Good afternoon, and welcome to Peraso, Inc.’s First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. Following the company’s prepared remarks, instructions will be given for the questions-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded today, Monday, May 9, 2022. I would now like to turn the call over to Peraso’s CFO, Jim Sullivan. Please go ahead.

Good afternoon and thank you for joining today's conference call to discuss Peraso’s first quarter 2022 financial results. I'm Jim Sullivan, CFO of Peraso, and joining me today is Ron Glibbery, our CEO. This afternoon we issued a press release and related Form 8-K, which was filed with the SEC. 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 may be accessed through the webcast link on our IR 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 in reliance on forward-looking statements. These statements include without limitation any projections of revenue, margins, expenses, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net income or loss, cash flows or other financial items. Also any statements concerning the expected development, performance and market share, or competitive performance relating to our products or technologies. All forward-looking statements are based on information available to Peraso on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Peraso’s 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 SEC. Peraso 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. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide 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 section of Peraso’s website. Now, I would like to turn the call over to our CEO, Ron Glibbery for his prepared remarks. Ron?

Thank you, Jim. Good afternoon and welcome to everyone joining us over the phone and via webcast. I look forward to providing an update on our business, and highlighting a few of the milestones we’ve achieved since our last conference call. With the first full quarter of combined operations completed following the close of the transaction between Peraso and MoSys in December, I'm very pleased with the team's execution in our results. Significant integration activity has been completed and we continue to evaluate potential cost synergies to maximize overall operational efficiencies. In terms of our results, revenue in the quarter increased over 200% year-over-year and we continue to experience increased adoption of our mmWave solutions from fixed wireless access. Before getting into more detail on our progress during the quarter, let me first provide a brief overview of the company for those that may still be new to the story. Although new to the public markets, Peraso has been in the mmWave business for over 12 years and has been an industry leader in the development of 5G mmWave silicon in modules. 5G mmWave is a revolutionary cellular technology providing access to significant additional bandwidth and capacity and frequency bands between 24 and 100 gigahertz. Once deemed impossible by skeptics, 5G mmWave is now embraced by the wireless ecosystem as a critical enabling technology that continues to gain momentum globally, which differentiates us from other companies that talk about mmWave technology is that our high performance [indiscernible] solutions have been field proven and we've been shipping in-volume for several years. In fact, today, our 60 gigahertz products are shipping to multiple Tier 1 customers and we have a growing pipeline of design wins and ongoing engagements with additional Tier 1 customers that span multiple end user market applications. The overall…

Thank you, Ron, and good afternoon everyone. It's great to be speaking with you again today. During my comments, I will make several references to non-GAAP numbers. Unless otherwise indicated, referenced amounts exclude stock based compensation expense, amortization of reported intangible assets arising from acquired assets and interest expense. These non-GAAP financial measures and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related current report on Form 8-K, which was filed with the SEC today and can be found at the Investor Relations section of our website or on the SEC’s website at www.sec.gov. Now for our first quarter 2022 results. Total revenue equaled $3.4 million, compared with $1.9 million in the fourth quarter of 2021, and $1.1 million during the same quarter a year ago. Product revenue from the sale of our integrated circuits and modules was $3.2 million, compared with $1.9 million in the prior quarter and $1.1 million in the first quarter of the prior year. The year-over-year growth was driven by shipments of our mmWave modules, which we began shipping in the second quarter of 2021 and a full quarter of shipments of our memory ICs. License and other revenue for the first quarter of 2022 was $0.2 million. License and other revenue primarily consists of NRE services provided to mmWave’s customers, and royalties related to our memory technology. Gross margin was 53.3% in the first quarter, compared with 30.4% in the prior quarter and 43.8% in the year ago quarter. The sequential increase in gross margin in the first quarter reflect a more favorable product mix and to a lesser extent, the previously referenced contribution from license and other revenue. Product gross margin was 50.4% in the first quarter, compared with 31.4% in the prior…

Certainly. [Operator Instructions] Your first question is coming from David Williams from Benchmark. Your line is live.

Thanks so much. Appreciate you let me ask a question and congrats on the progress and the quarter, definitely making some nice headway here.

Thanks David.

Yeah. Maybe, Ron, firstly, as you kind of think about just the tractions you've received on the recently introduced Wave beamformer IC, what do you think that adds in terms of incremental market opportunity? And then can you maybe talk about some – just the engagements that you're having now? How has the traction been and what do you think that can mean for the business for this year?

Thanks, David. Thanks for the comments. And well, certainly we feel that our existing mmWave opportunities are growing. We expect to see continued growth. I think Jim shared our Q2 forecast. So, we're feeling very good about our existing business. And frankly speaking, I think that's just going to get better as we've introduced the PERSPECTUS line of modules that that we released earlier in the quarter. If you kind of take a look at that, you'll see that we really will become the dominant player in that existing market. And of course the 5G is the next generation. I mean, we really have introduced, but we believe is the most integrated 5G being former for that market in the market. So, we don't expect to see 5G revenue this year. We expect that to be the existing business, albeit growth, but we do expect to see good growth from the 5G business moving forward in 2023.

Okay. Fantastic. And then maybe if you think about your product roadmap, obviously the beamformer is a very nice add to that portfolio, but what do you think in terms of that growth or the additional components or maybe adjacent opportunities to think about the portfolio? How do you think that trends? Are there other things in the pipeline you think will give you increased scale and size in terms of market? And then maybe what are those type of products look like?

Well, if you look at the presentation that we did earlier, from our – what's very important to keep in mind about our 5G product is that it's a scalable architecture. First of all, it actually supports dual-band in the 5G space. So that's actually very important. It's a 28 and 39 gig band. And so for carriers, particularly in the U.S. the ability to support both those bands simultaneous in one piece of silicon really leads to a new, really price point – price performance point in that market. So, our plan moving forward, it was to start with this, but really to scale it down to not just the fixed wireless market, but really a broad range of products, including laptops, tablets, and hotspots in that 5G space. I think over the next three years, you're going to see real growth in Peraso, not just with this existing process beamformer, but with a whole family of products using that same architecture that we scale to a variety of products in the 5G space.

Thanks very much for the color there. And maybe just a couple more here for you, if you don't mind.

Sure. Sure, of course.

As you kind of think about the macro environment and the CapEx spending cycles, how do you think your business performs through the cycle? And do you think you have maybe a little better isolation from the consumer volatility, just kind of in that, in your current business just given where your in-markets are in your typical customer base?

Well, I mean, one thing we're seeing very, very consistently is use of wireless to wireless spectrum is on a growth. It really and I think this is well documented that the mobility, the spectrum, and the capacity of the mobile networks or the usage is increasing at exponential rate. So, that's what we're tapping into, is that use of wireless, web wireless spectrum. And so, we see that today with our existing products and we see that trend continue and over the next, really for the foreseeable future. I mean that's really what our business is all about, is really addressing that what we see as exponential growth in the use of the mobile spectrum.

Okay. And Jim, maybe one for you real quick on the gross margin side. Just kind of thinking about the more favorable mix and the components pricing and the different things that go into the gross margin, how should we think about that longer-term? You talked about your longer-term margin being that 50% something, but how do you think that trends and I guess this quarter, how much of that was from pricing and how much was simply just from that mix shift?

This quarter it was primarily driven by the mix shift. We had meaningful contribution from our memory ICs that have 60% plus gross margins. That's a legacy business. We have existing customers. We’re pleased with the backlog and visibility there, and we had put through some price increases last year like everyone is doing. So, we're benefiting from those now. On the – we talked about I think in the fourth quarter call with regard to the modules, you know, we’re still, we've just been shipping those products less than a year, and working on margin improvements with scale. We just need scale there. And we have a pretty comprehensive plan to bring those further up, but frankly, we were quite pleased with the – where the margins came up this quarter and hopefully here the next couple of quarters, kind of keep it in the low 50s. We may have some dips and of course we always benefit from the license and other, whether it's performing in a reservices formula, new mmWave customers as we work to get them towards production and then some small royalties that come in from our memory side. But we're optimistic, we can kind of keep the 50% plus margins here and drive them higher in 2023.

Thanks. And one last one if I can? Just on the design of pipeline, can you talk a little bit about the engagements that you – you've mentioned some on the call, but maybe walk us through any of the engagements and kind of where you're seeing that strength and maybe just any color around that pipeline would be helpful?

Oh, Jim, you want me to take that?

Yes, that's probably best to you on design [indiscernible] pipeline.

So for the engagements, I mean, we, I think one thing I would just say right front is that our customers are pretty strict with their confidentiality as much as they can, but what we're seeing is engagements with really people or companies, wireless carriers or equipment makers in fixed wireless ecosystem. And so, we continue to grow those engagements. And I think, actually with our PERSPECTUS announcement, I mean, a technology that was very important for us to introduce in Q1 was Point-to-Multipoint. I mean that's really a game changer for the company. And so, the support of Point-to-Multipoint i.e. going from one access point to multiple endpoints completely changes the economics of that space for us. So, we're really starting to see again growth in our engagements and we absolutely believe that will continue to grow throughout every quarter this year and into 2023, but really the point-to-point, the successful introduction of that point-to-point technology was critical for us.

Well, thanks again for the time and it's great to see the progress.

Thank you very much. Thank you your time as well.

Thank you, ladies and gentlemen. This concludes our Q&A session and our conference call. Thank you for attending today's presentation. You may now disconnect.

Thank you.