Peraso Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Financial statements are unaudited; amounts below are in U.S. dollars unless noted. Peraso develops and sells mmWave semiconductor devices and modules, and also sells memory ICs, engineering services, and technology licenses.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Net revenue | $3.294 million | $2.018 million | $10.981 million | $3.816 million |
| Gross profit | $1.294 million | $1.099 million | $4.234 million | $1.843 million |
| Gross margin | 39% | 54% | 39% | 48% |
| Operating expenses | $5.305 million | $4.442 million | $22.017 million | $13.227 million |
| Net loss | $4.008 million | $3.821 million | $17.805 million | $13.407 million |
| Net loss per share, basic and diluted | $0.20 | $0.73 | $0.89 | $2.55 |
Revenue growth reflected memory IC sales, which entered the consolidated business following the December 2021 reverse acquisition, and increased mmWave module shipments. Q3 product revenue rose 120% year over year; royalty and other revenue declined 63% to $234,000. For the first nine months, product revenue rose 244%, while royalty and other revenue declined 25%.
Gross margin declined as modules, which carry lower margins than ICs, made up a larger share of shipments. R&D and SG&A also increased, in part because 2022 included the acquired MoSys operations and because prior-year results included Canadian subsidies. Nine-month 2022 results also included a $2.557 million operating gain from the Intel transaction.
At September 30, cash and cash equivalents were $2.852 million and short-term investments were $1.071 million, totaling approximately $3.9 million; working capital was $9.0 million. Operating cash use was $13.419 million for the first nine months, compared with $7.057 million a year earlier. Investing activities provided $10.439 million, mainly from maturities of investments; financing activities used $61,000. Total liabilities were $5.017 million, including $1.187 million of lease liabilities. The balance sheet reports no outstanding borrowing debt.
Accumulated deficit was $135.004 million. Management said cash, cash equivalents, and investments were insufficient to fund operations for the next 12 months and that substantial doubt existed about the company’s ability to continue as a going concern absent additional financing. Peraso was seeking financing; no assurance was given that it would be available on acceptable terms.
Material changes, outlook, and risks
- Intel license and asset assignment: Under an agreement dated August 5, 2022, Intel paid $3.0625 million at closing for an exclusive license to specified technology and assignment of certain patents. A further $437,500 was contingent on release criteria, expected to be addressed within six months of closing. Peraso recorded a $2.557 million net gain in Q3; any gain on the holdback would be recognized when criteria are met. Management expected the transaction to reduce annual operating expenses by approximately $2.7 million.
- Management outlook: Peraso expected revenue to increase for the remainder of 2022 and in 2023, citing mmWave product growth, a full-year contribution from memory products, expected module customer demand, and price increases. Management expected memory product sales to grow over the next 12 months, but noted the products have been in production since 2014 and their longer-term outlook is uncertain. It also expected higher 2022 R&D and SG&A expenses than in 2021. These statements are forward-looking, not guaranteed guidance.
- Customer and collection exposure: WeLink represented 28% of nine-month revenue. Peraso had $0.7 million of receivables from WeLink and recorded a $0.7 million doubtful-account allowance due to collection delays. Two customers represented 60% of accounts receivable at quarter-end. Peraso also deferred recognition for $1.1 million of shipments to WeLink because revenue-recognition criteria were not met, and deferred $0.6 million of related cost.
- Other risks: The filing cites ongoing losses and financing needs, supply-chain lead times and higher costs, inflation, possible customer delays or reduced purchases, and macroeconomic uncertainty including COVID-19 and the Russia-Ukraine conflict. Higher inventory levels increase inventory risk. No material legal proceeding was reported.
- Reporting comparability: The December 2021 transaction was accounted for as a reverse acquisition, with Peraso Tech as accounting acquirer. Prior-year periods therefore do not include MoSys operations, limiting comparability with 2022. The filing also reclassified certain intangible amortization expenses between cost of revenue, R&D, and SG&A; the reclassification did not change net loss or cash flows.
Important facts for investors to verify
- Financing plans, cash burn, and liquidity runway, given the going-concern warning and $13.419 million of nine-month operating cash use.
- Whether the Intel holdback release criteria were satisfied and the related payment and gain were recognized.
- WeLink collections, the adequacy of the doubtful-account allowance, and whether deferred shipments qualify for revenue recognition.
- Whether module sales and pricing improve revenue without further eroding gross margin, and whether memory product demand supports management’s outlook.
- The filing contains inconsistent MD&A figures for nine-month net loss and accumulated deficit; the financial statements and notes report $17.805 million and $135.004 million, respectively, and should be checked against the filed statements.