Greetings, and welcome to Summit Wireless Technologies third quarter update. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kirsten Chapman, with LHA Investor Relations. Thank you. You may begin.

Thank you, Judd. Good morning, everyone. I'd like to welcome you to the Summit Wireless Technologies Third Quarter 2020 Update Call. With us today are wireless -- Summit Wireless' CEO, Brett Moyer; and CFO, Joe -- George Oliva. 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 the course of today's call. Statements contained herein that are not based on current or historical facts are forward-looking in the nature and constitute forward-looking statements within the meaning 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 current macroeconomic uncertainties associated with COVID-19 pandemic, our ability to predict the timing of design wins entering production in the future revenue associated with our design wins, our rate of growth, our ability to predict customer demand for our existing and future products and to secure adequate manufacturing capacity, consumer demand conditions affecting our consumers' end markets, our ability to higher retain and motivate employees and affects the competition, including price competition, technological, regulatory and legal developments, developed in the economy and the financial markets 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 the upcoming risks and ongoing risks and uncertainties of the company's business, I'll refer you to the company's various SEC filings. With that, it is my pleasure to turn the call over to Brett Moyer. Please go ahead, Brett.

Thank you, Kirsten. And I'd like to welcome you, ladies and gentlemen, to the Summit Wireless call for Q3 update. When we started the year, our team was very excited about all the progress and work that got done in 2019 and how that would impact 2020's P&L. Clearly, COVID impacted that initially. But this is the quarter we get to start showing you what has kept us motivated and excited in terms of design wins, membership growth, consumer response and revenue growth. Now for the new investors, I'll do a quick overview. For potential investors, Summit has 2 pieces. One is the technology side that designed custom ASICs that gone to wireless modules that get built into either TVs or AV receivers but primarily speakers. So if a company is selling a WiSA certified product, that means they've purchased a module from me for $9 to $10, and inserted it into that product. If they're WiSA ready, that means they're interfacing to us, but they have not bought a module. Now the other part of Summit investment is WiSA. We run the WiSA Association for the industry and -- which is more than 60 brands. And that WiSA Association has a critical role, right? It is to make sure that the consumer ultimately has a great experience, #1, because they know that this product can connect with the other products. So for the consumer, when they see that, they know that they're going to get a simple setup that they're going to know it's going to be a high fidelity signal and they'll be able to have immersive sound or theater -- movie theater sound, however you want to phrase it, in your room, in your living room. Now during the last 4 months, we added 7 more companies…

Thank you, Brett. So Q3 was our strongest quarter to date. Revenues in the quarter were $607,000. That's a 45% increase over the same quarter in the prior year. Our gross margin was just over 17 points, which was compared to 7.6% in Q3 2019, which was about 9.5-point improvement. And our cash was north of $9 million at the end of the quarter, and we're projecting that Q4 will be $860 million-plus, 100% growth over Q4 in the prior year.

All right. Thank you, George. So when we look at all the activity that's gone on in 2019 and 2020 under the radar screen, and we look forward into Q4 and 2021. We still anticipate to add new members, including more TV and projector companies. We expect more brands to ship WiSA Certified products as well as more projects from existing brand shipping. We see SoundSend increasing speaker sales because of the easy installation and the broad distribution And we expect to add more TV brands and increased volume in WiSA-enabled TV. Now before we go to the questions, it is the season. I just want to highlight, there is great surround sound in a box. All you have to do is wrap it out -- up and wait for the surprise. So here's 3 links to 3 great audio systems that will give you, for under $1,500, a kickass sound, ship in 1 box and you click there. If you want to really build out your home theater, LG has got some great OLED and Nanocells that are WiSA ready that will connect to Platin and Klipsch speakers. So I'm going to let this slide hang during Q&A just to drive the point home. This is a great opportunity to click on this and look for promotions on these websites. And with that, operator, I'd like to open up for the questions.

[Operator Instructions] Our first question comes from the line of Ruben Roy with Benchmark.

Brett, congrats on seeing some traction here. It's great to see the numbers move up and kind of the excitement as we head into year-end. I guess just to start, can you maybe give us an update? Obviously, you're getting some traction with some high-end brands out there. But in terms of overall market dynamics, as you think about -- we've got your Q4 guidance, but obviously, you had a tough beginning of the year. How are things looking around the supply chain? Can we build these things and get them out the door? And are we going to have a little bit of a different seasonal trend as we think about the first part of next year, given that things slowed down a bit earlier this year? That would be helpful to kind of understand how you're thinking about all that at this point.

Well, so I think there's going to be a different seasonality this year than traditionally in the consumer space or the home audio TV space. I say that for a couple of reasons. I have said most of the year that we expect the fall to be a good selling season because of COVID. The home improvements, the home gyms, all that stuff got done in the spring, people went outside. Now what you do now you're stuck in the house and we're in wave 2, right? I think there's validation that we've seen from our customers that lead times are extending because products are selling out. We have seen orders coming in inside our lead times since late August. So I believe there's a pretty strong consumer demand, and it should continue into Q1 because customers are not going to be able to fulfill all the demand even though it's Christmas season -- or our customers, right?

Right. Okay. That's very helpful. And yes, I'd agree with that. You were seeing that in some of the other areas of consumer electronics as well. Maybe just a quick follow-up, Brett. I dialed in a little bit late, but did you give us an update on how things are going with your wave strategy? And anything new to report around that at this point?

Yes. So if you go back to consumer interest and the graph, we had a lot of consumers growing. We have run a series of ads that are multi-brand whether it's LG, Platin and Klipsch. Whether it's Platin, Enclave and Klipsch or Platin, Enclave, Axiim, et cetera. They performed very well. I think from a consumer -- from an integration perspective, this is critical for 2021. I think it's huge leverage for the WiSA Association to help those brands cost effectively reach consumers as a partner. So our multi-brand test or what we refer to as, say, a good, better, best, for example, ad that lands on a Platin, an Enclave and Klipsch ad. If you run just 1 brand, you'll get 1 click to 1 of those brands, website or Amazon page. When you put 3 brands in, you actually get 1.8 clicks. So almost -- it almost doubles the number of clicks to WiSA certified brands and it increases the engagement with the consumer. And I think you can see that impact, which I mentioned earlier, Ruben, that our return visitors to the site has gone from 10% in September to 17% in October, early November.

Right. Got it. Okay. Just to finish up, Brett. So obviously, exciting to see the traction, the engagements, the Wave et cetera. How are you thinking about module costs? You've said in the past that you think you could hold it on average of $9. Any changes as we start to see some momentum here into '21?

I do not anticipate us changing the guidance of $9. When we set that guidance, we anticipated whatever changes that we expected we'd have. So I think as you look forward, that's a solid number in 2021.

Our next question comes from the line of Ed Woo with Ascendiant Capital.

Congratulations on the quarter. My question is more on the retail channel in terms of the retailers. Do you see them willing to take up more inventory as we head into the Christmas selling season or you're kind of holding back? Or what is it like when you're talking to the retail channel right now?

So we're a component. So we talk to the retail channel in the effort to get them to recognize WiSA as a category that they should multi-brand multi-SKU, right? Get them to recognize whether there's 1 brand, there's other brands around it that they should look at bringing in. We talked to them about the Wave and how that can drive business to their actual storefronts or their websites. So I don't think -- we're on the front line of -- on the actual orders from retail. But I do know that we have had some of our customers say, they wish they had more access to components beyond us to build more product for the season. So I would expect retailers to have tight inventory because they were hurt hard by COVID. And I expect the consumer to have higher-than-normal demand for this category, as I mentioned in the prior questioning. So I think supplies will be tight, inventory will be tight by the end of the year at retail.

All right. That's great to hear. And then my question is, you typically use CES in January as a big showcase for your new products, obviously. Will we get a similar type of new introductions by either you or by some of your partners?

Yes. So I can't tell you exactly how those formats will get done, right? Everybody is very curious on how CES plays out. The CES is going to happen. It will happen virtually. And it's still -- the consumer electronics has a very defined seasonality. Products have to be announced in early Q1. They have to be in production or going to production in Q2. They have to get delivered in their European, U.S. markets by late Q3, October. So I don't think that seasonality changes. The events around CES might spread over 4 or 6 weeks in terms of product announcements because certainly. People aren't there to see it, individual brands have the opportunity to wait until it's closer. Well, the seasonality is going to remain the same. It's all driven by the holiday season buying.

[Operator Instructions] Our next question comes from the line of Jay Schuster, a private investor.

Brett, any progress with any of the cell phone manufacturers, Samsung or Apple or LG, in particular?

Jay, so you're really talking about what's going on with Gen 2 and the ability to transmit from handheld devices, whether it's a tablet, even in TV? We have said, which we will continue to say that we'll announce our first product later this quarter. Well that's what we anticipate. And that will be a -- we'll start talking more about Gen 2 in the year-end call.

So when you say Gen 2, that will be your perfected product rather than an introduction of like LG has agreed to put this in all their phones?

Agreed. That will be -- we have a product that is different performance, meets the good enough, meets -- is target to the broader market, and there's a series of products that will roll out of that over the course of next year, and we are starting the sell-in process.

Because it seems like if you get 1 of those done, the volume there is just enormous. And I don't know what the margin on that will be. But if you get any of those 3, it seems to put it in their phone, it seems the others are going to be driven to do it to copy.

That's true, in theory. Clearly, from the presentation though, now and mostly, this year, I am focusing both the team and the investor attention on market adoption at -- in the soundbar space. We think it's a highly competitive offering. We think that gives us the opportunity -- that gives us a near-term service available market of $100 million, and we have a good foothold in the TV market and audio going around the TV market, and that's our focus. Now when we launch our Gen 2, we'll start talking about that in more detail. But what's going to drive this P&L this year and next year dominantly is the stuff we're talking about today.

And is there any forecast as to when you turn cash flow positive? Or is that just too unpredictable?

Well, yes, we have those forecasts internally. We have not issued them publicly. We see a pretty strong business plan in front of us. So we'll let the quarter speak for themselves as we continue to grow.

And so have you publicly said what kind of revenue you need in a quarter to achieve cash flow positive?

We have not. People can model off that historically. We have said on our OpEx is, runs around $2.4 million. I think we guided $2.4 million, $2.5 million for Q3 on a -- excluding some noncash charges around stock issues, we were at $2.4 million in Q4. So I think anybody can model it out.

[Operator Instructions]

All right, operator. We're going to give it one more plug. Go to Platin, go to audio -- Enclave audio or Axiim, and get a great surround system in a box that you just have to wrap for Christmas and Hanukkah and all the other gift-giving opportunities in the holiday season. And with that, I'd like to thank everybody for joining us today. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.