Akoustis Technologies Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 13, 2024

There are 8 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to Akoustis Technologies Fiscal management will take questions. A replay of the call will be available on the Investor Relations section of Acoustic's website. Thank you. You may begin.

Speaker 1

Thank you, operator, and good morning to everyone on the call. Welcome to Akoustis' Second Quarter Fiscal 2024 Conference Call. I'm Ken Boller, CFO. I'm joined today by our Founder and CEO, Jeff Shealy and EVP of Business Development, Dave Eichle. Before we begin, please note that today's presentation includes forward looking statements about our business outlook.

Speaker 1

All statements other than statements of historical facts included in this conference call, such as expectations regarding our strategies and operations, including the timing and prospects of product development Customer orders and design wins, possible collaborative or partnering relationships, litigation matters and expected financial and operating results 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 obligation to update any forward looking statements made on today's call. Our SEC filings mention important factors that could cause actual results to differ materially. Please refer to our latest Form 10 ks and Form 10 Q filed with the SEC to get a better understanding of those risks and uncertainties. In addition, our presentation today may also refer to certain non GAAP financial measures.

Speaker 1

A reconciliation of these measures to the most directly GAAP measure is presented in our earnings call highlights release available in the Investors section of acousis.com. I would now like to turn the call over to Jeff Sheely, Founder and CEO of Akoustis. Thank you, Ken, and welcome everyone to our FY 'twenty four fiscal 2nd quarter conference call. Revenue in the December quarter was within our guided range of flat sequentially. During the December quarter, we had 2 customers that each made up greater than 10% of our reported revenue.

Speaker 1

XBAW related sales accounted for the top 5 customers and 7 out of the top 10 customers. Our top 10 customers made up 58% of revenue. Our top 25 customers made up 74% of revenue. In terms of regional sales, 3 of our top 10 customers were Asia based. Our top 36 customers made up 80% of our revenue with 40% of our sales coming from Asia, followed by 47% of our sales coming from North America and 13% of our sales coming from Europe.

Speaker 1

Finally, our top two customers were Asia and U. S.-based customers, respectively and collectively made up 30% of sales. Last year, we commented that the buildup in channel inventory, particularly at our Wi Fi customers in the Asia region would adversely impact our revenue in the second half of calendar twenty twenty three. Our revenue met our guided targets for September December quarters. Today, we believe we have worked through the inventory issues from 2020 3, and we expect demand returning in Wi Fi with strength in Wi Fi 6E and first production demand in Wi Fi 7.

Speaker 1

Consistent with our early guidance for fiscal Q3 on last quarter's investor call, We reiterate our expectation to return to record quarterly revenue for the quarter ending March 31, 2024, up 18% to 25% sequentially. The company continues to focus on expense and cost savings To significantly reduce cash burn moving forward, Ken will detail our ongoing activities and impact on reducing our cash burn during his I would now like to take a moment to discuss updates involving the company's activity Related to the Chips and Science Act of 2022. Regarding Chips Act funding, there are 2 detailed updates to share with investors. First, during the December quarter, we became members of 3 microelectronics, ME Commons hubs focused on electronic warfare for the Department of Defense. Membership to these hubs is critical as it allows access to be part of the hub proposal team for new government research programs.

Speaker 1

We currently have 2 active EW proposals under 1 hub membership with one of the proposals potentially worth several $1,000,000 annually beginning in the second half of calendar year twenty twenty four. Furthermore, we are currently pursuing memberships with additional ME hub centers and will detail our efforts and progress moving forward. 2nd, the CHIPS Act of 2022 included a provision for a 25% refundable investment tax credit For Chips ITC, on investments in facilities that manufacture semiconductors or semiconductor manufacturing equipment that were placed in service after December 31, 2022, we currently estimate the amount of the refundable tax credit applicable to Akoustis to be $3,700,000 to $4,700,000 over the next 12 months to 15 months. Next, I would like to discuss several updates in our primary target markets, beginning with WiFi. Our first milestone for the December quarter in WiFi was to receive a design win in a next generation WiFi 7 solution with a Tier 1 U.

Speaker 1

S. Based carrier. Our carrier partner has awarded us design wins for 2 high band XBAW filters For WiFi 7, further, we received prototype orders to support a production ramp In the second half of calendar year twenty twenty four, our second milestone was to secure multiple design wins For our Tier 1 enterprise class customers, Wi Fi 7 suite of routers, we announced this design win last week along with visibility on volume orders to support the production ramp. We support this new platform with a suite of advanced filters covering both wideband and narrowband solutions. Also, our 1st mass produced aluminum scandium nitride single crystal XBAW filter is to be qualified for production for this customer's application.

Speaker 1

Our 3rd milestone was to secure a design win For a Wi Fi 7 solution with a Tier 1 enterprise class OEM, we announced this completion Of this milestone in our January 10 press release, this customer is our 2nd Tier 1 customer to adopt multiple wideband and narrowband solutions covering 5 gigahertz and 6 gigahertz Wi Fi 7 for a 4x4 multi user MIMO AP platform. We received prototype orders to support a production ramp, which is slated to begin in the second half of calendar year 2024. Looking ahead in the March quarter, we expect to ramp XBAW filter production for 2 programs In WiFi 7 at a Tier 1 enterprise class customer, in addition, we expect to ramp XBAW filter production For Wi Fi 7 with a Tier 1 enterprise class OEM and we expect to secure a design win for a WiFi 7 solution with a Tier 1 enterprise class OEM. Next, I would like to discuss our recent developments in the 5 gs mobile market. During the December quarter, we recognized filter sales, which incorporated our WLP package to our Tier 1 RF component customer.

Speaker 1

This customer was a top 10 customer on a revenue basis. Also in the December quarter, we expected to deliver the first of 3 WiFi filters to our Tier 2 5 gs mobile RF front end module making customer. We have contracted with this customer for 3 filters. We shipped the first of 3 filters. The second filter is releasing to the fab this month and the third filter is currently in the design phase of the process.

Speaker 1

Finally, we successfully engaged a 5th mobile partner offering our XBAW process and foundry for their module and discrete product needs. We have shipped this partner multiple XBAW die for engineering evaluation for a future multiplexer application for the mobile market. Our anticipated milestones for the March quarter include deliver the second of 3 revised Wi Fi filters to our Tier 2 5 gs mobile RF front end module making customer. And now I will discuss our progress in our network infrastructure business. During the December quarter, we completed the redesign of our new and improved 5 gs Band 41 and 5 gs U.

Speaker 1

S. 3.8 Gigahertz network structure filter solutions. We successfully sampled the Band 41 filter earlier this month, and we currently are evaluating the performance of our 3.8 gigahertz filter and engineering as we prepare for sampling. During the quarter, we experienced softness in XBAW filter shipments to our 5 gs network infrastructure customers. However, we expect modest growth of shipments to return in the March quarter.

Speaker 1

For the March quarter, we expect to secure A foundry order for development of up to 4 5 gs, 4 gs, LTE, XBAW, LPDI with a Tier 1 Satcom provider. 2nd, we expect to gain approved supplier status and achieve a design win with a Tier 1 infrastructure customer. And finally, we expect to complete NRE development and deliver and N-one hundred and four samples to a Tier 1 network infrastructure customer. Finally, before handing the call off to Ken, I would like to provide an update on our Defense and Other Markets business. During the December quarter, 2 out of our top 10 customers were in our Defense and other business category, and I will begin with an update on our published milestones for the quarter.

Speaker 1

First, as we announced on January 29, We secured a BAW filter design win for an automotive wireless battery management system or WBMS solution using a Tier 1 IC reference design. We expect a production ramp in the March quarter of calendar 2025. 2nd, we completed the qualification of the optimized second XBAW resonator for a key customer in the timing control market. Now that this qualification is complete, the design is released for limited production. The resonator is used in a tunable oscillator scheduled for production in the second half of calendar twenty twenty four.

Speaker 1

3rd, we delivered our first X band BAW filter using Akoustis' advanced XP3S technology to a Tier 1 defense customer. We met with this customer last month and received positive feedback and expect this engagement to continue for X band phased array radar applications. As previously mentioned, our biggest success in the defense and other market segment was the introduction of our new XP3F technology, which incorporates a new revolutionary patented multilayer nanomaterial that incorporates our single crystal piezoelectric material. This new nanomaterial was developed with funding from the Defense Advanced Research Projects Agency or DARPA to scale the XBAW technology to frequencies up to 18 gigahertz. During the December quarter, we began work on our multimillion dollar Phase 2 contract option, which extends our current DARPA coffee program and funding through December 2024.

Speaker 1

During the December quarter, we continued shipments supporting a new DARPA contract unrelated to the DARPA coffee contract, which requires high performance custom resonators for timing control applications. This customer was a top 10 customer for the December quarter. In addition, we submitted a proposal on a new multimillion dollar program with the Office of Naval Research to fund RF filter multiplexers incorporating our XBAW and P3F materials technology, which if awarded could be announced as early as Q2 of calendar 2024 and begin in summer 2024. In our GDSI business, we serviced 148 customers during the December quarter and the average customer spend is up approximately 17% over the same quarter last year. As mentioned earlier, Akoustis has established memberships with 3 regional hubs And GDSI has at least 5 additional applications pending with remaining hubs, which we expect to convert to memberships by Q2 of calendar 2024.

Speaker 1

One key customer milestone for the quarter was a successful completion of a supplier quality audit for an FDA approved diagnostic chip aimed at real time PCR results. Finally, GDSI saw double digit increase in new quoting activity over the prior quarter, which we will push to convert to new orders to grow the business. For the March quarter, in the Defense and Other Market segment, we are expecting to deliver The new XBAW PDK to 2 customers for ongoing foundry engagements and complete the design and sample of a new 2.4 gigahertz WiFi CPE automotive XBAW filter to multiple customers. And now I would like to hand the call over to Ken to go through our financial highlights. Thank you, Jeff.

Speaker 1

For the Q2 ended December 31, 2023, the company reported revenue of $7,000,000 which is in line with our prior guidance and flat over prior quarter ending September 30, 2023. However, this represents an increase of 20% year over year. On a GAAP basis, operating loss was $15,000,000 for the December quarter, driven by revenue of $7,000,000 offset by labor costs of $8,000,000 depreciation and amortization of $3,200,000 and other operational costs totaling $10,800,000 It is noteworthy that our labor and other operating costs have declined sequentially. As a result, GAAP net loss per share was $0.21 CapEx spending for Q2 was $1,600,000 completing our New York fab tool capacity expansion project 500,000,000 filters per year. Cash used in operating activities was $11,300,000 which included additional payroll costs associated with our expense reduction efforts, increased legal costs and increased AR and other, which will be converted to cash in the March quarter.

Speaker 1

The inventory channel buildup in Wi Fi is behind us and we continue to receive design wins and introduce new products. As a result, we have backlog to support a return to record quarterly revenue in the March quarter, with quarterly sales expected to be up 18% to 25%. On the expense front, we have undertaken aggressive expense reduction and cost saving measures that we estimate will reduce our operating cash flow burn rate by 30% to 38% sequentially in the March quarter. Furthermore, with the expense reductions and cost saving actions in place, We expect the operating cash burn will drop another 30% to 40% in the June quarter. Given the top line projections, Chip's ITC refunds and full impact of recent cost savings, we continue to expect operating cash flow breakeven later this year in the December quarter.

Speaker 1

The company sits with a strong balance sheet after the recent completion of $11,500,000 Underwritten common stock offering announced in late January. And I will now turn the call back over to Jeff for his closing comments. Thank you, Ken. The market opportunity for our patented high frequency XBAW and XP3F filters continues to be substantial. We currently have approximately 189 issued patents and patents pending providing a substantial IP mode around our technology.

Speaker 1

We continue to work aggressively to achieve each of our stated objectives and we will continue to provide updates on our execution against these objectives as we progress. I want to emphasize to investors that management continues to focus on improving our income statement. As per our guidance, we expect to achieve record quarterly revenues in the March quarter. We are diligently pursuing Product cost savings to lower operating expenses and improve gross margin. We have undertaken necessary steps to reduce our operating cash burn in the coming quarters.

Speaker 1

We believe this is prudent in the economic environment that we are facing. Further, I appreciate our employees for their hard work, Passion and dedication in working together to position our company for growth in the quarters ahead. Finally, I also wish to thank our shareholders who continue to support the company. And with that, I would like to open the call for questions

Operator

Our first question is from Anthony Stoss with Craig Hallum Capital Group. Please proceed.

Speaker 2

Good morning, guys. Nice progress. Maybe for Ken, can you talk about your, I guess the new revenue per quarter for breakeven in Q4? What you think gross margins might be in that quarter get you to breakeven and also maybe just kind of lay out a linear what you expect OpEx each quarter throughout the year?

Speaker 3

Good morning, Tony. Let me comment a little about revenue for operating cash flow breakeven. I will say that we had significant expense reductions starting in the September, October timeframe and we continue to do so. We had about $14,000,000 annualized reductions. Now we have additional cost savings that push those reductions above $20,000,000 annualized.

Speaker 3

So that also somewhat brings down the need for the gross margin and the revenue in the quarter of operating cash flow breakeven. But I still predict that to be in the come down a little bit, but the $11,000,000 to $15,000,000 range per quarter of revenue achieve operating cash flow breakeven. And that would also assume a margin of 20% to 25% in that quarter. On the OpEx side, I think you touched on that as well. Those numbers have come down and they are going to continue to come down as well.

Speaker 3

I predict our operating expense line on our GAAP financial statements will be more in the range of about $10,000,000 per quarter By the time we get a full quarter of annualized savings and that we get operating cash flow breakeven. And we talked about margin improvements in area as well. We're undertaking a number of measures internally to improve our margins, we are focusing on some of our existing parks where we have high laminate costs. Some of those costs we can bring down on the laminate side as much as half of what it currently is. We also are introducing a number of new products.

Speaker 3

We have about 17 products in production currently. That number is going to more than double next year. So we're introducing More products and all those products have a lower cost structure to them, particularly on the back end side as they're smaller form factor. And I think I answered all your questions. If I missed one, tell me, let me know and I'll go back on it.

Speaker 4

No, no,

Speaker 2

I think you hit them all and then Jeff would love to hear your views. It sounds like the inventory on the Wi Fi is now normalized. Maybe from a design perspective, what you see and if you're going to double your products going into next year, what do you think about design activity or number of wins? Let's

Speaker 4

see. In terms of just in terms of the you touched on several things. Let me start with the Wi Fi inventory. I think we emphasized that in the prepared comments. We have seen We started seeing that lift with orders as well as ongoing design wins.

Speaker 4

And we started seeing that back in the October November timeframe and that's why we were comfortable kind of providing the guidance back to growth and record quarterly revenue. In terms of just estimated, we've provided in the prepared comments What we expect milestones at least over the next quarter, you can see additional design wins there. But in terms of number of design wins Over the next year, that let me ask Dave to kind of touch base because he's a little closer to the customer.

Speaker 5

Good morning, Tony. A couple of comments I'll make just following up on Jeff's statements. The 2 Wi Fi seven design wins that we just announced, Those are in enterprise class programs. And there's some custom filters that we've done for these two customers, And they will turn into standard products that we're going to market to the rest of the industry as well. Dollar content in these are almost 2x what we have with Wi Fi 6E programs.

Speaker 5

So I think that's significant. That's what we're trying to track now is significant design wins that will see appreciable revenue. In addition to the other design win we announced with the Wi Fi 6E program, which is more of a consumer base, the volumes on that are good. A lot of these are with the new products that Ken mentioned that were released. The 2 that are getting the most attraction right now that we Expect to see multiple design wins per quarter with WiFi 7 now that certification is approved and moving forward and there's a lot of Momentum, there was some slowdown last year on WiFi 6E transitioning into WiFi 7.

Speaker 5

So we see that picking up in these For both these two parts are in a small form factor that's going to service the 5.5 and the 6.5 gigahertz. We also have investments that we're making on 2.4 gigahertz as well, so that we can bundle all 3. We focus mainly on

Speaker 4

high frequency, but recognizing that we

Speaker 5

do have demand down but recognizing that we do have demand down at lower frequency as well and we can service that. So we expect this momentum to be pretty strong through 2024 calendar year with a lot of the WiFi 7 and you can expect us to make every quarter announcements new design wins and give you guidance on one of those projected ramps.

Speaker 4

Thanks, Steve.

Speaker 1

Best of luck, guys.

Operator

Our next question is from Craig Ellis with B. Riley Securities. Please proceed.

Speaker 6

Yes. Thanks so much for taking the questions and guys congratulations on getting the cost structure down and moving closer to cash I want to start with a follow-up to the prior question. So it seems from the prepared remarks And the comments just provided in Q and A that a lot of the momentum in Wi Fi is around enterprise products. And so I was hoping to get some further color on what you're seeing on the consumer side and how you would expect the mix of consumer and enterprise to play out as we go through this year?

Speaker 5

Good morning, Craig. This is Dave. So I'll take that Question. Yes, a lot of our activity has been with the enterprise and the volumes system volumes are not as high in the 100 of 1000. But as I commented earlier, the dollar content is pretty significant with these, particularly when you're looking at filters that could range to the 20 to 30 system.

Speaker 5

And we've got a unique position here in that we're enabling these systems based on our product portfolio of narrowband and wideband. So that's good to continue to increase our customer base there, and it's usually pretty sticky. Once you have a customer in this sector And you maintain a good customer intimacy and technical support. You will continue to support the new design wins. The 1 market segment that you didn't mention though that is That is pretty strong for us also as a carrier side.

Speaker 5

And we just did a press release yesterday, and that was for Wi Fi 7 program that we got designed into. And if you look at our press release, it lists the subscriber base that they have up $32,000,000 So that those type of volumes that we see on the carrier side, both for WiFi 16 and WiFi 7, puts it up competitive to the type of volume you see on the consumer side. And then the press release we did several months several weeks ago was for a consumer grade. So we are starting to penetrate the consumer grade that's been a lower priority just based on it is Usually more price sensitive and they go after older technology. But we're seeing that those architectures Going to higher MIMO count and also with the requirements of Wi Fi 7 due to latency and The channel bandwidth that the higher performance BAW filters in the smaller form factor is more critical.

Speaker 5

So Their negotiations on price is less important.

Speaker 4

It's more on performance. Craig, this is Jeff. I just wanted to follow on Dave, Summarize the WiFi segment, one of the things I wanted to make sure we added in here was just some of the momentum in the defense and other markets. And that's really been driven by what's going on, not only with Our success in the coffee program, I think we mentioned in the prepared comments, not only starting up the Phase 2, but there's definitely A follow on activity to that at the systems level and we alluded in the prepared comments On some momentum in the contract, that also is supported by these research hubs that are in place That we have current proposals in place. We're pretty bullish on being able to secure funding, A follow on funding for the XP3F technology, which as you know allows us to access much higher frequencies.

Speaker 6

That's real helpful color guys. And then the follow-up is for Ken and it's really just a clarification on 2 things. The first one related to those comments. As we think about sequential revenue growth in fiscal 3Q, it would seem that it stacks up as being Significantly led by enterprise Wi Fi followed by defense and then networking. Is that the case?

Speaker 6

And then can you just clarify What the CapEx outlook is for calendar 2024 and to the extent there's Any linearity profile that you can share that would be helpful too? Thank you.

Speaker 3

Sure, Craig. I'll expand a little bit on CapEx spend. So we've been mentioning over the past few quarters that we're completing our 500,000,000 filter capacity expansion. That has been completed. We are now we have that capacity.

Speaker 3

Certainly, when we talk about operating cash flow breakeven and the revenues needed, That capacity is well beyond what that revenue is. We do not anticipate any real material spend in CapEx the remainder of calendar year 2024, there are a few open projects that we'll finish. There are a few CapEx items that just come across on everyday business as machines possibly break down or we need a new small type of equipment like an analyzer or something of that sort. But I anticipate CapEx spend for the remainder of the year to be in the 100 of 1,000 per quarter or less.

Speaker 5

And then I guess, Craig, to your question on the Q3 revenue, just trying to give you visibility on that, where you are good strong backlog that's why you've seen the guidance being in that 18% to 25%. The good news is that the slowdown we saw And we talked about the inventories under control. We started to see the tick back up on some of the legacy Wi Fi 6E programs As they make transition to the Wi Fi 7 program. So one example is our enterprise Tier 1 customer that we've announced in the past, their volumes are picking back up on the WiFi 6E and we're already starting to get appreciable WiFi 7 preproduction orders that were ramping and then the same thing with the carrier. WiFi 6E program has picked up from reductions in their inventories.

Speaker 5

So that demand is going on as they transition into the WiFi 7. So that's two examples as we also have other customers picking up in introduction in the WiFi 7. We're starting to see significant pull on our 2 products. So there's a lot of good activity there. The network side has slowed down.

Speaker 5

If you look at 5 gs overall, Nokia, Ericsson, others in that sector have had Poor quarterly earnings and so that has slowed down the 5 gs deployments. So there is still some demand on the small cell, but that's going to be less of a factor this quarter. And next quarter, we expect it to pick up with, obviously, the current products, but also some of the engagements that we made in the prerecorded.

Speaker 6

That's real helpful. And then just finally, Ken, you mentioned AR would improve in Q3. Do you expect that to fully normalize or does that play out through the fiscal second half of the year? Thank you.

Speaker 3

So Craig, we at the end of December, we had some AR buildup on our balance sheet. That was due to a lot of year end orders that shipped out towards the end of December that we will collect in this quarter, Q3. There were also some timing issues, particularly with a large program that we have on the NRE side with the government and that's we can Build them and receive money according to a set schedule. So that's also in our other receivables other asset section. We'll collect that in this quarter as well.

Speaker 3

And I expect that to normalize out throughout the remainder of the year.

Speaker 6

Got it. Thanks guys.

Speaker 4

Thanks, Craig.

Operator

And our next question is from Suji Desilva with ROTH and Kilometers. Please proceed.

Speaker 7

Good morning, Jeff, Dave and Ken and congrats on the progress here. Maybe a longer term question, Jeff. Given you have multiple segments that seem to have opportunity here and promise, What do you think in a year or 2 are the larger sort of segment contributors? I mean, I would think it would be mobile, but the defense programs sound like with these hub memberships, they could be as well. So any kind of qualitative thoughts there would be helpful.

Speaker 4

Yes. If you look at activity, there's Certainly in the I think we've outlined quite a bit going from WiFi 60 to WiFi 7. You see not only the content increase, Dave touched on the wide band and narrow band, the portfolio that we have. The other thing that maybe didn't come through, but, is the ASP The ASPs and the WiFi 7, that's favorable for us. So we're kind of mixing into new platforms, which Certainly have starting ASPs that are higher.

Speaker 4

So we're very bullish with the content. Dave outlined 2x to 4x of additional content. So we're pretty excited about that. If you look over in the Defense segment, David indicated, it has slowed down. We do see that picking up through the year.

Speaker 4

So while it's small, we do expect that business to roughly triple over the next year. If kind

Speaker 1

of you look at some

Speaker 4

of the internal modeling, so Wi Fi, we expect very strong performance there. Defense is on the defense side, several contract programs. And we mentioned in the prepared comments that We would be expecting, if awarded, at least one of those contracts to begin mid year. And we continue on with the Phase 2 at DARPA and then that has spawned some additional activity in the foundry. So that's strong and also some of the new spin off programs that have come there.

Speaker 4

You mentioned mobile, So I'll touch on that. We have been addressing we've got foundry activity ongoing there We're providing filters for fully integrated solutions.

Speaker 3

We'll see

Speaker 4

how that plays out. But we've been we mentioned in the prepared comments that we shipped the first filter. There's 2 additional filters that are in the design and fabrication phase. So that can be a contributor. What I will say though kind of overarching is if you look at the model that We're charging to the mobile would be upside to the model that we're projecting for the full year.

Speaker 4

And so as we talk about Getting the cash flow breakeven at the end of the year. And we do expect That cash flow to be a little lumpy going through the year because we got ITC credits and the timing of those. Ken mentioned some of the timing challenges. But overall, the mobile would be upside to the plan and with strong performance in defense, Wi Fi as well as network on a percentage growth basis.

Speaker 7

Jeff, that's a very helpful color on What's embedded in your expectations here? Second question is on the, I guess, the new single crystal product you're sampling and just to understand the competitive landscape again and whether single crystal product expands your competitive advantage. Just the color on there and whether that opens up markets or whether it's kind of continuous across the products you're doing to that new one?

Speaker 4

So yes, I'll start with that and then ask Dave to kind of follow in. But that particular is that we mentioned that's going in a new Wi Fi 7 design. We're utilizing that to obtain Some performance enhancements that we think are differentiated. It is amongst the narrowband designs that we're selling. Again, just a reminder, the WiFi 7 incorporates both wideband and narrowband.

Speaker 4

We have Multiple narrowband custom designs, which they really are no second source for. So we're Not having to compete with 2nd source on those and so that helps us with our bundling activities. So that's in terms of the single crystal. And maybe Dave wants to add anything else there.

Speaker 5

Suji, I'll comment the 2 things really with the single crystal. The development that we've been doing for the last couple of years to introduce This open and with the alumina nitride has enabled us to really service The narrowband and the wideband filters for certain market segments. So the gives us some advantages on power handling with some of these applications where you've got this really steep rejection and a narrow transition window. Also, we've seen some improvement in harmonics, which are critical for some of these COSYS type applications. The other thing is it's a building block of our XP-3F, which again is a unique feature of Akoustis.

Speaker 5

And the technical community recognizes that and that is a manufacturer process with this multilayered nanomaterial compared to other technologies that DARPA is funding. So It's gaining pretty significant interest from the defense industry base, but also from the 5 gs Sector that's looking at or I should say the cellular sector that's looking at 6 gs for FR3 and then also the Satcom market. So the same crystal is a good building block for discrete devices and also for these high performance technologies like the XP3s. Okay.

Speaker 7

Thanks, Dave. Thanks, Jeff. And my last question is just an update if you can on the litigation with Klarvo, that would be helpful. Thank you.

Speaker 4

Thank you, Suji. I'll take that one. Regarding the lawsuit Qorvo filed against Akoustis in Delaware, The case has reached a point where I can share Akoustis' view that the facts do not support the wide ranging allegations made by Qorvo. Akoustis filed a motion for partial summary judgment on February 1. And if granted in full, this motion would Dispense with the majority of Qorvo's complaints, everything but the patent claims.

Speaker 4

But I'll add that the company is well positioned on the patent claims. As mentioned in prior calls, the company has developed design updates to demonstrate with real world data The XBAW filters do not use Qorvo's patents. The motion we filed also asked the court to confirm that these designs Do not infringe 1 of the 2 Qorvo patents at issue. The other Qorvo patent expires this summer. Akoustis also believes Qorvo's damage experts use faulty methods and assumptions to develop key parts of Qorvo's estimate of damages.

Speaker 4

Akoustis has filed a motion to exclude that testimony. This motion represents an additional challenge to key parts of Qorvo's claims. Please keep in mind, even if the court ultimately does not grant Akoustis' motions, the defects in Qorvo's case will remain hurdles Qorvo would have to overcome at any trial. Qorvo has filed its own motion for partial summary judgment, But this motion is limited to a ruling on the validity of Corvo patents. No matter the outcome of the motion, Corvo would still bear the burden of providing approving Akoustis Products in French corporate patents, notwithstanding all the engineering performed by Akoustis to support his defense in the case.

Speaker 4

Now turning to the lawsuit filed by Akoustis against Corvo In federal court in the Eastern District of Texas, this case is beginning to gather steam. As a reminder, this lawsuit alleges Qorvo is infringing license exclusively to Akoustis by Cornell University. As described in past calls, Qorvo has filed a motion to dismissed the case and a motion to strike Akoustis' infringement contentions. The court held a hearing on Qorvo's motion to strike on January 10, 2024. After the hearing, both sides After hearing both sides, the court denied Corvo's motion to strike.

Speaker 4

As a result, this case is moving forward at full steam. Okay.

Speaker 7

Thanks for that detailed update, Ajay. Thanks, guys.

Operator

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

Speaker 4

Okay. Yes, so this is Jeff. I want to thank everybody for your time today. I did want to point out that one typo that we had in the prepared comments was We actually sampled the 3.8 gigahertz and shipped samples of that 3.8 gigahertz and that was not the Band 41. So I just want to clarify that Before we end the call, with that, we look forward to speaking with you during our next update call to discuss the current quarter's execution against our milestones we discussed today as well as future expectations.

Speaker 4

And with that, I'd like to wish everybody a great day. And thank you and goodbye.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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Earnings Conference Call
Akoustis Technologies Q2 2024
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