Resonant Inc.
Q4 2016 Earnings Call Transcript

Published: 31 Mar 2017

[Operator:]

Greetings and welcome to the Resonant fourth quarter 2016 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 would now like to turn the conference over to Greg Falesnik, Managing Director for MZ North America, Resonant's Investor Relations firm. Thank you. You may begin.

[Greg Falesnik:]

Thank you operator. Earlier this afternoon, Resonant released financial results for the fourth quarter and the year end December 31, 2016. The release is available on the Investors section of the company's website at www.resonant.com. Additionally, some of this information in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties, assumptions that are difficult to predict. Words and 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 but their absence does not mean that the statement is 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 release and the company undertakes no obligation to publicly update forward-looking statements or supply new information regarding the circumstances after the date of this release. Resonant's CEO, George Holmes is your host today and he will introduce the rest of the team joining him on the call. With that, I will turn it over to George.

[George Holmes:]

Thank you Greg and good afternoon to everyone joining us on today's call. With me today is Jeff Killian, our CFO. Let me begin with the story of 2016 which has been one of transformation as we migrated from a purely development stage company to one focused on customer engagement and execution. To summarize our accomplishments for 2016, our year-to-date performance and then to discuss the roadmap of the remainder of 217 and beyond, we entered 216 with no active customers. We did have a solid technology platform which we had already validated with two SAW foundries. We also began 2016 with a well defined roadmap for execution for the year. During Q1, we rebranded the company and simplified our story to focus on tools, technology and team, utilizing our ISN and EDA platform, IP focused and licensable blocks and a team with some of the brightest minds in the RF space. We helped show customers how we can help capture additional margin by either shortening their design cycle or developing solutions on more cost effective and manufacturing processes, such as developing filters on SAW or TC-SAW processes that has historically been only developed on BAW or FBAR processes. In the first quarter 2016, we signed our first two customers via MoUs for the evaluation of our platform and also the design and development of multiple products. In the second quarter, we expanded those relationships with the first two customers by converting those MoUs to licensing deals. One of these customers is a Tier 1 customer. The second company that historically had been focused on the industrial PA applications, however focused on their relationship with Resonant as a way to enter the mobile space. We also successfully raised $6 million in an oversubscribed private placement. In the third quarter, our focus was to continue the momentum with both current and future customers. We expanded licensing agreements with our Tier 1 customer that cover new designs for PAMiD modules using wafer level packaging. This included our first quadplexer. As we closed out the third quarter, we successfully added two new customers, a Tier 1 RFIC company and a Tier 1 filter manufacturer via development agreements, JDA's to evaluate the ISN technology platform. We also continued the expanse of IP portfolio and capabilities. To that end, we acquired GVR Trade, a Swiss-based company specializing in the consultation and the design of surface acoustic wave, SAW and bulk acoustic wave, BAW devices. This acquisition augmented our ISN platform. We further increased our IP portfolio to over 100 patents issued and pending. We raised $11.5 million in a confidentially marketed public offering that was oversubscribed. Our momentum continued to gain in the fourth quarter. We added two new customers through first-of-their-type fables filter companies. These are module manufacturers that want to extend their module business through engagement with Resonant. During the quarter, agreements were signed for three more quadplexers. As part of this ever-increasing augmentation of our ISN platform, we also included TC-SAW to support the technology for improved temperature stability. In all, we ended 2016 with over 25 sockets under development based upon contracts with six customers. Significantly 85% of these agreements contain binding license agreements, which include negotiated royalty rates. 2016 focus on execution yielded some significant results as we continue to drive the business closer to commercialization. It is also important to note that our ISN EDA platform is now supporting five SAW and two TC-SAW foundry processes characterized for multiple fab sequences with both SAW and TC-SAW development capability. Finally, we closed the year with $9.8 million cash, in line with our roadmap and in support of our ongoing momentum. In the first few months of 2017, we continued to retire risk in the business with solid execution. In February, we announced a major milestone that one of our first licensing customers successfully shipped over one million preproduction units to four separate handset OEM manufacturers. We believe these initial shipments represent modest revenue in mass production later this year but nonetheless, they validate our capabilities to convert ISN ready designs into production within nine to 12 months of signing a licensing agreement. Shipping these preproduction parts represents one of the last steps before commercial acceptance of our designs. We also closed additional follow-on business with an existing Tier 1 customer for new designs targeting difficult bands using chip scale packaging. The first quarter of 2017 also saw the closing of a $7.5 million private placement driven by our largest investor in our last round extending our runway into 2018. The team at Longboard Capital recognized the catalyst of one million units being shipped and proactively engaged the company. The last thing I want to highlight that as we have continued to engage customers on more complex designs, we have introduced a concept called 'ISN Ready and ISN Pilot to our customer engagement process for designs of hard bands that have predictable design time that have the potential to convert to royalty revenues in nine to 12 months. For more complex, cutting edge and novel concepts, we deliver more novel Resonant IP, we have ISN Development and ISN Technology that have design times that have the potential to convert into to revenues in 18 to 24 months. Now before going further, I would like to turn the call over to Jeff to discuss the financials for the year. Jeff?

[Jeff Killian:]

Thanks George. I will begin with a summary of our fourth quarter and year end 2016 financial results, which are compared to our fourth quarter and year end 2015 results, unless otherwise stated. Revenue for the fourth quarter of 2016 with $187,000, compared to none in the fourth quarter of 2015. Revenue for 2016 was $302,000, compared to none in 2016. These increases were due to the revenue recognized in connection with our filter design development agreements. We began the year with no development agreements and ended the year with over 25 filter design contracts. Research and development expenses for the fourth quarter of 2016 totaled $2.5 million compared to $1.1 million in the fourth quarter of 2015. Research and development expenses for 2016 totaled $6.4 million compared to $4.3 million in 2015. These increases were due to higher costs associated with an increase in headcount and the associated activity in our filter designs. General and administrative expenses for the fourth quarter of 2016 totaled $2.8 million compared to $1.3 million in the fourth quarter of 2015. General and administrative expenses for 2016 totaled $8.5 million compared to $4.9 million in 2015. These increases were primarily due to increased payroll and travel costs associated with the expansion of our sales and marketing team and increased business development costs. For the year ended 2016, we also incurred $598,000 of legal expense related to the pending lawsuits, $295,000 of expense related to senior executive transition costs and $92,000 of business acquisition costs. Operating loss in the fourth quarter of 2016 totaled $5.2 million compared with $2.5 million in the fourth quarter of 2015. Operating loss in 2016 totaled of $15.3 million compared to $9.7 million in 2015. This increase was primarily due to higher G&A expenses and R&D costs associated with the growth of our business. The net loss for the full year of 2016 totaled $15.2 million or $1.50 per fully diluted share compared to a net loss of $9.7 million or $1.36 per share for the full year of 2015. Net loss for the fourth quarter of 2016 was $5.2 million compared to a net loss of $2.5 million for the fourth quarter of 2015. On a non-GAAP basis, adjusted EBITDA for the fourth quarter of 2016 which excludes non-cash charges for stock-based compensation, depreciation and amortization, was a loss of $3.7 million. This is compared with a non-GAAP adjusted EBITDA for the fourth quarter of 2015 of a loss of $2.2 million. Adjusted EBITDA for 2016 was a loss of $11.9 million or $1.23 per fully diluted share. This compared with a non-GAAP adjusted EBITDA in 2015 of a loss of $7.6 million or $1.06 per fully diluted share. Cash and investments at December 31, 2016 totaled $9.8 million compared with $5.5 million in December 31, 2015. We believe we have sufficient cash to support planned operations into 2018. And lastly, I wanted to update you on our share count as it stands today. After our recent financing with Longboard Capital, we currently have 14.4 million shares outstanding. With that, let me turn the call back to George.

[George Holmes:]

Thanks Jeff. Looking ahead to the balance of first half of 2017, we expect to continue driving our business forward. First, we expect to see additional follow-on deals with existing customers for any validation and risk reduction for our long-term billing and revenue growth opportunities. Second, we expect to continue adding new customers and agreements to both fables filter companies as well as SAW and TC-SAW customers. Third, we expect to continue expanding our IP footprint covering our ISN technology platform, which is paramount to maintaining a strong and sustainable competitive advantage as a licensing company. We will be producing and publishing key metrics which we believe will support and provide customers even greater confidence in our ability to deliver solutions in a fraction of the time and costs compared to traditional design solutions. For the second half of 2017, we expect the early validation of our royalty revenue model. This should provide a roadmap into 2018 given the number of licenses currently in the contract and those we expect to close before year-end. We also have the potential to see the addition of new customers, foundries, new licenses and follow-on licenses. Our ISN platform is fundamentally independent of filter technology, so we do see the potential for adding new process technologies such as BAW and/or FBAR to our capabilities. We are very excited to have so quickly expanded both our customer base and existing customer agreements with current customers and are focused on facilitating future growth by continuing to build a solid pipeline of perspective additional customers. As we demonstrated the power of our platform, IP and team, we have been able to build relationships with these new customers quickly. On a final note, the scale of the potential market opportunity for products we are pursuing with these designs is enormous and continues to grow. The worldwide combined total available market for high-value bands in the mobile segment of the filter market we are targeting is approximately $5.8 billion. For devices we currently have under contract that serves available market is approximately $2.6 billion or roughly 44% of the total available. And as such, we believe we are well-positioned to capitalize given this potential and opportunity. Now before providing my closing remarks, I would like to open lines for Q&A and I will turn it back over to the operator. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from the line of Cody Acree from Drexel Hamilton. Please go ahead.

[Cody Acree:]

Thanks guys for taking my question and congratulations on the progress. George, maybe just at a high-level before we get into the details. Since taking on the role of CEO, maybe if you can just talk about what changes you made from a strategic direction? And maybe how your focus for 2017 is a bit different than when you first began?

[George Holmes:]

That's a great question, Cody. I think from a strategic direction standpoint, I was actively involved from the time I joined in developing the strategic direction of the company, which included really creating this notion of an ISN EDA platform technology that we could use as the basis from which to deploy our IP. So well from a strategic direction standpoint, I am locked and loaded on that. I think what you will see that I have done since I joined is, we have really taken the company and as we have now gone from really developing technology to one focused on design and execution has really put into place a real focus on quarter-to-quarter execution. Obviously, as we continue to drive towards being able to talk about a royalty revenue model and royalty revenue ramp, the key thing is executing and delivering and making sure that we execute on time to customer expectation and quite frankly, helping those customers drive their engagements with the OEMs forward to ultimately shorten the time to revenue. So I would say, in large part is a keen focus on execution, a keen focus on execution on a quarter-to-quarter basis and really working to help facilitate and drive the team in that fashion.

[Cody Acree:]

Thanks for that. And George, I guess any other details you can give us whether be in the fourth quarter or since, just feedback that you have been getting from your customers? Obviously they continue to engage, but what technical feedback have you been getting? I guess, where are you, as far as maybe if you can give us any color on number of spins? Or just any color on the technical progression and maybe what you are hearing from customers?

[George Holmes:]

Man, that's a great question too, Cody. So I think the real thing is, if you look at the customer engagement, clearly you don't see an expansion of the customer engagement from two designs to north of 15 designs with our largest Tier 1 customer unless they feel that you are executing and adding value. I think one of the things we have seen is the desire to have us engage in other process technologies to expand our footprint in the design process. Clearly we went from doing duplexers, very hard duplexers to adding quadplexers to adding PAMiDs. Now they are asking us to design PA modules. So if you look at the engagement, I think that they are basically validating our fundamental premise that the ISN technology platform that we have actually allows them to do things more efficiently and with more predictable outcomes. Also, obviously our Tier 1 customer adding another process technology to give them greater opportunity and greater breadth of capability is a great thing for us. I mean, clearly what I want to do with my ISN platform is to have a platform that can cover any process technology, whether it be SAW, TC-SAW, BAW, FBAR, have multitude of different foundries that we have, database structures that are well understood and really drive the business forward such that we are actually talking about any time we get a new design, we are talking about an ISN Ready design and an ISN Ready design is one that we have that we go and deploy in our foundries that is well characterized. The design characteristics are very well-defined and something that has a very predictable outcome. That answer your question?

[Cody Acree:]

Yes, it did. Thank you very much. And I guess with the ISN platform, are you finding in real world, I guess what you expected? I guess, initially you and Terry were talking about with predictability that you could get from first spend to dialing it in to final qualification within about three or four spin timeframe, saving what would be traditionally many more spins at your other competitors. So are you finding that that's the case?

[George Holmes:]

I think they are very definitely within that design criteria and probably doing better than that in some cases, depending on where in the ISN platform we are operating with the given customer. I think maybe this is a good time to kind of talk a little bit about this whole notion of ISN Ready. We have created and I think I talked to you about this specifically and for everybody else on the call, one of the things that was important is, we went into this design process with a key customer is to compartmentalize and be in a position to effectively communicate how long it takes to get designs done. And so we created four distinct categories of design types, ISN Ready, ISN Pilot, then we have ISN Advanced Development and then ISN Technology. The first two, ISN Ready and ISN Pilot, really are focused on designs that are very well defined. The process technology at the customer is very well defined. The specifications are very well defined. The market is very well defined. The end customer test requirements are very well-defined. So that makes it very easy for us to execute and deliver in a number of spins that's quite frankly less than what you described. Then you get into this area of ISN Pilot that has may be a new package technology associated with it but it is still in the process technology we have to understand and a band perhaps that we understand very well. So very close to ISN Ready but you know is going to take a little bit more work from our standpoint, but still something that we could execute and deliver in the nine to 12 month timeframe. But well, you might see that we are in one to two spin area on an ISN Ready design and then three to five spin area in an ISN Pilot design. Then you take that one step further and you start talking about the more advanced technologies, things like quadplexers, hexaplexers would be things that kind of fit in that category, even a triplexer perhaps. It takes a little bit longer potentially depending on the process technology, the package technology to get those things through the process. So still in the plus or minus five category. But it really depends on how well the partner has their backend characterized. And then you stuff that's really pure play development. You are talking about maybe dual passband filter or something else that might be a fundamental architecture change. Something like, for example a tunable filter would fit into that category as well. So really being able to characterize our entire design suite. These are things that we are working with customers on very closely to make sure that we can characterize this and actually create this, turn these things in the marketable materials that we can talk about. Not quite there yet, but we think we will get there this quarter. Does that help?

[Cody Acree:]

It does. Thank you. And then last for me, just the major milestone of hitting the million preproduction units. What is your expectation of the typical OEM evaluation of those units? And then how do we go from there to revenue?

[George Holmes:]

Good. Well Cody, that's a great question and one, I am sure you see this from a number of your companies and clients that you cover. There is no single answer. If you had asked that question a year ago before Tier 1 OEMs had issues with batteries out in the marketplace, I would say that the two biggest Tier 1s were pretty predictable. Products that they understood. It was probably in the six-month timeframe from the time we delivered them a product that they didn't expect till they could characterize it, qualify it and run it through their QA process to the point where they could actually start buying product. Those timeframes are very unpredictable now and not very well defined. That said, still less than a year but a little bit more unpredictable. You come down to a Tier 2 and Tier 3, you still have Tier 3s and Tier 4s that have qualification cycles they can be a week to a month. So you can see very rapid time to engagement, time to early ramp and conversion into royalty revenues. I think with that million unit milestone, the interesting thing about that was it was three different filters into four different customers. So you sit back and you look at how that thing played out. Building a bunch of parts into a bunch of different product families that they are out sampling to a bunch of different customers. That's a little bit different because you have a brand-new entrant into the mobile space. This is our partner that we have described, characterized historically as one that was in the industrial space. By engaging with us, they were able to enter into the mobile space. So they are having a little bit longer qualification cycle. But you know I think we are still on track to see nine to 12 months from the time we sign that licensing agreements to see early revenues and suggest that we will be reporting that on our Q2 call.

[Cody Acree:]

Perfect. Thank you guys and congratulations on the progress.

[George Holmes:]

Okay. Thank you very much, Cody.

[Operator:]

Thank you. Our next question comes from the line of Randolph Kim from Longboard Capital. Please go ahead.

[Randolph Kim:]

Hi guys. Thanks for taking the question here. Just trying to touch on the revenue again a little further as far as the commercial side goes. When are you announcing the commencement of commercial revenue?

[George Holmes:]

Randolph, always asking the tough question. Okay. So I think the key thing here is, as we said in the past, we are not yet in the position to forecast revenue. That said, I think it's important for us to emphasize that we don't want to have any false start. We want to be predictable and sustainable with our revenue growth. And such, we are going to let the execution, our customer's execution speak for itself when the time comes, much like I just described to Cody. But in addition to that, I want to add some additional clarity. I want to remind everyone, there are three key points that we have discussed on several of our past calls that I want to bring back to the forefront of everybody's attention. And then I want to give you an update on one of those points. The first point would be for ISN Ready designs, majority of the designs we have under contract, we believe that we will be able to convert those sockets into early revenues in nine to 12 months from the date of signing the licensing agreement, which I think is fairly typical. The second point would be, we have previously highlighted that royalty revenues from these companies that we license designs to, that royalty tends to be for licensing per unit royalty basis tend be in the 1% to 20% range with the typical being in the 3% to 7% range. We said in the past that we believe that our tools, technology and team will give us the potential to shorten design cycle and increase customer margins that we see the potential for higher royalty revenue rates than the average. So again 1% to 20% is the range, 3% to 7% is the average. We tend to believe that we should do a little bit better than that because of what we are contributing to the end customer. The last thing I want to highlight for you is the market for mobile filters. It's just enormous. The mobile filter market is forecasted by Navian to be 50 billion units or $9.9 billion in 2017. Resonant is focused on the high-value portion of that market, as we have said in the past. And the targeted bands that we are focused on represents 14.7 billion of the units, so 14.7 billion of the 50 billion units. But it represents $5.8 billion of the $9 billion revenue opportunity. So we are focused on those high-value bands that creates the greatest opportunity for royalty revenue. As of this call, Resonant has devices under contract in 100% of our targeted bands. So the TAM for the market that we are currently serving now equals $5.8 billion. Our customers are currently serving $2.5 billion or 44% of that specific market and based on Navian's reported share for our customers, the devices Resonant has under contract represent $250 million worth of filters if our customers were 100% successful in achieving their revenue targets and their share didn't increase with these new designs which we believe they have the potential to do. So hopefully that gives you a little bit more color than just where we are at on revenue and to bring you back to what the revenue opportunity could be and really gives you feel of the view of what that revenue opportunity and mass could be in the coming quarters and coming years. Hope that helps, Randolph.

[Randolph Kim:]

Yes. Thanks. I know you mentioned the revenue side, but with these 25 plus opportunities or designs under development you have now, probably I shouldn't ask much about those, but could you help us understand what this means for the company as far as turning volume to customers?

[George Holmes:]

Yes. I think I just nailed that. Basically, if you look those 25 contracts that really says those 25 contracts cover virtually the entire TAM for the market today. And if you cycle through the comments I just made, that coverage of the entire market represents a market opportunity filter designs, i.e. if our customers with products they currently have under contract with us actually delivered all those sockets based on their current market share as defined by Navian, there's $250 million worth of revenue opportunity of filters. That's the number. And you take that and do the math against the royalty opportunity that I described just previously and you can hone in on what that royalty opportunity could be for those devices we currently have under contract.

[Randolph Kim:]

Okay. Great. That's all for me. Thanks.

[Operator:]

[Operator Instructions]. Our next question comes in the lines of Suji DeSilva from Roth Capital. Please go ahead.

[Suji DeSilva:]

Hi George. Hi Jeff. Congratulations on the progress here.

[George Holmes:]

Hello Suji. How are you?

[Suji DeSilva:]

Good. A follow-up on Cody's question about the cycle. I guess the nine to 12 months you talk about, is that going to be a tight band across the guys you are working with? Or you are going to find some that go for years versus others that can happen quicker? What's your thoughts there?

[George Holmes:]

Yes. That is why we are trying to create these categories that we call ISN Ready, ISN Pilot, ISN Advanced because we are trying to at least bucketize the complexity so that you get those things are kind of well-defined. But I think it's reasonable to expect that some customers, even though they should be able to do it quickly will take twice as long and some customers that you think would typically take longer, i.e. the larger companies might execute quickly. I think we are seeing that they are all kind of falling into that category right at the moment. But there are companies that we are engaged with today that are of the larger variety, Tier 1 type customers that want to move very, very quickly on advanced designs. And we will just have to wait until we get engaged with them and see how that plays out. Today, I would stick with the nine to 12 and 18 to 24 is major buckets of characterization. But all bets are off when guys can throw money at something.

[Suji DeSilva:]

Right. It sounds like you trying to make that process more systematic. On the products themselves that you are working with, is it the right way to think of you guys metric wise as some products are simpler and some are more complex, dual or quadplexers or even the modules and is that the right way to measure, in your mind, the success of working on more complex products are simpler? Is that oversimplifying kind of what success means to you guys?

[George Holmes:]

No. I think you are dead right on that thought. Clearly, when we are talking in my very first half conference call for Resonant last year, I mean, we were trying to our first duplexers, right and we were trying to get our first complex duplexers. And the reason we characterized in this complex is we are trying to point it in the right direction of more complex, higher frequency, so higher price, which means higher value and ultimately based on our royalty program, the ability for us to make more money. That was kind of the starting point. I think that the fact that we have, in a very short period of time, been able to go from duplexers to even more complex duplexers to quadplexers, we now have four quadplexers under contract. We will likely be the first person ever to deliver our quadplexer in all SAW and then the other, so as we said on our last quarter call, we have number of quads that are SAW only and then we have some that are combinations on TC-SAW, even a SAW, TC-SAW complex quadplexer is still orders of magnitude more cost effective that a BAW quad. And right now the benchmark for delivering a BAW quadplexer, I believe that the Tier 1 guys are delivering those quadplexers from the time they start to designs till the time they are putting it into the marketplace about 24 to 36 months. I believe we will do e a lot better than that. I think we will easily be inside our ISN Advanced timeframe, which is start at 18 months. I think we will do better than that. Till being the date we actually deliver it and we are actually abler to talk about revenues that come, but as it looks right now and the engagement with the customer is very solid and we are very excited. That's a great one to be first on. And when that gets into the production, I believe you will hear us talking about it when the time comes.

[Suji DeSilva:]

Okay. Great. Thanks again guys.

[George Holmes:]

Thank you.

[Operator:]

Thank you. Our next question is a follow-up from the line of Cody Acree from Drexel Hamilton. Please go ahead.

[Cody Acree:]

Hi. Thanks guys. George just one follow-up, just a clarification. The $250 million of addressable potential that you are talking about, that is of the customer's filter revenue. You are not talking about that as far as a royalty $250 million rate. Is that right?

[George Holmes:]

I think we are a little early for that to be our royalty revenue potential. Cody, you are absolutely right. You nailed it first. That's the filter revenue potential. And clearly you have got to keep in mind, right and I want to make sure this is properly characterized for everybody. We did no licenses in Q1 last year, five licenses in Q2 and then we stacked it up over the quarter-over-quarter. So clearly those things lay in over the course of the next three to four quarters. But if they want all the sockets and the team, the market share that Navian currently attributes to them for those sockets of for their core business, that's the type of revenue potential that they should see from those devices they have under contract with us. I think the key thing here is, we believe and I think it's reasonable to expect, that if our customers are trying to deliver a competitive solution that has historically only been delivered in a higher priced manufacturing process and they are able to do it on a lower priced process or a combo process that there is the potential for them to increase their share, which is why we said that that $250 million is what Navian has them all pegged at today. But we think there is a potential for it to be larger than that over that timeframe. Does that help?

[Cody Acree:]

Yes, it does. Thank you. And Jeff, just on burn rate of OpEx expectations for 2017?

[Jeff Killian:]

Yes. Thank you. So in the fourth quarter, our cash on our balance sheet reduced to $2.9 million and we ended the year with $9.8 million in cash. We refreshed that cash with $7.5 million with investment from Longboard. So if you use those two numbers, you can see clearly that our cash is positioned to take us into 2018. As we mentioned before, we continue to gain traction with customers and we will invest in our resources to turn those design as appropriate. So you can see our cash burn, it's up a little bit over time as we get more headcount to help address increase pipeline designs in our company.

[George Holmes:]

But here is a good point, Cody, this might be interesting for you as well. I mean, if you looked at the number of designs we were able to turn in Q1 2016, we were turning one design a month. You look at the number of designs we are turning just this last month, we have get a tenfold improvement. So you get a 10X improvement in design throughput, heavily leveraged off the fact that we have got a tool that has further matured, an IP portfolio that's pretty matured and from a headcount perspective, we have increased about 40%. So a small increase in heads and total burn and a massive increase in velocity as it relates to our ability to turn designs.

[Cody Acree:]

Thank you for that, George. But Jeff, so your OpEx is running a little over $5 million now and you are expecting that that's a good baseline and you are inching up sequentially from here, not any major step functions?

[Jeff Killian:]

Right. No major step function. It the fourth quarter, our stock-based compensation was, because of the issuance of awards and others was larger than the quarterly run rate and so if you start taking that $5.3 million back to cash, you get a feel for that. So we are going to see the same. The inch up has some volatility, but you kind of get the run rate dialed in.

[Cody Acree:]

Okay. Thank you guys.

[Operator:]

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to management for closing comments.

[Jeff Killian:]

Great. Thank you operator. In closing, I would like to extend my appreciation to our team for their hard work and dedication in moving the company along the path to commercialization. We believe the growth of our customers and designs further cements our value and that the tools, technology and team we are bringing are an offering to the industry. And now we have the cash position which will enable us to continue to transition from a development stage company into a product focused licensor with recurring royalty revenue, a business model that has proven very successful in the RFIC industry. The demand for wireless data continues to grow at a phenomenal rate and the RF front end market, specifically filters, is the fastest growing area of the mobile industry. The market growth we are seeing that is driving growth in unit volumes, sales and complexity all plays to our strengths. We have had a very productive 2016 and a strong pipeline in 2017. We plan to continue to support our current customers with new designs to expand our customer footprint in our focused segments of filter companies and pure play foundries as well as to explore new partnership opportunities with nontraditional semiconductor suppliers, all while keeping a keen focus on driving designs to the end customer adoption and shipment to ensure probability of success in achieving significant royalty revenues in the second half of 2017 and beyond. The key to our successful is to listen to our customers and to provide them with the competitive advantage in this very competitive market. We are confident in our ability to achieve these goals and look forward to reporting our progress on them in the next quarterly call. Thank you all for your participation.

[Operator:]

Thank you. Ladies and gentlemen this does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.