Ocean Power Technologies Inc (OPTT) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter fiscal year 2015 Ocean Power Technologies conference call. My name is Francis and I will be your coordinator for today. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call to Mr. Shawn Severson of The Blueshirt Group. You may begin.

Thank you. Good morning, everyone. Thank you for joining us OPT's conference call and webcast to discuss the financial results for the three-month period ended January 31, 2015.

On the call with me today are George Kirby, President and CEO, and Mark Featherstone, Chief Financial Officer. George will provide an update on the Company's recent developments, key activities and strategies after which Mark will review the financial results for the third quarter. Following our prepared remarks, we will open the call to questions. This call is being webcast along with our earnings presentation on our website at www.OceanPowerTechnologies.com.

The presentation material can be accessed through the investor relations section of our website. The webcast will be posted at www.OceanPowerTechnologies.com for replay approximately 2 hours following the end of this call. The replay will stay on the site for on-demand review over the next several months.

Before we get started, please turn to slide two of our presentation where you will notice regarding the use of projections or other forward-looking statements during this call as well as 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.

Forward-looking statements are identified by certain words or phrases such as may, will, aim, likely result, believe, expect, will continue, anticipate, estimate, intent, plan, contemplate, seek to, future, objective, goal, project, should, will pursue and similar impressions or variations of such expressions. These forward statements are based on assumptions made by management regarding future circumstances of 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 expected or implied by such forward-looking statements.

Some of these factors include among others the following; future financial performance, expected cash flow, ability to reduce costs and improve operational efficiencies, revenue growth and increased sales volume, success in key markets, competition, ability to enter into relationship with partners and other third parties, delivery and deployment of PowerBuoys, increasing the power output of PowerBuoys, hiring new key employees, expected costs of PowerBuoy products and building customer relationships. Please refer to our most recent Form 10-K -- excuse me -- 10-Q and 10-K and subsequent filings with the SEC for a further discussion of these risks and uncertainties.

We disclaim any obligation or intent to update the forward-looking statements in order to reflect events or circumstances after the date of this earnings call.

And with that, I'd like to turn the call over to George to begin the discussion.

Thanks, Shawn. Good morning, everyone. Although I've already spoken with many of you on this call, I want to take a moment to introduce myself. I joined OPT as CEO at the beginning of this year and I'm excited about the prospects of our technology applications in our chosen markets. We performed an in-depth review of the Company's operations, strategy and commercialization initiatives and I'm very enthusiastic about the opportunities ahead of us. I am looking forward to working with our customers, the OPT team and shareholders as we transform our Company into a leading energy technology company.

Let's begin with slide three as I'd like to review some of the recent developments at OPT. First, I'm excited to say that we have three PowerBuoy deployments planned for calendar year 2015 and I'll be providing more details on this later. Additionally, we have made significant progress on the redesign of the APB-350. The new Power Take-Off design, or PTO, is lighter weight, it's less expensive and we believe more durable. In addition to our ocean deployments, our plan is to demonstrate durability using a highly accelerated life test or HALT which is scheduled to begin in May.

Other recent highlights include significant work on the Mitsui Engineering & Shipbuilding contract. As a reminder, this contract is undergoing stage gate review and we more fully describe this in the MD&A section of our latest 10-Q.

Lastly, we received $1.1 million through the New Jersey Tax Certificate Program. This cash infusion will be used to help offset our product development costs and Company operations.

Moving to slide four, I'd like to provide a little additional color around our planned PowerBuoy deployments. We recently completed the relocation and reassembly of the PB40 PowerBuoy in Bayonne, New Jersey. From a timing perspective, we expect the PB40 to be fully tested and ready for deployment later this month and it will be our first in calendar 2015.

Actual deployment is expected to occur as soon as final permits are received and an acceptable weather window opens. The PB40 features our modular PTO which can be scaled for buoys of various sizes and a range of power outputs. Furthermore, several of the PB40 components and subsystems are common to our APB-350 PowerBuoy and we expect that the PB40 deployment will further validate critical design and performance parameters related to the ongoing APB-350 optimization.

The second expected deployment is our optimized APB-350 PowerBuoy. What I will tell you is that this device is a strategic fit for us as we believe that we remain well positioned to capitalize on the growing market for off-grid power production at smaller scales. We are excited about our next generation APB-350. We refer to it as A1. We expect to deploy this prototype in the summer of 2015. A1 will utilize the existing buoy structure deployed in 2013 and will include newly designed PTO and upgraded components.

Our third planned 2015 deployment will be the APB-350A2. This unit is being designed with an optimized geometry for improved operating efficiency as well as reduced fabrication, transportation and deployment costs. Our plan is for A2 to also incorporate an improved energy storage system and to undergo a preliminary design review in the second calendar quarter of 2015 with a planned deployment in late 2015.

Turning to slide five, I'd like to discuss the key strategic shift we are making at OPT. After conducting a comprehensive review of our technology, our markets and opportunities, we believe the highest return opportunity for our technology is in smaller scale applications which offers a number of benefits versus larger utility power projects and will better serve our Company and our shareholders. We believe this will result in a more manageable technical roadmap with more near-term deployment opportunities and better risk and cost management.

We also believe this strategy gives us a more cost-competitive solution and as a result will lead to faster commercial revenues. There are four key market segments which we are targeting -- ocean observing, offshore wind, defense and security, and oil and gas. To help you better understand how our technology functions in these markets, I'd like to provide you with two examples.

Let's start with the ocean observing industry. There are several thousand systems deployed today collecting various meteorological and ocean data to support weather monitoring and prediction and to support studies in climate change in maritime operations. This data is also important to defense and security as well as the oil and gas industries which must design, build and operate structures that endure this harsh ocean environment.

These systems predominantly use battery and solar power which lasts from three to 12 months before requiring service. Ocean Power Technologies PowerBuoy system is intended to provide these industries with significantly more continuous power than is commercially available today for autonomous applications and with what we expect to be a substantially longer service interval thus enabling new or enhanced data collection opportunities.

The offshore wind industry is also very exciting for us. It requires substantial data to determine ocean environment and wind resource conditions for turbine design and layout, power generation prediction, and for financing purposes. A wave powered mobile monitoring system is a re-deployable asset for use across multiple projects during early-stage development. Or it is advantageous during the entire project lifecycle for monitoring and correlation of project output to the wind resources.

So we see significant opportunities in this market in the UK and there's already growing potential here in the US as well as Asian markets.

Moving on to slide six, as mentioned in our recent public announcements, we have carried out a strategic pivot. We are shifting our focus toward what we believe to be a faster path to commercial revenues with lower technical and manufacturing risks and a lower and more attractive overall cost. We are moving away from large utility scale project development to address the needs of autonomous remote applications as our first priority.

We believe that our products and technologies will offer disruptive and enabling advantages such as reliable persistent power supply, reduce maintenance and support, competitive economic value, and multi sensor capabilities given increased power and enhanced interface and packaging compatibility.

As previously mentioned, A1 is anticipated for deployment this summer demonstrating what we expect will be our commercial-ready PTO system. A2 deployment is expected later in 2015 and we expect this to demonstrate our commercial-ready structure. The goal of these efforts is to help us validate the reliability, seaworthiness and manufacturability of the APB-350.

Also discussed earlier, we are preparing to deploy our PB40 when permitting and weather allow and in addition to incorporating our modular PTO technology, the PB40 includes various components and subsystems that are used on board the APB-350. So this deployment will provide additional important data related to performance risk of the 350 as well as critical information related to the scalability of our technology in general.

I will now turn it over to Mark, who will review our financial results in the quarter. Mark?

Thanks, George. And good morning, everyone. I will now briefly review results for the third quarter before we go on to questions.

Turning now to slide seven, revenue in the third quarter of fiscal 2015 of $23 million increased $0.1 million from the same period last year. The higher revenue in the quarter reflects the increased billable work under the current phase of our project with Mitsui Engineering & Shipbuilding, or MES.

As George noted, the MES project is currently undergoing a stage-gate review which is further discussed in the MD&A section of our latest Form 10-Q.

The net loss for the three months ended January 31, 2015 was $2.2 million as compared to a net loss of $0.8 million for the three months ended January 31, 2014. The increase in the Company's net loss year-over-year primarily reflects increased product development costs associated with our PB40 PowerBuoy prototype that we intend to deploy off the coast of New Jersey and increased costs with the next generation of the prototype APB-350.

In addition, costs related to consulting fees and patent amortization were also higher. These increases were partially offset by decreased site development expenses related to our terminated project in Australia. The increase in now loss was also a result of the decrease in income tax benefits compared to the prior year and losses on foreign exchange.

For the nine months ended January 31, 2015, OPT reported revenue of $3.6 million as compared to revenue of $1.1 million for the nine months ended January 31, 2014. The increase in revenue year-over-year is primarily due to increased billable work for the removal of the anchoring and mooring equipment from the seabed off the coast of Oregon, increased billable work under the current phase of our project with MES, and the completion of our WavePort contract with the European Union. These increases were partially offset by decreased revenue on other billable development projects.

The net loss for the nine months ended January 31, 2015 was $9.9 million as compared to a net loss of $7.9 million for the nine months ended January 31, 2014. The increase in the Company's net loss year-over-year primarily reflects increased estimated project costs associated with our contract with MES, increased legal fees, as well as higher consulting and patent amortization costs. These increases were partially offset by decreased product development costs due to the substantial completion of our cost-sharing contract with the US Department of Energy, or DOE, for our Reedsport project in Oregon.

In addition, there were decreased costs associated with other internally funded development projects in addition to lower employee-related costs and decreased site development expenses related to our terminated project in Australia.

Turning now to our balance sheet on slide eight, total cash, cash equivalents, restricted cash and marketable securities was $20.5 million as of January 31, 2015 compared to $19.6 million as of January 31, 2014.

With that, I will turn it back to George before we open up the call for questions.

Thanks, Mark. Let's turn to slide nine please. In summary, we are focused on a smaller scale off-grid wave power with what we believe are significant opportunities in our target markets. In the third quarter, we further increased our technical capabilities with additional engineering resources to help us accelerate our product development and commercialization with a continued focus on reliability, durability and lifecycle costs. We have three deployments planned for calendar year 2015 to validate these criteria and we believe that our accelerated life testing will provide additional confidence in our PTO design.

We continue to believe that we have strong growth prospects in front of us. Key markets include offshore wind, oil and gas, defense and security and ocean observing and these markets continue to benefit from long-term growth trends. We believe our solutions will play a critical role just as our market engagements are currently confirming their significant interest in off-grid autonomous power applications.

We want to thank you for your support and time today and operator, we are now ready to take questions.

(Operator Instructions). Amit Dayal, H.C. Wainwright.

Thank you. Good morning. Could you talk a little bit about the cash burn that you expect for the next few quarters?

I think as you saw in our 10-Q, we have indicated that we have sufficient cash on hand to fund operations through the first calendar quarter of 2016. I think if you look historically for the last quarter, our cash burn was running around $1 million a month. So without being specific to going forward but I think that's a reflection of an approximate ballpark.

I will also mention that as you know, our business is a product development business at the moment and that tends to be a bit lumpy as we incur costs around deployment and actually launching these products. So as you are pulling together your models you might want to also keep that in consideration.

Right, that's what I was trying to get at. As deployments start ramping up as you start getting closer to maybe even doing some pilots, obviously the cash burn will probably start increasing at that point. Do we have a sense of what those levels would be on a quarterly basis at this stage or is it too early to speculate on that side?

Yes, we only provide cash flow or revenue forecasts on a quarterly basis. But there are some as George mentioned, some lumps of cash burn that occur around deployments or construction of prototype buoys.

Got it. You have identified these new markets or these new opportunities for smaller sized autonomous buoys. Are we in discussions? Where are we showing the product, the technology etc. to potential customers?

It's really in all of those markets right now. We are talking to offshore wind, we are talking to ocean observing, we are looking at oil and gas opportunities. Really what we want to do is we want to bring customers in to the product development process up front and partner with them. That brings us the voice of the customer, it enables us to understand what sensor integration is required. We think that it will ultimately result in a better product. So we are trying to engage customers -- potential customers in all of those markets right now.

Got it. And just last question I guess on the income tax benefit that you received. Is this a one-time benefit for the fiscal year for 2015 or is this something that you could potentially apply for again and benefit from next year as well?

Yes, we've actually been very fortunate on that to be able to qualify for that New Jersey program for a number of years and have realized the benefits of over $1 million a year for the last several years. So while nothing is ever guaranteed we are hopeful to be able to participate in that program going forward as well.

Okay, got it. Thank you, guys.

(Operator Instructions). Since we have no questions in the queue, I would like to now turn the call over to Mr. George Kirby for your closing remarks.

Thank you, operator. So we are very excited and very optimistic about the future. We are laser focused on advancing our products to commercial status, on achieving our three deployments in 2015. We recognize that we have challenges in front of us but we are fully committed and engaged to drive the business to success.

I am extremely proud of our team. Our progress to date has been phenomenal and our prospects for the future are equally phenomenal.

So with that, I want to thank everybody again for joining the call and thank you. Have a good day.

Ladies and gentlemen, this concludes your presentation. You may now disconnect. Enjoy your day.