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Resonant 4Q16 report +4

17:51 30-Mar-17


The Resonant conference call has just concluded and the press release did not include numbers specific to the fourth quarter.  Quarterly revenue of $87K was mentioned on the call, but honestly, none of that matters much at this stage.  What does matter is some color that finally allows for projections of some VERY rough revenue numbers going into next year:

It remains to be seen how much market share Resonant's customers will be able to capture, but management expects it to be a very high percentage, and that its royalties will also be somewhat higher than average due to the superior designs.  At best, with 100% market share, Resonant might be expected to earn in excess $1 per share on the parts that are already in process with customers.

Against that one has to balance the considerations that Resonant finished the quarter with $9.8M on the balance sheet, and burned through $2.9M last quarter.  That burn rate might increase slightly going forward, but should not multiply.  This makes it a close call as to whether or not initial license revenue from the parts that have sampled will arrive in time to preclude further dilution.

For the long-term, however, you can start to see why I say that Resonant probably has the most upside potential of any company that I cover.  The company is demonstrating completing designs in half the traditional time, and it is now categorizing designs in three major categories:

Name
 Description
 Design Time
ISN-Ready relatively simple (SAW, etc.) designs with very well-understood and clear qualification parameter
 9-12 months
ISN-Pilot more difficult designs (such as Quadplexers) with existing, clear parameters
 18-24 months
ISN-Advanced experimental designs such as tunable filters
 Longer

It is also a very good sign that Resonant's largest customer has advanced from 2 to 15 designs over the course of the past year.  The company now has 25 parts in process at 3 customers, with additional deals and customers are expected.  The TAM for all the product types that Resonant is currently working in was cited as $2.5b.  Management eventually expects to be able to service the entire high-end filter market, with a $5.8b current TAM.  Using the license fees above, that puts the eventual revenue opportunity for Resonant close to $3b.  There is still a lot that can go wrong and RESN remains firmly in the GRoDT category until commercial license revenue starts coming in.  So far, so good, though.