Peraso Inc. (ticker: NASDAQ:PRSO), a provider of millimeter-wave solutions, reported a decrease in total net revenue to $3.8 million for Q3 2024 in its latest earnings call, led by CFO Jim Sullivan and CEO Ron Glibbery. Despite the decline from $4.5 million year-over-year, the company sees a promising future with increased customer engagement and military contracts. Operating expenses have been reduced by nearly 20%, and the net loss has narrowed. Looking ahead, Peraso anticipates a revenue inflection point starting in Q1 2025 and expects double-digit growth in the second half of 2024 compared to the prior year.
Key Takeaways
- Peraso Inc.'s Q3 2024 total net revenue fell to $3.8 million, down from the previous year.
- The company's net loss improved to $2.7 million, reflecting cost reduction efforts and a narrowed loss.
- Peraso's millimeter-wave solutions are gaining traction, with 82 customer engagements and nine design wins.
- Significant orders include a $1.4 million follow-on from a South African WISP and initial military orders.
- Revenue is expected to grow in the second half of 2024, with double-digit growth compared to 2023.
- BEAD program eligibility could enhance market opportunities for Peraso's technology.
Company Outlook
- Peraso expects to surpass first-half 2024 revenue in the second half and achieve double-digit year-over-year growth.
- The company plans to fulfill its backlog of memory IC orders by the end of Q1 2025.
- Q4 2024 revenue is projected to be between $3.6 million and $4 million.
- The U.S. government's BEAD program is expected to support ongoing engagements and market opportunities.
Bearish Highlights
- Q3 2024 revenue decreased year-over-year, with a drop in product revenue and royalty revenue.
- The company experienced a $0.3 million inventory write-down.
- Cash and equivalents were at $1.3 million as of September 30, 2024.
Bullish Highlights
- Operating expenses decreased by nearly 20% due to cost reduction efforts.
- The company secured about $2.9 million in gross proceeds from the exercise of Series B warrants.
- Peraso's technology is now eligible for funding under the BEAD program, potentially expanding its market.
- The company has strong customer engagement and a robust design win pipeline.
Misses
- The GAAP and non-GAAP gross margins decreased due to inventory write-downs and reduced royalty revenue.
Q&A Highlights
- CEO Ron Glibbery discussed the potential impact of the BEAD program and a material military contract.
- BEAD funding disbursements are expected to be delayed until 2025-2026, with about 10% of customers starting to apply.
- The military contract is significant and sensitive, with volume shipments planned for Q2 2024.
Peraso Inc. is navigating a challenging period with reduced revenues but anticipates a brighter future driven by strategic customer engagements and market opportunities presented by the BEAD program. The company's focus on millimeter-wave technology positions it well to capitalize on the evolving needs for high-speed Internet access and the shift towards more tech-neutral funding approaches. With the expectation of revenue growth and the fulfillment of a significant military contract, Peraso Inc. remains optimistic about its prospects in the upcoming quarters.
InvestingPro Insights
Peraso Inc.'s recent financial performance and future outlook can be further contextualized with insights from InvestingPro. The company's market capitalization stands at a modest $3 million, reflecting its current position in the millimeter-wave solutions market.
InvestingPro data reveals that Peraso's revenue for the last twelve months as of Q2 2024 was $13.37 million, with a concerning revenue growth decline of -8.55% over the same period. This aligns with the company's reported decrease in Q3 2024 revenue. However, it's worth noting that the quarterly revenue growth for Q2 2024 showed a significant improvement at 76.36%, which could indicate a potential turnaround in line with management's expectations for future growth.
Two relevant InvestingPro Tips highlight Peraso's financial challenges:
1. Peraso is quickly burning through cash, which corresponds with the company's reported cash position of $1.3 million as of September 30, 2024.
2. The company is not profitable over the last twelve months, consistent with the reported net losses in the earnings call.
These tips underscore the importance of the cost reduction efforts and the anticipated revenue inflection point that management discussed. The company's ability to manage its cash burn and achieve profitability will be crucial for its future success.
InvestingPro offers 11 additional tips for Peraso, providing a more comprehensive analysis for investors interested in delving deeper into the company's financial health and market performance.
Peraso's price-to-book ratio of 0.84 suggests that the stock may be undervalued relative to its book value, which could be of interest to value investors considering the company's future growth prospects and potential market opportunities from programs like BEAD.
As Peraso navigates its financial challenges and seeks to capitalize on its technological advancements, investors may find the additional insights and real-time metrics available through InvestingPro valuable for making informed decisions about this emerging player in the millimeter-wave solutions market.
Full transcript - Peraso Inc (PRSO) Q3 2024:
Operator: Good afternoon, and welcome to Peraso Inc.'s Third 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, Tuesday, November 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 third 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 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 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 for our third quarter call. Revenue in the quarter was within a range of expectations, with overall results being highlighted by meaningful improvement in our operating performance. We began to see the benefit of our previous and ongoing actions to reduce costs and increase efficiencies, resulted in operating expenses decreasing almost 20% year-over-year. Although the broader macro environment and prolonged inventory adjustments remain ongoing challenges, we continue to make notable progress during the quarter to advance existing customer engagements, towards new design wins for our millimeter-wave solutions. Much of this recent activity has predominantly focused with our targeted markets of fixed wireless access and tactical military communications, which I will expand on in more detail as part of today's call. Turning to Slide 4, we continue to ship significant quantities of our end-of-life memory IC products. Third quarter shipments increased sequentially to approximately $3.7 million from $3.4 million in the second quarter. We ended the third quarter with a total remaining purchase order backlog of approximately $5.7 million. We remain on schedule to fulfill the total remaining backlog of memory IC orders by the end of the first quarter of 2025. As previously discussed, these shipments against remaining backlog will continue to contribute meaningful revenue and cash flow, as we work further to expand our millimeter-wave design, win pipeline and continue to support customer ramps of our millimeter-wave products. Next (LON:NXT) on Slide 5, we are continuing to cultivate a robust and growing pipeline of opportunities for our millimeter-wave solutions. As discussed on past earnings calls, our sales efforts and engagements have been focused on expanding market reach across diverse geographies and end market applications. These include recently announced customer wins in Africa, Asia and other areas around the globe that can benefit from our millimeter-wave technologies for high reliability and low reliability, multi-gigabit wireless connectivity. Starting with a few key takeaways from our current pipeline, first, we have consistently increased the number of new funnel opportunities to 82 customer engagements, and we currently have 23 active engagements that are either undergoing hardware evaluation or an advanced design and engineering stages. To-date, we have successfully converted nine prior design engagements, to in-production wins commercialized by its customers. As a reminder, once a program converts to full production, we no longer included as part of our current active pipeline. To briefly highlight a couple of our recently announced wins, in early November, SAF TEHNIKA released its FreeMile 60 radio, which provides Fixed Wireless Access or FWA services using Peraso's Perspectus millimeter-Wave modules with X720 chipset. Utilizing the unlicensed 60 gigahertz band and incorporating Beamforming coverage and optional antenna kits for enhanced directionality, this radio leverages the power of our prospectus platform and is expected to be deployed in fixed wireless networks in Europe and North America. In another recent way, Miliwave announced its MWC-932 product at WISPAPALOOZA adding to its existing AirPath 60 product line. This new product utilizes Peraso's Perspectus millimeter-Wave modules in X720 chipset. The MWC-932-932 provides a wireless Ethernet Bridge for applications that require multi-gigabit throughput and utilizes the unlicensed 60 gigahertz band to overcome the frequently encountered interference from Wi-Fi, while also providing a robust link at distances up to five kilometers. Lastly, we also recently announced an initial purchase order for our newly integrated High-Velocity Roaming or HVR Technology for applications in South Korea. More specifically, this unique application is expected to leverage Peraso's millimeter-wave technology to enhance high-speed Internet connectivity on moving trains and subways. Turning to Slide 6, I want to review the recent traction with our unique DUNE millimeter-wave platform for Dense Urban applications. The DUNE platform implements intelligent media access control features, which, along with the prospective series of millimeter-wave modules enables Wireless Internet Service Providers or WISP to deploy low-cost, low-power, long-range point-to-multipoint fixed wireless solutions in dense networking environments. These advantages are particularly crucial in regions such as Africa, where reliable, low power connectivity is essential for economic growth and social development, particularly as this market is heavily reliant on battery backup systems due to frequent power outages. This last month, we announced $1.4 million follow-on purchase order from a South African WISP for our DUNE solution. This additional order for Peraso's innovative millimeter-wave enabled solution builds on initial production order secured and shipped in the first half of 2024. We believe the rapid growth of Internet users in Africa presents a huge opportunity to bridge the digital live divide, and this recent follow-on order is another early indication of this market's future potential. In addition to South Africa, we are actively seeking to partner WISP worldwide with a goal of delivering high-quality wireless connectivity that empowers individuals and businesses alike. As further evidenced, we also recently announced another DUNE order from a WISP in Kenya. As this WISP replaces its existing technology with Peraso’s DUNE system, the customer expects to significantly improve the quality of Internet services across its existing network. With an estimated 22.7 million Internet users in Kenya, Peraso believes the potential impact of this project could be substantial. Finally, we are also engaged with several other prospective customers targeting future deployments in dense urban environments, and have made multiple shipments of doing proof-of-concepts in support of trials and ongoing evaluations with other WISP in Africa. Moreover, the members of the Peraso team are currently participating in the ongoing 2024 Africa Tech Festival in Cape Town, South Africa. They are there this week to promote the capabilities of our millimeter-wave products and technology and also collaborate with leading experts in the telecom industry. This includes exchanging insights, fostering new connections and advocating for the adoption of millimeter-wave fixed wireless solutions in densely populated areas across the continent. Turning to slide 7. We also continue to focus on expanded opportunities for our millimeter-wave technology in tactical defense and military applications. With the growing demand for stealth communication platforms used on the battlefield, we believe Peraso’s 60 gigahertz millimeter-wave technology is uniquely poised to meet the rigorous demands of the military and modern defense markets. Our technology ensures secure, high-speed transfer and intelligent benefit environments, while simultaneously avoiding any potential interference with the licensed spectrum. As a recent proof point, we secured an initial purchase order from a military customer for our prospective module products. Again, our proprietary and narrow beam forming technology is ideally suited for battlefield applications. This particular configuration is intended to enhance situational awareness and communications for deployed soldiers engaged in combat operations. We currently anticipate initial shipments in fulfillment of this order during the first quarter of 2025. Based on a rapid expansion of recent engagement activity, we fully expect to announce additional wins leveraging our millimeter-wave technology for mission-critical, tactical communication applications over the coming year. Moving to slide 8. I wanted to take a moment to highlight other emerging developments that we believe could contribute to expanded customer adoption and market opportunities from our millimeter-wave solutions. Although, we've discussed BEAD on previous calls, new information continues to be made available to influence the potential strategic direction of service providers and the technology solutions deployed. As a brief reminder, the US government's BEAD program is a significant initiative meant to improve access to high-speed Internet by providing total grants up to $42 billion to fund infrastructure and adoption programs. The head of the National Telecommunications and Information Administration, or NTIA, which is a government agency that oversees the BEAD program, recently provided formally updated guidance that makes high-speed Internet using unlicensed spectrum, fixed wireless access, including the millimeter bands eligible for program funding. Now that we are eligible for funding, we believe the superior value of our proposition and significant cost advantages when compared to the cost and disruption of trenching fiber will lead to Midland fixed wireless access plan a key role in bringing high-speed broadband access across America. New engagements with customers and partners supported by BEAD program funding would increase and potentially significantly accelerate the market opportunities for our millimeter-wave technology, and we are continuing to closely monitor all related new developments. In closing, I remain pleased with the progress that we continue to make across our business, especially on expanding our sales funnel in more diversified geographies and applications. We remain focused on advancing and converting existing customer engagements into production orders for our millimeter wave products, and we also expect that our ongoing shipments to fulfill the remaining backlog orders for our end-of-life memory IC products will continue to contribute meaningful revenue and cash flow through early next year. Taken together, we continue to anticipate total revenue for the second half of 2024 to increase over the first half of the year, as well as represent double-digit growth over the comparable prior year period. With that, I'll turn the call back to Jim to review the third quarter financials, as well as our revenue outlook for the fourth quarter of 2024.
Jim Sullivan: Thank you, Ron. Turning to the results for the third quarter of 2024. Total (EPA:TTEF) net revenue was $3.8 million compared with $4.2 million for the prior quarter and $4.5 million for the third quarter of 2023. Product revenue from the sale of our memory integrated circuits and millimeter wave products in the third quarter was $3.8 million compared with $4.1 million in the prior quarter and $4.3 million in the third quarter of 2023. Royalty and other revenue for the third quarter of 2024 was $30,000 compared with $0.1 million in the prior quarter and compared with $0.2 million in the same quarter a year ago. GAAP gross margin decreased to 47% in the third quarter from 55.5% in the prior quarter and 45.4% in the year ago quarter. On a non-GAAP basis, which excludes amortization of acquired intangible assets, gross margin for the third quarter was 61.7% compared with 68.8% in the prior quarter and compared with 58% in the third quarter of 2023. The sequential decrease in both GAAP and non-GAAP gross margin was primarily attributable to a $0.3 million write-down of millimeter wave inventory, as well as lower royalty and other revenue. GAAP operating expenses for the third quarter of 2024 were $4.5 million compared with $6.8 million in the prior quarter and $5.6 million in the third quarter of 2023. Non-GAAP operating expenses, which excludes stock-based compensation, amortization of intangible assets and severance costs, were $3.3 million in the third quarter compared with $4.9 million in the prior quarter and $4 million in the third quarter of 2023. The year-over-year decrease in third quarter operating expenses on a GAAP and non-GAAP basis was primarily attributable to a combination of previously implemented cost reductions and the company's ongoing cost containment initiatives. GAAP net loss for the third quarter of 2024 was $2.7 million or a loss of $0.98 per share compared with a net loss of $4.4 million or $1.88 per share in the prior quarter and compared with a net loss of $0.6 million or $0.87 per share in the same quarter a year ago. On a non-GAAP basis, which excludes stock-based compensation, amortization of acquired intangibles, and severance costs, net loss for the third quarter of 2024 was $0.9 million or a loss of $0.34 per share. This compared with a non-GAAP net loss of $2.1 million or a loss of $0.88 per share in the prior quarter and a net loss of $1.1 million or a loss per share of $1.56 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 third quarter of 2024 was approximately 2.8 million shares. Adjusted EBITDA, which we define as GAAP net income or losses 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 $0.8 million in the third quarter compared with negative $1.9 million in the prior quarter and negative $0.9 million in the prior year period. As of September 30th, 2024, we had $1.3 million of cash and equivalents, representing a cash burn of approximately $0.6 million from the prior quarter. As recently announced, subsequent to the end of the third quarter, the company entered into inducement offer letter agreements with certain holders of Series B warrants of the company for the holders to purchase 2,246,030 shares of the company's common stock. The holders exercised their Series B warrants for cash at a reduced exercise price of $1.30 per share and in consideration, the company issued a new common stock purchase warrants. These exercise Series B warrants resulted in aggregate gross proceeds to the company of approximately $2.9 million. Please see the Form 8-K the company filed on November 5th with the Securities and Exchange Commission for a detailed description of the offering. Immediately following the closing of this offering, the company had 3,517,144 shares of common stock and exchangeable shares outstanding, which excludes an additional 1,759,790 shares of common stock that were not issued at the closing of the offering and are held in abeyance pending receipt of issuance instructions from the warrant holders, although the company received payment for such a billion shares at the closing. Now turning to our outlook. As Ron highlighted in his remarks, we have a diverse pipeline of customer engagements to utilize process millimeter-wave solutions in multiple target markets, including fixed wireless access, tactical military communication, and transportation applications. Our team remains focused on converting these opportunities into design wins and new production orders for our millimeter-wave products. Additionally, we continue to have a meaningful backlog of non-cancelable purchase orders for our end-of-life memory IC products. For the fourth quarter of 2024, the company currently expects total net revenue to be in the range of $3.6 million to $4 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?
Operator: Thank you. The floor is now open for questions. [Operator Instructions] And the first question today is coming from David Williams from Benchmark. David, your line is live. Please go ahead.
Q – David Williams: Hey, good afternoon, gentlemen and thanks for taking my questions. Maybe first, Ron, it sounds like you've got a lot of traction here and congratulations on the design wins that you've announced. When do you think we should start seeing maybe an inflection coming on the revenue side? Just trying to get a sense of when these design wins could turn into deployment and then eventually revenue?
Ron Glibbery: Well, thanks, good question David and for listening in today. I appreciate that. So obviously, from our perspective, the sooner the better. We think -- we know for sure there's now backlog late Q4 and into Q1. So we think Q1 is realistically when it's really going to -- we're going to start to really see that inflection point. We -- as we said in my remarks, like we have worked through -- we're working through the inventory issues and so on, just kind of general macro issues. But I would continue to stress like from our perspective, the design win activity is very strong, and we're really -- we're more than optimistic that by Q1, we're going to start to see those shipments start to resume because we were starting to see that backlog. So that's kind of the thinking from our side.
Q – David Williams: Okay. Perfect. Thanks so much for that color. It sounds like maybe that the inventory is largely at least getting worked through. Are you seeing that in your North America, maybe your largest customer from their inventory as well? Or is most of this maybe the positive more from outside of that largest customer.
Ron Glibbery: I would say both. And just to kind of rewind a little bit, Dave, when we -- obviously, over the last few quarters, we were really caught by our customer concentration -- with a couple of customers. We've worked so hard over the last two years to really fix that problem. We've got 100 -- not really, I'd say, in the order of 100 customer engagements. It's actually, from my perspective, quite remarkable. So what we're going to start to see -- we are already start some green shoots in Q4 with existing customers and start to see the new customers come online in Q1. So it's really a combination of both, I would say. So -- and again, like starting to see that volume. But definitely -- I mean, one stat that I'll throw out that I think is quite remarkable that I was kind of updated after kind of recently is -- part of our design win process is what we call Eval kits [ph] where customers buy Eval kits -- kind of try things out testing. We sold 28 of those in the third quarter and -- or in the -- I'm sorry, the second quarter. No, it was actually the third quarter, and it was actually the most we ever sold in our history. So every single quarter, not only have we seen the design wins going up and the customer case has gone up. But people are actually really testing their stuff out early. So I'm really thrilled with, again, the traction we're seeing on that front, and we're really optimistic that by Q1, we're going to start to see those orders start to come in.
Q – David Williams: Great. Yes, it's certainly good to see the traction there. I guess if you're thinking about kind of your WIP deployments and the lift care. How heavy a lift is it for these wins to deploy the fixed wireless access or -- and are you seeing it more from existing providers in the marketplace? Are these start-ups that are coming in that are looking to get involved in the fixed wireless access -- or is this just any color there on that customer and what those look like in terms of your design engagement.
Ron Glibbery: Well, I would say somewhere above 95% of the list we deal with our experience. And I would beat the drum on the same problem, which is we solve the congestion problem on millimeter-wave [ph]. And so the problem with congestion is with existing 5 gig and even now 6 gig solutions is it can only support so much customer density in the marketplace, and we solve that problem. So these are experienced risks, who are actually ripping out their 5 gig systems because they just can't support the density. So I'm really trying to think if there's anybody new on the market, but I don't really -- I can't really think of it. I mean they're all very experienced WISP that really get the advantage we bring to the marketplace with millimeter-wave.
David Williams: Yes, yes. And just one more, if I may. And do you think we'll see that kind of transition from the 5G over to 60 gig with the North American market? Just kind of given the success they've had there and the congestion issues are clearly going to be an issue at some point?
Ron Glibbery: Absolutely. I think like the announcement in Los Angeles of a 60-gigahertz solution is really the bellwether there. And that absolutely solving the density problem in the urban market. And again, I would say -- so I think in North America, so the beauty of what we bring to the marketplace is what we refer to as fiber-like performance. So now even our customers are tidying up to 2 gigabit per second, which is exactly like fiber, and I think the point that I'd like to actually kind of expand on a little bit is this whole BEAD funding. And of course, the $42 billion of BEAD funding is really -- was really fiber oriented. And I really believe, and I mean, don't call me on this, but I really believe that with the change of administration, you're going to start to see a much more tech neutral stance from the administration because basically, as opposed to kind of trying to architect a fiber-only approach, you're going to start to see in North America, whatever solves the problem best approach. And of course, when we bring to the party, besides solving the congestion problem is the fact that we can reach into 1 or 2 gigabit speeds like fiber. So that's -- those are two real benefits that we bring to this marketplace, especially in North America.
David Williams: Great. Thanks so much for the help and best of luck to you in the fourth quarter.
Ron Glibbery: Thanks, Dave.
Operator: Thank you. Your next question is coming from Jon Hickman from Ladenburg Thalmann. Jon, your line is live. Please go ahead.
Jon Hickman: Hi. Hey, just two questions.
Ron Glibbery: Hi, Jon. Thank you.
Jon Hickman: One, is any – is BEAD money being spent right now on the fiber side? Or is it like in permitting stage and stuff like that?
Ron Glibbery: I think it's still early, would be my assessment. I mean the BEAD process is reasonably onerous. It takes matching funds. I think the application process is quite onerous. So I think the funds are starting to trickle out but it's probably more of a longer-term process in 2025 and 2026 Obviously, from our perspective -- sorry, the only thing I wanted to say is from our perspective, the only -- I mean, the change we're really hoping to see is to go from a really a very fiber-centric approach to a tech-neutral approach that includes our technology.
Jon Hickman: So are you seeing anybody -- any of the risk like starting to like ask for them money?
Ron Glibbery: Well, I mean, we were at a WISP, so called Wispapalooza about a month ago in Las Vegas. And definitely, people are circling around. I don't recall anyone saying to us specifically, they've applied. But I think they are in the background starting to apply for sure because it's a significant amount of money. So I would say, if I had to handicap it, maybe 10% of the customers we see in that marketplace would have been starting to apply. But I think in general, people really want to see how things are going to shake out, and we're starting to see that now.
Jon Hickman: Okay. And then my other question is, can you elaborate on the size at all of that military contract and when you might start like actually shipping to that customer?
Ron Glibbery: Well, in terms of the size, I think the most -- first of all, I mean, I would have to say that it's a highly sensitive contract. I think in terms of the size, probably the most I could say right now, John, is that it's material to our business. It's not like a smaller portion of our business. So it would be a material contract for the company. We're hoping to be shipping in volume in Q2 next year. So just to clarify that point, I mean, we are getting -- I mean, again, on the whole military discussion, I think a lot of the 28 evaluation kits that we shipped out are to military people, particularly a lot of it is drones. And I think as everyone knows, in the Ukraine war in the Middle East, drones are playing a very significant role. And so the whole concept of Stealth high-speed communications is a big part of that value proposition we bring to the party. But generally, I think one of the knocks against militaries, it takes long. But I think what we have to keep in mind for our business is that there are ongoing wars that people want solutions now. So we expect to be shipping in volume right now if all goes well, and it is going well by Q2 next year.
Jon Hickman: Okay. Thanks.
Ron Glibbery: My pleasure.
Operator: Thank you. I show there are no further questions in queue at this time. That will conclude today's conference call. Thank you for your participation. You may now disconnect.
Ron Glibbery: Thank you.
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