Ocean Power Technologies Inc (OPTT) 2009 Q3 法說會逐字稿

Good day, everyone, and welcome to Ocean Power Technologies' third-quarter 2009 audio webcast. Today's conference is being recorded and webcast. At this time for opening remarks I would like to turn the call over to the Chief Financial Officer of Ocean Power Technologies, Mr. Charles Dunleavy. Please go ahead, sir.

Thank you. Good morning and welcome to Ocean Power Technologies audio webcast for the third quarter ended January 31, 2009. Earlier today we issued our third-quarter results press release and we will be filing our Form 10-Q with the US Securities and Exchange Commission today. Our public filings can be viewed on the SBC website at SEC.gov or you may go to our website, OceanPowerTechnologies.com. I'll be joined on today's webcast by Mark Draper, our Chief Executive Officer, and Dr. George Taylor, our Executive Chairman.

During the course of this conference call management may make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

As indicated in the slide, these forward-looking statements are subject to numerous assumptions made by management regarding future circumstances over which the Company may have little or no control and involve risks and uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements.

We refer you to the Company's Form 10-Q and other recent filings with the Securities and Exchange Commission for a description of these and other risk factors. I will now turn the call over to Dr. George Taylor, our Executive Chairman.

Thank you, Chuck, and thanks to everyone who has joined us for today's webcast. As you'll all be aware, I recently took up the position of the Executive Chairman. In this new role I will continue to provide OPT with strategic guidance and also will focus on business development opportunities worldwide.

I would like to take this occasion to thank the Board and members of the executive team for giving me their continued support during my tenure as CEO. I look forward to continuing to work with them closely on an ongoing basis.

Simultaneously as I took on my new role, Seymour Preston was appointed as Vice Chairman of the Company and Lead Independent Director. In this capacity he will preside at all meetings of the Board of Directors and stockholders.

In addition, Mark Draper was appointed Chief Executive Officer. I would like to take this opportunity to talk about his contributions at Ocean Power Technologies and give you some more details on his background.

Mark joined OPT in September 2004 as the Chief Executive and Director of OPT's wholly-owned subsidiary, Ocean Power Technologies Ltd., which is based in Warwick, England. In June 2007 Mark was also given the added responsibility as the Chief Operating Officer for the whole company.

From the beginning Mark has consistently demonstrated strong capabilities in the areas of operations, technology development and commercialization. He has greatly contributed to the growth of the Company; in particular he has led our efforts to expand operations in Europe and North America. Mark has led the Company's progress on the development of our cornerstone PB150 product and utility connection infrastructure.

Mark also brings to OPT extensive experience in the utility industry in both renewables and conventional sources of power. Before Mark joined OPT he held a number of senior managerial and engineering roles at Powergen plc, a UK energy utility with an annual turnover in excess of GBP6 billion pounds.

Mark's most recent position at Powergen was as Managing Director of their generation business where he was responsible for all of Powergen's power stations totaling 9,000 MW capacity, a combined heat and power business the technology division and the company's renewable energy business.

It is important to note that Mark was in charge of establishing and managing the growth of Powergen's renewable generation activities which included onshore and offshore wind power stations. Mark's experience has served OPT extremely well and I am very confident that he will lead the Company to new heights as OPT moves to the next stage of growth in the worldwide renewable energy marketplace.

I would like to take a few minutes to review OPT's business and the progress we have made in the third quarter. We continue to execute on our global expansion plan with our agreement with Leighton Contractors to develop wave power stations off the eastern south coast of Australia.

Leighton Contractors employs over 9,000 people and has projects with a value of AUD9 billion. Over the past 50 years Leighton has played an active role in building Australia's ports and marine facilities, transportation infrastructure and energy projects.

This contract with Leighton will expand our portfolio of activities in Australia. The initial phase of the work will require us to identify potential project sites and assess their commercial prospects under contract from Leighton. Upon identification of projects to be developed Leighton will obtain approvals, negotiate power purchase agreements, structure power financing and oversee project delivery using OPT's PowerBuoys.

In January we signed a letter of intent with the global security company, Lockheed Martin, to collaborate on the development of a utility scale wave power generation project in North America. Under the agreement OPT would provide its project and site development expertise and its proprietary PowerBuoy technology.

In addition, OPT will build the power takeoff and control systems of the plant while Lockheed Martin would provide construction, system integration and deployment of the plant as well as operations and maintenance services. This is the first agreement between the two companies for a utility scale renewable energy project and builds on our previous work together on systems for the US Homeland Security and Maritime Surveillance.

We continue to see demand for our PowerBuoy technology as evidenced by the $6.9 million in (technical difficulty) we reported for the quarter, a significant portion of which relates to our next generation technology, the PB150. This compares with $5.5 million as of last year end, April 30, 2008. We see an important opportunity for OPT as the US federal and state governments increase their investments in the renewable energy sector under the recently announced stimulus measures.

OPT is directing resources to working at both state and federal levels in order to position the Company to benefit from various government programs. We believe that our projects on the West Coast of the United States are well-positioned to put such government investment to work right away. With that I would like to turn our webcast over to Mark.

Thank you, George for your kind words and for your confidence in me to continue your legacy and take OPT forward. I thank you, the Board and the executive team for this new responsibility and look forward to your continued expert support and counsel as Executive Chairman.

As most of you who have been following the Company are aware, OPT is a leading wave power company and is the only pure play public wave power company. Our technology is based on modular oceangoing buoys, the rising/falling of the waves move the buoys, capturing the mechanical energy that it then converts into electricity. OPT's technology continues to build on 10 years of in-ocean experience and develop its unique capability to electronically tune the system to improve energy conversion efficiency.

Our balance sheet also reflects a strong cash position, a very important asset in the current economic environment. We offer two products to our customers, a utility PowerBuoy system and an autonomous PowerBuoy system. To give you a sense of our products we have included photographs of both an autonomous PowerBuoy and a utility PowerBuoy on this slide.

The first slide photograph is of the autonomous PowerBuoy built for the U.S. Navy's DWADS, Deep Water Active Detection System program, which was tested off New Jersey in October 2008. The second photo is of the utility PowerBuoy deployed and tested in Spain for Iberdrola.

Now let me give you some detail regarding the projects on which we have made progress in this third quarter. During the quarter we commenced work under a new $3 million contract award for the second phase of our development of a unique PowerBuoy for the United States Navy in connection with their DWADS program. This builds on the first phase testing and is the ocean testing of an advanced version of our autonomous PowerBuoy.

We also partnered with the U.S. Navy on another collaborative project, the deployment of a 40 kW peak rate PowerBuoy in Hawaii. The PowerBuoy, which we launched off the Marine Corps base at Kaneohe Bay, will be later connected to the Oahu power grid to provide power to the grid that serves the base. Initial commissioning tests were very encouraging and power produced in line with predicted levels.

Meanwhile our work with PNGC Power and the US Department of Energy on the deployment of a 150 kW PowerBuoy near Reedsport, Oregon also continues to move forward in the areas of permitting and licensing. The system is expected to use a PB150 PowerBuoy, major portions of which will be fabricated and integrated in Oregon.

OPT and Iberdrola, one of the world's largest renewable energy companies, are continuing to work on what is expected to be a utility grade OPT wave power station in Spain. Following deployment for ocean testing of the first PowerBuoy there in September 2008 OPT has been working on improvements to the power takeoff and control systems.

We have also made impressive progress with our work under a contract with the Scottish government at a European Marine Energy Center in Scotland to deploy a grid connected PB150 PowerBuoy. In the first quarter OPT focused on the construction of the power takeoff and conversion assembly. The electrical control system, which is the core of the PB150 system, was recently shipped to the UK from OPT's Pennington, New Jersey manufacturing facility.

We also continued our review of perspective supplies for the manufacturing of the PowerBuoy structure which is on track to be ready for deployment by the end of calendar year 2009.

We welcomed Dr. Phil Hart to the position of Chief Technology Officer. In this role Phil will lead Advanced Technology development for OPT, in particular development of the next generation of PowerBuoy systems. He will also take charge of OPT's ongoing research programs. Phil brings to OPT broad expertise in international Marine technology. We believe his knowledge in developing and implementing technology and his experiences leading various marine and subsea development engineering projects will serve OPT extremely well.

To give you some background, Phil previously worked for the Global Marine Systems for eight years, an international marine technology and engineering company which marketed to telecommunications, renewable energy, oil and gas and homeland security. At Global Marine Systems Phil led research and development efforts and was in charge of integration and the development of new technology.

Phil has also worked as an engineering consultant on projects for clients which have included Statoil, Texaco and BP Amoco and spent much of his career deploying systems in the sea. We believe that Phil will be instrumental in the development of the technological advancements OPT requires as we continue our pursuit of becoming a global best in class renewable energy company.

During this quarter OPT continued to make state progress on the design of the 150 kW rated PowerBuoys which comprise a significant portion of our current backlog. The initial structural design of the PB150 was completed by year end 2008 and we continue to project that the complete system will be ready for deployment by the end of calendar 2009.

Our work with an independent engineering group to attain certification of the structural design is also progressing well and the first round of such certification reviews has been completed. We are also pleased that our patent portfolio has continued to grow with one new US patent issued for our core PowerBuoy technology during this quarter. OPT currently has a total of 40 issued US patents with extensive patent coverage in other parts of the world.

I'd now like to turn the call over to Chuck Dunleavy, our CFO, for a discussion of our financial results.

Thank you, Mark. Revenues decreased by $04 million in the three months ended January 31, 2009 to $1 million as compared to $1.4 million in the three months ended January 31, 2008. The decrease in revenues was primarily attributable to lower levels of revenues on our wave power station off the coast of Spain and the autonomous PowerBuoy work net of an increase in revenues related to our Hawaii project for the U.S. Navy.

Cost of revenues decreased to $0.6 million in the three months ended January 31, 2009 as compared to $2 million in the prior year's comparable quarter. This decrease in cost of revenues reflected the lower level of activity noted previously in connection with revenues for the quarter. In addition, the quarter benefited from reduced estimates of cost at completion in connection with the Hawaii project.

Product development costs for the third quarter of fiscal 2009 were slightly below those reported for the third quarter of fiscal 2008. The product development costs were primarily attributable to our work to increase the power output of our utility PowerBuoy.

Selling, general and administrative cost increased to $2.1 million in the third quarter of fiscal '09 as compared to $1.9 million in the prior year's quarter. This increase is due partly to an increase in additional payroll and incentive base costs related to company growth.

Interest income in the third quarter of fiscal 2009 decreased to $0.4 million as compared to $1.1 million in the third quarter of fiscal 2008 reflecting decreases in interest rates and slightly lower invested balances.

Foreign exchange losses decreased to $88,000 in the third quarter of fiscal '09 compared to a loss of $450,000 in the prior year's quarter. This favorable change is primarily attributable to the relative change in value of the British pound sterling compared to the US dollar during the two periods. The resulting net loss for the three months ended January 31, 2009 was $3.6 million comparing favorably to a net loss of $4 million in the quarter ended January 31, 2008.

For the nine months ended January 31, 2009 the Company reported revenues of $3.4 million compared to $3.7 million in the nine months ended January 31, 2008. The 7% increase primarily -- decreased rather, primarily reflected lower revenues associated with our Spain wave power station contract, the Hawaii project with the U.S. Navy, and the contract with the Scottish government offset in part by increased revenues from our autonomous PowerBuoy system with the U.S. Navy.

Cost of revenues decreased to $4 million in the nine months ended January 31, 2009 as compared to $4.7 million in the prior year's comparable period. This decrease in cost of revenues primarily reflected the lower level of activity noted previously in connection with revenues for the nine months.

OPT reported a net loss of $13.6 million for the nine months ended January 31, 2009 compared to a net loss of $8.3 million for the nine months ended January 31, 2008. This change in net loss reflects the factors discussed before in connection with the [compared] results of the third quarter of fiscal '09 with the exception of the period-on-period nine-month increase in foreign exchange losses. Please note that the nine-month operating loss for fiscal 2009 is squarely in line with the Company's expectation.

The Company finished the third quarter of fiscal 2009 with a strong cash position. At January 31, '09 total cash, cash equivalents and investments were $85.6 million compared to $89.6 million at October 31, 2008. Our cash, cash equivalents and marketable cash investments consist primarily of highly liquid instruments including term deposits with large commercial banks and US treasury bills and notes.

Net cash used in operating activities was $12.7 million for the nine months ended January 31, 2009 compared to $8.9 million for the nine months ended January 31, 2008. As you can see in the chart net cash used in the third quarter's operating activities showed a decrease from both the first and second quarters of fiscal 2009.

We expect our cash burn for the remainder of this fiscal year 2009 to be consistent with that experienced in the first nine months. This is in line with the planned use of proceeds that we had outlined during our US IPO which includes continued development efforts for our PowerBuoy systems and the expansion of our sales, marketing and manufacturing programs associated with the commercialization of the PowerBuoy system.

Now I'll turn the call back over to Mark for a discussion of OPT's growth strategy and his closing remarks.

Thanks, Chuck. As we wrap up the call I would like to emphasize our growth plan and strategies for the balance of fiscal year 2009 as we look forward to the coming fiscal year. We continue to focus construction on our PB150 PowerBuoys.

Our interest and increased sales and marketing efforts over the next three years on coastal North America, the West Coast of Europe, the coast of Australia and Japan remains in place. These areas represent strong potential markets for our PowerBuoy wave power station because they combine favorable wave conditions, political and economic stability, large population centers, high levels of industrialization and significant and increasing electricity requirements.

We intend to build on existing commercial relationships and expand the number and size of projects we have with our current customers. We have delivered on this strategy by continuing to build on our partnership with the US Navy. In addition, we entered into an agreement with Leighton Contractors and announced our collaboration with Lockheed Martin.

The recent expansion of the production tax credit in the US to include wave energy as well as funding opportunities under economic stimulus initiatives reflect the US government's increased interest in marine renewables. We expect to take full advantage of such initiatives.

Finally, in addition to these operational and regulatory advantages, OPT has a strong financial position that we can leverage as we continue to expand our business. Our cash position is an important advantage given the current economy and the weak credit markets. Our cash burn for fiscal 2009 has remained in line with guidance. At OPT we are dedicated to maintaining our strong financial position as we focus on driving the Company forward.

With that I would like to thank you all for attending today's webcast and for your continued support and interest as work towards making Ocean Power Technologies a leading player in the worldwide energy marketplace.

Thank you, everyone. That concludes today's webcast. You may now disconnect.