Q1 2020 Earnings Call

Good day and welcome to the Energy Corporation first quarter 2020 financial results Conference call. All participants will be in listen only mode should you need assistance clean signal constant specialists by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions to ask a question you May press starts in one on your telephone keypad to withdraw your question. Please press store then too.

Please note. This event is being recorded and I'd like to turn the conference ever to Mike Bishop energies Investor Relations. Please go ahead.

Making Jason welcome everyone.

Before we begin I would like to remind participants in during today's call. The company will make forward looking statements.

These statements whether in prepared remarks or during the couponing session are subject to inherent risks and uncertainties that are detailed into companies filings with the securities and Exchange Commission.

Except as otherwise required bisexual securities laws.

Disclaimers any obligation or undertaking to publicly really updates or revisions to the forward looking statements contain here in her elsewhere.

Changes and expectations with regard to those events condition and circumstance.

Also please note that during this call and are just we'll be discussing non get financial measures as defined by F.C.C. regulation G.

Reconciliations of these <unk> funded financial measures to the most directly comparable gap measures I included in today's press release, which is posted on the company's website.

Now I would like to turn the colleges Deaver zone C.E.O. that are just please go at Steve.

Thanks, Mike.

And welcome to the enter just first quarter 2020 conference call.

Clearly these are challenging times for everyone.

As our sincere hope that all of you in attendance today, along with your family's remain safe and secure from the virus.

Yeah today.

I would cover our we see certification and the what up power <unk> developer kit announcements and provide an operational overview of the business, including the impact of the global pandemic on energy.

Brian's Iretta are CFPO, who is joining us today will provide a financial update.

Following which we will open to call to question.

I would like to begin with comments on the announcement two weeks ago regarding F.C.C. certification of a completely new groundbreaking what up mid field transmitter technology.

That's the company's inception.

The overwhelming differentiator of the enter just technology has been its ability to support both contact based charging as well as charging at a distance.

We chose to focus on contact they charging first because we believe that represented the fastest path.

Both achieving globally, the regulatory certifications required to successfully launched a completely new technology.

And.

Since the contest contact face charging paradigm was already established.

It would be easier to foster the customer partnerships necessary to integrate the technology into consumer and industrial applications.

We took this path with the clear understanding that in order to develop a true what out based wireless power 2.0 ecosystem.

Both contact and distinct charges capabilities were required.

While enter just entered the wireless charging market focusing on contact face application.

The ultimate goal for the company has always been charging at a distance.

This is why we are excited by the recent certification from the F.C.C. and today's what up power hub developer Kid announcement that extends from it.

Both are important as they demonstrate significant advancements in our core technology and extend our leadership in the wireless power to point the whole roll up.

Given the response, we have received from prospective customers, we believe that technology and the power hub will have positive implication for enriches and all a bit stakeholders.

On December 26, 2017, and or just now the first F.C.C. part 18 power at a distance certification.

What else tech that used being farming techniques to focus energy in three dimensional space.

This technology was designed to send higher levels of power at distances up to 15 feet to charge larger consumer devices like smartphone large headsets desktop accessories and other power hungry devices.

Since then.

True continued worked with customers and global regulatory agency.

Came clear that the most expeditious path to obtain global regulatory certification coupled with the strongest customer support for initial commercialization of R.S. charging at a distance.

Acquired a smaller less complex and lower cost transmitter that could be easily and cost effectively integrate it into products such as smart speakers.

Gaming console clock radios tabletop lamp and similar size product.

These transmitters are targeted at charging smaller receivers like Irebal <unk>.

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Smart glasses gained controllers and various sensors that benefit from the convenience.

Wireless charging.

The enter just development and regulatory team took on the challenge and the end result is the new technology that was certified by the F.C.C.

The key to the F.C.C. certification is the fact that it's just not using beam forming.

<unk> charging zone 30 centimeters from the transmitter in the design that meets all of the required F.C.C. part 18 health and safety standards.

The core of the water power develop power hub developer kit is based on the F.D.C. certified technology and offers our partners are very scale level low cost.

Small transmitter that features 815 to 17 centimeter charging villains in a simple to integrate form factor.

Of course.

<unk> commercialized product emanating from this developer kit as this industry standard practice will need to undergo individual regulatory certification.

The interest into what out power developer kit, which is now ready for customer evaluation has been significant.

We are encouraged as there appears to be a number of opportunities for the developer kit and the wireless power since application, resulting in a number of customer engagements already underway.

We believe we will see the first regional product launches to consumers distance transmitters based on our water power technology in fiscal 2021.

Behind the what up power hub simplicity is the deployment of a great deal of innovation and invention, which has been appropriately protected by it recently filed patent, which we believe ads barriers to competition as well as increasing the core.

The L.C.C. and the resulting power up developer kit are synergistic with our beam forming platform.

Does enter just distance charging portfolio now features beam forming for higher power longer distances out to fit a 15 feet and non beam forming technology for lower power shorter distance application.

Despite the disruption and the delay due to the cold at 19 pandemic there have been another or other significant positive announcements made sense to last quarterly call, including the American equity 28 guerrilla announcement of a new customer engagement that is accelerating towards first customer shipments expected.

For the end of the year and finally, the Frost and Sullivan Award recognizing the leadership position the better just in the wireless jogging to point overall rollout.

Regarding the impact of the global pandemic on our business certainly there has been and we expect there will continue to be Edwin.

From the visibility we now have ended the next few quarters.

The pandemic represents the delay.

But not a roadblock to a business or a deterioration in the scope of the opportunity.

As with many companies we acted quickly at the onset of the pandemic to bolster our employees work from home capability.

Our operations have remained for the most part functional.

However, the majority of our customers and all of our O.D.M. manufacturing facility began shutting down for scaling back in the first quarter and <unk> just starting to return to work.

The shutdowns has had a twofold effect.

First with no way of putting our engineers on site at our customers labs and offices the movement of customer opportunities progressing through the various stages of product development and product launch slot cycle has slow and second shift sales and resulting revenue has been delayed as customers who were planning to move.

What up unable products into production and we're expecting to be buying enter just chips through our partner dialogue have been stall until manufacturing ramps back up.

A case and pull up.

The wireless Lee charge Primo W. hearing aid from new sound, which represents the first Bluetooth enabled what up implementation without control was originally scheduled to shark start shipping to consumers in April.

When the global pandemic hit the original schedule was negatively impacted by several months <unk>.

Fortunately as a C.E.O. up new sound, David you announced on linked in on Monday.

The Primo W. now watch is now back on track and expected to be available to consumers in the next few months.

For more information on new sound and the what up enabled Primo W. lunch. Please refer to the enter just website.

While engagements and revenue have been delayed we have not seen any weakening in our interactions with potential customers in fact, largely due to the interest that excitement generated by the water power. The total number of actual customer engagement has actually increased in the last few weeks.

We are also cracking more than 10 customers that are in various stages of development with a goal of shipping what up enabled products to consumers before the end of this year.

However, given the current uncertainties, we cannot provide any forecast as to how many of these customers will go into production before the end of the current year.

The important take away is at the assessment reflect delays in our business, but not a decline in sales interest or opportunity.

As indicated in an earlier press release, we went through our revenue guidance on April 20th and even know businesses are starting to return to work. There is still a considerable amount of both short term and long term uncertainty, which precludes us from offering any revenue guidance at this time.

We will update our view on revenue as the picture become clear in future conference call.

In summary.

<unk> well options caused by the pandemic our customer final remains robot.

However, like most companies we are dealing with a very fluid and volatile business environment, where the situation can change quickly.

Nonetheless, we believe the business is fairly ferret sees me bearing fairly well.

Our engineering and customer acquisition teens remain intact and I've actually been expand it to meet the increased customer interest on the side note I want to extend the Hardy. Thank you to all of our employees, who up maintain their focus flexibility and continued commitment to these challenging time.

Our partnership with dialog remain salad and expanding into new areas of customer engagement.

While we are realistic the dairy just exist a great deal of uncertainty we are managing all the factors, we can control and attempting to react quickly to new developments as labour arise.

With the momentum of the contact power business building and the introduction of the <unk> at a distance what up power coupled with the resulting customer interest. We believe enter just will emerge from the current crisis in a strong position to extend its leadership role and drive the wireless charging power.

Two point <unk>.

Brian allow certain to call over to you.

Thanks to before I begin I'd like to remind everyone to their clothes market today issued a press release announcing our financial results for the first fiscal quarter of 2020 ended March 31st.

In the first quarter, we recognize $61000 in revenue compared to $47000 in the prior quarter and $67000 in the same quarters last year.

<unk>. This year included engineering services perform for dialogue and the accompanying cost would be service is shown as a separate line and R.P.N.L. get <unk>.

Costs associated with this or internal engineering costs moved out of R. and D. operating expense and tied to the project involving the development of new technologies and it was expected and is expected to wrap up at the end of June.

Echoing Steve's earlier discussion introduction of power offers existing and potential partners.

Product offering path contracted distance charging although this current pandemic limits, our ability to turn customer activities and do a forecast. We can share that we are encouraged by two expanded opportunities and so now some of it's brought and is expected to bring those are fun with new and current customers moving through design phases continues to develop.

Is there a business.

Visibility improves and macro condition stabilized only badly began to position to offer more tangible but for the balance of 2020.

On the expense side total gap spend including the services cost by just mention for the first quarter tool peak like 7 million.

Approximately point 8 million lower than not than 9.5 million, a total expensive <unk> quarter, and approximately 2.5 million lower than the same period last year.

Proven expenses is tied to lower headcount costs, including start compensation of lower overall engineering costs, reflecting the maturing technology portfolio and its impact on reducing chip tape up in development expenses are they related r. and d. expenses.

However, we do remain and already focus company.

80% of our total gaps then tied to this area.

We also expected our total gas expense trend in this range for the balance of the year and should remain below last fiscal years expense.

Where did you want it was 52 heads compared to 65 in the same quarter last year same court same quarter last year and expect that headcount will increase slightly to approximately 55 head since we moved through this year.

Or net loss to the first quarter and a gap basis was approximately 8.6 million for 25% loss for sure on approximately 34.2 million weighted average shares outstanding.

This compares to one 9.4 million dollar that last part a quarter for 29% loss for sure and other 11 million dollar net loss for 39% loss per share into one of last year.

Let me know switch over two and knowing that you have the numbers for the first quarter, because we believe adjusted or nine gap you, but provides a useful comparison for investors, especially court company or stage when used together with gap information.

Excluding 2.4 million of start compensation of appreciation for my total Q1 gap expensive 8.7 billion.

Non gap operating expenses totaling approximately 6.3 million down approximately half a million compared to the prior quarter last year priors border last year and 1.4 million then Q1 of last year.

Net revenues are adjusted EBITDA or non gap operating loss for Q1, this $6.3 million approximately point 5 million better than the prior quarter at 1.4 million better than Q. ones last year.

Nongaap engineering expensive decreased by approximately one millionth <unk> quarter to 3.4 million.

It was 1.6 million lower than the sacred last year.

Decreases mainly attributed to lowered shift development and headcount costs third party shift related costs that I highlighted in the gap section.

Gap S.G.N.A. increased over the counter quoted by approximately point 5 million, reflecting higher public company costs, which typically peak in the first quarter, but now also reflecting higher costs related to socks for for start up certification and increasing director and officer insurance costs for public companies, which is more than quadrupled for us over the last five years.

Compared to the same period last year, Q1 history, and <unk> <unk> Q1, S. today costs to approximate point 1 million higher in part due to the increasing costs associated with being a public company because I just highlighted.

We ended the quarter with approximately 20 million a cash we believe the A.T.M. put in place last October including in the current quarter has provided sufficient low cost cap open to get a working capital beeps.

In other than the least liabilities tied to our facilities, we remain get free.

Clothes, we expect a gap and non got cash off during expensive to the pool year to try and lower than the last fiscal year.

And despite the uncertainty certainty created by Coke and we also expect to announce additional product the commercial partnerships and becoming much.

What's that Homo turn it back to sleep.

Thanks, Brian Operator will now take questions.

Okay to ask a question do you mean, Chris store, then one when you're Touchtone phone for using the speaker phone. Please pick up your handset before pressing the keys to withdraw your question. Please press stores into.

The first question comes from Suji to silver from Ross Capital. Please go ahead.

Close even a little Brian congratulations on the execution challenging environment, certainly and the accomplishments effects just a housekeeping question Brian for the the service revenue cost is that's something we should consider something that costs tickets sold against remedy that impacts of gross margin numbers that below the line and it wasn't clear whether that cautious going to continue and grow.

Or whether it's a kind of a one time cost.

Yeah. It last question your last part first it's it's a one time cost of it that that project will conclude in June.

You need project working together with the dialogue, which was considered the related party. We don't control you know actual property. So the presentation is shown to get from statement is reflects that so it's not it's not a an ongoing cost or certainly not a third party cost. It's simply just move the cost about a bar dee.

And segregated so again second quarter, we should we should conclude that project can probably be.

I'll watch must be about.

Understood, Okay, and then going onto living at the products now that I get kind of breaking out kind of at a distance kind of contact and then kind of close I guess I'd like to know maybe Steven if if these three products requires separate regulatory body kind of processes or whether they covered together in in single efforts across country.

That kind of color would help as a starting point.

So I just wanted to be clear when we talk about.

The announcements today, we're talking about the what excuse me the power hopped developer kit, which is a subset of the F.C.C. certification. So it's the same technology. So it is it is one essential product. If you will we have contact.

And we have the the the short distance technology, and then we have the longer distance beam forming technology.

Any any of it used to be any product that emerges from these developments will have to go through its own regulatory certification process in order to.

In in order to before I should say before it can be a soul to the public. So every product has to go through a certification process. These are three separate so global regulatory efforts.

The idea.

Sorry go ahead.

No that was what I was looking for and if you had anything to add that that'd be great.

Okay. So what we as we said that go ahead.

Yeah.

So I guess given that they are separate and I I just want understand the ticket me because the new product I guess, the the one that no longer needs to be forming for the short distance in terms of cost and form factor Steven <unk>. What are what are the kind of now the the benefits for the customers that they can perhaps go to market faster better.

Well as I said, we we learned a lot in in talking with customers over the last couple of years. We also understand the global regulatory environment, very very well exceedingly well and it's a very conservative environment.

And so based on these two factors we made the determination best the best path.

War essentially launching at a distance technology would be in a smaller transmitter less expensive much easier in simpler to integrate and also certainly as a as a as a faster path on a global regulatory track than I am much more.

Complex device.

The the strategy also plays well with our key market efforts so.

That we're currently focused on with our contacts based product as you know with these markets were targeting hero bowls, and Wearables and smart glasses, Hmm and one of the key element is that those devices.

<unk> shipping with contact base transmitters will also be compatible with the distance charger. So we expect to come to market next year. So that's a very important consideration and as I said are the customer interest is proven to be very very strong and it largely because.

It's less expensive, it's a lot easier there's a whole plethora of devices that can use the technology and it. It just represents the fastest way to to really bring distance the charging to fruition.

Okay. That's very helpful. It sounds like you have a clear path for the customers to integrate the technology and and seamlessly and then maybe last thing on the hearing aid market I I'd heard from except for other computer companies there that that could be a challenging market because of obviously the <unk> issues for the elderly I'm wondering if there's a geographic sort of element to it with your customer.

You sound or whether you have confidence in that market ramping or whether they can be perhaps be ahead, when they're there'll be helpful. Since that seems like one of the first markets coming out the gate for you guys.

Well again, we we really can't speak to how how this is all going to play out we have very limited visibility our engagements continue to move forward and the hearing aid and P.S.A.P. markets do represent a significant opportunity for us but.

These companies are just starting to get that back to work now and we'll have to see how this this all plays out our our visibility is really limited to you know 30 60 days out right now.

That's fair enough I'll jump back in the queue. Thanks for the color guys.

Mmm.

The next question comes from John Hickman from Landenburg. Please go ahead.

She thanks for taking my question.

I was wondering if you could.

But feature cash.

That get you.

You know through this period and for next year when revenue search room for you.

Yeah, Hi, John right.

Yeah, Hi, John this is.

How about it in my my script to be our our our expenses, we have with great visibility to worth it to our expenses I believe.

And we expected the trend below last year.

So I I think given the success we've got into B.A.T.M.

We we want the the best for shareholders in stakeholders like and on a goal is completely to squeeze operation operational execution. So that we don't have to continually departs over to the market.

So I think right now we are our cash needs a bit Mac.

And we'll continue to take the most prudent course of action when it comes to having to raise additional capital.

Okay.

<unk> can you talk a little bit about what's going on regulatory wife and.

And the Asian markets.

Certainly.

So.

Where we were very pleased with the the Japanese certification the Japanese regulatory agency is is highly regarded and a well known as a as a very very thorough.

Agency, and so overcoming that hurdle really kind of set.

Tone for the follow on approval.

We believe that there are three approvals are certifications that we require now in order to complete the the full global.

Regulatory capability or or certification process.

And those three are Korea.

China and India.

Unfortunately, when this pandemic broke.

Those agencies for some of the first to close down.

And.

The visibility that we have now is is very limited we understand that they are starting to open up and we engage in China.

Less so in India, excuse me and in Korea, and not so in India as we understand.

Our regulatory team continues to believe that we have passed the certification in all three jurisdiction.

The the thing we can't answer now is just how soon these agencies will be back.

Operating at full speed, how soon they'll work through whatever backlog was created as part of the pandemic.

Of course, ultimately how soon we can complete the certification process.

I'm sure there's going to be a delay an impact we have no idea as to the magnitude yet.

But as I said, we remain optimistic that the issue is a question of of wind and not f. and that once these agencies get back and operational will fully engage again.

Okay. Thanks.

At this point I will turn the cold back to Mr Zone for closing remarks.

Thank you everyone for attending today's call, we sincerely hope that you along with all of our stakeholders and partners remain safe as we work our way through this pandemic together.

Also thanks to our employees safety and wellbeing will continue to be our top priority and who have shown such tremendous commitment and dedication throughout the path through few months.

Finally.

And let me say and I believe I speak for everyone on the and enter just team.

We fully expect to emerge from the pandemic in a position of strength.

As we continue to execute on our top priorities of increasing the numbers of customers shipping what up enabled products to consumers.

Steadily increasing revenues.

Completing global regulatory certification as well as launching the first charging at a distance transmitters as quickly as possible.

We will look forward to report progress on all four of these schools at the next conference call. Thank you Goodbye.

The conferences no concluded thank you for attending today's presentation.

Disconnect.

Yeah.

Yeah.

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