Q2 2022 Akoustis Technologies Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the acoustic technologies fiscal 2022 second quarter Conference call. As a reminder, this conference call is being recorded at the conclusion of the company's presentation of Christmas management will take questions to ask a question. Please press star.
Speaker 1: Good day ladies and gentlemen and welcome to the Acoustic Technologies Fiscal 2022 2nd Quarter Conference Call. As a reminder, this conference call is being recorded. At the conclusion...
Speaker 1: To ask a question, please press star 1 on your telephone keypad.
One on your telephone keypad to be placed into the queue.
Speaker 1: A replay of the call will be available on the Investor Relations section of the
A replay of the call will be available on the Investor Relations section of <unk> website.
Thank you operator, and good morning to everyone on the call welcome to acoustic <unk> second quarter fiscal 2022 conference call. We are joined today by our founder and CEO , Jeff Shealy interim CFO , Ken bowler and EVP of business development, Dave likely.
Speaker 2: Thank you operator and good morning to everyone on the call. Welcome to Acoustus 2nd Quarter Fiscal 2022.
Speaker 2: We are joined today by our founder and CEO Jeff Sheely, interim CFO Ken Boller, and EVP of Business Development, Dave Eichel.
Speaker 2: 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 in this conference call, such as expectations regarding our strategies, operations, costs, plans and objectives, including the timing and prospects of product development and customer orders, our expectations regarding achieving design wins from current and future customers.
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 in this conference call such as expectations regarding our strategies operations costs plans and objectives, including the timing and prospects of product development.
In customer orders, our expectations regarding achieving design wins from current and future customers the possibility of entering into collaborative or partnering relationships potential impacts of the COVID-19 pandemic litigation matters guidance regarding expected revenue product orders and milestones for the current.
Speaker 2: the possibility of entering into collaborative or partnering relation.
Speaker 2: potential impacts of the COVID-19 pandemic, litigation matters, guidance regarding expected revenue, product orders, and milestones for the current and future fiscal quarters, and expectations regarding the integration of acquired business operations are forward looking state.
Future fiscal quarters and expectations regarding the integration of acquired business operations are forward looking statements.
Speaker 2: Such forward-looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and answers.
Such forward looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties.
Speaker 2: The company and our management team assume no obligations to update any forward-looking statements made on today's call.
The company and our management team assume no obligations to update any forward looking statements made on today's call.
Speaker 2: Our SEC 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 SEC to get a better understanding of those risks and uncertainties.
Our SEC 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 SEC to get a better understanding of those risks and uncertainties.
In addition, our presentation today, we 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 the lease available in the investors section of acoustic Dot com.
I would now like to turn the call over to Jeff Shealy, founder and CEO of acoustics. Thank you, Tom and welcome everyone to our 2022 second fiscal quarter conference call.
<unk> made tremendous progress during the December quarter, as we increase the number of customers in production fivefold and grew our revenue over 90% sequentially.
We were able to accomplish this despite the ongoing headwinds in the macro environment, driven by COVID-19, and the associated supply chain.
Semiconductor shortages.
We delivered record revenue of $3 $7 million in the quarter and we remain confident that we will see continued sequential revenue growth for the foreseeable future.
Currently we expect that given our growing customer activity in Wi Fi five G mobile five G infrastructure in other markets.
Revenues for our current third fiscal quarter, ending March 31, 2022 will increase by more than 25%.
Our Wi Fi business continues to gain traction as we are adding new customers in both Wi Fi six and Wi Fi six C. R.
Our first Wi Fi six customer is leveraging our leading 5.2 gigahertz and $5 six gigahertz tandem coexistence filter solution and we entered production with a second Wi Fi six customer in the December quarter.
We also ramped production with our first three Wi Fi 60 customers during the December quarter, as our 5.5 gigahertz and $6 five gigahertz coexistence filter solutions are in the final stages of qualification and entering full production release.
We were excited to announce this morning.
Five additional Wi Fi design wins, most of which will enter production in the first half of the current calendar year.
And we expect additional design wins moving forward.
I'm also pleased to announce that we expect four of our Wi Fi 60 X ball filter products to be fully qualified and be released into production in the current March quarter and four additional Wi Fi 60 X ball filter products are expected to be qualified and released into production and.
The June quarter.
Additionally, we continue to advance the progress of our Wi Fi six he diplexer, which we are currently developing for one of the largest P. C chipset makers in the world.
The first design to this new Diplexer was shipped to this fortune 100 customer in December and we received positive feedback on that design.
The initial performance of the Diplexer performed well and enabled the customer to characterize in their system, providing valuable technical feedback for next design iteration.
We remain on schedule for commercialization of this extremely exciting product.
We attribute our surge and recent design wins to the fact that we delivered the first Wi Fi 60 ball filter solution to market.
And have the most extensive why 560 ball filter portfolio to satisfy the enormous challenges of wide bandwidth and high frequency operation.
Within the five to seven gigahertz spectrum.
Yeah.
To summarize our recent Wi Fi activity.
We now have more than 12 commercialized ex BOL Wi Fi filters eight for Wi Fi six <unk> and four for Wi Fi six.
As of today, we have announced a total of 12 design wins up.
Up from five design wins at the end of last quarter.
Furthermore, we expect to see additional Wi Fi filter when throughout the current calendar year.
And lastly, we are well into the development of our first export Diplexer, which would allow us to enter the PC market and another very substantial market opportunity in both unit volume and revenue.
Okay.
Moving on to five G. Mobile December was another exceptional quarter on numerous fronts for our five T mobile initiatives, we doubled the number of customers from two to four in the quarter, including adding a multibillion dollar tier one module maker as well as a tier two module maker that is for.
On the Asian handset market.
Our new tier one mobile customer is designing multiple five G filters and plans to use our export technology to deliver multiple best in class five G mobile modules and challenging bands above two gigahertz for using cutting edge <unk> smartphones and other devices.
We are currently helping the customer develop initial samples of the filter and we expect to deliver filter samples in the next quarter.
If the performance of the filter meets the customer expectations, we expect to establish a foundry arrangement with a customer targeting production ramp in the second half of calendar 2023.
Our other new tier two five G mobile customer is a rapidly growing RF module maker that has had great success in <unk> handsets targeting the Asian market and plans to use our ex BOL filters to design and sell for G. Five G RF.
<unk> has five G grows worldwide.
We have started developing an initial filter for this customer and expect that a successful design could lead to multiple additional filter designs over the next year.
During the December quarter, we continue to move forward with our two previously existing five T mobile customers as well we received favorable technical feedback from our first tier one RF component customer on the first of two filters that we are designing and expect to ship samples of the second filter to this customer by the.
And of the current quarter.
We remain on track to deliver qualified parts for production ramp by the end of calendar 2022.
And finally, we received additional.
Feedback from our first RF front end module customer after signing a foundry agreement last year.
This customer has decided to redesign the first filter, which we expect will happen during the first half of the current calendar year, but expect to remain ready for production ramp by the end of calendar 2022 .
The redesign is driven by changes in the customer filter specifications and does not involve changes in our X ball technology.
In fact, we expect that this customer may wish to expand our agreement and design multiple other new filters for Wi Fi applications.
We expect to have more to tell you on that subject in the near term.
As we mentioned on our last quarterly update call. We are bringing the production of wafer level packages or W. L. P in house.
We have determined that we can produce better products with superior cost characteristics.
In our New York facility that can be sourced from an alternative outside supplier.
We continue to work towards the design lock of our new advanced packages with full W. L. P process qualification expected to follow later this calendar year.
Well this is a bit later than our initial target of March. It is in time for our previously targeted delivery of five G mobile products in the second half of the current calendar year.
We believe bringing the W. L. P process in house will enhance substantially our ability to control the quality cost and customization of our advanced packages.
To summarize our five G mobile activity, we doubled the number of customer engagements from two to four.
In the December quarter.
We have multiple customer funded ex BOL filters in design.
Our customers in <unk> include a tier one RF component company that we are developing to export filters for.
A second tier one RF front end module maker that is developing filters with our X ball resonators for five G handsets.
A tier two RF front end module maker, which has signed a foundry agreement with us for the development of one X ball filter and a second tier two front end module maker that we're currently developing one filter for with the expectation.
Additional filters for 45 G mobile if the first is accepted.
We shipped five gene mobile samples to our first tier one RF component customer in December .
Our sin foundry customer is redesigning its initial filter design and we expect it will expand the number of filters it wants us to manufacture.
With news on that front expected in the near term.
And finally, we are currently migrating manufacturing supply chain of W. L. P into our new York's Fab, which we expect will have design locked in and be available for qualified production in calendar 2022.
And now I would like to discuss our infrastructure business highlights.
As we announced at the end of last quarter, we plan to enter production with our first citizens broadband radio service or C. P. R. S customer in the recently completed December quarter, and with our second C. B R. S customer in the current quarter.
We expect to enter production with fully qualified product with both of our C. B R. S customers by either the end of the current March quarter or early in the next quarter ending June 30th 2022 .
We continue to work towards the introduction of the first samples of a new breakthrough material that offers both leading ball micro filter power handling capability as well as the ability to cover wide bandwidth for macro base stations and other applications that require high power. We are extremely excited about this new material.
Science, and we'll update you further as we get closer to introducing filters leveraging this innovative technology.
Lastly, we continue to develop a new X ball filter for the new 3.8 gigahertz U S. <unk> spectrum that was auctioned at the end of last year. We have made significant progress on the development of this filter and expect to complete our first design iteration and provide samples by the end of the current quarter.
To summarize our five G network infrastructure activity, we have four completed five D network infrastructure ex ball filters.
Three for five <unk> small cell base stations and one for C. B R. S.
To date, we have announced three design wins in small cell with our tier one customer and one from a second customer.
Additionally, we have received three design wins for C. B R. S from two leading network infrastructure Oems.
And finally, we have over 10 customer engagements five of which already placed purchase orders.
In our other market segment.
We recently announced entering the RF timing and frequency market with our leading X ball resonators, we are working with a leading maker of timing RF components to develop ultra high frequency ex ball resonators for use in the customers' finished devices.
The timing RF market represents a significant opportunity for acoustics, and both unit volume and revenue.
Our customer is developing products that could be disruptive in the timing RF components market.
Looking to displace older analog technologies with ultra low jitter and phase noise devices.
We are extremely excited that our leading X ball resonators can be a part of this groundbreaking opportunity.
In our defense contract business, we continue to progress.
During Q2 on our existing R&D contract with DARPA to further enhance our export PDK.
In addition, we submitted a multimillion dollar contract proposal with DARPA to extend the operating range of our ex BOL RF filters up to 18 gigahertz using novel materials and device manufacturing.
We had been selected for negotiation for a potential contract award, which is expected later this quarter, assuming successful and timely negotiations.
To summarize our other market segments activity, we had seven completed ex ball filter solutions for the civilian and defense markets.
Our ultra high frequency ex ball resonators are now being used to deliver disruptive digital timing and control products to the broader communications industry.
We continue to refine and improve our export P. D K driven by the direct to phase two contract with DARPA and we have received notification that we had been selected to negotiate terms for a new multiyear multimillion dollar contract with DARPA to scale, our export technology up to 18 gigahertz and.
We have a total of four customer engagements.
Two of which have already placed purchase orders or provided in our <unk> revenue.
I would now like to hand, the call over to Ken to go through our financial highlights.
Thank you Jeff.
The second quarter ended December 31st 2021 the company reported revenue of $3 7 million, which is an increase of 96% over the prior quarter ending September 30th 2021 .
On a GAAP basis operating loss was $15 2 million for December quarter, mainly driven by revenue of $3 7 million offset by labor costs of $9 2 million depreciation of 1.6 million and other operational costs totaling $8 million as a result, GAAP net loss per share was 29 cents.
On a non-GAAP basis operating loss was $12 3 million and non-GAAP net loss per share was 21 cents.
Reconciliation of these amounts to the corresponding GAAP measures is available in our press release issued this morning available on the investors section of our corporate website.
Capex spend for Q2 was $7 1 million compared to $5 7 million in the prior quarter, mostly related to the continued capacity expansion and equipment redundancy and the company's New York Fab.
Cash used in operating activities in Q2 was $10 8 million down from $12 7 million in the prior quarter, mainly due to certain year end payments in the prior quarter.
The company exited the December quarter, with $67 5 million of cash and cash equivalents versus $75 7 million at the end of the previous quarter.
During the December quarter, the company raised $13 4 million in cash through additional at the market equity financing at an average price of approximately $7.04 per share.
In the March quarter, we expect multiple new Wi Fi six <unk> and network infrastructure customers to ramp production and therefore, we expect to see record revenue up more than 25% sequentially from the December quarter.
Based upon our growing backlog of design wins, we anticipate that top line growth will continue in the June quarter and beyond.
I will now turn the call back over to Jeff to discuss our second fiscal quarter performance and future milestones.
Thank you Ken.
I'm pleased to report that our view of the March quarter remains positive. Despite the ongoing semiconductor supply shortages and supply chain issues that are impacting the broader industry.
Our momentum continues to grow driven by Wi Fi six Wi Fi 65, G mobile five D infrastructure and our other markets.
We expect to ramp production from five customers to more than eight customers by the end of the current quarter with additional customer design wins expected across all our markets as calendar 2022 progresses.
In the March quarter, we expect to generate revenue from each of our business segments, including five G Mobile Wi Fi five G network infrastructure and our other market segment.
We continue to strive towards executing on our targeted milestones and we'll continue to keep you informed of our progress.
Our anticipated March 2022 milestones include.
And Wifi.
First we expect to ramp multiple Wi Fi six and Wi Fi six <unk> customers.
We expect to exit the quarter with four fully qualified Wi Fi six he filters.
And we expect to iterate, a second design of our new Wifi six he diplexer to our tier one P C chipset customer.
For five G mobile we plan to deliver inspect filters and ship our second filter design utilizing our new W. L. P process to our first tier one RF component customer.
And we expect to iterate the original filter design for our first tier two RF front end module customer and receive a purchase order for two additional filters for development.
And we are currently supporting our new tier one mobile customer.
Developing initial samples of their first ex BOL filter and we expect to deliver filter samples in the next quarter.
Next in our five G network infrastructure segment, we expect to release our C. B R S design and.
And began production ramp with two customers.
And we expect to deliver a 3.7 to 3.98 gigahertz C band five G filter for the U S market and expect to sample with multiple tier one customers for both small cell and D. A S. A a S base station equipment.
And finally in our other market segment, we expect to ship, a new X ball filter design to our existing defense customer and receive a new volume production order on the 3.8 gigahertz filter product and we expect to complete negotiations on a potential award for a new multi year multimillion dollar proposed.
Will from DARPA.
In conclusion.
We believe the market opportunity for our patented high frequency ex ball filters is substantial we now have 56 issued patents and 93 patents pending as we continue to build a substantial IP moat around our technology.
We continue to work diligently to achieve each of our stated objectives and we will continue to provide updates on our execution against these objectives going forward.
Finally, I would like to thank our employees for their hard work passion and dedication throughout this past calendar year, particularly during the 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 gene network infrastructure and defense markets.
We have also experienced exceptional momentum and the five G mobile market driven by our leadership in filters that operate above three gigahertz, and our new and expanding wafer level packaging capabilities.
I 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 as a reminder, ladies and gentlemen, please press star one to ask a question.
Our first question comes from the line of Anthony Stoss with Craig Hallum Capital Group. Please proceed with your question.
Morning, guys. Congrats on the continued progress Geoff maybe can.
Can either one of you to <unk>.
On the supply chain shortages can you quantify the impact to revs in December and how would you think it will impact March and then for you Jeff you talked about exiting 2021 with five in production designs can you venture a guess at the end of this year, how many of the same thing how many designs.
Designs, you'll have volume production.
Yeah.
Okay. Good morning, Tony.
I appreciate your comments.
For the first one on that in terms of what we expect in terms of exiting.
This calendar year with how many in production I'm going to kick that over to Dave.
To start okay. Good morning, Toni Thanks for the question.
You know we are we commented on that we're exiting this year or exiting last year going into this year five customers in production.
Our weighted towards Wifi six feet.
You know the Wifi six the activity is still very very strong so I think that.
Percentages.
Continued to increase over the next 12 months.
So I wouldn't say that doubling to 10 customers in production is a reasonable goal and that's something that we're going to continue to push beyond that.
The main thing is just on the timing of these customers typically cycle cycle time for design activity from start to production release is somewhere in the range of.
Nine to 15 months, depending on if it's a enterprise customer or a consumer retail customers. So it's oh.
Dependent on that depending on obviously the supply chain you know what we've been seeing also from Neil says he suppliers. There's extended lead time at least with two two major guys. So.
Working within those boundaries.
I have a positive I believe that would be greater than 10 by the end of the year.
Okay.
And just.
And just what we put in the prepared comments was that we plan on being.
Over eight in the March quarter.
Yeah.
Okay, and then on the component shortage, how much it impacted revs for Ken.
Yeah, so given the macro headwinds for both sales and the supply chain shortages you know, we're seeing a certain delays in ordering times for where those are.
Operating expense items, such as laminates.
Also in particular on the Capex front.
We're now seeing delays a certain limit of over a year up to 15 months in some instances so.
Certainly on our part it takes it takes more planning and.
More.
At the time, it will need to bring capacity in line of what we need to be fully redundant and those matters.
Certainly caused us more and more.
While lead time items.
Messenger context earlier yeah.
And Tony This is Jeff just to follow up on that.
As you know we sell into.
These these Wi Fi units.
Each of those units are take a silicon chip and the availability of their silicon chips is has been a challenging are certainly not going to speak for the suppliers of those.
But that is tended to impact.
In terms of we did see some impact of that in the December quarter, and I would call. It a general headwind going forward again, we don't we don't control, we can only control what we ship and where we have the capacity to ship what we need.
However.
If you look at our guidance for the for the March quarter.
Of 25%.
Sequential.
There is some conservatism in that in terms of the.
The availability of the silicon chips, and that's something that we have to wait.
When we set up.
Our guidance to the investors.
Okay. Thanks, Jeff if I could just ask one more for Dave.
Any kind of color would be appreciated when you look at kind of your first two Wi Fi customers their experience with your solution.
How actively are they engaged how quickly are they coming back for repeat design or additional design was any any color kind of on your Atlanta customer and then you expand it would be helpful.
Yeah again, good question, Toni and it's I would say, 100% is then they come back the relationships are very strong.
Oh, five customers and there is multiple programs and that's that's really our goal is.
We're pretty well distributed across.
Consumer enterprise and carrier now and what we wanted to do is obviously secure them as a customer customer acquisition and maintain that customer. So the good thing is is that we're actually involved in the early architecture now of the designs so their systems, particularly with 556.
Utilization of the new spectrum.
Becoming more difficult to develop these filter solution central's satisfy some of the folks just requirements that they're thinking about how they use it for backhaul or or obviously additional notes.
Client devices.
So right now, we're 100% of maintaining customer acquisition and looking at getting into the new programs.
Yeah, I think the main thing that these customers recognize that we were early to market with the technology.
Our first customer that we brought on board and that would be the leading and they expect us to continue to lead and develop solutions that satisfy the future architecture designs Youre working on.
And Tony This is Jeff let me add just a little more color to what Dave said.
It varies by customer but.
Not uncommon for us.
These customers have multiple programs.
They may have designs going on in multiple sites. So theres multiple programs that are running in development in parallel cycle.
So these are typically in the nine to 12 months. So we like this market from that vantage point in terms of our overall time to market and I think that overall theme, which we touched on in the prepared comments.
So some of the activity we have going on.
<unk> what are the key features of our technology is being able to integrate them.
More than one of more than one filter in a in an integrated module and I think the first example.
I'm fortunate that we have ongoing so we do have oh.
With these relationships that we're developing are we've been able to also get in on the advance roadmap with these customers.
Looking at more integration opportunities, where we can put more and more of our ex paal content in a single a single module, which allows us for the fixed cost of the module, which is roughly similar for whether you have one filter or multiple sensors.
Uh huh.
It allows us to put more content more features in it. So the integration is going to be something that I think investors should expect to see a continued trend from our product line.
And we will certainly continue supporting our single band solutions, but certainly we're going to go where the customer roadmaps.
Integration opportunities take us.
Thanks for all the detail guys.
Thank you Tony.
Thank you. Our next question comes from the line of harsh Kumar with Piper Sandler. Please proceed with your question.
Yeah, Hey, guys first of all congratulations it sounds like there's just tremendous and exciting things going on I checked your company. We're excited about the future, but justice I may ask a question or two you you've talked a lot about you seem to be getting a lot of 60.
Design wins design ins is there a financial difference from your standpoint between the rest of the filters that like the rest of the lifestyle. So since you do like a six versus a 16 from either a aspira margin angle you come out ahead in one versus the other scenario maybe you can even talk about you.
Or P C product.
That are that you're developing and working with but I think it's a fortune 100 company that you mentioned.
Yeah, well first harsh I appreciate your comments.
Thank you.
Let me in terms of the pricing went up.
I've been here on that.
Certainly add some color to it.
He's closest to the customers.
I'll, let him start.
So yeah. We are there's two advantages that we see engaging with fly Fi 60 market and and where we want it maintains its leadership position.
One is that the price is typically got greater than 25% higher than what you'd see in the Wifi six Wi Fi six can you like some of the Oh, where incumbent technologies and as you get into the Wifi six it's difficult for that you've heard US mentioned the D. Our amount of block type filters and even some of the L. P C.
You guys, so the premium price.
Don't have to be as competitive.
You know, we do have a premium in both market segments based on the performance size et cetera. The other advantages the mimo multi user mimo. So the number of filter utilizing the <unk> typically higher on average than what you see in the Wifi six so the dollar content per system.
System has increased so obviously, we expect more revenue per system and also we see the take rate.
Markets with Wifi six are you really starting to take off this year. So we've got high expectations for this market segment with regard to the U S. P C.
Customer of the AR and the dark horse as Jeff mentioned before yeah, where I think in a very unique position here is this is one of our first.
Non handset mobile customers.
The volumes are good it's a respectable and you know when you're looking at not only a P. C. There's other mobile applications. Besides a handset that we can get involved and so we are taking a leadership position in developing these acoustic and bulk acoustic wave.
Sure.
That would be utilized Wi Fi six and also my five seven upcoming which has some unique requirements things like multi link operation and using a bulk acoustic wave technology allows you to develop these two high performance filters, what they call high isolation and and also get rejected.
Oh insertion loss, particularly for these batteries hold devices that you can't do with other technology. So this is something that you know, it's going to take them a little bit.
At a time for us to get into production on this but not just with this one customers with multiple customers.
Harsha.
Can I add a little more color to that.
You had mentioned I E S. P N margin I think.
As Dave mentioned, the 16th premium.
Product from our and from a margin profile that's.
Gotta be largely driven by the Oh.
So we call that our logistics yield.
Dosing that can be driven by.
Our margin on the specification it can be driven by the way but of course, it can be driven by the size of the product. So I just want to make sure everybody's aware that Oh, we do have cost savings initiatives going on.
And you know from my from I think everybody's perspective here on this and it's important that we get.
Back to the customer in the quantities that they need to support their program that builds credibility with the customer but.
We also are very cognizant of the need for cost savings as we go forward and also utilization of the fab, which is going to drive down costs.
The wafers as well so yields laminate cost size of size of product and then as I mentioned earlier, just the amount of integration that we can do and functionality. We can bring a within the module is going to allow us to get higher asp's.
At a lower cost point, so integration certainly a path one of the path to profitability.
The last thing I wanted to ask you've touched on the di Fletcher.
P C products.
We've recently.
A series of design reviews with that customer and that are developing that is is proceeding as planned.
And we're working with them on the front end.
Yield expectations as well as.
Sure we meet their performance requirements, so very good interaction with that customer.
And we're just going to continue that and then as a follow up.
Just in terms of adding content.
As we have mentioned previously being able to add a switch functionality to the module. So there's there's more content that we can we can add to drive up a S. P. A.
And we.
We believe we will certainly improve the margin profile of the products going forward.
Hey, guys. Thank you so much for that color Jeff.
Yes for a while I mean, you always maintain I'm switching things to the mobile side now you're always maintained I mean, when you ultimately get into you know a mobile in a meaningful way that you would always do it in some kind of a partnership and for a while you know last couple of quarters, you didn't mention that on the call, but today. It took the time dimension it on their calls.
Jim you feel good about your tier one activity customer activity that you got going on enough that you weren't hadn't mentioned that you're getting some kind of foundry arrangement could you maybe talk about how youre thinking about dish perhaps.
Yeah, well certainly thanks for the question in terms of the mobile market.
Is clearly the largest opportunity by both unit volume as well as.
So overall Tam.
In terms of size of market.
So as.
As we put it in the prepared comments, we're moving from you know we moved a significant movement last quarter from two to four.
Customers that we mentioned I.
I think they are.
The conversations can continue to emerge with additional customers beyond those.
Those are that's where they'd be in the early earlier phases that we're not ready to talk about but just in terms of overall posture in terms of the mobile market.
I would.
We certainly see.
That opportunity.
Yeah.
It would require you know we've talked about 500 million filters in terms of the plant capacity for the Fabs.
The current stage.
We would need to expand that into the billions of filters.
To.
To really go after a tier one I think we feel pretty good about our tier two opportunities that we have.
But our partnership would certainly be one option and while we can't comment on any conversations that are that are ongoing.
I would say, that's certainly front and center of mind I would also add as you know the U S. Congress is currently contemplating their conference Bill on Chips Act or you seek.
Whichever version you want to talk about the Bill, we certainly view that as Kennedy to expand capacity.
That could certainly provide the opportunity for us to scale up from six inch to eight inch which would oh it back too.
The ability to produce a.
Higher margin products, yet, but certainly our scale are they the wafer scale with the wafer size, but certainly leading to an improvement of the margin profile Oh, the mobile products. So the important thing is is we've got engagements with multiple customers in mobile.
In the prepared comments, we talked about.
Those are those cycles, we've got very positive feedback we mentioned some redesign that's going on so I would certainly mentioned that we've got robust activity in going on mobile right now and our.
Parents conversations over where that can lead but the important thing is for us to first deliver a compelling performance, which we believe we're in the process of doing and we think that will lead to a.
Linked to the engagements.
So we're looking forward all of a sudden engagement partner.
The original thinking in terms of there being more module.
Manufacturers and there aren't filter suppliers I think that thesis is still intact as we're seeing we're seeing opportunities for engagement partners that require very high end.
Filter products and also would just end by saying some of the mobile customer.
Customers that we're talking to also have requirements for a Wi Fi. So we already have a jumpstart in terms of the product portfolio to support those cuts.
Our customer requirements and so the best thing we can continue to do is continue to expand the portfolio.
We went completely are convinced that our design and manufacturing business model is the appropriate model to be successful in this market and we've got we've got the capacity and we can support these added engagements.
As we go forward so.
That's a that would just be a summary of our out of our mobile strategy.
Hey, I appreciate all the color guys. Thank you so much.
Thank you harsh.
Thank you. Our next question comes from the line as she did show that with Roth Capital Partners. Please proceed with your question Hi, Jeff Good morning, Ken Dave Congrats on the momentum here.
Just to ask on the Wi Fi to do design wins.
That you announced can you talk about maybe the size of those opportunities for the new customers relative to the previously announced three are they similar sizes is there any material differences worth mentioning.
Hey, good morning <unk>.
Let Dave.
First thanks for your comments and I'll, let David touch.
Opportunities Morten C G.
So.
It's from the engagements that we've got with the new customers.
There are some that are similar in size to our first customer and as Jeff mentioned earlier you know some of these customers will have multiple programs. So you know there'll be smaller derivatives also as well.
And then you know the the new customers that we're talking this year I expect to be the same size, if not possibly bigger to our first customer.
So it is it is a spread you know by the end of the year.
We look at all these design wins that are going to go into manufacturing, you're probably gonna have you know a handful.
Implications of a programs that'll be at the same size as the first customer and then a smattering of other smaller programs. So it's you know without giving too many specifics, it's broad range, but its healthy and substantial.
Okay. It sounds like a good diversification of the revenue stream there and then if you could talk about the mobile foundry customer that redesign maybe Jeff.
You know you indicated they read the redesign but that had positive with potential implications can you just maybe go one click deeper in there and talk about what what gives you that that sort of positive outlook on that.
Yeah again.
Not to pile on here, but these are you start like closest to the customer here. So I'll, let him at least leave with it yeah.
This is I just leave them on or building on what Jeff mentioned earlier, we've got these four customers.
We're engaged with and.
The good thing is is that we've added capacity to be able to service a market. We've got the W. P coming in house and there are also some dynamics going on in the market that are going in our favor too with the difficulties of the coaches.
L T. She sees can't our service and then also they need an access for technology to be competitive.
Don't have old technology. So those are all playing in our favor. So the two customers that we mentioned that we believe will go into production by the end of the year. One of them is basically done is designed.
This was the first design worked.
It worked well and they're actually redesigning its based on feedback of their system designer of their firm design.
We delivered everything that we.
We need to deliver them so they're looking at their full so they're fulsome architecture and the performance. So they had to make some tweaks based on you know the interaction with the active devices in the substrate.
So we believe.
Based on their first success at you'll have final success with the next design and the target is to be able to ramp.
With them by the fourth quarter.
Also with the tier one a component manufacturer had very good results with the first design and are actually planning to do.
Another design spend with them to finalize the design as well so both of those guys timing wise you know, we're pretty bullish that we'll see.
Nothing going into production hopefully both of the one it may be just one but right now everything is pointing in the right direction and then with the other strategics.
Those are developments that were going to continue to nurture to really you'll get to a point of assessing the technology and potential integration into their films.
Let me if I could just add to what Dave said they.
Just for.
Just for 100% clarity we are we.
We have been producing filters, we've been delivering those filters to these customers they are integrating them into their platform.
Which is.
Is.
Effectively a modular platform and we're getting feedback so if we're if you're hearing redesign I would translate that is a that they they liked the performance enough, but certainly from from our knowledge of filter designs.
You have to have the ability to tweak and it's certainly if youre doing a module where you have to have the ability to turn knobs on performance and so.
Our view is a redesign as a positive thing because we've got a relatively short cycle time, and it's a it's confirmation from the customer that they are interested they liked the performance and but they need us they want to optimize it in their platform.
And then.
And then finally in the <unk>.
The final thank Dave mentioned about just the conversation and the benchmarks, but these new customers are that's.
That's a you know the earlier question about from harsh on.
Partnership So I think that's where those partnerships tend to get hashed out is once once you demonstrate that performance.
Then that's when our discussion.
About our capacity.
As well as production platforms.
Where you get into the conversation over what their requirements are in the capacity.
I would add.
Take little Liberty and just say we have a very good model of our capacity, we look at that planning over an 18 month horizon and make sure that we have.
<unk> had the capacity.
We're also very.
We're very on top of the lead times of equipment that are needed to expand that capacity and so we've got a very good operations planning team that is keeping us hum.
On top of all.
All of the planning.
So we.
We can bring we bring back to the conversation with the mobile partners to make sure they understand what capacity, we can provide and what.
Its very helpful insight, Jeff and then last question quick one perhaps for again, bringing I'm guessing not really but bringing W. L. P. In house is that a material impact to your capex outlook. Thanks.
Thanks, Suzy I would say in general no.
As far as what we're looking at the 500 million million parts expansion project and redundancy those are quite a bit much play.
Quite a lot more spend W. L. P. As is much less of the capacity.
Capex need for that project and Sushi I, let me add to that I'm just.
Just a little more color.
When we acquired these facilities are it had.
It had multiple fab areas.
If oh, we had mentioned that we previously had two tenants that we're occupying two different spaces in a in the facility.
Because we knew we would need the space. So we chose not to renew those tenants leases.
Several years ago, and one of the areas that we called Fab three I is the area where the W. L. P is a is being installed at the W. L. P process is being installed in the fab. So I just want to emphasize that it's an existing fab area. We did do some.
More or less restart and restart certification of that facility, but that's a far cry from having to capitalize the new fab area.
So there's a lot of Oh, we used every square inch of the facility there and we've got a very efficient team that.
Notice the facilities and knows how to.
You know start these facilities up as we need it and expand them as we need.
Okay. Thanks, everyone.
Okay. Thank you Susan.
Thank you.
Next question comes from Rick Schafer with Oppenheimer and company. Please proceed with your question.
Hi, Good morning. This is the way Marc on the call for Rick. Thanks for letting me ask the question and congrats on your design win announcements. So you guys continue to expand your CNS pipeline from recent announcements in Wi Fi and mobile. So I was wondering if you can share any color on their sales pipeline. How large is the overall pipeline and what products do you see your leading this.
Pipeline. Thanks.
One way, it's Jeff I appreciate your kind comments, let Dave start with the sales pipeline question Yeah from a.
From a product portfolio.
The announcement, we basically indicated that we've got 12 products and four of those are really Wifi, six either them or Wifi six eat them.
We will continue to do the development on the Wifi six products.
But at a smaller percentage than most of the effort is going to go into Wi Fi succeed and events, we might place seven so we're going to continue to invest in there and really with these tough coexist requirements. You know with the transitions that you see with Wifi six feet and the bandwidth requirements from a pipeline standpoint, yeah. We are.
Besting in Asia, right now as far as from a sales channel.
So, adding adding new heads there to continue to support the you know the accelerated our engagements that were seeing and this is coming out of all regions.
From Taiwan, China, and Korea, and also Japan.
There's a lot of activity with the Oems.
You know, which are the original design manufacturers that work with the Oems and they support multiple OEM programs. So we have good activity in North America and also in regions of Europe .
Also supported out of those Oh, Taiwan and China.
Find locations. So this pipeline will continue to increase we're talking about 12 design wins or 13 design wins that we're at right now and expect it to.
<unk> continued to increase you know we've got goals that we've established of design wins per quarter and not all of those will go into production. The main thing is just is you'll get a obviously a product go to.
Every platform and work with customers you know, we have a lot of customer intimacy to support them through the application engineering and really get the product to the optimal performance of that.
They wanted to really set its production. So we will continue to focus on Wifi, six <unk>, primarily and Wifi six.
A small percentage and wages to Jeff, but let me let me just add a couple of points.
With the recent acquisition of ours Goodbye I think we've done our team has done a really good job of.
Aligning the sales channels filling any gaps.
So we're playing in the past <unk> talked about some of the expansion that we have in Asia.
Ongoing.
So that's extremely important and just in terms of the pipeline just to emphasize I know, we guided up sequentially, 25% up but if you look at our if you look at the.
With some of the archive.
Our product revenue being flat to down quarter over quarter.
You have been looking at.
The sequential increase in in the in the core export filter business.
It's gonna be up well over 50%. So we think that and we see that continuing not only for Q3, but we see a we've got a pipeline of design wins that are really support that.
That our continued growth.
In Q4 so.
You know the pipeline I think we're getting good feedback on what were doing in the sales channel and that's leading to a design win sales funnel and with the sales channels that we have a leading to a very nice sequential growth in the in the export business.
Okay.
Great. Thanks for that so in regards to our S. M. I could you frame out how all of that or S. M. I contribute to revenues in the December quarter on what products and markets that they come from.
Yeah.
So yeah.
Yeah. So let me let me touch on that.
So we previously when we acquired the orphaned.
My ER business or the 51% majority ownership of it Oh.
We gave guidance so they came in above expectations for the December quarter, I think what that tells us is oh.
Initial signs as a very good acquisition here.
And I think the emphasis there is a new markets.
As well as a new sales channel complementary sales channel and then also have more traction with.
With our Oh set suppliers. So that's our overseas Assembly and test was certainly one of them we've picked up additional traction in and additional priority.
We do expect them to be flat.
Flat to down for the March quarter, and AR, and then have some sequential growth in the <unk> in the fourth quarter.
So that's how that.
Plays up in terms of some additional color.
We are in the queue.
Q, we did if you look at no number seven you can get the additional analysis.
Or if it might I think theres, a pretty detailed analysis are.
Provided in the filings so.
I appreciate the question. Thank you.
Thank you.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Healey for any final comments.
Thank you operator, and thank you everyone for your time today, we look forward to speaking with you during our next update call to discuss our current quarter execution against the milestones we outlined today as well as our future expectations that we set I wish everybody, a happy and safe Monday and thank you for your time and attention.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.