Datavault AI Inc. (DVLT) Earnings Call Transcript & Summary

Greetings and welcome to the Virtual Roadshow with Summit Wireless. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brett Moyer. Thank you. You may begin.

Thank you, Rob. And welcome, ladies and gentleman. I appreciate you taking the time learning about Summit and wireless standard WiSA. There will be -- this is primarily a non-deal roadshow, reaching out to new investors, but I know we have some existing investors on the line. So the first 3 or 4 slides will be catching up new people to our strategy and after that, there'll be some new content to the older investors that have heard for the presentation once or twice or the earnings calls. I'd like to remind everybody we're making forward-looking statements, and they may change in the future. So Summit. Summit is -- in investment, Summit has 2 companies. One is Summit Wireless that has all the engineering, patents, technical know-how to do multichannel surround sound. And the other is WiSA. That's a wholly owned subsidiary. And WiSA is a standard much like HDMI that makes sure when one device sends a signal, the other device knows how to receive a signal and send information back to the original device. So WiSA has more than 70 brands in it in the association. It has a specification out there. And its primary role is to make sure exactly what this picture says, the speaker [ to trying to ] talk to a TV or a AV receiver, a phone, they can talk to it and get audio and play it out to the consumer, right? Our position is a technology that has a high fidelity signal is 96,000. It will handle up to 8 channels, which will support Dolby Atmos and is best in class in the industry. Now we will have -- Summit will have this year close to 25 brands shipping our technology in it. This is a list of slightly more. So some may not launch, but we're pretty good about at least 25 being out there in the market this year. There will be -- in addition to the 4 TV companies we've announced prior or that are in market, it will be a fifth company coming shortly, and we expect a sixth company -- sixth brand as well, right? So for those people who have followed us since the IPO, a slide like this would have said members, 30 members 2.5 years ago. Now it shows you 30 brands that are actively supporting WiSA, huge progress by the team. Our market opportunity is created by a few simple forces. One is, as TVs have gotten super thin, they've lacked the ability to create great audio because there's no air, there's no depth to speakers in a TV today. So the consumer has shifted to adopting sound bars or sound bars with subwoofers. And those helped quite a bit to improve the TV's audio. But the thing with a sound bar is it's still only 30, 40 inches wide in the front of the room, right? So all your audio is jammed into 3 or 4 feet. It's not like a movie theater where you have a wall of sound behind you, in front of you and above you, right? That's what you get with home theater. So some sound bars are using WiFi to get rear speakers, which is another slight improvement to a subwoofer and sound bar. But when you look at what WiSA can deliver, WiSA is able to deliver a simple setup solution for a complete home theater experience. So what that means is you got a left front speaker, you got a right front speaker, you got center speaker in front of the TV, you got rears, you got a subwoofer. And even though you have all those speakers and traditionally, that meant you had to go out and pull wires and drill holes and irritate everybody in your house. Now with WiSA, all you have to do is plug those speakers into a wall outlet and the transmitters will find them and set up your system. So literally, you can buy an Enclave or a Platin home theater in a box. It comes with all the speakers. And you'll have -- you'll spend 10 minutes on boxing it, 5 minutes plugging speakers into wall outlets and that's it. You have a full home theater system. Now that's a big audio improvement, but what about cost? Well, the costs here at the bottom of the slide, with highlight. If you look at a Sonos or Bose or Sony premium sound bar, just the sound bar is $800. Well, you can go and look at a WiSA system from Platin Audio or from Enclave, and for $100 or $200 more, you have a complete home theater system that sounds better than what those premium sounds bars and subwoofers sound. So we are excited on how all these brands are bringing out products using our technology. We think it delivers a better sound field, at lower prices with the same simple installation. And so that's really the opportunity technically and audio-wise. But if you think about your smart devices, initially now, we're talking about TVs. All these TVs have streamed surround sound 5.1 content. Some are adding Dolby from Netflix, even YouTube is now sending 5.1 in coated signals to the TVs. So all this content's there for the consumer. WiSA has now made it easy for the consumer to pick their level of audio where they want a $20,000 [ astounding ] set of speaker systems from Bang & Olufsen or High Impact, the great value $1,000 system from Platin Audio. You pick your audio sound, but we make it just as simple to set up as a sound bar. Right? So you got the content now, you got the simplicity of setup and it's cheaper than most premium sound bars that you own in your house. All right. So what's the impact of all these designs and all this technology and effort for the last couple of years. You can see this is a chart of the last 3 quarters that we reported out and the guidance for Q2 this year. And each quarter not only has seen increase in growth over the prior year, but accelerated growth over the prior quarter over the prior year. So we have guided to 250% growth in Q2, which is the highest growth we've had. And we're going to go through what's driving that growth now, right? And there's really 3 factors. So driving that growth is SoundSend, our WiSA Wave marketing effort. And next year when we start reporting out revenue on our gen 2 technology, that will be driving growth. But this year, it's all about SoundSend and the WiSA Wave. So what's SoundSend's role? So there are a number of transmitters that transmit the WiSA signal. They come in different -- they're in different regions, different price points, different functions. So what we thought the industry was missing was the absolute low-cost, super simple transmitter for [indiscernible] consumer, not the audio file, not the person that's going to go and spend $5,000 on a system, there's some great AV receivers out there that have WiSA in it. But for the [indiscernible] consumer, this buy them mid-tier sound bar, once the simplicity is set up with the better sound field and the better experience. So with one of our ODM partners, WiSA has launched SoundSend and fundamentally SoundSend will plug in to any smart TV that has HDMI ARC, which I think is any TV built in the last 5 years at least and more. And it will automatically find any WiSA Certified speakers that are in that room as soon as you turn it on. So you cannot get simpler than that. It doesn't -- you don't need an installer to come, it does come with an app. So if you want to optimize your audio at setup, you can, but otherwise when plugged into the HDMI ARC port for eARC, the TV is going to turn your system on and off, you don't need another remote and you are good to go. We launched that I think in December last year. Right at the beginning of the December, we started shifting it. We picked up [ 4 quick words ]. You can see it bundled in the Platin Audio product lines. You can see a distributed ad on some of the e-tailers. And we think this is a great facilitator for speaker companies because they know they can go and design WiSA Certified speakers without the fear of wondering how they are going to get a transmitter there. Because WiSA is committed to distributing the SoundSend anywhere in the world that it is being demanded or requested by speaker company. We will let the speaker company source it directly from the ODM. All we are trying to do is make sure this is facilitated in the market. So that is about SoundSend's role. Now what about the WiSA Wave and this is gonna be the bulk of the new information for some of the older investors. But the wiser way would be to think about the opportunity here. Here we've got multiple brands, ship and WiSA products. It is a new technology, it is high-performing, how do we create a category at retail, just like HDMI, so the consumers asking for WiSA. So the retailer knows how to merchandise it. So we've created the WiSA Wave. And as an association, we have some benefits. Right? We can -- as you see in this example, we can run an ad on the left. In this case, we're showing it on a mobile device and talk about the power of WiSA. We run a little video clip and some of the big brands that are in like LG and Klipsch. And then when you click on that ad as a consumer, you're going to go to a landing page and instead of seeing just one product, we can show 3, 6, how many products we want, depending what type of ad we're running. So we can share the cost of 1 ad across multiple brands. right? So number one, that's great. For the consumer, the consumer gets educated, right? By seeing multiple brands, reading whatever is on the landing page, clicking on brands. And they understand that this is -- they get educated, and this is a category, and we help them click on either learn more, they're just investigating or shop now, and we'll send them to retailers, and I'll show you a couple of examples in a few minutes. And finally, from a marketing perspective in the digital world, if you responded to that add on the mobile device and then you came the landing page and then you clicked on, say, the Klipsch or an Enclave speakers. Well, we, as an association, now know you are a consumer interested, you're an audio consumer. And we'll tag you with Facebook and Google Pixel so that we can remarket to you on behalf of the other brands, right? And for a retailer, this facilitates consumer buying because they get educated, they come into or onto a reseller's website with some information knowing what to do. So at the highest level, we -- the WiSA Wave is a marketing effort to build awareness with the consumers, represent all these WiSA products as a category and identify how to go out and market to consumers that would be interested in buying it. At a more practical level, after that first visit by the consumer, as an association, we now know -- so we announced that there is roughly 900,000 visitors in the first half of the year. Well, we know all the demographics, male, female, age. We know what regions they came from, what cities, what countries or continents, we know who's come in twice. We can tell who's shopping versus researching. Now -- and that information for remarketing and retargeting, that's all available to our member brands if they want to remarket to visitors at WiSA. It can be from the brand's perspective or a retailer can, right? If somebody is primarily looking at Platin Audio and Enclave, then they're probably a consumer audio person versus somebody who's looking at Bang & Olufsen or Harman or Klipsch, they're probably an audio file. So there's a wealth of knowledge there. We've got these visitors coming through, and we're in the process of bundling that. So our brands and our customers can market effectively their products to consumers interested in it. The rules are pretty simple. You got to be current with your association fees. You got to have the WiSA Certified logo in your ads or emailers or mailers, and there's no bashing other WiSA members. Now another component of the WiSA Wave is as we talked about at the top of the presentation, there are a lot of brands now shipping the product -- Summit's product. Most of those are branded WiSA. Some are not branded WiSA, but will become branded WiSA. But what the industry was missing is an entry point sub-$1,000 price point. So WiSA also is behind marketing Platin Monaco and Platin Monaco's Platin Malan's sole purpose is to build and get an entry point -- an entry price point for it to attract consumers to feed them up the WiSA food chain, both in price point and performance. Now those are kick-a** systems. They performed phenomenally. But our -- if a retailer has one WiSA brand on the floor, that's a single component. So if they're looking for a second brand, we'll work with that retailer to give them a second brand. If they've got 2 brands and they're good with it, we don't need to go into retail. But Platin is there to drive marketing, to drive awareness to WiSA and to provide an attractive entry point for the whole ecosystem. All right. Yesterday, we announced, which we have been doing every quarter for maybe 1.5 years now, the WiSA web traffic. So dramatic increase in Q2. We had almost 750,000 visitors across the WiSA websites. We expect $300,000 in Q3 and about $850,000 in Q4 during the holiday season, right? If you look at it annually, we literally have gone from 22,000 people in 2019. Those were mostly second half to $360,000 in 2020, and we upped our guidance from 1 million visitors to 2 million visitors. Now all those visitors, as we talked about earlier, are going to come in and be part of our digital analytics for remarketing for building that WiSA ecosystem for sending them to retailers. And I think what was interesting that we saw in the first time in Q4 between Christmas December 15 window, our return traffic to WiSA got as high as 21%. Now the week of Father's Day, our return traffic on WiSA was 25%. So that has me pretty excited that come Q4 after all these visitors and remarketing that the consumer will continue to come back to WiSA to do their comparison shopping and learn about what product they want to buy from the WiSA ecosystem. We talked about when you hit that landing page, you can either hit buttons that say, learn more or buy now. We have discussed in the last earning calls that we expect to open up a WiSA store at Amazon. And that the program is actually a little bigger than just opening up a WiSA store. So what you can see in the left-hand side of this slide is the top and on the right-hand side is the bottom of the first page of what we think will become the WiSA store on Amazon. And again, want to do a quick brief reminder of what WiSA does. We know by time we've sent you here. You've already been to -- you've already responded to one of our ads. You've already been to our website, whether from an ad or organically or referrals, and now you've hit a button that says, shop. And the point of the WiSA story is this will aggregate all the products that have been certified by WiSA that are available on Amazon, right? Now to all brands sell on Amazon into one easy place for the consumer to make an informed [ advent ] shopping experience that both informs them and gives them full availability of products. So the consumer gets reminded about WiSA. You can see down below, they can click on WiSA Certified speaker section. Now to open up to all the speakers that are available on Amazon, you can see transmitters or WiSA Ready TVs and then there's a final one, which will be promotions. You can see some of the resellers wanting promotions already around bundling TVs with WiSA Certified speakers, right? So I think we're pretty excited about that. I think it will make it very easy for the consumers and maybe not in the same look and feel, but we expect to have somewhere between 5 and 10 retailers with a similar type of setup on their stores. So if you're a WiSA Certified retailer, then you have 2 TV brands and you got 2 speaker brands available for you, and you have a WiSA section on your e-tailing platform. So that the consumer puts in WiSA on your sound bar, on your search engine, it's going to go to the WiSA page that highlights all your WiSA products. And in that case, you'll qualify to be a WiSA retailer and we'll highlight you on the WiSA website as well. Now the third platform for driving growth, which will be 2022, 2023 and beyond. We had a lot of IP. We are focused on the smart devices having all this content available comes streamed into it from the Internet, whether you're talking 1 billion smartphones or 200 million TVs, et cetera, right? So we have announced our first product that uses the IP on a standard WiFi module. It lets you do 4 speakers, and we announced that in Q1. It will probably start impacting our revenue in the first half of next year, right? That product was a 2.4 gigahertz 4-channel product. We expect to have a 5 gigahertz 8-channel product next year. Right. Financially, as members have grown, designs have started to increase, products and production have increased. Now we're seeing revenue increase. So Q1 was $1.2 million versus $400,000 prior year. We guided to -- I think it was $1.2 million in Q4 and Q2 this year, which is the 250% growth. Trailing is now up to $4 million at the end of June based on our guidance. We have plenty of cash at roughly $10 million, and we got -- at the end of June, we were added to the Russell Microcap Index. So with that, we're going to go and open up the floor for questions.

[Operator Instructions] Our first question comes from Marty Elbaum with Horizon Networks. Our next question comes from James Lieberman with Revere Securities.

This looks extraordinary in terms of what you really put together and the opportunities look just enormous. Can you give an idea of what the opportunities are down the road in terms of the market size? And how you might see this thing ramping up? You give the idea of like a 2- to 3-year ramping. I'm just trying to get a picture of how -- what kind of color you would give to that.

Yes. So there's 2 aspects to the market size, right? So let's take the aspect around the current technology that we have that's in these designs that's driving revenue next year -- this year. Well, I think there's going to be about 40 million sound bars sold this year. Now if you convert 5% of them to surround -- WiSA Surround Sound System, at whatever price point doesn't matter to me, right? I'm selling a module into every certified product. If you convert 5% and that puts the company at a $100 million revenue stream right now. You know what, people wonder why am I reporting about iBall's coming to WiSA? Well, because the industry and consumers have forgotten how good surround sound is. When you have 12 feet of sound in front of you versus 36 inches, that's the theater experience, right?

Yes.

And so my biggest leverage is to start reminding consumers that there's these great simple solutions out there that are really -- when you think about $799, $1,100, that's really -- that's like 8 trips for a family to a movie theater and it pays for itself, right? So that's one section, right? Just moving the sound bar buyer or the 75% of the TV buyers that haven't -- don't buy audio into WiSA. Longer term, so if you're going into 3 years, 4 years, 5 years, then you have the IP licensing capabilities for smartphones, smart speakers, smart TVs. I think -- I don't know if it's still in the slide I showed today, but at one point just because it can be a smart ass sometimes. Smart refrigerators, there is no reason for refrigerator that is connected to the internet can't control your audio. There really isn't, right? I am not saying I personally would ever do that, but there is no reason you couldn't do it. So fundamentally, that gen 2 technology will pull together all the smart devices, so we either sell a module or sell IP and bring them into the WiSA ecosystem.

It's a different way of thinking about sound in terms of marketing than I realize. But I guess as you get more designed into some of high-end products that everyone looks at for anyway, you grow with that market. I mean people want to improve the sound quality. And that's something -- it's certainly something that's been lacking for a while.

The industry has been highly focused on displays, which -- I mean, the last 15 years, the displays have really -- gotten really big for the same price point, and they're phenomenal, right? But that's not why you go to the movie theater, and that's if you go back 15 years ago, the hard thing about home theater were 2 things, right? You had to drill a bunch of holes for wires. You had to get an AV receiver and figure it all out. And then every single time you wanted to use it, you had to go and get your Blu-ray disc or DVD disk, right? Well, all of that is sitting in your phone or your tablet or your smart TV, right? So we think what we're doing is just giving the consumer a really simple way to get back to that full home theater sound.

And will you be able to have certain displays like this in places like Best Buy or places like that where they have like rooms where you can actually experience what you're talking about?

Best Buy has with Klipsch. They had about 300 stores the last 1.5 years. So not all 900. I don't know if they're still on there or not. We have been highly focused on digital media, Jim, because that is independent of COVID. And even though we have a lot of brands, some are strong in Europe. Some are strong in China. Some are strong in the U.S. None of them -- so the best way for me to make a category is to pick off of territory, in this case, North America and create it online and not wait for retail to open up from COVID, not wait for consumers to go back to retail, but create that category online virtually and through the marketing. So that's one of the reasons we always bring a consumer to a page that has at least 3 of our brands on it, right? I mean do you want to spend $2,500 for a Klipsch speaker system? I got them at home. They sound fabulous. Or do you want to spend $900 on a Platin Monaco. I got those at home and those sound fabulous, too, not the same, but those sound great, right? So we're letting our brands set up their displays with their retailers. That's an enormous amount of money and work, whereas I can have big leverage on the digital side supporting it.

[Operator Instructions] Our next question is from Marty Elbaum with Horizon Networks.

Brett, can you hear me now?

Marty, you're back.

I'm back. I was off before. I guess I was muted. Listen, congratulations. I think what you're doing is amazing. And I think all this hard work is starting to pay off, and I could see the future being very bright for your company. I'm very excited about the WiSA Association. And to me, it would seem that, that could be bigger than the company itself. And maybe you could spin that off. Have you given any thought to that?

Well, I give a lot of thought to a lot of things. So that's not much of a criteria. Now WiSA, I think, in the trademark around WiSA, I have advocated in past investor meetings and presentations that if we get done what we're trying to get done this year, next year, I think the WiSA trademark becomes the most valuable thing because technology can evolve. Just like HDMI, first, it was DVI, then Silicon Image, Sony and Samsung [ pool ] technology and call it HDMI, then there's 1.0, 2.0, 2.1, 2.4, right? So we have it set up to be independent if it needs to be. It's run independently. It has a [indiscernible] WiSA that runs it. We have it set up with trademarks protected around the world so that it can evolve over the next 20 years to be that wireless, high-resolution, multichannel standard or logo that the consumer recognizes.

That's fabulous. I think the potential is unlimited for that. It's great. And I don't think the financial community understands your potential.

Yes. Well, there's nothing like more customer shipping, more consumers buying and more revenue to get everybody to understand that this is a big opportunity.

I thank you for the job that you're doing and I look forward to seeing more news on the company in near future. And hopefully, the company will [ turn profitable ].

There are no further questions. At this time, I'd like to turn the call back over to your host, Brett Moyer for closing comments.

All right. I'd like to thank everybody that took the time to get introduced to Summit and for those that took the time to get updated on Summit. We think this is pretty -- we're in an exciting time period. We're driving pretty hard to achieve all objectives. And if anybody has questions, they can follow up with me afterwards since my e-mail is out there in the world everywhere. All right. Thank you.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.