Datavault AI Inc (DVLT) 2020 Q1 法說會逐字稿

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 afternoon, everyone, and I'd like -- 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; and CFO, George Oliva; as well as Tony Ostrom, the President of WiSA, the 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 and are subject to a number of risks and uncertainties and other factors, including 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's my pleasure to turn the call over to Summit's 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 4 quick slides to catch them up. And 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 George will do finances.

If you think about Summit, there's -- we're in the business of developing wireless IP. We've implemented that into a couple custom chips. Those get added on to a wireless module, and we sell those to speaker companies or AV receiver companies or dongles. But if a product has been WiSA Certified, that means somebody has purchased a module from Summit and we've made $9 or $10 on that and built it into that product. If it's 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. It is run by Tony Ostrom. There is more than 60 brands involved in that, it's growing quite a bit. I think by the time we get to September 1, you'll see a steady stream of brands being added. So that number 60 will be reported out in Q2, substantially higher. But that is the company, wireless, multichannel, 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 standards organization is to make sure that a consumer ultimately can see a WiSA logo on a TV box, on a PC, on an AV receiver and know that, that will connect to any WiSA Certified speakers, right? That's the mission. Much like today, you have HDMI cables, and most consumers know this HDMI cable goes into that HDMI cable input, and it connects the TV with anything that needs to run audio/video signals through it. So we want WiSA to be that wireless signal for high resolution multichannel.

There's a broad range of brands. But if you're new to the story, these are the primary ones. We talk a lot about these and only because they're active with designs or projects or valuations or shipping. And so you'll see -- these are the ones that you'll hear most about this year.

Now just 8 weeks ago, we had our year-end call. I don't want to go through all those again. But if you're new to the story or if you heard that call, we have expanded the 8K TV line. So we picked up a third brand. So for this fall Christmas season, we expect to see 3 brands that are working with Summit and selling for Christmas. We have a broad list of transmitting devices. Particularly most excited about the WiSA HDMI hub, and Tony Ostrom's going to talk about that today. And there's a very broad rollout of WiSA Certified speakers, a good number of them have not been named yet. And as they pass certification, they will be named and getting e-mails from investors that are starting to find those names and find them being marketed as WiSA. But our policy is not to announce products until they have completed membership and until they have completed certification.

So if you see brands out there, I know of at least 2, there may be as many as 4 that are marketing WiSA, but they are still in the membership certification process. So that's why you have not heard us announce them, right?

So COVID, certainly the big topic for most companies, universally, retail had a huge drop. I think I saw yesterday a 15% drop. But that was more severe. If you take out the survival stores, so grocery stores, Target and Walmart, and if you take out the Home Depot, Lowe's type stores where people sitting at home, have nothing to do but improve their house. Now what does that mean for consumer electronics in general or WiSA Certified products? There's a survey out in Variety Magazine, which is a big media hub. They surveyed 1,000 people, 70% of those people said they are most likely to watch a first run movie from the couch now because of COVID. So we believe that there's a good opportunity this fall, as people finish their home improvements to the physical structure, having just spent 8, 12, 10 weeks locked down in their house, they will be evaluating, during the holiday season, how much entertainment they want to have at home and how to spend that money. Certainly, the surveys that are coming out as recently as last week are indicating that process is starting to happen.

We are fortunate and we're thankful for the government. We did receive $846,000 of PPP money. In line with that, the wage concessions that we talked about last call have been restructured. So if you're under $100,000, that PPP money will bring you back to your original base. If you're a part of the core team, senior management or myself, your wage concession will be cut in half and will run through September 30 currently.

From an impact on the supply chain, we saw a few orders move from March into April. And we have indicated that we've seen 2- or 3-week slips. What we will see is, as we ramp back up with production in Q3, will there be any downstream supply issues. We don't see any currently, but certainly, the factories are back to work. The engineering teams are -- have been designing for months now. In China, new product launches. We are seeing POs come in for Q3 around those new product launches. So we're still anticipating that Q3 is a really good quarter for us.

Basically, if you're in a consumer electronic business and you're shipping TVs or speakers, you can't airfreight those. So you have to decide latest end of June, you have to have your production running in Q3 to support your Christmas forecast, right?

Now I'm going to -- we've talked about what's our TAM, what's our market size. There's a big opportunity long term around all the TVs. But this year, we are highly focused on the opportunity around converting soundbar sales to WiSA Certified products, whether it's the premium guys, the mid-tier guys, the entry-level price points, we think there's a differentiation. So we see converting 5% of the soundbar market into WiSA Certified home theater-type products as an opportunity to grow our revenue to $100 million, right? There's going to be about 35 million soundbars sold worldwide this year. In just the U.S., that should be 10 million to 12 million soundbars and home theater in the box-type solutions for this year alone. So this is our focus, get our leg up, get the revenue going. Tony is going to walk us through how WiSA is positioning WiSA Certified products around the soundbar and where they fit in, and do some competitive analysis for you.

And with that, I'd like to turn over the call to Tony.

Thanks, Brett. Thanks, everyone. So like 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 2 customer needs as we move forward with WiSA. And if we -- what we're right now 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, it's what we're providing. So we're taking that narrow sound stage provided by the soundbar, and we're widening it considerably to create a 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 much ease of install and the same price point as some of those mid to top-tier soundbars.

Additionally, what we can do is allow the consumer to add speakers behind them. And again, if we go back to that professional cinema, we know that speakers aren't just in front of us, but they're beside us and behind us. Really, enveloping us in sound and creating a great sound stage, we make that easy. So not just separating left, center and right and making a wall of sound but creating a room of sound by surrounding the listener with 5 speakers, up to 7 speakers plus a subwoofer for up to 8 channels.

And if we look at kind of the progression of what's possible now for a consumer, you start at the very basic with just the TV sound. Obviously, what the soundbar market is showing us that people want to upgrade that. And soundbar is marginally better. Still, doesn't give you the width, doesn't give you the depth and doesn't really give you amazing frequency response and/or volume. So sometimes, you add a subwoofer. That increases frequency response. But still as far as output, width and the entire sound stage, still not quite where we want to be when we're comparing ourselves to a pro cinema. You can fake some of those surround effects. There are simulated Dolby Digital and Atmos products out there, and they do a slightly better job than a soundbar with a subwoofer, they do improve the experience. But still what we're really trying to do there is in the full green system at the top, create a truly immersive audio experience. And we're trying to do it, and we're allowing our consumers to -- our partners to do it at the same price points as soundbars and with the same level of installation.

And quite frankly, if you're mounting that soundbar on a wall, we could actually be easier than a soundbar installation because you're actually just setting the speaker in front of the TV, out left, out right, behind you and the subwoofer, plugging them all in, and we want that setup to take less than 15 minutes.

Now if we look at traditionally what that cost and opportunity looked like, previously, before WiSA, you were looking at the attachment of audio to whatever that annual TV volume was, right? Well, however many TVs were being sold, that's how many systems you could sell. But the complicated connectivity, dealing with an AVR, wiring the speakers up, if you wanted to do it yourself and take a weekend, you could be one of those brave souls or you could actually hire somebody to do it. And the cost of that is north of $1,000, $1,500 or more. And then on top of that, you'd have to go procure all the media.

Then we introduced WiSA Certified, and it was primarily a component of a higher-end system around a higher-end TV. The price points for the component that transmitted the audio, which was typically a WiSA hub or a WiSA soundbar, the price points of those were $300 to $800. So again, tying that to the more elite TVs probably as well. So you're looking at probably about 3 -- about a 30 million TV connect opportunity.

And then we came out with WiSA Ready, which was a far simpler way to connect. A single USB connector in the side of the TV, any WiSA Ready TV, lowered the price point of entry, so that transmitter in the $199 to $225 range. But we were just dealing with WiSA Ready TVs. And although that was 15 million to 20 million TVs, it still wasn't a huge number of TVs that we could connect to.

Now what Brett was talking about with the HDMI connected WiSA transmitter, number one, we maintain that low price point, and it can even get down to $99 to $149 to connect to any TV with HDMI. But now we're not relying on them to just be WiSA Ready. So all of the WiSA components reside in the transmitter, not just the TV. So now we're talking about any TV that has HDMI and an audio return channel, which just this year, will be somewhere estimated 200 million to 220 million TVs on a global basis. And we're not just talking about new TVs now because those -- that HDMI and ARC standards have been around for years. So we can actually go back to -- and attach to legacy TVs that are already installed in people's homes. So we don't have to just rely on new TV purchases and those people being our consumers. So now we have lower price point and a far greater field of TVs that we can connect to, and it's still just as easy as it ever was with a power plug and an HDMI connection.

The product is called the WiSA SoundSend. It's the wireless audio transmitter that's connected via HDMI, decodes up to Dolby Atmos, and it is WiSA branded. So now we are connecting a WiSA device, getting our brand out there to approximately 800 million smart TVs that are installed and coming out this year. And we are allowing people to connect those TVs to any WiSA Certified speakers. So any of our speaker brands can leverage this product to move their products and at the same time, help us get into distribution without having to take on the process of creating their own transmitter, which, quite frankly, a lot of speaker guys don't want to have to do.

We're lowering the price to the customer. Again, that $99 to $149. So instead of an expensive AVR, this is now your new AVR that connects you to your TV, which is where all that content is coming in and allows up to 8 speakers to surround you in immersive audio. Available for retail in Q3, and we will distribute this. So we will distribute it, and we will rely on our speaker members to distribute it along with their speaker systems so that we know that we're aligned at retail. We know that we're thinking about how we're merchandised at retail. We're trained. Everybody is going to use the WiSA language, the WiSA training, so the story is consistent at all touch points for the consumer. And we will take care of the customer service. So we will get a direct feedback loop from lead users taking this product into their home and using it. We'll know who's using it, where they're using, how they're using it, what they're connecting it to and we'll get all that direct feedback so that we can, number one, process it internally to make ourselves better and also pass that on to our speaker brands and other brand members that want to create something similar in the future. We are an association, and it's a group effort, and we want to share all of this intelligence that we'll be gathering with our membership.

So if you look at where this will set in a competitive landscape, right, we're looking at that mid- to high-end soundbar market. The soundbar market that has been growing and growing. We are not just hovering above it as a step-up in price point, we are right in the middle of it. This shows a lot of leading audio systems in that $799 to $1,800 price point that are billed as multichannel home theater type systems. And if you look at where the 4 WiSA systems plot in this group, we are right in the middle, ranging from $899 to $1,495. We are not the highest end product from a price point perspective. But if you look at the stats, we are the ones that say 5.1, we are the ones that say rear speakers are included, we are the ones that say discreet front speakers for that nice wide stage and we're the one that's associated with THX. So we have -- THX has been working with our membership to create Tuned by THX and THX Certified solutions that's very difficult to do with a soundbar. But because we are discreet speakers and we're creating a nice wide sound stage with great frequency response and hit those THX criteria, either when they're -- we're tuned by them, we get better or when we're certified with them, it's a badge of honor for our members. So we are now playing in the same price points, with the same ease of connectivity and far superior performances. And this is where we can really get some velocity going.

Some of the market research that we've been doing, we've been really digging into now understanding who our customer is and what components of the WiSA experience do they gravitate toward because we can talk about a lot of different things. We can talk about number of channels. We can talk about the cinema-like experience. We can talk about quality of audio. We can talk about simple connectivity. We can talk about the fact that you can hear the dialogue better because there's a discreet center channel. We can talk about a lot of different things. And we can talk about it to a lot of different people because everybody has -- pretty much everybody has a smart TV. And now, with content coming in with Hulu and Amazon and Netflix, everybody has that content coming in, and they're used to absorbing it. So our market potentially is huge, but we want to make sure we're hitting the key targets that are really most interested in what we're doing and building a good home theater system.

So we're looking at consumer benefits and creating messages around those, targeting to those profiles, immersive and spatial sound, affordability, simplicity of setup and high fidelity are coming to the top as the key lead attributes that people are most gravitating towards. We are driving industry awareness through web and podcast and interviews. Most recently, we've been on Power Sound, we've been on Dealerscope, and we will continue to do this both with lead users and reviews and with podcasts and other interview opportunities.

And then we're testing direct-to-consumer ads. We've been testing those in Q2 and looking at those responses and ciphering through them and making sure that our message is getting to the right people and how they're responding and what those best opportunities are. And we're seeing that for around $2, and in many cases, less than $1, we can generate a Buy Now click going to a homepage for a product and potentially driving another Buy Now click for a purchase. So when you're talking about $699 to $999 systems, that $1 to $2 to get somebody to pay attention is a pretty low marketing budget. So we're really excited with that. We think we can continue to refine that to the point where we get the HDMI transmitter out, we really know who we're talking to, what message we're sending them. And we're able to really get them aware of the product and get some great systems in people's homes.

We are also going to share all that information with our membership because while we are branding this product WiSA, we want as many of our brands to sell this product as possible. And many of them have shown interest in learning from this experience and then building their own product later because maybe they want a slightly different feature set or a different industrial design or whatever. We will help them by giving them all of this feedback that we learned from these test ads in this process of bringing this product to market to help them down the road.

Outside of all of that, we continue to work with other technology leaders in our space in several different joint efforts. A good example from the past, the last couple of years, few years have been Xbox and THX, both of which have joined WiSA. Xbox, wanting to make sure that their Xbox One, One S and One X was working with a WiSA transmitter. That transmitter is the Axiim LINK. The reason we spent time with that, that Axiim helped to bring that product to market with Xbox in mind was because you can't just connect anything to an Xbox. You have to be Xbox Certified. And so the Axiim LINK is actually the only product on the market that's WiSA Certified and Xbox Certified. And now all of those Xbox units, which not only are gaming systems, but in many cases, are the center of somebody's home entertainment system, can easily connect to the LINK and then any WiSA Certified speakers.

THX, also a WiSA member, has been working with, as I mentioned earlier, some of our speaker members to create either Tuned by THX or THX Certified products. They love what we're doing. They understand that convenience and a wireless approach to home theater is a big part of the future of our category. And they are -- our technology is at a level that can be used in a THX Certified system, which is good for them because more people can have those systems and good for us because it shows the quality of audio that we're actually dealing with.

The latest and very exciting for us is a company out of Barcelona, Spain called Broomx. And Broomx is the whole room, the room virtual reality company. And these guys -- I mean, this is kind of World's Fair type stuff. They're creating multiperson room virtual reality experiences. And they realized what we were doing from an immersive audio perspective, they wanted to take their immersive video and blend it with immersive audio to really create these amazing experiences for people. And so the opportunities are homes, hotels, businesses, retail, what you could do with gaming, what you can do with different environments and atmospheres and create both visual and sonic immersive experiences. It's pretty amazing stuff. They want to work with several of our speaker brands to create these experiences in various locations. And those are just the types of technology entities that gravitate towards what we're doing, and we're really excited to work with guys like that. So we continue to seek out those opportunities as well to get our brand out there and to get the experience out there and share what we can do with immersive audio.

Are we on mute? Sorry. I was on mute. We'll start over. Good call, Tony, and 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 gaming consoles and smart speakers.

From a marketing perspective, when you think about the direct pricing that Tony just walked through on the competitive matrix, this substantially lowers the cost module. But now there is some performance give, but it's certainly above the good enough line, and we think it will ultimately drop $100 to $150 off of a 5.1 WiSA Certified system in the marketplace. So if you flip back to Tony's 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's a very intuitive ConexUs button that we demonstrated for setup where the consumer simply touches the front speaker, the center speaker or a soundbar, however it's 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 setup 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 as the multichannel 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 to briefly give you some financial updates.

Thanks, Brett. So revenue in Q1 was in line with historical run rate of over $400,000 a quarter. Q2, we started the quarter soft as the shelter-in-place has caused retailers to be closed. And -- but we're anticipating that, that will be lifted. And as retail opens, we'll see orders resume a ramp. So Q3 is the main holiday production quarter, so we're 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 costs and reduced all expenses that we could possibly reduce. Travel was eliminated because of the shelter-in-place. So Q2, you'll see the full impact of the cost cutting, where we'll have reduced the spending of $1 million from Q4 to Q2.

In terms of financing, we've raised quite a lot of money in a very difficult environment. We raised over $9 million from investors and $800,000 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 order 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've 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.

My question is on international rollout versus domestic. Will you be focusing on both markets at the same time? Or will you be focusing mainly on the U.S. domestic market?

So Ed, if you -- so 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's quite a bit of activity with the premium speaker brands in Europe. There's -- which was initially led by Harman. So Harman as a brand has a stronger brand in Europe and a stronger brand in Asia than in the U.S. But there's -- between now and September, you'll see a number of brands come out that are European brands. You've seen a couple already that we have announced as certified this year. From a direct marketing or test messaging, primarily, we're testing the U.S. for response and effectiveness. It is one big ecosystem. Now how the 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, it's great to see that your price points have come down pretty much to the broad market. But how much lower do you think it can go? And what do you think is a real sweet spot for your products?

I think there's certainly -- on the current set of modules, there's certainly room to continue to chip away at the list price. But when you look at the competitive matrix we just showed you, if you're talking about premium soundbars and mid-tier soundbars that are marketing 3.1, 5.1, LG has a 7.1.2 soundbar, all coming out of a tube. We are in the sweet spot. We're at the lower end. So I think truly, the big next step is the designs that start in Q1 around our Gen 2 because that knocks -- that's not knocking $0.20 off a module or $0.50. That's knocking $3, $4, $5 off the module, depending what price sheet you're on, right? And you multiply that times 4, 6 or 8 modules in the system, that starts dropping 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 the WiSA ecosystem, but Platin and Enclave are out there. There's a big presentation we have tomorrow. Hopefully, that's our third brand. And then there's several others that are a little farther away in their decision making. But I think it's really a brand count right now, and then Gen 2 drops you a whole another level of pricing.

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

Yes. We showed first round of 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 talked -- walked you through. So that will be -- we expect to start designs with customers in Q1.

Great. And then my last question is, you guys obviously have a very broad network of companies in the WiSA system. What TV brands are left that 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 2, all right? And if you're talking about Asia and China, there's a half dozen, right, that are primarily Asia and China-based brands.

Perfect. And your goal is obviously to get them 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 any 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 of the 800 million smart TVs in the market, there is no problem with any of those TV brands sourcing it from 1 of 2 ODMs that have developed these dongles. So one is Tonewinner and one is Hansong, and branding it themselves. So when we look at engaging with the TV, it can be internal with hardware, as [B&O] did. It can be WiSA Ready with user interface as LG and Sharp have done. Or it can be engaged in terms of their own speaker brands because almost all the TV guys have audio brands with HDMI hub.

(Operator Instructions) Our next question is from Daniel Carlson with Tailwinds Research.

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

Well, step one is going to be to get more of these products that are coming out in those price ranges into more distribution. And a couple of the 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 those into distribution. It's not like they're launching this fall, they're launched. And so they're kind of matriculating through various distribution right now. And then getting the training out there, getting 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 we'll have a better idea in the fall. And 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.

Got you. Okay. That's helpful though. 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. So I'm just wondering if 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 has been accepting it and what the biggest hurdles are? And do you still see -- do you see any impediments towards reaching those potentials at some point. Has the market changed though as technologies changed around you? Or is it still something you're targeting?

Well, look, I think -- so if you go back to those slides, we have said there's a 25% to 35% external audio attach rate. But if you think about 35 million soundbars on 200 million TVs worldwide and you take 2/3 of the low end TVs or half the TVs out, right there is your attach rate, right? If you think about what we're doing, this is a game now, it's not a technology rollout. It's strictly executing out designs. And we talked last call, and I briefly covered it this call, there's a lot of speaker designs out. So I think the 2 biggest things to solidify market share for WiSA is, one, the speaker designs, and two, that HDMI hub that lets any of the speakers plug into any of the TVS.

Yes. Okay. 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 toward this type of category because they see the natural expansion of the soundbar customer into this type of product. 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's a lot of that going on as well as trainings. The way people advertise has kind of shifted, and there's a lot of advertising on Facebook in trying to drive people to more direct sales. So I don't have -- I don't really have a number. I just see increased activity.

I mean, Dan, if you go back to the data we showed in the last call for Q1, website unique visitors on WiSA Association, I mean Q1 -- I think Q1'19, there was 1,100 unique visitors to the WiSA Association. Q1 2020, there was almost 40,000 unique visitors to the WiSA Association, and they spent almost 2 minutes on the site. So that activity is driven through the money that our brands are putting into it. So when you -- if you go down to the LG website and you go to the OLED TV section or the NanoCell, they have 4 homepages that rotate. And one of them is the WiSA Ready page. I don't think that cost them anything, but from an exposure perspective, it's enormous, right? And that's what you're starting to see show up in web traffic.

Got you. And then looking at Q4 this year, and maybe, I mean, you ship in Q3. So -- but just in terms of unit volumes of WiSA systems sold, do you have any sense of -- and I'm not looking for guidance here, but just sort of the number of systems out there, you must be seeing dramatic year-over-year growth in unit sales, assuming COVID's done and people are actually allowed in shops again. Do you have any sense on what that could look like?

Well, look, we certainly think that's [the pace.] Obviously, we think the value proposition, the number of brands out there is going to indicate that. COVID is the wildcard. But traditionally, the CE build cycle is June to October. I think that will be -- will slide. I think there will be POs 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 high the water level is, is to be determined by everybody around COVID, right? But from just a sheer speaker brand count, from a sheer price position of the marketed systems like the Enclave Audio, which -- by the way, Enclave Audio is just a fabulous system for either $999 or $1,495. If anybody is thinking about it, you got to look for -- you got 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, I have the Enclave system and love it. So I'm a convert. But one last question, Brett. Just can you sort of -- looking at a market cap of $8 million or so, the value players there is ridiculous. How -- what's the total invested in R&D in 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 it's a bargain. So I'm just trying to understand the discount here.

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

So no comment on strategics.

No comment on strategics. Prefer to think about the fall's valuation or [soon].

Feels like an inflection point to me, so I'm excited. So thank you very much.

There are no further questions registered 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're currently doing is the next phase to establishing WiSA as that wireless multichannel standard in the consumer's mind and at retail. And we look forward to giving you an update in late July, 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.