In a recent earnings call, WiSA Technologies (ticker: WISA) announced a substantial increase in Q3 revenue, reaching $1.2 million—a 240% rise from the previous year. The growth was credited to improved gross margins and a strategic shift toward direct-to-consumer sales. The company also successfully reduced its inventory by 17% and concluded the quarter with a strong cash position of $3.9 million.
A pivotal development for WiSA was the shipment of its intellectual property for a set-top box, which is slated for a European launch by Christmas 2023 and a global release in 2025. Additionally, the company has made a significant acquisition of Data Vault Holdings' intellectual property and trademarks, setting the stage for future growth and the expansion of market reach by 2025.
Key Takeaways
- Q3 revenues soared to $1.2 million, marking a 240% increase year-over-year.
- Gross margins improved with a strategic shift towards direct-to-consumer sales.
- Inventory levels were reduced by 17%, ending the quarter with $3.9 million in cash.
- Shipment of WiSA IP for a set-top box is expected to launch in Europe by Christmas 2023.
- The acquisition of Data Vault Holdings' IP and trademarks for $200 million in stock and a $10 million note.
- Data Vault's integration aims to monetize data in high-growth markets, leveraging a combined 67 patents.
Company Outlook
- WiSA anticipates a significant increase in WiSA E revenue in Q4 2023.
- The company is expected to hold an investor day around CES in January 2024 to outline its future direction and technology offerings.
- Plans to expand market reach and leverage high-margin licensing models across various sectors by 2025.
Bearish Highlights
- The company did not highlight any specific challenges or setbacks during the earnings call.
Bullish Highlights
- The integration of WiSA’s audio technologies with Data Vault’s blockchain and AI capabilities targets high-growth markets.
- Innovative data technology initiatives, including a new meta layer for data characterization, are in development.
- Monetization strategies for Data Vault include partnerships and a data exchange with a favorable revenue split for clients.
Misses
- There were no specific misses reported during the earnings call.
Q&A highlights
- The call included discussions on the Data Vault's utilization of Adio's ultrasonic technology to enhance data monetization.
- Upcoming announcements are expected to detail contracts and collaborations with significant data buyers and sellers.
WiSA Technologies' Q3 performance underscores its strategic pivot towards direct-to-consumer sales and innovative data technologies. With the acquisition of Data Vault Holdings and the integration of cutting-edge blockchain and AI capabilities, WiSA is positioning itself for significant expansion into new markets. The company's robust patent portfolio and upcoming partnerships promise to bolster its market presence and revenue streams. Investors and industry observers are looking forward to the investor day in early January 2024 for a clearer picture of WiSA's direction and technological advancements.
InvestingPro Insights
While WiSA Technologies (WISA) reported impressive Q3 revenue growth and strategic developments, InvestingPro data and tips provide additional context for investors to consider.
According to InvestingPro, WISA's market capitalization stands at a modest $11.61 million, reflecting its small-cap status. This aligns with the company's current growth phase and recent strategic shifts. An InvestingPro Tip notes that WISA "holds more cash than debt on its balance sheet," which corroborates the company's reported strong cash position of $3.9 million at the end of Q3.
However, investors should be aware that WISA is "quickly burning through cash," as another InvestingPro Tip suggests. This could be a concern given the company's ambitious growth plans and recent acquisition. The tip that the stock "generally trades with high price volatility" is particularly relevant in light of the significant developments announced in the earnings call.
It's worth noting that InvestingPro offers 14 additional tips for WISA, providing a more comprehensive analysis for investors seeking deeper insights into the company's financial health and market performance.
The InvestingPro data shows a revenue of $1.79 million for the last twelve months as of Q2 2024, with a concerning revenue growth of -34.87% over the same period. This contrasts with the positive Q3 results reported in the article, suggesting that the recent growth may be a turning point for the company if sustained.
As WISA continues to execute its growth strategy and integrate its recent acquisition, investors may want to closely monitor these metrics and consider the additional insights available through InvestingPro to make informed decisions.
Full transcript - WiSA Technologies Inc (WISA) Q3 2024:
Operator: Good day, and welcome to the WiSA Technologies Q3 Results and Business Update. All participants will be in listen-only mode. Should you need assistance, after today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to David Barnard with Alliance Advisors Investor Relations. Please go ahead.
David Barnard: Thank you, Megan. With us today are Brett Moyer, CEO and President of WiSA Technologies, and Nate Bradley, CEO of Data Vault Holdings. Before turning the call over to Brett, I would like to remind everyone that today's conference call will include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and risk factors discussed in our filings with the SEC. WiSA assumes no obligation to update any of these forward-looking statements except as required by law. We also refer you to slides two and three of today's accompanying presentation for more detailed information. With that, I'll turn the call over to Brett. Please go ahead.
Brett Moyer: Thank you, David, and good morning, ladies and gentlemen. It's been an eventful three months since our last update, starting with the announcement in early September of our purchase of assets from Data Vault Holdings for the IP and trademarks around Data Vault and Adio. With such a significant transaction and transformation of the company, we have Nate Bradley on the call today, and I'll turn it over to him shortly. During the interim since that announcement, we have had several press releases about new products and new markets that Data Vault's IP is being entered into, and he's going to walk us through that today. But first, if we look at what's going on with WiSA and WiSA E, which you know, we've invested heavily over the last three years and have roughly twenty-six patents filed around it. Results in Q3 financially improved. We had $1.2 million in revenue, which is up 240%. Our gross margins improved. Driving that was the decision to take the small platinum audio speaker line that we have out of retail, so we're strictly direct to consumer, and we reduced inventory by 17%. We ended the quarter with $3.9 million of cash. From an operational milestone, we did announce in our pre-announcement that the team significantly started shipping WiSA IP for transmit in a set-top box with the customer, and that product is expected to be on the shelves by the Christmas season. It will be on the shelves in Europe initially and will go worldwide in 2025. That is an Android OS-based system, and the team has already started developing WiSA E transmit software to work on Linux, which will impact our 2025 revenue. For new people on this call, I'm going to briefly review the transaction again that we announced at the beginning of September with Data Vault Holdings. That was to acquire the patents, the trademarks, and the IP for their subsidiaries of Data Vault and Adio. The terms were $200 million in stock at $5 a share and $10 million in an unsecured promissory three-year note. If we raise money from a strategic or financial partner, 10% of that will go back to paying off that note over the next three years. Major milestones this morning: we filed the preliminary proxy for both the annual shareholders meeting and the purchase of this IP. We will clear any SEC comments and should be mailing that so that we can close out both the annual shareholder meetings and the transaction with Data Vault this year. Post-closing, Nate will become CEO of the companies, we'll change the name to Data Vault, and I'll become CFO. Now with that brief summary on WiSA and the transaction, I'd like to turn the call over to Nate. He's going to walk through both his history, which is a long successful track record of taking IP and monetizing it in both public companies as well as financially. Nate, I'm going to turn it over to you.
Nate Bradley: Sure. Thank you very much, Brett. Appreciate your time this morning in joining us. We have obviously a very exciting time here. My background, for those that don't know me, is centered around invention. I have successfully taken products from invention to commercialization and into the public markets. Over my lifespan, I've had various timing that I have figured out with respect to this. You get better in life, or at least you intend to. This current opportunity follows a career that is highlighted by our solution of the Internet for people with disabilities at AudioEye (NASDAQ:AEYE), a previous company, ticker AEYE, NASDAQ traded company. We sold for making mobile and Internet accessible for those with disabilities. In doing that and my subsequent experience around intellectual property patents, I have perfected a process in both filing and receiving patents from United States and international bodies, but also reducing those to practice. Here, we've got the timing right with WiSA discovering their twenty-six patents and their incredible traction in the marketplace combined with our own. We've got a very exciting company moving forward. These inventions have been targeted at two primary vertical markets. If you look at blockchain and artificial intelligence, these represent high-growth markets. The growth rates are impressive, but the utility of these technologies is probably why we are all here. WiSA has a strong data infrastructure that we found along with their patented audio systems and technologies. We have a blockchain and artificial intelligence play at Data Vault that is harnessed in our flagship technologies, Data Vault and Adio. Adio is really the overlap that we have with WiSA and why we're so excited about the collaboration. We have an ultrasonic technology, a system that uses quick response mobile quick response technology that rides over sound. Think of it like an invisible QR code. We have the ability to over these ultrasonic anchors deliver data and connect real-world objects with their virtual counterparts in meta form. This is where we enter into the Data Vault systems, but the benefits of this Adio platform allow us to perfect systems in events and venues. We have a number of pilots under our belt and just completed one in the MMA space over this past weekend, where we proved the model that had a very high visitor engagement, improving upon what we did last year with the Katy Perry concert at Resorts World. We've also deployed this at the largest convention center, the largest casino floor in America, the LIV Golf Tour. We've been on MMA fights, we've been at Art Basel, we were the first to arrive there with NFT technologies. We have a number of big event venue pilots under our belt, including Major League Baseball, where we proved that ability to use these ultrasonic sounds to get significant increases in mobile engagement. We've perfected an ad network over these networks that we've patented and perfected with respect to its high-margin delivery of advertising data to consumers. Working with some of the largest event venues, we've been able to perfect these systems and also work with WiSA to hone these technologies to control better our ultrasonic signals using WiSA technologies. We can make spatial and other very specific tuning available on-site at these venues. I'd also point out that our technology goes over broadcast, so it's a very successful technology that first addresses an event venue but can also be broadcast for the out-home audience, which is a significant breakthrough. If we go to the next slide, we've also announced the ability for us to harness data in its most consumable forms. We have launched a hollow vision, DBHollow, that uses holographic technology, can take data assets and convert brand and data assets into visual experiences that are human-like. We've been able to take the name, image, and likeness of individuals and provide now a display that's connected to our Data Vault and our Adio system that allows for monetization. So we literally have a pay-per-view box that can unlock content on a paid-for basis or a licensed basis and control the display of holographic content up to including brand displays and highly scientific data where we proved the model for scientists that allow them to use data within their research to create in silico environments to view and experience their experimental data in a way that allows them to experience and have better connection to datasets that they're creating and explain to others what their scientific research means and presents to the world. We've perfected this across a number of shopping malls, events and convention centers, hotels and resorts, sports arenas and stadiums, as well as university campuses, which we have a very focused effort around generating revenue in that marketplace. That leads us to this, which is a degree credential. In addition to experiential holographic content, we've perfected a holographic content that represents degree college degrees, bachelor's, master's, and doctoral, can be delivered in a very high quality and experiential coin that is issued to the graduate. It can be used in a format that our Adio tones provide for a signal that can be confirmatory of a degree credential, meaning that a utility coin is issued to the graduate. That coin has within it audio technology that we've patented called Adio. When you play that Adio tag, it can literally confirm with that college and university the credential itself. Things like transcripts and other assets of data can be conveyed using that same technology. So we're extremely excited about this. It's a great productization of the combination of our acoustic division and our data division. It productizes down to our clientele, and we proved it at Arizona State University working with their Luminosity Labs to cut our teeth and get all of the necessary data arrangements made within that university so that we're able to issue coin in a way that is passive to the university. They simply do what they are doing normally, and we're delivering a web three credential on top of that. That is a revenue center for the school, certainly for us. It's a focal revenue center to prove the Data Vault and Adio models in the marketplace and in this one, a highly scalable vertical market, where every graduate is developing revenue for our company. In the form of this coin, which is also saving the college and university money. It's actually generating revenue on top of the money they save. These protective credentials represent a web three systems integration and a revenue generation that's never existed before. So we're very excited about this, I have a focal effort, and we're knocking down a number of known brands. We've also announced our collaboration and work that we're doing with scientific laboratories. We have perfected a supercomputing software application of Data Vault, where we index data no matter how large the repository. Our National Laboratory is having amongst the largest data repositories outside of our federal government. Some of them are owned and controlled by our federal government's agency. What we are able to do with respect to the data asset is to develop an index. Our software is a web three utility that's not storing the data of our customers, but it is characterizing it. It's this new meta layer. At that meta layer, we can function as a library and indexer. Think of it as the Dewey Decimal System of data assets. We're able to then also provide a value layer. We can understand how much data costs to create. We can understand the value of data and how much it represents in the marketplace. Most importantly, we develop technologies that allow us to monetize data on behalf of our clientele. By doing that, we've perfected a system that allows national laboratories to share data, to funnel data into other systems while also being remunerated for the cost of data and the creation of data. This is a breakthrough in scientific research. Our Data Vault is also a perfected system, as I showed, with the hologram, to view scientific data in experiential ways that help scientists collaborate and communicate their scientific objectives. So we're very excited again about this initiative. We do have a focal point here on the East Coast where we're developing this laboratory. If we go to the next slide, our data technology, really, in synopsis, we have a history of proven success with our team. We've taken IP portfolios that were much smaller than that we have here at Data Vault and WiSA, and we've perfected that into commercial operation. Both technologies are in that same position now. We happen to meet at that inflection point and increase each other's value as we've learned to use WiSA technology. We've also looked at their IP assets and ours together and what that means to the market space. We have a combination of sixty-seven patents. That'll be a hundred patents going into the mid-part of next year. As we get issuances, we're filing continuation and continuation of parts. We've been meeting as engineering teams to combine our technology stacks and find these acoustic connections to data and Data Vault monetization, which we're perfecting. We have also high-margin licensing models that are congruent at Data Vault and WiSA. We have a high-performance computing software licensing strategy. We've also leveraged that across sports and venues and our biotech and education fintech real estate, healthcare, and energy sector clientele. We've looked at the effect of that AI and blockchain combination using web three in total addressable markets that are expansive in those cases. So automation, technology utilization across big bang opportunities, opportunities where we unlock inside the scale of our clients. We're doing that across a number of acoustic and data initiatives. We have traction with these clientele that are household names, large brands that have adopted and trust our company and our technologies to bring forth a number of revenue-generating strategies. This is our outlook going into 2025. With that, I'll conclude my comments.
Brett Moyer: Thanks, Nate. With that, operator, we'll open up the call for questions.
Operator: We will now begin the question and answer session. Please pick up your handset before pressing the keys. The first question comes from Jack Vander Aarde with Maxim Group. Please go ahead.
Jack Vander Aarde: Okay. Great. Good morning, Brett. Good morning, Nate. I appreciate the third-quarter update, and congrats on the recent steps you've made to finalizing the Data Vault transaction. No shortage of moving parts going on. Let me start with a question for Brett on the third quarter. I'm looking at the fourth quarter. Brett, third-quarter revenue, $1.2 million. That's a nice strong uptick. Was this solely driven by Gen 1 WiSA HT sales? Was there any WiSA E in there at all?
Brett Moyer: Thanks. So that's two questions. Yes, there was WiSA E in there. But, yes, it's still primarily Gen 1 WiSA HT.
Jack Vander Aarde: Okay. Yeah. Sure. Primarily, Gen 1, but there was some WiSA E. Okay. And you have five WiSA E agreements formalized and more in the pipeline, it sounds like. Can you just remind us what your initial expectations for WiSA E in this fourth quarter are? Like, will it ramp up a little bit from the third quarter here? Then if you could just remind us of your 2025 WiSA E expectations.
Brett Moyer: Okay. So we haven't done any guidance on 2025. But we will say that WiSA E-related revenue will have a significant uptick in Q4 versus Q3.
Jack Vander Aarde: Gotcha. That's helpful to know. And then it sounds like just intuition-wise and just obviously more time with the WiSA E brands rolling out. Sounds like 2025 will no guidance, but will further ramp, obviously. And you know, one other point, Brett. In the third quarter here, your gross margin did recover. Do you expect I think that kind of, you know, the WiSA HT Gen 1, the gross margins around can be around 30% on a unit basis. Is that still a fair assessment, or is there any lumpiness to the gross margins?
Brett Moyer: It is fair on WiSA HT to model, you know, 30-35%. I would anticipate as you go forward with both WiSA E kicking in with NRE charges, WiSA E being a software license for transmit and royalty payments, that as you model out through 2025 and 2026 and we bring in these software licensing added at a Data Vault, to have significantly higher gross margin percentages.
Jack Vander Aarde: Okay. Great. That's helpful color. Maybe I'll switch gears. Couple questions for Nate. Nate, there are clearly many moving parts and a lot of recent developments. I've been tracking your press releases. On the Data Vault side, maybe can you just walk us through some of the near-term monetization drivers you are most focused on or think are the most meaningful as you enter 2025? You've covered a range of examples and partnerships, you know, Adio and HyperVision and VerifyU. Can you just touch on some of the specific ones that you see as the most likely or the most meaningful monetization drivers as we head into next year?
Nate Bradley: Yes. On the two, Data Vault and Adio, Adio, sports entertainment venues, live events, large sporting events in the golf space in particular. Any event really where you have a sprawling canvas to produce from or to host fans upon. If you look at PGA and some of the tour concepts around Adio, that's a big driver for the Adio business. Events and venues and concerts, their broadcast corollaries, so streaming and traditional broadcast delivery of Adio. That all is handled through the ad network, so it has additional monetization. Think of the complex technology, but very simplified in its operation and in its creation of revenue around the ad network. A very complex technology that gets very consumable in how it's productized and brought to market. An ad platform, Adio, across venues, sports, entertainment. With Data Vault, the high science. The ability to use the holograms of HyperVision that we are, you know, with the DBHollow brand, bringing a pay-per-view gateway experiential layer around the use of holograms and high science. That's using scientific data that we proved and showed at an exhibit at the Digital Twin Institute, where we were able to show a plant being grown off of the data into it. You feed a sun cycle into a seed, you feed nutrients and other datasets into an object that had the genome that is mapped, and you can grow that seed right in front of you into a plant rather than waiting six months. This is a strategy where we use data to display. We've proven it in one of the hardest use cases, but it has application downstream in much easier to understand, easier to implement things such as looking at a car, looking at a building. Looking at things in 3D that are driven by data. Our ability to inspect them and to trust what we're seeing is accurate through the Data Vault. That's where anchoring and other assets come in. We're going to focus on that high science laboratory setting in monetizing data as an index and data as a value. Downstream from that effort, it causes universities, other commercialization efforts of Data Vault that will start to emanate. All of that again as Adio is focused on an ad network, Data Vault is focused on an exchange. We have the ability with our information data exchange to simplify all of that business into an exchange. We sell data on behalf of our clientele in a safe and secure environment that's never existed before on our information data exchange. Those are the focal points, the ad network and the information data exchange, driven by those two platforms.
Jack Vander Aarde: Excellent. Excellent. I appreciate that. That's helpful color. Maybe just let's go one step further there. On the Data Vault, it kind of did create digital twin side of the business. How do you actually monetize it then? Will this require contracts to be announced, signed, or is this more of a live marketplace where end customers can actively go on and purchase data from you guys? What kind of visibility will an analyst be able to see, I suppose? Will there need to be a contract that's announced? Are there more partnerships? That would be helpful color.
Nate Bradley: Yes. Partnerships on the buy and sell side. You will see a number of clients sign in to the platform. We're at the commercialization stage of Data Vault. It's the flagship property of WiSA. Data Vault, WiSA has a strong data back end that's very, very useful to Data Vault, and its function for us is like sonar, bringing data back to the Data Vault through the ultrasonic technology of Adio. The monetization, to answer your question, on the information data exchange, you could expect a 70-30 split. Thirty percent of the yield of a trade, think of it as 15% buy side, 15% sell side interest in that dataset, comes back to our company. So 70-30 split, 30% coming to Data Vault, 70% in the pocket of our client, where we've taken, like Bloomberg does, a terminal, and we have a virtual meta terminal that we turn up for our clients called Data Vault. What we add for our clients to their datasets is a meta layer that adds value. We value and score. We have patented technology that values and scores that data. When we split, it's on a 70-30 basis. You'll see turned up clientele with announcements around contracting on the sell side or on the data side, the inventory. Then on the buy side, organizations that we've aligned with such as Bloomberg and BlackRock (NYSE:BLK) and Accenture (NYSE:ACN) and those that are large and institutional buyers of data that have very complex requirements that Data Vault meets on behalf of customers. Both sides announcing buy and sell side, and then the events and venues and the use of Adio being other areas that we'll announce. When we do announce those, keep in mind Data Vault is the back end. All of those ad systems and other systems are really built for the purpose of creating data, and we harness that at Data Vault.
Jack Vander Aarde: Excellent. Okay. Now that makes a lot of sense. I appreciate that rundown, Nate. Then maybe just one more for both of you, for both Brett and Nate. It sounds like, you know, so you got the proxy pretty much formalized. That'll be sent out here. It sounds like if our shareholders approve the transaction, this will happen pretty quickly soon after. Do you guys envision hosting a joint kind of investor day of some sort after, you know, shortly after, just once all the dust is kind of settled and the name everything kind of transfers over? What should we be expecting? Will there be an investor day type event where you kind of formalize and crystallize everything and crystallize the message maybe in January or late December? What are you guys thinking there? Thanks.
Brett Moyer: I think the time that you should think about is it'll either be at or immediately following CES. So first of January.
Jack Vander Aarde: Okay. And do you plan on both being at CES, Brett? Showing off both technologies? I know WiSA has had a strong presence there in the past, obviously.
Brett Moyer: Yes. Fantastic. Both technologies, both teams.
Jack Vander Aarde: Fantastic. I think that's it for me for now. There's a lot going on. I look forward to watching you guys execute. Good luck.
Brett Moyer: Thank you.
Operator: This concludes our question and answer session. I would like to turn the comments back over to Brett Moyer with WiSA Technologies for any closing remarks.
Brett Moyer: Yeah. So, you know, I think clearly there, to quote Jack, there's a lot of moving parts, but it is a very exciting combination of IP that we've acquired. I think the whole teams are looking forward to executing this out and watching revenue grow as we come into 2025. With that, I'd like to thank everybody for joining the call this morning.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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