Q1 2021 Resonant Inc Earnings Call
Good day and welcome to restaurants first quarter 2021 earnings conference call.
Today's conference is being recorded.
At this time I'd like to turn the conference over to Greg for lesson from GE group, the company's Investor Relations firm.
Please note we will be using a presentation during today's call, which is accessible on the events page of Brexit and its IR website.
With us today via phone. Please go to the events page to either view or download the presentation to follow along.
Turning to slide two.
Earlier today resonant released financial results for the first quarter of 2021 the earnings release that accompanies this call is available on the investors section of the company's website at Www Dot IR dot resonant dot com.
Additionally, some of the information and this conference call contains forward looking statements and involve risks uncertainties and assumptions that are difficult to predict.
Words or expressions, reflecting optimism satisfaction with current prospects as well as words, such as believe intend expect plan and anticipate and similar variations identify forward looking statements.
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. Several factors that could cause or contribute to such differences are described in detail and residents. Most recent form 10-Q, and 10-K and subsequent filings with the SEC.
C.
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 and it's my pleasure to turn the call over to the chairman and CEO President George Holmes, George 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 our first quarter 2021 financial results Conference call. Joining me on today's call is Marty Mcdermott, our CFO and Bill and Kelly, our CFO will be joining the Q&A.
Turning to slide three.
We are off to a momentum start in 2020, one working to expand our global footprint of our revolutionary RF filtering technologies as the growth and demand from mobile data continues.
Our game changing X bar RF filter technology is being increasingly recognized as a leading solution to unlock the future of next generation ultrafast hybrid Z wireless networks and the applications that use networks enable and.
In particular for five day cellular and Wifi six applications.
To that and our work with the world's largest RF filter manufacturer to bring the expert technology to the market for mobile handsets not only continues to progress but has done so well ahead of schedule.
And from the initial performance packaging and expectation for reliability being met or exceeded and we are now moving aggressively towards the mass commercialization and high volume manufacturing phase of the agreement.
More importantly, we now have the ability to expand our current engagement beyond the initial four contracted designs and expect to do so before the end of 2021.
And 2020, we sampled the first non mobile export five gigahertz Wi Fi devices, and recently began sampling non mobile expert Wi Fi six E or six gigahertz devices.
As we move through 2021, we look forward to continuing to demonstrate the impressive performance of our designs and formulating new high value partnerships.
Breakthrough technology Index bar as demonstrated by our industry partners, who have taken advantage of expert simple manufacturing process.
Applicable and eat two high volume foundries, and fundamental and lower cost solutions and in fact, each separate foundries have successfully manufactured our export technologies to date.
As I stated and our last conference call, we expect 2021 to be and outstanding gear or export technology or solutions were developed to be the best and the industry and now more than ever. This is quickly being recognized by the market and by the major players within the ecosystem.
But as we look at the competitive landscape for addressing the requirements of five G 60, mobile Wi Fi five six and seven ultra wideband and potential and millimeter wave. We believe our export based solutions will be the best solutions to unlock the true potential for these next generation wireless networks.
Turning to slide for those.
Those who have been closely following the industry no. We are and the very early days of five G. When it comes to performance.
<unk> market expected to contribute roughly seven six trillion dollars to the global economy over the next decade, it's easy to understand why the investment going into the space and the front and continues to ramp up.
In January and mobile network operators, and the U S and over $80 billion to acquire a new sub six gigahertz <unk> spectrum on which the next generation of <unk> network services will be built.
This was a momentous step and the advancement of <unk> network deployments and this validates the national infrastructure of next generation mobile networks is still in development.
What does this tell us about today's by G and its current form true five G has yet to expand and the many cities and and few locations, where there is five day coverage and exit.
EBITDA subpar performance.
In order for networks to reach the high data speeds are true five G. There are several critical items that need to occur and considerations the market needs to address.
A lot about the potential of residents ex parte technology, but let me spend a few minutes discussing what this would look like and a world without X bar based filters.
The newly acquired sub six gigahertz RF spectrum I, just mentioned is a strong indication that the next wave of <unk> deployment will be and the sub six gigahertz range.
Without X bar five G networks would likely utilize today's aluminum nitride ball RF filters.
Which were developed specifically for <unk>.
And to their limited and high frequency RF performance. These legacy filters would require many more base stations deployed across the network to deliver the same coverage and consumer experience.
Moving out these additional base stations would be possible, but isn't and incredibly more costly approach to achieve true five G performance per.
Other spectrum wasted due to interference and grading spectral efficiency would be massive.
And the inefficiency impact b and the billions of dollars and that isn't just the U S.
Turning to slide five let me continue under the premise of a world per ex parte does not exist.
There is clearly the potential for massive spectral efficiency issues driven by the challenges associated with using RF filters designed with technology developed for four G. And these next generation networks legacy Bob filter technology inherently does not have the required power handling our bandwidth and high frequencies, causing devices.
Such as handsets and routers that utilize these filters to suffer with degradation connectivity and performance.
Now, let's compare mobile devices, leveraging legacy filter technology against devices with resident and state of the art expert technology.
You will see that the difference in performance and substantial.
The delay and mobile download times is just an example of the differences between using legacy filter technologies versus residents expert technology.
And the modern environment, where smart devices home appliances connected vehicles health care and many more applications and rely on optimal speed low latency. We believe our export technology will be fundamental and meeting the connectivity requirements and performance expected by consumers to these next generation networks.
Turning to slide six.
When we discussed the benefits of EXPAREL when compared to legacy filter technology, the differences and performance are measurable and can be demonstrated.
Let's dive into the exact challenges that existing board technologies have when it comes to meeting the bandwidth requirements of next generation networks.
These networks are expected to expand into higher frequencies.
7% to 12 gigahertz range for example, which X bar is ideally suited for.
Legacy builder technologies would need external components to be added or would require models with different topologies and in order to operate at these frequencies.
Another solution as doping with additional layers or other experimentation with material changes to increase performance.
These R&D efforts are very expensive and unnecessary size present challenges to reliability and have the potential for increased signal loss.
X bar and the other hand inherently meets these requirements. These frequencies with its wide bandwidth capability and high power handling and ultimately and much lower cost.
The results from external lab testing of this Wi Fi six he filtered data demonstrate why our expert based solution provide substantial rejection of all unwanted signals, while not constrained the flow of data. This is why export based solutions showed the best results available and the market.
To summarize on slide seven we believe resin is the only company that has technologies capable of natively and meeting the requirements and true five G. <unk>.
Five and six gigahertz, Wi Fi and ultra wide band.
Through X bar, we are bridging the gap from today's early rollout of five G. The coexisting ecosystem of next generation networks.
We'll bring wide bandwidth high frequency low loss and high power capability.
As we've talked about residents filter design application also reach far beyond mobile and we continue active discussions with additional potential customers for non mobile applications, which also require high frequency and wide bandwidth performance.
Today, our engagements include tier one customers and Wi Fi and infrastructure applications and.
In fact, and the first quarter, we began sampling fully acoustic Wi Fi succeed devices with 200 megahertz of bandwidth and five gigahertz Wi Fi filters with 740 megahertz of bandwidth both with more than 30 D b rejection to potential interferes.
We also announced at the beginning of the year that resident and became a member of the Wi Fi Alliance Global nonprofit industry Association of companies, who share the vision of seamless connectivity.
Turning to slide eight I will briefly comment on I S. N. A proprietary design platform that is the backbone of our capabilities and which serves as a key differentiator for resonant allow.
Allowing us to revolutionize the three to seven gigahertz RF front end.
By leveraging a three dimensional multi physics finite element modeling tool, we're able to generate precise design and rapid speed with fewer turns and the manufacturing process. The.
And the platform enables integration into modules at a pace that we believe is at least twice as fast as the standard imprecise process is employed by the rest of the industry.
This past quarter, we have increased the capabilities of our three dimensional finite element modeling for acoustic wave filters by tenfold.
Enabling us to optimize complete filter designs today, we believe president and is the only company with this capability.
And most filter companies utilize simpler models, such as Com and Mason or bvd modeling, which are empirical design techniques with many iterations limiting the optimization for complete RF solutions.
Turning to slide nine over the past year, we focused on building out our intellectual property or IP moat around our technology. This is essential to our operational strategy as we retain all of the IP for our designs, we licensed to our customers.
We continued the expansion of our robust patent portfolio during the first quarter as we added over 30 additional patents since beginning of 2020 one day.
To date, we have over 330 patents issued and pending and the U S and and internationally.
As our export technology is increasingly validated by our partners. We have focused most of this IP growth around X bar and we now have more than 175 patents issued and pending for X bar related technologies.
Moving to slide 10.
Isn't it maintains unique position within the RF filter market, meaning we do not compete with RF filter manufacturers on the contrary, we're leveraging our technology platform to enable the world's largest filter manufacturers and in doing so hoping the leading global Oems deliver products into the market with state of the art filters.
This strategic approach a lot of standard or a partnership with the world's largest RF filter manufacturer.
In 2019.
To recap the agreement for those newer to our story. The deal consisted of a strategic investment of $7 million into resin as well as a $9 million multiyear commercial agreement utilizing our ex parte technology.
As I mentioned earlier, we achieved the second of four milestones under this agreement in October.
This was a critical point of the process as it validated our export filters for five G with confirmed targeted performance packaging and initial reliability as a result of this achievement.
Which occurred ahead of schedule and we've been able to monetize the partnership and form of prepaid royalties to day.
We have received 50% of the prepaid royalties for the initial contract.
As a next step with this partner, we will move to the commercial production phase of the agreement and turn our focus to high volume manufacturing and export based RF filters from <unk> application.
Our work with this partner validates our belief that binding RF filter solutions that can meet the demands of high frequency applications is paramount for the industry.
Going forward there remains the potential for us to contract with this partner for additional designs. This year as we work towards the remaining two milestones of the agreement.
Let me put the opportunity of this partnership into perspective by observing the competitive landscape of the RF filter manufacturing industry.
A few key facts are as follows.
90% of the market for filters and Duplexes and controlled by the top seven filter manufacturers.
Our partner has the largest market share in both categories controlling 37 per cent of the filter market and 32% of duplexer market there.
And their filter market share is bigger than the second and third largest filter players combined.
Further our partner has established relationships with some of the worlds largest Oems.
Which allows us to leverage their expertise to bring <unk> into the market versus doing it ourselves.
Given these market dynamics. This partner alone represents the potential of over $100 million of annual revenue for resonant.
Turning to slide 11, and I'll conclude this section by highlighting the team we have assembled for advisory Board.
Which consists of leaders with significant experience at the forefront of the industry.
Not only is our adviser team provided us with invaluable guidance on our business strategy, but the team has been very active with industry thought leadership.
Throughout 2020, and during the first quarter of 2021 and our team has led a roundtable events to discuss the current state of the RF filter market. The main drivers of next generation networks and the role export will play and the industry going forward.
Many of these event and discussions and panels are available for replay on our website.
In February we expanded our advisory team to welcome several thought leaders to our technical Advisory Committee. This newly formed community is focused on expanding resonates intellectual property portfolio and advancing adoption and development of our ex parte technology.
We will continue working closely with them and believe the caliber of the advisory Board and the technical leadership Committee and speaks to the value that our technology brings to the market.
You can find full biographies are advisory board and technical Advisory Committee on our website.
Now with that I'll pass it over to our Chief Financial Officer, Marty Mcdermott for a review of our first quarter 2021 financial results and what drove them Marty.
Thank you George turning to slide 12.
And I'll provide an overview of our financial results.
The amounts I talk about are GAAP, except where noted.
Billings were $120000 and the first quarter as compared to $280000 and the same year ago quarter.
Revenues increased 12% year over year to $608000 from the first quarter.
As compared to $544000 and the same year ago quarter.
This was in line with our previously provided guidance.
At the end of the first quarter deferred revenues totaled $1 $3 million.
We estimate that amount will be recognized as revenue over the remainder of the contracts.
Research and development expenses totaled $5 $4 million from the first quarter as compared to $5 $5 million in the same prior year quarter.
The decrease is primarily due to lower personnel costs offset by expanded design activities on our ISN platform ex par technology and filter design development.
Sales marketing and administrative expenses totaled $4 $1 million and the first quarter as compared to $3 $1 million from the prior year quarter.
The increase was primarily due to higher personnel costs and costs associated with filing our new form S. Three registration statement.
Our operating loss was $8 $8 million and the first quarter as compared to an operating loss of $8 $1 million from the prior year quarter.
Net loss was $8 $8 million and the first quarter or a loss of <unk> 15 per share based on 59 8 million weighted average shares outstanding.
Compared to a net loss of $8 million or net loss of <unk> 18 per share based on 43 8 million weighted average shares outstanding from the prior year quarter.
Non-GAAP adjusted EBITDA was a loss of $6 $4 million or a loss of <unk> 11 per share and the first quarter.
Comparator and adjusted EBITDA loss of $6 $4 million.
Or a loss of <unk> 15 per share and the prior year quarter.
Cash and cash equivalents totaled $21 $6 million on March 31, 2021.
Remember we have no debt.
On March 31, 2021, we.
We had a total of 68 employees 16 of whom have a Phd and 47 of whom are part of the technical staff over $8 6 million RF filters designed with our ISN platform were shipped to Oems and our customers in the first quarter of 2021.
Which is in line with our previous guidance and represents a year over year increase of 437% and a sequential quarterly increase of over 25 per cent.
To date and our customers have shipped over 61 million RF filters designed with our ISN platform to their OEM customers several of which have been identified by third party teradyne companies and tier one phones and these amounts represent real production unit volumes that have been shipped and sold by handset manufacturers to <unk>.
<unk>, not just sample or distribution shipments and.
And finally.
Turning to slide 13 on the topic of guidance.
We expect revenues and the second quarter of 2021 to be in line with revenues and the first quarter of 2021.
As a reminder, we continue to expect revenues to be non linear from quarter to quarter. As a result of revenue recognition for our prepaid royalty deals.
That said, we do expect revenues for the full year of 2021 to grow significantly over full year 2020.
Now I'd like to turn the call back to George for closing remarks George.
Thanks, Marty now, let's turn to slide 14.
But what did track as we move through 2021.
As you just heard Marty explained we expect significant growth as we accelerate the pace over what we saw in 2020.
Our legacy and foundry programs will continue to grow and provide initial footholds for customer expansion and the X bar based relationships.
2021 will be a breakout year for our <unk> technology and.
And we expect continued and the ongoing validation from the market that export based solutions may be the only viable solution to meet the demands not only five G. But also <unk> Wi Fi five six and seven ultra wideband and potentially even millimeter wave.
We will expand our relationship with the world's largest RF filter manufacturer as we work with them to build a high volume manufacturing platform for X bar filters and will meet the exacting demands of the largest mobile handset Oems and the world.
We expect to secure contracts in 2020, one focus on export for non mobile applications, which could include autonomous and electric vehicles and other internet of things or infrastructure applications.
With that I'd like to thank you all for joining us today I look forward to providing updates throughout the year as we continued to gain momentum and work to revolutionize the connection between people and things.
With that I'll hand, it over the operator to begin the question and answer session operator.
Thank you.
We will now be having a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is and the question queue.
And we also press star two if you would like to remove your question from the queue.
One moment, please vote now poll for questions.
Alright, and first question comes from tore Svanberg with Stifel. Please proceed with your question.
Yes, Thank you and.
Congrats on the continuous progress here.
Question is on Wi Fi six I know, you're probably working on a lot of different options here, but can.
Can you share with us other than obviously tracking it from a milestone perspective, what what what are going to be some of the things to look out for.
Are you going to be partnering with somebody or anything.
And anything you can share with us what would be helpful.
Okay, Great and Torrey Great question and thank you for the congrats on the progress I mean, clearly our focus is and has been expanding our footprint of customers for X bar and export related technologies. As you recall, we have an exclusivity and the field of mobile until March of next year, well within the design cycles of what most of the.
A major Oems are looking at today. So the focus we have on widebody engagement for the non mobile applications, just become more and more important.
As we look at it and and look at what we're seeing from other companies trying to get out with some of the early products that need these.
Kind of initial deployment application requirements, we're seeing that we're just further seeing further validation that the ex parte technology with its wide bandwidth and high frequency performance and with a single acoustic device is just gonna per you know provide tremendous advantage for OEM.
And when they are designing networks. So we're focused on you know probably the top six or seven.
Uh huh.
Tier one idms and the space, obviously, we have a partnership with the largest us we're focused and the other areas and we expect that we you know with the engagements we have right now.
And that we will see very good activity and she'd be D and position to talk about kind of those next customers here and the next six months Don do you want to talk about just a few minutes to kind of augment my story on Wi Fi succeed and what we're seeing from a performance advantage perspective of the export based technologies versus standard aluminum night.
Try and solutions.
Thanks, George and as we've been talking about over the last few calls which is a fundamental difference with X bar is a very large native bandwidth and the aluminum scandium Nitro and technology.
And so that continues to hold and we see no real change and the market there.
We announced and this call that we've been sampling our latest iteration of samples for Wifi six <unk>.
Beyond that for example, and restores new interference coming like apples are tags were just recently announced GWB broadly into the market that's net.
Interference or that we need to manage and our and filtering and so.
And that continues to be an evolving story that interferes or getting closer and closer and need.
And our filtering and so beyond that you know if you look around the world different markets different skus are required and the different frequency allocations and we continue to.
Refining our products and are working on new samples that address the different market segments around the globe.
Very good and as my follow up and and.
In relation to the expansion of your relationship with the largest RF filter manufacturer.
I know you sort of passed the second milestone there's two more.
Do you need to sort of get through the the last milestone before you expand on that relationship or you know could could there be something before that.
I, absolutely think there'll be something before that Tory I mean, as we sit back and look at the work that we did last year and the significance of bringing that kind of a second milestone in early and it allowed to start talking about what's next.
Clearly we had to prove that we can do what we said we can do with the early performance reliability and packaging before they wanted to open up and start looking at new applications. I think what we're seeing today is they're very aggressive and looking at new applications as we see the technology continue to move forward. So I'm.
Very optimistic.
And that we will engage with them this year and see additional devices come into our contracted relationship with them before year end.
We try and deal one last question, which will be in advance of the final two milestones.
Great. Thank you just one last question for Marty Marty day, SG&A came in and a little bit higher I think that was because of the filing that you mentioned should we expect the SG&A and sort of get back to normal and kitchen.
No and I'm glad you are looking at that after the stock comp stock comp because that had a big impact on the quarter, but no I mean, I think we've reached we move it up to a level because of the increased activities and everything that we're working on and that you've heard about but I do expect them to remain fairly high.
ASP for the rest of the year.
Great. Thank you.
And thank you.
Thank you.
Our next question comes from Cody Acree with benchmark capital. Please proceed with your question.
Hello, and thank you guys and congratulations and thanks for taking my questions.
And maybe.
And get back to the prior question and I guess from the initial question.
Where are and Dylan chime in.
Could you talk maybe at a very base level.
And if you're looking at eight foundries that are total to produce your saw filters.
Using a.
Our standard saw process, knowing the limitations that your competitors or the industry or your customer water has had with saw reaching that five.
Five to seven gigahertz bandwidth with I'm, sorry about frequency range with the wide bandwidth.
What is it that you're doing inherently that is allowing you to get to that bandwidth with the salt structure and not having to use that vertical propagation that.
Your competitors are using.
Yeah.
Well first and foremost Cody, let me congratulate you and your new position and thank you for the question.
That is right deep and the heart of the technical aspect of the technology and clearly I'm sure you want to hear from me on this but.
I'm going to turn that question over to Dylan and so we can talk about the technical aspects and address your question Don Yeah, and I think you nailed it on the scaling issue was saw the reason saw filters have not scaled up these higher frequencies as just the dimensions get too small and it becomes not manufacturer will.
What's different is we bill looks like a saw filter, but it is truly a bulk acoustic wave filter and so we use the same price.
Processing approaches and saw realizable, who acoustic wave filter, but our geometries are much larger and are easily within the mainstream production capabilities of the soft fab. So we get the car.
Cost structure benefits and ease of processing of saw but then we're getting and the performance benefit of Bob and on top of it with the materials that we're choosing we get larger bandwidth than the existing and <unk> technologies.
Does that answer your question, Yeah that helps a lot. Thank you.
And then just went GA Marty I guess, you gave us your units that your customers shipped this quarter.
And how straightforward how linear is the relationship between your revenue and that shipment and you do the straight math, it's about seven cents per.
Is that the right way to think about things going forward.
No actually I mean, as we sit back and look at the devices that continue to get added to that portfolio of devices from our legacy contracts. We're actually seeing some of our later contracts start to move forward into manufacturing, which will have higher asp's and.
Have the potential to deliver.
And a higher dollars to us obviously I stick with the guidance that Marty gave you.
From a quarter over quarter perspective, and what to expect for the year, but I think the advantage. We're seeing is as we continue to go through the process. We are seeing some of the newer devices.
<unk> to go through the qualification process and we're optimistic that they will get into the marketplace here and the second second third and fourth quarters.
I guess just further on that then I guess the level of visibility that you have with those.
Is it in your billings today, and just conversations with your customers because you're talking about a significant improvement in 'twenty one yet to date. Your first half is going to be kind of flattish a little bit better.
And with with last year, so that is relying heavily on the second half and your second half last year was pretty strong with that are that large milestone payments.
Yeah, that's a great question and great point, and Cody, obviously, and we highlighted just a moment ago, we expect next.
The next opportunity for expanding the footprint with our tier one.
And kind of flagship customer that will come with it additional.
And if we're successful we will come with it additional prepayments some of which will get recognized as revenue and most of which will get recognized as billings, so greater cash component into.
And to the front and if we're successful and then obviously if we're successful attracting.
And second third and fourth ex parte customer for non mobile applications. Our business model is going to continue down the path of looking for prepaid royalties. So we would expect that also will be part of that car.
Complement that would be contributing to not only.
Billings and cash, but also too early revenue recognition for those devices does that makes sense.
It does it does and I guess George.
Just the last one I'm sorry to get along here, but you mentioned there.
<unk> and are targeting the prepaid.
And given your cash balance today are the prepays as important as they were maybe previously.
And are you, taking and unnecessary discount to get those over the long run.
Well I think what you would you know.
What I would tell you.
And obviously, there's first mover advantages for anybody to get in first.
And you would expect that we would be focused on what the value of X bar brings to not only our current customers, but future customers on a go forward basis, and the fact that we're in a much better position now because we have proven the technology and we are demonstrating these devices to new.
Customers and not just asking them to bet on the com and it will be as good as we say, it's going to be puts us in a much better negotiating position clear.
Clearly the tail will be and the team do we are we able to sell those next generation devices for 225 million per device on a prepaid royalty basis will it be something larger than that or will there be some blend of prepaid and follow on royalty payments.
Based on execution and delivery of devices that are prepped and ready to go into the market.
We're looking at all of these.
And we're keenly focused on it and the good news is we're in much better position day, because X bar is much closer to a commercially viable solution today than it was two years ago. When we signed net initial agreement.
Sure well. Thank you guys very much appreciate everyone.
Hello, and thank you, thanks, and congrats again.
Thank you.
Our next question comes from Anthony Stoss with Craig Hallum. Please proceed with your question.
Hey, guys my congrats as well and the continued progress George I'm curious on the non mobile Wi Fi opportunity.
How many different customers and you're currently sampling to maybe speak to the size of the pipeline you have towards the second half of the year is there any chance of production.
Production and revenue later on this year and then as a follow up I'm curious if the eight different foundries that you have is that really.
Speeding up things and that's why though.
A bunch of traction all of a sudden and the Wifi side.
And a great great series of questions, let's start with the last one first obviously the traction we've gotten with a multitude of different foundries that clearly allows us to pick and choose given their different capabilities for the different application set and ultimately for our customers who they are.
Like to partner with obviously some of those boundaries are part of the vertically integrated.
Ecosystem and some of those are Standalone foundries. The good news is many of the relationships. We have now go back six years.
And from some of those early <unk> and <unk> devices that we actually designed and developed so on the on the foundry front, we feel really good that when we come on to a new customer we can sit back and have a great deal of confidence to say hey, we can transfer expert technology to you either.
Via one of our third party foundries or directly into their ecosystem very very quickly and that's kind of the first part.
When it comes to kind of the second question clearly there is a.
Small handful of customers that I think anyone would love to have and Theyre goody bag and some of which are already engaged.
Many of whom have got something in their own portfolio that theyre looking to see if they can make it work and we're coming in and giving them and alternative that in most cases, guys are saying hey, this looks like a very viable alternative and give us much greater and a greater extended performance portfolio.
So I would tell you that today I'd feel comfortable saying that we are actively engaged with 80% of the players and the tier one community.
And you know and we expect it will get at least one maybe two or perhaps even three.
To engage with us and the long term the.
The good news is we take new players down and bring bring new ones up into the kind of explore export portfolio it kind of gets.
<unk> effect, there, obviously nobody wants to be left out and have the only aluminum nitride based solution that just doesn't need to really support the application requirements and I think what we're seeing right. Now is these early entrants leveraging those hybrid based solutions just don't.
Form two.
And to expectation for the long term and that just creates greater opportunity force.
Thanks for that George and I thought.
I would also say that we're also.
Engaged with the Oems not because we hope to sell to them directly because obviously, we've noted that and the path that is not our business model, but engaged with them to make sure that we completely understand the challenges that they have.
And what they're looking for from the device manufacturers and I think thats, just making the overall ecosystem type relationship much much better.
I'm, sorry, I cut you off.
No no no that's helpful detail for share and I'm curious as time has progressed do you think George or what are you hearing from either your largest RF customer or potential customers has it is at the speed of your I S and software platform or is it the ultra wide bandwidth that is really the most important factor to them or potentially both.
And I'm curious if it's changed along the way.
Well, it's interesting and I'm going to give you the layman's version of it and then I'll, let Dylan chime in.
Clearly.
When we got out.
And started first in the early day showing some of these early X bar filters with wide bandwidth I think everybody went and while that's.
That's really interesting, but can anybody build them.
Now we've been down that path, we've shown that we can build it on a multitude of different foundries, our largest customer has validated did pay this another big chunk of cash and now were moving ahead into the mass commercialization commercialization phase of their program I think all of that is good but I think one of the things that has been key.
E L.
Everybody understands the challenges that the filter manufacturers have designing at these higher frequencies and wide bandwidth and these designs are very very complex.
Looking at you know.
And the spurious performance of these types of devices being able to model. It efficiently unless you can model and efficiently you can't solve these problems.
And pack type of.
Type of implementation approach. These <unk> tools that we have I think you know.
Two years ago, when we were talking about ISN people went yeah, yeah, Yeah, I've got Com I've got some of these other tools it kind of works for us, but as we move up and frequency I think were really seeing that guys are standing up and taking notice because we can identify issues, we can identify what's happening and the fabrication process.
And we can turnaround and resolve them very very quickly and that's all ISN base doing.
Keeping the bird analogy going it's kind of a chicken and the egg problem that we did I S N to even recognize the opportunity to have the ex parte breakthrough that was really the key to give us the insight and then certainly showing extra hardware gets the industry very excited because it's you're seeing is believing.
And this sort of this bandwidth and and all acoustic solution is quite surprising, but then there's always different requirements for products by geographic region by customer and everyone has their own approach to solving the problems and then you get and the speed argument.
Where I really do believe as tour state and the script that the we have a very unique capability to do the full <unk> simulations of these filters.
Which gives us a very accurate results and ultimately.
Ultimately cut cycles of learning and you'll get to a faster sample.
Got it best of luck guys. Thank you.
Thank you.
Thank you.
And as a reminder to our audience. If you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Rajiv Gill with Needham and company. Please proceed with your question.
Yes, thanks for taking my questions and congrats as well and all the movement and the momentum that's going on in the business.
And Marty just a quick question you talked about kind of the.
50 per cent of the prepaid royalties.
I'm starting to kind of hit the model.
And that you.
Do you expect.
And those prepaid revenue depending on the revenue recognition.
Kind of draw.
Drive the growth.
Our growth this year could you just from minus in terms of the revenue recognition.
Commission and the timing of that.
And then.
Follow up.
You mentioned and you kind of turning to the commercialization.
And of the agreement with your top customer.
Can you maybe describe a little bit about kind of what the activity has been like I know you had seen a lot of momentum and the and the non mobile market.
But how do we think about.
That opportunity as we kind of progress through the year and going into 2020 two.
First let me handle the revenue recognition. It is what drives it is RF on these prepaid deals is our activity on a contract. So we get the prepaid in and then we start working on the project and recognize revenue from that it depends on the length of the contract I think we're getting better at these thing.
Things were getting smarter, so they can be shorter times.
To wrap them up so there's some acceleration there, but it really is hey, we've got you know you got the one in place we've talked about we've got more that we're working on and that's what's going to drive our anticipated growth for the rest of the year volume.
Going forward, it's all but where it's all dependent on getting getting more contracts.
The other the other question you had was the commercialization.
And of the current contracts. So let me let me address that just to make sure I think I understood. The question Rajeev I mean, the as we look at the commercial and commercialization phase for our current customer, but they are focused on now is getting the manufacturing capability ramped up in <unk>.
<unk> and starting being and are positioned to sample those first four devices to their customers and gaining traction with them and the marketplace commercializing it for them now for us that does not change the revenue component because those first four devices.
Fixed revenue component, there and $9 million to two five millions per device what it does do for us is that the greater value that they see and their customer base.
These devices being recognized for their performance gets them more excited to do not only the next for the next eight the next 12. The next 16 devices with us and as we've historically said 12 devices at the current ESP cash.
Cash flows this business and if we increase the price at some level, whether it would be 225 to three or two 5% to some number larger than that it reduces the total number of devices to cash flow of the business and what we've talked about with that one customer alone we believe they're worth.
$100 million annually at full volume with full recognition. They are one customer we believe that opportunity exists with all seven of the tier ones will we get all seven absolutely not.
Should we get our unfair share well, that's our job right. So that's what we're focused on and we won't be satisfied until we do so I think what we're seeing here is with these devices going through to the commercialization phase with that tier one customer. It also I mean, nobody nobody is.
And out there and the marketplace Oems talk.
All of their all their salespeople talk all their distributors talk the entire environment starts a groundswell of opportunity and the more activity our customers have with their customers the greater activity, we get with other idms in this space. So we think there is commercialization.
<unk> phases massive from an opportunity generator for us not only with them, but with everybody else and we're seeing that activity already which is why we are already sampling those wi.
Wi Fi based devices to the other idms and the space.
Help.
Yes.
Very helpful.
And Oh dealing with with the expansion of the number of bands and filter requirements.
Our non mobile devices.
And non mobile market.
Estimated to be kind of as large as the mobile mobile market.
Wanted to get your thoughts on that I know you're.
Very very keen on focusing on that market.
And with Wi Fi 660.
And then currently I think last quarter, you were working to take the revenue revenue realization to below 20 months from the beginning of the design process, which was previously around 24 to 36 months.
So I wanted to go and kind of an updated view on how you're thinking about revenue realization and taking it below 20 months and thanks again.
Maybe I'll tackle the market size piece of it I think what's so interesting about Wi Fi is that until this generation of Wi Fi six none of the solutions really relied on acoustic filters.
<unk> technology, and ceramic filters and as the emerging interference problems that are really mandating. The performance that you can get it and in acoustic solution. So it's a greenfield space for acoustics.
And with the elimination of wires and the home and the office Youre seeing and access points and CPE devices go from one or two antenna and it's up to eight.
One it's a new market for <unk> and again, the multiplication factors, which is creating really high unit volumes and getting it.
And the same order of magnitude at least.
And as handset filters.
And on the revenue side recognition and I want to pass that went back to George.
Yes, I think what you're talking about here Rajeev is the fact that when we look at our original and customer engagement strategy and.
And we talked about how long it would take to convert from the time, we engaged to the time we saw revenues.
And he was 24 to 36 months and Thats because when we were doing these early engagements.
Beasley went to customers and said Hey, we have an idea. We think we can do a band three filter for you. If you Trust US we can engage with you can sign a contract with us right.
Engagement check and then we will develop a filter against your process you can try it and see if it's good enough and if it is you can take it and take it to your customers.
And go through that engagement process and that whole end to end process was 24 to 36 months.
Different here and by the way in that timeframe. None of that was based on us doing a validation model and a fab ourselves with our own designed what we do with X bar everything we've done so far we've gone we've designed it we fabricated we tested it and I and fabricated package tested it and take.
And a tested product to a customer and said here's what we want to build for you in your Fabs and so it shortens that engagement cycle and shortens that development cycle, because they don't have to learn how to do that.
And I believe what we're seeing right now we're taking minimally.
And a 12 months off of it probably it.
18 to 24 month timeframe now down from 24 to 36 months.
And I think that will get shorter.
<unk> guys get into the market with X bar and we're doing we're ladder and on other X bar based devices.
Because we'll have that capability already built into their manufacturing flow will it get less than 12 months now won't get less than 12 months it'll be still and the 12 months to 20 months from 2008, and 12 months to 24 month phase depending on what the and target market is obviously, if youre going into mobile a lot more goes into the reliability.
And of those types of devices not only at the at the IBM, but also with the OEM when Youre talking CPE devices consumer electronics kind of a lower threshold of.
Pain as it relates to reliability because it was designed to turn every 90 days so.
And they tend to not be.
<unk>.
Life mission critical types of devices as it were.
So I think we will still see that the lifecycle will still be and the 18 to 24 month timeframe, but obviously massive reduction.
In the time to get a product from the time of signing a contract into the marketplace, but probably even more important the engagement cycle and the front end and sugar.
And so theres not a trust me, we think we can do it.
Hey, Here's a product go try it and come back and tell us what you think.
Okay.
Does that help.
Yes that makes total sense I appreciate all the insight. Thank you.
Yeah.
Thank you.
And there are no further questions at this time I would like to turn the floor back to George Holmes for any closing remarks.
Great. Thank you operator.
Everyone on today's call, we'd like to thank you again for joining US today resident continues revolutionize the RF front end market with its export technology, and we look forward and keeping you up to date on our continued progress on future calls. Thank you. Thank you again and have a great day.
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