Q4 2020 Summit Wireless Technologies Inc Earnings Call
Greetings welcome to summit wireless technologies fourth quarter of financial results Conference call.
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The question and answer session will follow the formal presentation.
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I will now turn the conference over to Kirsten Chapman from <unk> Investor Relations.
You may begin.
Thank you Rob good morning, everyone I'd like to welcome you to summit wireless technologies fourth quarter on yearend 2020 update call with US today are summit wireless CEO and President Brett Moyer and CFO, Georgia, Lee that before I turn the call to Brett I'd like to remind everyone of the safe Harbor statement referenced in the SEC filings.
The private in Securities Litigation Reform Act of 1995 provides the 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 the section of 27 day.
<unk> of the Securities Act of 1933.
And section 21 E of the Securities Exchange Act of 1930 for such forward looking statements reflect the company's expectations about future operating results performance and opportunities. These forward looking statements are based on the information currently available to the company and are subject to the number of risks and uncertainties and other factors, including cash.
For an economic uncertainties associated with the COVID-19 pandemic, our ability to predict the timing of design wins, the entering production in potential future revenue associated with our design wins our growth rate.
Our ability to predict customer demand for future and existing products and to secure adequate manufacturing capacity consumer demand conditions affecting our customers' end markets, our ability to hire retain and motivate employees the it.
Next of competition, including price competition.
The clock technological regulatory and legal developments.
The buildings and the economy and financial markets and others that could cause the company's actual results performance and prospects of not for <unk> to differ materially from those expressed or implied in the forward looking statements.
For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business I refer you to the company's various SEC filings.
I'm pleased to turn the call over to.
Brett Moyer, President and CEO of Summit wireless. Please go ahead Brett.
Thank you Kirsten and good morning, and thank you, ladies and gentlemen for joining us on the call today.
So we're looking forward to it for a week.
Of some good questions discussion afterwards.
We did notice of.
Because we are tracking shareholder growth through the tracks. The acquired program. There's about 1200, new shareholders. So we'll do two slides of.
Ketchup overview and then there is a good number of new slides in terms of performance and growth that I think you all find interesting.
Some of it just as a catch up for the new shareholders.
This is.
One is the.
The core business developing technology.
Oh on chips modules IP for the wireless home theater space. The other is the Weiss of standard now the wife the standard is the interoperability of the marketing of products to transmit and can receive interoperability between each other.
And we have talked about weiss of the in more than 70 brands.
The objective is to make sure of television on how to communicate the speaker speaker knows how to communicate too.
The Navy receiver.
And that standard is maintained by <unk>.
This is a new slide for everybody. It may look similar but it's fundamentally different so of you'd think about.
When we IPO, Ed a little more than two years ago, We had six speaker brands shipping Weiss of certified products.
This slide is not a member of slides anymore. This is on slide that talks about brands that'll be shipping in 2021, if they're not already shipping.
And as you can see it's going to exceed more than 25 brands.
We have three TV brands of fourth one then the fifth one we expect that come this year.
For the fall selling season.
And we looked at 25, plus sneaker brands in the market for Christmas selling season.
For for the new shareholders.
We see the mission here is making sure of consumer has a very simple way to install a completely immersive surround sound around the smart T V.
The other than Tvs had the poor audio sound bar helps so sound bars of soap operas better.
But when you look at what a wide set of pads and you look at say the platinum or the enclave price points Youre looking at of <unk> thousand dollars to get a complete home theater system that you can set up in 10 minutes most of that time is on packing.
In this half the price of what the premium sound bars are going for bi.
Sony both Somos. So we think as the consumer becomes educated there's a broad.
Demand that'll come around these price points.
Okay.
Three growth drivers now.
The one it sounds and that's pretty well vetted a couple of new information on there. We did talk a lot about why is the way of today and then the next generation IP.
And you know fundamentally if we go to the.
Samsung Slide you've seen this it's a universal of low cost transmitter of that can plug into any HDMI television and transmit too.
Oh wise the certified speakers it'll set up the wireless home theater system automatically AR in the second or two.
Question is we did analysis in the fall how is it being received.
I'll tell you that were happy with the demand on this for it and the industry pros at CES awarded at three different awards, which is outstanding for the new product in the new category.
Alright, what's the mission of the wave.
You know the mission of the wave is to educate the consumer.
Both on that exist in the benefits.
Critically expand the category of as perceived by the consumer and the retailers on the brands and drive lower marketing costs for the brands that are shipping products. We.
We think this will be this is high leverage for us for putting a lot of backward in the log on to talk a little bit about it.
Yeah.
This.
On your left would be one well is one example of a weiss of wave.
AD that we ran right it sucks people and by looking at the T V or sound bar talks about some of the bigger tier one brands that are of shipping product you click on that they come to a landing page.
Now on that landing page.
We generally run of good better best solution as defined by price points. So what this does is it creates in the consumer's mind. The category. So for example, if you look at this one there's an 890 914 95, and the 24 95 solution right and we can mix and match these and we have put different Brad.
Zane on the other suggest the one example.
Now.
The advantage of having multiple brands is a it creates that category, which is important the wise, though.
Be it actually increases the consumer engagement the C. Three speaker three brands there in three different looking solutions versus one so for the individual brand just ran an AD to looking at enclave well that's the only thing that could peak their interest but like in this case what happens if you're on an apartment you.
One of the low profile sub which of the Monaco of house.
And you don't want the big subway clips or enclave Oh, okay, you're still the wife's of customer that if he had just gone the enclave we might have lost you because you didn't want the big sub and vice versa. There's a bunch of people don't want of low profile. So so.
Now I'll offer different looks price points audio solutions, great set category of image for the consumer.
Now.
The next 90 days, you'll see a lot of transformation on the wife the website to increase the engagement and leverage what we started to do in the fall you'll see a new website come in you'll see the ability of brands to launch and promote their new products.
You'll see the ability of brands, who increased promotions and giveaways to create engagement with the consumers.
Each brand as part of its association fee will get a member of page. So they can although it'll be on the how the top of it'll look like why is the website page.
Page because it will be everything on that content is defined by the brand and by their imaging and messaging. So somebody like enclave has two different tiers of products out the might want to put both of them on there that might just wanted to put the one or two on promotion company like L. G that has projectors all loads of nano.
They want three sites three different images and talk about each one of those categories and allow the consumer to click off to the website or you can click off directly to a retailer.
And that's important because of you will hear us talk about and define an authorized reseller program right. So again. This is all about building the category both on the consumer of the retail mind, and if you're going to be an authorized reseller of you're going to have three or more weiss of products youre going to have a trained specialists that can answer the questions.
From the consumer.
So for example, you would probably have on your page you remember page you would have you know.
Kind of reach contact us of for questions Weiss of at G and H photo or something right.
So we think it's important that we identify the 10 or 12 key retailers that have both Tvs and speaker brands different price points different brands and they can educate the consumer and we work intensely with those considered those retailers to make sure. Their databases are set up properly the consumer can type in whitestone.
Get all of their product not some of them, depending on who started it up.
And so we'll be working heavily with that and then the and all of that should expand the consumers' awareness and education of wireless home theater and the Weiss of solutions.
Yeah.
Traffic. This is on an update to how we see the millions of visitors coming in the sheer it is heavily tied to September through December.
We see the first two year first two quarters and as growth certainly over a year over year. So Q1, we think there'll be about 135000 versus 34000 last year.
So that's up about 400 per cent.
But really Q1 and Q2 is all about us focusing on bringing the all of those initiatives. We just talked about so when it comes into Q3 and Q4.
On the brands know how the market to the wife of educated consumer in the consumer sees a broad category of products.
Now this does give you a quick the idea of how the how are analytics can help a consumer of consumer brand directly market to the consumer.
And first cost effectiveness that we can as association drive.
His.
Cost sharing through the association of PS.
The identification of consumers interested in the home theater alright.
Alright, So we go out and you buy millions of impressions 98 per cent of them are worthless, but youre going to get 20000 people. So it was 20000 people may like the low profile sort of big saw book known brand of non known brands and innovative brand well, how do we go back and remarket to them. So the analytics that we've developed over the last three of them while the lab.
Three months of the last year.
We're able to let of brand go back to anybody who has visited Weiss of based on when they visited in the last six months last 90 days last 30 days, whether they visited from Europe, or Brussels or Kansas.
Right.
They can we can drill down to letting them remarket to people that click by now from that landing page. We saw they went to went to Amazon.
The people, who go to Amazon one half of one per cent by a product.
More or less so theres still 99, 5% debt or or engaged enough to get all the way to of reseller, but need something else. So why not let another brand come back and remarket to them.
You can remarket to somebody just visited Weiss of two or more times spent more than two minutes for five minutes on the website.
We can drill down and give the brand the ability even segment between the consumer and the audio file engage her. So if you came in and you looked at bank of the Olson and you looked at system Oreo of Bouchard those of our audio file speakers right and their their price that way, but if you came in and looked.
Flatten or.
Enclave.
We're going to categorize you as a consumer so that's somebody that's trying to target of 500 dollar of less price point product can go back and re market to them.
Requirements on the brands are very minimal you gotta be paid current on your association fees.
You need to use the old Weiss of certified logo in your AD.
Upfront now at the end of of video.
And Theres no bashing peers, where all of a fan of Weiss of family.
Alright, new.
As a new slide not necessarily new product.
But just to clear up what we're doing are.
The platinum product line is distributed by summit in North America, not in Europe, and Asia, but it's if that product has been certified.
By way so we are doing the distribution in the U S.
Now.
We are in no way headed to be in the Speaker company.
But we are use on the platen line as a critical component of the Weiss of way to define the category and open up the category to more consumers.
So without plot in the.
The lowest price point MSRP would be $2 98 at enclave.
No.
Enclave has shared how the mix works between the 1100 dollar of 1500 dollar and the and that 1100 dollar opens the door.
The very high percentage of move to 1500 Bucks that has the same objective we plot and open the door to the 799 shopper move from the 999 moving from 999 to 11 98 and up the ladder. So we are the ODM had designed this product it was shot to several.
Oh speaker companies and we chose to pick it up because it opens at market to a broader consumer and feeds people up the ladder in the Weiss of category.
Next.
We because we believe in the way.
And the critical leverage we get out of it.
Having our own brand to model programs around is critical.
For developing the right analytics to go back to the speaker brands and saying. This is what you should do this is how you should do it et cetera right.
So most of the data that we have today is around the platen ads.
And the platinum products in the good better best ads.
So you'll see us open up of store in.
On the reason we're open up of the store. So we can sell some of that flattened direct.
Because when we sell of direct.
We're able to actually identify the exact buyer in.
And the demographics of that buyer and we can turn those Denver, and then Facebook knows who purchased not who clicked on the site now who clicked on a landing page to go to a reseller or who actually purchased.
So this allows the media companies to target exact buyers not shoppers, but buyers. So that's good for everybody in the why is the ecosystem the for us to be able to refine the 90% males that come into the wife the site to Hey, These are the 10% that really bought.
Alright, and remarket to them.
And then finally the critical point on platinum is we're a technology company that develops.
New wireless technology, we have another wave of technology coming out that we started launching in January and Weiss of the Platen line will be in the early adopter to prove to the industry that it is successful no generally the pattern is as a small company into the.
All of something you shake and bake it you spend a year or two a year or two.
Sell it and then you watch your customer design it per year, we're shortcut in that cycle on the Gen. Two.
So we will move gen two into of platinum product as fast as we can once we moved the ball.
And started shipping Gen two.
For the analyst modeling.
I, just don't see the being more than 10 per cent of our revenue not it helps certainly a little bit here, but really this is a tool of the weiss of wave in driving the overall category.
Alright, Nextgen, we have launched a 2.4 gigahertz, a Wi Fi for channel product.
To the smart market.
We've got multiple customers who are evaluating it now.
We are hopeful our Iot module manufacturer yeah.
We'll bring out their five gigahertz, which is scheduled for Q3, which would allow us to have a a full multi channel low cost solution of next year.
Yeah.
Now again, if you go back to two years ago on the IPO we had.
The accident Q, which is the navy receiver transmitter 1200 bugs as of then brought out the $2 29.
<unk> USB dongle that transmitted for for Xbox and Weiss of ready Tvs. It sounds then drops out of another $50 of drops the Xbox costs that you are at 179.
Currently the platinum product line is evaluating the sounds send U S b.
We mentioned the T V brand for in five there will be more brand shipping Weiss of ready Tvs. This year and if you look at what happens if you move sound center of USB architecture, you drop of painful Dolby tax drop HDMI royalties and you lower the tariffs and the overall costs.
We think that would let you let of brand bring out of dongle at 99 to 119.
Okay and then if you look at next generation there are three TV brands that have.
Products built into them currently for two a bank and also on Sky worth.
And you know that module of 13 to $16 roughly.
The next generation is going to drop that caused by <unk> 80 per cent.
And so if you think about enabling the T V to go direct of wireless speakers you are now getting to a very low single digit.
The cost burden.
But not much more of than maybe an HDMI cable to the consumer.
Now how does all of this technology trend into say the lower end of the market, which is where the volume is.
The two years ago was 999 was the lowest you could get.
You'll see a 99 799, and we think with the Nextgen next year, you're on the 699 749.
The price point.
Now those are consumer prices.
We think our margin.
<unk> continues to grow and expand with this evolution.
But the market broadens, even though the the with.
With the lower solution cost of the consumer.
So with that I'm going to turn the call over to George.
Thank you Brett.
Q4 was the strongest quarter to date, we see continued improvement in key metrics of revenue and gross margin.
Revenue for the quarter exceeded the $1 million represents a 141% increase over the same quarter in 2019.
And the sequential increase of 71% over the third quarter in 2020.
On the gross margin was approximately 24% for Q4.
Compared to 17% in the third quarter. So that's the seven point increase in margin mainly attributable to scale as volume increases.
Total Opex was $3 9 million for the quarter that included 955000 of noncash charges.
Per the Q for 'twenty.
A $2 9 million.
In 2019, which included 222 day of noncash charges.
The Q4 2020 number of included 250000 of advertising expenses relating to the waves.
Cash at the.
The end of the year was seven 4 million at December 31.
Cash for.
Rejected at the end of March 31. This year is between nine and it'll be above nine and could be up to 10, depending upon the timing of lot of customer payments late in the month.
Of that increase in cash.
Was mainly attributable to the warrants that were exercised in January.
The customer prepayments of relating the orders for the balance of the year.
In terms of revenue guidance for Q1, we expect to exceed 100% growth over the same quarter of Q1 'twenty again.
Revenue in Q1, 'twenty was approximately 400 gig so we're projecting over 800 K of our revenue for Q1 and the margin should be again in the mid twenties.
On Opex total opex as a forecast of $3 2 million.
That will include 600, K of non cash charges relating to stock comp expense mostly.
And that also includes about 200 K for advertising relating to the waves and as I said the the gross margin will continue in the mid Twenty's as we see improvement from scale.
And with that I'll hand, it back to Brad.
Alright, Thanks, George and so if I summarize where I think we are you're going to see a very shortly more tvs.
The engage with the Weiss of system.
Clearly youre seeing more consumers coming into there the weiss of weighted websites. There is a lot more speaker brands or shipping products.
And lower prices to the consumer or are rolling out all of which we think drives revenue for us this year of next year.
And with that I'll open up the call for questions operator.
Thank you at the site will now be conducting a question and answer session.
To ask a question. Please press star one from your telephone keypad and the confirmation tone will indicate your line is from the question queue.
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One moment, please while we poll for questions.
Thank you.
Our first question comes from the line of Sushi, the silver with Roth Capital. Please proceed with your question.
Hi, Brett Hi, Georgia, Great work on the progress here.
Thanks, Susie thanks for joining all of the.
No problem.
Yeah My pleasure. So I'm first question here, Brett wraps George what percent of your your design wins, you product design wins are ramping today versus still on the come to launch just to understand kind of how full the pipeline is for you.
Yeah.
So.
In terms of.
Launching this year or launch of next year I'm not sure of the time frame you're looking for.
In terms of what's in the market.
We're launching accounts.
Yeah lunch in calendar 'twenty, one which of your wins of not yet come to market like what percentage of your wins have not come to market yet first of all of the ones that are already in the marketplace.
From the consumer's perspective.
From a brand perspective, I would say.
60% are now in the market.
I mean very shortly will be.
From a.
Project perspective.
Yeah, I'm not sure I mean, we're <unk>.
Total projects that are on the mark that'll be in the market or close to it.
The 95 in the high nineties.
So each brand a lot of the brands have multiple projects.
Okay.
And then is there any way to quantify the to quantify the or qualitatively describe the shape of the unit ramp in calendar 'twenty, one on where some of the key factors are there are.
You go through the year of how the quarters are literally shape up in the ramp.
So, let's just I mean, the classic seasonality of the component to it.
Consumer electronic business as Q3 is as strongest seasonally.
June through October is when you'd hit most of the shipments.
Because you've got to build it get it on the water and get it to Europe, or Asia, or North America per Christmas right.
So certainly we are seeing strong demand already for Q3.
Oh from certainly from the historical perspective.
And I think.
But that's how it calendar is it.
Now to a small extent debt we have the product the platinum product line, that's gonna be of Q4 for.
As you know as I said on my guidance is.
I wouldnt be building the big model around that that's not our objective.
Right understood.
Is there any in the in your ramp in 'twenty. One is there any customer concentration among two or three large customers driving the units or is it fairly diversified.
Our largest customers Harman.
Division of Samsung.
Our largest weiss of ready T V is L G.
There'll be a second one that will.
That.
It was really a very high tier one that'll diversify that.
And I think by time, you get to the end of the year all of those brands that we saw earlier in the presentation, we will start to heavily diversified Harman.
Okay.
The good year for you guys and then lastly, just the IP business model I want to understand that a little better just what the business model is there on what the opportunity for what mix of revenue as there is.
Yes, yes, usually cause I just qualify one thing on the Harman discussion.
Of course, if there is on the tour of saturation of the government.
But there is not a concentration round of particular products in the Hartman.
We have many projects under the Harmon.
World right. So if you go to the project level, there's no one concentration of anywhere.
Okay, Great I appreciate that clarification of breath, and then lastly, just the IP business model one of understand that better what the business model is there and what the opportunity is a mix of per cent of revenues is longer term, if it's strategic to grow revenue Sir.
So in the strategic we think it's a it's.
It's the the largest market by far.
The two four gigahertz is of for channel. So that is targeted to your sound bars with Subwoofers on wireless rears.
We think it is.
Really no we like our side of the margin of the business, but it is an aggressive come price compared to current solutions in the market for that market segment.
We're highly encouraged we think it.
Because as you know when you if you go into a sound bar, you're talking 30, 40000 systems on the design right or more so these are of higher volume.
Products, we see it impacting Q, our 2022 significantly.
And made the two solutions have a good solid race.
Okay. Good.
Good luck of you guys on 'twenty one.
Right.
Our next question is coming from the line of Jack vendor Art with Maxim Group. Please proceed with your questions.
Great. Good morning, Good morning, Brett George good to see solid fourth quarter growth. It's the.
Staying momentum based on that first quarter outlook good to see I'll start with the question for Brett.
Just regarding the revenue outlook again, you're forecasting the you know more than a 100 per cent year over year grew out of you just came off over 100.
Hundred per cent growth from fourth quarter, you're expecting over 100 per se again, the first quarter, which is very exceptional growth clearly.
Can you provide maybe additional color on you you touched on the drivers, but as it relates to the first quarter.
What what are the what are the key drivers outside of but just I guess sound sand and then when you include all of these new Speaker partners.
Why is the certified systems, how do I, just think about which ones are driving the most growth I imagine the wife's of partners.
And then also I'm, just thinking about retail versus the online e-commerce.
Anything you can provide there.
So while the that's a big dump truck full of questions Jack.
[laughter], the you pick and choose.
[laughter] alright so.
For the for our brands that are in market.
It may not be of surprised we havent talked about it but I think almost all of the brands are seeing strong demand.
Right and you know the the Wii.
<unk> been on the brands are benefiting from a surge of buying and outfitting the house from Covid.
Certainly in the in Q4 and Q1.
You know it would be interesting to see how it goes but for US we have.
Have.
Quite a few projects coming on so it's not a factor too in terms of how we see the year.
We see Q1, well, we talked about the suite of J, a little bit, but you know Q3 is traditionally the big quarter seasonally for the industry.
Hum.
Well, we have a steady.
Stream of products rolling out between here in September.
Which should make a good consumer.
Selling season in Q4.
Got it that's helpful and that's expected and it's good to see your view remains there.
And then just going back to prior quarters, I know you've talked about.
Sometimes the level of visibility as you look beyond a given quarter of couple of quarters plus the design process takes it takes a while I'm just what's your level of visibility right now like how far out.
Is your visibility in terms of what you're you're.
Your potential production ramp for us throughout this year and then keeping in mind maybe.
Maybe maybe some external supply shortage factors on a semi.
Yeah.
Yeah. So.
We.
But when you see the K filed we have increased our inventory levels, you'll see an inventory increase at the end of Q1 as well right.
And we made the decision back in December we were very concerned.
About the tightness of the silicon industry versus all of these projects that were coming on line.
So we placed orders for.
Around the turn of the year to ensure that we were in the.
Food chain to make sure we had the all of our long term chips.
Alright, so we couldn't Conversely, where that we told.
The brands are customers that.
We were going to 'twenty, one lead times 21 week lead times.
Now that gives us some visibility, but in fact, when new customers come on board, they're gonna put P. O's and no matter. When you told them. The lead time was right if customer sell down. So for example of you. If you try to buy eclipse speaker system, they've been sold out since mid December.
There's a piece here of piece there, but you cannot get out of 5.1 of I don't even if he can get of $3 one anymore.
So if you're sold out youre going to port of ordering in the regardless.
So we're seeing both longer term demand the old come in and grow our <unk>.
Lead times, and where C. P O of coming in because they're sold out.
Got you.
For and then maybe just a question for for George on the gross margin front here.
The fourth quarter gross margin result was exceptionally strong definitely relative to consensus and my estimate which is good to see and it sounds like its benefiting from that that ramping of revenue now at the 1 million dollar level. So I guess as you look for the balance of 2021 of if revenue continues to.
The remaining at $1 million of above per quarter.
Just can you talk about how you would expect that the impact gross margins what kind of range. We're looking at I know you've provided for first quarter, but for the rest of the year as revenue really scales.
Well I would I would.
You see continued improvement I don't want the over promise, but you know I would you know I would look at it in the mid to high Twenty's overtime.
Okay. That's fair and then maybe just one last follow up back to Brett kind of relating to the gross margin in the long term opportunity with Gen. Two technology. This is my understanding is that the much higher gross margin profile or.
Potential so just.
You think I guess just for a review of comments do you expect the gen. Two to really be watched I guess next year is that right for that correctly or am I misunderstanding that.
For let's just clarify the data points 'cause it could be both right. So we did launch the two four gigahertz.
We look for that to start impacting Q4.
We do expect.
Of five gigahertz chip out of our module chip partner that we can use to expand our IP to more than four channels in Q3, which means we will probably launch it at year end and it should impact next year's revenue.
As well.
Got you and in the margin kind of profile dynamic of debt still early stage on paper here, but.
Is there opportunity for upside relative to the the.
The Gen one technology.
The answer is yes.
But we're not going to disclose that too.
The customers.
The price is going to be.
Set based on volume.
And performance versus.
Bluetooth or other.
The wireless Wi Fi solutions.
Fantastic makes sense, okay, great. That's it for me guys. Congrats on the strong results and.
Wish you the best with the strong outlook. Thanks.
Jack.
Our next question is from the line of Ed Woo with of sending capital. Please proceed with your question.
Yes, congratulations on the quarter again. My question is what are you guys seeing and hearing from your customers. Your partners in terms of what they're seeing out of consumer demand for this year. Obviously it was very volatile last year, how did a few right now obviously, we're looking towards the holiday season. This year.
Well I think if I summarize on the majority of our brands had.
Our Q4 and Q1 is strong for them.
I think anybody can guess on what will happen during the summer.
But I think it's sad to say I think COVID-19, though.
Really.
Created an awareness of what you can do from home entertainment.
In your house cost of Affordably, both from large screen Tvs to wireless audio surround sound.
I think it pushed and part of that and it's going to be a permanent shift to adoption in the home.
Particularly because.
It also pushed the streaming services to step up for.
I mean, Disney plus cross the 100 million users right, whereas about too I saw on the press right. So all of the streaming services.
Now there's been a lot of streaming but streaming first run movies.
Just first run action movies content movies.
You know that's just that's just the begging for a good audio system around the 65 inch Tvs and 70 inch Tvs et cetera.
Yeah.
Yeah.
Great and then have you seen any difference between your European market customers and the North American customers.
Consumers are brands.
Consumers and brands.
Yes.
So when you look at the brands that we say of shipping or about the ship.
Those brands cut across all segments. So some brands are much stronger in Europe. Some brands are stronger in China, some brands or a stronger of North America right.
From a consumer demand.
Okay.
I do not know enough to say.
What the difference between the European and the U S consumer.
We have more data on the U S consumer primarily because I can see what the lower price solutions being on Cleveland flatten or doing.
And there the European P and brands are dominant.
In the mid tier and higher audiophile categories for style right. So if you look at you look at harm and if you look at the Bouchard. If you look at system audio banging.
Banging Olafsson Lewis or audio file of products and in the case of Harman and banging Olsen, they're highly artistic.
What percentage of <unk>.
What percentage of your business right now is international.
Can you tell.
Well from where we ship, we ship almost everything to China.
Because almost everything is built there there are some stuff that goes into.
The your P on for low running stuff.
From a consumer brand.
I would I would guess, it's fairly distributed between Europe and.
North America.
Thank the consumer of the the brands that are strong in China, they're coming online in Q2 and Q3.
Great well, thank you and I wish you guys. Good luck.
Yes. Thanks.
Our next question is from the line of Kevin Dede with H C. Wainwright. Please proceed with your question.
Good morning, Brett and George Thanks, very much for taking my questions appreciate it.
Thanks, Kevin appointing share up yeah, no no pleasure to be here very happy.
So yeah, I apologize I'm still a little confused on your your current module of the Gen. Two and I guess the Gen. Two <unk> can you talk about how you.
Plan on integrating those technologies into sounds and just so I understand I mean, I I get that the gen. Two.
And Gen. Two a model I module, I guess, which is the five gig the.
Those get integrated into the TV, but I just I just wanted to make sure I understood. How you planned on migrating some of them.
Well so.
Let's talk Gen. One gen two of his family's first.
So.
The current generation it has and the that sounds sounds using an all certified products are using.
That is of.
The highest performance and that continues on for years.
Alright years the.
The Gen two soft on the suspect to good enough for the broader consumer market, but it is not in any way of audio file.
Technology.
Okay.
Yeah, no understood given the few work given the jurors support channel supported channels.
Yeah, well, even when we we get the five gigahertz and we think we can do eight or 10 or 12.
That's not an audio file.
Quality of performance right I mean, well you get out of Gen. One as five millisecond latency in 'twenty for a bit.
On.
<unk> audio right now.
We will still use on compressor audio on it.
The five gigahertz lets us get more channels off the same module and.
And I think both of them, it's not just the going into of T. V. I mean, they're all applicable to either of P C or of sound bar or of T V or or any of the high volume product right.
From.
So you had one more question I forgot Kevin I'm sorry.
No no no problem I, just wanted to make sure I understood how.
You know how you how you plan on bringing these to the market right and how it sounds then.
Right you know you're yeah, yeah, just your thinking on behind out because I mean, it leads to my next question Brett. So let me kind of move back to the ranges.
So let me go for this one.
We see the at least the 2.4 gigahertz.
I don't think that will go into Samsung, we don't have that planned.
We see the two point for going into the sound bars, we see that Ian.
Product with for channels that can displace the current Wifi vendor and displace the current Bluetooth vendors right and the Wi Fi vendors and those are those solutions are generated.
A lack of home theater of box or sold integrated right. So we have not addressed we have not made of part of the wife's of standard.
If you want a Wi Fi performance fears of lower cost higher performing solution.
On.
Now the.
Five gigahertz.
We'll be.
Hey.
Will address and interoperability market.
Yeah.
We think the Tvs need it we think of the speaker brands needed at the consumer level.
But again at this price point, we still think at 749 or 699, you're selling the solution in the box primarily.
But the brand that once the terminal Weiss of ready T V into.
On an integrated solution and stream directly to their sound bar or their speakers.
They need they do need to still have interoperability at some level we think.
Okay. So.
In your prepared remarks for it you mentioned moving customers up the technology ladder and it begs the question.
Right.
The price ladder, okay. It yeah, but it begs the question on <unk>.
I guess.
Replacement cycles for lack of a better definition and I was wondering if you could speak to that a little bit given theres a huge installed base of Covid is nothing new so large screen Tvs of been selling well and that's sort of wireless curious about how you're gonna position sounds then you can drive price the price per.
Moving to that lower maybe you get more wireless surround sound adoption given such a large.
Big screen T V install base.
Yeah. So.
So tv's haven't had a phenomenal run last year.
Which creates with the streaming service a great opportunity for aftermarket audio of sales number one right for.
On a replacement cycle.
Most of these design wins are two three.
Ear of cycles.
At these price points right.
Now for the Gen one stuff.
That's the stuff doesn't.
Get the cycled out of every year that those are long term design wins.
I, what I met what I've met is really at the consumer level right. So I think everybody is pretty much used to buying the new iPhone every 18 months or maybe 24 months now that Theyre 1200 Bucks I'm just wondering how you see.
On the way that we should listen I know you've been on this business for a long time and there's nobody on this call. It knows the better than you do I'm just wondering how.
You'd expect consumers to react to this new technology coming to market and their willingness to change out what they have.
I don't think it's the replacement cycle issue at all.
Alright, I think what's being sold now is pro Sumer audiophile category of products and as of five gigahertz solution comes out next year.
That's a whole different consumer market.
The difference between in the television World and LG OLED <unk> versus the LG OLED.
Right you got a 15 on our dollar price point versus the $350 price point.
So we totally see gen two.
Opening of market that we're not even address it.
I see okay.
Yeah, I don't okay that helps.
They're not oil and water, Kevin, but they don't I don't truly think the.
The two markets between Gen, one and Gen two mix.
Okay.
Okay. Thanks for that clarification because.
Yeah.
I clearly didn't get it.
Yeah no weird.
The Gen. One has the performance level of debt no solution has.
And that is.
If you're going to spend $500 on an audio system, you're not going to take any other solution.
Unless you want a bunch of big wires and spa.
Then another half a day or day wiring your house right.
Yeah, no I wouldn't be speaking to you if I thought that was the the ideal adoption.
[laughter].
That's just that's another rhetorical statement for rhetorical question.
Let's take the step back and look at Palatin.
Okay give us just give us a sense on how you're seeing.
You know your constituents right your partners the TV brands of Speaker brands sort of react to that introduction I know part of it was sort of of kicked with the Spurs Oh I'll, let you know I mean like Jack I have a dump truck full of questions too, but I I promise I won't keep you all day I'm on.
I'm just kind of curious on how.
How you see that reaction now.
And whether or not you think you'll see a response to that sometime this year or do you think it might take.
You know it might take some of the bigger players a little bit longer to react to that what's your take on that.
What was your question on how they're responding to the platen product line.
Exactly and not so much the line per se, but the the concept right. It's really about the philosophy, let's see.
To your point opening up of market at a lower price point and address.
Address the market that hasn't been addressed and I you know I know I at least the my understanding is that your.
Part of driving that was it.
It was introducing this this line if I'm not mistaken.
100 per cent.
100% so.
If you if you look at the customer base, if they're selling the 2000 dollar solution.
They could care less about of 799, 699 999 solution right.
If we're selling a $500 of 1100.
They're a little guarded at the moment.
But.
The proof is in the putting a year from now do I have a million consumers coming through on my able the funnel those consumers I mean, we send.
As many people off to log on claims and a week.
That's what we think their monthly website traffic is.
Yeah.
No.
You can be mad about of 999 price point, but and again if I'm driving.
Consumers to you because of if.
If you break it down say of millions of consumers come into the wisely.
It doesn't matter what cloud I'm sure there is the.
0.32 of 0.5 sales perspective.
On the close rate.
At least 99.5% of those people the buy a different solution.
It's no different than retail.
So if they see value in in the traffic and it gets driven their way.
Then there'll be okay by the end of the year.
I have.
If they seen the show up in 25 retail storefronts.
There'll be met but I'm not I don't have any intention to do a full brick and mortar lunch. This is all about getting the consumer awareness of the consumer traffic and at least the e-commerce part of retailers.
Structured around.
Why so.
And to be perfectly honest the reason I'm not encouraging people to model out the steep with the just goes.
And for two one brand came in.
Instead of look.
ODM.
We want to buy.
50000 of the systems next year.
I'm done habits right.
Zone.
Sorry, what.
Well.
You know theyre going to modify it they'll do whatever right, so that probably won't happen, but right now on to one of that.
We are getting.
The lowest price customer margin with price to get the 99 the didn't do it.
So I one of the 999 price point for Whitestone I want of 799 price point of no. Other bodies nobody else is going to step in and then I will step in and establish at least in the in the Internet World.
Yeah.
Okay.
Okay understood. Thank you for the clarification.
On associated fees when do you suppose you might have to break those out.
Can you give us any indication of their contribution to annual revenue at this point.
I do not believe they will cross 10%.
So we would not have to break them out.
They're pure margin obviously.
Hum.
How quickly.
I want the association of B well.
What's the gross margin of platen to cover.
My wife's of marketing expenses.
Okay.
Okay.
Associated fees on so fundamentally any association be on going.
Who drive to use of support the Weiss of wave.
Okay.
Thank you.
George you mentioned, a sort of of target operating margin in.
And the high Twenty's I'm wondering if you.
Expect that this year.
What's the what's the timeline associated with your thinking on that.
Okay.
I would I would say the next several quarters.
Yeah.
Yeah.
Okay.
Obviously, I see the change with the top line seasonality.
Yeah, I mean, it's it's there's some contributing factors of you know mix of when Gen. Two comes in and so forth but.
You know as volume increases, we should see some of continuous improvement.
The deal Alright, gentlemen.
Take my jump trucking.
Lee leave leave you with the rest of the queue. Thank you very much I really appreciate the I appreciate the time of energy.
Thanks, Kevin.
Thank you.
For one additional question of changes would be the line of Jim Mcelroy with Bradley Woods. Please proceed with your question.
Thank you. Thank you good morning.
Good morning, Brett on slide four of the morning on Slide 12 up your deck. The one that's why it's a way of accelerating web traffic, yes, the yes.
The projected visitors in 2021 is that based on.
Just the product launches that.
It had been announced so far or does that include.
Anticipated product launches.
In 2021.
No. It includes a full look at our 2021.
Great and then.
If I were to.
Try to map the slope of this projected visitors.
To the slope of revenue.
Would it be similar or would be or would one of those be steeper.
Then the other.
Well if you mapped.
Consumer traffic versus our quarterly revenue.
There are at least off by a quarter right.
Cause of somebody's buying in Q4 at retail.
That product was shipped in the ship that product.
The Q.
The Q3 most likely.
Maybe October.
And we saw.
We saw on Q4 this year past year in 2020 debt between Christmas and on December 15th or 13th but whenever Amazon cut off big box shipping in time for Christmas.
There was a lot of consumer research going on on the website return visitors, which generally run in the 8% to 12%.
Jump the.
220 per cent for that three week time period, and some days it was at 24 per cent.
So.
There would be of cycle, there would be a quarter.
Lag three.
The between one or the other depending which way you're referencing it right.
Got it perfect that's exactly what I was looking for thanks, a lot of good luck with everything.
Yeah. Thanks.
Thank you at this time, we've reached the end of our question and answer session I'll turn the call over to Mr. Brett Moyer for closing remarks.
Alright, so I really appreciate all of the questions today I appreciate everybody attending the conference the the call.
We speaking for the team we are very excited about our opportunities in 2021.
On building Weiss of as that wireless category for the consumer the.
The Brigham Great audio around those great Tvs at all you guys have and.
And gals and with that I'll close the call.
Thank you. This concludes today's conference you may disconnect your lines of at this time and we thank you for your participation.
Yeah.