Peraso Inc. (PRSO) Earnings Call Transcript

Good afternoon, and welcome to Pareto Inc.'s Second Quarter 2026 Conference Call. At this time, all participants a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, August 11, 2026. The 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 Pros' Second Quarter 2026 financial results. I'm Jim Sullivan, CFO of Parosso; and joining me today is Ron Globe, 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 Parosa's website at parussoinc.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 the IR website. . As a reminder, comments made during today's conference call may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical fact could be deemed as forward-looking. Carasso 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 or technologies. Any statements regarding the sufficiency of the company's capital resources and its ability to continue as a going concern. Any statements regarding customer demand forecasts and concentration risk. And any statements related to prospective future financing arrangements or capital transactions and the evaluation of our pursuit of strategic alternatives. All forward-looking statements are based on information available to Prasco on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Prasco'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 Process public filings with the SEC. Carasso 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 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 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 page of our website. I'll now turn the call over to our CEO, Ron Glibery, for his prepared remarks. Ron?

Thank you, Jim. Good afternoon, and welcome to everyone on the call and webcast. We appreciate you taking the time to join today's call. As reported in our press release this afternoon, revenue for the second quarter increased approximately 36% sequentially and was above our previous expectations. The sequential growth primarily reflected our successful depilment of a previously delayed order shipment to a new fixed wireless access customer. Despite the better-than-anticipated top line results this quarter, our overall business continues to be impacted by a combination of macro-related headwinds and irregular order patterns across our existing customer base. . With limited ability to influence certain underlying market dynamics, particularly those affecting our leading fixed wireless access customers, we remain focused on the elements of the business we can control. These include operational efficiencies and ongoing cost management and enhancing the resilience of our supply chain while continuing to cultivate extensive customer engagement across our target end markets. Turning to Slide 4. Across each of our target end markets, we continue to be encouraged by the growing recognition of 60 gigahertz millimeter wave technology and its inherent performance benefits over conventional wireless communication solutions that operate in lower frequency bands. Historically, the most prevalent commercial applications for 60 gigahertz technology has been fixed wireless access. While this continues to be the largest and most mature end market for Perazzo, the rapid proliferation of AI and associated demand for hardware in support of AI infrastructure has led to significant market dislocation. With respect to fixed wireless access, this includes customers navigating persistently elevated memory prices and the constrained supply of other key components. We believe this has and is continuing to contribute to subdued purchase order activity and limited near-term visibility into future customer demand. While these current market dynamics are expected to extend into the fourth quarter, the value proposition of 60 gigahertz millimeter wave technology and fixed wireless application is its commercially proven ability to overcome interference and capacity limitations in congested wireless environments. As such, we believe we are positioned to benefit once the current supply dislocations moderate and order patterns normalize. Having said that, it's become increasingly clear over the past 12 to 18 months, that the inherent benefits of 60 gigahertz millimeter wave technology extend beyond traditional fixed wireless access applications. We continue to engage with prospective customers and partners seeking to utilize our 60 gigahertz solutions to address real-world challenges encountered in other end markets, namely in autonomous edge AI unmanned aerial vehicles and defense communications applications. Today, we are actively engaged on a combination of new and existing opportunities to leverage Perrazzo's proven 60 gigahertz technology in both of these high-value end markets. Turning to Slide 5. I want to start with the substantial emerging market opportunity that we see for our technology and emerging edge AI and associated autonomous systems application, whether it's operating a fleet of autonomous vehicles, a storm of drones or a factory or pool of robots, implementing Edge AI at scale creates a fundamental bandwidth challenge. These platforms typically require the continuous upload of massive volumes of sensor and camera data as well as the download of large AI models and software updates. This often entails not only multi-gigabit data transfers, but doing so well operating in close physical proximity to many other independent autonomous devices, traditional 5 gigahertz WiFi technology struggles in these types of environments due to limited spectrum. Additionally, omnidirectional coverage creates widespread co-channel interference or overlapping of wireless signals as the number of devices share in the same channel increases, the throughput collapses in latency becomes unpredictable. With 60 gigahertz technology, we utilize highly directional narrow beams. That directional nature significantly reduces co-channel intraperence, allowing numerous simultaneous multi-gigabit length to operate reliably inside the same physical footprint with deterministic low latency performance. This isn't just conceptual. In June of this year, we completed a customer demonstration with our partner, work that put these advantages on full display. Together, we created a simulated drone wireless environment and successfully operated a high-capacity network cluster that achieved a peak aggregate data rate of more than 50 gigabits per second. Within the combined space of a large room, we simultaneously transmitted several independent multi-gigabit streams, something conventional sub-6 gigahertz technology struggled to do at that density without severe interference. The demonstration also underscored 2 additional attributes that are critical for autonomous and mission-critical systems. The inherent low probability of intercept and detection of 60 gigahertz lengths and the ability when combined with Bioworks network synchronization technology to maintain coordination without reliance on GPS, that GPS independence is particularly valuable in contested or GPS-denied environments. Looking ahead, we see applications in both defense, especially emerging drone form tactics and commercial settings, such as automated factories, where large fleets of robots require high-capacity interference-free connectivity. The Bioworks collaboration is a strong example of how complementary 60 gigahertz technology can address real-world applications, the traditional wireless architectures were not designed to solve. As we've introduced on previous conference calls, many of these fundamental characteristics of 60 gigahertz are equally, if not more, critical and defense and tactical communications applications. Turning to Slide 6. I want to highlight 1 of the most unique applications of our technology within the tactical communications space, iApp app, which stands for identification brander system. It goes without saying today's increasingly modern Battlefield is a complex and congested environment, the ability to rapidly and reliably distinguish friendly assets from hostile One is mission-critical, traditional IFF systems operate by transmitting what's known as an interrogation signal and receiving authenticated responses. These signals or links can be detected, jammed or so, exposing troops and assets to devastating consequences, including friendly fire incidents. The gigahertz technology is designed to meaningfully upgrade the performance of an IFF system in 3 ways. First, the highly directional narrow beam makes the communication link inherently difficult for an average are to detect or intercept. Second, that same directional beam, combined with the physical properties of the 60 gigahertz band substantially reduces the risk of spooky or successful jamming. Third, we have integrated our solutions to deliver these capabilities in a compact low-power form factor, this makes it ideal for size, weight and power constrained platforms such as unmanned aerial systems, or UAS. In partnership with our previously announced lead defense contracts are intact, we are continuing to make solid progress on the refinement and testing of next-generation drone IPF solutions. This system is purpose-built for highly contested electronic warfare environments and is designed to enable secure real-time mutual authentication between friendly, drones and ground forces. Following our delivery of initial limited production modules earlier this year Feedback on this jointly developed solution continues to be positive, which we believe is meaningful validation of Perrazzo's 60 gigahertz technology for IFF applications. More broadly, the combination of stealth oriented design, anti-jam resistant architecture and compact integration is generating expanded interest from additional prospective customers and partners seeking to evaluate the benefits of 60 gigahertz for their future product road maps. With that foundation, let me turn to the wider opportunity we see in unmanned aerial systems communications. Moving to Slide 7. Building on the initial foundation from our ongoing work on IFF applications, we have identified and are beginning to target broader opportunities for our 60 gigahertz solutions and unmanned aerial systems. In fact, the rapid growth of UAVs and related systems, especially in defense and security applications has helped to increase the awareness and the limitations of traditional sub gigahertz radio lakes. These legacy systems are increasingly susceptible to wireless, congestion, relatively easy to detect and vulnerable to jamming in contested electromagnetic environments. Additionally, modern drones have become highly data-intensive with large arrays of sensors, they are also frequently required to support real-time coordination autonomy and swarm operations. Today's existing on communications infrastructure is challenged to meet all of these demands. 60 gigahertz millimeter wave technology is designed to enable a fundamentally different solution for modern new AS platforms. Instead of broadcasting energies broadly, it utilizes highly directional high-capacity data lakes. Atmospheric oxygen absorption further limits long distance propagation, reducing the probability of detection or interception outside the intended top. Adaptive beam forming is the foundational capability that makes this possible. enabling precise energy steering and spatial filtering of interference and high spatial use of multiple independent links can operate concurrently without overlapping interference. As seen on the slide, the narrow point-to-point math of 60 gigahertz beams are virtually impossible to detect and extremely difficult to jam. The highly directional beam makes alignment by GAM are difficult, while oxygen attenuation further weakens potential interfering signals. Since by definition, the band is unlicensed 60 gigahertz also avoided interparts with licensed spectra. Bringing all of these elements together, this week, we expanded our product portfolio with the formal introduction of [ Parazo'sPRM2145 ] and this new jam-resistant communications module is purpose-built for unmanned aerial vehicles, autonomous systems and defense applications. The PRM 2145 leverages our proven 60 gigahertz platform to deliver secure ultra-low latency gigabit class performance in a lightweight compact form factor optimized for airborne platforms. It is designed to support robust command and control lengths, high-definition video, ISR data transport, identification friend or for communications and drone to drone networking. This new module is expected to be available for customer evaluation in the fourth quarter, supporting integration across a broad range of unmanned and autonomous platforms. We believe the PRM 145 further strengthens our early entry position in these high-value add markets while also reinforcing our strategy of diversifying Parazo's future growth beyond our core fixed wireless access business. Turning to Slide 8. Before my concluding remarks, I want to briefly highlight 1 other real-world application and the opportunity that we are actively engaged in development of with a prospective customer. Today, the current landscape within defense, tactical communications is rapidly driving the evolution of next-generation solutions. One real-time example of this is hybrid UAV networks. In these architectures, 60 gigahertz communications links are combined with other transport layers, such as satellite backhaul or selective fiber to deliver high capacity, low latency connectivity while still maintaining the intended stealth and antigening benefits of millimeter wave technology. As visualized on this slide, this hybrid approach allows operators to optimize a complete end-to-end network for range, resilience and mission flexibility in contested or GPS-denied environments. I wanted to briefly share this example of a hybrid UAB network on today's call opportunities. First, it reflects the type of advanced system design work that we are actively collaborating with partners to solve and work toward bringing to market. And second, I believe it further illustrates the expanding role of 60 gigahertz can play beyond traditional point-to-point or fixed wireless use cases. In closing, our near-term focus remains firmly on the areas within the company's control. We continue to take steps to strengthen the resilience of our supply chain and reduce single supplier bottlenecks while also reducing to secure additional distribution partners that will expand the market reach of our 60 gigahertz millimeter wave portfolio. Our highest priority is driving commercial traction, converting existing customer engagements proof of concepts and technology demonstrations into design wins, purchase orders and production revenue that can support renewed top line growth. While near-term visibility, particularly within fixed wireless access remains limited due to external market dynamics and irregular order patterns, the breadth of our current engagements and the growing recognition of 60 gigahertz differentiated capabilities makes us optimistic for the future. With that, I'll turn the call over to Jim for a detailed review of the financial results for the quarter.

Thank you, Ron. Turning to the results for the quarter. Total net revenue for the second quarter was $1.3 million compared with $1 million for the prior quarter and $2.2 million for the second quarter of 2025. Product revenue in the second quarter was $1.2 million compared with $0.7 million in the prior quarter and $2.2 million in the second quarter of 2025. The sequential increase in product revenue for the second quarter of 2026 was attributable to higher shipments of millimeter wave products. Sales of our legacy memory and related products were less than $25,000 in each of the first 2 quarters of 2026. We recorded no sales of legacy memory and related products in the second quarter of 2025. We -- gross margin was 63.7% in the second quarter compared with 61.5% in the prior quarter and compared with 48.3% in the year-ago quarter. The sequential increase for the second quarter of 2026 was primarily attributable to millimeter wave product mix, including increased sales of inventory written down in prior periods, as partially offset by a decrease in nonrecurring engineering services or NRE revenue. The year-over-year increase was primarily attributable to an increase in NRE revenue and millimeter wave product mix. combined with an increase in sales of inventory written down in prior periods as partially offset by a decrease in sales of memory and related products. GAAP operating expenses for the second quarter of 2026 were $3.1 million, consistent with the prior quarter and compared with $2.9 million in the second quarter of 2025. Non-GAAP operating expenses, which excludes stock-based compensation, were $2.9 million in the second quarter, consistent with the prior quarter and compared with $2.7 million in the second quarter of 2025. Our recent non-GAAP operating expenses level of approximately $2.9 million per quarter continues to reflect the benefits realized from previously implemented cost reductions and our ongoing cost containment initiatives. GAAP net loss for the second quarter of 2026 was $2.2 million or a loss of $0.16 per share compared with a net loss of $2.5 million or a loss of $0.22 per share in the prior quarter and compared with a net loss of $1.8 million or a loss of $0.31 per share in the same quarter a year ago. Non-GAAP net loss, which excludes stock-based compensation and changes in fair value of warrant liabilities, for the second quarter of 2026 was $2.1 million or a loss of $0.15 per share. This compared with a non-GAAP net loss of $2.3 million or a loss of $0.20 per share in the prior quarter. and a net loss of $1.7 million or a loss of $0.28 per share in the same quarter a year ago. The weighted average number of basic and diluted shares outstanding for purposes of calculating both GAAP and non-GAAP EPS for the second quarter of 2026 was approximately 14.1 million shares. Adjusted EBITDA, which we define as GAAP net income or loss as reported excluding stock-based compensation, change in fair value of warrant liabilities, interest expense, depreciation and amortization and the provision for income taxes was negative $2 million in the second quarter of 2 and compared with negative $2.3 million in the prior quarter and negative $1.6 million in the second quarter of 2025. With regard to the balance sheet, as of June 30, 2026, the company had approximately $3.3 million of cash compared with $2.7 million as of March 31, 2026. The net increase of approximately $0.6 million in the company's cash balance at quarter end reflected approximately $2.4 million of net proceeds from sales under the company's at-the-market offering program during the second quarter of 2026. As of today's call, the company has approximately 15.1 million shares of common stock to an exchangeable shares outstanding. As previously disclosed, the company has been exploring potential strategic alternatives, including a merger, sale of assets or other similar transactions as well as various potential sources of additional capital. On June 30, 2026, the company entered into a committed equity facility with low principal investments. This facility allows, but does not obligate the company to issue and sell up to $25 million of shares of its common stock. In addition to providing access to additional working capital for general corporate purposes, the facility is expected to support continued product development targeting expanded opportunities in drone, defense and tactical communications markets. Independent of the newly entered equity facility, we don't have any updates to share today in the company's broader strategic review process. As Ron previously mentioned, overall visibility into future near-term demand remains challenging due to the regular order patterns from our fixed wireless access customers. Due to insufficient visibility, we will not be providing quarterly guidance on today's call. This concludes our prepared remarks, and we thank you for your time this afternoon. Operator, please commence the Q&A session.

[Operator Instructions] Your first question is coming from Jon Hickman from Ladenburg.

So this this new communications strategy. So who did you say your partner was again that you're working with to design for the like the factory floor and UAVs and all that.

Are you referring to the final slide .

No, the No, is the third to the last one, showed all the robots and stuff. .

Yes. Well, that -- again, it's obviously still confidential, John. But the concept there is I think what's really insightful about that situation is that in the -- and you've seen this a lot in the U.S. as well as China, with humanoid robots which are basically have full freedom. The models are complicated. So it turns out that data flow between the network and the human robots are substantial. That's where our chips come into play. And if you look at that, I love that slide because actually that slide just shows you the benefit of our technology over traditional wireless technology, which is that we have a very narrow very, very physically limited area of operation. versus traditional wireless, which has a very wide field of operation. And that's why we win in to circumstances. So we really see that market as an important emerging market because of that capability of our technology. So I hope that slide got the message across. I think it did. But I mean that's really the concept behind it.

You said you'd have chips available for -- for people to experiment or see if they work and by the end of the year in the fourth quarter?

Lunar ships no, no, what we meant to say was our chips are available now -- the only concern about -- we -- overall, we have run into an issue. We've seen this with other companies whereby the availability of third-party memory like DDR4, DDR5 is limiting sales. and making orders kind of lumpy. So that's what I was referring to. As far as the silicon for that application, we are in full production, and it's available today. .

So what were you talking -- when you said you would have ships available for in the fourth quarter .

We have a new -- yes, we have a new module product based on our existing silicon. And the new module, we did a press release yesterday, and that is called the PRM is that -- I think that's what -- so that's a new module with some -- you have to go on our website to see the specific technical details. But basically, it's another part of our module family based on our existing silicon, of course, the significant change to that particular product is, again, a new antenna, which we design in-house ourselves. So we've got the ability to change the antenna to provide different RF characteristics.

Okay. And then you've been working with some partner, I think, in Israel. On the friendly fire thing for a while now, more than -- so are you generating revenues there?

Well, we definitely have generated revenue there, substantial revenue, 7-figure revenue from 2 perspectives. One perspective is from an engineering perspective, and we actually have shipped volume Generally, I would say what we're seeing is originally that business and still is based on what we call inventory -- but actually, we're starting to see a shift over to the drone application as well. So just you can imagine the need for family fire in circumstances where you've got a drone and inventory on the ground. And then Drone wants to make 100% sure that it's not targeting ground personnel. So it's really an evolution of that model from kind of ground-based communications to aerial based communications. So we're starting to see that transition. And we really do anticipate more volume from that customer over the next few quarters.

So this this issue of drones being jammed or their communication interrupted to make them an effective -- so theoretically, every drone should have millimeter microwave on it so that it can have.

Yes, theoretically. And frankly speaking, that again, that is a core value proposition. So from our perspective, we've always had this capability. What's changed over the last year, John, is the fact that traditional wireless technology that was used to controlled drone now is getting jammed by the enemy. So we frankly see our really our technology potentially going -- and we have to keep in mind, this is really more for military and security applications where the user wants to avoid being jammed by the end of. Obviously, if you just find a drone and a wedding and you want to take some pictures, I mean, not really necessarily requirement for anti-jamming -- but frankly, for military and security applications we're seeing very, very strong interest there, and you're going to see a lot of announcements from us over the next few weeks and months. As a matter of fact, that was the announcement we made yesterday was a specific new module for the drone application. So we see it as a very, very important part of the drone rollout over the coming years.

So can you -- so it's kind of a defensive technology, you're preventing communications interruptions on the drug. Can you turn it around and make it an offensive like use it to more precisely interrupt other people stones? Or is that not a