Q2 2021 Akoustis Technologies Inc Earnings Call
[music].
Good day, ladies and gentlemen, and welcome to the Tuesday Technologies business update conference call. As a reminder, this conference call is being recorded.
At the conclusion of the company presentation acoustic management will take questions.
To ask a question. Please press star one on your telephone keypad to be placed into the queue.
A replay of the call will be available on the Investor Relations section of the acoustic website.
It is now my pleasure to introduce.
Tom <unk> director of Investor Relations. Thank you you may begin.
Thank you operator, and good morning to everyone on the call welcome to acoustic second quarter fiscal 'twenty and 'twenty, one business update conference call we.
We are joined today by our founder and CEO, Jeff Shealy.
Interim CFO, Ken Boller, and EVP of business development day 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 included during this conference call, including statements regarding our strategies operations costs plans and objectives, including the timing and prospect of product development and customer orders, our expectations regarding achieving design wins from current and future customers.
<unk> ability of entering into collaborative or partnering relationships potential impacts of 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 obligations to update any forward looking statements made on today's call.
Our SEC filings mention important factors that could cause actual results to differ materially. Please.
Please refer to our latest form 10-K, and form 10-Q filed with the SEC 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 in the investors section of acoustics dotcom.
I'd now like to turn the call over to Jeff Shealy, founder and CEO of acoustics.
Thank you Tom and welcome everyone to our 2021 second fiscal quarter business update call. We ended the calendar year with another strong quarter exceeding our original guidance by 30% with revenue of $1 3 million.
Our highest quarterly revenue to date, and our core chip business, driven by ex BOL filters and filter related revenue.
Revenue increased over 100 per cent quarter over quarter in December as we generated revenue from each of our major commercial markets, including Wifi five G network infrastructure, <unk> mobile devices and defense.
We now have 15 commercial ex BOL filters and our product catalog with many more planned our production ramp with our first Wi Fi six customer has been a great success and we delivered additional filters to our tier one five G network infrastructure customer and the December quarter.
We expect additional success throughout calendar 'twenty 'twenty, one as we layer in new products and customers across our focused markets. We also called for the redemption of $10 million.
Of our convertible debt in the December quarter, and last week, we announced that we have delivered notice of redemption for the remaining $15 million to our existing noteholders.
This will retire all convertible debt remaining on the balance sheet and put acoustics on a more sound financial footing.
Our outlook remains confident as we continue to execute across multiple markets with the opportunity to deliver significant top and bottom line revenue and earnings growth for years to come.
We currently expect to report strong revenue growth in the March quarter in the range of two point, though to $2 5 million or up 70% at the midpoint.
We are fully booked to the midpoint of our revenue target for the March quarter. The increase will be driven by our current Wi Fi six customer shipments to our tier one five <unk> small cell network infrastructure customer and initial shipments of our new five G mobile filters to two of our three announced five T mobile customers and <unk>.
<unk> revenue from multiple five G RF front end customers' network infrastructure providers.
And our recently announced DARPA contract.
I would now like to provide a quick update on the impact of COVID-19 on our business and markets.
We continue to employ precautionary steps, including selective.
Moat work authorization and Worksite isolation from outside visitors.
The incredible flexibility afforded by our in house manufacturing model in the current environment has allowed us to continue to develop and ship our products with minimal impact.
During the pandemic acoustics has continued to operate with all key personnel as an essential business in both New York and North Carolina, and we continue to accelerate product development consistent with our strategic roadmap, we greatly appreciate our employees and value their flexibility.
And disciplined staying safe during this challenging time.
It is difficult to predict how or if the ongoing pandemic will impact our customers' future production ramp timing or if we will be impacted by any supply chain disruptions going forward.
Currently we are experiencing a normalization of demand across our product markets, including Wi Fi, especially given the emerging Wi Fi six standard and the demand for high Q micro acoustic ball filters that can address these new high frequencies.
I would now like to address our business performance by market segment, beginning with five G mobile.
The December quarter was our most significant quarter to date and five G. Mobile as we added not one but two new customers, who plan to incorporate our ex BARF filters and upcoming products targeting five G handsets the.
The two new customers are in addition to the existing tier one RF module maker that we had been working with for over a year.
The mobile handset market is our largest potential ball filter market opportunity by both unit volume and revenue and we continue to see a broad increase in interest.
And activity in our ex BOL filters for the mobile market.
In fact, our ex BOL filters have already been evaluated by several leading tier one and tier two mobile handset Oems.
As we have previously mentioned entering the tier one handset market in the near term would require a partner.
However, we believe with our previously announced 500 per cent capacity expansion of our New York Fab.
Which we expect to complete by this June that we will have the wherewithal to enter the handset market servicing our recently announced new RF customers <unk> several tier two handset Oems without a partner.
Given the substantial interest and sales funnel activity for both our five gene mobile and Wi Fi six he filters, we're planning to further expand our New York Fab by doubling again, our capacity by the end of calendar 'twenty 'twenty, one to support the ramp expectations of multiple five G handset and <unk>.
Wifi six heat customers in calendar 'twenty 'twenty, two and beyond.
With respect to our first tier one mobile customer we have remained actively engaged and are currently developing new five G. Ex BOL filters for testing and approval, which is expected in the first half of calendar 'twenty 'twenty one.
We shipped initial samples, although ex BOL filters to this customer in the second half of calendar 2020 and are currently executing against open purchase orders.
Our second RF module customer, which we announced in early November is moving quickly to develop a module for mobile applications using our ex BOL filters.
Customers product is expected to be available for sale by the end of calendar 'twenty 'twenty one.
I am happy to report today that we successfully completed the first filter design for this customer in the December quarter, which was one of our stated milestones and this new design is currently running through our New York wafer fab.
Finally in mid December we announced a third tier one RF solution customer. We are currently developing five G mobile ex ball filters for this customer with the goal of entering commercial production in calendar 'twenty 'twenty to <unk>.
Given early discussions with this customer we believe our engagement may expand to include multiple filters for multiple bands and both five G and Wi Fi modules and.
This customer sells into multiple handset Oems, we expect that this customer could become a significant contributor to both filter volume and revenue in calendar 'twenty 'twenty two and beyond.
We currently expect to complete the first filter design and provide early engineering samples for this customer in the upcoming June quarter.
As we have discussed previously we have dedicated engineering resources to the development of advanced chip scale packaging.
And wafer level chip scale packaging or W. L. C. S. P to address the next generation of five G products.
One of our stated milestones for the December quarter was to deliver our first fully qualified CSP flip chip solution.
I am pleased to announce today that the W. L. C. S. P process flow is now locked and we expect to complete technology qualification next month.
Once qualified and released we will be able to address the mobile market across our entire product line given the significantly smaller footprint of our new package solutions, which offer a one to one ratio to the size of the ex parte die.
To summarize our five gene mobile activity.
We have multiple customer funded filters in design.
We have announced three customer engagements to tier one RF component companies and one leading RF front end module maker in all three customer engagements are active with either the design or manufacturing teams within our company.
And finally, we have just completed the development of our first chip scale package and have additional design slated for completion in the first half of calendar 'twenty 'twenty one.
I will now discuss our achievements in Wi Fi.
We announced last week that we have successfully design locked our tandem five five gigahertz and $6 five gigahertz ball micro filter solutions for Wi Fi 60.
The designs of our breakthrough <unk>.
And very challenging given their wide bandwidth requirement, which is nearly 10 times wider than our first five point too.
Gigahertz product for the Wi Fi six market.
Further it requires the development of high performance P as electric materials and the associated modeling design kits to engineer these filter solutions.
This was one of the most important milestones we set for the December quarter as he enormous momentum in Wi Fi six <unk> continues to build both in the U S and worldwide as other countries are making room for extended Wi Fi above five nine gigahertz.
Why 560 is emerging as one of our largest opportunities driven by the rapid release and adoption of Wi Fi six E. C. P E and evidenced that handset Oems are planning to incorporate the new 60 frequencies in five G mobile devices.
The new filters will now be able to target the router cable set top box and other C. P markets as well as the future five G enabled mobile device market.
Likely making the Wi Fi six even market significantly larger than the current Wi Fi six market by both volume and revenue.
We have multi.
Multiple active engagements and the Oems Odm's S O C makers and channel partners for Wifi, six and now Wi Fi 60.
We are now in the advanced stages of the sales cycle with several customers for Wi Fi six he and expect additional design wins in the coming months.
Specifically last week, we announced a volume order from our first 5565 gigahertz tandem Wi Fi 60 solution from a new tier one customer the orders for multiple user multiple in multiple out or.
M U mimo consumer focused router using multiple 5.5 and $6 five gigahertz ex BOL filters.
The customer expects to ramp this platform in the second half of calendar 'twenty 'twenty one.
In the December quarter, we revised and improved our custom Wi Fi six he filters for one of our two announced tier one enterprise class customers and delivered volume prototypes for their engineering builds.
Both customers intend to use our standard 5.5, and $6 five gigahertz ex BOL filter products, which we design locked last week.
We remain on track with both customers and expect both to enter production once their respective product qualifications are complete.
Our Wi Fi six ex BOL filter solutions entered the commercial router market in the December quarter as our high profile tier one consumer focused customer began shipping finished products.
The filters are being used in a tri band.
IMMU Mimo mesh router with multiple ex ball filters per device feedback from the customer continues to be extremely positive and discussions are already underway with increased unit expectations for next year.
In addition, we have provided this customer samples of our standard Wi Fi $65, five and $6 five gigahertz filters for potential use in future Wi Fi six platforms.
We have met all delivery expectations for our 5.2 and $5 six gigahertz filters and I'm personally very proud of our design and operations teams that have successfully manage this first significant commercial production ramp during a pandemic.
During the December quarter, we announced the addition of two new design wins with new Wi Fi six customers.
The first design win announced during the quarter as for a gateway router product that will use multiple wifi six ex ball filters for IMMU Mimo product. It is expected that this product will begin its production ramp late in the June 'twenty 'twenty one quarter.
The second Wifi six design win announced in the December quarter is from another new customer, which intends to use the five point to 5.6 gigahertz ex ball coexistence filters for our Wi Fi bridge product and is expected to enter production in the second half of calendar 'twenty and 'twenty one.
As Wi Fi is rapidly, becoming one of our largest opportunities.
I want to highlight that acoustics is one of the first to market with both the 5.5 and $6 five gigahertz ball micro filter solutions for the rapidly developing Wi Fi six <unk> market, which we believe will expand significantly in calendar 'twenty 'twenty, two and beyond it's five G mobile device maker.
<unk> begun to incorporate the new Wi Fi six E standard in smartphones tablets laptops and other devices.
To be clear, we believe that Wi Fi 60 will drive significant filter revenue and unit growth beginning in the current calendar year with significant growth in 2022 and beyond.
To summarize our Wi Fi activity.
We have four completed ex ball Wi Fi filters to for Wifi, six and two four Wi Fi 60.
We have announced three design wins in Wi Fi six one of which is already in a commercially available tri band mesh router.
We have announced to Wi Fi six <unk> customers that are using our standard 5.565 gigahertz solutions.
We have signed a strategic purchase agreement and are building multiple custom 60 filters for a third enterprise class customer.
And finally, we have over 15 customer engagements and Wi Fi six <unk> 10 of which have already placed prototype purchase orders.
Next I would like to discuss the opportunities in five day network infrastructure.
[noise] wide bandwidth high power handling low insertion loss and high out of band rejection or the core filter performance requirements for five G network infrastructure.
Acoustics is ideally positioned to grow its market share in this segment, given our small form factor filter solutions and.
In our growing portfolio of RF filters above three gigahertz.
We're five G is being deployed worldwide.
We are currently designing <unk> shipping filters in three main segments of the five G infrastructure market, including small cell base stations macro base stations and citizens broadband radio service or C. B R. S equipment.
Additionally, we are watching closely the ongoing F. C. C. C band auction for 3.7 to $3 nine eight gigahertz spectrum, which thus far has garnered more than 80 billion and gross bids. This will create yet another five gene network infrastructure opportunity for acoustics, and we expect to demonstrate ex.
BARF filters addressing this new spectrum in the first half of calendar 'twenty 'twenty one.
We continue to ship ex BOL filters to our tier one five <unk> small cell network infrastructure customer and support of its initial ramp we have shipped a total of four filters to this customer and have received three design wins.
The production ramp with this customer is presently slower than previously expected given operator, driven network deployment and timing changes.
But we continue to expect to ramp production with multiple filters with this customer in the current year.
We're currently on track to begin ramping our second small cell five day network infrastructure customer with volume shipments in the first half of calendar 'twenty 'twenty one.
The citizens broadband radio service or C. B R. S has emerged as a new market for acoustic after the spectrum auctions that occurred this past summer.
We continue to believe that the successful utilization of the C. B R. S bands within the five gene network will require a significant amount of high frequency filters and recent customer design activity appears to support our thesis.
We locked the design of our first 3.6 gigahertz C. B R. S ex BOL filter in March of 'twenty 'twenty.
And announced our first order from a distributor in the September quarter to support promotion and customer engagements.
In the December quarter, we received.
Our first order from a leading wide area network equipment provider for both C. B R S infrastructure and customer premise equipment.
We understand that this customer remains on track to begin commercial ramp in the second half of calendar 2021.
Furthermore, we're currently engaged with over 10 S O see OEM and ODM makers for the development of C. B R. S networks, using five G and expect to have additional design wins in calendar 'twenty 'twenty, one and beyond.
One of our milestones for the December quarter was to complete the development of a macro base station filter for our first tier one customer and design lock the product.
We successfully delivered a new high performance filter design to this customer at the end of November and will update investors on the progress with this customer when possible.
Summarize our five G network infrastructure activity, we have five completed five G network infrastructure filters.
For for small cell base stations and one for C. B R. S.
We have announced three design wins in small cell with our tier one customer we expect volume filter shipments to our second customer by June of 'twenty 'twenty one.
We have announced a C. B R S order from a leading.
Wide area network customer for infrastructure and C. P E and.
And finally, we have over 10 customer engagements four of which have already placed purchase orders.
I would now like to discuss our progress in our other market segment.
During the December quarter, we were awarded a new multi year R&D contract.
From the defense Advanced research projects agency.
Or DARPA to further develop acoustic technology.
Through the development of a P E zone Mems process design kit or PDK for the company's proprietary and patented ex BOL process.
The direct to phase two or D. P. Two contract is dedicated to developing a general purpose PDK that will enable ball and other similar mems structures to be designed and fabricated using the company's state of the art patented ex BOL process.
The P E zone Mems PDK underdevelopment.
Will encompass all aspects of the process ranging from material properties process rules for stack dimensions Prost.
Process control monitoring design rule checking an example device models.
Upon successful completion of the D. P. Two program DARPA has an option to fund a phase III program.
This option supports multiple new customer engagements, leveraging the new PDK to create devices and.
Circuits, including RF filters, using the company's ex ball process.
We expect this will expand the opportunities for ex ball moving forward as other designers will be able to develop new products utilizing our novel ph electric materials and substrates outside the current devices, which could lead to new opportunities in adjacent vertical markets.
To summarize our other market segment activity.
We have seven completed ex BOL filter solutions completed for the civilian and defense market.
We have one design win in phased array radars and have and continue to ship production filters to our customer.
We have already started and are currently progressing on our D P to contract with DARPA.
And finally, we have a total of three customer engagements two of which have already placed purchase orders or provided in our <unk> revenue.
Now I would like to turn the call over to Ken to go through select financial highlights.
Thank you Jeff.
For the second quarter ended December 31, the company reported revenue of $1 3 million, which was an increase of 106% as compared to the previous quarter.
Proximately 30 per cent higher than our guidance.
This revenue growth was driven by an 81 per cent increase in our core filter related revenue on a sequential basis.
On a GAAP basis operating loss was $10 2 million for the December quarter, mainly driven by labor of $6 3 million depreciation of 1 million and other operational costs totaling $2 9 million.
As a result, GAAP net loss per share was 39.
On a non-GAAP basis operating loss was $8 2 million and non-GAAP net loss per share was 22%.
Reconciliation of these amounts to the corresponding GAAP measures is included in the press release issued this morning available on the investors section of our website at <unk> Dot com.
Capex spend for Q2 was $2 1 million compared to $2 3 million in the prior quarter most of it mostly related to the target's 500 per cent capacity expansion of the company's New York Fab.
Cash used in operating activities in Q2 was $8 3 million compared to $7 9 million in the prior quarter.
The current quarter included an increase in accounts receivable expected to be received in the following quarter and certain inventory build related expenses associated with our ongoing product ramp.
The company exited the December quarter, with $47 8 million of cash and cash equivalents.
This $37 3 million at the end of Q1.
During the quarter the company raised $20 2 million utilizing our ATM program by issuing $2 3 million shares of common stock at an average stock price was $8.93.
The company also took action to bolster its balance sheet by calling all $10 million of October 2018 six.
Six 5% convertible senior notes for redemption of notes were subsequently converted into shares of common stock.
Separately. This past week, we delivered notice of redemption to holders of our $15 million principal amount of May 2018, $6 five per cent convertible senior secured notes.
While there is still some uncertainty regarding timing of customer production ramps due to COVID-19, our visibility continues to improve given the rollout of five G and new Wi Fi platforms.
We currently expect to reported strong revenue growth in the March quarter in the range of two to two 5 million were up 70% at the midpoint.
We are fully booked to the midpoint of our revenue target for the March quarter.
I will now turn the call back over to Jeff to discuss our future milestones.
Thank you Ken.
Our backlog and sales funnel continued to grow as we enter commercial production across multiple markets and layer in new customers across each of our market segments in.
In the March quarter, we expect to generate revenue from each of our business segments, including five G Mobile Wi Fi five gene network infrastructure and other markets, including defense.
We continue to strive towards executing on our targeted milestones and we will continue to keep you informed of our progress.
Our March 'twenty 'twenty, one milestones include qualification of our first wafer level packaging solution.
Shipment of a five G mobile filter design to our second RF front end module customer.
Release of the ex BOL filter design for our third mobile customer.
We expect to announce our first design win in Wi Fi six <unk> and finally, we plan to receive at least one design win for the <unk> market.
Yeah.
Looking slightly further out our calendar 'twenty 'twenty one milestones include.
The design lock and commencement of production with our second RF mobile module maker.
The delivery of compliant ex BOL filters to both our tier one RF mobile customers.
Next we expect to ramp production with multiple Wi Fi six and Wi Fi six key customers, including three announced tier one Wi Fi 60 customers.
We plan to complete product qualification of CSP and WL CSP ex BOL package filters per five G mobile five G infrastructure and Wi Fi and finally, we expect to ramp production with multiple five G and C. B R S infrastructure customers.
In conclusion, 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 growing ex BOL filter product catalog puts us in a great position to grow revenue by more than 70% sequentially in the March quarter as reflected in our guidance and we look forward to expanding our filter catalog as we progress through 2021.
To support our current engagements and emerging sales opportunities, we have been working diligently to expand our capacity by 500 per cent to be able to produce hundreds of millions of ex BOL filters per year.
Given the expected ramps in both five G mobile and Wi Fi 60 in calendar 'twenty 'twenty two we now plan to double this output once again by the end of calendar 'twenty 'twenty one.
We continue to add key hires across our sales design and manufacturing teams beyond our current expansion plans. The company is positioned to scale as our new York's fab can ultimately produce up to 5 billion ex BOL 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 our core belief and strong management and technical staff strong intellectual property, which currently includes 38 issued and licensed patents.
And 74 patents pending large.
Large and growing markets with limited historical competition, and the high band and Ultra high band spectrum.
And our qualified wafer manufacturing operation, which has now proven to deliver volume quantities of ex BOL filters and is expanding to address high growth opportunities in our target end markets.
Finally, I remain especially grateful to our employees for their hard work passion and dedication throughout 2020, particularly during this ongoing pandemic as our team has kept the momentum going on our R&D.
Which has led to multiple design wins across the Wi Fi five G network infrastructure and defense markets.
We've also experienced exceptional momentum in the five G mobile market driven by our leadership in filters that can operate above three gigahertz, and our new and expanding wafer level packaging capabilities.
I 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.
Okay.
Thank you we will now be conducting a question and answer session I would like to ask a question. Please press star one on your telephone keypad.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
We ask that you please limit yourself to one question and one follow up question. One moment. Please while we poll for your questions.
Okay.
Yeah.
Our first question comes from the line of Sujit de Silva with Roth Capital. Please proceed with your question.
Good morning, Jeff can Dave Tom.
Happy to see the progress you guys are making on revenue, it's well deserved.
Couple of questions.
Wi Fi segment I believe you know three revenue customers and I think you said 15 in the pipeline, perhaps 10 prototype orders.
Help me if I got those numbers right and more importantly.
What portion of those do you think can ramp revenues for you guys now by the end of 'twenty, one just to give us some ballpark idea and the factors there in that ramp six vs 60 other factors. Thanks.
Hey, good morning Tsuji, Jeff.
I appreciate your comment and.
I'm going to turn it to day just for some color on Wi Fi and maybe I'll add a few comments with you.
Morning T. G. So the activity that you estimate is correct. Yeah. We've got three engagements on the Wifi 60, and we've got a we have three engagements with Wi Fi six we're ramping in production right now one of the Wifi six and we have two more that should be ramping.
You know by June 'twenty 'twenty one.
Majority of the activity that we highlighted on the additional customers in the Wifi six is going to happen in the second half of the year. So if I was to.
Can you give a ratio it's probably a larger percentage would be to Wi Fi succeed once it starts really ramping in production in the second half. So yeah. We should have a combination of both you know throughout 2021 with the majority of them picking up in the second half with Wi Fi succeed.
Okay very helpful color, Jeff I'm, sorry, I, just wanted to add to that.
We've had a very successful ramp in our Wifi six that's.
That same customer is also.
As a follow on program in Wi Fi six as well as the new program and 60.
We've been providing parts to support both of those programs.
Just a little bit of more color you see customers that.
Genuine a Wi Fi six evolution, you see customers that are in Wi Fi six that are building hardware that contain.
About 6% and 60 configurations, and then also customers that are exclusively working on <unk>. So there is a.
Kind of a field is pretty diverse, but and I think with the customers that we're talking about we also see as many as three platforms our per customer in terms of different different platforms that are launching over.
The next 12 to 18 months. So it's a it's a very robust from a sales activity and we are.
Very pleased with the portfolio that we have that we can service.
Both Wifi six and what we see at this point.
Okay, great and it sounds like a very exciting opportunity and my other question is on the smartphone market.
It sounds like you have a smartphone OEM and a module.
Module provider I want understand which one was potentially larger and how long would it take for the module customer to get their own OEM customers to qualify the product what's the cycle there.
Okay I'm sorry.
And I want to ask David to chime in so first I want to clarify what I said in the script I think I had the.
Numbers flipped so it's two RF front end.
And mobile and one customer.
Customer.
So your question was regarding the.
Your opponent customer Oh that day.
Talk about sales.
Yeah. So we've the.
The activity that we've got going into mobile is primarily focused on supporting those three customers that Jeff just mentioned, we do have some activities talking with the mobile phone Oems as well.
And you know those are focusing more on the Asia market, where there's opportunities for discrete.
Filters.
With respect to the.
You know one of the three customers you know we could see something in the second half of this year.
It depends on obviously the development of their module and getting it into the market and getting it into certain models. They are a proven supplier to the market. So that's something that.
We're taking advantage of them also have an access to the ball technologies.
The only non captive premium ball provider out in the market and now that we've got AWS ESP.
Platform.
To accelerate the development within a customer with regards to the other ones. We still have to deliver compliant product to them are compliant designs to them.
The intent would be to see something in the 'twenty 'twenty two period calendar year.
So again, depending on obviously their success of designing it into a mobile phone OEM, but these guys are well known in the industry and service multiple customers in that market segment.
Okay, great. Thanks for all the color congratulations again guys.
Thank you.
Yeah.
Thank you. Our next question comes from the line of harsh Kumar with Piper Sandler. Please proceed with your questions.
Yeah, Hey, guys first of all congratulations it's just tremendous I mean literally watching this company I'm you know become become very meaningful so congratulations too.
Two questions, mostly strategic I'm, just if I could ask you to turn and there's lots of stuff going on right. You've got different end markets lots of action. So could you maybe rank order suraj how on the order of attractiveness and how you see some of the end markets in which one you would prefer.
If you had your way, which one would you prefer over the others. If there's anything like that and then I've got another one.
Okay.
I appreciate your comments and thank you for those.
In terms of attractiveness, we stated previously that.
The mobile market by in terms of unit.
Unit volume in overall size.
It's the most attractive to us that range that certainly remains so and we've talked about all the activities that we've had a CSP to enable us to get into that market.
And a key development this year.
But most mobile market also the Wi Fi.
Market would come very quickly after that.
In terms of the mobile market.
For us a little bit better going to come in terms of a growing number of engagements. We've got three now and that.
The Wi Fi market is one that we're currently ramped it.
It's one we've taken.
Our ex.
Ex parte technology and ramping into high volume production over a period of months average as we said in the script. We've executed we believe Brit brilliantly net market by delivering volume quantity.
That market one of the things, we really love our are markets that are being disrupted Wi Fi. He is the big disruptor.
If you look at the products that are required for Wifi six either acquire as much as 10 times the bandwidth of what we are what.
What we have to deliver and Wi Fi six market.
One two gigahertz and so we see a very dynamic market. There one that's going to have a lot of unit volume that.
That would also whats going to dovetail, we believe into the model. So it's got kind of a dual.
Significant so in that regard.
And then a five day infrastructure, we've talked about the traction in the small cell and we did see some slowdown in that market.
'twenty.
But we think that's going to pick up pretty dramatically in 2021. So those are there.
The big three and then.
Derivative markets are certainly the best market.
And that's true it to us because it's very high performance oriented.
And also they werent really cutting edge.
Oh filters and Inc.
<unk> phased array applications that need high power and that sort of areas that we excel at so that's kind of a secondary one that's still one of.
Ultimately, what we need to do more market share.
New York, that's where we're focused on we're focused on expanding our capacity to get there and but that's that's our recipe for success here and in our business.
Hey, Jeff. Thank you for the color. So piggybacking off that question mobile you know all of a sudden has gone up in your eyes are quite dramatically I think last year, you guys were saying that you would not enter it without a pause.
Because of the capital requirements, you've seen to overcome the capital requirements for each of them doing very nicely on the capacity piece. I guess question is is it just from the interest you're seeing that you saw like having a partner that would limit your opportunities is that what happened or was there some other logic to just.
Going at about it on your own.
Oh.
So I think for the for the mainstream tier one market is still a partnership on what we're seeing with two of the three customers is.
Their business is.
Is that a is that a magnitude that we actually can bite off and chute zone and the.
Size of opportunity is meaningful to us as we're scaling up.
The December quarter, what it what it brought to us with two new customers in that category.
Allow us to play.
We are we still have a.
Tier one front.
Front end engagement.
<unk> taken some steps to accelerate and we'll see where that engagement goes but I think you know for that extremely high margin.
It's going to be a true still reported chip and we've got.
Adequate relationships, we think that are ongoing now.
Okay drive there.
To the to our opportunities in mobile that we announced in December quarter were ones that we can we can manage without.
Hey.
A very large partnership.
Wired for medically increasing the scale of it.
Our.
Factory in New York.
Understood. Thanks, Jeff Congratulations again.
Thanks harsh.
Yeah.
Thank you. Our next question is coming from the line of Anthony Stoss with Craig Hallum. Please proceed with your questions.
Good morning, guys.
Congrats as well to the tire because its employee base its nice to see the hard work really starting to pay dividends to per.
Just in a follow up for Dave on the doubling of production by the end of 'twenty 'twenty. One do you foresee any issues in lead times in getting that capital equipment installed and ready to produce and then also I'd love to hear an update kind of where you see the competitive landscape at this point, especially on the Wi Fi side, and then I'll get off.
Follow up after that.
Okay.
I appreciate your comments and good morning.
In terms of.
Procurement.
Challenges for expansion.
Things that we've been you know.
One of the things strategically we've done is really book out and what lead times a day I can tell you on an assumption.
We've seen.
We've seen maybe one to two months.
And lead times.
We've mitigated that as we looked at we looked at that select category.
Tickets.
And we are already we pulled the trigger on bringing those in Oh, that's that's one way we manage the lead time a challenge there.
The other challenges in terms of our capacity.
Capacity expansion.
It's been raining outside instead.
Installers into our App.
In order to install equipment.
We've implemented solutions.
Say off hours that weekend.
To enable us.
Remain compliant from a regulatory standpoint.
Bringing those those outside.
And also keeping our employees safe we've worked on all schedules in off hours in order to achieve that.
Overall, we think we're in very good position in terms of lead time for this expansion and the.
The other the other aspect is not always.
Lead time of equipment, we have to recruit bring in.
Labor offer the added shifts and so when we make a significant progress on a second shift.
In the second half of 2020, and we're going to continue.
We don't see foresee any major problems here filling up those ships.
With that additional capacity in terms of the competitive landscape.
I would share is.
That.
We're not the only one thing the attractiveness of a Wi Fi market and the dynamic clearly that was one of our top two and it really dovetails back into mobile.
But I'm a big problem.
Landscape.
Standpoint is that the industry, yeah I understand.
It's still.
This is always the case.
Well, we have to do is not standing still either and I hope.
Reported to the Investor day.
Investors can judge for themselves.
We're not standing still items.
But in terms of specific commentary, we don't comment on any specific.
Competitors.
What I would say is that a burden on us to produce state of the art filters.
And do those in a timeframe that allow our customers to compete.
And so that required a rapid response are in rapid prototyping and really gearing to a very short term in order to allow.
Our customers are Pete.
So you said you had a question for Dave or any follow up yeah.
Yeah, no. Thanks for that detail, Jeff and then for Dave maybe you wouldn't mind, commenting on just overall what are you seeing changes on the content side, how many filters for per.
Per device on the Wifi, six Z side, and how important you think wafer level packaging might be even just for that Wifi marketplace.
Good morning, Tony Good question.
With Wi Fi six we relate to the market there and.
Dr and GCC type filters that creativity.
A pretty strong position, but we had success and we are continuing to have success in that market segment.
Wi Fi six E. It definitely is playing in our favor with the IQ acoustic ball technology.
The spectrum is more challenging there for the other technology.
To be able to hit that coexist requirement.
Wondered and 10 megahertz split between the two bands.
So that's something that you know the content wise.
We are seeing that there's a good mix of two by two mimo and four by four mimo.
It's playing there both on the enterprise and the retail.
And then that the you know that the interest level as you can see in our our.
Our.
Announcements is that you know we've got over 15 engagements there and a ton of them have already placed orders and we just locked the design and you know we're gonna be providing preproduction parts in this coming quarter. So there's a significant pole and the main reason is is that we enable that channel 15, six gigahertz spectrum.
That nobody else does from a yeah. They can from a D R and L. T. C. C. So that in addition to poll that we're seeing in the mobile side, you know as Wi Fi succeed and not just on the smartphone, but also in a potential tablets and laptops is a a big play for.
Or the ball.
And that's where we will need the Wl's E. S. P. So we could utilize the W. L. E. S. P. R. R modules that go into C. P.
Yeah, but.
And that May give us some advantages in performance, but size is not as critical as it is in the mobile.
Smartphone or tablet and laptop and you'll see more announcements of product being released with Wi Fi succeed and just like in <unk>. Some of them won't have as Richard there is.
I guess higher performance on the filtering for their niche model, but they'll need to.
To integrate it with her performance filters, if they want to meet the requirements you know for those standards.
Thanks Best of luck guys.
Okay.
Thank you our next questions come from the line of Rick Schafer with Oppenheimer. Please proceed with your questions.
Yeah.
Yeah, Hey, good morning, guys and I'll add my congratulations as well.
You know, Jeff I guess I've got to just kind of a two parter for you first I mean.
You've talked in the past I think about having sort of a two at least 12 months, leading Wi Fi six I mean do you feel like you've got a similar or possibly longer lead in six E.
And then sort of second part of that question you sort of assuming Wi Fi is set to lead growth this year, which it sounds like it is what would you consider sort of a dark horse for you guys for this year for upside I mean would it be.
The handset business ramping a little quicker could it be C. B R. S. After the cable guys. I think just spent $4 billion on spectrum. So I'm just curious kind of your take there.
Okay, Good morning, Rick and thank.
Thank you for the comments.
Beginning.
In terms of.
Our product lead in the market I'd.
I'd say the.
In Wifi six we do see competitive.
Art.
That are in that marketplace that again.
It is the type of work.
Situations, where we also have.
We have redesigned some of our partners to improve their competitiveness and that's that's really how games played once you commit to a particular market as you make it.
You make a profit improvements at a profit more important and we certainly have done so with our Wifi six products.
In terms of Wi Fi succeed one of the things that's pretty interesting to me from a standpoint is as I mentioned earlier the bandwidth requirements are 10 times that of the narrow with Wifi six.
That you have to produce that.
Not just the circuit design, that's a complete redesign.
Materials.
We're looking at.
And in the six gigahertz band nearly 200 megahertz of bandwidth.
That is by any means to review.
So there are very few.
That I believe could continue to pull that down at all.
Nonetheless.
<unk> previously.
Standpoint.
The industry never stand still and nor do we so Arctic as you're on that I think with the magnitude of interest in <unk> I would be completely shocked if.
Competition is not.
Those day every opportunity to produce those parts are.
Building.
And design.
60 product, but we'll see what comes out.
I'll take the approach of.
Don't sit and stare at what the competition is doing and make them sit and stare at you.
So in terms of let's go execute on our end and we think the rest will take care of itself if we're.
We're able to package technologies and deliver the performance requirements in a short period of time.
To your second question in terms of any dark horses or upside.
You mentioned.
Clearly clearly one that is really.
As materialize during the last quarter has been the mobile you mentioned two additional customers coming onboard.
Pretty aggressive schedules.
Wherever they are.
They're working.
They really work in our favor because they're working with frequencies. We think we're already pretty good in terms of these are these are older high band <unk> frequencies, where we already have models in place we already have products in.
Very near the frequencies are working are playing.
Those are those are really nice opportunities in that volume.
And that they've got.
They've got very tight schedules in short triggers and when they want to move on you mentioned the CBRE I think that's clearly a net one.
If you look at.
That one that would really affect last summer with the SEC.
And the three six gigahertz range.
I think another one just kind of a dark horse to be looked at as a CVR excuse me. The C band auction I mentioned that in his comments that spectrum in the three seven to $3 nine gigahertz.
<unk>.
The amount of net debt.
Mountain garnered in that auction, thus far is pretty staggering it's over $8 billion.
So that's clear.
Has some impact but we believe.
On the items better.
So we're already as we said in the prepared notes already designing filters for that.
That we think are going to be available. This first half of this year.
So.
You know one of the other more courses.
The subject as well.
So I think there's nice opportunity of platforms that are using book Wifi six in line of occupancy and being able to you know.
It's not exact.
Not.
Not all of our customers are doing part switchover 60, they're going.
Ridge type design that that used book.
<unk> and <unk>. So I think we will see more line out of our Wifi six products.
As the market evolves to succeed so that's those are all positive things.
Star Wars.
I think.
The only other thing.
Maybe.
On a little bit ago too is in the mobile sector.
Laptops and tablets, that's an area that we haven't talked too much about and there's no interest.
Being in the market.
Particularly around Wifi six so I think you can see some activity picking up second half of this year around that sector as well.
Okay. Thank you guys. Thanks, Dave Thanks, Jeff just a quick one on the capacity announcements I mean I think.
These level set me here, if I'm, if I may correct, but I think you originally targeted.
Two to 300 million filter capacity by this summer.
I guess is that correct and so we should be thinking sort of four to 500 million filters by end of year in terms of capacity and then.
And then what does that mean for your Capex plans for this year.
Yeah, I think the B.
We are targeting.
Targeting very clearly by the end.
Your assumption is correct.
We're careful not to quote an exact number but certainly.
And that for 400 million plus.
For the 600 million type.
Our capacity it would be in that range. There is still some bottleneck incremental bottlenecks.
That we can address.
More capacity clearly a focus on our end on staffing out all four shifts.
In order to.
Maximizing capacity so there are some things.
We can do incrementally that I'm sure a lot of our large equipment that we have in the fab can do significantly higher but we get these bottlenecks that we have to.
Oh, we have to address some of that can be through automation and other is through smaller capital equipment and then obviously the labor filled out piece of that so and it also depends on the mix.
And how many.
The mobile market is going to have.
If it's a it clearly has the smallest chip. So you can get more per wafer. So there's a lot of different ways to calculate the number.
But overall we're I.
I think your comments are correct.
Thanks.
Okay. Thank you.
Thank you. Our next question is come from the line of Cody Acree with loop capital. Please proceed with your question.
Thank you and congratulations guys on the entire team.
Maybe if I could just touch on Opex, we can.
Ramps through 'twenty, one paucity and customers what is the opex budget looks like for the year, maybe your thoughts on cash burn as well for you.
Hey.
Good morning, Jeff.
And then I can let him comment yeah. Good morning, Cody as Jeff mentioned.
We are ramping up our capacity expansion over the next three county or 'twenty, one to get double again, so we will be bringing on additional shifts in the way we handle that isn't typically when we break into new employees. Its usually a quarter ahead of when the capacity need is.
Wired.
So we will be bringing in.
Additional costs to find that capacity expansion, but we'll be prudent and we will do so when we have line of sight to revenue they'll be looking at like I said about a quarter ahead of time, when we expect to incur those costs.
And then obviously as we utilize more of the capacity in our plant.
The operating cash flow burn itself will come down and we mentioned before when we get to the $12 million to $15 million in revenue, we would expect to be operating cash flow breakeven at that point depending on mix.
Any any specifics that you're you're thinking about as far as your capex ramp through the year.
Yeah, I think what we stated before as far as the initial 500.
Per sand capacity expansion, it's about $4 million to $6 million left on that spend an additional about nine to 10 million to get double again to get to the.
What we talked about earlier of 400 million filters ish range a lot of those items that we discussed earlier we're.
We purchased the equipment and they already have the capacity to do that that could do that level of filters. So what we're talking about now with some of the less lead time items and bottleneck areas.
To get double again, our capacity throughout the.
Calendar year 'twenty 'twenty one.
Do you expect to be cash breakeven in the same level has been discussed before.
Yeah as I stated earlier I think.
Our models indicate that will be operating cash flow breakeven in the $12 million to $15 million of revenue.
And some of that depends on whether it's a low round of higher and depending on the mix of what we're selling during that quarter.
And then lastly, Jeff can you just talk about maybe for Dave as well just the overall implications of the C band auctions, albeit placed into your sweet spot of a filter.
Your are your capability today, and but as you go forward do you expect that C band opens up significantly more spectrum for you is it does it become a <unk>.
A larger market driver maybe than what handsets would have otherwise and and then what do you think that does to five G in millimeter wave.
Okay, So a lot to unpack.
There, but let me let me jump into it I was scribbling notes here just to make sure I tried to address it so far.
First piece was there on the C band auction I'll comment and then I'll get Steve to jump in here as well.
In terms of the C band auction, but that if you look at how we've been planning.
Planning, our capabilities and our technology around those necessary capabilities.
Auction for those that aren't.
Two familiar with.
It sits right in the end.
And 77.
It's Friday.
Right at the Hyatt <unk> 77, and so that's been a band net that's been of interest to US interesting about the interesting thing about 77 is it's extremely wide bandwidth. So we've been developing materials.
That are necessary to be able to address a very wide bandwidth within.
The overall items spectrum, including 77, so in terms of our capabilities, it's right in the Bull's eye of where we've been developing.
I'll remind you that the first product the company made was it and delivered into the market.
Phased array radar filter at three eight gigahertz, which is right at that end.
So we have been developing models design kits capability.
And expertise at these higher frequencies.
Throughout the life cycle of a company.
In terms of it being a larger market I think in terms of the.
The deployment in the market I think there's great indications by virtue of a magnitude of what's going on in the auction.
That's gonna be deploying there's a whole there's a whole load of filters that are going to be required for that for that particular band both in the infrastructure as well as in the mobile area. So.
Really falls within our sweet spot and you couple in or wafer level packaging capability and we're bringing on.
In terms of what that does per five millimeter wave.
I think there is.
From certainly from my perspective.
The sub.
Sub six sub seven gigahertz.
Technologies are by far easier too.
To implement our four.
In the mobile environment.
And on the millimeter wave.
Lot of challenges.
Challenges with.
With millimeter wave.
In a mobile environment.
That are just challenging comp so I think.
From a more reliable standpoint, the subs ex sub seven gigahertz frequencies are really are certainly going to be deployed there is certainly a role for millimeter wave. It's it's for fixed.
Type.
Backbone.
For the fixed backbone.
Theres, a clear business case for that but in them.
So that's more of a point to point type use, whereas the mobile environment.
It's very much a dynamic one that creates some challenges for millimeter wave so back to your back to the C. Band I think it is going to play a significant growth in <unk> and we believe we got the technologies and capabilities to address that.
Yeah, Cody I'll, just add a couple more points I think Jeff highlighted that we've been focused on that 3.8 gigahertz in developing the technology several years back. Additionally, we've been shipping 300 megahertz.
Solutions in the 70.
77, Ben Yeah to the Asian markets and so there's new spectrum as you know 280 megahertz. So we just shipped this up new designs and we've been talking to the providers in the market.
And we've also been talking to the key Oems that service the North American market as well. So this is a huge play and we've got pretty good line of sight on the technical requirements. Obviously, the shake out you know as far as who bought what.
Who's going to win the contracts still gotta happen.
But we believe as Jeff highlighted it's gonna be a pretty significant market opportunity for us on the infrastructure side and the mobile followed then thereafter.
It will I believe eat into the millimeter market based on the spectrum.
It comes available.
Easier from a technology standpoint to deploy carries the similar been not as good a bandwidth, but has better bandwidth and obviously the legacy frequency spectrum. So we think this will be a we're bullish on you know what will happen over the next several years with this sector.
Great. Thank you guys congrats.
Thanks Jody.
We have reached the end of the question and answer session I would like to turn the call back over to management for any closing comments.
Hi, Thank you all for your time today, we look forward to speaking with you during our next update call to discuss the current quarter execution against our milestones and future expectations.
We wish everyone, a safe and healthy a week and we look forward to all of you soon thanks.
You very much.
Thank you that does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Thank.