Q2 2024 Akoustis Technologies Inc Earnings Call

Jeffrey B. Shealy: However, we expect modest growth of shipments to return in the March quarter. For the March quarter, we expect to secure a foundry order for the development of up to four 5G, 4G LTE devices. XBOG WLP-DI with a Tier 1 SATCOM provider.

Jeffrey B. Shealy: Second, we expect to gain approved supplier status and achieve a design win with a Tier 1 Infrastructure customer, and, Finally, we expect to complete NRE development and deliver band N104 samples to a Tier 1 network infrastructure company. Finally, before handing the call off to Ken, I would like to provide an update on our Defense and Other Markets business. During the December quarter, two out of our top ten customers were in our Defense and Other Business category, and I will begin with an update on our published milestones for the quarter. First, as we announced on January 29th, we secured a ball filter design win for an automotive wireless battery management system, or WBMS, solution used in a Tier 1 IC reference design. We expect a production ramp in the March quarter of calendar 2025. Second, we completed the qualification of the optimized second X-Ball resonator for a key customer in the timing control market.

[music].

Jeffrey B. Shealy: Now that this qualification is complete, the design is released for limited production. The resonator is used in a tunable oscillator application scheduled for production in the second half of calendar 2024. Third, we delivered our first X-band ball filter using Akoustis' advanced XP3F technology to a Tier 1 Defense Customer. We met with this customer last month and received positive feedback, and expect this engagement to continue for X-band phased array radar applications. As previously mentioned, our biggest success in the defense and other market segments was the introduction of our new XP3F technology, which incorporates a new revolutionary patent in multi-layer nanomaterial that incorporates our single crystal piezoelectric material. This new nanomaterial was developed with funding from the Defense Advanced Research Projects Agency, or DARPA, to scale the XBOLT technology to frequencies up to 18 GHz.

Operator: Good morning, ladies and gentlemen, and welcome to Akoustis Technologies' fiscal 2024 second quarter conference call. As a reminder, this conference is being recorded. At the conclusion of the company's presentation, Akoustis Management will take questions. To ask a question, please press star 1 on your telephone keypad to be placed into the queue. A replay of the call will be available on the Investor Relations section of Akoustis's website. Thank

Good day, ladies and gentlemen, and welcome to Christian Technology's fiscal 2024 second quarter Conference call. As a reminder, this conference is being recorded at the conclusion of the company's presentation, Chris just management will take questions to ask a question. Please press star.

Jeffrey B. Shealy: During the December quarter, we began work on our multi-million dollar Phase II contract option, which extends our current DARPA Coffee Program and funding through December 2024. Additionally, during the December quarter, we continued shipments supporting a new DARPA contract unrelated to the DARPA COFFEE contract, which requires high-performance custom resonators for timing control applications. This customer was a top 10 customer for the December quarter. In addition, we submitted a proposal for a new multi-million dollar program with the Office of Naval Research to fund RF filter multiplexers incorporating our XBAW and P3F materials technology, which, if awarded, could be announced as early as Q2 of calendar 2024 and begin in summer 2024. In our GDSI business, we serviced 148 customers during the December quarter, and the average customer spend is up approximately 17% over the same quarter last year. As mentioned earlier, Akoustis has established memberships with three regional hubs, and GDSI has at least five additional applications pending with remaining hubs, which we expect to convert to memberships by Q2 of calendar 2024.

One on your telephone keypad to be placed into the queue. A replay of the call will be available on the Investor Relations section.

Its website. Thank you you may begin.

Kenneth E. Boller: Thank you, operator, and good morning to everyone on the call. Welcome to Akoustis' second quarter fiscal 2024 conference. I am Ken Boller, CFO, and I'm joined today by our founder and CEO, Jeff Shealy, and EVP of Business Development, Dave Aichele. 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 and operations, including the timing and prospects of product development and customer orders and design, Possible Collaborative or Partnering Relationships. LITIGATION MATTERS, Expected Financial and Operating Results For more information, visit www.fema.gov. Such forward-looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties. I am not under any obligation 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.

Thank you operator, and good morning to everyone on the call welcome to Christmas as second quarter fiscal 2024 conference call I'm, Ken ball, our CFO and I'm joined today by our founder and CEO, Jeff Shealy and E V P of business development they'd 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 in this conference call such as expectations regarding our strategies and operations, including the timing and prospects of product development and customer orders and design wins possible collaborative or partnering relationships litigation matters and expected financial and opt.

Results are forward looking statements.

Forward looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties.

The company and our management team assume no obligation to update any forward looking statements made on today's call.

Our SEC filings mention important factors that could cause actual results to differ materially. Please.

Kenneth E. Boller: [inaudible] Follow the SEC to get a better understanding of those risks and uncertainties. In addition, our presentation today may also refer to certain non-GAAP financial... a reconciliation of these measures to the most directly comparable gap measures, which we presented in our earnings call highlights. Available in the investors section of Akoustis.com, Now I'd like to turn the call over to Jeff Shealy, founder and CEO of Akoustis. Thank you, Ken, and welcome, everyone, to our FY24 Fiscal Second Quarter Conference Call. Revenue in the December quarter was within our guided range of flat sequentially.

Please refer to our latest Form 10-K, and Form 10-Q filed with the SEC to get a better understanding of this risks and uncertainties.

In addition, our presentation today may also refer to certain non-GAAP financial measures.

Reconciliation of these measures to the most directly comparable GAAP measure is presented in our earnings call highlights release 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.

Thank you, Ken and welcome everyone to our FY 'twenty for fiscal second quarter Conference call.

Kenneth E. Boller: One key customer milestone for the quarter was the successful completion of a supplier quality audit for an FDA-approved diagnostic chip aimed at real-time PCR results. Finally... GDSI saw a double-digit increase in new quoting activity over the prior quarter, which we will push to convert to new orders to grow the business. For the March quarter, in the defense and other market segments, we are expecting to deliver the new XBAW PDK to two customers for ongoing foundry engagements and, complete the design and sample of a new 2.4 GHz Wi-Fi CPE Automotive XBoff Filter for multiple customers. Now I would like to hand the call over to Ken to go through our financial highlights. Thank you, Jeff.

Revenue in the December quarter was within our guided range of flat sequentially.

Jeffrey B. Shealy: During the December quarter, we had two customers that each made up greater than 10% of our reported revenue. XBAL-related sales accounted for the top five customers, and 7 out of the top 10 customers. Our top 10 customers made up 58% of revenue. Our top 25 customers made up 74% of revenue. In terms of regional sales, three of our top 10 customers were Asia-based.

During the December quarter, we had two customers that each made up greater than 10% of our reported revenue.

Ex BOL related sales accounted for the top five customers and seven out of the top 10 customers.

Our top 10 customers made up 58% of revenue our top 25 customers made up 74% of revenue.

In terms of regional sales three of our top 10 customers, where Asia based our top 36 customers made up 80% of our revenue with 40% of our sales coming from Asia, followed by 47% of our sales coming from North America, and 13% of our sales coming from Europe.

Jeffrey B. Shealy: Our top 36 customers made up 80% of our revenue, with 40% of our sales coming from Asia, followed by 47% of our sales coming from North America, and 13% of our sales coming from Europe. Finally, our top two customers were Asia and U.S.-based customers. Last year, we commented that the build-up in channel inventory, particularly for our Wi-Fi customers in the Asia region, would adversely impact our revenue in the second half of calendar 2023. However, our revenue met our guided targets for the September and December quarters. Today, we believe we have worked through the inventory issues from 2023, and we expect demand to return to Wi-Fi with strength in Wi-Fi 6E and first production demand in Wi-Fi 7. Consistent with our early guidance for fiscal Q3 on last quarter's investor call, we reiterate our expectation to return to record quarterly revenue for the quarter ending March 31, 2024, up 18 to 25 percent sequentially. The company continues to focus on expense and cost savings to significantly reduce cash burn moving forward.

Finally, our top two customers, where Asia and U S based customers, respectively, and collectively made up 30% of sales.

Last year, we commented that the buildup in channel inventory, particularly at our Wi Fi customers in the Asia region would adversely impact our revenue in the second half of calendar 2023.

Kenneth E. Boller: For the second quarter ended December 31st, 2023, the company reported revenue of $7 million, which is in line with our prior guidance and flat for the prior quarter ending September 30th, 2023. However, this represents an increase of 20% year over year. On a GAAP basis, operating loss was $15 million for the December quarter, driven by revenue of $7 million, offset by labor costs of $8 million, and other operational costs totaling $10.8 million. It is noteworthy that our labor and other operating costs have declined sequentially. As a result, GAP's net loss per share was 21 cents.

Our revenue met our guidance targets for September and December quarters.

Today, we believe we have worked through the inventory issues from 'twenty to 'twenty three.

We expect demand, returning and Wi Fi with strength and Wi Fi <unk> and first production demand and why five seven.

Consistent with our early guidance for fiscal Q3 on last quarters Investor call. We reiterate our expectation to return to a record quarterly revenue for the quarter ending March 31, 2024 up 18% to 25% sequentially.

Company continues to focus on expense and cost savings to significantly reduce cash burn moving forward.

Jeffrey B. Shealy: Ken will detail our ongoing activities and impact on reducing our cash burn during his upcoming comments. I would now like to take a moment to discuss updates involving the company's activities related to the Chips and Science Act of 2020. Regarding CHIPS Act funding, there are two detailed updates to share with investors. First, during the December quarter, we became members of three microelectronics ME Commons hubs focused on electronic warfare for the Department of Defense. Membership to these hubs is critical as it allows access to be part of the hub proposal team for new government research programs.

Ken will detail, our ongoing activities and impact on reducing our cash burn during his upcoming comments.

I would now like to take a moment to discuss updates involving the company's activity related to the chips and Science Act of 2022 rigs.

Kenneth E. Boller: CapEx spending for Q2 was $1.6 million, completing our New York FAB tool capacity expansion project to $500 million filters per year. Cash used in operating activities was $11.3 million, which included additional payroll costs associated with our expansion reduction efforts. ,,,,,,,,,,,,,,,, and others, which will be converted to cash in the March quarter. The Inventory Channel build-up in Wi-Fi is behind us. We continue to receive design wins and introduce new products. As a result, we have backlog enough to support a return to record quarterly revenue in the March quarter, with quarterly sales expected to be up 18 to 25 percent. On the expense front, we have undertaken aggressive expense reduction and cost-saving measures that we estimate will reduce our operating cash flow burn rate by 30 to 38 percent sequentially in the March quarter. Furthermore, with the expense reductions and cost-saving actions in place, we expect the operating cash burn rate to drop another 30 to 40% in the June quarter.

Regarding chips Act funding there are two detailed updates to share with investors.

First during the December quarter, we became members of three microelectronics.

The Commons hubs focused on electronic warfare for the department of defense.

Membership to these hubs as critical as it allows access to be part of the hub proposal team for new government research programs. We currently have two active EW proposals under one hub membership with one of the proposals potentially worth several million dollars annually beginning in the.

Jeffrey B. Shealy: We currently have two active EW proposals under one hub membership, with one of the proposals potentially worth several million dollars annually beginning in the second half of calendar year 2024. Furthermore, we are currently pursuing memberships with additional ME Hub Centers and will detail our efforts and progress moving forward. Second, the CHIPS Act of 2022 included a provision for a 25% refundable investment tax credit, or CHIPS ITC, on Investments in Facilities that Manufacture Semiconductors or Semiconductor Manufacturing Equipment that are placed in service after December 31st, 2022. We currently estimate the amount of the refundable tax credit applicable to Akoustis to be $3.7 million to $4.7 million over the next 12 to 15 months.

First half of calendar year 2024.

Furthermore, we are currently pursuing memberships with additional any hub centers and will detail our efforts and progress moving forward.

Second the chips Act of 2022 included a provision for a 25% refundable investment tax credits or chips I T C.

On investments in facilities that manufacture semiconductors are semiconductor manufacturing equipment that were placed in service after December 31st 2022.

We currently estimate the amount of the refundable tax credit applicable to acoustics to be $3 7 million to $4 7 million over the next 12 to 15 months.

Jeffrey B. Shealy: Next, I would like to discuss several updates in our primary target markets, beginning with Wi-Fi. Our first milestone for the December quarter in Wi-Fi was to receive a design win for a next-generation Wi-Fi 7 solution with a Tier 1 US-based carrier. Our carrier partner has awarded us design wins for two high-band XBoff filters for Wi-Fi 7.

Next I would like to discuss several updates in our primary target markets beginning with Wi Fi.

Okay.

Our first milestone for the December quarter, and Wi Fi wants to receive a design win in our next generation Wi Fi seven solution with a tier one U S based carrier.

Our carrier partner has awarded US design wins for two high band ex BOL filters for Wi Fi seven.

Jeffrey B. Shealy: Given the top-line projections, and the CHIPS ITC refund, we continue to expect Operating Cash Flow break-even later this year in the December quarter. The company sits with a strong balance sheet after the recent completion of an $11.5 million underwritten common stock offering announced in late January. And I will now turn the call back over to Jeff for his closing comments. Thank you, Ken.

Jeffrey B. Shealy: Furthermore, we received prototype orders to support a production ramp in the second half of calendar year 2025. Our second milestone was to secure multiple design wins for our tier one enterprise class customers for the Wi-Fi 7 suite of routers. We announced this design win last week, along with visibility on volume orders to support the production ramp. We support this new platform with a suite of advanced filters covering both wideband and narrowband solutions. Also, our first mass-produced aluminum-scanium nitride single crystal XBoff filter is to be qualified for production for this customer's application.

Further we received prototype orders to support our production ramp in the second half of calendar year 'twenty 'twenty four.

Our second milestone was to secure multiple design wins for our tier one enterprise class customers why five seven suite of routers.

We announced this design win last week, along with visibility on volume orders to support the production ramp.

We support this new platform with a suite of advanced filters, covering both wide band and narrow band solutions.

Also our first mass produced aluminum scandium nitride single Crystal ex BOL filter is to be qualified for production for this customer's application.

Jeffrey B. Shealy: The market opportunity for our patented high-frequency XBAW and XP3F filters continues to be substantial. We currently have approximately 189 issued patents. Patents are pending, providing a substantial IP moat around our technology. We continue to work aggressively to achieve each of our stated objectives, and we will continue to provide updates on our execution against these objectives as we progress. I want to emphasize to investors that management continues to focus on improving our income statement. As per our guidance, we expect to achieve record quarterly revenues in the March quarter. We are diligently pursuing product cost savings to lower operating expenses and improve gross margin. We have undertaken the necessary steps to reduce our operating cash burn in the coming quarter.

Jeffrey B. Shealy: Our third milestone was to secure a design win for a Wi-Fi 7 solution with a Tier 1 Enterprise Class OEM. We announced this completion of this milestone in our January 10th press release. This customer is our second Tier 1 customer to adopt multiple wideband and narrowband solutions covering 5 GHz and 6 GHz Wi-Fi 7 for a 4x4 multi-user MIMO AP platform.

Our third milestone was to secure a design win for our Wi Fi seven solution.

With a tier one enterprise class OEM.

We announced this completion of this milestone in our January 10th press release, this customer as our second tier one customer to adopt multiple wide band and narrow band solutions covering five gigahertz and six gigahertz Wi Fi seven four a four by four multi user mimo eight.

P platform.

Jeffrey B. Shealy: We've received prototype orders to support a production ramp, which is slated to begin in the second half of calendar year 2024. Looking ahead, in the March quarter, we expect to ramp up XBoff filter production for two programs, in Wi-Fi 7, at a Tier 1 Enterprise Class customer. In addition, we expect to ramp XBoff filter production for Wi-Fi 7, with a Tier 1 Enterprise Class OEM. And we expect to secure a design win for a Wi-Fi 7 solution with a Tier 1 Enterprise Class OE. Next, I would like to discuss our recent developments in the 5G mobile market. During the December quarter, we recognized filter sales that included our WLP package for our Tier 1 RF component customers. This customer was a top 10 customer on a revenue basis. Also, in the December quarter, we expected to deliver the first of three Wi-Fi filters to our Tier 2 5G mobile RF front-end module customers. We have contracted with this customer for three filled filters. We shipped the first of three filters.

We received prototype orders.

To support our production ramp which is slated to begin in the second half of calendar year 2024.

Looking ahead in the March quarter, we expect to ramp.

Paul filter production for two programs in.

And why five seven.

At a tier one enterprise class customer.

In addition, we expect to ramp ex BOL filter production for Wi five seven.

With a tier one enterprise class of OEM.

Operator: We believe this is prudent in the economic environment that we are facing. Furthermore, I appreciate our employees for their hard work, passion, and dedication in working together to position our company for growth in the quarters ahead. Finally, 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. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

And we expect to secure a design win for our Wi Fi seven solution with a tier one enterprise class OEM.

Next I would like to discuss our recent developments in the <unk> mobile market.

During the December quarter, we recognize filter sales, which incorporated our W. L. P package to our tier one RF component customer.

This customer was a top 10 customer on a revenue basis also in the December quarter, we expect it to deliver the first of three Wi Fi filters to our tier two five G mobile RF front end module, making customer.

We have contracted with this customer for three filters.

We shipped the first of three filters. The second filter is releasing to the fab. This month and the third filter is currently in the design phase of the process.

Jeffrey B. Shealy: The second filter is being released to the FAB this month, and the third filter is currently in the design phase of the process. Finally, we successfully engaged a fifth mobile partner, offering our XBAL process and foundry for their module and discrete product. We have shipped this partner multiple XBOB die for engineering evaluation for a future multiplexer application for the mobile market.

Finally, we successfully engaged a fifth mobile partner offering our export process and foundry for their module and discrete product needs.

We have shipped this partner multiple export die for engineering evaluation for a future multiplexer application for the mobile market.

Jeffrey B. Shealy: Our anticipated milestones for the March quarter include delivery of the second of three revised Wi-Fi filters to our Tier 2 5G mobile RF front-end module making customers. And now, I will discuss our progress in our network infrastructure business. During the December quarter, we completed the redesign of our new and improved 5G Band 41. 5G US 3.8 GHz network infrastructure filter solution.

Our anticipated milestones for the March quarter include deliver the second of three revised Wi Fi filters to our tier two five G mobile RF front end module, making customer.

Anthony Joseph Stoss: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. Our first question is from Anthony Stoss with Craig Hallam Capital Group. Please proceed. Good morning, guys.

And now I will discuss our progress in our network infrastructure business.

During the December quarter, we completed the redesign of our new and improved five G band 41, and five G. U S 3.8 gigahertz network infrastructure filter solutions.

Jeffrey B. Shealy: We successfully sampled the Band 41 filter earlier this month, and we are currently evaluating the performance of our 3.8 GHz filter in engineering as we prepare for sampling. During the quarter, we experienced softness in XBAR filter shipments to our 5G network infrastructure customers. However, we expect modest growth of shipments to return in the March quarter. For the March quarter, we expect to secure a foundry order for the development of up to four 5G, 4G LTE devices. XBog WLP Dye with a Tier 1 SATCOM provider.

Kenneth E. Boller: Nice progress. Maybe for Ken, can you talk about your new revenue per quarter for breakeven in Q4, what you think gross margins might be in that quarter to get you to breakeven, and also maybe just kind of lay out a linear OPEX each quarter throughout the year. Good morning, Tony.

We successfully sampled the band 41 filter earlier this month.

We currently are evaluating the performance of our 3.8 gigahertz filter and engineering as we prepare for sampling.

During the quarter, we experienced softness in ex BOL filter shipments to our <unk> network infrastructure customers. However, we expect modest growth of shipments to return in the March quarter.

For the March quarter, we expect to secure a foundry order for development of up to four five G. <unk> LTE.

Export W. L P die with a tier one satcom provider.

Jeffrey B. Shealy: Second, we expect to gain approved supplier status and achieve a design win with a Tier 1 Infrastructure customer, and, Finally, we expect to complete NRE development and deliver Band N-104 samples to a Tier 1 network infrastructure customer. Finally, before handing the call off to Ken, I would like to provide an update on our Defense and Other Markets business. During the December quarter, two out of our top ten customers were in our Defense and Other Business category, and I will begin with an update on our published milestones for the quarter. First, as we announced on January 29th... We secured a ball filter design win for an automotive wireless battery management system or WBMS solution using a Tier 1 IC reference design. We expect a production ramp in the March quarter of calendar 2025. Second, we completed the qualification of the optimized second X-Ball resonator for a key customer in the timing control market.

We expect to gain a proof supplier status and achieve a design win with a tier one infrastructure customer and finally, we expect to complete in our redevelopment and deliver.

Kenneth E. Boller: Let me comment a little about revenue for operating cash flow breakeven. I will say that we had significant expense reductions starting in the September-October timeframe, and we continue to do so. We had about 14 million annualized reductions.

And in 104 samples to a tier one network infrastructure customer.

Finally, before handing the call off to Ken I would like to provide an update on our defense and other markets business. During the December quarter, two out of our top 10 customers were in our defense and other business category and that will begin with an update on our published milestones for the quarter.

First as we announced on January 29th we secured a ball filter design win for an automotive wireless battery management system or W. B M. S solution using a tier one I see reference design.

Kenneth E. Boller: Now we have additional cost savings that push those reductions above 20 million annualized. So that also somewhat brings down the need for gross margin and revenue in the quarter of operating cash flow breakeven. But I still predict that it will be in the, come down a little bit, but the $11 to $15 million range per quarter of revenue to achieve operating cash flow breakeven. And that would also assume a margin of 20 to 25% in that quarter.

We expect a production ramp in the March quarter of calendar 2025.

Second we completed the qualification of the optimized second X ball resonator for a key customer and the timing control market.

Jeffrey B. Shealy: Now that this qualification is complete, the design is released for limited production. The resonator is used in a tunable oscillator application scheduled for production in the second half of calendar 2024. Third, we delivered our first X-band ball filter using Akoustis' advanced XP3F technology to a Tier 1 defense customer. We met with this customer last month and received positive feedback, and we expect this engagement to continue for X-band phased array radar applications. As previously mentioned, our biggest success in the defense and other market segments was the introduction of our new XP3F technology. This new nanomaterial was developed with funding from the Defense Advanced Research Projects Agency, or DARPA, to scale the XBOLT technology to frequencies up to 18 GHz.

Now that this qualification is complete the design is released for limited production.

The nadir is used in a tunable oscillator application scheduled for production in the second half of calendar 2024.

Third we delivered our first expand ball filter using acoustic <unk> advanced X P. Three F technology to a tier one defense customer we met with this customer last month and received positive feedback and expect this engagement to continue for X band phased array radar applications.

As previously mentioned our biggest success in the defense and other market segment was the introduction of our New X P. Three F technology, which incorporates a new revolutionary patented multi layer nano material that incorporates our single Crystal P. As electric material this new nano.

Kenneth E. Boller: On the OPEX side, I think you touched on that as well; those numbers have come down, and they are going to continue to come down as well. I predict our operating expense line on our GAP financial statements will be more in the range of about $10 million per quarter by the time we get a full quarter of annualized savings and that we get operating cash flow breakeven. And we talked about the, you know, we talked about margin improvements as well. We're undertaking a number of measures internally to improve our margins. We are, you know, focusing on some of our existing parts where we have high laminate costs. Some of those costs we can bring down on the laminate side by as much as half of what it currently is.

Material was developed with funding from the defense Advanced research projects agency or DARPA to scale, the export technology to frequencies up to 18 gigahertz.

Jeffrey B. Shealy: During the December quarter, we began work on our multi-million dollar Phase II contract option, which extends our current DARPA Coffee Program and funding through December 2024. Additionally, during the December quarter, we continued shipments supporting a new DARPA contract unrelated to the DARPA COFFEE contract, which requires high-performance custom resonators for timing control applications. This customer was a top 10 customer for the December quarter. In addition, we submitted a proposal for a new multi-million dollar program with the Office of Naval Research to fund RF filter multiplex, incorporating our XBAR and P3F materials technology, which, if awarded, could be announced as early as Q2 of calendar 2024 and begin in summer 2024. In our GDSI business, we serviced 148 customers during the December quarter, and the average customer spend is up approximately 17% over the same quarter last year. As mentioned earlier, Akoustis has established memberships with three regional hubs, and GDSI has at least five additional applications pending with remaining hubs, which we expect to convert to memberships by Q2 of calendar 2024.

During the December quarter, we began work on a multimillion dollar phase two contract option, which extends our current DARPA coffee program and funding through December 2024.

During the December quarter, we continued shipments supporting a new DARPA contract unrelated to the DARPA coffee contract, which requires high performance custom resonators for timing control applications.

This customer was a top 10 customer for the December quarter.

In addition, we submitted a proposal on a new multimillion dollar program with the office of Naval Research to fund RF filter multiplexers, incorporating our ex BOL mp3 F materials technology, which if awarded could be announced as early as Q2 of calendar.

Kenneth E. Boller: We are also introducing a number of new products. We have about 17 products in production currently. That number is going to more than double next year, so we're introducing more products, and all those products have a lower cost, a lower cost structure to them, particularly on the back-end side as their smaller form factor. And I think I have answered all your questions. If I missed one, let me know, and I'll go back on it. No, no; I think you hit them all.

'twenty 'twenty four and begin in summer 2024 and.

In our G D Assai business, we serviced 148 customers during the December quarter, and the average customer spend is up approximately 17% over the same quarter last year.

As mentioned earlier acoustics has established memberships with three regional hubs and G. DSI has at least five additional applications pending with remaining hubs, which we expect to convert to memberships by Q2 of calendar 2024.

Jeffrey B. Shealy: One key customer milestone for the quarter was the successful completion of a supplier quality audit for an FDA-approved diagnostic chip aimed at real-time PCR results. Finally... GDSI saw a double-digit increase in new quoting activity over the prior quarter, which we will push to convert to new orders to grow the business. For the March quarter, in the defense...

One key customer milestone for the quarter was the successful completion of a supplier quality audit for an F. D. A approved diagnostic chip aimed at real time PCR results.

Jeffrey B. Shealy: And then Jeff would love to hear your views. It sounds like the inventory and Wi-Fi are now normalized. Maybe from a design perspective, what would you see? And, you know, if you're going to double your products doing it in the next year, what do you think about design activity or number of wins? Let's see, in terms of, you know, just in terms of the things you touched on. Let me start with the Wi-Fi inventory. I think we emphasized that in the prepared comments. We have seen, you know; we started seeing that lift with orders as well as ongoing design wins. And we started seeing that back in the October and November time frame, and that's why we were comfortable kind of providing the guidance back to growth and record quarterly revenue.

Finally.

G D S. I saw a double digit increase in new quoting activity over the prior quarter, which we will push to convert to new orders to grow the business.

For the March quarter, and the defense and other market segment, we are expecting to deliver the new ex BOL PDK to two customers for ongoing foundry engagements and complete the design and sample of a new 2.4 gigahertz Wi Fi CPE automotive ex BOL filter.

Kenneth E. Boller: In other market segments, we are expecting to deliver the new XBall PDK to two customers for ongoing foundry engagements and to complete the design and sample of a new 2.4 GHz Wi-Fi CPE Automotive XBoss Filter. Now, I would like to hand the call over to Ken to go through our financial highlights. Thank you, Jeff.

Multiple customers.

And now I would like to hand, the call over to Ken to go through our financial highlights.

Thank you Jeff for the second quarter ended December 31st 2023, the company reported revenue of $7 million, which is in line with our prior guidance and flat over the prior quarter ending September 30th 20 twenty-three.

Kenneth E. Boller: For the second quarter ended December 31st, 2023, the company reported revenue of $7 million, flat for the prior quarter ending September 30th, 2023. However, this represents an increase of 20% year over year. On a GAAP basis, operating loss was $15 million for the December quarter, driven by revenue of $7 million, offset by labor costs of $8 million, and other operational costs totaling $10.8 million. It is noteworthy that our labor and other operating costs have declined sequentially. As a result, GAP's net loss per share was 21 cents.

However, this represents an increase of 20% year over year on a GAAP basis operating loss was 15 million for the December quarter, driven by revenue of 7 million offset by labor costs of $8 million depreciation and amortization of $3 2 million and other operational costs totaling $10 8 million. It is.

Noteworthy that our labor and other operating costs have declined sequentially.

Jeffrey B. Shealy: In terms of, you know, just estimated, we've, you know, we provided in the prepared comments what we expect milestones, at least over the next quarter. You can see additional design wins there. But in terms of the number of design wins over the next year, that, let me ask Dave to kind of touch base because he's a little closer to the customer. Good morning, Tony.

As a result, GAAP net loss per share was 21 cents.

Kenneth E. Boller: CapEx spending for Q2 was $1.6 million, completing our New York FAB Tool Capacity Expansion Project to $500 million filters per year. Cash used in operating activities was $11.3 million, which included additional payroll costs associated with our expense reduction efforts, and other which will be converted to cash in the March quarter. The Inventory Channel buildup in Wi-Fi is behind us, but we continue to receive design wins and introduce new products. As a result, we have backlog enough to support a return to record quarterly revenue in the March quarter, with quarterly sales expected to be up 18 to 25 percent. On the expense front, we have undertaken aggressive expense reduction and cost-saving measures that we estimate will reduce our operating cash flow burn rate by 30 to 38 percent sequentially in the March quarter. Furthermore, with the expense reductions and cost-saving actions in place, we expect the operating cash burn to drop another 30 to 40% in the June quarter. Given the top-line projections, the CHIPS ITC, continues to expect operating cash flow break-even later this year in the December quarter.

Capex spending for Q2 was $1 6 million completing our New York Fad tool capacity expansion project to 500 million filters per year.

Cash used in operating activities was $11 3 million, which included additional payroll costs associated with our expense reduction efforts increased legal costs and increased a R and other which will be converted to cash in the March quarter.

The inventory channel buildup and Wi Fi is behind US and we continue to receive design wins and introduced new products. As a result, we have backlog to support a return to record quarterly revenue in the March quarter with quarterly sales expected to be up 18 of 25%.

David M. Aichele: You know, a couple comments I'll make just following up on Jeff's statements. The two Wi-Fi 7 design wins that we just announced, those are in enterprise class programs. And there are some custom filters that we've done, you know, for these two customers, and they will turn into standard products that we're going to market to the rest of the industry as well. The dollar content in these, you know, is almost 2X, you know, what we had with the Wi-Fi 6E programs. So I think that's significant, and that's what we're trying to track now is, you know, significant design wins that will see appreciable revenue. In addition to the other design win we announced with the Wi-Fi 6E program, which is more of a consumer-based, you know, the volumes on that are good.

On the expense front, we have undertaken aggressive expense reduction and cost saving measures that we estimate will reduce our operating cash flow burn rate by 30% to 38% sequentially in the March quarter.

Furthermore, with the expense reductions and cost saving actions in place, we expect that operating cash burn will dropped another 30% to 40% in the June quarter.

Given the topline projections the chips I T C refunds and full impact of recent cost savings. We continue to expect operating cash flow breakeven later this year in the December quarter.

Jeffrey B. Shealy: The company sits with a strong balance sheet after the recent completion of an $11.5 million underwritten common stock offering announced in late January. And I will now turn the call back over to Jeff for his closing comments. Thank you, Ken.

The company sits with a strong balance sheet. After the recent completion of 11 5 million underwritten common stock offering announced in late January.

And I will now turn the call back over to Jeff for his closing comments.

You can the market opportunity for our patented high frequency ex Spa and X P. Three S filters continues to be substantial we currently have approximately 189 issued patents and.

Jeffrey B. Shealy: The market opportunity for our patented high-frequency X-BAU and XP3F filters. Patents Pending, providing a substantial IP moat around our technology. We continue to work aggressively to achieve each of our stated objectives, and we will continue to provide updates on our execution against these objectives as we progress. I want to emphasize to investors that management continues to focus on improving our income statement. As per our guidance, we expect to achieve record quarterly revenues in the March quarter. We are diligently pursuing product cost savings to lower operating expenses and improve gross margin. We have undertaken the necessary steps to reduce our operating cash burn in the coming quarter.

And patents pending providing a substantial IP moat around our technology.

We continue to work aggressively to achieve each of our stated objectives and we will continue to provide updates on our execution against these objectives as we progress.

I want to emphasize to investors that management continues to focus on improving our income statement as per our guidance, we expect to achieve record quarterly revenues in the March quarter, we are diligently pursuing product cost savings to lower operating expenses and improved gross margin, we have undertaken necessary steps to reduce.

David M. Aichele: A lot of these are with the new products that Ken mentioned that were, you know, that were released the two that are getting the most attention right now that we expect to see multiple design wins per quarter. You know, with Wi-Fi 7 now that, you know, certification is approved and moving forward, and there's a lot of momentum. You know, there was some slowdown last year on Wi-Fi 6E transitioning to Wi-Fi 7, so we see that picking up in these two parts, you know, are in a small form factor that's going to service the 5.5 and the 6.5 gigahertz. We also have investments that we're making on 2.4 gigahertz as well so that we can bundle all three. We focus mainly on high frequency, but, you know, recognizing that, you know, we do have demand down at the lower frequencies as well, and we can service that.

Our operating cash burn in the coming quarters.

Operator: We believe this is prudent in the economic environment that we are facing. Furthermore, I appreciate our employees for their hard work, passion, and dedication in working together to position our company for growth in the quarters ahead. Finally, 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. [inaudible] A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

We believe this is prudent and the economic environment that we're facing.

Whether I appreciate our employees for their hard work passion and dedication and working together to position our company for growth in the quarters ahead.

Finally, 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 if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to email to you question finally, Kim for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys our first.

Question is from Anthony Stoss with Craig Hallum Capital Group. Please proceed.

Good morning, guys nice progress.

Anthony Joseph Stoss: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Anthony Stoss with Craig Hallam Capital Group. Morning, guys. Nice progress. Maybe for Ken, can you talk about your new revenue per quarter for breakeven in Q4, what you think gross margins might be in that quarter to get you to breakeven, and also maybe just kind of lay out a linear OPEX each quarter throughout the year. Good morning, Tony.

Maybe maybe for Ken can you talk about you.

<unk>.

I guess, the new revenue per quarter for breakeven in Q4, what you think gross margins might be in that quarter to get you to breakeven and also maybe just kind of lay out a linear would you expect opex each quarter throughout the year.

David M. Aichele: So we expect, you know, this momentum to be pretty strong through 2024 calendar year, with a lot of Wi-Fi 7. And you can expect us to make, you know, every quarter announcements on new design wins and give you guidance on one of those protective ramps. Thanks, Dave. Best of luck, guys. Thanks, John.

Good morning, Tony.

Let me comment a little about revenue for operating cash flow breakeven.

I will say that we had a significant expense reductions starting in the September October time frame.

We continue to do so.

We had about $14 million annualized reductions.

Now we have additional cost savings.

There was a reduction of about $20 million annualized.

So that also somewhat brands down.

Kenneth E. Boller: Let me comment a little about revenue for operating cash flow breakeven. I will say that we had significant expense reductions starting in the September-October timeframe, and we continue to do so. We had about 14 million annualized reductions.

Craig Andrew Ellis: Our next question is from Craig Ellis with B Riley Securities. Please proceed. Yeah, thanks so much for taking the questions.

The need for the gross margin and the revenue in the quarter of operating cash flow breakeven.

But I still predict that to be in the.

Come down a little bit, but the $11 million to $15 million range per quarter of revenue to achieve operating cash flow breakeven.

Craig Andrew Ellis: And guys, congratulations on getting the cost structure down and moving closer to cash flow break even. I want to start with a follow-up to the prior question. So it seems from the prepared remarks and the comments just provided in Q&A that a lot of the momentum in Wi-Fi is around enterprise products. And so I was hoping to get some further color on what you're seeing on the consumer side and how you would expect the mix of consumer and enterprise to play out as we go through this year. Good morning, Craig. This is Dave.

And that would also assume a margin of 20% to 25% in that quarter.

Kenneth E. Boller: Now we have additional cost savings that push those reductions above 20 million annualized. So that also somewhat brings down the need for gross margin and revenue in the quarter of operating cash flow breakeven. But I still predict that it will be in the, come down a little bit, but the $11 to $15 million range per quarter of revenue to achieve operating cash flow breakeven. And that would also assume a margin of 20 to 25% in that quarter.

On the Opex side, I think you can touch on that as well.

Those numbers have come down and they are going to continue to come down as well.

Our operating expense line on our GAAP financial.

Financial statements will be more in the range of about $10 million per quarter.

By the time, we get a full a full quarter of annualized savings.

And then again operating cash flow breakeven.

And we talked about.

We talked about.

Margin improvements in this area as.

As well we are undertaking a number of measures internally to improve our margins we are.

David M. Aichele: So I'll take that question. Yeah, a lot of our activity has been with the enterprise, and the volume, system volumes are not as high in the hundreds of thousands. But as I commented earlier, the dollar content is pretty significant with these, particularly when you're looking at filters that can range in the 20 to 30 per system.

Kenneth Boller: On the OPEX side, I think you touched on that as well, those numbers have come down and they are going to continue to come down as well. I predict our operating expense line on our GAP financial statements. We'll be more in the range of about $10 million per quarter by the time we get a full quarter of annualized savings, and that we get operating cash flow breakeven.

Say on some of our existing parks, where we have a high laminate costs.

Some of those some of those costs, we can bring down the laminate side as much as half of what apparently is we also are introducing a number of new products.

We have another 17 products in production currently.

That number has gone up.

Double next year.

So we're introducing.

David M. Aichele: And we've got a unique position here in that we're enabling these systems based on our product portfolio of narrow band and wide band. So it's good to continue to increase our customer base there, and it's usually pretty sticky. You know, once you have a customer in this sector, you know, and you maintain good customer intimacy and technical support, you will continue to support the new design. The one market segment that you didn't mention, though, that is pretty strong for us also is the carrier side. And we just did a press release yesterday, and that was for the Wi-Fi 7 program that we got designed into. And if you look at that press release, it lists the subscriber base that they have, you know, up to 32 million.

More products and all of those products have any lower.

A lower our cost structure to that particularly on the on the back end side has a smaller form factor.

And I think I answer all your questions I missed one let me know and I'll just go back on it.

No no I think you hit them, all and then Jeff I'd Love to hear your views it sounds like the inventory on Wi Fi is now normalized.

Maybe from a design perspective, what would you see.

If you are going to double your products going into next year, what do you think about design activity or a number of wins.

Yeah.

Let's see in terms of.

Just in terms of.

You touched on some of the changes let me start with Wi Fi inventory I think we emphasized that.

Prepared comments.

We have seen.

We started seeing that lift.

With the orders as well as.

I'll go and design wins.

And we started seeing that back in the October November timeframe, and that's why we were comfortable.

The guidance back to growth.

And record quarterly revenue.

It turns out.

Yes, just estimated we weave.

We provided in the prepared comments.

What we expect milestones at least over the next quarter you can see additional design wins, there, but in terms of number of design wins over the.

David M. Aichele: So those type of volumes that we see on the carrier side, both for Wi-Fi 16, and Wi-Fi 7, you know, puts it up competitive with the type of volume you see on the consumer side. And then the press release we did several weeks ago was about a consumer grade.

For next year.

Let me, let me ask Dave to kind of touch base cause he's a little closer to the customer good.

Good morning, Tony.

Yeah, a couple of comments.

Just following up on Joes statements.

Two Wi Fi seven design wins that we just announced those are an enterprise class.

Programs and there are some custom filters.

We've done for these are at least two customers.

David M. Aichele: So we are starting to penetrate the consumer grade that's been a lower priority just based on it being usually more price sensitive, and they go after older technology. But we're seeing that those architectures go into higher MIMO counts. And also, with the requirements of Wi-Fi 7 due to latency and channel bandwidth, that the higher performance ball filters and the smaller form factor are more critical.

And they will turn into standard products that we're going to market to the rest of the industry as well the dollar content in these.

We are almost two <unk>, what we have with Wi Fi six <unk> programs.

So I think that's kind of that's what we're trying to track now as you know significant design wins that will see an appreciable revenue.

In addition to the other side when we announced the deal.

Jeffrey B. Shealy: So their negotiations on price are less important. It's more on performance. Hey, Craig, this is Jeff.

Wi Fi succeed program, which is more of a consumer base. The volumes on that are good a lot of ease or with the new products.

Jeffrey B. Shealy: I just wanted to follow on, Dave, and summarize the Y5 segment. One of the things I wanted to make sure we added in here was just some of the momentum in the defense and other markets, and that's really been driven by what's going on, not only with our success in the COFI program. I think we mentioned in the prepared comments that not only is phase two starting up, but there's definitely a follow-on activity to that at the systems level, and we alluded to some momentum in the contract. That also is supported by these research hubs that are in place, and we have current proposals in place. We're pretty bullish on being able to secure funding, follow-on funding for the XP3F technology, which, as you know, allows us to access much higher frequencies. That's really helpful, guys.

And that were.

That release to that against the most.

Right now that we should expect to see.

Design wins per quarter.

157.

Certification is approved and moving forward and there's a lot of momentum.

There was some slowdown last year on Wifi succeed transitioning into Wifi seven so we see that picking up in these two properties your parts you're in a small form factor that's going to services.

And the $6 five gigahertz, we also have.

Investments that were making on two four gigahertz as well.

That we can bundle it all three we focus mainly on higher frequency, but.

Recognizing that we do have to be at a lower frequency as well as a service.

So we expect.

This momentum to be pretty strong through 2024 calendar year.

What was the Wifi seven and you can expect us to make.

Every quarter announcements on new design wins give you guidance on when this project ramps.

Thanks, Steve Best of luck guys.

Thank you.

Our next question is from Craig Ellis with B Riley Securities. Please proceed.

Yeah. Thanks, so much for taking the questions and guys. Congratulations on getting the cost structure down and yeah, and moving closer to cash flow breakeven I wanted to start with a follow up to the prior question. So it seems from the prepared remarks and the comments you just provided and Q&A then a lot of the momentum.

Craig Andrew Ellis: And then the follow-up is for Ken, and it's really just a clarification on two things, the first one related to those comments. Ken, as we think about sequential revenue growth and fiscal 3Q, it would seem that it stacks up as being significantly led by enterprise Wi-Fi, followed by defense, and then networking. Is that the case?

And Wi Fi is surround enterprise products and so I was hoping to get some further color on what you're seeing on the consumer side and how you would expect to mix.

Kenneth E. Boller: And then, can you just clarify what the CAPEX outlook is for calendar 24, and to the extent that there's any linearity profile that you can share, that would be helpful, too. Thank you. Sure, Craig, I'll spend a little bit on CapEx spend. So, we've been mentioning over the past few quarters that we're completing our 500 million filter capacity expansion. That has been completed. We now have that capacity. Certainly, when we talk about operating cash flow breakeven and the revenues needed, that capacity is well beyond what that revenue is.

Our consumer and enterprise to play out as we go through this year.

Good morning, Craig It's Dave So I'll take that question.

Yeah, a lot of our activity has been with the enterprise and the volume system volumes are not as high in the hundreds of thousands.

As I commented earlier the dollar content is pretty significant with these particularly when you're looking at Toysrus exit range of the 20 to 30 per system.

And we've got a unique position here that we're enabling these systems based on our product portfolio with narrow band and wide band.

That's good to continue to increase our customer base, there and it's usually pretty sticky once you have a customer in this sector.

We've seen a good customer intimacy and technical supports you will continue to support the new design wins.

Kenneth E. Boller: We do not anticipate any real material spend in CapEx for the remainder of calendar year 2024. There are a few other projects that we'll finish. There are a few CapEx items that just come up in everyday business as machines possibly break down or we need a new small type of equipment like an analyzer or something of that sort.

The one market segment, but you Didnt mentioned.

It's pretty strong for us also as carrier side.

We just did a press release yesterday and that was for Wi Fi seven program that we got designed into and if you look at our press release.

<unk> subscriber base that they have up to 32 million so that those types of volumes that we see.

On the carrier side, both Wifi six you my five seven.

David M. Aichele: But I anticipate CapEx spent for the remainder of the year to be in the hundreds of thousands per quarter. And then, Craig, to your question on the Q3 revenue, just trying to give you visibility on that, where you are, and a good, strong backlog to that. That's why you've seen the guidance being in that 18% to 25%. The good news is that the slowdown we saw, and we talked about the inventories being under control, we started to see the pick back up on some of the legacy Wi-Fi 16 programs as they make the transition to the Wi-Fi 7 program. So one example is our enterprise tier 1 customer that we've announced in the past. Their volumes are picking back up on the Wi-Fi 16, and we're already starting to get appreciable Wi-Fi 7 pre-production orders that we're ramping. And then the same thing with the carrier. The Wi-Fi 16 program has picked up from reductions in their inventories.

It puts it up you know competitive type of all you can see.

On the consumer side and then the press release, we did several months several weeks ago.

It was for a consumer grade. So we are starting to penetrate the consumer grade that's been.

A lower priority just based on it is usually more price sensitive and they go after a older technology.

We're seeing those architectures are going to hire mimo Kal.

And also with the requirements of Wi Fi seven.

Due to latency and the channel bandwidth that the high performance filters in the smaller form factor is a more critical so are there negotiations on prices.

It's important it's more on performance.

Craig This is Jeff I, just wanted to follow up Dave.

Where is the Wi Fi sector.

Segment one.

One of the things I wanted to make sure. We we added in here. It was just some of the momentum in the defense and other markets.

That's really been driven by what's going on not only with our success in the coffee program I think we mentioned in the prepared comments.

Not only are starting up the phase two but there is definitely a follow on activity to that it's a systems level and we alluded in the prepared comments on some momentum in the contract that also is.

Supported by these.

<unk> research hubs that are in place that we have for proposals in place we're pretty bullish on.

Hum on being able to secure.

David M. Aichele: So that demand is going on as they transition into the Wi-Fi 7. So those are two examples, as we also have other customers picking up on the introduction of the Wi-Fi 7. We're starting to see significant pull on our two new products. So there's a lot of good activity there.

Of funding a follow on funding for the <unk> technology, which as you know allows us to access much higher frequencies.

That's real helpful color guys and then the follow up is for Ken and its really just a clarification on two things. The first one related to those comments, Ken as we think about sequential revenue growth in fiscal <unk>. It would seem that it stacks up as being significantly led by enterprise Wifi.

David M. Aichele: The network side has slowed down. If you look at 5G overall, Nokia, Ericsson, and others in that sector have had poor quarterly earnings. And so that has slowed down the 5G deployments. So there is still some demand for the small cell, but that's going to be less of a factor this quarter. And next quarter, we expect it to pick up with, obviously, the current products, but also some of the engagements that we made in the pre-recorded. That's really helpful.

Followed by a it depends and then network King is just that the case and then can you just clarify a what.

What what the Capex.

Outlook is for calendar 'twenty, four and to the extent, there's any linearity profile that you can share that would be helpful. Too. Thank you.

Sure, Greg I'll spend a little bit on Capex spend.

So we.

We have been mentioning over the past few quarters that we're completing a 500 million filter capacity expansion.

That has been completed.

We are now we have that capacity.

Certainly when we talk about operating cash flow breakeven in the revenues needed that capacity is well beyond what that revenue is.

Kenneth E. Boller: And then just finally, Ken, you mentioned AR would improve in the fiscal third quarter. Do you expect that to fully normalize, or does that play out through the fiscal second half of the year? Thank you. So, Craig, at the end of December, we had some AR buildup on our balance sheet that was due to a lot of year-end orders that shipped out towards the end of December that we will collect in this quarter, Q3. There were also some timing issues, particularly with a large program that we have on the NRE side with the government, and we can bill them and receive money according to a set schedule. So that's also in our other receivables, other asset section, and we'll collect that in this quarter as well, and I expect that to normalize out throughout the remainder of the year. I got it.

We do not anticipate any real material spend in capex for the remainder of calendar year 'twenty 'twenty four.

There are a few other projects.

We'll finish there are few.

Capex items that just come across our everyday business as machines, possibly break down or we need a new small type of a bit like an analyzer or something that's worth.

I anticipate that that spend the remainder of the year to be to be in the hundreds of thousands per quarter or less.

And then I guess, Greg to your question on the Q3 revenue.

Just trying to give you visibility on that you know where you are good strong backlogs you know too that and that's why you're seeing the guidance being in that 25% and the good news is that the slowdown we saw and we talked about the inventories under control.

As you would pick back up on some of the legacy Wifi six <unk> programs.

As you know they make transition.

You know to the Wifi seven program. So one example is our <unk>.

Price tier one customer that we've announced in the past.

So picking back up on the Wifi, six and we're already starting to get appreciable Blackberry seven preproduction orders you know they are ramping and then the same thing with the carrier Wi Fi succeed program.

Picked up.

From a reductions in their inventories so that demand is going on as they transition into the workforce.

So that's two examples as we also have other customers picking up an introduction in the Wifi.

We're starting to see significant pull on or two new products. So there's a lot of good activity there in the network side has slowed down.

Craig Andrew Ellis: Thanks, guys. Thanks, Craig. And our next question is from Suji DeSilva on the Roth MKM. Please proceed.

Five G overall, Nokia Ericsson and others in that sector of pet porker with quarterly earnings and so that has slowed down in the five deployments. So theres still some demand on the small cell, but that's going to be less of a factor this quarter and next quarter, we expect it to pick up.

Suji DeSilva: Good morning, Jeff, Dave, and Ken, and congrats on the progress here. Maybe a longer-term question, Jeff, given you have multiple segments that seem to have opportunity here and promise, what do you think in a year or two are the larger sort of segment contributors? I mean, I would think it would be mobile, but the defense programs sound like with these hub memberships they could be signaling as well. So any kind of qualitative thoughts there would be helpful.

Obviously, the current products, but also some of the engagements that we made in the.

And the prerecorded.

That's real helpful. And then just finally can you mentioned a R.

Did improve in the fiscal third quarter do you have do you expect that to fully normalized or does that play out to the.

Fiscal second half of the year. Thank you.

So Craig.

At the end of December we had some build up on our balance sheet.

That was due to a lot of year end orders that shipped down towards the end of December that we will collect it.

In this quarter Q3, there were also some you know some some some timing issues, particularly with a large program that we have won the lottery side with.

With the government and that's.

Jeffrey B. Shealy: Yeah, if you look at the activity, there's certainly in the, I think we've outlined quite a bit going from Wi-Fi 60 to Wi-Fi 7. You see not only the content increase, but they've touched on the wideband and narrowband portfolio that we have. The other thing that maybe didn't come through is the ASPs and Wi-Fi 7, which is favorable for us. So, we're kind of mixing into new platforms, which certainly have starting ASPs that are higher.

It's we can we can build them and received money. According to a set schedule. So that's a that's also in our other receivables other E S.

That's that section and we'll collect that in this quarter as well and I expect that to normalize out.

Throughout the remainder of the year.

Got it thanks guys.

Thanks, Craig.

And our next question is from C. G D Silva with Brett and he can please proceed.

Morning, Jeff, David and Ken and then congrats on the progress here.

Maybe a longer term question, Jeff I am giving you have multiple segments that seem to have some opportunity here and promise what what what are you thinking a year or two are the larger sort of segment contributors I mean, I would think it would be mobile, but the defense program sounded like when these hub memberships, they could be particularly as well as any kind of qualitative thoughts there would be helpful.

Jeffrey B. Shealy: So, we're very bullish on the content. Dave outlined, you know, 2 to 4X of additional content, so we're pretty excited about that. If you look over in the defense segment, you know, as David indicated, it's, you know, it has slowed down. But we do see that picking up through the year.

Yeah, if you look at.

If you look at activity there is.

Certainly in the I think we've outlined quite a bit.

For Wi Fi six Wi Fi seven are you see.

He not only the content increase Dave touched on the wide band and narrow band.

Jeffrey B. Shealy: So, while it's small, we do expect that business to roughly triple over the next year, if you look at some of the internal modeling. So, Wi-Fi, we expect very strong performance there. On the defense side, several contract programs, and we mentioned in the prepared comments that we would be expecting, if awarded, at least one of those contracts to begin mid-year. And we continue on with Phase 2 at DARPA, and then that has spawned some additional activity in the foundry. So, that's strong, and also some of the new spinoff programs that have come out there. You mentioned mobile, so I'll touch on that.

A portfolio that we have the other thing that maybe you didn't come through but is that an ESP the isps in the Wi Fi seven.

That's a favorable.

For us so we're kind of mixing into new platforms, which certainly have starting asp's at or higher so.

We're very bullish with the content.

<unk> outlined.

Two to Forex of additional content. So we're pretty excited about that if you look over in the.

In the defense segment.

And David indicated it has.

It has slowed down and what do you see that picking up through the year.

So.

While it's small and we do expect that business to roughly triple over the the.

The next year.

If.

If you look at some of the internal modeling.

So Wifi, we expect very strong performance there.

Defense is on the defense side several.

Several contract programs and we mentioned in the prepared comments.

We would be expecting.

If awarded.

Jeffrey B. Shealy: We have been addressing this. We've got foundry activity ongoing there, where we're providing filters for fully integrated solutions. We'll see how that plays out.

At least one of those contracts to begin mid year and we continue on with the phase two of DARPA and then that has spun some additional activity in the foundry. So that's strong and and also.

Some of the new spin off programs that have come there.

You mentioned mobile so I'll touch on that we have been addressing.

Jeffrey B. Shealy: But we've been, we mentioned in the prepared comments that we shipped the first filter. There are two additional filters that are in the design and fabrication phase. So, that can be a contributor. What I will say, though, kind of overarching, is if you look at the model that we're charging for, mobile would be an upside to the model that we're projecting for the full year. And so, as we talk about getting the cash flow break-even at the end of the year, and we do expect, you know, that cash flow to be a little lumpy going through the year because we've got ITC credits and the timing of those. Ken mentioned some of the timing challenges. But overall, the mobile would be an upside to the plan, and with strong performance in defense, Jeff, that's a very helpful caller on what's embedded in your expectations there.

We've got a foundry activity ongoing there.

We're providing filters for a fully integrated solutions, we'll see how that plays out but.

But we've been we mentioned in the prepared comments that.

We shipped the first filter there is two additional filters that are in the design and fabrication phase.

So that can be.

A contributor.

What I will say, so I'm kind of overarching is if you look at the model that we're chart, we're charging to the mobile would be upside to the model that we're projecting for the full year and so as we talk about getting.

Getting to cash flow breakeven.

At the end of the year.

And we do expect.

That cash flow to be a little lumpy I'll go through the year, because we got IDC credits and the timing of those Ken mentioned some of the timing challenges, but overall.

The mobile would be upside to.

To the plant and with strong performance in defense Wi Fi as.

As well as network on a on a percentage growth basis.

That's very helpful color on what's embedded in your expectations and your second question is on the I guess, the new single Crystal product sampling and just understand the competitive landscape again and whether the single Crystal product expands your competitive advantage just a color on there and whether that opens up markets and whether it's kind of continuous across the products you are doing to that news.

Jeffrey B. Shealy: The second question is on the new single crystal product you're sampling, and just understand the competitive landscape again and whether the single crystal product expands your competitive advantage, just the color on there, and whether that opens up markets, or whether it's kind of continuous across the products you're doing to that new one. So, yeah, I'll start with that and then ask Dave to kind of follow in, but that particular product that we mentioned that's going in the new Wi-Fi 7 design, we're utilizing that to obtain some performance enhancements that we think are differentiated. It is amongst the narrowband designs that we're selling. Again, just a reminder, Wi-Fi 7 incorporates both wideband and narrowband.

Yeah.

So yeah, I'll start with that and then.

David kind of Halloween.

But the.

Is that we mentioned that's going in and a new Wi Fi seven I decided we're utilizing that to obtain the performance enhancements that we think are differentiated.

Is amongst the narrow band designs that we're selling again, just a reminder, in Wi Fi service.

It incorporates a wide band and narrow band we have.

Jeffrey B. Shealy: We have multiple narrowband custom designs for which there really are no second sources, so we're not having to compete with second sources on those. And so that helps us with our bundling activities. So that's in terms of the single crystal. And maybe Dave wants to add anything else there.

Multiple narrow band custom designs, which there really are no second source for them. So we're not.

Not having to compete.

With a second source on those and so that helps us with our public activities.

So that's and in terms of the single Crystal.

Maybe Dave wants to add anything else there.

David M. Aichele: Suji, I'll comment on two things, really, with the single crystal. The development that we've been doing for the last couple of years to introduce the DOPE into the aluminum nitride has enabled us to really service the narrowband and the wideband filters for certain market segments. So the single crystal gives us some advantages in power handling with some of these applications where you've got this really steep rejection and a narrow transition window.

I will comment on two things you know really the single Crystal you know the development that we've been doing for last couple of years to introduce.

It was open and with the aluminum nitride has enabled us to really service.

The narrow band in the wide band filters for certain market segments. So the.

Personally gives us some advantages on power handling you know with some of these applications, where you've got this really steep.

Rejection under narrowed transmission window.

David M. Aichele: Also, we've seen some improvement in harmonics, which is critical for some of these COSIS-type applications. The other thing is it's a building block of our XP3F, which is, again, a unique feature of Acoustis. And the technical community recognizes that and that this is a manufacturing process with this multilayer nanomaterial compared to other technologies that DARPA's funding. So it's gaining pretty significant interest from the defense industry base, but also from the 5G sector that's looking at – or I should say the cellular sector that's looking at 6G for FR3. And then there is also the SATCOM market.

So we've seen some improvement in harmonics.

Which are critical for some of these coaches type applications.

The other thing is it's a building block of our X P. Three of which again is a unique feature of acoustics and the technical community recognizes that and that this is a manufacturing process with this multi layered in a material.

Parents, you other technologies that DARPA funding, so it's getting pretty significant interests from the defense industry base, but also.

From the <unk>.

Sector, that's looking at it.

Or I should say the cellular sector. That's looking at 64 F. R. Three.

And then also the satcom market. So there are certain principle, it's a good building block for discrete devices and also for these outperformance technologies like the XP.

Jeffrey B. Shealy: So the single crystal is a good building block for discrete devices and also for these high-performance technologies like the XP3F. Thanks, Dave. Thanks, Jeff. And my last question is just an update, if you can, on the litigation with Corvo. That would be helpful. Thanks. Thank you, Suji. I'll take that one.

Thanks, Dave Thanks, and my last question is just an update if you can on the litigation with clarify that'd be helpful. Thank you.

Thank you <unk> I'll take that one.

Jeffrey B. Shealy: Regarding the lawsuit Corvo filed against Akoustis in Delaware, the case has reached a point where I can share Akoustis' view that the facts do not support the wide-ranging allegations made by Corvo. Akoustis filed a motion for partial summary judgment on February 1. And if granted in full, this motion would dispense with the majority of Corvo's complaints, everything but the patent claims. But I'll add that the company is well-positioned on the patent claims.

Regarding the lawsuit Corvo filed against the cruises in Delaware. The case has reached a point where I can share.

Kirsten since you had the facts do not support the wide ranging allegations made by Corvo Acousticians acoustic filed a motion for partial summary judgment on February one.

And if granted in full this motion this motion will dispense with the majority of foremost complaints everything but the patent claims, but I'll add that the company is well positioned on the patent claims.

Jeffrey B. Shealy: As mentioned in prior calls, the company has developed design updates to demonstrate with real-world data that X-Ball filters do not use Corvo's patents. The motion we filed also asks the court to confirm that these designs do not infringe one of the two Corvo patents at issue. The other Corvo patent expires this summer. Akoustis also believes Corvo's damage experts use faulty methods and assumptions to develop key parts of their estimate of damages.

As mentioned in prior calls the <unk>.

Company has developed designed updates to demonstrate with real world data set export filters do not use corvo patents. The motion. We filed also asked the court to confirm that these designs do not infringe one of the two hormone patents at issue.

Corvo patent expires this summer.

Of course. This also believes cargos damage experts use faulty methods and assumptions to develop key parts of kormos estimate of damages acoustics has filed a motion to exclude that testimony. This motion represents an additional challenge to keep parts of core goes claims please keep in mind.

Jeffrey B. Shealy: Akoustis has filed a motion to exclude that testimony, which represents an additional challenge to key parts of Corvo's claims. Please keep in mind, even if the court ultimately does not grant Akoustis' motions, the defects in Corvo's case will remain hurdles Corvo would have to overcome at any trial. Corvo has filed its own motion for partial summary judgment, but this motion is limited to a ruling on the validity of its patents. No matter the outcome of the motion, Corvo would still bear the burden of providing Akoustis products, and approving Akoustis products in French Corpo patents, notwithstanding all the engineering performed by Akoustis to support its defense in the case. Now turning to the lawsuit filed by Akoustis against Corvo in federal court in the Eastern District of Texas, this case is beginning to gather steam.

Even if the court ultimately does not grant acoustic since motions. The defects in cargoes case will remain hurdles corvo would have to overcome in any trial.

Corporate wide followed its own motion for partial summary judgment, but this motion is limited to a ruling on the publicity of Corporately patents no matter the outcome of the motion corporate was still bear the burden of providing acoustic products.

Christmas products infringe <unk> patents, notwithstanding all the engineering performed by increases to support its defense in the case.

Now turning to the lawsuit filed by acoustics. It gets corvo in federal court in the Eastern District of Texas. This cases, beginning to gather steam.

Jeffrey B. Shealy: As a reminder, this lawsuit alleges Corvo is infringing a patent licensed exclusively to Akoustis by Cornell University. As described in past calls, Corvo has filed a motion to dismiss the case and a motion to strike Akoustis' infringement contentions. The court held a hearing on Corvo's motion to strike on January 10, 2024. After the hearing, both sides... After hearing both sides, the court denied Corvo's motion to strike.

As a reminder, this lawsuit alleges corvo is infringing our patents license exclusively to acoustic by Cornell University as described in past calls.

<unk> filed a motion to dismiss the case anymore and a motion to strike acousticians infringement infringement contentions.

Corn held a hearing on corvus motion to strike on January 10th 2024, after the hearing both sides.

Our after hearing both sides of the court denied kormos motion to strike as a result. This code. This case is moving forward at full steam.

Yes.

Okay. Thanks for that detailed update thanks, guys.

Jeffrey B. Shealy: As a result, this case is moving forward at full steam. Thanks for that detailed update, Jeff. Thanks, guys. Thank you. Thank you. We have reached the end of our question and answer session. I would like to turn the call back over to management for closing remarks. Okay, um... Yeah, so this is Jeff. I want to thank everybody for your time today. I did want to point out that one typo that we had in the prepared comments was that we actually sampled 3.8 gigahertz and shipped samples of that 3.8 gigahertz, and that was not band 41.

Excuse me.

Sure.

We have reached end of our question and answer session I would like to turn the call back over to management for closing remarks.

Yeah.

Okay.

Yeah. So this is Jeff I wanted to thank everybody for your time today I did want to point out that one one typo that we had in the prepared comments was we actually sampled the 3.8 gigahertz and ship samples of that 3.8 gigahertz and that was not the band 14.

So I just wanted to clarify that before we end the call with that we look forward to speaking with you during our next update call to discuss the current quarter's execution against our milestones that we discussed today as well as future expectations and with that I'd like to wish everybody a great day, and thank you and goodbye.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

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Jeffrey B. Shealy: So I just want to clarify that before we end the call. With that, we look forward to speaking with you during our next update call to discuss the current quarter's execution against our milestones that we discussed today, as well as future expectations. And with that, I'd like to wish everybody a great day, and thank you, and goodbye. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. [inaudible] The Ultimate Parody Site! Copyright 2020, New Thinking Allowed Foundation. All rights reserved. The Bulletproof Executive 2013, BF-WATCH TV 2021

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