To add to this, 100m recurring revenues by the end of next year is unrealistic because:
It should be expected that the first deals are lower in terms of fees and royalties as the first deal in any business is always the hardest. Once the first deal is made, it is significantly easier to make the deals that follow.
After the licence fee is paid, the company would embed Weebit’s technology into their design and it takes them a year to a year and a half for them to finish doing their design and get into the fab to start manufacturing. So there is a delay, but when it gets into the fab that is when Weebit would start getting royalties.
Once it is in the fab it will take time for the production and sales of the chips to ramp up.
If we are lucky, WBT will start getting customer agreements in the embedded market in mid next year and in 2022 for the discrete market. The neuromorphic market will eventually come into play, but I would assume that will take a lot longer and I don't know when agreements for that would be made.
Going through the example that Pitt Street did which I have described below is useful for understanding how it would work and to get a rough estimate on timelines if everything goes well. I would guess that a more realistic estimate for how long it would take to get to that level of revenue is 4-5 years. It is hard to know how many deals would be made, what the terms would be and when they would be made.
WBT is expecting to generate revenues from three separate, but related streams, which are paid per customer project/product:
Non-recurring engineering (NRE) work related to specific integration needs
One-off licensing payments. It is standard in the industry for IP licencing fees to be between $500,000 and $2,000,000.
Royalties from customers’ sales of semiconductors that use WBT’s ReRAM technology. The royalties are typically 1% to 1.5%. 3% is possible, but would only be done in cases where there were more dependencies on Weebit.
The current markets are:
Embedded – replace existing embedded flash (eFlash) technologies, with a market estimated to be worth US$23bn. It is forecasted to reach ~US$36bn by 2030. Targeting first demonstration to customer by end of Q1 2021. Targeting first customer agreements within 3-4 months of demonstration
External (discrete) – single chip replacing NOR and NAND flash technologies and market estimated to be worth US$60bn. Targeting integrated ReRAM + selector to be demonstrated by Q3 2021.
Example: assume WBT entered into a licencing agreement with a semiconductor company to licence its technology with specific integration requirements. Terms could include US$500k of NRE fees, US$500k in one time licencing fee and 1.5% royalty on sales from each of its chips that incorporates SiOx ReRAM (the licensing fees and royalty percentages are usually linked, i.e. a higher license fee or is typically combined with a somewhat lower royalty percentage and vice versa). Further assume that this customer will sell 1m, 5m, 10m and 15m of these chips in years 1 through 4, respectively, at US$5 each. In this example WBT will recognise the following three revenue streams from this customer:
NRE fees of US$0.5m.
One-time licencing fees of US$0.5m before the start of production.
Royalties of:
Year 1: US$75k (1m x US$5 x 1.5%) Year 2: US$375k Year 3: US$750k Year 4: US$1.3m
The above example has $75 million dollars worth of chips being sold in year 4 which is 0.326% of the current embedded market. It is expected that Weebit will make many licencing agreements like the above. An important point to note is that it is license fees per customer project, not per customer and that customers often have many different projects. So for each one of these projects, they would be paying a license fee. If a customer has many licences, a global licence fee might be established.
WBT Price at posting:
$2.28 Sentiment: Buy Disclosure: Held
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