle back again on today's call and dig a little deeper into adjacent markets. While each of these prospective discussions were focused on completely different end markets, they all shared a common use case, namely overcoming the challenges associated with processing massive amounts of high-bandwidth video for edge AI applications. A few new natural examples of these edge AI applications would include last-mile delivery services, autonomous vehicles and drones. Stepping back for a second, what's really compelling is that the same inherent high-performance and advanced capabilities that mmWave brings to fixed wireless and tactical communications, the same attributes can be critical enablers for high-bandwidth video for edge AI. More specifically, 60 gigahertz mmWave readily supports multi-gigabit data rates for streaming or transferring high-resolution video. Additionally, ultra-low latency instantaneous data transfer for real-time applications. And lastly, 60 gigahertz mmWave is also inherently and exceptionally power efficient. This is especially critical for edge AI device, many of which are battery powered, high-resolution video at multi-gigabit data rates. We'll keep you posted with our progress over the coming quarters. Turning to Slide 7. This is an updated snapshot showing the evolution of our engagement pipeline over roughly the past 2 years. The figures on this slide represent the number of different SKUs or distinct device models at each stage of engagement. And then at the bottom is the cumulative number of SKUs that customers have released to production. For those that may be familiar with previous versions of this slide, you might notice that the current number of funnel opportunities is smaller than in the past. This is the result of a recently completed effort to narrow the total pool of identified opportunities down to those our team believes have the most commercial potential and highest formal engagements. As such, you can consider the currently greater than 30 funnel opportunity shown at the top as qualified opportunities. We chose to do this for two reasons. First, it better reflects the number of realistic near- to intermediate opportunities that we are actively cultivating. And then second, it also reflects our heightened focus internally towards advancing the most attractive and highest probability opportunities into formal engagements with customers. I can continue to like using this slide because it clearly demonstrates not only the progress that we made over time, but also provides near real-time insight into the literal pipeline of potential new incremental business that we are currently working on. In addition to briefly mentioning that all of the pictures shown here are actual customers and products [Audio Gap] call out a couple of key takeaways. First, we have nearly doubled the number of customer SKUs in production over the last 2 years, contributing to a meaningful diversification of our customer base as well as end market applications. Then lastly, this is the first time that Peraso has had a double-digit number of new customer devices in preproduction at any single point in time. This is a testament to our team's focus and dedication as these preproduction SKUs represent line of sight to new potential revenue streams once released to the commercial production by customers. In closing, we had a great third quarter, and we are pleased with the continued progress of our growth initiatives, highlighted by the record revenue contribution of our mmWave product. In addition to capitalizing on the momentum of the fixed wireless access market, we are seeing rapidly expanding opportunities for our 60 gigahertz wireless solutions in new end markets and applications, all of which are poised to benefit from the high bandwidth, secure and power-efficient connectivity offered by Peraso's technology. [Audio Gap] engagements into additional design-ins and production orders spanning both mmWave fixed wireless access as well as adjacent new market opportunities for our 60 gigahertz solutions. We believe that today, we are well positioned to deliver continued year-over-year growth from our mmWave products in the fourth quarter and into 2026. Coupled with this anticipated growth, we are remaining committed to disciplined expense management with the goal of driving steady improvement in our quarterly operating results. With that, I'll turn the call back over to Jim to review the financials and provide our revenue outlook for the fourth quarter.

Thank you, Ron. Turning now to the results for the third quarter of 2025. Total net revenue for the third quarter was $3.2 million compared with $2.2 million for the prior quarter and $3.8 million for the third quarter of 2024. Product revenues for the third quarter of 2025 from the comparable period of 2024 was primarily attributable to the reduction in shipments of memory IC products due to the previously announced end of life of the products. Specific to sales of mmWave products, revenues were $3 million in the third quarter of 2025 compared with $2.2 million in the prior quarter and $0.1 million in the third quarter of 2024. Consolidated GAAP gross margin increased to 56.2% in the third quarter from 48.3% in the prior quarter and compared with 47% in the year ago quarter. The increase in GAAP gross margin for the third quarter of 2025 from the prior comparable periods was primarily attributable to a more favorable revenue mix of mmWave products and solutions as well as shipments of inventory written down in prior periods. On a non-GAAP basis, gross margin for the third quarter was also 56.2% compared with 48.3% in the prior quarter and compared with 61.7% in the third quarter of 2024, which was primarily attributable to shipments of memory IC products. GAAP operating expenses for the third quarter of 2025 were $3 million [Audio Gap] for software license obligations and $4.5 million in the third quarter of 2024. The decrease in operating expenses on a GAAP basis from the comparable period of 2024 was primarily attributable to reduced stock-based compensation expense and amortization expense related to intangible assets fully amortized in 2024. Non-GAAP operating expenses, which excludes stock-based compensation, were $2.9 million in the third quarter compared with $2.7 million in the prior quarter, which included a $0.2 million accrual reversal for software license obligations and $3.3 million in the third quarter of 2024. The decrease in operating expenses on a non-GAAP basis from the comparable period of 2024 was primarily containment initiatives. [Audio Gap] per share in the prior quarter and compared with a net loss of $2.7 million or a loss of $0.98 per share in the same quarter a year ago. And changes in fair value of warrant liabilities for the third quarter of '25 was $1.1 million or a loss of $0.15 per share. This compared with a non-GAAP net loss of $1.7 million or a loss of $0.28 per share in the prior quarter and a net loss of $0.9 million or a loss of $0.34 per share in the same quarter a year ago. The weighted [Audio Gap] in shares [Audio Gap] in fair value of warrant liabilities, interest expense, depreciation and amortization and the provision for income taxes was negative $1 million in the third quarter of 2025 compared with negative $1.6 million in the prior quarter and negative $0.8 million in the third quarter of 2024. With regards to the balance sheet, as of September 30, 2025, the company had approximately $1.9 million of cash compared with $1.8 million as of June 30, 2025. The net positive change of approximately $0.1 million in the company's cash balance for the third quarter included approximately $0.9 million of net proceeds from the warrant inducement offering of certain Series C warrants and approximately $0.7 million of net proceeds from the company's at-the-market offering program during the quarter. As of today's call, the company has approximately 8.98 million shares of common stock [Audio Gap] transaction as well as various potential sources of additional capital. Aside from confirming that the strategic review process continues to be ongoing in coordination with the company's financial adviser, there are no related updates to share on today's call from what we have previously disclosed. Now turning to our outlook. As Ron previously discussed, we are [Audio Gap] 60 gigahertz wireless solutions. Based on current backlog, the company expects total net revenue for the fourth quarter of 2025 to be in the range of $2.8 million to $3.1 million. This concludes our prepared remarks, and we thank you for your time this afternoon. Operator, please commence the Q&A session.

[Operator Instructions] [Audio Gap]

Confident, but it sounds like you're making a lot of momentum here. So I guess maybe my first question is on the new OEM that you announced or spoken to. Can you give a little more color on that? And it sounds like that's a very -- you're very optimistic about that. What does that opportunity look like? And what does that mean do you think?

Well, it's the -- and we feel we're #2 OEM in the space. So they're very sensitive to confidentiality, so we can't release the specifics. But from our perspective, it's just to get another validation. And something that I didn't mention on the call -- sorry, Dave, that I should is that these OEMs now historically have been using like other -- and I won't say which competitors, but other competitors who are -- who now we're beating out because we have better performance. That's exactly what happened in this case. So a couple of things are happening. Obviously, the inventory kind of the correction is coming to an end. But I think more importantly, we're starting to see all of these OEMs who are using other chipset vendors come over to Peraso, and I think we're going to continue to see that over the coming quarters.

[Audio Gap] for you, obviously, it signaled a demand in that fixed wireless access. But does that specifically speak to anything from your perspective and either positive or negative?

Well, broadly, it's positive. I mean that -- I think Starry made no bones about their use of mmWave. So I think it's another great validation of the technology. You'll have to infer whether they were using Peraso or not. But I would say, generally, it's been a very positive endorsement for Peraso. But yes, I mean, Starry was a real advocate of -- and what's interesting actually is they're using it for MDUs, multiple dwelling units. So it's turning out mmWave is a really nice technology for satisfying that market as well. And we're seeing that in other jurisdictions. But we think the real kind of catalyst in that situation was the support for MDUs, if you will.

Okay. Great. And just a couple more quick ones. But I wanted to ask about the timing of customer production schedules. You talked about your funnel. You're obviously gaining some momentum there. Is there any way to kind of think about your customer typical design cycles now that we're through this inventory? Do you get a sense they're coming to market more quickly? Or will there still be an elongated kind of design cycle before we see them turn into production?

Yes. I mean I think it's case by case, but here's how I would look at it, Dave, like in the fixed wireless space, that's tried well-oiled machine like a 9- to 12-month period kind of from an engagement to kind of mass production. New opportunities like military, you're looking at probably 12 to 15 months, obviously, because there's more work and there has to be done more customization. So it really depends if it's an existing market or a new market. And again, like we're seeing these opportunities now in edge AI, and that may take, again, 12 to 15 months would be my estimate, but that's kind of the time frames that we're looking at normally.

Okay. Great. And then maybe just, Jim, on the balance sheet, it looks like you've got the inventory and AR were both up pretty sharply sequentially. Anything to speak to there? Or maybe how should we think about your working capital going forward?

Yes. No, the AR was really a timing of functioning of sales. And I know certainly, as of today, we've collected, I think, over 70% of it. And the remaining amount is one customer, which has a little bit longer terms. So nothing unusual in there, just a function of the higher product revenues. And then from inventory, we've actually used a fair amount of the inventory for certain products that we had on hand. So we've actually been building more inventory on certain products to meet anticipated demand looking out for Q1 and Q2. So the good news is we continue to sell what we have. And in those cases where we've depleted it, we've actually gone out and built more wafers. So we're going to continue to tightly manage the working capital looking forward. And we're really kind of managing the builds based on what we see in the backlog. We want the orders placed. So we're not too -- don't lean too far forward on the inventory.

And just one last one, if I can. Sorry to take all the time here, but I wanted to ask on the gross margin, given that you've -- some of that was written down previously, obviously, mmWave doing better. How should we think about kind of the balance on the gross margin as we kind of go forward from here?

We're still trying to keep it in that right around 50% range. It was a little bit higher here in the third quarter because of the -- it certainly benefited from product mix with the mix of customers. And then as well, as you pointed out, the sales of reserve inventory, which we still have some of that we're going to move through in the next few quarters. There was also a very small contribution from our memory products, like $75,000 or so revenue that also contributed as well as the NRE revenue that we brought in on the mmWave side. I think more realistic here in the short term is we're still kind of working through things. It's kind of in that -- we're still targeting kind of that 50%. On the low side, kind of high 40s, but kind of right around 50% is what we're targeting.

The next question is coming from Kevin Liu from K. Liu & Company.

Maybe just a follow-on to some of the production schedules mentioned earlier. You have that double-digit number of customers in your pipeline that are in preproduction mode. Once they get to that late stage, how long does it typically take before you start to see them contribute more meaningfully to your growth?

Once they get to preproduction, Kevin, so preproduction is quite a long way. I mean a lot of -- it's a very strong part of the pipeline process -- pipe cleaning process. So typically, that's about 3 months away, I think 1 quarter away at the most. Once a customer gets to that point, they're well down the path. Things -- like some of the more fundamental things like, for example, regulatory approval. By then they've normally got it. They've got -- like if there's any late parts in their -- kind of in their bill of material. So there are a few things. But typically, once you see a customer at preproduction, it's about 3 months away.

Sounds good. And I know you can only say so much about kind of that lead tactical defense customer you have, but you did mention some additional trials before they get to more meaningful long-term revenues for you guys. How long do you expect some of these trials to go before you get to that?

Yes, they've got trials. I mean there's trials coming up at Christmas. I think we'll see real production from these guys. I mean what they're telling us now, it looks like we'll start to see the real production for that in the second half of '26. But obviously, we'll have to place orders before then, but that's kind of the timing we're looking at, which net-net is about that 15 to kind of like, call it, 5- to 6-quarter lag from the time we engage to the time we're in full production. So pretty typical. But frankly speaking, that -- it's a very complex product. We would put a lot of effort into it. But I mean, just to give you like a quick example, I mean, our power consumption was cut down like 20x from our standard power consumption. So when we see these new opportunities once in a while, we have to make a contribution to get that product to market as well, in case it took some time, but that will be about a 5- to 6-quarter lag time from the time we engage. But we're seeing for that customer second half of '26.

Got it. And with some of the adjacent market opportunities you pointed out and these customers evaluating your products, can you talk a little bit about kind of the pipeline of NRE opportunities and how much if any sort of additional research or customization might need to occur to win these customers?

Well, it turns out -- there's kind of 2 buckets. And just to clarify, I mean, I tried to clarify on the call, Kevin, but really, what's interesting about these opportunities is historically, we're very good at doing video. But this is really -- let's take a VR headset. That was video going to the VR headset. The change on the examples that we gave is like cameras within the device like either in a self-driving car or maybe in like AR glasses. That's video coming out of the device. And it turns out there's no good way to do that wirelessly today, except for Peraso. So it turns out there's 2 different buckets. One bucket is with our existing chips. Again, still requires some NRE to get those things to market, but they want to move very, very quickly. The other bucket is actually customization of chips. That will take longer, but kind of a much bigger deal. So I would say that those are the 2 categories we're looking at in terms of NRE and kind of with our existing chip, but also almost more exciting -- not more exciting, but as exciting is the opportunity to do silicon spins for these specific applications as well. We wouldn't do it unless it was a big deal.

Yes. Understood. And then just lastly, maybe for Jim. For your Q4 guidance, curious how much more memory revenue there is from that deal you guys announced last quarter? And if because of that higher margin revenue, we should assume kind of gross margin increases on a sequential basis?

Yes, there's still -- we had press released those memory orders a couple of weeks back. There's still about 375,000 of memory shipments in this current fourth quarter, which will be pretty high margin. It will definitely lead to improvement there. I think we'll kind of see margins in the fourth quarter kind of around where they were in the third quarter with that memory benefit coming in, kind of mid-50s.

And there were no other questions at this time. That does conclude today's Q&A session. And this also does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Thank you.