Energous Corporation (NASDAQ: WATT) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Energous develops WattUp radio-frequency wireless power technology, including chipsets, software, hardware and antennas for near-field and at-a-distance charging. Its business remains in development and early commercialization, with revenue primarily from customer product-development projects.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $201,364 | $61,500 | $531,389 | $237,350 |
| Operating expenses | $12.67 million | $7.62 million | $32.54 million | $24.66 million |
| Loss from operations | $12.47 million | $7.56 million | $32.01 million | $24.43 million |
| Net loss | $12.46 million | $7.56 million | $32.01 million | $24.36 million |
| Basic and diluted loss per share | $0.20 | $0.18 | $0.51 | $0.62 |
| Cash used in operating activities | Not separately stated | Not separately stated | $22.50 million | $19.44 million |
Revenue increased year over year but remained very small relative to operating costs. R&D and sales and marketing spending rose, while the quarter’s results also included $4.02 million of severance expense related to former CEO Stephen Rizzone. The filing does not present a meaningful gross-margin measure for the current periods.
At September 30, 2021, cash and cash equivalents were $28.28 million, down from $50.73 million at December 31, 2020. Current assets were $29.17 million and current liabilities $4.40 million. Total liabilities were $4.40 million, principally current lease liabilities and operating accruals; the filing reports no borrowings or other financial debt. Stockholders’ equity was $26.00 million.
Material changes and notable events
- Q3 revenue rose to $201,364 from $61,500; nine-month revenue increased to $531,389 from $237,350. Product-development project revenue accounted for 2021 revenue; no contract-services revenue was recorded in the first nine months of 2021.
- Q3 net loss widened to $12.46 million from $7.56 million. Nine-month net loss increased to $32.01 million from $24.36 million, while loss per share improved from $0.62 to $0.51, reflecting a larger weighted-average share count.
- Rizzone retired as CEO and director in July and left employment at the end of August. The separation agreement generated $4.02 million of Q3 severance expense, including $1.10 million accrued and unpaid at quarter-end. Cesar Johnston and William Mannina were acting CEO and CFO, respectively.
- Dialog, acquired by Renesas, notified Energous on September 20 that it was terminating the strategic alliance. A contractual wind-down continues through September 2024 for certain existing customer relationships, but the parties’ exclusivity rights ended. Energous said it would need to seek a replacement partner or develop internal capabilities.
- After quarter-end, Energous launched a new ATM program with up to $35 million of offering capacity. By October 31 it had sold 12,229,433 shares for $27.91 million gross and $27.06 million net proceeds.
Outlook, risks and contingencies
Management estimated that September 30 cash, anticipated revenue and October 2021 ATM proceeds would fund operations into November 2022. The company expects to pursue additional financing as needed; availability and acceptable terms are not assured. Management also said it expected its one-watt PowerBridge transmitters for commercial IoT applications to begin shipping in Q4 2021. The filing provides no quantified revenue or earnings guidance.
Key risks include limited commercial revenue and continuing losses, uncertain customer adoption and product-launch timing, the need for financing, and replacing Dialog’s manufacturing, distribution and commercialization role. COVID-19 disruptions were cited as having delayed potential customer adoption and product launches, with further effects uncertain. Revenue and receivables are concentrated among a small number of customers. Management reported no pending legal proceedings believed likely to have a material adverse effect and stated disclosure controls were effective as of September 30, 2021.
Most important facts for investors to verify
- Whether PowerBridge shipments and other customer product launches occurred as expected, and whether they produce recurring, material revenue.
- How Energous will replace Dialog’s manufacturing and distribution capabilities, and the implications of the alliance wind-down and ended exclusivity.
- Actual cash burn and the assumptions behind management’s estimated runway into November 2022, including subsequent financing needs.
- The impact of the ATM share issuance on dilution and remaining offering capacity; compare the 12.23 million shares sold after quarter-end with shares outstanding.
- Whether customer concentration, COVID-related delays and leadership transitions affect project milestones, collections or operating plans.