Ocean Power Technologies Inc (OPTT) 2024 Q2 法說會逐字稿

Good morning. And welcome to the Ocean Power Technologies second quarter of fiscal year 2024 earnings conference call and webcast of this call is also available and can be accessed by a link on the company's website at www.oceanpowertechnologies.com.

This conference call is being recorded and will be available for replay shortly after its completion on the call today are Dr. Philipp Stratmann, President and Chief Executive Officer; Robert Powers, Senior Vice President and Chief Financial Officer; and Joseph DiPietro, Controller, Treasurer and Principal Accounting Officer. Following the prepared remarks, there will be a question and answer session. Now I am pleased to introduce Joseph TPH.

Thank you and good morning. After the market closed yesterday, we issued our earnings press release and filed our report on Form 10-Q for the quarter ended October 31, 2023. Our public filings are available on the SEC website and within the Investor Relations section of the OPT. website.

During this call, we will make forward-looking statements that are within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections or other statements of the Company's plans, objectives, expectations, or intentions.

These statements are based on assumptions made by management regarding future circumstances over which the company may have little or no control and involve risks, 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.

Additional information about these risks and uncertainties can be found in the company's Form 10-K and subsequent filings with the SEC. The Company disclaims any obligation or intention to update the forward-looking statements made on this call. Finally, we posted an updated investor presentation on our IR website. Please take a moment to review it as it provides a nice overview of our Company and strategy. Now I am pleased to introduce Dr. Philipp Stratmann.

Thank you, Joe, and good morning, everyone. We're pleased to have you join us on this call. On Your continued support is greatly valued.

Before we delve into the numbers I'd like to highlight, but I'm pleased with our quarterly results and our continued positive momentum. The market demand is clear, our customers are procuring autonomous resident and roaming assets and protect marine environments, collect essential ocean data and enhance national security.

We continue building our pipeline and are converting opportunities into backlog and revenues as seen with wins like the recently announced and multi vessel contract, we believe we are well positioned to translate this momentum into profitable growth in the next 15 to 18 months and deliver value for our shareholders.

Let's talk about some recent developments. In November 2023, we announced that we have substantially completed our research and development phase and are primarily focused on commercial activities. We have built a suite of products and solutions that we believe will be the basis for our current and future commercial success resulting in meaningful progress in backlog, revenue and profitability with contracted.

We've backlog increasing from $3.1 million at July 31, 2023 to $4.5 million at October 31, 2023. This pivot to commercial and operational activities has enabled a reduction and reallocation of headcount, the divesture of our 3D and the material reduction in third-party expenditures.

As a result, the majority of our employees are now dedicated to customer delivery. We expect that leasing recent meaningful contract wins, which I will describe more fully in a moment, the growth in our commercial pipeline and the expense savings noted will enable us to reach profitability during calendar year 2025 using current capital resources. This expectation does not account for extraordinary expenses such as those related to the Paragon litigation that could cause OPT to seek additional capital from financing sources.

In December 2023, we secured our first multi buoy letter contract. This is a subcontract with a US-based prime contractor with a $6.5 million ceiling to deliver Maritime Domain Awareness solutions for US government agencies.

This contract exemplifies our commitment to innovation and underscores the crucial role our technology plays in bolstering maritime national security and providing state-of-the-art solutions, including multibillion arrays that contribute to a safer maritime environment.

In October 2023 were awarded our first multi vessel IB order volume order from Samara, a prominent player and offer services the order valued at $1.6 million underscores the recognition by customers of our ability to provide innovative and sustainable solutions for the offshore industry due to demand. Production is already underway to fulfill the order and will allow for revenue recognition this fiscal year, we recently retained real moving to Reno, Vic Makoto as a special advisor to the company's Board of Directors.

We plan to leverage his experience expertise and networks as we build on our momentum in providing intelligent maritime solutions to the US, government and defense and security sectors and carefully navigate the challenges of securing access to on protecting highly sensitive and confidential information.

Finally, we recently appointed Mark, but you need to the newly created role of Chief Commercial Officer. Matt will report directly to me, and we will leverage my vast experience- to drive the next phase of our growth and the commercialization of our cutting edge products, particularly for the national security and defense markets.

In short, are the increased commercial and operational activity levels I'm seeing throughout the organization. We continue to position the company well within the industries we serve. Our opportunity pipeline continues to grow. In addition, to the orders I just discussed.

We've also continued to add to the top of the pipeline on October 31, 2023 is approximately $93 million for a net gain of approximately $26 million during the first half of the fiscal year. We are continuing to grow revenues and our gross profit margins are increasing and our strategy is working, and we see additional opportunities for multisystem orders on the horizon.

Now before we dive into the financial highlights, I'd like to introduce our CFO, Robert Powers. Rob will provide you with more detailed information about our financial performance in Q2 fiscal 2024 for functional.

Let's begin with revenue. In Q2 2024, our revenues reached $900,000, marking a significant increase compared to the $300,000 reported for the same period in the prior year. Year-to-date, our revenue generation is in excess of two times where we were last year. This growth can be primarily attributed to the conversion of backlog from our strong performance in IB sales and revenue generated from our DoD contracts.

Our orders are $2.9 million year-to-date and growing with backlog standing at $4.5 million at October 31st, 2023. We continue to expect order activity and revenue to ramp meaningfully throughout the second half of the year.

Our gross profit for Q2 2024 stood at $500,000, a substantial improvement compared to the Q2 23 figure, which showed a gross profit of under $100,000. This improvement is primarily attributed to our unmanned vehicles business, particularly the higher margin within the leasing business. I am enthused about progress we've made in this area and the expansion of the progress made in fiscal 2023.

Our operating expenses for Q2 2024 amounted to $8 million, reflecting our investments in both personnel and systems to support the growth. Philip and I discussed previously

As for the net result, we reported a net loss of $7.2 million for Q2 2024 compared to a net loss of $5.9 million for Q2 2023. We continue to manage our cost tightly, making targeted investments in the personnel and structure needed to support our strategy and plans for growth.

As Philip mentioned, we expect our operating expenses to decrease materially going forward and as a result of our plan to achieve profitability. On the balance sheet front, our combined cash, cash equivalents and short-term investments as of October 31, 2023, totaled $18.9 million. Notably, we continue to maintain a debt-free balance sheet with no bank debt and our financial structure.

In terms of cash flow, the net cash used in operating activities for the first half of fiscal 2024 amounted to $15.5 million. This primarily reflects our net loss, the payout of employee bonuses accrued during fiscal year 2023, and the payment of the earn-out accrued during fiscal 2023 related to the outstanding performance of our autonomous vehicles business.

Finally, you will note that our inventory balance increased by approximately $1.5 million to &2.5 million. This investment in inventory was necessary in order to satisfy the growing backlog as well as our planned growth in revenue for fiscal 2024. That covers our financial update.

Before we enter the Q&A, I'd like to remind everyone that the purpose of today's call is to discuss our second quarter of fiscal year 2024 results as well as our financial outlook. As we head into Q&A, we ask that you limit your questions to these topics. Thank you.

Thank you. We will now be conducting a question-and-answer session.(Operator Instructions)

Shawn Severson, Water Tower Research LLC.

Good morning, everyone. Have a great move on the pipeline and I'm curious when you talk about the pipeline and look at that $93 million. Is there any way to look at that and figure out how much reoccurring revenue something like that can drive? I guess I'm trying to understand the mix of that pipeline and what it would look like should convert and go into backlog and sales? Is it really heavy towards this mix of recurring revenue?

Good morning, Sean. Thanks. Thanks for the question. One thing we are definitely noticing in the mix of the pipeline is an ongoing shift from what the Company was made two years ago when the current management team stepped in to me, but it was primarily product sales program.

So now really materially shifting towards lease opportunities, which obviously are recurring revenue as well as sort of more the data and robotics as a service side. If you look at some of the examples, even some of the larger multi volume orders that we got contain, whilst there might be leases in the first place. They also contain minimum operating day guarantees.

Third, ultimately becomes a take-or-pay contract under which we can provide assets to our customers. And what that enables us to do is to provide an stack on top of each other kind of as we move into the forecast and start providing guidance moving forward.

And just a second question on that. I know it's going to vary project by project, of course. But what are the key triggers that the convert this pipeline? I mean, are you waiting for budgetary approval for pilot programs? Just trying to understand what triggers conversion in that pipeline generalization?

Yes. Thank you for the question, Shaun. It partially depends on the customer. As we said, the bulk of our customer base and opportunities that we have now are government related. And within that government sector, it is primarily in defense and national security.

And in those instances, it is oftentimes just the speed of contracting and definitive pricing terms before anything can be provided. In other cases, it is just it is aligning the project that these assets are looking at these assets are being deployed on if it's on a larger project until that project gets financing.

But overall, we're also seeing a shortening of the pipelines in order from a conversion perspective as we're stepping from an economic play opportunity identification into pipeline into discussions with the customer and into it being a in a purchase order.

And that is largely due to the fact that we're not really seeing a lot of demonstration requirements anymore because the vehicles and the buoys are now being seen as commercialized and productized offerings.

Is that that that's great.

Thanks.

Thank you. At this time, I will turn the floor back to management for any closing remarks.

Thank you. We continue progressing towards profitability. We never take any of your support for granted, and we thank you for being a valued shareholder.

Thank you for your participation today. This concludes today's teleconference and webcast. You may now disconnect your lines at this time.