Q3 2023 WiSA Technologies Inc Earnings Call
Good day and welcome to the White cell technologies third quarter 2023 results conference call.
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And now I would like to turn the conference over to David Barnard from L. H, a investor Relations. Please go ahead.
Yeah.
Thanks Marlene.
As a reminder, this is the third quarter results conference call for Weiss of technologies with US today is Brett Moyer, CEO and president before turning the call over to Brett I'd like to remind everyone that today's conference call will include forward looking statements, which are subject to various risks and uncertainties that could cause our actual.
Our results to differ materially from these statements.
Any such forward looking statements should be considered in conjunction with the cautionary statements in our earnings release and risk factors discussed in our filings with the SEC why is that assumes no obligation to update any of these forward looking statements, except as required by law with that I'll turn the call over to Brett. Please go ahead Brett.
Yeah.
Thank you David and thank you, ladies and gentlemen for joining the call today.
Today, we will not be going over the financials. When you filed the Q last night, if you have questions on financials I'll take those during the Q&A, but.
60 days ago at the end of July at 90 days ago at the end of July we launched the YC E module.
<unk> is a major a four year milestone for the company. So well we're going to focus on today is what happened in the next 90 days. So what do we do in July or August September October and I think you'll find that we really had tremendous success in the launch and getting this product.
Out into the market so.
So it will just go through two quick slides, if there's new people listening to the webcast.
Why is a it was about wireless audio spatial audio.
We look at.
What are the Dolby and exterior Dts are doing they're trying to bring in elevated audio as well as front back where side audio traditionally the home theater stuff.
So why <unk> role in it is to make sure that we can get whatever audios BMD coded by the T V or the avian receiver or a smart device to the speakers all the speakers make sure they're in sync.
With the video and in sync with each other so you have a truly immersive flawless wireless audio.
Okay.
The other roll Weiss. It does is we have a Whitestone association, which is designed to make sure that when our product says why so the YC E on it.
The market knows the consumer knows that that product, who will work with any others that are interoperable.
I think that's a very important thing it's important to the speaker companies. It's important to all the audio companies as well as if you're if you're a smart device a phone or a TV you want to know that the consumer has options to listen to the content on your smart device and it works with multiple brands.
So that's the that's the crux of it historically, we've had really premium audio brands designing a chip and our products.
Right, but today, let's talk about YC E. So we had launched weiser with custom chips lot of IP took us a wild develop.
As we've talked about in the last several years, our goal was to get to.
<unk> software base technology that can be loaded onto low cost Wi Fi chips, whether there are 2.4 gigahertz five gigahertz can be loaded onto smart devices without additional hardware and with that launch at the end of July we now have a false.
Sweet of YC E products to go out and talk to customers about we have the D. S module, which is on the expressive why our Iot module that handles up to four channels and we'll talk about a sound bar out lunch, where that last week, we have the YC E modules, which is what we sampled at the end of July.
And that includes the software that can be also loaded into.
A smart device directly to transmit to speakers right.
So let's talk about the sound bar that was launched last week. It was previously announced that we started shipping customers.
The plot in the RVO.
<unk> 5.1, 0.4, Milan sound bar.
We are taught.
For 18 months now that one of the great things about <unk> is it can handle five audio channels and he can give you the ability to have atmos speakers at a very low cost and the rear of the room. So you got.
Lest we already got audio coming from the left side from the right side and audio gone up above you hitting the ceiling coming back down to give you that truly immersive sound. So when you look at the Milan 5.1, 0.4, you got two rear speakers that are also two ceiling speakers and you have a sound bar that's adding to.
Up firing speakers, so theres really four speaker, sending audio to the ceiling. There is totaled 10 speakers or six going directly at your level, where you're sitting so the combination creates a truly immersive sound, though if you go out and look at some of your.
Tier one audio companies Samsung LG, the sound bar guys clips, you'll see these type of products selling that 1200 Bucks 1800 Bucks.
This product is being launched at an MSRP at 799.
It's has a launch promo at 699, right now and for anybody listening to this call or reading. The press release today, you have 48 hours to go to platinum audio Dot U S and enter a promo code why say EBIT tests. This audio system out. So we think it's a great demo for <unk>.
Busters to understand why is to eat and how does it work what's the quality of the audio that's being wirelessly transmit it we think it's a great audio product and we're offering that 48 hour opportunity for people to test it but you had to go to platinum audio Dot U S. And then her YC E for the promo card.
Alright, why is to eat so a month ago give or take we announced a licensing a free license from the association as to any members to television and display members. So that's T V's and projectors.
We think that we thought that was an exciting idea. We have spent the last four weeks are presenting to T. V. Guys will go through some of the stats, but why do we do that because Tvs are extremely sensitive to their bill of material cost, it's a highly competitive market and by offering the transmit software.
Two Tvs for free it creates a lot of use cases for them. It doesn't matter where this these are low and T V. I N T V a gaming TV or a project or they all have.
Hum.
Less audio than what most consumers desire so by having a free.
Why is the embedded software to transmit to sneakers. It opens up a lot of use cases.
It can go the T V could go straight to the sound bar that would eliminate all the HDMI cables or it can go another level and since the T V. D codes audio in the sound bar codes audio you have the ability to go directly to the sound bar or speakers and eliminate the cost of the coating and the like.
Tronox and the sound bar.
Think that could drop 25 to $50 off the retail price of below and sound bars.
Okay.
Some of what the response, we got her T V's, particularly this is true in the China brands is they'd like to just simply get a left and the right stereo speakers around their T V with a sub walker to get that better sound, but at a low cost. So that's a great use case headphones yep.
Or elderly people that have a hard time hearing for gamers that don't want to wake up the whole house.
There's no reason the T V can't use wise to eat a stream directly to headphones designed with Y C E O.
Or more sophisticated Tvs, which you know.
So if you look hard you'll see them in the U K, but a lot of the TV companies are looking at it.
Adding speakers in the top of the T V as well as the bottom of the T V, which is where they are today traditionally so the atmos is coming out of the front of the room to the ceiling from the T V directly.
Or and if you had YC E. Then you could add atmos speakers, just like that sound bar, we walked through and Subwoofers, where the back of the room right. So.
So or you can make combinations anyway, you want so we thought a month ago by offering this opportunity. It would give the TV guys are great opportunity to start thinking about different design applications that serve the customer better.
So why YC E. There's other not as a dominant or not a sophisticated technologies.
We talked about the program. We now have our offering is a zero cost a bomb.
Right.
We have the high audio channel counts that we can support Dolby Atmos, we have interoperability between brands we.
Have a speaker ecosystem.
And with maybe not be completely transparent to the average investors.
Most Tvs have two or three S. O sees that they used to cover their whole product line.
So one of the advantages of YC E has is you can implemented at your low end at your mid range or your high end and whatever audio products, whether they're sound bar Speaker Subwoofers you design. It will work across all your T V line.
And finally, as we've talked about we think wipes to eat creates the opportunity the lower prices on audio products by eliminating the duplication of body goes in sound bars and Tvs.
Okay.
Okay.
So what has gone on since we launched at the end of July.
Had more than 60 meetings presentation demos.
Cross 30 companies.
So frequently this means we've gone back two or three times with some of the bigger companies to make sure of the visions that television divisions that technology approval people are all going through.
In reviewing ways to either testing ways to eat demonstrating wise.
Right.
We have 13 meet brand specifically around the licensing opportunity that we announced 30 days ago, we've met with 13 of them seven of them have.
We are currently reviewing the licensing agreement right now we think this is great progress by the sales team and in the wife's association to be do so quickly you have seven brands are reviewing our license agreement.
And then finally the final milestone for four people trying to track our progress is we've shipped more than 85 development boards or wasted E modules.
Brands test develop et cetera on wisely.
Worldwide all regions.
For consumer electronics.
Finally, we think there's going to be a lot of press coming up at CES just before just after see yes, but we will say that one of the big things is we will show a tier one TV brand with YC E embedded in it streaming using just their software to speakers.
Right, we think that's a fundamental a milestone that will excite the industry. We think all these meetings, we've had will drive executives into the wise to our booth.
Booths and that'll we'll have a very successful.
T E S and we think all of this activity will impact 'twenty 'twenty four is revenue materially.
So with YC E. We've talked a lot today about the tea being able to go to audio speakers are sound bars, or even smart speakers right. We think that's important but as you look forward into 2022.
I'm sorry 2024.
You'll see more and hear more about our implementations and expansion of the technology to allow wife's to either be on phones or tablets as well as the T V, reaching all audio devices.
So we're excited about the response over the first 90 days there are companies that are starting to design with the wife's a <unk> module.
We think it materially impacts our 2024, we think there's quite a bit of use cases that it'll be demonstrated and announced both at CES and in 2024, there'll be TV partnership speaker partnerships and strategic partnering as we go through the first half of next year.
So finally this slide you've watched us is very similar but look we have a very strong IP position, we have YC E. Complete enable we can talk to and engage customers at every level, whether it's the low cost 2.4 solution D S where they are.
The embedded solution and the direct implementation we've got.
Establish Speaker Association that is unparalleled in the industry and there's 30 plus brands that are designed and used twice a technology historically that really is partly driving why we've had so many meetings quickly we're not launching ways to eat into a vacuum as a new company we've launched Weiss.
E in three different flavors three different cost points.
Into an established.
Customer base of Whitestone.
With that operator, I'd like to open up.
Oh the call to questions.
Thank you.
I will begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
And we have a question coming from Jack Vander out Randy.
From Maxim group.
Jack Please go ahead.
Thank you good morning, Brett Thanks for the update good to hear why she E and new product launches on track.
Hum.
Couple of quick couple of questions on financials, obviously, but and on the outlook.
I'll start on the YC E until the stats you discussed just to try to understand things a little better.
Okay. So you had 60 plus meetings for the YC E. So far across 30 plus companies.
Zero in on the seven display brands that are reviewing licensing agreements.
Can you hear me just just to start exporting at a high level, what the licensing agreement process kind of as well whenever you think how do you think it might play out.
Hum.
How many stages are involved but what's kind of the timing of this and then what does it mean from a from a potential revenue and revenue ramp perspective. Thank you.
Okay. So let's go one level higher Jack to the 13 and the TV display companies, we've talked to so there's surely has covered all the primary TV companies, whether they're Chinese Taiwanese Korean and Japanese brands right.
We've covered them all.
The <unk>.
Our licensing program.
In terms of a process you know first we have to demo offer the program. The program is specifically driven around Weiss our interoperability.
So if you're willing to.
Transmittal YC E interoperable signal.
Then we're offering a free license to the T V display companies.
Right, if you're not willing and you wanted to use our technology to only transmit to your brand vendors a pricing discussion around that.
Because as our mission has been historically is to build a global interoperable brand.
That works, both with audio and display devices right. So you have to be a member wise. So there is a limited time to join.
Why is it and Theres a limited time to sign the membership agreement or if you're a member to sign the addendum to the agreement that gives you the right to use YC E. In your display device.
Right from an economics perspective.
We made we'll make our money off of the modules right why is it your modules, where theyre going into sound bars are speakers et cetera right.
From a timing perspective.
There are a couple of Tvs that are brands that are pushing to try to implement in 'twenty four.
But I think the majority of the T V brands, if they implement will be 25 2025 modules.
No.
The TV brands are not the only ones that are implementing Weiss I E.
So that's why we mentioned that we think materially.
Why is that you will impact 'twenty 'twenty four right. So you could have media servers, you have speaker companies you can have sound bars, all those people move faster.
But what's being worked on in the TV brands right now are the it's primarily the 2025 product line.
Now our engineering team.
Come up with.
Well, we think is a genius solution. If you want to just use for.
Channels, which is great for rear Atmos speakers or is great. If you're one of the like the Chinese companies are talking about put just stereo and so workers around the front of the front of the room in their T V.
That we think is capable we implemented under the 'twenty 'twenty four product line and is a 90 day ish.
Type inflammation implementation timeline.
Okay, great. Okay got you. So a couple of different okay. Those are some important nuances for sure.
The revenue is okay. So you still expect a pretty strong.
Push from what from what you see in 2024 from a revenue line.
Probably not so much on the TV guys right off the bat, but they but these are all important drivers of our funnel it sounds like.
Bigger picture wise, but you do think you have some revenue coming in from YC E.
Maybe in the fourth quarter or at least in the first half of 'twenty four.
Is that correct.
I think you can anticipate.
<unk> mid year.
So right at the Q2 Q3 timeframe.
For wife's to either start impacting revenue probably from your position you'd want to model it as of Q3.
Gotcha.
Okay. That's helpful and I wanted to I don't want to I know, it's not official guidance or anything like that so I just want to make sure I have a general directional idea. It's good to hear you know Brett.
Okay, Let me shift gears and question something nuts, and bolts kind of housekeeping financial questions.
Yeah. So in terms of the revenue the revenue guidance that you provided last from last quarter or couple of quarters ago. Your revenue for the third quarter exceeded your expectation. It seems like that's that was good to see now you provided fourth quarter revenue guidance of one to one and $1 4 million for the fourth quarter and then for <unk>.
Thousand 24, you had one point provided $10 million to $15 million of revenue.
Which may have had some impact from the potential pending acquisition of calm air. So just just wondering what what can you can you just reiterate a review kind of what your expectations are now or is that guidance still holds true for the fourth quarter and for 2024.
Right. So the 10 to 15 on the full year was two conferences to go.
And that was with Tommy or in our P&L.
Right.
And I think I said baseline was $5 million per each and each company was targeting 10, so that put us in the 10 plus range right.
So that was that guidance regarding com here.
We are still active with them, we think there's a good synergy they are wrapping up their strategic customer.
And that's the trigger for us to get to a final definitive agreement.
Right.
From a quarterly perspective, Q3 was stronger than we expected.
Some of that I would anticipate coming from Q4.
But clearly Q4 is the holiday season.
Right.
Your next next five weeks of the Big sales weeks for the Platen line. You know, we just launched a the sound bar, which really is a stunning proud product and.
At amazing value for that type of price point any one of those prices I showed earlier.
So as that rolls out we hope that we expect that to positively impact both traffic coming to Weiss of building the awareness of why set itself with consumers as well as driving some additional revenue for us.
Got you Okay. So just to review fourth quarter, though you.
You still expect a seasonally strong quarter.
Is the guidance range still true or do you expect the corner just to be stronger than the third quarter.
Okay.
So I think if the consumer does the right thing.
It's going to be in the target of in the range of Q3.
Alright, so could we did pull in some revenue from Q4 into Q3.
Effectively.
Yes.
Gotcha.
Okay. That's helpful and then if I move on to just.
Gross margin, which is obviously if there was an explanation covered in the in the press release and the 10-Q, but just trying to get a read through on kind of your expectations then.
From an analyst's perspective more or less.
So what what are you expecting anything like that.
Just in general do you expect kind of more of a normalized gross margin or do you expect kind of a similar.
Result, I guess in the near term until the YC E licensing kind of kicks in next year.
Yeah. So the gross you know there's there's good news and the bad news of the gross margin. So let's just put those pieces together is testament of the.
No 60 odd meetings that we had.
We think more designs in the audio file space.
We're going to get implemented and in YC E versus why why is the H T. So that's one of the reasons, we modified our inventory reserve on it right. So yeah Bad news, we took the reserve. Good news is when we took it because we're getting very strong feedback from the technology evaluations on why is that.
Right.
Uh huh.
Audio product perspective, we think that will continue in the low teens.
Our mission there is convert inventory to cash effectively.
Versus margin because as we look into Q3 and Q4, it's all about why to eat products.
So you know, we only market audio products like a sound bar or speakers to drive.
Consumer awareness around why set and demonstrate performance of our technology with the consumer to potential customers of ours, which as you know, particularly example, the sound bar right.
So I think.
As you look at speaker margins as is probably the high teens.
Through Q2.
Gotcha Okay.
That's helpful now and yet cash cash is king right. It makes sense there okay, Brett if I have any moral all I'll, let you know, but I'll hop back in the queue. Thanks for the update.
Yep.
And again, if you would like to enter the queue and ask a question press star one.
And since there are no further questions at this time.
I will turn the conference back over to Brett Moyer for some closing remarks.
Thank you so I like that.
Like to thank everybody for joining us either today or on the webcast later today and tomorrow.
I would like to remind you that our weis at ease and launched in the first product that we can offer to your to the consumers directly as though the sound bar the $5 one point for Milan, Sandbox and Theres, a great opportunity to get that just ahead of Christmas at 649. If you use why is that he is a promo code.
It flattened out or you've got U S. That's my commercial but thanks for joining appreciate it.
And this concludes the conference we thank you very much for attending today's presentation. You may now disconnect.
Okay.