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Friday, August 10, 2018

Energous Raising $75 Million

In addition to their standard 10-QEnergous submitted a Form S-3 today, indicating that they are looking to sell up to $75 million of equity in the company, coming barely 6 months after their earlier $40 million raise (from a 2015 S-3 and then an amendment in January 2018). With $37m in the bank as of last month, and a burn rate of near $13m a quarter and statements they will increase R&D spend, I had guessed they'd be raising soon but thought it might be nearer the end of the year. It seems they think now's the right time, perhaps before negative press catches up with them and sours the public. They do not have to raise all this at once, it can be done over time, but given they've set the price at $14.05 I expect much will be done soon.

This likely gives the company another 5 to 6 quarters of operation, which in conjunction with cash in the bank will keep them going until mid 2020. Given that around $4m of equity based compensation goes to the team per quarter, that's another $32m or so of extra cash in their pockets.

Interestingly this comes just after I heard reports of the CFO presenting at Oppenheimer, and apparently he was awful - weak, unenthusiastic, and got ripped to pieces by multiple tough questions after his talk. At least Rizzone is enthusiastic about what he's doing!

A few days ago the company indicated it had revenues of $200,000 per quarter and its major product release was still 18 months out. The 10-Q shows they have debts of just short of $200m to get to this point. Hardly compelling for a company with a $350m market cap.

Last time Raymond James acted as distibutor and made $1,000,000 from the sale (2.5%). Who's making the money this time around? The gravy train keeps rolling for at least another two years...


Wednesday, August 1, 2018

Energous Finally Questioned On Continuous Delays and Poor Performance on Earnings Call


You have no revenues and it’s been quarter-after-quarter and you're not doing any business, so why don’t you just come out and say it’s not working?


Every quarter Energous does their earnings call as publicly traded companies do. And every quarter they talk about the great future, and Wireless Power 2.0 (now at Phase 3.0!), and how next year is the breakout year, and the great game changing product is only 18 months away, perpetually. And after that, the four analysts that are selected each ask a rather boring question, ignoring things like low revenues, excessive executive compensation, departing founders, and missed product deadlines which the CEO gives a bland answer to, and we thank everyone and end the call.

But not this time.

Before we get to that, just a few highlights from the call - you can read the full thing here on Seeking Alpha, or listen to it here, start at 42m 00s for the interesting part.

  • They claim the long range transmitter will be out H1 2020. Time to carrot - 18 months. Again.
  • They claim a product release - near field charging for hearing aids. It'll be out in 90 days. Promise. Will they beat the Myant release...
  • Revenue is up from $25,000 last quarter to $206,000. That's split between services and royalties, they declined to give the split when questioned, so my guess $200k and $6k respectively. If it was big royalties they'd say. This is a company with a $350m market cap.
  • Expenses $12.5m per quarter (61x revenue), with $37.1m in the bank - fundraise needed by Q1 2019
  • Working to get regulatory approval with their Tier One partner in South Korea (Samsung?)
  • Admits their first generation product failed for every single Tier One customer, and this has left a "bad taste in the number of our customer's mouth" (was referencing inductive charging such as Qi, although I think they will be even less enthused about Energous...)

It was the usual ridiculous call, with the CEO and CFO putting lipstick on a pig and everyone else pretending it's a supermodel. Then we get the question from Matthew Winthrop of Aegis Capital Corp.

Matthew Winthrop (Caller) I’m curious on the hearing-aid business because my father was an audiologist and he tells me that you need to keep your hearing aid next to you in a very closed environment that doesn't get any dust or particles. So, I don't understand why you would need a wireless charge system when you have two plug it in right next to your bed? I’m confused.

Steve Rizzone (Energous CEO) Well, perhaps I can help you. Since your father has had experience with the hearing-aid, I am sure you’ve also seen him go through the process of changing these batteries. He has probably dropped one on the floor on more than one occasion.

Now I'm sure at this point the CEO felt he'd given his usual placating answer and it would be time to move on, but Winthrop wasn't having any of it.

Matthew Winthrop ... So, I don't understand, you came out here, got everyone into this, and told us we were going to charge cell phones and Teslas, and now you're telling we're going to do hearing-aids, sorry I know you are the CEO, but you got the whole world watching. You did a couple of hundred thousand of revenue, you have been putting this of quarter-after-quarter, how can you look at people in the eye and say, we're going to be huge, you’re not. You are just coming up and dancing with new products. Show me something, one company, one contract, something I can hang my hat on. I just don't understand what you’re doing.

Steve Rizzone Well, I respect your comments, but you’re wrong. And I think that the way you’re approaching this is incorrect also. I think you need to keep in mind the scope of what we’re looking to do. We are actively…

Unimpressed with this attempt to dodge and run out the clock, Winthrop interrupts Rizzone:

Matthew Winthrop (Exasperated) You have no revenues and it’s been quarter-after-quarter and you're not doing any business, so why don’t you just come out and say it’s not working?

Rizzone then gives a lengthy non-answer answer (he talks about a very clear, undeniable fact, but never says what it is...), talking over the top of Winthrop, claims they have not lied or been misleading - always a good sign when the CEO has to deny they're a fraud on a public earnings call -  and the call is ended.

So, finally, someone 'respectable' is pointing out that the emperor has no clothes, that they've been claiming monster specs and delivering little, that it's a constant push out, and that the revenues don't match the expenses. Importantly they are doing it on an earnings call, a matter of record now.

A questioner on their earnings call tells them to just give him something solid, or admit that it doesn't work as claimed, and they couldn't give that solid response. A dissembling, rambling, politician reply.

Finally. Let's see if it's the start of something. It will be interesting to watch any impact on the share price tomorrow.

Update Aug 2nd - It had a pretty significant effect on the share price, in the first few hours it's down ~20%