Resonant (RESN) Q2 2021 Earnings Call Transcript

Resonant (RESN)
Q2 2021 Earnings Call
Aug 11, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to Resonant's second-quarter 2021 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Greg Falesnik from MZ Group, the company's investor relations firm.

Greg Falesnik -- Investor Relations

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 2. Earlier today, Resonant released financial results for the second quarter of 2021.

The earnings release that accompanies this call is available on the Investors section of the company's website at 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 Holmes -- Chairman and Chief Executive Officer

Thank you, Greg, and thank you, everyone, for joining us on today's call. I'd like to welcome you to our second-quarter 2021 financial results conference call. Joining me on today's call is Marty McDermut, our CFO; as well as Dylan Kelly, our COO, who will be joining the Q&A session. Turning to Slide 3.

The second quarter of 2021 was highlighted by our continued advancements across our operational and strategic priorities. Notable in the quarter were the 17.5 million RF filters designed with our WaveX platform that were shipped to OEMs by our customers in the second quarter of 2021. This represents a year-over-year increase of approximately 450% and a sequential quarterly increase of approximately 104%. This acceleration of shipments has allowed our customers to ship over 79 million Resonant designed RF filters to date, and we expect to exceed 100 million units before year-end.

Turning to Slide 4. There are a select group of companies at the forefront of the industry that are facilitating the transition to next-generation, ultra-fast and high-frequency networks from device manufacturing to logistics and supply chains, to infrastructure, management and more, companies and government entities are working together to navigate the optimum path forward to a global wireless connected community. At the core of this transition is a need for technological innovations that enable the future of global connectivity. Wireless applications of the future, such as connected cars, smart cities and extended reality will all require the coexistence of next-generation networks, such as 5G, WiFi 6E, ultra wide-band and millimeter wave.

At Resonant, we have focused on and successfully addressed the requirements for unlocking these next-generation networks with our XBAR RF filter technology. XBAR has increasingly been recognized as the leading solution for these high-frequency communications with further applications into 6G and WiFi 7, which are now in the early stages of technical definition. One of the most significant validations of our proprietary technology and operating model is our strategic partnership with the world's largest RF filter manufacturer. This partner dominates the RF filter space with the largest market share of both RF filter and duplexer segments and does so by a considerable margin.

After a thorough evaluation of Resonant's XBAR technology, they quickly realized our unique ability to dramatically improve our filter performance for next-generation wireless networks, while also accelerating their ability to deliver these high-performance products to the market. Since our initial engagement, we have already exceeded expectations by successfully demonstrating the XBAR performance, packaging and initial reliability requirements ahead of schedule. With the most technically challenging milestones completed, we have now turned our focus to the commercialization and high-volume manufacturing phase of the agreement. In tandem with our initial four contracted designs with this strategic partner, we are also working to expand the scope of our agreement and expect to license additional devices with this partner in the remaining months of 2021.

As a reminder, this partnership has been focused exclusively on filter designs for mobile handsets. While this is clearly a key product vertical for next-generation connectivity, our XBAR technology is also ideally suited for the non-mobile segment, including mobile infrastructure, WiFi access points, ultrawideband and high-frequency IoT applications. We know how valuable our XBAR technology is, evidenced by our understanding that no other player has been able to demonstrate RF filter capabilities as suitable as XBAR for next-generation network requirements. In fact, every day that passes without a viable competing solution to XBAR, we firmly believe our technology becomes even more valuable.

That said, we have already successfully sampled non-mobile XBAR WiFi devices and expect to announce at least one formal partnership with a key industry player in the non-mobile segment in 2021. However, we are focused on doing the right deal with the right partner that fully reflects the value of our technology and fully rewards our shareholders. We expect the XBAR technology and IP to play a dominant role in what's going to be an incredibly high-growth segment of the market in years to come. XBAR was designed to match the new disruptive requirements of next-generation wireless networks.

In the same way that FBAR was optimal for 4G and previous generations of WiFi, we believe that our XBAR-based filters are the best solutions to unlock the true potential of 5G, 6G, WiFi, 5, 6 and 7 and ultrawideband. Turning to Slide 5. Resonant's key differentiator is our proprietary software design platform, WaveX, which enables us to take an innovative approach to RF filter design. During the quarter, we announced our WaveX design software, which is an upgraded version of our legacy ISN software platform, WaveX is enhanced specifically for advanced RF filter design, such as our XBAR, featuring full three-dimensional simulation of resonators and filters that is otherwise not possible with today's commercially available tools.

The critical requirements of 5G, WiFi and ultrawideband filters include optimizing isolation, minimizing insertion loss, maximizing bandwidth and increasing high-power durability. WaveX enables us to accurately simulate and deliver performance of our XBAR technology across multiple foundries, providing tremendous supply chain flexibility while meeting these complex requirements. The WaveX platform is a cloud-based, full three-dimensional, multi-physics finite element modeling tool with capabilities that are unmatched in the industry. Ultimately, WaveX enables Resonant design RF filters using manufacturing processes that are significantly more cost-effective when compared to traditional bulk acoustic wave or BAW approaches, resulting in superior performance and significantly reduced time to market for our customers.

Turning to Slide 6. Our operational strategy is dependent on maintaining a robust intellectual property portfolio around our technology. This is a continual focus at Resonant, and it is important to note that since XBAR is a fundamental novel filter technology, our resonator structures, processes and filter designs are all proprietary. It is significant to highlight that Resonant retains all intellectual property for designs we license to our customers.

We have grown our patent portfolio by adding over 75 additional filed applications or issued patents since the beginning of the year. To date, we have 375 filed applications or issued patents in the U.S. and internationally. It's no surprise that the bulk of our IP growth has been related to our XBAR based technologies, accounting for greater than 225 of filed applications are issued patents.

At the close of 2017, Resonant was not a significant player in BAW filter intellectual property. However, since the invention of XBAR, we have built a world-leading IP position in bulk acoustic wave filters and remain focused on rapidly expanding our IP portfolio to build a moat around our technology and trade secrets. Turning to Slide 7. XBAR is attracting attention due to its inherent capabilities to handle the requirements of next-generation wireless, especially when compared to the limitations of other filter solutions in the industry.

Let me touch on a few drawbacks of these legacy solutions. Most existing BAW filters are based on a piezo-electric material called aluminum nitride, which inherently has significant challenges in meeting the wide bandwidth and high-frequency requirements of next-generation networks. Combined with an immediate need for these networks to operate at higher frequencies, specifically the three to 10 gigahertz range, these legacy filter technologies would require models with experimental arrangements and added external components. Experimentation with material changes such as doping or some combination of all these methods to improve performance.

These processes are costly, add unnecessary size, hamper reliability and have the potential to significantly impact performance. Turning to Slide 8. Let's expand on some of the challenges associated with using RF filters designed for 4G on next-generation networks. Earlier this year, we shared the plots from third-party testing of scandium doped aluminum nitride BAW filter solutions compared to our XBAR, which showed our XBAR as a superior solution, providing significantly better power handling and rejection to interfering bands.

The performance plot on the left side of the slide, which is from a third-party test lab, demonstrates the limitations of legacy bar aluminum nitride technology for WiFi 6E with little rejection to 5G and ultrawideband potential interference. These limitations resulted in slower data speeds, reduced coverage and drain battery life. It's important to note that today's aluminum nitride bar filters RF filters were developed specifically to meet the demands of 4G. Meaning they exhibit limited RF performance at high frequencies.

We believe using these legacy filters for the requirements of 5G would result in a massive waste of spectrum due to interference to creating spectral efficiency. This inefficiency impact would be in the billions of dollars in the U.S. alone. For those of you who are interested in the details of spectral efficiency, you can find a detailed white paper on the subject on our website.

Further, relying on legacy RF filter solutions would require a massive infrastructure expansion to deliver the same coverage in consumer experience as an XBAR based network. This approach would require operators to roll out many more base stations across the network, an extremely expensive approach. Clearly, the cost liability of using these legacy filters to achieve true 5G performance reaches far beyond the device manufacturers. Devices such as handsets, routers that utilize these filters would suffer from poor connectivity.

This is due to the legacy filter technologies' inability to protect signals from interference over large bandwidth at high frequency. These issues will be apparent across the increasingly connected ecosystem of devices from home appliances to connected vehicles and healthcare devices. Our modern world is dependent on solutions that enable optimal connectivity and performance. Turning to Slide 9.

I'll stress once again, we believe our XBAR technology is the only technology capable of reasonably meeting the requirements of true 5G, five and six gigahertz WiFi and ultrawide band. In addition, XBAR has a roadmap beyond these immediate wireless standards without the inherent limitations of aluminum nitride BAW Solutions. XBAR bridges the gap from today's early rollout of 5G to the promise of wide bandwidth, high frequency, low loss, high-power capability networks, all while delivering significant cost efficiencies. Turning to Slide 10.

Key to our continued growth is the fact that we are not a competitor to RF filter manufacturers, but rather, we enable them by helping them deliver products with state-of-the-art technologies to market at a rapid pace. Our go-to-market strategy as a pure-play licensing business has been well received. As evidenced by our partnership with the world's largest RF filter manufacturer, which included a $9 million multiyear commercial agreement for our XBAR technology. Additionally, our customers have shipped over 79 million units of our legacy designs for sub three gigahertz applications, providing further validation of our licensing model.

We expect to surpass 100 million devices shipped with Resonant IP before year-end. Now let me spend a few minutes on the overall market for RF filters. The market for filters and duplexers is extremely concentrated. The top seven filter manufacturers controlling 96% of the market.

Our partner has the largest market share in both categories, controlling 36% of the filter market and 33% of the duplexer market. They are also the largest filter supplier by a significant margin, as evidenced by their filter market share being larger than the second and third largest players combined. By leveraging our partners' established relationships with the world's largest handset OEMS, we expect XBAR technologies to penetrate a large portion of the market. This partnership alone represents the potential for over $100 million in annual revenue for Resonant.

Under our agreement, there are four milestones, the second of which was completed ahead of schedule in October of last year. With our XBAR filters, validated for the target performance, packaging and initial reliability, we are able to proceed with the monetization of the partnership in the form of prepaid royalties, of which we have received 50% for the initial contract to date. Together, we are now focused on the commercial production and high-volume manufacturing of XBAR based filters for next-generation wireless applications. With only two milestones remaining on the initial agreement, we expect to sign additional design contracts with this partner in 2021, and we'll announce these developments to the market as they are achieved.

Turning to Slide 11. While the mobile market segment has historically dominated the RF filter market, there's also a tremendous opportunity in the rapidly growing non-mobile segment. Smart cities, connected cars and IoT of the future will rely on next-generation networks, including WiFi 6E and ultrawideband that are designed to complement 5G. This coexistence between networks will ensure a seamless experience for consumers, preventing data overload, which would otherwise overwhelm a 5G network.

Next-generation WiFi and ultrawideband operate at similar frequencies in bandwidth as 5G. The requirements for next-generation WiFi and ultrawideband filters are similar to those of 5G. XBAR's innate ability to meet these complex requirements, uniquely positions Resonant to capitalize on the emerging non-mobile market. The number of WiFi 6E systems in the market is expected to grow from over 300 million this year to greater than 1.7 billion devices in 2025.

These projections show an increasingly attractive market, and we are aggressively working to secure a deal for the design of XBAR filters for non-mobile devices by the end of this year. With that, I'll pass it over to our Chief Financial Officer Marty McDermut for a review of our second-quarter 2021 financial results and what drove them. Marty?

Marty McDermut -- Chief Financial Officer

Thank you, George. Turning to Slide 12. I'll now provide an overview of our financial results. The amounts I talk about are GAAP except where noted.

Billings, a non-GAAP measure, were $85,000 in the second quarter, as compared to $211,000 in the same year-ago quarter. Revenues were $614,000 in the second quarter, compared to revenues of $604,000 in the same year-ago quarter. This was in line with our previously provided guidance. At the end of the second quarter, deferred revenues totaled $766,000.

We estimate that amount will be recognized as revenue over the remainder of the contracts. Research and development expenses totaled $5.9 million in the second quarter, as compared to $4.8 million in the same prior-year quarter. The increase is primarily due to expanded design activities on our WaveX and XBAR technologies, higher stock-based compensation and expanding our patent portfolio. Sales, marketing and administrative expenses totaled $3.8 million in the second quarter, as compared to $3 million in the prior-year quarter.

The increased amount is primarily due to higher personnel-related costs and travel expenses. Our operating loss was $9.1 million in the second quarter, as compared to an operating loss of $7.2 million in the prior-year quarter. Net loss was $9.1 million in the second quarter or a loss of $0.15 per share based on 60.8 million weighted average shares outstanding, compared to a net loss of $7.2 million or a loss of $0.14 per share based on 52.9 million weighted average shares outstanding for the prior-year quarter. Non-GAAP adjusted EBITDA loss was $6.7 million or a loss of $0.11 per share in the second quarter, compared to an adjusted EBITDA loss of $5.4 million or a loss of $0.10 per share in the prior-year quarter.

Cash and cash equivalents totaled $22.7 million on June 30, 2021. Remember, we have no debt. On June 30, 2021, we had a total of 73 employees, 19 of whom have a PhD and 52 of whom are part of the technical staff. Finally, revenues to be non-linear from quarter to quarter as a result of revenue recognition for our prepaid royalty deals.

Revenue is recognized over the course of the development cycle of these new engagements and existing contracts where development cycles generally range from 18 to 24 months. Lastly, we expect to achieve cash flow breakeven on a quarterly basis some time in 2022. And now I'd like to turn the call back to George for closing remarks. George?

George Holmes -- Chairman and Chief Executive Officer

Thanks, Marty. Now let's turn to Slide 14. What to track in the back half of 2021? As Marty just stated, we expect our business to accelerate significantly from the growth we experienced in 2020. Our legacy and foundry programs will continue to grow and provide initial footholds for customer expansion into XBAR based relationships.

This legacy business is expected to exceed 100 million units shipped before year-end. We expect 2021 to be a breakout year for our XBAR technology. We expect continued and ongoing validation from the market that XBAR based solutions are likely the only practical solution to meet the demands of not only 5G, but also 6G, WiFi 5, 6 and 7, ultrawideband and potentially even millimeter wave. Together with the world's larger RF filter manufacturer, we will continue building high-volume manufacturing platform for our XBAR based filters that will meet the exacting demands of the largest mobile handset OEMs in the world.

We also expect to expand our relationship with them to include additional design contracts. We expect to secure a contract in 2021 focused on XBAR for non-mobile applications, which could include autonomous and electric vehicles, Internet of Things or infrastructure applications. With that, I'd like to thank you for all for joining us today. I look forward to providing updates in the coming quarters as we achieve the next milestones in our business and work toward our mission to revolutionize the connection between people and things.

Now I'll hand it over to the operator to begin our Q&A session. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] The first question comes from Anthony Stoss with Craig-Hallum. Please go ahead.

Anthony Stoss -- Craig-Hallum Capital Group -- Analyst

Hey, George. Hey, Marty. A couple of questions. Let me begin with, George, now that you're going into the high-volume manufacturing phase with your -- with the world's largest RF maker, has there been any technical challenges or anything else that's shown up? And then also, when do you think we can see XBAR in consumer devices? Then I had several follow-ups after that.

George Holmes -- Chairman and Chief Executive Officer

OK. Great. Thanks, Tony. I think the answer to that is obviously sure, there's always technical challenges in these types of programs.

We're developing RF technology that we believe will enable wireless networks for the next 20 years. I think we both expected in the development process that there are going to be items that are going to need technical attention. I think for those of you who follow what Murata is doing on a quarterly basis, they even commented about this on their call a couple of weeks ago. And I think what's important to note that what we announced in October is that we're ahead of schedule by almost a quarter.

And even more interesting from their call is the fact that they're already sampling devices to their customers. That's again ahead of schedule by better than almost a quarter. I think the key here for all of us is that there are no showstoppers with the technology, and we're moving aggressively ahead to help them with moving ahead to kind of the rapid manufacturing phase of this program. Dylan, anything I missed on that?

Dylan Kelly -- Chief Operating Officer

Maybe just perspective on prior technology launches, people always want things to go faster. But if we look at some of the older technologies like FBAR or even IHP SAW and the kind of development times from start to production were like 10 years. On this project, we just passed a year and a half in to really running the project, and we're looking at less than three years from start to volume deliveries. That's I mean a new testament to the WaveX platform allowed us to move faster.

George Holmes -- Chairman and Chief Executive Officer

Yeah. I think kind of the second half of that question, Tony, is kind of when do we expect to see export devices out there in the marketplace. I think, as it relates to mobile, obviously, we have an exclusivity in the mobile segment of the market until March of next year. I think with our customer being on-track and already sampling ahead of schedule, I think that's consistent with them targeting the 2023 releases of handsets as the technologies have to get in the OEM's hands, they need time to design it in.

And we'll see those get into the marketplace in early 2023. I think that's consistent with our announcements when we signed this contract and consistent with our leading customers expectations, I think the thing that's even more exciting is the non-mobile segment of the market could potentially see that this technology get in the marketplace as early as the end of 2022. So lots of activity on both fronts, we feel good about where we are, and we think there is a great trajectory going forward.

Anthony Stoss -- Craig-Hallum Capital Group -- Analyst

Thanks for that color. And then one more for you, George, and then one for Marty. Speaking of your biggest RF customer, with their exclusivity ending in March of 2022, have you been able to have conversations with other handset makers in case you can't secure a fair enough deal for Murata? I'm curious your thoughts on kind of activity ahead of that. And then, Marty, if you won't mind, putting maybe a little bit of finer point on a revenue range that you would expect for Q3?

George Holmes -- Chairman and Chief Executive Officer

OK. So clearly, the IDMs that we're targeting, which we described in the kind of in the prepared remarks of the top seven guys in the space. They clearly are engaged with and have deep penetration with all of the mobile handset manufacturers. Our exclusivity with Murata ending in March, will open us up to be able to engage others and move quickly into mobile agreements with them, if that's what makes sense.

I think where we find ourselves today is we're actively engaged with the other six Tier 1 manufacturers aggressively moving to share with them what XBAR technology can do in the non-mobile space. And I think the fact that they are engaged with us will give them a leg up when they move over into mobile. So I don't think we're going to miss a beat there as we move into kind of having free rein to market the technology in the mobile space come April 1, 2022. Marty, do you want to do the second half of that question?

Marty McDermut -- Chief Financial Officer

Yeah. So Tony, as George mentioned, we expect to enter into these significant additional design contracts with our Tier 1 strategic partner, as well as securing a contract or non-mobile, all by the end of the year. These contracts are -- they're great. They result in immediate billings and positive cash flow under our prepaid model and revenue recognition is over the development cycle, which may take 18 to 24 months for a mobile and should be less on a non-mobile deal.

As a result, revenue recognition for the rest of the year is really -- is ultimately dependent on the timing of when we sign that contract and the work we accomplished in that period.

Anthony Stoss -- Craig-Hallum Capital Group -- Analyst

Can you maybe give me a sense of -- so if it does a good time in Q3, kind of a blended ballpark revenues between Q3 and Q4 then?

Marty McDermut -- Chief Financial Officer

Well, earlier in my comments, I said we expect it to be nonlinear. So although we've also said over-the-top that we expect have grown significant growth over the year. So I think where we are in this quarter is, hey, we're near, we haven't announced a deal yet. So we're moving a long time.

So we're losing the burn, we're burning time right now. So I think you're going to see a comparable revenue level in Q3, and then you're going to see something higher in the fourth quarter, we live up to that. We still think we'll get there.

George Holmes -- Chairman and Chief Executive Officer

Yeah, clearly, a hockey stick.

Marty McDermut -- Chief Financial Officer

Yeah, it's a hockey stick.

Anthony Stoss -- Craig-Hallum Capital Group -- Analyst

OK. Thanks, guys. 

Operator

The next question comes from David Williams from Benchmark. Please go ahead.

David Williams -- The Benchmark Company -- Analyst

Thanks, guys. I appreciate taking the questions. Just want to kind of talk about the commercialization phase that you talked about. And if you could kind of give us an idea of what that looks like, and maybe how it differs from customer to customer as you move into more engagements? And then how do you think that we should think about the revenue side of that as you move through the commercialization phase and beyond?

George Holmes -- Chairman and Chief Executive Officer

Well, David, keep in mind, all of these deals that we're doing today are based on prepaid royalties. There's really two main prepaid royalty deals that we're looking at, say, one is a fully paid up royalty, in which case, we get all of the projected revenues or billings at the time of signing and whatever the next milestone might be or there is the buy-down of a royalty rate, in which case, we get an upfront payment and we get ongoing royalties on a per unit basis. Both of those allow us to have greater predictability as we stack these devices up on a year-over-year basis. I think what we've said historically is given the existing XBAR contract that currently is $9 million, four devices, $2.25 million per device, we can get to cash flow breakeven with 12 concurrent devices.

I think the challenge for us, and this is what we're highly focused on is once you pass that first-mover advantage and given that first customer, the best deal they're going to get. And this technology proves itself, which it has with the major milestones that we've already achieved, we're going to have an opportunity to actually relook at what those ASPs are for those prepaid deals. Now if we are successful, obviously, that reduces the number of additional devices we need to contract in order to get to cash flow breakeven. And obviously, we are very, very focused on trying to do that with our customers.

And we think the value of the technology has been proven out, clearly by the milestones that we announced last year. And we're seeing a similar type of validation with the work we're doing on the non-mobile side. I hope that helps.

David Williams -- The Benchmark Company -- Analyst

Yeah. That's great. And then maybe you had talked on the call by expanding relationship potentially with Murata. What do you think that could look like in terms of number of devices? Should we expect something similar to what we've seen already? Or would you expect this to be maybe one or two of devices?

George Holmes -- Chairman and Chief Executive Officer

Well, including for them, right, they would want to get as many devices under contract as possible because as the technology gets further validated, it's going to get more valuable. So for us, what is more valuable mean, it means higher ASPS. So you would think that they would want to move ahead with kind of the next round of product releases and kind of secure and lock in kind of a pricing structure. So that leads you down the path for more devices sooner rather than later.

I think what we've said is we're trying to get minimally two additional devices this year, maybe as many as four and anything north of that, I think, is gravy. We're working very hard to try to get ourselves in the right position, right blend of customer engagements and then having the right ability to kind of add breadth to our customer base for XBAR. So we're looking at boding both things. So 2% to 4% from RF Tier 1 world's large filter manufacturer and then two to four from at least one other customer.

And if we can get a third customer for XBAR, that would be great.

David Williams -- The Benchmark Company -- Analyst

Fantastic. Thanks so much for that. And then maybe just one last one, you've kind of talked about the WiFi 6 filter demand. And can you maybe run through the ASPs there, how you're thinking about that in terms of what your rates would look like? And then maybe the differential between mobile and non-mobile and in terms of volumes that you could expect?

George Holmes -- Chairman and Chief Executive Officer

That's a great question. I'm going to have Dylan to jump in here and help me a little bit from an end product ASP perspective. But if you look at a blend for the number of devices under contract, I think for us, we're looking at a blended rate. Probably, we'd probably see probably 60-40 mobile to non-mobile is kind of what we're thinking is probably going to be the out of the box kind of first engagement.

We'll continue to expand the footprint on the mobile side and then have a good handful of non-mobile engagements as well. I think from an ASP perspective, you've got an end device ASP, that end device ASP and our customers position in the marketplace is what allows us to create the math problem that we used to create what the prepaid royalties would be. So the good news for us is we're less concerned about the ASPs when they hit the marketplace, which could be 18 months to 24 months. We're more concerned about what the model looks like upfront because that's how we negotiate our contract.

And for us, being in the position that we're in, getting these prepaid royalties is very, very important because it helps us not only get to cash flow breakeven sooner, but also makes us less dependent on our customers' ability to secure sockets with the OEMs, don't know what I missed.

Dylan Kelly -- Chief Operating Officer

I think another thing to think about is that previously, the WiFi as point of CPE, this market has been covered by non-acoustic filters. So it's really -- it's a greenfield market for players that are doing acoustics. And we are expecting that the volume demand billions of units as we go into WiFi 6 and 7 and you see offices converting to a wireless network doing a lot of antennas. This is the MIMO technology.

So that's going to consume a lot of filters. Yeah, it's still probably -- it's nothing like the tens of billions of filters to go into smartphones, but billings is very interesting. And because volumes are a bit lower. ASPs are likely to be at least double as seen in smartphones, if not higher.

And just on top of that, so what we're bringing to the table and the higher rejections to other bands, we think it opens up the possibility for a significant bill of materials cost reduction in the CPE solution. And hopefully, we'll be able to take advantage of that as well.

Operator

The next question comes from Tore Svanberg with Stifel. Please go ahead.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Yes. Thank you. First question for George. George, you mentioned the $100 million opportunity for XBAR.

Could you maybe help us with some of the math there? I mean, obviously, you will not to get scientific about it, but just sort of general numbers and how we get to those types of numbers.

George Holmes -- Chairman and Chief Executive Officer

Yeah. This really comes from us doing some work based on looking at the presentation that was made by our customers at their annual shareholders meeting. And when they did that, we kind of looked at what they saw the market opportunity for them. And we back annotated into that.

Our percentage of their business, which came from their slides as well. And then looked at that and multiply it times our average royalty rate and came up with a number of somewhere between 100 and $200 million. So that being 5% to 10% of the market opportunity that they believe they have access to 4 or 5G types of devices. So it really comes from leveraging the data that they presented to their shareholders.

I'm not taking a stab at what we think that opportunity could mean for us three to five years out.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

No. That's fair. And a question on potential higher ASPs for subsequent contracts. Is WaveX part of that? So I guess, my question is, as you sample WaveX to your largest partner, is that a way to potentially get higher ASPS? Or are there other considerations here as well?

George Holmes -- Chairman and Chief Executive Officer

Well, a couple of things here, Tore. We do not license the WaveX platform, except for PMTx, the process monitoring tool. We still consider the WaveX platform as very, very proprietary. It's what gives us our technical edge.

We leverage the PMTx tool to help us with our customers hone in on the repeatability of their manufacturing processes. And so those are two different elements for us. WaveX is really what gives us the ability to do this very complicated modeling that allows us to deliver cutting-edge BAW technology on what ultimately is a surface acoustic wave manufacturing process. So it's the way this tool that allows us to do what we do.

Today, we're not really sharing that with the customers, except from a process monitoring perspective. But really what gives us the ability to kind of increase ASPs is clearly, first thing on a box, obviously, early mover advantage, guy coming to the table with not only the first contract for XBAR and a strategic investment. They get the best deal possible. I think it is now that we've proven the technology does what we say it can do.

We've proven that the devices can be packaged. We've proven those devices from an early reliability and a power handling perspective, that's what's going to really allow us to increase the ASP. The technology has just gotten more and more valuable as we've proven it out in different applications, not only for our Tier 1 customer, but for other non-mobile customers out there in the market.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Very good. Just one last question on the non-mobile and potential contracts announced before the end of the year. You mentioned a few applications there. How should we think about your go-to-market strategy there? Will you have exclusivity for perhaps somebody that sells into automotive versus somebody that sells into WiFi 6 access points? Just trying to understand a little bit better, sort of the go-to-market in non-mobile.

Dylan Kelly -- Chief Operating Officer

Yeah. I'll fill that one, Tore. It's really the same model that we're pursuing with the big IDMs. The markets here now, there's tremendous pull for WiFi 6 because of the five and six figures be in coexistence.

And so we're still on the same track of any cultures to support those full bandwidth and split those efficiently, so we can reduce the number of filters in the CPE. But even there we're still looking at something like eight filters in a box. So it's a gigantic market as it rolls out. And frankly, I think we've been surprised at the pace at which WiFi 6 is being deployed.

A lot of press -- it's already being rolled out into handsets as well this year.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

OK. I guess I was just trying to understand a little bit more sort of the exclusivity part, if you work with any WiFi chip supplier or more of a system integrator, anything you can add there?

George Holmes -- Chairman and Chief Executive Officer

Yeah. I mean -- so first things first, right? Let's talk exclusivity. We provided our first XBAR customer exclusivity in exchange for their investment, not as part of their commercial agreement with us. Our position today is we are doing exclusivity in -- for new customers or for our existing customer, we aren't going to provide an exclusivity component into the deals that they would like to get engaged with.

Today, we are intending to sell the technology to all-comers as it were. So I think from that perspective, we are trying to be a universal supplier to everyone of the XBAR technology.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Really good. Thank you, George. Thank you, Dylan.

George Holmes -- Chairman and Chief Executive Officer

Yeah. Thanks, Tore.

Operator

The next question comes from Rajvindra Gill with Needham and Company. Please go ahead.

Denis Pyatchanin -- Needham & Company -- Analyst

Hi, guys. It's Denis Pyatchanin asking questions for Raji. It's actually Denis in for Raji, guys. How are you? 

George Holmes -- Chairman and Chief Executive Officer

Good. How are you?

Denis Pyatchanin -- Needham & Company -- Analyst

Great. Thank you. So George, a question for you, please. So you'd mentioned that Murata was running a little bit ahead of schedule by about a month, and that they were sampling devices from customers.

Could you tell us a little bit more about exactly what kind of devices they're working with? And any kind of color on why things are moving ahead of schedule? I mean, are they at all being impacted by any of these supply chain issues? And how that whole dynamic is kind of playing out right now?

George Holmes -- Chairman and Chief Executive Officer

Yeah. That's a great question. And so let me kind of circle back on my comments. When I say they appear to be ahead of schedule, that is based on the comments on their quarterly call where they said they were sampling devices and had been sampling a number of devices out there in the marketplace.

There, when we go back and look at the initial press releases by both us and them, they expected to be in sampling at the end of the year, which would be fourth quarter, sampling this year, ramping into production and volume next year. So when I say they're ahead of schedule, I think they're ahead of schedule by about a quarter from what I can tell. When it comes down to who they do that with and how they take that approach, that's between them and their customers. So we are not involved in that.

We're involved in making sure they can get the technology to a point where they can share it with others. That's our responsibility in kind of where we spend our time and energy. Hope that helps.

Denis Pyatchanin -- Needham & Company -- Analyst

And have they ever mentioned anything about kind of the current supply chain situation impacting their ability to kind of bring these products to market? Or are they kind of --

George Holmes -- Chairman and Chief Executive Officer

Sorry about that. I missed that as part of your question. So if you look at the overall supply chain right now, clearly, the semiconductor supply chain has an impact on the module manufacturers and kind of what it is that they're doing. However, we're looking at an early sampling of these devices, and we're looking at it from a vertically integrated -- the largest vertically integrated filter manufacturers.

So when it comes to them sampling to their customers, probably not an issue. They are not selling in volume yet. So they're just in the sampling stages. So not an issue that we've seen.

If we look at our entire customer base, only one of our customers has an issue with one application in automotive that has been impacted by the supply chain. And that is one of our legacy components, sub three gigahertz device that we announced several quarters ago that continues to be shipped, but in lower volumes.

Denis Pyatchanin -- Needham & Company -- Analyst

Got it. That was really helpful. That's it for me. Thank you.

Operator

The next question comes from Kevin Dede with H.C. Wainwright. Please go ahead.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

Good afternoon, gentlemen. Thanks for taking my call. Appreciate it. 

George Holmes -- Chairman and Chief Executive Officer

Hey, Kevin. How are you?

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

I'm good and very happy to be here. So thank you for having me. Sir, can you elaborate a little bit on the foundry model? Where does that stand? Maybe this is a little Resonant 101, and I apologize for that. But maybe take us through that again, because one of your slides here indicates that you expect to press XBAR tech to the foundries in 2021.

I was just hoping you could kind of review where that stands, how many customers you have there, where they stand and how you expect that to go forward per what you've indicated here?

George Holmes -- Chairman and Chief Executive Officer

Yeah. So let me kind of circle back to kind of the foundry program. When we put that in place and we continue to capitalize on it as we see unit volumes increasing on a quarter-to-quarter basis, we put that in place in large part to enable foundries to take our standard products and push them into the market, and we're seeing that happen today with some of our legacy standard product technologies. What I said on the call is one of the things that our legacy customers do is they become more successful, and they validate their ability to take our designs, push them through production and into the marketplace is create a nice roadmap for us to extend our XBAR platform into those currently non-XBAR customers.

Today, where we find ourselves with those foundry customers is they're heavily focused on legacy sub three-gigahertz applications because that's the market that they address. So we think they're a good pipeline for us in the long-term. Today, they're not actively being pursued by us as XBAR customers, except as it relates to some of our foundry partners who have actually become suppliers for prototypes that we leverage to our large IDMs that we're engaged with. But those are more on the prototype front.

As you know, we don't ship and sell product directly. So we go out with XBAR, and we've been able to demonstrate that we can build XBAR devices on eight different foundries, some of those are those foundry program partners. But we leverage that for our internal sampling capability and have proved to ourselves that we can port the technology. So it's part of the technology validation process, probably more than anything, today for XBAR.

Hope that helps.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

Yeah, yeah, yeah. So just remind me, they're not -- I mean, it's still sort of the same standard royalty model on devices shipped from that foundry. Once that happens?

George Holmes -- Chairman and Chief Executive Officer

Well, if you recall, Kevin, if we go back and we started talking about our foundry customers, in particular, large Chinese foundry partners that we have. Those all came with prepaid royalties associated with them. So those contracts are still being fulfilled. We are still getting prepaid royalties for those as we go through the process of delivering devices to them.

And so we still get prepayments from them. They do have a follow-on royalty payment that comes along with them. But those are part of our new prepaid royalty program on a go-forward basis. And those, as noted previously, are all from our standard product library on sub three gigahertz devices.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

OK. OK. And then the move for them to start working with XBAR tech would be predicated on the device that they're making, the end market that that device goes in, it wouldn't be in a handset application until after March next year, correct? Is that the right way to think about it?

George Holmes -- Chairman and Chief Executive Officer

There are two things here, Kevin. I mean, clearly, some of the foundry partners that we have, would love to get involved in XBAR sooner rather than later, even if it was in the non-mobile space. Our focus today for XBAR, though, is on the large IDMs. And the reason being is, one, we've had good success there, obviously.

To the world's largest IDM to take the technology into the market, we are focused on the other top six guys kind of as first order of business. And I think we'll see some success there from that group of customers before year end. I think the roadmap that these other customers create for us as when we're ready and we look to push it out to a broader group beyond the top seven, we've got guys that have been shipping product for two or three years, and will be aggressively pulling us into that segment of the market. So it is a nice roadmap thing for us.

Today, we're going to put our focus, and we have been putting our focus on the largest players in this space because that's where we think we'll get the best bang for the buck of our development resource.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

OK. Can you remind us how many foundry partners you have? I mean, I think at last count, that was a handful, at least. I'm just wondering what I lost track of that number.

George Holmes -- Chairman and Chief Executive Officer

Well, we've got a total number of customers that is over a dozen today. Of those, it's a small handful that are pure-play foundries. And I think we've noted previously, two Tier 1 foundry partners that we've done contracts with in Asia at this point.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

OK. On WaveX is an upgrade to ISN. Can you just sort of remind us of the cloud-based business model and how that paradigm shifts with the improvement in the software's capability?

George Holmes -- Chairman and Chief Executive Officer

Sure. And I'm going to ask Dylan to kind of jump in and talk a little bit about WaveX and its capability. But just as a precursor to handing it over to him, keep in mind that when we purchased GVR Trade several years ago now, that was when ISN, which is the precursor to WaveX, was a single dimensional software tool for acoustic wave filters, designing filters, leveraging finite element modeling. And it was a very nice tool at that point in time.

We have subsequently added the capabilities of three-dimension and now three-dimensional model into these devices, to the capabilities. And it was with the addition of three-dimension that we pushed and changed the name to WaveX because it gives us some significant additional capability. But it's that tool set that allowed us to go do XBAR, and that's what I think is really novel. Dylan, do you want to talk a little bit about why we think it's novel, what we've done with the tool over the course of the last six to nine months and kind of where you think it's going?

Dylan Kelly -- Chief Operating Officer

Yeah. It was really a challenge we wanted to migrate from two-dimensional to three-dimensional simulation. And so really, it's a ground-up redesign, we want some computational physicists on staff that was the problem and realized using then to how it is compute was not going to be the right path. So we're really focused on moving toward the cloud, which introduces a bunch of new, let's say, coding challenges on managing that model.

But if you could come to those, it's extremely scalable and allowing us to simulate bigger problems, which then lets us make more optimized products. And so whereas before we can use our own, let's say server farm, and now we can scale up by 10, 100, even 1,000x the kind of problem that we can tackle using those outside resources. And still get simulations back at the time we needed to service our customers. So that's fully triggered the rebrand was that we really did reinvent the tool from that first ISM model.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

OK. So just so I understand it correctly, Dylan, what you're saying is that you're leveraging cloud and expanding your compute capability, not your distribution capability?

Dylan Kelly -- Chief Operating Officer

Yeah. And then the software really has to be written, very specially to harness that cloud compute model. There's a lot of know-how that goes in.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

So George, just going back to your prepared remarks and the slides you showed, there's a big emphasis on aluminum nitride. How comprehensive has your survey been of competitors? Is that really the sole technology that everyone seems to be attacking the 5G, WiFi 6 market with? Or are there other versions that you might consider comping yourself up against?

George Holmes -- Chairman and Chief Executive Officer

It's a great question, Kevin, because we do focus on aluminum nitride BAW because that is kind of the benchmark, which everybody is measured against because of what it did for 4G and 4G LTE. And clearly, as the technology that the largest players in that segment in the market are using to try to extend that to these higher frequencies. Are there other solutions? Yeah, there are other solutions, but they don't have the same performance that an acoustic RF filter has. Dylan, you want to touch on a couple of other things that guys are doing in the non-acoustic space, and what has historically been done in WiFi.

Dylan Kelly -- Chief Operating Officer

Yeah. Really, it's in the world of ceramics. And to explain, if you go back to like first-generation, the second-generation cellphones, they had ceramic based duplexers, and they were gigantic. And so there's immense pressure to make an acoustics solution work to shrink the form factor and get us where we are today, where there's 100 filters on the phone.

And so if you open up an access point today, you will find these legacy ceramic cultures, and they're quite big. They could be between figures five or eight millimeters or something. And so what we're seeing is a lot of pressure on size as we move to these MIMO access points to get the feature set called WiFi 6. And so we're seeing some battle there.

But overall, with the rejection capabilities of acoustics, we're expecting that's going to win out.

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

Thanks for chiming in, Dylan. I appreciate it. Thanks for entertaining me, gentlemen.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to George Holmes for any closing remarks.

George Holmes -- Chairman and Chief Executive Officer

Thank you, operator. I just want to thank everybody for joining on today's call. Hopefully, we've been able to answer everyone's questions, give you a good insight as to where we're going. We think the future is bright for the team here at Resonant and for our shareholders, great opportunities and really some really interesting milestones that should happen between now and the end of the year.

And we look forward to having the opportunity to talk to you all about it. So thank you again. Have a great day.

Operator

[Operator signoff]

Duration: 60 minutes

Call participants:

Greg Falesnik -- Investor Relations

George Holmes -- Chairman and Chief Executive Officer

Marty McDermut -- Chief Financial Officer

Anthony Stoss -- Craig-Hallum Capital Group -- Analyst

Dylan Kelly -- Chief Operating Officer

David Williams -- The Benchmark Company -- Analyst

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Denis Pyatchanin -- Needham & Company -- Analyst

Kevin Dede -- H.C. Wainwright & Co. -- Analyst

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