Peraso Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results are in U.S. dollars; financial statement amounts below are in millions unless otherwise noted.
Business context and comparability
Peraso develops and sells fabless semiconductor products, including mmWave devices and modules, and memory ICs; it also earns royalties and engineering and licensing revenue. The December 2021 acquisition of Peraso Technologies was accounted for as a reverse acquisition, so the 2021 comparative results do not include the acquired memory product line on the same basis. This limits year-over-year comparability.
Financial highlights
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Net revenue | $4.284 | $0.697 | $7.687 | $1.798 |
| Gross profit | $1.485 | $0.262 | $2.940 | $0.744 |
| Gross margin | 35% | 38% | 38% | 41% |
| Operating expenses | $8.521 | $4.691 | $16.712 | $8.785 |
| Operating loss | $(7.036) | $(4.429) | $(13.772) | $(8.041) |
| Net loss | $(7.043) | $(5.430) | $(13.797) | $(9.586) |
| Basic and diluted loss per share | $(0.33) | $(1.03) | $(0.64) | $(1.83) |
- Q2 revenue rose $3.587 million year over year, primarily from memory IC sales and mmWave module shipments. For the first half, product revenue was $7.324 million; royalty and other revenue was $0.363 million.
- Gross profit increased with shipments, but margin declined as mmWave modules, which management says have lower margins than ICs, made up more sales.
- R&D expense was $5.643 million in Q2 and $11.127 million for the half; SG&A was $2.878 million and $5.585 million, respectively. Higher costs reflect the combined operations, investment in product development and the absence of prior-year government subsidies.
- Cash, cash equivalents and investments totaled approximately $6.0 million at June 30, 2022, down from $18.1 million at year-end 2021. Cash and cash equivalents alone were $2.820 million. Working capital was $9.9 million.
- Operating cash use was $11.562 million for the first half, compared with $5.651 million in 2021. Investing activities provided $8.574 million, mainly from investment maturities; financing activities used $0.085 million.
- Total liabilities were $5.871 million, including $1.394 million of lease liabilities. The balance sheet lists no outstanding loan or convertible-debt balance at June 30; the prior-year financing had been repaid or converted in 2021.
Changes, outlook and risks
- Management expected revenue to increase during the remainder of 2022, citing anticipated mmWave sales, 2022 price increases and a full-year contribution from memory products. It also expected R&D expense to increase. The filing provides no numerical earnings or revenue guidance.
- The company reported recurring losses and cash burn, and stated that its available cash, cash equivalents and investments were insufficient for the next 12 months without additional capital. Management disclosed substantial doubt about the company’s ability to continue as a going concern within one year, absent sufficient financing. Potential responses include cost reductions, headcount cuts and curtailed activities.
- Customer concentration is significant: four customers each represented at least 10% of Q2 revenue, and three customers accounted for 80% of accounts receivable at quarter-end.
- Management discussed longer component lead times, elevated supplier and labor costs, inflation, recession concerns, COVID-19 and the Russia-Ukraine conflict. It had identified alternate component sources and raised prices on some products, but noted that the price increases had had minimal impact to date.
- Subsequent event: On August 5, 2022, Peraso agreed to grant Intel an exclusive license to certain Stellar technology and assign certain patents. Intel agreed to pay $3.0625 million at closing and $0.4375 million upon satisfaction of release criteria, and to assume a related services agreement. Peraso expected approximately $2.7 million of annual operating-expense reductions; accounting treatment was still under evaluation.
- The company reported no legal proceeding expected to have a material adverse effect and concluded disclosure controls were effective as of June 30, 2022.
Key facts for investors to verify
- Whether Peraso secured additional financing sufficient to address the disclosed 12-month liquidity shortfall, and the timing and cash impact of the Intel transaction.
- Whether revenue growth converts to improved margins and lower operating cash burn, particularly given the lower margins on module sales.
- Whether major customers sustain purchases and pay on time, given the disclosed revenue and receivables concentration.
- How the reverse-acquisition accounting affects comparisons with 2021 and how subsequent filings report the Intel agreement proceeds and expense reductions.