This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good afternoon, and welcome to the Energist Corporation third quarter 2021 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Matt Sullivan, of Investor Relations. Please go ahead.
spk02: Thank you, Anthony, 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, whether in prepared remarks or during the Q&A session, are subject to inherent risks and uncertainties that are detailed in the company's filings with the Securities and Exchange Commission. Except as otherwise required by federal securities laws, Energist disclaims any obligation or undertaking to publicly release updates or revisions to the forward-looking statements contained herein or elsewhere to reflect changes in expectations with regard to those events, conditions, and circumstances. Also, please note that during this call, Energist 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. Now, I would like to turn the call over to Cesar Johnston, Acting CEO of Energist. Please go ahead, Cesar.
spk01: Thanks, Matt. Good afternoon, and welcome to the Energist 2021 Third Quarter Conference Call. Joining me today is Bill Manina, our Acting Chief Financial Officer. The third quarter of 2021 was significant in energies for several key reasons. Number one, we continue to sharpen our vision for the company with a focus on far-field technologies and the deployment of wireless power networks. Number two, and this is very important, we receive FCC approval for our one-watt power bridge transmitter technology for active energy harvesting power transfer at any distance, no distance limitation. And number three, we establish new partnerships with IoT market leaders that will drive the demand for wireless power delivered at a distance into 2022 and beyond. We at Energes are at an important inflection point that we believe will move the company into the next phase as we leverage the significant and accelerated investments being made by a number of companies in low-power edge devices, including electronic shelf labels, retail tags, IoT sensors, and low-power edge computing. We are gaining recognition as a leading player in the development of RF power transmission semiconductor devices for deployment of a new generation of wireless power networks. Our vision of RF power transmission at a distance within the context of market needs and regulatory constraints continues to evolve and is driving development and availability of our WADA power bridge transmitter solutions at 1 watt and five and a half watt conducted power. We recently announced FCC approval for our one watt solution, which complements our earlier European Union regulatory certification for unlimited distance wireless charging. Given this positive traction, we are pleased to share that we have started production of our one watt WADA power bridge transmitters to fulfill orders for our first wireless power network customer with deliverables beginning in Q4 of 2021. We believe that our wireless power networks would broadly serve the power needs of the IoT ecosystem, where wireless power networks will support numerous receiver devices in multiple vertical market segments. from retail to industrial to healthcare with their related tags, sensors, and CPUs. When receiving power wirelessly from an energy-powered network, these receivers can be deployed with smaller batteries and even with no batteries at all, leading to greener, lower cost, and easier to maintain IoT deployments. As an example, IoT wireless power receivers could support artificial intelligence processing at the edge of an IoT network for audio or video processing, improving device uptime, polling cycles, and timeliness of data flows. Currently, many new features of IoT devices struggle to be implemented due to the limits of ambient energy harvesting. Their power demands and battery depletion cycles Injecting power wirelessly into these environments can greatly improve IoT device performance and deployment feasibility. Looking at our financial performance, we are pleased to report that third quarter revenues rose to $201,000 compared to $61,500 in the 2020 third quarter. Sequentially, third quarter revenues were up from $185,000 in the second quarter. Bill will provide a more detailed breakdown of our financial results, including our balance sheet, which we recently further strengthened through our previously announced ATM financing. Now for an update on our operations. Our search for a CEO continues, and we have no immediate updates. In August 2021, and now going into our agreement with Renesas, Renesas closed their previously announced acquisition of Dialog Semiconductor. And as a consequence, Energes was notified during the quarter that Renesas wished to amicably terminate our existing agreement with Dialog. Our agreement provides for an orderly transition upon notice of termination, and we have begun transferring manufacturing operations back to our company for the four energy devices that were part of the agreement, namely the EN4100, which is our transmitter, the EN3210, our one-watt power amplifier, the EN2223, and the EN2210 receivers, which are all CMOS devices. I would like to point out, and it's important to note, that these four devices were 100% designed and engineered by ENERGYS. And we own all of the IP, and we have exclusive rights to them. Now, why is it important to point this out? Because as designers and the team that actually engineered these devices, we have deep technical knowledge of them, and we have a deep understanding also of the dialog processes, which will allow for a smooth transition of packaging and test back to energies. We will use our existing production and test capabilities, which we employ today for other devices in our portfolio, and which, by the way, were not part of the dialogue agreement. Furthermore, the production foundry that these devices are fabricated at is a third-party company with whom both dialogue and energies have independently had long-lasting business relations. Simultaneously, on the sales support side, the Energes team has been deeply engaged with dialogue on potential customer opportunities, providing technical sales and business support to our joint customers, and the Energes team has now direct ownership of the full customer funnel. In summary, we do not expect a negative material impact to our business as we transition manufacturing and sales, and as we complete the business transition, we expect that working together with the Renesas Dialog team at the transfer of the operations will proceed smoothly. Now, moving on the technical side, we would like to provide you more background of our WADA power transmitters and our vision to be the backbone for WADA-based wireless power networks, which we believe represents a significant market opportunity for the company, and we're very, very excited about it. During the third quarter, we strengthened our position supporting the application of our active harvesting technology. WattApp wireless power networks operate in a similar architectural manner as communication networks by deploying multiple transmitters across a given power transmission area. Energia's WattApp power transmitters merge our power network needs with communication networks via our VLE link. This results in a transmission device, in this case once more PowerBridge, that can be deployed in a ubiquitous manner to immediately build what-app wireless power networks supporting an ecosystem of multiple types of IoT received devices simultaneously receiving multiple levels of power. As an example, IoT-connected devices with varying power needs, such as stacks and sensors, can be installed in retail, industrial, and healthcare markets, adding to a potential total addressable market of 30 billion devices by the year 2025, as stated in the report by Estatistas. Statista's Internet of Things, and non-IoT active device connections worldwide from 2010 to 2025. In addition to the first achievements of production of our one-watt power bridge transmitters, we mentioned earlier, we recently announced its availability via a developer kit. which allows designers of IoT edge devices to rapidly explore the benefits of deploying Energia's WADAP-based wireless power networks in their solutions. Furthermore, our WADAP Power Hub technology, which has been developed on a common technology platform and approaches our WADAP power bridge transmitters, received European Union certification back in May 2021. Our RF semiconductor devices, along our WADAP software developer kit and advanced antennas are the key ingredients to build our WADAP-powered bridge transmitters, which can be deployed to complement, again, as previously discussed, any communication infrastructure and allow us to gather IoT receiver data by effectively concentrating valuable and monetizable data into a cloud infrastructure. For example, Our water power bridge is easily attached to a Wi-Fi access point, leveraging our customers' existing investment to provide rapidly deployed and consistent power coverage if desired. Our VLE communications interface can be leveraged to provide additional data communication channels, even performing data concentration and data relaying to Wi-Fi APs and IoT devices. Now a quick update on our partners. Looking ahead, we believe that Engex is now positioned to be a significant player in the development of IoT wireless power networks. We continue to productively partner with multiple companies that share and complement our vision and technologies. We have previously discussed and announced our partnership with E-Peace, E-Ink, Atmosic, and Technology, and we are productively uniting our individual efforts to leverage our collective investments. This quarter, and this is a very important and we're happy to announce, a new partnership with Williott. The collaboration positions energies to support Williott as the leader in the deployment of ultra-low power smart tags, or as they call it, IoT pixels. which will revolutionize the extraction of relevant and monetizable data into the Williott Cloud. Williott's technology is an important development in the real-world deployment of next-generation RFID-like networks, providing a new emerging market. On the regulatory side, we continue to see progress internationally, and we are opening new markets for wireless power transmission. As previously discussed in our previous earning calls, we see significant advantages in the 900 megahertz band compared to other bands, which are more crowded and suffer from higher propagation losses, which enable energy-as-what-app solutions, substation technology advantages in both efficiency and range. Additionally, we're seeing steady progress at the International Telecommunications Union, ITU, towards full global allocation of wireless power transmission, including the 900 megahertz band. And in Japan, we're seeing the Broadband Wireless Forum continuing its progress on RF-based wireless power transmission. We continue our engagement and our discussions with the FCC, and we, with industry collaboration, are part of an expert filing that now is focused on obtaining regulatory approval of higher performance next-generation systems. Finally, we're pleased to share with you that earlier today, we announced that we have received two CES awards. The first for embedded technology, and the second for sustainability, ECO design, and smart home. These awards recognize our wireless power network technology. Energies will present at CES 2022 in January, demonstrating the award-winning WADA power bridge transmitters, and with multiple partners to display an end-to-end WADAP energy harvesting ecosystems of transmitters and receivers and all operating IoT and edge sensors, including CPUs as well. We will also include demonstrations of our power hub and our near-field technologies. In summary, Our water power bridge at a distance charging transmitters are ready to support the advent of the IOTH as we open the U.S. and EU markets for wireless powered networks. I will now turn the call over to Bill Manina, our acting CFO. Bill.
spk04: Thanks, Cesar. As you saw at the close of the market today, we issued our Q3 earnings press release announcing the operating and financial results for our fiscal 2021 third quarter ended September 30th. For the third quarter, we recognized 201,000 in revenue compared to 185,000 in the prior quarter and approximately 62,000 in the same quarter of last year. GAAP operating expense for the third quarter was 12.7 million, approximately 1.5 million higher than the 11.2 million of operating expense last quarter and approximately $5 million higher than the third quarter of last year. The increase compared to the prior quarter was largely due to a $4 million severance accrual related to the resignation of our former CEO, which was partially offset by a $2.3 million decrease in stock compensation expense. Together with a small increase in product development expenses, the severance accrual accounted for most of the increase compared to the same quarter of last year. Regarding the severance accrual, I would like to note that only $1.1 million of the $4 million accrual remained payable at the end of Q3 2021. Year-to-date, our gap operating expense was $32.5 million, approximately $7.9 million higher than the $24.7 million of year-to-date gap operating expense in fiscal 2020. The year-over-year increase was primarily due to the severance accrual for our former CEO and an increase in stock-based compensation. The net loss for the third quarter on a GAAP basis was $12.5 million, or a $0.20 loss per share on 63 million weighted average shares outstanding. This compares to an $11 million net loss in Q2 of 2021, or a loss of $0.18 per share and a $7.6 million net loss or loss of 18 cents per share in Q3 of 2020. Our weighted average shares were 41.9 million shares in Q3 2020. The year-over-year increase in the share count was mainly due to the completion of our at-the-market offering, or ATM, in the fourth quarter of 2020, which raised an additional 38.8 million of cash and added 18.9 million shares. Now for a non-GAAP view of our numbers for the quarter, as we believe adjusted or non-GAAP reporting provides a useful comparison for investors, especially for a company at our stage, when used together with GAAP information. Excluding approximately $4 million of severance, approximately $1.9 million of stock compensation, and approximately $69,000 of depreciation expense, from our total Q3 GAAP operating expense of $12.7 million, net non-GAAP operating expense was approximately $6.6 million, a decrease of approximately $263,000 compared to the prior quarter and an increase of approximately $1.1 million compared to Q3 of last year. Non-GAAP operating loss for Q3 was $6.4 million and approximately $279,000 lower loss compared to Q2 and an approximately $930,000 higher loss when compared to Q3 of last year. As a reminder, Q3 of 2020 had reduced spending due to the business disruption, lower travel expense, et cetera, due to the COVID pandemic. Non-GAAP engineering expense was $3.5 million for Q3. an approximately $56,000 decrease versus the prior quarter and an approximately $456,000 increase compared to the same period last year. The year-over-year increase was mainly attributable to higher chip design costs and engineering supplies costs. Non-GAAP SG&A expense was $3.2 million, a decrease of approximately $200,000 versus the prior quarter and an increase of approximately $600,000 compared to Q3 last year. The decrease compared to the prior quarter was mainly due to the annual meeting related expenses in Q2. The increase over the prior year's quarter was mainly due to an increase in headcount and consulting costs in sales and marketing and also higher recruiting costs. Year to date, our total non-GAAP expense was $20 million. $1.9 million higher than the $18.1 million of year-to-date non-GAAP expense in fiscal 2020. The increase was mainly due to increases in chip design costs, sales and marketing personnel costs, and recruiting costs. Turning to the balance sheet, we ended Q3 with $28.3 million in cash and remained debt free. Also, as we mentioned in our earnings release, In Q4, we have raised gross proceeds of $27.9 million in cash from our ATM financing, which we announced in the filing with the SEC last month. We expect our Q4 net non-GAAP operating expense run rate to remain in our current range, averaging approximately $6.6 million per quarter. Overall, excluding one-time items, our 2021 non-GAAP operating expenses should reflect an approximately 10% increase over fiscal 2020 non-GAAP expenses. I will now turn the call back to Cesar.
spk01: Thank you, Bill. Operator, we would like now to open up the call for questions.
spk00: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Suji Del Silva with Roth Capital. You may go ahead.
spk05: Hi, Cesar. Hi, Bill. Question on the Renaissance Agreement and the transfer of the four products back. What are the manufacturing cost and budget business model implications of the way you sell the products as that transfer happens? Just to understand the difference in the go-forward model.
spk01: Yeah, so you're asking some details of the agreement, definitely. As far as the transfer, we own test lines with some local partners. Those are being done as we speak right now, and that includes the movement of wafers, devices, and hardware, related hardware, and the setup of those in our test lines, which, by the way, are in parallel with some of the other programs that we have. related to GAN and CMOS PA controllers. Now, as far as the costs are concerned, at a high level, there was an agreement with Dialog where we shared the cost, and that extra expense that Dialog will share with us is no longer there, so we will pretty much add that to our overall revenue. Any other questions?
spk05: Yeah, sure. Yeah, that does. And then looking at these two partners you have, Willie, and technology, what are the next steps in those partnerships and the go-to-market for customers, and what do they bring to Energist in terms of kind of market reach and traction?
spk01: Yes, that's a very good question. There are two types of partners that we have. There are partners that are integrators, okay, or systems partners, in this case technology. And what they bring and they add is they add the potential to further our capabilities in the engineering side and development side to support other potential customers, specifically here in the European Union. So it's an extension of our team, our AE team, our FAA team. And they are focused today on training potential customers and also helping us find new customers that will need access to our development kits. So that's the technology side. Now, when it comes to Williott, Williott is a different type of partnership. in such a way that we have a very unique and very special solution targeted to active power transmission. Okay, targeted at being able now to open up a new market of low-power tags that are very, very similar to RFID but are way much more smarter because they have very specific, very low-power CPU-based devices with BLE interfaces that are extremely low-cost. So together, we are opening up a brand-new IoT vertical market that was nonexistent, and we are – Through our very special transmitters, in this case our 1-1-1-1 transmitter, we are now able to deploy wireless power networks with no distance limitations across any potential industrial, retail, or healthcare floor, and has been able to piggyback on Wi-Fi networks and deploy together systems of that type. Now, as far as what are the next steps with them, we work very closely together for months in the development of the technology. We certainly will continue to move forward as we progress on this market on the technology side. And on the business side, there are multiple potential customers that we're looking at that we will be opening up and doing POCs as we move forward. And as we prove and show the technology those customers will eventually use that to track devices and being able to find devices anywhere in all those three markets that I described to you, industrial, healthcare, and retail.
spk05: Okay. Great. Thanks, Cesar. And then last question on the FCC approval there at any distance. What are the implications of that from a technology kind of differentiation perspective, and what are the market implications of that? Is it really the energy? tags you can now do across a retail or other setting, or any color there would be helpful.
spk01: Great question. As you know, we've been pushing standards for wireless power networks for years. We've been pushing the technology on that area. And in the case of the 1-watt systems, we have a unique solution that allows us to pass Part 15 which we have now demonstrated, and by virtue of that have no distance limitation. And by using multiple transmitters, again, by spreading those along the lines of Wi-Fi access points or even within shelves and different places in a given plant or industrial site, we can actually have no limit on distance.
spk05: Okay. All right. Thanks, Cesar.
spk01: Thank you.
spk00: Our next question comes from John Hickman with Leidenberg. You may go ahead.
spk03: Hey, I have two questions. One is, I think you mentioned that you were setting yourself up for deliverables for Q4 of this year. Does that translate into chip sales for this quarter? Hi, John. How are you?
spk01: I'm good. Glad to talk to you today. Yes, and what we're doing is we have chips and we have actually systems that have been integrated into transmitters. So we are ramping up contract manufacturing lines that allow us to build those in such a way that we can fulfill the orders that we have at hand right now. So it's a combination of the chips, and that certainly has – value on it, but we also benefit from the fact that we're putting those transmitters together, which adds an extra value on top of that.
spk03: Okay. So were there any product sales in Q3, or was that all like R&D?
spk01: No, definitely. I mean, we have evaluation kits, and that's part of the part of the sales that we've done. And we continue to do, and we've been doing that for a while.
spk03: Okay. And my last question is, so now you're going to have to build a sales and marketing organization? Yeah. Okay. Out of the picture.
spk01: Great question. We always get those questions. So we do have a marketing and sales organization. Okay. It's always been there and they've always been connected and engaged with dialogue. Certainly the fact that dialogue was there, added to what we have, but the relationship has always been that we operated similar to a business unit where the contacts came through dialogue and our team here took ownership and partnered with them, but we always took the lead as we were the ones that have the knowledge of the technology and the operation and could close the deals. So we do have that team and that team is still intact here. Now, the question is, will we need to add further in the future? Yeah, as we grow the business, we will definitely consider that.
spk03: Okay. So just are you going to look around for another partner-like dialogue, or are you going to just do the manufacturing process?
spk01: At this point in time, we can do the manufacturing. I mean, we've been enabled for years. Again, if you recall during the presentation, I mentioned that only a limited number of devices were with Dialog. We have other devices, including our GAN line of products and other controllers. So we are perfectly capable of doing that, and we'll continue to do that. And now, certainly, we will evaluate if other opportunities show up, but it's a matter of... of whether the partnership, the potential partnership makes sense or not to energies.
spk03: Okay.
spk01: Thank you. Thank you.
spk00: This concludes our question and answer session. I would like to turn the conference back over to Cesar Johnston for any closing remarks.
spk01: Thank you. We would like to thank our investors and partners for their ongoing support. We're making the future of wireless power networks a reality and have started ramping up production and delivery. We will continue working to enable new markets via our regulatory efforts, while we will also continue to push our technologies to deliver higher power levels to open up future opportunities, resulting in new potential revenue streams. We look forward to updating you next quarter. Thank you.
spk00: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer