Q2 2020 Resonant Inc Earnings Call

Aspects as well as words, such as believe intend expect plan and anticipate in similar variations identify forward looking statements, but theyre absence does not mean that 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 from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in residents. Most recent form 10-Q, and 10-K and subsequent filings with the SEC.

These forward looking statements speak only as of the date of this call and the company undertakes no obligation to publicly update any forward looking statements or supply new information regarding the circumstances. After the date of this call with that it is my pleasure to turn the call over to the chairman and CEO President George Holmes.

Thank you Greg. Thank you everyone for joining us on today's call.

Like to welcome you to our second quarter 2020 financial results coal.

Let us get started but turning to slide three.

Q2 was a quarter of continued momentum.

Our export technology is quickly becoming recognized for its performance and applicability in meeting exacting demands of Fiveg.

Before we dive deep into ex bar lets take some of the key highlights from the quarter.

Revenues of $1.1 billion in the first half the 2020.

The growth of greater than 450 per cent compared to the first half of 2019.

Sequentially, we saw revenue growth of 11% in the second quarter over 4.5 billion units designed with our eyes and technology were shifted in the first half 2020.

The growth of greater than 200% compared to the first half or 2019.

Sequentially, we saw unit volume growth greater than 95% the second quarter.

To date, our customers have shipped over 40 million units designed with our as a technology.

Let me emphasize these are production unit volumes not just sample quantities.

Most importantly continued to move our breakthrough expert technology forward.

On the mobile Sinovacs bar or work with our strategic partner, the world's largest or a filter supplier is progressing very well as we work to deliver upon our second major milestone by the end of this year.

On the Nonmobile or wildfire side effects bar, we fabricated fiveg filters at our fourth foundry and delivered a complete Fiveg X bar wife, I sample kit to an existing partner, who has extensive foundry and broad distribution relationships that support a majority of the Oems throughout Asia.

We were able to successfully package ex parte devices in two different high volume packaging technologies.

Every day, we expand the manufacturability and capabilities of Exmar Viki it much more valuable.

Let's turn to slide four.

I want to emphasize we believe X bar is quickly becoming recognized solution for high frequency Fiveg applications.

It has been referenced it in a number of corporate and industry publications.

The Best example, being a recent report one of the largest and most reputable tear down companies system, plus and that report they reviewed the Skyworks BAW filter, which included our unique ex parte technology and partnership with the world's largest RF filter manufacturer along with other traditional bought technologies.

Yeah.

The ongoing validation leads us to fundamentally believe we're revolutionizing RF filter design and delivering on the true promise of Fiveg.

Slide five highlights what everyone knows fiveg will be revolutionary.

Industry momentum continues toward the promise of full fiveg.

What does that really mean to business of consumers.

Five GE will have download speeds 20 times faster than Fourg. For example, a movie take six minutes to download on Fourg take less than 20 seconds with the real Fiveg.

By GE, leaving and see.

For the time it takes to send data from 1.2, another is 25 times faster than Fourg.

Data transfer with Fiveg will be almost instantaneous and unlocks new use cases for mobile data never before imaginable with Fourg.

[noise] Fiveg will not only be revolutionary to next generation mobile phones, but smart devices sensors connected vehicles and more.

Oh jeez low latency in high speed is what makes the internet of things possible on a wider scale.

It's no wonder the dollars going into five to your massive.

The market is expected to contribute roughly 7.6 trillion dollars the global economy by 2030.

Life is no exception the opportunity is booming.

For example in the U.S. the wife I succeed Bad was recently approved with over one gigahertz bandwidth, that's 18% fractional bandwidth 6.5 gigahertz.

We expect there to be continued efforts it expanded these bandwidth and lower frequencies, which can also be enabled by our ex parte technology.

That was slide six.

At the device level, meaning your mobile phone or smart devices, the industry isn't truly ready for the Reals fiveg.

We have historically defined as weve too.

Highlighted in the Infographic, we published in June on Fiveg.

So what's the problem.

At least five geophones use inefficient filtering technologies that will cut it in the future generations, because they rely on the uncrowded use of the Fiveg frequency spectrum.

And are not can survive without a band emissions.

The next wave of Fiveg, what I'm, referring to is weve to deliver high data rate.

But require much larger bandwidths protection from interference recurring a different type of resonator technology that was used today.

So in many ways players who talk about having five you capabilities today are focused on the initial coverage and leveraging it is a marketing tool, but not ready for the next phase.

To our knowledge resonates export technology is literally the only RF filter technology that has showcase the ability to innately beat the complex requirements of bandwidth of Fiveg applications. When I talk innately I mean natively out of the box to meet these requirements not only do we believe our technology the desk solutions.

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Other competing technologies that have been used in the market are using things like doping or additional external components increase resonator bandwidth, which negatively affects performance and still doesn't meet the full bandwidth demands required fiveg.

And all these technologies are competing against one another.

The beauty of residents business model is that we are enabling customers rather than competing against them.

Now, let's turn to slide seven.

Good how did resident become their RF filter solutions provider with the exclusive technology to deliver upon the promise of Fiveg.

As we've discussed before the key differentiator is our infinite synthesized networks or I guess in multi physics electronic design automation or E.D.A. software platform, specifically created for the development of RF filters.

Yes in enables us to design faster better and more cost effectively than competing technologies.

What do I mean by that.

Faster comes from our ability to leverage mathematical models rapidly design filters that often require a few returns.

Foundry and provide a path to straightforward integration into modules.

The cheaper comes from several areas fewer engineers are needed. The returns are needed filters can be manufactured on a cheaper process. The precision of our designs the product can get to the market quicker.

The better comes from our ability to solve these complex challenges demanded by the increasing filter requirements such as those demanded by five G. What's key here is the use of our I ascendon platform simulate thousands of variation, we believe can't be contemplated by traditional methods.

Now, let's turn to slide eight.

So today, we senator attracted the intersection the combination of the demands of Fiveg.

The innovation, new materials, such as engineered substrates, the strength and speed of bias in that have allowed us to create are completely novel export technology.

Which as I highlighted earlier is quickly becoming recognized is uniquely positioned to meet the demands of high frequency fiveg applications.

The biggest validation of our expert technology was clearly the strategic deal and partnerships truck late last year with the world's largest RF filter manufacturer.

As a reminder, this entailed a strategic investment of $7 million and resident.

And residents secured 89 million dollar multiyear commercial agreement for four Babs utilizing our ex parte technology.

And we've continued to make tremendous amount of progress with this partnership based on our roadmap. We are reiterating that we expect achieved the next major milestone the second before.

By the end of this year.

Explain just how significant this opportunity is like to give you an idea the scale important this engagement.

Seven companies control more than 98% or the market for both filters and duplexers.

Our partners the clear leader both categories controlling 37% of the filter market, 32% of the duplexer market.

There are filter market share is bigger than the second third largest players combined.

So.

Where we're standing today, we're feeling really good about the progress and validation, we're getting from the Fiveg market.

The opportunities in non mobile we are engaged with it for wife I in infrastructure applications are focused keenly on xplores ability to deliver performance necessary and high frequency my bad with.

That said I like to remind you that poor GE is still the dominant filter in the market today.

It will continue to grow.

Largely driven by Mimo and non Standalone Fiveg, which uses for GE is an anchor.

It'll be an increasing fourg content, even in Fiveg phones is a backstop for fiveg coverage.

These next generation Fourg designed well need to have lower cost and higher power than ever before.

China for GE market, which is dominated by smartphones represented 30% of the overall market and there was a big move from war non U.S. words content.

We have a number of large and dominant filter foundry partners in age already.

Being very aggressively to enter the market and supply large <unk> Chinese handset manufacturers.

We delivered the first two designs in the second quarter and expect to live in the next five designs and third quarter to these partners.

This allows us to serve isn't turnkey filter technology foundry services business partner, the Fabulous it OEM customers.

Increasing their competitiveness.

In this marketplace.

And these are all companies, we have signed standard per unit licensing and prepaid licensing agreements with the already.

Now before turning it over to Marty, let's wrap this section by turning to slide nine.

I wanted to briefly touch on our patent portfolio, which has continued to grow.

Today or IP portfolio numbers are 250 filed or issued patents 85, specifically focus on X bar for Fiveg.

When we reported Q2 results last year, we stood at 175 patents filed or issued and 17 focus on X bar.

A significant increase year over year.

I'm pleased to say that debate, we've been awarded for X bar patents.

And highlight that without question. This is meaningful in such a short period of time.

With that I'll pass it over to our Chief Financial Officer, Marty Mcdermut for review of our second quarter financial results Marty over to you.

Thank you George.

Turning to slide 10.

I'll now provide an overview of our financial results.

The amounts I talk about our DAP, except where noted.

For the second quarter of 2020 as compared to the first quarter of 2020.

Billings were approximately $211000 as compared to $280000 last quarter.

Revenues increased 11% to $604000 compared to $544000 last quarter.

At the end of the second quarter deferred revenues totaled $1.1 million.

We estimate that amount will be recognized as revenue in the coming quarters.

Research and development expenses decreased 13%.

The $4.8 million.

Down from $5.5 million last quarter due to a workforce reduction that occurred in March 2020.

Sales marketing and administration expenses of $3 million.

$100000 compared to last quarter.

Operating loss improved to $7.2 million compared to an operating loss of $8.1 million last quarter.

Net loss improved to $7.2 million or a loss of 14 cents per share.

Based on 52.9 million weighted average shares outstanding.

Compared to a net loss of $8 million or a net loss of 18 cents per share.

Based on 43.8 million weighted average shares outstanding for the first quarter of 2020.

Non-GAAP adjusted EBITDA improved to a loss of $5.4 million.

For a loss of 10 cents per share.

Compared to an adjusted EBITDA loss of $6.4 million or negative 15 cents per share last quarter.

Cash and cash equivalents totaled $23.9 million at June Thirtyth 2020.

No doubt.

On June Thirtyth 2020, we had a total of 63 employees.

One of whom have a Phd and 46 of whom are part of the technical staff.

Finally, here's a few items relate into guidance.

We believe revenue growth will accelerate in the third quarter.

We expect third quarter 2020, operating expenses to increase modestly compared to the second quarter 2020, primarily due to predicted increases in fabrication costs of our ex bar non mobile devices.

I'd now like to turn the call back to George for closing remarks George.

Thanks, Marty I'll close with slide 11.

The second quarter is set the stage for an exciting second half.

What you look for here are some metrics and milestones to track.

Volumes and revenues have are expected to continue to increase second half of the year will be bigger than the first half.

Got a strong balance sheet with almost $24 million in cash and no debt.

You have tremendous momentum fueling our growth.

Five GE dominates our efforts.

Our year end, we expect to achieve our next major milestone with the world's largest filter manufacturer is leveraging our expert technology for mobile applications targeting five G.

The continued market validation of our expert performance is created numerous opportunities or next engagements in whiteface CB and other non mobile applications.

Org continues to add value, we expect to deliver our next five resides in the third quarter, two our Asian foundry partners, whom we have both standard licensing and prepaid agreements in place.

We expect a unit volumes in our legacy business to continue to grow quarter over quarter.

Before I wrap things up I want to take all of our employees Board and advisory members for all their hard work that has contributed to our current successes. During these difficult times of the cobot 19 pandemic with that I'll hand, it over to the operator to begin our question and answer session operator.

Thank you at this time will be conducting a question and answer session. Joining us through this question answer session today will be George Holmes, Marty Mcdermut and Dillon Kelly.

If you'd like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your line is in the question can you May press star to for like to remove your question from the Q4 participants uses speaker equipment. It may be necessary to pick up your handset before pressing the star keys. One moment. Please my we poll for questions.

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My first question comes some tour Sandberg with Stifel. Please proceed with your question.

Yes, Thank you and congratulations on that continuous progress first question is on explore core for life I was just hoping for a little bit more the detailed update or George I don't I don't know if there are any no customer engagements or.

Oh, it sort of an inflection points from accounting perspective that you can share with us.

Well Hey, Thanks story, we've got a couple of things, let me touch on their though Andrew rid Dillon Kinda give me an update on wherever the technology I think where we are today is a with the expanding capabilities. We have with the expert platform, it's really becoming clear that we've got a really competitive and refrigerant differentiated offering here with.

Bandwidth and ER with the bandwidth we can deliver into these applications and with that we're getting lots of validation from the marketplace and so what that really has enabled us to do is to get out there and really be a little bit choosy and what the opportunities every one engage on and as we look at its day.

We're still very confident and our bid or ability to secure that next year one partner.

But don't give a quick update on where we were out with the technology.

Thanks, George but as you know we've noted in the quarter, we delivered or the first samples of Wi Fi.

In June and where we are as now.

So now you know multiple different samples that addressing different regional needs.

The 5.6 gigahertz rollout.

No. They I'd say, we've just determined as the particularly in the infrastructure side. The traditional solution that ceramics are not going to meet the requirements are going forward for interference so definitely be an acoustic solution.

And as George noted as were benchmarking against aluminum nice right. We continue to see we have the lives of you know two times factor benefit and bandwidth. They can hit the whole bandwidth with a single filter. We think we're the only solution in the market that can do that.

Yeah, I think Tory what this does it just makes the experts loosened up much more valuable and that and therefore creates lots option for us.

Yeah, that's great and also had a question on X bar and and Marotta you talked about some sort of next milestones by the end of the year, obviously I'm not asking you to pre announce what pros are.

But you know maybe you could just update us on how that partnership is going and I need to starting to work on perhaps you know some some new design.

Well you know the I think ER and thank you for that asking for the specifics because obviously, we don't want to dive in deep on that at this juncture, but I would tell you that it's a it's going quite well I mean, clearly the thing that makes it gives us lots of confidence here is the fact that they evaluated all the different technologies out there.

In the market.

Before coming to us and engaging with us on Xplore and we've continued to meet a meet the milestones that they'd set out for us and that's got us on a path.

We believe will get us to kind of that need next major milestone before yearend.

And I think what we're doing is we're running hard and fast and if we're lucky enough to reach that milestone sooner I think they'll give additional validation that you know the power of the tools that we have in particular I assume platform and the team really allows us to do things faster better cheaper than you can do as a traditional.

Traditional way to develop filters and so that really is kind of what we're focused on right now where we're focused on you know we have a we have a kind of a stop gap that we've highlighted that is it the yearend and we're working real hard to try to be debt and I think that's where we see our team putting a jefferson.

One is your management team do you want to add a few comments.

Yeah, there were really fortunate to be partnered up with the world's largest filter manufacturer. When there was there there's not position because their manufacturing excellence. This goes back to kind of the preferred partnership or whatever again, the design know how everything the manufacturing excellence to build these filters and I'd say on top of it.

The side of the the macro.

Condition stands at a great position on in terms of he'll stay open and you were able to continue doing our designs on the word from home environment. So things are going quite smoothly.

That's great one last question for for Marty.

Marty do you have the operating cash flow number for the quarter.

Yes, how much was burned for the quarter.

Yes, correct.

Yeah for about 5.7 million.

Great and then it's down much in kind of significant yeah down significantly from the first.

Understood. Thanks, again to burden relations.

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Operator.

We have somebody in Q for another question.

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Ladies and gentlemen, it looks like we're experiencing some technical difficulties a with that and George I would suggest maybe you wrap up the Q and a here and I didn't sign off.

Okay, Great Oh, sorry, guys that we weren't able to answer any additional questions here or do the jepson technical difficulties, but.

What I wouldn't tell you is Ah. Thank you very much for all of your ongoing support we've had a a great run in the first half were excited about the opportunities in front of us.

We're doing our best to kind of stay ahead, and and do what it needs to what we need to do in this time of Covance and is still in said a the good news is we're making lots of progress and this is a very exciting time for us we'd like to thank everybody for their ongoing support and thanks again for joining today's call.