Q1 2021 Akoustis Technologies Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the acoustic technologies business update conference call. As a reminder, this conference call is being recorded at the conclusion of the company presentation. Because this management will take questions.
To ask a question. Please press star one on your key pad to be placed into the queue Irene.
A replay of the call will be available on the Investor Relations section of the cruise this website.
Thank you operator, and good morning to everyone on the call well.
Welcome to <unk> first quarter fiscal 2021 business update conference call.
I'm joined today by our founder and CEO, Jeff Sheley interim CFO controller and.
VP of business development they likely.
Before we begin please note that today's presentation includes forward looking statements about our business outlook all statements other than statements of historical facts.
During this conference call, including statements regarding our strategies operations.
Plans and objectives, including the timing and prospect of product development and customer orders.
Expectations regarding achieving design wins pretty current and future customers the possibility of entering into collaborative or partnering relationships.
I went back to the COVID-19, pandemic and guidance regarding expected revenue product orders and milestones for the current and future fiscal quarters are forward looking statements.
Such forward looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties.
The company and our management team assume no obligation to update any forward looking statements made on today's call.
Let's see see filings mention important factors that could cause actual results to differ materially.
Please refer to our latest form 10-K, and form 10-Q filed with the FCC to get a better understanding of those risks and uncertainties.
In addition, our presentation today will also refer to certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measure is presented in our earnings call highlight release available on the investors section of acoustic stucco.
I would now like to turn over the call to Jeffs, Chile, founder and CEO of acoustics.
Thank you Tom and welcome everyone to our 2021 first fiscal quarter business update call.
We had a strong start to our fiscal 2021 year as we enter production into high volume commercial markets, including wildfire six in Fiveg small cell networking equipment.
In White barn, we ramped production with a tier one consumer focused brand that is currently stocking shelves with a tri band Multiuser Mimo C. P. Router ahead of the holiday season.
We started volume shipments with our tier one fiveg small cell network infrastructure customer, which we expect to continue ramping moving forward with multiple X ball filter design wins we.
We achieved all of our strategic milestones for the September quarter and delivered on unexpected fronts that I will discuss during the conference call today.
In fiscal Q1, we beat our revenue guidance of up to 50% quarter over quarter based upon our initial ramp in why fiveg and Fiveg small cell shipments.
And today I'm pleased to announce we expect our fiscal Q2 revenue to be up at least 50% sequentially. This.
This means for the first time, we expect to achieve approximately $1 million in quarterly revenue from our chip business there.
The growth is being driven by strength across our Wi Fi network infrastructure and mobile business segments.
Overall, our optimistic outlook is grounded with execution across multiple markets, which should contribute to our revenue ramp providing acoustic us with the opportunity for significant top and bottom line growth for years to come.
Before I talk about each of our markets segments I would like to spend a moment discussing the ongoing impact. The COVID-19 pandemic has had on our business and touch on what we expect over the coming months.
As a result of the pandemic acoustics continues with several precautionary steps, including selective remote work authorization and worksite isolation from outside visitors.
Overall, we continue to experience the incredible flexibility afforded by our in house manufacturing model in the current environment as it allows us to continue to develop and ship our products with minimal delays.
To this day acoustics has continued to operate with all key personnel as in the central business in both New York and North Carolina during the pandemic and we continue to accelerate product development consistent with our strategic roadmap.
We greatly appreciate our employees and value their flexibility and discipline staying safe during this challenging time.
Looking ahead it is difficult to know the additional impact of the pandemic, particularly on our customers regarding their respective supply chains and product launches as.
As we discussed on the last conference call why five six has experienced the greatest disruption earlier in calendar 2020, as Oems continue to build existing design.
Looking forward, we see future designs with both why Fysixteen and why 560, where we are well positioned with our product portfolio.
The defense market is also showing some signs that programs are being delayed but this should not impact our expectations for calendar 2021 as growth in our high volume commercial markets should more than compensate for any delays in the defense business.
We have organized today's call to give you both a progress report and or target milestones on each of our four main filter market segments.
Those being why Fiveg Fiveg network infrastructure, five T mobile devices and finally, our other markets segment in.
In addition, Ken will provide an overview of our financial results along with Ford revenue guidance, and finally, I will highlight our expectations and milestones beyond the December quarter.
And now I would like to move onto our business performance by market segment, beginning with wildfire.
The September quarter was our strongest quarter to date and why has it mark the initial production ramp by our first why Fysixteen Tri band multi user mimo customer.
This customer is a high profile tier one consumer focused brand that is currently shipping finished product into the retail channel for holiday sales and marks the first commercial Wi Fi product with multiple X ball filters onboard.
Initial feedback from the customer has been extremely positive and discussions are already underway with increased unit expectations for next year.
We have met all delivery expectations for our 5.2, and 5.6 gigahertz filters and I'm personally very proud of our design and operations teams that have successfully manage this first significant commercial production ramp.
We are now tracking multiple active engagements with Oems odium, that's so see makers and channel partners and why five six.
Our team has done an excellent job filling our sales funnel and we are now in the advanced stages of the sales cycle with several customers, where we expect additional design wins over the coming months. Despite the current impact of the global pandemic.
As we have discussed previously the.
The FCC announced in late April the approval of 5.9 to 7.1 gigahertz.
Your wife, I 60 unlicensed use.
Which is the largest spectrum addition, since the FCC allocated unlicensed spectrum for Wi Fi and 1989.
This next generation of Wi Fi is expected to use the existing 5.1 to 5.8 gigahertz unlicensed bands, which we refer to as the five five band.
Along with the newly allocated 5.9 to 7.1 gigahertz bands, which we refer to as the 6.5 band to deliver higher data rates for Wi Fi Sixsix.
The engineering challenges in delivering these new filters include high frequency operation Ultra wide bandwidth.
In high adjacent band rejection, leveraging key performance features of our patented ex bought technology.
We have been aggressively developing wideband, what P.A.'s all electric material device models and RF filter designs and have filed new key patent applications surrounding why Fivesixty RF filters.
During the September quarter, we successfully introduced the first ball base 6.5, why 560 filter. This followed our tandem 5.5 gigahertz filter, which we introduced during the June quarter.
We have achieved robust sampling of these filters with multiple Oems Odeon and that's so see vendors and we expect to design lock ins start qualification of these new X. BAW filters by the end of the current calendar year.
These two why 560 filters, our standard products that will be available to all customers its catalog parts.
We received our first order for our 5.5 and 6.5 gigahertz tandem solution during the September quarter from a tier one enterprise class OEM and expect production to begin by mid calendar 2021.
In addition to the standard why 565.5, and 6.5 gigahertz X BAW filters. Some Oems are requesting custom solutions during the September quarter, we signed a strategic purchase agreement for multiple why fysixteen filters with a tier one enterprise.
Last wife, I, OEM, which is expected to go into production in calendar 2021.
In the September quarter, we shipped multiple custom why fysixteen filters to this customer and look to deliver additional samples in the coming months and our new wafer level packages, which deliver the form factor required for the mobile market, including Fiveg smartphones.
Whereas activity and why five six remain strong the interest and demand for why Fysixteen filter solution is robust as many Oems and OTI EMS have quickly shifted new C. P product designs to address why fysixteen.
In addition, we strongly believe there will be a need for a ball micro filter solutions for why 560 and mobile handsets.
And as I just mentioned we are about to ship our first WLP solution sample that we expect will satisfy what should be a very sizable opportunity.
In summary, we believe the revolution into why Fysixteen will drive significant unit and revenue growth for Coustas beginning in the first half of calendar 2021.
Next I would now like to discuss our opportunities in Fiveg network infrastructure.
Wide bandwidth highpower handling lower insertion loss and high out of band rejection or the core product performance features for Fiveg network infrastructure.
Acoustics is ideally positioned to grow its market share in this segment, given our small form factor solution and our growing portfolio of RF filters above three gigahertz.
Their fiveg is being deployed worldwide.
We are currently designing endorse shipping filters in three main segments of the Fiveg infrastructure market, including small cell base stations macro base stations and citizen broadband radio service or CBR S. equipment.
In the Fiveg small cell market, we shipped an initial volume order with our tier one customer with a band in 77 filter in the September quarter.
We also announced our third Fiveg small cell design win with this customer and shipped a fourth filter that we expect will go into production in early calendar 2021.
In the September quarter. We were also pleased to announce that we had received the design win from a second fiveg small cell customer that is expected to start ramping in early calendar 2021.
And we are actively engaged with four additional potential small cell customers, including two tier one equipment providers.
In our last update we spoke about.
Our other existing tier one fiveg network equipment customer and the plant to deliver this customer a spec compliant highpower filter by the end of November with the intent to go into production by the middle of calendar 2021.
We're currently tracking toward the execution of this goal.
In late July the FCC began the auction of the priority access license or Pal portion of the citizen broadband radio service spectrum for the U.S. market.
The CBR S bands operate between 3.5, and 3.7 gigahertz and will provide cellular carriers and other major communications companies, new and additional sub six gigahertz spectrum.
Which can be a key enabler for making fiveg deployments possible by providing last mile data service and improving coverage of individual unlicensed networks.
Verizon dish networks, Comcast and charter where the early winners spending approximately 3.7 billion of the total 4.6 billion four pounds in the recent auction.
We believe that the utilization of CBR S bands within the Fiveg network will likely require a significant amount of high frequency filters to deal with a multitude of co existence issues.
Which falls squarely into our sweet spot producing and delivering high quality high frequency BAW filters.
Through our knowledge acoustics continues to be the only supplier providing BAW filters for this application and we are receiving increased interest given the performance and size of our CB RF filter solution.
As we announced this past March we have designed locked our first CBR S X ball filter and have sampled it to greater than 10, as so see and Seabear S equipment makers up from the three customers, we announced in the March quarter.
In addition, we completed orders to a distributor to support promotion and customer engagements for the 3.6 gigahertz BAW filter.
Furthermore, last week, we announced that we have received our first design wins from a CBRN network infrastructure OEM for 3.6 Gigahertz X ball RF filter solution.
Which are expected to ramp into production in the second half of calendar 2021.
The order is from a customer that received and tested the filters. When they were originally introduced over a year ago and are now ready to produce new C. P E and network equipment as the operators are looking to build out their networks now that the auctions have been held in spectrum is now available.
The customer intends to use our export filters for C P products and for inclusion in network infrastructure equipment.
I would now like to discuss our efforts in the mobile device market.
The mobile handset market is our largest potential BAW filter market opportunity by both unit volume and revenue.
Our ex BAW filters have already been evaluated by several select top tier one and tier two mobile handset Oems and we're seeing increased interest in using our ex BAW filters in the mobile device market.
As we have discussed before entering the tier one handset market in the near term would require a partner.
However, we believe with the ongoing 500% capacity expansion of our New York Fab that we will have the wherewithal to enter the handset market servicing one or more tier two handset Oems without a partner.
Hi, I'm happy to announce this morning that we have received our first order from a new customer for X ball filters for Fiveg mobile RF front end solutions.
We are jointly developing coexistence RF filters for integration into our customers' RF modules, which are expected to enable ramp in second half of calendar 2021.
From our early discussions with this customer we see the opportunity to supply multiple filters in multiple bands for Fiveg and Wi Fi RF modules.
Since our customer supplies numerous device Oems. This represents a one to many sales opportunity for coustas in the Fiveg mobile market.
Beyond customer driven activity, we have dedicated engineering resources focused on dramatic package size reductions.
Specifically the development of advanced wafer level packaging or WLP and wafer level chip scale packaging or W.L.C.S.P. solutions to address next generation Fiveg mobile products.
Working within a 100% North American supply chain acoustics has been developing a W. Ell CSP process with the capacity needed to support the high volumes associated with the mobile device market.
W. Ell CSP technology development has been steadily progressing throughout calendar 2020.
With preproduction parts expected to be available in early calendar 2021.
We are also actively developing flip chip wafer level DDI solutions.
Which provide a low cost WLP technology supporting improved performance and smaller footprint integration.
We remain on track to deliver qualified packages by the end of the current calendar year.
And finally in our other markets segment I was pleased to announce last Tuesday that we have been awarded a new multi year R&D contract from the defense Advanced research projects agency or DARPA to further develop acoustics is technology through the development of a P.A.'s, though mems.
Process design kit or PDK.
For the company's proprietary and patented ex paal process.
The direct to phase two or DP two program will be dedicated to developing a general purpose PDK that will enable ball and other similar mems structures to be designed and fabricated using the companys state of the art ex Paal process.
The proposed PPA, so Mems PDK will encompass all aspects of the process ranging from materials properties process rules for stock dimensions process control monitoring design rule checking an example device models.
Upon successful completion of the DP two program DARPA has an option to fund a phase three program. This option supports multiple new customer engagements leveraging the new PDK to create devices in circuits, including RF filters using the company's ex ball process.
We expect this will greatly expand the opportunities for X ball moving forward as other designers will be able to develop new products utilizing our novel Piazza electric materials and substrates outside of the current devices, which could lead to new opportunities in adjacent markets.
Now I would like to turn the call over to Ken to go through select financial highlights.
Thank you Jeff.
For the first quarter and ended September Thirtyth. The company reported revenue of $636000, which was an increase of 74% as compared to the previous quarter and represented 100, an 18% increase in our core filter product revenue.
On a GAAP basis operating loss was $10.3 million for the September quarter, mainly driven by labor cost of 6.3 million depreciation of 1 million and other operational costs totaling 3 million.
As a result, GAAP net loss per share was 31 cents.
On a non-GAAP basis operating loss was 8.3 million and non-GAAP net loss per share was 23 cents.
Capex spend for Q1 was $2.3 million compared to $3.4 million in the prior quarter, mostly related to the targeted 500% capacity expansion and the company's New York Fad.
Cash used in operating activities in Q1 was $7.9 million compared to 4.9 million in the prior quarter. The increase a $3 million is primarily due to certain fiscal year end payments not expected to repeat in the second quarter and increases in spending related to our capacity expansion.
The company exited the September quarter, with 37.3 million of cash and cash equivalents versus $44.4 million at the end of Q4.
The decrease in cash from operating activities and Capex spend was partially offset by the mindful management of our balance sheet utilizing the at the market financing instruments.
During the September quarter, we added $3.1 million net cash in the balance sheet through the utilization of this instrument. After all fees, an average sale price of approximately $8 an eight cents.
While there is still some uncertainty regarding timing of customer production ramps related to COVID-19, our visibility is improving given the rollout of fiveg and new Wi Fi platforms. We are fully books with backlog in house to guide revenue up at least 50% sequentially in the December quarter and for the first.
Time, we expect to achieve more than $1 billion in quarterly revenue from our chip business.
I will now turn the call back over to Jeff to discuss our future milestones.
Thank you Ken.
Overall, we expect to see revenue from all of our target end market segments in the December quarter.
Our company continues to strive to achieve our targeted milestones across each of our market segments.
The targeted milestones for the December quarter, which can be found in our November 2020, investor presentation on our website include.
Delivery of a design lock 5.5, and 6.5 gigahertz, why Fivesixty X BAW filters by the end of the year.
Continued ramp with our why five six customer for multi user mimo devices.
We expect one to two new design wins in Wi Fi six using our existing X ball co existence filters solutions.
We expect to commence a production ramp with our tier one small cell network infrastructure customer with multiple filters.
We expect to deliver a design lock filter for first tier one fiveg network infrastructure customer.
And we expect to receive an x. ball filter order for CB Rs from a major esso see vendor.
In addition, we expect to introduce a qualified wafer level package solution for the mobile device market.
And we expect to complete a design.
For a new Fiveg X ball filter for our new RF front end mobile customer.
And finally, we expect to kick off the first phase of the DARPA program.
In conclusion, we.
We continue to work diligently to achieve each of our stated objectives and we will continue to update you on our execution against these objectives going forward.
Our team at acoustics has done a tremendous job over the past year and I'm pleased to reiterate that we have 15 design locked X ball RF filters as of today, which is more than a seven fold increase in the past 12 months.
This growing product catalog puts us in a great position to ramp revenue in the December quarter.
As reflected in our guidance and we look forward to expanding our filter catalog.
As we discussed in our previous conference call to support our current engagements and emerging sales opportunities. We continue investing to increase manufacturing capacity by 500% to produce hundreds of millions of X ball filters per year.
We continue to add key hires across our sales design and manufacturing teams.
Beyond our current expansion project. The company is positioned to scale as our current New York wafer fab can ultimately produce up to $5 billion ex BAW filters per year when fully equipped.
I would like to thank those who have joined us on the call today.
We continue to build our company around strong management and technical staff.
Strong intellectual property, which currently includes 33 issued and license patents.
And 73 patents pending.
A large and growing markets with limited historical competition in the high band and Ultra high band spectrum.
And our qualified wafer manufacturing operation, which is expanding to address high growth opportunities in our target end markets.
Next I would like to highlight the addition of Mike Mcguire, former grant Thornton CEO to our board of directors.
Brings a wealth of operational and transaction experience to the board and we are fortunate to have him join the team at acoustic is.
We are successfully penetrating the Wi Fi market with our first design win with the world's first tandem 5.2, and 5.6 gigahertz Ultra high band BAW filter solution, which will be in a consumer product for sale on the shelves for the holiday season.
We are shipping Wi Fi Sixsix filter solutions to multiple Oems Odeon and that's so see makers and already have a strategic purchase agreement and this next generation networking standard.
Additionally, our fiveg engagements with global leaders in both network infrastructure and mobile handset markets have led to four design wins and small cell base stations with two customers.
And now we are experiencing early success in CB Rs and Fiveg mobile RF front end modules, providing acoustics with technology validation from multiple Oems and strong growth opportunities in high performance coexistence ball RF filters.
And finally, I am forever grateful to our employees for their hard work passion and dedication during this ongoing pandemic.
As our team has kept the momentum going on our R&D, which has led to multiple design wins across Wi Fi Fiveg network infrastructure and the defense market.
We are also seeing increased activity in the mobile market driven by our new and expanding wafer level packaging capabilities.
Also wish to thank our shareholders, who continue to support the company.
And with that I would like to open the call for questions from the investment community.
Operator. Please go ahead with the first question.
Thank you, we'll now be conducting a question and answer session. We ask that you. Please ask one question and one follow up then return to the queue if you'd like to be placed into question queue. Please press star one under telephone keypad, a confirmation code will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the Q.
Once again Thats star one to be placed in the question queue and we do ask that you ask one question one follow up the return to the queue. Our first question today is coming from Anthony Stoss from Craig Hallum. Your line is now live.
Good morning, guys, Jeff Im curious if you can shed a little bit more light on this morning's press release with the RF module maker, which frequencies. They are targeting and perhaps you can size that opportunity for us.
And then also thanks for the update on the Fiveg massive mimo, new spec can you also share any updated thoughts on when volume production might begin with that same customer. Thanks.
Hey, Tony Good morning, I'm going to have Dave kick off a horse comments here on the on the announcement this morning and then.
I'll follow up Im also touch on the massive mimo.
Opportunity.
Good morning, Tony saved likely.
I appreciate the question opportunity to I guess share a little bit more about the news that we announced this morning.
Hi, this is with a leading RF front end module manufacturer and there are opportunities multiple opportunities as we commented.
This customer the main focus right now is with the Wi Fi coexist with.
With Fiveg cellular.
Cellular and the frequency coverage that we can support with this customer is going to be from two gigahertz up to seven gigahertz.
Not disclosing exact frequencies right now, but the plan is that we'll work both Wi Fi and also the Fiveg spectrum.
And the potential on this is supporting.
Both the the China market with what it called the tier two tier 1.5 customers along with a potential with the tier ones as well so we're going to work with them closely.
Developing a solution that can be integrated into their module meeting the form factor and obviously the targets books.
And then with respect to the mass my mother, and Jeff can comment as well.
We're making good traction with the customer confidence is high that we'll be able to deliver a solution.
That is meeting the specs and then it really is sitting down with them.
To align with the insertion point and ramp so.
So I think the guidance is the middle of the year, but you know once we deliver that solution to the customer will be able to have more specifics that we can share with you on the next call.
Okay, Tony and I'm going to add to that just.
With that with the Fiveg effort mobile opportunity.
Yes, Dave emphasize that was a that's a co existence filters. So that's that particular, well working with a module partner at that does that lacks access.
Two bulk acoustic wave technology, which is critical for coexist and so.
The bands that they're focused on are very difficult to address with competing.
Filter technologies. So we feel there's a good match and that we played the key hall I do like reminding people of that.
Relative to the number of module players that are out there.
There are very few.
Opportunities are options for.
Supplying our suppliers of bulk acoustic wave.
Jumping over to the massive mimo opportunity I, just augment a couple of comments Dave made.
Yes, we've been working.
Several channels of this number one is getting set up as a supplier with a with this customer that's.
That's not a trivial step so Dave.
Dave mentioned good traction.
And multiple fronts.
I also like to touch on just a technical college, a confidence that we have in the design.
We have.
We've been working multiple this very difficult design and it pushes the the power on the low we're.
We're very comfortable on that power spec, but.
But.
The specs that are.
That we have to meet our.
In the end.
You are looking at greater than five pages of spec requirements that you have to have to hit all of them. So I would characterize this latest span as somewhat of a cleanup.
Spin and.
Yeah, we've been we've also been busy as.
As you can tell from the various areas. We've been we discussed in the prepared comments and Wi Fi and also in small cell.
So these.
These wafers.
Moving through the fab and.
We're certainly.
Confident in that we're on track for delivery of a.
Final parts this quarter so.
Okay. Those are my comments to add to daves.
Okay. Thanks, just one quick follow up related to wafer level packaging.
How much do you need to spend on Capex, I guess heading in or in 2021 to be prepared for volume production into the handset space are you far along or any comments would be helpful. Thanks.
Yeah, so for.
So I think what we said in the prepared comments is.
We felt we could support one to two.
Customers in a tier two market with.
What we're already investing in terms of capacity.
So if we if we start looking at.
In the tier. One then were then you have to talk about.
Our next phase of expansion, but we what we what structure any agreement.
That will require a higher capacity, we would we would structure that where we got.
We would have some assistance from a customer in terms of expansion that capacity and or commitment.
But the I think to answer your the customer we announced this morning, we believe we can service with the existing 500% capacity expansion.
Ken may want to add to that.
Just to add to what Jeff mentioned that we had about five to 7 million of additional spend over the next seven months to enable us to achieve that stated goal to 5% capacity expansion.
In our New York, that's just to give you a flavor for what is left.
Reaching that goal.
Good job guys. Thank you.
Thank you John et cetera.
Thank you. Our next question today is coming from Cody Acree from loop capital. Your line is now live.
Yes, guys. Thanks for taking my questions just two quick ones.
If you look out just next year.
What without giving guidance for the full year can you just talk about what the mix is expected to look like and maybe as you entered the year versus how you expect to exit the year.
Okay maybe.
Maybe let me, let me talk about kind of what what where we see strength in the business right now and and I always like referencing. These these sorts of discussions with where we are I am not only with a product portfolio, but where we are in the <unk> and the sales funnel.
We we tried to put a.
Some significant or add significant confidence in the Wi Fi six business. So we we feel we've got a solution. There we've got a good a good channel to market we've got.
We've got multiple customers and the.
In advanced and the sales funnel I think we mentioned even in the milestones we expect it to add one to two design.
Design wins by the end of the year. So that's that's coming along pretty well in addition to the Wi Fi six his wife I 60.
Here I.
I'd like commenting we've been we were first in the Wi Fi six market.
With with a tandem filter solution. We are also first in the Wi Fi Sixsix market, where the tandem filter solution. What is different is that the wife I 60 market is just is very much in the early innings. It's just commencing so the difference for us is that.
We've been.
We've been focused on getting on reference designs and Wi Fi Sixsix, whereas those were already completed when we were entering the market in Wi Fi six so.
We we've successfully ramped a in quantify six in the five gigahertz portfolio that we've announced and we've been shipping that we mentioned the that that consumer unit is going to be we expect to be fully available this quarter.
For the holiday season that customers given us a forecast for the next 12 months, which gives us confidence for our capacity planning and certainly see they see upside in that.
So it's going to be it's going to be next year is going to have.
Well be a heavy dose of Wi Fi six were adding Wi Fi six each of that.
We've we've announced a catalog.
Catalog based solution.
Solutions in Wi Fi Sixsix as well as there and their.
Their custom based solutions that are call. It derivatives of those standard products, which were comfortably addressing so we see Wi Fi six and Wi Fi Sixsix us as a very comfortable a portion of of the mix and next year.
We've mentioned for design wins and a in a small cell fiveg infrastructure.
That market.
What's projected have very high growth.
And slow down a bit in the second half of this calendar year, we are expecting that.
We're expecting that.
Small cell infrastructure too.
To grow.
Rapidly for next year, we feel that product portfolio is finished in that segment.
Where as Dave mentioned, we.
We expect to be entering negotiations in.
With this first of Fiveg infrastructure customer.
And.
That has opportunity.
Of kicking in.
Second half of next year.
And then I think what we mentioned this morning is we've added a second customer. So we have two active customers in mobile and the second customer has said ramp plans scheduled for second half of next year. So I.
I would I would say.
All in with when you factor in where we are in a sales funnel with it where we are and the.
The product portfolio phase I could see a scenario, where we're very well diversified amongst those three markets.
A third a third and a third depending on how design wins goes how how.
Our product launches go but in terms of absolute number we've been.
We started giving forecast on a quarter by quarter basis, and we've done so this morning I'm.
Expect in.
Just to reiterate what we said is oh, we're going to be up 50%.
In the December quarter, a minimum of 50%.
From what we had in in the September quarter, So, but that's that's what next year looks like see if Dave wants to add any any color on kind of how you are seeing next year.
I think the I think Jeff gave a good description up just a little bit more color.
The wife, I 60 activity level is good but it is one that we're working more directly with the Oems and the Oems instead of being on the reference design, whereas the activity on the white by 60 is pretty intense.
Theres a lot activity there.
So we're working both with the chipset vendors and the Oems and the Oems.
Concurrently and the yeah. So I think the mix and the revenue is going to be higher with the wife I in the first quarter and second quarter of next year.
Small so we'll continue to ramp and as Jeff highlighted we did see a slowdown the China market. If you've seen any of the reports recently is you know.
Started looking at investing more into the small cell architecture, particularly for urban settings. So.
So we expect that volume to continue to drive and you know as we get into the massive mimo you know that will be appreciable as it gets into the second half and then obviously the mobile ramp is really second half. So I think that's a good description a third a third a third by the end of next year.
Great. Thank you guys appreciate that and then lastly could.
Could you maybe talk about just maybe Dave with what you're seeing as far as ASP trends are some of these early design wins.
Being earned at significant discounts to what you're expecting longer term. If you can just kind of talk about what your thoughts are for next year.
Yes so.
On the white buy side, the lifeway six yeah, we still get a premium.
Versus some of the D.R. type technology out there, but the premium you know is not as high as what we can get on the white fysixteen.
Mainly because the technology.
It's pretty competitive with the art.
At Lifeway six so we you know we are getting a premium but we have to be competitive to continue to win the design slots and ramp. The good news is for US and also making sure that we price it appropriately in the market. The wife I Sixsix is we're enabling so.
Solutions architectures, you know with the Oems that you cannot get with you know.
The incumbent VR technology out there.
Mainly in that they.
They lose the first 160 megahertz channel and the six gigahertz band and that is not that's a penalty that the Oems and the chipset providers do not want to pay so we can get a premium yeah. That's yeah above obviously, the premium we get and they walk by six so I think we'll continue to.
No ramp both SEC.
By six my place ICSI.
Well you improve on our margins as we get into the wife, I 60, which will also be a larger percentage of the market for Tri band solutions, Yeah. The networks get deployed and then small so we're very well positioned there we get a premium based on the technology. It's just that the micro caustic filter that competes against traditional.
Ramic that you can't get to the size and two the coaches performance. So we and also the price point there is higher than what we see in Wi Fi and also in the mobile.
And its utilizing the same technology. So this is a favorable from a margin standpoint as well.
Yeah, and Cody I'll just add.
Just as a reminder, just what what it is we're building. So it's you know ours is a six cents silicon substrate based approach.
And I think the what we're seeing now that weve successfully ramped or.
The other key piece to that in terms of just our cost structure is just.
Yields and we are we are building and shipping now into the millions of pieces.
With it extremely high yield so we're very comfortable with the yields that we're getting a that allow us.
To ship and that volume.
And there's there's always a lot of work when you're talking about.
Optimizing yield to maximizing yield a we've got a tremendous team here that are focused on that and again. These are very high precision filters that are in these frequencies, so they're not trivial to produce.
And but we've got teams that are keeping these yields very high so from Iraq.
Being comfortable to play in all of the markets that Weve mentioned this morning.
It's extremely important that a you know.
Not only that were on a silicon platform, but that we're getting high yield. So I just wanted to add that to what they've set up because that's a big enabler for us to compete in all of these markets.
Great. Thank you appreciate it.
Thanks Cody.
Thank you. The next question today is coming from Suji de Silva from Roth Capital. Your line is now live.
Morning, Jeff can Dave Congrats on the progress here two quick questions. I think first of all just a clarification on Wi Fi when you did Tri band initially the 5.2 gigahertz filter went out before the five six and then the tandem solutions when for 60 with the five five and the six five will there be this phenomenon of one filter then both or will it be.
Random solutions were out of the gate.
Well it did touch on that morning Suji right.
Right now, it's pretty much tandem or maybe lags by about a week or two weeks, but.
But not you know what we saw at the five to five six and I think part of the reason there is obviously the yeah. The progress we've made in our our models and also the Fivesix was leading the charge for increase in the bandwidth and we've just a you know with the success of that have been able to leverage that with the five five and the six by which are both very well.
Then with as well so yeah, we've been successful in delivering the tandem solutions to customers. We have received the orders it as we have announced and we've been able to ship and that activity is going to continue the good thing is we're getting orders.
Orders based on the what we call yes, one samples that were shipping right now and then with the final design lock that we're targeting the end of this year that activity levels going to increase yeah, Suji, It's Jeff I, just would add to it.
One key difference and in Wi Fi six as you mentioned, where we had staggered deployment of the two filters.
In in that particular end since we were developing we had to develop a Phd electric materials that can handle the wider bandwidth requirement for the 5.6.
So those are we're starting in a situation with the five five and six five where we have to starting core materials.
To go off and do the designs and so are.
We've we've allocated our resources and the design area to focus on both and that means they can they can come out together and we don't have this staggered deployment like what we had with Wi Fi six in the five to into five six.
Okay. That's helpful clarification, and then on the manufacturing side, just curious what the ramp plan to the capacity adds are you seeing any movement in equipment lead times or is that stable are you able to get the equipment as scheduled thanks.
Yes. Thank you.
Thank you for that so let me touch on.
I think the for our growth plan I think it's important to understand these moving pieces in the fab we.
We have we.
We have several things ongoing we now have commenced a second shift.
And operation that expands the capacity with the current equipment, we had but your question was towards a lead times and a.
Capital equipment.
What we saw earlier in the in the pandemic.
Was we had ordered some equipment and we were we were we were challenged with getting the right.
I'll call it the factory installers to come in and install the equipment.
That was very early on in the pandemic. If you look at it more recently, what we see is weve.
Staying within the regulations of New York State. We've we've got we've got a good work around on how to get that done.
But.
To the equipment lead times, we're monitoring that very closely and.
Those.
If I look at it.
Look at the full list of things things that where we have to have to scale. It can range anywhere from Oh, yeah, we get we get ranges from anywhere from.
Three months of lead time for certain pieces of equipment and then the additional equipment can be up to a 10.
10 months to 12 months it can be quoted.
So we keep a running track of what that looks like so we can we know what what's long lead and what we need to release, if if we need to pull certain triggers on capacity.
Okay. Thanks, Jeff.
Thank you Suji.
Thank you. Our next question is coming from Rick Schafer from Oppenheimer. Your line is now live.
So I'll add my congratulations.
Do you guys. He just Jeff My first question.
Maybe I'm reading between the lines too much here from some of your earlier comments, but.
Are you shifting your stance at all regarding strategic partnership for tier, one mobile or entry into that market.
And just curious I mean could you go it alone.
Yes, I'm I'm thinking no. If you did what that timeline might look like and I'm also thinking I mean, you did.
Take that that stance I mean could you could you partner directly with the tier one handset OEM, which I think you sort of alluded to earlier.
Let me to put words in your mouth.
Just sort of it in our E type model something like that for you could you give sort of a ramp in partnership with your with your tier one customer tier one customer.
Hey, Rick Good morning, Thanks for the question.
So I don't think were if you look at the prepared comments I don't think we've done a us a shift in stance.
What weve, what we have said all along is that we felt we could address the tier two with the current capacity.
But I think we reiterated in the comments this morning that we're.
We're going to seek a partnership if you look at Tom to address a tier one market that.
If you look to address a tier one market. It's a it's a it's a step function and now wafer requirements and we think that that that.
The way you have to enter that market you really need to you really need a partner to to help resource that that expansion in capacity. So we're going to continue to maintain that I think we we did emphasize that this new customers a second customer and.
And we Havent said much about what were what's going on with the first customer I purposely.
So I, our our stance has not changed there.
What I do want to do is his comment that.
We have we have access to a direct to the tier one OEM market and and we've actually receive technology technology validation.
From several customers and and certainly our customers have.
I've taken samples from us through their channel into the account so we.
We continue to.
We continue to sample our technology out to Oh, we Ams as well as our RF module partners and we're going to continue doing so and and you know, but the tier one market I think from a capacity standpoint, an investment standpoint is I would be too risky for us.
US to change our position on that too.
To ramp up our capacity in a and a build it and they will come I think we.
We've got some extremely other attractive markets that were currently ramping in and we're going to organically grow capacity.
So that's what we that's that's our current strategy is is to ramp as we as ramp capacity as we needed we meet monthly with our operations team evaluating sales looking out.
Oh no.
Minimum of 12 months and typically one to two years and a and we look at capacity planning.
And also evaluate lead times just to make sure we're in a position to.
Expand up accordingly.
Got it thanks for that insight clarification and color Jeff.
Maybe a second question also kind of maybe kind of maybe a broad one but.
You've been winning a lot of small cell.
I'm curious what you think that says about the set up five in Fiveg small cell in particular, it just seems like a more bullish.
I'm more bullish set up versus Fourg, where the small so disappointed some original expectation any I don't know if you can talk about why that changes or why that is changing in fiveg and maybe as part of your answer Jeff I'd be curious are you comment on the kind of the kind of dollar content you're see in your it all I all these small cell wins for Coustas so far.
Thanks.
Yeah, Let me, let me start David I'll kind of hand, and this went back and forth with commentary, but I'm going to start.
First thing I think to note is just over the last year, what we've seen is a fairly dynamic market.
We've we've started with specs that were fairly narrow band and quickly evolved as the system the.
The systems evolved keep in mind, a in the in the China market, there's more than one carrier and you've got equipment manufacturers that are trying to adapt their equipment to work with more than one carrier and as you as you bolt on another carrier you can be bolting on additional spectrum requirements to the filter so weve.
I would characterize the last 12 months as.
A period of a spec.
Specification definition and as well as a demonstrator for various.
Various carriers and I think.
What's been key from our end to end through this pandemic is that weve reacted very fast to that as the specs of change and Thats positioned us to.
To be in some of the the early reference.
Designs that were shipped to.
To various carriers in Asia and.
And some of the initial equipment that was the point.
For demonstration purposes, So we think.
From a you mentioned bullish I think we're pretty bullish on our end we got we got the right portfolio again. This is in these higher frequency bands where we've.
We've got our act together to.
The design and manufacture and.
We think we've we've we've appropriately follow the follow the developments in that market aligned well with the right people and positioned ourselves for significant growth next year in that market I want to have Dave comment.
Yeah, Martin Rick there's comments I'll make you know I've lived through the small so growth expectations falling flat in previous years and what's a different I think this year is a couple of things.
Right now with the if I look at China, specifically, you take the the mobile network operators up there they've actually got it written into their their white papers and their their rollouts and you're looking at Fiveg and the spectrum is moving up in frequency and also with massive mimo, it's a new architecture that Vera.
The expensive comparable to a small cell architecture. So it's a blend and if you look at it the China Ministry and the network operators are going to allocate more funds to do the small cell rollout and it's more of a densification strategy. So yes. It will.
Gotten pretty good visibility on forecast for next year and Oh, we are both bullish because of what we've been seeing there.
I think that you'll see that in other sectors around the world even in the U.S. as you look at the U.S. Yeah. There are some restrictions on how you can deploy.
Yeah networks that are being relieved by municipalities and so forth so deploying a small so.
Is not as income and cumbersome as it was in the past. So there's things here that are making it easier for that market to grow. So we're yeah. We're I think pretty well positioned from a technology standpoint, and we'll just continue to launch product to fill those those spectrum opportunities that we see in the fiveg.
Great. Thanks for Bellekeno and good luck.
That's correct.
Thank you we reached end of our question and answer session I like to turn the floor back over to management for any further or closing comments.
Okay wanted to end the call by saying I want to thank everybody for their time today, we look forward to speaking with you during our next update call to discuss a current quarter execution.
Against the milestones that we discuss this morning as well as the future expectations that we set.
Want to wish everybody, a safe and and and healthy holiday and talk soon thanks, so much.
Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.