Q4 2020 Resonant Inc Earnings Call
Good day, and welcome to Shannon's fourth quarter and full year.
Earnings Conference call Today's conference call is being recorded at this time I would like to turn the conference over to great for US Nick from the MZ group, the company's Investor Relations firm.
Thank you operator. Please note we will be using the presentation during today's call which is accessible on.
<unk> 20th age of resonant IR website, if youre on.
With us today via phone. Please go to the events page to either view or download the presentation of all along.
Turning to slide two.
Earlier this morning resonant released financial results for the fourth quarter on full year 2020, the earn.
So when you set of companies on this call is available on the investors section.
The events of the company's website at Www Dot IR dot resonant dotcom.
Additionally, some of the information on this conference call contains forward looking statements that involves risks uncertainties and assumptions that are difficult to predict words or expressions, reflecting optimism satisfaction with current prospects as well as words such as believes.
Section and expect plan and anticipate and similar variations identify forward looking statements, but their 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.
Factors that could cause or contribute.
Tribute the such different changes at the property and detail on the residents. Most recent form 10-Q, and 10-K and subsequent filings with the SEC.
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 circumstances. After the date of this call.
Our intent with that it's my pleasure to turn the call over to the the chairman and CEO of resident George Holmes George for the floor is yours.
Thank you Greg and thank you everyone for joining us on today's call.
I'd like to welcome you to the fourth quarter and full year 2020 of financial results Conference call joined.
Joining me today is Marty.
Our CFO and Dylan Kelly, our CFO of joining for the Q&A.
Turning to slide three.
'twenty 'twenty was a remarkable year for resonant.
As the trend towards the connected world continued to accelerate and therefore, so did the need for effective RF filtering technologies.
For mobile video conferencing.
Mcdermott streaming to emerging applications, such as autonomous vehicles and remote surgery demand for mobile data continues to grow exponentially.
Our proprietary technology platform at its core enables the design and manufacturing of wide bandwidth high frequency RF filters for high performance networks.
As the need for data ramps up in our society. We are proud to be able to continue to play a critical role in delivering a new age of connectivity.
Let's look at some of the key highlights from our fourth quarter and full year 2020.
Revenues for the full year were a record $3 $2 million.
And there's over 330% greater than our revenues in 2019.
Let me remind everyone that these are royalty revenues, which suggest the equivalent of annual component sales of roughly $30 million based on our historical average royalty rates of approximately 10%.
Over.
$6 9 million units developed with R. I S. N design technology were shipped by our customers the Oems in the fourth quarter of 2020.
Representing a year over year increase of over 200%.
The sequential quarterly increase of over 65 per cent.
This momentum allowed.
The hit the milestone of our customer shipping over 50 million RF filters designed with our I assume the design technology.
This represents real production unit volume that have been shipped and sold by handset manufacturers to consumers.
Not just sample of distribution shipments.
Even in light of our accelerated unit volumes in Q4.
And record revenues for the year. The most significant developments remain with our breakthrough ex bar RF filter technology, which is quickly being recognized as one of the best solution for the industry to unlock the future of next generation Ultra high frequency network and the applications. These networks enable.
We.
Continue to work closely and execute upon our strategic partnership with the world's largest are of children manufacturer bring ex parte to the market for mobile handsets.
We passed the second milestone of the agreement ahead of schedule on October 2020, which.
Which included major technical milestones in achieving previously determined performance.
Packaging and initial reliability targets.
The pawn passing this milestone we received the $2 $5 million of royalty payment.
And most importantly are now moving into the mass commercialization and high volume manufacturing phase of the agreement.
More on this later, but all of our work with this important customer has remained on.
Tracking ahead of our published schedules.
In addition to the exports progress on the mobile side. We also showcased the ability to successfully manufacturer of ex parte filters for non mobile applications using the standard surface acoustic wave or sort of front end process and multiple foundries.
Fundamentally validates our ability to.
The previous these filters faster better and cheaper by using only proven high volume manufacturing processes.
As opposed to traditional bulk acoustic wave or bar of foundry processes, which are more complex and expensive.
To date six separate foundry have now successfully manufactured our ex parte filters.
It is an industry breakthrough why because it demonstrates ex parte simple manufacturing process applicable to the high volume foundries and fundamentally lower cost.
Indeed, 2020 was a momentous year of resident and I am pleased with the validation of our ex bar based solutions in.
Which again, we are just now getting to the point, where we believe our technology. The not only be proven is the best but also the only solution. The unlock the true potential for five G 60, Wi Fi five six and seven ultra wideband and potentially even the millimeter wave driven.
Driven by this market recognition and potential.
We expect 2021 to be the breakout year for our ex part of technology.
Turning to slide for there's a ton of of excitement in the media around the promises of five G and understandably so as it will affect every industry and broadly improved many parts of our day to day lives. However, I'd like to spend some time clarifying where we are from.
The Mark are headed as it relates to the rollout of five G.
As well as the ultra fast next generation networks, such as Wi Fi and ultra wideband, which are often dependent upon each other and are critical to the connected world. We all envision in the future.
The improvements in speed and latency with their foundation and power handling.
Where we of frequency and wide bandwidth. The next generation networks require to open the door to massive connectivity between people and things are taking shape on a broader scale mobile phone smart devices home appliances connected vehicles and many more applications are poised to benefit from this real time communication.
And all of the networks.
And hiring these applications need the RF filter solution such as the ones resident ex parte technology enables.
On the network operators are working hard to deliver nationwide <unk> coverage in its initial for them.
We're in the very early stages in its performance and capability.
We're essentially rounding first piece with today's five G as its the only available.
<unk> parallel gently few cities across the limited number of expensive devices, but the exhibit less in marketing performance.
The revolutionary improvements at five <unk> networks will provide is not yet available.
The five G data speeds will be 100 times faster than <unk>.
With the latency 25 times that of.
Able on leap.
And this will only be achievable with protection against the interference.
In January U S. Mobile network operators spent over $80 billion to acquire a new sub six gigahertz are of a spectrum of.
Upon which their fiber network services will be built a new record.
This is another indication.
The <unk> forecast for the second wave of five key deployment will be in the sub six gigahertz range and it won't be until <unk> third wave for full millimeter wave deployment.
What this means is in the absence of ex parte technologies being deployed the market would leverage of aluminum nitride bar.
Which has shorter range requiring more base stations.
One of our of deployed and the operators networks, which equals higher costs.
We believe there is the potential for billions of dollars of spectrum that could be wasted in the U S alone due to the interference degrading spectral efficiency or based on the increased number of base stations to deliver the same coverage.
<unk> will also depend on next generation networks.
Since the beaches, Wi Fi <unk>, and ultra wideband, which bring additional capacity and speed as well as the extreme location accuracy.
These new network serve as a backstop to the <unk> cellular network, which can easily reached capacity and become overloaded turning to slide five.
The challenge that exists with these networks.
Unlike any other in the history of of wireless technology <unk>.
Delivering state of the performance of these next generation networks requires every device to have high performance RF filters.
It's well documented that the RF filters that were designed for for G requirements are not technically well suited and cannot scale to meet the demands of these next generation networks.
Due to the physics behind the basic knowledge, not having the required power handling and bandwidth at high frequencies.
So let's take a few minutes to explore what would happen in the world of residents ex parte technology do not exist.
The handset Oems are going to demand the market leading providers of RF filters deliver the best solutions. They can.
It works the can support the standards of <unk> operation remember 98 per cent of the RF filter market is controlled by southern company's.
Turning to slide six.
Without ex bar those.
Of those legacy filter technologies will be adapted to deliver the best solutions available.
Pushing the boundaries of their existing performance.
And the external components for creating module different topologies to try to deliver at least the minimum performance thresholds required.
Another well known approaches the experimenting with material changes to increase performance.
We had an external lab measure of the performance of the typical aluminum nitride boss solution compared to an ex parte solution.
Here's what they found.
Turning to slide seven.
These creative approaches using traditional boss structures still fall of remarkably short the desired performance of five G Wifi <unk> and ultra wideband.
When it comes to interference protection lost power handling size and cost all of these new wireless technologies reps.
But Ed Ellen resulting in performance compromises for legacy filled for technologies choking. The intended throughput of five G. However, Wi Fi 60, with the widest bandwidth of 1200 megahertz is still the most significant challenge, especially on the handset for all previous generations of cellular Wi Fi and the ultra wideband must coexist.
Presenting on the spot from a third party test lab highlights the limitations of legacy ball of aluminum nitride technology for Wi Fi succeed.
The little rejection to five G and ultra wideband potential interference.
Which will slow data speeds reduce coverage and drained battery life.
Powers critical on these new high frequency applications.
Because as you increase frequency you have to increase power to maintain the same coverage and speeds. These.
The solutions in many cases fall short of the typical ex par solution by up to 75 per cent for total power at the bad debt.
As we move to slide eight.
Isn't it the ex parte technology provides the bridge from today's early.
The case net of five G to the wide bandwidth high frequency low loss and high power capabilities that we expect from the true five G Wi Fi and ultra wide band to coexist for maximum performance and.
And we believe we are the only company that has the technologies that can meet these next generation requirements innately.
Slide nine.
The test results highlight measured state of the art Wi Fi six <unk> filter day, there with what we believe is the best in class performance when compared to legacy bought technology currently available on the market.
In both cases, the performance was measured by the third party test lab and the improved rejection using our ex parte technology is clearly demonstrated removing.
Third party of interference and not choking the flow of data.
Resident is now on the position simple fully acoustic Wi Fi six the devices with 1200 megahertz of bandwidth and five gigahertz Wi Fi filters with over 740 megahertz of bandwidth both with more than 30 D b rejection to potential interferes.
We believe these are.
We're moving class devices.
As a result of our work and industry, leading progress we're being asked the spirit of several thought leadership events in panels relating to the role of RF filters and <unk> and next generation networks.
In 2020 and through March of 2021, our team has led a roundtable events.
Best of many of which you can find links to on our website.
At the beginning of 2020. One we also announced that resident became a member of the Wifi on land a global nonprofit industry Association of companies, who share our vision of seamless connectivity.
As we transition to slide 10, let me once again highlight.
But our unique technical capabilities stem from leveraging our state of the art ISN design software platform, a key differentiator as we leverage a three dimensional multi physics finite element modeling tool to rapidly create precise design.
This provision results in rapid generation of designs.
With fewer turns in the manufacturing process and ultimately reduce time for integration into module versus the standard iterative in the imprecise process that is typical in the industry today.
Moving on to slide 11.
What's fundamental on this methodology is that as we complete designs for our customers by leveraging.
I often design platform, we actually retain all of the IP.
To that end in 2020, we focus on building a significant protect of intellectual property moat around our technology that is increasingly validated by our partners and appreciated by the market.
We grew our patent portfolio by 50.
During the year over year to over 300 issued and pending patents in the U S and internationally.
The bulk of this growth related to our ex parte technology and today, we have over 150 patents issued and pending for ex bar related technologies to support high frequency networks for like five and six Gee why five five.
50% of seven ultra wide band and millimeter wave.
Slide 12, before we move on and wrap up the section I want to highlight the advisory Board team, we have assembled and all of their hard work through 2020 and early 2021.
Along with helping lead our business strategy and execution Advisory team has played a thought leadership role.
Sick by educating the market on the role that ex bar is and will be playing in the rollout of next generation of wireless networks.
As previously noted in the last year advisor team participated in panel at eight conferences and seminars discussing the current state of the filter market and the main drivers of next generation networks.
Recently, we have expanded our advisory leadership to include several thought leaders, who have joined our technical Advisory Committee.
You can find the complete set of biographies on the advisory team and technical Committee on our website.
Slide 13.
Just as we differentiated our approach developing are.
Most of them on gene IP from the very beginning we took a strategic approach to our business model.
Other than competing with the RF filter manufacturers, we're enabling them, we believe the world's leading Oems will be increasingly dependent on manufactured leverage our filter design to deliver products into the market.
Yes.
Taking the least at finding RF filter solutions that can meet the demands of high frequency applications is going to be paramount for the industry and ex par is quickly gaining recognition.
As a reminder, we entered into a partnership with the world's largest RF filter manufacturer of last year.
The deal consisted of a strategic investment.
This horrible $11 million in the resident as well as the $9 million multiyear commercial agreement for for bands utilizing ex part of technology.
The agreement laid out for milestones to ensure a mutually beneficial and productive process from the start.
As I mentioned earlier, we achieved the second milestone under the agreement in October.
Over well ahead of schedule.
This is an incredibly significant as it validates our ex parte filters for five G meaning.
Meaning they do what we say, they're going to do and we confirmed targeted performance packaging and the initial reliability.
This achievement brings in prepaid royalties and the millions of dollars rather than having to wait for unit shipment.
First one is we have received 50 per cent of the prepaid royalties for these first for bands to date.
We're now focused on the next phase of the agreement, which focuses on building a commercial platform in high volume manufacturing of ex parte based RF filters for five G applications from here, we have two more milestones to hit as the designs moved to commercial.
Commercial production and high volume OEM shipments.
Our work with its partners going exactly as anticipated and the remains the potential for us the contract with them for additional designs this year.
This partner alone could represent a potential of over $100 million of annual revenue per resident.
While that seems like a big.
Step from where we are today it becomes clearer when observing our partners' position in the industry.
The top seven filter manufacturer of control over 98 per cent of the market for filters and duplexer.
Our partner has the largest market share in both categories.
Trolling 37 per cent of the filter market and 32 per cent of the duplex or market.
<unk> filter market share is bigger than the second and third largest players combined.
Further our partner has established relationships with some of the world's largest handset Oems.
Which allows us to leverage their expertise to bring ex bar into the market versus doing it ourselves.
Moving to slide 14.
Leasing partnerships uniquely position resident for success with next generation mobile handset applications. However, let me remind you that residents filter design application reaches beyond mobile.
We are engaged with other tier one customers and Wi Fi and infrastructure applications that require high frequency and wide bandwidth performance.
In fact recently, we secured a high volume two four gigahertz saw Wi Fi socket with a tier one handset OEM.
The commencing shipments of our first ex bar of Wi Fi six the samples we've.
We've announced that one of our existing partners a tier one RF filter manufacturer bigger.
Skipping high value band RF filters designed by resonant into the automotive market.
As manufacturers look to deliver five G functionality of next generation vehicles, our ex parte technology is an ideal fit for auto manufacturers to optimize performance on the low cost production processes.
<unk> as we move forward through the first half of this year, we expect to secure a contract focused on ex bar for non mobile application, which could include autonomous and electric vehicles, other Iot CPE or infrastructure applications.
With that I'll pass it over to our Chief Financial Officer, Marty Mcdermott for a review of our fourth quarter and.
Full year 2020 financial results Marty.
Thank you George.
Turning to slide 15, I'll now provide an overview of our financial results.
The amounts I talk about of GAAP, except where noted.
Billings were minimal in the fourth quarter as compared to $82000 in the same year ago quarter.
Billings were approximately $3 $2 million in 'twenty, 'twenty as compared to $2 $2 million in 2019.
Revenues increased 32% year over year to $607000 in the fourth quarter as.
As compared to $459000 in the same year ago quarter.
Annual revenues increased 330% year over year to $3 $2 million in 2020 as compared to $735000 in 2019.
At the end of the fourth quarter deferred revenues totaled $1.8 million.
We estimate that amount will be recognized.
<unk> revenue over the remainder of the contracts.
Research and development expenses totaled $4 $8 million from the fourth quarter.
As compared to $5 $2 million in the same prior year quarter.
The lower amount primarily results from reduced head count initiated.
And in Q1 of 2020 as.
As well as reduced travel expenses due to COVID-19 par.
Partially offset by higher patent related expenses.
Research and development expenses totaled $19 $5 million on 'twenty 'twenty.
As compared to $18 $9 million in 2019.
With the increase primarily due to expanded design activities on our ISN platform ex bar technology and filter design development.
And patent related expenses, partially.
All set by reduced head count and lower travel expenses.
Sales marketing and administrative expenses totaled $3 million.
On the fourth quarter.
As compared to $3 $1 million in the prior year quarter.
The lower amount is primarily due to lower travel expenses.
Sales marketing and administrative expenses totaled $12 $2 million on 'twenty 'twenty as compared to $12 million in 2019 with the slight increase.
Primarily the result of higher public company related expenses and compensation expenses, partially offset by lower travel expenses.
Our operating loss of $7 $1 million on the fourth quarter as compared to an operating loss of $7 $9 million on the prior year quarter.
Operating.
<unk> losses of $28 $5 million from 'twenty, 'twenty as compared to an operating loss of $30 $2 million in 2019.
Yeah.
Net loss was $7 $1 million on the fourth quarter or a loss of 13 cents per share based on 55 million weighted average shares outstanding.
Compared to a net loss of $7 $8 million or a net loss of 24 cents per share based on $32 7 million weighted average shares outstanding for the prior year quarter.
Net loss was $28 $4 million for 2020 or a loss of 50.
The five cents per share based on 51 3 million weighted average shares outstanding as compared to a net loss of 29.
$9 million for 2019.
For a loss of $1.02 per share based on $29 4 million weighted average shares outstanding.
Non-GAAP adjusted EBITDA was a loss of $5 $5 million or a loss of 10 cents per share on the fourth quarter compared to an adjusted EBITDA loss of $6 million for.
Our negative 18 cents per share in the prior year quarter.
Non-GAAP adjusted EBITDA was the loss of 20.
The $1.7 million or negative 42 cents per share for 'twenty 'twenty.
Paired to negative $23 $4 million or a negative 80 cents per share in 2019.
Cash and cash equivalents totaled $25 million at December 31, 2020, which.
Which included $11 million of net proceeds from sale of equity under our ATM program.
Remember we have no debt.
With current cash on hand, we have enough to last into calendar year 'twenty 'twenty two.
On December 31st 2020, we had a total of 60.
Seven employees 16 of whom have a Phd in 48 of whom of part of the technical staff.
And then finally, turning to slide 16 on the topic of guidance.
As we highlighted in our pre announcement, we expect revenues in the first quarter of 2021 to be in line to slightly ahead of revenue.
In the fourth quarter of 2020.
For the full year of 2021, we.
I'd now like to turn the call back to George for closing remarks George.
Thanks, Marty now, let's turn to slide 17.
<unk>, what's the track in 2021 well.
Well this year with full of accomplishments to be celebrated.
Our work ahead is cut out for us as the critical challenges that face of our industry quickly approach.
We are just getting started.
As we look forward to 2021 we expect our volumes and revenues for.
For the year to be significantly higher.
As we accelerate the pace of what we saw in 2020.
Our legacy in foundry programs will continue to grow and provide the initial foothold for customer expansion and the ex bar based relationships.
2021 will be a breakout year for our ex part of technology.
And we expect continued and ongoing validation from the market that ex parte based solutions may be the only viable solution to meet the demands of not only five G. But also 60 Wi Fi five six and seven ultra wide band and potentially even millimeter wave.
We will expand our.
Our relationship with the world's largest RF filter manufacturer as we work with them to build a high volume manufacturing platform for ex parte filters. The won't meet the exacting demands of the largest mobile handset Oems in the world.
We expect to secure a contract in the first half of the year focus on ex bar for.
Total applications with.
Which could include autonomous and electric vehicles.
Other internet of things or infrastructure applications.
I want to thank all of our employees Board and advisory members for their dedication.
This year in particular.
Non <unk> navigated the COVID-19, pandemic and as we seek to revolutionize the connection between people and things. Your hard work has translated to the growing success of our company.
With that I'll hand, it over the operator to begin our question and answer session operator.
Thank you.
If he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star of keys, our first question.
<unk> is from the Tories Sandberg with Stifel. Please proceed.
Yes, Thank you and congratulations on the continuous success here are first of all of <unk>.
George could you elaborate a little bit more on the sort of third and fourth milestones for.
Your.
Your your your largest the contract customer.
I think of the past you've talked about a conversation commerce elevation of the products potentially being on track for a second 21 on you know just just wondering if that's still the case.
Well you know, we're still tracking a tory are to meet the objectives.
As of our customer you know they highlighted in their press releases. They wanted to have devices out into the mobile space at the end of this year and as they continue to plan to do that we plan to continue to support them in all of the efforts to make that happen I think what youll see from us.
From a milestone perspective.
Specter of on the current agreement is Oh meeting kind of of the next milestone this year and and really focused on expanding the footprint with that customer into other devices and those will not only be in the mobile sector, but I wouldn't be surprised if we saw devices from them on the non mobile sector.
Sector as well because they're moving quick.
Very good on as a follow up question. This time around you have talked a little bit more about to two new things one is ultra wide band the other.
One is as automotive so could you perhaps elaborate on why.
Okay, so you're narrowing of engaging with the potential partners on filters for either one of those two segments.
Yeah sure on I'm going to hand, this off the drilling so he can kind of chime in and talk about why experts technology is applicable in those spaces and why we think we're ideally positioned.
Yeah.
Kind of Moratory.
We seem to be becoming much more of popular as you know on location service over the last year or so and as those of you didn't widely deployed in handsets theres definitely a major of interference case between Wi Fi and E. W. B.
And so that's going on is that.
The new filter in the requirement that wasn't really the present.
Current before.
And similarly in automotive for so many.
So when the module is being shipped in vehicles now basically every car asset and LTE.
The modular mono minute.
Migrates of five G and again.
With automotive.
Telemetry using.
Five days of excuse me a lot of new filtering requirements there because.
Jim.
No failures of the communication and the parents as to the squashed.
Very good just one last question if I may on the.
The Wi Fi side, you've talked about potentially announcing.
A contract on customer there.
The first half of this year.
Is that still on track and you know I assume that would be separate from you know of your your sell other.
Contract.
On the largest contract.
Well I think it would be could be easily be of completion of both Tory where you see of Wifi.
Wifi deals coming in in multitude of different factors from a multitude of different customers I think the the key thing that we have is with these latest and greatest Wi Fi solution. The performance is.
We're really excited about it and what we see is we've got a full band acoustical.
The only solution that is going to we believe the really change the way the market's looking at these types of devices.
As evidenced by some of the stuff we talked about today on the call.
Very good and congrats on the continuous.
Progress here. Thank you.
Thanks for.
Our next question is from Rajiv Gill with Needham <unk> Company. Please proceed.
Okay.
Hey, Rajeev is there.
Hi can you hear me yeah, sorry, I was on mute sorry about that yeah. Yeah. Yeah. Thank you for taking my questions.
A question on on the non mobile opportunity for ex Barry you talked about.
Seeing some traction in the first half of 2021 I was wondering if you can kind of maybe frame that in terms of of how big that opportunity could be and how you think about that as part of kind of your long term growth trajectory.
Okay, well first let me I'm going to let Dylan jump in and talk a little bit but about the technology itself from what we're seeing with these early devices that are we're going to start sampling here in the next week or so we'll talk about that briefly and then I'll kick in and talk about what do we think that opportunity is still on.
So I think what's really changed.
Historically the.
Acoustic filters were on views and a lot of Wifi applications. So there was the ceramic filter technology before now.
And now we're seeing with the makers of the access points of CPE devices want to operate the five and six gigahertz bands simultaneously.
And there you really need of the performance of the acoustic wave.
For the filters.
So at the end of a deck of comparison of gas.
And the market is the best competing technology.
Yeah.
The major limitations from the implementation of the aluminum nitride bar to meet all of the different projection of the requirements necessary. Both in the infrastructure side is for.
The one smart phones.
So.
And we've had pretty strong conviction on the conviction of all year.
We don't really differentiate it.
In the space and I think we've got the the data to prove it now.
It's pretty exciting time for us.
From a market opportunity of Rocky I think what we're seeing is you know the the Wi.
Our kid well historically has not been deemed to be as large.
As the mobile market.
I think the latest data suggest that as they're moving into the acoustic filter.
Requirements are that that market is going to be about as big as cellular for.
Find moisture. So we're excited about it it's a it's a market opportunity of that plays well with our technology and its just going higher and frequency of creating even greater opportunity for us in the long term.
Yeah. Thank you for that just the question follow up question Dylan on on the the coexistence filter.
Acoustic so the.
The Wi Fi six <unk> devices will have both bands in one device.
And I think using residents of technology, which is kind of a single wide band filter is the solution that can kind of solve some of the the issues that some of the manufacturers are trying to use which is the two filters.
The TPS requirements and that could impair.
The impact performance.
So just on on that I was wondering if you can kind of elaborate a little bit further and you touched upon on the on the presentation, but how that kind of a differentiation of of using a single wide band filter is creating kind of this competitive advantage and Wi Fi six feet.
To me.
So the one thing I would say I should have asked for was that the move.
Moving to the 61 day, we'll have both the five and the six gig bands running simultaneously and on top of it. It is for these mimo systems on a multiple input multiple output.
It really is having the need for antennas for the <unk>.
Five year span.
For the six gigahertz band.
One of those needs of filters are now on an eight filters in the box and that's why the scale of the market is getting pretty interesting relative to the size of mobile.
What happens when you do the the multiple filter implementations of our competitions pursuing other.
For certainly the size of cost impact.
They also have.
Potentially of performance issues across those transition frequencies and most likely going to have the additional loss, which ultimately resulted in the of shorter range for your Wifi network.
Thank you and just my last question in terms.
Of the success that you're getting on the on the foundry side you'd mentioned you have now six separate saw foundries now of manufactured ex bar.
I Wonder how you kind of think about the foundry strategy as part of our.
Part of the strategy of developing on overall ecosystem to start supporting ex bar and how that will.
The feel more adoption of of that technology. Thank you.
Yeah.
It's kind of interesting play for us that allows us to very cost effectively be able to build samples of potentially go to market direct.
It's also on their.
We used tool tool for business development, where we can show you know it's coming.
Kind of consistently surprised of the ability to be able to do this to go use off the shelf saw process of abilities.
The export of devices and.
And so it's also a really wonderful to be able to go on and talk with the other tier one acres and show them of hardware right and get them very interested on the technology.
Yeah Rajeev.
We can all of it it's an interesting byproduct of the our existing business right. When we when we started this company.
In 2014, we were focused on you know vertically integrated our filter manufacturers, we got into the foundry business looking for.
For ways to collapse, the time to market it or what we of the work that we did to really understand how you could couple of the capabilities of these pure play foundries with our tool sets that we can kind of deliver these devices very cost effectively.
Just really became an added bonus as.
As we got into the you know the development of ex bar and being able to go out and show that we can go get a ex parte devices manufactured on a number of different foundries and we're talking about a number of a number of new foundries now today as well. So it's a is it I think.
One of the very definite competitive advantages, we have were using a very well known process. It's not a difficult thing to do to spin up a new soft boundary on ex bar, whereas if you had to go spin up of new foundry on you know of.
Custom Bob.
The process I think that's pretty difficult so.
And has proven to be pretty difficult and so I think we're pretty lucky here and really allows us to.
Show, how competitively advantage of this technology is today and will be even more so in the future.
I appreciate it thank you.
Uh huh.
Our next question is from Cody Acree with loop capital. Please proceed.
Yeah. Thanks for you.
Hey, Thanks for taking my questions.
Just on to that point of the.
The multiple foundry.
<unk> saw foundries.
Well what is that due to the pricing curve.
For your competitors I guess, how much of the Alibaba <unk>.
Price improvement or year.
Your partners your customers partnering with foundries.
Able to come in and be competitive with the.
The internal manufacturing fabs of of possibly from Broadcom or corbo.
Oh, that's of Great question and you.
So if we sit back and look at it and I'll take you back three or four years ago. When we were talking about the fundamental differences in cost structures.
The versus Tc saw versus bought devices.
And we were saying that at that point in time.
The structures were about 30% of the cost of the box structure and of TC saw was about 60%. So if you sit back and kind of use that and extrapolate that forward and.
Sorry for doing an ex bar based device.
You know I think the theyre going to be significantly advantaged. If you were doing a head to head comparison of equal to performance device.
Youre going to be out of the box being in better shape from a cost structure standpoint that said.
Now you know, it's not apples to apples right I mean, you're having the scandium doping of having to use different architectures.
With these bought devices I think that Oh I'll go back to your conversation with the with Mike and I two years ago at CES, you know if we could build it they will.
Third and I think that's what we're finding right now today Cody its we're demonstrating devices that have a markedly better performance than what you can do.
With the either of scandium doped or a hybrid architecture of an existing bought on board structures. So.
Come on you know if it was apples to apples you've got a significant cost advantage. Once you start having to do all of these other ancillary things to make these devices kind of get close in performance.
It gets better.
And one follow up there and then just my final just are.
Your final list of customers.
Able then to our the passing that along I guess and or are they using that to improve their margins or is that weighted more towards their customer benefits and put them on more likelihood that you ramp into the market faster.
With the great question that day.
The.
Would assume that we aren't focused on the major idms, which we are we're using the the fabulous relationships, we have to demonstrate ex Florida devices.
If you recall historically, we just partnered with companies.
On.
They.
For our part for Us to design, we did of design and then we had the weight.
12 to 18 months for them to figure out how to build it today, we leveraged the foundry relationships such that we can show samples to potential idms and Oems and reference design manufacturers that might want to.
<unk> leverage ex part of technology for the Idms, They would want the port that technology into their process much like we're doing with our friends in Japan that were currently engaged with then we've got others that are looking at doing the same thing in other parts of the World and then lastly.
Obviously, we have the capability to enable our reference design manufacturer, even a large OEM because of those foundry relationship. So when it comes to how would the foundries be pricing it to those partners.
Yes, it depends on the leverage of the partner would have you know if you're talking.
Lastly, the tier one Oems.
Uses these boundaries for other activities theres, probably going to be tremendous leverage if you're talking about a new entrant that's trying to get into the market I would guess that these foundries are going to be having more of a.
Margin share of type of arrangement with them, because they're both new and they don't have the customer.
Looking whether our customer wouldn't have the power to negotiate.
Okay, great. Thank you and lastly, just.
As Youre looking let's say at the end of 'twenty one as you go through these expansions.
From just wireless when you look more Wifi on auto and Iot infrastructure.
What do you think the your 2022 mix could look like.
Your just your oil royalty mix versus the of application.
Oh.
That's a good question.
The I'm not sure I've got a great answer for that at this point.
We shouldn't the actual.
The ownership the company.
We look at the companies that we're talking to you today.
<unk>.
I could easily see you know.
The mix, we're only 40 per cent of the revenues coming out of the mobile because we have one customer there who has got an exclusive.
Through March of next year, and Theyre going to the only ones that are going to market there.
And where we're teeing up and loading up a lot of guys on the Wi Fi front.
But you know I think it could come to a balance of pretty quickly thereafter.
In the 'twenty, three time frame, where we'd see a pretty balanced.
The Wifi infrastructure non.
Non mobile set of customers with our mobile customers. So it makes the excellent. It does thank you George Thank you guys appreciate it.
Thank you much.
As a reminder of the star one on your telephone keypad, if he would like to ask a question. Our next question.
<unk> is from Kevin Dede with H C. Wainwright. Please proceed.
Good morning, guys. Thanks for taking my question.
Hey, Ken.
George So just can we follow up on the dollar side of the question that Tori asked on the large customer I think you referenced 9 million.
As part of milestone payments and I I think you spoke to it during the prepared remarks.
I think what have you realized that I think you mentioned $2 5 million was that is that what you recognized thus far and can you just speak to what youre expecting in terms of.
That's the.
The commercial side this year and then what that would leave for.
For the balance of 'twenty two.
Kevin It's a great question, let me see if I can answer it for you as Marty would note and would remind me I'm not going to get out over my skis and talk about the the forecast for the balance of the year much more.
More than next quarter, but let's see if I can answer your question.
The $9 million of prepaid royalties that's exactly what these were those prepaid royalties, we got the first pre payment of.
At the signing of the contract we get the second pre payment.
When we reach the has made.
<unk> milestone in October, which validated the technical aspect.
Aspects of.
As highlighted in our press release this morning and it also.
Created a platform where they had validated initial liability and.
The ability of those devices. So those prepaid royalties equaled 50 per cent of that $9 million those deals.
The early deal for ex bar, which you know early mover advantage pricing that that customer of God.
Was it two two.
<unk> 5 million per device.
As we've noted.
It takes 12 concurrent deals at that pricing to get this business to cash flow and.
And we feel good about the trajectory we have with them on expanding the number of devices, we have under contract with them.
This.
This year and that's the mission right once you the on a per.
Has the initial milestones then you kind of <unk>.
Move on to looking at what's next and that's kind of where we find ourselves today.
And then you look at what we're doing with other customers.
Also on the prepaid royalty fraud.
Rod.
As we've noted we expect the kind of get our first Wifi customer.
This coming quarter.
And I think those will be kind of similar kind of deals.
You know I'm.
Pretty good trajectory for us for the balance of this year.
And as.
Marty and I both noted.
On the prepared remarks, we expect the 2021 to be significantly higher than 2020.
Okay Fair enough George Thanks, Thanks for the detail on I'm.
Ex exclusivity associated with that large customer.
Working in.
In auto environment, and non mobile sort of sidesteps the requirements that you're obligated to them on I guess is sort of where I'm fishing.
Set of little bit different we have the ability of freedom to operate in all non mobile applications.
So of non mobile application is Wifi CPE.
Infrastructure automotive these are all non mobile applications, we had the freedom operating in those areas.
Okay.
A lot of them for me.
Sorry go ahead of all.
If you recall the exclusivity ends one.
<unk> for from the end of this month.
So we're within literally one design cycle of being out of our exclusivity period for.
For the major mobile application so.
The exciting time.
Agreed.
Hi, Hugh.
<unk>.
Multiple times of prepared remarks on your slides George the third party test lab. When you did some analysis on aluminum nitride.
Can you talk about who that was and maybe who funded the tests.
I'm trying to get to.
Somehow rationalize whatever bias.
The rest of it had been brought in incorporated in that.
Given that it's a third party I understand I'm just curious.
Obviously, the Kevin there's there's teardowns that are done.
We don't have parts in the marketplace of the only way you can get third party testing done is if you provide the parts to them.
And you paid the bill and so in this case, we went out and searched and bought in the market via distribution.
Some of the cutting edge parts that are being marketed out there are two of the different Wi Fi and CPE players, we bought those parts provided into of tests lab.
Along with our own parts and they did the head to head testing.
Comparative testing.
And there are 10-K result, their test results matched very closely to the test results that we had and also test results we've seen at other customers, but obviously our customers are not going.
Their test results are out there in the marketplace generally.
Yeah, no understood understood fair.
Fair enough. Thanks for the additional color I appreciate it.
Absolutely.
Thank you we have concluded our question and answer session.
I would like to turn the conference back over to management for closing remarks.
Thank you operator in closing 2020 was a remarkable year 2021 stands to be even better.
Our ex parte technology has the potential to enable our partners to dominate the new <unk> Wi.
Hi Fi and other high frequency applications. There is truly a lot to be excited about and a lot to look forward to.
I want to thank all of our shareholders for their ongoing support and with that I'll close today's call. Thank you everyone.
Thank you. This does conclude today's conference you may.
Disconnect your lines at this time and thank you for your participation.