Resonant Inc.

Greg Falesnik - Investor Relations George Holmes - Chief Executive Officer Jeff Killian - Chief Financial Officer

Quinn Bolton - Needham and Company Anthony Stoss - Craig-Hallum Kevin Dede - HCW Cody Acree - Drexel Hamilton

Thank you, operator. Earlier this afternoon, Resonant released financial results for the first quarter of 2018 ended March 31, 2018.

The earnings release that accompanies this call is available on the Investors section of the company's website at www.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 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.

Resonant's CEO, George Holmes, is your host today and he will introduce the rest of the team joining him on the call. With that, I'll turn the call over to you George.

Great. Thank you, Greg and good afternoon to everyone joining us on today's call.

With me today is Jeff Killian, our Chief Financial Officer. Our past two calls have highlighted the need to avoid distraction and remain focused on execution.

In the first quarter we successfully eliminated those distractions, highlighted by a capital raise, which injected significant capital for the company and shortly after reaching an agreement with one of the largest investors to expand the size of our board and avoid a proxy contest at Fishier's [ph] stockholders meeting. The new bill [ph] was very positive events for the company, leaving us in a very strong position to capitalize on the momentum we have established since early 2016, which we believe has made Resonant a significantly more valuable company.

We are no longer development stage company, but an industry disrupter with many companies engaged under contract and designed contract that have a potential to deliver $450 million in product revenue annually to our customers. We have also enabled new players to enter the market aggressively to our fabless and foundry model, all which puts Resonant in a tremendous smooth provision to meet our objectives, which include growing revenues.

Given the customer plans, revenues are expected to increase significantly quarter-over-quarter to the balance of the year, trending towards mid seven digits for the fiscal year 2018. We'll be expanding our customer footprint, adding additional capabilities in our ISM platform and increasing our intellectual property footprint as well.

Before jumping into the details, I'd like to have our CFO, Jeff Killian provide you an overview of who we are and what we do. Jeff?

Thank you, George. For those of you that are new to our story, we have continued to retire risk in Q1 with our ninth straight quarter of execution.

This has been accomplished by continuing to strengthen the three legs of our stool, which are noted as our tools, technology and team. Let me touch on each of these.

Tools, we continue to develop our infinite, synthesized network platform or ISM platform to address the increasingly complex design challenges in the RF front end. It is through this toolset that we are able to deliver designs faster, better and cheaper than those typically being developed in-house by current filter suppliers.

Leveraging our ISM platform, we gain greater design efficiency and precision that directly address many of the challenges plaguing the RF market today. We continue to hire talented employees to further the development of this platform.

Technology, we have continued to invest in expanding our IP footprint, growing the number of patents both domestically and internationally, with a keen eye to the competitive landscape for our technology. In addition, we are investigating adjacent markets and opportunities that will enhance the strategic asset, increasing the value of this critical component that we can leverage towards increasing shareholder value.

Today we have 153 patents, 72 of which were issued prior to yearend 2017 and since January we had 10 new patents that were either issued or allowed. Team, we continue to add key members to our team with deep industry experience.

Notably in Q1 we added Dejan Nenov, as our VP of Software to further the development of our ISM platform. We ended the quarter with 52 employees of which 39 are technical.

11 of our employees are Ph.Ds. As discussed on our last call, we have now established a presence in China to support our many customers in that location.

This is the key part of our global expansion and helps ensure that we have the capabilities to support our customers along with the necessary experience required by the handset OEMs to qualify parts. This added focus is designed to ensure a shorter time to revenue qualification and product shipment.

Now before wrapping up, I will walk through some financials for the first quarter of 2018. Revenue for the first quarter of 2018 was $157,000 accounted for under ASC 606.

As of January 1st 2018, we adopted a new revenue recognition standard, ASC 606. On a modified retrospective approach whereby we recorded the impact of the adoption as a cumulative adjustment to retained earnings.

Consequently financial results have not been restated for comparative purposes. That being said, revenue for the fourth quarter of 2017 was $171,000.

Royalty revenue for the first quarter of 2018 totalled $50,000 and was the highest quarter to date. As noted previously, initial royalty revenues are from our early agreements that were strategic with lower royalty rates.

The strategics represent roughly 60% of the royalty revenues in Q1. Excluding the strategics, the balance of the Q1 royalty revenue is driven from agreements which are at or above 10% royalty rates.

It is these types of devices that will fuel our expected revenue growth through the balance of the year. Adoption of ASC 606 has negatively impacted our revenues in Q1, as the timing of milestone payments were adjusted.

Research and development expenses for the first quarter of 2018 were $3.3 million compared to $3.1 million in the fourth quarter 2017. General and administrative expenses were $2.7 million for both the first quarter of 2018 and the fourth quarter of 2017.

Operating loss in the first quarter of '18 totaled $5.8 million compared to an operating loss of $5.6 million in the fourth quarter of 2017. The net loss for the first quarter of '18 was $5.7 million or $0.28 per diluted share, based on 20.2 million shares outstanding and with a net loss of $8.3 million or $0.48 per diluted share based on 17.3 million shares outstanding for the fourth quarter of 2017.

There were $2.7 million of non-cash want warrant inducement expense included in the net loss for the fourth quarter of 2017 that did not reoccur or impact the first quarter of 2018. Non-GAAP adjusted EBITDA in the first quarter of 2018 was a loss of $4.6 million or $0.23 per fully diluted share compared to a loss of $3.4 million or $0.19 for fully diluted share for the fourth quarter in 2017.

Adjusted EBITDA is determined by taking net loss and adding interest, taxes, depreciation, amortization, stock based compensation and warrants inducement expenses. Cash and investment at March 31, 2018 totaled $32.9 million compared with $19.5 million at December 31, 2017.

In March 2018, we closed an underwritten public offering for approximately 5.7 million shares of common stock at a per share price to the public at $3.50. Subsequent to the quarter, the underwriters exercised in full their 30-day option to purchase approximately 850,000 additional shares at $3.50 per share to cover the over-allotments in connection with the offering.

Collectively, we received net proceeds of $21.2 million from the offering, after deducting the underwriting discount and offering expenses. Excluding the proceeds from the capital raising activity in the first quarter of '18, we used $5.2 million in cash during the quarter, which is up from the $4.2 million used in the fourth quarter of 2017.

The change is due primarily to the reduction of accounts payable and accrued salaries and payroll related expenses that existed at year end. And lastly, I wanted to touch base on our share count as it stands today.

We currently have 26.7 million shares outstanding. With that, let me hand it back to George to further discuss where we are today, as well as our outlook for the remainder of 2018 and beyond.

Thanks, Jeff. Our current outlook puts us in a stronger position today than ever before.

From a capital standpoint, at the end of the first quarter we had approximately $33 million in cash, the most in our company's history and do not see the need for additional capital in the foreseeable future. In fact, we believe this should be sufficient to bring this into cash flow positive territory.

From a capability standpoint, we will continue to invest in three areas of our business. As Jeff described, our ISM platform, our IP and our team to ensure we continue to grow and deliver on our promise of delivering designs that's faster, better and cheaper for our customers.

In particular in 2018, we have added focus on our ISM platform, extend the tools development team with new executive leadership and broadening the reach of our IP by partnering with SAW IP [ph] From a customer standpoint, we have more customers than ever, totalling eight with over 50 devices contracted with increasing complexity. Our most recent tally suggests that if our customers are capable of capturing 100% of their current market share, as reported by Navient this would equal more than $450 million in end product revenues for our customers.

We also enable to complete the new segments of the market in 2017 that didn't exist before and have continued to expand that footprint in 2018. The first segment is characterized with tablet filter s companies.

In many cases they are key component providers for the RF front end market who do not own their filter, but want to participate in the rapidly growing market. As such, we have engaged Resonant to create greater designs, utilizing our ISM platform and IP and have our foundry partners actually manufacturing the filters.

We then took the step one step further and opened up another segment of the market. We approached pure play foundries and packaging companies and offered them their [indiscernible] to enter the market by leveraging our technology and IP.

By creating this fables filter ecosystem, we have the ability to enable numerous new entrants into the filter model supply chain that can effectively compete in a market that has been dominated by only a few key players so far. It is worth noting, a similar model was introduced many years ago in the semiconductor industry.

In fact, this fabless and foundry model was attributable to the success and expansion of the semiconductor industry as it exists today. We believe that Resonant is the only company possessing the tool of an IP necessary to provide a parallel model for the mobile filter industry.

Well-established foundries are capable of producing high quality filters in volume are available today. Customers hungry for a stable supply of mobile filter models is also available today.

Resonant is the only company that has the necessary tool of an IP to link the foundries to those customers. So what can we expect for the remainder of 2018 based on our accomplishment today?

First, as we've indicated, we expect to ramp royalty billings quarter-over-quarter and units consistent with higher ASPs and anticipated higher royalties. Second, we expect to have more devices in turn.

We continue to work with tear down companies to help them identify our technology and phones and expect more tear down with validation that are designed to successfully been included. In addition, as an IP licensing company we will continue to review current phone teardowns to verify our royalty streams and identify any potential infringing technologies.

These are expected to not only be tear one phone, but also from other key manufacturers across the globe. As a reminder, Resonant has three agreements in place with all of our customers and we're not at liberty to confirm or deny which phones or technology ultimately gets incorporated into.

That said, we have made significant efforts to work with leading teardown companies and educate them on what to look for in Resonant designs. It is through this process alone that the market will be able to identify our technology in those handsets.

We expect continued traction with our current customers extending the device that we currently have under contract and continue to execute delivery parts ready to go to the market. We expect to continue growing our customer base, this includes vertically integrated customers, tablets customers and foundry customers.

We will continue to expand our ISM platform, this expansion of the platform entails first making an overall platform more robust, second turning more of the application into a faster implementation based on the technology validations we performed in early 2017 and finally adding new capabilities such as the ability to design bar filters as well. What a growth, directionally, I'd also like to touch on the market and opportunity at hand today.

The filter market continues to grow at an exponential rate. Despite falling handset growth, we expect the filter market to grow and will continue to be driven by high data rate applications, such as video streaming, which in turn drives increasing complexity of the RF front end.

Some driving factors include band proliferation. Up to 40 bands are currently supported by high end smartphones according to year.

Carrier aggregation, mobile experts predict that over 25 billion RF pass will be shipped that include downlinked carrier aggregation by 2022. This will include up to five carriers aggregated at the time.

And then finally the proliferation of 5G. Now let's talk about what this means specifically.

I'm sure you're all heard about it. 5G comprises mobile broadband such as high speed mobile networking for video streaming.

Mobile broadband requires dramatically increased data range, which equals more RF pass, MIMO and multiplexes for example, which equates to more complexity and more filters. The IoT and secure reliable segments of 5G mobile network, which includes applications such as mobile payments, medical and government applications are also things that are driving these networks, which were more wireless devices an equals more filters.

As we've discussed in the past the sheer size and growth in the market is staggering. For example, YO [ph] estimates that in 2015 the market was about $4 billion.

This same market is expected to exceed 28 billion by 2025, representing a CAGR of 21%. From market penetration standpoint, we have internally confirmed that our technology has made it into at least two phones.

The first occurred in early 2017 and most recently in our fourth quarter earnings call we announced we had made it in GIT [ph] another phone as well. Third party teardown companies have also validated that they have identified our technology in at least two phones from Tier 1 OEM.

As the unit volumes in Q1 2017, we had our first major shipment milestone of shipping over 1 million units. In Q1 of 2018, we surpassed yet another major milestone over 10 million units were shipped and 100% of which were generating royalty revenues.

Today we have provided some additional clarity that we expect given current customer forecast to significantly increase total revenues quarter-over-quarter as we drive to reach our goal of our first $1 million quarter. Given current customer forecasts and our ongoing execution, our revenues are expected to increase significantly quarter-over-quarter through the balance of the year, trending towards mid seven digits for the fiscal year 2018.

Now before providing my closing remark, I'd like to open the lines for Q&A. And we'll turn it back over to the operator.

Operator?

Hey, George and Jeff congratulations on the nice outlook. Good to see the growing momentum.

I wanted to ask just for an update, I think on the last call you guys talked about having four devices shipping in the market, I think three may have been sort of the original strategic designs, one a higher more complex band and you had expectations to potentially have as many as 10 devices shipping in phones by the end of the year. Are you guys still on track to see 10 by the end of the year?

It's great question Quinn and one of the challenges that we've indicated in the past is that as you work through getting devices designed, developed and ultimately qualified by our customer is them getting the devices qualified at the OEM that's a challenge. As we noted on our last call, one of the big achievements that we undertook in the fourth quarter of last year and have continue in the first quarter of this year is really working with our customers to help them get through the set test and set [ph] a qualification at the OEMs.

We continue to do that. We continue to work that very, very aggressively.

And I would say that the outlook is good to reach that objective of having up to 10 devices qualified and shipping end phones by the end of the year.

Great. And then sort of follow up question.

You know, I know in the past you've talked about some of the more complex filters, including band 1, 3 multiplexers and 40, 41 filters for the China market. How are you feeling about progressing sort of through the design and qualification on those more complex bands as you look into the second half of the year?

You know, as noted I think in the fourth quarter we hope to get through the qualification process in the first half of the year and how those devices shipping in the second half. I think today we're still on track to make that happen.

Clearly, quadplexers are very complicated devices when it comes to handset testing, as we noted on our last call, we've broken the code on how to help our customers and their OEMs, we do that from a much more automated perspective, taking out a lot of the guess work has historically been kind of in that last 10 yards of getting a product to qualification that help us with the quad as well. And I think we're still on track for that.

Perfect. And just last question for me.

You talked about expanding the capabilities of the ISM software platform to potentially include broad design capability. At some point you guys need to bring in a bar manufacturing foundry partner to enable that bar design or do you think you can enable bar design at the software tool without having a qualified foundry partner sort of standing by for you know to take those bar designs to manufacture?

It's a great question and clearly you know, having a partner that's developing products in bar today will make that process much more you know direct and straightforward. I would tell you that from a software development perspective devoting a bar platform is very complicated beast, is probably a 12 to 18 month effort.

So you know, looking at that in the fourth quarter of last year 2019 you know, will end product for us. Clearly we're engaged with companies today that you know, have a multitude of different process technology in the bag and it will likely come to fruition that we actually bring that product and actually started using it when we actually have a customer.

And so we continue to work in that in that regard. What I would also tell you is that you know, when we look at what we're doing from a software perspective you know, it is across the board.

Last year we elevated part of the pipeline into SaaS applications. We're going to continue to do that, continue to commercialize the product for our own internal use because we think that that makes the product better.

One of the key things that we're focused on is increasing design efficiency. You know, we believe we're several steps ahead of the current - our customer base as it relates to our design efficiency.

One of the key focuses for us is to continue to increase our design efficiency over the course of the year because as we indicated with 22% CAGR, plus that is going to create such a dramatic demand on filters. It's just going to create even more opportunity for us.

So the fact that we can put one design and have been doing a multitude of designs for the year and doing it much more efficiently than our end customer is going to put it in a very good position strategically. So doing that, coupled with adding new features and functionality is really where we're spending our money on the software development side this coming year.

Hope that…

Great. Yes.

Thank you, George and congrats on the nice progress.

Thank you much.

Hi, George, Jeff. A couple of questions.

George maybe can you - do you see any change in cadence from your existing customers as they are getting more confidence through the experience here with you guys that they're likely to further use you deeper and deeper within their product set. And secondly, I think the two phones that are shipping from you - through the same one customer when you think you'll have your second customer shipping later?

Then I have a couple of follow ups?

Okay. So look to hit the first one quickly.

I think that the fourth quarter of last year was a great example of what we see happen when we get engaged with a new customer. They tend to get engaged with us.

They did do one or two designs early and then they were you know, once we've been successful with those one or two designs they tend to lean in pretty aggressively. You saw that happen in the fourth quarter where we had a new customer.

We had a qualified a design with them and they turned around and they brought 13 new designs on us. You know, that is something that we see happen on a very regular basis.

You know, we spend a lot of time this quarter, kind of teeing up that next group of customers, as well as taking down some design from our leading customers. So you know, I would say that that is absolutely the case.

We continue to see a lot to be increasing you know, some of what we're seeing right now from a low perspective the fact that we did such a good job in middle of the year last year, those designs are now coming to fruition. Getting through the end design process, I expect that this quarter and the next two quarters are going to be very robust from a design acquisition standpoint based on that.

And then the other question was when you think your - you'll have a second customer with product out shipping?

Well you know, we do have a second customer third shipping product. You know, I think that clearly you know, not only ourselves, but third party teardown companies tend to focus on the devices that find their way into the major markets, as we have identified historically and even on this call Jeff talked about 60% of our royalty revenues in the first quarter came from our early strategic customer that we enable them with three devices that they were shipping in the marketplace and they were shipping into kind of low value handset manufacturers in China, in other markets.

We do have devices that are finding their way in fairly sizeable way into those developing markets, whether it be you know, Whitebox handset in China or into the India market as well. I think one of the things that we noted in my remarks is we expect that as those devices stay in the market for a longer period of time they will start bubbling up and finding their way into the field of view of those teardown companies that are doing broad base teardowns in US and hopefully that will become really available for people to see.

Last two questions for me. One for Jeff.

As you look forward into Q4 '18 here, revenue really exist around. Can you give us sense of what you might be expecting now or is this change in a blended royalty rate per device and then George the tenfold that you still expect to be live in end of the year.

How many different customers would be equating to that ten phones?

Yes, I would talk about going forward, the ASP from our customer's filters and the royalty rates. I think we gave a little bit of a clue there already.

And what we have fabrication Q1 between the strategics and non-strategic. And so those strategics are clearly below a dime and they're clearly in a lower royalty rate below the average range that you get into the market.

But when you get to the run rate that is improving quarter-on-quarter, those range from nearly a dime to about $0.30 and so we're moving up that spectrum, you've seen that in our IR presentation and that's on an average basis, heading up towards near dollar, as we get more of those high value, high complex filter design going forward. And the royalty rates tag along with that.

We go from that mid sweet spot we kind of have in our guidance. We've given that, if you will start to 10%, over time based upon the mix and the mix changing going forward and we have some royalty rates and under contract as we mentioned that are up to 20%.

So it's clearly progressing throughout the year on both those fronts and that's what drives our revenue.

And to kind of jump in your second question for me Tony. We announced at the end of last year we get 10 devices that has been qualified by our customers that we're now sampling at OEMs.

So I can't really speak to how many OEMs those devices will go, hope it's going to whole bunch, given their forecast, their forecasts are very robust and we're kind of feeling pretty good about ramping towards the mid seven digits towards the end of the year. But what I can tell you that three to five of our customers that are shipping devices in volume.

So we got a good complement, that's not all coming from one customer, it's coming from a nice mix of our vertically integrated companies and the tablet companies. So it's good cross section.

We do have some back movers and shakers that are not in that mix yet, that we think will have an potential to come online pretty aggressively in the second half of the year. But right now, if I had to you know, ready to ground, I would say probably to the five.

Thank you.

Thank you much.

George. Jeff, thanks for taking the call.

Hey, Kevin. How are you?

Good, good, good. Hey, thanks.

So George, just 20,000 foot perspective. Can you talk a little bit to the competitive environment?

Have you seen any changes or are there any - is there anybody out there that's getting clever like you and adopting, you know, finite element modelling, any sort of swinging things?

Well, [indiscernible] guys doing finite element modelling all the time. So you know, I think our biggest fear is and things you don't know you don't know.

And we've got a play it like we own it all the time from that perspective, always looking over our shoulder, always being concerned that one of those major players will see our - what they view as a nice little niche market that you know, 8 billion going to 25 billion is something that might be interesting. Today, that's on horizon, doesn't mean that that won't change tomorrow, which means why we are spending the money that we're spending to stay ahead, be aggressive, continually to add features and functionality to what it is that we're doing, extending our IP footprint.

You know, from what we can tell right now we've got a pretty good playing field that is pretty wide open. But I think that from both Jeff and my perspective and the rest of management team here is we're always nervous about the things you don't know.

Yes. Fair enough.

Thanks. Jeff, could you sort of walk through the sale cycle and revenue recognition now under AOC 606.

I mean when - at what point do you know are you able to tally it up. Just so I sort of understand that you know the sales cycle and the way that you're recognizing?

Yeah. Thanks for the question actually.

And there's much more people and on AOC 606 and see the new industry is being created to comply with that. But that being said, we have two components, our customers pay an upfront in order to get the design swatted, and some operate milestone payments with success to design.

And then clearly our goal is to get into high volume ramping royalty revenue. 606 changed the way that we've been treating the upfront and the milestones.

And we had to apply the new methodology. That being said, what was the impact to Q1.

It took $48,000 away from the practices we had '17, away from the revenue that we posted in Q1 of '18. So 157 would have been the 200K in our normal rate and that's just changing the timing of recognition of those deposits we received upfront that have typically been spread over the design cycle before we get to a qualified design.

Those $48,000 of revenue has actually evaporated, the profit that we showed, the retrospective approach is one of choices in 606. Had we had much more meaningful revenue historically the 606 gave you the feature to go back and restate 2017.

Instead of spending our dollars, getting a restatement of our revenue from 2017 we said the 48,000 is going to evaporate. We're not going to push to a pass period to show how revenue would have been higher in 2017.

We closed the books and we're going to go forward with 606 going under the new rule. That being said, it's onetime true-up.

We believe with the upfront we're receiving, the new license agreements we're taking in with a deeper penetration we're getting with our customers and new customers that this is going to again pop back up to its run rate and begin to get a normal run rate going forward. We'll get the deposits upfront.

We'll spread them over the year design cycle and move on to a onetime blip in the accounting treatment, but not a reflection of execution to our plan.

Okay. So the bottom line is really that you didn't have to change things as you compare with '17 and that I guess it seems to me that the general execution from your perspective hasn't really changed much.

Or you still spreading that, okay, you're still spreading that upfront design over the life of the design?

Exactly, and this time that's what we're doing. We continue to look at you know, the ways that we engage our customers in a better way to engage them under contract to make their life easier of course and to make our accounting easier.

We will continue to evaluate that under these new rules. But right now the way you explained it is perfect.

We're going to keep going as we're going. We're going to be spreading it over the life of the design, anticipate a design time and then working toward the royalty revenue, that's the ultimate goal here.

Okay. How about - how about the royalty payments themselves, like once that customer starts shipping the design?

Yeah, so that's working very well. Our customers for this contract - I think give us a statement 15 of the following month on all shipments and likewise when we invoice them and they get paid and we get paid from that.

So it's working very smoothly. Every month we get an update from them on shipments.

We get the invoice and invoices because it's a product shipment if you will, we will recognize revenue at the time we invoice. No we will not be spreading that royalty revenue over time one invoice is recognized in the period.

Okay. So there are no changes to that procedure under AOC 606?

That's correct.

Okay. Could you just help me understand the unit numbers, if I remember correctly it was 5 million in January alone and 10 million for the quarter?

Am I understanding it correctly?

No, you're not. We did talk about on our last call, we talked about some of the half million units shipped in 2017 that we had already surpassed 5 million in Q1.

We made a decision that you know, we have historically been a very prolific communicator as it relates to press releases and whatnot. And you know we're kind of beyond where everything goes, you know, new device under contract is a material event.

So we've made a decision to go through and announce major milestones, in this case 10 million units, 25 million units, 50 million units, 100 million units, for us on a quarterly basis the goal here is getting to 100 million units per quarter. That is where we're driving to, that's we're trying to get to.

Today, I would tell you that we have surpassed the 10 million unit number in Q1. We're driving towards 25, that be the next big milestone, that is next big announcement.

Okay. So just so I have it straight, when you reported year end, you talked to 7.5 million ship for the year rate and 10 for the first quarter.

And then next time we'll hear from you on this as when you reach 25?

Yeah.

Okay, fair enough. Thanks, George.

Thank you, Jeff for the AOC detail. Appreciate it.

You bet. Kevin, thanks.

Hey, guys. Thanks for taking my question and congrats on the progress.

George just where are you seeing the largest concentration of your newer engagements, whether it be geographically or just from the mid-tier, high tier standpoint?

Thank you for your question Cody. And you know, clearly we get started with the companies in the Korean market, which is kind of our early engagements, expanding into Japan and Taiwan and now in China.

If I had to look at you know, where we're spending most of our time right now with our tablet and foundry models, China is really interesting opportunity. Clearly there are some macroeconomic things that play there that may create even greater opportunity for us with some of these tablets companies that want to move very, very aggressively to try to get products into the marketplace.

I think we're going to continue to see that that piece of the marketplace is going to grow. You see a lot of the - IT companies in that space coming from that market in Taiwan in particular.

And so we further engage new clients, not only the vertically integrated companies, but the tablets and foundry partners that we have, I believe that we're going to see a large propensity of our new customers coming from the tablets and foundry segment. And then moreover on top of that would be from the Chinese market itself.

Are you seeing any impact from the band ZTE?

Direct impact, no.

Well, not direct impact, but just your design engagement are there - some of the 50 plus engagements. Are you aware that any of them are directly targeting ZTE?

No, that was what I meant from a direct impact standpoint. None of our guys are focused on ZTE, it's kind of at least as it relates to having us help them, help them with end customer qualification that's not really something that's being impactful right now.

And then from a frequency standpoint, can you just maybe talk us through where the bulk of your concentration is as we look at just the band spectrum?

So make sure we understand the question, so we have a number designs starting with the strategic, clearly those were more of the lower ASP, less complex and we've been moving through and some great announcements in the fourth quarter with full band 41 and quad prices 13. And I think that's kind of a reflection of the complexity of our license agreements and those were the only two that we've actually been allowed by our customers to talk about.

If you recall clearly in the past one of the things that our customers consider very proprietary not only their names, but also the bands that we're working on because they believe that it's you know, kind of a directly - direct pathway back to us. So the only time that we made an announcement of the actual bands or the actual partners has been at our customer request and in both cases on band 41, the band 41 products that we did on our customer wanted us to lean in and talk about that in the marketplace because they felt it would create opportunity for them which it did and which we believe will see starting to ship revenue of those products in the second half the year as a result.

And I know once we quite went through the same thing. So I think that from a direct discussion of what the bands are specifically, we need to shy away from that.

But as Jeff has stated in the past and when he talks about his blueberry chart that we have in our investor presentation which I'm sure you can remember, we are clearly in the middle, taking full advantage of those, higher value, higher frequency, higher complexity devices that are right in that sweet spot. We're not working up on the fringe of the highest frequency.

I can tell you that because we're focused on things with higher volume.

And lastly just any color you can give as to what led to the recent proxy issues with Park City?

You know, I can't give you any color of what led to it. I mean, what I can tell you is we reached a solid agreement to prevent a proxy contest.

We feel good about that. I think the team that actually feels good about that and you know it put us in a position today we can be focused on business, which is I think the ultimate goal because we believe collectively, I don't want to speak for Park City per se, but I think that if you spoke to them they would agree that you know having us been focused on the business and you know working on ensuring that we can ramp royalty revenues is the most important thing for us.

So we're happy to have them behind us.

Okay. Very good.

Congrats on the progress. Thank you.

Okay, thanks.

Thanks, guys. Just a follow up a little bit on Kevin's question.

So I did check my notes and you guys did say that in January you guys shipped 5 million units, I kind of wanted to understand how we get from five to the end of January 10 at the end of March and kind of the linearity I would say in the quarter for those units?

That's great question. What I said when Kevin asked it was I'm not going to answer that question.

What I said is I will tell you that what we're going to do is we talk about major milestones major milestone that we agreed to talk about with 10, that major milestone is 25. And today the 10 million units for the quarter we believe will run it hard to north of 25.

Can't tell you when that's going to happen when it does you'll be first to know, you and the rest of folks on the call about it. And that's kind of where we ended up.

Okay. And in terms of linearity, can we talk about that or is that part of the same process?

It's part of the same, but I will give you some color on color just as you look at volumes, we had a great quarter from volume perspective, I mean well over - well over 10 million units, right. You know, as you look at on a quarter to quarter basis an you look at where it's happening, you probably noticed much better than I do.

Q1 is typically about 30% down quarter from most folks in the component that are shipping into the mobile market. That's pretty expanded number both high volume speak to.

We saw that we had very robust volume in Q1 and that the large part because we're you know just in the ramping stage. So it's not - we aren't really as affected as others might be in this area.

Good quarter for us. We didn't see a lot of pullback, but you know clearly when you have Chinese New Year and you have mobile Congress and you have people coming off the high of Q4 and what happens over the holidays Q1it tends to pull back a bit, we had a solid quarter.

Okay. And then in terms of the 50 design that you guys have, how many of those did you add in the first quarter?

You know, we talked about in the first quarter there were two that we talked about in the first quarter. Holding announcement it was two designs with our largest single customer.

And those are two new devices that we put under contract that target specifically for the Chinese market. We came off of if you recall in the fourth quarter our largest quarter ever with 60 new - brought in the mix in the fourth quarter, first we added to.

We have very robust pipeline to balance the year. And you know, we think that's going to put us in very good step the time we come back to you.

Okay. And then Jeff, in terms of the expenses kind of going forward for the balance of the year you guys gave a little bit of guidance for the topline.

What do you think expenses are going to look like over the next couple quarters here?

Great question. You know, I mean, EBITDA number we provide you know we were at $4.6 million in Q1 and that shows that you know we've hired over 10 people during the course of the fourth quarter.

This is fully loaded with all the people, plus new hires. We're getting four that you will and 88ish type of employees targeted for the end of the year.

So we can see that four, six you know, in the last call I said that you know we should be looking at cash burn starting with you know 5 hand. And when you get what we talked about our cash burn in Q1 with $5.2 million and that would because of our 18 accrual came down to about 600K and we had some of those larger AP, included in our balance sheet at 12/31.

So we were EBITDA four, six. We had cash burn of five, two.

When you subtract out capital activity I should say. And so wrapping those numbers the cash will swing up and down with four, six kind of inch forward as we move forward in headcount.

Okay. And also what is the share count at the end of the quarter?

We are at 28.7 million shares outstanding as of May 9.

Great. Thanks a lot.

You bet.

Great. Thanks very much.

In closing, I want reaffirm that we're in a strong position companies ever been in its history, with a robust balance sheet, strong customer relationship, growing capabilities in technology and commercialized. We clearly have a unique opportunity to deliver significant shareholder value.

I'm extremely proud of the accomplish that we have achieved today. As we march towards credible and predictable high margin recurring royalty revenue for the company.

In conclusion, we thank you for your ongoing support. Thanks again.