Resonant Inc (RESN) Q4 2020 Earnings Call Transcript

Resonant Inc  (NASDAQ: RESN) Q4 2020 earnings call dated Mar. 15, 2021.

Corporate Participants:

Greg Falesnik — Investor Relations

George B. Holmes — Chairman and Chief Executive Officer

Martin McDermut — Chief Financial Officer

Dylan J. Kelly — Chief Operating Officer

Analysts:

Tore Svanberg — Stifel Nicolaus — Analyst

Rajvindra Gill — Needham & Company — Analyst

Cody Acree — Loop Capital Markets — Analyst

Kevin Dede — H.C. Wainwright — Analyst

Presentation:

Operator

Good day and welcome to Resonant’s Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Greg Falesnik from the MZ Group, the Company’s investor relation firm.

Greg Falesnik — Investor Relations

Thank you, Operator. Please note, we’ll be using a presentation during today’s call, which is accessible on the Events page of Resonant’s IR website. If you are with us today via phone, please go to the Events page to either view or download the presentation to follow along.

Turning to Slide two. Earlier this afternoon, Resonant released financial results for the fourth quarter and full year of 2020. The earnings release that accompanies this call is available on the Investors section of the Company’s website at www.ir.resonant.com. Additionally, some of the information in this conference call contains forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression 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 statements are 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 call, 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 call.

With that, it is my pleasure to turn the call over to the Chairman and CEO of Resonant, George Holmes. George, the floor is yours.

George B. Holmes — Chairman and Chief Executive Officer

Thank you, Greg and thank you everyone for joining us on today’s call. I would like to welcome you to the fourth quarter and full year 2020 financial results conference call. Joining me today is Marty McDermut, our CFO and Dylan Kelly, our COO who will be joining for the Q&A.

Turning to Slide 3, 2020 was a remarkable year for Resonant as the trend towards the connected world continued to accelerate and therefore so did the need for effective RF building technologies. For mobile video conferencing and streaming, through emerging applications such as autonomous vehicles and remote surgery, demand for mobile data continues to grow exponentially. Our proprietary technology platform at its core, enables the design and manufacturing of wide bandwidth, high frequency RF filters for high performance networks. As the need for data ramps up in our society, we are proud to be able to continue to play a critical role in delivering a new age of connectivity.

Let’s look at some of the key highlights from our fourth quarter and full year 2020. Revenues for the full year were a record $3.2 million, which is over 330% greater than our revenues in 2019. Let me remind everyone that these are royalty revenues which suggest the equivalent annual component sales of roughly $30 million based on our historical average royalty rates of approximately 10%.

Over 6.9 million units developed with our ISN design technology were shipped by our customers to OEMs in the fourth quarter of 2020, representing a year-over-year increase of over 200% and a sequential quarterly increase of over 65%. This momentum allowed us to hit the milestone of our customers shipping over 50 million RF filters designed with our ISN design technology. This represents real production unit volumes that have been shipped and sold by handset manufacturers to consumers, not just sample or distribution shipments.

Even in light of our accelerated unit volumes in Q4 and record revenues for the year, the most significant developments remain with our breakthrough XBAR RF filter technology, which is quickly being recognized as one of the best solutions in the industry to unlock the future of next generation ultrafast high frequency networks and the applications these networks enable. We continue to work closely and execute upon our strategic partnership with the world’s largest RF filter manufacturer, bring XBAR to the market for mobile handsets.

We passed the second milestone of the agreement ahead of schedule in October 2020, which included major technical milestones in achieving previously determined performance, packaging, and initial reliability targets. Upon passing this milestone, we received a $2.5 million royalty payment and most importantly, are now moving into the mass commercialization and high volume manufacturing phase of the agreement. More on this later, but all of our work with this important customer has remained on track and ahead of our published schedules.

In addition to XBAR’s progress on the mobile side, we also showcased the ability to successfully manufacture XBAR filters for non-mobile applications using a standard surface acoustic wave or SAW front end process in multiple foundries. This fundamentally validates our ability to produce these filters faster, better and cheaper by using only proven, high volume manufacturing processes as opposed to traditional Bulk Acoustic Wave or BAW foundry processes which are more complex and expensive.

To date, six separate foundries have now successfully manufactured our XBAR filters, which again is an industry breakthrough. Why? Because it demonstrates XBAR’s simple manufacturing process, applicability to high volume foundries and fundamentally lower cost. Indeed, 2020 was a momentous year at Resonant and I am pleased with the validation of our XBAR based solutions in the market. We are just now getting to the point where we believe our technology will not only be proven as the best, but also the only solution to unlock the true potential of our 5G, 6G, Wi-Fi 5, 6, and 7, ultra-wide band and potentially even millimeter wave. Driven by this market recognition and potential, we expect 2021 to be the breakout year for our XBAR technology.

Turning to Slide 4, there’s a ton of excitement in the media around the promises of 5G and understandably so, as it will affect every industry and broadly improve many parts of our day to day lives. However, I’d like to spend some time clarifying where we are, where we are headed as it relates to the rollout of 5G as well as the ultrafast next generation networks such as Wi-Fi and ultra-wide band, which are often dependent upon each other and are critical to the connected world we all envision in the future. The improvements in speed and latency with their foundation in power handling and high frequency and wide bandwidth, the next generation networks required to open the door to massive connectivity between people and things are taking shape on a broader scale.

Mobile phones, smart devices, home appliances, connected vehicles, and many more applications are poised to benefit from this real-time communication and all of the networks powering these applications need RF filter solutions such as the ones Resonant’s XBAR technology enables.

While the network operators are working hard to deliver nationwide 5G coverage in its initial form, we are in the very early stages in its performance and capability. We are essentially rounding first base with today’s 5G as it’s only available in relatively few cities across a limited number of expensive devices, that exhibit less than marketed performance.

The revolutionary improvements that 5G networks will provide is not yet available. Real 5G data speeds will be 100 times faster than 4G with latency 25 times that of 4G, and this will only be achievable with protection against interference. In January, U.S. mobile network operators spent over $80 billion to acquire new sub 6 gigahertz RF spectrum upon which their 5G network services will be built, a new record. This is another indication of our forecast that the second wave of 5G deployment will be in the sub 6 gigahertz range. It won’t be until 5Gs third wave for full millimeter wave deployment.

What this means is in the absence of XBAR technologies being deployed, the market would leverage aluminum nitride BAW, which has shorter range, requiring more base stations to be deployed in the operator’s networks, which equals higher cost. We believe there is a potential for billions of dollars in spectrum that could be wasted in the U.S. alone due to interference degrading spectral efficiency or based on the increased number of base stations to deliver the same coverage. 5G will also depend on next generation networks such as Wi-Fi 6E and ultra-wide band, which bring additional capacity and speed as well as extreme location accuracy. These new networks serve as a backstop to the 5G cellular network, which can easily reach capacity and become overloaded.

Turning to Slide 5. The challenge that exists with these networks is unlike any other in the history of wireless technology. Delivering state of performance to these next generation networks requires every device to have high performance RF filters. It’s well documented that the RF filters that were designed for 4G requirements are not technically well suited and cannot scale to meet the demands of these next generation networks, due to the physics behind the base technologies not having the required power handling and bandwidth at high frequencies.

So, let’s take a few minutes to explore what would happen in a world where Resonant’s XBAR technology did not exist. The handset OEMs are going to demand that the market’s leading providers of RF filters deliver the best solutions they can, that can support the standards of 5G operation. Remember, 98% of the RF filter market is controlled by seven companies.

Turning to Slide 6. Without XBAR, those legacy filter technologies will be adapted to deliver the best solutions available, pushing the boundaries of their existing performance by adding external components or creating modules of different typologies to try to deliver at least the minimum performance thresholds required. Another well-known approach is experimenting with material changes to increase performance.

We had an external lab measure the performance of a typical aluminum nitrate BAW solution compared to an XBAR solution and here’s what they found. Turning to Slide 7, these creative approaches using traditional BAW structures still fall remarkably short to the desired performance of 5G, Wi-Fi 6E, and ultra-wide band.

When it comes to interference protection, loss [Phonetic] power handling size and cost. All these new wireless technologies represent a challenge resulting in performance compromises for legacy filter technologies, choking the Internet throughput of 5G. However, Wi-Fi 6E with the widest bandwidth of 1,200 megahertz is still the most significant challenge, especially in the handset where all previous generations of cellular, Wi-Fi, and ultra-wide band must co-exist.

The performance plot from a third-party test lab highlights the limitations of legacy BAW aluminum nitride technology for Wi-Fi 6E. The little rejection to 5G and ultra-wide band potential interference, which will slow data speeds, reduce coverage, and drain battery life. Power is critical in these new high frequency applications because as you increase frequency, you have to increase power to maintain the same coverage and speed. These solutions, in many cases fall short of the typical XBAR solution by up to 75% for total power at the bandwidth.

As we move to Slide 8, Resonant’s XBAR technology provides the bridge from today’s early roll out of 5G, the wide bandwidth, high frequency, low loss and high power capability that we expect from the true 5G, Wi-Fi and ultra-wideband to co-exist with maximum performance. And we believe we are the only Company that has the technologies that can meet these next-generation requirements innately.

Slide 9, third party test results highlight measured state of the art Wi-Fi 6E filter data with what we believe is the best in class performance when compared to legacy BAW technology currently available in the market. In both cases, the performance was measured by a third party test lab, and the improved rejection using our XBAR technology is clearly demonstrated, removing interference and not choking the flow of data.

Resonant is now in the position to sample fully acoustic Wi-Fi 6E devices with 1,200 megahertz of bandwidth and 5 gigahertz Wi-Fi filters with over 740 megahertz of bandwidth, both with more than 30 DB rejection to potential interference. We believe these are best in class devices. As a result of our work and industry leading progress, we’re being asked to spearhead several thought leadership events and panels relating to the role of RF filters in 5G in next generation networks.

In 2020, and through March of 2021, our team has led eight roundtable events, many of which you can find links to on our website. At the beginning of 2021, we also announced that Resonant became a member of the Wi-Fi Alliance, a global non-profit industry association of companies who share our vision of seamless connectivity.

As we transition to Slide 10, let me once again highlight that our unique technical capabilities stem from leveraging our state of the art ISN design software platform, a key differentiator as we leverage a three dimensional multiphysics finite element modeling tool to rapidly create precise designs. This precision results in rapid generation of designs, with fewer turns in the manufacturing process and ultimately reduced time for integration into modules versus the standard, iterative and imprecise process that is typical in the industry today.

Moving on to Slide 11, what’s fundamental in this methodology is that as we complete designs for our customers by leveraging our ISN design platform, we actually retain all of the IP. To that end, in 2020 we focus on building a significant protective intellectual property mode around our technology that is increasingly validated by our partners and appreciated by the market.

We grew our patent portfolio by 50% year-over-year to over 300 issued and pending patents in the U.S. and internationally. The bulk of this growth relates to our XBAR technology and today we have over 150 patents issued and pending for XBAR related technologies to support high frequency networks like 5G and 6G, Wi-Fi 5, 6, and 7, ultra-wide band, and millimeter wave.

Slide 12, before we move on and wrap up this section, I want to highlight the advisory board team we have assembled and all of their hard work through 2020 and early 2021. Along with helping lead our business strategy and execution, advisory team has played a thought leadership role by educating the market on the role that XBAR is and will be playing in the rollout of next generation wireless networks.

As previously noted, last year our advisory team participated in panels at eight conferences and seminars discussing the current state of the filter market and the main drivers of next generation networks. Most recently, we have expanded our advisory leadership to include several thought leaders who have joined our technical advisory committee. You can find a complete set of biographies on the advisory team and technical committee on our website.

Slide 13, just as we differentiated our approach to developing our technology and IP, from the very beginning we took a strategic approach to our business model. Rather than competing with the RF filter manufacturers, we’re enabling them. We believe the world’s leading OEMs will be increasingly dependent on manufacturers to leverage our filter designs to deliver products into the market. It is our belief that finding RF filter solutions that can meet the demands of high frequency applications is going to be paramount for the industry and XBAR is quickly gaining recognition.

As a reminder, we entered into a partnership with the world’s largest RF filter manufacturer last year. The deal consisted of a strategic investment of $7 million into Resonant, as well as a $9 million multi-year commercial agreement for four bands utilizing XBAR technology. The agreement laid out four milestones to ensure mutually beneficial and productive process from the start.

As I mentioned earlier, we achieved the second milestone under the agreement in October, well ahead of schedule. This is incredibly significant as it validates our XBAR filters for 5G, meaning they do what we say they are going to do, and we confirm targeted performance, packaging and initial reliability. This achievement brings in prepaid royalties in the millions of dollars rather than having to wait for unit shipments.

We have received 50% of the prepaid royalties for these first four bands today. We’re now focused on the next phase of the agreement, which focuses on building a commercial platform and high volume manufacturing of XBAR based RF filters for 5G applications. From here, we have two more milestones to hit as their designs move to commercial production and high volume OEM shipments.

Our work with this partner is going exactly as anticipated, and it remains the potential for us to contract with them for additional designs this year. This partner alone could represent a potential of over a $100 million in annual revenue for Resonant. While that seems like a big step from where we are today, it becomes clear when observing our partner’s position in the industry. The top seven filter manufacturer controlled over 98% of the market for filters and duplexers. Our partner has the largest market share in both categories controlling 37% of the filter market and 32% of the duplexer market.

Their filter market share is bigger than the second and third largest players combined. Further, our partner has established relationships with some of the world’s largest handset OEMs which allows us to leverage their expertise to bring XBAR into the market versus doing it ourselves. Moving to Slide 14, existing partnerships uniquely positioned Resonant for success with next generation mobile handset application.

However, let me remind you that Resonant’s filter design application reaches beyond mobile. We are engaged with other tier one customers in Wi-Fi and infrastructure applications that require high frequency and wide bandwidth performance.

In fact, recently we secured a high volume 2.4 gigahertz SAW Wi-Fi socket with a tier one handset OEM and are commencing shipments of our first XBAR Wi-Fi 6E samples. We’ve announced that one of our existing partners, a tier one RF filter manufacturer, began shipping high value band RF filters designed by Resonant into the automotive market. As manufacturers look to deliver 5G functionality in next generation vehicles, our XBAR technology is an ideal fit for auto manufacturers to optimize performance on low cost production processes.

As we move forward through the first half of this year, we expect to secure a contract focused on XBAR for non-mobile applications, which could include autonomous and electric vehicles, other IoT, CPE or infrastructure applications.

With that, I’ll pass it over to our Chief Financial Officer, Marty McDermut, for a review of our fourth quarter and full year 2020 financial results. Marty?

Martin McDermut — Chief Financial Officer

Thank you, George.

Turning to Slide 15, I’ll now provide an overview of our financial results. The amounts I talk about are GAAP except where noted. Billings were minimal in the fourth quarter as compared to $82,000 in the same year ago quarter. Billings were approximately $3.2 million in 2020 as compared to $2.2 million in 2019.

Revenues increased 32% year-over-year to $607,000 in the fourth quarter as compared to $459,000 in the same year ago quarter. Annual revenues increased 330% year-over-year to $3.2 million in 2020 as compared to $735,000 in 2019. At the end of the fourth quarter, deferred revenues totaled $1.8 million. We estimate that amount will be recognized as revenue over the remainder of the contract.

Research and development expenses totaled $4.8 million in the fourth quarter as compared to $5.2 million in the same prior year quarter. The lower amount primarily results from reduced headcount initiated in Q1 of 2020, as well as reduced travel expenses due to COVID-19 partially offset by higher patent related expenses. Research and development expenses totaled $19.5 million in 2020 as compared to $18.9 million in 2019, with the increase primarily due to expanded design activities on our ISN platform, XBAR technology and filter design development and patent related expenses, partially offset by reduced headcount and lower travel expenses.

Sales, marketing and administrative expenses totaled $3 million in the fourth quarter as compared to $3.1 million in the prior year quarter. The lower amount is primarily due to lower travel expenses. Sales, marketing and administrative expenses totaled $12.2 million in 2020 as compared to $12 million in 2019 with a slight increase primarily a result of higher public company related expenses and compensation expenses, partially offset by lower travel expenses.

Our operating loss of $7.1 million in the fourth quarter is compared to an operating loss of $7.9 million in the prior year quarter. Operating loss of $28.5 million in 2020 was compared to an operating loss of $30.2 million in 2019. Net loss was $7.1 million in the fourth quarter or a loss of $0.13 per share, based on 55 million weighted average shares outstanding compared to a net loss of $7.8 million or a net loss of $0.24 per share, based on 32.7 million weighted average shares outstanding for the prior year quarter.

Net loss was $28.4 million for 2020 or a loss of $0.55 per share, based on 51.3 million weighted average shares outstanding as compared to a net loss of $29.9 million for 2019 or a loss of $1.02 per share based on 29.4 million weighted average shares outstanding. Non-GAAP adjusted EBITDA was a loss of $5.5 million or a loss of $0.10 per share in the fourth quarter, compared to an adjusted EBITDA loss of $6 million or negative $0.18 per share in the prior year quarter. Non-GAAP adjusted EBITDA was a loss of $21.7 million or negative $0.42 per share for 2020 compared to negative $23.4 million or negative $0.80 per share in 2019.

Cash and cash equivalents totaled $25 million at December 31st, 2020 which included $11 million of net proceeds from the sale of equity under our ATM program. Remember, we have no debt. With current cash on hand, we have enough to last into calendar year 2022. On December 31st, 2020 we had a total of 67 employees, 16 of whom have a Ph.D. and 48 of whom are part of the technical staff.

And then finally turning to Slide 16 on the topic of guidance. As we highlighted in our pre-announcement, we expect revenues in the first quarter of 2021 to be in line to slightly ahead of revenues in the fourth quarter of 2020. For the full year of 2021, we expect both unit volumes and revenues to be significantly greater than 2020.

I’d now like to turn the call back to George for closing remarks. George?

George B. Holmes — Chairman and Chief Executive Officer

Thanks, Marty. Now let’s turn to Slide 17 for what’s track in 2021. While this year with full of accomplishments to be celebrated, our work ahead is cut out for us as the critical challenges that face our industry quickly approach. We are just getting started. As we look forward to 2021, we expect our volumes and revenues for the year to be significantly higher as we accelerate the pace of what we saw in 2020.

Our legacy and foundry programs will continue to grow and provide the initial foothold for customer expansion into XBAR based relationships. 2021 will be a breakout year for our XBAR technology and we expect continued and ongoing validation from the market that XBAR based solutions may be the only viable solution to meet the demands of not only 5G, but also 6G, Wi-Fi 5, 6, and 7, ultra-wide band and potentially even millimeter wave.

We will expand our relationship with the world’s largest RF filter manufacturer as we work with them to build a high volume manufacturing platform for XBAR filters that will meet the exacting demands of the largest mobile handset OEMs in the world. We expect to secure a contract in the first half of the year, focused on XBAR for non-mobile applications, which could include autonomous and electric vehicles, other Internet of Things or infrastructure applications.

I want to thank all of our employees, Board and advisory members for their dedication. This year in particular, as we navigated the COVID-19 pandemic and as we seek to revolutionize the connection between people and things, your hard work has translated to the growing success of our Company.

With that, I’ll hand it over to the operator to begin our question-and-answer session. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions]. Our first question is from Tore Svanberg with Stifel. Please proceed.

Tore Svanberg — Stifel Nicolaus — Analyst

Yes, thank you and congratulations on the continuous success here. First of all, George could elaborate a little bit more on the sort of third and fourth milestones for your largest contract customer? I think in the past you’ve talked about commercialization of the products potentially being on track for second ’21 and — just wondering if that’s still the case.

George B. Holmes — Chairman and Chief Executive Officer

Well, we’re still tracking, Tore, to meet the objectives of our customer. They highlighted in their press release that they want to have devices out into the mobile space at the end of this year. And as they continue to plan to do that, we plan to continue to support them in all of the efforts to make that happen.

I think what you’ll see from us from a milestone perspective on the current agreement is meeting kind of the next milestone this year and really focused on expanding the footprint with that customer into other devices. And those will not only be in the mobile sector, but I wouldn’t be surprised if we saw devices from them in the non-mobile sector as well, because they’re moving quick.

Tore Svanberg — Stifel Nicolaus — Analyst

Very good. And as a follow-up question, this time around you’ve talked a little bit more about two new things; one is ultra-wide band, the other one is automotive. So could you perhaps elaborate on why that’s the case so you’re now engaging with potential partners on filters for either one of those two segments?

George B. Holmes — Chairman and Chief Executive Officer

Yeah, sure. And I’m going to hand this off to Dylan so he can kind of chime in and talk about why XBAR’s technology is applicable in those spaces and why we think we’re ideally positioned. Dylan?

Dylan J. Kelly — Chief Operating Officer

Good morning, Tore. I think we’ve seen UWB becoming much more popular as a location service over the last year or so. And as those are widely deployed in handsets, there’s definitely a major interference case between Wi-Fi and UWB. And so that’s again, it’s a new filtering requirement that wasn’t really present before. And similarly in automotive, there’s so many modules being shipped in vehicles now, basically every car has an LTE module and modem in it, and they all migrate to 5G. And again, with automotive telemetry using 5G there’s going to be a lot of new filtering requirements there because [Technical Issues] failures of the communication interference has to be squashed.

Tore Svanberg — Stifel Nicolaus — Analyst

Very good. Just one last question if I may, on the Wi-Fi side, you talked about potentially announcing a contract or a customer there first half of this year. Is that still on track, and I assume that would be separate from your cellular contract, the largest contract?

George B. Holmes — Chairman and Chief Executive Officer

Well, I think it could easily be accomplished [Phonetic] Tore where you see a Wi-Fi deals coming in multitude of different factors from a multitude of different customers. I think the key thing that we have is with these latest and greatest Wi-Fi solutions, the performance is — we’re really excited about it. And what we see is we’ve got a full band, acoustic only solution that’s going to we believe really change the way the market’s looking at these types of devices, as evidenced by some of the stuff we talked about today on the call.

Tore Svanberg — Stifel Nicolaus — Analyst

Very good, and congrats on the continuous progress here. Thank you.

George B. Holmes — Chairman and Chief Executive Officer

Thanks Tore.

Operator

Our next question is from Raji Gill with Needham and Company. Please proceed.

George B. Holmes — Chairman and Chief Executive Officer

Hey Raji, are you there?

Rajvindra Gill — Needham & Company — Analyst

Hi, can you hear me? Sorry I was on mute, sorry about that. Thank you for taking my questions. A question on the non-mobile opportunity for XBAR, you talked about seeing some traction in the first half of 2021, I was wondering if you can kind of maybe frame that in terms of how big that opportunity could be and how you think about that as part of kind of your long-term growth trajectory?

George B. Holmes — Chairman and Chief Executive Officer

Okay. Well, first let me — I’m going to let Dylan jump in and talk a little bit about the technology itself and what we’re seeing with these early devices that we’re going to start sampling here in the next week or so. He’ll talk about that briefly, and then I’ll kick in and talk about what we think that opportunity is. Dylan?

Dylan J. Kelly — Chief Operating Officer

Yeah. So I think what’s really changed is historically, acoustic filters weren’t used in real life applications. There was a ceramic filter technology before. Now we’re seeing what the makers of the access point CPE devices want to operate 5 and 6 gigahertz bands simultaneously. And there you really need the performance of Acoustic Wave filters, and so instead of a deck comparison against what we can find in the market as the best competing technology, and you see these major limitations in the implementation of the aluminum nitride BAW to meet all the different regulation [Phonetic] requirements that were necessary, both on the infrastructure side as well as smartphones. So, we had pretty strong conviction all year that we can really differentiate in this space and I think we’ve got the data to prove it now. So it’s pretty exciting time for us.

George B. Holmes — Chairman and Chief Executive Officer

And from a market opportunity, Raji, I think what we’re seeing is the Wi-Fi market well, historically has not been deemed to be as large as the mobile market, I think the latest data suggest that as they’re moving into the acoustic filter requirement that that market’s going to be about as big as cellular for acoustic filters. So we’re excited about it. It’s a market opportunity that plays well with our technology. And it’s just going higher in frequency, creating even greater opportunity for us in the long-term.

Rajvindra Gill — Needham & Company — Analyst

Yeah, thank you for that. Just a question, follow-up question Dylan on the co-existent filter. So, the Wi-Fi 6E devices will have both bands in one device. And I think, using Resonant’s technology, which is kind of a single wideband filter as a solution that can kind of solve some of the issues that some of the manufacturers are trying to use, which is two filters to meet these requirements and that could impact performance.

So just on that, I was wondering if you can kind of elaborate a little bit further and you touched upon on the presentation, but how that kind of a differentiation of using a single wideband filter is creating kind of this competitive advantage in Wi-Fi 6E?

Dylan J. Kelly — Chief Operating Officer

Yeah. So the one thing I say — I should have brought up [Phonetic] for was that the move to the 6E which will have both the 5 and 6 gig bands running simultaneously, and on top of it, it is for these MIMO systems, multiple input, multiple output, it’s working with four antennas for a 5 gigahertz band, four antennas for the 6 gigahertz band, each one of those needs a filter. So now it is 8 filters in a box and that’s why the scale of the market is getting pretty interesting relative to the size of mobile.

And then what happens when you do the multiple filter implementation that our competition is pursuing, there’s certainly a size and cost impact and we also have potentially performance issues across those transition frequencies and most likely going to have additional loss, which ultimately results in the shorter range for your Wi-Fi network.

Rajvindra Gill — Needham & Company — Analyst

Thank you. And just my last question in terms of the success that you’re getting on the foundry side, you mentioned you have now six separate small foundries now of manufactured XBAR, I was wondering how you kind of think about the foundry strategy as part of the strategy of developing an overall ecosystem to start supporting XBAR and how that will kind of fuel more adoption of that technology? Thank you.

George B. Holmes — Chairman and Chief Executive Officer

It’s an interesting play for us that allows us to very cost effectively be able to build samples to actually go to market direct but it’s also useful tool for business development where we can show, they’ve been looking consistently surprised at the ability to be able to do this, to go use off the shelf SAW process and build these XBAR devices. And so, that’s really wonderful to go in and we’ll talk with the other tier one makers and show them hardware and get them very interested in the technology.

Dylan J. Kelly — Chief Operating Officer

Yeah, Raji. It’s an interesting byproduct of our existing business, right? When we started this Company in 2014, we were focused on vertically integrated filter manufacturers. We got into the foundry business looking for ways to collapse the time to market. What — the work that we did to really understand how you could couple the capabilities of these pure play foundries with our tools such that we could kind of deliver these devices very cost effectively, just really became an added bonus as we got into the development of XBAR and being able to go out and show that we can go get XBAR devices manufactured on a number of different foundries. And we’re talking about a number of new foundries now today as well.

So it’s — I think one of the very definite competitive advantages we have. We’re using a very well-known process. It’s not a difficult thing to do to spin up a new SAW foundry on XBAR, whereas if you had to go spin up a new foundry on a custom BAW process, I think that’s pretty difficult. So, and its proven to be pretty difficult. So I think we’re pretty lucky here. And really it allows us to show how competitively advantaged this technology is today and will be even more so in the future.

Rajvindra Gill — Needham & Company — Analyst

Appreciate it, thank you.

Operator

Our next question is from Cody Acree with Loop Capital. Please proceed.

Cody Acree — Loop Capital Markets — Analyst

Yeah, thank you.

George B. Holmes — Chairman and Chief Executive Officer

Hi, Cody.

Cody Acree — Loop Capital Markets — Analyst

Thank you, hey. Thanks for taking my questions. Just onto that point, the multiple foundry, SAW foundries, what does that do to the pricing curve to your competitors? I guess how much of a price improvement are your partners, your customers partnering with foundries able to come in and be competitive with the internal manufacturing FABS as of possibly from Broadcom or Qorvo?

George B. Holmes — Chairman and Chief Executive Officer

That’s a great question, and if we sit back and look at it and I’ll take you back three or four years ago when we were talking about the fundamental differences in cost structures of SAW versus TC SAW versus BAW devices, and we were saying that at that point in time, SAW structures were about 30% of the cost of a BAW structure and TC SAW was about 60%.

So if you sit back and kind of use that and extrapolate that forward, and now you’re doing an XBAR based device, I think they’re are going to be significantly advantaged if you were doing a head to head comparison of equal to performance device. I think you’re going to be out of the box in better shape from a cost structure standpoint.

That said, it’s not apples to apples, right? I mean, you’re having the scandium dope, you are having to use different architectures with these BAW devices I think that, I’ll go back to your conversation with Mike and I two years ago at CES. If we could build it, they will come and I think that’s what we’re finding right now today, Cody. It’s we’re demonstrating devices that have markedly better performance than what you can do with either a scandium doped or a hybrid architecture of an existing BAW structure.

So, if it was apples to apples, you’ve got a significant cost advantage. Once you start having to do all these other ancillary things to make these devices kind of get close in performance, it just gets better.

Cody Acree — Loop Capital Markets — Analyst

And one follow-up there and then — my final, just — are your fabulous customers able then to — are they passing that along, I guess, and/or are they using that to improve their margins or is that weighted more towards their customer benefits and therefore more likelihood that you ramp into the market faster?

George B. Holmes — Chairman and Chief Executive Officer

That’s a great question and that, you know, would assume that we aren’t focused on the major IDMs which we are. We’re using the fabulous relationships we have to demonstrate XBAR devices. If you recall historically, we just partnered with companies and they identified a part for us to design, we did a design and then we had to wait 12 months to 18 months for them to figure out how to build it.

Today, we leverage the foundry relationships such that we can show samples to potential IDMs and OEMs, in references, our manufacturers that might want to leverage XBAR technology. For the IDMs, they would want to port that technology into their process much like we’re doing with our friends in Japan that we’re currently engaged with. Then we’ve got others that are looking at doing the same thing in other parts of the world.

And then lastly, obviously, we have the capability to enable our reference design manufacturer, even a large OEM because of those foundry relationships. So, when it comes to how would the foundries be pricing it to those partners, I guess it depends on the leverage that the partner would have. If you’re talking with a tier one OEM that uses these foundries for other activities, there’s probably going to be tremendous leverage. If you’re talking about a new entrant that’s trying to get into the market, I would have guessed that these foundries are going to be having more of a margin share type of arrangement with them, because they’re both new and they don’t have the customer, our customer wouldn’t have the power to negotiate.

Cody Acree — Loop Capital Markets — Analyst

Okay, great. Thank you. And lastly, just as you’re looking, let’s say at the end of 2021, as you go through these expansions from just wireless, and you look more Wi-Fi and auto and IoT infrastructure, what do you think the year 2022 mix could look like, just your royalty mix versus the end applications?

George B. Holmes — Chairman and Chief Executive Officer

Oh, that’s a good question Cody. I’m not sure I’ve got a great answer for that at this point.

Cody Acree — Loop Capital Markets — Analyst

Thanks George.

George B. Holmes — Chairman and Chief Executive Officer

You know, if we sit back and [Speech Overlap] if we look at the companies that we are talking to today, I could easily see a mix where only 40% of revenues coming out of mobile, because, we have one customer there who’s got an exclusive through March of next year, and they’re going to be the only ones that are going to market there. And we’re teeing up and loading up a lot of guys on the Wi-Fi front.

But, I think it can come to a balance pretty quickly thereafter in the ’23 timeframe, where we’d see a pretty balanced Wi-Fi infrastructure, non-mobile set of customers with our mobile customers. Does that make sense?

Cody Acree — Loop Capital Markets — Analyst

Excellent, it does. Thank you, George. Thank you, appreciate it.

George B. Holmes — Chairman and Chief Executive Officer

Thank you much.

Operator

[Operator Instructions]. Our next question is from Kevin Dede with H.C. Wainwright. Please proceed.

Kevin Dede — H.C. Wainwright — Analyst

Good morning, guys. Thanks for taking my question.

George B. Holmes — Chairman and Chief Executive Officer

Hey, Kevin.

Kevin Dede — H.C. Wainwright — Analyst

George, so just can we follow up on the dollar side of the question that Tore asked on the large customer? I think you referenced $9 million as part of milestone payments, and I think you spoke to it during your prepared remarks. I think what have you realized that, I think you mentioned $2.5 million was that — is that what you’ve recognized thus far and can you speak to what you’re expecting in terms of the commercial side this year and then what that would leave for the balance in 2022?

George B. Holmes — Chairman and Chief Executive Officer

Well, Kevin it is a great question. Let me see if I can answer it for you. As Marty would note, and would remind me, I’m not going to get out of my skis and talk about the forecast for the balance of the year, much more than next quarter. But let’s see if I can answer your question. $9 million of prepaid royalties, that’s exactly what these were. Those prepaid royalties, we got the first pre-payment at the signing of the contract, we get the second pre-payment when we reach this major milestone in October which validated the technical aspects as highlighted in our press release this morning, and it also created a platform where they had validated initial liability and manufacturability of those devices.

So those prepaid royalties equals 50% of that $9 million. Those deals, that early deal for XBAR, which early mover advantage pricing that, that customer got was at $2.25 million per device. As we’ve noted, it takes 12 concurrent deals at that pricing to get this business to cash flow, and we feel good about the trajectory we have with them on expanding the number of devices we have under contract with them this year. And that’s the mission, right? Once you’ve passed the initial milestones, then you kind of move on to looking at what’s next. And that’s kind of where we find ourselves today.

And then you look at what we’re doing with other customers also on the prepaid royalty front, as we’ve noted, we expected to kind of get our first Wi-Fi customer this coming quarter. And I think those will be kind of similar kind of deals. So, pretty good trajectory for us for the balance of this year. And as Marty and I both noted in the prepared remarks, we expect 2021 to be significantly higher than 2020.

Kevin Dede — H.C. Wainwright — Analyst

Okay, fair enough, George, thanks. Thanks for the detail. On exclusivity associated with that large customer, working in an auto environment and non-mobile sort of sidesteps the requirements that you’re obligated to them on, I guess is sort of where I’m fitting?

George B. Holmes — Chairman and Chief Executive Officer

It is a little bit different, we have the ability and freedom to operate in all non-mobile applications. So a non-mobile application is Wi-Fi CPE, infrastructure, automotive, these are all non-mobile applications, we have the freedom to operate in those areas.

Kevin Dede — H.C. Wainwright — Analyst

Okay. Last one for me is — yeah, sorry, go ahead.

George B. Holmes — Chairman and Chief Executive Officer

If you recall, the exclusivity ends one year from the end of this month. So we’re within literally one design cycle of being out of our exclusivity period for the major mobile application. So exciting time.

Kevin Dede — H.C. Wainwright — Analyst

Agreed. Okay. You referenced multiple times in your prepared remarks and in your slides, George this third party test lab, when you did some analysis on aluminum nitride, can you talk about who that was and maybe who funded the test? I’m trying to get to somehow rationalize whatever bias may have been brought and incorporated in that, given that it’s a third party, I understand, I’m just curious.

George B. Holmes — Chairman and Chief Executive Officer

Well, obviously Kevin, there’s tear downs that are done, we don’t have parts in the marketplace. So the only way you can get third-party testing done is if you provide the parts to them, and you pay the bill. And so in this case, we went out and searched and bought in the market via distribution, some of the cutting edge parts that are being marketed out there to the different Wi-Fi and CPE players.

We bought those parts provided them to a test lab, along with our own parts, and they did head to head testing, comparative testing. And their test results matched very closely to the test results that we had and also test results we’ve seen at other customers. But obviously our customers are not going to share their test results out there in the marketplace generally.

Kevin Dede — H.C. Wainwright — Analyst

Yeah, no, understood. Understood. Fair enough. Thanks for the additional color. Appreciate it.

George B. Holmes — Chairman and Chief Executive Officer

Absolutely.

Operator

Thank you. We have concluded our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

George B. Holmes — Chairman and Chief Executive Officer

Thank you, Operator. In closing, 2020 was a remarkable year. 2021 stands to be even better. Our XBAR technology has the potential to enable our partners to dominate the new 5G, Wi-Fi, and other high frequency applications. There’s truly a lot to be excited about and a lot to look forward to. I want to thank all of our shareholders for their ongoing support. And with that, I’ll close today’s call. Thank you, everyone.

Operator

[Operator Closing Remarks].