Energous Corporation — Q3 2022 Form 10-Q
Business context and reporting period. The filing covers the three and nine months ended September 30, 2022. Energous develops WattUp RF-based wireless charging technology, including near-field and at-a-distance charging solutions. The company reported limited production-system and development-project revenue and remains in a development and commercialization phase.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $223,201 | $201,364 | $672,133 | $531,389 |
| Gross profit (loss) | ($196,859) | $201,364 | ($222,560) | $531,389 |
| Gross margin | Approximately (88)% | 100% | Approximately (33)% | 100% |
| Operating loss | ($6.11 million) | ($12.47 million) | ($20.33 million) | ($32.01 million) |
| Net loss | ($5.96 million) | ($12.46 million) | ($20.14 million) | ($32.01 million) |
| Basic and diluted loss per share | ($0.08) | ($0.20) | ($0.26) | ($0.51) |
| Operating cash flow | Not provided for quarter | Not provided for quarter | ($18.84 million) | ($22.50 million) |
Balance sheet and liquidity at September 30, 2022: Cash and cash equivalents were $30.36 million, down from $49.07 million at December 31, 2021. Current assets were $31.87 million and current liabilities $3.76 million; working capital was approximately $28.11 million. Total liabilities were $5.20 million, primarily operating lease liabilities; the filing reports no borrowings. Stockholders’ equity was $29.26 million. Nine-month investing cash outflow was $127,198 and financing cash inflow was $249,705, from ESPP contributions.
Changes versus prior comparable periods
- Revenue increased 10.8% in Q3 and 26.5% for the first nine months, primarily from higher production-system sales. Revenue remains small relative to operating costs.
- Q3 and nine-month net losses narrowed, by approximately 52% and 37%, respectively. Lower operating expenses and prior-year severance and stock-based compensation were significant factors. Q3 2021 included $4.02 million of severance expense; nine-month severance expense was $633,444 in 2022 versus $4.02 million in 2021.
- Cost of revenue was $420,060 in Q3 and $894,693 for the first nine months of 2022, versus none in the 2021 periods, resulting in negative gross margins in 2022.
- Operating cash use improved year over year, but cash declined by $18.72 million from year-end 2021 through September 2022.
Outlook, risks, and unusual items
- Management estimated that September 30 cash, together with anticipated revenue, would fund operations through November 2023. The company expects to seek additional financing; availability and acceptable terms are not assured. No specific revenue or earnings guidance was provided.
- The business operates in a nascent, unproven market. Risks include customer adoption, technical and regulatory hurdles, competition, supply-chain disruption, and the need for capital. COVID-19 and inflation-related pressures may also affect customers, suppliers, and costs.
- Two customers represented approximately 87% of Q3 revenue; one customer represented approximately 46% of nine-month revenue. Four customers accounted for approximately 99% of period-end accounts receivable.
- Dialog terminated the strategic alliance in 2021. A wind-down period for certain existing customer relationships continues through September 2024; the company is transferring supply-chain activities and developing internal capabilities.
- A May 2022 San Jose lease amendment extended the office lease by three years. Total future lease payments were $2.24 million, with $2.15 million recorded as lease liabilities. The company also has a hosted design-software agreement requiring quarterly payments of approximately $233,000 through Q2 2024.
- After quarter-end, Energous raised $453,180 net through ATM share sales from October 1 through November 7, 2022; $6.62 million remained available under the ATM program as of November 7. Common shares outstanding were 77,722,402 at September 30 and 78,083,343 as of November 7.
- Management reported effective disclosure controls as of September 30, 2022 and no material change in internal control over financial reporting during the quarter. It reported no pending legal proceeding believed likely to have a material adverse effect.
Important facts for investors to verify
- Whether production-system sales and customer adoption can grow sufficiently to improve gross margins and support operating costs.
- Cash burn against management’s stated runway through November 2023, and the timing, amount, and dilution or other terms of additional financing.
- Customer concentration, receivable collection, and the sustainability of revenue from major customers.
- Progress in replacing Dialog-related capabilities and any effects on manufacturing, costs, or existing customer programs.
- Post-quarter ATM issuance, remaining authorized capacity, and resulting share-count dilution.