Hello and welcome to Energous Corporation Second Quarter 2020 Financial Results Conference Call. All participants will be in listen only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note today’s event is being recorded. I would now like to turn the conference over to Mike Bishop. Mr. Bishop, 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 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 in expectations with regard 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 on the company's website. Now, I would like to turn the call over to Steve Rizzone, CEO of Energous. Please go ahead, Steve.

Thanks, Mike. And welcome to the Energous second quarter conference call. Joining me today is Brian Sereda, our Senior Vice-President and Chief Financial Officer. Before moving to an update on the business, I would like to thank our shareholders for their support during our recent shareholder proxy and meeting. Energous continues to steadily build the foundation to advance the company to the next level. With respect to the business, the company has adapted well to the complexities of the current pandemic and was able to meet expectations for both earnings per share and revenue. While our customer engagements have been impacted resulting in further lengthening of what is already a long product cycle process, we believe the company continues to be well positioned to achieve increased near-term revenues while reducing expenses. The impact on product cycles has the accompanying effect of pushing our chip revenues. The delays in the product launch of the NewSound Primo hearing aid illustrates this point. The NewSound hearing aid was previewed months ago with both companies anticipating shipments to consumers by now. However, the product launch cycle for the hearing aid was significantly extended due to COVID-19 related issues including four factory shutdowns, supply chain delays and the inability for engineers to be onsite at the production facility due to travel restrictions. As these product and pre-product cycles are delayed so too is the procurement of ships necessary to support these cycles. Fortunately, the NewSound product launch is now moving forward in terms of general availability and accompanying chip procurements before the end of the year. The pandemic has had a slowing effect. It has not negatively impacted the quality or number of customer acquisition projects in the pipeline. On the contrary, despite the pandemic the number of qualified business opportunities moving through the various…

Thanks, Steve. As you saw the close of market today, we issued our Q2 earnings press release announcing operating and financial results for our fiscal 2020 second quarter ended June 30. For the second quarter, we recognize 114,000 in revenues compared to 61,000 in the prior quarter, and approximately 48,000 in the same quarter of last year. Despite the tougher operating environment due to COVID, and echoing Steve's earlier comments, we continue to make progress by increasing customer engagements in additional markets, steadily advancing our regulatory progress with expected future approvals in the few remaining critical markets, all while keeping our expenses in check and below historical spending patterns. Total GAAP expenses for the second quarter totaled $8.3 million approximately $0.4 million lower than the $8.7 million of total expenses last quarter, and approximately $1.7 million lower than the second quarter of last year. The decrease compared to the prior quarter and prior is mainly a result of lower engineering and headcount costs, including lower stock-compensation expense. We expect the current level of expense to trend in this range for the balance of this fiscal year due to our reduced development costs tied to the initial vertical markets we anticipate generating our revenue from heading into 2021. Headcount is expected to remain below 60. And as we head through the second half of this fiscal year, we continue to leverage dialogues, global sales and operations infrastructure, which is especially important now the travel and direct customer engineering interactions are severely limited due to COVID. In addition to our lower operating expenses compared to past quarters, our current business model also allows us to leverage our earlier investments in lab facilities and equipment without anticipating the need for any increases in capital investment to achieve our expect -- expectations for future…

We'll take questions first. Are there any? We'll go to the operator for questions now.

Yes, thank you.[Operator Instructions] And the first question comes from Suji Desilva with ROTH Capital.

Hi, Steve. Hi, Brian, congratulations of progress here in a challenging environment. Certainly, no problem. The four top tier customers you have in the in the pipeline, very exciting. You know, maybe you could give us some sense of what end markets are products that may be targeting or categories. And what's the challenge here, Steve, for top tier customers versus a smaller, more nimble ones? What are the key factors? Is the lack of globally e-covering regulatory approvals or what are the other factors? Thanks.

I think the so the markets that are moving forward are hearables, hearing aids, smart glasses in particular. Those are the markets that are gaining a lot of traction for us and also the markets where the four top tier customers are progressing. Just to note, we have additional top tier customers in these markets that are also in varying stages of development, however, the products that they have targeted do not qualify from a million ship a year perspective. They're more in the 250,000 to 500,000 range. And so, they although they are significant and the y are top here, in terms of their market presence, these the particular projects that we’re engaged with do not support the 1 million chipsets per year minimum. The issues that are really related to the slowdown, Energous I think has done a really good job in adapting to the realities of today in terms of the business cycles. We have established a very, very proactive and capable video production capability more able to engage our customers over the internet and with the utilization of video, but the fact remains that the flight cycles have been slowed. I mentioned that NewSound and I think that that's an excellent example of the kind of experiences that we're running with right now. First, we had general closeout -- shutdowns of our top tier customers all together. Then they have slowly gotten back to engagements and interacting with us. And now instead of making trips and engaging real time, we're going through video and conferencing cycles. In one pre-production cycle in particular, that I can relate to you, we had a software problem, software loading problem in the pre-production testing cycle. And if we wouldn’t an engineer on site, we could have taken traces, we could have identified the problem. And as we have in the past and been able to resolve it in in a couple of hours. Unfortunately, because of the going back and forth, the time differences, it took us over a week to resolve that. So these are just the kind of delays that we're experiencing. As I mentioned, though, the good news is we're not seeing any dropouts. The cycles are slowed. But we're not seeing any dropouts. The interest remains strong, especially with the new power hub, we have a lot of activity focused on distance and distance applications now. And we're really excited about the military applications. Our technology is very, very well suited to the military. And we have a number of active opportunities that we're working. These are the early stages, but it looks to be a very significant in business, exciting business market for us.

Steve, my follow up question really is around military. And I hadn't heard you mentioned it as much before. So it sounds like something's newer. Should I think of that as the traditional military kind of long cycle design in kind of cautious moving forward? Or is it possible, possible those guys are moving relatively quickly, they've kind of pulled you in and want to go on things and what's the size of that market relative to other opportunities? How should we think about it?

Well, I think that the size of the market is equivalent to our largest opportunities, but we need to be cautious about this because, it's -- we're at the initial stages and, we all have experience with the military markets before. They extend out there, their product cycles and their investigations are longer, but once they do cross over, they become virtual annuities with very, very significant upside potential. So I think we need to watch this here. This is -- we think these things will, will take some time, but they – our technology is really ideally suited to these applications. So the ones that we've been familiarized with, and we think that this can be a meaningful part of our business, but again, this is this is farther down the line in terms of timing?

Well, it's certainly encouraging military customers looking at because that speaks to the ruggedness and reliability of products. So that's good news, for sure. And then, and then lastly, for Brian, perhaps, I think you talked about either reduced or stabilizing development costs. I just want to make sure I heard kind of the point in terms of vertical markets, are you focusing on certain vertical markets is that what’s driving a stable OpEx here, was that planned? Or is that kind of prudent in this environment? Any color there will be helpful? Thanks.

Well, yes, I mean, the initial vertical markets where you'd have -- where we have mature technology. We're not creating -- we're not, you might say, inventing in those particular verticals. So the technology now is ready for commercialization. And we're not having to make heavy investments. We don't anticipate having to, to roll out, new technologies, for example, for different vertical markets for the foreseeable future, because we have a lot of, in our -- in our customer funnel, current customer funnel, there's a lot of activity going on for the technology that we have. And that's what I was trying to say, is that we're not making investments in markets where we don't have any particular interest. Or there's really no market driven demand. And so that the, the technology that we developed, is now well suited for the customer funnel that we've got. And we can serve the entire customer funnel, which will keep us busy through 2021.

Okay, I'll jump back. Yep, that makes sense. I'll jump back in the queue and I stopped in the progress guys.

Thank you. At this point, I would like to turn the call back to management for closing comments.

Thank you for attending our second quarter conference call. Please note that we will be presenting at the LD Micro Conference in early September. We do look forward to reporting additional progress in our next conference call in November. We'd like to thank you and wish you a good afternoon.

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