Akoustis Technologies Inc (AKTS) 2021 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Akoustis Technologies business update conference call. As a reminder, this conference call is being recorded. (Operator Instructions) A replay of the call will be available on the Investor Relations section of the Akoustis website.

It is now my pleasure to introduce Tom Sepenzis, Director of Investor Relations. Thank you. You may begin.

Thank you, operator, and good morning to everyone on the call. Welcome to Akoustis Second Quarter Fiscal 2021 Business Update Conference Call. We are joined today by our Founder and CEO, Jeff Shealy; Interim 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 during this conference call, including statements regarding our strategies, operations, costs, plans and objectives, including the timing and prospect of product development and customer orders; our expectations regarding achieving design wins from current and future customers; the possibility of entering into collaborative or partnering relationships; potential impacts of the COVID-19 pandemic; and guidance regarding expected revenue, product orders and milestones for the current and future fiscal quarters; 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. 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 2021 second fiscal quarter business update call. We ended the calendar year with another strong quarter, exceeding our original guidance by 30% with revenue of $1.3 million, our highest quarterly revenue to date in our core chip business driven by XBAW filters and filter-related revenue.

Revenue increased over 100% quarter-over-quarter in December, as we generated revenue from each of our major commercial markets, including Wi-Fi, 5G network infrastructure, 5G mobile devices and defense. We now have 15 commercial XBAW filters in our product catalog, with many more planned. Our production ramp with our first WiFi 6 customer has been a great success, and we delivered additional filters to our tier 1 5G network infrastructure customer in the December quarter. We expect additional success throughout calendar 2021 as we layer in new products and customers across our focus markets.

We also called for the redemption of $10 million of our convertible debt in the December quarter. And last week, we announced that we have delivered notice of the redemption for the remaining $15 million to our existing noteholders. This will retire all convertible debt remaining on the balance sheet and put Akoustis on a more sound financial footing.

Our outlook remains confident as we continue to execute across multiple markets, with the opportunity to deliver significant top and bottom line revenue and earnings growth for years to come. We currently expect to report strong revenue growth in the March quarter in the range of $2.0 million to $2.5 million or up 70% at the midpoint. We are fully booked to the midpoint of our revenue target for the March quarter. The increase will be driven by our current WiFi 6 customer shipments to our tier 1 5G small cell network infrastructure customer, initial shipments of our new 5G mobile filters to 2 of our 3 announced 5G mobile customers, engineering revenue from multiple 5G RF front-end customers, network infrastructure providers and our recently announced DARPA contract.

I would now like to provide a quick update on the impact of COVID-19 on our business end markets. We continue to employ precautionary steps, including selective remote work authorization and worksite isolation from outside visitors. The incredible flexibility afforded by our in-house manufacturing model in the current environment has allowed us to continue to develop and ship our products with minimal impact.

During the pandemic, Akoustis has continued to operate with all key personnel as an essential business in both New York and North Carolina, and we continue to accelerate product development, consistent with our strategic road map. We greatly appreciate our employees and value their flexibility and discipline in staying safe during this challenging time.

It is difficult to predict how or if the ongoing pandemic will impact our customers' future production ramp timing or if we will be impacted by any supply chain disruptions going forward. Currently, we are experiencing a normalization of demand across our product markets, including Wi-Fi, especially given the emerging WiFi 6E standard and the demand for hi-Q microacoustic BAW filters that can address these new high frequencies.

I would now like to address our business performance by market segment, beginning with 5G Mobile. The December quarter was our most significant quarter to date in 5G mobile as we added not 1 but 2 new customers who plan to incorporate our XBAW filters in upcoming products targeting 5G handsets. The 2 new customers are in addition to the existing tier 1 RF module maker that we have been working with for over a year. The mobile handset market is our largest-potential BAW filter market opportunity by both unit volume and revenue, and we continue to see a broad increase in interest and activity in our XBAW filters for the mobile market. In fact, our XBAW filters have already been evaluated by several leading tier 1 and tier 2 mobile handset OEMs.

As we have previously mentioned, entering the tier 1 handset market in the near-term would require a partner. However, we believe with our previously announced 500% capacity expansion of our New York fab, which we expect to complete by this June, that we will have the wherewithal to enter the handset market, servicing our recently announced new RF customers and/or several tier 2 handset OEMs without a partner. Given the substantial interest and sales funnel activity for both our 5G mobile and WiFi 6E filters, we are planning to further expand our New York fab by doubling again our capacity by the end of calendar 2021 to support the ramp expectations of multiple 5G handsets and WiFi 6E customers in calendar 2022 and beyond.

With respect to our first tier 1 mobile customer, we have remained actively engaged and are currently developing new 5G XBAW filters for testing and approval, which is expected in the first half of calendar 2021. We shipped initial samples of our XBAW filters to this customer in the second half of calendar 2020 and are currently executing against open purchase orders.

Our second RF module customer, which we announced in early November, is moving quickly to develop a module for mobile applications using our XBAW filters. The customer's product is expected to be available for sale by the end of calendar 2021. I am happy to report today that we successfully completed the first filter design for this customer in the December quarter, which was one of our stated milestones, and this new design is currently running through our New York wafer fab.

Finally, in mid-December, we announced a third tier 1 RF solution customer. We are currently developing 5G mobile XBAW filters for this customer with the goal of entering commercial production in calendar 2022. Given early discussions with this customer, we believe our engagement may expand to include multiple filters for multiple bands in both 5G and Wi-Fi modules. As this customer sells into multiple handset OEMS, we expect that this customer could become a significant contributor to both filter volume and revenue in calendar 2022 and beyond. We currently expect to complete the first filter design and provide early engineering samples for this customer in the upcoming June quarter.

As we have discussed previously, we have dedicated engineering resources to the development of advanced chip scale packaging and wafer-level chip scale packaging, or WLCSP, to address the next-generation of 5G products. One of our stated milestones for the December quarter was to deliver our first fully qualified CSP flip chip solution. I am pleased to announce today that the WLCSP process flow is now locked, and we expect to complete technology qualification next month. Once qualified and released, we will be able to address the mobile market across our entire product line given the significantly smaller footprint of our new packaged solutions which offer a 1:1 ratio to the size of the XBAW dye.

To summarize our 5G mobile activity: we have multiple customer-funded filters in design; we have announced 3 customer engagements, 2 tier 1 RF component companies and 1 leading RF front-end module maker, and all 3 customer engagements are active with either the design or manufacturing teams within our company; and finally, we have just completed the development of our first chip scale package and have additional designs slated for completion in the first half of calendar 2021.

I will now discuss our achievements in Wi-Fi. We announced last week that we have successfully design-locked our tandem 5.5 gigahertz and 6.5 gigahertz BAW microfilter solutions for WiFi 6E. The designs are breakthrough and very challenging given their wide bandwidth requirement, which is nearly 10x wider than our first 5.2 gigahertz product for the WiFi 6 market. Further, it requires the development of high-performance piezoelectric materials and the associated modeling design kits to engineer these filter solutions. Clearly, this was one of the most important milestones we set for the December quarter as the enormous momentum in WiFi 6E continues to build both in the U.S. and worldwide as other countries are making room for extended Wi-Fi above 5.9 gigahertz.

WiFi 6E is emerging as one of our largest opportunities driven by the rapid release and adoption of WiFi 6E CPE and evidence that handset OEMs are planning to incorporate the new 6E frequencies in 5G mobile devices. The new filters will now be able to target the router, cable set-top box and other CPE markets as well as the future 5G-enabled mobile device market, likely making the WiFi 6E market significantly larger than the current WiFi 6 market by both volume and revenue.

We have multiple active engagements in OEMs, ODMs, SoC makers and channel partners for WiFi 6 and now WiFi 6E. We are now in the advanced stages of the sales cycle with several customers for WiFi 6E and expect additional design wins in the coming months. Specifically, last week, we announced a volume order from our first 5.5/6.5 gigahertz tandem WiFi 6E solution from a new tier 1 customer. The order is for multiple-user, multiple-in, multiple-out, or MU-MIMO, consumer-focused router using multiple 5.5 and 6.5 gigahertz XBAW filters. The customer expects to ramp this platform in the second half of calendar 2021.

In the December quarter, we revised and improved our custom WiFi 6E filters for 1 of our 2 announced tier 1 enterprise-class customers and delivered volume prototypes for their engineering builds. Both customers intend to use our standard 5.5 and 6.5 gigahertz XBAW filter products, which we design-locked last week. We remain on track with both customers and expect both to enter production once their respective product qualifications are complete.

Our WiFi 6 XBAW filter solutions entered the commercial router market in the December quarter as our high-profile tier 1 consumer-focused customer began shipping finished products. The filters are being used in a Tri-Band MU-MIMO mesh router with multiple XBAW filters per device. Feedback from the customer continues to be extremely positive, and discussions are already underway with increased unit expectations for next year. In addition, we have provided this customer samples of our standard WiFi 6E 5.5/6.5 gigahertz filters for potential use in future WiFi 6E platforms. We have met all delivery expectations for our 5.2 and 5.6 gigahertz filters, and I'm personally very proud of our design and operation teams that have successfully managed this first significant commercial production ramp during a pandemic.

During the December quarter, we announced the addition of two new design wins with new WiFi 6 customers. The first design win announced during the quarter is for a gateway router product that will use multiple WiFi 6 XBAW filters for a MU-MIMO product. It is expected that this product will begin its production ramp late in the June 2021 quarter. The second WiFi 6 design win announced in the December quarter is from another new customer which intends to use the 5.2, 5.6 gigahertz XBAW coexistence filters for a Wi-Fi bridge product and is expected to enter production in the second half of calendar 2021.

As Wi-Fi is rapidly becoming one of our largest opportunities, I want to highlight that Akoustis is one of the first to market with both the 5.5 and 6.5 gigahertz BAW microfilter solutions for the rapidly developing WiFi 6E market, which we believe will expand significantly in calendar 2022 and beyond as 5G mobile device makers begin to incorporate the new WiFi 6E standard in smartphones, tablets, laptops and other devices. To be clear, we believe that WiFi 6E will drive significant filter revenue and unit growth beginning in the current calendar year with significant growth in 2022 and beyond.

To summarize our Wi-Fi activity: we have 4 completed XBAW Wi-Fi filters, 2 for WiFi 6 and 2 for WiFi 6E; we have announced 3 design wins in WiFi 6, 1 of which is already in a commercially available Tri-Band mesh router; we have announced 2 WiFi 6E customers that are using our standard 5.5/6.5 gigahertz solutions. We have signed a strategic purchase agreement and are building multiple custom 6E filters for a third enterprise-class customer; and finally, we have over 15 customer engagements in WiFi 6E, 10 of which have already placed prototype purchase orders.

Next, I would like to discuss the opportunities in 5G network infrastructure. Wide bandwidth, high-power handling, low insertion loss and high out-of-band rejection are the core filter performance requirements for 5G network infrastructure. Akoustis is ideally positioned to grow its market share in this segment given our small form factor filter solutions and our growing portfolio of RF filters above 3 gigahertz where 5G is being deployed worldwide. We are currently designing and/or shipping filters in 3 main segments of the 5G infrastructure market, including small cell base stations; macro base stations; and Citizens Broadband Radio Service, or CBRS equipment. Additionally, we are watching closely the ongoing FCC C-Band auction for 3.7 to 3.98 gigahertz spectrum, which thus far has garnered more than $80 billion in gross bids. This will create yet another 5G network infrastructure opportunity for Akoustis, and we expect to demonstrate XBAW filters addressing this new spectrum in the first half of calendar 2021.

We continue to ship XBAW filters to our tier 1 5G small cell network infrastructure customer in support of its initial ramp. We have shipped a total of 4 filters to this customer and have received 3 design wins. The production ramp for this customer is presently slower than previously expected, given operator-driven network deployment and timing changes, but we continue to expect to ramp production with multiple filters with this customer in the current year.

We are currently on track to begin ramping our second small cell 5G network infrastructure customer with volume shipments in the first half of calendar 2021. The Citizens Broadband Radio service, or CBRS, has emerged as a new market for Akoustis after the spectrum auctions that occurred this past summer. We continue to believe that the successful utilization of the CBRS bands within the 5G network will require a significant amount of high-frequency filters, and recent customer design activity appears to support our thesis.

We locked the design of our first 3.6 gigahertz CBRS XBAW filter in March of 2020 and announced our first order from a distributor in the September quarter to support promotion and customer engagements. In the December quarter, we received our first order from a leading wide-area network equipment provider for both CBRS infrastructure and customer premise equipment. We understand that this customer remains on track to begin commercial ramp in the second half of calendar 2021. Furthermore, we're currently engaged with over 10 SoC, OEM and ODM makers for the development of CBRS networks using 5G and expect to have additional design wins in calendar 2021 and beyond.

One of our milestones for the December quarter was to complete the development of a macro base station filter for our first tier 1 customer and design-lock the product. We successfully delivered a new high-performance filter design to this customer at the end of November and will update investors on the progress with this customer when possible.

To summarize our 5G network infrastructure activity: we have 5 completed 5G network infrastructure filters, 4 for small cell base stations and 1 for CBRS; we have announced 3 design wins in small cell with our tier 1 customer; we expect volume filter shipments to our second customer by June of 2021; we have announced a CBRS order from a leading wide-area network customer for infrastructure and CPE; and finally, we have over 10 customer engagements, 4 of which have already placed purchase orders.

I would now like to discuss our progress in our other market segments. During the December quarter, we were awarded a new multiyear R&D contract from the Defense Advanced Research Projects Agency, or DARPA, to further develop Akoustis' technology through the development of a Piezo MEMS process design kit, or PDK, for the company's proprietary and patented XBAW process. The direct-to-phase 2, or DP2, contract is dedicated to developing a general-purpose PDK that will enable BAW and other similar MEMS structures to be designed and fabricated using the company's state-of-the-art patented XBAW process. The Piezo MEMS PDK under development will encompass all aspects of the process, ranging from material properties, process rules for stack dimensions, process control monitoring, design rule checking and example device models.

Upon successful completion of the DP2 program, DARPA has an option to fund a phase 3 program. This option supports multiple new customer engagements, leveraging the new PDK to create devices and circuits, including RF filters, using the company's XBAW process. We expect this will expand the opportunities for XBAW moving forward as other designers will be able to develop new products utilizing our novel piezoelectric materials and substrates outside the current devices, which could lead to new opportunities in adjacent vertical markets.

To summarize our other market segment activity, we have 7 completed XBAW filter solutions completed for the civilian and defense market; we have 1 design win in phased array radars and have -- and continue to ship production filters to our customer; we have already started and are currently progressing on our DP2 contract with DARPA; and finally, we have a total of 3 customer engagements, 2 of which have already placed purchase orders or provided NRE revenue.

Now I would like to turn the call over to Ken to go through select financial highlights.

Thank you, Jeff. For the second quarter ended December 31, the company reported revenue of $1.3 million, which was an increase of 106% as compared to the previous quarter and approximately 30% higher than our guidance. This revenue growth was driven by an 81% increase in our core filter-related revenue on a sequential basis.

On a GAAP basis, operating loss was $10.2 million for the December quarter, mainly driven by labor of $6.3 million, depreciation of $1 million and other operational costs totaling $2.9 million. As a result, GAAP net loss per share was $0.30. On a non-GAAP basis, operating loss was $8.2 million, and non-GAAP debt loss per share was $0.22. Reconciliation of these amounts to the corresponding GAAP measures is included in the press release issued this morning available on the Investors section of our website at akoustis.com.

CapEx spend for Q2 was $2.1 million compared to $2.3 million in the prior quarter, mostly related to the targeted 500% capacity expansion of the company's New York fab. Cash used in operating activities in Q2 was $8.3 million compared to $7.9 million in the prior quarter. The current quarter included an increase in accounts receivable expected to be received in the following quarter and certain inventory build-related expenses associated with our ongoing product ramp. The company exited the December quarter with $47.8 million of cash and cash equivalents versus $37.3 million at the end of Q1.

During the quarter, the company raised $20.2 million utilizing our ATM program by issuing 2.3 million shares of common stock at an average stock price of $8.93. The company also took action to bolster its balance sheet by calling all $10 million of our October 2018 6.5% convertible senior notes for redemption, and the notes were subsequently converted into shares of common stock. Separately, this past week, we delivered notice of redemption to the holders of our $15 million principal amount of May 2018 6.5% convertible senior secured notes.

While there's still some uncertainty regarding timing of customer production ramp due to COVID-19, our visibility continues to improve given the rollout of 5G and new Wi-Fi platforms. We currently expect to report strong revenue growth in the March quarter in the range of $2 million to $2.5 million, or up 70% at the midpoint. We are fully booked to the midpoint of our revenue target for the March quarter.

I will now turn the call back over to Jeff to discuss our future milestones.

Thank you, Ken. Our backlog and sales funnel continue to grow as we enter commercial production across multiple markets and layer in new customers across each of our market segments. In the March quarter, we expect to generate revenue from each of our business segments, including 5G mobile, Wi-Fi, 5G network infrastructure and other markets, including defense. We continue to strive towards executing on our targeted milestones and will continue to keep you informed of our progress.

Our March 2021 milestones include qualification of our first wafer-level packaging solution; shipment of a 5G mobile filter design to our second RF front-end module customer; release of the XBAW filter design for our third mobile customer; we expect to announce our first design win in WiFi 6E; and finally, we plan to receive at least 1 design win for the CBRS market.

Looking slightly further out, our calendar 2021 milestones include the design lock and commencement of production with our second RF mobile module maker, the delivery of compliant XBAW filters to both our tier 1 RF mobile customers. Next, we expect to ramp production with multiple WiFi 6 and WiFi 6E customers, including 3 announced tier 1 WiFi 6E customers. We plan to complete product qualification of CSP and WLCSP XBAW package filters for 5G mobile, 5G infrastructure and Wi-Fi. And finally, we expect to ramp production with multiple 5G and CBRS infrastructure customers.

In conclusion, we continue to work diligently to achieve each of our stated objectives, and we will continue to update you on our execution against these objectives going forward. Our growing XBAW filter product catalog puts us in a great position to grow revenue by more than 70% sequentially in the March quarter, as reflected in our guidance, and we look forward to expanding our filter catalog as we progress through 2021. To support our current engagements and emerging sales opportunities, we have been working diligently to expand our capacity by 500% to be able to produce hundreds of millions of XBAW filters per year. Given the expected ramps in both 5G mobile and WiFi 6E in calendar 2022, we now plan to double this output once again by the end of calendar 2021. We continue to add key hires across our sales, design and manufacturing teams. Beyond our current expansion plans, the company is positioned to scale, as our New York fab can ultimately produce up to 5 billion XBAW filters per year when fully equipped.

I would like to thank those who have joined us on the call today. We continue to build our company around our core belief in strong management and technical staff; strong intellectual property, which currently includes 38 issued and license patents and 74 patents pending; large and growing markets with limited historical competition in the high-band and ultra-high band spectrum; and our qualified wafer manufacturing operation, which is now proven to deliver volume quantities of XBAW filters and is expanding to address high-growth opportunities in our target end markets.

Finally, I remain especially grateful to our employees for their hard work, passion and dedication throughout 2020, particularly during this ongoing pandemic as our team has kept the momentum going on our R&D, which has led to multiple design wins across the Wi-Fi, 5G network infrastructure and defense markets. We've also experienced exceptional momentum in the 5G mobile market, driven by our leadership in filters that can 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 Instructions) Our first question comes from the line of Suji Desilva with ROTH Capital.

Very happy to see the progress you guys are making on revenue, it's well deserved. Couple of questions. The Wi-Fi segment, I believe 3 revenue customers and I think you said 15 in the pipeline, perhaps 10 prototype orders. Just help me if I've got those numbers right. And more importantly, what portion of those do you think can ramp revenues for you guys by the end of '21, just to give us some ballpark idea? And the factors there in that ramp, 6 versus 6E, other factors?

Suji, this is Jeff. Appreciate your comment, and I'm going to turn it to Dave just for some color on Wi-Fi. And maybe I'll add a few comments at the end.

Suji, so the activity that you estimate is correct. We've got 3 engagements on the WiFi 6E, and we've got -- we have 3 engagements with WiFi 6. We're ramping in production right now 1 of the WiFi 6, and we have 2 more that should be ramping in the -- by June 2021. Majority of the activity that we highlighted on the additional customers in the WiFi 6E is going to happen in the second half of the year. So if I was to give a ratio, it's probably a larger percentage would be to the WiFi 6E once it starts really ramping in production in the second half. So we should have a combination of both throughout 2021, with the majority picking up in the second half with WiFi 6E.

Yes. I just wanted to add to that. We've had a very successful ramp in WiFi 6. That same customer is also -- has a follow-on program in WiFi 6 as well as a new program in 6E. So there, we've been providing parts to support both of those programs.

So just a little bit of more color. You see customers that are continuing WiFi 6 evolution, you see customers that are in WiFi 6 that are building hardware that contain both 6 and 6E configurations and then also customers that are exclusively working on 6E. So there's 00 kind of the field is pretty diverse. But -- and I think with the customers that we're talking about, we also see as many as 3 platforms per customer in terms of different platforms that they're launching over the next 12 to 18 months.

So it's very robust from sales activity, and we're very pleased with the portfolio that we have that we can service both WiFi 6 and WiFi 6E at this point.

Yes, great. And it sounds like a very exciting opportunity. And my other question is on the smartphone market. It sounds like you have a smartphone OEM and a module provider. I just want to understand which one was potentially larger? And how long would it take for the module customer to get their own OEM customers to qualify the product? What's the cycle there?

Okay. I'm going to start here, and I'm going to ask Dave to chime in. So first, I want to clarify what I said in the script because I think I had the numbers flipped. So it's 2 RF front-end customers in mobile and 1 RF component customer. So your question was regarding the RF component customer, and I'll let Dave talk about what that sales cycle looks like.

Yes. So we've -- the activity that we've got going in the mobile is primarily focused on supporting those 3 customers that Jeff just mentioned. We do have some activities talking with the mobile phone OEMs as well, and those are focusing more on the Asian market where there's opportunities for discrete BAW filters.

With respect to the -- 1 of the 3 customers, we could see something in the second half of this year. It depends on, obviously, the development of their module and getting it into the market and getting it into certain models. They're a proven supplier to the market. So that's something that we're taking advantage of and also having access to the BAW technology, of which were the only noncaptive premium BAW provider out in the market. Now that we've got a WLCSP platform, this will accelerate the development with that end customer.

With regards to the other ones, we still have to deliver compliant product to them or compliant designs to them. And the intent would be to see something in the 2022 period, calendar year. So again, depending on, obviously, their success of designing it into a mobile phone OEM, but these guys are well-known in the industry and service multiple customers in that market segment.

Our next questions come from the line of Harsh Kumar with Piper Sandler.

First of all, congratulations. This is tremendous. I mean literally watching this company become very meaningful, so congratulations. I had two questions, mostly strategic. Jeff, if I could ask you to kind of -- there's lots of stuff going on, right? You've got different end markets, lots of actions. So could you maybe rank order for us how -- on the order of attractiveness, how you see some of the end markets and which one you would prefer -- if you had your way, which one would you prefer over the others, if there's anything like that? And then I've got another one.

Okay. Harsh, appreciate your comments, and thank you for those. In terms of attractiveness, we've stated previously that the mobile market by -- in terms of unit volume and overall size is the most attractive to us. That certainly remains so. And we talked about some of the activities that we've had WLCSP to enable us to get into that market, that's been a key development this year. But mobile market, also the Wi-Fi market, we've come very quickly after that. We've -- in terms of the mobile market, that's, for us, a little bit betting on the come in terms of growing number of engagements, we've got 3 now in that one.

But the Wi-Fi market is one that we're currently ramped in. It's one we've taken our XBAW technology and ramped it into high-volume production over a period of months. As we said in the script, we've executed, we believe, brilliantly in that market by delivering volume quantity. In that market, one of the things we really love are markets that are being disrupted. I think WiFi 6E is a big disruptor. And if you look at the products that are required for WiFi 6E, they require as much as 10x the bandwidth of what we had to deliver in WiFi 6 market for the 5.2 gigahertz. And so we see a very dynamic market there, one that's going to have a lot of minute volumes. That one also is going to dovetail, we believe, into the mobile. So it's got kind of a dual significance in that regard.

And then the 5G infrastructure, we talked about the traction in the small cell. And we did see some slowdown in that market in 2020, but we think that's going to pick up pretty dramatically in 2021. So those are the -- I'll call those the big 3. And then there the derivative markets, certainly, the defense market has some attractiveness to us because it's very high-performance oriented, and also they want really cutting-edge-type filters. And for phased array applications, they need high power, and those are areas that we excel in. So that's kind of a secondary one, but still a lot of interest.

Ultimately, what we need to do on our end is still that factory up in New York. That's where we're focused on. We're focused on expanding capacity to get there. And -- but that's our recipe for success here in our business.

Jeff, so piggybacking off of that question, mobile all of a sudden has gone up in your eyes quite dramatically. I think last year, you guys were saying that you would not enter it without a partner because of the capital requirement. You've seemed to have overcome the capital requirements piece. You're doing very nicely on the capacity piece. I guess, question is, is it just from the interest you're seeing that you felt like having a partner would limit your opportunities? Is that what happened? Or was there some other logic to just going in on your own?

So I think for the mainstream tier 1 market, it's still a partnership. What we're seeing with 2 of the 3 customers is that their business is at a magnitude that we actually can bite off and chew. So size of opportunity is meaningful to us as we're scaling up. So I think the December quarter, what it brought to us was 2 new customers in that category that allow us to play. We still have a tier 1 front-end engagement. That one has taken some steps to accelerate, and we'll see where that engagement goes.

But I think for the extremely high volume, it's going to be -- it's still going to be through a partnership. And we've got adequate relationships, we think, that are ongoing now that can ultimately drive there. But the 2 opportunities in mobile that we announced in December quarter were ones that we can manage without a very large partnership that requires dramatically increasing the scale of the capacity of the factory in New York.

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

My congrats as well to the entire Akoustis employee base. It's nice to see the hard work really starting to pay dividends. Two for Jeff, then a follow-up for Dave. Jeff, on the doubling of production by the end of 2021, do you foresee any issues in lead times in getting that capital equipment installed and ready to produce? And then also, I'd love to hear an update kind of where you see the competitive landscape at this point, especially on the Wi-Fi side? And then I'm going to follow up after that.

Okay. I appreciate your comments. In terms of procurement challenges for expansion, one of the things that we've been -- one of the things strategically we've done is really looked out at what lead times have done. I can tell you, on some of the longer lead times, we've seen maybe 1- to 2-month type of adjustments in lead times. The way we've mitigated that is we looked at -- that select category is very long lead time tickets, and we already -- we pulled the trigger on bringing those in. So that's one of the ways we've managed the lead time challenge there.

The other challenge in terms of capacity expansion has been bringing outside installers into our fab in order to install equipment. But we've implemented solutions, say, off hours, the weekends, to enable us to remain compliant from a regulatory standpoint, bringing those outside heads in and also keeping our employees safe. So we've worked some off schedules and off hours in order to achieve that.

Overall, we think we're in very good position in terms of lead time for this expansion. And the other aspect is it's not always just lead time of equipment, we have to recruit and bring in the labor for the added shifts. And so we've made significant progress on the second shift in the second half of 2020. And we're going to continue -- we don't see -- foresee any major problem there filling out those shifts for that additional capacity.

In terms of the competitive landscape, what I would share is that we're not the only ones seeing the attractiveness of the Wi-Fi market and the dynamic. Clearly, that was in our top 2, and it really dovetails back into mobile. So -- what I would say from a competitive landscape -- standpoint is that the industry never stands still. This is always the case. What we have to do is not stand still either. And I hope, from what we've reported to the investors today, investors can judge for themselves, but we're not standing still either.

But in terms of specific competition, we don't comment on any specific competitors. What I would say is that the burden is on us to produce state-of-the-art filters and do those in a time frame that allow our customers to compete. And so that requires rapid response from our end, rapid prototyping and really gearing to a very short time constant in order to allow our customers to compete.

So -- and you said you had a question for Dave or any follow-up?

Yes. And then for Dave, maybe you wouldn't mind commenting on just overall where you're seeing changes on the content side. How many BAW filters for -- per device on the WiFi 6E side? And how important do you think wafer-level packaging might be even just for that Wi-Fi marketplace?

Tony, good question. The -- with WiFi 6, we relate to the market there. And the DR and LTCC type filters had created a pretty strong position, but we had success and we are continuing to have success in that market segment.

On the WiFi 6E, it definitely is playing in our favor with hi-Q acoustic BAW technology. The spectrum is more challenging there for the other technology to be able to hit that coexist requirement of 110 megahertz split between the 2 bands.

So that's something that the -- content wise, we are seeing that there's a good mix of 2x2 MIMO and 4x4 MIMO that's playing there both on the enterprise and the retail. And then that -- the interest level, as you can see in our announcements, is that we've got over 15 engagements there, and 10 of them have already placed orders. And we just locked the design, and we're going to be providing preproduction parts in this coming quarters. So there's a significant pull. And the main reason is that we enable that channel 15 in the 6-gigahertz spectrum that nobody else does from a -- they can't from a DR and LTCC.

So that -- in addition, the pull that we're seeing in the mobile side as WiFi 6E, and not just on the smartphone but also in potential tablets and laptop, is a big play for the BAW technology, and that's where we'll need the WLCSP. So we utilize the WLCSP and our modules that go into CPE, but -- and that may give us some advantages in performance, but size is not as critical as it is in the mobile, be it smartphone or tablet and laptop.

And you'll see more announcements of product being released with WiFi 6E. And just like in 5G, some of them won't have as, I guess, higher performance on the filtering for their initial model, but they'll need to integrate it with higher-performance filters if they want to meet, obviously, the requirements for those standards.

Our next questions come from the line of Rick Schafer with Oppenheimer.

I'll add my congratulations as well. Jeff, I guess I got just kind of a two parter for you. First, I mean, you've talked in the past, I think, about having sort of at least a 12-month lead in WiFi 6. I mean do you feel like you've got a similar or possibly longer lead in 6E? And it's sort of second part of that question. You're sort of assuming Wi-Fi is set to lead growth this year, which it sounds like it. Is, what would you consider sort of the dark horse for you guys for this year for upside? I mean would it be the handset business ramp a little quicker? Could it be CBRS after the cable guys, I think, just spent $4 billion on spectrum? So I'm just curious of kind of your take there.

Okay. Rick, and thank you for the comments at the beginning. In terms of product lead in the market, I'd say there -- in WiFi 6, we do see competitive parts that are in that marketplace. That, again, is a type of situation where we also have redesigned some of our parts to improve their competitiveness, and that's really how the game is played once you commit particular market is you make cuts and improvement to the product for them, and we certainly have done so with our WiFi 6 product.

In terms of WiFi 6E, one of the things that's pretty interesting to me from a standpoint is, as I mentioned earlier, the bandwidth requirements are 10x that of the narrowest WiFi 6 product that we have to produce. That's not just the circuit design, that's a complete redesign of materials. You're looking at in the 6 gigahertz nearly 1,200 megahertz of bandwidth. That isn't, by any means, trivial. So there are very few competitors that I believe can even pull that design off.

Nonetheless, as I said previously, from a competitive standpoint, the industry never stands still and nor do we. So hard to gauge you on that. I think with the magnitude of interest in 6E, I would be completely shocked if competition is not -- those that have the opportunity to produce those parts aren't building and designing 6E product. But we'll see what comes out. We always take the approach of don't sit and stare at what the competition is doing, make them sit and stare at you, so in -- terms of let's go execute on our end, and we think the rest will take care of itself if we're able to package the technology and deliver the performance requirement in a short period of time.

To your second question, in terms of any dark horses or upside, you mentioned -- clearly one that has really -- has materialized during the last quarter, has been the mobile. We mentioned 2 additional customers coming onboard. Pretty aggressive schedules, however, they're working -- they really work in our favor because they're working at frequencies we think we're already pretty good at in terms of these ultrahigh band 5G frequencies where we already have models in place. We already have products in very -- near the frequencies they're looking at playing. So those are really nice opportunities, in that their volume and that they've got very tight schedules and short triggers of when they want to move.

You mentioned the CBRS. I think that's clearly another one. If you look at -- that was really an event last summer with that spectrum in the 3.6 gigahertz range. I think another one that's kind of a dark horse to be looked at is the C-Band auction. I mentioned that in comments. That spectrum in the 3.7 to 3.9 gigahertz, that's for 5G. The amount of margin in that auction thus far is pretty staggering. It's over $80 billion, so that's clearly going to have some impact, we believe, on the 5G spectrum. So we're already -- as we said in the prepared notes, already designing filters for that, that we think are going to be available this first half of this year.

So one of the other dark horses since we're on the subject is I think there's nice opportunity of platforms that are using both WiFi 6 and WiFi 6E and being able to -- it's not -- not all of our customers are doing part switch overs to 6E. They're doing kind of bridge-type design that use both WiFi 6 and 6E. So I think we'll see more life out of our WiFi 6 product as the market evolves to 6E. So that's several positive things.

Dave, anything you want to add to that in terms of dark horse?

I think the only other thing maybe I touched on a little bit ago, too, is in the mobile sector with laptops and tablets. That's an area that we haven't talked too much about. And there's interest that we're seeing in the market, particularly around WiFi 6E. So I think you can see some activity picking up second half of this year around that sector as well.

And just a quick one on the capacity announcement. I mean I think -- and please level set me here if I'm incorrect, but I think you originally targeted sort of 200 million to 300 million filter capacity by this summer. So I guess, is that correct? And so we should be thinking sort of 400 million to 500 million filters by end of year in terms of capacity? And then what does that mean for your CapEx plans this year?

Yes. I think the -- where we're targeting there is clearly by the end of the year. So your assumption is correct. We don't -- we're careful not to quote an exact number, but certainly, in that 400 million plus -- call it, 400 million to 600 million type capacity, it would be in that range. There's still some bottlenecks, incremental bottlenecks that we can address to eke out more capacity. Clearly, have a focus on our end on staffing out all 4 shifts in order to maximize the capacity.

So there are some things that we can do incrementally that -- a lot of the large equipment that we have in the fab can do significantly higher, but we get these bottlenecks that we have to address, some of that can be through automation, other is through smaller capital equipment. And then obviously, the length of build-out piece of that. So -- and it also depends on the mix and how many -- how -- the mobile market is going to have -- if it's -- it clearly has the smallest chip, so you can get more per wafer. So there's a lot of different ways of calculating the number, but overall, we're -- I think your comments are correct.

Our next question is coming from the line of Cody Acree with Loop Capital.

Congratulations, guys, and to the entire team. Maybe if I could just touch on OpEx. With your ramp through '21 capacity and customers, what does the OpEx budget look like for the year? Maybe your thoughts on cash burn as well for the year?

Cody, it's Jeff. I'm going to hand that off to Ken. Let him comment.

Yes. Cody, as Jeff mentioned, we are ramping up our capacity expansion over the next -- throughout calendar year '21 to yet double again. So we will be bringing on additional shifts. And the way we handle that is we typically -- when we bring in new employees, it's usually a quarter ahead of when the capacity need is required. So we will be bringing in additional costs to fund that capacity expansion. But we'll be prudent, and we will do so when we have line of sight to revenue. We'll be looking at, like I said, about a quarter ahead of time when we expect to incur those costs. And then, obviously, as we utilize more of the capacity in our plant, the operating cash flow burn itself will come down. And we mentioned before, when we get to the $12 million to $15 million in revenue, we would expect to be operating cash flow breakeven at that point, depending on mix.

Any specifics that you're thinking about as far as your CapEx ramp through the year?

Yes. I think what we stated before -- as far as the initial 500% capacity expansion, we have about $4 million to $6 million left on that spend, and additional about $9 million to $10 million to yet double again to get to what we talked about earlier, 400 million filters-ish range. A lot of those items that we discussed earlier were -- we purchased the equipment, and they already have the capacity to do that level of filters. So what we're talking about now is some of the less lead time items and bottleneck areas to yet double again our capacity throughout the calendar year 2021.

Do you expect to be cash breakeven in the same level that has been discussed before?

Yes. As I stated earlier, I think our model still indicate that we'll be operating cash flow breakeven in the $12 million to $15 million of revenue. And some of that depends on whether it's a lower end or higher end depending on the mix of what we're selling during that quarter.

And then lastly, Jeff, can you just talk about -- maybe for Dave as well, just the overall implications of the C-Band auctions, albeit it plays to your sweet spot of filter -- your capability today. And -- but as you go forward, do you expect that C-Band opens up significantly more spectrum for you? Is it -- does it become a larger market driver maybe than what handsets would have otherwise? And then what do you think that does to 5G and millimeter wave?

Okay. So I'd love to unpack here, but let me jump into it. I just was scribbling notes here just to make sure I try to address it. So your first piece was there on the C-Band auction, I'll comment and then I'll let Dave to jump in here as well.

In terms of the C-band auction, that -- if you look at how we've been planning our capabilities and our technology around those necessary capabilities, the C-Band auction, those that aren't too familiar with it, it sits right in the n77 -- it's right at the high end of n77. So that's been a band that's been of interest to us. The interesting about -- the interesting thing about n77 is it's extremely wide bandwidth. So we've been developing materials that are necessary to be able to address very wide bandwidth within the overall 5G spectrum, including n77.

So in terms of our capabilities, it's right in the bulls eye of where we've been developing. I'll remind you that the first product the company made was -- and delivered into the market was a phased array radar filtered at 3.8 gigahertz, which is right at that band. So we've been developing models, design kits, capability and expertise at these higher frequencies all throughout the life cycle of the company.

In terms of it being a larger market, I think in terms of the deployment in the market, I think there's great indications by virtue of the magnitude of what's going on in the auction that it's going to be deployed. There's a whole load of filters that are going to be required for that particular band, both in the infrastructure as well as in the mobile area. So it really falls within the sweet spot when you couple in our wafer-level packaging capability we're bringing on.

In terms of what that does for 5G millimeter wave, I think there's -- from -- certainly from my perspective, the sub 6, sub 7 gigahertz technologies are by far easier to implement for -- in the mobile environment than the millimeter wave. There's just a lot of challenges with millimeter wave in a mobile environment that are just challenging to overcome.

So I think from a more reliable standpoint, the sub 6, sub 7 gigahertz frequencies are really -- certainly going to be deployed. There's certainly a role for millimeter wave. It's for fixed-type backbone -- for the fixed backbone of 5G is a clear business case for that. But in -- so that's more of a point-to-point type use, whereas the mobile environment is very much a dynamic one that creates some challenges for millimeter wave.

So back to your -- back to the C-Band, I think it's going to play a significant role in 5G, and we believe we've got the technology and capabilities to address that.

Dave, do you want to add anything to that?

Yes. Cody, I'll just add a couple of more points. I think Jeff highlighted that we've been focused on that 3.8 gigahertz and developing the technology several years back. Additionally, we've been shipping 300-megahertz solutions in the -- in that n77 band to the Asia market. And so this new spectrum is 280 megahertz. So we just shipped this up, new designs.

And we've been talking to the providers in the market, and we've also been talking to the key OEMs that service the North American market as well. So this is a huge play, and we've got pretty good line of sight on the technical requirements. Obviously, the shakeout as far as who bought what and who's going to win the contract still got to happen. But we believe, as Jeff highlighted, it's going to be a pretty significant market opportunity for us on the infrastructure side, and the mobile will follow then thereafter. It will, I believe, eat into the millimeter market based on the spectrum that becomes available. It's easier from a technology standpoint to deploy. It carries the similar band -- not as good a bandwidth, but has better bandwidth than, obviously, the legacy frequency spectrum. So we think this will be a -- we're bullish on what will happen over the next several years with this sector.

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

Thank you all for your time today. We look forward to speaking with you during our next update call to discuss the current quarter execution against our milestones and future expectations. I want to wish everyone a safe and healthy week, and we look forward to following us soon. Thank you very much.

Thank you. That does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.