How Resonant grew to $3M revenue and 5 customers in 2021.

hey folks my guest today is mr george holmes who joined resident in 2016 as the ceo prior to joining the company he served as chief commercial officer for tygo energy where he was responsible for expanding the company's demand creation activities resident is focused on solving the 5g traffic jam uh mr george home is ready to take to the top yeah fire away all right so what does it mean when you say solving the 5g traffic jam for folks that don't understand what 5g is why is there a traffic jam right now oh gosh that's a that's a great question so traffic jam is probably an interesting way to put it i mean we look at 5g is right now the promise what is to come right the the world today we're talking about all the things that will be enabled by 5g yet we're a long way from it so you know the operators today are trying to get the infrastructure in place they're trying to create the footprint we hear all of the commercials around what t-mobile is doing what att doing what verizon's doing yet today we as consumers don't get access to it you know we're looking for that 30-second download of a high-def movie as we're jumping on an airplane just doesn't happen today it won't happen for a couple of years so we've we've got a real good idea of what's coming but the the road rap is not quite materialized yet now like i talked about pre-show most of our founders we have on our sas founders you're more focused on sort of iot in this 5g problem you're also publicly traded so let me not bury the lead here what was trailing 12 months revenue and what percent was hardware over software so if you look at our business you know we we were you know a public venture-backed startup so that means we're a publicly traded startup company we did three million dollars in revenue last year rough numbers um and that is royalty revenue so we get paid on the shipment of products on a per unit royalty basis and we get about 10 royalty so we enable about 30 million dollars for the revenue last year and we haven't uh we haven't really given guidance on what this year will look like other than the fact that we're doing better quarter over quarter every quarter yeah i don't want you to get you in trouble here with the sec so let's only talk about historical numbers here for a second empowered 30 million dollars of gmb of which you took 10 which is 3 million what is that 30 million what is that money flow that you're empowering yeah we're you know we do filters for mobile devices in particular you know we are in that rf front end that a wheel enables the communication between two different devices a filter is that physical fence between frequencies you've got a lot of different things coming into your mobile device you know if you look at kind of the first handsets that were enabled uh back in 2007 when the first iphone came out it had about half a dozen filters in it today the current 5g iphone has about 100 filters in it just a lot more data pathways going back and forth as we're trying to push more and more data to the mobile handset and we are the little fences between those frequency paths okay so it's a pure hardware play there is no software upsell here ah so the the interesting thing about that is what we do for a living is completely enabled by our software platform we have an eda software development tool that allows us to design these rf filters we are the only ones that have a tool like this that allows us to do three-dimensional modeling of acoustic wave filters and so it's that software tool that has allowed us to create the devices that we actually license to other people so our business is made up of three fundamental components a software component an ip component and an integration component we put those three things together and we license technology to third parties who was a third party you might license to broadcom corvo skyworks uh you know you name it anybody that's an idm an original device integrated device manufacturer targeted in the r front end um you know there are seven companies that represent 98 percent on the market starting at the top with mirada corvo skyworks broadcom qualcomm wysol and tayo yuden that's the big those are the big kahunas in this space and they're the ones that really enable everything we do from an rf pathway perspective now george can skyward and broadcom pay to directly use your eda software tool themselves or do they have to go through you they have to buy the hardware from you they can't use the software they have to come through us we do not license our software to third parties today um we've designed it so that we could but technically what we're doing today is we take our software tools we leverage our ip portfolio which is well over 300 patents filed and issued um and we put those two things together and developed designs for our customers i see okay so let's talk about the 30 million dollars in gmv and i want to try and make this relatable to our listener so i'm holding up my phone right now like can you point to the piece like if i open the back of my phone that like you would make right that you're making a 10 cut on uh you don't know it's a grain of their size of a grain of sand they're very very small devices and they're they are physical hardware devices they are actual physical things you actually go and touch um but they're very very small and you know they're like i said if you've got a brand new iphone it's got a hundred of them in that phone oh wow and they're integrated into modules typically and those modules are provided by those big players we just described okay so let's just use an iphone because everyone listening understands an iphone okay what is apple or skyward or broadcom weber paying you to get those hundred little sand sized devices into one phone well that's a great question so a company like us gets paid a royalty on a per unit royalty basis and we get somewhere between seven and fifteen percent of the asp the average selling price of the devices that we're designing uh as i told you we made three million dollars in revenue ourselves last year we enabled roughly 30 million dollars worth of devices to be sold into the marketplace to earn that three million dollars um if you look at the devices that go into that iphone and you look at the kind of the components that go into that you know about about 20 to 25 percent of the total material cost of the phone is the rf front end and it's that our front end that has all of those components got it so so in this phone what there's a hundred or two hundred dollars worth of hardware that one of these folks had to pay you to get access to no it's about it if you look at the actual hardware cost the phone depending on which phone you're looking at you know um that you're talking in about a thirty dollar range that's what the costs are financed okay so anyone listening right now should think of you like you sold a 30 component that made their iphone work they made it possible of that 30 thing that you sold you made about three bucks you know if we sold every single device that went into it that would be about 70 percent of the total rf front end cost so 30 but 30 bucks times 70 is 21 bucks that's about the filter cost that goes into that of that 30 bucks that's about 100 devices you know so 100 devices you know you're about you know 21 divided by 100 that's the number of you know types of sizes of components on an asp perspective we might get two or three of those devices depending on who the customer is that actually is supplying that our front-end component to that phone manufacturer so we've sold right now over 60 million devices into the marketplace so customers our customers um have sold those to uh phone manufacturers today and how many of the little sand size things have you guys manufactured in the past year is that a is that a good question well except that we don't manufacture remember we license technology to folks that they in turn manufacture okay i didn't know that so you don't have hardware you don't have cost of goods sold for physical we don't we don't make anything which is why that three million dollars that we made last year from a royalty perspective is so important we have no below the line cost associated with me the development of that revenue it also you wouldn't report in your revenue then as a public traded company you wouldn't report the 30 million gmd you'd report the 3 million we provide three million correct so how the heck are you it's gotta be patent portfolio your market cap right now is about 227 million dollars that's a ridiculous valuation for anyone thinking about that compared to private sas or private hardware companies how why so big well and we think it's small actually we think there's a a lot of weight a lot of room to run with that number right now and i'll tell you why as you look at what we're doing as a you know a publicly traded micro cap company that is truly a startup company in the early stages of revenue we are delivering on the promises that we made two or three years ago and we continue to deliver on those promises as we continue to grow quarter of a quarter it's the opportunity that we enable if you look at the opportunities that we enable for example with our most recent deal for 5g filters we are going to enable several billion dollars worth of revenue for our customer so it's that opportunity that i think investors look at it's the enabled revenue opportunity that we're creating and us continuing to deliver on the promise against those targets that will make that happen are you pricing too cheap i think we're cheap that's that's my view i think it's a i think it's a great value today for sure why haven't you increased prices well we don't uh oh two different two different questions i think my stock price is too cheap you're talking about if our of our prices of what we sell for today yeah if you're if you're enabling these folks to sell so much gmb maybe you're pricing you mean maybe you're too cheap yeah you know it's a great question i would tell you that if you look at the largest uh licenses licensors of technology companies like arm testra siva and whatnot they're very happy to get one to two percent royalty we're getting on average seven to fifteen percent royalties so we think we're in pretty good shape from that perspective um the other thing that we're doing as we go forward we're we're selling our technology on a on a prepaid royalty basis so now we're actually getting paid before our customers actually deliver a product into the market so we're doing that to really to make it more predictable for our royalty revenues going forward um i think as we see the opportunities continue to expand and and the work that we're doing today i think we'll see that the our revenue numbers will grow and they'll grow exponentially over the course of the next three or four years and as a result company uh investors didn't invest in what we're doing we'll see a tremendous uplift in the opportunity set yeah your reported revenue back in 2018 was 524 million i believe you joined me when you sorry 524 000. when did you join the company what year 2016. okay yeah so that was that was two years after you joined you've since run from half a million revenue to 3.2 million in scaling 12 months revenue according to public traded issues here but the flip side to that is you spent your operating expense your op-ex was about 32 million to generate 3.2 million in revenue a lot of that is 19 million on rnd how much of that is subsidized by the government none okay so you don't get any subsidy so how are you funding the visit i mean you're burning capital like crazy 30 million a year yeah well we raise money in the public markets so um you know we did that through public offerings um we have some tremendous investors that believe in what we're doing they believe in the opportunity set you know as we noted on our last quarterly call you know we've continued over the last seven to eight quarters to meet or exceed you know our projections uh on unit volume and revenue growth of our legacy business and on our future business which is all the 5g and wi-fi 6e business that we're working on we continue to exceed expectation there as well beating our internal and external reported milestones and our largest customer happens to be the world's largest filter manufacturer they've in turn reported to their shareholders that the most important technologies that they have uh going forward for the rf front end include resonance technology so we're pretty excited about that and i think it's going to ultimately yield pretty significant dividends uh we noted on the on our last quarterly call we believe that customer has the potential to generate over 100 million dollars annually for resident uh you know as they get to full volume on delivering filters into the 5g space and that's one of seven tier one companies so we think the opportunity here the opportunity here is very large and you know resident at a you know north of 100 million in revenue is going to be a very significant company in the marketplace how long does it take you to get 100 million revenue you know uh we're we're thinking that the opportunity set is in the 2025 2026 range is where those opportunities will present themselves as the unit volumes continue to expand and the number of devices continue to expand over the course of the next several years yeah it's obviously exciting when you take uh 28.8 million back in february of last year in post ipo equity help us understand what that means oh okay that's a great question so you know if you look at the the the cash that we've raised over the course of the last several years you know we're burning right now uh about rough numbers uh six and a half seven million a quarter and that is all in r d for the most part i mean the biggest chunk of it's in r d which is largely what drives this you know massive ip engine that we're creating i mean well over 300 patents filed and issued over 150 are in the 5g space we are arguably in the top six from an ip generator perspective in the ba filter space i believe will be number one or number two definitely in the top two or three uh by the end of this year um makes is a very significant company from a technology asset based um perspective and that's what we're going to go create new designs against which will allow us to get and maintain these high royalty rates the georgia last year excuse me who put in the 28.8 million last year it's in the public markets it's you know hundreds of investors we sold public we sold shares in the public market oh i see got it got it okay will you do that again this year no that's we've uh we've noted in the last our last quarterly call that we have cash into early part of next year assuming no additional revenues yeah okay interesting many people would argue that a patent portfolio is only as valuable as how you've defended it and won in court so over 158 patents you have issued in 5g how many of you defended in court and won none okay so like like are they worth anything well that's a great question um and yeah i think you're absolutely correct you know your patent portfolio you know the value of a patent portfolio is based on the number of defenses that you've had and what you've won and ultimately you know as we look at our portfolio we have not defended it yet but uh you know we're on the front end of developing a portfolio and uh it still is larger than in most of our potential customers and i think where we're at today as we go through and work to build this portfolio out you know defense is really not the position we're looking at clearly the people that we partner with have um the opportunity to take this technology and leverage it and uh you know as we sit back and see what happens you know i think there's gonna be some opportunities for that to uh materialize into some real uh royalty streams for us in the future last question why not sell the eda software direct to sky work let them pay you a hundred thousand dollar per year contract value super high margin and then you can still take the royalty revenue too for folks that don't want to buy the software direct yeah it's a great question it's one of the things when we created the software platform uh we we created with the that in mind um you know we aren't doing that today uh today we've validated the technology against a multitude of different different foundries uh i think we have over 12 foundries that we've actually qualified the the platform against over six that we've qualified our 5g technologies against and for us you know right now we're thinking we're getting better value out of the go to market model that we have but we have that in the goody bag that if we want to extend the platform uh and start licensing that software platform on a go forward basis we have the ability to do so last question why is a guy like you do this 2016 it sounds like probably had a cushy job at the energy company why decide to jump into this you know i'm a startup and turnaround guy i've been doing this for 35 almost 35 years now um you know spent the first half of my career you know working in companies that were in need of turnaround or rapid growth and been doing uh startups for the last 10-15 years this is fun we're having a ball i mean i work with a great group of scientists right now probably the best group i've ever worked with you know i've got roughly 70 employees better partner 50 of them are in the technical side i walk into a room i'm clearly the guy that's got the fewest number of digits behind his name it's just a lot of fun working with a lot of really smart young people that are doing really exciting things and we think we're in a position to kind of change the overall market and how many how many customers in the last 12 months made up this 3.3 million revenue a couple of customers last year got it so yeah it's very much an enterprise sales motion it's four or five yeah yeah yeah interesting well you're in hot space it'll be fun to see what happens next george i appreciate you doing this let's wrap up with the famous five number one what's your favorite business book oh my favorite business book oh goodness gracious you know what i'm not a guy who goes out and reads business books so it's it's an unfair question to me i spend all my time reading email every day all right number two is there a founder you're following or studying uh who excuse me a founder a founder well i mean i think we all watch what's happening with elon musk just because he's an interesting guy to watch and follow and for those of us who live in austin we've got to see what he's going to do to our town well he's increased property values that's for sure uh number number three what's your favorite online tool for building a business favorite online tool well you know i said to say i'm a salesforce junkie so what can i tell you all right number four how many hours of sleep do you get every night george four that's not healthy four hours you know we were just talking about that that's the only reason i know that it's four three to four if i'm lucky i'm getting old you don't sleep much really for how do you survive i mean i would die on four hours of sleep i'm 31 and healthy well and i would say i'm not 31 and i would say i'm kind of healthy how's that why don't you get more sleep it's i mean seriously that's like you can't go four hours every night without seriously i i get to bed at night and i wake up in the middle of the night and i start thinking about what we have to do and i get up and i start working on it's just i'm having a ton of fun i guess when uh i guess you know it it'll come a time when i don't have this kind of fun stuff to work on and maybe i won't be thinking about it 24 7 and i'll get a little more sleep but as it stands right now that's why that's the way it works blackrock owns 5.4 percent of your outstanding shares when they listen to something that do you think that that's an advantage they hear that go we love it george is working hard he's only asleep sleeping four hours that's a great question i don't know i mean the uh as i sit back and look at it those weren't the things that they were worried about when i when i last talked to them they're more worried about some other things as it relates to what what our business is doing and i think we are we're doing a great job at uh creating value for folks like that so at this juncture i think they're probably pretty happy all right george and what's the situation married single kids oh i'm married with two kids i've had two daughters that are just out there having a ball doing great drinks how are you how am i i'll be 59 this year 59 last question what's something you wish you knew when you were 20 oh what i wish i knew when i was 20. uh you know i i think if i was 20 and doing it all over again i really would uh i really would have liked to know that uh you know it's uh there are a lot easier ways to make money or probably done software fully from the from the get-go hardware is hard they call it hardware for a reason there you go george holmes with resident.com publicly traded sas company did 3 million and trailing 12-month revenue spent about 30 million to make that revenue though so reinvesting mainly in their patent portfolio and r d team 75 people on the team 15 engineering and 300 patents 150 in the 5g space they're purely a company focused on licensing this piece of hardware at 30 million bucks in gmv last year again make about 10 of that they built an internal software they haven't started selling that externally yet but we'll see what happens there as they look to continue to grow again 75 people 227 million market cap today we'll see what happens next george thanks for taking us to the top thank you one more thing before you go we have a brand new show every 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