WiSA Technologies, Inc.

Welcome to the YSET Technologies fourth quarter and four-year 2022 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists 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 of your touchstone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I'd like to turn the call over to David Barnard, LHA Investor Relations. Please go ahead.

Great. Thanks, Anthony. With us today on the call are Brett Moyer, CEO and President, and CFO, George Oliva. Before turning 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 as 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 to secure adequate manufacturing capacity, consumer demand conditions affecting consumers and markets, and the ability to hire, retain, and motivate employees, the effects of competition, including price competition, technology, regulatory and legal developments, developments in the economy and financial markets, and other risks and uncertainties detailed from time to time in the company's filings with the SEC Commission. including those described in risk factors in our annual report on Form 10-K for the year ended December 31, 2022, which will be filed later today, as is 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 I'd like to welcome our investors and participants to the call. We're looking forward to having a good conversation today. So we've had quite an exciting quarter and year. So, you know, at the top of the list, we're going to talk about WISA-E. We think it's a compelling technology advancement for the entire consumer electronics industry, right? We'll explain how WISA-E fits fits into the ecosystem and the TVs and the audio world. Next, WISA DS, so that's our low-cost five-channel solution targeted for soundbars. We have brands now starting to issue RFQs to ODMs that are specifying DS, so sales cycles trucking along. We're going to go over the WISA Wave and the marketing focus of the company with Atmos and upfiring speakers. This is particularly important since one of the strengths technically that we have is a high channel count for wireless audio. And if you really want to go to immersive, you need to have more channels of audio and upfiring speakers. So we'll walk through that today. On the side, the consumer electronics industry is still in a slump from overbuilding inventory and weak consumer demand. It certainly impacted us. You know, in response to that, operation expenses will drop by a million plus dollars from Q4 to Q1. But despite the slump and the impact on continuing into the first half of the year, we still expect full year 2023 growth over full year 2022. This will be probably the only slide, one of the few slides that some of you have seen before, but for new participants, This lays out what we have been talking about for multiple years as a roadmap. Now, the difference is everything here in one form or another was demonstrated to companies at CES. So we've moved from concept, goal, desire to the engineering team has finished off or is in the process of finishing off all for a lot of this technology that's on this roadmap. So as a brief history, to refresh everybody, YSAT is our original module. Average cost is $10 to $12. It's best in class and targeted for the audiophile speaker market. So expensive markets, generally more expensive than what I would say Sonos, which is the top of the consumer level market, right? YSADS takes us from the audiophile market into the soundbar market. which we think is substantial. We think it's somewhere in the mid 40 million units a year worldwide. And there's a couple of players in there, but we think the feature set of WISA DS and the cost of WISA DS will let us penetrate a significant number of the designs over the next 18 months. But as I mentioned in the first slide, we've already started penetrating them. New at CES, but still this was on our roadmap, was WISA E. This is the same software in WISA DS, but enhanced because it's running on a more powerful Wi-Fi chip, a 5 gigahertz from Realtek. So, again, why a 5 gigahertz? It lets us do more channels. It lets us have higher performance. It lets us approximate the WISA HT performance and, in some cases, exceed it. And then, finally, the embedded taking that IP from WISA DS and WISA E modules and using it to run in conjunction with an SOC on a smart device. All of this was demonstrated at CES. So what did we show at CES? We had 22 companies, which is a full schedule for three days. Up here at the top left, not in the picture, is a sound bar. On the top right-hand picture, That is WISA-HT in the Platinum Monaco with up-firing speakers, the little speaker to the right of the sound bar. It's not the sound bar. All right. So that's the first Atmos solution we've brought out under the Platinum brand. And, again, the point is to demonstrate to consumers, to the industry, that for a small incremental amount of money, you can get that Atmos feeling in speakers, not just sound bars. All right. The next product, just to the left of it, which is not on the picture, is the sound bar using WISA DS. Now, this had a huge impact at CES. We've been marketing the specs of WISA DS for nine months, but not until companies and product managers and engineers sat in front of an actual sound bar using WISA DS With Atmos speakers in the rears and Atmos speakers in the sound bar in the front, did they grasp what a significant improvement this audio experience is? Yet, it's a cheaper solution. Third demo, WISA-E. This is the first time we showed WISA-E publicly. People were simply amazed. We only showed six channels of audio, but we ran Top Gun flawlessly in it. And when we go to release it, we'll be at eight channels headed towards ten channels. And finally, brand new, right, nobody was aware that this was going to happen, is the bottom picture on the right. That is a simple demo of RIP running with a set-top box TV SOC playing 3.1. Immediately following, the demand was strong enough that we had – probably half our executive team in Asia going through Korea, Japan, and Taiwan, so that the companies with the most interest could share our exciting technology advancements to the rest of their peers in their companies. So we had the sound bar, we took YSDHT with us, and that continues the sales practice going forward. So what's the point of DS? Why was it so mesmerizing? Well, if you look at this chart, which some of you have seen before, you know, the blue color audio is what normally comes out of a sound bar and rear speakers. That's a 5.1 configuration. A lot of companies have the purple coming out of a sound bar, which is up firing at most for the front of the room. What DS delivers, and that's why I blew them away, is up firing in the rear as well but not just up firing it's at a lower price point and it's the same simple implementation off of one module so if you have rear speakers you can have at most rear speakers for free potentially if you discount the drivers right so that that's what blew them away this bubble of blue and purple is what truly gives you immersive audio and that's what we demonstrated That's what will be built into the Rio sound bar that Platinum Audio will release in Q3. From a price feature viewpoint, here's a relatively simple comparison from an audio perspective. You can make a comparison chart 20 rows long. But if you just look at the fundamental audio experience, and you look at the price point of a Sonos Arc at $899, Sonos ARC 899 does not include rear speakers, does not include a sub, does not include rear upfiring speakers. It does include front upfiring speakers built in the soundbar. When Platinum Audio launches using WISA DS, it'll be 899, but it'll deliver rear speakers. It'll deliver a subwoofer. It'll deliver rear upfiring speakers, and it'll have the front upfiring speakers in the soundbar. a bunch of limited quantities both to prove to the audio companies this is a great solution, prove to consumers WISA DS is a great solution, and deliver a great audio. Now, WISA E is really, we believe, ultimately the biggest opportunity here. So, as I mentioned, we demonstrated it. And that's because you see other industry executives currently talking about trying to eliminate the HDMI cable from the TV to the sound bar. Well, that's nice. Nothing like saving $10 for the consumers. But what YCE is about and what we're starting to drive with the press release this morning is changing the industry conversation. Why would you stop there, right? With YCE built into an Atmos-enabled TV, You save the consumer hundreds of dollars at retail pricing and deliver better experience. The soundbar and the TV duplicate a tremendous amount of electronics and hardware, which is expensive. So if you think about it, there's maybe a small Wi-Fi chip added to a TV, but you eliminate the module around the Wi-Fi chip. You eliminate Adobe Atmos royalty that's being paid in the soundbar. You eliminate the soundbar's SOC, which is the operating chip, right? You eliminate all HDMI connectors. You eliminate the input-output expenses around other devices in the soundbar. You eliminate the HDMI cable, which the industry is trying to do, and duplicate streaming services. Now, there's more things that get reduced, but fundamentally our argument is with YSA-E, you can move the soundbar into a speaker, whether it's a A long tube with a set of speakers in it or whether it's discrete speakers, we don't care, but the channel count is there to eliminate the duplicated costs between a sound bar and TV and bring truly immersive audio into the home. That's just as simple to set up as it was in a sound bar. All right. Update on the WISA wave and the marketing strategy. So in 2022, we had more than a million visitors come into our websites, more than 2 million pages. Every one of those visitors was responding to an organic search, a product review, a customer spec sheet that brought them in or our ads. If we ran ads, we pivoted the messaging mid-year in 2022 away from bringing people just to the WISA site and bringing them to the Platin site, but bringing them with an ad that said WISA certified or Platin Audio Model XYZ certified by WISA. The impact was we shortened the cycle for the consumer to make a buying decision and strengthen the branding results for WISA certified. And we'll continue to work that. we had quite a good response on growth of pure organic searches coming into WISA. An addition that will occur in 2023 is linking WISA certification to Dolby Atmos or DTS-X. So one of our key strengths is we have the knowledge to implement more channels of audio than anybody. And that's a key feature of getting the most out of Dolby Atmos or DTSX. So when we go out and work product reviews, the industry press, this CE Pro headline that just came out in the last week or so is exactly what we're going to be pushing and what we're striving for. And to quote, Latin's updated Monaco 5.1.2 home theater system, adds Dolby Atmos to its WISA-powered offering to create an affordable yet immersive home cinema experience. Now, that's not our quote. That's the CE Pro headline. And that's what you'll see over and over again this year as we focus on the Monaco with up-firing speakers and as we focus in the fall on the Atmos launch with Rio 5.1.4 soundbar using the WISA DLs. From the state of the industry, to touch on my earlier comments, there is a glut of inventory. You can see heavy discounting on TVs, particularly the most visible. Now, so impact to us is we have seen pushback on customers and we've seen some cancellations. This will continue in the first half, but we do think we are getting indications, initial indications, that It should be cleaned up by the time we get to mid-year. Despite the industry's perspective, we believe we have full-year growth year over year because we have new WISA-HT designs going into production, two in Japan and one in Korea. We have obviously completely new WISA-DS designs going into production, and we've got Platinum Audio's Rio 5.1.4 soundbar being launched in Q3. So you take those three new product category launches, add inventory and balance, and we think we end the year with growth despite the first half. Now I'll turn the slide over to George.