Movella Holdings Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Marbella's first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To answer the question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advising your hand is raised. Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Lana Adair. Please go ahead.

Good afternoon and welcome to Movela's first quarter 2023 earnings conference call. Today's discussion will contain forward-looking statements based on the environment as currently seen by the company's management and as such are subject to various risks and uncertainties. Actual results may differ materially. It also contains references to non-GAAP financial measures that the company believes provide useful information to its investors. The Orange released most recent annual report on the Form 10-K, and under filings with the SEC, each of which are posted on the Bella Dyer website, provide more information on the specific risk factors that could cause actual results to differ materially from management's expectations. They also provide additional information on non-GAAP financial measures, including reconciliations where appropriate to the corresponding GAAP financial measures. Guidance provided today incorporates the order trends that management has seen to date and what they believe today to be appropriate assumptions. Results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions, and cuts in demand and spending, including the impact of recessionary fears, world events, the rate of growth of our core markets, including the live streaming community, and other various factors detailed in the earnings relief and the company's filings with the SEC. It's not possible to accurately predict demand for goods and services, and therefore, the company's actual results could differ materially from guidance. And now, I'll turn the call over to Novello CEO, Ben Lee.

Thanks, Lana. And thank you all for joining our Q1 2023 earnings call and our first earnings call as a public company. I'm excited to update you on Mobella's progress. To begin, I'd like to touch upon a few financial highlights before our CFO, Steve Smith, walks through additional details of our first quarter financial performance. I'm pleased to share that we achieved $9.2 million revenue in Q1 of 2023, which is historically our seasonal low quarter. While first quarter revenue was 4% lower year over year, our GAAP gross margins improved by approximately 1,000 basis points, from 51% to 61% year over year. And we are expecting continued gross margin improvement throughout the fiscal year. Importantly, we have a very strong cash position. We have $62.1 million in cash and cash equivalents at the end of March. We do not anticipate a need to raise additional cash for operations ahead of turning profitable as we expect to reach break-even in Q3 of this year, and we anticipate becoming operating cash flow positive in Q4 this year. Our strong cash position allows us to provide full attention to executing the launch of new products and expanding customer use cases, which I'll discuss in more detail later. Before we share details of our most recent initiatives, I would like to provide an overview of our business for those who are newer to the Movala story. I will then highlight a few case studies and discuss our current operating environment. Movala is a global leader in digitizing movement of the human body and of automatons that mimic human movement. We digitize movement with a highly differentiated, full-stack solution that integrates sensors, visualization software, and AI cloud analytics. Movala is best known for our XSense technology. Our XSense products integrate sensors, advanced algorithms, and user-friendly software that digitize non-verbal movements of humans and automatons. We serve three core markets, entertainment, health and sports, and automation and mobility. This diversity of end markets highlights the broad application of our technology. Modala is a well-established company. with over 2,000 customers and 125 channel partners around the world and growing. Our customers include well-known brands such as Electronic Arts, Ubisoft, Marvel Studios, Netflix, Siemens, Honeywell, and the United States Olympic team. Our channel partners include global leaders such as Mouser, Digikey, and Aeroelectronics, serving the automation and mobility market, as well as our growing network of focused regional distributors, system integrators, and value added resellers that extend our sales coverage globally, particularly in the entertainment and health and sports end markets. In the entertainment market, we believe Movala is the gold standard for Hollywood quality motion capture, In the film and video game industry, Morales Xsense motion capture technology has been used to create highly realistic and immersive experiences by digitizing the movements of actors and animating them in real time. Our technology enables the lifelike movements of CGI characters and avatars that transport viewers to new and exciting worlds. Our products and technology have enabled recent blockbuster movies such as Black Panther, Avatar, and Lao Lao Crocodile, and continue to be the go-to solution for AAA video games. For example, leading game developer Ubisoft utilizes Movala's XSense motion capture suits to improve time-to-market and reduce cost of production by digitizing movements of actors during takes of live scenes and providing precise movement data for real-time recording and pre-visualization of character movement. This was highlighted by Nick Dobrovich, pre-visualization artist at Ubisoft. who provided the following quote for us. The addition of Xtend suits to our pipeline has fundamentally changed how we at Ubisoft prototype new features and pre-visualized scenes. Every week, teams from our studio are in the suits and recording data for quick integration into the engine. The Extend Suite has saved us time and money while helping us to get stronger ideas executed faster. I want to thank Nick for this great customer testimonial. In Q1, we opened the early access application window for Obscure, Mozilla's new all-in-one platform product that provides creators with user-friendly tools to deliver interactive experiences, including real-time human movements for digital avatars during live streaming sessions on well-known streaming sites such as Twitch. We are encouraged by the strong response to our obscure early access window, resulting in oversubscription by popular live streamers prior to production launch this summer. In the health and sports market, hundreds of collegiate and professional sports teams are leveraging our data analytics systems and software. Our human performance platform powers top athletes, including the U.S. Olympic team. For example, Olympians competing in indoor wall climbing at Tokyo 2020 used our XSENS body suits for training. which allow them to see their animated climb with precise data analytics that help the athletes to make adjustments to their form and improve performance time. Another use case example in health and sports is Toyota. We are proud to be a long-term partner of Toyota to improve the health, well-being, and safety of industrial athletes in automotive production lines. Movala is an integral part of Toyota's ergonomic process improvement strategy, supporting Toyota's internal health and well-being approach of maintaining and improving the physical and mental health of their staff across Toyota manufacturing divisions. Additionally, the same advanced technology used for movies and video games We are creating motion IP for top athletes. This is an exciting new frontier, enabling them to monetize their signature moves. Steve Young is a perfect example of a veteran elite athlete excited about technology. We reenacted with Steve his football career highlights in our X-Sense motion capture suit and essentially immortalized his actual movements by digitizing them. We have also recently digitized basketball all-star Jason Tatum, and other athletes have expressed strong interest. In the automation and mobility market, our sensor fusion tools are used today by top companies to sense movements of robots and automatons on land, sea, and in the air. We recently introduced the MTI320 high performance active heading tracker to the market for robots and autonomous vehicle applications. Our MTI family of high precision sensors enable more efficient movement of automatons by providing real-time orientation and stabilization data. For example, our customer Great Orange in India which supplies warehouse robots to customers over 30 countries, uses Movala MTI sensors to enable more efficient and more accurate movement of their robots in warehouse environments. Movala's technology is based on our proprietary inertial sensors, which are small, lightweight devices that can be attached to the body or to objects to capture movements in three dimensions. Movela sensors are incredibly accurate with a high sampling rate that captures even the most subtle movements. But what really sets Movela apart is our software. Movela's software is designed to be user-friendly and intuitive, allowing developers and creators to capture and analyze movement data quickly and easily. And with our powerful analytics tools, Movalis software makes it easy to turn raw movement data into actionable insights, helping users to optimize performance and improve results. Movalis full-stack product portfolio is protected by over 160 granted patents, which provides a strong competitive moat. We continue to invest in the advancement of our products and extending our technology leadership. To drive greater adoption across a variety of use case applications, we developed a mobile dot product, which is a consumerized version of our integrated system of sensors and software. We launched it at CES a few years ago with a tagline, five dots, a million dream applications. Mobile Adopt Sensors and our software development kit save developers the engineering effort of making their own sensors so that they can focus their resources on creating amazing apps. So far, our third-party developer count has grown to over 800, many of which are starting to announce exciting products. serving the health and sports market primarily. For example, Euleria has gamified physical therapy and rehab using the mobile laptop. Euleria's advanced in-clinic and in-home user-friendly products represent the significant opportunity we see for our technology to improve the quality and availability of physical therapy In addition to our existing business, we found ourselves at the epicenter of explosive new markets for digital movement applications. This includes next-gen entertainment, gaming, and live streaming markets. In addition to professional studios, a growing number of individual influencers are using our products to drive movements of the avatars for live streaming on platforms such as Twitch. We are further enabling this emerging growth market with the recent announcement of our new obscure platform for live streamers. We believe the growth of individual influencers on our obscure platform will accelerate in 2024 and beyond. As mentioned earlier, Our cash position is strong, and this gives us the flexibility to relentlessly drive innovation. We recently announced Obscure Early Access is an example of our execution. We also recently launched Movala's online shop for our homepage. We believe this offering addresses the growing new customer demand to buy online. and will lead to additional revenue growth for Movala, complementing our growing direct sales team and channel partners network. Finally, before turning to Steve, I'd like to comment on artificial intelligence and the macro environment. We see AI as an enormous growth acceleration opportunity for Movala's existing and new offerings, This is the reason we hired Vijay Nekarni, our CTO, over two years ago. Vijay was the head of AI in his two prior companies. For entertainment applications, Movela is already leveraging AI to improve our products and user experience with new features, such as dynamic calibration, which improves accuracy as the user moves. Factory calibration optimization is another example of our AI implementation, which reduces cost and increases capacity. And with additional AI enabled product enhancements in development. In health and sports, generative AI will accelerate our ability to develop and offer predictive analytics for performance, injury prevention, and recovery for both professional athletes and the everyday person. For example, ScaleFit, a Movela partner, is working on a more advanced version of ergonomics measurement system for industrial athletes. using ChatGPT to provide assessment and recommendations for workplace design and injury prevention. The AI product extension now automatically generates highly sophisticated assessment reports as well as individually adapted measures for ergonomic place design and injury prevention based on the data generated by Movela sensors. with a roadmap for identifying real-time correction for repetitive stress on the body. In this example, generative AI is used in conjunction with mobile's existing XSense integrated sensor and software systems for providing new insights and therefore bringing meaning to movement. At the end of the day, AI is a set of algorithms for data pattern recognition. And the rich data generated and aggregated by mobile sensors and software will benefit from such AI advancements. This is exactly what we originally envisioned with our company tagline, bringing meaning to movement. In terms of the economic and geopolitical backdrop, we are not isolated from challenges in recent operating environment. Our customers' rationalization of operating expenses as well as shifts in consumer spending behavior driven by inflationary pressures and ongoing layoffs are impacting our near-term forecasts. The bright spot is that we have achieved our NASDAQ listing objective of establishing a solid cash balance in our treasury. This allows us to continue to mindfully invest in new products and technologies during the current period of macro uncertainty. To summarize, Movala is a global leader in the digitization of movement and has a highly differentiated full stack platform. We are an established company with over $40 million of revenue, over 2000 customers in 2022, and an experienced management team with a track record of scaling global companies. The company has a strong cash balance and is uniquely positioned to power multiple fast-growing end markets and applications with the same foundational technology and products, leveraging our patent-rich IP portfolio. And while this is certainly a growth story, I'm most excited about our strong financial model. The business as it stands is a very capital efficient with strong high growth margins. And it's expected to reach breakeven in Q3 this year and profitability in Q4. With that, I'll turn it over to Steve now to provide an overview of our first quarter 2023 financial results.