Good day and welcome to the Energous Corporation First Quarter 2018 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Bishop, Investor Relations. Please go ahead.

Thank you, Andrew, and welcome, everybody. Before we begin, I would like to remind everyone 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, Energous 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 regards to those events, conditions and circumstances. Also, please note that during this call, Energous 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 to the company’s website. Now I would like to turn the call over to Steve Rizzone, CEO of Energous. Please go ahead, Steve.

Thank you, Mike, and good afternoon. Welcome to the Energous first quarter conference call and update. As usual, with me today is Brian Sereda, our Chief Financial Officer. I will begin the call commenting on the considerable progress Energous made in the first quarter, moving then to some comments on the company’s financial results, before turning the call over to Brian for the details. I will close with a perspective on the outlook for the balance of 2018 and the goals we expect to accomplish this year before opening the session up for questions. Executing on our top-tier customer opportunities is our first priority at Energous, as these customers represent the key to a significant ramp in revenue and the ultimate crossover into profitability. The common thread across all of these customers is the global nature of their business. To be considered a top-tier player, you must have a worldwide presence. In order to support these customers and pave the way for global launches of WattUp-enabled consumer products, international regulatory certifications are key milestones that must be achieved. I’m very pleased to announce that in the last few days, our regulatory team leveraging off the recently announced FCC certification of our Near Field Wireless Charging Technology has received notice of regulatory approval of the same Wireless Charging technology from the European Union, Australia, Belize, Colombia, New Zealand, Uruguay and Venezuela. These approvals, along with the recent FCC approval, represent a total of 38 countries in five regions that have now certified the Energous’ Near Field Wireless Charging Transmitter and Receiver technology for consumer use. The combination of the European Union certification with our FCC certification is especially important to our worldwide launch as it gives Energous tremendous momentum and a very strong precedent to leverage as we now expand our…

Thanks, Steve. As you saw at the close of market today, we issued a press release announcing our operating and financial results for the first quarter of fiscal 2018 ended March 31st. As Steve highlighted, in the first quarter we generated a total of $25,000 of revenue from engineering services. This compares to $29,575 of engineering services revenue in the previous quarter in Q1 of last year respectively. We also shipped quantities of chips to a customer through Dialog in Q1 and earlier this quarter. In earlier this quarter Q2 and supported preproduction product runs for anticipated production ramp later this year. We do expect chip shipments to grow as we progress through fiscal 2018 with potentially larger shipments beginning in the third quarter, growing in volume in the fourth quarter. As a quick note, we will recognize revenue on production orders placed once Dialog ships the chipsets. Our engineering services revenue number of $25,000 in the first quarter belies the amount of effort expended and innovation delivered to our Tier 1 customer. We also expect engineering services revenue to continue as we advance through 2018, and potentially increase quarter-over-quarter beginning in Q2. The depth of our overall customer opportunities has only increased over the last several quarters, along with the corresponding level of engineering development required to bring these customers to market. Now regarding expenses, starting with GAAP numbers in the first quarter. Total GAAP expense for Q1 was approximately $13.5 million, an increase of $2.2 million compared to $11.3 million in Q4 of last year, and an increase of $0.4 million when compared to $13.1 million in Q1 of last year. Almost 60% or $1.3 million of the increase in GAAP expense compared to the prior fourth quarter is related to stock compensation, which totaled $4.6 million for…

Thank you, Brian. Before turning the call over to the operator for questions, I would like to give our investors some perspectives on the milestones we expect to announce over the course of the year as signs of our continuing progress towards our goal of profitability and dynamic growth. First, we expect to announce in the coming months a number of additional international regulatory certifications. The key to significant bottom line growth are our top-tier customers who have a global presence. We must pave the way for these customers to efficiently obtain the necessary regulatory approvals for WattUp-enabled consumer devices to facilitate global launches of their products. Second, we expect to see modest but increasing chipset shipments through the latter part of this year. When we expect to see significant increases in chip sales as our top-tier customers ramp for global product launches in 2019. Third, we expect engineering services revenue will continue with the possibility of quarter-over-quarter increases as project milestones solidify. Given the revenue potential from our top-tier customers, the ramp of engineering services revenue is less critical than continued forward progress of the engagement. Fourth, we will continue to operate a lean and highly efficient expense model enabled by our relationship with Dialog, which eliminates the need for Energous to build out global sales and operations functions. Our current silicon roadmap will bring to market higher power and more efficient charging solutions based on CMOS, GaAs and GaN technology as we take out the next generation of our ICs. With this said, our goal is to continue to expand our customer acquisition and execute on our silicon roadmap as we maintain our investments in innovation in all areas necessary to successfully commercialize the technology and maintain our leadership position in Wireless Charging 2.0. We view 2018 as the year Energous gains traction in anticipation of it all coming together in 2019 when we believe there is an opportunity for significant recurring revenue. To us, traction equates to multiple applications of the full spectrum of WattUp technology spanning multiple vertical markets supported by an established supply chain through our partner Dialog, resulting in a dynamic, rapidly increasing predictable business and revenue growth model. Operator, we will now take questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from William Gibson of ROTH Capital Partners. Please go ahead.

Thank you. Steve, you mentioned or at least in your release about the testing object detection in the charging capabilities. What’s the timing of that hitting the market?

So to clarify, I believe what you’re talking about is foreign object detection.

Foreign object, yes.

Is that correct?

Correct.

Okay. So we mentioned foreign object detection because it is a very, very significant problem for the first-generation coil-based technologies. As you may be aware, you are probably starting to hear a number of stories where if you place your coil-based enabled product on a coil transmitter and it’s got a key attached to it or you drop a quarter on it, it will heat up. And so the ability or the inability of coil-based technologies to detect foreign objects is a real problem. Energous doesn’t have that problem. Ours is an RF-based technology. And so we’re not susceptible to the same types of foreign object issues that the coil-based technologies are. We understand and can detect our receivers only. It’s a capability of the technology. And so this is a very, very significant advantage for Energous and it’s inherent in our technology. It is part of all of our current product releases and its part of all the releases associated with Near Field for which this is a major consideration. So that capability is a core part of our current technology.

And then one follow-up question. Shipments to one of the Tier 1 consumer products companies sounds like in the fourth quarter. Will any of these products beyond the market this year in time for Christmas or is that a next year phenomenon?

Given our current view of the product cycles of these top-tier companies, which of course as you would expect, are elongated, we believe that we will receive orders for meaningful quantities in the fourth quarter in anticipation of rollouts of WattUp-enabled products from top-tier consumer electronic companies on a global basis in early 2019. I do not believe that any of these top-tier companies will be rolling out fully WattUp-enabled products in conjunction with the Black Friday release.

Okay. But in terms of revenue recognition, I assume Dialog will be shipping in the fourth quarter to these customers or at least that’s the expectation?

Yes. It’s a fairly straightforward revenue model, Bill. Once Dialog ships, we tally up the shipments, invoice Dialog and collect cash in the following quarter. It’s a royalty based back to us.

Okay, thank you.

[Operator Instructions] The next question comes from F L Kirby of Morgan Stanley. Please go ahead.

Hey, good afternoon, gentlemen. I have been on several of your calls with a great deal of optimism about what is going to occur. And the only reason I really have found to stay with the company is because of your connection with Dialog. One of my serious objections or problems is the fact that insiders there with all of this news anticipated, why are so many shares of Energous being sold by insiders?

Well, thank you, I think that’s a fair question. I think that we have seen shares by our – sales by our insiders. And I think we tried to address that issue. Every time we’re awarded RSUs in conjunction with performance, and by the way all of our RSUs are performance-based. That is a core cornerstone characteristic of the company and that equity is awarded based on performance. And when that equity is awarded, there are significant tax consequences. You have to pay the taxes on the stock award, at the time it’s awarded and at the value that it is awarded. And so if you take a look at all of our filings, we try and make it very, very clear that all of these are basically sale to cover strategies, where we have – we’re awarded stock, we sell enough stock to pay for the taxes, and then we hold the remainder of the stock to take advantage of long-term capital gains. And so you never see an entire tranche of stock that was awarded simultaneously sold. Again, this is all the strategy to sell sufficient stock to cover taxes so that, again, we can buy and hold that stock in a long-term basis.

Well, from the past maybe 1.5 year that I have been watching the stock, following the company and following your commentary, it seems like we keep getting pushed back for revenue realization. But to a previous question, is there a number that can be associated with revenue that you can kind of give us a hint with regards to year-end 2018?

So let me make two comments on that. The first is rather along. And then the second will address the number specifically. First of all, when you take a look at our past statements, it’s absolutely necessary to keep in mind what we’re trying to accomplish here and the environment in which we work. As I said earlier, we have a huge vision. We are seeking to establish a global ecosystem that fundamentally changes a basic paradigm about how consumers charge their battery devices. Now this vision is very, very complex. There’s lots of elements to it. And it is unique. There is no roadmap out there. This is something that has never been done before. So you can’t make direct comparisons with what we’re doing and any other company. The closest parallel you can draw is Wi-Fi. And if you look at Wi-Fi, there was no single company that was at the heart of Wi-Fi like Energous is at the heart of Wireless Charging 2.0. Now having said this, as I said, this is very complex business. We have not only our go-to-market strategy of selling silicon, we also have antennas and enabling software and complex algorithms that are part of the system. We’ve got a global worldwide regulatory front. Then we have the issue of two product cycles. Our product cycles, and then our customers product cycles. And we can only control our product cycles. We cannot control our customer product cycles. As I mentioned earlier, in this environment, things change, and they change fairly rapidly. So when we make these forecasts, what we’re doing is that any given point in time, giving you the best view as to how we see things rolling out in the future at that point in time. With the understanding, as I…

Very good. Thank you.

You’re welcome.

[Operator Instructions] The next question comes from Jim Schnieders of Schnieders Capital Management. Please go ahead.

Hi, Steve. I just had one question for you and more color when you are just talking about. In terms of your customer funnel, and it seems like you guys have a lot of stuff going through regulatory process this year, which is kind of Dialog said as well that you like to see a whole lot this year, we’ll see a ramp next year and lot of the bigger OEMs are cross-testing products and they have to go through this regulatory cycle. So my question is, can you give us a little more color on when you start to see more people in your customer funnel get approval from different regulations, are those – are you going to give us updates on the call, or we will see press releases issued, or we see press releases issued from some of your customer funnels. Can you just give us some more color how that rolls out?

Yes. So when we’re talking about regulatory approvals, I think there’s two elements to it. First is that our strategy is for Energous to do the first approval. Basically we are blazing a trail on both the Near Field and power-at-a-distance strategy that will provide the initial precedent for regulatory approval of follow-on products in each jurisdiction or within each country. Keeping in mind that every product that is shipped has to go through it’s own regulatory approval process. And so the advantage of our strategy is once we establish a precedent, our customers, when they submit their WattUp-enabled devices for regulatory approval in their respective agencies can point to this precedent and say basically we’re doing it just like that was done. And so it short-circuits the regulatory process considerably. Again, every device, Near Field, Far Field, transmitter-receiver has to go through regulatory certification. And our objective is to make that as easy and as painless as possible for our customers so that this will enable them to launch their products quickly and again focus their resources on elements other than the regulatory process.

Have any customers actually received certification? I know you’ve got the Near Field and you’ve got the Mid Field last year. Can give us colors in terms of how many customers kind of in the queue received those certifications or have any received any so far?

We are not aware of any customers that have received certification. We believe that there will be multiple customers in the next few weeks and months that will enter into the certification process as this is necessary obviously for them to ship products to the consumer. We’re aware of one customer who will be shipping one product in The United States and a second product with a very focused launch in Vietnam. And we anticipate that those regulatory cycles will begin shortly. We’ve got work to do on our own in Vietnam to get the necessary first cycle approval. And so all of that’s in play. But we will not be making announcements per se on customer approvals. What we will be making announcements on the expanding list of international agencies that have approved the WattUp Near Field product. And then later this year, we expect to start to see the first certifications internationally of the WattUp distance technology.

Okay, thanks a lot.

The next question comes from Randy Spector, a Private Investor. Please go ahead.

Hi, thanks, I have two questions. One, I just want to confirm that your own personal sales of stock had been to pay taxes only? And second, I’m just curious as to what precisely has to happen for the company to be in the position to identify one or both of its two major consumer electronics customers?

Okay. I mean, I think those are – the first question is a fair question. I have made one sale of stock. It represents less than 2.5% of my total holdings, and it was absolutely to pay taxes, which I was crushed on, quite frankly. With respect to your second question, which is a good question, Randy, we’re never going to be able to release the names of our top-tier customers, for that matter, the majority of our customers in general. The reality is that consumer electronic business is a very, very competitive and cutthroat business. And our customers do not want their competitors to know in any way, shape or form who they are working with or what technologies they are integrating. Now obviously, I think a lot of this will become clear as these products begin to reach the market and they are disassembled and the components are made clear as typically happens with most of these devices. But as far as Energous actually making customer announcements, they are really going to be few and far between just because of the nature of the consumer electronic industry.

Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Steve Rizzone, Chief Executive Officer, for any closing remarks.

All right, very good. Thank you everybody. We want to thank you for your time and your continued support. As I said earlier, we are confident that we’re on a path now. We can see the view of revenues, which are our top priority, absolutely top priority in the company. The revenue view is becoming clear, it’s our major focus. Quarter-over-quarter we think we’ll improve and we’re very, very focused on as quickly as possible, crossing that chasm over into profitability. So we’ll look forward to reporting continue progress along those lines. I would add that in the coming months I’m going to be at the Ladenburg Conference in New York, and hopefully I will see some of you there. Thank you, again for your continued support, and we look forward to reporting continued progress at the next conference call. Good day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.