Greetings. Welcome to the Summit Wireless Technologies' Fourth Quarter and Year-End 2019 Update Call. [Operator Instructions] Please note, this conference is being recorded.At this time, I'll turn the conference over to Kirsten Chapman with LHA Investor Relations. Kirsten, you may now begin..

Thank you, Rob, and good afternoon, everyone. I'd like to welcome you to Summit Wireless Technologies' Fourth Quarter and Year-End 2019 Update Call. With us today are CEO and President, Brett Moyer; and CFO, George Oliva.Before I turn the call over 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 for 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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange 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 the current macroeconomic uncertainties associated with the COVID-19 pandemic and others that could cause the company's actual results, performance, prospects and opportunities to differ materially from those expressed in or implied by these 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.It is now my pleasure to turn the call over to Brett Moyer.

Please go ahead, Brett..

the speakers in the field; TVs, which is the hub of the entertainment, and we're proud to be part of bringing the TV back to be in the hub of the entertainment away from set-top boxes, et cetera; but there's also other transmitting devices. Additionally, home theater has required AV receivers. And most of these we did show or have announced.

But new to the public is there will be a second Harman soundbar coming out that we're excited about, lower price. And what we showed at CES were 2 ODMs that have HDMI dongles. Now these are small dongles. They were prototypes at CES.

At least one of these will go into production in Q2 and will be in market in Q2.Now why are we excited about this? Well, first of all, the cheapest way to interface with the TV without adding cost of TV is a USB dongle. But a small HDMI dongle is really effective for the mass market. These will probably promo at $9.99 and list at $1.29 or $1.49.

And what market does it apply to? Well, while the WiSA Ready TVs can use the USB dongle, this will let any WiSA Certified speaker attach to any smart TV, that's been built in the last 3 to 5 years with HDMI ARC.So the setup for the market potential for our speaker partners is dramatically expanding because the interface is below $100, but with a dongle and all TVs that are installed can use a simple application.

For setup, it's to set up an HDMI dongle you'll require a little phone app. You optimize how you want your sub-woofer volume and your rear speakers, whether you have Atmos or not. So a few minutes doing that. But after that, because you got HDMI ARC, the TV will control that system. It will control the volume going up and down and turn it on and off.

So it becomes quite simple after a short setup exercise using a little mobile app. And both of them support Dolby Atmos.Now all that's exciting because a lot of products rolling in this market are in-market.

But what I really like here is, and we highlighted just as CES, but it's becoming more apparent is there's a number of products that the consumer can buy for true immersive sound versus simulated soundbar immersive sound, right? That are under $1,000. As you can see, the original Enclave system, you can go out on to Amazon and get it for $469.

That's a great system. It's unbelievable for $469. There are new products that are $999, $1,495. Then you got Platin Audio with one product out that's been streeting around $699 and another one that maybe hits $599.

And the point here is, now the consumer really has the choice to decide, do they want simulated or real immersive sound in that room? WiSA makes it simple to set up. It's comparable, these systems are comparable to a premium soundbar. And we think with price points and brands, we'll be able to penetrate 2,000 to 3,000 stores before the end of the Q3.

So, before the fall selling season.The industry has noted this. It's a good quote from digital time, saying "It's WiSA's year". We believe them. And it's the year of Wireless Home -- true Wireless Home Theater. A lot of questions come in to us around marketing. Some of this we have shown.

But if you think about the last call, we showed this display, which is the LG, Klipsch, Axiim Link partnership at 296 Best Buy stores. And they got it in. They got it displayed, but it came in so late in the season.There really was not effective promotions around it.

But what you are now seeing -- and it started in January, you can see them now, if you go online on bestbuy.com, but you're now starting to see Klipsch and Axiim bundles that are showing 10% off on bestbuy.com. I'm sure they're out in other retailers. Our understanding is Klipsch, Axiim and LG did spot promotions in January across bundles.

You can look at Klipsch's website, you can get 5.1, 7.2s.Again, there are promotions, they're around free financing, there's discounts that are off and on depending when you look at the site. But products are hitting the -- or getting onto the shelves. They are starting to be promoted. All the way to -- LG has been very supportive all year.

Particularly Nepal is a good example of their web page. And again, it's all about buy. Buy this cool product.Klipsch's sites got everything. A lot of great video on there, if you go on it. Their main speaker line now is the Wireless Home Theater speakers versus the passive ones.

And Harman and their company stores and in the Samsung stores in Korea is highlighting their WiSA and citation lines.Now we put out an earlier release because we saw this trend start in Q4 and this has continued, right? Generally, a technology standard would not have a lot of consumers coming to its website.

The CEO of HDMI is on our Board and he's shocked at these numbers. But with all these product announcements in Q4, you can see the unique visitors coming into the website jumped to 20,000 a quarter, which was only 1,200 this time last year quarter. That trend has continued.

Year-to-date in Q1 this year, we're at 32,000 and climbing.And maybe, even more important, just the sheer number of volume with people coming in, the quality is very high.

So 40% of these visitors are clicking buy now or learn more and going off to -- after spending 1.5 or two minutes to the WiSA website, getting educated about technology, convenience and products. They're going off to a particular brand's product page for either to buy it or investigate it further.

So several of our brands, we've communicated this out to the existing brands that are shipping, are creating landing pages knowing that this engaged consumer is above all other consumers they can reach out.

They research, they're engaged, they come to their site fully knowledgeable about WiSA.And so how do you create landing pages to promote their product and close a sale? So we're very excited about this opportunity that is creating for the WiSA members. These are some of the lead numbers. We're not going to go through them.

You want to see a full list that's updated on the wisaassociation.org homepage.So on to COVID. The way I look at it is there is long-term and near term. The 3 long-term things, which are the most critical for us is consumer preference for wireless is not going to be impacted.

Second, what drives our revenue in Q3, Q4, Q1 is project design starts, partly. We have not seen any projects canceled. Some may have been delayed by 1 or 2 months or 3 or 4 weeks.

But from our perspective, everybody that's got a product in Asia being designed right now or designing a product for their customer, is 100% engaged and driving hard, actually. They're fully up to speed.

Now the other side of the coin is, a lot of products are being launched, so is this impacting retail shelf placement? We have not heard yet.In fact, as recently as Friday, one of our customers had their salespeople fly in to Micro Center.

So commitment is high by our customers to get these seated on their retail shelf but the retailers are responding, the consumers are responding. Now near term, unknown what the sell-through will be.

To the right here, clearly, you can see that both WiSA and Enclave have started messaging that, hey, bring the entertainment inside, leave the madness outside, is Enclave's message for those that are self-isolating and restricted to their homes.WiSA has a little broader message of, Bring that theater home to you. Okay.

You can't go out right now, but you can bring that theater home. You can go on Amazon and in 48 hours, you'll have a 5.1 system that you can set up in 10 or 15 minutes, easy peasy. So will this increase sell-through? Decrease? We're not certain. But the long-term implementations are everything's still clicking as it's supposed to.

From a supply chain, clearly, manufacturing came up slower in Q4 or I'm sorry, in Q1 in February after Lunar New Year. And that may impact stuff by 1 month for different customers and products, but listen, you're talking 2 weeks to 8 weeks impact, nothing material.Financials. So we did conclude our bridge financing.

Very appreciative of the Lind partners still coming through with the financing during a turbulent week last week. But that's not all we're doing to make sure we get through this period. The team has taken a temporary wage cut for 10 weeks, which is substantial.

I can't tell you how impressed I am with the commitment of our employees, but we'll make it right to them at some point. We have expense reductions beyond lack of travel.

If you think in terms of those who are modeling, we just released Q4 numbers, I would expect OpEx to be close to $1 million lower than Q4 in Q2, to give you a perspective.From a financing perspective. First things first is anyway as a shareholder, we needed to vote your proxy on the reverse split.

Our objective is to take this bridge and clean up our finances and strengthen our balance sheet shortly so that we can, so there's no delisting issues. So, we vote your proxy. Now from a financing strategy, there's a broad range of actions we're looking at. There's various financial instruments.

We have strategic options and of course, with the government passing the bailouts, we're going to go see if there is any COVID loans. I mean, we're asking our employees to dig deep. So if we can get a loan and help relieve some of that, we will.So in summary, when you wrap this all up, we have more products than the last call, substantially more.

We have receivers, speakers, TVs, et cetera. We have consumer interest, and we'll have a broad global footprint. A lot of our brands are stronger in Asia and Europe than the U.S., but even in U.S., we think we'll get in the 2,000 to 3,000 store front range.So with that, I'll open it up for questions..

[Operator Instructions] Our first question today is coming from the line of Ed Woo with Ascendiant Capital..

My question is more on the supply chain. I know you said that it's been relatively unaffected.

But do you think that this will change as we head into the holidays?.

I don't think -- I mean, my personal belief and what we see is there's some Q1 bumps around this, but if the consumer electronic industry is going to have a supply chain problem, the best time of the year is February, right after Christmas.

So I don't see the supply -- unless there's another massive wave of COVID going through Asia, which certainly, at least the news coming out of China is not that, I don't see any impact on supply for the holidays..

Great.

And then going on to some of your product releases and promotional plans from some of your partners, have you seen any change at all in the near term?.

So I think we are not so sensitive to changes because really, everything we see is building out. So we don't have this broad baseline to measure the in-size of delta. But as I mentioned earlier, we don't see -- we haven't heard of a change in retail evaluation of our consumer -- our customers' products going on to the retail shelf.

Too early to know whether end consumers are going to respond in a meaningful way to some of the ads we've talked about in terms of, "Hey, if you're stuck at home, bring the theater home, keep the madness out," right?.

Yes, you actually made a good point about how home entertainment, particularly stuff like Netflix and video games usage and demand has greatly increased at this time everybody's staying home. So that could be an opportunity..

Right. So you can see on here, part of the Enclave ad that if you download the website or if you go to the WiSA YouTube channel, you can see the latest ad, which addresses, bring the theater home. It's about 1.5 minutes long, it's pretty clever. But at the end of this, if you want, I can click it here and you can play it, we can play it, maybe.

I don't know if that will work. I take that back, Ed. [Indiscernible] if we open this video..

No problem, no problem. And my last question is just on the WiSA membership. You mentioned that there was the fourth TV brand that you haven't disclosed yet. What's your coverage ratio of the percentage of market share in the U.S.

of TV manufacturers that are part of the WiSA Association?.

How are you asking that? In terms of premiums or in terms of products launched?.

Probably market share, if you have that information? Percentage of TV by the manufacturers that are part of the WiSA Association..

Yes. So I don't think, I really could answer that, only because if you're talking about shipments and market share, then we're primarily talking about LG, and that's not my business to disclose yet. I think I can answer those questions once some of the others are in market and it's a category answer versus a category of one..

[Operator Instructions] The next question comes from the line of Daniel Carlson with Tailwinds Research..

Just a couple of things about Q1 here.

I'm wondering since it's pretty much over, if you can talk about how it's shaping up relative to Q4 and sort of, what the sell-through is like? Are you seeing reorders from customers? And just, sort of, just how the general business is right now?.

So we have started in March, seeing replenishment orders come back from some of the products that were launched in Q4. So that's a positive sign. In terms of shaping up, there's some small supplies issues. So I would think we are in line with our historical run rate.

But we just shipped $200,000 worth of stuff that I didn't think was going to get out this quarter. So the supply chain is coming up to speed very rapidly, but that's what I would expect..

Okay.

And then can you comment at all on what's going on at Best Buy in terms of how sales are going there? And sort of the attach rate with the LG TV, is that something they're pushing? Are you seeing good attach rates there?.

I don't have any visibility on that, actually. But what I have visibility of and we addressed earlier in the call, is that Klipsch now that they're over the madness of the Christmas season, they are aggressively merchandising and setting up and they have a calendar to merchandise those speakers at Best Buy.

And our understanding on that calendar is both promotions that they drive and joint promotions that are driven with LG. But that's our understanding. We don't have visibility of that calendar..

Got you. And then my last question is, it would be great if Sonos were to join the WiSA Association and get on this platform.

Is there any chance of that happening in 2020 in your opinion?.

We're lovers. We love all brands. So we talk to lots of brands that still aren't in it. There is brands that I've not announced. And until we announce them, I'm not going to preannounce anything..

At this time, we've reached the end of our question-and-answer session, and I'll hand the floor back to management for closing remarks..

All right. Well, I'd like to thank everybody that joined us. I'd like to thank our employees. And you can follow-up with me after the call..

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..