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Resonant 3Q18 results -4
17:50 13-Nov-18
The Resonant conference call has just ended and some very good
color was available. Analysts also questioned the mere $30K of
royalty revenue, and that is due to simple filters being in
short-lived consumer products. In the meantime, royalty from the
newer more complex ones is taking longer than Resonant's customers
had projected, but they have not gone away. This is particularly
related to China Mobile and 5G carrier aggregation. The new
schedule for hitting 7 figures on a quarterly basis is 2Q19 and
4Q18 could turn out to be similarly disappointing in terms of
revenue recognition. However, PMTx should help to avoid endless
slippage, and many data points, including new ones that I'm still
writing up in conjunction with the Vodafone call, indicate that 5G
is ramping and will get traction over the next year or two. For
now, I note that Resonant's parts-related revenue should precede
the service revenue associated with stocks like VOD and CTL.
Getting back to concrete statements on the present, royalties are
coming from 3 customers now, with the latest being the fabless
customer, but it just started at the end of last quarter.
Hopefully that helps to mitigate what I just said in the first
paragraph. Management says that customer should also be
introducing a module (as opposed to a part) which is another step
up the value chain. Also, some handset testing is now being done
by Resonant as it gains credibility, which is a big step that
shortens time to qualification. All of these factors lead me to
believe that Resonant can still avoid dilution if it manages to
ramp revenue according to the revised schedule.
More important for the long term is that the BAW filters
developed with XBAR look to be a little over a year off from
customer sampling. Performance details on the initial resonators
will hopefully be able to be shared at Mobile World Congress at
the end of February.
Licensing Resonant's software was also discussed. Management's
response is that it only wants do that if it can license on a per
unit delivered basis. That is likely to only be available as
Resonant's customers disrupt the market. I think that management
is wise to hold off in this area, since software distribution
winds up being a big risk toward leaking and devaluing proprietary
technology.
Underlying all of this in my mind is the possibility of market
incumbents recognizing newly disruptive technology, and seeking a
financial solution. I can't guarantee this will happen, but my
experience leads me to point out that the difference between
fundamentally new technology, which Resonant seems to have, versus
just new business models is critical in these sorts of
situations. I will look at Macom's report, as promised, but clues
and thus further follow-up are unlikely. Failing that, the real
question will be how difficult duplicating Resonant's technology
would be, as per my prior paragraph. Resonant still seems to be
on-track, even though the original schedule was overly
optimistic. Nothing is assured, though.
It seems like Resonant's customers were overly optimistic about how quickly parts would be qualified by end customers. Even so, the market reaction seems like is an opportunity in conjunction with the following data points which have been revealed so far:
- 17 devices accepted, 20 by year end, 30% tier 1
- 6 devices generating royalties, 4 more this year
- Royalty rate increased to 9.4% from 9.2% sequentially
- Over 60 devices are now contracted, with about 75 expected by next year.
- First fabless part to enter the market this quarter.
Additionally, the ISN Compare & PMTx software that Resonant has introduced do look revolutionary, as does the XBAR process. Management is maintaining its long-term growth outlook, and is still in its prepared remarks. More after the Q&A.
On 11/13/18 4:24 PM, Esekla wrote:
Resonant has reported its results for the third quarter:
- a loss of 18 cents per share misses by a penny
- on $115K of revenue, which misses by $285K
There is no explanation for the gaping revenue miss, which has the stock down 17% to $2.40 at the moment. The conference call starts momentarily, and I will want to hear if this is a matter revenue recognition timing, or a more problematic accounting issue that I worried about.