WiSA Technologies, Inc.

Greetings and welcome to the Summit Wireless Technologies third quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kirsten Chapman. Thank you, Kirsten. You may begin.

Thank you, Paul. Good morning, everyone. I'd like to welcome you to the Summit Wireless Technologies third quarter 2021 financial results call. With us today are Summit Wireless CEO and President Brett Moyer and CFO George Oliva. 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 Securities Litigation Reform Act of 1995 provides a safe harbor of 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 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. 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 and are subject to a number of risks and uncertainties and other factors, 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 our design wins, our growth rate, Our ability to predict the customer demand for our existing and future products and to secure adequate manufacturing capacity. Consumer demand conditions affecting our customers and markets. Our ability to hire, retain, and motivate employees. The effect of competition, including price competition. Technological, regulatory, and legal developments. and developments in the economy and financial markets and others that could cause the company's actual results, performance, and 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 company's business, I'll refer you to the company's various SEC filings. Now it is my pleasure to turn the call over to Summit CEO, Brett Moyer. Please go ahead, Brett.

Thank you, Kirsten, and good morning, ladies and gentlemen. I appreciate you taking the time out of the middle of your day to join our earnings call. Two quick slides just for anybody that may be new, right? Summit is two organizations. In the Summit wireless side, we develop IP ASIC chips that handle multi-channels wireless audio. Primarily, you see those being sold into speakers, some TV companies right now. and we have an association called WISA whose function is to make sure that when a signal is sent to a speaker or from a speaker or from a TV to a speaker, there's a clean standard on how that signal should go out and how the signal should be received, and you get interoperability for the consumer. So technically, WISA manages that standard, but from a consumer's perspective, the WISA brand is a logo that the consumer knows this TV works with that product, these speakers work with that transmitter. So when Summit sells a module and a speaker is certified, each speaker will have one of our modules in it. That'll make it WISA certified, and that's our revenue model today. Some exciting news since the last call. Last week, Rolling Stones called the Platinum Milan 5.1 best home theater system. And that's pretty interesting when you think it's only $8.99 of all the systems Rolling Stones tested. So you'll see that obviously show up in Christmas ads. We were able to engage with the two leading HTMI executives that launched HTMI back in the day. So one was Eric Omgren, and one is Steve Benuti. One ran the HDMI organization, and one ran all the IP licensing. So we brought them on to help drive our next generation of technology as we roll that out. And then a series of product launches from our customers, like LG, Hisense, Toshiba, Harman, Bang & Olufsen, Hanson, But really, I think the biggest step on this list, besides the HDMI guys helping us, is when we last talked, we had just opened up the Amazon WISA storefront. And today, we now have five stores that are open and two coming shortly. So now there are seven WISA stores. Not all stores have the same WISA product. It depends what products are handled by each retailer and e-tailer. But it does mean that we're continuing to drive that ecosystem being built out. From a consumer education traffic perspective, we still expect to see 2 million people, plus or minus, come through our websites, which allows us to drive analytics around them, whether they visited us once, twice, three times, whether they've been on the sites a long time, a short time. And we believe there's high value in those analytics both for our brand customers and our retailers. And we're going to talk a little bit more about that. Revenue is expected to grow 160%. This is slightly lower than our last call as we've had a couple customers enter redesign projects of existing products so they could design out products. parts that are unavailable or super long lead times. So those will ship in the first half of next year is what we anticipate. All right. Just briefly, if you think about what did Rolling Stones just nominate? Best Home Theater System, $899. So for that $899, you get true spatial sound in the front of the room, right? You got a left speaker, center speaker, right speaker, not a little sound bar. You've got rear speakers. You've got a subwoofer. Now you compare that $899 versus an $800 soundbar from Sony Sonos Bose and many others actually. It's a pretty big market segment now for a soundbar with $1,300. We think Weiss is ideally enabling great spatial immersive audio for the consumer with simplicity of setup and lower prices. So that's our model. You can see This picture with that logo and probably some promotional pricing around it, you'll see out in the digital media world. But this is powerful for WISA itself, right? So this lets us go out and talk about a WISA system that's been nominated by Rolling Stones as the best out there. But then it lets consumers come into the WISA ecosystem and think about do they want this one or the next one or the enclave ones or the Bang & Olufsen ones or whatever their audio preference is, right? So great award. You'll be seeing this floating around the digital world. Now, if you remember a couple slides back, we talked about spatial audio, and we've talked about spatial audio for several years in that slide. But what we're seeing is the industry rapidly coming around to our perspective of spatial audio is important. It just can't come from a sound bar. You can use algorithms to simulate it in a sound bar, but there's nothing like using spatial audio algorithms on multiple speakers. And in the Verge, which is a tech rag, you can see Apple, Verizon, Netflix, Amazon. All these articles came out in the last 30, 45 days. So we're pretty excited about the fact that we're moving to a new technology that And the industry is coming around to spatial audio matters. Whether you're listening to music, watching movies, that experience is important. And, yes, algorithms will help it in a sound bar or a small stereo speaker system. But algorithms will do a whole lot more if you've got four, six, eight speakers floating around that room. Now, we will continue to expand in our industry. next few calls around our next generation. But our vision is that spatial audio is relevant, is relevant in every room of the house. It can be driven from a phone. You don't need an expensive closed system to run it, right? So Weiss has an open system. You put it on any brand you want. That's our vision, as opposed to Sonos or Apple that have closed architectures, right? Three growth drivers still are the same. If you've been here before, SoundSend, LaWiseAway, headed to 2 million target visitors, and we've got seven national retailers supporting stores, and, of course, our next generation of technology. Quickly, we're going to jump right over this, but SoundSend is performing its role. It's given speaker companies the confidence that there's a cost-affordable transmitter for WISA-certified speakers, and it's given consumers the confidence to know that If they bought, say, a Klipsch hub that's probably now five years old that didn't have Atmos back then, they can go out and keep those great speakers, but buy a sound set that does have Atmos. The voice-to-wave, headed to two million. We think this has broad reach across the industry. It lets the brands expose their products. It gives consumers the opportunity to think about spatial audio Immersive audio and who's shipping what type of products and it lets us create analytics around the marketing for remarketing and resellers to target products to to close sales When we talk about the analytics Yeah, you're going to see why so ads you can see there's lots of the landing pages. You've seen this one before there's generally a good better best selection between brands or bundles and But what we're able to get is demographics, geography, who's shopping, who's spending a lot of time in our sites. And then this allows us to go back and remarket both as a Platinum Audio brand, but more important to us as an industry leader, right? So with those analytics, one of these retailers and WISA are currently running joint ads, co-sponsored financially to WISA. use the consumer analytics that we have from the wave, and remarket their WISA products to those consumers. We like the initial results, and we'll continue to expand that. Again, on the right side of this slide, if you think about our positioning on Platin, so make sure there's an entry level for the consumer that competes aggressively against the soundbar. But I got to tell you, we had a director of the company by the Enclave Pro, He said it's killer audio, which we've been saying for years. So that entry level and midstream level, those are really great value audio experiences for the money. All right. This current generation of technology we think is directly applicable to the soundbar market. We think there's going to be about 42 million soundbars sold next year worldwide. Anybody can run the math, but 5% of those soundbars getting converted into audio a home theater WISA-certified system would drive us to $100 million in revenue. That's not what we'll get next year, but to our team, this is a very concrete SAM that we can go out and market around, market against, and deliver revenue for our customers and investors.