Resonant Inc.
Q1 2017 Earnings Call Transcript

Published: 11 May 2017

[Operator:]

Greetings, and welcome to the Resonant Q1 2017 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 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 three months ended March 31, 2017. The release is available on the Investor Relations section of the Company's Web site at www.resonant.com. Additionally, some of this information in this conference call contains forward-looking statements that involve risks, uncertainties and 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 any 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 the call over to you George.

[George Holmes:]

Thank you, Greg. And good afternoon to everyone joining us on today's call. With me today is Jeff Killian, our Chief Financial Officer. The story for 2017 is our ongoing transformation from a purely development stage Company to one focused on execution. To that end, customers continue to express their confidence in Resonant, evidenced by not only the ongoing conversion of JDAs into formal licensing agreements but the signing of multiple new designs and licensing agreements. In the first quarter, we continued to retire risk in the business with solid execution. We announced a major milestone that one of our first licensees successfully shifts over 1 million preproduction parts to four separate handset original equipment manufacturers. We believe these initial shipments will represent modest revenue once in mass production later this year. Nonetheless, they validate our capabilities to convert designs into production within 12 months of signing a licensing agreement. Moreover, we enabled a provider of industrial filters to expand their markets and enter the mobile filter market quickly and efficiently. We also closed additional follow-on business with an existing Tier 1 customer for new designs, targeting difficult bands using chip scale packaging. As we continue to strengthen our customer engagement process, our design capability and predictability has also matured. ISN Ready and ISN Pilot are available for designs of difficult bands with predictable design times that have the potential to convert to royalty revenues in nine to 12 months. For more complex cutting edge and novel concepts, which levered more Resonant’s IP, we have ISN Advanced Development and ISN Technology that have design times with the potential convert to revenues in the 18 to 36 months. It is also worth noting, in Q1, that we closed the $7.5 million private placement Longboard Capital. The team at Longboard recognized the catalyst of 1 million units been shipped, and proactively engaged with the company, establishing their position as our largest investor. Following the close of the quarter, in April, we signed an extensive joint licensing agreement with an existing customer, a leading RF front-end component vendor, for the development of our fifth quadplexer and the second quadplexer for this customer for the Chinese market. Also, in April, we signed three new licensing agreements with an existing customer, a leading Tier 1 fabless front-end component vendor. The new licensing agreements encompass two high volume bands that were converted from joint development grants, as well as the new quadplexer. Now before going further, I'd like to turn the call over to Jeff to discuss the financials for the quarter. Jeff?

[Jeff Killian:]

Thanks, George. I will begin with a summary of our first quarter 2017 financial results. Revenue for the first quarter of 2017 was $156,000 compared to $187,000 in the fourth quarter of 2016. The revenue for these quarters are primarily related to the revenue recognized for upfront non-refundable payments, and will vary depending on the amount of the payment as well as the expected development period. Research and development expenses for the first quarter of 2017 totaled $2.1 million compared to $2.4 million for the fourth quarter of 2016. These decreases were primarily due to lower stock based compensation and incentive accruals. General and administrative expenses for the first quarter of 2017 totaled $2.8 million and were essentially flat when compared with the fourth quarter of 2016. The fourth quarter of 2016 included increased year-end stock based compensation and incentive accruals, whereas the first quarter of 2017 included lower stock-based compensation expenses, offset by costs associated with the senior executive transition. Operating loss in the first quarter of 2017 totaled $4.9 million compared with $5.2 million in the fourth quarter of 2016. This decrease is primarily due to lower stock-based compensation and related incentive accruals quarter-on-quarter. Net loss for the first quarter of 2017 was $4.9 million compared to net loss of $5.2 million for the fourth quarter. Diluted net loss per share in the first quarter of 2017 was $0.37 and was based on 13.4 million shares outstanding. Diluted net loss per share in the fourth quarter of '16 was $0.42 and was based on 12.4 million shares outstanding. On a non-GAAP basis, adjusted EBITDA for the first quarter of 2017, which excludes non-cash charges for stock-based compensation, depreciation and amortization, was a loss of $4 million or $0.30 per fully diluted share. This compared with a non-GAAP adjusted EBITDA for the fourth quarter of '16 of $3.7 million or $0.30 per fully diluted share. Stock-based compensation for Q1 2017 totaled $693,000 and was $1.3 million for the fourth quarter of 2016. Cash and investments at March 31, 2017 totaled $13 million comparing with $9.8 million as of December 31, 2016. We believe we have sufficient cash to support planned operations into 2018. Lastly, I wanted to touch based on the share count as it stands today. On a fully diluted basis, we currently have 14.5 million shares outstanding. With that, let me now turn the call back to George.

[George Holmes:]

Thanks, Jeff. Looking forward to the balance of 2017, we are focused on timely and predictable execution as we drive towards royalty revenues. In particular, as we highlighted during our discussion, following the last call, we expect to continue to enjoy the expansion of our served market as we continue to secure designs for current and future customers. We will continue to invest in our ISN platform, enabling our customer to lever their tools, team and technology with the potential to greatly reduce their overall development times and cost. Our focus will continue to be on high value that have the greatest potential for higher than industry average per unit royalty revenues, and that can be converted in the shortage amount of time. And we will utilize our first mover advantage to continue to enable the new segment of the filter market, establish entrants that have the ability to move quickly and leverage their position in the RF supply chain to capture market share. And on a final note, as we have noted in the past according to Navian, the scale of the potential market opportunity for the products we are pursuing is enormous and continues to grow. Worldwide combined annual total available market to the mobile filter market is greater than 8.5 billion and we probably serve the high-value segment of the market that is greater than 2.5 billion, creating a tremendous opportunity for the Company. Now, before providing my closing remarks, I would like to open the lines for Q&A. And I will turn it back over to the operator. Operator?

[Operator:]

Thank you. At this time, we’ll be conducting a question-and-answer session [Operator Instructions]. Our first question is from Cody Acree with Drexel Hamilton.

[Cody Acree:]

George, maybe just follow-up on your last comments about the served available; with the recent signing of deals, recent expansion of projects, any color as to how that might have impacted some of the opportunities you’re addressing as far as revenue potential?

[George Holmes:]

Absolutely. I think what we noted in the last call we were trying to connect the dots for folks on what the market potential was for our customers and the products we had under the contract. For those of you on the call and that were on the call last quarter, we talked about how our customers that have products under contract with us, the percentage of the total market that they have, and how for the products we have under contract, how that stacks up to a total market opportunity for filters under contract with us. At the end of last quarter, we had roughly $250 million worth of filters under contract being designed by our team with our partners. That number has continued to expand and we have not lost any in the last quarter, so we continue expand on that number. Today, we see that somewhere between $255 million and $260 million of market opportunity for filters for us today. The real reason driving that this past quarter is a number of the new designs were from fablets filter entrants that are new to the marketplace. So their market share is much smaller than some of our historical partners and the market share that they've had. But we're very excited about it because we think they’re very well positioned to capture market share quickly. Hope that answer your question, Cody.

[Cody Acree:]

And may be just also your comments; on ISN platform reducing design cycles or lowering cost. Have you been able to get any empirical data about what you're able to fit to the customers, whether it’d be design cycles or cost wise?

[George Holmes:]

We we’re continuing to drive towards that end. I mean it’s a great question. Obviously, we've said historically that team, tools and technologies are fundamental driving force here. And I think one of the things that we’ve done is been able to demonstrate for our customers that we can do it in the shorter period of time. So let me talk about that a little bit. One of the key things that people look at as a key metric is the number of turns. It takes for a company, a filter manufacturer, to get a filter into the marketplace. We’ve historically benchmarked ourselves against the number of 7 to 10 turns. What we come to learn is that for complex filters that we are developing that number is actually much, much higher, and that much, much higher for the Tier 1 manufacturers in the marketplace. We're seeing that in many cases, 15 to 20 turns is pretty normal for them to get a product out to door and ultimately be able to sample it and deliver it to an OEM. What we’ve been able to demonstrate with these early designs is that once we get design lock, and design locks for us is walking down the characterization of the individual fab and get design rules locked down. Once we able to do that, which we can do very quickly, we’ve been able to turn designs and as few as three turns to deliver designs to companies that would in turn be in a position to ship those as finished products to OEM. Significantly reducing the number of cycles, the numbers of turns required to get product into the marketplace. And even more significantly, we have in recent months, seen that we’ve actually been able to get products out in a single turn that is sampleable. So that’s a pretty significant development for us. And how we see that manifesting itself is with our Tier 1 and Tier 2 customers, when they’re out there competing in the marketplace against other Tier 1s and Tier 2s; they’re having products that are cheaper, better size performance and equal to or better performance from an electrical characteristic prospective. So I think on all fronts, we’re seeing that cheaper, better, faster is something that’s in the cards for what it is that we're doing with our ISN platform, and we're getting continue working to that end. And I think you will see that over the course of the next couple of quarters, you’ll probably see some white papers up from us on the specifics to that, much like the white paper we produced little over a year ago on our first band three duplexer.

[Cody Acree:]

And George just lastly then, now that you 30 some odd projects under I guess in progress. Is there any concentration or I guess band count -- band number, frequency where you’re typically getting more concentration of customer interest or just trying to characterize what's the frequency or band numbers that are most in your wheel house?

[George Holmes:]

I'm going to hand this one to Jeff, because there’s a lot of number to go on with this one, and he’s been working on the math for us here over the course of last several months. Jeff, do you want to hit that one?

[Jeff Killian:]

Sure. So in February, when we announced 1 million part shipment, we tried to provide more clarity in the first time that we produced a scatter diagram in our IR package that shows the concentration of designs from a value perspective. And we just updated that slide again, so thank you for the question. And what you're going to see on slide 20 on our webpage in the IR section is a brand new update on that. And so slide 20 what its showing, if you look at the comparison from February to now, the concentration of new design is in the upper customer enabled margin. So the first two designs were proof of our concept, if you will. Now, they're asking us to do the more difficult design that provides them more enabled margin. That's allowing us to get royalties and our license agreement that are above typical market prices. So if you were to compare the upper quadrant, if you will, upper left it shows the highest enabled margin to customer. We have more dots in our scatter diagram, just two months later after producing that.

[Cody Acree:]

George, just one point I was asking though was more so along the line of maybe a frequency range. Are you finding most customer interest in any particular band segments of above a gig and half, below 2.5, something like that, any help?

[George Holmes:]

Cody, we've been shying away from the specifics in that, historically, because at this juncture that kind of would allow companies to really hone in on the devices we're actually doing. But I think it's safe to say that if you look at the higher frequency higher complexity parts, the TBD types of filters, you'll see that we've got some pretty good density in that area. And when it comes to quadplexers, I mean, there's only a couple of quads that are out there that are worth looking at, I mean 13s 266s, are kind of the big ones that we're seeing a lot of play. And I think it's safe to say that we've got some good density in that area and now we've got greater than five quads currently under contract. And I think you're just going to see that continue to be proliferated into the marketplace, because there's not lot of options for quads. Obviously, you've got Avago [ph] and Corvo, it's been a challenge for some of those companies to compete effectively out there in the marketplace with high margins. We think we're going to be in very good shape, because we're doing these quads in both SAW and a combination of SAW and TC-SAW. So as we've expanded our footprint from our ISN platform from just SAW to TC-SAW, it's given us an additional level of flexibility and ability to be creative on how we go solve these problems for specific customers. And it's really allowing us to go after those more complicated higher frequency types of applications. Did that help?

[Cody Acree:]

It did help a lot. Thank you, George. Thanks, Jeff.

[Operator:]

Our next question is from Kevin Dede with Rodman.

[Kevin Dede:]

I was hoping that you could elaborate a little bit more on the number one question probably on everybody as mine is just help sort of de-risk the royalty recognition of revenue going forward, I know you talked to 250 addressable market before and then today's its 255, 260 wondering if you still think that 3% to 7% royalty average fits and what else you might be able to add in terms of looking at that royalty ramp later this year?

[George Holmes:]

A couple of things and let me pull you back a little bit as it relates to 3% to 5%, 3% to 7%, that is the industries typical royalty rate. I don’t believe I've indicated that will be ours, I think I've indicated we should be in a position once that actually gets out there into the market place to show that we are doing better than that. I think it's safe to say that we will do better than that. and that's in large part due to what Jeff just described as it relates to contributed margin that we're allowing our partners and customers to get from attacking these very complicated filters that I just discussed with Cody, and doing it on SAW and TC-SAW rather than BAW and FBAR. That gives them a greater margin potential which makes them more competitive when they have the ability to price product cheaper and leaves a good room for us from a royalty perspective. I think though if I wanted to circle back and give you a really solid view. I feel pretty good that we are going to be on average better than 3% to 7% range.

[Kevin Dede:]

Just looking at the second half of the year in light of the 250 and 255, 260 do you see that continuing to escalate through the course of year and how do you suppose we should think about the way that you'll be able to recognizing it?

[George Holmes:]

Two really good questions. One, if you look at it -- as you look at kind of what we have done quarter-over-quarter since we signed our first licensing agreement in Q2 of last year and you can actually isolate the quarters. I think its little bit difficult and I know that folks like yourself and Cody and Lu have all done your best at trying to figure which quarter these actual license agreements got singed in. But if you look at it, it really went from about five then we did eight then we did -- we expanded couple of those and got -- we were able to split couple of those, so that of the eight we actually got couple of additional products out of those. And then in the first quarter of this year we signed an additional six and then basically the day -- first day of the second quarter we signed another two. So we have pretty good velocity. It's been pretty consistent. We did first quarter even with Chinese New Year which basically six to eight weeks out of the quarter, we were able to keep that momentum. I think we're going to continue to see that, I think one of the things clearly Kevin and you know this better than I do, as we look at the impact of what's coming i.e. 5G, it just creates a tremendous amount of opportunity for us. Whether it's the greater number of bands, whether its carrier aggregation, whether it's Mymo all of the things that you get that it just truly drive the overall proliferation of filters and filter requirements product density on the board. It really just exacerbates a problem that already exists in the marketplace, which is, there is not enough filter designers to design the number of filters that are required in the marketplace, that's a tremendous uplift in opportunity for us, because we just make guys more efficient as we talked earlier. And when you make companies more efficient, giving them the ability to do more resides in the shorter period of time, I think that's going to create opportunity for us. So I think from our perspective you will continue to see that customer acquisition, design and licensing proliferation continue, I think we've got a great pipeline, the customers we have clearly we've demonstrated that once we get engaged with them they extend the work that they're doing with us, so I think the answer to your question is, we are going to continue to see a great opportunity for us.

[Kevin Dede:]

Okay, so you touched on 5G, George. I know you folks have put a pretty nice white paper on that, that looked like it had all the handy work of Dr. Eddy [ph] behind it. But I'm wondering if you wouldn’t mind sort of just peeling that onion back a little bit, I mean you mentioned brand, carrier aggregation, Mymo. But it seems to me that IoT is an interesting aspect there and I'm wondering how you might address that and where developing the that software developed kit sits in your strategy going forward?

[George Holmes:]

Yes, that's a great question and when you throw things in like IoT Kevin as you well know you are now outside the room of the 50 billion units that are there being driven in the mobile market you are now in the ancillary markets, the low price filter segment of the market, which is one that we are not addressing directly, but one that we would address through the potential of licensing our software to others to go after those segments. IoT is one of those segments, clearly medical is another, automotive is another, another 15 billion to 25 billion depending on how you count it, and only going to continue to expand as we see the proliferation of smart devices that have antennae on them virtually everywhere. So what does that going to mean to us I think that's going to mean additional opportunity that would be completely accretive to what it is that we are doing by licensing our software. So than the second question I think you had is where we at on that front. We completed as we had indicated previously on previous calls. We completed the development of the first phase of our ISN platform and have done internal testing and demonstration to some key OEMs. We are not in a position today to start rolling that out. We're focused on core business today with 30 plus designs under our belt, we are leveraging that software platform to make sure that we are aggressively supporting those customers and driving ourselves to first royalty revenue. In the second half probably late in the second half part of this year I think you will see that we may start demonstrating that more actively, but its defiantly a hook we have for new customers to get them engaged, hope that helps.

[Kevin Dede:]

Absolutely thanks George and Jeff question for you on share -- the non-stock shares comps there at almost 700,000. Could you just help me understand how that breaks down between your operating expense lines?

[Jeff Killian:]

So stock comp expense will be identified in our Q, which is due to be filed here shortly and I think it split just about nearly half and half, but the details will be coming out on our foot notes six here shortly.

[Kevin Dede:]

Okay, since I have you here, could you just comment a little bit on how to look at OpEx going forward in like of your hiring plans?

[Jeff Killian:]

So we continue to strategically have positions open, mostly to expand our R&D resources to manage the increase numbers of designs and George articulated today. And so we look to be able to increase our capacity and have more designs and so by the end of the year executing to our plan, we could probably be in a position to handle up to a third more designs if you will at any point in time.

[George Holmes:]

Concurrently.

[Jeff Killian:]

Concurrently, thanks.

[Kevin Dede:]

Okay, but I'm just wondering how -- what you would recommend us do when looking at the OpEx implications of that?

[Jeff Killian:]

So from a run rate prospective, I think that from a modeling it would be prudent to take your R&D line up modestly over time, you will see in your Q filed today or later tomorrow that our headcount was basically flat within one of where we were to the end of the year, but we should be taking that R&D line up by the end of the year 10% to 15% type of shot, slowly over the quarters, as we add new strategic engineers to our production tools.

[Operator:]

[Operator Instructions] Your next question is from Suji DeSilva with Roth Capital.

[Suji DeSilva:]

The customers you talked about -- the four customers you talked about the million unit, I'm curious for that four customer if they are ramping into or planning to ramp into, if they are all roughly equal size or one or two of them are considerably bigger than the other two, just to understand the concentration opportunity in that customer.

[George Holmes:]

Suji that’s a great question and I wish I could give you a definitive answer. You may recall in last call or two calls ago now, when we announced that, our customer does not disclose specifics of who their customers are, what they disclose to us is shipments to customer A, B and C and along this case A, B, C & D and quantities per and the fact that they are either Tier 1 or Tier 2 or Tier 3 or white box manufacture. In this case these were all white box guys and the distribution was pretty even across the board with them. But unfortunately, we don't have for that type of customer we don't have specific insight into who they are and what their challenges are. Now that said clearly our customers when they're engaged with some of the larger OEMs, they do get us involved, but in this case that wasn't what we were working on.

[Suji DeSilva:]

Well George the color you gave was pretty helpful in terms of [indiscernible] relation profile there, so thanks for that. And then kind of my naïve notion as a customer that's coming new to filter, what you're helping get into it, industrial customer might take longer by some multiples to get to market then, somebody who already sells filters, but I could probably argue the converse some of those new is quick, they're going to be less baggage, first of all is that a kind of base notion, correct me, it's still kind of how much longer would a new customer to the filter market take over somebody whose already been doing it when you help them?

[George Holmes:]

So there's two -- there's couple of things that play here, let's talk about a new foundry first getting into the mobile filter space when they've been historically in the industrial filter space, so they already have installed foundry. So, what they don't know how to do is they don't know how to use the design for designs specifically for the mobile application. We're able to help them do that and we're able to characterize their foundry specifically for things that are important. And so it actually moves pretty quickly because they already have a process that's well defined. It's just targeted as a different application set. That's kind of one piece of the puzzle and then we move pretty quickly and clearly that's pretty indicative, I think you'd find also as you move up the food chain whether it's a foundry or whether it's an OEM, as you move up the food chain to a more a Tier 3 or Tier 2 or Tier 1 OEM, design cycles just get longer because they are much more sensitive to their market perception and position in the marketplace and the reliability of the components and the product they put into the market. So, little guys tend to be nimble which is a good thing. Now that said when we're talking of the fabulous filter company in some cases these are very-very large RF -- RFIC houses, and interestingly enough they're moving pretty quickly as well, but they're companies that already know how to leverage a third-party foundry, the fact that we're able to deliver them things that they're used to seeing from a model, from a synthesis perspective, I think is very-very helpful. So, when you're doing finite element modeling and you're doing synthesis and you're delivering complete models to an RFIC house and it looks very similar to the kinds of models and synthesis tools that they get out of their silicon side of the house, I think that gives them confidence to move much more quickly and I think that's what we're seeing. And that's one of the distinct advantages if you recall of our overall platform. Unlike our brother in the dual filter design the old fashioned way, I mean we're all about finite element m modeling, synthesis and delivering models such that when it gets to a fab it looks just like what they know how to do from a silicon perspective.

[Operator:]

Our next question is from Lou Basenese from Disruptive Tech Research.

[Lou Basenese:]

George and Jeff just a couple of quick follows up, just on the customer acquisition sides, since you guys are doing with likely be considered a finite customer pool, how many new customer acquisitions are reasonable to expect possible before the end of this year or may be on a quarter by quarter basis?

[George Holmes:]

That’s a great question Lou and I would have told you, when we started this little project a year ago or at least when I started this project a year ago, it was pretty finite and you'd probably say 20 guys represent 85 %plus of the overall market, fact that now we're adding in this component of fables filtered houses, guys that are currently in the RF and end stage, power amplifier guys other model guys, you may double that total number, probably not the top 80% still probably 25 to 30. So to get to your question, what does that mean to us from a customer expansion prospective, we get one to two a quarter, I think we're doing pretty good, consuming the types of customers we’re going after today and the fact that we're much more particular then we once were because we can be. So I think one to two quarters we went to year it was 10 to a dozen I think that will be a good number.

[Lou Basenese:]

Okay appreciate that color and then just one the preproduction parts you guys said, I know that was a meaningful milestone but are there any customer that aren’t allowing you announce preproduction parts or refusing to announce progress until parts are actually in a phone?

[George Holmes:]

Well its interesting, customers kind of on all fronts really are not excited about us talking about our progress in the market place. And they really want to let their work speak for itself, so they want us behind the scenes. We have the good fortune that that one partner allowed us to talk about it, because it was a pretty major milestone and corporately for them was the major milestone was well because they were now shipping products into the mobile filter space. So it's pretty hard to get guys excited right now to allow us to talk about what we're doing with them from the business prospective. I think one other things that may be happen, however is over the course of time you may see the potential for us to do somethings that are maybe ancillary to talking about product. So maybe talking about collaboration with specific company on technology ideas to address specific needs in the market space, so you might see collaborative papers for example. And while that’s not definitive its least indicative of the kind of people that we're working with on a day in, day out basis. And I could easily see, given the kind of relationships we have that kind of things happening over time.

[Lou Basenese:]

Okay, so it is conceivable that there are other customer out there that have productions parts out, but you can’t disclose that. I guess that just leaves natural into it. The only other question I've question of that, just thinking about specific milestones that you reported, talks about reducing risk as we have towards royalty revenue. Are there any other milestones that we should be looking out for that would be a positive leading indicator of that revenue ramp or that ultimate recognition of royalty revenue.

[George Holmes:]

Well as you know, I think we’re just getting rubber's going to hit the road this revenue quite frankly Lou, when can actually talk about royalty revenue that's meaningful. But what I can tell you is as we go down the path and you look at things that would happen, clearly there is the potential just like in semiconductors when -- I mean a good example, right, the iWatch came out and it had wireless charging in it nobody knew who put silicon provider for that so what happened is there were tear downs done and through that tear down process it was announced by one of the tier down companies that there was a specific chip manufacturers part in that iWatch. I can easily see that happening here and I think for us that would be a great milestone as a precursor of revenue. Clearly a tear down activity of a Tier 4 phone would be interesting to know that we are in the marketplace and in a tier 4 phone, but the higher up the food chain, the closer we are at the tier 1 the more significant that kind of activity would be and clearly we would do our best to support that and help facilitate, making sure that people could understand that our technology was on the marketplace. Does that help?

[Lou Basenese:]

Okay, no that's helpful. I appreciate. Thanks for taking my questions.

[Operator:]

There are no further questions, please proceed with your closing remarks.

[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. I also want to send our appreciation to our investors, who've have taken time to understand our ISN pilot customer acquisition cycles and the key milestones that we believe had significantly reduce risk in the advance revenue. Clearly royalty revenues will be the foundation on which we build the company. And our continued expansion of our customers base and designs under contract will be what ensures that trajectory. Our strengths lie and the transformational capabilities of ISN platform, which allows us to design complex filters duplexes and quadplexes to capitalize on the continued expansion of mobile filter market and to address the new and expanding market drivers like 5G with this explanation and back on demand for filters. And requirement for higher NIT [ph] rates and throughput and the addition of carrier aggregation, Mymo and higher transcend powers and modulations teams will continue to drive that those are market and create additional opportunities for companies like ours. We would like to thank you again for your attention and have a good day.

[Operator:]

This conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.