WISA TECHNOLOGIES, INC. (WISA)·Q3 2023 Earnings Summary

Executive Summary

• Q3 revenue rebounded 81% sequentially to $0.77M (from $0.43M in Q2) as lower speaker pricing converted inventory to cash; however, gross margin fell to -217% due to a $1.4M inventory reserve tied to legacy HT chips, driving a net loss of $6.11M and EPS of -$0.97 .
• Management highlighted strong traction for WiSA E: 13 TV/display brands engaged, 7 reviewing licensing, and 85+ development boards shipped; a tier-1 TV demo with embedded WiSA E is slated for CES 2024 .
• Cost actions: cash OpEx expected to decline by ~$0.5M in Q4 vs Q3 and by $1.1M in Q1’24 vs Q3; liquidity supplemented by an October financing ($4.8M gross proceeds) and a $650K short-term loan in September .
• Q4 revenue color: management now expects Q4 to be “in the range of Q3,” implicitly below prior $1.0–$1.4M guidance; Platin soundbars with WiSA E are shipping and expected to contribute in Q4 .
• Catalysts ahead: CES 2024 tier-1 TV WiSA E demo and potential partner announcements; estimates context from S&P Global was unavailable for WISA, so beat/miss vs consensus cannot be determined .

What Went Well and What Went Wrong

What Went Well

• WiSA E commercial momentum: “licensing discussions with 13 TV brands…7 brands…reviewing the licensing agreement” and 85+ dev boards shipped, validating multi-SoC portability and interoperability strategy .
• Sequential revenue rebound: “sales of $0.8 million up over 81% vs. Q2 2023” due to pricing actions on speakers; management emphasized growing confidence in WiSA E adoption from 60+ meetings with ~33 companies .
• Upcoming CES showcase: management will demonstrate embedded WiSA E on a tier-1 TV, a critical proof-point to drive 2024 licensing and module revenue .

What Went Wrong

• Margin compression from inventory charges: gross margin plunged to -217% driven by a $1.4M increase in inventory reserves on HT chips and lower volumes vs fixed costs/lower pricing, pressuring profitability .
• Persistent losses and liquidity risk: net loss grew to $6.11M; cash fell to $0.21M at quarter-end, prompting a high-cost short-term loan and subsequent preferred financing; going concern risk disclosed .
• Guidance tone-down: after Q2 guiding Q4 revenue to $1.0–$1.4M, management now signals Q4 to be around Q3 levels, reducing near-term growth expectations despite product launches .

Financial Results

Segment revenue mix:

KPIs (operational, Q3 2023):

Trajectory within 2023:

Notes: Q3 press release rounds revenue to $0.8M vs $0.769M in the 10-Q .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our WiSA E initiatives gained significant traction…driving initial licensing discussions with 13 TV brands…7 brands are currently reviewing the licensing agreement…shipped over 85 development boards…demonstrating multi-channel audio implemented on a tier 1 branded TV at CES ’24” — Brett Moyer, CEO .
• “In Q3 2023, lower pricing on speakers drove sequential revenue growth…While converting inventory to cash, the pricing incentives resulted in low margin sales…we recognized a $1.4 million inventory reserve primarily related to our legacy HT semiconductor chips” — Brett Moyer .
• “Cash operating expenses in Q4 2023 are expected to decrease $0.5 million vs Q3 and…decrease $1.1 million in Q1 2024 vs Q3; primarily G&A and S&M, not impacting engineering for WiSA E” — Brett Moyer .

Q&A Highlights

• Licensing path/timing: free transmit license offered to display brands contingent on WiSA E interoperability; revenue to be driven primarily by modules; TV implementations mostly 2025 product lines, with some simpler 4‑channel implementations potentially on 2024 lines; WiSA E impact modeled from Q3’24 .
• Q4 revenue color: after a stronger-than-expected Q3, management now anticipates Q4 to be “in the range of Q3,” citing holiday seasonality and Platin soundbar launch, implying below prior $1.0–$1.4M guidance .
• Gross margin outlook: near-term margins to remain low given inventory conversion strategy, with reserve reflecting shift from HT to E products based on positive customer feedback on WiSA E evaluations .
• Comhear update: still active; definitive agreement linked to Comhear’s strategic customer; previous 2024 revenue framework ($10–$15M) included Comhear; mix and timing remains dependent on partner progress .

Estimates Context

• Wall Street consensus (S&P Global) for WISA Q3 2023 revenue and EPS was unavailable due to missing CIQ mapping; therefore, we cannot assess beat/miss vs consensus at this time [SpgiEstimatesError].

Key Takeaways for Investors

• WiSA E is gaining real traction (13 brands, 7 reviews, 85+ kits), increasing probability of medium-term embedding/licensing across TVs/soundbars; CES 2024 tier-1 demo is a near-term catalyst .
• Q3 revenue outperformed prior guidance ($0.77M vs $0.45–$0.60M) but at the cost of margin due to inventory pricing and reserves; expect margins constrained until inventory is cleared and module/software revenue ramps .
• Management’s Q4 commentary points to revenue around Q3 levels, implicitly below prior $1.0–$1.4M, tempering sequential growth expectations despite Platin soundbar contribution .
• Cost actions should reduce cash OpEx materially in Q4 and Q1’24, extending runway alongside October financing; monitor cash burn and dilution risk given going concern disclosure .
• Watch for 2024 inflection: module/software deals (TVs likely FY25 lines) and non-TV devices (media servers, soundbars, speakers) could contribute earlier; management suggests modeling WiSA E impact starting Q3’24 .
• Risks: execution on licensing, conversion of pipeline to production, liquidity constraints, and continued margin pressure until mix shifts to higher-margin modules/software .
• Near-term trading implications: stock likely sensitive to CES headlines, licensing announcements, and any incremental financing; medium-term thesis hinges on WiSA E standardization and embedding across multi-SoC ecosystems .