Q1 2021 Summit Wireless Technologies Inc Earnings Call
Ladies and gentlemen, thank you for standing by our conference will begin shortly once again. Thank you for standing by our conference will begin shortly.
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Greetings and welcome to the summit wireless technologies first quarter 2021 financial results call.
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It's now my pleasure to introduce Kirsten Chapman of L. A L. H a investor relations. Thank you you may begin.
Thanks, Darryl and good morning, everyone I'd like to welcome you to the summit wireless technologies first quarter 2021 financial results call with US today are summit wireless CEO and President Brett Moyer and CFO, George elite that before I turn the call to Brett I'd like to remind everyone of the safe Harbor statement referenced in the SEC filing.
The part of it.
Securities Litigation Act.
Of 1995 provides for a safe harbor for forward looking statements, including statements made during the course of today's call. The 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 27, a of the security stack of 1933.
Section 21 E of the Securities Exchange Act of 1930 for such forward looking statements reflect the company's expectations about its future operating results performance and opportunities. These forward looking statements are based on information currently available to the company are subject to a number of risks and uncertainties and other but other factors including current.
Macroeconomic uncertainties associated with the COVID-19, our ability to predict the timing and design wins and during production and the potential future revenue associated with our design wins are made of growth our ability to predict.
Kind of customer demand for our existing and future products and to secure adequate manufacturing capacity consumer demand kind of conditions affecting of our customers end markets, our ability of higher and maintain the motivate employees, our suppliers' ability to.
Provide support.
The effect of competition, including price competition, technological and regulatory and legal developments and developments in the economy and financial markets and others that could cause the company's actual results performance prospects and opportunities to differ materially from those expressed in or implied by the forward looking statements.
For a more detailed discussion of some of the ongoing risks and uncertainties of the business I'll refer each of the company's various SEC filings. It's now my pleasure to turn the call over to the summit CEO Brett Moyer. Please go ahead Brett.
Thank you Kirsten and welcome ladies and gentlemen to the.
Some of Q1 investor update.
This is an exciting quarter, we're reporting out record revenue and significant improvement in the gross margin performance of the company and ending with a strong cash position.
We will go through today some of the key growth drivers that we outlined in the Q1 call.
So for new investors or investors still doing due diligence I'd refer you to the March 12th year end call, we laid out the key milestones in the strategic plan.
She is part of your education on why so.
No.
Sure.
Why is the summit, which was the wife the stock symbol of those two organizations.
Some of it doesn't.
One of the Whitesville organization.
And in the summit side of the organization, we develop chips modules IP for wireless multichannel.
And we have a standard organization.
With over 70 brands participating at sort of that we can each transmitter each T V or each speaker knows the standard to communicate with the other products.
So that's sort of the quick overview the.
The.
We're not going to go through all 70 brands, but we are going to talk about the brands that are shipping this year sort of starting in the last call.
We did outline this slide there are some new brands.
I'd like to highlight that we added the six T V. So as investors you can expect us to just like we announced Tysons since the last call you can expect us to announce of shift in the six TV brand working with why so low.
The twin now and the holiday season.
In terms of overall break on shifting products from what was that.
We're around at the IPO, two and a half years ago. There were six now you can Caesars, we say 25 plus.
There's more than 30 brands on this page and as products hit the market and are available of the consumer will increase our.
Our branch count of <unk>.
Companies use in some of his technology.
Three main growth drivers for 2021 and 'twenty 'twenty two just as a reminder is sound sent which is a small transmitter that will plug into any HDMI connected TV with Arthur E R and could.
Connect to all Weiss of certified speakers.
Second the initiative is the Weiss of ways. The objective is to educate our millions of consumers on the category.
Well, we're going to give you an update on that and it sounds that in this quarter and the third is our next generation Wi Fi technology, which we are not updating today since we just did it on March 12.
Alright happy to announce that.
LG has extended their wife's already TV line into the 2021 line.
They also will be trying to sit down for extended it to their projectors.
And the next Weiser ready brand as high since they announced their products. The earlier this week.
On may shift.
So you can now go out and do research you've already started seeing some reviews come up on them.
And those that reviewed in particular included the mentioned about why so which is important.
Yeah.
On the speaker sizes, you slides, our the cool slides if you looked at banging Olson, we've just announced that one.
Very high price Wicked cool rotating oh form factor around it.
And that is now available.
The other really innovative design is from the Harman radiant is.
This is not available in the U S. But it is available internationally.
As of 2.1 system and those tall thin.
The columns are actually highly sophisticated speakers using some proprietary audio IP of apartments.
And then extending the first company to extend into the Dolby Atmos as life. So they have ceiling speakers.
None of them, let any of our speaker partners.
Net or working with custom installers.
Connect to real sneakers in the ceiling, so not a stimulated of Dolby not sounds kind of out of the top of the sound bar going up to the ceiling and then bouncing back down.
It'll be actually calibrated to the speaker's installed the the ceiling and give you a great Dolby Atmos sound.
And finally kill we announced this morning has launched the uncle Sam spear.
The type of in here.
And you will see that Oh, well they are aggressively marketing already in Japan, and they will move it to international distribution.
That's the eye Candy for this presentation update on sound send.
And we've now picked up for awards. The most recent one of the Stevie Award. There's another one out there that we're competing for but this just shows you. The strong recognition of the consumer electronics industry has given the sound center already as a brand new product, we will be pushing more features and software.
Our updates.
In the new software release for sound send in May.
It will probably happen every twice a year or so just like Tvs get it and then starting this quarter, you'll see some sand distributed internationally.
First two countries will be the U K and Japan.
Okay Weiss of wave.
I will still say this is probably the biggest catalyst for this year.
So if you think about but why is the association of his mission is to help.
The the mission beyond just making sure the technical spec.
Just to make sure of consumers start getting educated on the why shouldn't the benefits of the simplicity of setting up the system. They can sure that are the retailers see weiss of products as a category as a C. H D of my products as a category is a C. Bluetooth is the category.
In.
I think as we build this out we will be able to lower our brand's marketing costs by using the analytics from the website.
Yes.
So we have been reporting out traffic growth, while we saw that start to increase with Oh geez launch back in 2019.
We had guided to 135000 in Q1.
There's some seasonality to the consume like consumer shopping patterns. So clearly it came down from 185 in Q4, but Q1. This year. The Q1 last year with more than 300% growth in visitors to the various weiss of websites.
Still on track and still projecting that we will reach of million visitors. This year.
Yeah.
Okay.
Now.
By leveraging Weiss's analytics, you know as I mentioned, we plan, we're working to drive down the cost of our members marketing and to increase consumer awareness. So with that objective in mind, we think we added a new member to our our board.
Wendy Wilson, she was VP of marketing for charge point. They just did their IPO one of the world's largest EV charging networks and it comes out of the digital marketing space from Yahoo, and Disney Disney and Josh So.
So we're looking forward to her guidance and.
Participating in building all.
The Weiss of wave into a powerful vehicle for our members.
And then coming up you'll be able to see that we will be opening a wife the store on Amazon. So this will not cover all products, but any product that is listed in the U S that has been worse Weiss of certified we will aggregate into one storefront for the consumer.
So if they come in to Amazon and don't do a search for why so they will see the wife's already Tvs.
We'll see from LG and the highest since they will see weiser ready projectors from LG. The if they'll see transmitters speakers everything thats been that is on that site.
In the Amazon will be aggregated and we think this will help make it easier for the consumer to choice choose US also validate the category.
And finally I think the.
It makes it a convenient place for either speaker companies of our TV companies or a V receipt of your companies to create bundles of promote those bundles isn't always the world.
And with that I'd like to turn the call over to George.
Thanks, Brett.
We are happy to report Q1 was another record revenue quarter for US revenue was $1 2 million, that's the increase of 181% over the same quarter in 'twenty 'twenty.
The gross margin continued to improve to 25, 6% compared to 23 nine in Q4 and over 15.3, and the Q1 'twenty 'twenty.
Our opex came in at $3 million that included 300 K of noncash charges.
That was below the guidance previously of $3 2 million we gave.
Cash improved to $9 7 million at March 31st.
In terms of Q2 guidance, we expect revenue to be 250 per cent increase over Q2 2020.
The gross margin is expected to continue to improve sequentially up from the current 25 six.
Opex is expected to be about $3 1 million, which will include approximately 400 kt of noncash charges.
If you look at our trailing 12 months at the end of Q2, we forecast to be over 4 million on the trailing 12 months.
Yeah.
Alright, Thank you George.
So from a position.
Two the industry, we've dramatically expanded the number of products that are in market or about to be in the market licensed certified where demand we're driving consumer education, and we think we've got a great year of coming out for us and with that I'll open it up to a question.
Sure.
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One moment, please while we poll for your questions.
Our first questions come from the line of Jack Vander <unk> with Maxim Group. Please proceed with your questions.
Great Hi, Brett Hey, George Ah Congrats.
Great Channel results.
Thank you plus the plus good to see the strong guidance and yeah. Thanks for taking my questions.
Right I'll start with the question for you you you've mentioned in the expectation to add another two display partners later this year.
And I know you can't provide any explicit obvious mentioned, but maybe maybe a two part question here. One are you able to provide any kind of descriptive color maybe how how large these potential partners are.
The relative to your existing partners you know what region of the location anything you can provide that'd be helpful. The size. It up and then secondly can you remind us what this means for you as you add more display strategic partners, what does that mean for your business momentum.
Well our business so.
I'm not yeah, so I'm not going to go beyond saying that theres two more coming.
I'd say, they're they're both well recognized brands.
I think they're both in the top 10.
And and.
So we're going to leave it out of that right.
The last call the sort of there was the one more kind of now there's two more come in so we continue to make a lot of progress from a business perspective.
You know weiss of ready products.
The T V products, certainly help build the ecosystem and give confidence of the speaker companies that the sort of standard that's here to stay.
And that's one reason we brought out the sound sense of the speaker guys now they can do the wireless speakers there'll be a sound standard risk bunch of Tvs right now it sounds kind of connection the all Tvs, but if you're doing the wife's the radius and easier consumer experience because it's integrated into the TV and it's the cheaper consumer experience.
Cheaper for them of a connection to the T V.
In terms of so for US this great brand building as great of enabling one when the Tvs.
Brand support us.
Got it that's helpful color, Brett Thanks, and then.
Switching switching topics.
Can you may provide some more color on your plans to open the the wipes the Amazon storefront I'm just you know from my perspective, it seems like a pretty big deal.
Imagine that would really help just accelerate overall wife's of brand awareness with consumers and also added another sales channel.
It seems like a like a potential large opportunity if you could provide any more color there.
Well, we do think it's gonna be of catalyst right. So how that transforms into the P&L.
Well.
Will take several quarters only because of increases Weiss of sales certified product sales you know they've got to go back through and doing the whole production stuff right, but I think the first big benefit out of that is hey. This is the category. So all of the other retailers of they're worried about what Amazon is doing well see that.
For US 810, 12, whatever the number of brands are in there, but don't see all of the wife's of ready Tvs as well right. So it just tells the best buys of the World of tells the problems of the World tell us any of the retailers that you know this is a real category and you need to focus on it both on your web.
Sites as well as your retail floor.
Got it Okay. That's helpful too and then maybe maybe I'll just ask one more question and then I'll cede the floor the.
Yeah, I just want to touch on the on the second quarter revenue guidance, you provided sort of of directional informal guidance, but you know you expect growth of at least 250 per cent year over year correct that I guess implies you also expect at least a sequential growth from this this first quarter result.
And it seems like you know you kind of left it open ended with at least 250%. So it seems like there's potential for more.
Can you maybe just talk about you know what your level of confidence and visibility is this does this play into like the retail market is it opening up just the retail stores and all of your brand members and it just seems like it's the it's it's it's a vote of confidence here that things are improving.
With COVID-19 and your retail partners and then also supply constraints with the the chip shortage, but yet you're still guiding to the strong revenue growth. So can you just talk about your you know what what's driving that revenue growth in.
The the factors playing into your visibility for that.
Okay, Jeff you got five questions in one so I'm going to give it a try.
Yeah, So when you.
So you are right, we do expect another record quarter in Q2.
From of the demand side, so from our customer side.
We think Q2 and Q3 R. R.
The strong.
The strong quarters.
We think.
There is.
A fair amount of demand.
From the consumers both from COVID-19 and people that are locked in as well as people because of COVID-19 reassessing the value of their house the value of the entertainment in your system.
No.
I think that'll continue through the year.
Based on the orders we've seen we've got a strong bookings through Q3.
And I think everybody will be.
Looking to see how the Christmas season shapes up in September right.
In terms of supply.
It's a tough world out there on.
For a lot of companies currently we have firm commitments of delivery of true of the June production run.
And for all critical parts.
In our radio chips and our.
Of our own chips are firm commitments through true the Q3 quarter.
Could change at any moment, that's the environment, the consumer electronics and auto world, there's living in but right.
Right now we don't see we see fully supporting our customers the product.
That's that's the and I said that was my wife's because of just one more follow up to that with the get firm commitments through the June production run does that set you up nicely then for that third quarter, which as you know, it's a strong delivery month or quarter for you guys.
Does that.
Does that kind of helped I dunno walk in your ability to satisfy demand for that holiday season.
Is sort of it so we did place substantial pose on all critical parts back in October and November.
So us delivery dates have moved around a little bit but from for.
Hey supply for from a supply in the inventory balance our modules are coming in and going out just about as fast as we can build them right now.
Excellent fantastic of here Congrats on the solid result, again I'll hop back in queue.
Alright, Thanks, Jeff.
Thank you. Our next question is come from the line of Kevin <unk> with H C. Wainwright. Please proceed with your question.
Hi, Brett.
I think I'm, taking my call.
So I'm gonna see if I can I can pack as many into one as possible too so.
Forgiving in advance.
Okay.
I love the color on the color.
That has that was the T. V question Alright, So would you mind just taken us through your financial model again, given the surprisingly strong gross margin.
What's your target gross margin for the year, Oh, plus George said, it's going to improve sequentially. So I was hoping you wouldn't mind just taken us through what your general expectation is for the year and maybe give us an idea on your breakeven.
Yeah, So let's talk margin too.
We have said for the six.
Six quarters eight quarters the.
Our target is to get to 30 points.
You started to see that.
A change in Q3 last year of little bit and more in Q4 and again in Q1, we got into the 26 per cent range right.
So we continue to.
Expect.
Our full year margin that it'll be you know of.
Close to or just shy of the 30 points over time.
Okay.
Okay.
Yeah that that's okay, right. So I don't see the that Hasnt changed it just looked like your.
You know what you report would suggest that you might be able to do better than that could you give us some insight on why you think you did so well in March.
So.
There's a couple of factors Kevin right there's mix.
So some of our of the newer come customers have.
Slightly higher pricing right. So.
When we were in the launch phase we were.
More aggressive.
There's also the fact that with higher revenue.
The the fixed cost of Opex gets amortized over more revenue dollars right.
Absolutely okay.
So those are the two components.
Okay fair enough what I suspected.
Back to the semiconductor issue.
Understand you're you're feeling okay through Q3 can you just give us some insight on.
I guess your.
Supply timing versus your customer's delivery schedule to meet for you sales in light of of difficult semiconductor environment globally.
Well, okay. So.
Let's talk about the critical the critical quarters for consumer sales is.
Also deliver it in June through October.
And we have.
In place of support all the open orders plus.
The anticipated orders.
So we think the customers will be fully supported.
Now the only the.
The only hedge I gave you is.
It's a rough world out there, we we fight we fight for our share of allocation.
We have commitments for our share of allocation.
So we think we have a good Q2 Q3, our supply chain.
Yes.
Okay.
Could you speak to the share count I mean, I knew there were some warrants outstanding it seems to me that many of exercise could you give us some inside of that obviously, it's probably in the 10-Q, I'd imagine, but I haven't seen that yet so.
Just some insight on that and what you think might be left open that could yet be exercised.
Yeah. So George you can get ready to do the actually the numbers if you.
You have the available hold on hold on.
I say.
There is still a substantial amount of unexercised in the money warrants right. So the fundamental plan of we expect warrants to pure bleed in over time.
That can be of non dilutive source of funding.
Is still the plan of the of.
A record.
So George you can go through the share count.
So the Q1 shares was just under 10, it was 9.98 million.
Yeah.
Okay spreads net and that was good.
I had mentioned is approximately 5 million shares with the weighted average exercise price of like 299.
So that's that's outstanding on the warrants.
Okay.
Awesome.
A couple of more.
I think this is probably the big one now obviously with the addition of you made to the board you're hoping total leverage great experience in the digital marketing side you're.
What why we ER visits are up through March why for visit for a baby wise of the why is that why is the visits okay. Thank you I still struggle with that obviously give us some insight. Please brett on how you intend to take those visits and convert them I know of.
Obviously, there's lots of web analytics in the background.
But given that you've been running this program for a few quarters now.
Maybe you could share with us how you've seen that program working to your advantage.
Yeah, So there's a lot of layers to that right but.
The phase we are in the with that program right now is too low.
Run ads around why so.
Right. So if you see of why if you it.
If there is 100000 people from the website.
That's probably 3 million Weiss of brand impressions.
But did that right yeah.
So that's about 3 million Weiss of brand impressions.
And from there you can see who returned for the websites.
Now you know not only who is.
Aware of why simple. He also knows who is returning to Weiss of to do more research. So you you can now identify that person both in Google and Facebook and thing.
The two go back and re market to them.
And identified people.
By region.
So if you think about Ontario is launching their sound sphere in Japan.
Well have the ability to tell them every single person that came in from the Japan for the last six months right.
So they have the ability to go back and say look we're gonna for doing their own marketing book why not go after those thousands of people that have come in in the last six months and already know something about whitestone and re market directly to them.
But if you think about we have a lot of European brands doing high level stuff.
And we will probably I think in Q1, we got about 6000.
Five of 6000.
Consumers from Europe.
Alright, so those people can be aggregated by the company kind of country for.
For aggregated by the Euro.
U K versus the mainland.
And it allows them to re market back so now that we have the data.
That's what where we're going back to.
The brands and showing them how to use it.
So again this is the shake of town gets the data show them, what they can do how to use it.
And have them ready to use it during the fall season.
Well.
Some other ways that we have used it Kevin.
Think about building the Weiss of category.
Yeah, we've run Weiss of adds have come to what we call the good better best.
Page landing page.
And that will talk about the simple set up and the wife the story, but the notable show three problems.
Typically it's been flattening as the price leader.
Enclave of as the.
Mid tier and then of eclipse or Harman or <unk> or one of the premium brands right.
And that builds in the mind of the consumer.
A broad category.
That the category exists.
That's another example of how we can use it to build the category.
No.
When those consumers click on one of those product pages.
They are able to go but we are able to send them directly to a retailer. So we send people to the best buy we've sent people. The anh photo we have sent people to Amazon.
Well one of the one of the advantages now of opening up the Amazon store.
Is.
If we can just send anybody the clicks and all three of those into the Amazon store the C. All of the products.
Okay.
Okay. Thank you.
I I I guess, the thing that sort of stands out and listen I'm I I have tremendous tremendous confidence in you and your team and complying with the G. D. P. R regs, but could you just speak to that a little bit.
In terms of privacy.
Yeah.
So we've already adjusted for.
The Apple adjustments.
We're in full compliance.
From from our perspective.
There's a lot of ways the reach out to a consumer.
And one of the most effective ways of at least for US right now is running lookalike campaigns on Facebook.
So as consumers come in we still have we're still able to tag them Facebook and Google are still able to build profiles around the people of actually visited Weiss of so.
Let's just say 100 people came in on a two way says one of the Weiss of landing page.
This book will look at those hundreds of people.
Trove of that there are any of their algorithms and run campaigns.
Advertising campaigns for people that look like the.
100 visitors.
So we havent violated anybody's privacy rights.
Well, we have used the we are able to model campaigns around who has already engaged.
So right. So you look at why should you watch the yeah I apologize for speaking over your boss you just watched the data so it's anonymous.
Well Facebook does that right, we just had bags.
I don't have any idea of who they are.
All right give me either email address for a promotional coupon.
Yes, they come in and buy something out of the plot in the store.
Which is critical right. Once you get 100 sales out of say the plot in the store.
You can tell of Facebook Hey.
I mean, the these are real buyers right. These arent people have clicked on ads.
Current people, who clicked on product shots on of landing page from an AD right. This is somebody that's gone from them.
The order for you or some research going all the way through and purchase so the farther down the channel we can get the tighter weekend.
Re target people, none of the sleep, but we target effectively because they looked like existing purchasers.
Yeah.
Okay.
Okay.
Okay.
Anecdotal feedback.
Yeah, Yeah, Yeah, no absolutely I I, just I apologize it was just sort of Oh you know.
Next to all of the huge black holes in my little brain that was just sort of.
I was just curious so I really promo for the time you take care of go through it.
Looking at the.
I know, there's a lot we still have to learn we get a board search to find somebody who has some deep expertise in this the currently Wendy is and if you think about our job is to find what I used to tell people you know five needles in a haystack right we need the <unk>.
On the buy home theater somebody that wants to buy of sound bars, you can convert them up to a real audio experience right well she's so she has P&L responsibility for.
Selling charging stations.
Two EV vehicles, so very similar right of narrow market gotta do of digitally and so we think there's a whole level of sophistication that it'll come beyond this.
Okay. Okay.
Well.
Yeah, So just a little anecdotal feedback for you partner here runs of Somos.
System at home.
And disgruntled because it's very limited in its selection so.
Are we just are collectively see.
The advantages that an open system provides customers.
For what it's worth.
But thank you all again Brett greatly appreciate it.
Yeah, well thanks for the questions.
Yeah.
Okay.
Thank you our next questions come from the line of at group of ascending capital. Please proceed with your questions.
Yeah, congratulations on the quarter and also congratulations on being able to manage the supply shut the semiconductor shortages. My question is more on your customer partners are you hearing about any issues. They are having in terms of being able to release the products. This year and maybe is the holding back the durability to possibly.
Ship more.
So.
Yeah.
There is.
Widespread shortages across the industry. So.
So we hear it all the time.
Yeah.
Right and nobody is holding back everybody's chasing.
They're chasing inventory of their chasing launch dates are chasing capacity.
But so far for us.
We have a good order book and we have a good supply and we continue to work it.
Just like our customers too.
So you don't see it as the issue of out of the terms of any of the products that your partners are planning to launch. This year you haven't heard from any of them, saying Oh, you know, we can't do it or its really definitely delayed because we're having our own supply issues.
So I think in general if you talk about our customer base the supply issue doesn't stop of lunch.
It may delay it two weeks six weeks eight weeks.
Because of my time, you get to production.
Right.
As an organization you just spend all of this time testing certifying designing building.
Validation runs you're not going to hold up youre going to fight it and fight the supply issues and get them out.
So it may cost you a week from may cause the eight weeks, but.
You're not going to hold it up and it was a similar thing with COVID-19 for the last year I said.
Sales of our were challenged when COVID-19 was peaking.
If you remember on the call I said that the design work in Asia.
The stop force for six weeks in China and went right back that we didn't lose designs because of COVID-19. We lost for six weeks of launches because it's the same thing now right.
Losing designs, we're not losing launches, but the timing of certainly moving around.
Great and then my last question is it seems that the most of your marketing focus is in the U S is that correct and what about international, especially in Europe, our marketing.
So if you're talking about the wave the answer is at the moment, yes, and I would expect.
Europeans to see.
The more act of work from why sort of in Q3.
We have a lot of brands that are out.
In Europe their premium brands, they are slightly different but we're first focused on getting R. R.
Our analytics and our programs to offer to the members.
Sorted out where we have good knowledge and a large.
Territory without different languages the struggle with.
Okay.
Great well, thank you for answering my questions and good luck.
Thanks, Ed.
Thank you as a reminder of if you would like to ask a question. Please press star one on your telephone keypad.
Okay.
There are no further questions at this time I would like to hand, the call back over to management for any closing comments.
Well, thank you, ladies ladies and gentlemen for joining the call today.
The team's working hard to deliver great results I'd like to thank the team.
I'd like to think of our customers and look forward to our next update the in Q3.
Thank you.
Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.
Have a great day.