Q2 2023 Energous Corporation Earnings Call
Okay.
Good afternoon, and welcome to the <unk> Corporation second quarter 2023 financial results earnings Conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero after today's presentation.
There will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I would now like to turn the conference over to Craig Mcphail of Investor Relations. Please go ahead.
Thank you 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.
Subject to inherent risks and uncertainties that are detailed in the company's filings with the securities and Exchange Commission.
As otherwise required by federal laws introduce disclaims any obligation or undertaking to publicly release updates or revisions to the forward looking statements contained herein.
Elsewhere to reflect changes and expectations with regards to those events conditions and circumstances also please note that during this call and your kits will be discussing non-GAAP financial measures as defined by SEC regulation G.
Reconciliations of these non-GAAP financial measures. 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 Steve Johnson CEO of Enersys.
Go ahead Susan.
Thanks, Greg.
Good afternoon, and welcome to the <unk> 2023 second quarter conference call joining.
Joining me today is Suzanne Kim Duncan, our interim Chief Financial Officer.
Okay.
For those of you are familiar with our technology and it goes develops Iot wireless charging or wireless power networks through its advanced semiconductor and power rich products based on its proprietary technologies.
Our strategy is to energize Iot devices, and IRA backs electronic shelf labels and sensor applications across the smart home Smart office, industrial retail and health care markets.
Editors power Iot devices operating without depending on large and closely replaceable batteries and their related operations replacement maintenance overhead we aim to enable smart Iot devices with placement freedom mobility, and lower installation costs by removing wires.
And electrical outlet requirements.
Additionally, wireless power networks provide energy and connectivity to smart Iot devices, enabling control monitoring and tracking of the Iot device in this environment for example.
A warehouse or a shell label or medical equipment in a hospital environment.
Yeah.
Since the beginning of 2022 and you just got to focus on developing differentiated and optimized products to build Iot wireless power networks, and then to put the correct strategic partnerships in place to create a cloud enable and to win in smart Iot market ecosystem for our customers.
We are focused on selected the markets, namely Iot devices in our facts electronic shelf labels and sensor applications across the smart homes Smart office industrial retail and health care markets, we aim to work with leading customers or those emerging customers with the highest potential in these markets.
In a typical of a rollout of a wireless power network, our customers conduct a wireless power network technology evaluation, and then a proof of concept installation or P. O C. For their particular application. This is then followed by a proof of validation phase and a final production space.
Understanding how we introduced is progressing with its parent customers and the addition of new customers through these P. O C. N P. O V implementation spaces is in our view an important indicator of increased interest and then they're just technology and potential revenue in future quarters.
On that note I am incredibly pleased to report that Andrew just continues progressing on a paucity of P. O C trend from when we first reported two P. M. Six in the third quarter of 2022. These grew to 10 P. M. A CS in Q4 2022 and 14th.
You'll see in the first quarter of 2023, and we are now glad to report that the total number of active D. O. C. S has grown to 20, we're really in early discussions or early implementation phases with additional plc's. We have achieved 10 times POC growth since we.
Started our Iot wireless power efforts, Inc, Q3 2022.
From the 20th Plc's, we have now eight systems and approve a validation phase. So remember that's the second phase or are waiting to move into this space. We are also happy to report that one of the one of the wireless power network installations has enter the production phase with a four.
<unk> 100 company in partnership with thin there.
We are proud advantages progress and developing cloud enable and to win the smart Iot wireless power networks ecosystems.
Let me provide a live example of one of our customers to give you an appreciation of how the <unk> technology is being deployed.
In this example, our technologies are applied to the transportation and logistics supply chain markets.
Power bridges are installed in multiple areas interjection warehouses as the power bridges are mounted on the ceiling in multiple cory the walls and inside merchandise shelves.
Power bridges energetic.
Pardon me. This is the conference operator, we're speaking privately may I have your name please.
How's Your line you did a cadaver name please.
Hi. This is the conference operator can I have your name please.
You are now rejoining the main conference bridges to attract the products for distribution of strokes are loaded and unloaded.
Yeah.
Finally in this example, using our system integration partners cloud software Iot devices with real time visibility and transparency can now be analyzed using predictive capability for self optimization, resulting in cost efficiency improvements and full automation.
And then just efforts in developing and identifying new P O sees and technical collaboration with our customers and our focus applications as the markets continue as we identify and onboard new system integrators and distributors. We will continue to update you today, we stand at 14 technology partners through distribution partners and for Us.
Iot system integrator partners with more expected to be added in the second half of 2023.
Let's now move our discussion to update the first half of 2023 specific progress.
Earlier this week, we announced the next phase of our partnership would wiggle, it's sponsored by the Air Force Research Lab and the U S Department of Defense D O D.
And then just power bridges will continue to provide radio frequency based wireless power of a distance for wiggles.
WPZ net worse.
This second phase.
Also as we close.
Our.
Yeah.
As we close our first half of 2023, we would like to give an update of our 'twenty to 'twenty three goals as presented in our Q4 2022 earnings call.
First maintain our technical and growing market leadership through innovative Iot Wpn product development.
In the first half of 2023, we completed the one what power brief certification in the world's largest markets and we introduced our two watt power breach.
The new two watt power transmitter provides extended range better coverage and RF signal penetration than the one watts of power breached transmitter.
We also offer evaluation kits, featuring our technologies for RF sensors, as well as connectivity and payments devices for our customers to evaluate our technologies.
Second work closely with our power bridge production partners to optimize the cost and corresponding gross margin as we move to higher volume production in the first half of 2023, we identify and enabled production lines with a well known Asia based contract manufacturer supporting our power of Rich Assembly for local.
Cost and legible zoom execution.
Third continued to identify key technology and systems partners to expand our potential markets and facilitate access to new potential customers through our industry leading technologies.
As of the end of Q2, we have 14 technology partners to distribution partners and for system Integrator partners. We continue our efforts to find new potential partners to support them develop new market applications.
Move our current and future customers are steadily along the path to commercialization from POC to proof of validation and then to full production.
As of first half 2023, we now have 20 P. O sees a proof of validation and one customer that production installation face from just two P. O sees in third quarter 2022.
A 10 times increase since our first early installations.
And finally <unk>.
Support their rollout of power breach production ramps with our key customers and partners and achieve expected annual revenue growth over 2022.
As part of the P. O C efforts, we now have several Iot wireless power networks installed across multiple markets in the U S. Europe and APAC regions, we expect plc's, the resulting production installations to bring revenue generation with a target to achieve annual revenue growth over 2022.
Given these assumptions, we're currently anticipate year over year growth of 20000, or 20% or more which will be weighted towards the second half of the year.
On the financial side, we continued to make efficiency improvements and achieved a 7% reduction compared to Q2, 2022, and our non-GAAP costs and expenses, we recognized revenue of.
Well $117000 for Q2, 2023, representing a growth of 21% over the prior quarter. In addition to adding six new proof of concept installations in this quarter.
The number of proof of concepts cost customers moving along the path to final production has to increase compared with the prior quarter, which we view as an important indicator of future revenue potential. We have made good progress in the last year with 20 P. O see installations as of today and we're working to secure additional P O see installations.
And higher production volumes in the future.
I will now turn the call to Susan.
Thank you Sir.
Earlier today, we issued our Q2 earnings press release announcing the operation and financial results of our second quarter fiscal year 2023, which ended June 30th.
Revenue in the second quarter was approximately $117000 as mentioned earlier by CSR.
This is a 21% increase from prior quarter.
The 50% increase.
233000, we reported in Q2 of 2022.
Year to date revenue was about $214000.
As of June 30th.
Decrease of 52% compared to 2022.
Cost of revenue was about 83.
In dollars in Q2, a decrease of $56000 compared to the prior quarter.
<unk> hundred $89000 decrease compared to Q2 of 2022.
For the second quarter total GAAP cost and expenses increased by 100.
$45000 compared to the prior quarter down to $6 $2 million. This is primarily due to a decrease of $210000 of R&D and chip development costs and $100000 in trade show expenses.
Offset by an increase of $208000 and annual meeting expenses.
Year over year total GAAP costs and expenses for Q2 decreased by approximately $1.1 million.
Compared to the same quarter last year.
Primarily due to decrease of 100 $543000 in severance pay.
$289000 in recruiting expenses $189000 and cost of revenue and $125000 in chip development and engineering supply.
Net loss for the quarter second quarter on GAAP basis was approximately $4 million.
A or a four cent loss per share on approximately 91.2 million weighted average shares outstanding.
This amount includes $1 $9 million and our other income.
For them from a change in the fair value of our warrants.
Q2, net loss compares to a $6 $7 million net loss.
Prior quarter.
Our aim.
And 8%.
Per share on 81 4 million weighted average shares outstanding.
And a seven point.
Evan.
$1 million net loss.
Alright, nice that loss per share loss in Q2 of last year.
77 1 million.
Weighted average shares outstanding.
Andrew.
Alright year over year net loss trending downwards is primarily due to our efforts and aligning our operations for it.
Iot vertical strategy.
And terming access expenses from our legacy go to market strategy.
Well, let me now give you a non-GAAP view of our numbers for the second quarter.
As we believe our non-GAAP information provides a useful comparison for our investors.
Especially for a company at our stage when used with GAAP numbers.
Yeah.
Yes.
non-GAAP costs and expenses for Q2 excludes.
Approximately $504000 of stock compensation.
$45000 of depreciation and amortization.
And $90000 of severance expenses from our total Q2, GAAP cost and expenses of $6 2 million.
non-GAAP cost and expenses totaled approximately $5 $6 million.
Which was approximately $216000 less.
Then the $5 $8 million.
Total non-GAAP costs and expenses in Q2.
And approximately $424000 less compared to Q2 of 2022.
Our non-GAAP net loss for Q2 was.
$5.3 million.
Or a six cents loss per share which includes a non-GAAP .
Adjustments for the one $9 million of other income for the fair value adjustment of our warrants in Q2.
This decrease in non-GAAP net loss of approximately $240000 compared to the prior quarter and $498000 compared to Q2 of 2022.
We saw minor expense fluctuation across all areas and line of heart.
Expectations.
Notably in non-GAAP research and development expenses was $2 $6 million, which was approximately 199000 decrease.
Compared to the prior quarter and approximately $258000 decrease.
Tad to Q2 of 2022.
On the balance sheet, we ended the quarter with approximately $220 million in cash and cash.
Equivalent.
And we still stay.
Debt free.
As mentioned earlier, we realized $1 9 million change in fair value of our warrant liability, which was accounted for as other income in Q2 of this year.
To conclude we expect our GAAP and non-GAAP cash operating expenses for the full year to trend downwards.
We continue to find savings in cost and expenses to align.
Our financial operations with our market strategy.
And I'll give the call back to the operator for our question answer session.
Thank you.
Thank you we will now begin the question answer session to ask a question you May Press Star then one on your touch Jonestown.
Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
The first question comes from Sujit de Silva with Roth Capital. Please go ahead.
Hi, Cesar Hi, Susan Thanks for taking the question so first.
First of all CS are carefully Susan on the.
<unk> 20 of them I know you said one of them is into production what.
What portion of the remaining 20 do you think are relatively close to the validation.
Duction stage versus maybe earlier, if you could kind of rank order those and maybe segregate them from which a 'twenty might be kind of nearest or near to it. So how are you.
Yeah. So we reported 20 Plc's. We went from 14 to 26 of them are kind of early but if you recall during the conversation. The presentation. I mentioned there is eight of them that are now in proof of validation. So we're already in the second stage I would expect.
Some of those if not all of them.
Actually become production and if you're going to ask me how some extra production. It is dependent on the industry and the applications certainly at least the one production that we have win when pretty fast from a time perspective in <unk> and went into production within I would say six to nine months.
Okay that helps I didn't realize the 20 was inclusive of the validation Nathan the protection one that absolutely ops more so for the one that's in production season, how should we think about it.
The ramp up here what kind of.
What maybe what end market is it is it is it and what's what's the opportunity here and what's the timing is there an initial.
Ramp period or is it the phase in by sites or sugar beets.
Very good question. So first of all we're very glad we're really happy to report that that one production is done with our partner thing there.
And that's already been deployed with a fortune 100 companies.
Reality is that due to NDA constraints, we cannot at this point in time discuss who that fortune 100 companies, okay, but what we can say about that company and what the deployment has been which is in the hundreds of them.
The number of transmitters is the fact that it is in the logistics.
Area its in the warehousing area and it's looking into components that are extremely expensive that need to be tracked and they need to restore and need to be known where they are at a given time and in those particular installations that we hadn't warehouses and I want to stress. These are what.
When we deploy our wireless power networks, we deployed the nest the networks on the ceiling.
On the walls and many many cases inside the shelf to provide more and more coverage. So having a very strong background on Wi Fi in my previous life.
Before joining <unk> typically in the case of Wi Fi, we have let's say one AP every 10 meters or so but in certain applications that we've seen so far in particular these one in many cases, we see maybe.
10 X number of transmitters that we actually provide to be able to cover one one Wi Fi.
System that gives you kind of an idea of.
We're just technologies.
Yearend towards right I mean.
Great No. That's very helpful. I appreciate that color and my last question is on the calendar 'twenty three.
Outlook guidance I guess, the the revenue I think you are saying up 20% year over year from last year, obviously implies a ramp in the second half any sense of sort of how the how that plays out through Q versus sports do you just to understand at least qualitatively, perhaps and what's your visibility into that.
Do you think that that second half ramp.
So we still.
Guidance on in the direction, we are loaded towards the second half of the year.
Uh huh.
We have those validation.
Proof of validation systems.
Those are moving really really well so we will be updating you in the next.
Quarter on where we are with those.
Okay can I just ask one last question there.
Will there be more than one production system contributing to revenue in <unk> was that the expectation built into your guidance.
That is the expectation based on what we have right now and.
It's about at this point in time, a function of the customers' decision making.
And some of those are by the way are.
Related to the Fortune 100 company, we've been working with.
Okay very helpful. Cesar. Thank you Cesar Thank you Sir.
Thank you. Thank you Susan.
Our next question comes from Jon Hickman with Ladenburg. Please go ahead.
Yeah.
Hey, most of my questions were already asked and answered, but I do could you.
Maybe speak to the fact that now you have 20 of these proof of concept programs in summer so.
Farther along than that is it getting easier for the customers do their validation because of.
You know.
Because of previous work.
Yes definitely.
We are.
Wait much more experience on the requirements of.
The installations, we've done a number of them by now so in many cases.
We are able to go and set them up with much faster than we usually we have situations where within 24 hours 48 hours, we can actually sit down and show the capability and the feasibility of our technology, which by the way compared to other old technologies. It is far superior when it comes to be severely and coverage.
And do you have the manpower.
Or like different proof of concept to double by the end of the year to 40.
Could you.
[laughter] Yeah, yes, yes, we can in fact as you pointed out as we move forward.
What we've done what we've done as part of the strategy is try to focus ourselves into a very limited number of products and that includes our one what do what systems. They're all the same they're not change pretty much we just step and repeat that and how we install in how we deploy the technology is something where we have developed internal tools there.
Unique to our industry and allow us to pretty much know what the best places in and what the best locations are in and working with those customers. We have very very clear technical guidelines that actually have saved tremendous amount of time and yes. I mean, if we had to double we are preparing for that yes.
Okay. Thank you.
Thank you John .
I appreciate it.
This concludes our question and answer session I would like to turn the conference back over to Cesar Johnston for any closing remarks.
Thank you.
And it just continues progressing as we lead in the emergence of Iot wireless power networks and towards removing the need for batteries and cables.
We continue to innovate and developing novel solutions, using our advanced technologies and a robust intellectual property. We sold in this quarter in the two watt power, which transmitter announcements, which positions the company as a leader in power charging solutions.
Finally, I was pleased to see a 21% increase in revenue over the prior quarter and believe that our key progress indicator for potential revenue in future quarters as the number of Iot wireless power network proof of concept installations, which has grown by 43% over the past quarter now totaling 20.
Thank you to all our shareholders stakeholders and managers team members.
And we look forward to updating you on the company's progress again.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Thank you. Thank you.
Thanks, Paul.