Resonant Inc. (RESN) CEO George Holmes on Q4 2019 Results - Earnings Call Transcript

Resonant Inc. (NASDAQ:RESN) Q4 2019 Earnings Conference Call March 10, 2020 4:30 PM ET

Company Participants

Moriah Shilton - Senior Vice President, LHA Investor Relations

George Holmes - Chairman & Chief Executive Officer

Marty McDermut - Chief Financial Officer

Conference Call Participants

Cody Acree - Drexel Hamilton

Tore Svanberg - Stifel

Raji Gill - Needham & Company

Kevin Dede - H.C. Wainwright

Operator

Greetings, and welcome to the Resonant Fourth Quarter and Full-Year 2019 Corporate Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I'd now like to turn the conference over to Moriah Shilton, Senior Vice President of LHA Investor Relations, Resonant's Investor Relations firm. Thank you. You may begin.

Moriah Shilton

Thank you, operator. Please note, we will be using a presentation during today's call, which is accessible on the Events page of Resonant's IR website. If you are with us today via the phone. Please go to the Events page to either view or download the presentation to follow along.

Turning to Slide 2. Earlier this afternoon, Resonant released financial results for the fourth quarter and full-year 2019. The earnings release that accompanies this call is available on the Investors section of the company's website at www.ir.resonant.com.

Additionally, some of the information in this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression 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, 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. Several factors that could cause or contribute to such differences are described in detail in Resonant's most recent Form 10-Q and 10-K and subsequent filings with the SEC.

These forward-looking statements speak only as of the date of this call and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call.

With that, it is my pleasure to turn the call over to the Chairman and CEO of Resonant, George Holmes.

George Holmes

Thanks, Moriah. Good afternoon, and thank you for joining today's call. Joining me today is Marty McDermut, our CFO. Turning to Slide 3. In today's call, I will discuss Resonant’s achievements from 2019, expectations for 2020 and beyond. Before I do, I'd like to welcome the notable number of new investors who have joined us since our last update. We sincerely appreciate your interest and investment in Resonant and look forward to working with you in the future. Also, let me welcome Dylan Kelly to our executive team as Chief Operating Officer.

I'll give you little more details on Dylan later. To facilitate today's call, we will be using our new investor presentation to which we have added a few slides to specifically address the topics of this call. You can access the presentation in the IR section of the company's website. As a refresher and for new participants, Resonant resolves critical RF problems by providing differentiated solutions for the largest segment of the RF front-end market. We leverage our proprietary software platform, our deep portfolio of intellectual property and our seasoned team to deliver solutions that our partners and customers could not do themselves with greater efficiency and at lower cost and with a reduced time to market.

Turning to Slide 4, so how do we do this? We believe Resonant has developed unparalleled and disruptive technology. A revolutionary and proprietary Infinite Synthesized Network or ISN software platform enables the development of high performance, low cost designs, and in many cases, resulting in as much as three to five times faster design development. Most notably, our novel and innovative XBAR bulk acoustic wave or BAW resonator structures are targeting the exacting requirements of 5G and Wi-Fi 6. On the business front, we have a diversified growth platform with licensing revenue streams from both our ISN enabled 4G filter solutions and breakout royalty growth from our XBAR solutions.

Our future includes other high-frequency enabled 5G products which I'll discuss in more detail later in the call. Our foundry program directly enables new entrants to rapidly address the changing needs of the China market. Turning to Slide 5, now let's discuss 2019 which set the stage with huge successes based on our technology and business model. On the technology front, we demonstrated the first working XBAR 5G filters with 10% bandwidth and high-power handling at Mobile World Congress in 2019.

We signed a strategic investment and commercial agreement totaling $16 million, with the world's largest RF filter manufacturer, targeting production of mobile phone filters in 2021 and 2022 timeframe. This agreement was the first of what we expect will be many license agreements with prepaid royalties. We're targeting to deliver the first non-mobile samples based on XBAR in the first half of this year.

On the business front, in the first half of 2019, our customers shipped over 1.5 million units. In just the third quarter of 2019, they again shipped over 1.5 million units. And in the fourth quarter, we met our expectation with over 2.25 million units, bringing the total units shipped to-date to over 35 million units since we started in 2016.

In addition, in February, we significantly strengthened our cash position through a public offering yielding $26.3 million in net proceeds. As we entered 2020, COVID-19 or as it's more commonly known the Coronavirus has had a clear impact on the overall market where many of our customers and partners have already lowered their first half forecast. One of our peers even reduced their quarterly forecast as much as 50%.

At Resonant, we continue to expect to see revenues grow quarter-over-quarter from Q4 2019 to Q1 2020 more on that later from Marty. We're using this time of market uncertainty to evaluate our existing customers, focusing the company on companies resources on our strongest customers, including those with pre-payments, as well as transitioning our foundry customers to our new Tier-1 foundry partners in China with lower costs to help them make them more competitive.

Turning to Slide 6, I'd like to spend a little time on the cornerstone that fuels our opportunities in growth. Our Infinite Synthesized Network or ISN software platform. As I mentioned earlier revolutionizes filter design as it enables low cost filter fabrication with superior performance and faster time to market. To the best of our knowledge, ISN is the only RF filter design platform that delivers an integrated end-to-end multi-dimensional acoustic and electromagnetic modeling capability that allows designers to innovate quickly and virtually in real time.

We do this by simulation versus the industry standard iteration process that can and does take multiple turns, which is disruptive and costly to the manufacturing process and extends development time. Most importantly, ISN delivers, designs across the entire wireless spectrum.

Turning to Slide 7, let me highlight that it is our game changing XBAR technology that will be the platform for our future, building on the engagement learnings and intellectual property from the past. XBAR is our revolutionary bulk acoustic wave or BAW resonator structure, which was designed with ISN and is produced using standard manufacturing processes which means it leverages standard SAW and MEMS manufacturing processes to deliver a BAW structure, which is a novel low cost approach for meeting these new technology requirements.

It is important to highlight that XBAR was designed specifically to meet the exacting standards of 5G and Wi-Fi coexistence in particular, the demand for bandwidth and high-power. XBAR has shown the ability to allow cellular and Wi-Fi networks in adjacent frequency bands to mitigate interference problems. Allow me to present an analogy we've used in the past to illustrate the coexistence issues. It's like driving down the highway.

Filters are what keep cars or signals in the right lanes or in the right data path. 5G creates new challenges as neighboring cars i.e. Wi-Fi is right next to you crowding your lane and sometimes even entering your lane, stopping your path or even causing a crash or collision. Resonant’s XBAR filters are simply better barriers between the lanes of the highway, keeping those adjacent cars or signals where they're supposed to be. And let's not forget that XBAR was built on our foundational intellectual property over 200 patents with greater than 50 patents specifically focused on 5G.

Turning to Slide 8, we have multiple diversified revenue streams targeting high growth markets of both 4G and 5G. We first began generating licensing revenue on a per unit basis for custom filter designs. We expanded our offering to include filter IP standard library based designs available through our foundry program to shorten time-to-market.

In 2019, we added prepaid royalties to our cutting edge XBAR technologies. And in 2020, we added license agreements targeting the China market for existing 4G applications that included pre-pay royalties, and additional royalties once minimum unit volumes are exceeded. Finally, we expect to get white label sales from our foundry supply chain through engagements that could start as soon as later in 2020.

Turning to Slide 9, let's discuss what everyone is focused on 5G, an increased number of filters, more complex filters are required for 5G's high frequencies. 4G phones currently require about 60 filters, whereas 5G phones are expected to require more than 100 filters. Our proprietary IDT-membrane resonator technology enables our XBAR family of solutions. XBAR has already been contracted by the world's largest RF filter manufacturer for use in mobile. Additionally, we’re engaged with other industry leaders for high bandwidth, high power 5G applications for a wide variety of industries outside of mobile such as Wi-Fi, CPE and infrastructure. We’re targeting delivery of these first non-mobile samples based on our XBAR technology in the first half of this year.

Turning to Slide 10, the first wave of 5G is here. The focus of initial deployment is to drive down carriers cost of data delivery, leveraging reformed 4G with a move to higher frequency and higher bandwidth in the mid-band, which is 2.5 to 4.2 gigahertz in the U.S. and up to five gigahertz globally, starting in 2021. This timing puts our agreement with the world's largest filter manufacturer in the sweet spot, as they are poised to enter the market with our technology right as the market takes off.

And with our recently announced five gigahertz and six gigahertz Wi-Fi Band-Pass filters, we are positioned to deliver the next round of Tier-1 engagements. For those of you who want to learn more, we have published a white paper that goes into further detail that can be found on our website.

Turning to Slide 11, let's talk about the 4G market, which is the dominant filter market today. It's not going away anytime soon, as 4G filters will be reformed for 5G technology, and the 4G network will provide a backstop for 5G coverage holes. As the market continues to commoditize, we look at ways to further improve time-to-market and help our partners compete more effectively. As a result, we have recently partnered with a Tier-1 Chinese foundry, leveraging our filter IP standard library and capitalizing on our ISN tools and services to deliver solutions in a timely and cost effective manner, specifically targeting the China market.

Prepaid royalties are expected to be dominant in our revenue stream for 2020 complemented by royalty unit volumes from existing contracts. Turning to Slide 12, as noted, 4G is expected to remain with us for many years, ASPs have declined rapidly, since the initiation of many of our agreements for filter designs, and specifications continue to get more challenging. As a result, there has been more rapid shift in customer interest to products based on our filter IP standard library that capitalize on the strength of our ISN platform and our ability to design standard products that can be easily ported between foundries.

We already have initial contract signed with a Tier-1 component and foundry player, which include prepaid royalties, while our customers demand throughout 2019 had a solid trajectory in 2020 we’re cautiously optimistic given the current state of the global market that we will continue to see growth in this throughout 2020. We will focus on performing customers to ensure we continue to get the value out of our investments.

Turning to Slide 13, our foundry program provides our current fabless customers alternative access to a stable and experienced supply chain for the 4G market. We signed the Tier-1 Chinese foundry partner in January of 2020, complementing our existing Chinese foundry relationships. Since foundries have the potential to enable market participants at a scale to compete with today's dominant suppliers, and have the potential to further reduce the costs of the RF front-end for existing technologies.

Turning to Slide 14, I'd like to highlight two achievements that clearly show our noticeable traction in the market and accelerating momentum. First in 2019, the world's largest RF filter manufacturer entered into a $9 million commercial agreement with us for the rights to develop multiple designs using our XBAR technology targeting the mobile market. Upon signing the commercial agreement, they also made a $7 million strategic investment in us. The second achievement occurred in January of 2021 when a Tier-1 Chinese foundry sign multiple license agreements for prepaid royalties and upfront payments with the potential for additional royalties or minimum volumes were exceeded. This customer also licensed our Process Monitoring Tool or PMTX to aid in its manufacturing processes.

Turning to Slide 15, before I turn the call over to Marty, I’d like to discuss our expanded management team. In December of 2019, we announced that Dylan Kelly joined Resonant and a newly created Chief Operating Officer role. He is responsible for Engineering, Product Marketing and operations functions. His extensive semiconductor business expertise and professional network across a broad range of areas including smartphones, wireless infrastructure and test and measurement are natural fit for this new role. Now I'd like to turn the call over to Marty for a discussion of our financials and how Resonant is capitalized and positioned to deliver for shareholders. Marty?

Marty McDermut

Thank you, George and good afternoon everyone. Turning to Slide 16, which is using a new format to assist our investors with keeping track of two of our most important metrics, cash and customer progress. The amounts I talk about are GAAP except where noted. For the fourth quarter of 2019 as compared to the third quarter of 2019, billings were $100,000 as compared to $2 million last quarter. Revenues totaled $459,000 compared to $79,000 last quarter.

At the end of the fourth quarter, deferred revenues totaled $1.7 million. We estimate that amount will be recognized as

revenue in the coming three quarters. Research and development expenses of $5.2 million up from $4.6 million last quarter is due to expanded design activities on our ISN platform and XBAR technology.

Sales, marketing and administration expenses of $3.1 million up slightly from $3 million last quarter. Operating loss of $7.9 million compared to an operating loss of $7.5 million last quarter. Net loss of $7.8 million or a loss of $0.24 per share, based on 32.7 million weighted average shares outstanding compared to a net loss of $7.4 million or a net loss of $0.26 per share based on 29.2 million weighted average shares outstanding for the third quarter of 2019.

Non-GAAP adjusted negative EBITDA of $6 million or negative $0.18 per share compared to a negative $5.9 million or negative $0.20 per share last quarter. For the full-year 2019 as compared to 2018, revenues totaled $735,000 compared to $524,000 in 2018. Research and development expenses of $18.9 million, up from $14.3 million in 2018. It's primarily due to expanded design activities on our ISN platform, XBAR technology and filter design development.

Sales, marketing and administration expenses of $12 million, up from $11.5 million in 2018 is due to higher public company related expenses and compensation expenses. Operating loss of $30.2 million, compared to an operating loss of $25.3 million in 2018. Net loss of $29.9 million or a loss of $1.02 per share based on 29.4 million weighted average shares outstanding, compared to a net loss of $24.8 million or net loss of $0.98 per share based on 25.3 million weighted average shares outstanding for 2018.

Non-GAAP adjusted negative EBITDA of $23.4 million, or negative $0.80 per share, compared to negative $19.2 million or negative $0.76 per share for 2018. We had $10.7 million cash at the end of 2019 and raised approximately $28.8 million in

gross proceeds, $26.3 million in net proceeds from a public offering in February 2020. With the opportunities we see, we believe this positions us well to be cash flow breakeven on a quarterly basis by the end of the fourth quarter 2021. We ended 2019 with a total of 77 employees, 20 of whom have a PH.D. and 57 of whom are part of the technical staff.

Finally, as George mentioned, the Coronavirus is causing headwinds. But even in consideration of that we believe revenues in the first quarter of 2020 will exceed revenues from the fourth quarter of 2019. GAAP operating expenses for the first quarter of 2020 will be comparable to the fourth quarter of 2019. I'd now like to turn the call back to George.

George Holmes

Thank you, Marty. Turning to Slide 17, Resonant has never been in a better position to deliver growth for its customers, employees and shareholders. We have a strong balance sheet buoyed by the recent proceeds from our February 2020 public offering. We're targeting the largest segment of the rapidly growing market RF filters, which are expected to nearly double to $28 billion by 2025. We have a robust technology and IP portfolio of over 200 patents filed or issued with more than 50 targeted for high frequency 5G devices. And we've demonstrated and contracted XBAR base filter designs, the first RF filters that can meet the high bandwidth requirements from 5G, our partnership with the world's largest RF filter manufacturer and strong traction with our other existing customers are proven validation of our technology.

And our foundry program will further expand our customer base by allowing component suppliers ease of entry at low cost.

Leaving all this is our proven management team. I'd now like to turn the call over to the operator for questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We’re now conducting a question-and-answer session. Joining us today for questions are George Holmes, CEO, Marty McDermut, CFO and Dylan Kelly, COO. [Operator Instructions] Our first question today is coming from Cody Acree from Drexel Hamilton. Your line is now live.

Cody Acree

Thanks, guys for taking my question.

George Holmes

Hi, Cody.

Cody Acree

Thanks, appreciate it. Good. So Marty, thanks for the guidance into Q1. Can you just talk a little bit about the visibility there, is that transition from your prepaids? How much of that is going to be from prepaid royalties that you have visibility to how much that is from deferred revenue? And then what are you expecting your unit volume variability to be?

Marty McDermut

Yes, Cody, all our revenue is really from licensing. So we're looking at it as one group, it's coming from the royalty

model for contracts that we have out there and we're getting on the current prepaid contracts that we have in-house. So yes, we’ve got better visibility than we did three months ago because we brought on the contracts in China, we don't want our deferred revenue. So things are looking, it's easier for me to give you a little bit more guidance, but I'm not going to go farther out.

Cody Acree

Sure. And I guess just George in your conversations with customers. Are you having, are you seeing material changes in maybe your partner's availability, just personnel or designers that's slowing down projects you're working on?

George Holmes

Given what's happening in the overall market, right?

Cody Acree

Yes, just given what’s happening with Corona?

George Holmes

I don't -- I think what we're seeing right now is doing more video conferences, right. I mean we run our business that way. Fortunately, we're used to most of our customers are in Asia already. So we're used to having daily conference calls with them. Clearly, we've got a new big customer and they have been making trips up to see us very regularly. But I think pretty much all the big companies now are kind of going to, hey let’s put unnecessary travel on hold and leverage the video conferencing. But I haven’t seen that would change activity one bit, and that activity quarter-over-quarter since we did the announcement of the Tier-1 deal has continued to go up and continue to go up with all majors as well.

Cody Acree

Understood, thank you very much.

Operator

Thank you. Our next question is coming from Tore Svanberg from Stifel. Your line is now live.

Tore Svanberg

Yes, thank you and congratulations.

George Holmes

Hey, Tore.

Tore Svanberg

Yes, hi and congratulations on all the different milestones here in the last few months. Maybe I can start with your recent contract with the large filter manufacturer based on your slide on Page 10, it looks like their critical mass in 5G is going to kind of be in the 2021 to 2023 timeframe. So I'm just wondering if you could comment a little bit on all the different designs that you're working with them on right now because clearly we're only about seven, eight months from 2021?

George Holmes

Yes, that’s a great question. I'm going to ask Dylan to chime in here in a second. I mean, obviously, we announced, when we announced the contract that we only had identified a couple of bands that we were working on, 77 and 79 with them. And clearly, we've got a couple more to get after. But I mean, you want to give a quick update on kind of where we have macro level?

Dylan Kelly

Yes, I think it goes back to this slide in our deck already addressed the second wave of 5G in the 2022, 2023 timeframe with the frequency bands in the three to five gigahertz range. That continues to be the focus and I think those continue to be the time windows. And there's definitely a lot of urgency around delivering those on time. Definitely want to see them have to watch them.

George Holmes

Yes, I think the other thing that we would see here, right is those designs for those phones will be coming out with those timeframes. They're happening this year and next year and so our engagement is very, very timely. And we expect, as we noted in the call that we're going to be hitting stride with them right at the time volumes start to ramp.

Tore Svanberg

That's very helpful. And moving on to XBAR outside of mobile, you talked about some possible engagements here in the first half of the year in Wi-Fi, or Wi-Fi 6 specifically. Could you just elaborate a little bit on that? Is there a specific region or application that you're seeing some of that traction?

George Holmes

My goodness, Tore, you allowed me to triple these questions over to Dylan. We did a webinar about two weeks ago because, as we all know, no one traveled to Barcelona this year. And what we were highlighting in that webinar is the new technologies that we've developed specifically for Wi-Fi both in the five and six gigahertz range. Hi, Dylan, do you want to expand on kind of where we’re at with those and kind of where we see they fit competitively against what's happening out there in the marketplace?

Dylan Kelly

Yes, we saw the encroachment coming from N79, following up against the five gigahertz band really mandating the need for acoustic filter technology. And Broadcom also recently announced support going into the six gigahertz band for Wi-Fi, which again that's the need for high-performance filtering. So both of those things really create an urgency around Wi-Fi as well. And then in that webinar, we've demonstrated our latest result of measured six gigahertz Wi-Fi filters with more than a gigahertz of bandwidth or 18%.

So we think that we’re in a great position there as we already have better samples, we're engaged with the Tier-1s throughout the first half of this year.

Tore Svanberg

Really helpful. Just one last question on your recent foundry partnership engagement. You talked about some getting some additional royalties as you get as you meet certain unit milestones. I know these are obviously very uncertain times, but should we assume that maybe those unit milestones get met sometime in the second half of this year?

George Holmes

Yes, we wouldn’t expect those to get met this year. We expect prepays take effect this year. So we'll see the prepays for this year affecting overall revenues. And as Marty does his magic to allow us to recognize those prepays, we will see those starting to hit the revenue line. I think what you'll see is that the opportunity for those to go through their minimum volume hurdles to happen in 2021, I think one of the things that we can tell you that in light of everything that's happening in China, you would expect these things to be pushed out. We're actually seeing a pull-in of the activity with this major foundry partner, which is exciting giving everything that's going on in the market.

Tore Svanberg

Sounds good. Congratulations again.

George Holmes

Okay, thank you very much.

Operator

Thank you. [Operator Instructions] Our next question is coming from Raji Gill from Needham & Company. Your line is now live.

Raji Gill

Yes, thanks. Just a question on the Tier-1 foundry in China, wondering if you could kind of elaborate further on what was the motivation of the foundry to do the deal with you. What kind of value you're bringing to the table and how do you see that ramping throughout the year?

George Holmes

That's a great question. And it's our core value prop, right. It is all about the fact that we have the ability to design faster, better cheaper than anyone else. And we can couple with their capabilities that actually enable them to actually go out to the market in a very broad way. I mean obviously China Inc. is very focused on supplying products indigenously from their own manufacturers.

And we have a number of foundry partners in China already all moving very aggressively to get into the marketplace and supply the big Chinese handset manufacturers. This is an even larger foundry relationship. It's one we're very excited about. And they're moving at light speed and they're moving at light speed in large part because they're probably the best funded large foundry in China today.

So we're very excited about them. They are, as I said moving faster than we anticipated. They're about a quarter ahead. And that's even after the Chinese New Year shut down and the early Coronavirus shut down that they had, which lasted in total about six, seven weeks. So excited to see they’re moving ahead, excited we’re prioritizing this as their investments. And I think that we're really going to see this to be a tremendous opportunity for us. I think the other thing you've got to keep in mind is that we're focused -- the focus of this relationship is on some three gigahertz and in that area, that's the commoditized segment of the marketplace and having a foundry partner working directly with us to take products into the market is going to make them very well positioned to capture share.

And our model with the agreement we had is based on a 5% share. They hit the hurdle rate and start kicking back into paying as a per unit royalty, we expect these guys to blow through 10% easily and could easily be 30%, 40%, 50% market share supplier in the Chinese market. Time will tell, it's out there in the future. It's a tremendous opportunity. And if you look at the overall market, then what is about 40% of the market in China. So that's a really significant opportunity for us.

Raji Gill

And, Marty, you talked about this year, revenue is going to be driven by prepaid revenue and other things. Can we talk about kind of the cadence of the prepaid revenue kind of think about that on a quarter-by-quarter basis. How does that flow through?

George Holmes

It's a great try, we aren’t giving guidance on a quarter-to-quarter basis. What I can tell you it is going to happen. We’re not going to try to predict it too far out there in the future. As Marty said, he's going to stay pretty close to build on that. There's too much uncertainly in the overall market, but the fact that we've got prepays gives us a great deal of assurance. We’re not no longer having to help our customers actually get into the market. We know that we're going to get paid for our hard work. But the real thing we're focused on Raji is really we sit there and look at what's happening for us. It's all about what happens next. And we're focusing on executing on our XBAR solutions, focusing on what's happening with 5G, the enablement that we're doing in China, Inc. is just crazy. And so that's really where you will see us spend a lot of time and energy. The large part is under the money is going to be for the long-haul over the next 10 to 15 years.

Raji Gill

Thank you.

Operator

Thank you. Your next question is a follow-up from Cody Acree from Drexel Hamilton. Your line is now live.

Cody Acree

Yes, thank you.

George Holmes

Thanks Cody.

Cody Acree

Hey, thanks for getting back in here. Marty, I know you've had a difficult time setting the parameters around how those prepaids going to be able to get recognized to revenue, have you been able to set some firm benchmarks that will help you to clarify things going forward?

Marty McDermut

Yes, I think, yes it’s complex. It wasn't -- I mean, it was after looking at it now how easy it was. I think as those roll in, we get more of them or there's more momentum will become smoother. And you've got some indications now of what the first quarter revenue was, what's our backlog, layer some things on top and I think that's how to look at it is not, it's not like some other royalty model where there's huge variations. I think ours will be because of the prepaid model will be worth moved.

Cody Acree

Great. And what are your expectations on spending for the year R&D and SG&A guidance?

Marty McDermut

We haven't done it for the year. We've definitely given it for the first quarter. The fourth, the XBAR, the efforts that we're spending on the XBAR Contract has driven the cost up, I expect the first quarter ought to be about the same and then we're looking, we've talked looking at some software expenses, some other things to keep that really stable or push it down a little bit.

George Holmes

I think it's safe to say, though, Cody, we're mindful of the spend and we set out when we did this financing with the goal to make that that case scenario last time to go to the marketplace. So we're going to be very, very focused on our spend on a quarter-to-quarter basis. Q1 is always up a little bit because we pay annual bonuses in the first quarter. And we have some additional payroll expenses that happen here. But as we sit back and look out kind of where we're going in the future, the good news is we are really, really mindful of the work we're doing with customers. As I noted on the call, we're going to be focused on really focused on customers that are generating revenues in a predictable fashion, culling the herd when it makes sense and putting our money to work where we know we've got a good, good trajectory on the back-end.

Cody Acree

Great, thank you guys.

Operator

Thank you. Your next question is coming from Kevin Dede from H.C. Wainwright. Your line is now live.

Kevin Dede

Well, thanks. Thanks for taking me, George. I was thinking…

George Holmes

How are you?

Kevin Dede

I'm great, I'm great. I thought your team was cutting me out. I don't know how many times I punch star one in. But I'm here now, thank you. Thanks for taking me.

George Holmes

Yes, no worries. No worries, absolutely. Actually we didn’t hear (inaudible) queue, when you did towards the end. I thought you forgotten about it. So I'm glad you're here. What do you got for us, Kevin?

Kevin Dede

I'm sorry, George. What was that?

George Holmes

I said what question do you have for today?

Kevin Dede

I’ve got a couple, I've got a couple. One, I was hoping you could peel the onion back a little bit more on what's going on in the China market. What are the Murata guys telling you, and what do you think your foundry guys are telling you?

George Holmes

That's a great question, Kevin. I look my friend Dylan here to give you his stage and then I will follow on at the end.

Dylan Kelly

All right. I mean, as the Chinese market is enormous beyond Apple and Samsung, China represents over 70% of the cellular device market. We know even prior to trade pressures, there's been a long-term trend to in-sourcing. And now there's a lot of motivation to build everything domestically. That's what's resulted in these big deals, we've done here in the first quarter. To-date, Murata has continued to enjoy the biggest gains and market share from the trade bet, maybe nearly doubling their business in the last year in China. And then beyond that, let's say largely to the detriment of the U.S. players. I answered your question, Kevin?

Kevin Dede

Yes, that helps. That helps. But I was wondering if you had something a little more granular, Dylan vis-à-vis COVID-19?

George Holmes

Well, I mean I think one thing that we can say and I've already touched on Kevin is our customers are not slowing down. If anything, they're putting the foot on the gas to move ahead aggressively. That's what it looks like. I mean, clearly, we haven't put eyes on them in a couple of months face to face. We've just been having our daily call. But the indications are things are moving ahead. We're getting, we're getting all of our touch points that we would expect as we move to the design and development process. The nice thing about having Dylan as part of the team, you've got a guy who knows how to scale a business in particular a component business.

And so we're looking at how do we superset designs in an even better fashion than we've done, than we've done in the past. And that that just makes these design costs go down, where you sit back and think about this, where historically every design we did was custom, now we're taking design or super setting them across three or four different customers. And we're able to deliver those in a very predictable, even more predictable fashion than we were in the past. So coming back to some of the question that Cody asked, what we're doing from a cost standpoint, that drives costs down.

And if you look at it from a predictability standpoint, from an opportunity set, we see the opportunities are moving ahead, and then moving ahead at blank speed. We don't see at this juncture guide slowing down there which is obviously why at least for our customers, we're seeing some level of confidence that still allowed Marty to stick his neck out as he did for Q1.

Kevin Dede

Okay, okay, fair enough, George. Can you help me reconcile beyond I think my most rudimentary understanding, your Chinese foundry partners looks to me as though he's targeting 4G, whereas your large Japanese manufacturer is leveraging your technology to get after 5G. I'm wondering what you see happening once the market in China moves to 5G more rapidly. What happens to your relationships?

George Holmes

I fundamentally believe it will expand. I mean, we've seen every relationship we've executed and delivered upon, expand at least it relate to footprint of the designs that we're doing. We have a better business model really based on the strength of the work that we're doing, clearly a differentiated technology with our XBAR product that allows us to command a much better deal for Resonant and its shareholders. So I see that being a tremendous opportunity.

But I mean there's a lot of stuff going on here in the marketplace causing a great deal of disruption. If you'll indulge me, I'll talk a little bit about it clearly. I hope you're as a front that are the other folks on the call, the work that Broadcom is doing to kind of offload their filter business is creating any interesting disruption in the marketplace, which we think will be very, very good for us. They have a nice little sweet spot with the technology they deploy nice big holes on both sides. But we actually can build very, very effectively both in SAW and with our XBAR technology, if you look at the overall market is there kind of setting a value to, you look at this and go company enterprise value based on what they're talking about the market that $15 billion grown to $25 billion enterprise value of $60 million to $100 million.

And if you look at that, and then look at what's going to be 5G, about 30% to 35% of that going to be 5G. This is a tremendous opportunity for us, if you think about it, historically, these companies in the market have gotten by with relying on technologies 30 to 40 years old to do design, you can't do that for 5G. The Resonant ISN platform has enabled unprecedented performance with our XBAR family of products as we're focusing on enabling a dominant share of that marketplace. As you know, our jumping off point is our view with the world's largest filter manufacturer, we’ve got 40% share.

We're aggressively pursuing others on mobile applications for XBAR like Wi-Fi, CP and infrastructure, like we talked about on the call, that's going to allow us to increase the share of enabled market that we have and the size of this opportunity enabled by XBAR, it’s just mind boggling for Resonant, we can end up with over 50% of the companies out there enabled with our technology. What kind of value is that going to mean for us? It's going to be tremendous. So our focus is going to be execution, execution, execution for 2020.

Kevin Dede

Okay, George, that sounds pretty good. Can you help me make sure that I have these time lines, straight in my little head as Dylan was talking about sort of a pocket developing where it seems to me that there's a lot of urgency within China to develop products to fill that 5G hole right? Well your exclusivity with your large Japanese partner have expired in time to present XBAR technology to other customers addressing that market?

George Holmes

Absolutely, Kevin, we sit back and look at it, right. I mean, today the market in China and for the major Chinese manufacturers, other than the largest ones is 4G. And in large part, it's discrete still today. And so we're going to be able to satisfy that with these relationships that we've enabled. We're very excited about it. We're already getting feedback from some folks that they see that that's impacting what it is that they're doing. And we want to be a market disrupter, we think

that's a good thing for us.

It creates opportunity which we believe is good for us. When it comes to our 5G contract, obviously, XBAR is not the only high frequency technology we're developing, but the XBAR technology that we've licensed to the world's largest filter manufacturer, that that exclusivity expires in March 2022. That's around the corner when it comes to phone development. It's like tomorrow, you're one cycle away from being out there in a big way enabling everybody. And keep in mind while we can't market technology into that segment of the market, we can develop products and have them ready to go. So our white label program, some other things that we're doing to facilitate the development of XBAR and get it into the marketplace.

It's just going to put us very well positioned to be able to capture opportunities as we come out of that exclusivity period.

Kevin Dede

Okay, George, thanks. That helps a lot. I got one for Marty, actually, two. So Marty heard the deal done in February here. What do you expect the average share count to be at the end of the March quarter? And then what does that share count go to the end of the June quarter?

Marty McDermut

We just did that off, we're not planning another one right now and we think the share count after that is about 52 million, 53 million -- 52 million, 53 million shares that should stay stable, little increase.

Kevin Dede

Right, right. But it had so only half of it falls into the March quarter right, it is about the middle of quarter that that deal was done?

Marty McDermut

You’re talking about the weighted average, yes.

Kevin Dede

Yes, yes, yes, yes.

Marty McDermut

The total outstanding will be at that 52 million level.

Kevin Dede

All right, so that's what we'll see in for the June quarter?

George Holmes

Yes, it’s done. Two-thirds of it will fall in, so you’re going to be talking around 40 million.

Kevin Dede

Okay, okay. All right. So Cody's trying to get you to dig in a little deeper on royalty payment recognition. I want to try once myself here. Will there be any point in time when will the accounting rules allow you to just sort of brush over it? Will there be any point in time when you'll have to recognize prepayments, payments on devices actually shipped.

George Holmes

No, it doesn't look like it. And Marty and I've been doing a lot of work on this. He spent a lot of time educate me on it, obviously. I mean, the part of the reason we're going to talking about revenues as a single bucket is because that's he sit back and look at it, it's all attributed to the licensing of devices. And so we don't have today, a component business where we're doing the white label devices. And so the fact that we've got prepays of two different varieties, we’ve got royalty revenues, have another variety. At the end of the day, triple net, the only thing that makes sense to talk about is revenue in a single bucket, at which point in time we have white label revenues, which will come at a higher rate to us, but we’ll break that out, but until then, I think we are where we are Marty?

Marty McDermut

I think, I think what you're referring to Kevin is some sort of take money and you have nothing else to deliver that I don't see that happening in our business model for the short-term. So it'll be recognized over some period of time.

Kevin Dede

Okay, how about the use of the process modeling tool that the PMTX that your foundry is licensed to use, is that sort of dump into the royalty bucket too?

Marty McDermut

Not at this point in time, because at this point in time, Kevin, we have chosen intentionally not to take dollars for licensing that those tools from an ISN perspective, we retain ownership of the solution set, we're gathering data, we get a lot of access rights to the data that's gathered. That's more important to us from a learning perspective, at such a time that they we decided we're going to put that into a software licensing model, obviously software licensing would be called out.

But today we're using that, we're using that platform as again additional learnings for us. As we know, we've talked about for a long time the power of our ISN tool is kind of the secret sauce of what it is that we do to what enabled virtually every single design that we have. It's what allowed us to develop XBAR in a very short period of time allowed us to iterate very quickly, allowed us to win the business with the Tier-1. And it's what allowed us to do these very, very exciting designs for Wi-Fi coexistence in five and six gigahertz arena. So we probably aren't going to be licensing that anytime soon, but we want to learn how to and that's what we're using that for.

Kevin Dede

Okay, fair enough gentlemen. Thanks for letting me on the call guys, and thanks for indulging my questions. I appreciate it.

George Holmes

No worries, thank you very much.

Operator

Thank you. [Operator Instructions] We have reached the end of our question-and-answer session, I'd like to turn the floor back over to management for any further or closing comments.

George Holmes

Great, thank you operator. In closing, let me highlight our recent strategic event, partnering with the world's largest filter manufacturer with a focus on 5G, our Tier-1 partnership with the Chinese foundry targeting the China handset market for 4G and our recent financing. Combined, these have put the company in an excellent position to execute on our business plan and strategy, which should yield significant dividends for our customers, partners and shareholders. We thank you again for your ongoing support. Have a great day.

Operator

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.