Energous Corporation (WATT) — Q2 2022 Form 10-Q
Business context and period: Unaudited results for the three and six months ended June 30, 2022. Energous develops WattUp RF-based wireless charging technology and reported a single wireless-charging-systems segment. Its market remains nascent, and revenue is limited.
Financial highlights
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $233,000 | $185,000 | $449,000 | $330,000 |
| Cost of revenue | $271,000 | $0 | $475,000 | $0 |
| Operating loss | $(7.06) million | $(11.02) million | $(14.22) million | $(19.54) million |
| Net loss | $(7.02) million | $(11.02) million | $(14.17) million | $(19.54) million |
| Loss per share, basic and diluted | $(0.09) | $(0.18) | $(0.18) | $(0.32) |
| Operating cash used | Not stated by quarter | Not stated by quarter | $13.45 million | $12.54 million |
Revenue increased 26% in Q2 and 36% for the six-month period year over year, primarily reflecting production-level systems sales. Cost of revenue began with those sales, resulting in gross losses of approximately $38,000 for Q2 and $26,000 for the first half. Net losses narrowed, while first-half operating cash use increased about 7%.
For the six months, research and development expense was $6.74 million (down from $10.69 million), sales and marketing was $2.77 million (down from $4.24 million), and general and administrative was $4.05 million (down from $4.94 million). Management attributed much of the declines to lower stock-based compensation and reduced headcount; 2021 included substantial PSU compensation expense.
At June 30, cash and cash equivalents were $35.67 million, down from $49.07 million at December 31, 2021. Current assets were $37.20 million and current liabilities $3.97 million. Total assets were $40.02 million, total liabilities $5.58 million, and stockholders’ equity $34.44 million. The filing reports no debt borrowings; lease liabilities totaled $2.34 million. First-half investing cash use was $113,000, and financing cash provided was $165,000, entirely from ESPP contributions.
Changes, outlook and risks
- Management said June 30 cash, together with anticipated revenue, was expected to fund operations through August 2023. The company expects it will likely need additional financing; availability and acceptable terms are not assured. No specific revenue or earnings guidance was provided.
- The company recorded $633,000 of severance expense related to the departure of its former SVP of Marketing and Business Development. It also reported accrued severance, principally relating to the former CEO, expected to be paid through August 2023.
- A May 2022 amendment extended the San Jose headquarters lease by three years. It created a $2.07 million right-of-use asset and lease liability; monthly rent beginning October 2022 is $58,903, subject to escalations.
- Dialog terminated its strategic alliance agreement after its acquisition by Renesas. The wind-down period runs through September 2024 for certain existing customer relationships, with exclusivity rights ended. Energous said it was moving supply-chain activities away from Dialog and developing internal capabilities; transition could cause delays, higher costs or reduced revenue.
- Revenue remains very small relative to operating costs and is concentrated: four customers represented approximately 88% of Q2 revenue and 69% of first-half revenue. Management identified technology commercialization, customer adoption, regulatory approval, competition, supply-chain disruption, COVID-19 effects and access to capital as material uncertainties.
- Subsequent to quarter-end, the Compensation Committee approved PSU grants for CEO Cesar Johnston on July 20, 2022; the Board also increased shares available under the inducement plan by 2 million. Disclosure controls were assessed as effective, with no material control changes reported.
Important facts for investors to verify
- Whether production-level sales and development-project milestones can grow into recurring, material revenue, and the profitability of those sales.
- Whether cash burn tracks the stated runway through August 2023, and the amount, timing and dilution or other terms of any additional financing.
- Customer concentration, order visibility, and whether the Dialog transition affects product supply, customer relationships, costs or revenue.
- Lease and severance payment schedules, and the future impact of equity compensation and potential share issuance on dilution.
- Progress on technical development, customer adoption and required regulatory approvals, including any effects from supply-chain or pandemic-related disruptions.