Peraso Inc. (NASDAQ:PRSO) Q2 2024 Earnings Conference Call August 12, 2024 4:30 PM ET
Company Participants
Jim Sullivan – Chief Financial Officer
Ron Glibbery – Chief Executive Officer
Conference Call Participants
David Williams – Benchmark
Jon Hickman – Ladenburg
Kevin Liu – K. Liu & Company
Operator
Good afternoon, and welcome to Peraso Inc.’s Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded today, Monday, August 12, 2024.
I would now like to turn the call over to your host for today’s conference call, Mr. Jim Sullivan. Please go ahead.
Jim Sullivan
Good afternoon, and thank you for joining today’s conference call to discuss Peraso’s second quarter 2024 financial results. I’m Jim Sullivan, CFO of Peraso and joining me today is Ron Glibbery, 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 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 webpage.
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 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. With respect to remarks on today’s call involving non-GAAP numbers, unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of reported intangible assets, severance costs 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.
Now, I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron?
Ron Glibbery
Thank you, Jim. Good afternoon, and welcome to everyone on the phone and webcast. We appreciate you taking the time to join us today.
Jumping right in, we’re very pleased by our continued progress during the second quarter. As reported in today’s press release, total revenue of $4.2 million exceeded the high end of our original guidance and represented growth over 50% sequentially and more than 70% year-over-year. Strong growth was driven by increased shipments of our end-of-life memory IC products, coupled with revenue contribution from a new volume production order for our millimeter-wave antenna modules. Gross margin also expanded. And although reported operating expenses were up slightly due to certain charges incurred during the quarter, we continued to closely manage expenses in support of improving operating results and reducing our cash burn.
Turning to Slide 4, I want to briefly highlight the status of the end-of-life with our memory IC products. As anticipated, second quarter shipments against our backlog increased sequentially to approximately $3.4 million compared to $2.4 million in the prior quarter. Net of the most recent $2.9 million end-of-life order purchase order that we received at the end of Q1, we ended the second quarter with total remaining purchase order backlog of approximately $9.1 million. We currently expect third quarter shipments of our IC memory products to be comparable to shipments in the second quarter. Additionally, there have been no significant changes to our original timeline for completing the end-of-life of our memory IC products, and we maintain on schedule to fulfill the total remaining backlog by the end of the first quarter of 2025. As discussed on previous calls, these shipments against remaining backlog will continue to contribute meaningful revenue and cash flow over the next few quarters as we work aggressively to further expand and ramp customers for our millimeter-wave products.
Next on Slide 5, this is an updated snapshot of our global engagement pipeline for new RF millimeter-wave business as of the end of July. As a reminder, for those who might be newer to our story, Peraso has been a leading innovator of millimeter-wave technology for more than a decade. We have a multiyear track record of commercial shipments and our technology has been field proven extensively. Until more recently, our millimeter-wave business was exclusively focused on serving a small number of strategic fixed wireless access customers. Over roughly the last year and a half, we have put in place a growth strategy with the goal of establishing a larger and more diversified customer base for our millimeter-wave business.
We initially set out to achieve this objective primarily focused on the rapidly growing fixed wireless access market in North America, however, our current efforts and engagements are now equally focused on expanding market reach across diverse geographies and end market applications. We first introduced this pipeline slide in early 2023, and we believe it continues to represent a helpful leading indicator of our progress, not only in terms of customer diversification, but also the expanding growth of potential of our millimeter-wave business.
To highlight a few of the key takeaways from this year to date view of the pipeline, first, taking the top number that represents new funnel opportunities and combining it with those across the four progressive stages of active engagement, our pipeline comprised 95 total engagements at the end of July. For context, we are consistently pruning our account of funnel opportunities if either activity on an engagement stalls or we choose not to pursue it for commercial reasons. Additionally, once a program engagement converts to being in production, we no longer include it as part of our current pipeline. Even after accounting for both sides of — both of these variables, our current number of total engagements is up more than 25% compared to this time last year.
Turning to Slide 6, as briefly mentioned in my opening remarks, during the quarter, we secured and shipped the first volume production order for our DUNE platform. First introduced earlier this year, DUNE is our dense urban network environment platform solution for fixed wireless access. We specifically designed the solution to overcome the challenges associated with delivering reliable and high-speed network access in densely populated areas such as urban neighborhoods. This new volume production order for our millimeter-wave antenna modules was from a South African service provider that is leveraging Peraso’s DUNE platform solution for its initial deployment. It would be difficult to imagine a better form of commercial validation for our DUNE platform and its unique ability to deliver gigabit speed fixed wireless access in dense urban environment applications. As a newly established service provider in the region, we anticipate their first initial deployment will take at least several months, however, we do expect additional incremental orders from this customer as they progress on extending their deployment in the coming quarters.
In addition to this lead customer, we are currently engaged with several other prospective customers targeting future deployments in dense urban environments. This includes our shipment of DUNE proof-of-concepts to multiple WISP in Africa with whom we are supporting ongoing evaluations. We also continue to believe that millimeter-wave technology solutions uniquely position us to potentially participate in planned North American deployments announced by one of our long-time WISP customers. As such, we remain very optimistic about the recent commercial validation and strong expressed interest in our DUNE platform, which we believe represents the leading commercially-proven fixed wireless solution for dense urban environments.
Moving to Slide 7, I want to take a moment to highlight the recent emerging development that we believe could potentially encourage expanded customer adoption and market opportunities for our millimeter-wave solutions. For those not already familiar, BEAD is a federal grant program funded through the United States Department of Commerce. BEAD stands for Broadband, Equity, Access and Deployment, and the program was established with the purpose of allocating $42.45 billion in direct support of broadening access to high-speed Internet.
Although a majority of the program’s funding was initially thought to be prioritized for Internet delivered over fiber optic cable, the head of NTIA, which is the agency that oversees the BEAD program, very recently stated the agency is planning to provide further guidance on the types of Internet delivery that are eligible for potential funding. More specifically, the NTIA has anticipated to provide guidance that makes funding eligible for the deployment of high-speed Internet using unlicensed spectrum fixed wireless access, including millimeter-wavebands.
I would emphasize that this anticipated new guidance from the NTIA has yet to be formally announced. However, to the extent that Internet access delivered via unlicensed fixed wireless access does become eligible for funding, this would likely motivate and benefit a large number of WISP deployment across America, which in turn could potentially result in significant expanded market opportunity for Peraso.
In closing, we’re encouraged by the continued customer ramp of our millimeter-wave solutions during the second quarter. We aim to gain further traction in the coming quarters as we remain focused on advancing and converting existing customer engagements into production orders for our millimeter-wave products and platform solutions. We also expect our ongoing shipment to fulfill remaining backlog orders for our end-of-life memory IC products will continue to contribute meaningful revenue and cash flow throughout the early next year. Taken together, we anticipate total revenue for the second half of 2024 to increase over the first half of the year, while also representing revenue growth year-over-year.
With that, I’ll turn the call back to Jim to review the second quarter financials as well as our revenue outlook for the third quarter of 2024. Over to you, Jim.
Jim Sullivan
Thank you, Ron.
Turning to the results for the second quarter of 2024, total net revenue increased to $4.2 million, which was above the high end of our original guidance range. This compared with revenue of $2.8 million in the prior quarter and $2.4 million for the second quarter of 2023. Product revenue from the sale of our memory integrated circuits and millimeter-wave products in the second quarter was $4.1 million compared with $2.7 million in the prior quarter and $2.2 million in the second quarter of 2023. Royalty and other revenue for the second quarter of 2024 was $0.1 million, consistent with the prior quarter and compared with $0.2 million in the same quarter a year ago.
GAAP gross margin increased to 55.5% in the second quarter from 46.4% in the prior quarter and 25.3% in the year-ago quarter. On a non-GAAP basis, excluding amortization of acquired intangible assets, gross margin increased to 68.8% for the second quarter from 66.4% in the prior quarter and compared with 45.9% in the second quarter of 2023. The sequential and year-over-year improvement in gross margin for the second quarter was primarily attributable to increased revenue contribution from shipments of our end-of-life memory IC products.
GAAP operating expenses for the second quarter of 2024 were $6.8 million compared with $4.9 million in the prior quarter and $5.6 million in the second quarter of 2023. Operating expenses for the second quarter of 2024 included severance expenses of $0.4 million, which will be paid over the next 13 months as the company complete the temporary layoff initiated in November 2023 and $1.6 million charges for software license obligations, which will be paid over the next five quarters. Non-GAAP operating expenses, which exclude stock-based compensation, amortization of intangible assets and severance costs were $4.9 million in the second quarter of 2024 compared with $3.4 million in the prior quarter and $4.1 million in the second quarter of 2023. The increase in second quarter 2024 operating expenses on a GAAP and non-GAAP basis was primarily driven by $1.6 million of charges for software license obligations recorded during the second quarter of 2024.
GAAP net loss for the second quarter of 2024 was $4.4 million or a loss of $1.88 per share compared with a net loss of $2 million or $1.07 per share in the prior quarter and a net loss of $4.1 million or $6.68 per share in the same quarter a year ago. On a non-GAAP basis, net loss for the second quarter of 2024 was $2.1 million or a loss of $0.88 per share, which excluded stock-based compensation, amortization of acquired intangibles, severance costs and the change in fair value of warrant liabilities. This compared with a non-GAAP net loss of $1.6 million or a loss of $0.83 per share in the prior quarter and a net loss of $3 million or a loss per share of $4.93 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 2024 was approximately 2.4 million shares.
Adjusted EBITDA, which we define as GAAP net income or loss as reported, excluding stock-based compensation, amortization of acquired intangibles, severance costs, change in fair value of warrant liabilities, interest expense, depreciation and amortization and the provision for income taxes, was negative $1.9 million in the second quarter compared with a negative $1.4 million in the prior quarter and negative $2.8 million in the prior-year period.
As of June 30, 2024, we had $1.9 million of cash, representing a decrease of approximately $0.6 million during the second quarter of 2024.
Turning to our outlook. As Ron discussed, we continue to cultivate a growing pipeline of customer engagements for our millimeter-wave solutions and we are working to convert number of these opportunities into new production orders over the coming quarters. Looking at the second half of 2024, we continue to have a significant remaining backlog of non-cancelable purchase orders for our end-of-life memory IC products. Specific to the third quarter of 2024, the company currently expects total net revenue to be in the range of $3.8 million to $4.2 million.
This concludes our prepared remarks. And I’ll now turn the call back over to the operator to assist with the Q&A session. Operator?
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] First question comes from David Williams with Benchmark. Please proceed.
David Williams
Hey, good afternoon, gentlemen. Thanks for taking my question here. I guess maybe first, Ron, thanks for all the color on the business. And one of the things I think is really interesting is just the expansion in your engagement pipeline. Can you talk a little bit about that, just the diversity of customers there? And you spoke a little bit about it, but can you give us a little more color on what you’re seeing there and how you think that develops, I guess, over the next several quarters? Are you seeing increased activity or the same? Just any color there that would help us understand your customers or potential customers would be helpful, I think.
Ron Glibbery
Thanks, Dave. Good to speak to you. Yeah, I mean, from my perspective, obviously, we’re pleased with the revenue and the margin for the quarter, but what keeps me very motivated is that our design activity in millimeter-wave is just going very, very strong. I’m very bullish in terms of that activity. So, I would say, there’s a couple of points to make.
One point is that on the fixed wireless aspect of our business, it just — as operators get used to millimeter-wave and the benefits that we provide, i.e., the high performance, and particularly, our ability to operate in dense environments, I would say almost on a weekly basis, we have new opportunities. So, we just continue to see that growing frankly. It’s — let’s face it, fixed wireless is a very, very hot topic in terms of broadband communications and we’re in the heart of that either in America, by the way, or globally. So, I’m thrilled with our design activity in terms of fixed wireless access business. And again, the main drivers there are the gigabit performance combined with our ability to operate in dense environments.
The other topic, Dave, that gives me optimism is our momentum in defense and military. And the watchword there is a phrase called low probability of detection. So, as I’ve mentioned in last — in past calls, as we’ve learned from conflicts in Ukraine as well as in the Middle East, there’s a very serious problem, which is detection of traditional radio signals. And so because we use phased-array technology and we create pencil beams, it’s almost impossible for the enemy to detect. So, this is becoming a very, very important topic in military applications. And we didn’t really talk about it in the slide presentation, but another real — potentially even larger area of growth for us beyond fixed wireless is our military and defense application. So that’s another area where we’re seeing increased design activity. So, that’s to me, obviously, we’d love to see the increase in revenue, but we really believe that’s in the pipeline and the design activity is very strong from our perspective.
So, I hope that helps in terms of some color.
David Williams
Yeah, very helpful. Thanks for all that insight. The other thing I wanted to ask about was you had a press release out earlier that was about custom IP for Wi-Fi 8 and future IEEE standards. Just kind of curious what — how you think about that and what that all entails? Is that a capital expense or is it development? How do we think about Wi-Fi 8 opportunity and development?
Ron Glibbery
Well, yeah, that’s a great question as well, and thank you for bringing that up, because we didn’t bring it up. But basically the idea there is that the IEEE has determined that they’d like to include 60 gigahertz and — really 45 gigahertz to 71 gigahertz in next-generation Wi-Fi or at least IEEE standards. Normally Wi-Fi adapts IEEE standards.
So, from our perspective, there’s two ways we can play it. I mean, we can use capital to develop chips on our nickel and go to market with that, or we can collaborate with existing players. I mean, at the moment, we’re thinking more along the collaboration route. We’re really — to be quite frank, we’re very, I’d say, fixed on fixed wireless and military right now. We think for consumer electronics, we can play a role there. We think, of course, that market is going to be huge, but it is a few years away still, but we’re extremely well positioned from a capabilities perspective to really partner with larger players in that space. And sky is the limit in terms of the opportunity, but it’s a little early to predict. But what I can predict is that our ability to build technology for that space is more or less unprecedented in terms of our skills. So that’s how we kind of see that. But it was terrific. It was really a terrific update from our perspective to see that the IEEE is supporting 60 gig for future generations.
David Williams
Okay. All right. Very good. And then just kind of on the DUNE platform that you shipped this quarter, it sounds like you’re getting a lot of interest there. How quickly, I guess, can they deploy? And what do you think the size of that market is? Today, you’re dealing obviously with one, but that’s — it seems like a very large opportunity just in that region. But if you were kind of thinking about how quickly they can deploy and how quickly this could turn to revenue, any color or thoughts on that?
Ron Glibbery
Well, the good news on that, Dave, is that the boxes are ready. Like we’ve got several ODMs that are building the devices for that market. So, somebody brought this up the other day. And so, I think what’s interesting about this space is that, this is really a matter of promoting this within the service providers so that service providers can buy these boxes. So, in other words, really the limitation is how quickly the service providers will actually deploy. It’s not a function of, oh, we have a design win and we have to wait 12 months or 18 months before the hardware is ready. There is hardware deploying today as we speak.
And when we actually — I mean, to be quite frank, we have a growing — the manufacturers are now seeing the success of 60 gigahertz. And so, we’ve got — there’s, I would say, at least four or possibly even five manufacturers who are committed to building products, so they can very quickly get into market. So, from our perspective, our job is to make sure that the service providers understand the benefits of 60 gig and they can get to market quickly. It’s a matter of how quickly they can roll it out and deploy.
But — so the good news is we’re not waiting for hardware. The hardware and software more importantly is available from several vendors. And so, really it’s just a matter of how quickly service providers and — service providers not just globally, but also in the US for sure, in terms of how quickly they will — they can start to deploy this technology and they don’t have to wait for hardware, they can quickly order from one or several manufacturers.
David Williams
Okay. And just one last one, if I may.
Ron Glibbery
Sure.
David Williams
You talked a little bit about — you talked about the BEAD funding earlier and that seems like a very large opportunity over time, just kind of given the magnitude of that there, but you also have a couple of other out there, RDOF being one. But you talked a little bit about potentially including fixed wireless access there. How large of an opportunity — if you were to kind of guess on maybe in North America, how much deployment could be covered by fixed wireless access? Is there really a way to think about that, what that opportunity could be?
Ron Glibbery
Yeah, that’s a good question. So, I would say, in North America, let’s say for argument’s sake, we’re looking at 100 million homes. So, we think the number is a good 20 million that could benefit from that, right? So, let’s call it 20 million homes. So, I’m just kind of doing a very, very high-level estimate, Dave, but I guess from my perspective, and those are number that I have been used to, it’s like, let’s say — we think about 20% is in a region where they would definitely benefit from wireless technology access. So, I think that would be kind of the number. So that would probably put some brackets around it.
But BEAD is, I’m just thrilled with the latest update from the NTIA and this was last week. Basically, as I stressed in the presentation, this is not formally committed, but it was definitely spoken about by the Head of NTIA and we expect to see that in the next two to three weeks. But it is a pretty major — and basically what people were saying is like, oh, yes, fiber is a good technology. It’s absolutely not viable with $42 billion to give everybody in America fiber. It’s as simple as that. And so, they’ve actually recognized the absolute importance in unlicensed wireless technology is to providing everybody in America with very high-speed broadband.
David Williams
Perfect. Thanks for the color and best of luck on the quarter, gentlemen.
Ron Glibbery
Thank you, Dave.
Jim Sullivan
Thanks, Dave.
Operator
The next question is from Jon Hickman with Ladenburg. Please proceed.
Jon Hickman
Hello. Ron, can you hear me?
Ron Glibbery
I sure can, Jon.
Jon Hickman
Okay, great. So, I have a couple of questions. Jim, could you tell us out of the $4.1 million, how much was millimeter-wave?
Jim Sullivan
The revenue breakdown was approximately 80% memory and 20% millimeter-wave for the quarter.
Jon Hickman
80/20. Okay. And then, is there seasonality in the summer here?
Ron Glibbery
Is that to me, Jon, or Jim?
Jon Hickman
From either one, and I don’t care.
Ron Glibbery
I can take that. I mean, there’s — we haven’t seen seasonality. Like, basically, people buy broadband. Least on I can speak to the broadband side, and then Jim can speak to the memory side.
But on the broadband side, Jon, I would say it’s — there’s no real seasonality. I mean, to be frank, I mean, as we said in the press release and on the slides, we did — we are going through this inventory correction. So that’s kind of the bigger picture issue. But from a seasonality perspective, I don’t — we don’t really have any specifics there that we’ve seen over the years in terms of any particular quarter that’s better or worse.
Jon Hickman
Okay. And then, the BEAD, guys, did you say that you expect them — to hear more out of them in the next two to three weeks?
Ron Glibbery
Yes. Basically, there was a conference last week where the Head of — so basically, the way BEAD is administered through the NTIA, and the Head of the NTIA has said now that they see themselves including unlicensed wireless as part of the BEAD funding. So that’s a very significant change in policy from our perspective and obviously in a very positive way, because BEAD was — or NTIA — to step back a little bit, like BEAD was really when approved by Congress was supposed to be technology neutral. So, it didn’t matter how you got people good broadband, they were supposed to just get people good broadband. It got shifted a little bit when it got to the NTIA, which said, well, you know what, good broadband is brought to you by fiber and we think everybody should get fiber, but there was definitely pushback from the States because they basically said, hey, we agree fiber is great, but it’s just way too expensive for this budget to deploy everybody with fiber. So, we need to include all technologies, which by the way was the original concept that whatever it took to solve this problem. So, where we come in with millimeter-wave is we’re providing fiber like speeds, i.e., a gigabit with very low latency. So, we think — so I think it’s great to see that NTIA is proposing a very significant policy shift here in terms of adding unlicensed wireless to the repertoire of tools.
Jon Hickman
Okay. That sounds good. So, if they — when they speak again, do you think they’re going to actually say we’re going to allocate so much of that original budget to fixed wireless?
Ron Glibbery
Absolutely. Well, I mean, this is certainly their position, yes. Completely, I’m expecting that. It would be a major step back if they changed their mind at this point. It was pretty well documented.
Jon Hickman
Okay. So, they’ll actually put a figure on like a percentage?
Ron Glibbery
We think the way it will work is that basically it will be — it’s more or less letting the market decide. So, I’m not sure there’s going to be a limitation, right? I mean, basically the market will decide what’s the best way. And what we have to keep in mind is really the advantage that we provide with unlicensed fixed wireless is that it’s very economical to deploy, but they also — the other factors, it’s very rapid deployment. So, we can — we don’t have to trench holes for fiber to go through, which takes some time. So, we can deploy very quickly as well. So, we think the market will ultimately decide. Frankly, from a cost perspective, fixed wireless – millimeter-wave fixed wireless is a great solution.
Jon Hickman
So, how — do you want to guesstimate about if this goes the way you’re saying, when could the market start using those funds?
Ron Glibbery
Oh, I think second half of — like this year, absolutely, this year.
Jon Hickman
Oh, this year?
Ron Glibbery
For sure, yeah.
Jon Hickman
Okay. So, if I was a broadband supplier and I wanted to do a project and I wanted to — so I do the project and submit it to BEAD for financing?
Ron Glibbery
Yes. You can include in your plan, millimeter-wave fixed wireless for sure.
Jon Hickman
Yeah, but then — okay. And then, BEAD — does BEAD reimburse the provider? Like…
Ron Glibbery
Effectively, it’s subsidized. I’d have to, like, research exactly what the mechanics are, Jon, but I mean, ultimately, the BEAD underwrites the deployment for sure, right? Like so, it’s essentially underwrites the deployment of those deployments.
Jon Hickman
Okay. And then, can you elaborate any more on the military side? Like, are you shipping products to military or are people trying it out? Where are you in that process?
Ron Glibbery
Well, we’ve actually — we did announce a prior deal for proof of concept, and we have some further commercial engagements that I could say broadly. I mean, you can understand that the military is highly confidential. But what I can share is that there’s some little key features that we provide to the military. So, not the least of which is because we use phased-array technology and we create pencil beams, it’s very difficult to detect in the battlefield. So that’s what I’ve talked about already.
Believe it or not, another important feature about 60 gig is that it’s normally unlicensed in in most jurisdictions. So, when the military goes in like — whatever military goes into a certain theater, they don’t have to worry about screwing up people’s cellular frequencies, which are actually licensed. So, the fact it’s unlicensed is actually important to the military.
And even another benefit to the military is that actually there’s a certain level of oxygen absorption for our technology. So again, the enemy’s ability to detect our signals after a certain distance becomes very, very limited. So, the net-net is that it’s a very stealth technology. And this is the key attribute and it’s really starting to become a real factor in terms of the value proposition for military deployments.
And frankly speaking, when we speak to military engagements, I mean, basically, these deployments we speak of on kind of almost a per soldier level. So, the volumes are extensive beyond even what we’re talking about on fixed wireless. So, we’re seeing the military and defense applications is really a strong part of our growth opportunity.
Jon Hickman
Okay. Just one more question for Jim.
Ron Glibbery
Sure.
Jon Hickman
So, the software license and severance, that’s an accrual that you’re taking, so there will not be further expenses for those items going forward?
Jim Sullivan
Yes. So, the severance — yes, on the severance, that’s correct. The severance obligation, which was just over $400,000, those amounts will be paid out over a 13-month period starting July 1, 2024. And that was just the resolution of the temporary layoff we had initiated back in November 2023 in Canada and taken those positions off the payroll back then.
The other piece, the software obligations, there is still some of the licenses will be expensed going forward, but that amount was $1.6 million of expense and there’s about $1.55 million of cash that will be paid over the next kind of five quarters.
So, there’ll still be some license expense going forward in the P&L, but I don’t expect any more charges — accelerated charges in that manner going forward for those items.
Jon Hickman
Okay. That’s it for me. Thanks.
Ron Glibbery
Thanks, Jon.
Operator
[Operator Instructions] The next question comes from Kevin Liu with K. Liu & Company. Please proceed.
Kevin Liu
Hi, good afternoon. Ron, just wanted to start on the DUNE platform as well. You mentioned during your script that you have the large WISP provider in North America that could also start deploying that. Wondering if you could put some parameters around when that could start and kind of the size of that opportunity in North America. And then, going back to your progress in Africa, just wondering how quickly you could expand from kind of this first customer to the next one.
Ron Glibbery
Sure. So, in North America, the opportunity — and we’ve confirmed with the supplier that we are participating. We’re not revealing what portion of the program, but we announced last quarter it was deployment in Los Angeles. So that was 280,000 subscribers. And so that — I mean, frankly, we didn’t bring it up this time because we brought it up last time, Kevin, but basically the idea there is, again, like our ability to deploy in dense urban environments, it’s just extremely important.
So, the real issue with traditional unlicensed wireless is congested. And every single customer we’re engaged with is limited in their deployment by the congestion caused by traditional Wi-Fi signals. So, Los Angeles is the deployment in North America and we’re hoping for others. In Africa, I know Africa is a lot of people. We have eight — at least eight trials underway beyond the one that we discussed. So, stay tuned for that. We hope to have on the next call like some hard purchase orders from those deployments.
But — yeah, so this again, it all boils down in those cases — there’s probably two major things. First of all, the price points of the millimter-wave are absolutely competitive with any technology. But second of all, again, we solved the density problem and traditional wireless Wi-Fi has pretty severe — quite severe congestion issues and because of our beam-forming capability, we solve those problems. So stay tuned, but we continue to see growth there every single quarter.
Kevin Liu
That’s good to hear. And maybe just on the millimeter-wave inventory correction, can you talk about what you’re hearing from your largest customers there? Do you feel like they’ve digested through most of that and you could see where there’s ramp up here in the second half? Or do you think it’s still a couple of quarters away before they’re kind of at normal level?
Ron Glibbery
Yes. I mean, they’re quite cagey, Kevin, in terms of what they’re sharing, but what I do know and I think what was an important kind of metric in fact is that their sell-through are quite extensive, right. So, there’s no — I would say one of the primary ways that we track user satisfaction is through — just through — simply through chat groups, right, through Internet provider chat groups. And I mean the feedback is overwhelmingly positive.
In terms of specific timing, we’re hoping later in the fourth quarter and early first quarter, we start to see that turnaround. It could be sooner, it could be a little later, but the customers are very cagey in terms of the specific timing.
What we do know is their sales are increasing, and so that’s good news. So in other words, the inventory correction like is not a function of sales slowing down. We’re quite optimistic that sales are ramping, but the time is a little bit of a question mark for sure. We’re hoping later this year.
Kevin Liu
Got it. And just one follow-on on the Wi-Fi 8 comments you guys made earlier.
Ron Glibbery
Sure.
Kevin Liu
Are there any specific kind of investments within R&D or other parts of your cost structure that you’ll need to invest in to support that? Or do you see opportunities for say NRE deals or other types of partnerships where you could limit your own investment dollars?
Ron Glibbery
So, I would humbly submit that we have the greatest millimeter-wave RF team on the planet. So — but kidding aside, we see it as a revenue-generating opportunity here in the short term, is the simple fact. We’re not going to spend capital resources on specific product development. Although as Jim mentioned, the tools we are paying for the EDA tools associated with [chip] (ph) development, but we’re obliged to those anyway. So, from our perspective, our initial participation in Wi-Fi 8, certainly over the next couple of years will be revenue generating, not revenue spending — at least operating expenses spending versus revenue generating. So that’s how we see Wi-Fi 8 playing out for us for the next couple of years. After that we’ll see, but for now we see there’s a revenue generating opportunity.
Kevin Liu
Great. Thanks for taking the questions, and good luck during the third quarter.
Ron Glibbery
Yeah, my pleasure, Kevin. Thank you.
Jim Sullivan
Thanks, Kevin.
Operator
I show there are no further questions in queue at this time. That will conclude today’s conference call. Thank you for your participation, and you may now disconnect. Thank you.
Ron Glibbery
Thank you.
Operator
Thank you, gentlemen.
Read the full article here