Energous Corp (WATT) 2022 Q1 法說會逐字稿

Good day, and welcome to the Energous First Quarter 2022 Financial Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Matt Sullivan, Investor Relations. Please go ahead.

Thank you, Andrew, and welcome, everyone. Before we begin, I would like to remind participants that during today's call, the company will make forward-looking statements. These statements, whether in prepared remarks or during the Q&A session, are subject to inherent risks and uncertainties that are detailed in the company's filings with the Securities and Exchange Commission.

Except as otherwise required by federal securities laws, Energous disclaims any obligation or undertaking to publicly release updates or revisions to the forward-looking statements contained herein or elsewhere to reflect changes in expectations with regard to those events, conditions and circumstances. Also, please note that during this call, Energous will be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release, which is posted on the company's website.

Now I'd like to turn the call over to Cesar Johnston, CEO of Energous. Please go ahead, Cesar.

Thanks, Matt. Good afternoon, and welcome to the Energous 2022 First Quarter Conference Call. Joining me this afternoon is Bill Mannina, our acting Chief Financial Officer. As you saw on our first quarter press release that came out this afternoon, we reported revenue of approximately $216,000 in Q1 2022, which represents a 49% increase over the same quarter for 2021. This highlights the growing interest in our wireless power networks technology, and we are very pleased to report that for the first time in the company's history, we are shipping measurable quantities of product.

The Energous vision is that wireless power is crucial to unlocking significant unrealized potential, speeding app and expanding the deployment of IoT devices. Our WattUp wireless charging technology is designed, not only to enable mobility for devices as we charge them while in motion and over the air at large distances, but also to enable freedom of placement flexibility for fixed IoT sensors, trackers and other IoT devices without the constraints of wires or the need to change batteries. We are finding that there is particularly solid customer interest in wirelessly powering RF tags and electronic shelf labels. We believe that early adoption of wireless power in these areas would lead to future IoT deployments in retail, industrial, medical, smart home and smart office market environments. We also believe these target markets hold tremendous potential for Energous.

In our previous Q4 2021 earnings call, we mentioned 3 near-term business goals, which we would like to give an update on today. The first was to fulfill the commercial delivery of 1 watt WattUp PowerBridge orders. As noted on our last call, our first shipment of WattUp PowerBridge was delivered in Q4 2021. We are happy to report that in Q1 2022, despite continuing supply chain challenges, we fulfill an increasing number of units of 1 watt WattUp PowerBridge transmitters. These transmitters are built with Energous semiconductor and software technology and are being used today by several end customers in trials and demonstration type deployments.

Our PowerBridge wireless power network solution in conjunction with low power IoT Pixel tags from our partner, Wiliot, are receiving early positive feedback as customers can now see firsthand the value of Wiliot's IoT Pixels wirelessly energized at distances greater than 10 meters. And going forward, our aim is to generate volume demand for our WattUp PowerBridge from these trials. And as we get visibility to larger order volumes, we expect to be able to significantly reduce our cost of revenue.

The second near-term goal, as we discussed last quarter, was to identify a beachhead RF tag application and related addressable markets, targeting our first production pilot deployment. One potential application that we've been -- we have identified is the need to wirelessly power asset tracking devices. This application has attracted initial interest from multiple companies who are evaluating our WattUp PowerBridge IoT wireless network solutions. We will report further on this initiative as our collaboration progresses.

Our third stated near-term goal is to identify a market launch customer for electronic shelf labels, or ESLs. Power and ESL is a major challenge for the industry due to reliance on cumbersome cables and battery replacement. We are actively developing a wireless power network system for ESL deployments, and we are productively engaged with a global ESL device leader.

Now to support our IoT business focus, we recently announced new appointments to the Energous Board of Advisers. These new advisers are highly experienced and well recognized in the industry for their past accomplishments along with their overall vision for the future of IoT. We are excited to have Bob Friday, Alessandro Piovaccari, and Mark Tyndall as part of our team, and we look forward to working with them as they contribute to our efforts.

We have spent considerable effort obtaining regulatory approval to ensure that we can sell our products free from restriction in the major geographic markets. I would like to now update you on the significant regulatory certifications progress the company has recently made for IoT wireless charging at a distance.

Since our first 1 watt WattUp PowerBridge certification in the U.S., in October 2021, we have received new certifications in the European Union, India, Canada and most recently, in China last month in April, which represents a 6-month time span of sequential RF wireless charging certifications, highlighting our leadership position for worldwide regulatory certifications for wireless power networks. As we have noted in the past, the IoT ecosystem continues to expand rapidly and is expected to grow from 12 billion devices today to nearly 40 billion by 2025 according to IDC and the report entitled Worldwide Global DataSphere IoT Device and Data Forecast, 2021-2025.

Beyond the successful regulatory approvals received over the past 6 months, we are excited to see the major movement in the U.S. for greater than 1 watt conducted power delivery at unlimited distance. Our long-term collaboration with the FCC since the early days when we first opened Part 18 less than 1 meter has now evolved into a draft FCC Knowledge Database, or KDB, that allows Part 18 for a unlimited distance power transmission. This progress mirrors other worldwide efforts and solidifies the future of wireless power networks as a recognized emerging technology and solution with a path to becoming available in world markets. We believe that these regulatory achievements combined with the rise of the IoT markets provide the perfect combination for rapid growth of connected devices as the next generation of industrial, retail, health and smart office or smart home infrastructure are deployed.

On the operational side, we have completed the transfer of the EN4100, EN3210 and EN2210 device supply chain to Energous from our previous partner, Dialog Semiconductor, and we continue working on the transfer of the EN2223 device supply chain. We have seen no major impact in manufacturing as we continue to work with and source from our original foundry partner. This partner is the same firm that we have been using since day 1, back when we fabricated our own designs and is indeed the same firm that was used when we moved to our operations to Dialog. Now that the supply chain is back under Energous management, we're working directly with this foundry as we have done it in the past.

On the business partnerships, we see business partnerships playing an important role in the deployment of Energous IoT wireless power networks. We continue to develop relationships with partners that complement our vision to expand our business reach. As noted on our last call, we are engaged in a partnership with Wiliot, an emerging RF tag leader and maker of groundbreaking battery-less IoT Pixels. Wiliot includes our 1-watt WattUp PowerBridge as the wireless power source in their storage kits, which was announced in January. And as part of our continued partnership, we will be participating in the Wiliot training session at RFID Journal LIVE! next week in Las Vegas, where we will be supporting their training event. We are excited to see the strong interest in this offering as our WattUp PowerBridge wireless power network solution provides guaranteed levels of power with up to 100% IoT device visibility at greater than 10 meters.

During Q1 2022, in partnerships with Atmosic, an emerging leader in low-power BLE devices, we announced an IoT wirelessly charged sensor evaluation kit, which includes a 1 watt PowerBridge with Atmosic ATM3 receivers, which is expected to become available in Q2 of 2022. Atmosic receivers will be powered over the air with our WattUp PowerBridge, while establishing a BLE connection to transmit sensor data up to the PowerBridge with its capabilities for further sensor data transfer into a wireless network infrastructure for cloud data management processing.

Also announced this quarter, Syntiant is a new partner who's low-powered neural decision processors for artificial intelligence represents the addition of next-generation high-performance yet low-power consuming IoT devices at the network edge with new data processing capabilities. Our aim is to become a critical provider in delivering the power and connectivity that will be required by artificial intelligence devices to process and upload data for cloud processing and, in certain applications, improve the network latency response. By using Energous WattUp PowerBridge technology, Syntiant's sound processing as a new generation of smart IoT devices, which can react and control IoT devices deployed in retail, industrial, home and office environments.

In summary, Energous execution of its IoT wireless power networks is underway and showing solid progress in multiple technical, regulatory and partnership areas. Our WattUp PowerBridge products have now reached a number of potential end customers that are evaluating our solutions. The ramp-up of our semiconductor devices production is also in place. We expect that as we -- as with any new product, demand and interest may fluctuate as we ramp up, and we will plan accordingly.

Finally, we reiterate our long-term goals as we outlined last quarter. Our goals were: support of the AirFuel Alliance efforts to make wireless power transmission as standard; lead the ITU recommendation to align 900 megahertz wireless power transmission spectrum as the first designated wireless power spectrum worldwide; certify high power that is greater than 1-watt conducted power, IoT power bridges, transmitters in the U.S. and EU without distance limitations; fourth, identify potential market applications for ESL vertical markets and target first pilot deployments; also identify third vertical market and build end-to-end system for customer technology demonstration; finally, deliver year-over-year revenue growth driven by expanding IoT WPN deployments. We are focused on these long-term tasks and continue to make progress. We will update the audience as important accomplishments are made on these targets.

I will now turn the call to Bill Mannina, our acting CFO. Bill?

Thanks, Cesar. Before we begin, I'd like to remind everyone again that we issued a press release today at the close of market, announcing our financial results for our first quarter of fiscal 2022 ended March 31. As we mentioned in the release, we delivered our first shipment of 1-watt PowerBridge transmitters in the 2021 fourth quarter, and we are very pleased to report that in the 2022 first quarter, we fulfilled additional orders of WattUp PowerBridges.

Revenue in the first quarter was $216,000, a 49% increase over the $145,000 we reported in Q1 2021. Sequentially, this compares to $225,000 in Q4 2021. As discussed, we do anticipate quarter-over-quarter revenue fluctuations as we ramp up sales. As a result of our product revenue in Q1, we reported the related cost of revenue for our product sales.

Cost of revenue was $203,000 in Q1. We do not report cost of revenue in the prior quarter or in Q1 last year. Going forward, our aim is to generate volume demand for our products, and we expect to be able to significantly reduce our cost of revenue once we achieve larger order volumes.

For the quarter, total non-GAAP -- total GAAP -- I'm sorry, GAAP spending decreased by $2.3 million, down to $7.4 million compared to the prior quarter primarily due to a decrease of $2.5 million in stock compensation expense. Year-over-year, total GAAP spending for Q1 decreased by $1.3 million compared to the same quarter last year, which is due to a $1.3 million decrease in stock-based compensation.

Research and development expense accounted for 48% of total costs and expenses in Q1. Management continues to evaluate targeted cost savings opportunities while still supporting business growth.

Net loss for the first quarter on a GAAP basis was approximately $7.2 million or a $0.09 loss per share on approximately 77 million weighted average shares outstanding. This compares to a $9.4 million net loss in the prior quarter or $0.13 loss per share on 72.9 million weighted average shares outstanding, and an $8.5 million net loss or $0.14 loss per share in Q1 of last year on 61.6 million weighted average shares outstanding. The increase in share count year-over-year is primarily due to our at-the-market, or ATM financing, completing Q4 of the last fiscal year, which raised approximately $27 million.

Let me now give you a non-GAAP view of our numbers for the first quarter as we believe non-GAAP information provides a useful comparison for investors, especially for a company at our stage, when used with GAAP information.

Excluding $0.8 million of stock compensation expense and $0.1 million of depreciation expense from our total Q1 GAAP cost and expenses of $7.4 million, net non-GAAP cost and expenses totaled approximately $6.5 million, approximately $0.3 million less than the $6.2 million total non-GAAP cost and expenses in the prior quarter and approximately even compared to the same quarter last year. Our non-GAAP net loss for Q1 was $6.3 million or an $0.08 loss per share. This is an increase of approximately $0.3 million compared to the prior quarter and essentially flat to Q1 of last year.

We saw minor expense fluctuations across all areas in line with our expectations. Non-GAAP research and development expenses decreased by approximately $0.3 million from the prior quarter to $3.1 million, and we had the same decrease of $0.3 million compared to the prior year. Non-GAAP SG&A increased over the prior quarter by approximately $0.3 million due primarily to public company year-end reporting costs. Compared to the same period last year, Q1 non-GAAP SG&A costs increased by approximately $100,000. We ended the quarter with approximately $42.8 million in cash and remain debt free.

To close, we expect our GAAP and non-GAAP cash operating expenses for the full year to trend in the current range with our normal quarterly fluctuations. We continue to forecast year-over-year revenue growth.

I will now return the call back to Cesar.

Thank you, Bill. We would like to thank our shareholders and stakeholders for their support. We would also like to thank our partners who share our vision and support the growing IoT wireless charging market. Energous' goal is to make WattUp wireless power a worldwide standard for over-the-air wireless charging at 900 megahertz. We believe Energous is poised for success due to our strong innovation capabilities in the technology, regulatory and business development areas. We have made a tremendous amount of progress towards our goals in IoT wireless power networks. Thank you for your support as we work to unleash the full potential of IoT through WattUp wireless charging by removing cables and batteries.

At this time, we would like to open the call for questions. Operator?

(Operator Instructions)

The first question comes from Suji Desilva with ROTH Capital.

Congratulations on the shipments continuing great for WattUp. Yes, the PowerBridge. So let me ask this, the -- it seems like the shipments initially are through Wiliot, if I heard it kind of -- if I read between the lines there. Are there -- is that -- correct me, are there other partners that are also shipping trial products? I just want to know how many partners are helping seed the market already.

Suji, we're not giving the customer detail at this time.

Okay. That's fair enough. Maybe perhaps, then you could talk about the end markets that those initial PowerBridges are shipping into to understand where you're seeing initial traction and market-wise verticals.

Sure. As we have previously discussed, we are focused on 2 particular applications. One of them is RF tags and the second application is electronic shelf label. On the RF tag side, with Wiliot, in conjunction with their IoT Pixels, we are looking at a couple of markets that seem to be pretty interesting right now. One of them I actually mentioned on the call today and deals with asset tracking. There's a lot of interest on being able to track devices in markets such as industrial, retail as well as smart home and smart offices where pretty much customers are interested in being able to find different components that they have deployed across their premises. And being able to actually find those components in a timely manner, it's kind of interesting to see, especially in medical applications where -- from what we hear, it takes sometimes over a couple of hours to find equipment. And with this type of technology, you can find that equipment, especially in emergency situations quite fast.

There are some applications also in retail, whereas you have merchandise in the front of the store and that merchandise is consumed by the buyers that merchandise -- it's highlighted and it's actually communicated to the warehouse and the warehouse can actually bring that into the front. So those are 2 examples, I think, where we've seen asset tracking as a potential business right now.

Suji, on ESL, just to add to your question because I said there were 2 potential applications. On ESL, we're seeing also very complementary usage of ESL tags to basically complement our tags, where the RF tags can be in the front of the store or the premises or the warehouse and where you can have actually those RF tags indicating verbatim what the status of, let's say, inventories or warning people that things are going low or, in certain cases, in retail, actually updating coupon prices and merchandise pricing as people move through stores and things like that, okay?

Great. Yes, it sounds like really some good areas for opportunity for you guys. In these pilots, Cesar, are you shipping both the transmit base gateway as well as the end device kind of receive? Is it both ends that these pilots are taking products?

It's a combination of both. In the case of, let's say, Wiliot evaluation tags, those are extreme low vertically integrated devices from a technology point of view. Okay. So they're optimized to be extremely cheap and dedicated to retail and asset tracking as well as other RF tags applications. So in those potential scenarios, what you're seeing is just a combination of PowerBridges with those labels and potentially, in certain cases, ESL displays. There are other applications that also you could potentially share that environment with higher power devices that require the technology that we have or also potentially could use devices that we have also put together as part of our reference designs. This is not just semiconductor that we have, we have referenced designs also, and they tend to use our e-peas partner solution. So there's a combination. There's not a one-off percent.

Okay. Very helpful. Switching over to the financials perhaps. The revenue in the quarter, the $216,000, is that 100% product revenue? Or are there still nonproduct elements in terms of pilot product?

There's a mix, Suji.

Okay. There is a mix. Okay. And then I know the COGS are high here because you're at low volumes and initial kind of shipments. What are the target gross margins you would foresee as you get to a more volume ramp, just to understand where this can go.

Definitely, we're looking to ramp that number down. I mean we're not targeting exact numbers at this time on the call. But definitely, with volume, we can bring the number down.

Okay. That's very helpful. And then lastly, on the quarter, I know you completed the ATM here. Can you talk about what the cash burn was in the first quarter? And if you'll be looking to, I guess, set up another ATM or kind of other funding vehicles or whether you feel like you have good coverage for the near term.

Okay. Well, actually, we mentioned we've raised $27 million last quarter. So we haven't actually finished the ATM. (inaudible) $7 million left on the ATM, and that's still just up to our own timing.

Okay. No, I heard you said you completed it, but I guess you hadn't completed the ATM. You just -- $7 million left, got it. And then what was the cash burn in the quarter -- for the first quarter?

Overall, about $6.3 million.

Okay. Congrats on the progress.

This concludes our question-and-answer session. I would like to turn the conference back over to Cesar Johnston for any closing remarks.

As previously stated, we would like to thank our shareholders and stakeholders for their support and, most important, our partners that allow us to extend our reach and make our products well known. We are working hard here to make Energous the solution for IoT wireless power networks, and we will be updating all of you as we move forward and make progress. This has been a very important quarter for us. We announced our first product in history, and we are seeing today as we move forward the growth of wireless power networks, and this is a very important year. So thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.