WiSA Technologies, Inc.

Greetings, and welcome to the Weiss Technology Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief Q&A session will follow the formal presentation. As a reminder, the conference call is being recorded. With us today are Brett Moyer, CEO and President, and CFO Jeff Oliva, or George Oliva, sorry. 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 in 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 the company'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 to 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, and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission, including those described in Risk Factors on our annual report on Form 10-K for the year ended December 31, 2021. file with the SEC as revised or updated for any material changes described in any subsequently filed quarterly reports on Form 10-Q. 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 thank you, ladies and gentlemen, for joining George and I in this Q2 update. Last year, the company initiated a strategic vision to expand our technology solutions beyond the niche audio file market that we dominate to solutions that can reach the broad consumer electronic market. The primary investments that were undertaken included expanding our R&D effort and patent filings, hiring the former HDMI executives to build strategic partnerships in the industry, expand Weiss's role to work with retailers and directly with the consumer. Today, in addition to our Q2 results, we will discuss why now for these investments, the size of the market opportunity, the technology roadmap for each market segment, and the anticipated revenue ramp. Why now? When you think about where the industry has evolved, there's enormous work on spatial algorithms. There's release of codexes that can give you that three-dimensional sound by both Dolby Atmos and DTS. Wi-Fi chips have become significantly faster and lower cost. even to the point that some of the IoT chips, like the expressive chip we have a partnership with, can become useful in multi-channel immersive wireless sound. As we all saw in the last two years, being in our COVID caves, content is prevalent. It is streamed everywhere from every device. Yet when we're watching that content, it is not the same as when you're in a theater, when you're in a stadium, when you're at a concert or a symphony, that audio sound is half the experience, not just the video. So we got the content. How do we bring the rest of the audio to market? And then the third leg here is when you look at the TVs, they've gone 1K, 2K, 4K, 8K. They're running out of display technology that's meaningful to the consumer. So how do you continue to grow your business as a TV manufacturer? You synchronize audio to your TV and integrate audio solutions to build your P&L. So we think those three factors create a great opportunity for spatial audio and for WISA technologies. Now, where do we fit in that space? Because we're not the content guys. We're not the Wi-Fi media guys, right? And we're not the codecs. But we are the transport. So what our engineering team knows how to do is synchronize a lot of speakers, keep the latency low, make sure we work in a heavily congested Wi-Fi space. So we get audio from the smart device to the speaker. And that's our role, to support the other three legs of this tool. We've been successful with our original technology launch. Most of you have tracked us, so you've seen these brands. But these are really the premium brands in the industry. The audio guys are some of the highest performing audio speaker companies in the world. So we have a great reputation to launch this new endeavor. So we take, number one, we take the IP developed originally with WISA-HT. We extended and developed the WISA Association that moved from a test organization, a certification organization, to a broad consumer-reaching organization, which we'll talk about a little bit. We are now launching... The first product with our IP called WISA DS that's on a 2.4 gigahertz high performance. And then following that, we'll take the IP that we are working with in DS and move it to a five gigahertz solution, which lets us add more features and reduce latency as well as license IP. So three technologies, one existing, two starting to ship this year, third one coming next year. WISA-HT, WISA-DS for sound bars and TV integration, WISA-E for IP licensing and smart speakers and all other devices. So when you look at the whole market, WISA is the only company that is able to offer a low-cost module for soundbars, a mid-range solution for all smart devices, and a premium solution for those audiophile customers that we have today. And we're the only company that's being able to span the breadth of solutions and cost points. When you look at the market size, this dramatically increases our market size. We showed you this slide last time, but just for the refresher, we're going from a 40, 50, 60 million TAM to several hundred million with YSA DS to over a billion with YSA E. And the price parallels are, you know, HT is the most expensive. YSA DS is probably 65, 70% less. then HT, and WISA E is right in the middle. So that chart of future cost goes from the lower left hand all the way up to the right. And no matter what your objective is, whether you need IP licensing or a complete module, we're able to handle the whole market. So the role of WISA, which... has expanded dramatically in the last 12 months. I think it was this time last year that we talked about WISA stores. And the first one was at amazon.com backslash WISA. And we expected to get five or six last year. Today, we did announce that we expect to expand that and buy another three to five. And materially, we now have inbound requests from retailers asking how do they become a WISA certified retailer? How do they set up a WISA store and what are the requirements? That's a big swing in terms of momentum for WISA when you can take WISA certified TVs or speakers and have the retailers aggregating them so that WISA looks like one complete solution to the consumer. With the consumer marketing, you saw us grow web traffic from relatively nothing to 2 million consumers last year. This year, we'll increase that to 3 million, between 2 and 3 million. That's lower than our previous guidance, and that's as a result of consumer patterns changing and what they're buying. Now that people are leaving the COVID cave, we saw a change in demand, both through our customers, as well as our marketing with Wysa. So we shifted more of the marketing dollars out of Q2 and Q3 into the fall selling season, when people come back from their vacations, come back from their first trips, come back from eating restaurants, and they're back in their house thinking about what to do for the fall and winter. And finally, for WISA, critical to that was we did launch, invest, and then launch the SoundSend. And as you can see below, the SoundSend actually provides to the industry the safety of knowing they can design speakers and there will be a WISA HD SoundSend, there will be a WISA E SoundSend for our interoperable standards. The industry has responded with some great awards, including the 2022 winner for Smart Home Excellence. And we'll continue to support that product so that the consumer and the retailer and the speaker guys know there's a product that'll connect WISA speakers to any smart TV. Okay, so there's new information on this slide, but for the new people joining this call, WISA DS has one primary competitor that dominates the wireless speakers in the soundbar, and the soundbar transmits either subwoofer or rear speakers. WISA DS, comparing to that, can offer more channels that we can do upfiring as well as rear speakers and a subwoofer. It has a stronger performance in a congested wireless space, and it's substantially cheaper. So we think all three of that positions us strongly. Now, we launched this particular feature of 5.1.4 capability in March. COVID has hampered our ability to go to Asia, but our Asian team has already generated 12 companies that are going through the testing evaluation cycle, and they break out between eight companies focused on soundbars, three companies focused on integrating testing and for the possible integration into TVs and one company that's launching a product for the auto active market. We expect at least two of these will go into production in Q4 this year. So how does all this technology evolve over time? So if you start at 2023, you have WISA-HT, the Gen 1 modules. You have the speaker systems. You have WISA-DS and WISA-E modules all in market next year. Now, WISA-E will just be getting there late in the year, and we will launch platen speakers into the market with WISA-E, with a WISA-E SoundSense. And again, what's the purpose of that? Not to be a speaker company, but to prove to potential customers that we perform well in the retail and perform well in the consumer home, and we're a safe technology to adopt, right? So YCE will start in 23 and build us the blue color. WISA DS modules will start in Q4 this year in terms of revenue and continue to build. We think it's a strong product and it builds continuously through 2024. Speakers will grow as a result of our effort to prove WISA E a viable technology and performing well with consumers. And the G1 WISA HT modules will grow have new design starts throughout next year, and then slowly ramp down over the next three or four years. From an IT position, from our investment in the last 12 months and the next six, fundamentally changed our position in terms of patent holdings. We've now got 12 issued or in the process of review or filings. That's from the benefit of the 12 years we've been working at it. And again, this is all about, do you have an engineering team that knows how to handle sync, latency, congested Wi-Fi space, and audio repair? And the engineering team has done fabulous at developing WISA DS and WISA E. We're really excited at that performance as it measures against competition. So now I'd like to turn the slides, the presentation over to George, our CFO.

Thank you, Brett. Q2 revenues were $946,000. It's down 40% from the same quarter the previous year, but up 67% sequentially from Q1. The gross margin was 20 points, down from 29% in the previous year, but up from 11% sequentially from Q1. Operating expenses were $4.3 million, including half a million of non-cash expenses, primarily stock comp expense, compared to $3.3 million in the previous year with $400K of non-cash expenses. The increase in OPEX was due in large part to our engineering efforts, as Brett has discussed. The loss for the quarter was 4.1 million compared to 4.6 million in the prior year. The larger loss in the prior year despite lower OpEx was due to a non-cash charge we took in relation to converting the preferred last year to common. The ending cash for the quarter was approximately 4.8 million. In terms of guidance for the rest of the year, we expect revenue to continue to increase sequentially in Q3 compared to Q2 and increase additionally in Q4 compared to Q3. As module volumes increase, the margin should continue to improve into the mid-20s. And then with the cash on hand, in combination with increasing revenue, decreasing inventories, and the $3 million in financing that we announced this morning should be sufficient to fund our execution into 2023. As we proceed, Mention, we closed, we signed a definitive agreement with our largest shareholder for 3 million of net funding on convertible note. And that includes warrants that are priced at a dollar, approximately 2 million warrants at a dollar. And that's it. I'll turn it over to Brett.

Thank you, George. So in summary, before we go to Q&A, which will be open to all investors that have questions, the team has a high competency team. of technical skills that has been proven out with some premium audio brands. We're rapidly launching the IP that we put on to the expressive module, and that'll start generating in Q4. WISA has expanded its role in starting to bring inbound contacts from retailers, which is a significant shift in its performance. And we got a very strong IP position that we think sets up for continued growth in the next four years. And with that, David, I'd like to open it up for questions.

Great. Thanks, Brett. Now we'll be conducting the Q&A session. In this format, you can raise your hand if you're joining via the Internet, or if you've dialed in, you can raise your hand by dialing star nine and unmute your line by dialing star six. If you are called upon, we ask that you announce your name and company affiliation before starting your question. We'll take a moment here to assemble the queue.

Let's see. We'll take our first question here and proceed.

Do they know they were selected?

I have several questions. I see Jack in here and I see your hand is raised. I'm trying to call on you.

Hi, David. This is the operator. What phone number are you trying to allow to talk?

It ends in 0884.

Okay. Okay, go ahead, and you can ask your question now.

Great. Can you hear me guys okay?

Yeah.

Yep. Okay, great. Jack Vandardi here, speaking from Analyst from Maxim Group. How are you doing today? Appreciate the update. I'll start with a question for Brett.

um actually you know quick housekeeping question just quick one um what do you guys expect to release the full financial statements and 10 in the 10 q um any you know probably very soon within an hour i guess okay we might have to wait we might be we might be required to wait till the close of the market i'll i'll uh

Today, regardless.

Today, regardless.

Yep, no worries there. Appreciate the update there. Okay, then Brett, maybe as for the revenue guide, looks like you're now expecting sequential growth in the third quarter and then sequential growth in the fourth quarter. Just any additional color you can provide there on the top line and then maybe any initial thoughts on overall revenue potential for 2023?

Okay, so what we see, and I think probably you've seen it reported out in other, since it's the last day to report out in other earnings calls, but we do see that the consumer, we saw in our own internal tracking through the Weiss Association that consumer shifted, demand shifted at the end of April, right? So- We think that's been followed up in orders coming in from our partners, as well as reported out in Sonos' case. So we're just being more conservative until we see that demand come back. We get the consumer desire, being consumers ourselves, to get the hell out of the house. But we think that turns around back in the fall. So we see sequentially growing revenue. We're just not forecasting yet how that impacts the full year. For 2023, what's that? Yep, understood there.

And then I was going to move on to 23 then. Yeah, so 2023, we're expecting a strong year.

between DS coming in, YCE coming in, you know, YCE rolled into speakers, probably knocks a hundred dollars off of MSRP. So in the world of inflation, consumer buying a hundred dollars is everything. Every hundred dollars is, uh, higher, uh, conversions and, and sell through. So we think 2023 is up against this year, up against last year. Um, whatever reference point you want to use. And we think the feedback we've gotten out of those first 12 companies, and a couple of them are really grinding YCDS, has been extremely positive, in their words, shockingly strong performance for a 2.4 gigahertz solution. So we think as that rolls into next year and 2024, that's a strong revenue driver.

Great. And then, yeah, actually, just to that point, just for clarity, so Weiss to DS will be shipping, is shipping this year, when exactly? And then Weiss to E, is there a specific timeline for that during 2023 when that's going to ship? Is it the end of the year? Is there a particular quarter? Well, actually, yes. So...

I misspoke on YCE in my presentation. We will actually start sampling YCE in Q4 this year. So there's four or five beta customers that we're talking to, and we'll select four or five of them depending on our bandwidth to work with them to test, evaluate, and just like we did with DS. So that won't generate revenue, but just in terms of technology and shippable maturity, we expect to have those four or five beta customers with modules, with WISA-E, to test and bang up in Q4. WISA-DS, we'll have two companies, well, we have two companies that are planning to go into production, which means we're shipping during Q4.

That would be an official launch. That would be a commercial-ready product in the fourth quarter with those two customers for Weiss PS?

Yes.

Okay. Great. And then let's see. How about your – because I'm waiting for the balance sheet. I'm not sure. Maybe I missed it. But can you provide an update on your inventory levels currently and then, you know, how you expect your inventory levels to move going into 2H? to back after this year. And then just anything you've heard or any updates with your customers, their end inventory situation.

Yeah.

So George, you want to take our, our, our second quarter inventory was, was relatively flat from Q1, but Q1, we, we saw an increase. Um, you know, as our customers have rescheduled orders out, we are also having to reschedule our vendors out. Um, so, uh, to the extent that we can defer the excess purchases to next year, uh, we should start, we should start to see our inventory come down in the second half of the year. Um, We don't really have a lot of visibility of our customers inventory. I know Brett, you can talk to that.

We do not. So, but we do, we are in the channel. I will say the feedback coming from the retailer side of the channel is that there's going to be healthy promotions and discounting in the fall around consumer electronics. So that leads us to believe that as demand shifts, Our customers have been chasing product because of all the part shortages and logistics challenge. We still see part shortage issues impacting our customers. Logistic challenges of getting stuff out of manufactured in Asia into North America or Europe seem to have abated largely. But you now have customers that are putting out large POs to try to circumvent part shortages. And now as consumer demand has shifted somewhat, at least temporarily for these four or five months, we think that builds a promotional opportunity for good discounts for consumers in the fall.

Helpful comment there, Paul. Because I appreciate the update. Thank you, George. Thank you, Brett.

And just to confirm your question about the queue, the queue will be filed at the close of market.

Excellent. Thank you very much, George.

Okay. Moving on, let's go to caller number ending in 3186. I think that's Kevin. Do you want to unmute your line? Dial star six.

Hi, Brett. Hi, George. Can you hear me okay? Kevin Deedy here, HC Wainwright.

Yeah. Good morning, Kevin.

Thanks for having me on the call. And thanks for the help with handling the call. All right. So you touched on this a little bit, Brett, right? You touched on an abatement in source. I was hoping you could sort of add a little more color on that. I guess a little more curious about the environment in China given the pretty hefty COVID restrictions. It doesn't seem to me that you're seeing a manufacturing issue. I just wanted to confirm that.

Well, so in terms of COVID in China, it's nasty. Where it impacts us most is being able to send senior executives from here to there to really show the vision of the product lines. So we have to depend on people in country. We can't get in or out of China. We from a part shortage, we know there's still sporadic part shortages. So that's impacting some of our customers. There's no question. But logistically, you know, once stuff gets built, it's flowing.

Right. Yeah. So that's kind of where I was going. I mean, things things are getting built and you you see that people are able to meet orders. At least your customers see that trend, I guess, strengthening, which seemed to be an issue earlier in the year.

Yeah, we think now, whether it's because people are pushing, I mean, we've seen customers push out orders. You know, we think it's around consumer demand. So pushed out orders frees up inventory, right? So we do know from, we have an ODM in China on our board. So we do know there's still part shortages in the space. But I would say the industry has probably gone 75 to 80% back to normal.

Okay. Good to hear. You remarked during your presentation that brands see, I guess, a limited return on increased performance and I guess pixel count on large screen TVs. Right. And so you're, you mentioned that you think they're going to try to exploit the, you know, the sound experience as an avenue to boost margin. And I'm just wondering, like, yeah, I'm just wondering how much real evidence do you have of that?

Well, there's two brands that have been doing it for a couple of years, right? One is Vizio and one is Samsung. So if you look at their product lines and their merchandising at retail, they are heavily, I don't want to say integrated as in they work flawlessly. but they're heavily merchandised together. Number one, number two, we've seen through the Weiss association, a number of retailers that do very well with bundles. Now you can bundle a soundbar or you can bundle enclave or platinum, right? So again, if the retailers are seeing it, the brands will see it. Then if you take one step further back in the cycle, here we are launching Weiss at DS. Out of the 12 companies that are actively digging into it, eight of them are looking at it for soundbars.

Okay. So does that mean the soundbar comes With the television? Like pretty, you know, packaged with the TV?

No. It's a merchandising at point of sale.

But the important nuance is that the TV will find it and turn it on with little consumer issues.

Right, so that's our play, right? So why would you integrate WISA DS into your TV? I mean, look, this is what B&O has been doing with us for 10 years, right? There's a WISA module inside every one of their TVs. It finds every WISA speaker in that room. So our position, which we think resonates, is that having wireless integration in the TV with an interoperable speaker standard creates an opportunity for the TV brand to link their TV and their audio to one sale.

Okay, but the audio doesn't have to be of their brand. It does not.

Right.

That's the beauty of it.

Okay. Right. I mean, that's the beauty of it. You talked about... Go ahead. Yeah, no, I'm sorry. I interrupted.

No, I was just going to say, that's the beauty of it, merchandising-wise, from pick any brand, Skyworth or LG, right? Merchandising, they're going to merchandise their audio with their TVs, right? Right. But having interoperability... less than gives a consumer flexibility exactly because not everybody wants you know a thousand dollar audio system around their tv someone twenty thousand dollars around their tv like a bno situation okay you mentioned amazon as your first retail location and i know there was one other sort of name brand can you just talk about i mean you

For stores? Yeah, for stores, right. You mentioned that three to five more coming online. I was just kind of hoping you could expand on that and in conjunction, maybe talk about your confidence in the marketing spend as you believe consumers will come back to the home experience.

Right. So right now, the stores are Amazon Beach, Electronic Express, Waltz. There's one or two that elude me right now.

There was one that began with an R, if I remember correctly.

I'm sorry, Brett, keep going.

Focus, Beach, Waltz, Electronic Express, and Amazon. That would be six. Yeah. And then there's a handful. So we think three to five will make it by year end that have expressed their desire. Some are selling Platinum speakers or will. And some are just merchandising Wysa. So you had Hisense certified for being SoundSend compatible. There'll be, we hope other brands, we expect other brands to certify that. So that builds a bigger base at retail and more importance to have a storefront that aggregates all the Wysa products in one place for consumers. So why do I think consumer demand comes back? I don't think consumers going back into a COVID cave. Hopefully none of us want to be there. Right. But you are under incredible price pressure with inflation. You, if you just think about the mentality of the consumer, right, you got your trips in, but you're going to come back and have to figure out how to make the family budget in the fall. And I think if you have good promotions trying to align production, inventory, and demand around this, there will be a surge of consumer buy-in. From an audio side, TVs have done really well up until Q2. So there's a lot of TVs without audio around it. But the psychology of the consumer, I think, is still get out of the house quickly. at the moment, right? Can't argue. And, you know, look, do we spend more or less on marketing? It'll depend on the results we see, right? I mean, we literally track it every single day.

Right. Can you speak to the results that you're seeing on Amazon? I mean, I noticed that your Wise Wave figures Looks like they fell off considerably from the March to the June quarter.

Well, we're taking them down.

I think 520.

We took the spend down in Q2. We took the marketing expense down in Q2. We saw a drop right after April. So when we looked at the May results, the consumer spend pattern changed. Now that's when we look at consumers coming into WISA, you know, where do they go afterwards? You know, what's the conversion into a platen sale, which is super small, right? But that is our metric.

Right.

And it changed quite a bit. So it doesn't do us any good to drive consumers into the WISA ecosystem to buy whatever product, right? Whether it's a LG TV or an enclave, if, you know, they're not ready to buy. So we dropped the full year guidance. We dropped spending down on our plan in Q2 and Q3. And we have most of the money shifted to September through December. Okay. After kids go back to school, after summer vacation, with the start of football, fall, the cold, and hopefully no virus.

Right. Just monkey pox. The other question kind of comes up, Brett, on manufacturing then. Do you see the WISA connected customers able to meet demand? Again, I apologize. I'm just going to kind of going back to manufacturing as you see it in China.

Well, that's going to be skew-specific, ballparking, but I would say 80% of the skews can meet demand now. There's certainly no reason they couldn't meet demand from our side. It never has been. But there still are part shortages that are out there, but the complexity of the problem has dropped quite a bit.

Can you just sort of walk me through the timeline then? In order to meet demand in the September-December timeframe, products got to be in manufacturing now or soon. Correct.

It has to be in manufacturing latest October.

Latest October.

Right. If logistics are running well, which they currently are, In other words, boat time into a harbor and into a port and out of the port. Okay. You have to be producing Q3 latest October.

Okay.

So we have visibility of RPOs in Q3, therefore, right? Should they get rescheduled because of demand further down the pipe, right? We don't have that visibility. We have visibility now to what our customers think they want to do now. Okay. Because they got to build now.

Right. Okay. Yeah, no, thanks for taking me through that and and answering the other questions, Brad. Really appreciate it. Yep.

Thanks, Kevin.

Great. We have a couple more questions queued up. Why don't we go to, it's a caller with ending in 6291. If you could unmute your line with dialing star six.

Could we unmute? There we go. Please go ahead.

Hello. Marty? Yeah, hi. Can you hear me? We can. Well, good morning to you guys. I have a few questions for you, Brett. Okay. My first question is, Why did you do this type of financing that you announced today? Convertible security. I don't understand that. Can you explain to us why you did that?

Yeah, so in general, we have said our preference through financing is through strategic partnerships or using the ATM program. We wanted to make sure our balance sheet was strengthened for the year end, but we didn't want the dilution of an S1 at the moment at these prices. So we wanted to let all this investment we made in the last 12 months and the next six months roll into the market, assuming that gives us a better opportunity for strategic partnerships and gives us a better opportunity to finance the effort at better stock prices. So this structure allowed us to secure, strengthen the balance sheet for the year end and pay it off with future money if we need to, or pay it off monthly using an ATM next year. I mean, we have six months to... to start making payments. And, you know, when you look at it, it's with our largest shareholder. So we think it's a supportive transaction to the strategy.

Okay. Okay. My next question is, I can understand, listen, I think your share price seems to be suffering. It's been suffering for a while. I can't understand. I'm a buyer of this stock. I think it's very cheap. I can't understand, and we've spoken about this before, why haven't officers and directors purchased stock at this price? I don't get it.

So that's a good question. And the... The simple answer is officers and directors are right now in a quiet period, and they have been for an extended period of time, and that will extend beyond the release of these financials. So they're not allowed to buy or sell at the moment.

They're locked down. Can we expect some support once you release these numbers?

No, that's what I'm saying, Marty. The directors and the board is in an extended quiet period right now. Okay. Okay. I respect that. Yeah. As much as they want to or may want to, they cannot sell or buy.

Okay, great. That's great. My last question to you guys, can you, Brett, can you explain to me, I'm a little confused about the announcement about the NVIDIA Association. Can you go into some detail as to what that's all about and what's the future look like for the company with NVIDIA, if at all?

So, NVIDIA joined WISA, which is always a great sign when a technology leader joins WISA. It strengthens the overall organization. There's a number of members in WISA that have not launched products, and we don't pre-announce anybody's product. So it could be they are tracking us. Because for some reason that we may not even know, it could be they're working on a, or they're working on a product. Right. But we can't discuss anybody's products. Just like we can't discuss who the three TV brands are that are digging into DS. Why is the DS to possibly integrate into the TVs? Right. That's. And some of them are members of voice and some of them are not. But. What we talk about is YSO organization and memberships, retail consumer tracking, but we never talk about somebody else's product or product plans before they're announced by the company.

I think it's great that it seems like you're working on a lot of exciting things and the future looks very bright for your company.

Look, I can't say enough about the talent of the engineering team and how well we've seen DS perform under some really rigorous testing in Asia. So, you know, we're chomping at the bit to get the YCE modules out. and get a full product line out there to cover the whole industry. Sounds great to me. Thanks, Marty. Thanks.

We've got, I think we've got one more question and time for one more question. So it's the caller with ending in 6030. If you could unmute your lines by dialing star six.

Yeah. Thanks for taking my question. Has inflation impacted your margins at all or the stronger dollar?

Yeah, who's this?

This is Ed Wu at Ascendian Capital. Oh, okay, Ed. The voice sounded familiar and I couldn't place it. So can you repeat the question?

Yeah. Has inflation or the strong dollar impacted your gross margins?

Inflation has impacted gross margin. Every production run we've run for nine months has some component premium on it or assembly premium, whether we're running modules or speakers. And inflation is partly driven by part shortages. and partly driven by overall labor costs in the industry. But that's, you know, in terms of our P&L, Ed, it's not the most material. It doesn't rank as the top five things on the business, right?

Great. And then it looks like you have a great, you know, product strategy in the U.S. and heading into the holidays. Can you talk a little bit about your European and international marketing strategy for WISA?

So that's actually very observant. WISA as an association has predominantly focused on the US. There are plans in the work to expand that to Europe. We have not launched that effort yet until it's more likely that effort gets launched to and around WISA-E, where you have the new product coming in. Most of our European customers are really high-end audiophile brands that are sold through custom install home theater shops. Whereas when you start going out to try to talk to consumers in the millions, you need some mass retail. And the place we have it is in North America right now. And I think we get mass retail in Europe when we have YCE built into other brand speakers.

Great. Thanks for answering my questions. I wish you guys good luck. Thank you. Thanks, Ed.

And we're showing no further questions. Brett, if you want to have some closing remarks.

I'd like to thank everybody for joining us. The team's pretty excited about the accomplishments we've made and looking forward to talking with you in 90 days. Thank you.