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spk09: Good day, ladies and gentlemen, and welcome to the Acoustis Technologies Business Update Conference Call. As a reminder, this conference call is being recorded. At the conclusion of the company presentation, Acoustis Management will take questions. To ask a question, press star 1 on your keypad to be placed into the queue. A replay of the call will be available on the Investor Relations section of the Acoustis website.
spk03: Thank you, Operator, and good morning to everyone on the call. Welcome to ACOUSTA's fourth quarter and fiscal year end 2021 business update conference call. We are joined today by our founder and CEO, Jeff Scheele, interim CFO, Ken Bowler, and EVP of business development, Dave Eichle. Before we begin, please note that today's presentation includes forward-looking statements about our business outlook. All statements other than statements of historical facts included in this conference call, such as expectations regarding our strategies, operations, costs, plans, and objectives, including the timing and prospects of product development and customer orders, our expectations regarding achieving design wins from current and future customers, the possibility of entering into collaborative or partnering relationships, potential impacts of the COVID-19 pandemic, and guidance regarding expected revenue, product orders, and milestones for the current and future fiscal quarters, our forward-looking statements. Such forward-looking statements are predictions based on the company's expectations as of today and are subject to numerous risks and uncertainties. The company and our management team assume no obligations to update any forward-looking statements made on today's call. Our SEC filings mention important factors that could cause actual results to differ materially. Please refer to our latest Form 10-K and Form 10-Q filed with the SEC to get a better understanding of those risks and uncertainties. In addition, Our presentation today will also refer to certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measure is presented in our earnings call highlight release available in the investors section of Acoustis.com. I would now like to turn the call over to Jeff Shealy, founder and CEO of Acoustis.
spk06: Thank you, Tom, and welcome everyone to our 2021 fourth fiscal quarter and year-end business update call. Fiscal 2021 was an exciting year for Acoustus as we entered volume commercial production of our patented XBAL filters with our Tier 1 consumer-focused Wi-Fi 6 customer. This helped lead to year-over-year revenue growth of over 270% in fiscal 2021, and we expect strong growth to continue in fiscal 2022 and beyond. We have had a growing number of design wins across each of our major markets over the past several months, which we expect will translate into record quarterly revenue by the December quarter. While we exited the June quarter with one major customer in production, we expect to end the current calendar year with over five customers in production, with additional customers expected in early calendar 2022. We generated significant momentum in our Wi-Fi filter business in fiscal 2021, specifically in the wireless router market with both Wi-Fi 6 and Wi-Fi 6E filters. And we are currently ramping up efforts to enter the 5G mobile market in calendar 2022. We added two new customers in 5G mobile during fiscal 2021 and have delivered early samples to one of these customers. We continue to target production ramps with both customers in calendar 2022. We added two new network infrastructure customers in fiscal 2021, both targeting the citizens broadband radio service or CBRS market in the US. We expect to begin shipping against volume orders in the current September quarter to support the customer's initial ramps this calendar year. The ramp of our 5G small cell Network infrastructure business continues to be impacted largely due to the effect of the global semiconductor supply chain shortages on our customers, as well as operator-driven network deployment priorities and timing changes. But we continue to expect to ramp multiple filters with our customers in the current fiscal year. In our defense and other markets, we continue to work with DARPA on the Direct-to-Phase-2, or DP2, program, for the development of an XBAW filter product development kit that will enable BAW and other similar MEMS structures to be designed and fabricated using the company's state-of-the-art patented XBAW process. Recently, we added a new VP of Engineering, Cameron Chima, an extraordinary talented executive who brings a wealth of RF experience in product design, manufacturing, technology development, program management, and importantly, 25 years of experience in microacoustic hardware. Cameron comes to us from Qualcomm RF360, where he was vice president of engineering. Cameron will lead our 5G mobile and multi-chip module development, as well as assist in deploying wafer level packaging into mobile products, including 5G smartphones. I am pleased to introduce him to our executive team and welcome him to our company. And we look forward to his leadership and contributions moving forward. I would now like to discuss the highlights from each of our market segments in the June quarter, beginning with our Wi-Fi business. Wi-Fi activity continues to increase as evidenced by the multiple announcements we have made over the past few months and the customers we expect to go into production later this calendar year and expanding further in calendar 2022. We continue to ship both 5.2 and 5.6 gigahertz Wi-Fi 6 coexistence filters to our tier one consumer focused customer. This was the first of three Wi-Fi 6 customers that we announced over the past year. And as we announced last week, we expect to ramp production with our second Wi-Fi 6 customer beginning in the December quarter of the current calendar year. We believe the Wi-Fi 6E filter market will expand significantly in calendar 2022 and beyond, driven by the rapid release and adoption of Wi-Fi 6E CPE. Additionally, there are strong indications that OEMs are planning to incorporate the new Wi-Fi 6E standard in 5G smartphones, tablets, laptops, and other devices, likely making the Wi-Fi 6E filter market significantly larger than the current Wi-Fi 6 market by both unit volume and revenue. We have made significant progress with our Wi-Fi 6E portfolio, which includes our 5.5 and 6.5 gigahertz coexistence solution, our new 5.6 and 6.6 XBAL filters that we announced in April. In the June quarter, we announced our first design win in Wi-Fi 6E with a Tier 1 enterprise-focused customer and we expect additional Y560 design wins in the September quarter and beyond. Additionally, we have design locked and delivered to our previously announced Tier 1 Enterprise customer four custom high-performance XBAL filters targeting ultra tri-band applications. These four filter products are currently in qualification for production release, and the initial production ramp is scheduled for the December quarter. In the March and June quarters, we also added three new Wi-Fi system on chip or SOC customers with reference design wins for multiple Wi-Fi 6E platforms. We expect more than three Wi-Fi 6E customers to be in production by the end of the year with more to follow in calendar 2022. We've recently announced that we have received our first development order from a tier one PC chipset maker for a Wi-Fi 6E Diplexer, the development of this diplexer will build on our earlier filter modules and leverage our expanding chip scale package or CSP technology. This new diplexer represents the first step towards developing more complex and integrated modules for our customers using our XBAL process and technology. The PC market represents another large market for Acoustus, and we are well positioned to meet the critical requirements, including small size and superior signal selectivity in Wi-Fi 6E. And finally, last week we announced that we have received a new design win from a carrier-focused OEM for our 5.5 and 6.5 gigahertz Wi-Fi 6E filters for a MU-MIMO Gateway product, which is expected to begin shipping in the December quarter of the current calendar year. To summarize our recent Wi-Fi activity, we have more than 12 XBall Wi-Fi filters, four for Wi-Fi 6 and more than eight for Wi-Fi 6E, up from four last quarter. As of today, we have three announced design wins in Wi-Fi 6 and two in Wi-Fi 6E, and we expect the number of Wi-Fi customers in production will increase from one to more than five by the end of the year. We also added three new Wi-Fi 6E SoC partners in the March and June quarter. And lastly, we're developing our first XBAR diplexer with which we intend to enter the PC market, another substantial market in unit volume and revenue. I would now like to discuss our recent developments in 5G mobile. While most of our efforts in 5G mobile are geared towards engineering samples by the end of the calendar 2021 and production ready parts by the end of calendar 2022, we did receive a significant validation of our technology from one of our 5G mobile customers in the past few months. In June of this year, we delivered the first engineering samples to our tier two RF front end module customer, and we signed a foundry agreement with this customer, which puts us in excellent position to enter the 5G mobile market in calendar 2022. This opens Acoustus to our largest potential market by both revenue and unit volume and is a significant achievement for our company and team. We continue to make progress with our second tier one RF component customer. As we announced this morning, we just delivered first engineering samples of the first of two filters that we're developing for their 5G mobile products. We are on track to deliver the second sample to this customer by the end of the current calendar year and remain confident that we will be ready to enter volume production with this customer in the second half of calendar 2022. Our wafer level packaging efforts continue to progress. We introduced our first WLP technology in the past month using a North American supply chain and expect to qualify the process by the end of the current calendar year. In the past month, we also shipped 5G mobile engineering samples to our RF front end module maker customer, complete with these new WLP packages. We plan to expand our capabilities in WLP as we deliver new filters that can leverage the technology for mobile handsets and other devices where size considerations are at a premium. To summarize our 5G mobile activity, We have multiple customer-funded XBAL filters in design. We currently are focused on two customer engagements, a Tier 1 RF component company and a Tier 2 RF front-end module maker. And both customer engagements are actively engaged with either our design or manufacturing teams. We have recently entered into a foundry agreement with one of our customers to produce a 5G mobile handset filter product. in the second half of calendar 2022. And we have shipped 5G mobile samples with our new WLP technology and expect to enhance our WLP capabilities moving forward. I would now like to move on to network infrastructure. Wide bandwidth, high power handling, low insertion loss, and high out-of-band rejection are the core filter performance requirements for 5G network infrastructure. Acoustus is ideally positioned to compete in this segment, given our small form factor filter solutions and our growing portfolio of RF filters above three gigahertz, where 5G is being deployed worldwide. Citizens Broadband Radio Service, or CBRS, has emerged as the initial driver for our 5G network infrastructure business, with three design wins in the current calendar year, including two at the end of July. The first customer design win for CBRS is for a 3.6 gigahertz XBAL filter for base station equipment, and the second customer's two design wins include both base station and consumer premise equipment. We expect to ship volume filters to both customers in the current September quarter as each customer looks to ramp production before the end of calendar 2021 and into 2022. Furthermore, we are currently engaged with over 10 SOC, OEM, and ODM makers for the development of CBRS networks using 5G and expect to announce additional design wins as the CBRS networks are further deployed. The FCC C-band auction for 3.7 to 3.98 GHz spectrum last December raised over $80 billion. on new sub-6 gigahertz 5G spectrum in the United States. This has created yet another 5G network infrastructure opportunity for Acoustus, and we demonstrated early XBAL filter samples addressing this new 3.8 gigahertz spectrum in the June quarter. We are currently improving on this initial design and expect to demonstrate additional samples by the end of calendar 2021. We expect carriers will look to deploy small cell base stations that operate at this frequency by late calendar 2022 or early calendar 2023, and we are currently in early discussions with multiple OEMs. As we mentioned on our last conference call, the production ramps with our 5G small cell network infrastructure customers focused on Asia have been slower than previously expected due to the global semiconductor supply chain shortages, operator-driven network deployment priorities, and timing changes, but we continue to expect to ramp production with multiple filters with these customers in the current fiscal year. Similarly, continued customer specification changes have delayed commercialization of our massive MIMO network infrastructure filters, but we continue to work with the customer to develop a plan to introduce a final product. To summarize our 5G network infrastructure activity, We have five completed 5G network infrastructure XBAL filters, four for small cell base stations, and one for CBRS. To date, we have announced three design wins in small cell with our tier one customer and one from a second customer. Additionally, we have received three design wins for CBRS from two leading network infrastructure OEMs. In the June quarter, we developed our first 3.8 gigahertz filter for the US 5G mobile, with further iterations expected in late calendar 2021, early calendar 2022, and we now have over 10 customer engagements, five of which have already placed purchase orders. I would like to now discuss our progress in our other market segment. During the June quarter, We continue to work with the Defense Advanced Research Projects Agency, or DARPA, to develop our technology involving the multi-year R&D contract from DARPA through the development of a piezo MEMS process design kit, or PDK, for the company's proprietary and patented XBAL process, the direct to phase two or DP2 contract, is dedicated to developing a general-purpose PDK that will enable BAU and other similar MEM structures to be designed and fabricated using the company's state-of-the-art patented XBAU process. We expect this will expand the opportunities for XBAU moving forward as other designers will be able to develop new products utilizing our novel piezoelectric materials and substrates outside the current devices, which could lead to new opportunities in adjacent vertical markets. I am pleased to announce today that we have received an order from one of our existing defense customers for a seventh XBAL filter the customer will use in a phased array radar application that is expected to ship later this calendar year. To summarize our other market segments, we recently received an order to deliver a seventh XBAL filter to our first defense customer. We have seven completed XBAL filter solutions for the civilian and defense markets. We continue to refine and improve our XBAR PDK driven by the Direct-to-Phase II contract with DARPA. And finally, we have a total of three customer engagements, two of which already have placed purchase orders or provided NRE revenue. Next, I'd like to hand it over to Ken for some financial highlights.
spk07: Thank you, Jeff. For the fourth quarter ended June 30th, the company reported revenue of $2.2 million. driven by a 68% increase in our core XBAL filter product revenue. Revenue was within the guided range we gave last quarter, despite the ongoing headwinds driven by COVID-19 and the resulting supply chain disruptions. On a gap basis, operating loss was $11.8 million for the June quarter, mainly driven by revenue of $2.2 million, offset by labor costs of $6.9 million, depreciation of $1.4 million, and other operational costs totaling $5.7 million. As a result, GAAP net loss per share was $0.20. On a non-GAAP basis, operating loss was $9.8 million, and non-GAAP net loss per share was $0.19. Reconciliation of these amounts to the corresponding GAAP measures is available in the press release issued this morning, available on the Investors section of our corporate website. FAPEX spend for Q4 was $2.6 million compared to $5.4 million in the prior quarter, mostly related to the continued capacity expansion in the company's New York FAB. Cash used in operating activities in Q4 was $7.4 million, up from $5.9 million in the prior quarter. The company exited the June quarter with $88.3 million of cash and cash equivalents, versus $90.4 million at the end of the previous quarter. During the June quarter, the company raised $7.5 million in cash through additional equity financing at an average price of $10 per share. Given the current challenges in the semiconductor supply chain and how that may impact our Wi-Fi customers, as well as timing shifts related to 5G small cell network infrastructure, we expect revenue for the September quarter to be relatively flat at approximately $2 million. However, we expect a return to top line growth in the December quarter as we begin to convert several of our Wi-Fi 6, Wi-Fi 6E, and CBRS wins into production revenue. In fact, we expect record quarterly revenue in the December quarter as the total number of customers in production increases from one today to more than five by the end of the year. I will now turn the call back over to Jeff to discuss our future milestones.
spk06: Thank you, Ken. While we are not expecting sequential revenue growth in the current quarter, given the supply chain impact on our customers, we do expect to see a return to top line growth in the December quarter and beyond as we begin to layer in several new customers. In fact, as Ken stated earlier, we expect to deliver record quarterly revenue in the December quarter as multiple design wins in Wi-Fi 6, Wi-Fi 6E, and network infrastructure begin their respective production ramps. As we enter calendar 2022, we expect the supply chain issues to begin to be addressed, which should allow for more normalized run rates from our customers, which should further help our top line growth. In the September quarter, we expect to generate revenue from each of our business segments, including 5G mobile, Wi-Fi, 5G network infrastructure, and other markets, including defense. We continue to strive towards executing our targeted milestones and will continue to keep you informed of our progress. Our anticipated September 2021 quarter milestones include, first, we expect to receive at least two new Wi-Fi 6E design wins. In addition, we plan to begin ramping our second Wi-Fi 6 customer into production. Further, we expect to ship the first of two 5G mobile engineering samples to our Tier 1 RF component customer. Next, we plan to ship our first pre-production WLP wafer to our Tier 2 RF front-end module customer. And further, we expect to ship filters in volume to two CBRS customers. And we expect to receive an order for our second generation 3.8 gigahertz filter from our existing defense customer. And finally, we expect to receive an order for a new advanced multi-chip module for applications including radar. Looking further out, our anticipated calendar 2021 milestones include the design lock of our 5G mobile filter with our second RF mobile module maker, plus the delivery of 5G mobile XBall filters meeting our customer spec to our tier one RF component customer. In addition, we plan to ramp production with multiple Wi-Fi 6 and Wi-Fi 6E customers, including two announced Wi-Fi 6 and four announced tier one Wi-Fi 6E customers. We expect the production qualification of CSP XBall package filters for 5G mobile, 5G infrastructure, and Wi-Fi. And finally, we expect to ramp production with two CBRS network infrastructure customers. In conclusion, we believe the market opportunity for our patented high frequency XBAL filters is substantial. With 52 issued patents and 82 patents pending, we are well positioned to capitalize on that opportunity. We continue to work diligently to achieve each of our stated objectives, and we'll continue to update you on our execution against these objectives going forward. We continue to add key hires across our sales, design, and manufacturing teams. Beyond our previously announced expansion plans, the company is positioned to further scale as our New York fab can ultimately be equipped to produce up to five billion XBAL filters per year. Finally, I would like to thank our employees for their hard work, passion, and dedication throughout fiscal 2021, particularly during this ongoing pandemic, as our team has kept momentum going on our R&D, which has led to multiple design wins across the Wi-Fi, 5G network infrastructure, and defense markets. We have also experienced exceptional momentum in the 5G mobile market, driven by our leadership and filters that operate above 3 gigahertz, and our new and expanding wafer-level packaging capabilities. I also wish to thank our shareholders who continue to support the company. And with that, I would like to open the call for questions from the investment community. Operator, please go ahead with the first question.
spk09: Thank you. To ask a question today, you may press star one. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, It may be necessary to pick up the handset before pressing the star keys. Our first question today comes from the line of Anthony Stoss with Craig Callum. Pleasure to see you with your questions.
spk10: Hi, guys. Congrats on the progress on Wi-Fi. Maybe the first question for Ken, is there any updated revenue per quarter that you guys would need to hit to break even? I'm not sure if gross margins have changed. And probably for Jeff, Do you have everything you need right now in the manufacturing plant to be able to handle, say, volume or asset side? Thanks.
spk06: Okay, good morning, Tony. We'll start with Ken to your first question.
spk07: Good morning, Tony. As far as operating cash flow breakeven goes, I expect to reach operating cash flow breakeven at approximately $15 million per quarter, depending on our product mix. And I do expect that to occur in the next – 12 to 21 months. Just give a little time frame around that.
spk06: Okay, Tony. Good morning. Thanks for the comment. From a manufacturing standpoint, we've made tremendous progress up in the New York facility. The fab now, we hit a pretty key milestone in early August. With overnight shifts that bring, you know, that allowed us to hit the milestone we were hunting in terms of capacity expansion for the mid-year point. And then we expect through a 24 by 7 operation by the end of the year to be able to hit that 500 million filter milestone. target that we were positioning for, and we're on track for that. And certainly a tremendous amount of work in terms of the team in New York bringing that together, but also a lot of planning to get the equipment in place. As you know, lead times and equipment have been pushing out, and this was something we got ahead of and have been positioning ourselves for. to be successful from a capacity expansion standpoint.
spk10: Just as a quick follow-up, Jeff, on the 5G infrastructure, small cell, I know you talked about component shortages. When do you think you'll start shipping again? What quarter?
spk06: I'll bring Dave in here, and I'll probably end with some comments, but Dave?
spk04: Morning, Tony. The CBRS, as we commented on, two customers are going to be ramping with the CBRS. We've been shipping some volume pre-production parts this quarter, and production ramps are going to be next quarter. On the 5G Asia, the line of sight that we have, and it's all going to depend on timing with the Chinese providers on, I guess, shifting back up to the higher frequency line, We're expecting really the end of this year, first quarter of next year. So it's all going to be really driven by the time in the market. The good news is that we believe the chipset supply, particularly with the wider bandwidth, is sampling and able to ramp as well, which has been part of what's hampered us. And then looking further out, our investment that we're looking at right now with the 5G U.S. market, we're going to be sampling towards the end of this year. But, you know, it takes a while to get designed into the infrastructure market, so that, you know, will be a further ways out, as well as the U.S. market ramping.
spk06: So, Tony, I'd like to add to Dave's comment. Really, just for those of you not familiar with that Asian market, what has transpired there is, as Dave touched on, is this move to much significantly wider bandwidth markets. Initially we saw specs in the 100 megahertz bandwidth range. Those have expanded out to 300 megahertz. And so while we were ready to ramp with the portfolio that we announced, up at 300 megahertz there were some other, as Dave mentioned, chipset availability was a challenge. Also some of the operator deployment focus was an issue. I did want to point out for some of the milestones or as a milestone in June, I don't think we advertised tremendously, but we did take the opportunity with this lull to really make some improvements on the product portfolio and enhance some of the performance for our wide bandwidth filter portfolio. And then, as Dave touched on, I want to make sure we brought in the C-band engagements. Dave talked about sampling, but multiple customer engagements on the C-band that we're pretty excited about for the U.S. market.
spk10: Thanks for the call, guys. Best of luck.
spk02: Thank you, Tony. Our next question comes from the line of Suji Da Silva with Ross Capital.
spk09: Please proceed with your question.
spk08: Good morning, Jeff, Dave, Ken. Congrats on the progress here. I just want to understand on the Wi-Fi 6E market, a lot of momentum here. In 6E, are those all tandem 5-5-6-5 opportunities? And can you talk about what the ultra-triband product is? I don't know if I've heard that term before.
spk04: Okay. Let's let Dave start. Good morning, Suji. Thanks for the comment. Yeah, pretty much everything that we are shipping right now, both for Wi-Fi 6 and Wi-Fi 6E is tandem. And the number of MIMO that you see in the 6E has increased. So traditional Wi-Fi 6 was 2 plus 2, sometimes 2 plus 4, what we're seeing primarily in the 6E. The Wi-Fi 6E multi-user MIMO is 4 plus 4, and we're actually seeing some that even go up to 8. So this tandem approach, depending on how they configure the system, it's multiple filters per system. It could be 8 going up to 12 and even higher. And the ASPs on these filters, the average selling price is higher as well. So it's a good opportunity for us. And then With reflective to the ultra tri-band, that really is an architecture that we're enabling in the market that allows the transition of 50 megahertz bandwidth transition from unit 4, which ends at a frequency of 5895, and the start of unit 5, which starts at 5945. So we are the only supplier of filters in the market today that is in design phase and sampling, which we believe will production ramp next quarter. That will enable that 50 megahertz transition, which is significant because it enables the full utilization of Uni 1 through Uni 4 for the 5 gigahertz, and then Uni 5 through Uni 8 for the 6 gigahertz.
spk06: Okay, and Sue, let me add a couple things. And thanks, by the way, for your comments opening. I did want to emphasize, you know, Wi-Fi is a clear strength for us. We've got, as we said in the prepared comments, we've got 12 filters for this market, four in the Wi-Fi 6, and then another eight for the 6E market. I think Dave touched on, you know, depending on the partitioning of the system, That requires either standard tandem or the spectrum is broken up and then additional customized filters are used there. I want to emphasize Acoustis is an enabler for this ultra tri-band architecture. And as Dave said, we've got, you know, that's certainly one of the opportunities that we mentioned. And a point of emphasis, you know, we've been in production for, In the current quarter, with one Wi-Fi 6 customer, we're expanding that in both Wi-Fi 6 and Wi-Fi 6E to a total of five customers, we expect, for the December quarter. So a lot of the activity that's been gearing up in the company has been on the qualification and supply chain readiness and delivery of pre-production units to a broad range of customers in Wi-Fi.
spk08: Great. Thanks, Jeff and Dave, for that really detailed color there. And then switching over to wireless infrastructure, I just want to understand, obviously, that the China ramp has paused, but is going to come back. Will the non-China wireless infrastructure opportunities be of a similar magnitude or potentially bigger than the China wireless opportunities that comes back? Or what's the relative sizing of those two buckets?
spk04: So to just say, The China market ramp is pretty significant in that they're looking at obviously replacing the 4G network that I think wasn't fully deployed in China. So they're putting a significant investment in the 5G deployment. It just depends on the frequency spectrum. But we are seeing signs that other markets are strong. And mainly what we're looking at is the 5G U.S. deployment. around the 3.98. So we believe that that one is going to be as strong as the China market in some respects, but it's timing. It's not going to really happen until 2022. So we're ahead of the curve in the development of the components that we want to be sampling. And as Jeff highlighted earlier, we'll continue to make improvements on our designs. There's some tough specifications that you see when you look at the 5G network infrastructure. The ball technology is very well suited to meet the needs of performance plus size in these small cell applications. So we're excited about the opportunity.
spk06: Yeah, and, Suji, let me add to that. For the non-China market, you've got, as we've detailed, both CBRS, which is unlicensed, by the way, and then the CBAM, which is, Dave, in the prepared notes, we talked about the the auction for those licenses was pretty substantial. So I think Dave touched on, and I'll emphasize, our product portfolio is further ahead. We invested in that for the Asia market. But we're now seeing significant design activity in the CBRS market. We touched on that in the script. And then we've been investing forward in the CBAN and producing samples to be able to deliver the market later this year. So just some additional color there to add.
spk08: No, appreciate that. Thanks, guys.
spk06: Thank you, Sujit.
spk09: Next question comes from the line of Harsh Kumar with Piper Sandler. Please, Sujit, your question.
spk01: Yeah. Hey, guys. First of all, congratulations. Looks like a tremendous amount of activity, design wins, and And, you know, you guys are grabbing it with both hands. So this is an exciting time indeed. I had a quick question, Jeff, for you. Maybe Dave or Jeff, could you talk about the process for 5G mobile? You talked about engineering samples being shipped, you know, very recently to your, I think you said it was customer number two, tier two customer. Could you talk about the steps from here to maybe seeing what I would call a design or a manufacturing agreement or however you want to call that in terms of significant revenue with a customer? What is the process that's involved?
spk06: Hey, good morning, Harsh. Thanks for your comments. And I'll let Dave start and maybe add some comments at the end.
spk04: Good morning, Harsh. So, you know, the two customers that we've got good progress with right now, One of them we've signed a founder agreement with, and that's given some pricing. It's given pricing. It's given access to the PDK, which is a design kit to allow them to do the designs into our FAB process. And then we've talked about program timing. So we've got a good strategic engagement going with them. We have to get through the development cycle of the designs of our filter in their WLT process and integrating into their modules. So we're in the midst of that right now. And then with the Tier 1 component supplier, this is an architectural change within their company that's utilizing the high-performance Acoustus core engine that will enable them to hit some of the tough coexist requirements that can't be handled with more traditional components. technology. So that platform is, you know, we've shipped, you know, our first design to them and the process is for them to really characterize and model the performance, you know, measured against the models and then make some design changes potentially to, you know, their core substrate. And then if need to, we will go back and then do the same with our dye and But our hope is to iterate to a design that proves the performance. And they've got customers identified that they're already engaged with, that if things go well through this process, we'll be looking at a potential ramp in the end of next county year. So that's something that we're excited about. And then we've got our next design with that customer that we're looking to ship by the end of next quarter. So both of those are going to be characterized and evaluated, and they're going to feedback to see if we need to iterate or not.
spk06: So, Harsh, let me add to that. Dave touched on the foundry model for 5G mobile. I want to emphasize that that allows us to leverage what we have in terms of capacity up in New York for the mobile market. without interfering with our product portfolio and Wi-Fi and infrastructure. It also couples, and we didn't really touch on, we did touch on in the script, but I want to emphasize The wafer-level package or WLP technology that we developed want to emphasize the progress that we've made there that is an enabler for this mobile market. It addresses a size and cost point that allows our filters to be integrated into a module. But it also opens up, and we kind of did it in the script, on diplexer product development for the PC market. And, you know, looking ahead, this WLP is, you know, could be in as, you know, what I would estimate about 80% of our, make up 80% of our product portfolio going forward. It addresses cost savings that we're looking for. And as to a question earlier by Tony in terms of break-even point, it really allows us to drive cost savings to get us to a point of break-even. We have also, over the last quarter, I think it's relevant to mention, is that we've made enhancements in that supply chain, really to make that supply chain robust, as well as shorten cycle time, as it's clearly going to be a very important facet of our design and manufacturing business model.
spk01: Thanks, guys. And I had a follow-up. I know the basic benefits of your technology, higher frequency, et cetera, but I'm trying to understand, as you're winning these 5G mobile wins, Dave and Jeff, what are the customers sort of like benefiting from here? When they come to you, are they coming to you because of smaller size or is the performance that much better and therefore the battery proposition is
spk04: much better just could you help us understand what is in what is in it for the customers with your with your superior technology so they it really is performance is the main thing and you know with our expansion in the fab you know we're able to be cost competitive as well being able to drive more volume you know through the fab But it's really coming down to performance. These customers are targeting more difficult specs, particularly with the 5G deployment, that their traditional technology that they've always had access to can't address those specs. So it's both the insertion loss, which is going to help, obviously, with the battery usage, and it's also the rejection for the coexist technology. particularly when you get into some of these quad flexor type designs or more complex where isolation between adjacent bands is very important. So we can address, you know, for some customers in the TX, so the transmit chain where traditional saw is not going to be able to handle the power, but also the tough coexist requirements. So ball is better suited for that part of the duplexer. And also, you know, with more traditional LTCC-type technology, which has lower queues, which basically impacts the co-existing requirements, when they get access to our core acoustic technology, they can get that sharp rejection that's required. So this is really a theme that we've carried for the last five years as a company, but just didn't have the capacity at the time in the past to really enable some of these customers to grab market share. And so we're excited about the opportunity of working with them, and it's a very well-defined need that we address.
spk06: And Harsh, let me add to that. Dave talked about the performance. You've got bandwidth and power handling capability, which is very critical in these modules. There's frequency performance. Clearly you've got frequencies that are increased not only in the 5G spectrum, 3 to 5, but we've shared a lot of information what we're doing in the 5 to 7 for Wi-Fi 6, Wi-Fi 6E. So frequency performance is extremely critical. And adding to what Dave said, there's a lot of, there's very low mode, moding in our technology, and that produces smooth characteristics both in the pass band as well as out of band, as Dave talked about when you're coupling multiple filters together. And then finally, in terms of value proposition to the customer on the 5G mobile is, it has to be in a form factor that can be integrated. And, you know, what we've been able to put together in the wafer-level package we think is going to be highly able to be integrated in various technologies, particularly in the module technologies, but also in a wide range of product configurations.
spk02: Got it. Very helpful, guys. Thank you so much. Thank you, Horst. Thank you. Our next question is from the line of Rick Schaefer from Oppenheimer.
spk09: Please proceed with your question.
spk05: Yeah, thanks, and let me add my congrats, guys. I'm hitting a whole lot of milestones. It's kind of tough to keep up even taking notes on all the announcements you guys have. I guess I had a couple questions. First is just, you know, Jeff, I don't know to the degree you can share, but if you could give some more color and help us understand better your sales funnel, whether you talk about it by size or how that ramp maybe looks over the next, you know, 12, 24 months. I'm curious, you know, within that, if you could talk about sort of what the pipeline looks by some of these end markets, you know, so, you know, how much of it's Wi-Fi, how much of it's, you know, 5G RAN, how much of it's, you know, defense and handset, you know, if you could give us any idea of what maybe that looks like.
spk06: Rick, good morning to you and thanks for your comments. In terms of color on the sales funnel, I'll pull Dave in here in a minute, but let me comment of what we've said and kind of what we see for, you know, looking ahead. What we are driving to from a plan standpoint, we mentioned is double digit growth quarter over quarter for the December quarter. And that's driven purely by the number of programs that we're planning on ramping. We mentioned Wi-Fi 6, Wi-Fi 6E. There's infrastructure that's starting to come into play as well. But predominantly over the next few quarters, revenue is going to be dominated in the Wi-Fi sector. arena. Also for the full year, we're, you know, we feel very confident with the sales funnel that we have and the design win notifications that we've received from customers that we should, you know, from a plan standpoint, we're fully expecting triple digit growth year over year. And that's FY22 over FY21. I think the market expects that out of us, but I'm very pleased that we've got a robust sales funnel that actually supports that. The activity in Wi-Fi 6, we're adding additional customers into Wi-Fi 6. I know that's been some time coming. There's been some headwinds in the market, but from a Wi-Fi 6E standpoint, that's a new market. We talked about what we're doing in tri-band, ultra tri-band, as well as in the Wi-Fi 6E, bringing in the new six gigahertz band and solutions into that band. So, you know, for us, it starts with having the product portfolio that you can attract the customers, but then having the end, the back end application sales organization that can drive and work with customers to solve any system issues, board-level issues that can drive towards these design wins. Our approach has always been in terms of sales funnel. Part of the sales funnel is, you know, earlier in the sales funnel is the design wins. So if you look at what we've announced previously when we talk about design wins, you can actually build that sales funnel and look at what's dropping in And if you look at where we're ramping, you can see clearly there's Wi-Fi 6 and Wi-Fi 6E dropping through to the sales revenue portion of the sales funnel. And we've talked about some of the headwinds in infrastructure, but we think that we've got a product portfolio and design wind pipeline there that's going to support growth going forward. Dave, do you want to add anything?
spk04: Just a couple comments, Rick. You know, we've got a CRM tool that we utilize, and we've got a model. And, you know, there's quarterly metrics that we track to for the sales funnel. We are focused right now on the Wi-Fi 6E. That has the fastest growth opportunity for us, and we are delivering technology right now that's ahead of the competition. And we expect to and will continue to drive R&D to maintain that lead. So that is a focus with the sales organization on securing the design wins that Jeff highlighted. The infrastructure we still believe is a good market. That layers in next year, calendar year 2022. And then the mobile, as we highlighted, more comes into the latter part of next year, really you know, being significant in County of 2023. So that's really the motivation, the drive that the team's looking at right now.
spk05: Thanks, guys. And kind of in line with that, I'm curious on capacity. Sounds like you guys are on track for the 500 million exiting this year. You know, I mean, that's great. I mean, I'm just curious along the way if you're bumping into any bottlenecks, you know, on the labor side or tool side and You know, where I'm going with that is I looked at, you know, you see this hockey stick ramp in your model next year with all these design wins and all this activity. I didn't know if you could talk at all about what your capacity plans are for next year. And I'm curious, you know, with the CHIPS Act or the, I guess it's the Innovation and Competition Act, you know, kind of making its way through Congress. I mean, are you seeing... tool, you know, lead times start to stretch out or extend as people anticipate those monies coming loose. You know, maybe by the end of this year, I know there's some speculation. So I didn't know if you were having to order stuff now, you know, maybe a little earlier than you have in the past in terms of tools. Thanks.
spk06: Yes, thanks. So to that, you know, additional color on that capacity, it is, you know, we saw this problem coming and got ahead of it. We've been, you know, this is not, capacity is not something that you dial in overnight. You've got to commit to it. In terms of the labor, the labor pool has come together quite well. We, you know, we've been able to from a recruiting standpoint, been able to tap the local community colleges, the local universities there in New York, as well as recruit from out of state. And so labor has come together pretty well. Again, this is something that happens over a period of quarters. We have to have labor in place at least one quarter in advance of when you're really going to get the productivity out of that. I would like to comment, and I think this is a credit to our New York Fab team. If you look at the productivity, as everybody's well aware from the pandemic we've been weathering, if you look at the productivity from January of last year to now in our factory, it has been a straight line up. And that has been through a combination of the tools, as well as the labor that we've brought on board. And that's, you know, I've always said our strategy there is to get to a point where we can support cash flow break-even, and then, you know, we'll adjust accordingly. You mentioned the CHIPS Act or the innovation bill that has been making its way through Congress. To our knowledge, that's not yet been approved on the House side. Obviously, we're watching that very closely, and certainly we've got some ideas on how we can continue to expand moving forward. I think strategically for us, we can look at larger-scale wafers, and additional capacity, you know, taking from 500 million filters into several billion filters would give us capacity then to attract Tier 1 type activity in mobile. And then the final point I'd like to emphasize, and I think we hit this in the script, but I want to emphasize it, If you look at – we're very pleased with the capacity that we have available to us, where we're focused on – I've always talked about cycle time, but also adding to the expertise in the engineering on this front as well. We've actually added some talent. As most people know, Rowan Holden is our chief product officer. He's carried the weight and water getting us into the mobile as well as the infrastructure thus far. And we've added Cameron Chima over the last quarter to help expand out that expertise. And we're really focusing on improvement of efficiency and velocity of products into the market. And that's, if you look at really where we're fine-tuning, the capacity is, we're in excellent position there. I don't see any roadblock to us being able to deliver the product It is – it's more the engineering and cycle time of engineering. We're focusing on shorter time to market, getting from the time we get a spec from a customer to the time we deliver the product. And overall, I think that's a benefit of the model that we have in terms of design and manufacturing, and that's how we're built, and we're just focused on design throughput efficiency, and that's where we're working currently in engineering.
spk02: Thank you, Rick.
spk09: Thank you. At this time, we've reached the end of our question and answer session. I'll turn the floor right to management for closing remarks.
spk06: I wanted to take the opportunity to thank everyone that's joined us today. We will continue to plan to update you on significant milestones moving forward. I wish everyone a safe and healthy day, and thank you again, and goodbye. This concludes today's conference.
spk09: You may disconnect your lines at this time. Thank you for your participation.
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