Akoustis Technologies, Inc. (AKTS) on Q3 2022 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen and welcome to Akoustis Technologies Fiscal 2022 Third Quarter Conference Call. As a reminder, this conference call is being recorded. At the conclusion of the company’s presentation, Akoustis management will take questions. A replay of the call will be available to the Investor Relations section of the Akoustis website. I will now turn the conference over to Tom Sepenzis, Director of Investor Relations. Thank you. And you may begin sir.
Tom Sepenzis: Thank you, operator and good morning to everyone on the call. Welcome to Akoustis third quarter fiscal 2022 conference call. We are joined today by our Founder and CEO, Jeff Shealy; CFO, Ken Boller; and EVP of Business Development, Dave Aichele. Before we begin, please note that today’s presentation includes forward-looking statements about our business outlook. All statements other than statements of historical facts included in this conference call, such as expectations regarding our strategies, 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, litigation matters, guidance regarding expected revenue, product orders and milestones for the current and future fiscal quarters, and expectations regarding the integration of acquired business operations are forward-looking 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 akoustis.com. I would now like to turn the call over to Jeff Shealy, Founder and CEO of Akoustis.
Jeff Shealy: Thank you, Tom and welcome, everyone to our fiscal 2022 third quarter conference call. I am pleased to report that Akoustis delivered greater than 25% sequential revenue growth and over 80% year-over-year revenue growth as we continue to commercialize our leading BAW filter products. We were able to accomplish this despite the ongoing headwinds in the macro environment driven by COVID-19 and the associated semiconductor supply chain shortages. In the March quarter, 5 new customers enter production, bringing the total number of customers ramping production to 10. We expect to see this number continue to grow throughout calendar 2022. We delivered record revenue of $4.6 million in the quarter and we remain confident that we will see continued sequential revenue growth for the foreseeable future. Currently, given our growing customer activity and WiFi, 5G mobile, 5G infrastructure and other markets, we expect revenue for our current fourth fiscal quarter ending June 30, 2022 will increase by more than 30% sequentially. I would now like to discuss each of our target market segments in greater detail, beginning with the WiFi segment. We ramped production of XBAW filters for 3 additional WiFi customers in the March quarter, bringing the total number of WiFi customers to 8. We have over 15 announced design wins, including 2 new design wins secured in the March quarter and we expect to add both additional customers and design wins as calendar 2022 progresses, I am also pleased to announce that we fully qualified our 5.5 gigahertz and 6.5 gigahertz WiFi 6E XBAW filter products over the past few months and expect to qualify and release into production for additional WiFi 6E/7 filters in the current June quarter. Additionally, we continue to advance the progress of our WiFi 7 diplexer, which we are currently developing for one of the largest PC chipset makers in the world. The first design of this new diplexer was shipped to this Fortune 100 customer in December and we received positive feedback on that design. The initial diplexer performed well and enabled the customer to characterize in their system providing valuable technical feedback for the next design iteration, which was just released into our New York fab facility. We expect to ship the new iteration sample filter to the customer by the end of the current June quarter. We remain on schedule for commercialization of this extremely exciting product and have received interest from other OEMs for diplexer, triplexer and other multiplexer products. We attribute our surge in recent design wins to the fact that we were an early entrant in WiFi 6 and WiFi 6E and 7 BAW filter solutions to the market and today have one of the most extensive WiFi 6E and 7 BAW filter portfolios to address the enormous challenges of difficult dual-band coexist, wide bandwidth and high frequency operation within the 5 to 7 gigahertz frequency spectrum. To summarize our recent WiFi activity, we now have more than 12 commercialized XBAW WiFi filters, 8 for WiFi 6E and 4 for WiFi 6. As of today, we have announced a total of 15 design wins, up from 10 design wins at the end of last quarter. Furthermore, we expect to see additional WiFi filter design wins throughout the current calendar year. Further, we have qualified and released into production 4 WiFi filters, including WiFi 6 and WiFi 6E and 7 and lastly, we are advancing the development of our XBAW multiplexer products led by our first diplexer which will allow us to enter the PC market, another very substantial market opportunity in both unit volume and revenue. Moving on to 5G mobile, we continued our momentum in 5G mobile during the March quarter, adding another new multibillion dollar Tier 1 RF front-end module maker customer bringing the total number of 5G mobile customers in development to 5, including 3 Tier 1 companies. Our new Tier 1 mobile customer is currently designing multiple 5G filters and plans to use our XBAW technology to deliver multiple best-in-class 5G mobile modules in challenging bands above 2 gigahertz for use in cutting-edge 5G smartphones and other devices. We received an initial development order from this new Tier 1 customer early in the March quarter for a challenging 5G mobile band with stringent coexistence specifications. We shipped a second XBAW filter designed to our Tier 1 5G mobile RF component customer in the March quarter and received a follow-on order to optimize the first design for an expected production ramp beginning at the end of the current calendar year. We also received a follow-on order from our first Tier 2 5G mobile RF module customer to reiterate the original filter design and to deliver resonator models for 2 new additional filters. The redesign was driven by changes to the customer’s filter specification and was not driven by our XBAW technology. We remain on track to deliver completed filters using our wafer level package or WLP by the end of the current quarter and are pleased with our expanding relationship with this customer. And finally, we continue to progress with the Tier 1 5G mobile customer we engaged with at the end of calendar 2021. After shipping initial resonators in December, the customer has characterized and designed new XBAW filters that are expected to be released into our New York fab in the current June quarter. As we mentioned on our last quarterly update call, we are bringing the production of our WLP in-house within our New York fab. We continue to work towards the design lock of multiple new advanced packages with full WLP process qualification expected to follow later this calendar year. We believe bringing the WLP process in-house enhances substantially our ability to control the quality, cost and customization of our advanced packages. To summarize our 5G mobile activity, we added a new Tier 1 5G mobile customer during the March quarter, bringing the total number of mobile customers to 5, including 3 Tier 1 customers. Further, we have multiple customer-funded XBAW filters in design and our current customer engagements include a new Tier 1 mobile RF front-end module and filter OEM for whom we expect to make multiple filters, a Tier 1 RF component company that we are developing 2 XBAW filters for, a second Tier 1 RF front-end module maker that is using our XBAW resonators to develop multiple filters for 5G handsets, a Tier 2 RF front-end module maker, which has signed a foundry agreement with us for development of 1 XBAW filter and a second Tier 2 front-end module maker that we are currently developing one filter for, with the expectation of additional filters for 4G/5G mobile if the first filter is accepted. We shipped multiple 5G mobile XBAW filter samples to our customers during the March quarter. And finally, we are currently migrating the manufacturing supply chain of WLP into our New York fab, which we expect to have design locked and available for qualified production in the second half of calendar 2022. And now, I would like to discuss our network infrastructure business highlights. I am pleased to announce that we officially began ramping production of 2 Citizens Broadband Radio Service infrastructure companies in the March quarter. We expect these two customers to continue to ramp in the current June quarter and beyond. I am also pleased to announce that we have recently received another CBRS design win from a third network infrastructure OEM which will begin to ramp in the June quarter as well. Given the success and momentum we are experiencing in WiFi and 5G mobile, we shifted our engineering resources in the March quarter. As such, our new C-Band 3.8 gigahertz 5G filter for the U.S. infrastructure market is now expected to sample in the current quarter and we remain actively pursuing our next generation massive MIMO materials and we will update you as this effort progresses. To summarize our 5G network infrastructure activity, we have 4 completed 5G network infrastructure XBAW filters, 3 for 5G small cell base stations and 1 for CBRS. To-date, we have announced 3 design wins in small cell with our Tier 1 customer and 1 design win from a second customer. Additionally, we have received 4 design wins for CBRS from 3 leading network infrastructure OEMs. Moving on, in our defense contract business, we continued to progress during Q2 on our existing R&D contract with DARPA to further enhance our XBAW PDK. In addition, we are finalizing a multiyear multimillion dollar contract with DARPA to extend the operating range of our XBAW filters up to 18 gigahertz using novel materials in device manufacturing and expect to have positive news on this front to share with you soon. These new materials may have implications in our current 2 to 7 gigahertz frequency range that we are focused on today given higher power handling capability and high Q values associated with these new materials. In our other market segment, we recently announced entering the RF timing and frequency market with our leading XBAW resonators. We are working with a leading maker of timing RF components to develop ultra high frequency XBAW resonators for use in this customer’s finished devices. The timing RF market represents a significant new opportunity for Akoustis in both unit volume and revenue. Our primary customer is developing products that could be disruptive in the timing RF components market looking to displace older analog technologies with ultra-low jitter and phase noise devices. We are extremely excited that our leading XBAW resonators can be a part of this groundbreaking opportunity. And finally, as we announced this morning, we have completed the acquisition of the remaining 49% of RFMi which will enhance our sales channels supply chain and addressable TAM. We welcome the entire RFMi staff to Akoustis and look forward to continued success as a team to grow our business in the RF acoustic filter market. To summarize our other market segment activity, we have 7 completed XBAW filter solutions for the civilian and defense markets. Further, our ultra-high frequency XBAW resonators are now being used to deliver disruptive digital timing and control products to the broader communications industry. In addition, we continue to refine and improve our XBAW PDK driven by the direct to Phase 2 contract with DARPA and we expect to sign a new multiyear multimillion dollar contract with DARPA to scale our XBAW technology up to 18 gigahertz. Further, we successfully completed the acquisition of the remaining 49% of RFMi. And finally, in addition to the numerous customers acquired through the RFMi acquisition, we have a total of 3 XBAW customer engagements, 2 of which have already placed purchase orders with us or provided NRE revenue. I would now like to hand the call over to Ken to go through our financial highlights.
Ken Boller: Thank you, Jeff. For the third quarter ended March 31, 2022, the company reported revenue of $4.6 million, which is an increase of 25% over the prior quarter ended December 31, 2021 and in line with our revenue guidance. On a GAAP basis, operating loss was $14.8 million for the March quarter, mainly driven by revenue of $4.6 million offset by cost of revenue of $5.4 million and operating expenses of $14 million. Included in operating expenses were labor costs of $7.2 million, depreciation and amortization of $1.5 million and other operational costs totaling $5.4 million. As a result, GAAP net loss per share was $0.27. On a non-GAAP basis, operating loss was $12.3 million and non-GAAP net loss per share was $0.22. 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. CapEx spend for Q3 was $9 million compared to $7.1 million in the prior quarter, mostly related to the continuous capacity expansion and equipment redundancy in the company’s New York fab. I would like to highlight that we expect CapEx to decline significantly in the second half of the year as the front-end loaded costs involved with bringing the wafer level packaging in-house tapers off. Cash used in operating activities is beginning to trend down and was $9.7 million in Q3, down from $10.8 million in the prior quarter. We also expect to see our operating expenses decline in the second half of the year as our costs benefit from greater fab utilization. The company exited the March quarter with $55.9 million in cash and cash equivalents versus $67.5 million at the end of the previous quarter. During the March quarter, the company raised $6.8 million in cash through additional at-the-market equity financing and average price of approximately $6.03 per share. In the June quarter, we expect multiple new WiFi 6E and network infrastructure customers to ramp production and therefore we expect to see record revenue, up more than 30% sequentially from the March quarter. And based upon our growing backlog of design wins, we anticipate that the top line growth will continue into our next fiscal year and beyond. I will now turn the call back over to Jeff to discuss our fourth fiscal quarter performance and future milestones.
Jeff Shealy: Thank you, Ken. I am pleased to report that our view of the June quarter remains positive. Despite the ongoing semiconductor supply shortages and supply chain issues that are impacting the broader industry. Our momentum continues to grow driven by WiFi 6, WiFi 6E, 5G mobile, 5G infrastructure and our other markets segment. By the end of the current quarter, we expect to ramp production from 10 customers to more than 11 customers, with additional customer design wins expected across all our markets as calendar 2022 progresses. In the June quarter, we expect to generate revenue from each of our business segments, including 5G mobile, WiFi, 5G network infrastructure, and our other market segment. We continue to strive towards executing on our targeted milestones and will continue to keep you informed of our progress. Our anticipated June 2022 milestones include in our WiFi segment, first, we expect to announce 3 additional WiFi 6E design wins. Further, we expect to deliver our second diplexer iteration to our Fortune 100 PC chipset customer and received feedback. And we expect a development order from a Fortune 100 internet company for two diplexers for design into next generation AR/VR headsets and other consumer devices. For the 5G mobile segment we expect to receive our first purchase order for a 5G mobile filter from a Tier 1 customer announced in December. In addition, we expect to iterate the original filter design for our first Tier 2 RF front-end module customer and receive a purchase order for 2 additional XBAW filters for development. And lastly, we are currently supporting our new Tier 1 mobile customer to develop initial samples of their first XBAW filter. Next, in our 5G network infrastructure segment, we plan to ramp production with 3 CBRS infrastructure customers and we expect to deliver a 3.7 to 3.98 gigahertz T-band 5G filter for the U.S. market and expect to sample with multiple Tier 1 customers for both small cell and DAS/AAS base station equipment. And finally, in our other market segment, we expect to receive a purchase order for the development of new XBAW multi-chip module for a multibillion dollar Tier 1 defense customer. And we expect to finalize a new multiyear multimillion dollar project with DARPA. In conclusion, we believe the market opportunity for our patented high frequency XBAW filters is substantial. We now have 58 issued patents and 100 patents pending as we continue to build a substantial IP moat around our technology. We continue to work diligently to achieve each of our stated objectives and we will continue to provide updates on our execution against these objectives going forward. Finally, I would like to thank our employees for their hard work, passion and dedication, particularly during the ongoing pandemic as our team has kept the momentum going on our R&D, which has led to the multiple design wins across the WiFi, 5G network infrastructure and defense markets. We have also experienced exceptional momentum in the 5G mobile market driven by our leadership in 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.
Operator: Thank you very much. We have our first question from the line of Cody Acree with Benchmark. Please go ahead.
Cody Acree: Yes, guys. Thanks for taking the question and congratulations on the progress. Guys, I guess Jeff or Dave, can you just talk real quickly about China with the lockdowns in the Shanghai area? Are you seeing that impacting any of your engagements?
Jeff Shealy: Hey, good morning, Cody, Jeff here. Let me let, I’ll let Dave start and I will follow-up with some comments.
Dave Aichele: Good morning, Cody. Good to hear from you. The – we are not really seeing too much impact from the supply side. What we are seeing is just delays of exporting and importing into the country. It’s mainly going through ports that maybe filled up on the receipt of materials. So, we have some of our OSATs, somebody else has located in China and then some of the customers as well. So that’s impacting but that’s maybe a 1, 2 week delay that we are counting for right now. So, other than that, we are not seeing anything significant.
Jeff Shealy: Yes. And Cody, Jeff, here. Just from the China side, from my perspective, I give a lot of credit to our operations team as you probably are well aware. We use our OSATs overseas. And our team has spent many, many evenings up late managing. We had really one of the strongest quarters out of the supply chain. And I credit our operations team for that. We had a healthy backlog and we successfully shipped against the internal objectives that we had for the quarter. And so I think what’s has – what this pandemic has done is forced a lot of handholding online on calls, but we feel we have got the right team to manage that and they did an excellent job last quarter.
Cody Acree: Excellent. Thank you for that. Jeff, you gave a lot of detail and thank you for that on the prepared remarks. But maybe if you just go back and just summarize your customers, your 10 customers, going to 11 here in the June quarter and how that is impacting your revenue? If you can just talk about where that XBAW revenue came from during the quarter, where the bulk of that is coming from and then into the June quarter, what are your expectations and then maybe how does that parse through the rest of the year?
Jeff Shealy: Okay. From a customer base, I will let Dave touch that and then I will certainly follow-up more strategically.
Dave Aichele: So to the question, Cody, we have got as we highlighted 10 production customers right now. And a majority of those are in the WiFi sector. So approximately 8 of them are in WiFi and 2 are in the 5G CBRS sector. And so as you can see, a larger percentage is in the WiFi. And we have a split between where I categorize with enterprise and retailer consumer and also the carrier market. It’s a good split. And it’s also a split that we have regionally from North America to Europe and then also in Asia. Most of the production is being done over in Asia, but at least from a design win and OEM, its split between those regions. And as Jeff highlighted, we had a very strong last quarter and shipping against to these customers, the 5G CBRS market is just really starting to pick up in North America, so we are going to continue to track that as well. And I expect as we have the early remarks that we are going to continue with these design wins and transition these customers to production. And it’s just – it’s a mix on timing. And also, some of the customers are being impacted by the semiconductor shortage. So we are going to continue to layer in new customers to offset some of the ups and downs that we may see.
Jeff Shealy: Cody, from just to piggyback that a little bit, just segment wise, if you look at the 5G infrastructure, we actually had a healthy quarter as we mentioned in the comments of in the CBRS. I believe the volumes were up approximately 5x in terms of volumes in the 5G infrastructure segment. For us, just at a high level, 2022 is really about growing our revenues. We have got design wins that we have been – we have been announcing and expanding. And our growth in 2022 is really focused from a revenue basis going to draw from WiFi. And really the storyline for the second half of 2022 is we have been working very diligently on wafer level package as well as these miniature form factors that are – that enable us to get into the mobile market. As we said, we have got currently 5 customers in the mobile segment and we are really pushing hard to home in on a first design win in the second half. So, that’s sort of how the how the story kind of builds and – but that’s how we are pushing it. And again, with regard to kind of the support for that, what we have been putting in is capacity, we have been wrapping that up in the New York fab in order to support the programs that we have as well as some of the initial mobile work that we are doing. So, there is some additional color.
Cody Acree: I appreciate that guys both of you. If you can just talk maybe, Jeff, a little bit about your current momentum, just your revenue base is obviously skewed right now towards WiFi. And what I guess I am looking for is some efforts over some explanation of the maturity of your projects and how that I expect you would be talking about them being more in the nascence of your relationships that when can we think about those moving into more mature volumes?
Jeff Shealy: So from – the way I look at it is really into two branches. Number one, you got to have the right products and you got to have the right machinery or operations in order to support that. We have been putting that in place and very pleased that we have a chip fab that can produce the designs and – but you also have to have the right product base. So in the – what we are supporting now in WiFi, I think we said in the prepared comments, we have got 12 commercialized filters, 8 of those are for WiFi 6E as well as four for WiFi 6. From a momentum standpoint, I think was part of your question, we have – the WLP has really begin to allow us to get shipments to these mobile customers. We have had successful demonstrations of our chips in RF modules. And that’s what’s given us the confidence on the mobile front. So, I’d say the momentum is high on the mobile side. We are certainly enjoying the benefit of there being more RF module companies out there than RF filter companies to supply those modules. So, we certainly benefit from that. But we are now in a position on the WLP. And again, if you look back from impact of the pandemic, we went from a supply chain that was outsourced and had a very long cycle time to one that’s in stores that we can support out of New York. And that’s what gives us the momentum as well as the confidence for the mobile market. So, those are my comments at least momentum wise.
Cody Acree: Okay, thank you. That’s it for me. Thank you.
Dave Aichele: Thanks, Cody.
Jeff Shealy: Thanks, Cody.
Operator: Thank you. We have next question from the line of Harsh Kumar from Piper Sandler. Please go ahead.
Harsh Kumar: Yes. Hey, guys. Congratulations. First of all, some pretty tremendous growth coming. I wanted to Jeff ask about the 30% sequential, 30% or more sequential growth rate that you highlighted for the June quarter. Interestingly, you also mentioned that you expect most of your revenue items, business lines to contribute to that growth number. I was curious how you think about that number in terms of the different areas that, that is coming from infrastructure and mobile/WiFi, mobile and then WiFi? And then also my second question I will ask it right now, when do you think diplexers for PCs become meaningful for you? Is it in the June quarter or whether that be later on?
Jeff Shealy: Okay. So, let’s tackle both of those. I think I am go in reverse order, Dave touch on the diplexer timing for that program.
Dave Aichele: Yes. So, on the diplexer development that we are doing for the chipset, PC chipset OEM, really that’s a, we’ve gotten the first iteration that we shipped to them and they were able to characterize provide us feedback in their design and we are iterating the second design, expected to ship that in the end of this quarter. And then really what we are moving into is a development phase with them. And that development phase is going to take about 15 months where they are going to start characterizing their systems, start doing their MPI launch and then also go into a preproduction mode. And then by the end of next year, we expect the product to be in production ramp and relatively high volume. So, that’s the focus with that customer. We are now just starting to take this design and the technology, the XBAW Technology, which has a significant benefit in these type of applications for mobile, consumer applications where coexist requirements for WiFi 6E and WiFi 7, for asynchronous operation is becoming very important benefits that you see with the XBAW Technology on isolation, and coexist capabilities. So, as we announced in the Q4, or as we come into Q4, we expect to get another order from a consumer mobile application. So, we are excited about the potential with the diplexer and also the technology lends itself well with diplexers and potentially quadplexers and beyond. So, we are going to continue to engage with the market and share our capabilities and technology.
Jeff Shealy: Okay. Harsh, back to your first point in terms of sequential growth, I think we indicated that growth would come from all the segments. I will tackle those and in the following order. First, in the WiFi segment, what I would characterize is, we mentioned the ongoing plans for not only additional design wins, but we already have enough design wins. And just I want investors to appreciate we are just now ramping in WiFi 6E, and just started that ramp. So, we are going to continue ramping in the WiFi segment. That’s both WiFi 6, where we have announced additional sockets in the WiFi 6. We have got design wins that are just starting production in WiFi 6E. There is development that’s going on in WiFi 7. And if you look at a very high level in that WiFi segment where that’s going is integration is a big part of the product roadmap. And that’s – that certainly is we would consider that greater by two or more filters in a module. In the – so that’s, again, with – that’s just continued growth across multiple design wins in the WiFi segment. If you go to the 5G Mobile segment, we have announced the addition – the CBRS is a point of strength for us. And we will see growth quarter-over-quarter for that. I expect that to be in the single digits quarter-over-quarter. And then Dave touched on what kind of activity we have in the Mobile segment earlier. But I can say that we have got active customers that have roadmaps that have insertion points. And so we are driving hard supplying those designs. And again, I emphasize those designs are coming with the WLP process, which we now can produce in-house. And so we are supporting those and we will see growth in that segment as well. And then in the Other Market segment, as where we have been winding down the DARPA PDK immense program that we have. We were pretty right on the details of the new multimillion dollar DARPA program. However, we had no revenue in the March quarter from the DARPA – from the new DARPA program. And so that program will be starting as well. And we are really excited about that program for some of the technology that we see that’s going to come from that will be further enhancements in the end products that we will be producing. So, we are pretty excited about that. But it is across other markets, all our of our four market segments that we discussed.
Harsh Kumar: Thanks, guys and congratulations.
Jeff Shealy: Okay. Thank you, Harsh.
Operator: Thank you. We have next question from the line of Rich Schaefer with Oppenheimer. Please go ahead.
Rich Schaefer: Thanks guys and I will echo Harsh’s congratulations. Nice progress seems like on all fronts. I think my question, my first one anyways is really on BAW and congrats on the latest mobile PO that you are talking about in the release and everything. I guess I am curious if you can give us any sense of revenue timing there for that latest PO and then maybe bigger picture to sort of if you could level set us and maybe describe your mobile, what your mobile revenue funnel looks like now, just across the five customers, excuse me?
Jeff Shealy: Rick. Yes, no worries. Rick, thanks for your kind comment. Dave will start with the customer perspective there.
Dave Aichele: Good morning Rick. Let me paint a little picture that looks out maybe over the next 2 years. And I think to echo what Jeff has commented, the WLP enablement has really allowed us to accelerate some of these engagements prior to really having WLP in-house. It was more of an R&D relationship. And we have been engaged with many of these customers over the last 5 years, and really turning the corner so that we can start looking at pre-production, production ramps programs. So, the one that’s the most exciting for us is the Tier 1 component manufacturer, which we commented. We have got two designs with them and both the designs have been successful. And we look to them to be our first customer and volume production target is by the end of this year. And really, that’s to align with our WLP qualification as well. And that customer has already got favorable response on their designs with their channels. So, that will lead into production through 2023 with one, if not two. So, that’s what we are in discussions with right now. With respect to the other four, their different levels of engagements, the one we just announced in March is early. As you can imagine, that’s going to take some time to transition, but our hope is that things go well with them through the development and that we will see production ramp in 2024. So, that is a little bit further out. And then in between that is the other engagements that we are targeting. So, our Tier 2, our front end, the intent would be that the design would go onto production next year as well targeting the China and China mobile market. So, it’s various levels of degrees from ramping to production end of this year to other programs that we expect to be in production in 2024. But it’s all – that is our next step function and revenue growth once we see WiFi continue to grow, and then the 5G infrastructure, the mobile start laying on top of that.
Jeff Shealy: And Rick, Jeff here, I just was going to add a little more color around that just to have you appreciate what we see from our side. Until the really late in the March quarter, WLP, which is that enablement technology that allows very miniature designs that can be integrated in RF modules, I would just characterize that as a pain point for us to get parts to customers, as we were building that supply chain in-house and beginning the qualification for it. So, where we have moved from struggling with that technology to actually now delivering full wafers with complete WLP integration into the technology module. So, we are – that we have got very positive feedback from the customers. In terms of just to reiterate a couple things Dave said. We really focused on a second half design win, which design win for us, what also includes a fair amount of pre-production units, and those we expect would be second half of 2022 going into production, as Dave said, in 2023, with one to two customers is kind of what our business plan looks like. Also, we would like to characterize, the type of engagements that we are having. That could be one to two engineering weekly meetings with these customers, meeting separately with procurement, separate meetings with quality, lot of quality documents coming through, coming across for us to satisfy their quality requirements as well as management on really building bridges and strategic engagement with them for us as a supplier. So, that’s just a little more color to what Dave added.
Rich Schaefer: Thanks for all that color. And I know, I guess my second question is just around capacity. And I saw on the release, you are talking about 500 million, I think by the end of the year. And obviously, a lot of that I would assume is from mobile and opening the doors there to ramp that business. I guess I am curious where capacity is so kind of how far you have to go to get to that 500 million by the end of this calendar year. I believe its calendar year comment? And Jeff, I was curious if I would, maybe if we could get your perspective on sort of what the latest you are hearing on the Chips Act is, or I guess whatever it’s being called now. And because again, just I am curious, I guess how long sort of once it’s approved. I guess really my question is what’s the strategy here around ordering tools given long lead times? Do you start throwing orders in now or if how past a year lead time. So, do you order ahead of any kind of Chips Act money, or are you treating that as found money if and when it comes or just sort of what’s your strategies around that would be would be helpful, too? Thanks.
Jeff Shealy: Okay. So Rick, I want to be – I am going to tackle your first or your second question first, if you don’t mind. So, just in terms of the latest on the Chips Act, I think it’s pretty well documented that the House versus Senate voted and successfully on their bill. The House voted separately on a similar, but had some differences in it. So, what the process is, is that both houses of the Congress are gathering a committee, which is made up of approximately 80 members, thereabouts. And that committee will then sort through the differences. We expect those differences to be hashed out as early as later this month. And then it would be sent to the President’s desk for signature, which I think all indications that we have seen is that will happen. So, pretty optimistic about that bill being signed into law. In terms of our strategy, it kind of goes back to your first question, which was we have said all along that we were going to invest in capacity that could get us to better than cash flow breakeven. And the investments that we have made, this isn’t about ordering equipment now and anticipation. We have always said that we weren’t going to put the mobile market requirements on the backs of our investors. However, we have made the investments to get to 500 million filter chips at the end of this year, just to characterize that for you. We actually model out the factory for 18 months and react accordingly. And so what I would characterize is from an equipment standpoint, what you see in our CapEx reflects the equipment that we have already had the foresight to order to get to the 500 million. So, we are not ordering equipment at this stage to get to 500 million, that’s more about the labor aspect to actually run the wafers. So, we are very comfortable with the investment we made. As you know, lead times on some of this equipment can be pretty challenging. However, we didn’t want to jeopardize an initial capacity to get to 500 million in this type of timeframe, where it’s pretty challenging. So, we had to foresight to order that those equipments, some of the final installs will be happening around middle of the year. So, we are not in the ordering phase of that, we are in the receiving and installing phase of that. But predominantly, the limitation on filters for us will be labor. And we will add that as warranted. So, I think I covered your question if you have any follow-up I don’t know.
Rich Schaefer: No, that was great. Thanks so much Jeff.
Jeff Shealy: Okay. Thank you, Rich.
Operator: Thank you. We have next question from the line of Suji Desilva with ROTH Capital. Please go ahead.
Suji Desilva: Hi, Jeff. Hi Ken. Dave Aichele, congratulations as well, great progress here. Jeff, in your prepared remarks, you talked about shifting resources between segments to address new opportunities. Perhaps it was around wireless infrastructure. Could you clarify or elaborate on what that was in reference to?
Jeff Shealy: Yes. I mean we have – let me just maybe back up and help you appreciate a little bit about our engineering. So, we have got a product engineering and advanced engineering. And the goal of the product engineering is being focused on low risk, high predictability schedules to get to market. Where we do have flexibility though is in the advanced engineering team to go after opportunities as they come in. I think Dave mentioned some of the opportunities. And I think it’s the strength of the company being able to rapidly respond. We actually from a business process will look at opportunities as they come into the company, Pareto, those for opportunities and have the flexibility to shift. The beauty of what we are doing is we don’t have to – we are not shifting technologies per se, the technologies that we are using with the exception of the WLP, have a relatively mature technologies, and we are pretty comfortable. So, we have the flexibility in the fab to run products from different markets. I think that’s we have got very good supporting evidence that we can run dozens of different products in the fab just because it follows a very similar process flow. So, I think specifically, we certainly have moved resources from the 5G infrastructure small cell market. We have moved those on to – into the mobile market, as well as some of the advanced chips that we have been very vocal about in the WiFi, where we are integrating more than one filter into a module. And we do so really with the customer support and commitment. So, we have got agreements in place, as well as orders in place to actually produce those as well as line of sight to programs. Anything you want to add to that, Dave?
Dave Aichele: Yes. So Suji, a couple of comments that I would like to make is, early investments in the 5G infrastructure was primarily the China market, that return on investment has not really panned out as well as we had hoped. And a lot of that is due to the way that China has been rolling out their spectrum. The infrastructure market is a little bit slow to adopt new standards. And the deployments in Europe and also in the U.S. is going to take a little bit of time. So, what we have been looking at is where is the really growth opportunities. And one of the things that is clear, at least with our engagements with the WiFi market is we are now recognized as one of the leading BAW filter suppliers. And the industry is starting to shift pretty significantly away from traditional type filters to more of these high performance filters. So, we see the activity in what we have established with 60 and upcoming seven. As a way to continue to leverage that we want to continue to have a portfolio of products that we will be the primary source that they go to, they would be in the end customer comes to us to have these engagements. So, with that and the activity level on mobile, we have had to put some design resources there. So, that’s the main reason for some of the shifts.
Suji Desilva: Okay. Thanks Jeff and Dave, that’s very helpful color. And maybe just and this question may not be fair, but just to ask it. The mobile customers that are coming, versus the WiFi customers you have now, is there a way to kind of take the average run rate of the two over – as they mature over time and saying what kind of multiplier a mobile customer may have, customer may have for you versus a typical WiFi customer?
Dave Aichele: Yes. So, the multiples are pretty significant. And it really depends on if you are talking to Tier 1, or if you are talking to Tier 2. So, with respect to the Tier 1s, depending on the end platform that they are going after that multiplier can be pretty significant with respect to an OEM that we get in the WiFi market. So, that multiplier can be 5x to 10x with respect to what we are seeing right now on run rate on the WiFi side. So, that’s something that, as we talked about that revenue will start layering on in calendar year 2023 and then going into 2024.
Jeff Shealy: Yes. And Suji, I will just add to that, that the pre-production levels for the mobile market are more in line with what the production levels are in the WiFi market, that’s a another colorful way of saying what Dave said.
Suji Desilva: That’s helpful. Thanks, Jeff. Thanks guys.
Jeff Shealy: Okay. Thank you, Suji.
Dave Aichele: Thanks Suji.
Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Jeff Shealy, Founder and CEO for closing remarks. Over to you, sir.
Jeff Shealy: Okay. Well, I would like to thank everyone for your time today. We look forward to speaking with you during our next update call to discuss the June quarter’s execution against our milestones and future expectations. I would like to wish everybody a good day and goodbye. Thank you.
Operator: Thank you very much. Ladies and gentlemen, that concludes today’s conference call. You may disconnect your lines at this time. Thank you for your participation.
