Energous (NASDAQ:WATT) Q3 2026 Earnings Call

0:00 Good day and welcome to the Energist Wireless Power Solutions third quarter 2026 financial results conference call. All participants will be on listen-only mode during the prepared remarks. Following the prepared remarks, we will conduct a question and answer session. Instructions on how to queue for a question will be provided at that time. Please note, this event is being recorded. As a reminder, during today's call, the company will make four looking statements. These statements are subject to inherent risk and uncertainties detailed in the company's filings with the Securities and Exchange Commission. Actual results may differ materially from those anticipated. Except as otherwise required by federal law, Energist disclaims any obligation to publicly release updates or revisions to any forward-looking statements to reflect changes in expectations.

0:46 I would now like to turn the conference call over to Mallorie Burak, Chief Executive Officer and Chief Financial Officer of Energist.

0:54 Thank you and welcome everyone to the EnerGIS Wireless Power Solutions third quarter 2026 earnings call. For those newer to the EnerGIS story, I would encourage you to review the replay of our first quarter call, which provides a full company overview, and our second quarter call, which lays out the commercial framework I will build upon today. I will keep the background brief and focus on what has changed and what is building. At its core, Energis is an end-to-end ambient IoT platform delivering battery-free sensing and real-time operational intelligence. We are building the physical data layer foundation for enterprise AI.

1:41 By combining wireless power, battery-free sensing, and intelligent data infrastructure, our products enable continuous real-time visibility into assets, inventory, and operations, helping enterprises move from simply tracking what's happening to predicting what might happen next and taking action. This intelligence enables companies to mitigate annualized losses stemming from spoilage, inventory shrinkage, as well as operating costs resulting from manual tracking methods like RFID. Since pivoting our strategic vision away from consumer IoT to enterprise wireless power solutions in 2022, our focus has been to move from technology validation to commercial adoption at the largest enterprises in the world.

2:38 While our sequential quarterly revenue growth underscores that commercial adoption of our product offerings is underway, We believe that the fourth quarter will more clearly demonstrate that the rate of adoption is ramping as our largest customers are expanding in scope and use cases, our shipments continue to build, and our pipeline is beginning to produce specific conversion milestones. In terms of today's agenda, I will start with our operating highlights and the financial headlines including our gross margin recovery path. Giampaolo will then give a detailed update on each of our customer programs and the sales pipeline including how programs convert from proof of concept to deployment.

3:31 Greg will walk through the financials in detail and I will return briefly with a few concluding thoughts. Since our PowerBridge transmitter began shipping in 2024 through September 30, 2026, we have shipped over 69,500 transmitters, primarily driven by demand for our 2-watt PowerBridge Pro. The sequential increases in quarterly shipments that began in the fourth quarter of 2025 reflect the shift from technology validation to commercial adoption of our wireless power networks. The third quarter continued the trend of consecutive quarterly revenue growth.

4:18 We reported $3.4 million of revenue in the third quarter, up approximately 10% from the $3.1 million reported in the second quarter. We expect sequential growth to continue and to accelerate in the fourth quarter. Gross margin for the third quarter was approximately 14%, a meaningful improvement from the second quarter as the factors we described last quarter began to ease and our July price increase took effect. On our last conference call, we described the retooling, component cost, and customer prioritization factors that reduced second quarter margins and we said that we expected margins to progressively recover.

5:09 Greg will cover the third quarter drivers of this, including the effect of the July price increase. Also on our second quarter conference call, we shared that we were working toward limited production volume at our overseas contract manufacturer during the quarter. In the third quarter, however, all units sourced came from our US contract manufacturer. The reason stems back to what we described last quarter. The production line upgrades needed at our overseas contract manufacturer to support the enhanced product design were still being completed during the third quarter, so volume there had not yet begun.

5:55 Despite that, we still recognized improvement in our gross margin primarily attributable to the price increases implemented in July. Looking to the fourth quarter, both our U.S. and overseas contract manufacturers are producing at volume. As a result, we expect fourth quarter gross margins to improve quarter over quarter, and we estimate returning to our historical hardware margin levels in the mid-30% range during the first half of 2027. Our long-term objective remains achieving gross margins of 40% or better. I will now turn it over to Giampaolo, our Chief Strategy and Growth Officer, to discuss our customer programs, our pipeline, and the commercial dynamics we're seeing. Giampaolo?

6:49 Thank you Mallorie. I intend to cover four areas today and update on fuel of our active commercial deployment, where our proof of concept programs stand and where we expect them to convert. What we are hearing from enterprise customers about data and how our software platform fits into the equation. Our enterprise adoption is advancing across manufacturing, retail and cold chain. The most important shift this year is that the focus is moving from pilots to broader deployments. while at the same time our customers are expanding the use cases they run on our network, including state of inventory, condition monitoring, and asset tracking. Active commercial deployments. Starting with our largest retail customer, a Fortune 10 company, we are now working with them on additional use cases which they intend to begin rolling out across their Superstore format in 2027.

7:44 This customer has over 500 Superstores in the United States and the scale per location matter. A super center requires over 125 bridges compared with roughly 10 to 15 bridges for a standard store. The same customers warehouse club division is planned to deploy across approximately 550 locations at about 15 bridges per location. We expect that rollout to begin in early 2027 and continue throughout the year. Looking out over the next 12 months, We expect demand from these Fortune 10 customers to continue at the 2026 levels. This customer is also evaluating a potential expansion into Canada across their regular retail format, which will require new regulatory approval for the PowerBridge Pro in that jurisdiction.

8:36 Infrastructure requirements in that region are still being determined. Fleet and distribution center applications continue to be explored. Both involve more complex infrastructure which our customer is assessing. Turning to our Fortune 10 e-commerce customer, based on that customer's current planning, we continue to expect growth over the next 12 months. Deployment have and will continue across Europe. We expect to see acceleration in deployment in the US where we are still in the very early stage of opportunity completion with this customer. Use case continue to expand as well. and we are now looking at an expansion opportunities in Brazil. While we are limited in what we can share in greater detail, in 2027 we expect revenue from this customer to exceed 2026.

9:30 We share both of these updates today to provide confidence to our investor that we believe our revenue base looking forward is stronger and set up for continued growth. Our largest customers are strong supporters of our technology and are still in the early stages of their adoption cycle. Because it is the question we frequently receive, I would like to spend some time discussing our sales pipeline, pipeline conversion, and where active programs currently stand. Our framework has not changed. A program begins with an alignment phase to agree on goals and metrics, typically lasting about a month. A proof of concept follows, generally lasting up to three months.

10:15 Successful programs might then expand to multiple trials or move to commercial deployment. With the current sales cycle spanning approximately six to nine months versus 18 to 24 months historically, programs now move faster, but we judge progress by stage advancement, not by the number of trials. We also recognize that we have not announced named customers this year. Many of our customers do not permit disclosure and we will not name a customer without permission. What we can do is tell you where some of the more advanced programs are by stage. Several end-to-end proof of concept trials are currently active. The first is with a large semi-perishable consumer product manufacturer.

11:02 It is nearly completion and we currently expect the customer to move to deployment in the first quarter of 2027. If that happens as planned, It will be the first of our end-to-end solution programs to convert from our proof-of-concept pipeline to a deployment, creating a recurring revenue stream generated from our end-to-end solution, anchored by the monitoring and analytics provided by our SaaS platform eCompass. The second proof-of-concept, which we introduced last quarter, is with our regional supercenter and grocery chain operating under the stores across the Midwestern United States. Building on that data generated in the initial phase, we are now working with the customer to define phase two around measurable business outcomes, reducing shrink, lowering scanning, hardware and maintenance cost, and improving labor efficiency and supporting e-commerce growth. The planned scope include tracking goods between distribution centers and stores, improving shipment manifest accuracy, and integrating physical world data into existing enterprise system and analytics.

12:09 The focus is on validating how our end-to-end solution can deliver operational and financial value while feeding into the customers' day-to-day workflows. Beyond those two opportunities, we are exploring additional end-to-end proof-of-concept initiatives, one notably in the healthcare space where a Fortune 10 healthcare retailer that previously completed a proof-of-concept through a channel partner has chosen to re-engage directly to test our full-scope solution. Our strategic partnership with AWS continues to strengthen, serving as an important channel for expanding Energia's enterprise reach and accelerating adoption of our end-to-end ambient IoT platform. Customer engagement through the AWS channel has reached a new high, with a growing number of active proof-of-concept programs and joint opportunities.

13:02 This momentum is also reflected in the AWS recently increasing its reporting highlight customer launches from more than 50 to more than 100, an encouraging indicator of broader customer adoption across the AWS partner ecosystem. Energes continues to expand its presence in the AWS marketplace with three qualified devices alongside our eCompass software platform and our eSense battery-free sensing technology. Together, this offering provides enterprise customers with access to our integrated wireless power, sensing, and data infrastructure solution. Looking ahead, we expect our collaboration with AWS to remain an important driver of pipeline development, customer acquisition, and future deployment opportunity as joint co-selling initiative progress and existing program advance towards a broader commercialization.

13:58 Our national quick service restaurant program remains active. As we discussed last quarter, this customer completed its initial proof of concept in food preparation and cold storage environment. They continue to evaluate different solutions. Although we are only supplying the power bridge transmitters for this particular proof of concept, we believe the value proposition of using battery-free wireless technology remains a compelling solution for this use case. Our data strategy. As enterprises expand AI into physical operation, they will need reliable, timely data about what is happening across their assets, inventory, and facilities. Energy strategies is to address that need through an integrated solution spanning persistent energy, connected sensing, and trusted physical data infrastructure.

14:50 Our focus is on delivering actionable data into customer existing systems with customer retaining control of their data and how it is used. Central to this strategy is the evolution of the eCompass into our Layer 3 platform. The software layer that turns physical world sensor readings into contextualized usable data and events for enterprise applications. Our roadmap includes enterprise APIs Real-time event processing, AI-assisted infrastructure management, and trusted physical data service. Together, these capabilities are intended to help customers assess data quality, monitor infrastructure performance, and integrate physical intelligence into their operational scale.

15:38 We are pursuing strategic integration and partnership with Enterprise IoT Supply Chain, and AI software providers to extend the value of our platform beyond hardware deployment. By delivering persistent, trusted, and contextualized physical world data directly into enterprise intelligence and decision-making systems, EnerGIS aims to enable continuous operational visibility, predictive insight, and increasingly automated workflow at scale. We believe that this strategy will create opportunities for recurring revenue through infrastructure management and physical data service, while allowing our partner to deliver specialized analytics, applications, and business outcomes.

16:25 Although this initiative remains at an early stage with no assurance of resulting agreement or revenue, our strategic direction is clear. to establish Energis as the foundational physical data infrastructure platform for enterprise AI and physical AI. I will now turn it over to Greg. Thank you, Giampaolo. Good afternoon. I will now review Energis' financial results for the third quarter and nine months ended September 30th, 2026. Third quarter financial results. Revenue for the three and nine months ended September 30th, 2026 was approximately $3.4 million and $9.6 million respectively versus approximately $1.3 million and $2.6 million in the same periods in 2025. Increases of 167% and 270% respectively over the same prior year periods.

17:27 Third quarter revenue increased approximately 10% sequentially over the second quarter of 2026. Gross margin improved from 3% in the second quarter of 2026 to 14% for the three months ended September 30th, 2026. As our offshore contract manufacturer ramps production, we believe gross margins will continue to show improvement in the fourth quarter and into 2027. The company has maintained its quality performance record with zero product returns since commercial production of its PowerBridge Pro began in 2024. Ensuring the highest level of product quality remains a key priority for the company as we work toward widespread adoption of our technology.

18:13 The net loss for the nine months ended September 30th, 2026 was $7.1 million compared to a loss of $8.3 million for the same prior year period. a 14% improvement year-over-year. The narrowing loss year-to-date reflects our commitment to remain focused on exercising fiscal discipline as we work towards achieving profitability and cash flow breakeven. To underscore this commitment, since the current management team took over in early 2024, approximately $9 million of annualized expense has been cut. contributing to a 50% improvement in net loss for the nine months ended September 30th, 2026, compared to the same period in 2024.

18:59 As we look ahead, our primary objective is to strike the right balance between driving sustained long-term growth and accelerating our path to profitability. We believe that growth and profitability are not mutually exclusive, and maintaining this balanced strategic framework serves to build a scalable business model that is well positioned to deliver value to our shareholders. As of September 30, 2026, the company's cash and cash equivalents were $28.8 million. No shares were sold under the ATM program during the third quarter. I will now turn the call back to Mallorie.

19:36 Thank you, Greg. Regarding Greg's reference to the ATM, I would like to mention that while our ATM facility remains in place, we have made no use of it since the first quarter. During the last two quarters calls, I committed that there were no plans for additional ATM usage this year and that commitment has not changed. We believe our cash position at the end of the quarter of $28.8 million is sufficient to support our commercial programs and we remain confident in our ability to execute without additional equity financing. Before we move to Q&A, I'd like to reiterate what I hope investors take away from today's call. First, we expect sequential revenue growth to accelerate in the fourth quarter. Both contract manufacturers are expected to contribute to our unit volume and we anticipate gross margins will continue to improve.

20:38 Second, we anticipate continued growth during the next 12 months. We believe 2027 demand from our largest retail customer to at least approximate 2026 levels with the warehouse club rollout beginning early in the year and we believe 2027 revenue from our e-commerce customer will exceed that of reported in 2026. Third, we feel strongly about our competitive position and the direction of the business. We hold more than 300 issued patents and regulatory approvals in over 110 countries. We believe the macro backdrop is a tailwind for our business as enterprises look for persistent energy and trusted data to support physical AI. Our pipeline continues to grow Active proof of concept engagements through our AWS channel are at a new high.

21:38 Our partners are doing more and we expect to show the first conversion from our end-to-end solution proof of concept pipeline to deployment in the first quarter. Revenue, shipments, margins, and pipeline are all moving in the right direction. The market is beginning to recognize that physical AI requires the ability to continuously generate trusted data from the physical world, and we believe that capability begins with persistent energy. We believe it begins with energist technology. As physical AI evolves, one reality is becoming clear. Intelligence is only as reliable as the physical data that powers it. Continuous data requires persistent sensing and persistent sensing requires persistent energy. This is where we believe Energist becomes foundational to the physical AI ecosystem.

22:41 We are grateful for your continued support and we will now open the call for questions. Thank you. We will now begin the question and answer session. To ask a question, you will need to press star 1 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star 11 again. We will pause momentarily to assemble the roster. Our first question comes from John Hickman with Leidenberg-Dalman. Your line is open. Yeah. Your line is open.

23:25 Hi, John. Mallorie, can you hear me?

23:28 Yes.

23:29 So can you, maybe this is a question for John, probably, but can you give us some kind of year-over-year pacing of new customers? You know, yeah. Either like proof of concept or...

23:51 Oh, like the pipeline?

23:54 Yeah, like what's the year-over-year growth rate here in the number of customers or proof of concepts or I don't know how you want it.

24:04 Yeah, so John, I think to answer your question, we believe that given the pipeline and the current active proof of concept, we expect that the number of active customers across 2027 to basically double. If today, you know, we have two active paying customers currently in deployment, we are expect that that number will go to four across 2027.

24:34 But you have more than two customers right now, right?

24:38 Yeah, I think so. If you recall back to the second quarter of 2026 when five customers made up 74% I recall it yeah so we expect that to grow I think I think I'm sorry say that again that last bit yeah so we expect the customer base to grow we're expanding our proof of concept pipeline but also the proof of concepts that are are active right now and I believe it's fair to say that we've also received significant inbound interest asking for demos and to start proofs of concept and I believe that is also somewhat a function of the familiarity that people are gaining and the education that people are receiving about the technology.

25:44 and that sort of tracks with what Giampaolo had talked about during the first quarter about the technology adoption curve and that we were early on in that curve and it takes time to educate the market to demonstrate the value proposition of the technology and I think we're starting to gain traction in that regard.

26:11 Okay, thank you. Thank you. As a reminder, to ask a question, please press star 1 1. As there are no further questions, this concludes today's conference call. Thank you for your participation. You may now disconnect.