Good afternoon, and welcome to Peraso Inc's second 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 question and answer session. If anyone needs assistance at any time during this conference call, please press the star key followed by the 0 on your touchtone phone. As a reminder, this conference call is being recorded today, Monday, August 15th, 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 second 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 the 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 gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows, or other financial items. Also, any statements concerning the expected development, performance and market share or competitive performance of 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 statement, including unexpected changes in the company's business. More detailed information about 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. The timing of today's call couldn't be better as it provides a great opportunity to highlight several of the significant developments we've announced in recent weeks. Starting, though, with a brief overview of our revenue results for the quarter. Revenue in the second quarter increased 25% sequentially. It was up nearly 30% year-over-year. Growth in the quarter was driven by record product revenue and more specifically, the continued ramp of Peraso's millimeter wave ICs and modules for the fixed wireless access market. Turning first to our most recent news, last week we disclosed that Peraso entered into a technology license and patent assignment agreement with Intel Corporation.
The agreement primarily includes the transfer of certain memory-related assets related to our MoSys Stellar Packet Classification Platform IP, which are not core to any of our existing lines of business. We anticipate the transaction to result in total gross proceeds to Peraso of up to $3.5 million, which will add non-dilutive cash to the balance sheet and also contribute to a reduction of OpEx going forward. Additionally, as Intel introduces the licensed technology into the market, Peraso, as an Intel Partner Alliance Gold partner, stands to potentially benefit from additional design opportunities for our advanced memory products. It has been a long-standing belief that millimeter wave technology was fundamental to providing the necessary bandwidth, capacity and speed for future generations of connectivity.
As demand for wireless bandwidth continues to grow, we are seeing increasing recognition and buy-in across the industry that millimeter wave technology is the solution for incremental wireless bandwidth, faster access speeds, and more universal access in all geographies. Last month, the Chair of the U.S. FCC, Jessica Rosenworcel, was quoted as saying current users have long surpassed the 25/3 Mbps download/upload standard, which has remained unchanged since implemented in 2015. Proposals to increase the U.S. broadband standard to 120 Mbps in the near term and 1 Gbps/500 Mbps longer term. With existing spectrum tapped out, leading carriers such as Verizon are increasingly embracing millimeter wave technology to increase the speed, reach, and performance of their networks. Millimeter wave is a global technology and solution, and a growing number of large international carriers have begun deploying 5G millimeter wave equipment.
As further evidence, the three largest telecom carriers in China recently commenced formal collaboration to advance the broad use of millimeter wave technology. Leveraging Peraso's field-proven millimeter wave technology and multi-year track record of commercial shipments of our 60 GHz solutions, in May, we introduced our 5G millimeter wave beamformer IC. As highlighted last quarter, we believe 5G millimeter wave solution is the world's most highly integrated 5G beamformer IC. Specifically designed to initially target end user customer premise equipment in the 5G carrier market, our beamformer IC supports all FR2, 5G and our millimeter wave bands. Additionally, our single IC solution integrates Peraso's patented architecture and advanced 5G antenna technology to provide dual stream MIMO support with two independent 16-channel arrays for 32 total channels per device.
I also want to emphasize that our ability to now target the end device market with this new 5G millimeter wave product represents meaningful expansion of Peraso's TAM by an estimated $1.5 billion in 2025. During the third quarter, we will demonstrate the evaluation modules based on our 5G millimeter wave beamformer IC at both Mobile World Congress, Las Vegas, and the European Microwave Conference in Milan. We've also made our 5G millimeter wave solution available for sampling to select customers and partners, and we are focused on building a pipeline of engagements for this product throughout the second half of the year. Turning to an update on the fixed wireless access market, where Peraso continues to build on our established market position as a leading supplier of millimeter wave IC and modular solutions for 60 GHz applications.
The fixed wireless access market continues to demonstrate growing momentum regardless of the data points used to measure, number of service providers, number of subscribers or total fixed wireless connections. Ericsson's mobility report, published in June, includes a series of supporting data highlighted by the forecast of over 100 million fixed wireless connections in 2022, which are then expected to double in 2027. Wells Fargo has predicted that fixed wireless access will account for 60% of net added connections, primarily taking share from what otherwise would be cable modem connections. Another compelling data point from the recent market traction, together, Verizon and T-Mobile reported more than 550,000 new fixed wireless customers in the second quarter alone.
Further supporting the continuation of these current trends, the federally funded Rural Digital Opportunity Fund, RDOF, is poised to provide $20 billion over 10 years to incentivize deployment of broadband network access in rural communities across the U.S. As demonstrated by our solid revenue growth in the second quarter, we continue to make great progress ramping our existing tier one customers while also expanding Peraso's leadership position in the fixed wireless market. As recently announced, in July, we received multiple purchase orders totaling $6.4 million for the combination of our millimeter wave IC and module products for the fixed wireless applications. Although we're not able to refer to them by name, I will say the collective orders came from two well-established leaders in fixed wireless access.
Also notable is that a portion of the orders was for our newly introduced millimeter wave Perspectus modules, which provide customers with comprehensive solutions that significantly reduce their time to market. Our Perspectus solutions also feature multi-gigabit access and Peraso's unique point multi-point capability, as well as superior range, with nearly 10x that of the competing point-to-point offerings. We expect to begin initial fulfillment of these orders late in the third quarter, with ongoing shipments through the first half of 2023. We believe these orders serve as a strong validation of our millimeter wave technology and product roadmap as we continue to expand our pipeline of new customer engagements and work to secure additional design wins and orders in the coming quarters. With that, I'll pass the call back to our CFO, Jim Sullivan, to review the financials and provide our guidance for third quarter.
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, business combination transaction costs, and the change in fair value of warrant liability. 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. Now for our second quarter 2022 results. Total revenue was $4.3 million, compared with $3.4 million in the first quarter of 2022, and $0.7 million during the same quarter a year ago.
Product revenue from the sale of our integrated circuits and modules was $4.1 million, compared with $3.2 million in the prior quarter and $0.6 million in the second quarter of 2021. The sequential and year-over-year growth was primarily driven by the continued ramp in shipments of our millimeter wave modules for the fixed wireless access market. Royalty and other revenue for the second quarter of 2022 was $0.2 million and comprised royalty revenues from licensees. Royalty and other revenue generally consists of our NRE services provided to millimeter wave customers and royalties related to our memory technology. GAAP gross margin was 34.7% in the second quarter, compared with 42.8% in the prior quarter and 37.6% in the year ago quarter.
On a non-GAAP basis, excluding amortization of reported intangible assets, gross margin for the second quarter was 43%, compared with 53.3% in the first quarter of 2022 and 37.6% in the year ago quarter. The decrease in gross margin over the previous quarter primarily reflected increased volume shipments of our millimeter wave modules, which carry higher average selling prices, but lower gross margins than our IC products. Product gross margin was 32.1% in the second quarter, compared with 39.2% in the prior quarter and 27.1% in the second quarter of 2021. As we progress through 2022 and into next year, our corporate gross margin target continues to approximate 50%.
We expect revenue growth will contribute to higher levels of scale and enable us to capture additional production cost reductions on our millimeter wave modules, while also realizing benefits from anticipated ongoing sales of our high margin memory IC products. More generally, I would also add that in the immediate term, we are continuing to see and navigate some of the same inflationary costs in the supply chain that have been cited broadly by other companies across the industry. We've experienced increased prices from our suppliers due to supply chain disruption, inflation, or a mix of both. For certain products, we have increased prices to our customers to mitigate the impacts. Although to date, in 2022, the impacts of these price increases have been minimal.
We have and continue to experience longer lead times for certain components used to manufacture our products, and therefore have increased lead times for our customers. GAAP operating expenses for the second quarter were $8.5 million, compared with $8.2 million in the prior quarter and $4.7 million in the year ago period. Total operating expenses for the second quarter of 2022 on a non-GAAP basis, which excludes stock-based compensation and amortization of reportable intangible assets, were $6.6 million, compared with $6.9 million in the prior quarter and $2.8 million in the same quarter a year ago.
GAAP net loss for the second quarter of 2022 was $7 million, or a loss of $0.33 per share, compared with a net loss of $6.8 million or $0.34 per share in the prior quarter, and a net loss of $5.4 million, or loss per share of $1.03 in the same quarter a year ago. On a non-GAAP basis, net loss for the second quarter of 2022 was $4.8 million, or a loss of $0.23 per share, which excludes the stock-based compensation and amortization of reported intangibles.
This compared with non-GAAP net loss of $5.1 million, or loss per share of $0.25 in the prior quarter, and a net loss of $3.5 million, or loss per share of $0.68 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 2022 was 21.6 million shares. In terms of adjusted EBITDA, which we define as GAAP net income or losses reported excluding stock-based compensation, amortization of reported intangibles, interest expense, depreciation and amortization, and the provision for income taxes.
Adjusted EBITDA for the second quarter of 2022 was negative $4.5 million, compared with negative $4.3 million in the prior quarter, and - $2.5 million in the prior year period. Turning to the balance sheet. As of June 30th, 2022, our cash and investments balance was $6 million compared with $12.2 million in March 31st, 2022. The burn of $6.2 million for the second quarter of 2022 was primarily attributable to the negative EBITDA of $4.5 million, payment of $0.6 million of tape-out and related costs for our 5G beamformer chip, which were expensed in the first quarter of 2022, and timing of collection of $1.1 million of accounts receivables that were immediately received after the end of the quarter.
As Ron previously highlighted, subsequent to quarter end, we completed a technology license and patent assignment agreement with Intel involving certain non-core memory related assets related to our MoSys Stellar Packet Classification Platform IP. The transaction is expected to result in total gross proceeds to Peraso of approximately $3.5 million, of which just over $3 million is payable immediately, with the remaining $0.4 million of consideration expected to be received within no more than six months from the closing date. In addition to serving as a non-dilutive source of capital that adds cash to the balance sheet, in connection with the agreement, four Peraso employees have accepted employment with Intel, and we've also terminated the services of six full-time equivalent consultants.
Collectively, these actions and the elimination of certain associated overhead costs are anticipated to contribute to a $2.7 million annualized reduction in our run rate operating expenses. I would also reemphasize that all of the IP and patents included as part of the agreement were non-core and the associated technology was non-revenue generating. As Ron discussed, entering the third quarter, we have significant backlog that extends well into the first half of 2023, which positions us for growth. The company expects total net revenue for the third quarter of 2022 to be in the range of $4.3 million-$4.5 million. This concludes our prepared remarks, and we will now open the call to questions. Operator, please initiate the Q&A session.
Absolutely. Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please indicate so by pressing star one on your touchtone phone. Pressing star two will remove you from the queue should your question be answered. Lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star one if you have a question or a comment. Okay, the first question is coming from David Williams with Benchmark. Your line is live.
Hey, good afternoon. Thanks for taking the question, and congrats on all the progress. You guys are definitely gaining a lot of momentum here.
Thanks, David.
Yeah. Forgive me if I missed something. I've got a couple of calls in the background, so I might be a little confused here, but just forgive me if I ask something ludicrous. I guess first I wanted to ask, and you talked a little bit about this on the call, but just the kind of CapEx deployment of the fixed wireless access, kind of where you're seeing that and what your thoughts are. It sounds like there's a lot of activity going on there, lots of subscribers being added. Generally, I mean, it seems like we're in the very early stages and how do you think about that trend as we move forward maybe over the next six to 12 months?
Well, do you want me to take that, Jim?
Yes, please.
Yeah. I'll jump in. Thanks, David, for being on the call and asking that question. Yeah, so you know, if you look at the second quarter results of even Verizon and T-Mobile, I mean, they added 560,000 subscribers. There was significant momentum, and actually they took many of those subscribers away from the cable modem business. I think we're part of this overall trend. I mean, what we're seeing is this idea that in the fixed wireless market, obviously there's a lot of unhappy people with the current internet situation. You know, we happen to be tapping into that. I mean, obviously, you know, from our perspective, you know, we had a great second quarter.
Our bookings for July, I think, reflected that trend, the $6.4 million. You know, as Jim mentioned, we've got great momentum going into Q3, Q4, and into Q1. I guess from our perspective on the fixed wireless side, we just think there's a broad trend in fixed wireless growth. We certainly saw it with the big carriers. We're seeing it on our bookings. You know, we think we're just really at the beginning of that wave.
That was fantastic color. I've heard recently a couple of folks that have spoken about the fixed wireless access and kind of needing to be the very first in line to sign up for that in the neighborhoods or in your area.
Mm-hmm
Because it just can't support the significant bandwidth, I guess that some of the internet has. It sounds like maybe the millimeter wave and your 32 channels sounds like you might be able to help resolve some of that bottleneck. Is that fair to say, or is that a problem elsewhere, perhaps?
Well, we've got on our Perspectus chipset close to 3 Gbps of bandwidth. You know, we support the concept of point to multipoint, so you know, multiple users will dilute that. But on peak rates for people is in the gigabit range. Clearly people aren't really using that, but they're certainly using the hundreds of Mbps, and we satisfy that. That's the beauty of millimeter wave, is that we can support these very high data rates, and we're tapping into that. You know, it's really a confluence of issues here that we're seeing. It's the increase. As the FCC is saying they want to increase the rates to over 100 Mbps.
It's the ability for millimeter wave to provide that, those data rates, and it's really the, you know, the demand from the user base of going from their 10 or 20 Mbps up to 100+ Mbps. It's really the confluence of several things coming together here for us.
That's fantastic. Maybe, Jim, if you kind of think about maybe the Intel agreement here, what does that do in terms of it sounds like it's non-core existing lines of business, and so there's OpEx and maybe a revenue component, not a revenue, but a sales component there. Strengthens the balance sheet some. It helps you kind of buffer some of the costs. What are the other benefits do you think you get out of Intel or this agreement? Maybe how do you think about maybe other opportunities for similar types of agreements?
Yeah, no, great, you know, great question, David. You know, obviously, you know, top, you know, first off, you know, a non-dilutive source of capital for the company.
Sure.
You know, if you look back, Coy, you know, the company has had a track record. You know, the advantage of being an IP-rich fabless company. You know, obviously when we joined the companies together here back in, you know, December, you know, really pursuing an IP play is not on the, you know, the agenda. Our R&D dollars are going towards our millimeter wave product efforts and new module products and obviously now the 5G beamformer chip, which we're very excited about. Number one, a great way to monetize some technology. You know, two, on the business side, you know, we have, you know, memory IC products.
At this stage, you know, as others in the industry have, I would say, curtailed their roadmap of high-performance memory products, we found some new life for our products. I think having this technology in the hands of, you know, Intel going forward could lead to additional opportunities for our memory chips because they are optimized to run on our silicon. You know, stay tuned there. We'll see how that plays out. You know, obviously, as I said, putting cash on the balance sheet's always a good thing. Last, we estimate this takes out about $2.7 million of OpEx, you know, non-GAAP OpEx.
So we'll see a benefit immediately here to our financials, call it in the first full, you know, third quarter of that savings. Obviously, we're pleased that the team members who worked very hard on that technology and built something that obviously Intel valued, you know, we're glad to see them, you know, join Intel in various capacities. You know, as far as the accounting for the transaction, we've got to work through that with our auditors, you know, for the third quarter here. Stay tuned. Our guidance number does not assume any revenue from that transaction. You know, it's just purely our, you know, our products and some of our regular, you know, royalties, et cetera.
I think it was just a win-win, and we continue to evaluate, you know, other opportunities. Particularly, as Ron said, this was technology that had been, you know, to date, really non-revenue generating. We were quite pleased. You know, we've, as I said, you know, the company has always had a track record of being alert to these types of transactions. We're always in tune to opportunities, and particularly with the focus on selling, you know, selling products. You know, the IP is, you know, we kept any rights we needed related to our memory products. You know, fine to have it in the hands of a obviously, much larger reputable company that can push it forward.
Yeah. No doubt they, you guys have done a good job just driving that IP and creating valuable assets. So it's great to see that monetization. Maybe just a last one for me here, and I know you touched on this briefly on the call, but just on the balance sheet. You know, you've announced a lot of really great deals of, you know, [Remenu] and the Intel deal. You know, there just seems like you've got a lot of momentum in the business. Just kind of wondering how you're thinking about the balance sheet and what your level of comfort is with the working capital and cash. Just, is it restraining your ability any at all?
Because it seems like the momentum is just, it's really built quickly over the last couple of quarters. I know that's hard to plan for, but how do you think about your balance sheet, and how are you gonna continue to drive this forward?
Yeah. Let me make a few comments, and then I'll ask Ron to chip in some color after he hears my perspective. You know, obviously, we're pursuing you know these non-dilutive transactions to bring in you know bring in capital. You know, we've obviously, as you can see from the growth in inventory, kind of built up some inventory. We're carrying you know adequate inventory, especially during these you know challenging supply chain times in the industry. We have not had you know certainly on the memory side any hiccup in being able to deliver parts timely. On the millimeter wave, it's been really minimal. You know, maybe an order got pushed a week or two, and you know frankly, the customer didn't cause any issues. We've been very fortunate there.
You know, obviously, by keeping the inventory. You know, we also have, obviously, long customer relationships. We haven't, you know, had any discussions around the balance sheet with customers on that front. Obviously, we're going to look, you know, opportunistically at the balance sheet. This Intel deal will help in the short run, but you know, be alert for opportunities there. I mean, the capital markets are certainly challenging right now. You know, we're in such an early stage of showing our story here. You know, again, just having completed a business combination right at the end of 2021 and really trying to, you know, putting up some numbers on the board so people can see, you know, which way we're headed.
You know, obviously, we intend that to be up and to the right. You know, we've kind of started that trend. I think, you know, pointing to the press release we announced last week and as Ron reiterated in his remarks, you know, we've got a great amount of backlog, which gives us excellent visibility into at least the first quarter of 2023 as far as what we're targeting to do. Ron, what would you like to add?
Yeah. I think you hit the key, Jim. David, again, to your point, I mean, July, with the bookings we had in July, the $6.4 million, and of course, that was on top of all the existing backlog we had already. The timing is obviously terrific for us because now it gives us visibility well into 2023, even to the second quarter of 2023. You know, that you know, that's kind of a reasonably important position to be in. Not to mention, you know, from a design win perspective, we keep racking them up. You know, for example, we just booked an order last week, from a customer who actually got first samples in June.
It was really the quickest design, you know, kind of sampling to early production order in our history anyway, at Peraso. You know, all those things combined I think bode well for shoring up the balance sheet over the next several months.
Well, best of luck to you. You've got a phenomenal story, and I think the millimeter wave is going to be a very large driver here, going forward the next couple of quarters. Congrats, and looking forward to seeing the continued progress.
Oh, thanks very much, David. It's great to have you on the call.
Yeah, appreciate it, David.
Once again, if there are any remaining questions or comments, please indicate so by pressing star one on your touch-tone phone. Okay. We have a question coming from Kevin Liu with K. Liu & Company. Your line is live.
Hey, good afternoon, guys. Let me add my congrats on your progress as well. Maybe if we could just start with the $6 million+ in orders you booked during July. I know you can't share the specific customer names, but can you talk a little bit more about whether these were kind of new or existing customers to you guys? How should we think about kind of the revenue contribution over the course of this year versus next year?
Sure, I can speak to that, Jim. There, you know, Kevin, and thank you very much for joining the call today, Kevin. Much appreciated. The way you can think about it is those were existing customers, you know, two different classes. One customer is an equipment supplier, another customer is actually a service provider. It's actually quite interesting because, you know, at least from my perspective, because I think, you know, I think we've shared in the past, we're actually seeing service providers now making their own equipment in some cases because it kind of helps their, you know, kind of their overall business model. It was nice to see orders from both because it kind of implies both sides of the equation are healthy.
You know, in terms of, you know, for the rest of this year, certainly it will, at least on the fixed wireless side, constitute, I would say, the bulk of our business. But you know, look, like I'm someone who believes in focus, and I believe that, you know, by focusing on these accounts, it's really allowed us to be successful. I mean, we, you know, we have a direct, you know, line into both of these R&D organizations. You know, any issues that come up, we immediately are on top of. That's paying off now in terms of business because, you know, we've really, you know, paid our dues with these customers, and frankly, you know, they're doing very well from a deployment perspective.
Now, having said that, you know, starting now in the third quarter and certainly into the fourth quarter, you know, we really plan to expand our customer base because now we've got you know, the beauty of our module product, and I had just described earlier on the call that we you know had taken really sampling in May or June timeframe to early production now. The beauty of our module business is that we can engage new customers very quickly. By the way, that was the other news that we had in the second quarter was we brought on well we have a deal with Richardson for distribution of our modules.
This is yet another confluence that's working in the positive vein for Peraso, which is, you know, we've got module products that really take the guesswork out of millimeter wave and provides a very turnkey solution. So look, the $6.4 million in orders was concentrated around a couple of customers, but now that the modules are fleshed out and working well, we really see, you know, that pushing out to a much more substantial customer base over the rest of the year.
That's great to hear. I know you're also bringing a lot of products to market to support kind of licensed 5G millimeter wave spectrum. You talked about some of that sampling beginning in this current quarter. Maybe if you could provide a little bit more detail around just the number of partners that you expect to be testing those solutions by year-end. How do you think about when you get more material revenue contribution, you know, from those folks that may move forward?
Well, the 5G story, so we, you know, we announced the silicon at the start of Q2. We're genuinely thrilled with this silicon. So, you know, we will be showing it, as we mentioned, at European Microwave and also at Mobile World Congress in Las Vegas. You know, in terms of really we'll be, in my view, limited by not so much, you know, the number of potential people to work with, it's actually our ability to support those designs. And it really goes back to what we're doing with the Perspectus modules, which now is we have a couple of great customers. They're really turned on. You know, I think when it comes to 5G, it won't be unlimited customers, but we will focus on it'll be a waterfall.
We'll focus on, you know, the 20% of the customers that provide, you know, 80% of the revenue. That's how you can see that rolling out over the rest of this year. You know, I think the great news, frankly, on 5G millimeter wave is. You know, obviously we've seen, Verizon continues to support millimeter wave. They just announced four new cities supporting millimeter wave. We're seeing very strong continued support out of Japan. Now we've been told that in China, as of about two weeks ago, the three top carriers are focused on really collaborating and making sure millimeter wave is deployed in China. We're seeing it as a global deployment.
Again, from our perspective, over the next six months, you can see us really engaging on a, I would say, selective in the sense that we are going after the customers who will provide the most bang for the buck in terms of revenue. That's really where we see the 5G product going over the next six months.
Understood. It sounds like you guys are still fairly confident in getting to, you know, a higher gross margin target by year-end. Could you just talk about some of the assumptions underlying that, whether it's predicated on just continued ramp on the millimeter wave side, or what sort of operational improvements or cost inflation easing do you see contributing to that?
Well, there's some actually nuts and bolts stuff in there. For example, just fundamental yield, test time, you know, we are going to see some price increases commensurate with the price increases we're seeing. Certainly as the volumes go up, that really gets, you know, prices down. It's really the traditional vectors that you can see on increasing margins. We definitely have quite a few vectors, and I think all of those things are being looked at and executed upon simultaneously. We actually feel quite good. I can just give you one example. In our test facility, we're doubling the capacity, and so we're reducing our test time. That leads directly to reduced margins.
you know, we're doing those kind of things, and there's an array of strategies we're undertaking to reduce our costs and of course, to increase our gross margins over, really over the, frankly, over the next 18 months, not just over the next six months.
Got it. Just lastly, for me, it sounds like much of the cost savings from this Intel agreement are going to flow through in the near term. Do you expect that to remain the case for the remainder of the year, or do you plan to reinvest some of those savings as we make our way into 2023?
You know, right now we would.
Well-
Oh, go ahead, Ron.
No, go ahead.
Maybe the CEO and CFO have different perspectives.
I don't think so.
I don't think so either. I'm being facetious. It's been a long day already. You know, from my perspective, we plan to take advantage of those savings and, you know, reduce our OpEx, you know, across our memory millimeter wave businesses. You know, right now, as Ron said, our 5G beamformer chip is ready for sampling. So we have cut back some of the expenditures around that now that we have a chip that we're comfortable sampling. You know, we had tape-out expense for that in Q1. We had some, you know, minor follow-on items this quarter, but, you know, we'd look to, you know, take the OpEx savings.
Yeah, Jim, the only thing I was gonna say, and I actually completely agree, but I just wanted to point out to Kevin and everyone on the call that, you know, the bulk or for pretty much 100% now of our R&D dollar is towards wireless. You know, that. You know, I guess one reason behind this decision on licensing this technology is, you know, the $2.7 million is a pure reduction, as Jim said, but it also allows us, you know, to focus our R&D dollars on wireless and not dilute that between wireless and the memory. That 's kinda where we've ended up here. Yeah, it's just really gonna go towards cost savings.
Yeah. Well, appreciate you guys taking the questions this afternoon, and good luck in the second half.
Thank you very much.
Thanks, Kevin.
Okay, thank you. We have no further questions in queue. I'd like to turn the call back to management for closing remarks.
Well, I'll jump in with that, Jim. You know, just for everyone on the call, I mean, I hope that our enthusiasm for fixed wireless and millimeter wave and our module strategy is all coming through because I think Q2 really, you know, saw the confluence of all those strategic vectors. The $6.4 million in bookings in July really was an epitome of those vectors in a positive way. I was really thrilled last week with the order we got, you know, which is a combination just of like early sampling in the May-June timeframe, and I think that really underscores the benefit of our module strategy.
Our 5G chips are, you know, just really continued a continued success that we've been seeing on our 60 GHz modules. You know, stay tuned for that. You know, we really plan to recreate the success we're seeing in 60 GHz, in the 5G bands, on the 28 and 39 bands. You know, I guess from Peraso's perspective, we appreciate everyone, you know, dialing in today and listening to our story. We're just really at the early stages here, and we really hope to plan to see continued growth over the next, you know, several quarters. Jim, any further comments?
No, I think you summarized it well, Ron. We appreciate everyone's time, and we look forward to speaking to you in about three months' time.
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your-
Thank you very much.
Telephones at this time. Have a wonderful day. Thank you for your participation.