Q4 2020 Energous Corp Earnings Call
Good day and welcome to the other just Corp fourth quarter 2020 financial results Conference call.
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I would now like to turn the conference over to Mike Bishop with the company's Investor Relations. Please go ahead Sir.
Thank you Rocco 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 forward looking 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.
Sept as otherwise required by federal Securities laws and are just 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 and there just 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 would like to turn the call over to Steve or zone CEO of inter just go.
Steve.
Thanks, Mike Good afternoon, everyone and welcome to the energy fourth quarter Conference call.
Joining me today is Brian Sorretto, our senior Vice President and Chief Financial Officer.
Our agenda today includes an overview of our fourth quarter and full year performance.
A review of our growth strategies upcoming milestone milestones, we are driving towards and our future outlook.
We believe 2020 was a momentum building year for the company given the customer validation progress we achieved in contacting technology and the introduction of our power hub distance technology.
Fight the challenges of the pandemic, which has had a delaying impact on many of our customer engagements and resulting revenues.
The opportunity base for the Wattup technology continues to expand.
Specially in distance technology.
In terms of momentum in the fourth quarter, we announced that go plays method posture tracking tracker received FCC certification.
This announcement is important for two reasons first it serves as additional validation that the Wattup technology is gaining acceptance as the number of companies either shipping to end users are in the final stages of preparing to do so continues to increase and expand in markets served.
Second the announcement marks and are just as formal entry into the large and rapidly expanding market for wirelessly charged sensors and trackers initially charged by contact transmitters and expect it to evolve to include distance transmitters.
Moving on to the hills of the Gulf Clay announcement, we announced that the American Equus.
These trials, if its equine health tracking sensor and barring any delays they are preparing to go to market, possibly as early as this quarter.
Go play in American earthquake products designed I'll highlight two key advantages of the Wattup technology.
Namely the ability to hermetically seal of receiving device, thereby rendering it watertight and the ability to charge multiple receiving devices simultaneously with a single transmitter.
If you've been following the consumer electronics industry, you will know the charging of multiple devices simultaneously on a single Matt or with a single transmitter has been a major challenge for history for the industry, including many well known CE company in particular, they have struggled attempting to implement multi device charging functionality.
Utilizing first generation coil based technology.
Our RF technology solves these problems and can simultaneously charge multiple devices as well as different types of configuration and charging angles, all providing the user with freedom of placement.
Keep in mind that many of the contact charging applications. We are talking about today, we will also benefit from the ability to be charge wirelessly at a distance as the number of a number of our partners and customers are actively engaged in bringing over the air charging transmitters to the market.
Moving on to the horrible segment, we now have two hearing aid customers with product either available to end users are expected to be available soon possibly as early as the current quarter. The first to market was the delight PSA Pea released in common with our Korean partner SK Telesis, which we believe will be followed by new.
Found in the release of their Primo M hearing aid what the true drop in charge experience.
That is a user simply needs to place their hearing AIDS onto the charger in the charger will identify the placement of these devices as well as begin to charge. The batteries battery levels are then monitored by the charge of providing the appropriate charging levels based on information received from the hearing AIDS internal power management technology.
And are just also announced that air technique has selected the Wattup technology for a new model of hearing aid called the tie X a special significance to it and or just is that the initial tie X products will be launched in Europe.
The air technique hearing aid will likely be the first wattup enabled device on the market in Europe, a milestone we're excited to achieve.
We continue to see momentum in hearing AIDS, given the Wattup technologies ability to support full product hearing aid models, including in the ear devices with unique shapes with pose coupling problem for first generation coil based charging options.
Further a special interest in hearing aid manufacturers is the ability of the Wattup transmitter technology to support one to many giving hearing a designers and engineers the ability to use a common charging transmitter platform across a broad number of product skus.
We are particularly pleased in the strong interest in our charging technology continues to expand across a variety of vertical markets beyond sensors and hearing AIDS I would now like to provide some updates on customers announced in 2020.
And it just is working with companies like Zentaris, who are exploring a broad spectrum of potential military application solutions, including the soldier of the future.
We believe that there will be broad federal and military sector interest and opportunity in second generation W. P. T solutions utilizing wattup <unk> unique capability to support excuse me to support both contact and distance charging and in response, we are dedicating resources to focus on developing our mark.
Business.
We are already seeing starting to see the benefits of this investment, which we believe could result in the military and federal applications, becoming a meaningful percentage of our venture.
Revenues.
We are still in the development stages with crap Hal the top tier battery manufacturer based in China.
A great battery charging technology into a single easy to implement cost effective solution for a broad spectrum of applications.
How has significant market share in important target markets, including hearing AIDS medical devices and sensors, we expect to report additional progress with this partner and future quarterly calls.
On a side note earlier today, we announced our second battery partnership with thin film to enable ultra thin wirelessly charged solutions for applications, such as horrible wearables and connected sensors designers of these types of devices space constraints around form factor many need to be waterproof.
Highly durable partyless are very thin, adding challenges to their design thin film is a leader in solid state lithium micro battery technology and with our complementary RF based wireless charging technology together, we are actively working to promote solutions for today's small form factor applications that we believe we will.
Enable some truly disruptive wearable designs in them.
Moving on our collaboration with Posco in conjunction with the partnership out per some feedbacks.
And SK Telesis is still progressing as you will recall last quarter, we successfully completed the field trial of a wattup enabled ultra wide band industrial tracking device.
We believe this opportunity will accelerate as soon as Korean regulatory certification has been formalized.
Cost is always a major consideration for the introduction of new consumer technology.
And just as important to fortunate to have the support of our Prime ODM, who has developed a common transmitter platform for Wattup enabled contract receivers, we have been able to direct our number of customers and prospects in this direction, where they can take advantage of economies of scale reduce risk and lower startup costs as the.
The Wattup technology continues to expand adoption and mature we see both the number and role of Odm's expanding as we shift more of our customer inner ration requirements do them, thereby lessening the demands on enter just internal support and development resources.
Now for an update on our regulatory efforts that remained three important markets, where certification of Wattup technology is pending China Korea and India.
Our goal is to have the path to certification in these three markets complete before the end of this year. However, we will continue to caution our investors that we are dealing with government agencies. So there can be no certainty in terms of timelines.
We believe India will likely be first followed by Korea, and China. The situation with China may accelerate as we continue to increase the number of customers in this important market as well as the possible impact of expected improvements in the trade relationship between the U S and China by the New administration.
We announced FCC regulatory certification of the power hub expanding the distance charging zone out two one meter.
This announcement has had major implications, both tactical and strategic for <unk>.
As most of our investors are aware <unk> was the first company to complete an FCC part 18 certification for power at a distance back in December of 2017, which essentially allows for greater power than one watt to be transmitted over the air as long as predefined health and safety standards are met.
To achieve this industry, leading milestone our engineering team developed a multi antenna transmitter that concentrates power in a small three dimensional space the third.
Bifurcation represented a validation of our technology and was an industry breakthrough for distance based W. P T.
However in response to customers' concern about size cost and complexity of implementing beam forming technology.
Our engineering and regulatory teams combined their effort and developed a completely new thing.
Single antenna non beam, forming technology that is inexpensive.
Easier to implement all in a small form factor, which meets the FCC mandated health and safety standards as evidenced by the September announcement.
<unk> been farming continues to be an active technology that may be used in future applications. Our focus has shifted to the power hub, which is experiencing strong interest in creating a workspace or desktop charging environment for things like wireless keyboards.
Nice Bluetooth earbuds, essentially anything battery powered that sits on the desk. The interest has been far beyond our expectations I will address this issue in a moment, but suffice it to say we are rapidly realigning our resources to support the interest in power hub and believe it will help accelerate the.
<unk> isolation of both the desktop as well as far field distance applications.
Many of our investors have asked about the dialog relationship, especially in light of the recent announcement from Renaissance to acquire dialogue to be clear dialogue continues to be our go to market partner.
We believe the accelerated traction we are seeing in the distance market is expected to be appealing to both dialogue and ran assists. As this is where <unk> is uniquely differentiated and where the ultimate value creation and major revenues for the company reside.
Though the existent, although the acquisition may take months to complete and it's very early in the process. At this time, we are not aware of any decisions that may have an impact on our relationship.
During the fourth quarter, we completed that at the market equity offering or ATM, Brian will provide additional details, but our balance sheet is the strongest it has ever been and we will set a solid foundation for us to grow our financial fundamentals, Brian I'll now turn the call over to you.
Thanks, Steve before I get started we issued a press release at close of market announcing our financial results for fiscal 2020, along with two other customer related announcements.
Before I get into the discussion of our financial results for fiscal 'twenty 'twenty. We are seeing what we believe are encouraging signs from engagements that will lead to commercialization opportunities.
Some of these engagements have been underway for several quarters as these customers want to pivot to wireless charging two <unk> and existing products at others now independently running their own internal engineering projects to possibly integrate our technology into yet unreleased products, where the need for wireless charging, particularly at distance is key to the functionality of the product in.
<unk> and as some of you may have seen three major consumer electronic companies in the last several weeks announced RF based charging concepts. We continue to believe we are the technology leaders in this space, we understand the science behind it we've made key investments in proprietary technology in semiconductors.
We understand the regulatory issues and have built a formidable portfolio of intellectual property to support our expectations of continued commercial progress.
Recapping 2020, we recognized $327000 in revenue compared to 200000 to in 2019.
Revenue from the <unk> for the fourth quarter was $90000 compared to approximately 62000 in the third quarter at approximately 46000 in the same quarter last year.
Total expense for the year on a GAAP basis was $32 2 million.
$6 8 million and 17% below $39 million of total expense in fiscal 2019, the lower expense was primarily an engineering due to lower head count costs, including stock compensation and lower R&D and chip development costs total.
Total expense for the fourth quarter was essentially flat to the third quarter and $1 9 million lower than total GAAP expense in the fourth quarter of last year.
Net loss on a GAAP basis for fiscal 2020 was $31 8 million approximately $6 6 million lower than $38 4 million and net of net loss in 2019. This.
This translated to a net loss per share of <unk> 76.
$41 7 million weighted average shares.
Standing compared to $1 27 loss per share in the prior year.
Net loss for Q4 was $7 5 million or <unk> 15 per share loss slightly better than the $7 6 million loss in the third quarter and $1 9 million lower compared to the loss of $9 4 million or <unk> 29 per share loss in the fourth quarter of last year.
I would like to now review, our 2020 results on a non-GAAP basis, as we believe that adjusted or non-GAAP EBITDA.
Provides a helpful tool to investors when used in combination with GAAP information.
Excluding noncash charges for depreciation and stock compensation expense of approximately $8 2 million in fiscal 2020 total net non-GAAP operating expense was approximately 24 million $3 6 million and approximately 13% lower compared to $27 6 million of net non-GAAP operating.
<unk> expense in 2019.
This is largely due to lower R&D in chip development in fiscal 2020 versus 2019 offset slightly by higher spending in SG&A as we increase sales engineering talent in response to our increasing customer engagements. Despite COVID-19.
Spending in R&D operations and regulatory represents just over 50 454 per cent of our non-GAAP cost structure down from 62% in 2019.
For the fourth quarter non-GAAP expense declined year over year by approximately <unk> 9 million to $5 9 million from $6 8 million of total non-GAAP expense in the same quarter last year compared to the prior third quarter non-GAAP expense increased by approximately <unk> 3 million from $5 6 million.
We ended the year with 56 employees compared to 51 at the end of 2019 and after two years of reduced spending we could see a modest increase of approximately 10% and operating expenses in fiscal 2021, as we engage new customers on power hub and other distance based wattup charging solutions.
Net loss for 2020 on a non-GAAP basis was approximately $23 6 million or <unk> 57 per share loss. This was $3 7 million and 14% lower than the $27 4 million or <unk> 90 per share non-GAAP net loss incurred in 2019 for.
For the fourth quarter, our non-GAAP net loss was $5 8 million or <unk> 12 per share approximately <unk> 3 million higher than the $5 5 million or <unk> 13 per share last quarter.
Non-GAAP net loss from the third quarter.
Net non-GAAP net loss from the third quarter, approximately <unk> 9 million or 14% lower than the $6 8 million or 21 share non-GAAP net loss per share in the fourth quarter of 2019.
During the fourth quarter 2020, we completed our at the market offering raising our cash balance to $50 7 million at the end of fiscal 2020.
We remain debt free with the strongest balance sheet in the history of the company I will now turn the call back to Steve.
Thank you Brian.
A few comments before I turn the call over to the operator for questions.
As I noted earlier, the accelerated development and interest in the Wattup power hub charging over the air transmitter coupled with regulatory approval has had a profound impact on the company.
To be clear.
Contact based technology continues to be an important element of our long term vision as we believe a true ecosystem will require both contact and distance wireless charging further contact wireless charging represents the near term path to revenue and customer adoption, both of which are very <unk>.
Horton to the company. Finally, there are significant applications that will always be contact base, where the element of distance will never be considered a migration path.
Having said this the Wattup technology is unique in that it supports both contact and distance. However distance has always been the real differentiator for energy.
This has been the case since the company was first brought to public in 2014, one of the major benefits of the power hub technology is that it can be extended from the desktop to encompass solutions for emerging far afield harvesting applications continuing with this theme today's partnership announced.
With with EPS is a special significance.
<unk> is a leading provider of ultra low power controllers for harvesting applications, including patient tracking and monitors asset tracking livestock trackers retail displays automated automotive and security sensors health and safety sensors and home automation day.
Name a few.
As these devices continue to grow and functionality.
So do their power requirements to the point, where they can no longer be supported by ambient harvesting or super caps, they need to be actively charged the <unk> distance technology is ideally suited for these applications and the EPS collaboration partnership represents the first step into what.
We believe will be a major market opportunities to transmit wireless power extended distances of five meters and beyond.
<unk>. The Wattup technology is currently capable of doing within all health and regulatory standards. The point being is that energy is now actively engaged with actual product in three markets.
Contact desktop with charging field feels out to three meters and far field harvesting out to five meters and beyond give.
Given the differentiation the power hub provides and the increase in inbound interesting interest we are seeing in distance charging the majority of our core R&D efforts are now focused on distance technology shifting the energy engineering efforts surrounding the more mature contact allergy over to our applications engineering.
Team do this and you can expect to hear some important exciting announcements in the coming months regarding customer power hub wins for wireless power distance applications as Brian noted earlier, we expect to modestly increase our expenses. This year over 2020, as we add head count to accelerate development.
To meet the demand for distance technology, and the introduction of one possibly two new chips to extend our technological lead in W. P T.
To conclude.
When we first launched <unk> in March of 2014 with a vision.
And early prototypes and a few employees.
We are excited by the fundamental paradigm shift we could drive in the daily changing morass of cables extension cords and hunting for power outlets.
As a new startup we expect it to be challenged but we believe our approach to wireless had the potential for adoption and REIT comparable to what Wifi has achieved a day.
We expected this would be hard and.
And we were not disappointed.
We have persevered steadily overcoming the many obstacles we have faced and today we are entering 2021.
Energized by our technical achievements, the many regulatory approvals received and by our growing customer engagement and we are enthusiastic about how they are building on our vision and deploying our products together with our partners employees and stakeholders. We are working hard and we are committed to build a bit.
That is sustainable profitable and a visionary leader in global W. P T.
Operator, we will now take questions.
Thank you Sir we will now begin the question and answer session.
Asking question dealer per start with one on a touchtone phone to withdraw your question. Please press Star then two.
Today's first question comes from <unk> with Roth Capital. Please go ahead.
Hi, Steve Hi, Brian Thanks for the color here.
Hum.
The projects that had been delayed by the the the macro the Covid can you talk about whether those projects continue to be pushed out or weather.
Towards the back end of that sort of project pushout impact from the macro on Covid environment.
Yeah, I think that Covid has certainly had had an impact but I think it's becoming less of an issue.
Hey.
The reality is also that that we're experiencing component problems I mean, they are the semiconductor issue is not confined to automotive alone. It's a it's a broad based problem in some of our customers have experienced significant.
Component problems and we've also had issues in in in ramping up from the DVT pvt, and moving into them.
Pre production with the typical production problems you would expect that are associated.
She added with yields and first time builds and the fact that we could not be on site and we had to resolve these issues at a distance has had an impact that we see that a lesson in but we've also taken steps. We've tried to increase the number of of team members that are out in in field locations in China and Europe.
As an example, and again, we're starting to see the benefits of that so I think it's had an effect I think we're on the downward side of that and I think that again, you can expect to see a continuing number of wattup enabled products coming to market throughout 2021.
That's great Steve and then there's the desktop opportunity from the power up sounds exciting certainly can you give us a sense of the order of magnitude of how many engagements you have or opportunities you have here and the diversity of those and then also whats your content for desktops or a transmitter versus an end kind of receiver device. If you will just under.
Standard the relative size of those two.
So.
The there's two elements here one is interest and the other is focus.
Our our current customer interest Q is well over 200 opportunities and we continue to massage and work these opportunities, but then the key especially for US is focus and really.
Understanding which of these opportunities have the quickest path to full commercialization.
We're done doing experiments and the investigations into innovation, we understand this business very very well.
I understand you know, what's doable today, especially in the regulatory environment and so focus is a key consideration into that and are focused customers number about 20.
And they are a combination of of distance and and contact which as I mentioned earlier contact continues to be a an important part of our business and one where certainly in 2021 will be the major focus of.
Of our revenues and our customer adoption announcements.
He said that distance, it's really it's really exciting the work that our our engineering and our regulatory team did to bring down the size.
And the complexity and especially the cost.
In terms of integrating this device into a very small form factor that easily easily fits into a.
<unk> smart speaker easily fits in in the in the bezel of a monitor.
And can be easily integrated.
As I said, because we're talking about a single antenna.
A single power amplifier and a single control chip with all of the necessary software and hardware configurations pre configured so.
We've worked very hard to make it simple and I think that that hard work and good work is really going to pay off the other thing that we're very very excited about is that.
We're also seeing a lot of movement in the far field or harvesting arena. This market. It has it has quite a way to really mature, but there's there's just a lot going on there and as I mentioned earlier, what we're seeing is kind of the migration of that market in that.
You know there was early stage sensors and tracking devices that we're looking to use ambient Harvey.
Harvest being our our super caps because they are their power requirements were very very low and that was largely due to the fact that their functionality was very very limited, but what we're seeing is that functionality is really starting to ramp up and as you ramp up that functionality. So do your power requirements and they become ideally suited.
For the power hub and again keep in mind. This is the same technology to the desktop and so we have three viable commercial offerings in contact desktop and in far field, which is we're defining as as five meters and beyond active today and in truth Theres just no other <unk>.
PT company that can speak or even come close to those kinds of of <unk>.
Productivity and market opportunity.
And Steve that the relative content for a transmitter versus overseeing type device or Ken device just to understand the ratio there. So.
They are the content for a transmitter for the power hub as I said, one P. A one one.
One controller chip hardware and software in a single antenna and.
The receiver is Arthur standard receiver that we've been able to shrink down to.
Three mail by three mail it in size and so it is it is a very inexpensive bill of materials that goes into putting this technology together.
Okay, Great and then my last question on the I guess, the further distance opportunity multi meter distances is that limited to energy harvesting or should we think you are talking about other opportunities there.
And if so is that just because the amount of power you can transmit over that distance any color there would be helpful.
Certainly I think what we're talking about now again, it's always been.
The delta between what the technology is capable of and what the regulatory environment will support.
We are you know we.
Traded conclusively several years ago that we could charge a smartphone at 15 feet. We had UL documented independently and the technology today is fully capable of doing that and more however, the regulatory environment is just not there yet and that's why it's been very very.
<unk> to us and quite frankly, Thats why is it that some of the delays in terms of us really kind of reaching this inflection point.
We had the first really understand the technology and the differences in frequency and then you know you're noticing a lot of white noise today in different frequencies.
I will tell you that the difference in frequencies as material.
Higher in frequency the longer the distance that it impacts efficiency and impacts regulatory in a very very significant way but.
But we had to understand the technology and then we had to understand the regulatory environment and what was doable and what was not doable and then match that to customer opportunities and as I said I think going into this year, we feel really confident and really enthusiastic about the fact that all three of those vectors have have come.
And have and have achieved a link.
Link linkage and to that end I as I said I think that our business is starting to accelerate.
So again I know, it's a long elongated answer I think initially we're talking about a mill of watts of power.
At distances and I think as just as you've seen in Wi Fi over a period of time, where the regulatory environments are relaxed, where the health and safety restrictions become better understood. You'll see the same things that will happen with the with the regulatory environment and easing of.
Power restrictions I think also the consumer and industry has a lot to do with that the more demand.
More requirements the more of this becomes a more a bigger issue.
More of the regulatory agencies are going to pay attention to it. So it's a it's miller, what's now certainly the technology has far more capability and over time, we think that that will will increase.
From relatively very low power to certainly opportunities that the support much higher power.
Okay helpful color. Thank you Stephen.
And ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to the management team for any final remarks.
Well. Thank you. Thank you for listening to our fourth quarter 2020 update we plan to participate in the 30 <unk> annual Roth Capital Partners Conference being held virtually on March 15th to the 17th. Please continue to monitor and are just dot com for additional updates on the company and exciting announce.
<unk> on the future of <unk> and W. P T. Good afternoon.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.