Peraso Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; unaudited. Peraso is a fabless semiconductor company selling mmWave products and memory ICs, along with engineering services and technology royalties and licenses. Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Net revenue | $2.403 | $4.284 | $7.436 | $7.687 |
| Gross profit / margin | $0.608 / 25% | $1.485 / 35% | $2.535 / 34% | $2.940 / 38% |
| Operating loss | $(5.037) | $(7.036) | $(8.833) | $(13.772) |
| Net loss | $(4.086) | $(7.043) | $(7.234) | $(13.797) |
| Net loss per share, diluted | $(0.17) | $(0.33) | $(0.32) | $(0.64) |
Q2 revenue fell 44% year over year, primarily because antenna-module shipments declined sharply; first-half revenue decreased 3%. First-half product revenue included $3.798 million of memory ICs, $2.038 million of mmWave ICs and $1.283 million of mmWave antenna modules. Cost of revenue included approximately $0.3 million of Q2 inventory write-downs and $0.6 million for the first half, primarily related to mmWave inventory.
Operating expenses fell year over year, reflecting cost reductions: R&D was $3.668 million in Q2 and $7.555 million for the first half; SG&A was $1.977 million and $4.219 million, respectively. Peraso recorded a $0.966 million Q2 noncash gain from the change in fair value of warrant liabilities ($1.624 million for the first half). The first-half results also included a $0.406 million gain on the Intel license and asset sale, recorded as a reduction of operating expenses.
Cash, liquidity and obligations
- At June 30, cash and cash equivalents were $2.146 million and short-term investments were $0.594 million. Total assets were $17.950 million; total liabilities were $6.909 million and stockholders’ equity was $11.041 million.
- Operating cash use was $3.574 million for the first half, compared with $11.562 million in 2022. Investing activities provided $0.409 million and financing activities provided $3.483 million, including approximately $3.6 million net proceeds from the June stock-and-warrant offering. Cash increased $0.318 million from year-end.
- The balance sheet reports current assets of $10.126 million and current liabilities of $2.942 million. Management separately reports working capital of $8.0 million; the balance-sheet amounts imply approximately $7.184 million, a difference investors may wish to clarify.
- No conventional borrowings are presented on the balance sheet. Liabilities include $0.813 million of lease liabilities and $3.618 million of warrant liabilities. The company had $2.2 million of non-cancelable inventory purchase orders and $2.9 million of non-cancelable CAD software purchase orders.
Material changes, outlook and risks
- Going concern and funding: Peraso reported a $7.2 million first-half net loss, a $156.8 million accumulated deficit and substantial doubt about its ability to continue as a going concern within one year. Management said current cash, investments and expected receipts were expected to fund planned operations into Q4 2023, but additional funding or significant spending reductions would be needed before year-end. There is no assurance financing will be available on acceptable terms.
- Memory product end-of-life: TSMC, the sole foundry for Peraso’s memory IC wafers, is discontinuing the necessary manufacturing process. Peraso began an end-of-life process and expects to fulfill customer orders during 2024 and 2025, with shipments intended to end in 2025. Memory ICs represented over 40% of first-half 2023 revenue; order timing, supply and customer schedules affect expected shipments.
- Strategic alternatives: Peraso engaged an investment bank to explore alternatives, including a merger or asset sale. No decision or timetable was established, and there is no assurance of a transaction.
- Cost reductions: The company said its February 2023 initiatives were intended to reduce annualized operating expenses by approximately $5 million. It expected R&D and SG&A expenses to decrease in 2023 compared with 2022; no specific revenue or profitability guidance was provided.
- Customer and inventory concentration: Two customers represented 69% of Q2 revenue (46% and 23%); one customer accounted for 74% of accounts receivable at June 30. Inventory obsolescence, customer orders and collections could affect results and liquidity.
- Nasdaq listing: Peraso received a minimum-bid-price deficiency notice in February and did not regain compliance during the initial period. Nasdaq granted an extension through January 29, 2024; the company must meet the applicable $1.00 bid-price requirement to avoid potential delisting.
Important facts for investors to verify
- Whether Peraso secures financing or completes a strategic transaction, and whether liquidity extends beyond the disclosed Q4 2023 runway.
- Customer purchase orders, deposits, foundry supply and shipment timing for the memory IC end-of-life program.
- Revenue recovery and gross-margin trends, especially mmWave product demand, product mix and inventory write-downs.
- Customer concentration, collections and the reported working-capital difference between management’s figure and the balance-sheet calculation.
- Nasdaq bid-price compliance by January 29, 2024, and the dilution and potential share issuance associated with outstanding warrants and equity offerings.