Full Year 2023 Energous Corp Earnings Call

Okay.

Unknown Executive: Good day, and welcome to the Energous Corporation full year 2023 financial results. All participants will be in listen only mode.

Good day and welcome to the.

And they're just corporation full year 2023 financial results, all participants will be in listen only mode.

Unknown Executive: Please note, this event is being recorded. I would now like to turn the conference over to Craig McPhail, Investor Relations. Please go ahead.

Please note. This event is being recorded I would now like to turn the conference over to Craig Mcphail.

Craig Mcphail: <unk> relations. Please go ahead.

Craig Mcphail: 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 are subject to inherent risks and uncertainties are detailed in the company's filings with the securities and Exchange Commission.

Craig Mcphail: Thank you and welcome everyone. Before we begin, I'd like to remind participants that during today's call, the company will make forward-looking statements, which are subject to inherent risks and uncertainties.

Craig Mcphail: They're detailed in the company's filings with the Securities and Exchange Commission. Except as otherwise required by federal laws, Energous disclaims any obligation or undertaking to publicly release updates or revisions to the forward-looking statements contained herein or elsewhere to reflect changes and expectations with regard to those events, conditions, and circumstances. Also, please note that during this call, Energous will be discussing non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in today's press release, which is posted on the company's website. Please note that we will not be taking questions on this call.

Except as otherwise required by federal laws, and or just disclaims any obligation or undertaking to publicly release updates or revisions to the forward looking statements contained herein or elsewhere to reflect changes and expectations with regards to those events conditions and circumstances also please note that during this call <unk>.

Craig Mcphail: We'll be discussing non-GAAP financial measures as defined by SEC regulation G.

Craig Mcphail: 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.

Craig Mcphail: Please note that we will not be making taking questions on this call.

Mallory Burak: Investors are invited to submit any questions to IR at energist.gov. Now, I would like to turn the call over to Mallory Burak, Principal Executive Officer and CFO of Energous Corporation. Please go ahead, Mallory.

Investors are invited to submit any questions to IR at energy stock club.

Craig Mcphail: Now I would like to turn the call over to Valerie Barrack Principal Executive Officer, and CFO of <unk> Corporation. Please go ahead malory.

Valerie Barrack: Thanks, Craig and thank you all for joining us I'm here with Tom Polen, Marino, our vice President and business to business development and marketing.

Mallory Burak: Thanks, Craig, and thank you all for joining us. I'm here with Gianpaolo Marino, our Vice President of Business Development and Marketing. I know our recent leadership change announcement is on your minds. And I will say a few words about that before we get into the business update and review of the 2023 results. But I want to start by reiterating that we are thankful to Cesar for his contributions to Energous and we wish him well in the future. Our board has initiated a search to identify a new CEO with the support of a search firm.

Valerie Barrack: I know our recent leadership change announcements is on your minds and I will say a few words about that before we get into the business update and review of the 2023 result.

Unknown Executive: I wanted to start by reiterating that we are thankful to Cesar for his contributions to allergists and we wish him well in the future. Our board has initiated a search to identify a new CEO with the support of a search firm.

Mallory Burak: While the search process is underway, the Board has established an Office of the Chair composed of myself and Raynette, our Board Chairperson, to take on the CEO duties. Together, we will oversee strategic planning and execution. As our Interim Principal Executive Officer, I will take the lead on operational matters, working closely with Gianpaolo and our senior leaders. Raynette will provide oversight and support from a Board perspective.

Unknown Executive: Well the search process is under way. The board has established an office of the chair composed of myself in mind that our board chair to take on the CEO duties together, we will oversee strategic planning and execution as our interim principal executive officer I will take the lead.

Unknown Executive: On operational matters, working closely with John Pollo, and our senior leaders.

Unknown Executive: And that will provide oversight and support from a board perspective.

Mallory Burak: While I have been in my role as CFO of Energous for just a few months, I bring many years of experience as CFO of high-growth and publicly traded technology companies. Since joining in January, I've had the opportunity to collaborate closely with our board and senior team, and I'm confident in our ability to continue to deliver on our mission and take advantage of the large market opportunity for us in wire-free, low power charging at a distance. We believe the important thing to take away from this announcement is that our board, our leadership team, and the whole Energous team are excited to move forward and build our next phase of growth in a strategic, deliberate way. We are intently focused on capitalizing on our first-to-market advantage and prioritizing the protection of our intellectual property portfolio while also improving operational efficiencies as we work toward enabling the next generation of wireless power networks. And with that, I will turn it over to Gianpaolo to provide a business update. Thank you, Mallory.

Unknown Executive: Well I have been in my role as CFO of Allergists are just a few months I bring many years of experience as CFO of high growth in publicly traded technology companies since joining in January I've had the opportunity to collaborate closely with our board and the senior team and I'm confident in our.

Unknown Executive: Our ability to continue to deliver on our mission and take advantage of the large market opportunity for us and wire free low power charging I did just that.

Unknown Executive: We believe that the important thing to take away from less announcements is that our board our leadership team and our and the whole allergists team are excited to move forward and build our next phase of growth and that's strategic deliberate way, we are intently focused on capitalized.

All our first to market advantage and prioritizing protection of our intellectual property portfolio, while also improving operational efficiencies as we work toward enabling the next generation of wireless power networks and with that I will turn it over Dutch on Pollo to provide the best.

Speaker Change: This update.

Dutch: Thank you Mallory.

Gianpaolo Marino: Energous continues to successfully execute its smart IoT-centric strategy, initiated in early 2022 when we repositioned and refocused the company to develop IoT power charging products at a distance using the intellectual property, regulatory knowledge, and market experience developed over the years and backed by our 200 plus patent portfolio, providing Energous with a significant competitive advantage as we work to develop and build a market for a new generation of technology. Our strategy has been focused on enabling new, high-value IoT markets, such as transportation and logistics and retail IoT, with the introduction of Energous Wireless Power Network. These networks allow our customers greater placement freedom, mobility, and lower installation costs by removing wires and batteries across RF tags and sensor applications, typically within a cloud-enabled environment, as is common when adopting new technology.

Dutch: And it just continues to successfully execute smart Iot centric strategy.

In early 2022, when we reposition and re targeted the company to develop Iot power charging product at a distance using the intellectual property.

Regulatory knowledge and market experience developed over the years and backed by our 200, plus patent portfolio, providing <unk> with a significant competitive advantage as we work to develop and build a market for a new generation of technology.

Dutch: Our strategy has been focused on enabling new high value Iot markets, such as transportation and logistics and <unk>.

Dutch: Retail I S T with the introduction of <unk> wireless power networks.

Dutch: These networks allow our customer greater policeman freedom mobility, and lower installation cost by removing wires and batteries across RF dogs and sensor obligation typically within a cloud enabled environment.

Dutch: As is common when adopting a new technology or customer initiated wireless network technology evaluation and then of course, the proof of concept installation Ob typically called P. O C.

Gianpaolo Marino: Our customer initiated wireless power network technology evaluation and then a proof of concept installation, what we typically call POC. This engagement not only allowed businesses to understand and test the application of the technology to their specific use case, but also, once seeing it deployed and validating the effectiveness of the technology, oftentimes leads to discussion about expansion opportunities and additional applications within the large companies with whom we are currently working. Understanding how Energous is progressing with its current customers and its addition of new strategic customers through these POC or trial installation phases is an important indicator of our global adoption of energy technology and the timing of future revenues. This is why we believe that quarterly updates on the number of POC customers are an important part of our stories and a good indicator of our growth. Energous 1-watt-powered bridge, typically called EGLE, is the only advanced and regulatory-certified product for wireless power network installation available on the market today worldwide.

Dutch: These engagement not only allowed businesses to understand and test the application of the technology to their specific use cases.

Dutch: But also once you get deployed in validating the effectiveness of the technology.

Dutch: Often time leads to discussion about expansion opportunities and additional application within the large companies with whom we are currently working.

Understanding all energy is progressing with its current customers and it's addition of new strategic customers through these POC or trial installation phases.

Dutch: He is an important inthe gauge indicator of a global adoption of <unk> technology, and the timing of future revenue.

Dutch: This is why we believe the quarterly update on the number of POC customers are an important part of our stories and good indicator of our growth.

Dutch: And just want one walk power breach with typically called Eagle is.

He is the only advance and regulatory certified product for wireless power network installation available on the market today worldwide.

Gianpaolo Marino: We will also be launching our new introduced 2 watt power bridge, Condor, product in early Q2. At the end of Q3 2023, we announced roughly 30 POC trials with multiple customers worldwide across a range of industries. At the conclusion of 2023, customer interest in our product accelerated as the number of companies in our focus market increasingly understood the value proposition of Energous Wireless Power Network, which is designed to help business teams implement more cost-effective solutions that also serve to solve operational bottlenecks due to the high cost of service and maintenance by enabling battery-less BLE tags and center solutions and drive automation improvements, improve visibility, and improve control throughout global supply chains, where even incremental improvements These capabilities enable Energous to provide our customers with insight and recommendations on best installation practices for our technology to yield the best results.

Dutch: We will also be launching our new introduced to walk power breach Condor product in early Q2.

At the end of Q3, 2023, we announced roughly 30 POC trials with multiple customers worldwide across a range of industries.

Dutch: At the conclusion of 2023 customer interest in our product accelerated as the number of company in our focused market increasingly understood the value proposition of <unk> wireless wireless power network, which are designed to help business team implement more cost effective solution that also serve to solve operate.

Dutch: <unk> bottlenecks due to the high cost of service and maintenance by enabling battery less BLE tags, and sensor solution and drive automation improvements improved visibility and improved control through our global supply chain, where even incremental improvements can generate significant value.

Dutch: So these engagement we are also becoming highly efficient on Iot wireless power network installation as we gained significant experience and knowledge of the technology system killer build these and related markets.

Dutch: These capabilities enable energy to provide our customer with insight and recommendation on best installation practices for our technology to yield best results.

Gianpaolo Marino: As such, we recently announced our partnership with Global Installer Velocity as a preferred system integrator partner and worldwide value-added reseller for our technology. Velocity will deploy advanced enterprise technology solutions to some of the largest brands in the world, and provide expansion opportunities into new markets, applications, and customers for Energous Wireless Power Technology across retail, healthcare, logistics, warehousing, and more. Velocity has installed energy as well as power technology, including 1-watt and 2-watt power bridge transmitter systems, and also installed Williott IoT PixelTags at its Innovation Lab in Riverside, Missouri, to showcase advanced use cases across multiple markets and applications.

Dutch: As such we recently announced our partnership with the global installer velocity as a preferred system integrator partner and worldwide value added reseller for our technology.

Dutch: The La city will deploy advanced enterprise technology solution to some of the largest brand in the world provides expansion opportunity into new market application and customer for enter just wireless power technology across retail health care logistics warehousing and more.

Dutch: Velocity has installed energy as well as power technology, including one watt and two watt power bridges transmitter systems and also installed Willis Iot pixel tags and each innovation lab in Riverside, Missouri to showcase advanced use cases across multiple markets and applications.

Dutch: We continue to build momentum in our market and sales development since pivoting to an Iot strategy in 2022.

Gianpaolo Marino: We continue to build momentum in our market and sales development since pivoting to an IoT strategy in 2020. Starting with 2 POCs in Q3 2022, we grew to 10, 14, and 20 from Q4 2022 through Q2 2023, respectively. As of Q4 2023, I'm pleased to report that we have 38 POCs across the US, Europe, and Asia, across multiple markets covering retail, industrial, logistics, and supply chain applications. It is important to note that a few of these POCs are now successfully completed, and we're now moving into a deployment cell phase. Based upon a growing operational need, we find that many of our customer trials are focused on delivering real-time asset tracking and supply chain visibility in cold chain applications for large Fortune 500 organizations, enabling their ability to monitor perishable assets in real time across their supply chain operations. This is a tremendous technological improvement compared to conventional RFID technology, where we can now enable full traceability in an automated, labor-efficient way.

Dutch: We started with two P. O C. In Q3 2022, we grew to 10 14 and to any from Q4 2020 due through Q2 2023, respectively.

Dutch: Q4, 2023, I'm pleased to report that we had 38 POC across the U S Europe and Asia across multiple market covenants retail industrial and logistic and supply chain obligation.

Dutch: Yeah.

Dutch: It is important to note that fueled these POC are now successfully completed and we're now moving into a deployment sale phase.

Dutch: Based upon our growing operational need we find that many of our customer trials are focused on delivering real time asset tracking and supply chain visibility and cold chain applications for large fortune 500 organization, enabling their ability to morning to monitor perishable asked it in real time across their system.

Dutch: Fly chain operation.

Dutch: It is a tremendous technology improvement compared to the conventional right. The RFID technology, where we can now enabled food traceability in automated labor efficient way.

Dutch: With its robust intellectual property portfolio and preparatory technology energy. This is ideally positioned to be the emerging leader to support and execute our smart Iot strategy across wireless about network with a solution that we believe addresses key operational pain point for many large organization we re.

Gianpaolo Marino: With its robust intellectual property portfolio and proprietary technology, Energous is ideally positioned to be the emerging leader to support and execute our smart IoT strategy across wireless power networks with a solution that we believe addresses key operational pain points from many large organizations. We remain encouraged by the growth in POC trials, which validates this leadership position and the attractiveness of our technology across different markets. Our product roadmap supports both 1 watt and 2 watt power bridges with a family of advanced proprietary EN4100, EN3210, and EN2223 semiconductor devices.

Dutch: Encouraged by the growth in POC trials, which validates this leadership position and attractiveness of our technology across different markets.

Dutch: Our product roadmap supports both one watt and two watt power bridges with a family of advanced proprietary E. N 40, 132 10, India in 'twenty, two 'twenty three semiconductor devices.

Gianpaolo Marino: Additionally, as we move forward, we will evolve a roadmap to support the future 15-watt regulatory-certified market in the U.S., which will open more markets for our wireless power technology. Strategic partnerships within the wireless power ecosystem play an important role in facilitating rapid and more expansive deployment. Today, we're working closely with 18 technology partners, two distribution partners, and four IoT system integrators, all leaders in their respective segments. We expect to engage additional partners as we progress through 2020. On December 13, 2023, we announced our partnership with Identiv, a global system integrator, with the specific objective of targeting real-time asset tracking and inventory control for industrial, logistics, and retail applications. In January of this year, we attended an RFID show in New York.

Dutch: Recently as we move forward, we will evolve our roadmap to support the future of 15 watt regulatory sort of bite market in the U S, which will open more markets for our wireless power technology.

Dutch: Strategic partnership within the wireless Barbara ecosystem play an important role in facilitating rapid and more expansive deployment.

Dutch: Today, we are working closely with 18 technology partners to distribution partners and for Iot system integrators partners all leaders in their respective segment.

We expect to engage additional partner as we progress through 2024.

Dutch: On December 13, 2023, we announced our partnership with Identive, a global system integrator with the specific objective of targeting real time asset tracking and inventory control for industrial and logistic and retail obligation.

Dutch: In January of this year, we attended an RF show in New York. This conference brings together key companies embark varying field of retail Iot and ecosystem.

Gianpaolo Marino: This conference brings together key companies in the varying fields of retail IoT and e-takeover. In summary, Energous continues to execute on its new go-to-market strategy and is making clear progress as we work to reposition and retarget the company for smart IoT applications. Energous' smart IoT strategy is generating a great deal of interest, as evidenced by our 38 POC trial installations, where our customers have communicated back to us that they understand the clear value offered by our IoT wireless power. Thanks, Gianpaolo.

Dutch: In summary, <unk> continues to execute on its new go to market strategy and he's making clear progress as we work to reposition and re target the company on Smart Iot application.

Dutch: Just smart Iot strategy is generating a great deal of interest as evidenced by our 38 POC trial installation, what our customers have communicated back to us that they understand the clear value offered by our Iot wireless power network.

Thanks, John Pollo.

Mallory Burak: Earlier today, we issued our earnings release announcing the operating and financial results for the year ended December 31, 2023. Focusing on the GAAP financial statements, our 2023 recognized revenue was approximately half a million dollars versus the 0.9 million dollars reported in 2022, representing a decrease of approximately 44 percent versus the prior year. Although revenue declined, our cost of revenue in 2023 was approximately 0.3 million dollars, yielding a positive 41 percent gross margin versus the negative 50 percent gross margin reported in 2022. The 2023 cost of revenue includes an inventory write-down similar to that recorded in 2022, and despite this additional recorded cost, the year-over-year change represents a significant improvement in gross margins versus last year. Total 2023 operating expense, excluding severance, decreased by approximately $3.5 million to $21.9 million from $25.5 million in 2022.

None: Earlier today, we issued our earnings release announcing the operating and financial results for the year ended December 31, 2023.

None: Focusing on the GAAP financial statements, our 2023 recognized revenue was approximately half a million dollars versus a point $9 million reported in 2022, representing a decrease of the prop proximately, 44% versus the prior year.

None: Although revenue declined our cost of revenue in 2023 it was approximately <unk> $3 million, yielding a positive 41% gross margin versus the negative 50% gross margin reported in 2022.

None: The 2023 cost of revenue includes an inventory write down similar to that recorded in 2022 and despite this additional recorded costs the year over year change represents a significant improvement in gross margins versus last year.

None: Total 2023 operating expense excluding severance.

None: Decreased by approximately $3.5 million to $21 $9 million from the $25 5 million in 2022.

Mallory Burak: Research and Development expenditure decreased by approximately $1.7 million in 2023 to $10.8 million versus $12.5 million incurred in 2022, primarily attributable to a reduction in stock-based compensation of half a million dollars, a decrease of half a million dollars related to lower consulting, third-party, and professional service fees, a $.4 million reduction in engineering supplies, components, and chip development due to project timing, a $.2 million related Sales and Marketing General and Administrative, SG&A, expenses for 2023 and 2022 were $11.1 million and $12.9 million, respectively. The reduction of approximately $1.8 million is primarily due to a $1.5 million reduction in personnel-related and stock-based compensation costs, a $0.4 million decrease in sales and marketing-related expenses, an approximate $0.2 million reduction in general and administrative costs, and a decrease in insurance premiums and board fees of $0.2 million, partially offset by increased costs relating to legal fees, investor relations, and corporate expenses of approximately half a million dollars.

None: Research and development expense decreased by approximately $1.7 million in 'twenty, two 'twenty $3 million to $10.8 million versus $12 5 million incurred in 2022, primarily attributable to a reduction in stock based compensation of.

Half a million dollars a decrease of half a million dollars related to lower consulting third party and professional service fees.

Point 4 million dollar reduction in engineering supply as components and chip development due to project timing a point 2 million dollar related related to reduced regulatory testing and fees and point $1 million of lower postage related costs.

None: Sales and marketing general and administrative SG&A expenses for 'twenty, 'twenty, three and 'twenty, 'twenty, two or $11.1 million and $12 $9 million respectively.

None: A reduction of approximately $1.8 million is primarily due to a $1.5 million reduction in personnel related and stock based compensation costs, a point $4 million decrease in sales and marketing related expenses, an approximate point $10 million right.

None: <unk> in general and administrative costs and a decrease in insurance premiums and board fees of point 10 million, partially offset by increased costs relating to legal fees investor relations and corporate expenses of approximately half a million dollars.

Mallory Burak: Severance expenses decreased by approximately $0.4 million to $0.4 million in 2023. The GAAP reported net loss for 2023 was $19.4 million versus a loss of $26.3 million in 2022. We feel it's valuable to share an adjusted net non-GAAP loss for 2023, given the level of non-cash related and extraordinary expenses incurred by the company. After adjusting the 2023 GAAP net loss by non-cash related expenses, such as depreciation, amortization, and stock-based compensation totaling approximately $1.8 million, as well as extraordinary expenses, such as severance expense of $0.4 million, which includes the associated stock-based compensation expense, and by $0.6 million representing the offering costs related to the warrant liability, offset by the change in fair value of the warrant liability of $2.5 million, the 2023 adjusted net loss was approximately $19.1 million, as compared to the adjusted non-GAAP loss reported in 2022 of $22.6 million, reflecting a $3.5 million improvement year over year.

None: Severance expenses decreased by approximately 4.4 million to point $4 million in 2023.

None: The GAAP reported net loss for 2023 was $19.4 million versus a loss of $26 3 million in 2022.

None: We feel it's valuable to Sharon adjusted net non-GAAP loss for 2023, given our level of noncash related and extraordinary expenses incurred by the company.

None: After adjusting the 'twenty two 'twenty three GAAP net loss by noncash related expenses, such as depreciation amortization and stock based compensation totaling approximately $1.8 million.

None: Well its extraordinary expenses such as severance expense of <unk> 4 million, which includes the associated stock based compensation expense and $5.6 million, representing the offering costs related to the warrant liability.

None: Offset by the change in fair value of the warrant liability of two and a half million dollars. The 'twenty two 'twenty three adjusted net loss was approximately $19.1 million as compared to the adjusted non-GAAP loss reported in 2022 F $22 6 million.

None: Dollars, reflecting a three and a half million dollar improvement year over year.

Mallory Burak: Shifting over to the balance sheet and cash flow, we ended 2023 with $13.9 million in cash and remained debt-free. During 2023, we raised approximately $4.2 million through the ATM to supplement our working capital. In addition, we generated approximately $2.8 million in net proceeds through the sale of common stock and prepaid warrants, and approximately half a million dollars from the collection of accounts receivable.

None: Shifting over to the balance sheet and cash flow, we ended 2023 with $13 $9 million in cash and remain debt free.

None: During 'twenty two 'twenty three we raised approximately $4.2 million through the ATM to supplement our working capital. In addition, we generated approximately $2 $8 million in net proceeds through the sale of common stock and prepaid warrants and approximately <unk> <unk>.

None: Half a million dollars from the collection of accounts receivable and we continue to focus on opportunities to improve cash flow through sales, improving gross margins and as well as reductions in spending.

Mallory Burak: And we continue to focus on opportunities to improve cash flow through sales, improving gross margins, as well as reductions in spending. In closing, I would like to say thank you to all our shareholders, stakeholders, and the Energous team members. We look forward to updating you on the company's progress again next quarter. And this concludes our year-end 2023 update. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

In closing I would like to say, thank you to all our shareholders stakeholders and they enter just team members. We look forward to updating you on the company's progress again next quarter and this concludes our year end 2023 update.

None: Okay.

Okay.

None: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.