Energous Earnings Call Q3 2018

Energous had their earnings call yesterday, and sadly it was a much calmer call than last time - no irate investor actually demanding real answers to pointed questions, demanding accountability for prior statements made. It was completely as expected, same old delays and obfuscation, you can read a transcript here for yourself. Last quarter's earnings call promised hearing aids on the market in the next 90 days, which was essentially today, so what do we get?

Indications are that the hearing aids from SK Telesys and Delight will be the first WattUp enabled products to hit the consumer market hopefully, before the end of this year.

"Indications" that "hopefully" in the next 90 days. Again. Will they just disappear and be forgotten, just like Myant? Why does anyone believe a single thing out of this CEO's mouth? Other 'highlights':

• Key products such as the spine tracker and some location tags are listed, so essentially tiny markets from non-Tier 1 customers. Not enough to sustain a $200m+ market cap company.
• Continuing with ~$12.5m per quarter expenses with ~$29m in the bank. Capital raise needed by the end of Q1 2019.
• They claim progress on their GaAs and GaN chips for transmitter, receiver, and power amp chips, and that they can handle up to 15 Watts. This may actually be true, but the surrounding transmitters and receivers will still be in the <100 mW range. There is legitimate work that can be done in this area, if Energous ever have worthwhile IP, this is where IMO it will be.
• They still mix consulting and licensing revenues so we can't split them, and they are still a paltry ~$200,000.

One of the more egregious statements came in the Q&A, regarding contact charging vs at-distance:

The strategy has always been that we go in first with near-field, engage the regulators and then migrate the discussions to distance.

The entire basis of the company for the first three years was at-distance, with FCC approval of at-distance always the 'Holy Grail' which finally came in Dec 2017 and then... nothing. They marketed themselves as charging multiple devices, at up to 15 feet, at up to 5 Watts. If they position themselves as a contact only Qi competitor, just without the existing infrastructure, support, standards, efficiency, or max power delivery, they'd never have the funding they have enjoyed. From the earnings call in Feb this year:

We expect the first contact-based transmitters will be in the hands of the consumers in early 2018, followed by the first at-distance transmitters coming in late 2018, culminating in far-field transmitters coming to the market in 2019.

We're heads down focused on commercialization, and we believe that the $40 million is sufficient capital to get us to that point (profitability).

So the first thing never happened, they've just admitted the second won't happen, the third really isn't a priority and never was, and that they will still be in the red by ~$12m/quarter by the time that $40m runs out so they miss the fourth by just a tiny amount.

Why does no-one call them on this? Well, in a way, the markets are doing that. Here's the stock price at around 8am Pacific this morning.

That's nearly a 9% drop first thing in the morning, hardly a ringing endorsement. We'll see if that continues. Unfortunately, you should remember that there are some large institutional investors still owning WATT, so that's part of someone's pension taking a hit there.

Now we wait another 90 days for the same again...

Energous, Theranos, uBeam Updates

I've been at the International Ultrasound Symposium in Kobe this week, and have hardly had time to do any updates or summaries of what's been going on in Energous, Theranos, and uBeam lately. Having spent the weekend walking around Tokyo, my feet are now sore enough that I'm going to sit still for a couple of hours and write. Let's start with Energous:

We last left Energous after an earnings call where finally someone questioned their basis for optimism, and they were promptly cutoff. Emperors do not like their nakedness pointed out. The other key takeaways from that call were that the long range transmitter was pushed out to 18 months away (again), and that hearing aid products would be out within 90 days. Well here we are 88 days later (which means another earnings call is coming up, Tuesday Oct 30th at 1.30pm PT), and what's happened?

First thing is that the share price seems to be on a long, slow, almost constant trajectory down, losing about $1.50 to $2.00 per month since April, and right now the after hours trading has the share price under $8, putting the company market cap close to $200 million. Not good for shareholders and compensation of employees, nor for any future share offering. Worse, given their revenues, >95% of their valuation is based on the hope of massive future growth - there might be a stock price at which the big institutional investors need to exit, and at that point it's game over. So what are they doing about it? I've indicated in the past that I expected to see some goosing of the stock price with pointless or small-time product announcements and so on, and those products were indeed announced. (BTW Energous, you didn't bother to check your website after the redesign - your "In the News" page is a bad link). 

First of all we have some asset tracking tags by Qubercom, though it seems it's the contact based charging, which kinda defeats the "IoT charging" wireless benefit when you have to drop 20 of them at a time on a charging pad. Seriously if you want to charge IoT low power devices wirelessly, there's already solutions like PowerCast out there. Then we have some spinal position trackers, also with contact based charging from the Gokhale Method, which I did try to buy, but the nice lady there told me they wouldn't be available until next year and only available to practitioners, so it's not really a big market. Apparently Austar Hearing have an upcoming product, but I can't find anything there. Now Energous have also passed regulatory approval for their contact charging in 100 countries (oooooh...), so you can imagine my shock when none of these had any effect on the stock price.

Pretty much, it seems everyone is wise to their games now. No stock bump just before Apple WWDC events, no belief that charging hearing aids is going to make them a $1 billion company. Without a major product release (not announcement), real regulatory approval for something practical, or clear licensing deal with a real company like Apple, this thing is heading to $0. Remember they are out of cash in Q1 2019 so they've less than 6 months to raise more money, and with a declining stock price that's going to be hard to do. Have we reached the limit of this game? I would say so, but the chutzpah of this company, and the gullibility of the press and the public, might mean there's another round left in it.

Theranos

CEO Holmes and COO Balwani of Theranos are facing criminal charges for fraud at the blood testing company. Earlier this month they lost an appeal to try to keep documents out of the government's hands, and according to Bloomberg the judge in the case referred to undisclosed charges and activities, while the Assistant U.S. Attorney bluntly stated that the indictment did not cover all the criminal activity, implying there may be more to come for the pair. Not looking good for them.

Marketwatch had an interesting article on "The Last Days of Theranos" and is pretty blunt with the sub-title of "the financials were as overhyped as the bloodtests". It covers a lot of the mechanics of what happened but the really standout parts for me were the statements from Daniel Warmenhoven, a board member from December 2016. It starts with this quote from him about one of the huge deals that "made" the company:

“The Walgreens deal made no sense, ... It was doomed from Day 1 because it was based on using the minilabs, which weren’t completed when the deal was signed."

So he immediately admits the whole thing was a fraud, but later comes out with this gem:

Warmenhoven told MarketWatch he blames engineers for the final sinking of Theranos. “They lost the recipe. The tests were not coming out right. That 60 to 90 days extra to figure it out took away the runway we thought we had.”

Yes, that's right - after terrible business practices, fraud, intimidation of former staff, 15 years work and over $700 million of investment, it comes down to two months and dumb engineers losing the Post-It with the entire future of the company on it. Damn those pesky engineers!

This seems to be the norm for people like Warmenhoven - engineers as annoyances, replaceable cogs that better behave, not a vital part of the technology development or company, but rather the true irreplaceable geniuses are the CEOs who are the innovators and aren't held back by such things as fraud, physics, or Post-Its. 

This ties with statements I've heard C-level execs make with all sincerity "I told the engineering team what they needed to do, they just didn't understand/weren't good enough". There's some school of MBA that says engineers are fungible units, and are lazy and always say they can't do it, and so need pushed. To an extent there's usefulness in pushing a team to achieve more, and then as a C-level exec providing them the resources, cover, and time to execute, but those without the training and experience seem to regard measured statements that something can't be done as demanded as more of the frustrating whining of a developmentally challenged child than of an experienced employee trying to do the right thing. The idea that the C-level is wrong or mistaken is clearly an option never to be considered.

uBeam

And so that brings me to uBeam. Only a couple of things to say here, there's really precious little new information on this. Mark Suster, the lead investor in uBeam, seems to have deleted all his Tweets from prior to October 1st this year, which is shortly after Perry "moved on" as CEO. He's been a prolific poster on many topics over the years, so this was surprising to see. Further, his Medium post supporting uBeam from just after my blog gained publicity, seems to have been altered. The article "What is it Like to Wake Up and Have the Press Ready to Torpedo Your Business?" used to contain the line:

“If for any reason we fall short of expectations we have set in the market, I will be the first person in line to admit it and then to immediately fund Meredith’s next company.”

for which Mark drew high praise - you can see references to it in the original blog comments, as well as articles from other investors here, here, and here - but at some point between original publication and now, that line disappeared. I wonder why it's not there anymore? (Thanks to HowardLong of EEVBlog for spotting this).

Last thing - I've been asked "What would you do if you were made CEO of uBeam today?" Here's my simple answer, and bear in mind I have not seen the status of the company or the books, I'm just inferring from public information:

I'd give the staff 60 days notice that their jobs were ending, and an offer of a bonus should they stay and tidy up their work (document, and pack it up), along with services to help find another job. Then I'd close down the company, and return the remaining money to the investors. In my opinion, it's the most they'd ever get back.

I'll be surprised if that happens as usually the "sunk cost fallacy" along with legal hurdles prevents such an approach, but I just can't see how the company is viable at this point.