Q4 2019 Earnings Call
Greetings and welcome to the residents fourth quarter and full year 20.
Teen corporate update call at this time constraints for me listen only mode.
Your next recession will follow the formal presentation, if anyone <unk> assistance during the conference. Please press Star Zero Wonder telephone keypad.
As a reminder, this conference is being recorded.
No it's trying to cover so what's my children.
Senior Vice President of value chain Investor Relations residents Investor relations. Thank.
Thank you you may begin.
Thank you operator, please note.
There will be using a presentation during today's call.
It's acceptable I mean, that's age of residents IR website.
If you are with us today via the phone.
Please go to the that's page either you or download the presentation to follow that up.
Turning to slide two.
Earlier this afternoon resonate released financial results for the fourth quarter and full year once you like to.
Turning to at least that accompanies this call is available on the Investor section.
The company's website at Www Dot <unk> are not that dotcom.
Additionally, some of the information in this conference call came forward looking statements that involve risks uncertainties assumptions that are difficult to predict.
Well look fresh and exciting optimism.
Actually the current prospects.
Well its words, such as the leader in can expect.
And and anticipate.
Similar variation identify forward looking statements.
Other absence does not mean, but the statements are not forward looking.
Such forward looking statements are not a guarantee of performance.
And the company's actual results could differ materially that's contained in such statements.
Several factors that could cause or contribute to such differences are described in detail and resonance most recent form 10-Q and pancake.
Because filings with the FCC.
These forward looking statements speak only as of today this call.
And the company undertakes no obligation to publicly update any forward looking statements.
Well I knew estimation regarding the circumstances after the date of this call.
With that it's my pleasure to turn the call over to the chairman and CEO and President George Holmes.
Thanks, Brian.
Good afternoon, and thank you for joining.
Today's call joining me today is Marty Mcdermut our CFO.
Turning to slide three.
In today's call I will discuss resins achievements from 2019 expense expectations for 2020 and beyond.
Before I do I like to welcome. The notable number of new investors, who joined us since our last.
Update.
We sincerely appreciate your interest in an investment in resin and look forward to working with you in the future.
Also let me welcome Dillon Kelly to our executive team.
As Chief operating officer, well give you a little more details on day one later.
The facilitate today's.
We'll be using our new investor presentation.
Which we have added a few slides to specifically address the topics of this call.
You can access the presentation in the IR section of the company's website.
[music].
As a refresher and for new participants resonant fold critical or a problem.
I, providing differentiated solutions for the largest segment of the RF front end market.
We leverage our proprietary software platform, our deep portfolio of intellectual property and our seasoned team to deliver solutions that are partners and customers could not do themselves.
With greater efficiency.
At lower cost with the reduce time to market.
Turning to slide four.
So how do we do this.
We believe resin has developed unparalleled and disruptive technology.
A revolutionary and proprietary infinite synthesized network or I guess and software platform enables the.
Hi performance low cost designs and in many cases, resulting in as much as three to five times faster design development.
Most notably our novel, one innovative export bulk acoustic wave or Bob resonator structures are targeting the exact same requirement of fiveg and.
Why by six.
On the business run whereby we have a diversified growth platform licensing revenue streams from both our eyes and enabled fourg build for solutions and breakout royalty growth from our ex bar solutions.
Our future includes other high frequency enabled fiveg products were drilled.
Discuss in more detail later in the call.
Our foundry program directly enables new entrants to rapidly address the changing needs of the trying to market.
Turning to slide five.
Now, let's discuss 2019.
Which set the stage with huge success is based on our technology and business model.
On the technology front, we demonstrated the first working X bar or Fiveg filters with 10% bandwidth highpower handling at mobile World Congress in 2019.
We signed a strategic investment and commercial agreements totaling $16 million with the world's largest RF filter manufacturer.
Yeah.
Production mobile phone filters in 2021, and 22 time frame.
Disagreement with the first of what we expect will be many license agreement with prepaid royalties.
We're targeting to deliver the first nonmobile samples based on X bar and the first half of this year.
On the business front.
And the first half in 2019, our customers shipped over 1.5 million units.
And just the third quarter of 2019, they again shipped over 1.5 million units.
And in the fourth quarter, we met our expectation with over 2.25 million units, bringing the total.
Total unit shipped to date to over 35 million unit since we started in 2016.
In addition in February we significantly strengthened our cash position through a public offering yielding 26.3 million in that proceeds.
As we enter 2020.
Covidien 19, or <unk> as its more commonly known the Corona virus has had a clear impact on the overall market.
For many of our customers and partners have already lowered their first half how forecasts.
One of our peers, even reduce their quarterly forecast as much as 50%.
At.
We continue to expect to see revenues grew quarter over quarter.
From Q4 2019 to Q1 2020.
Warn that later for Marty.
We are using this time of market uncertainty to evaluate our existing customers focusing the company.
On the company's resources on our strongest customers, including those with prepayments as well is transitioning our foundry customers to our new tier one foundry partners in China with lower cost to help them make make them more competitive.
Turning to slide six.
I'd like to spend a little time on the.
Zone that fuels the up our opportunities in growth.
Our evident synthesize that works or is in software platform.
As I mentioned earlier.
Revolutionizes filter design as it enables low cost built for fabrication with superior performance and faster time to market.
To that.
That's fair knowledge.
Yes, and is the only RF filter design platform. The delivers an integrated end to end multi dimensional acoustic and electromagnetic modeling capability.
How's designers to innovate quickly and virtually in real time.
We do this by simulation versus the industry.
Standard integration process, they can and does take multiple turns which is disruptive and costly to the manufacturing process and extends development time.
Most importantly, I send delivers designs across the entire wireless spectrum.
Turning to slide seven let me highlight.
That is our game changing export technology that will be the platform for our future building on the engagement learnings and intellectual property from the past.
Expertise, our revolutionary bulk acoustic wave or bar resonator structure, which was designed with I.S.N. and is produced using standard manufacturing.
This is.
Which means it leverages standards saw and Mems manufacturing processes to deliver a boss structure, which is a novel low cost approach for meeting these new technology requirements.
It's important to highlight the export was designed specifically to meet the exacting standards of Fiveg.
And wife I co existence.
In particular, the demand for bandwidth and high power.
Next bar has shown the ability to allow cellular and why find networks in adjacent frequency bands.
Mitigate interference problems.
Allow me to present, an analogy we have used in the past the illustrates course.
The co existence issues, it's like driving down the highway filters or what keep cars or signals in the right lanes or in the right did a pass fiveg creates new challenges as neighboring cars are your wife I was right next to you crowding your lane and sometimes even entering your lame stopping your path or even.
Causing a crash or collision.
Export resident expert filters are simply better barriers between the lanes. The highway keeping those adjacent cars are signals, where they're supposed to be.
And let's not forget that export was built on our foundational intellectual property over 200 pads the.
Greater than 50 patents, specifically focused on fiveg.
Turning to slide eight.
We have multiple diversified revenue streams targeting high growth markets of both Fourg and Fiveg.
We first began generating licensing revenue on our <unk> on a per unit basis for custom filter.
We expanded <unk>, we expanded our offering to include filter I'd be standard library based designs available through our foundry program to shorten time to market.
In 2019, we added prepaid royalties to our cutting edge ex parte technologies and in 2020, we added license agreements targeting the China market.
For existing Forbes Fourg applications that included pre pay royalties and additional royalties once minimum unit volumes or exceeded.
Finally, we expect to get White label sales from our foundry supply chain through engagements that could start as soon as later in 2020.
Turning to slide nine.
[noise].
Let's discuss what everyone is focused on fiveg.
An increased number of filters more complex filters are required for Fiveg is high frequencies.
Fourg phones currently require about 60 filters, whereas fiveg phones are expected to require more than 100 filters.
Our proprietary.
T membrane resonator technology enables our ex bar family of solutions.
Xplore has already been contracted by the world's largest RF filter manufacturer for use in mobile.
Additionally, we are engaged with under other industry leaders for high bandwidth Highpower fiveg applications for.
Wide variety of industries outside of mobile such as wife, I see P. infrastructure.
We are targeting delivery of these first nonmobile samples based on our export technology and the first half of this year.
Turning to slide 10.
The first wave of Fiveg is here.
The focus of.
Initial deployments is drive down carriers cost of data delivery.
Leveraging re farm for GE with the move to higher frequency in higher bandwidth in the mid band, which is 2.5 to 4.2 gigahertz in the U.S. and up to five gigahertz globally starting in 2021.
This timing puts our agreement with the.
Worlds largest filter manufacturer in the sweet spot as they are poised to enter the market with our technology right is the market takes off.
And with our recently announced five gigahertz and six gigahertz.
Wife, I band past filters, we are positioned to live in the next round of tier one engagements, but those of.
You want to learn more.
We have published a white paper that goes into further detail that can be found on our website.
Turning to slide 11.
Let's talk about the Fourg market, which is a dominant filter market today, it's not going away anytime soon as fourg filtered will be re farm for Fiveg technology.
And the Fourg network will provide a backstop for fiveg coverage holes.
As the market continues to Commoditizes, we look at ways to further improve time to market and help our partners compete more effectively.
As a result, we have recently partnered with a tier one Chinese foundry leveraging our filter I.P. standard library and capitalizing on our.
Isn't tools and services to deliver solutions in a timely and cost effective manner, specifically targeting the China market.
Prepaid royalties are expected to be dominant in.
No revenue stream for 2020 complemented by royalty unit volumes from existing contracts.
Turning to slide 12.
As noted Fourg is expected to ramp remained with us for many years is piece of decline rapidly since the initiation of many of our agreements for filter designs.
And specifications that continue to get more challenging as a result, there has been more rapid shifting customer interest of products based on a filter IP standard library.
The capitalize on the strength of our I assume platform and our ability to design center products that can be easily ported between foundries. We already have initial contracts signed with a tier one component in foundry player which include prepaid royalties well our customers demand throughout 2019 had a solid trajectory entering 2000.
Doesn't 20, we're cautiously optimistic given the current state of the global market that we will continue to see growth in this throughout 2020, we will focus on performing customers to ensure we continue to get the value out of our investment.
Turning to slide 13.
Our foundry program provides our current fabless customers.
Alternative access to a stable and experienced supply chain for the forging market.
We signed a tier one Chinese foundry partner in January of 2020, complementing our existing Chinese foundry relationships.
Such foundries have the potential to enable market participants at a scale to compete with today's dominant suppliers.
And have the potential to further reduce the cost that they are a front end for existing technologies.
Turning to slide 14.
I'd like to highlight two achievements that clearly show our noticeable traction in the market and accelerating momentum.
First.
In 2019, the world's largest are filled from any factored into.
Entered into a 9 million dollar commercial agreement with us for the rights to develop multiple designs using our ex parte technology targeting the mobile market.
Upon signing the commercial agreement. They also made a $7 million strategic investment in us.
The second of human occurred in January of 2020, when a tier one Chinese foundries I multiple license agreements.
For prepaid royalties and upfront payments with the potential for additional royalties, what's the minimum volumes were exceeded.
This customer also licensed our process monitoring tool or PMT X to aid in its manufacturing processes.
Turning to slide 15, before I turn the call over to Marty like to discuss our.
Ended management team in December of 2019, we announced the Dillon Kelly joined resident and a newly created Chief operating officer role. He is responsible for engineering product marketing and operations functions is extensive semiconductor business expertise and professional network across a broad range of areas, including.
In smartphones wireless infrastructure and test and measurement, our natural fit for this new role.
Now I'd like turn the call over to Marty for discussion of our financials, how resins capitalize them position to deliver for shareholders Marty.
Thank you George and good afternoon, everyone turning to slide.
Slide 16.
Which is using a new format to assist our investors with keeping track of two of our most important metrics cash and customer progress.
The amounts I talk about our GAAP, except where noted.
For the fourth quarter of 2019 as compared to the third third quarter of 2019.
Billings were $100000, that's compared to $2 million last quarter.
Revenues totaled $459000 compared to $79000 last quarter.
At the end of the fourth quarter deferred revenues totaled $1.7 million.
We estimate that amount will be recognized as revenue on that.
Coming three quarters.
Research and development expenses of 5.2 million up from $4.6 million last quarter is due to expanded design activities on our eyes and platform and Exmar technology.
Sales marketing and administration expenses of 3.1 million.
Yes.
Up slightly from $3 million last quarter.
Operating loss of $7.9 million compared to an operating loss of $7.5 million last quarter.
Net loss of $7.8 million or a loss of 24 cents per share based on 32.
Point 7 million weighted average shares outstanding.
Compared to a net loss of $7.4 million or net loss of 26 cents per share based on 29.2 million weighted average shares outstanding for the third quarter.
Of 2019.
Non-GAAP.
Adjusted negative EBITDA of $6 million or negative 18 cents per share compared to a negative $5.9 million or negative 20 cents per share last quarter.
For the full year 2019 as can add to 2018.
Revenues.
Totaled $735000 compared to $524000 in 2018.
Research and development expenses of $18.9 million up from $14.3 million in 2018, it's primarily due to expanded design activities on our eyes and platform.
Expire technology and filter design development.
Sales marketing and administration expenses of $12 million up from $11.5 million into eight in 2018 is due to higher public company related expenses and compensation expense.
Operating loss of $30.2 million compared to an operating loss of $25.3 million in 2018.
Net loss of $29.9 million or loss.
One dollar and two cents per share.
Based on 29.4 million weighted average shares outstanding.
Morning.
Compared to a net loss of $24.8 million.
Our net loss of 98 cents per share.
Based on 25.3 million weighted average shares outstanding for 2018.
Non-GAAP adjusted negative EBITDA of 23.4 million.
Dollars.
Our negative 80 cents per share.
Compared to negative $19.2 million or negative 76 cents per share for 2018.
We had $10.7 million cash at the end of 2019 and raised approximately $28.8 million in.
Gross proceeds.
$26.3 million, a net proceeds from a public offering in February 2020.
With the opportunities we see we believe this positions us well to be cash flow breakeven on a quarterly basis by the end of the fourth quarter 2021.
We.
Ended 2019 with a total of 77 employees.
20 of whom have a Phd and 57 of whom are part of the technical stuff.
Finally, as George mentioned, the Corona virus is causing headwinds.
But even in consideration of that we believe revenues in the first quarter.
2020, well exceed revenues from the fourth quarter of 2019.
GAAP operating expenses for the first quarter of 2020 will be comparable to the fourth quarter of 2019.
I'd now like to turn the call back to George.
Thank you Marty.
Turning to slide 17.
Team.
Resin has never been into better position to deliver growth for its customers employees and shareholders.
Have a strong balance sheet buoyed by the recent proceeds from our February 2020 public offering.
We are targeting the largest segment the rapidly growing market RF filters.
Which are expected to nearly doubled.
28 billion by 2025.
We have a robust technology in IP portfolio <unk> portfolio of over 200 patents powder issue.
With more than 50 targeted for high frequency Fiveg devices.
And we've demonstrated in contracted ex barbies filter designs.
The first.
RF filters that can meet the high bandwidth requirements from Fiveg.
Our partnership with the world's largest RF filter manufacturer and strong traction with our other existing customers.
Our proven validation of our technology.
And our foundry program will further expand our customer base by allowing component suppliers ease of entry at low.
So cost.
Leaving all this is our proven management team.
I'd now like to turn the call over the operator for questions operator.
Thank you will not be conducting a question answer session.
Joining us today for question, sorry, George Holmes CEO.
Turning Mcdermott CFO.
John Kelley COO.
If you like to ask a question. Please press star one or the telephone keypad a confirmation Tony will indicate your line is in the question Q.
You mean press star Q, if you'd like to move your question from the Q4 participants using speaker equipment to be necessary to pick up a handset before pressing the star keys.
Once again that star one to be placed into question Q1 moment. Please what we pull for questions.
Our first question today is coming from CODI grief from Drexel Hamilton Your line is that lives.
Thanks, guys for taking my question.
Yeah.
[laughter]. Thanks appreciate it good.
So at Marty Thanks for that the the guidance into Q1 can you just talk a little bit about the visibility there is that.
Transitioning from your prepaid so how much that it's going to to see from.
Three point prepaid royalties that you have visibility to how much that is.
Deferred revenue and then what are you expecting your unit volume variability to be.
Okay. They all our revenues really from a licensing. So we are now we're looking at it as one group, it's coming from the royalty.
Royalty model for contract we have out there on off what we're getting on the.
Prepaid in caught prepaid contracts that we haven't house. So yeah, we got better visibility than we did you know three months ago, because we brought on a the contracts and in China. We know what our deferred revenues. So things are looking it's easier for me to give me a little bit more guidance, but I'm not going to apply their out.
Sure and.
I guess just Georgia in your conversations with customers are you having a are you seeing material changes and maybe your partners availability just personnel or designers.
That's slowing down projects you're working on.
Oh, yes, given what's happened in the overall market right yeah.
Yeah, just given what's happened correct.
No I don't.
You're seeing right now is doing a lot more video GAAP is right I mean.
We run our business that way Fortunately, we're used to most of our customer for Asia already disorder used to having.
You know.
The conference calls with them.
Clearly, we've got a new based customer yeah, you know they have been making its good to see us very regularly but I think pretty much all the big companies. They are going to Ah Hey, let's put it on the jury trial old lover video conferencing, but I.
Got it seemed that he activity one bit that activity quarter over quarter.
Since we all since we did you.
The announcement of harbinger one.
He could go up and continued well makers as well.
Understood. Thank you much.
Thank you. My next question is coming from Tories Finberg from Stifel. Your line is.
Yes, Thank you and congratulations yeah, hi, congratulations on all the different milestones here. The last few months, maybe I can start with.
Your recent contract with the barge tilt to manufacture based on your slide on page 10, it looks like.
They are critical mass in Fiveg is going to kind of being down 2021 to 2023 timeframe.
So I'm just wondering if you could comment a little bit on you know all the different.
Designs that you're working with them on right now.
Could you know clearly we're only about seven eight months from from 20 to 21.
Yeah, that's a great question.
Oh, yeah till the time inherited a second I mean, obviously, we announced yeah, when we announced the contract that we.
The only had identified a couple of things that we were working on.
So dozens or not with them clearly we've got a couple more to get out or Oh, but I mean, you want to give a a quick update on kind of where we have macro wise.
Yeah, I think it goes back to this slide deck.
The second wave of Fiveg.
In the 20 to 23 timeframe with the frequency bands in the three to five gigahertz range.
That continues to be the focus.
It does continue to be the time windows and it's definitely a lot of urgency around the looking goes on time.
Definitely once the dust and launch.
No.
I think the other thing that we would see here right is you know those designs for those phones will be coming out of it motors timeframe.
They're happening this year end next year and so our engagement is very very timely and we expect as we noted in the call a that we're gonna be hitting stride with them right at the time volumes start to ramp.
That's very very helpful and moving on to explore outside of mobile you talked about some possible engagements here in the first half of the or in Wi Fi or what I stick specifically.
Could you just elaborate a little bit on that or is there a specific GAINO region or application.
That youre seeing some of that traction.
Oh.
Oh, My goodness toy you're allowed me to Triple these questions over to deal and we do that we did a we did a weather are about two weeks ago. Because you know as we all know no one traveled to Barcelona, This year and what we were highlighting in that Webinars.
Is the new technologies that we developed specifically for white, but both in the five and six gigahertz.
I don't you want to expand I've kind of where we're at with those on kind of where we see they fit competitively against what's happening out there in the marketplace.
Yeah, we saw the encroachment coming from and 79.
Hi, bumping up against the five gigahertz band really mandate a need for acoustic filter technology.
Your Broadcom also recently announced support going into the six gigahertz band for lifetime, which again.
That's you know the need for high performance filtering.
So both of those things really create an urgency around life.
Hi, as well and then that women are demonstrated.
Our latest result measured six gigahertz, why five filters with more than a gigahertz bandwidth or 18%.
Oh, So we think that we're in great position, there and Yep Yep later sampled we're engaged with the tier ones.
Well first half of this year.
Very helpful. Just one last question on your recent foundry partnership engagement you talked about you know some.
Getting some additional royalties as as you get a you meet certain a unit milestones.
I know these are obviously very uncertain times, but should we assume that maybe those unit milestones get met sometime into second half of this year.
Oh I wouldn't expect goes to get better this year with respect to prepaid take it take effect this year.
Yeah, So we'll see the pre pays for this year.
Affecting overall revenues and as Marty does his magic to allow us to recognize those prepays will see those starting to hit.
You know hit the revenue light I think what you'll see is that the opportunity for those to go through their minimum volume hurdles to happening in 2021.
I think one of the things that we can tell you that in light of everything is putting in China. You would expect these things to be pushed out.
We're actually seeing a pull in oh the activity with is would be is a major foundry partner, which is exciting giving everything that's going on in the market.
Sounds good congratulations again.
Okay.
Thank you as a reminder, ladies and gentlemen that is star one can be placed the question Q1 moment fees, what we pull for further questions.
Our next question is coming from Rogers from Needham and company. Your line is now lives.
Yeah. Thanks, just a question on the tier one foundry in China wondering if you could kind of elaborate further on what was the.
The motivation or the foundry to do the deal with you what would kind of value, you're you're bringing the table and how do you see that ramping throughout the year [noise].
Okay.
A great question and.
Our core value prop right is all about that but we have the ability do designs faster better cheaper than anyone else and we can coupled with their capabilities that actually enables them to actually go after the market in a very broad way I mean, obviously.
You know trying to Inc. is very focused on supplying product in a indigenously from their own manufacturers and we have a number of foundry partners in China already all moving very aggressively.
To get into the marketplace and supply the big trading.
Handset manufacturers. This is an even larger or foundry relationship. It's one we're very excited about their move and at Lightspeed and they said, they're moving to light speed in large part because they are probably the best funded a large probably a in China. Today. So we're very excited about them.
You know they are.
Our as I said are moving faster than we anticipated there about a quarter ahead.
Even after the Chinese new year shut down in the early Corrado virus shutdown that they had which lasted until about six seven weeks. So excited to see that moving ahead excited that we're prioritizing this is their investment.
I think that we're really going to see this to be a tremendous opportunity for us I think the other thing you've got to keep in mind is that you know were both you know the focus of the.
This relationship is on a sub three gigahertz and in that area.
Thats, the Commoditized segment of the marketplace and having a.
Andrew partner working directly with us dig products into the market is going to make them very well positioned to capture share and our model with the agreement. We had is based on a 5% share.
You hit the hurdle rate and start kicking back into a paying as our per unit royalty. We expect these guys too.
You know blow through 10% easily and could easily be a 30 40, 50% marketshare supplier into the Chinese market, a time will tell it's out there in the future the tremendous opportunity or do you know if you look at the overall market then what is about 40% of the market in China. So that's a really.
A significant opportunity for us.
[noise] and Marty talked about this year, a revenue can be driven by prepaid.
Revenue and other things <unk>, we talking about kind of the cadence of the prepaid revenue.
I don't think about that on a quarter by quarter basis, how does that kind of flow through.
It's a great.
We are giving guidance on a quarter to quarter basis, what I can tell you it's going to happen.
No we were not going to try to predict it I'm not too far out there in the future as Mark said, he's going to stay pretty close to build on that there's too much uncertainty overall market, but the fact that we've got Prepays gives us a great deal.
Sure.
We are not no longer.
Having to help our customers actually get into the market. We know that we're going to pay for our hard work. The real they were focused on rock is really as we sit there and look at what's happening for us. It's all about what happened that we're focusing on.
You know executing on our export or solution focusing on what happened with Black Friday.
The enabler that we're doing in China Inc. is just gravy.
And so that's really where you spend a lot in time energy Lockport, that's where the money can be for the long haul next 10 to 15 years.
Thank you [noise].
Thank you. My next question is a follow up from could easily from Drexel Hamilton. Your line is now wise.
Yeah. Thank you.
Just real change to give me back in here Marty I know you've had a.
Difficult time, setting the parameters around how those.
Prepaids going to be able to get recognized revenue or have you been able to set some some from benchmarks that helping you to clarify things going toward.
Yeah. Thanks.
You know, yes complex.
It wasn't I mean, it was after looking at it out how easy it was I think is whos role and we get more.
More of them are there more momentum will become smoother.
And you know you've got some indications now what the first quarter revenue was what's our backlog layer some things on top and I think.
Yeah, that's how to how to look at it is not it's not like some other.
Royalty model further shoot variations I think I was hoping because of the pre pay model.
More smooth.
Great and one of your expectations on spending for the year R&D NSG negative.
Well you guys why we haven't gonna for the year, we definitely have given it for the first quarter fourth.
X bar.
Yeah, it's that we're spending.
The.
After our contract is driven the costs up I expect.
You know that looks at first quarter ought to be about the same and then we're looking we've talked looking at some software expenses on some other things to keep that really stay well push it down but I think it's safe to say, though Cody we're mindful of this bad at.
No we set out when we did the financing with the goal to make.
No that's easy scenario a lot.
We go to the marketplace. So we're going to be very very focused on our spend a quarter to quarter basis Q1 is always up a little bit because you pay annual bonuses in the in the first quarter.
And we have some additional payroll expenses that happened here, but as we sit back and looked out you know kind of where we're going in the future. The good news and we are really really mindful, though work we're doing with customers as I noted on the call. We're very focused on really focused on customer that aren't generating that.
Predictable fashion a hole in the her when it makes that.
Putting our putting our money to work, where we know we've got you know a good good trajectory on to that.
Great. Thanks Cats.
Thank you My next question is coming.
From Kevin DD from H.C. Wainwright your lines.
Well. Thanks, Thanks for taking me George I was saying I.
I'm, great I'm afraid I thought I thought your team was cut me out I don't know, how many times I Punch star one in [laughter] well I'm here now. Thank you. Thanks for taking me.
Yeah, No worries no worries absolutely I mean it first.
Excuse when you get here Yeah, I thought you were talking about it so I'm glad you're here what are you got work yeah no.
Oh, I'm, sorry, what was that.
I think what questions yes.
Oh I got a couple.
I've got a couple one I was hoping you could peel the onion back a little bit more on what's going on in the China market. What are the marotta guys, telling you and what do you think your foundry guys are telling you.
You know that's a great question, Kevin I'm, a little girl Bye bye.
Bill on here just yet.
They smell pilot yeah.
All right I.
The me the Chinese market has enormous it'll be on.
People and Samsung China represents over 70% of the cellular device market.
We know even prior to trade pressures.
It's been a long term trend to insourcing.
And now there's a lot of motivation to.
To build everything domestically that's what's resulted in these big deal we've done here in the first quarter.
To date Marotta has continued to enjoy the biggest gains in market share.
From the trace back.
Nick.
You know maybe nearly doubling their business in the last year in China.
And then beyond that.
Let's say, the that's probably largely through a detriment of the U.S. players.
Oh I answered your question Kevin.
Yeah that helps that helps but I.
I was wondering if you had.
Something a little more granular jelen vis-a-vis go get 19.
Ah well I mean, you know it's I think one thing that we can say I mean, I've already touched side Kevin Yeah.
All our customers are not flow in doubt if anything there.
But in the put on the gap to move ahead aggressively Oh, that's what it looks like or I mean, clearly we haven't put eyes on them in a couple of months. They they are we just haven't are they call, but the indications are things are moving ahead, we're getting the you know we're getting all of our.
Touch points is we would expect.
As we moved to design and development process. The nice thing about having they want as part of the team you know you've gotta Guy who knows how to scale a business in particular a component business.
So we're looking at how superset designs in the <unk>, even better fashion that we've done than we've done.
On the path and that just makes these design costs go down the you know where you sit back and think about that where historically every design and was cost them now we're taking the bye.
Super setting them across three or four different customer and were able to deliver those in a very predictable even more predictable fashion than we were.
And the path. So up you know coming back to you know something like are they the question the kodiak than what we're doing from a cost standpoint that drives down or and if you look at it from a predictability standpoint from an opportunities that we see the opportunities are moving ahead and then moving ahead at length speed or we don't see at this job.
I'm sure Guy slowing down there, which is obviously why at least for our customers were seeing some level of confidence that fill out Marty to stick as neck out as you did a for Q1.
Okay. Okay fair enough George can you help me reconcile b.
I think my most rudimentary understanding.
Your Chinese foundry partners looks to me is always targeting for GE, whereas your large Japanese manufacturer is leveraging your technology to get after Fiveg I'm wondering what you see happening.
Once the market in China moves to Fiveg more rapidly what happens to your relationships.
I I fundamentally believe bill it's bad I mean, we've seen ever relationship we've executed delivered a bar.
Yeah, Oh, you know at.
It is really footprint of the bias that we're doing well we have a better business model. They beat the strength of the work we're doing Oh clearly.
Differentiated technology with our export product that allows us to commands a much better yield for resin and its shareholders. So.
I see that being a a tremendous opportunity, but I think there's a lot stuff going on here in the marketplace, causing a great deal of disruption if you'll indulge me off a little bit about clearly I hope you're at the fraud or a together a other both on the call worked at Broadcom.
It is doing to offload there they're filter business is creating a interesting disruption in the marketplace, which we think we'll be very very good for us.
You know they have a nice little sweet spot with the technology they deploy that.
Nice big hole.
On both sides, but we actions we can build very very effectively both and saw with our export technology. You look at the overall market is there you know kind of.
Kevin You know 71002, you look we've definitely go you know county enterprise value based on what they're talking about.
Well market. This you know 15 billion grow up to 25 billion as the enterprise Tiger $600 billion. Yeah. You know if you look at that and then look at what's going to be Fiveg about 30, 35% of that going to be Fiveg. This was a tremendous opportunity for us if you think about.
Got it historically these companies in the market it got five without relying on knowledge 30, 40 years old thought.
You can't do that provides.
No I asked that platform and then enable our president and performance with our core family of products.
So we're focusing.
Good morning.
Sure of that Mark.
As you know are jumping off point is our view with the world's largest filter manufacturer got 40% chair.
Aggressively pursuing other non mobile applications for X Barwick Wi Fi units start to what I don't recall, how that's going to let off increased the shared on April.
Market that we have identified the this opportunity enabled by at park it shouldn't mind boggling.
Correct.
[laughter] over 50 public companies out there enabled with our technology.
I think about exactly I mean for up it's going to be tremendous.
So our focus is gonna be execution execution execution the 2012.
Okay, George that sounds pretty good can you help me make sure that I have these timelines.
Straight in my Little had there's still one was talking about.
Sort of a pocket developing.
Where it seems to me that there are so a lot of urgency or within China developed products to fill that fiveg the whole.
Right.
Well youre exclusivity with your loss.
George Japanese partner have expired in time to present export technology to other customers addressing that market.
Absolutely or Kevin I, we sit back and look at it right I mean today the market in China and for the major Chinese.
Factors other than the largest ones is for GE and large part its discrete still today and so we're going to be able to satisfy that with these relationships that we've been able we're very excited about it we're already getting feedback from some folks that they see that that's impacting what it is that they're doing.
And you know we.
I want to be a market disruptor, we think that's a good thing for us.
They create opportunity at which we believe is good for us when it comes to our five key contract.
Obviously X bar is not only high frequency technology, we're developing but the export.
Weve licenses the world's largest filter manufacturer that that exclusivity expires March 2022, that's a round the corner when it comes to phone development, it's like tomorrow, a year one cycle away from being.
Being out there in a big way.
Billing everybody keep in mind well Mark.
Technology into that segment of the market, we can develop products and have them ready to go so our white label program from the other things that we're doing a lot to facilitate the development.
As far into the marketplace, it's just going to put it very well position to be able to capture opportunities and if we come out of that it was 50 threerd.
Oh, Okay. George Thanks that helps a lot I got to one for Marty actually too.
So Marty hurt the deal done in February here, what do you expect the average share count to be.
At the end of the March quarter, and then what what does that share count go to the end of the June quarter.
Well the M.
No. We just did that offer how we're not planning another one right.
Sure.
After that is about 50 to 53 million remaining 50 to 53 million shares that should stay stable.
Little increase.
Pardon right by the had so but only half of it falls into the March quarter right. You. It's about the middle look order that deal was done.
Talking about though.
You talked about the weighted average, yes, Oh, yeah, yeah correct.
Total outstanding won't be that 50.
[laughter] 2 million level.
All right. So that's what we'll see in for the June quarter.
Yeah, So just one should be well style.
Two thirds of have fallen so you're you're gonna be talking around.
And Fortys 40 millions.
Okay. Okay.
Alright, so codis try to get yet.
Digging a little deeper on royalty payment recognition I.
I would try watch myself here will there be any point in time when means.
Or will the accounting rules allow you to just sort of brush over it will there be any point in time, when you'll have to recognize pre may prepayments versus.
No payments on devices actually shipped.
No. It doesn't look like it and kept Marty and I have been doing a lot of work on this he spent a lot of time educate me out it obviously I mean, the part of the reason we're going to you know talking about revenues as a single bucket is because that's way you know they sit back and look at it it's all attributed to the licensing of devices.
And so we don't have you know it today.
Hey component business, where we're doing white label devices and so the fact that we've got the pace of two different varieties. He got royalty revenues of another variety at the end of a tripling that the only thing that makes us to talk about its revenue in a single bucket at.
I would point in time, we have white label, a revenues, which will come at a higher rate to up well it will break that out but until then I think they've we are where we are Marty.
No no had I think.
I think what you're referring to Kevin as.
Yeah, that's where you take money on your nothing else to deliver.
But I just don't see that happening in our business model for.
The short term so it'll be it'll be recognized over some period of time.
Okay, how about the use of the.
You know the approach to see modeling tool that the P. M T X.
That your your foundry is licensed the use of does that sort of dumping of the royalty bucket do.
Not at this point in time, because a at this point in time, Kevin we have chosen intentionally not to take or dollars for licensing that are those tools from an <unk>.
10 perspective, we retain ownership of the device or the solution set we're gathering data you know we got we get a lot of access rights to the data that gather that's more important to us from a warnings perspective, you know at such a time that they you know we decided we're going to put that into you know.
A software licensing model, obviously software licensing would be called out but today, we're using that we're using that platform. As you know again additional learnings for up as we know we talked about for a long time, you know the power of our iOS and tool it's kind.
Under the secret sauce of what it is that we do 12 enabled virtually every single design that we have it's what allowed us to develop xplore in a very short period of time, the loudest iterate very quickly allowed us to when the business with the tier one and it's what allowed us to do these very very.
Exciting designed.
For white by a co existence in the five and six gigahertz arena and so we probably are going to be licensing that anytime soon but we want to learn how to and that's what we're using that for.
Okay fair enough gentlemen.
Thanks for letting me on the call guys and.
Thanks for indulging my questions I appreciate it.
No worries thanks very much.
Thank you as a reminder, ladies and gentlemen that star one to be placed into question Q1 woman fees when we pull for further questions.
We reach in America.
<unk> answer session I'd like to turn the floor back over to management for any further closing comments.
Oh.
Thank you operator in closing, let me highlight our recent strategic Yvette.
Partnering with the world's largest still for manufacturer with a focus on fiveg.
Our tier one partnership for the Chinese foundry targeting but China.
That market for Fourg and our recent financing.
Combined these have put the company in an excellent position to execute on our business plan and strategy.
It should yield significant dividends for our customers partners and shareholders.
We thank you again for your ongoing support have a great day.
Thank you that does conclude today's teleconference. You may disconnect. Your lines, just time and have a wonderful day. We thank you for your participation today.