Datavault AI Inc.

Good day and welcome to the WISIS Technologies second quarter 2023 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to David Barnard with LHA Investor Relations. Please go ahead.

Thank you, Betsy. 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 presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Readers are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of risks and uncertainties impacting Weiss's business, including current macroeconomic uncertainties associated with the COVID-19 pandemic, our inability to predict or measure supply chain disruptions resulting from the COVID-19 pandemic and other drivers, Our ability to predict the timing of design wins entering production and the potential future revenue associated with design wins, rate of growth, the ability to predict customer demand for existing and future products, and secure adequate manufacturing capacity, consumer demand conditions affecting customers and markets, the ability to hire, retain, and motivate employees, the effects of competition, including price competition, technological regulatory and legal developments, developments in the economy and financial markets, risks and uncertainties impacting the proposed commoner transaction, such as the inability to enter into a definitive agreement with respect to the proposed transaction, expected performance of the parties there to risks related to receipt of necessary regulatory and shareholder approvals, failure to realize the anticipated benefits from the transaction. the ability of the parties to satisfy various conditions of the closing of the proposed transaction, and other risks detailed from time to time in the company's filings with the SEC, including those described in risk factors in our annual report on Form 10-K for the year ended December 31, 2022, as revised or updated for any material changes described in any subsequently filed quarterly reports on Form 10-Q, and the preliminary and definitive proxy statement or other documents that WISA intends to file with the SEC in connection with the proposed commoner transaction. The information in this presentation is as of the date hereof, and the company undertakes no obligations to update unless required to do so by law. With that, I'll turn the call over to Brett. Go ahead, Brett.

Thank you, David, and good morning, ladies and gentlemen. Welcome to the WISA technology presentation for Q2. It's an exciting update that we have today from the And we're going to focus on the WISA-E announcements that we did in July and a business update on WISA-HT, WISA-DS, and finances. Two quick slides in terms of where we are for new investors, if there are ones out there. WISA is a company that has developed wireless technology, both proprietary chips and software and IP, to help Consumers enjoy immersive audio that's delivered by Dolby Atmos, Dolby Atmos Music, DTS-X. It knows audio forms. We stream to up to six or eight speakers currently, roadmap to 10. But today, with the announcements that we just completed at the end of July, we're now able to talk about a software implementation in smart devices that can stream out to WISA-certified speakers. And we'll give you more detail as we go through this presentation. Where does WISA fit in the audio world? We're not the creators of the content or the wireless or the encoding and decoding that Dolby or DTSX implement, right? What we are is either hardware or software now that allows us to use standard Wi-Fi chips to transport audio. two speakers that's highly synchronized as speakers together and highly synchronized to the video that you're seeing in a high-def quality. The other role we serve for the industry is we have WISA LLC, which is an independent organization for certification of interoperability between products, between brands. That's the one that's led by Tony Ohlstrom. As we look forward to launch in YSA-E, we launch at this time, unlike 10 years ago when we launched the original HT. We launch with a strong customer base, a very high reputation in the industry for delivering the best wireless performance out there, technically. We're not going to go through all these specs, but just as a refresher, this is the roadmap we've followed. The WISA HT was launched 10 years ago with Bang & Olufsen at CES. We started porting our IP out of those custom chips into a WISA DS implementation with Expressive. Then in the last 18 months with the new chip coming from Realtek, we uplifted that and created WISA-E, both in modules and embedded software. Now, this is not a comprehensive feature list. We have been, as we announced in the press release, working with strategic customers to define specific features that they need individually or as a whole, and those are shared only under NDA. So, WISA-E, what's the importance of it? Well, this is... the first time that we have a software version. And what software allows you to do if you have a sufficient Wi-Fi power, which we think with Wi-Fi 6 and other Wi-Fi chips coming down, this will expand beyond just real text chips, but allows us to add software to TVs, to cell phones, to tablets, to smart devices that can all talk to the same type of speaker. And when you add IP, versus another Wi-Fi chip or another Wi-Fi module is substantially lower cost to the consumer and the brand. So before we jump into the press releases and the market economics around YCE, I got to give a big shout out to the Portland team. Every member up there has labored for years to move our IP out of a custom silicon into both WISA DS and then uplifting it into WISA E. And what they're delivering is the first product of its kind in the industry that can be embedded on SOCs and soundbars or smart TVs and other devices for immersive audio. In addition to our team in Portland, I'd like to do one more set of shout-outs to our partners, Expressive and Realtek and SunPlus, and the strategic customers that we have talked to over the last 18 months to refine the WISA-E product offering. Without them, we wouldn't have been able to get to today. So thank you, Portland. Thank you, strategic partners. All right. So the WISA-E effort started in earnest with the press release for RealTech in January 22. And once we made that announcement, it kicked off two efforts within the company. One is clearly the uplifting of the IP from WISA DS into a five gigahertz, more channels, higher resolution technical process for software. But the other was driven by the sales and product marketing team to work with strategic customers that can help define both the performance requirements that are minimally required for Wi-Fi the feature sets that they need, and the pricing that's appropriate for their type of products. And so with the announcements in July, we're now able to talk about these results. So the first announcement, July 25th, this is a set of software tools that may be not immediately transparent to the everyday investor or consumer. But these tools are designed to a make it easy to take YCE to production in the factories. But I think more importantly, make it easy to port YCE from one SOC to another. So why is that important? Well, if you think about a large tier one TV company or consumer electronics company, you know, LG or Samsung or Hisense or TCL or Sony. Typically, their product lines, when you look at, say, the TV, they have their own custom SOC, which is the chip that runs the TV and delivers the features at the high end. They're usually using MediaTek or Realtek or Amlogic in the mid-range and the lower end. So what does that mean? So The audio division does not want to design sound bars or speakers for each one of those SOCs. So by creating the software tools to make it easy to port an implementation from one SOC to another, it allows a consumer electronic company to choose WISA-E and allow the audio groups to develop speakers around WISA-E and know that no matter what TV or what sound bar or what smart device, the other sister divisions are doing, it will be able to interface with their audio. So we think that's very important to the success. The July 27th release, that's like the culmination of the last three or four years of engineering work out of Portland. That means we have now developed design kits, and we started shipping them to customers, right? In particular, we ship them to four countries, five different strategic customers that we have been working with to define the future pricing and performance specs. Now, those five customers is a small body count of five, but they represent more than 50% of the soundbar market. And that's based on future sources data with some limited input from customers. With YCE, as we mentioned earlier, we think it's important that there's interoperability between brands and interoperability within products of the same brand. And by going to software, we're able to do that. That is opposed to Sonos, which can work within its own speaker system but does not have the ability to work with TVs and sound bars outside of their brand or speakers, right? YCE can be implemented on a TV with wireless audio transmission ultimately, and that's the purpose of this software. Now, those five customers representing 50% of the market, we think they are able to – ship one to three million units of WISA-E product a year. That's our SAM. That's the feedback we've gotten from each individual customer. And what does that represent for us? Somewhere between five and $15 million of revenue a year for each customer that rolls out an extensive WISA-E design project. Okay, quick update on WISA-HT and DS. We see WISA-HT continuing to lead the WISA interoperability certification for many years to come. You'll see new members and new products being announced between here and CEA on September 7th. There will be another set of products with Tier 1 customers as well that will be announced in January at CES 24. WISA-DES will see the first sound bar launch. In October, that will be under the Platinum Audio brand. We're really excited about that because, as we've said in the past, we think YCDS changes the price performance equation for the consumer significantly in being able to deliver rear Atmos speakers, rear firing speakers, as well as a sound bar in the front that has up-firing Atmos speakers. People that saw that demo at CES were blown away. And so we're looking forward to showing to the industry the power of YCEDS in that sound bar in October. Financially, quick update here. So as we've talked about in the last few calls, the consumer electronics industry has not had a good 14, 15 months, right? When COVID unfolded, opened up travel, it opened up eating out. Dollars spent on the home entertainment systems, whether it's TVs or speakers, dried up, which caused inventory buildup at every level of the supply chain, whether it's modules, components in our inventory, modules or speakers in our customers' inventory. But we also said in the last call that we thought the second half, that would open up. And What we're seeing today is it is opening up, hence the guidance of sequential growth. What's driving that opening, I think, is the TV brands and the speaker brands have adjusted their pricing to bring the consumer back to making investments in their home. Now, the first sign of this pivot by the consumer spending we saw in July. July's revenue for our consumer audio products exceeded Q2's total revenue for audio products and was just shy of Q1's. So we think this is a powerful sign. We anticipate that our customers are having the same impact, which will drive both consumer product sales in Q3 and Q4 for our audio products and more module sales as our customers start returning to building for future sales versus bleeding off inventory. So when we look at revenue, we expect Q3 to be up, and we expect Q4 to be up significantly more. I think two calls ago, we talked about expense reductions going down in Q1. We're continuing to evaluate strategic spending. We expect second half this year to be lower by another half million from the prior year. and we expect 24 operating expenses be approximately $2 million lower versus 2023. At the end of June, we have $2 million on the balance sheet, and through warrant exercises, we raised another $700,000. So before we open up for questions, I just want to summarize what I think are the main positions for investment in WISA. We have a strong patent portfolio in applications around immersive wireless audio. We think WISA-E will lead the industry over the next several years and establish itself as the way to deliver immersive wireless audio. We have a first-rate customer base that works with WISA-certified and the WISA organization. And there's more than 30 brands that have delivered and built products around our WISA products. So we're launching WISA-E into a defined customer base with a reputation of delivering the highest quality. So with that, I'd like to open up the call for questions, operator.