Ocean Power Technologies Inc (OPTT) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ocean Power Technologies Q2 2016 earnings conference call. (Operator Instructions) As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Mr. Shawn Severson with Blueshirt Group. You may begin.

Thank you, and good morning. Thank you for joining us on OPT's conference call and webcast to discuss the financial results for the three-month period ended October 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 highlights for the quarter, key activities and strategy, after which Mark will review the financial results for the second quarter. Following our prepared remarks we will open the call for questions.

This call is being webcast on our website at www.oceanpowertechnologies.com. It will also be available for replay later today. The replay will be on the site for on-demand review over the next several months.

Yesterday, OPT issued its earnings press release and filed its quarterly report on Form 10-Q with the Securities and Exchange Commission. All of our public filings can be viewed on the SEC website at sec.gov, or you may go to the OPT website, www.oceanpowertechnologies.com.

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 provisions of the Private Securities Litigation Reform Act of 1985 -- excuse me, 1995. 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, that involve risks and uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied as by -- as such forward-looking statements. We refer you to the Company's Form 10-K and other recent filings with the SEC for a description of these and other risk factors.

And now I'd like the turn the call over to George to begin the discussion.

Thank you, Shawn. Good morning, everyone. Today I will review our business operations and provide an update on key activities and developments in the quarter. Following this, Mark will briefly review our financial results, after which Mark and I will be available to answer any questions. So let's begin.

First, we're excited that the Company is continuing to execute on our objectives and achieving considerable progress on both the commercial and technical fronts. As announced in late October, we redeployed the APB350 A1 PowerBuoy off the coast of New Jersey and resumed sea trials. We also released select performance data gathered during A1's initial deployment as well as initial results from the accelerated life testing of its redesigned power takeoff system, or PTO.

Our goal is to provide reliable, durable and cost-effective offshore autonomous power solutions where current power solutions are either too costly or unavailable. The deployment of A1 was a milestone in our long-term strategy to achieve this goal and gives us the opportunity to further develop and validate our APB350 technology.

Consistent with our strategic pivot, we also made considerable progress toward our next-generation APB350 product, which we expect will feature an enhanced electrical storage system, a higher-efficiency power management system and a user-friendly interface providing even more flexibility to end users. I am excited to announce that this next-generation buoy has undergone its critical design review, and we expect that it will achieve a maturity level through extensive in-ocean and factory-accelerated life testing that will allow us to proceed with a commercial product launch in 2016.

As we've mentioned before, we strongly believe that our APB350 represents a very appealing solution which provides a robust and cost-effective alternative to incumbent solutions that utilize batteries, solar, wind and diesel power for offshore applications.

As part of our efforts to demonstrate product reliability and durability, and to accelerate toward product commercialization, the Company initiated accelerated life testing on its redesigned APB350 PTO in the second quarter. The OPT accelerated life testing process consists of operating PTOs in tandem with accelerated operating profiles. This subjects the PTOs to various load conditions which are encountered in extreme sea states. The test simulates an equivalent three-year oceans deployment within a period of six to nine months using PTOs that are identical to those of the Company's APB350 A1. We intend to use accelerated life testing results to improve and to validate reliability, which we believe is critical to our prospective customers.

Furthermore, as an important component of our commercialization strategy, OPT formed a technical advisory panel during the second quarter of fiscal year 2016. The panel was formed as part of our efforts to accelerate PowerBuoy commercialization, and it plays a critical role in developing and further improving our technology and products.

The main objective of the panel is to facilitate the implementation of different PowerBuoy applications coupled with specific market requirements. As we previously communicated to you, the panel consists of select potential customers, end users, and technical and scientific stakeholders including Gardline Marine services, DNVGL, as well as representatives from two major oil and gas operators, a large oil and gas equipment manufacturer, and a leading meteorological and oceanographic sensor manufacturer.

The University of Western Australia Centre for Offshore Foundation Systems also participates on the panel by providing scientific advice related to marine subsea structures engineering. The panelists are reviewing and providing critical industry feedback on requirements and test protocols in order to increase our speed to market. This long-term collaboration is initially focused on the APB350, but it could also extend to future PowerBuoy designs.

Moving forward, we will continue to work closely with panel members to maximize the unique opportunities that this long-term collaboration provides to us. We are excited to continue to work with these highly acknowledged and experienced companies, and we look forward to continuing to integrate industry feedback with our day-to-day operations.

Additionally, in the second quarter we announced an agreement with Gardline Environmental to investigate the development of innovative metocean monitoring and maritime security systems together. Under this agreement, we will work closely with Gardline to investigate and then potentially develop, test and market advanced integrated solutions for end-users in the ocean-observing and defense and security markets.

We are very excited about working together with Gardline, who is a leader within the worldwide environmental services market. We strongly believe that Gardline's 45 years of experience within environmental, meteorological and oceanic studies, and hydrographic and geophysical surveys, will leverage our technology to further develop innovative applications and solutions that offer potentially revolutionary improvement to incumbent operational practices.

Lastly, given Board of Directors and shareholder approval, OPT completed a reverse stock split at a ratio of one share of newly issued common stock for every 10 shares of issued and outstanding common stock. With the stock split completed, we are now in compliance with NASDAQ listing requirements. And we believe that there's significant untapped value in the current OPT stock price, which we are intending to unlock through the commercialization of the APB350.

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 review results for the second quarter of 2016 before we open up the call for questions.

For the three months ended October 31, 2015, OPT reported revenue of $25 million as compared to revenue of $1.7 million for the three months ended October 21, 2014. The decrease in revenues compared with the prior year was primarily related to the decreased billable costs on our project with Mitsui Engineering and Shipbuilding, or MES, and with our contract with the US Department of Energy. The MES project is currently undergoing a stage gate review with its project stakeholders.

The net loss for the three months ended October 31, 2015 was $3.0 million, compared to a net loss of $4.4 million for the three months ended October 31, 2014. The decrease in net loss is primarily due to lower selling, general and administrative expenses, including reduced third-party consulting, site development and patent amortization costs.

During the three months ended October 31, 2015, we recovered product development costs from prior periods under our cost-sharing contract with the European Union for our WavePort project. In addition, the prior year included $0.3 million of growth loss due to a change in estimated project costs related to the MES contract.

For the six months ended October 31, 2015, OPT reported revenue of $0.6 million, as compared to revenue of $3.3 million for the six months ended October 31, 2014. The decrease in revenue is primarily related to decreased billable work for the DoE, WavePort and MES contracts.

The net loss for the six months ended October 31, 2015 was $7.1 million, as compared to a net loss of $7.7 million for the six months ended October 31, 2014. The decrease in the Company's net loss year over year primarily reflects increased estimated project costs associated with our contract with MES in the prior-year period as well as reduced legal, third-party consulting, site development costs and patent amortization expenses compared with the prior-year period. These decreases were partially offset by higher product development costs related to our APB350 and PB40 projects.

Turning now to the balance sheet, as of October 31, 2015, total cash, cash equivalents and marketable securities were $10.4 million, down from $14.2 million as of July 31, 2015. As of October 31, 2015 and July 31, 2015, restricted cash was $0.4 million and $0.5 million, respectively. Net cash used in operating activities was $7.0 million during the six months ended October 31, 2015, compared to $12.1 million for the six months ended October 31, 2014. The prior year reflects the return of $4.7 million related to an advanced payment received from ARENA, while the current year reflects costs related to increased deployment activity.

As discussed in previous conference calls, we have taken a number of steps over the last several months to reduce our cash burn rate while increasing our technical, operating and business development resources. As such, we continue to project that our operating cash burn in fiscal 2016 will be lower than that in fiscal 2015 despite increased deployment activity in fiscal 2016. We remain confident in our cash position, and we expect to have sufficient cash to maintain operations into at least the third quarter -- calendar quarter of 2016, and we are currently exploring alternatives to raising additional capital.

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

Thanks, Mark. Before we move on to Q&A, I want to highlight a few compelling reasons to consider OPT. One, we believe we are the technology leader in wave energy conversion for offshore applications. Our technology provides a critical offshore power solution for a number of industries. Our technology focus is on driving down costs, improving reliability and durability, as well as broadening and enabling commercial applications. Also, we currently have and continue to develop significant intellectual property around our technologies and applications.

Two, we are targeting large addressable markets including offshore oil and gas, ocean-based communication and data gathering, and security and defense. We are also garnering what we believe to be significant interest from potential customers to develop PowerBuoy applications, which could lead to solution demonstrations and market launch.

And lastly, we consider our staff to be world-class, and we have a solid leadership team in place at both the executive management and Board levels. We are executing multiple PowerBuoy deployments in order to further advance PowerBuoy validation, which we believe will serve as a near-term market catalyst as we move closer to commercialization.

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

(Operator Instructions) And I'm not showing any questions on the phone lines.

Okay. Well, thank you all once again for attending today's call. If you do have any further questions, please don't hesitate to contact us. Otherwise, we look forward to speaking with you all next quarter.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.