Energous Corporation 2026 Q2 Earnings Call

Ma'am, please go ahead. Thank you, and thank you, everyone.

I would like to first thank you for joining us on our second quarter 2026 earnings call. For those who joined us on the first quarter call in May, welcome back. For those who are newer to the Energous story, I would like to encourage you to review the replay of our Q1 call, which provides a full company overview and the commercial foundation for what I will be discussing today. I will keep the background context brief today and focus on what has changed and what is building. The short answer is a great deal is building. Our active deployments are expanding in scope, geography, and use cases at a pace that gives us increasing confidence in the long-term revenue trajectory of this business.

Our proof-of-concept pipeline has grown both in size and quality of the opportunities, and our technology platform has advanced in ways that are directly driving commercial demand. Before I get into the commercial updates, I want to address our second quarter financial results directly and with full transparency, because the gross margin line requires context that the numbers alone do not provide. Revenue for the three and six months ended June 30, 2026, was approximately $3.1 million and $6.2 million respectively, versus approximately $1 million and $1.3 million in the same periods in 2025, a 217% and 368% improvement over the same prior year periods. Driven by our performance in the first half of 2026, Energous achieved a new historic revenue milestone, having surpassed $10 million in revenue over the trailing 12 months.

For the six months ended June 30, 2026, gross profit was $1.2 million, representing a 176% increase versus the same prior year period. Gross margin was 19% for the six months ended June 30, 2026. Gross margin during the second quarter was below the levels we achieved in the recent quarters. This was driven by three primary factors, all of which we believe are temporary in nature and associated with the execution of our long-term growth strategy. First, as we introduced important hardware enhancements across our product portfolio, all of which were driven by our Fortune 10 customers, who were also requiring delivery of those upgraded products in the second quarter, we were limited to U.S.-based capacity as our contract manufacturer overseas was unable to retool its line in time to produce any volume in the second quarter.

As a result of these limitations, our U.S.-based contract manufacturer incurred one-time costs associated with retooling and upgrading production lines. These investments were necessary to support the enhanced product design, improve manufacturing capability, and position us for higher production volumes going forward. While these transition costs impacted this quarter's margins, they are not expected to continue at the same level going forward. Second, we experienced supply chain disruptions affecting several critical components. The disruptions were partly attributable to the AI-driven vacuum effect that resulted in finite global supplies of critical components being directed to hyperscalers. To maintain production schedules and meet customer commitments for Q2, we sourced components from alternative suppliers at a higher than normal cost. Although these actions created incremental material cost pressure, they enabled us to avoid significant production delays and preserve our delivery commitments.

As supply availability normalizes and our primary sourcing channels stabilize, we expect this cost pressure to diminish. Third, we made a deliberate decision to prioritize product availability for large strategic customers. In certain situations, we absorbed higher input costs rather than delay shipments or disrupt customer deployments. While this resulted in lower gross margins in the near term, we believe it was the right strategic decision to judiciously ramp our U.S.-based capacity in order to protect customer relationships, support continued revenue growth, and reinforce our reputation as a reliable supplier. Taken together, these factors reduced gross margins during the second quarter, but should be viewed as transitional rather than structural. Importantly, demand for our product remains strong. Our competitive position continues to improve, and none of these factors change our long-term margin objectives to reach 40% plus gross margins.

Looking ahead, the production line upgrades are substantially complete in the U.S. and are in progress at our overseas contract manufacturer with a goal of producing a limited volume of products overseas during the third quarter and expanding that volume in the fourth quarter. We are actively managing supply chain conditions, and the extraordinary costs associated with component sourcing are expected to moderate over time. As these temporary headwinds subside and operational efficiencies are realized, we expect gross margins to progressively improve over the coming quarters. Our strategy has always been to optimize long-term shareholder value rather than maximize quarterly results. We believe the investments we made this quarter strengthened our manufacturing capability, protected key customer relationships, and position the business for sustained growth. We remain confident in our ability to return gross margins toward our historical range while continuing to deliver revenue growth.

I also want to note that effective July 1st, we implemented a price increase across our product lines. This pricing action, combined with the production normalization and revenue scaling, supports our confidence in the Q3 and Q4 margin recovery I just described. One additional highlight worth noting, in the second quarter of 2026, five customers accounted for approximately 74% of our revenue. Compare that to a year ago, when two customers accounted for approximately 94% of revenue. That shift reflects meaningful diversification of our commercial base across multiple enterprise relationships and verticals, and it is a trend that we expect to continue as our pipeline advances. I will now provide updates on each of our active commercial programs before turning it over to Giampaolo Marino for the broader pipeline and technology discussion.

Our active commercial deployments are the programs where our technology is live in production environments, generating revenue today and scaling in scope and geography. I want to give investors specific updates on each program, because the trajectory of these relationships is the most important indicator of where the business is headed. Our first and largest active commercial deployment is with a leading national retailer across its distribution and retail network. This program targets approximately 4,700 U.S. retail locations, and we have delivered thousands of PowerBridge Pro units to ensure that the project remains on track to complete installations across those retail stores based on the customer's schedule. That milestone completion is significant. It will mark the full build-out of the initial program scope and establishes a baseline for expansion discussions already underway.

Approximately 90% of the rollout has now been completed, representing a major milestone for both the customer and Energous. What is particularly exciting about this relationship is it is not standing still while the initial store rollout completes. The customer is actively testing additional use cases within retail stores that go beyond the original cold chain compliance, including state of inventory plan and in-store internalized parcel delivery applications. We also believe that both distribution centers and their trucking fleet could represent expanded deployment opportunities in the future. These conversations reflect a customer that has gained confidence in the technology's production scale performance and is now exploring what else it can do within the same installed infrastructure. Beyond the retail store program, we are also working with this customer across approximately 50 of its membership warehouse locations.

We are supporting a cold chain initiative with this major retail customer by helping enable real-time visibility into pallet movement throughout the receiving process. The objective is to improve operational efficiency and strengthen cold chain compliance by providing continuous insight into asset dwell time from the loading dock to refrigerated storage. Plan is to expand that program to approximately 550 locations at the beginning of next year with what we believe could be a broader rollout in 2027. We are encouraged by the trajectory of this relationship and the scope of what it could represent over the next 12-24 months. Our second Fortune 10 commercial deployment is with a major enterprise in the e-commerce, technology, and cloud services sector, is accelerating in a way that we believe investors should understand because the scale of what is developing is substantial.

When we reported on this program in Q1, we noted 14 international installations outside the U.S. That number has grown, and more importantly, the scope of the program has expanded significantly in both geographies and use cases. This customer is now actively deploying across multiple international markets with several new countries on the expansion roadmap. The international dimension of this program alone represents a deployment opportunity that is many multiples of what we initially described. Equally important is the use case expansion within this relationship. We are currently supporting a total of five distinct use cases that are in active deployment. None of the five are fully deployed yet at scale. Each is in earlier stages of what we believe will ultimately be a very large multi-use case, multi-geography, and multi-facility program.

The breadth of what this customer is building with our technology across use cases and geographies simultaneously is a testament to the platform's versatility and the depth of this commercial relationship. One additional proof of concept I would like to touch on is an update on a program that was characterized only broadly in our Q1 commentary. We are in an active commercial program with a major federal government agency focused on the transport and processing of letters and packages across its facility network. This program is directly enabled by our U.S.-based contract manufacturing capability, which meets the domestic manufacturing requirements that are a condition of federal procurement. That strategic infrastructure investment is paying off in exactly the way that we anticipated when we made it. The proof-of-concept program is currently active. It generated meaningful revenue in the second quarter and was one of our top five customers.