Q4 2019 Earnings Call

Greetings welcome to the summer wireless technologies fourth quarter and year end 2019 update call.

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At this time I'll turn the conference over to Kirsten Chapman with El <unk> Investor Relations.

Person you may now be here.

Thank you bought and good afternoon, everyone I'd like to welcome you to send that wireless technologies fourth quarter and year end 2019 update call with US today, our CEO and President Brett Moyer and T cell George Oliver.

Before I turn the call over Brett I'd like to remind everyone that safe Harbor statement referenced in the FCC filings.

Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward looking statements, including statements made during the course of today's call.

Statements contained herein that are not based on current or historical facts are forward looking in nature and constitute forward looking statements within the meaning of section 27, eight the Securities Act of 1933 and section 21, either Securities Exchange Act of 1934.

Such forward looking statements reflect the company's expectations about future operating results performance in opportunities. These forward looking statements are based on information currently available to the company and are subject to a number of risks and uncertainties and other factors, including the current macroeconomic uncertainties associated with the coping 19 pandemic and others that could cause the car.

<unk> actual results performance prospects and opportunities to differ materially from those expressed in or implied by these forward looking statements.

For more detailed discussion of some of the ongoing risks and uncertainties up the company's business I'll refer you to the company's various FTC filings is now my pleasure to turn the call over kit.

Brett Moyer. Please go ahead, but.

Thank you curse, though.

Thanks, everybody for joining us today, it's certainly a dynamic time, but also an exciting time for us.

Some of it.

He today, we're really going to address a number questions I come in inbound look a little perspective in terms of what's happened since had during the year of 29 team Oh, we started it with a substantial a program announcement with LG at CES, where they're all led Tvs.

Nano sell TV little Weiser ready when we had projected some speaker and impact on the number brands adopting open to speak a world as well as other TV companies following well cover all those topics and impacting the sound bar and transmitting side.

Another set of Ah activities now that a lot of products are being launched that were launched in Q4 is marketing and consumer response, we cover.

There are always a host of every call I have a host of questions regarding cobot night do you haven't talked.

And finally, we'll talk about financing.

For the new members just a quick overview on why so why says a interoperability standard.

Yeah, it's between 60 and 70 brands.

Got it is to make sure that speakers and.

Transmission devices can this be designed for interoperability so TV knows how to work with a speaker of speaker knows how to work.

The soundbar et cetera on those so that's the technical side on the marketing side.

Enforces.

Oh.

Communication and standards around why Sun life's a trademark so that the consumer knows how to buy multichannel wireless.

Products that were together.

No.

Let's see yes, which really is just the eight weeks ago. Most of these are black products were in display and talk about.

And we talked about a broad range of additional products that would roll out this year.

And as we projected a year ago LG announcement gave the speaker guys have confidence to start quite a few designs, which is what you're seeing the black, but they're just entirely new wave of speaker brands coming out.

Which are highlighted in blue.

And these are anticipated to be out by the fall selling season. So you should see and ship in Q2 Q3 initially in their respective markets.

As a broad range of and when I mean respective markets or some of these brands that are not announced yet.

Our strong in Europe, and China versus the U.S.

So their brand axes is different it'll be which is different the F. There are unannounced members. In here are also announced projects a current numbers, but as you can see the speaker line up that are to be wise. The speaker line up a certified weiser products there's expand.

During dramatically again.

The Q4 belches.

The impact in the TV World right. So if you think about LG today, they showed innovation and leadership by becoming the first broad consumer product to be weiser ready.

We thought it would have a an impact than it has a this year.

We see yes, we showed two things one is bostco and has a speaker lets 8-K TV that his wife's are ready and that will require a transmitter and ER.

What's the speakers for audio and that is targeted to be shipped in Q3.

This year and also see yes, you saw LG again take a leadership role in the docking wise and expanding the functionality of the user interface to include speaker controlled Bhagyam true.

So that's the that's quite positive.

The fourth TV Guy that we've engaged with would have not announcing the name.

But they are in a production validation and design validation currently with an 8-K TV design that is scheduled to go into production in Q3.

And then the fifth project with one of our members.

One of our TV partners will be and that goes into production next month, we'll be weiser ready laser Tvs.

New you'll see those come out later in the quarter.

So when we look into 2020 as we did last year, when we announced cell gene, we said, we'd get to four or five.

TV brands a year later again, when we look at the activity that's going on with the team guys. There's.

A broad range of activity going on between Weiss TV and potential speaker partners.

Twain summit and TV guys a prototype in user interface. So all these discussions to lead us to believes that the four brands that were partnered with no well expand to buy another four movie in the eight plus range.

That will clearly drive market adoption as it did with LG <unk>, we also and drive revenue expansion for 2021 other ways to drive it from use it to leverage the TV.

It is to take the 8-K TV designs, we have now and extend out into the for K.

TV product lines of those brands.

Oh, we have showed us FICO is TV partner, we see that trend continuing we expected the impact 2021.

For us as well.

No there's three likes to the school building an ecosystem the speakers in the field Tvs, which is the hub of the entertainment.

We're we're proud to be part of bringing the TV back to be into hub of the entertainment away from set top boxes et cetera, but there's also other transmitting devices traditionally a home theater as required a.

Avi receivers.

And most of these we did show or have announced.

But new to.

The public is there'll be a second harman soundbar coming out, but we're excited about lower price.

And.

What we showed at CES were two OTI items that had.

H. do you might dongles.

Now these are small dongles never protocell prototypes at CES at least one of these will go into production in Q2 it'll be in market in Q2.

Now what why are we are excited about this well first of all the cheapest way to interface.

With the TV without adding cost the TV as a U.S.P. dongle, but they are small HD or my dongle is really effective for the mass market diesel probably promo at 99 and list out 129, or 149, and what does it wasnt market doesn't apply to well while the weiser ready TV is good.

And use the U.S.P. dongle. This will let anyway. So certified speaker attached to any smarttv. That's been built in the last three to five years with HTML arc.

So the setup for solar market potential for our speaker partners.

It is dramatically expanding because the interfaces below hundred bucks.

Dongle, and all TV set or install can use a simple application.

Core set up.

It's very it's a to set up an issue my dong it will require a little phone app.

You will optimize how you want your sub woofer volume and nuclear speakers, whether where do you have atmos or not so it was a few minutes doing that but after that because you got HTM I arc. The TV will control that system will control the volume going up and down and turning on and off so becomes quite simple after a short set up exercise yourself a little mobile.

Good [noise].

And both of 'em support Dolby Atmos.

Now all that's exciting because it gives a lot of products rolling in this market or in market, but.

But I really like here is we highlighted just so see yes, what has become more apparent is there was up.

A number of products that the consumer can by poor true immersive sound versus simulated sound bar immersive sounds right.

That are under a thousand bucks.

As you can see the original enclave system you can go out on to Amazon you Gotta for fear of 69, that's a great system. It's unbelievable for 40 69.

There are new products are 999, one for 14 95, and you've got Platen audio with one product out that's been streeting around six nine and another one Oh, maybe hits 599.

And the point here is now the consumer really has the choice.

To decide to they want simulated are real.

First of sound in that room Weiss it makes a simple to set up.

It's comparable these systems are comparable to a premium sound bar.

And we think with with price points and brands will be able to they'll penetrate two to 3000 stores.

Before the end of the Q3, so for the fall selling season.

The industry has been noted noted this its a good quote from a digital time, saying, that's why says year.

We believe them and as the year of wireless home through wireless home theater.

Lot of questions come into us around marketing or some of this we have shown by if you think about the last call.

We showed a this display which is the.

LG clips at some length.

Partnership at a 296 best buy stores.

And they got it in the got as displayed but it came in so late in the season, there really was not effective promotions around it.

But what we are now seeing and it started in January you can see him now if you go online and.

Oh, and best buy Dot com, but you're now starting to see clips an accent bundles that are shown and 10% off on best buy Dot Com I'm sure they're out and then other retailers.

Our understanding is clip Saxon and LG did spot promotions a in January as a cross bundles.

You can look at clips is website you can get 5.17 0.2 is again there.

Promotion around free financing were just council off and on depending what when you look at the site, but products are hitting this are getting one of the shelves that's starting to be promoted.

Oh wait to LG has been very supportive all year, particularly in the poly. Good example, their web page and again, it's all about abide by this cool product.

Clips insights got everything a lot of great video on there. If you go on it they their main speaker line now is a wireless home theater speakers versus the passive ones.

And Harman in their company stores and in the Samsung stores in Korea is highlighting their wife and citation lines.

Now, we put out an earn or release because we saw this trend start in Q4 and this has continued right.

Generally technology standard would not have a lot of consumers coming to its website.

Oh, you know the CEO of HTM eyes on our board and he's shocked at these numbers.

But with all these product announcements in Q4, you can see the unique visitors coming into the website jumped to 20000, a quarter, which was only 1200. This time last year a quarter.

That trend has continued year to date in Ah Ah Q1. This year were at 32000 climbing.

And you know maybe even more important just the sheer number of volume with people coming in the qualities very high so 40% of these visitors.

Our clicking by now or learn more and going off to after spending a minute and a half are too.

The why so website getting educated about technology convenience and products. They are going off to a particular brands product page for either to buy it or investigate it further.

So several of our brands, where we've communicated this out to the existing brands that are shipping or creating landing pages. Knowing that this this engaged consumers above all other consumer they can reach out the research there and gave that cover their site fully knowledge about why so and so how do you create land.

Pages to promote their product and closed the sale.

So we're very excited about a this opportunity that is creating for the why some members.

These are some of the lead members.

We're not going to go through and we want to see a full list a its updated on the on the West assertion station Dot work [noise].

Homepage.

So on the co good.

The way I looked at as there's there's long term and near term the three long term things, which are the most critical for us is.

Consumer preference for wireless is not going to be impacted.

Second.

You know what drives our revenue in Q3 Q4 Q1 is project designed starts partly.

We have not seen any projects cancel.

So may have been delayed by one or two months or three or four weeks, but from our perspective, everybody has got a product in the Asia being designed right now or designing a product for their customer.

Is 100% engaged and driving hard actually they're fully up to speed.

Now the other side of the coin is lot of products are being launch. So is this impacting retail shelf placement.

We have not heard yet yet in fact recently a as recently as.

Friday, one of our customers had their salespeople flying to Microsoft.

So commitment OHA as high by our customers would get these ceded on the retail show. So the retailers are responding to consumers are responding.

No near term.

Unknown unknown, what they sell through Ob.

We are to the right here clearly you can see that both weisel and enclave have started messaging that.

Hey, bringing entertainment inside leave the madness outside his enclaves message for those that are self isolating and and.

Restricted to their homes, you know why sounds a little broader message of bring that theater home to U.K.. We can't go out right now, but you can bring that theater home you can go on Amazon and in 48 hours, you'll have a 5.1 system that you can set up in 10 or 15 minutes easy PZ.

So will this increase sellthrough decrease were not certain but the long term implementations are everything's still clicked in as it's supposed to.

From a supply chain.

Clearly manufacturing came up slower in Q4 or I'm, sorry in Q1 in February after out lunar new year and.

You know that may impact stuff by one month for different customers and and products. But this is your talk in two weeks to eight weeks impact nothing material.

Financials. So we did conclude a bridge financing very appreciative of the Lin partners still coming through the financing during a turbulent week last week.

The.

But that's not all we're doing to make sure we got through this period.

The team has.

Has taken a a temporary wage cuts.

Or 10 weeks, which is substantial.

I can't tell you how a pretty impressed Diane.

With the commitment bar employees, but.

Will make their right to them at some point.

We have expense reductions beyond lack of travel a week. If you think it in terms of those that are modeling.

We just released Q4 numbers I would expect a ics opex to be close to a million dollars lower than Q4 in Q2.

To give you perspective.

From a financing perspective.

First things first is anybody that's a shareholder we need you to vote your proxy on the reverse split.

So our objective is to was to take this bridge.

And clean up our finances in strengthen our balance sheet. Shortly so that weekend. So there's no delisting issues.

So both your proxy.

Now from a financing strategy, there's a broad range of actions were looking at there's a various financial instruments, we have strategic options and of course with the government passing the bail out. So we're going to go see if there's any koby had lunch.

I mean, we're asking her employs a dig deep.

We can get alone and help relieve some of that we will.

So in summary, when when you wrap this all up new we have more products in the last call substantially more.

We have receiver speakers TV et cetera.

We have consumer interest.

And we'll have a broad global footprint a lot of our brands are stronger in Asia, and Europe than the U.S., but even in U.S., We think we'll get into two to 3000 store front range.

So with that I'll open it up for questions.

Thank you at this time will be conducting a question and answer session.

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Thank you.

First question today is coming from the line of Ed Woo with Ascendiant capital. Please proceed with your question.

Yeah. Thanks for taking my question. My question is more on the supply chain I know you said that you know it's been relatively.

On a practice, but do you think that all this would change as we head into the holiday.

I don't think I mean, my personal belief than what we see is there's a some Q1 bumps around this but if the consumer electronic industry is going to have a supply chain problem.

The best time, many years February right after Christmas.

So I don't see.

The supply unless there's another massive wave of kogut going through Asia, which certainly at least the news coming out of China is not that.

I don't see any impact on supply for the holidays.

Great that's going onto a common you're are you know product releases that national parks from some of your partners have you seen any change at all you know in the near term.

So I think.

We are not.

So sensitive to changes because really everything we see is building out. So we don't have the broad baseline or to measure at the inside the delta.

But as I mentioned earlier, we don't see we haven't heard of a change in retail evaluation of our consumer our customers products going onto the retail show.

Too early to know whether any consumer it's our goodness.

Respond in a meaningful way to some of the ads we've talked about in terms that you're stuck at home.

We're going to theater home keep the madness out.

Right.

Yeah, you actually made a good point about how you know home Entertainment Patrick worry you know, it's not like not pretty computer game. You say you get good man has greatly increase after time, everybody staying home.

Good afternoon to be a an opportunity.

Right so.

See you can see on here part of the enclave add a that a if you download the web site or if you go to.

The Weiss you to channel you can see the latest sad, which addresses you know brings a theater homes about a minute and a half longest pretty clever.

But.

You know at the end of this if you want I can click in here and you can play it we can play it maybe I don't know if that will work I take that back at.

Gorilla went on coffee or the video [laughter].

No problem and my last question is just on you know go to reach a membership you mentioned that drove the Fourk TV brand the youngest smells yet.

You know once Youre a coverage ratio what got you know for center market share in the U.S. I'm not TV.

Many factors that are part of duck and weave console accretion.

Oh, how are you asking that in terms of four nodes or in terms of products lunch.

How about market share.

Do you have that information in a percentage of TB private manufacturers that partner younger we are association.

Yes, so I don't think I really good is that only because if you're talking about shipments in market share. Then we're primarily talking about LG and that's not my business to disclose yep.

I think I can answer those questions. Once some of the others are in market and it's a it's a category answer versus the category up one.

Sure no comp well, thanks for answering my questions and I wish you guys. Good luck. Thank you.

As a reminder, you mean for star one to ask a question.

The next question comes from the line of Daniel Carlson with Challenge research to see if your question.

Ah Hey, Brett Thanks for taking my questions.

Just a couple of things about.

Q1 here I'm wondering since is pretty much over if you can talk about how it's shaping up relative to Q4 and answer what the sell through is like are you seeing reorders from customers and just sort of just how general businesses right now.

So we have started in March seeing replenishment orders come back from some of the products that were launched in Q4.

So that's a positive sign.

In terms of shaping up.

There are some small supplies issue. So I would think who you are in line with our historical runway great.

You know, we just shipped 200000 worth of stuff that I didn't think was going to get out this quarter. So.

I'm.

The supply chain is coming up to speed very rapidly.

But that's what I would expect.

Okay, and then can you comment at all on.

What's going on at best buy in terms of how sales are going there and sort of the attach rate with the LNG TV is that is that something they're pushing are you seeing are you seeing good attach rates there.

I don't have any visibility on that actually but what I have visibility and you know we addressed earlier in the call is that clips is now now that are over the demand is so the Christmas season.

They are aggressively merchandising and setting up and they have a calendar to merchandise.

Those speakers at best buy and our understanding on that calendar is those promotions that day drive and joint promotions that are driven with LG.

But that's our understanding we don't have visibility of that calendar.

Gotcha and then my last question is it'd be great if someone I swear to join the way said.

Does the Asian, then get on this platform is there any any chance to that happening in 2020 in your opinion.

We're lever we love all brands.

So.

We talk to lots of brands are still on it.

There is.

Brands that are not announced.

And you know until we announce some you know I'm not going to pre announce anything.

Got you, okay, well, thanks, Brett I appreciate it differently.

Thank you at this time of reach into a question answer session I'll hand, the floor back to management for closing remarks.

All right, where I'd like to thank everybody that joined us.

I'd like to thank our employees.

And you can follow up with me after the call.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.