Energous Corporation

Good day and welcome to the Energis Corporation Full Year 2023 Financial Results. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Craig McPhail, Investor Relations.

Please go ahead. Thank you 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 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 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 and 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. Please note that we will not be taking questions on this call. Investors are invited to submit any questions to ir at energist.com. Now, I would like to turn the call over to Mallory Barak, Principal Executive Officer and CFO of Energy Corporation. Please go ahead, Mallory.

Thanks, Craig, and thank you all for joining us. I'm here with Gianpaolo Marino, our Vice President of Business Development and Marketing. I know our recent leadership change announcement is on your minds, and I will say a few words about that before we get into the business update and review of the 2023 results. I want to start by reiterating that we are thankful to Cesar for his contributions to EnerGIS, and we wish him well in the future. Our board has initiated a search to identify a new CEO with the support of a search firm. While the search process is underway, the board has established an office of a chair composed of myself and Raynette, our board chair, to take on the CEO duties. Together, we will oversee strategic planning and execution. As our interim principal executive officer, I will take the lead on operational matters, working closely with John Palo and our senior leaders. Raynette will provide oversight and support from a board perspective. While I have been in my role as CFO of Energist for just a few months, I bring many years of experience as CFO of high growth and publicly traded technology companies. Since joining in January, I've had the opportunity to collaborate closely with our board and senior team, and I'm confident in our ability to continue to deliver on our mission and take advantage of the large market opportunity for us in wire-free low-power charging at a distance. We believe the important thing to take away from this announcement is that our board, our leadership team, and the whole Energist team are excited to move forward and build our next phase of growth in a strategic, deliberate way. We are intently focused on capitalizing on our first-to-market advantage and prioritizing protection of our intellectual property portfolio while also improving operational efficiencies as we work toward enabling the next generation of wireless power networks. And with that, I will turn it over to John Palo to provide a business update.

Thank you, Mallory. energies continues to successfully execute its smart iot centric strategy initiated in early 2022 when we repositioned and retargeted the company to develop iot power charging product at a distance using the intellectual property regulatory knowledge and market experience developed over the years and backed by our 200 plus patent portfolio providing energies with a significant competitive advantage as we work to develop and build a market for a new generation of technology. Our strategy has been focused on enabling new, high-value IoT markets, such as transportation and logistics, and retail IoT, with the introduction of Energes wireless power networks. These networks allow our customer greater placement freedom, mobility, and lower installation costs by removing wires and batteries across RF tags and sensor application, typically within a cloud-enabled environment. As is common when adopting a new technology, our customer initiated wireless powered network technology evaluation and then approved proof of concept installation, or we typically call POC. These engagements not only allow business to understand and test the application of the technology to their specific use cases, but also once seeing it deployed and validating the effectiveness of the technology, oftentimes leads to discussion about expansion opportunities and additional application within the large companies with whom we are currently working. Understanding how Energes is progressing with its current customers and its addition of new strategic customers through these POC or trial installation phases, is an important indicator of our global adoption of energy technology and the timing of future revenue. This is why we believe that quarterly updates on the number of POC customers are an important part of our stories and good indicator of our growth. Energy's one watt power bridge, we typically call EGLE, is the only advanced and regulatory certified product for wireless power network installation available on the market today worldwide. We will also be launching our new introduced two watt power bridge condor product in early Q2. At the end of Q3, 2023, we announced roughly 30 POC trials with multiple customers worldwide across a range of industries. At the conclusion of 2023, customer interest in our product accelerated as the number of companies in our focused market increasingly understood the value proposition of Energia's wireless power network, which are designed to help business teams implement more cost-effective solutions that also serve to solve operational bottlenecks due to the high cost of service and maintenance by enabling battery-less BLE tags and center solutions and drive automation improvements, improve visibility, and improve control throughout global supply chain, where even incremental improvements can generate significant value. Through this engagement, we are also becoming highly efficient on IoT wireless power network installation as we gain significant experience and knowledge of the technology system capabilities and related markets. These capabilities enable energies to provide our customer with insight and recommendation on best installation practices for our technology to yield best results. As such, we recently announced our partnership with the global installer Velocity as a preferred system integrator partner and worldwide value-added reseller for our technology. Velocity will deploy advanced enterprise technology solution to some of the largest brands in the world provides expansion opportunity into new markets, application, and customer for NRGIS wireless power technology across retail, healthcare, logistics, warehousing, and more. Velocity has installed NRGIS wireless power technology, including 1-watt and 2-watt power bridges transmitter systems, and also installed Williot IoT Pixel Tags at its Innovation Lab in Riverside, Missouri. to showcase advanced use cases across multiple markets and applications. We continue to build momentum in our market and sales development since pivoting to an IoT strategy in 2022. We started with two POCs in Q3 2022. We grew to 10, 14, and 20 from Q4 2022 through Q2 2023, respectively. As of Q4 2023, I'm pleased to report that we have 38 POCs across the U.S., Europe, and Asia, across multiple markets covering retail, industrial, logistic, and supply chain application. It is important to note that few of these POCs are now successfully completed and we are now moving into a deployment sale phase. Based upon a growing operational need, we find that many of our customer trials are focused on delivering real-time asset tracking and supply chain visibility in cold chain application for large Fortune 500 organizations, enabling their ability to monitor perishable assets in real time across their supply chain operation. This is a tremendous technology improvement compared to the conventional RFID technology, where we can now enable full traceability in an automated, labor-efficient way. With its robust intellectual property portfolio and proprietary technology, Energest is ideally positioned to be the emerging leader to support and execute our smart IoT strategy across wireless powered network with a solution that we believe addresses key operational pain points from many large organizations. We remain encouraged by the growth in POC trials, which validates this leadership position and attractiveness of our technology across different markets. Our product roadmap supports both 1-watt and 2-watt power bridges with a family of advanced proprietary EN4100, EN3210, and EN2223 semiconductor devices. Additionally, as we move forward, we will evolve our roadmap to support the future 15-watt regulatory certified market in the U.S., which will open more markets for our wireless power technology. Strategic partnerships. within the wireless power ecosystem play an important role in facilitating rapid and more expansive deployment. Today, we're working closely with 18 technology partners, two distribution partners, and four IoT system integrators partners, all leaders in their respective segments. We expect to engage additional partners as we progress through 2024. On December 13, 2023, we announced our partnership with Identiv, a global system integrator, with the specific objective of targeting real-time asset tracking and inventory control for industrial, logistic, and retail applications. In January of this year, we attended an RF show in New York. This conference brings together key companies in varying fields of retail IoT and its ecosystem. In summary, Energest continues to execute on its new go-to-market strategy and is making clear progress as we work to reposition and retarget the company on smart IoT application. Energest's smart IoT strategy is generating a great deal of interest, as evidenced by our 38 POC trial installation, where our customers have communicated back to us that they understand the clear value offered by our IoT wireless power network.

Thanks, Giampaolo. Earlier today, we issued our earnings release announcing the operating and financial results for the year ended December 31, 2023. Focusing on the GAAP financial statements, our 2023 recognized revenue was approximately half a million dollars versus the 0.9 million dollars reported in 2022, representing a decrease of approximately 44 percent versus the prior year. Although revenue declined, our cost of revenue in 2023 was approximately $0.3 million, yielding a positive 41% gross margin versus the negative 50% gross margin reported in 2022. The 2023 cost of revenue includes an inventory write-down similar to that recorded in 2022 And despite this additional recorded cost, the year-over-year change represents a significant improvement in gross margins versus last year. Total 2023 operating expense, excluding severance, decreased by approximately $3.5 million to $21.9 million from the $25.5 million in 2022. Research and development expense decreased by approximately $1.7 million in 2023 to $10.8 million versus $12.5 million incurred in 2022, primarily attributable to a reduction in stock-based compensation of half a million dollars, a decrease of half a million dollars related to lower consulting, third-party, and professional service fees, a $0.4 million reduction in engineering supplies, components, and chip development due to project timing, a $0.2 million related to reduced regulatory testing and fees, and $0.1 million of lower postage-related costs. Sales and marketing, general and administrative, SG&A expenses for 2023 and 2022 are were $11.1 million and $12.9 million, respectively. The reduction of approximately $1.8 million is primarily due to a $1.5 million reduction in personnel-related and stock-based compensation costs, a $.4 million decrease in sales and marketing-related expenses, an approximate $.2 million reduction in general and administrative costs, and a decrease in insurance premiums and board fees of 0.2 million, partially offset by increased costs relating to legal fees, investor relations, and corporate expenses of approximately half a million dollars. Severance expenses decreased by approximately 0.4 million to 0.4 million dollars in 2023. The GAAP-reported net loss for 2023 was $19.4 million versus a loss of $26.3 million in 2022. We feel it's valuable to share an adjusted net non-GAAP loss for 2023 given the level of non-cash-related and extraordinary expenses incurred by the company. After adjusting the 2023 gap net loss by non-cash-related expenses such as depreciation, amortization, and stock-based compensation totaling approximately $1.8 million, as well as extraordinary expenses such as severance expense of $0.4 million, which includes the associated stock-based compensation expense, and by $0.6 million representing the offering costs related to the warrant liability, offset by the change in fair value of the warrant liability of $2.5 million. The 2023 adjusted net loss was approximately $19.1 million, as compared to the adjusted non-GAAP loss reported in 2022 of $22.6 million. reflecting a $3.5 million improvement year over year. Shifting over to the balance sheet and cash flow, we ended 2023 with $13.9 million in cash and remained debt-free. During 2023, we raised approximately $4.2 million through the ATM to supplement our working capital. In addition, we generated approximately $2.8 million in net proceeds through the sale of common stock and prepaid warrants, and approximately half a million dollars from the collection of accounts receivable. And we continue to focus on opportunities to improve cash flow through sales, improving gross margins, as well as reductions in spending. In closing, I would like to say thank you to all our shareholders, stakeholders, and the NRGIS team members. We look forward to updating you on the company's progress again next quarter, and this concludes our year-end 2023 update.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.