Hello. Good day, and welcome to the Energous Corporation Third Quarter 2023 Financial Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to Craig MacPhail, Investor Relations. Please go ahead.

Thank you, Jeremy, 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 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'd like to turn the call over to Cesar Johnston, President and CEO of Energous Corporation. Please go ahead, Cesar.

Thanks, Craig. Good afternoon. Thank you for joining today, and welcome to the Energous 2023 third quarter conference call. Joining me today is Susan Kim Van Dongen, our Interim Chief Financial Officer. Let me start first with a short business update. Energous continues to successfully execute its smart IoT-centric strategy that we initiated in early 2022 when we reposition and we retargeted the company to develop IoT power charging products at a distance using the intellectual property, regulatory knowledge and the market experience that had been built by the company from the previous years of operation and which is backed by our 200-plus patent portfolio. The new strategy has been focused on enabling new high-value IoT markets using Energous wireless power networks. These networks allow our customers greater placement freedom, mobility, security, and lower installation costs by removing the need for wires and batteries across RF-tags, electronic smart labels and sensor applications typically within a cloud-enabled environment. So how does the customer rollout of our technology happen? Typically, our customers initiate a wireless power network technology evaluation and then a POC, proof-of-concept, installation for their application. This is then followed by a proof-of-validation or POV phase, which can result in a high-volume installation and volume purchase of Energous products. Understanding how Energous is progressing with its current customers and its addition of new customers through these POCs and POV implementation phases is an important indicator of the global adoption of Energous technology and the timing of future revenue. This is why we update you every quarter on the number of our POC customers. The Energous 1-watt PowerBridge product is the only advanced and regulatory certified product for wireless power network installations available on the market today. Last quarter, Q2 2023, we announced a 10x growth. Yes, x10 on our PowerBridge…

Thank you, Cesar. Earlier today, we issued our earnings press release announcing the operating and financial results of our third quarter fiscal 2023, which ended September 30. The revenue in the third quarter was approximately $169,000 and as mentioned by Cesar, this was a 44% increase from the prior quarter. Compared to the third quarter of 2022, revenue declined by 24%. Revenue for the third quarter of 2022 was higher due to one-time bulk sale to a partner as we moved into the smart IoT-centric markets. The quarter-over-quarter increase compared to the second quarter of 2023 is mostly driven by the additional new proof-of-concept customers in Q3. For the first nine months of 2023, we achieved revenues of $383,000, a decrease of 43% compared to the same period in 2022. Cost of revenue was $48,000 in Q3, a decrease of $34,000 compared to the prior period and $372,000 decrease compared to Q3 of 2022. The significant decrease from the prior year is primarily due to a decrease in sale of higher-cost products to our partner, as mentioned earlier, and a decrease in the net realized value adjustments. For the third quarter, total GAAP costs and expenses, which include the cost of revenue were $5.3 million, a $1 million decrease compared to the prior quarter. Aforementioned decrease in cost of revenue, we recorded a $420,000 reduction in R&D expenses, a $314,000 decrease in sales and marketing and a $406,000 decrease in G&A expenses compared to the prior quarter. This was offset by a $117,000 increase in severance expense in Q3 compared to Q2 of 2023. Total Q3 GAAP cost and expenses decreased by approximately $1.1 million compared to Q3 of 2022. The decrease was primarily due to the earlier mentioned significant reduction in cost of revenue, a $426,000 reduction in R&D…

All right. Thank you so much. [Operator Instructions] And our first question comes from the line of Suji Desilva from ROTH Capital. Suji, please go ahead.

Hi, Cesar. Hi, Susan. Congrats on the progress during the POCs. Cesar, of the POCs, the base of 31, just curious how many customers that across – are you seeing multiple POCs per customer? Or is it roughly one per – more one per...

No, it's not one per. I mean there's a couple of those where – actually customers might have larger than three or so. But in general, the majority at this point in time are single. Hi, Suji, I did forget to say hello.

That's okay. And then the POCs, which end markets amongst the POCs are closest to ramp. I know they probably cover a whole bunch of different applications. So curious, which ones do you think are closest to sort of volume?

Yes. So last quarter, when we talked about this, I gave a very good example of logistics and real-time asset tracking as one of the possibilities on the POCs that I thought was important. I'm happy to report this quarter that actually gave everyone a taste and a window of visibility of logistics and real-time asset tracking. So what I'm trying to say is it will be along those lines, warehousing asset tracking applications, RF-tag applications that we're seeing right now. And we cover a number of customers, if you noticed on the German POC that for the first time ever, we're at least able to give that visibility to our audience because it's always hard to talk about POCs as we have plenty of NDAs, and customers do not like to share that. So we're very thankful to Ecobyte for allowing us to share those names and for all those companies that are well-known companies and large companies in Germany and Europe to allow us to stay and they are the ones that actually publicize. I'm very happy with our progress.

Okay. Thanks, Cesar. And then my last question really is on the – I think there was a partner that you worked with, that you had a bulk sale. I was just curious on the mechanics of those and what causes those bulk sales to happen. Is that kind of preparing for a ramp or what the mechanics are there? Thanks.

Yes. So if you remember, we've only been focused on the Smart IoT strategy since early 2022. It's been less than two years. Certainly, we're getting closer to two years. It is unusual for a technology to get to this ramp as fast as we are. So I'm very, very happy to see products to see certification and so on. So early last year, as part of our investment on growing this IoT market, we have a partner that – a couple of partners that we work with and allow us to basically put together a number of eval kits and ways to actually get our technology out there, which, by the way, was a great investment, a one-time investment because as you can see, if it wasn't for that, I don't think it will be possible to have 32 POCs in no time. Typically, companies take over two, three years to just get a technology that's brand new to this point. So we're very, very happy with what we see so far.

Thank you, Cesar. Thank you, Susan.

Thank you.

All right. And our next question comes from the line of Jon Hickman from Ladenburg Thalmann. Jon, please go ahead.

Hi. Cesar, I was wondering if you were still going to hold your guidance for year-over-year growth further this year in revenues.

Yes. So as I mentioned on the call, I will give a final update next quarter. We're still looking into converted – the conversion ratio of those POCs and those 31 convert into 2024. And the next quarter, we'll be able to update you on that. But right now, we are still moving forward with what's been said before, yes.

So my math says that you'll need revenues of like $400,000 to make that happen. Is that aligned with your math?

Our math at the time when we started looking at this, look into basically the growth of the POCs and definitely, I mean, it really considers that. Otherwise, we would not have guided that way.

Okay. Thanks.

No problem.

All right. We have no further questions at this time. I'll turn it back over to the team at Energous for closing remarks.

Great. Thank you. Energous' smart IoT strategy is showing very promising results and our customers see the value offered by our IoT wireless power networks and evidence of this is the fact [Technical Difficulty].

I believe we just lost you, if you're still there. Still can't hear, you came in very briefly.

Can you hear us now?

Yes, I can.

Yes, I'm sorry, but Polycom here was not behaving properly. Okay. So Energous' smart IoT strategy is showing very promising results and that our customers see the value offered by our IoT wireless power networks as evident by the 31 POC trial installations as of third quarter 2023. Of particular importance this quarter, we are glad to announce our partnership with Ecobyte, which we believe provides visibility into the installation complexity and type of customers that we work with, which shows an important example of the type of real-time asset and logistics applications that we have been talking about in the recent earnings calls. We continue to focus on increasing our revenue as these POC trials evolve while closely managing our OpEx spend. Thank you, all, our shareholders, stakeholders and Energous team members, and we look forward to updating you on the company progress again next quarter.

This concludes today's conference call. Thank you for attending.