Q3 2024 Akoustis Technologies Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the acoustic technologies fiscal 'twenty 'twenty four third quarter conference call.
Operator: Good morning, ladies and gentlemen, and welcome to the Akoustis Technologies Fiscal 2024 Third Quarter Conference Call. As a reminder, this conference is being recorded. At the conclusion of the company 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 in the Investor Relations section of the Akoustis Technologies website. Thank you.
As a reminder, this conference is being recorded at the conclusion of the company presentation acoustic management will take questions to ask a question. Please press star one on your telephone keypad to be placed into the queue. A replay of the call will be available on the Investor Relations section of the website. Thank you.
Kenneth E. Boller: Thank you, Operator, and good morning to everyone on the call. Welcome to Akoustis' third quarter fiscal 2024 conference call. I am Ken Boller, CFO, and I'm joined today by our founder and CEO, Jeff Shealy, Corporate General Counsel, Drew Wright, and EDP 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 wins.
Speaker Change: Thank you operator, and good morning to everyone on the call welcome to Christmas This third quarter fiscal 'twenty 'twenty four conference call.
I am Campbell, our CFO and I'm joined today by our founder and CEO, Jeff Shealy Corporate General Counsel drew right E D. P. A business development Dave likely.
Speaker Change: Before we begin please note that today's presentation includes forward looking statements about our business outlook.
Kenneth E. Boller: Possible collaborative or partnering relationships, litigation matters, and expected financial and operating results are four forward-looking statements. Such forward-looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties. The company and our management team assume no obligation to update any forward-looking statements made on today's call. 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, followed by the SEC, to get a better understanding of those risks and uncertainties.
Speaker Change: 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.
Speaker Change: Hospital collaborative or partnering relationships litigation matters and expected financial and operating results are forward looking statements.
Speaker Change: Such forward looking statements are predictions based on the company's expectations as of today.
Speaker Change: Subject to numerous risks and uncertainties.
Speaker Change: The company and our management team assume no obligations to update any forward looking statements made on today's call.
Our SEC filings mention important factors that could cause actual results to differ materially.
Speaker Change: 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.
Speaker Change: In addition, our presentation today will also refer to certain non-GAAP financial measures. A reconciliation of these measures to most directly comparable GAAP measure is presented in our earnings call highlight relief available in the investors section of the Tuesday dotcom.
Kenneth E. Boller: In addition, our presentation today will also refer to certain non-GAAP financial measures. A reconciliation of these measures, the most directly comparable GAAP measure, is presented in our earnings call highlight release, available in the Investors section of Akoustis.com. I would now like to turn the call over to Jeff Shealy, founder and CEO of Akoustis.
Speaker Change: I would now like to turn the call over to Jeff Shealy, founder and CEO of acoustics.
Jeffrey B. Shealy: Thank you, Ken, and welcome everyone to our FY24 Fiscal Third Quarter Conference Call. Revenue in the March quarter increased 7% sequentially to $7.5 million. Filter related revenue was up 13% quarter over quarter and was the third highest quarter in the history of the company.
Jeffrey B. Shealy: Thank you, Ken and welcome everyone to our FY 'twenty for fiscal third quarter Conference call.
Jeffrey B. Shealy: Revenue in the March quarter increased 7% sequentially to seven and a half million dollars.
Jeffrey B. Shealy: Filter related revenue was up 13% quarter over quarter.
Jeffrey B. Shealy: The third highest quarter in the history of the company.
Jeffrey B. Shealy: During the March quarter, we had two customers that each made up greater than 10% of our reported revenue.
Jeffrey B. Shealy: During the March quarter, we had two customers that each made up greater than 10% of our reported revenue. XBAL-related sales accounted for the top four customers and six out of the top ten customers. Our top 10 customers made up 64% of revenue. Our top 25 customers made up 78% of revenue. In terms of regional sales, three out of our top 10 customers were Asia-based. From a regional standpoint, 48% of our sales come from Asia, followed by 39% of sales coming from North America and 13% of our sales coming from Europe. Finally, our top two customers were Asia-based customers and collectively made up 36% of sales.
Jeffrey B. Shealy: Ex BOL related sales accounted for the top four customers in six out of the top 10 customers.
Jeffrey B. Shealy: Our top 10 customers made up 64% of revenue.
Our top 25 customers made up.
Jeffrey B. Shealy: 78% of revenue.
Jeffrey B. Shealy: In terms of regional sales three out of our top 10 customers where Asia based.
Jeffrey B. Shealy: From a regional standpoint, 48% of our sales.
Jeffrey B. Shealy: Come from Asia, followed by 39% of sales coming from North America.
Jeffrey B. Shealy: 13% of our sales coming from Europe.
Jeffrey B. Shealy: Finally, our top two customers, where Asia based customers and collectively made up 36% of sales.
During the March quarter, we unexpectedly experienced a major Wi Fi 60 program abruptly sunset with one of our carrier customers.
Jeffrey B. Shealy: During the March quarter, we unexpectedly experienced a major Wi-Fi 6E program abruptly sunset with one of our carrier customers. We had previously secured a DesignWin with this carrier customer for Wi-Fi 7 and have already received production orders for this platform beginning in the September quarter. Overall, we are tracking nine design wins in Wi-Fi 7 AP platforms, and we see a growing trend to ramp major Wi-Fi 7 programs for enterprise and carrier customers in the second half of 2024.
Jeffrey B. Shealy: We had previously secured a design win with this carrier customer for Wi Fi seven and have already received production orders for this platform beginning in the September quarter.
Jeffrey B. Shealy: Overall, we are tracking nine design wins in Wi Fi seven AP platforms, and we see a growing trend to ramp.
Jeffrey B. Shealy: Major Wi Fi seven programs for enterprise and carrier customers in the second half of 2024.
Jeffrey B. Shealy: We remain bullish in Wi Fi seven and our <unk>.
Jeffrey B. Shealy: We remain bullish on Wi-Fi 7 and are currently in the early stages of production ramp with multiple tri-band and quad-band programs. As a result, we are guiding the June quarter revenue to be flat to down 5% given the Wi-Fi 6E sunset and imminent transition to Wi-Fi 7. The company continues to focus on expense and cost savings to significantly reduce cash burn moving forward. For the March quarter, cash burn was down 31% sequentially.
Currently in the early stages of production ramp with multiple Tri band and Quad band programs.
Jeffrey B. Shealy: As a result, we are guiding the June quarter revenue should be flat to down 5% given the Wi Fi six <unk> sunset and eminent transition to Y five seven.
Jeffrey B. Shealy: Our company continues to focus on expense and cost savings.
Jeffrey B. Shealy: <unk> reduced cash burn moving forward.
Jeffrey B. Shealy: For the March quarter cash burn was down 31% sequentially.
Ken will detail, our ongoing activities and impact on reducing our cash burn during his upcoming comments.
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 2022. Regarding CHIPS Act funding, there are two detailed updates to share with investors. As of the end of the March quarter, we are members of six microelectronics ME Commons hubs funded by the Department of Defense.
Ken: I would now like to take a moment to discuss the updates involving the company's activity related to the chips and Science Act of 2022.
Ken: Regarding chips that funding there are two detailed updates to share with investors.
Ken: As of the end of the March quarter. We are members of six Microelectronics Emmy Commons hubs funded by the department of Defense.
Ken: Membership to these hubs as critical as it allows access to be part of the hub proposal team for new government research programs.
Jeffrey B. Shealy: Membership to these hubs is critical as it allows access to be part of the hub proposal team for new government research programs. We currently have two active research programs under one hub membership. And we are waiting on the decision, with the first proposal potentially worth several million dollars annually, beginning in the second half of calendar 2024. Furthermore, we are currently pursuing several new memberships with additional ME Hub Centers and will detail our efforts and progress moving forward.
Ken: Currently have two active research programs under one hub membership.
Ken: And we are waiting on the decision with the first proposal potentially worth several million dollars annually beginning in the second half of calendar 2024.
Furthermore, we are currently pursuing several new memberships with additional Emmy hub centers and will detail our efforts and progress moving forward.
Ken: Second the chips Act of 2022 includes a provision for a 25% refundable investment tax credit.
Jeffrey B. Shealy: Second, the CHIPS Act of 2022 includes a provision for a 25% refundable investment tax credit, or CHIPS ITC, on investments in facilities that manufacture semiconductors that are placed in service after December 31, 2022. We currently estimate the amount of the refundable tax credit applicable to Akoustis to be between $2.8 and $4 million over the next 9 to 12 months.
Chimps ITC on investments and facilities that manufacture semiconductors that were placed in service. After December 31 2022.
Ken: We currently estimate the amount of the refundable tax credit applicable to acoustic <unk> to be between two eight and $4 million over the next nine to 12 months.
Next I would like to discuss several updates and our primary target markets beginning with Wi Fi.
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 March quarter was to ramp XBoff filter production for two programs at a Wi-Fi 7 Tier 1 Enterprise Class OEM. We successfully commenced pre-production deliveries at two ODMs for our customer during the quarter. One of the two programs included our first single crystal filter for enterprise Wi-Fi as it solves a difficult coexistence requirement while providing higher power handling for our customer solutions.
Ken: Our first milestone for the March quarter was to ramp ex BOL filter production for two programs.
Ken: Why five seven tier one enterprise class OEM.
We successfully commenced preproduction deliveries at two Oems for our customer during the quarter.
One of the two programs included.
Ken: Our first single Crystal filter for enterprise Wi Fi as it solves a difficult coexistence requirement while providing.
Higher power handling for our customer solution.
Ken: Our second milestone was to ramp ex BOL filter production.
Jeffrey B. Shealy: Our second milestone was to ramp X-Ball filter production for Wi-Fi 7 with a new Tier 1 Enterprise Class OEM. While we did not commence ramp-up, we have received initial purchase orders in support of the program and expect the program to ramp in the September quarter.
Ken: Five seven with a new tier one enterprise class OEM.
Ken: While we did not commence ramp we have received initial purchase orders in support of the program and expect the program to ramp in the September quarter.
Our third milestone was to secure a design win for our Wi Fi seven solution with a tier one network enterprise class OEM.
Jeffrey B. Shealy: Our third milestone was to secure a design win for a Wi-Fi 7 solution with a Tier 1 network enterprise class OEM. We completed this milestone and announced two design wins in our press release earlier this month on May 1st. Looking ahead, in the June quarter, we expect to ramp XBAL filter production for Wi-Fi 7 with a tier one enterprise class OEM. We also plan to secure multiple design wins with a tier one carrier for Wi-Fi 6E and 7.
We completed this milestone and announced two design wins in our press release earlier this month on May 1st.
Ken: Looking ahead in the June quarter, we expect to ramp ex BOL filter production for Wi Fi seven with a tier one enterprise class OEM.
Ken: We also plan to secure multiple design wins with a tier one carrier for Wi Fi six and seven.
Jeffrey B. Shealy: And finally, we expect to release at least seven new X-Ball filters into production targeting Wi-Fi 7 tri-band and quad-band architecture. Next, I would like to discuss our recent developments in the 5G mobile market. During the March quarter, we expected to deliver the second of three Wi-Fi filters to our Tier 2 5G mobile RF front-end module making customer. We have a foundry contract with this customer for a total of three filters. We have now shipped the first two filters. The third filter is still under customer design control and has not yet been released to the foundry.
Ken: And finally.
We expect to release at least seven new ex BOL filters into production targeting Wi Fi seven Tri band and Quad band architectures.
Ken: Next I would like to discuss our recent developments and the <unk> mobile market.
Ken: During the March quarter, we expected to deliver the second of three Wi Fi filters to our tier two <unk> mobile RF front end module, making customer.
Ken: We have a foundry contract with this customer for a total of three filters. We now have shipped the first two filters. The third filter is still under customer does not control and has not yet been released to the foundry.
Ken: Finally, we continue our engagement with our fifth mobile partner offering our export process and foundry for their module and discrete product needs.
Jeffrey B. Shealy: Finally, we continue our engagement with our fifth mobile partner, offering our XBOL process and foundry for their module and discrete product needs. We have shipped this partner multiple XBAU die for engineering evaluation or a future Wi-Fi 7 multiplexer application for the mobile market. Our anticipated milestone for the June quarter includes securing a purchase agreement with a new Tier 1 Asia partner focused on mobile and other market segments. I will now discuss our progress in our network infrastructure business.
Ken: We have shipped this partner multiple ex BOL die.
Ken: Our engineering evaluation for our future Wi Fi seven multiplexer application for the mobile market.
Ken: Our anticipated milestones for the June quarter include securing a purchase agreement with a new tier one Asia partner focused.
Ken: On mobile and other market segments.
Jeffrey B. Shealy: During the March quarter, we successfully achieved approved supplier status with two tier one infrastructure customers. Second, we successfully completed NRE development and delivered filters for the 5G in the 104 7 gigahertz band for massive MIMO architectures to a tier one network infrastructure customer. During the quarter, we experienced softness in XBAL filter shipments to our 5G network infrastructure customers. However, we expect flat growth in shipments for the remainder of calendar 2024 due to slow deployments of 5G small cell infrastructure hardware.
Ken: I will now discuss our progress in our network infrastructure business.
Ken: During the March quarter, we successfully achieved approved supplier status with two tier one infrastructure customers.
Ken: Second we successfully completed in our redevelopment.
Ken: And delivered filters for the five G.
In 1047 gigahertz band for massive Mimo architectures to a tier one network infrastructure customers.
Ken: During the quarter, we experienced softness in <unk> filter shipments to our five G network infrastructure customers.
Ken: However, we expect flat growth of.
Ken: Shipments for the remainder of calendar 2024, due to slow deployments of <unk> small cell infrastructure hardware.
Ken: For the June quarter, we expect to secure development order for band in 104 filter.
Jeffrey B. Shealy: For the June quarter, we expect to secure a development order for the band N-104 filter targeting massive MIMO with a tier one customer. Finally, before handing the call off to Ken, I would like to provide an update on our defense and other markets business. 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 and patented multi-layered nanomaterial that incorporates our single crystal piezoelectric material.
Ken: <unk> massive mimo with a tier one customer.
Speaker Change: Finally, before handing the call off to Ken I would like to provide an update on our defense and other markets business.
Speaker Change: As previously mentioned our biggest success in the defense and other market segment was the introduction of our New X P. Three <unk> technology.
Speaker Change: Which incorporates a new revolutionary and patented multi layered nano material that incorporates our single crystal piece of electric material.
This new nano material was developed with funding from the defense Advanced research projects agency or DARPA to scale, the <unk> technology to frequencies up to 20 gigahertz.
Jeffrey B. Shealy: This new nanomaterial was developed with funding from the Defense Advanced Research Projects Agency, or DARPA, to scale the XBAU technology to frequencies up to 20 gigahertz. During the March quarter, we continued work on our multi-million dollar phase two contract option, which extends our current DARPA coffee program and their funding through December 2024. As a result, during the March quarter, one of our top five customers was in our defense and other business categories.
Speaker Change: During the March quarter, we continued work on our multi million dollar phase II contract option, which extends our current DARPA coffee program.
Speaker Change: And the funding through December 2024.
Speaker Change: As a result during the March quarter, one of our top five customers were in our defense and other business category.
Speaker Change: In addition, we delivered our Nu X forge PDK.
Jeffrey B. Shealy: In addition, we delivered our new XFORGE PDK to two defense customers for ongoing foundry engagements to facilitate their upcoming filter design. Furthermore, we completed the design and sampled new 2.4 gigahertz Wi-Fi CPE, and automotive X-Ball filters for two non-automotive customers. In our contract business, our proposal for a new multi-million dollar program with the Office of Naval Research, or ONR, to fund RF filter multiplexers incorporating our XBAU and P3F single crystal nanomaterials technology has been accepted for award.
Speaker Change: To defense customers for ongoing foundry engagements to facilitate their upcoming filter designs.
Speaker Change: Furthermore, we completed the design and sample new two four gigahertz Wi Fi C. P E R.
Speaker Change: Automotive ex BOL filters to two non automotive customers.
Speaker Change: In our contract business our proposal on a new multimillion dollar program with the office of Naval research or ONR to fun RF filter multiplexers, incorporating our Xbox and P. Three F single Crystal Nano materials technology has been accepted for award and.
Jeffrey B. Shealy: And we are in the process of finalizing the contract with our customer so that we can begin performing in the summer of 2024. For the June quarter, in the defense and other markets segment, we are expecting to secure our new government contract focused on advanced XP3F filter architectures beyond 20 gigahertz. Further, we expect to secure a CB2X design when with a tier one automotive customer focusing on the European market, and we expect to release at least two new XBoff filters into production targeting CV2X and timing applications. Now, I would like to hand the call over to Ken to go through our financial highlights.
Speaker Change: We are in the process of finalizing the contract with our customer.
Speaker Change: We can begin performing in summer 2024.
Speaker Change: For the June quarter in the defense and other market segment, we are expecting to secure our new government contract focused on advanced X P. Three S filter architectures beyond 20 gigahertz.
Speaker Change: Further we expect to secure a C V to X design win with a tier one automotive customer focusing on the European market and.
Speaker Change: We expect to release at least two new Xbox filters into production targeting <unk> and timing applications.
Speaker Change: And now I would like to hand, the call over to Ken to go through our financial highlights.
Thank you Jeff for.
Kenneth E. Boller: For the third quarter ended March 31st, 2024, the company reported revenue of $7.5 million, which represents a 7% increase over the prior quarter ended December 31st, 2023. On a gap basis, operating loss was $22.6 million for the March quarter, driven by revenue of $7.5 million, offset by labor costs of $6.7 million, a goodwill impairment charge of $8.1 million, depreciation and amortization of $3.3 million, and As a result, the gap net loss per share was $0.26. On a non-GAAP basis, the operating loss was $12.5 million, and the non-GAAP net loss per share was $0.14.
Ken: For the third quarter ended March 31, 2024, the company reported revenue of $7 5 million, which represents a 7% increase over the prior quarter ended December 31 2023.
Ken: On a GAAP basis operating loss was $22 6 million for the March quarter, driven by revenue of $7 5 million.
Ken: Offset by labor costs of $6 7 million goodwill impairment charge of $8 1 million depreciation and amortization of $3 3 million and other operational costs totaling $12 million.
Ken: As a result, GAAP net loss per share was 26 cents.
Ken: On a non-GAAP basis operating loss was $12 5 million and non-GAAP net loss per share was <unk> 14 cents.
Ken: Capex spending for Q3 was <unk> 3 million.
Kenneth E. Boller: CapEx spending for Q3 was $0.3 million, and Cashews and Operant Activities were $7.8, representing a 31% reduction over the December quarter as a result of our expense reduction effort. We are guiding the June quarter revenue to be flat to down 5% as a result of the sunset of the current Wi-Fi 6e program and the transition from Wi-Fi 6e to Wi-Fi 7. As mentioned earlier, we remain bullish on Wi-Fi 7 and are in the early stages of a production ramp.
Ken: And cashews in operating activities was $7 8 million, representing a 31% reduction over the December quarter as a result of our expense reduction efforts.
Ken: We are guiding the June quarter revenue to be flat to down 5% as a result of the sunset of the current Wi Fi six <unk> program and that transition from Wifi six <unk> Wi Fi seven.
Ken: As mentioned earlier, we remain bullish and Wifi seven and are in the early stages of a production ramp.
Kenneth E. Boller: On the expense front, we continue to undertake aggressive expense reduction and cost-saving measures, as well as pursue investment tax credits, or ITCs, all of which we estimate will reduce our operating cash flow burn rate by an additional 30% sequentially in the June quarter. Given the top-line projections, the current timing of the CHIPS ITC refunds, and the full impact of recent cost savings, we expect to be operating cash flow break-even within the next nine months. I would now like to hand the call back over to Jeff.
Ken: On the expense front, we continue to undertake aggressive expense reduction and cost saving measures as.
Ken: As well as pursuing the investment tax credits right T sees all of which we estimate will reduce our operating cash flow burn rate by an additional 30% sequentially in the June quarter.
Ken: Given the topline projections the current timing of the chips ITC refunds and the full impact of recent cost savings, we expect to be operating cash flow breakeven within the next nine months.
Ken: I'd now like to hand, the call back over to Jeff.
Jeffrey B. Shealy: Thank you Ken.
Drew Wright: Before closing, I would like to hand the call off to Drew Wright, our Corporate General Counsel, to provide an update on current litigation matters.
Jeffrey B. Shealy: Before closing I would like to hand, the call off to drew right. Our corporate general counsel to provide an update on current litigation matters.
Thank you Jeff.
Drew Wright: I'd like to start with an update on all our litigation matters. I will start with the patent litigation in Texas, in which Akoustis is the plaintiff and Corvo is the defendant, involving a patent that Akoustis exclusively licenses from Cornell. Cornell is in the process of joining the case as a co-client. Since our last earnings call, one of Corvo's wafer suppliers filed a motion to quash a subpoena and filed an inter partes review, also called an IPR, challenging the validity of the Cornell 360 patent. Corvo followed up with its own IPR challenging the Cornell 360 patent. However, we are still early in the case procedures.
Drew: I'd like to start with an update on all our litigation matters.
Drew: I will start with the patent litigation in Texas in which he chooses the plaintiff and <unk>.
Drew: <unk> is the defendant involving a patent that acoustic exclusively licensed from Cornell.
Cornell is in the process of joining the case as a co plaintiff.
Drew: Since our last earnings call one of Corvus wafer suppliers filed a motion to quash subpoena and filed an inter parties review also called an IPR challenging the validity of the Cornell $3 60 pad.
Drew: Corvo, followed up with its own IPR challenging the Cornell 360 pad.
Drew: We are still early in case procedures.
Drew: More importantly, turning to litigation in Delaware, and which acoustic defendant and corvo is the plaintiff. The lawsuit originally began over two years ago and included claims of patent infringement and false advertising.
Jeffrey B. Shealy: More importantly, turning to the litigation in Delaware, in which Akoustis is the defendant and Corvo is the plaintiff, the lawsuit originally began over two years ago and included claims of patent infringement, false advertising, False Patent Marking, Employee Poaching, Misappropriation of Trade Secrets, Unfair Competition, RICO, and Civil Conspiracy. Corvo's claims of false patent marking and Rico claims were dropped before trial, which is good news. Now, after two and a half years, the lawsuit has moved to the trial phase, which began last week and is expected to finish this week.
Drew: Off patent marking employee poaching misappropriation of trade secrets.
Drew: Unfair competition.
Drew: Go and civil conspiracy.
Drew: Corvette as claims are false patent, marking and Rico claims where drops before trial, which is good news.
Drew: Now after two and a half years. The lawsuit has moved to the trial phase, which began last week and is expected to finish this week.
Drew: The lawsuit entered the trial phase with claims of infringement of two patents.
Jeffrey B. Shealy: The lawsuit entered the trial phase with claims of infringement of two patents, false advertising, misappropriation of trade secrets, unfair competition, and civil conspiracy. Last week, Corvo presented its fact witnesses and several expert witnesses. Corvo is expected to present its final expert witness and rest its case this morning. This week, the company will have its opportunity to tell its side of the story. The trial is expected to go to the jury before the end of the week, and the jury is expected to issue a verdict in the next several days.
Drew: Advertising misappropriation of trade secrets.
Drew: Fair competition and civil conspiracy.
Drew: Last week Corvo presented its fact witnesses and several expert witnesses.
Drew: Corvo is expected to present its final expert witness addressed its case this morning.
Drew: This week the company will have its opportunity to tell it side of the story.
Drew: The trial is expected to go to the jury before the end of the week and the jury is expected to issue a verdict in the next several days.
Drew: We are and will continue to vigorously defend against those claims however.
Jeffrey B. Shealy: We are and will continue to vigorously defend against Cuervo's claims. However, the outcome of any trial is unpredictable. In particular, the theories used by each party's experts result in very disparate estimates of the damages alleged by Corvo. We believe the theories used by our experts are better grounded in the facts and the law. However, if the jury adopts the theories of Corvo's experts, it is possible the jury will issue an eight-figure verdict. For that reason, this litigation may have a significant impact on the company, including its value, operations, and ability to raise money. With that update, I'd like to hand the call back to Jeff.
Drew: However, the outcome of any trial is unpredictable.
Drew: In particular, the theories used by each party's experts result in very disparate estimates of the damages alleged by corvo.
Drew: We believe the theory is used by our experts are better grounded in the facts and the law.
Drew: However, it's the jury adopts the theories of corvid as experts it is possible the jury will issue an eight figure verdict.
For that reason this litigation may have a significant impact on the company, including its value operations and the ability to raise money.
Drew: With that update I'd like to hand, the call back to Jeff.
Jeffrey B. Shealy: Thank you drew.
Jeffrey B. Shealy: The market opportunity for our patented high-frequency XBAL and XP3F filters continues to be substantial. 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 we navigate our business transition from Wi-Fi 6E to Wi-Fi 7, and expansion into the automotive network infrastructure and defense market.
Jeffrey B. Shealy: The market opportunity for our patented high frequency ex ball and X P. Three filters continue to be substantial.
Jeffrey B. Shealy: We continue to work aggressively to achieve each of our stated objectives.
Jeffrey B. Shealy: And we will continue to provide updates on our execution against these objectives as we progress.
Jeffrey B. Shealy: I want to emphasize to investors that management continues to focus on improving our income statement as we navigate our business transition from Wi Fi 62, Wi Fi seven.
Jeffrey B. Shealy: And expansion into the automotive network infrastructure and defense markets.
Jeffrey B. Shealy: We continue diligently pursuing product cost savings to lower cost of goods and improve our gross margin.
Jeffrey B. Shealy: We continue diligently pursuing product cost savings to lower the cost of goods and improve our gross margin. We have undertaken necessary steps to reduce our operating cash burn in the coming quarters. We believe this is prudent in the current economic environment. 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.
Jeffrey B. Shealy: We have undertaken necessary steps to reduce our operating cash burn in the coming quarters.
Jeffrey B. Shealy: We believe this is prudent in the current economic environment.
Speaker Change: Further I appreciate our employees for their hard work passion and dedication and working together to position our company for growth in the quarters ahead.
Speaker Change: Finally, I also wish to thank our shareholders, who continue to support the company.
Speaker Change: And with that I would like to open the call for questions from the investment community.
Speaker Change: Operator. Please go ahead with the first question.
Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question... You may press star 2 if you would like to remove your question from the... We ask that you limit your questions to one and a follow-up so that others may have an opportunity to ask questions. You may re-enter the queue by pressing star 1. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue. We ask that you limit your questions to one and a follow up so that others may have an opportunity to ask questions.
Speaker Change: You may reenter the queue by pressing star one.
Speaker Change: Since using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.
Operator: One moment, please, while we poll for questions. Our first question comes from Craig Ellis with B Riley Securities. Please proceed with your question.
Speaker Change: One moment, please while we poll for question.
Speaker Change: Our first question comes from Craig Ellis with B Riley Securities. Please proceed with your question.
Craig Andrew Ellis: Yeah. Thanks for taking the question and thanks for all the color. This morning guys.
Craig Andrew Ellis: Yeah, thanks for taking the question and thanks for all the color this morning, guys. I wanted to start just by digging a little bit deeper into the revenue dynamics in the first half of the year. So, I understand that there was a program transition from six to seven, but what I wanted to clarify is the magnitude of that transition on what we're seeing in the first half. I think I had expected around $19 million of calendar first half revenues.
Craig Andrew Ellis: I wanted to start just by digging a little bit deeper into the revenue dynamics in the first half of the year. So understand that there was a program transition from six to seven but what I wanted to clarify is the magnitude of that transition on what we're seeing in the first half I think.
Craig Andrew Ellis: It looks like it's going to be closer to $15 million. So, beyond the transition to seven that comes back in the second half, were there any other variances versus what the companies expected and then related to that? What is the risk that the transition to seven, that program really kicks off either in the fourth calendar quarter of this year or next year? So, it's for you, but maybe a little bit later. Appreciate the color on those items, guys.
Craig Andrew Ellis: I had expected around 19 million of calendar first half revenues it looks like it's going to be closer to 15, so beyond the transition to seven that comes back in the second half were there any other variances versus what the company's expected and then related to that.
Craig Andrew Ellis: What is the risk that the transition to seven that program really kicks off either in the fourth calendar quarter of this year or next year. So hits for you, but maybe a little bit later I appreciate color on on those items you guys to get it started.
Speaker Change: Hey, great. Good morning, just speaking here.
Jeffrey B. Shealy: The Wi-Fi 60, as we indicated in the script, was with one of our Wi-Fi 7 customers that is transitioning over. As you know, the Wi-Fi 7 standard was adopted at the beginning of the year, and so this customer made the decision abruptly to transition to Wi-Fi 7. In terms of the dynamics associated with that, for the first half of the year, the revenue associated with that Wi-Fi 60 program was approximately $1 million per quarter, and that was the shortfall for this quarter in terms of the Wi-Fi market.
Speaker Change: Thanks for your questions.
Speaker Change: On the revenue dynamics Wi Fi six.
Speaker Change: The script was with a.
Speaker Change: One of our Wi Fi seven customers.
Speaker Change: Transitioning over.
Speaker Change: Wi Fi standard.
Speaker Change: Adopted at the beginning of the year.
Speaker Change: Seven standard was adopted at the beginning of the year and.
Speaker Change: And so this customer base.
Speaker Change: Appropriately to transition to Wi Fi.
Speaker Change: In terms of the dynamics associated with that for the first half of the year.
Speaker Change: Without Wi Fi <unk> program.
Speaker Change: Approximately $1 million per quarter and that is.
Speaker Change: That is that was the shortfall.
Speaker Change: For this quarter.
Speaker Change: In terms of.
Speaker Change: The Wi Fi market in terms of the other market segments.
Jeffrey B. Shealy: In terms of the other market segments, we had previously been projecting a very slow recovery in infrastructure, so there were really no surprises there. In terms of our defense and other businesses, in terms of what we have going on with DARPA, what we have ongoing on the defense side, those businesses came in really as expected. We were a little light in the quarter on the GDSI foundry services business. There were some dynamics there that we came up a little bit light for the quarter.
Speaker Change: We had previously.
Speaker Change: Previously we've been projecting a very slow recovery.
Speaker Change: Sure.
Speaker Change: Really no surprises there.
Speaker Change: In terms of our defense and other businesses.
In terms of what we have going on.
Speaker Change: What we have.
Speaker Change: On the defense side.
Speaker Change: This came in.
Speaker Change: As expected.
Speaker Change: We're a little light in the quarter.
Speaker Change: On the Tsi.
Speaker Change: Foundry services.
Speaker Change: Business.
Speaker Change: What's the dynamics there.
Speaker Change: We came up a little bit light for the quarter.
Jeffrey B. Shealy: We are tracking that very closely for the current quarter, and we are back on track, we feel, and are monitoring that weekly. But I think really the headline was the one program in 60, and I do want to emphasize that one of the nine design wins that we have in Wi-Fi 7 is with that same customer, so they are transitioning over. In terms of your final point about the dynamics and potential pushout for Wi-Fi 7, we have got, as we said in the prepared comments, nine programs in Wi-Fi 7, and we are tracking those very carefully, and they are diverse across multiple customer bases where we began supporting Wi-Fi 7 in the March quarter, and we are seeing a ramp that is expected in the September quarter.
Speaker Change: Tracking that very closely for the current quarter and we're back on track, we feel and are monitoring that weekly.
Speaker Change: But I think really the headline was the one program at 60 and I do want to emphasize.
Speaker Change: Yes.
Speaker Change: Design wins that we have.
Speaker Change: In Wi Fi seven is with that same customer so they're just they're transitioning over.
Speaker Change: In terms of your final point about.
Speaker Change: The dynamics in potential push out for Wi Fi service.
We've got a.
Speaker Change: As we said in the prepared comments, we've got nine programs in Wi Fi.
Speaker Change: And we're tracking those very carefully.
Speaker Change: They were diverse across multiple customer basis.
Speaker Change: We began supporting.
Speaker Change: Seven.
Speaker Change: March quarter end.
Speaker Change: Seeing a ramp that is.
Speaker Change: As expected.
Speaker Change: The September quarter.
Jeffrey B. Shealy: We will continue to monitor that, and I will see if Dave wants to add any further color to my comments. Yeah, I think the only additional color I will offer, Craig, is that Wi-Fi 6E. We talked about a lot of the delays or programs pushing out or getting canceled last year. A lot of it had to do with chipsets, and we are not seeing those issues with Wi-Fi 7. As Jeff said, Wi-Fi 7 was allowed to go through certification at the beginning of this year, and we are seeing a lot of activity there for the nine programs. This one carrier class that did see a sunset. It was.
Speaker Change: To monitor that and I'll see if they want that any further color to my comments.
Speaker Change: Yes.
Speaker Change: The additional color.
Speaker Change: Craig.
Craig Andrew Ellis: Wi Fi six even we talked about a lot of delays or programs.
Craig Andrew Ellis: Pushing out or get canceled last year, a lot of it has to do with Jim says, we're not seeing those issues.
Craig Andrew Ellis: Wi Fi service.
Craig Andrew Ellis: The Wifi southern was allowing to go through certification beginning of this year and receive a lot of activity there to have nine programs.
Craig Andrew Ellis: Just one left.
So it was broad.
Craig Andrew Ellis: And in fact, you know us.
Craig Andrew Ellis: In fact as you know.
Craig Andrew Ellis: There are there as.
Craig Andrew Ellis: As well.
Craig Andrew Ellis: We are already seeing.
Craig Andrew Ellis: The ramp up of the wildlife separate program at least orders.
Pretty pretty good visibility on orders.
Craig Andrew Ellis: Sure.
Craig Andrew Ellis: So that is.
Good news and that we didnt lose this customer altogether.
So to that one program and the Ram.
Jeffrey B. Shealy: And the timing, so we're bullish obviously coming out of this Q4 quarter that we'll see a lot of activity in WIFI 7 in the second half of this year.
Craig Andrew Ellis: And the timing so we're we're bullish obviously coming out of it.
Craig Andrew Ellis: This quarter, there will be a lot of activity in the Wifi. So in the second half of this year.
Craig Andrew Ellis: And that's really helpful, Culler. I appreciate that, Jeff and Dave. I'll ask my second question to... As we look at gross margin and expense dynamics, so with flat-to-down revenues, I would expect that gross margins would be flattish in the quarter, and then we get the rise towards double digits in the back half of the calendar year as volume improves, and an exemplary job on expense management, any color on just the contour of OPEX lines through the rest of the calendar year. Thank you.
Speaker Change: That's really helpful color appreciate that Jeff and David Oh, I'll ask my second question too.
Speaker Change: Ken Ken as we look at our gross margin and expense dynamics, so with flat to down revenues I would expect that gross margins would be flattish in the quarter and then we get.
Speaker Change: The rise towards double digits in the back half of the calendar year as volume improves an exemplary job on expense management any color on just the contour of Opex lines through the rest of the calendar year. Thank you.
Ken: Good morning, Craig, Yes, so I'll comment on a few of those items one is.
Kenneth E. Boller: Morning, Craig. Yeah, so I'll comment on a few of those items. One is...
Kenneth E. Boller: On the offered expense savings, we've taken a lot of active measures to reduce our spend there. I do anticipate it coming down to the $10 to $11 million per quarter range. On the expense line, we have identified over $20 million in annualized savings on our op-eds. Additionally, on the margin, one of the key items there to remember is that we have 17 items in production, and we stated last quarter that that will roughly double in the next year.
Speaker Change: The operating expense savings.
Speaker Change: We've taken a lot of active measures to reduce our spend there.
You anticipate it coming down to the $10 million to $11 million per quarter range on all that.
Speaker Change: <unk>.
Speaker Change: Do you have.
Speaker Change: And if I had over $20 million in annualized savings of our Opex.
Speaker Change: Additionally on the margin.
Speaker Change: One of the key items there to remember is that we.
Speaker Change: We had 17 items in production.
Speaker Change: We had stated last quarter that that will roughly double in the next year.
Kenneth E. Boller: We have, I believe, 7 to 10 new products coming into production in Q4 of this year, this fiscal year, in the June quarter, and those products all come with a lower cost structure, particularly on the back-end side of the cost for those products, so we will see improvement with new products coming online, some of them replacing older products that are more expensive. And I do anticipate that our margin will continue to increase.
Speaker Change: We have at least seven to 10, new baas coming into production in Q4 this year.
Speaker Change: We are in the June quarter.
Speaker Change: And those products.
Speaker Change: With a.
Speaker Change: That's the cost structure, and particularly with the back end.
Speaker Change: Side of the cost for those products. So we will see improvement.
Speaker Change: With new products coming online.
Speaker Change: Some of them, replacing older products that are more expensive.
Speaker Change: And I do it.
Speaker Change: Hi Mara.
Speaker Change: <unk> will continue to increase it was in the single digits.
Kenneth E. Boller: It was in the single digits. I expect it to get into the double digits here in the next two quarters. And then we've stated that our operating cash flow break-even will be in the $11 to $15 million revenue per quarter, depending on MIPS, and that will come with roughly a 25% margin on those sales as well. Got it. Thanks for that, Collar, if you can.
Speaker Change: Expect it to get into the double digits here in a few quarters.
Speaker Change: And then we've always stated that our operating cash flow breakeven.
Speaker Change: In the $11 million to $15 million of revenue per quarter, depending on mix and that was on Wednesday.
Speaker Change: 25% margin on those on those sales as well.
Speaker Change: Got it thanks for that color Ken.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: It appears there are no further questions at this time I would now like to turn the floor back over to Jeff Shealy for closing comments.
Operator: It appears there are no further questions at this time. I would now like to turn the floor back over to Jeff Shealy for closing.
Jeffrey B. Shealy: Thank you, everyone, for your time today, and we look forward to speaking to you during our next update call to discuss the current quarter's execution against our milestones, as well as our future expectations. Thank you, and have a good day.
Jeffrey B. Shealy: Thank you everyone for your time today, and we look forward to speaking to you during our next update call to discuss the current quarter's execution against our milestones as well as our future expectations. Thank you and have a good day.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [music].
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Operator: [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? Thomas Sepenzis, Jeffrey Shealy, Kenneth Boller, Akoustis Technologies Inc. [inaudible] ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??
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