Business Overview
Energous Corporation (NASDAQ:WATT) is a pioneering force in the wireless power industry, revolutionizing the way we charge and power the growing universe of Internet of Things (IoT) devices. With its innovative wireless power networks technology (WPNT), the company is poised to enable the next generation of seamless, wire-free connectivity across a wide range of industries.
Energous has developed its WPNT, consisting of semiconductor chipsets, software controls, hardware designs, and antennas, that enable radio frequency (RF)-based charging for IoT devices. The company's WPNT has a broad spectrum of capabilities, including near-field and at-a-distance wireless charging, with multiple power levels at various distances. This technology is designed to facilitate the deployment of the expanding IoT ecosystem, which is forecasted to grow to 29.4 billion connected devices worldwide by 2030, according to Statista.
The initial IoT applications Energous is targeting include RF tags for asset tracking and cold chain applications, electronic shelf labeling (ESL), and IoT sensors for retail, industrial, healthcare, and logistics markets. The company's innovative approach to wireless charging sets it apart, as it is developing solutions that charge IoT devices using RF technology.
Energous has developed and released multiple transmitters and receivers to production, including prototypes and partner production designs. The transmitters vary based on form factor, power specifications, and frequencies, while the receivers are designed to support a wide range of wireless charging applications.
Financials
In 2023, Energous reported annual revenue of $0.5 million, a decrease of 44% compared to the prior year. Despite the revenue decline, the company's cost of revenue in 2023 was $0.3 million, yielding a positive gross margin of 41% compared to a negative 50% gross margin in 2022. This significant improvement in gross margins was achieved despite an inventory write-down similar to the one recorded in 2022.
Total operating expenses, excluding severance, decreased by approximately $3.5 million to $21.9 million in 2023 from $25.5 million in 2022. Research and development expenses decreased by $1.7 million, primarily due to reductions in stock-based compensation, consulting and professional fees, engineering supplies, and regulatory testing costs. Sales and marketing, as well as general and administrative expenses, decreased by $1.8 million, driven by lower personnel-related and stock-based compensation costs, reduced sales and marketing activities, and a decrease in insurance premiums and board fees.
Energous reported a GAAP net loss of $19.4 million in 2023, compared to a loss of $26.3 million in 2022. Adjusting for non-cash and extraordinary expenses, the company's 2023 adjusted net loss was approximately $19.1 million, a $3.5 million improvement compared to the adjusted non-GAAP loss of $22.6 million in 2022.
The company's annual operating cash flow was -$19.2 million, and its annual free cash flow was -$19.4 million in 2023.
Quarterly Performance
In the first quarter of 2024, Energous reported revenue of $0.1 million, consistent with the same period in the prior year. The company's cost of revenue was $0.1 million, resulting in a gross margin of 0% for the quarter.
Research and development expenses for the first quarter of 2024 were $2.3 million, a decrease of 24% compared to the same period in 2023. This reduction was primarily due to lower employee compensation, engineering components and supplies, legal fees, test development costs, and miscellaneous office and facility expenses.
Sales and marketing expenses for the first quarter of 2024 were $0.9 million, a decrease of 28% compared to the same period in 2023. This decrease was mainly driven by lower payroll costs, stock-based compensation, and marketing, tradeshow, and public relations expenses, partially offset by an increase in consulting expenses.
General and administrative expenses for the first quarter of 2024 were $1.8 million, a decrease of 6% compared to the same period in 2023. The reduction was primarily due to lower stock-based compensation, legal fees, and miscellaneous travel, facilities, and office expenses, partially offset by an increase in franchise tax.
Energous reported a net loss of $6.6 million in the first quarter of 2024, compared to a net loss of $6.7 million in the same period of 2023.
Liquidity
As of March 31, 2024, Energous had $10.7 million in cash and cash equivalents and remained debt-free. During 2023, the company raised approximately $4.2 million through an at-the-market (ATM) offering and generated $2.8 million in net proceeds from the sale of common stock and prepaid warrants, as well as $0.5 million from the collection of accounts receivable.
The company expects that its current cash and cash equivalents, together with additional anticipated proceeds from the ATM sales agreement during 2024, continued cost and expense reductions, and collections generated by anticipated revenues, will be sufficient to fund its operations through May 2025.
Outlook
Energous has not provided specific financial guidance for the upcoming year. However, the company remains focused on executing its Smart IoT-centric strategy, which has been centered on enabling new high-value IoT markets, such as transportation, logistics, and retail IoT, through the introduction of its wireless power networks.
The company has reported significant progress in its customer engagement, with the number of proof-of-concept (POC) trials growing from 2 in Q3 2022 to 38 as of Q4 2023, spanning the U.S., Europe, and Asia across multiple markets, including retail, industrial, logistics, and supply chain applications.
Energous has also announced strategic partnerships with key players in the wireless power ecosystem, such as Velociti, a global installer and value-added reseller, and Identiv, a global system integrator, to facilitate the rapid and more expansive deployment of its wireless power technology.
Risks and Challenges
While Energous has made significant strides in its strategic repositioning and customer engagement, the company faces several risks and challenges that investors should be aware of:
1. Regulatory Approvals: The company's ability to commercialize its wireless power technology is dependent on obtaining necessary regulatory approvals in various markets, which can be a time-consuming and uncertain process.
2. Adoption and Commercialization: The market for Energous' wireless power solutions is still nascent, and the company's success is dependent on customer acceptance and the successful commercialization of its technology.
3. Competition: Energous faces competition from other wireless power technology providers, as well as traditional wired charging solutions, which may impact the company's market share and pricing power.
4. Intellectual Property Protection: The company's ability to maintain and defend its extensive patent portfolio is crucial to its competitive advantage and long-term success.
5. Liquidity and Funding: While Energous believes its current cash resources are sufficient to fund operations through May 2025, the company may need to seek additional financing in the future to support its growth and development efforts.
Conclusion
Energous Corporation is at the forefront of the wireless power revolution, leveraging its innovative WPNT to enable the next generation of seamless, wire-free connectivity for the rapidly growing IoT market. Despite facing some challenges, the company has made significant progress in its strategic repositioning, customer engagement, and cost optimization efforts, positioning it well to capitalize on the vast opportunities in the wireless power industry. Investors should closely monitor Energous' continued execution and the company's ability to navigate the regulatory landscape and drive widespread adoption of its technology.