How Resonant grew Resonant 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...