Greetings and welcome to the Summit Wireless Technologies' First Quarter 2020 Update Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Ms. Kirsten Chapman, LHA Investor Relations. Please go ahead.

Thank you, Claudia. Good morning, everyone and I'd like to - pardon me, good morning everyone, I'd like to welcome you to the Summit Wireless Technologies first quarter 2020 update call. With us today are Summit Wireless, CEO and President, Brett Moyer; CFO, George Oliva; as well as Tony Ostrom, the President of WiSA, Wireless Speaker and Audio Association. 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 for certain forward-looking statements, including statements made during this - course of today's call. Statements contained herein, 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 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 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 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 welcome everybody to the Summit Wireless Technology call. Just to orient everybody, I know we have some new investors or potential investors to the story. So I'll go through four quick slides to catch them up, then we're going to talk about some pretty exciting activity going on with the WiSA team and how we're positioning WiSA Certified products for the fall selling season. And I'll do a brief overview on COVID, and Georgia will do finances. If you think about Summit, there is - we're in the business developing wireless IP. We've implemented that into a couple of custom chips those get add into onto a wireless module and we sell those to the speaker companies, or AV receiver companies or dongles, but if a product has been WiSA Certified that means somebody has purchased module from Summit. We've made $9 or $10 bucks on that and build it into that product. That is WiSA Ready that means they have provided user interface. So that it can recognize WiSA Certified products and make the consumer experience - enhance the consumer experience. We exclusively support the WiSA interoperability standard is run by Tony Ostrom. There is more than 60 brands involved in that, it's growing quite a bit. I think by time we get to September 1, you will see a steady stream of brands being added, so that numbers will be reported out in Q2 substantially higher, but that is the company, wireless multi-channel, high resolution, high performance, highly reliable simple to install wireless technology. For members that are in WiSA right, and again WiSA's role as a standard organization is to make sure that a consumer ultimately can see WiSA logo on a TV box, on a PC, on an AV receiver know that…

Thanks Brett. Thanks everyone. So what Brett said, we're really addressing the soundbar consumer for a couple of really good reasons what has happened with TVs has been great for our industry. They've gotten bigger and bigger, they've gotten thinner and thinner, but the ability for them to produce any decent sound has diminished considerably and at the same time they are now the centerpiece of most home theaters with respect to how we now aggregate content and access it and control it. The issue now is that these big screens have small sound and soundbars have risen in popularity so much over the last several years, because they are better than the TV sound and they are extremely easy to install. So we want to leverage those two customer needs as we move forward with WiSA. And if we - what we're right now we're looking at is, these big TVs with very small soundbars, sometimes not even as wide as the TV itself. So if we move on here, we're looking at what we call a wall of sound is what we're providing. So we're taking that narrow soundstage provided by the soundbar and where we're widening it considerably to create a very much more immersive realistic cinema like audio experience. So that's really what people want to do, as Brett mentioned 70% of people want to watch first run movies in their home. The biggest difference right now is that audio cinema like experience that we can provide. We make it easy for people to set up that great front sound stage separating left, center and right, because we're not putting them all in one small black plastic tube. We're actually providing the opportunity to spread them out and create a wall of sound with just as…

Are we on mute?

I was on mute. We'll start it over.

Good call Tony. Thank you. All right. So we're going to go through an update on where we are with the IP development. We've made a lot of progress. We showed preliminary 2.4 gigahertz solutions at CES, that was well received. From a market perspective, this opens up WiSA technology to your cell phones, your all your smart TVs, IoT devices, your tablets, your game consoles and smart speakers. From a marketing perspective, when you think about the direct pricing that Tony just walk through on the competitive matrix, this substantially lowers the cost modules. Now, there is some performance give, but it is certainly above the good enough line and we think it will ultimately drive $100 to $150 up about 5.1 WiSA Certified system in the marketplace. So if you put back to Tony slide when you're doing your analysis, you'll see that that changes price points, quite a bit on the competitive landscape. We think we get up to 12 channels. We think there is a very intuitive ConexUs button that we demonstrated for set up where the consumer simply touches the front speaker, the center speaker or soundbar, however is configured and you go to you sequentially walk around the room, touch the button and you're set up, that's how fast it can be. We have filed patents around that set up sequence. And we think this - we've made enough progress that starting in Q1, we will have design activity with design partners. And this is the next step to really what Tony is walking you through, you build WiSA, you establish the WiSA brand is a multi-channel solution on the market, not the brand of the speaker, but the solution technology solution like HDMI and we move to the IP version, which allows WiSA members and certified products to be substantially cost reduced. Now I'd like to turn the call over to George, who'll briefly give you some financial updates.

Thanks Brett. So revenue in Q1 was in line with historical run rate of over 400-K a quarter. Q2, we started the quarter soft as the shelter in place has caused retailers be closed and we're anticipating that will be lifted and as retail opens we'll see orders resume or ramp. So Q3 is the main holiday production quarter. So we are expecting a ramp to resume there. In terms of operating expenses, we have been on a belt tightening mission here since Q4 and cutting expenses on outside services, we mentioned we cut payroll cost and reduce all expenses that we could possibly reduce. Travel was eliminated because of the shelter in place. So Q2, you will see the full impact of the cost cutting, where we will have reduced spending $1 million from Q4 to Q2. In terms of financing, we raised quite a lot of money in a very difficult environment. We raised over $9 million from investors and 800-K from the payroll protection plan. We've been able to clean up the balance sheet. We've paid off the bridge loan of $2 million, vendors are all caught up. And we've got long-term lead items on orders that we prepaid. So we're in pretty good position going into the second half of the year in launching all these products we've been talking about. We also were able to regain compliance with NASDAQ, both on the minimum share price and on the minimum shareholders' equity with the money that we raised and the reverse stock split that we did. So I'm feeling pretty optimistic with the second half here.

Okay. Thanks, George. So with that, we're going to open up the call to questions, operator.

[Operator Instructions] Our first question is from Ed Woo with Ascendiant Capital. Please go ahead.

My question is on international rollout versus domestic. Will you be focusing on both markets. At the same time or we'd be focusing mainly on the U.S. domestic market?

So Ed if you - it depends on which part of the business. From a sales perspective and design-in perspective, we're focusing worldwide. If you're - and there is quite a bit of activity with the premium speaker brands in Europe, there - which was initially led by Harman. So Harman as a brand has a stronger brand in Europe and stronger brand in Asia than in the U.S., but there is - between now and September, you will see a number of brands come out that are European brands. You've seen a couple already that we have announced that are certified this year. From a direct marketing or test messaging primarily, we are testing the U.S. for response and effectiveness because it is one big ecosystem. Now, how WiSA members take the data from our test marketing and use it, I would expect it gets used across Europe, as well.

That sounds great. And then my next question is, you know, it's great to see that your price point come down pretty much into the broader market. But how much lower could go and what do you think it's a real sweet spot for your product?

So I think there is - certainly on the current set of modules, there is certainly room to continue to chip away at the list price, but when you look at the competitive matrix, we just showed you, you're talking about premium soundbars and mid-tier soundbars that are marketing 3.1 and 5.1, LG has 7.1.2 soundbar all coming out of the tube. We are in the sweet spot. We're at the lower end. So I think truly the big next step is the designs have started in Q1, around our Gen-2 because that knocks - that's not knocking $0.20 off a module or $0.50, that's not in $3, $4, $5 of the module depending what price you're on, right. And you multiply that times four, six or eight modules in a system that starts drop in ASPs $100 to $150. So I would argue for mid-tier premium audio we're in the sweet spot. We need more brands to help build WiSA ecosystem, we've [indiscernible] at there. There is a big presentation we have tomorrow, hopefully, that's a third brand and then there is several others that are a little farther away and their decision making, but I think is really a brand count right now and then Gen-2 drops to a whole another level of pricing.

That sounds great. And you said Gen-2 is coming out next year?

Yes. We showed first round the modules at CES in the 2.4 gigahertz space, but with 5 gigahertz, we can get more channels and get that theater experience we just talk - walked you through. So that will be - we expect to start designs with customers in Q1.

And then my last question is that you guys obviously have a very broad network of companies in the WiSA system, what our TV brands are left at, you would still want to bring into the WiSA association?

Well in the WiSA association, if you're talking about commonly recognized brands in the Western hemisphere, Sony and Samsung, would be the top two. And if you're talking about Asia and China there is a half dozen. Primarily Asia and China based brands.

That's great. And your goal is obviously to get some all on board?

So our goal is to get them all on board in one form or another, right. So you can have WiSA Ready, which is the easiest, cheapest, simplest solution for the consumer. But as Tony just walked you through, the HDMI dongle, we are not treating that as an exclusive product in a way. So while, WiSA will go out and sell it into the retail to make sure it's there, so speaker companies know that they can connect to any other 800 million smart TVs in the market. There is no problem with any of those TV brands sourcing it from one of two OEMs that have developed these dongles, so one is Tonewinter and one is Hansen and branding themselves. So when we look at engaging with the TV, it can be internal with hardware. As you know, did it can be WiSA Ready with user interface as LG and Sharp have done or can be engaged in terms of their own speaker brands, almost all TV guys have audio brands with HDMI hub.

[Operator Instructions] Our next question is from Daniel Carlson with Tailwinds Research. Please go ahead.

Tony, a question for you about the penetration in the soundbar market and you know you target 5%. Do you have any sense of how long it will take to get to that level?

Well, the step one is going to be to get more of these products that are coming out in those price ranges into more distribution and couple of brands are working towards that right now. So it's tough to gauge. I think this fall will be a really good first step because some of these products are already out and they're working on getting into distribution - like they're launching this fall they are launched. And so they're kind of matriculating through various distribution right now and then getting the training out there doing that process. So we'll know a lot more kind of after Q3, so it's kind of tough to gauge. I would hope that we would be able to capture a good chunk of that market this year. And then hopefully get to that goal and Brett can chime in, but hopefully get to that goal sometime maybe mid next year.

Yes, so let's just stick to what a better idea in the fall and yes we expect that with more brands coming into that price point that we showed in the competitive matrix. We'll get a good chunk of our goal now whether we get 1%, 2%, 3%, 4%, 5% next year - we're not prepared to forecast.

And then in the past, you guys had a similar slide talking about attach rates for surround sound systems on high-end TVs. And I don't remember the exact |numbers around that. But I think it was like you said 25% of high-end TVs had external sound et cetera. And so I'm just wondering maybe you could talk about how you've been progressing towards getting? I mean we know you're not there yet, but getting that penetration rate and just sort of how the market been accepting it and what the biggest hurdles are and do you still see - do you see impediments towards reaching those potentials at some point. As the market change though as technologies changed around you or is it still something you're targeting?

Well look I think, so if you go back to the slides. We have said, there is a 25% to 35% ex-terminal audio attach rate, but if you think about 35 million soundbars on 200 million TVs worldwide. And you take two-thirds of the low-end TVs or half the TV's out, right there is your attach rate right. If you think about what we're doing, this is a game now it’s not technology rollout it's strictly executing out designs. And we talked last call and I'll briefly covered at this call, there is a lot of speaker designs out. So I think the two biggest things to solidify market share for WiSA is one, the speaker designs and two that HDMI hub that let's any of the speakers plug into any of the TVs.

Tony, do you have any sense on what the total advertising budget is by your partners on WiSA related products?

The total budget, I wouldn't want to guess, I know that they continue to put more money towards this type of category because they see the natural expansion of the soundbar customer into this type of products and if you look at some of the website work that our members have done and some of the awareness on retailer sites. I know that there is a lot of that going on as well as trainings. The way people advertise is kind of shifted and there's a lot of advertising on Facebook and trying to drive people, it's more direct sales. So I don't really have a number I just see increased activity.

I mean Dan to - the data we showed in the last call for Q1 website. This unique visitor’s on voice association. I mean Q1 2019 there is a 1,100 unique visitors to WiSA association. Q1 2020 there was almost 40,000 unique visitors to the WiSA association and they spend almost two minutes on the site. So, that that activity has driven through the money that our brands are put into it. So if you go down to the LG website and you go to the OLED TV section or the NanoCell. They have four homepages that rotate and one of them is the WiSA Ready page. I don't think that cost them anything, but from exposure perspective its enormous right. And that's why you're starting to see show up in web traffic.

And then looking at Q4 this year and maybe, I mean you ship in Q3 - but just in terms of unit volumes of WiSA system sold do you have any sense. And I know I am looking for guidance here, but just sort of just the number of systems out there, you must be seeing dramatic year-over-year growth in unit sales assuming COVID is done people actually allotted shops again, do you have any sense on what that could look like?

Well look we certainly think that’s the stage. Obviously we think the value proposition, the number of brands out there is going to indicate that COVID is a wildcard, but traditionally, the CE build cycle is June to October. I think that will be - will slide I think there will be PO put in place for Q3 that are maybe 80% of what they want. And I think the brands will push production into October, as well as November. So I think Q3 and Q4 should be good. Now how much the water level is to be determined by everybody around COVID right. But from just a sheer speaker brand count from the share price position of market systems like the enclave audio - by the way enclave audio is just fabulous system for either $9.99 or $14.95. If anybody's thinking about it you got to look for - you to go online and buy one, it's just a great system. But when you look at that value and the brands of the premium it's all coming together for us this fall.

Yes, well you know I have the enclave system and love it. So I am with convert, but one last question Brett. Just can you sort of looking at a market cap of $8 million or so. The value player’s there is ridiculous, what's the total invested in R&D and developing this technology to-date. I'd like to just sort of quantify that and I'm wondering if any strategic people are coming around, talking to you because it seems like - did I get the bargain. So I’m just trying to understand the discount there?

The engineering into this technology is probably about $50 million so that just R&D effort, not account and sales and marketing and et cetera right, R&D generally is about half our OpEx. From a strategic perspective, we were not in the business to discuss anything that's going on unless there is something to definitively announce, if there is - if you're talking about the valuation from a strategic perspective. Optimally, I would prefer to have those discussions in the fall assuming that were out of this valuation zone. I clearly don't think the valuation is reflective of the valuation of the company in anyway. So the challenge of being public in those type of discussions is evaluation is and always related to the valuation of your IP and business value. There is lots of things that drive stock up and down, right.

Yes, and thanks for taking my questions [indiscernible]?

No comment on strategic prefer to think about the fall through valuation, we're seeing yes.

Well thanks for taking my question guys and feels like we're at a inflection point from me. So I'm excited. So thank you very much.

You're welcome. Thanks, Dan.

There are no further questions registered at this time. I would like to turn the conference back over to Brett Moyer for any closing remarks.

Well I'd like to thank people for attending this morning and listening on the webcast over the next couple days. I think there's a lot of really good information in here in terms of what we currently doing - it’s the next phase to establishing WiSA as wireless multi-channel standard in the consumers' mind and at retail. And we look forward to giving you an update in late July or early August. Feel free to reach out, if you have more questions, thank you.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for participating and have a pleasant day.