Good day, ladies and gentlemen, and welcome to the Akoustis Technologies Fiscal 2023 Second Quarter Conference Call. As a reminder, this conference call is being recorded. At the conclusion of the company presentation, Akoustis management will take questions.

[Operator Instructions] A replay of this call will be available on the Investor Relations section of the Akoustis website..

Thank you, operator, and good morning to everyone on the call. Welcome to Akoustis second quarter fiscal 2023 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..

Thank you, Tom, and welcome everyone to our fiscal 2023 second quarter conference call. I am pleased to report that the December quarter was a transformative period for Akoustis.

This transformation is centered around our entry into the 5G mobile handset market through the qualification of our new wafer level packages that were developed and manufactured in less than one year in our Upstate New York fab.

The availability of this disruptive package technology facilitated our first design win along with a high volume order for the 5G mobile handset market, our largest addressable market by volume and revenue. In January, we completed the acquisition of privately held Grinding and Dicing Services, Inc.

or GDSI, a strategic addition to our business model across multiple fronts. GDSI has been a key part of our back-end supply chain over the past year, as we increase the usage of chip scale packaging or CSP and wafer level packaging or WLP in our XBAW RF filter product portfolio.

Further, GDSI adds a critical piece to our strategy in 2023 to pursue CHIPS Act funding to reshore our back-end packaging supply chain on our existing campus in Upstate New York.

Integrating and expanding GDSI into our New York operations will create an end-to-end domestic semiconductor manufacturing process supporting national security, while also creating many attractive high paying jobs in the Finger Lakes Region of New York State.

Finally, for our current RF filter customers, we expect that the integration of GDSI will enable Akoustis to substantially speed up the prototype process and consequently reduce the time to market for our leading XBAW filters.

This acquisition could not have happened at a better time as demand is rapidly increasing for (ph) BAW filters that operate at frequencies in our sweet spot above 3 gigahertz in the 5G mobile, Wi-Fi, network infrastructure, defense, timing control and other markets.

I am pleased to report another quarter of record revenue with 5% sequential growth over the September quarter. Our XBAW filter revenue grew sequentially in the December quarter and we expect continued growth on a quarterly basis moving forward. This revenue growth was achieved despite significant macro headwinds across most of our operating segments.

Looking ahead to the March quarter, we are expecting 20% to 40% sequential growth across multiple products and services participating in multiple end markets.

The weakening demand in the tech sector along with several other macro challenges may impact the rate of growth of our business in the near term, which is consistent with recent commentary and guidance from other semiconductor companies.

During the December quarter, we experienced broad weakness in our SAW filter business in end markets such as automotive, IoT, medical devices, and particularly in China and Europe.

We expect strengthening in our SAW business in the current quarter, however, in our XBAW filter business, we expect to see growth increase in the second half of the calendar year as we ramp in mobile and our next generation Wi-Fi 6E products begin to ramp with multiple customers While we navigate near term challenges, we continue to expect incremental sequential growth each quarter throughout this calendar year.

Further, we remain focused on executing our entry into the 5G mobile device market with volume shipments beginning this quarter providing Akoustis with a significant opportunity to grow rapidly in both unit volume and revenue for the foreseeable future.

I would now like to give a brief update regarding the CHIPS and Science Act of 2022 and how Akoustis hopes to benefit from the act. The CHIPS Act legislation was introduced and authored in part by Senate Majority Leader Chuck Schumer. Its goal was to boost U.S.

competitiveness with China by allocating tens of billions of dollars to increase domestic semiconductor manufacturing and science research. As some of you may recall, Senator Schumer has personally visited and toured the Akoustis fab in Upstate New York twice once in June 2021 and again this past September.

He was pleased with the growth in manufacturing capacity and new jobs that we have delivered over the past year.

Akoustis senior management is working closely with the local, regional and state government of New York along with Senator Schumer's office to support implementation of CHIPS Act opportunities in Upstate New York, which we expect will present a significant opportunity for the revitalization of Upstate New York semiconductor presence and in particular, the Greater Rochester area where Akoustis RF filter chip manufacturing facility is located.

Over the past five years, Akoustis has proudly manufactured its innovative RF filter chip products in the USA. We believe the chips funding is meaningful to Akoustis and its shareholders and that we perfectly fit Senator Schumer's blueprint to make New York the global innovation and semiconductor hub.

We plan to apply for funding under CHIPS Act shortly after the submission window opens to add multiple new 8 inch silicon wafer manufacturing lines at our New York site.

In addition, given the supply chain delays, energy shortages and constraints associated with our Asia packaging partners, we hope to secure CHIPS Act funding to leverage the back end expertise of our GDSI business to build a U.S.-based advanced packaging center for the purpose of reshoring our packaging supply chain to reduce product costs and deliver our filter products with shorter time to market.

This U.S. packaging facility would support Akoustis XBAW filters as well as be offered to GDSI's 250 plus customers requiring back-end services. With respect to the possible magnitude of the funding for Akoustis, we previously indicated the magnitude of our proposal could be a multiple of the current market cap of Akoustis.

Of course, there is no guarantee that we will receive the amount of funding in our proposal and it is noteworthy to say that the requirements and processes for submitting a proposal for funding under the CHIPS Act is yet to be published.

The projects financed by such funding would position Akoustis to manufacture and deliver billions of XBAW filter chips annually and to serve both Tier 1 and Tier 2 mobile device companies for 5G smartphones, as well as other multi-billion dollar end market including 5G network infrastructure, high frequency Wi-Fi devices and other wireless markets.

I would now like to provide a little more color on our primary target markets. We recently achieved one of the most important milestones in company history allowing us to participate in the 5G mobile market with the completion and qualification of our internally developed wafer level packages or WLP.

This new package technology is significantly smaller than our legacy technology and is the key that has allowed us to enter the 5G mobile device market, where miniature size is a gating factor.

Our new packages are pin-for-pin (ph) compatible with rival BAW filter competitors and enable Akoustis to compete strictly on performance where we believe we can pair quite favorably. Bringing the WLP process in house enhances substantially our ability to control the quality, cost and customization of our advanced packages.

The successful development and qualification of our new WLP Solutions facilitated our first 5G mobile design win and follow on high volume order both of which we announced in the last two months. This new filter solution will be incorporated in our customers' multiplexer for 5G mobile handsets and other portable devices.

The multiplexer supports a major 5G mobile chipset reference design that is planned for introduction in the first half of calendar 2023. We expect to begin shipping to this first 5G mobile RF component company customer in the current quarter.

And finally, during the December quarter, we delivered the first of two filters, one of which will be down selected after both have been completed and tested to a Tier 1 RF front end module customer that is targeting a production ramp in calendar 2025.

The customer is leveraging our leading XBAW technology to develop a filter that can address difficult coexistence issues in 5G mobile and is expected to develop additional filters using our technology upon the successful completion of this initial design. Next, I would like to discuss recent developments in our Wi-Fi business.

During the December quarter, we announced three new design wins in Wi-Fi 6E for carrier class applications.

We received two of the design wins from a leading European Wi-Fi OEM that will be using Akoustis' 5.5 gigahertz and 6.5 gigahertz standard XBAW coexistence filter solutions, as well as our 5.6 gigahertz and 6.6 gigahertz standard XBAW coexistence filter solutions that allow for greater usage of the UNII-4 band.

The first Wi-Fi 6E router entered production at the end of calendar 2022 and the second router is expected to begin ramping by the end of March 2023 quarter.

The third design win is from a global network communication solutions provider that will be using Akoustis' 5.6 gigahertz and 6.6 gigahertz standard XBAW coexistence solutions in a Wi-Fi 6E extender for its carrier partner with a production ramp expected by late summer 2023.

In October, we announced new next generation Wi-Fi 6E and Wi-Fi 7 filter solutions designed to meet the stringent rejection requirements enabling coexistence with the UNII-1 through 3 and UNII-5 through 8 frequency band.

They offer what we believe is the best out of band rejection capability available today and at a significantly reduced size given our new chip scale packages. We expect to fully qualify these next generation Wi-Fi 6E and Wi-Fi 7 products and ramp production in the first half of the current calendar year.

Switching from legacy packaging to our new advanced WLP and CSP products is expected to greatly improve our gross margins over the next 12 months to 24 months and supports our effort to achieve cash flow breakeven in the first half of calendar 2024.

The Wi-Fi market continues to experience significant disruption from the supply chain issues we have discussed previously as well as new headwinds in the retail market that have emerged with the impact of inflation on consumer spending. Overall, this market is characterized as performance driven, but competitive.

Nonetheless, we continue to increase the number of design wins in high frequency advanced Wi-Fi given that we were an early entrant in Wi-Fi 6 Dixie and Wi-Fi 7 BAW filter solutions and today have one of the most extensive high frequency Wi-Fi portfolios that address the enormous challenges of difficult dual bank coexist, wide bandwidth operation within the 5 gigahertz to 7 gigahertz frequency spectrum.

While near term macro supply chain issues remain, we are executing on design wins, new production ramps and new product development at a higher pace than ever before and we expect the outlook will improve quickly once the broader supply chain issues improve. And now I would like to discuss our network infrastructure business highlights.

During the December quarter, we received an order for the development of an ultra-high band demonstrator from a Tier 1 5G network infrastructure customer. If the demonstrator is successfully received, our customer plans to develop a 5G massive MIMO XBAW filter solution for a multi element array.

Recently, we've engaged an additional Tier 1 OEM for the same frequency and end application. We continue to ramp production with three Citizens Broadband Radio Service or CBRS infrastructure companies in the December quarter. We expect these three customers to continue to ramp throughout calendar 2023 and beyond.

We started to ramp our 3.5 gigahertz 5G network infrastructure filter with a new network infrastructure customer in the December quarter. This is the second design win we have received for this filter. Our customer is targeting both Small Cell and MIMO applications with our XBAW filter in the European and Asian network infrastructure markets.

We are sampling the first iteration of our 3.8 gigahertz XBAW infrastructure RF filter for the U.S. 5G C-band market with multiple OEMs and expect to see greater Small Cell adoption beginning in second half of calendar 2023. And now, I would like to provide an update on our other business segment.

As mentioned at the beginning of this call, we concluded the acquisition of GDSI, which closed on January 1, 2023.

The acquisition brings a new cash flow positive services business to Akoustis with 250 plus customers, significant technical expertise in back-end services and alignment with our strategy to leverage the CHIPS Act to create new jobs and reshore core packaging technology from Asia.

In our Defense contract business, we continue to progress on our existing multi-year, multi-million dollar contracts with DARPA to further enhance our XBAW PDK and scale our XBAW technology up to 18 gigahertz.

We achieved a critical milestone during the December quarter and are making excellent progress towards scaling our technology to 18 gigahertz for our customer. The milestone achieved was enabled by our patented single crystal piezoelectric nanomaterials, which are unique to Akoustis in the BAW filter industry.

During the December quarter, we completed and shared new XBAW resonator data targeting X band frequencies for a Tier 1 defense customer. Our next step is to simulate two XBAW filter designs utilizing the resonator model for this X band application and we expect to move toward product development upon successful completion of the design study.

Our RFMI business experienced challenges in the December quarter that we believe will be short term in nature.

These include a decline in the automotive market in China due to COVID lockdowns, general softness in its European business, which was impacted by the economic realities associated with the Russia, Ukraine war and rising inflation and overall weaknesses in the medical market.

While January will experience the expected seasonal headwinds associated with Chinese New Year, we do expect revenue from this segment to increase sequentially in the current March quarter and return to a more normal run rate as calendar 2023 progresses.

We continue to make progress with our two XBAW timing control products and expect to complete the qualification of the first-two solutions in the first half of this calendar year. The timing RF market represents a significant new opportunity for Akoustis in both unit volume and revenue.

Our primary customers developing products that could be disruptive in the timing RF component 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 offer our customers disruptive performance.

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

Thank you, Jeff. For the second quarter ended December 31, 2022, the company reported revenue of $5.9 million, which is an increase of more than 5% over the prior quarter ended September 30, 2022, and representing an increase of 160% year-over-year.

On a GAAP basis, operating loss was $12.9 million for the December quarter, mainly driven by revenue of $5.9 million offset by labor costs of $8 million, depreciation of $2.6 million and other operational costs totaling $8.2 million. As a result, GAAP net loss per share was $0.19.

On a non-GAAP basis, operating loss was $10.6 million and non-GAAP net loss per share was $0.18. 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 Q2 was $3.2 million, a decline from $4.8 million in the prior quarter, reflecting the approaching completion of the capacity expansion and equipment redundancy project in the company's New York fab. Cash used on operating activities was $11.2 million, down 25% from $15 million in the prior quarter.

The company exited the December quarter with $46.6 million of cash and cash equivalents versus $60.7 million at the end of the previous quarter, primarily resulting from cash needed to fund operations and CapEx spending.

Subsequent to the end of our fiscal second quarter, on January 24, we closed an underwritten public offering of approximately 12.5 shares of common stock at a price to the public of $2.75 per share, partially used to cover the acquisition of GDSI.

Net proceeds to Akoustis after deducting the underwriting discount and estimated offering expenses payable by Akoustis were approximately $32 million. In the current March quarter, we expect multiple new Wi-Fi 6E and network infrastructure customers to ramp production along with our recent GDSI acquisition.

And therefore, we expect to see record revenue with revenue up between 20% and 40% sequentially from the December quarter. And based upon our growing backlog of design wins, we anticipate that 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 third fiscal 2023 quarter performance and future milestones..

in our Wi-Fi segment, we expect to announce our first Tier 1 Wi-Fi 7 SoC reference design win, further we expect to ramp a recently announced Wi-Fi 6E win with a leading carrier class customer, and we expect to secure our first Wi-Fi 7 design win.

For our 5G mobile segment, we expect to begin shipping filters to our Tier 1 RF component company customer against our 5G mobile high volume order. In addition, we expect to deliver the second iteration of a XBAW filter solution to our third Tier 1 RF front-end module customer.

And we expect to complete the second of two filters to our second Tier 1 RF module maker customer for testing and down selection. Next, in our 5G network infrastructure segment, we expect to receive an order for an n77 5G massive MIMO structure received filter solution.

We expect to sample in the first half of calendar year 2023, a new band 41 (ph) 5G filter solution for Small Cell base stations targeting the U.S. market. And finally, in our other market segment, we plan to sample a new CV2X XBAW filter solution for the automotive market.

And finally, we expect to complete the qualification in the first half of calendar 2023 of two resonators for the timing market from our first customer. In conclusion, We believe the market opportunity for our patented high frequency XBAW filters is substantial.

As of January 27, we now have 80 issue patents and 127 patents pending as we continue to build a substantial IP mode around our technology. We continue to work diligently to achieve each of our stated objectives and we will continue to provide updates on our accretion against these objectives going forward.

Finally, I would like to thank our employees for their hard work, passion and dedication, which accounts for multiple design wins across the Wi-Fi, 5G network infrastructure and defense markets.

We have also experienced an 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 our company.

And with that, I would like to open the call for questions from the investment community. Operator, please go ahead with the first question..

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Harsh Kumar with Piper Sandler. Please proceed with your question. Again, Harsh Kumar, are you on the line? If Harsh Kumar is not on the line, we'll proceed with the next....

Yeah. I'm sorry. I apologize. I was muted. Jeff, congratulations to you and your team, some excellent news here on a lot of different fronts. The first question and I had Jeff was on the 20% to 40% sequential growth and kind of the drivers.

I wanted to understand, if this is -- I know there are a couple of areas you mentioned that are going to be stocked associated with macro in China. But are the core markets generally speaking on track or is this pretty broad-based revenue growth or is this coming from one or two specific areas? And then I had a follow-up as well..

Okay. Good morning and appreciate your question. Let me get Dave to start in here and Ken may want to comment, but I'll start in with some couple of comments as well.

Dave?.

Yeah. Good morning, Harsh. The growth is pretty much broad-based. We had good distribution of revenue across all sectors in last quarter with Wi-Fi base station. And the mobile picking up Defense and the contract government contract. So it's pretty well spread.

We are seeing this quarter the growth coming from those sectors as well as picking up more in the mobile as we start to you know, chip that high volume orders that was mentioned in the script..

Great, guys. And then, yes..

Just to add to that, this quarter, the March quarter will also include our current acquisition of GDSI's revenue. So we have previously guided there about $1 million to $1.5 million in additional revenues for this quarter with the March quarter typically being the lowest quarter for them in the calendar year..

Of course, great. And then Jeff, you also kind of went out and mentioned that this will be a Europe grow generally speaking that you don't expect it down quarter as such.

And I know there's a lot of good stuff going on in the design win side, but maybe help us frame the cadence of the quarter or the linearity, if you will, do you expect a much better second half like all the other cellular companies are talking about or do you expect growth to be pretty evenly spread out?.

Harsh, yes. And another thing I'll point to just on the revenue front is, we mentioned we had a significant dip in RFMI in the December quarter. So that business -- we're expecting that business to kind of get back to normal levels in the second half. But if you look at the kind of the core business of the company, we do expect ramping in the mobile.

Dave talked -- touched on that and we touched on that in the script that's going to begin later this quarter. And we expect to continue adding orders to that -- for that particular customer and continue following production on that throughout the year. In addition, we mentioned some other things in the script, which I want to point our investors too.

We mentioned in Wi-Fi, significant activity. If you look at the dominant activity in the design wins, it's in 6E and Wi-Fi 7. For investors that may have been at the CES show significant activity and really connecting everything along that front.

So we mentioned in the -- adding some -- a leading carrier class customer that’s we're expecting that to begin ramping at the very end of this quarter and particularly beginning of next quarter. We continue to grow in the network infrastructure. We talked about activity increasing.

We mentioned specifically two customers in the massive MIMO area that we're currently working on solution. So we expect continued growth there.

And then really in the other class, we've got activity really in all segments, but we mentioned the timing market we would expect that to complete disqualification and then began ramping in that market as well. We continue to execute and also in the other segment's market on our contract business with DARPA.

I think this year could be a pretty significant year along the contract front, particularly in the second half, both not only we've mentioned in the script that our proposal with chips that's particularly in the manufacturing area. I think it would be a pretty good assumption to believe there's other assets in R&D that we'll be applying for.

And those can be certainly significant growth drivers on the R&D -- contract R&D front. Hope that gives you some context..

No, it does. Thanks, Jeff. And my last one, I'll get back in queue is, typically when we hear of design wins on the mobile side, we hear of a platform, not just companies don't -- OEMs don't give out just one phone.

So I was curious, if you could provide some color, is this a whole platform that you're winning or one, or is it bigger than that or smaller than that? Just any kind of color would be helpful and anything to the magnitude of ASPs would be great, if you can?.

Yeah. Dave, if you'd start there, I'll certainly get some color as well..

Yeah. And we've commented on this in the press release with the design win. It is in a RF component manufacturer that's doing a Tri-Flexor and they are designed into a Tier 1 major SoC provider. So it is a typical reference design that you would see go to multiple customers.

So the pickup rate, we we're working with our end customer to understand who the end -- their end customers are going to be once it gets designed into the platforms. This is mainly targeting the China mobile market. So even though the China mobile market is depressed and we'll hopefully pick up latter part of this year.

It's still a new opportunity for us going into new platforms. So it's a pretty significant growth opportunity for Akoustis and it's our first design win that will leverage to multiple opportunities in the future is the target. So that's a short summary on.

And Jeff, do you have any other additional color?.

Yeah. I just sound -- obviously, give you some feel. As you kind of look out at the spectrum, you look at the high bands where you've got 5G bands in the 3 gigahertz to 5 gigahertz. We've been very vocal about the work we've been doing in the 5 gigahertz to 7 gigahertz and Wi-Fi 6, 6E and 7.

So if you take a generation look back at 4G and where all the coexistence problems is where you get all these bands stacked up against one another. And I think, it's -- what our solution addresses is the coexistence challenges in the high band, particularly in the bands I just mentioned.

So in addition to the reference design that Dave touched on focusing on China mobile. I think it also would be safe to assume not only that we believe the product is being marketed as on a reference design, but also to some large direct customers in the Tier 1 market. So that gives you a little bit of color.

I would also add that the one project that we publicly announced, there's significant R&D that's going on behind that product for a potential new business, which will keep investors updated on a move forward basis..

Thanks, guys. Thank you..

Thank you, Harsh..

Our next question comes from the line of Anthony Stoss with Craig-Hallum. Please proceed with your question..

Good morning, guys. My congrats as well on the continued progress. Jeff, if you wouldn't mind, I know and maybe I missed this on the call, you're shipping to 15 different customers now.

Maybe can you share your thoughts on where you think you'll be exiting this year and maybe going forward? And then maybe a tougher question for you, but I like the fact that you highlight you expect to be cash flow breakeven in the first half of 2024 on a large uptick in gross margins.

Maybe help us think about where gross margins could be in 2024, 2025 considering different revenue rates?.

Yeah. So on the customer front, let me bring in Dave and maybe I'll add some color. But on the cash flow breakeven in gross margin front. I'll pull Ken in for that. I'll make some comments as well Dave. If you start on the customer, kind of how you see that expanding..

Yeah. Good morning, Tony. So the 15 customers, a large percentage of those right now are the Wi-Fi customers, Wi-Fi 6, Wi-Fi 6E. Some of the Wi-Fi 6 programs are going end of life and they're getting replaced by new Wi-Fi 6E programs and then Wi-Fi 7. We have a handful of the base station designs that we're also going to be picking up.

That's a longer secure rate than what we see in the Wi-Fi side and we're pretty well spread across the Wi-Fi between enterprise and carrier and also retail. And we continue to engage with those customers and with our opening of the Taiwan sales office, it's given us a greater visibility and opportunity to work closer with the ODMs as well.

So I expect that we're going to continue to pick up one to two customers every three to four months. So by the end of the year, along with base station, we should be north of 25 -- north of 15 somewhere around close to 20 customers.

And we'll continue to work on the other sectors as well with our RFMI acquisition, getting into IoT, also the medical and more activities happening right now around automotive, which is good, but that's a little bit longer cycle time to get designed in as well.

RFMI is doing what we had targeted by opening up doors with the automotive customers and we're starting to introduce some of our BAW technology in for the CD2X and then looking closer at some of the telematics applications and having them as a unit that basically is qualified to automotive standards is helping us to accelerate some of that activity.

So yeah, it's robust. The opportunity funnel is very large and we expect the activity to be pretty, pretty quick on moving these things forward..

And Tony, let me add to that. On the Wi-Fi front, as Dave mentioned, some of the -- you see platforms on Wi-Fi 6 going absolutely. And so it's -- the Wi-Fi 6E, Wi-Fi 7 segment is what's being replaced with it. And the ASPs are a little bit better there.

And then, as Dave mentioned on the base station front, I just want to point out that, in that particular end market, the ASPs are on the order of 4 times to 5 times higher for that market segment. And that can -- and those can be -- and it can be even higher than that depending whether you're talking about Small Cells or massive MIMO.

So, clearly, we want to mix into higher ASP opportunities, but it's a little covered at least on kind of the segments there..

Tony, let me talk a little bit on the gross margins. So as we're modeling out here, our march towards operating cash flow breakeven in the next 12 months to 15 months. We are looking to also improve our margins significantly through two different levers. One is increased back utilization.

Also some land and size reductions for some of our existing products, which will significantly cut our back-end off. Certain price negotiations with suppliers and our newer products have a smaller form factor and are more cost effective even additionally. And then last but not least, we mentioned WLP in the December quarter.

That is the lowest back-end off of all of our packaging. So we expect significant improvement as we go through the next 12 months to 15 months in 2024, margin towards approximately 30% margins. And then of the 40% and 50% plus as we move forward through the out years..

And let me add to that, Tony. I think Ken gave a good -- the size reductions on these packages, you're talking about 4 times to 5 times smaller and really is up to 10 times smaller depending on the part moving from what we historically had was in chip and wire getting over to CSP and WLP.

The other aspect of it, when you hear us talk about mobile, you hear us talk about WLP is a portion of that package, which we hope to eventually bring all of that in house. But a portion of that package today is actually fabricated inside our chip fab.

So we're absorbing that back end cost internally at really our marginal cost to produce at the full wafer level. So that's a little bit more color on that..

Got it. Just a follow-up for you, Jeff. Related to, I guess, more on the mobile side of things, for Akoustis and your opportunity. On the ASP side, it's clearly a lot more competitive on cellular mobile than on the Wi-Fi side.

Where do you think you'll fit in? Are you able to get a little bit more premium pricing for your better performance or do you have to match up kind of with current pricing?.

You have to -- it is a -- for the customers we're engaging with is a performance driven market. With that, you have to be cost sensitive and you have to be able to drive cost savings.

I think the true benefit to us, if you look at all the puts and takes here is that predominantly as I previously mentioned, the comments on the WLP being able to be produced inside our chip fab, that's a better cost structure for us, number one. Number two, we get a significant more number of die for wafer.

So once you figure the back-end cost along with just the products per wafer. If you look at the revenue per wafer, which is kind of what I look at, it's significantly higher and more favorable for us than what we're seeing in Wi-Fi. So it is a favorable mix for us to move into.

So even though it's a more aggressive market and we obviously have to be aware of the cost savings we've got to extend upon our customers as well. But the starting point for us is very good from a gross margin standpoint given the economics I just kind of walk you through..

Hey, three updates [Multiple Speakers] Yeah. Go ahead..

Tony, I was going to add a couple more points too. It is definitely a performance play for us. If you look at premium filter, demand in the 5G market is continuing to grow year-over-year if you look at the major Tier 1 OEMs on the smartphone side, the percentage involved designs that are going into the FEMs and into the applications are higher.

And where we're playing is where applications are demanding that coexist even up at the higher frequencies, which is where technology is leading performance.

But also down at lower frequency as well where you got the carry aggregation demand that's pushing for really high performance filters that don't have modes that give you that good coexist and also the high rejection. And also more important is being able to handle the higher powers as they're going up in frequency. So it's definitely a premium play.

And so we can, as just highlighted demand a dollar per wafer that is attractive for us modeled against the other market segments that we're targeting as well..

Thanks for the color Dave. Appreciate it..

Thanks Tony..

Thanks Tony..

Our next question comes from the line of Suji Desilva with ROTH Capital Partners. Please proceed with your question..

Good morning, Jeff, Dave, Ken. Congrats on the progress from me as well. On the mobile side guys, you have four customers I think.

What's the timing of when maybe all four of those are ramping? Just to understand how far [indiscernible]? Is the revenue opportunity here contingent on the CHIPS Act funding and bringing the back end in house or is that not really required to get to ramp for these work?.

So good morning, Suji. I appreciate your kind comments. Dave, start with -- and start with addressing his questions and I've got a couple of things, I'm going to follow-up..

So let me step back a little bit Suji. Yeah. With respect to mobile, we're categorizing two areas. One is the smart phone and then the other one is non-smartphone mobile.

So with the non-smartphone mobile, these are good opportunities for Akoustis that we're introducing the diplexer technology, which is also of interest to the smartphone market once you start looking at Wi-Fi 7 in the multi-link operation.

But the volume opportunities there within our capacity, but they're very attractive for the ARVR mat (ph) market, the PC modem market. With respect to the smartphone side, this first design win as we talked about is good volume targeting the China mobile market and it's within our capacity.

And there are potential other opportunities with this Tier 1 RF component supplier. That would stay in that similar vein of volume. And the other guys that we're talking to, they’re targeting more of the Tier 1 OEM market. And as we highlighted in the script that it's more towards 2025. So there's alignment with the CHIPS Act.

If that does come through to build up the capacity to support it and there's other means as well. So we're working closely with these other customers to align. So we've got multiple pathways that we're pursuing right now to stay engaged and continue to grow in the mobile market..

Yeah. And Suji, let me add to that because I want to be clear on this point. You mentioned the CHIPS Act and supply chain for the back end manufacturing are, as we've mentioned, have been very vocal on our wafer level package, which is used for these mobile customers that process and manufacturing process is fully qualified.

It currently uses a combination of both in-house as well as outsourced manufacturing, but we're dealing with very large OEMs on what we're outsourcing. So we don't think we're constrained at all in terms of supply chain being able to service that market.

What the CHIPS Act does for us potentially is, as we kind of mentioned is to be able to in source that back end manufacturing to not only control the quality of that, control the cycle time more tightly with that, but also scale that up as well.

As we also had mentioned on our scaling up our wafers up to 8 inch diameter would be a substantial expansion for us, using that legislation or leveraging that legislation. So that's -- I just want to be clear that the supply chain is already qualified for mobile.

What we're talking about with CHIPS is scaling it up to address multiple Tier 1 opportunities..

Okay. That's very helpful guys. And then my other question is on Wi-Fi.

I'm curious the supply chain constraints, how that's impacting the transition from Wi-Fi 6 to newer 6E and 7 designs, if they're being end of life-ed (ph) faster because of the supply tightness or if they're being kind of held longer because of the supply tight just curious how that transition is happening -- supply chain constraints. Thanks..

Dave, do you want to touch on that?.

Yeah. Suji, on that, the Wi-Fi 6E actually still good, but what we're seeing is a shift on platforms that would have been Wi-Fi 6E holding back and going into Wi-Fi 7 more on the retail side and the carrier side is still pretty robust on the 6E side.

The enterprise is, they've launched and they've released their 6E products and now they're working on Wi-Fi 7. So it's a mix. The 6E is -- there were more programs that we were targeting that are being put on hold and being shifted over to 7 because of those constraints on components and so forth.

And it seems that the leaders on the [indiscernible] side have been pretty aggressive in getting their Wi-Fi 7 chips out. So we're enjoying all the activity across all fronts. And what we see though is a lot of transition of programs going to Tri-band.

And then actually increased amount of opportunities on quad band with either 2 by 2 MIMO or 4 by 4 MIMO. So the dollar content in the existing Wi-Fi 6E programs and particularly in Wi-Fi 7 is going up pretty significantly. As Jeff mentioned earlier also with a little bit higher ASP for these platforms as well..

Yeah. The only other thing to add to that is, we mentioned in the script and I think it's a good point to reiterate it. Dave talked about carrier class customers. So we've got -- we're expecting to ramp here in the first half with a leading carrier class customer.

And we'll see some of that this quarter, but predominantly most of that's going to come in the second quarter of the calendar year..

Okay. Thanks, Jeff. Thanks, Dave..

Thank you..

Thanks, Suji..

Our next question comes from the line of Craig Ellis with B. Riley Securities. Please proceed with your question..

Yeah. Thanks for taking the questions. And guys, it's great to be on the call after all the years of conversation. And I'll just echo the congratulations on the huge development with mobile over the last couple of months. So I wanted just to start on that theme. With that, module maker volume design win really targeting the China market.

And this may be more of a question for Dave. Dave, how should we think about the potential for that to sample into what would typically be product releases for the big Golden Week selling season in October product that, that customer set and customer set could have around single stay and then year-end holiday and in Lunar New Year.

It seems like the initial volume timing would set you up well there.

Is that how you see it? And what would be the milestones leading towards those new product release windows?.

Yeah. That's exactly how we see it, Craig and thanks for your comments. The activity with our end customers been very active for the last year, particularly as we were getting WLP released that was a critical milestone and it also was verified in their platform as well with their reliability studies and qualifications.

So we've been working very closely with this customer and we've been feeding them the amount of quantities of products that they need on earlier orders so that they can stay engaged with a handful of the reference design customers. So the activity started prior to the beginning of this new year.

And the volume order that we announced in January or end of December is helping to support the development ramp with these key customers for the target, as you mentioned in the Q3 timeframe and we're basically aligned with them on delivering the volume demand and also get line of sight to what that ramp is going to look like starting really end of Q2 and to Q3 and Q4.

So if everything is aligned with what you mentioned model wise..

That's really helpful. The second question, I wanted to follow-up on some of the earlier inquiries on Wi-Fi 6E and do it in the following way. So if we look back to mid-January, when Apple released its new Mac offerings.

One of the things that they offered on some of the platforms was 6E and our checks in Asia showed that helped really ignite a lot of interest, not just in 6E, but with the transition to 7. So you've been clear on all the customer engagement.

I was wondering if you could just talk about the color you're picking up from the consumer and enterprise router market over the last month or so regarding the to follow on activity that the supply chain would have in response to Apple's announcement since they tend to be a technology trendsetter and a customer that really pushes the market to next-gen technologies..

Yeah. That's a good question, Craig. From our standpoint, we are actually very well engaged with all the Tier 1 guys now. We've built a good reputation out in the market that’s having, leading technology, leading performance of all filters. Particularly as the systems are shifting from a dual-band to a tri-band and looking at quad band.

So we have pretty good line of sight to all the platforms that are in development. And Jeff mentioned with the Wi-Fi, it's a key carrier class service provider, ramping, utilizing the UNII-4. We see things like that. And those guys are the ones that we're talking to now on the carrier side. We're also in multiple platforms.

We're also talking to the enterprise guys and we're also the retail guys. And the carrier guys are starting to launch RFPs that are doing Wi-Fi 7 that are looking at quad band architectures.

And the enterprise guys are doing our fees out for Wi-Fi 7, looking at not only quad band architectures, but also dual mode operation, where you can get up to 24 filters per system with multiple tons and so forth. So these infrastructures both in enterprise and also in retail and home, they are getting out there.

So that means that the UE side is going to start adopting it. I think we've mentioned that we're working with Tier 1 OEMs on non-smartphone mobile related device that would utilize Wi-Fi 7 and needs that infrastructure in place to support it. So they're aligned fairly well.

The fixed is going to be in the market ended this year, early next year for Wi-Fi 7. And then I expect that to start some of the UE devices coming in latter half of next year maybe mid-part. That's not fully flushed out timing wise, but that's just some visibility we've got..

Got it..

Thanks, Craig and this is Jeff. Let me add to that, that -- all that cover Dave just gave that feedback, that marketing intelligence feedback into our product development, new product introduction cycle and so used to bring it kind of full circle where we were talking about kind of where our gross margins are going.

We're incorporating these lower cost packages in those solutions to help drive gross margin improvements in the company. So it kind of feeds full circle. Those performance improvements we're also in capturing these new product packages in those to help on the gross margin improvement. I just wanted to add that to cover..

Yes. Thanks for taking on there, Jeff. My last question is a follow-up on issue that's come up earlier in this call and in prior calls. It's the Wi-Fi SoC tightness issue and I'm well aware that this isn't an acoustic specific issue, but it's one that impacts the broader Wi-Fi business.

The question is this, as we've seen foundry supply in Asia, loosen meaningfully at almost all nodes except the very highest nodes and acknowledging that Wi Fi SoCs have very long lead time. So we're not going to see a supply benefit immediately.

But are you seeing any signs from the ecosystem that you're interacting with that we could see better Wi-Fi SoC supply in the back half of this year? And if so, to what extent are those indications moving up if at all? Thanks, guys..

Okay. Thanks.

Dave, you want tackle that, your closes to the customer, what you're hearing?.

Yeah. So Craig on that, we are seeing a little bit of loosening on the -- at least the major two SoC providers. It still is long lead items. There's still inventories that are over there, the turns with the distribution market is still pretty high, both on the FEM and also on the passes, but also in the SoCs.

But we are seeing in loosening one of the other providers is probably two-thirds of lead time of one of the others. So there is some attractiveness to chip to the Wi-Fi 7 platform as well because that is less constrained as well, depending on who the SoC is and what foundry that they're operating in which node. So it is softening.

It's still is pretty long lead time and so forth and we do expect it to improve over the next six months to nine months.

That we're keeping our finger on the pulse and making sure we -- every platform we look at in our funnel, we look at who the chipset is, as well as the ramp scheduling program just so that we're not being held on inventory levels and so forth over in Asia as well..

Got it. Thanks so much guys..

Thank you, Craig..

Thanks, Craig..

And we have reached the end of the question-and0answer session now. I’ll turn it back over to management for closing remarks..

Yes. I'd like to thank everyone for your time today and joining today's call. We look forward to speaking with you during our next update call to discuss the current quarter execution against our milestones as well as future expectations. Have a great day..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..