Q2 2021 Energous Corp Earnings Call
Okay.
Good day and welcome to the Energen.
Second quarter 2021 financial results conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question you.
On the press Star then 1 on your telephone keypad to withdraw your question. Please press Star then 2.
Note. This event is being recorded I would now like to turn the conference over to Mike Bishop with the company's Investor Relations. Please go ahead.
Thank you Andrew and welcome everyone.
Before.
Yes, 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 on the company's filings with the securities and Exchange Commission.
Except as otherwise required by federal Securities laws.
And then 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 are just will be discussing non-GAAP financial measures as.
9 by SEC regulation G. Reconciliations.
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 Brian Cerrado CFO of <unk>. Please go ahead Brian.
Thanks, Mike and good afternoon.
I have Brian Schroeder, Chief Financial Officer, and before I begin I'd like to point out 2 press releases that hit the wire just after close today. The first announcing organizational changes there that are just on the second press release announcing our Q2 operating results ended March 31.2021.
Joining me today is Cesar Johnston executive.
The Vice President and Chief operating officer, and acting CEO and Bill Medina, Our VP finance and corporate controller, who will assume the role as acting CFO next month as I transition to an advisory role.
In addition to organizational changes the company also announced Kathy Bayless, joining our board as an independent director and member of the Audit Committee.
Continuing with the discussion from last quarter, the goal of distance charging or sending meaningful and sufficient energy at distance under global regulatory constraints has been the goal of the company since it began life as a public company in 2014. Since then significant technical and regulatory progress has transpired over the last several years and we.
I think the potential of the intersection of distance power transfer requirements and Iot powering big data via smart sensors and tag like devices designed to collect more relevant.
And monetize mobile data that is not feasible through NFC RFID.
<unk> I'd legacy devices constrained by distance and lack of necessary communication.
We're now seeing protocols. In addition, thanks to advancements of the technology and recent regulatory approvals.
<unk> charging and energy harvesting is becoming a reality and will bring new benefits to other industrial medical defense and consumer verticals.
And as we stated in our previous call. We continue to expect real examples of.
Distance based power transfer entering the market by the end of this fiscal year. We also expect that previously announced customers incorporating our contact based solutions should finally appear in the market by the end of this year.
Just a quick recap on the operating results for the second quarter ended June 30th before we get into the details we continue.
To see modest progress in terms of revenue growth closing Q2 was $185000 on revenue versus $145000 in Q1 total.
Total Q2, GAAP expenses were $11.2 million versus $8.6 million in Q1. The difference primarily result of noncash stock compensation charges in the quarter and Bill will provide.
Provide a breakdown of our financial results later in the call with that let me turn the call over to Cesar, who will provide an update on our regulatory technical and partnership progress Cesar.
Thank you, Brian and good afternoon, everyone.
We believe that any of those continues to be the leader in the development of next generation.
Wireless charging technologies using radio frequency wireless power transfer or W. P. D techniques, our revision for safe high on restaurants.
We're at a longer range continues to expand on it is at the core of our technology roadmap that we believe is in line with various markets such as industrial.
Retail and medical Iot, which will require such a solution begin in the next few quarters and far into the future.
From the last quarter, our patented portfolio grew by 4 patents to 240 patents granted our patents protect our dedicated our adult UPC semiconductors.
Australia devices, and we believe that we have 1 of the strongest and most valuable arris WPZ IP portfolios in the industry, which continues to make <unk> the clear technology leader in RF <unk>.
Also during this quarter the FCC's certify a brought on from American Equus.
Representing our fourth near field customer to receive certification we believe.
That we are the only RF based wireless charging company to have 4 partner programs that have been certified by the FCC.
We also announced the availability of a new 5 on a half.
And sales conducted power active energy harvesting developer kit.
The developer kit includes a pain score transmitter based on our new <unk> panel design that has been optimized for fire field performance. This transmitter can be mounted on walls or ceilings in multiple instances to cover large.
<unk> areas, requiring guarantee power in a seamless manner and that additional delivery greater than 15 feet.
The evaluation kit includes previously announced receivers supporting sensors electronic labels or low power CPU Veolia smart data processing devices geared towards Iot market applications.
Using our active harvesting technologies.
Based on power delivery at a distance requirements, we are uniquely poised to support the accelerated growth on expanding the scope of Iot applications. They went up after this energy harvest and ecosystem along with various partners devices supporting.
We had of solutions is here now.
Every building block is of importance and it should be.
Now, it's very obvious to all of our followers that we have systematically build a group of partners over time that include dialogue repo.
Inc.
Amies Atmos and others, we continue to identify additional companies that are actively evaluating our technology for use with their specific obligations involving Iot devices require reliable power on.
At a distance.
Whether charging and turned on batteries or in most cases harvest and transmitted energy to low power devices.
EPS that do not require batteries, if a reliable source of energy such as what we supply is available.
While our Wattup active energy system is currently geared to support several vertical markets.
Including industrial retail automation military and medical markets that require multiple.
<unk> etch sensors, which are driven which are which are driving the growth of our smart data in the cloud capture by sensors that are capable of powering.
Our regulatory efforts continue to progress.
Focusing on <unk>.
Opening up the RF WPC market and with the strong support of 900.
Net of Hertz as a key frequency of operations due to its many technical advantages including longer range. For instance, 900 megahertz shows a 2 to 3 times range advantage over 2.4 gigahertz. It is a well known fact that frequencies of 2.4 and 5 gigahertz are extremely.
Crowded with other wireless communication technologies, which precludes good performance compared to 900 megahertz, adding to our technology advantage.
At the ICU or the international Telecommunications Union. The current RF WPC draft includes 900 megahertz for worldwide application.
And in Japan, the broadband wireless forums reported 900 for a new RF WPC standard that shows indications of our first completion target by the end of this year.
Meanwhile, in the U S. We continue our dialogue with the FCC and have secure guidance to increase our roadmap transmission power beyond 5 on a halfway.
At 1 meter.
This is significant as longer range delivery of power will be necessary for larger deployments of smart sensors and industrial applications such as 4 <unk>.
<unk> logistics, we are developing new technologies, along the FCC guidelines, which we will disclose details off in the near future.
Furthermore.
We have also received an FCC pag preapproval guidance for 1 of our first mid steel customer products, which show safe power delivery at less than 1 meter distance.
In summary, we believe <unk> is on a sure path with the evolution.
Evolution of Iot on the requirements for power delivery are increasing distances. The advent of the Iot H is gross in path of our maturing charging at a distance technologies and as we have said on past calls on highlighted at the beginning of this call. We expect to see not only near field customers releasing products into the market in the next 2 quarters, but we also.
Also expect to see first examples of products charged at a distance in the market.
Unfortunately, we cannot get into the details of the specific applications, but hopefully we will soon be able to showcase the advantages of true wireless power and market with significant tamps, such as the smart tag on sensor markets along with other examples.
A distance charging allowing for functionality that cannot be accomplished by first generation coil based charging technology.
I will now turn the call over to Bill Molina, Vice President of finance and corporate controller.
Thanks Cesar.
As you saw at the close of the market today, we issued our Q2 earnings pressure.
Police announcing the operating and financial results for our fiscal 2021 second quarter ended June 30th.
For the second quarter, we recognized 185000 in revenue compared to 145000 in the prior quarter and approximately 114000.
Yes, really the same quarter of last year.
Total GAAP expense for the second quarter totaled $11.2 million approximately $2.5 million higher than the $8.7 million of total expense last quarter and approximately 2 point million $2.9 million higher than the second quarter of last year.
The.
And so the quarterly total GAAP expense increase was related to stock compensation expense recorded in the second quarter tied to the achievement of a vesting milestone that triggered the vesting of employee performance share units or psus.
Year to date our.
Total GAAP expense was $19.9 million approximately $2.8 million higher than the $17 million of year to date GAAP expense in fiscal 2020 and per my earlier comment the increase year over year was primarily tied to higher stock compensation.
With the majority of the income increase.
<unk> expense in the second quarter.
The net loss for the second quarter on a GAAP basis was 11 million or on 18th loss per share on $62.1 million weighted average shares outstanding.
This compares to an $8.5 million net loss in Q1 or 14 cents.
<unk> per share and an $8.2 million net loss or <unk> 20 per share in Q2 of 2020.
Also our weighted average shares were $40.6 million in Q2.2020.
The year over year increase in the share count.
It was mainly due to the completion of our at the market offering.
Pain or a T M in the fourth quarter of 2020, which raised an additional net $38.8 million of cash and added $18.9 million shares.
Now for a non-GAAP view of our numbers for the quarter as we believe adjusted or non-GAAP.
<unk> provides a useful comparison for investors, especially for a company at our stage when used together with GAAP information.
Excluding approximately $4.2 million of stock compensation and approximately 62000 of depreciation expense from our total Q2 GAAP expense of $11.
$2 million.
Net non-GAAP operating expense totaled approximately $6.9 million an increase of approximately 450000 compared to Q1 and an increase of approximately 750000 compared to Q2 of last year.
Net of revenue.
Our non.
EBITDA the operating loss for Q2 was $6.7 million and approximately 400000 higher loss compared to Q1, and an approximately 700000 higher loss when compared to Q2 of last year.
Non-GAAP engineering expense was $3.5 million and approximately 1.
GAAP 50000 increase versus the prior quarter and an approximately 300000 increase compared to the same period last year.
This was mainly attributable attributable to higher chip development costs.
Non-GAAP SG&A expense was $3.4 million an increase of approximately.
100, <unk> 300000 versus the prior quarter and an increase of approximately 500000 compared to Q2 last year.
The increase was mainly due to an increase in headcount and consulting costs in sales and marketing.
And an increase in annual shareholder meeting costs and G&A.
Year to date.
Total non-GAAP expense was $13.4.900 million higher than the $12.5 million of year to date non-GAAP expense in fiscal 2020.
Turning to the balance sheet, we ended Q2 with $338.2 million in cash and remain debt free.
We.
Our Q3 net non-GAAP operating expense run rate to remain in our current range.
Averaging approximately $6.6 million per quarter.
For Q3.
Excluding the 1 time restructuring charge, reflecting Steve <unk> severance costs.
Cost related to his retirement in the third quarter.
We may also see a slightly higher spend due to chip tape out costs expected to occur in the third quarter. However, the tape out costs could end up being pushed to Q4.
Overall, excluding 1 time items.
Spectrum on a 21 net non-GAAP operating expense should remain close to the expected net increase of approximately 10% over fiscal 2020.
As Cesar discussed expectations hold for multiple examples of contact and distance charging entering the market before the current.
Current fiscal year and.
I will now turn the turn it back to Cesar.
Thank you Bill the closing we would like to thank our investors for their ongoing support we continue progress in terms of garner on customer engagements, especially with regards to the distance on harvesting opportunities and we want to reassert average.
Our <unk> growth near field and distance based customers entering the market before the end of this fiscal year.
We also expect to announce additional technical on a regulatory achievements that we anticipated we lead to commercial opportunities in the coming quarters distance charging this here and we expect to share real.
Examples of these debt can only be commercially achieved through our revenue base.
Power transfer.
At this time I would like to open the call for questions operator.
We will now begin the question and answer session.
I ask a question you May press Star then 1.
<unk> on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then 2.
At this time, we will pause momentarily.
On assemble our roster.
The first question.
Comes from.
Tsuji Desilva with Roth capital. Please go ahead.
Hi, Cesar and best of luck in the new role of the CEO role and then Brian you no good.
Good luck.
Next our role and Bill welcome to the call. So.
Cesar I just wanted to ask just wanted to be clear on the label of acting CEO on what the processes next if any and if theres a strategy change you might want to articulate as you come into the CEO role versus the last few years. If there's anything you wanted to point out at this point that would be helpful. As a starting.
Sure. The company is conducting a ceo's church older than that there is no update we can provide.
Okay fair enough.
I'll save the question about the strategy until that that searches concluded.
So looking at some of the information on the in the press release the earnings before customers you highlight.
Can you maybe clear that support customers, you've already announced then I'd say new sound of your technical call equals, but I'd just love clarification to make sure Thats, how I should interpret that debt.
Granted day to place those sorry.
Yes, and David just pointed them out.
No I appreciate that and then the.
Well Mike.
I just wanted him that list before as kind of how many months does it take on average to get FCC approval. Once the process starts just understand how long that cycle is and then how does the pipeline look for additional absolutely approvals among customers, perhaps future customers or additional just to understand where where the pipeline stands now.
We have a number of customers on going through the.
Mike notes.
It's a function of where the customer is using our reference design.
A lot of these customers to their use of the signs that have already been preapproved and can go fairly fast.
But in general depending on whether its new design or not it could take longer and as far as the times is hard for.
On me to go on pinpoint the time when this is a government office on there are always different.
Timeframe that they provide to us yes.
Okay fair enough smart sand and perhaps it's getting easier.
Easier because the reference design, but we'll kind of watch that and then you talked a lot about energy harvesting this quarter you talked about the.
Process over the last months and so forth.
What how should we watch for the rollout or success of this energy harvesting area what.
What milestones Caesar would you point to for us to keep an eye on in the next few quarters that would indicate youre tracking with this opportunity to what you are hoping to achieve.
So actually harvests.
And that's happening today, we have partnerships with a number of.
Companies that we have already pointed out if you recall, we did announced last quarter a reference design that puts together the technology.
Dialog as well as EPS.
And on Inc.
What you will see is that we are now ramping up and providing those kits to different potential customers and as we do with that and we move forward. We're also identifying new potential customers that can oh, sorry partners that can actually add up to the whole ecosystem.
And will be announced on doses would be we.
Have a systems that show their utility.
Okay helpful. And then last question, perhaps for Bill on the Opex I guess, you guided 6.6 versus the 6.9 I want to understand if that for the second half of the year. I mean is that level sustainable going forward or will there need to be in.
Increased investments into the calendar year 'twenty 2 timeframe, what how should I think about the level you're at now versus what further products you need to build.
Hey, a J. This is Brian I can take it Brian I think we're in that we're in that 10% year over year increase range, we don't see a lot of.
On a fluctuation of the expense.
Thanks for 1 time.
And again timing of the chip tape outs, whether theyre Cmos gas scan theres, a big difference in costs. So we're kicking off a cmos chip out here shortly but it could fall into Q4 based on timing as you know the fabs are pretty busy and backdrop as.
As far as capital investments go on I think it was the second part of your question.
And so on and built out you know we have built these labs out over the last several years, they're fully utilized we don't see any big Capex requirements. There may be may mean that we'd have to go out and buy some additional test equipment, but overall.
Not really material.
In terms of dollar amount or investment size.
We're fully on Brian. The question was actually about Opex going ahead. After the second half of this year. This is a level you can build a business that I think I do believe.
As we've talked this is a highly leveraged model right, we're an engineering company.
And once we deliver the technology.
As a fabless semiconductor model with the usual amount of systems integration.
Assign work upfront, but I I believe and we continue to believe that this model is highly leverage able we'll see some modest head on head count increases as obviously the business volume increases, but overall very very like very Leverages will model, we don't expect to.
An inflection point in expenses to mirror any.
Revenue ramp.
Okay. That's all I had again good luck to yeah, absolutely again, good luck, there brand new World and Brian. Thanks for all the help you here.
Thank you yeah. Thank.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Cesar Johnston for any closing remarks.
Just want to thank everyone that attended this conference call and we can assure you that moving forward. This is the RF wireless power company that has the lead and we'd make it happen.
No.
We're here to make it happen. Thank you.
Okay.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
On top.
Thank you.
[music].