Energous Corporation — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; filed May 16, 2022. Energous develops WattUp RF-based wireless charging technology and related systems. Its revenue remains limited and is generated from product-development projects and production-level systems.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $215,961 | $145,065 |
| Cost of revenue | $203,249 | $0 |
| Gross profit / margin | $12,712 / approximately 5.9% | Not meaningful; no cost of revenue reported |
| Research and development | $3,527,146 | $4,591,244 |
| Sales and marketing | $1,613,590 | $1,794,212 |
| General and administrative | $2,027,520 | $2,287,396 |
| Operating loss | $(7,155,544) | $(8,527,787) |
| Net loss | $(7,152,718) | $(8,525,763) |
| Loss per share, basic and diluted | $(0.09) | $(0.14) |
| Operating cash used | $(6,356,971) | $(5,976,550) |
Cash and cash equivalents were $42.8 million at March 31, 2022, down from $49.1 million at December 31, 2021. Total assets were $44.4 million; total liabilities were $3.7 million, including $465,710 of operating lease liabilities. The filing reports no borrowings or other financial debt. Current assets were $43.5 million versus current liabilities of $3.6 million. Accumulated deficit was $343.6 million. Common shares outstanding were 77.1 million at quarter-end and 77.1 million as of May 11, 2022.
Changes and management commentary
- Revenue increased $70,896, or about 49%, principally from higher production-level systems revenue; cost of revenue rose to $203,249. Revenue remains small relative to operating expenses.
- Net loss narrowed by $1.4 million year over year, largely alongside lower operating expenses. R&D, sales and marketing, and G&A declined, primarily reflecting lower compensation and stock-based compensation, including lower headcount and awards that had vested or been forfeited.
- Operating cash use increased by $380,421 year over year despite the lower net loss, in part because noncash stock-based compensation was lower and working-capital changes affected cash flows.
- Management stated that cash on hand at March 31, together with anticipated revenue, was expected to fund operations through May 2023. The company expects to seek additional financing; availability and acceptable terms are not assured.
Outlook, risks, and unusual items
- The first end product using WattUp entered the market in 2019; Energous began shipping its first at-a-distance WattUp PowerBridge transmitters for commercial IoT applications in Q4 2021. The filing provides no quantified revenue or earnings guidance.
- Management describes the market as nascent and unproven. Commercial success depends on customer adoption, product feasibility and launches, regulatory approvals, complementary technologies, competition, and access to financing.
- COVID-19-related customer, supply-chain, and operating disruptions may delay adoption or affect sales. Inflation and supply-chain cost pressures are also identified risks.
- Dialog, acquired by Renesas, terminated its strategic alliance agreement in 2021. A wind-down period runs through September 2024 for certain existing customer relationships; exclusivity rights ended. Energous said it was moving supply chains away from Dialog and developing internal capabilities, with potential risks of delays, higher costs, or lower revenue.
- The company reported $909,873 of accrued severance expense related to former CEO Stephen Rizzone, expected to be paid through August 2023. It also accrued $225,802 under its executive bonus plan for Q1 2022, payable in Q2.
- Future lease payments were $470,120, and the company had a hosted design-software agreement requiring quarterly payments of approximately $233,000 through Q2 2024. Management said ordinary-course disputes and claims were not expected to have a material adverse effect; no material pending legal proceeding was identified.
- Two customers represented approximately 53% of Q1 2022 revenue, and two customers represented 63% of accounts receivable at quarter-end, indicating customer concentration.
Important facts for investors to verify
- Whether customer programs convert into recurring, meaningful production revenue and improve gross margins.
- Whether the stated cash runway through May 2023 remains achievable given operating cash use and the need for potential additional financing.
- Progress and costs of replacing Dialog-related supply-chain and commercialization functions, including obligations during the wind-down period.
- Customer concentration, receivable collection, and the timing and scale of production-level shipments.
- Regulatory approvals, technical performance in commercial settings, market adoption, and exposure to COVID-19, inflation, and supply-chain disruptions.