Good morning, and welcome to Peraso Inc.'s first quarter 2023 conference call. At this time, all participants are in a listen-only mode. If anyone needs assistance at any time during the conference call, please press the star key followed by the zero key on your touch tone phone. As a reminder, this conference call is being recorded today, Tuesday, May 16th, 2023. I would now like to turn the call over to the host for today's program, Jim Sullivan. Please go ahead.
Good morning, thank you for joining today's conference call to discuss Peraso's first-quarter 2023 financial results. I'm Jim Sullivan, CFO of Peraso, and joining me today is Ron Glibbery, our CEO. Yesterday, after the market closed, 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 investor relations 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, including the anticipated cost savings. 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 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 issued yesterday 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 our website. Now, I'd like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron?
Thank you, Jim. Good morning and welcome to everyone joining today on the phone and via webcast. I'm pleased to report that Peraso had a strong start to the year, highlighted by continued growth driven by record product revenues from a combination of our millimeter wave solutions for the fixed wireless access market, as well as our memory IC products. More specifically, total revenue in the first quarter increased 29% sequentially and 48% year-over-year, with product revenue coming in at $4.9 million. Our near-term focus remains on expanding Peraso's leadership in millimeter wave fixed wireless access as wireless ISPs seek to aggressively deploy multi-gigabit connectivity in the unlicensed 60 GHz spectrum to secure market share of a rapidly growing subscriber base.
Today, there are approximately 6.7 million WISP subscribers in the U.S., according to The Carmel Group, which is expected to grow to 12.7 million subscribers in 2025. Looking at the historical data, the trend suggests a doubling of subscribers every 5 years. Multiple large government programs designed to support universal broadband access are also helping to fuel the market's growth, especially in rural communities. In addition to the momentum with WISPs, fixed wireless access is continuing to capture a growing share of the broadband market. According to latest third-party market research, fixed wireless access has consistently represented over 90% of the net adds by the top broadband providers in the U.S. over the past three quarters.
As discussed on previous calls, fixed wireless access is a natural extension of 5G deployments, enabling carriers to maximize available bandwidth capacity while also offering faster, lower latency, and symmetrical connectivity to customers. As further validation, T-Mobile and Verizon collectively added nearly $3.2 million fixed wireless subscribers in 2022, which represented 300% growth over 2021. The market opportunity across just these two leading carriers is truly substantial, with each having 5G fixed wireless access service that has the potential to reach tens of millions of homes. Importantly, 5G millimeter wave fixed wireless access isn't unique to North America and is increasingly being recognized and ramped globally. Leading carriers in multiple countries, including Australia, Italy, and India, are either actively or have plans to deploy 5G fixed wireless access in the 28 GHz and 26 GHz bands.
We are seeing this ramp in the form of prospective engagements, which increased meaningfully during the first quarter. This growing interest also spanned the entire ecosystem, from major OEMs and equipment vendors to 5G baseband providers and makers of frequency converter devices. Based in part on our conversations with several prospective customers and potential partners, we believe there's clear industry recognition that Peraso's 5G beamformer is ideal for enabling cost-effective end equipment needed for deployment of high-speed fixed wireless access. Turning to slide seven, I want to share something new today. The recent significant progress we've been making to expand our engagement pipeline. Keeping in mind that Peraso historically has been focused on supporting a very constant group of core customers, late last year, we began a strategic initiative to extend our commercial reach and diversify our customer base.
This included the appointment of Mark Lunsford, who is fundamental to our ongoing efforts to expand Peraso's new business pipeline. On this slide is a simplified version of one of the tools we use internally to measure both the breadth and projected economic value of our existing pipeline. Although we've removed the implied economic values that we use internally, the number of engagements indicated on this slide represent our current pipeline. This shows that our combined funnel and active engagements have grown from 60 in the first quarter to 75 as of May 2023. This slide shows the progression of customer engagement phases through to pre-production. As of May 2023, you can see that an increasing number of customers in the technical design process, which includes schematic capture, layout, design, prototyping, test verification, and early pre-production.
Not only do we see the overall level of customer engagement increasing, we also see an increasing level of the status of those engagements as well. Switching gears, I want to review an important update related to our memory IC business, which as a reminder, Peraso acquired as part of the business combination with MoSys, Inc. in late 2021. The sole foundry for our memory devices is TSMC. They recently informed us that the manufacturing process used to fabricate wafers for our memory ICs would be discontinued in the second half of 2024. Given these are legacy products and require a unique non-standard process, which is not easily transferable to another foundry, we've begun notifying customers of end of life of our memory devices.
As part of the EOL, we requested our customers to provide us with a forecast and purchase orders for last time buys by the end of 2023. We currently expect to fulfill last time buy POs for our memory ICs through next year, 2024. That said, the timing of EOL shipments will ultimately depend on both delivery timelines from our suppliers, as well as the scheduling requested by our customers. It is too early to forecast the size and linearity of customers' last time purchase orders, we do anticipate the implemented EOL to result in a potential pull forward of future demand and revenue related to our memory IC products as we fulfill customers' POs during 2024. We now turn back to our core millimeter wave silicon business, which is poised to become the primary driver of Peraso's growth.
As I previously mentioned, the resilient growth of the fixed wireless access market has been impressive, especially considering the ongoing macroeconomic uncertainty. Our near-term focus for 2023 is to further capitalize on Peraso's existing leadership position in the unlicensed 60 GHz segment of the fixed wireless market, where WISPs are aggressively growing subscribers for multi-gigabit connectivity. Our highly integrated 5G beamformer product positions us well for emerging opportunities in the licensed fixed wireless market as well, including 5G CPE applications and 5G millimeter wave in the carriers market. Longer term, we believe there's significant incremental opportunities for our technology in next generation applications such as AR/VR connectivity as well as future Wi-Fi standards. In closing, we believe we are well-positioned with leading technology and a strong product portfolio in our millimeter wave business, and we continue to be encouraged by the sustained momentum in the fixed wireless market.
Acknowledging the current macroenvironment, we continue to prudently manage expenses and cash as we begin to realize the benefits from previously taking actions to streamline our organization. Looking ahead, we are focused on driving an expanding pipeline of new business engagements, both domestically and abroad, as well as diversification of our customer base in support of future growth. With that, I'll turn the call back to Jim to review the first quarter financials and speak to our outlook for the second quarter.
Thank you, Ron. Good morning, everyone. It's great to speak with you again today. During my remarks, I'll make several references to non-GAAP numbers. Unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets, impairment of goodwill, 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 Form 8-K, which was filed yesterday with the SEC. Turning to our first quarter 2023 financial results. Total revenue in the first quarter increased to $5 million from $3.9 million in the fourth quarter of 2022 and compared with $3.4 million during the same quarter a year ago.
Product revenue from the sale of our integrated circuits and millimeter wave integrated antenna solutions in the first quarter was $4.9 million, compared with $3.8 million in the prior quarter and $3.2 million in the first quarter of 2022. The sequential growth of first quarter product revenue was primarily attributable to increased sales of millimeter wave integrated solutions. The significant year-over-year growth was driven by increased shipments of both millimeter wave products and memory ICs. Royalty and other revenue comprised $0.1 million of royalty revenues from licensees of our memory technology in the first quarter of 2023. GAAP gross margin was 38.3% in the first quarter, compared with 44.2% in the prior quarter and 42.8% in the year ago quarter.
On a non-GAAP basis, excluding amortization of acquired intangible assets, gross margin for the first quarter was 45.4%, compared with 53.4% in the prior quarter and 53.3% in the first quarter of 2022. Non-GAAP product gross margin decreased to 43.8% in the first quarter, compared with 52.6% in the prior quarter and 50.4% in the first quarter of 2022. The sequential and year-over-year decreases in GAAP and non-GAAP gross margins for the first quarter were primarily the result of revenue mix, reflecting increased revenue contribution from our millimeter wave integrated solutions.
Although gross margin was lower in the first quarter of 2023, we continued to target a corporate non-GAAP gross margin of approximately 50% through a combination of the benefits from increased scale and reduced production costs on our millimeter wave integrated solutions, as well as the contribution from sales of our higher-margin memory IC products. GAAP operating expenses for the first quarter were $5.7 million, which included a $0.4 million gain on a previously completed license and asset sale. This is compared with $16.2 million in the prior quarter, which included a $9.9 million non-cash charge for the impairment of goodwill and $8.2 million in the first quarter of 2022.
Total operating expenses for the first quarter of 2023 on a non-GAAP basis, which excludes stock-based compensation and amortization of reported intangible assets, were $4.3 million, compared with $4.8 million in the prior quarter and $6.9 million in the same quarter a year ago. In February 2023, we announced that we had implemented cost reduction initiatives to reduce operating losses and streamline operations, which collectively are expected to decrease our operating expenses by approximately $5 million on an annualized basis. As reflected by our results, we began to realize the initial benefits from these targeted expense reductions during the first quarter. We continue to anticipate realizing further benefit from these actions over the coming quarters.
GAAP net loss for the first quarter of 2023 was $3.1 million, or a loss of $0.15 per share, compared with a net loss of $14.6 million or $0.71 per share in the prior quarter, and compared with a net loss of $6.8 million or $0.34 per share in the same quarter a year ago. On a non-GAAP basis, net loss for the first quarter of 2023 was $2 million or a loss of $0.09 per share, which excludes stock-based compensation, amortization of acquired intangibles, and a recorded gain for the change in fair value of warrant liability.
This compared with a non-GAAP net loss of $2.8 million or $0.13 per share in the prior quarter, and a net loss of $5.1 million or loss per share of $0.25 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 first quarter of 2023 was 21.6 million shares, which excludes 1.8 million shares of our common stock and exchangeable shares that are escrowed pursuant to the terms of an escrow agreement related to the December 21 business combination between Peraso and MoSys and subject to an earn out based on achievement of certain stock price targets.
Adjusted EBITDA, which we define as GAAP net income or losses reported excluding stock-based compensation, amortization of reported intangibles, change in fair value of warrant liability, goodwill impairment charges, interest expense, depreciation amortization, and the provision for income taxes, was -$1.8 million in the first quarter, compared with -$2.5 million in the prior quarter and -$4.8 million in the prior year period. From a balance sheet perspective, during the first quarter of 2023, we collected approximately $2 million previously outstanding from a lead customer and recognized approximately $1.1 million of revenue as a result of the collections. The company has no past due amounts from this customer. On March 31, 2023, we had approximately 23.4 million shares of common stock and exchangeable shares outstanding.
This amount includes 1.8 million shares subject to escrow, as noted previously. Regarding our business outlook, there are currently two unrelated customer sales transactions that we are actively working to close. The ultimate outcome and timing are uniquely difficult to predict, and either one or both of these pending agreements could potentially have a meaningful impact on anticipated revenue for the second quarter. As such, today we are not in a position to provide specific guidance for the current quarter. To the extent the outcome of one or both of these pending transactions becomes more certain, we will consider providing future potential updates regarding our expectations for the second quarter. This concludes our prepared remarks. Operator?
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one if you wish to ask a question, please hold while we pull for questions. The first question today is coming from David Williams from The Benchmark Company. David, your line is live.
Hey, good morning. Thanks, Dave. Question, I apologize for the background noise. Wanted to see there's a couple things here that are definitely interesting that I wanted to touch on. One is on the memory pull forward. I know Ron, you said that it's too early to tell what the end of life potential pull forward could be, but as you kind of think about the working capital here and in terms of that impact.
How do you think that the revenue projection could be from this? Do you think that all of the revenue you would have expected to capture over the next so many years will be pulled forward and be received by next year?
Hi, Dave. Thanks for dialing in. The answer to your question is yes. I mean, that's the hope. You know, we're just in the midst of that process now in terms of understanding from the customers, you know, what those requirements are. Yeah, it's essentially to fold, you know, that out-outline revenue into 2024. From a capital perspective, you know, this is a situation where we're, you know, looking to the customers to participate in that cash process, right? I mean, it's just was, you know, the message is, hey, you know, we're, you know, our foundry has discontinued this process.
You know, we're gonna try to keep it going as long as possible, in order to purchase the inventory necessary to satisfy your requirements, we'll need essentially a prepayment for that.
Okay. Okay. Very helpful. Then maybe secondly on the just the customers you talked about at the end of the script there, Jim. Any more color around that? You talked about two of them being separate and distinct from one another. Is there anything... Is this related to the NRE? Maybe if you could give us any more color on that NRE, if that's moving forward and maybe what bigger portion that could be or was. Thank you.
No, absolutely. It involves, you know, the NRE licensing components and, you know, as such, given, you know, the complexity, the revenue recognition rules around it and timing of payments, et cetera, you know, we just felt it was very challenging to, you know, kind of put a number out there. Obviously, you know, a, you know, for example, a $5 million number in Q1, it doesn't take much to kinda move that and, you know, create a, you know, miss or put us out of balance. We just felt the prudent thing to do, particularly in this market with, you know, the inventory situation across the industry right now, you know, on the...
Even on the product side, 'cause there is the potential for some, you know, push outs, pull-ins right up to the, you know, the, you know, last day of the second month of the quarter. You know, we just felt it was prudent to, you know, to hold off on the guidance number at this time. We certainly, as we said in our comments, would like to provide an update, you know, when we can. You know, albeit revenue recognition always has to be, you know, the company's conclusions need to be signed off by the auditors, et cetera, which can be, you know, tough to get ahead of the timing of the quarterly review, which would happen in July.
You know, that said, these transactions, and I think as we've, you know, mentioned out there, would have a meaningful impact on our liquidity, you know, when you look at the balance sheet. You know, they will definitely, you know, key to our revenue and liquidity, having these transactions closed.
Okay. All right. Fantastic. I certainly appreciate the color there and understandable on the booking of that revenue. I guess, maybe from a broader perspective, fixed wireless access and just kind of the rest of the business, you feel pretty comfortable with the design activity. Ron, maybe you can speak to kind of if that's accelerator, kind of what you said outside, maybe a little more color from what you provided in the script. Thank you.
Of course, Dave. My pleasure. Yeah. You know, I think there's a, there's a theme moving forward for Peraso, which is really to last November, you know, Our theme is really to diversify customers. I mean, so to eliminate this customer concentration-
Got it. Hey, I'm here for something else. Yeah.
Can you hear me, Dave?
I can. Sorry.
Sorry. Our theme is really to diversify customer base. We really pretty limited in our ability to do that till last November. We brought Mark Lunsford on board, and Mark, you know, Mark's goal is, as you can see from our pipeline, is to really diversify that customer base. Even from, you know, Q1 to Q2, we've seen a substantial increase, not only in, you know, in the pipeline, but also in the, you know, the salient stages of the pipeline. Yeah, by our estimate, right now we've got about 75 engagements, up from about 60 in Q1. We're just, you know, really focused on the commercial side of diversification of that customer base.
So far so good. Mark is doing an amazing job. Well, frankly, the whole team is doing an amazing job. We're seeing that design activity increase substantially. You know, and again, just to kind of maybe, you know, close that off, certainly, you know, fixed wireless is a big part of that. Also we're seeing, you know, some of this kind of shades of progress and things like high-speed video. You know, so that market, we've got a lot of intellectual property for things like, you know, low latency wireless video, be it VR or be it, you know, educational systems or be it docking stations.
More, you know, even though we've been, you know, of course, fixed wireless is our focus, but we are starting to see some diversification in terms of the applications, as well, which of course we're pleased with. We're just really focused on really diversifying that customer base so that we're not really reliant on a couple of customers, but really the whole industry.
Thank you. The next question is coming from Kevin Liu from K. Liu and Co. Kevin, your line is live.
Hi, good morning. I wanted to also ask a question on the memory business first. Just, you know, in terms of the actual production, can you talk a little bit about when TSMC would actually stop producing any more product, just to give us kind of a sense for, you know, how far into 2024, you know, customers can wait for their orders. Then beyond that, when you look at your memory business today, just curious if the revenue you do on kind of a annual or quarterly basis, you know, how many months of inventory or years of inventory are your customers typically purchasing in a given quarter or year?
Do you want to speak to that, Jim, or would you like me to?
If you wanna go first, Ron, I can chime in.
Why don't I start and then hand over the inventory side of things. You know, basically, I guess at some level the TSMC timing is confidential, proprietary information to TSMC, Kevin. Suffice it to say, you know, we've got, you know, we've got in the order of, let's call it eight, you know, six quarters of flexibility there, not counting any inventory. This is not gonna happen overnight. You know, those are kind of the broad time frames is, you know, kinda late 2024 for, you know, production and then, you know, presumably there'll be some carryover in terms of the inventory. That's kind of the broad, I would say the broad, you know, timing of this situation. We like to give our customers a lot of time.
They've invested a lot of money in these products, and so we wanna make sure they get full value. I'm not as close to the inventory situation, Jim. Maybe you could step in on that side of the things.
Yeah, sure, Ron. You know, our customers, like everyone, you know, our peers out there, others in the industry, we always seek to ascertain exactly how much inventory the customers are holding. Certainly would make our forecasting a lot easier. Most customers keep that, you know, pretty tightly held. We generally ship, you know, direct to customers or, you know, in the case of one customer in Japan, we go through a local distie, although they do not stock inventory, so we don't have, you know, disties holding inventory out in the, you know, out in the channel. It's difficult to get a handle on inventory.
You know, I will say, you know, the memory business is seeing the impact kind of Q2, Q3 of the, you know, the inventory management issues everyone is having out there, and have seen some pushouts of orders, et cetera. We are certainly not, you know, our side's not immune to that. Yeah, hard to have, you know, visibility. I mean, as we announced, we, you know, expect to see the impact, you know, from the EOL in 2024, as we do expect customers, I think as, you know, Ron answered, initially on David's question.
You know, we hope, you know, hope, expect, you know, use an insert forward-looking verb to see, you know, to see pull-ins as customers, you know, need to pull in future demand to ensure they're adequately stocked.
Yeah. Understood. You mentioned kind of the industry-wide, you know, inventory corrections going on currently. From your perspective, are you guys seeing that only within your memory business here, or is there any sort of correction that needs to happen on millimeter wave? Just wondering, you know, what you're seeing from an end customer standpoint, for, you know, across your products.
We're seeing it on both sides of the business. Neither one is immune. We're definitely seeing some, you know, desire. In the case of our memory, the purchase orders, you know, do have, you know, within a window, you know, push, you know, pushouts. We have not seen any cancellations on the memory side of purchase orders. We've seen some pushouts. Although we're optimistic they're pulled in. I mean, again, being a, you know, a relatively smaller provider, you know, it's, it, you know, meaningful to us, but, you know, the challenge is the contract manufacturers, the, you know, the algorithm says push out, and it's, you know, machine driven, and then, you know, we can get a pull-in, you know, a couple of weeks later to bring it back. Very, you know, difficult to measure.
We're also seeing it on the millimeter wave. I think there's been, you know, a little bit of a knee-jerk, let's, you know, let's push things out and then just pull them back in later. There's not as much flexibility for our customers on the millimeter wave side. Generally, those POs are, you know, not reschedulable. We will ship what we have, and in some cases, you know, if it's to the mutual benefit, kinda work with the customers on that. Yeah, we are also seeing that customers are taking longer to pay, and holding our usual issue where customers will hold the receivables at quarter end, and, you know, we'll do quite well in collections in the first half or the first month of the subsequent quarter.
Got it. Just on the two large customer transactions that you referenced, any sense you can give us in terms of how far along in the process this is? Are these both, you know, expected to close in Q2, and it's more just the revenue recognition that's kind of not as visible? Or would either of these potentially, you know, close later in the year?
Expected to close in, you know, in Q2. In the case of one of them, it's taken, you know, a little longer than expected, but we do expect it to come in, and as I said, it's, you know, we'll have a, you know, a beneficial impact on our balance sheet. You know, obviously, when you have, you know, different components involved, as I, you know, I mentioned the, You know, the various deliverables, it's always tough to, you know, determine the revenue recognition and the impacts again at our side. You know, we just felt it prudent to kinda hold off. We do expect those to close and certainly, you know, we're always subject to customer confidentiality, et cetera.
would expect to, you know, press release, at least one if not both, and, you know, give that kinda message out there that, you know, hey, it's in, it's in the books.
Great. You guys highlighted, you know, some of the fixed wireless access subscriber growth, even for kind of the licensed 5G spectrum. Just on the licensed 5G side, could you talk about whether, you know, you guys expect to see more demand or more wins coming initially, you know, domestically or internationally there? Any, any sort of update in terms of when you could start to see, you know, your first major customer win there?
Well, that's a good question. I mean, I think the first message, you know, Kevin, as we all know, 5G fixed wireless millimeter wave, was slow in 2022, because of the mid-band deployment. What we're seeing, yeah, now so now we're seeing over the last few weeks and months, just a really a spike in activity in terms of our engagements. I mean, we're talking, we're talking like top self, you know, partners, customers and partners here. Still a bit hard to judge. Like, I think globally in terms of the deployments, initially it was Verizon. Verizon is still shipping, but you're seeing, you know, other signs of life, like NBN in Australia has deployed, well, basically countrywide. Well, Italy is more of a 28 GHz.
Very substantial presence of fixed wireless. But probably what's driving a lot of it, a lot of activity right now is India. I think we all know that India has licensed the low band 26 and 28 GHz for fixed wireless. Fiber is just not that popular in India, so it looks like mostly India's gonna go fixed wireless. That's where we're really seeing momentum. I mean, again, the, you know, very significant conversations going on there. You know, specifically what we're finding is that, you know, our thesis that, you know, the way fixed wireless is successful is with, you know, really cost-effective equipment. Unlike most of our competitors, we designed a 5G chip absolutely focused on reducing the cost of consumer premise equipment.
There's some very, very strong interest in that chip. We're thrilled with the progress there. Actually, we're even starting to see some activity in North America really and globally on Satcom, like 5G to Satcom. That's, you know, that's a market that we're starting to see percolate as well. We're involved in, and it's the exact same premise, which is again, the ground equipment or the end user equipment has to be, you know, cost effective. You know, whereas initially all the millimeter wave, I think design wins mostly were in the base station, now vendors are looking at who's got the right answer for the end equipment. So we're definitely seeing some nice activity there.
I would summarize it for you, Kevin, as, you know, kinda globally the service providers that I suggested now, and, you know, starting to see some activity on the Satcom side of things as well. You know, I would say, you know, a theme for Q1 and now into Q2 is the 5G market and millimeter wave fixed wireless is starting to heat up for us. That's, so we're pretty happy with that.
Right. That's great to hear. One last question from me, just, in terms of the OpEx savings. Could you just talk about how much more you expect to be able to save kind of on a sequential basis heading into Q2?
Sure, Kevin. You know, we obviously announced that mid-February and made some, you know, some employee reductions. We had actually started, you know, weaning out expenses and some consultants kind of beginning in the fourth quarter, you know, continuing through, you know, Q1 as contracts ended. We're looking to see kind of additional benefit, you know, hopefully in the kind of the at least 10% range over where we were in Q1. You know, obviously subject to, you know, other movements and also, you know, subject to the, you know, these kind of revenue transactions and some incremental costs that may be associated with those, which could, you know, offset that, but obviously would more than offset that.
You know, obviously it takes some time to have the full benefit kick in, particularly when there are, you know, headcount reductions because obviously you have termination payments, et cetera.
understood. I appreciate you taking the questions and good luck here in the second quarter.
Thanks, Kevin. Appreciate your time.
Thank you. The next question is coming from Tim Savageaux from Northland Capital Markets. Tim, your line is live.
Great. Thanks. Good morning. I had a couple of questions. Wanted to follow up on the kind of pending agreements that you mentioned and ask whether those are new or extended agreement with current customers, and also try and relate that to the pipeline slide that you put up. I think you showed two customers going into pre-production, and a few more moving through the pipeline, kind of above that. Should we relate those two developments or are those separate? I'll follow up from there, as well as the current or new customer question. Thanks.
I can speak to that, Jim. One of them is not related to that. It's an existing customer. The thing to clarify, Tim, on the pipeline slide is that it doesn't show customers in production already. It's like people pending production and then, you know, production is separate. One of the customers does not show up on that pipeline slide, and the other one does. That would be the summary for how those two customers relate to what's on the pipeline slide.
Great. I know you indicated you removed the economic value, but, you know, I wonder if you might have any color on kind of the, whether in the aggregate or anything else, just from a total funnel perspective or for the ones that you're farther along on, what sort of market opportunity you see there. You know, given the uptick in the funnel, would you attribute that... Obviously, there's been a lot of company-specific activity, but, you know, have you seen an uptick in overall activity across the fixed wireless access market is contributing to some of that funnel expansion?
Well, definitely it's overall, you know, engagement. I'm calling from Washington today because we're actually in Washington with the wireless ISP organization, speaking to Congress or congressional members about, you know, the benefits of fixed wireless, especially with regards to the $44 billion BEAD funding. There's a lot of money there. I think in parallel with that, we're actually, I've said in the past, we're working with WISPs to really promote millimeter wave technology in their market. Kind of the key benefit that or the message that we're bringing to that market is, you know, Peraso technology brings gigabit links, you know, it's highly competitive with fiber. It's the symmetrical links, the low latency.
That's starting, no pun intended, that's starting to resonate with those customers. We have some early wireless ISPs who are embracing that fully and just basically saying, "Look, you know, fiber is a good solution, but fiber is expensive, it takes long." Just think about even, you know, the installation time, I mean, for a millimeter wave device is less than an hour, costs $30. A big part of our pipeline now is the fixed wireless opportunities, primarily at the OEM level, but even at the service provider level, where they're using our technology to get to gigabit links. I mean, another, you know, kind of another message we received from the WISP is, you know, of course, you know, people with 10 Mb are happy with 50 Mb.
Our view is if you provide a gigabit, you know, you're good for 10 years. I mean, nobody's, you know. That's a, like a least a 10-year cycle in terms of your, you know, in terms of your installation time, so, or install time with that customer. You know, that's kind of the message we're bringing to Congress, is that, you know, wireless is absolutely an essential part of the BEAD program because companies like Peraso are providing these gigabit links at a very, very aggressive price point, under $200 for the box. To speak specifically to your question, that constitutes a significant portion of the pipeline, you know, fixed wireless access from where we were back in November.
You know, and then I think more broadly, you know, I mean, the pipeline does include some indoor, you know, high-speed wireless, also some, you know, quite a bit of defense and also some transportation. We are just broadening our markets, but certainly fixed wireless is, I would say, the cornerstone and the anchor. By the way, in 5G it's all, that's all five, fixed wireless. There's really, you know, that's really the sweet spot for 5G, is that fixed wireless play. Does that answer your question, Tim?
Absolutely. Really helpful. Thanks very much.
Great.
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