Ocean Power Technologies (OPTT) FY2023 Q2 Earnings Conference Call

Ocean Power Technologies (OPTT) FY2023 Q2 Earnings Conference Call

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good morning and welcome to the ocean power  Technology's second quarter fiscal 2023   earnings conference call a webcast of this call  is also available 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 Phillip stratman president   and chief executive officer Bob power 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 I am now   pleased to introduce your host Mr Joseph  Dipietro thank you sir please go ahead   thank you after the market closed yesterday we  issued our earnings press release and filed our   quarterly report on form 10q for the period  ended October 31st 2022. our public filings   are available on the SEC website and within the  investor relations section of the opt website   this call will include 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 and 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 10K and subsequent violence 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 Phillip strathman  thank you Joe and good morning we appreciate you   joining us I'm pleased with our progress on  building our order book and sales pipeline we   are 2.9 Million Dollars of orders which is nearly  six times what it was at the same point last year   we remain on track for our nine million dollar  order Target over the year as we continue to build   our pipeline of feasibility studies demonstrations  and future orders our most recent win has been the   demonstration we are doing in Bahrain to show the  effectiveness of autonomous vehicles when they're   used in combination with power buoys and our  proprietary MDA software we just completed this   demonstration and are actively discussing next  steps in support of the digital Horizon exercise   we had a nice quarter of steady progress on each  component of our stated strategy which is working   from a high level we provide autonomous ocean  intelligence Solutions these can be roaming or   stationary and are usually powered by renewable  energy our systems offer benefits to customers   across multiple governmental entities as  well as customers in the commercial space   whether it is protecting offshore operations  Gathering ocean intelligence or supporting   offshore developments we reduce carbon  Footprints and lower operational expenses   specific to our strategy first we have data as a  service where we had a good quota on our pipeline   of order activity of wambi's we also made progress  on our MDA solution which is now available   commercially and is expected to begin to generate  Revenue in the second half of this fiscal year   we believe it is the start of a game-changing  aspect to our business we continue to get the most   interest from divisions of the government and we  believe we're building a strong recurring customer   base as mentioned last quarter we are working  with the U.S department of energy on the phase  

2 development of a Next Generation wave energy  converter specific to this project we received   the 1.1 million dollar payment in the quarter  which is intended to be used to develop and test   a modular and scalable mass on spring wave energy  converter power buoy over the next 24 months   this amount is included in the year-to-date  order activity I referred to earlier   I would like to take a moment to make a few  comments about our autonomous Vehicle Division   this division came to us via acquisition back in  November 2021 so a little over a year ago I could   not be more pleased with its management team and  the efforts to integrate the business with ours   most notably we're close to fully consolidating  the manufacturing operations to our facility in   New Jersey this will make us faster and be more  cost effective we continue to seek opportunities   to expand our customer base mostly in the  government sector and oil and gas industry   second is power as a service during the quarter  we continue to have solid activity related to   this component especially with inquiries on  leasing as opposed to owning we continue to   like our move in this direction since it brings  The Upfront investment level down significantly   for our customers in addition we're having good  success to date by pairing our power buoys with   our mvs and we expect this trend to continue going  forward third is our strategic Consulting Services   we add another good quarter of activity  related to Consulting especially around   simulation engineering software engineering  concept design and motions monitoring   in short I like the energy I'm seeing throughout  the organization we continue to position the   company well with the industries we serve and our  chosen verticals with that I'll turn it over to   Bob for more details on our financials thanks  Philip I will start with Revenue for the corner   our Top Line was 303 000 which compared favorably  to the 247 000 in the prior second quarter year   to date a revenue generation is nearly 2x where we  were last year as Philip indicated our orders are   at 2.9 Million dollars here to date and growing  we expect we continue to expect order activity   and revenue to rent meaningfully throughout the  second half of the year in terms of deferred   revenue our deferred contract liabilities are up  1.4 million dollars a recorder most of which is  

related to the 1.1 million Advanced payment will  receive from the modular belief under development   I expect this to be recognized as Revenue over  the next 24 months as the project takes place   we are managing our Cogswell so far we have had  minimal issues with our supply and we expect this   to continue our parts materials are available  where we have adequate inventory to continue to   wrap our production especially of Wham bees with  our established ymb business and the continued   growth of our higher margin strategic Consulting  business we expect to build gross margin going   forward moving to our cost structure we continue  to manage costs well our operating cost inched up   sequentially by less than one hundred thousand  dollars in the first quarter and are now at 6.4   million dollars this includes our engineering and  product development costs and our DNA from a high   level we expect our Revenue growth rates the far  outpace our operating costs growth over the next   few quarters we expect similar movement in our  cost structure as we saw in the second quarter   one final income statement item of note is the  1.2 million dollars of other income in the quarter   this relates to the employee retention credits  we applied for with the IRS in the second quarter   for tax returns that we filed in 2020 and 2021  during covid and when stay at home restrictions   were in place you can see a corresponding  increase on a balance sheet in accounts receipt   you're starting to receive payments in November  and expect full payment by the end of fiscal 2023.   this is great work by our team to make this  happen moving to our balance sheet we end the   quarter with 46.2 million dollars of combined Cash  Cash equivalence restricted cash and short-term  

Investments and no Bank debt our year-to-date net  cash used in operating activities was 11 million   dollars for the period and reflection quarterly  run rate in the line of the past few quarters from   a financial perspective we have a steady order we  are maintaining strong oversight of our costs and   positioning our company for Top Line growth with  that Philip and I are happy to take your questions   thank you the floor is now open for questions   if you would like to ask a question please press  star one on your telephone keypad a confirmation   tone will indicate that your line is in the  question queue you may press star 2 if you   want to remove your question from the queue for  participants using speaker equipment it may be   necessary to pick up your handset before pressing  the star Keys once again that is star one to ask a   question at this time the first question today is  coming from Sean Severson of wtr please go ahead   thanks good morning guys I'm Phillip Tony  Sean thanks for joining us thank you could   you expand a little bit on the trip to Bahrain  and the digital Horizon specifically I'm trying   to figure out kind of what's your what did you  learn there um you know from from uh what you   were seeing from them and what they were looking  for and then second of all what will be the next   steps there I'm trying to figure out are we in  like the third inning here the seventh inning for   some type of deployment or or you know getting  towards material orders yeah no that's uh great   great questions thank you thank you Sean um so you  know we we're very proud and humbled to be able to   support the US Navy and its efforts to increase  its autonomous and artificial intelligence   capabilities you know starting through fifth Fleet  uh in the Middle East and uh what what plans U.S   Navy may have after that you know we were one  of several participants that was out there   um we had three of our assets deployed during  digital Horizon including several long duration   um deployments that we carried out that went  you know in excess of you know 24 plus hours   and you know we continue our discussions now on  what this may mean in terms of next deployments   that will go on you've probably seen the  public statements that U.S Navy has made   um through Central Command and general carrilla  who stated during the Manama dialogues in Bahrain   um I think it was the weekend before Thanksgiving  that the plans for the Department of Defense are   to have a hundred usvs deployed in the  region by the summer of 2023 you know we   obviously uh approved and congratulate U.S  Navy on on that approach and increasing its   autonomous footprint and and we look forward  to supporting you in whichever way we can what   what other applications do you think this makes  sense where we look outside military deployment   if you look at the deployments that we have been  you know doing and demonstrating during during   digital Horizon it's very similar to some of the  other work we have done previously and built upon   the abilities that we have developed as part of  our proprietary Maritime domain awareness solution   you get into the Realms of supporting oil and gas  companies and other offshore energy companies with   monitoring of ocean areas on the surface you  quickly expanded into areas that are similar   to what we are doing for EGP down in Chile where  we're doing subsea monitoring and water quality   sensing and then that obviously extends into  illegal fissuring monitoring of protected areas   and quite quite frankly infrastructure  Assessments in harder to reach areas   where you're trying to remove  operator out of Harm's Way my last question is is on R D roadmap so I think  talk specifically about the MBA solution will be   helpful but also a bigger picture question when  you look at where you need to spend want to spend   um you know emerging Technologies sort of  commercializing Technologies can you just   walk through uh you know framework of of what  you're working on and where the spend is going to   be in in priorities and again I'm particularly  interested in that next round of MBA as well   sure I mean MDA you know we are offering and  discussing it with commercial customers right   now but obviously it being a technology-based  solution there's ongoing development that   we do for additional user features additional  integration of other sensors that we didn't have   before and so on so forth our primary focus is not  on coming up with the next thing but combining the   current technologies that we have into a holistic  offering that gives our customers the ability to   utilize roaming and or stationary assets that can  be combined with surface and subsea monitoring   equipment without without having to kind of you  know needing to pick and choose amongst a whole   range of companies but rather offering them a  One-Stop shop of an integrated solution that can   be as integrated or as diverse as they may require  for their Solutions so this isn't so much leaky   looking for next gen let's call it Leading Edge  bleeding edge technology this is really becoming   this commercializing solutions at this point  using the portfolio of technology is that is   that what I'm hearing absolutely we have a robust  set of platforms and obviously we will continue   to you know work on improved user features and  additional features we can integrate into it and   we are continuing the development of the Next  Generation math on Spring wave energy converter   which we working together with the bre under the  grant funding that we have received to utilize   that but it generally speaking the primary effort  is on in you know getting a holistic set of assets   out into our customers hands that can easily  collaborate and work with each other great thanks   I'll step back in the queue Okay so excellent  appreciate it once again that is star one if you   would like to register a question at this time  we'll pause a moment for additional questions   our next question is coming from Jeffrey Campbell  of Alliance Global Partners please go ahead   good morning um Phillip first I just want to ask  what are the expected benefits of the must work   uh Power Boy versus the current Solutions thanks  Jeff uh good morning and uh thanks for joining us   the the power buoy that we have right now is  entirely fit for purpose what we are looking   at and similar to what I I mentioned to Sean  is having a a you know a seamless Consolidated   offering in the marketplace by finishing the  development of the mosque system will be able   to start consolidating Hull shapes when it  comes to the buoy platforms which will give   us the ability to have one common Hull shape  whether you're using it with a wave energy   converter or without a wave energy converter as  we've done in the past with hybrid thus further   streamlining the the offering and making it  more cost efficient for our customer base   and do you anticipate there'd be any manufacturing  benefits from that as well maybe in terms of   internal costs for the companies absolutely if  you think about the supply chain benefits of   moving to a common Hull shape across all of the  buoy systems you know you can start you rapidly   start being able to scale up you know raw material  sourcing you can you can use start consolidating   working on whip assets and obviously it becomes  much easier to install the finished good sites so   there's a there's a whole bunch of benefits that  come from the consolidation of those efforts as   opposed to you know just the quote unquote benefit  of a common hole shape of the customer and I was   wondering can you provide us with any kind of  sense of what the revenue implications might be if   the USB sales if you get some meaningful portion  of that USB um stated Desire by the Navy in 2023 yes off we've stated you know we we we feel  comfortable with the 9 million bookings   forecast we put out for the current fiscal  year and we will work on expanding that for   the next fiscal year and you know I think the  interest that we're seeing in the market and   the broader demand picture you know is giving us  comfort that our sales team and Commercial team   you know can start concentrating on converting  opportunities into additional orders and backlog   uh well with that without asking for too much  specificity and should I take from that the 9   million estimate that's on the books contains  both commercial sales and and you know forward   payments of development projects and  but also some military sales as well   yes I mean as you're seeing with the efforts that  we've got ongoing you know currently on a digital   Horizon and the work that you know we've discussed  previously that we've been doing for Naval   Postgraduate School you know we we look we look  forward to having a robust pipeline that contains   a healthy mix of government and Commercial orders  and government being the defense and National   Security space as well as efforts around you know  non-defense uh spending on the government side   okay and my last question is with regard to the  oil and gas business I mean we're we're generally   led to believe that that offshore oil and gas  development is due to be fairly static over the   next future years there can be a few exceptions  like ExxonMobil offshore Guyana but in general   apparently fairly static so I'm wondering what  um what areas of application you find that you   believe you can grow into that industry even as  it itself seems to be sort of consolidating and   pulling back yeah I think we we will continue as I  mentioned we will continue to support our you know   oil oil and gas and sort of energy writ large  customers in the offshore world with Solutions   around monitoring of lease areas surface and  subsea um you know as we've previously stated   you know we we can support decommissioning efforts  and well monitoring and those those specifically   on the oil and gas side our efforts will continue  to pursue from uh from an opportunistic standpoint   thanks very much I appreciate the answers   oh you're welcome thank you Jeff thank you the  next question is coming from Sean Severson of   wtr please go ahead with your follow-up great  thanks uh Phillip a quick follow-up question   how how will you be looking at and how's maybe  the the government looking at maintenance on a   product like this so you know how you're talking  about in any field deployments um how would that   how would maintenance be taken care of would you  train them to do this or do you envision deploying   I mean it's a bigger picture question too not  just for that but um you know bigger rollout   of Maintenance and and you know service things  that you need to you need to take account for   yeah I can't I can't directly comment on how each  individual agency or you know um division of the   government is going to deal with maintenance  specifically the way we look at it and as itself   we've mentioned this before you know similar to  data as a service also on the vehicle side we've   been offering robotics as a service for a while  you know so we will provide operators that can   support the onboarding and in service training of  our systems with our customers and if there is a   desire by the customer to maintain that service  we will obviously you know maintain that service   and equally if there's a desire by our customer  you know specifically in certain spaces of the   government to move into maintenance and Servicing  by that agency or service itself you know we will   provide a train the trainer approach where we  will support and upskill the the government and   then provide you know spare parts and Logistics  maintenance as and when is required going forward   so my my last question is regarding  uh you know through the customization   of the Big Data Big Data side is very  interesting obviously subscription business   um how how much can you manage and customize what  you're looking from as soon as it's a function of   this instrumentation right which you're putting  out on there so if you know that there's a big   demand for service a you can equip um you know  equip them with the correct instruments and be   able to provide that service so I'm just trying  to understand how do you figure out what you how   you commercialize and what do you Market to the  to um you know potential customers for Big Data   yeah so on the proprietary side obviously we  have our Maritime domain awareness solution   which at the moment you know at the proprietary  part of that is primarily surface surveillance   intelligence and reconnaissance focused but as  long as it fits within the power budget I mean   we've stated this before we're sensor agnostic so  when to the extent that anybody wants to integrate   other sensors into it be they surface or subsea  you know we we will we will accommodate any of   those customer requests we're obviously collecting  a large amount of data from our deployments   that we have internally and to the extent where  customers allow us to retain some of the data that   that we can collect from deployments that we'll be  doing on behalf of others and uh so yeah we and we   continuously use that data to refine approaches  and and provide additional insights to the   customer base as we scale up and continue rapidly  scaling up the deployments that we have globally great thank you thank you thank you the  next question is coming from Jon Snow a   private investor please go ahead hey guys  uh just a quick question on the projected   9 million of Revenue will you be cash flow  positive with potential 9 million of Revenue I really appreciate the question um  it was the the 9 million of bookings   that we have forecast for the current  fiscal year are a forming the basis of   further growth as Bob mentioned during  the uh during during our during our   um earnings announcement you know we're  continuing to manage our sgna and our   our you know our margins in general and we  will be building on the 9 million which will   put us on a solid path forward to achieve  cash flow positive operations going forward so is that a 2024 cash flow positive   and uh with that another question on  why the delay in the annual meeting so the delay in the annual meeting is is is very  straightforward it was simply the fact that we   were about 1 million votes short for quorum um  our corporate by loss dictate that at least 50   at least 50 percent of our shareholders to  have their say on the items we put to vote   and we were a million million just about a  million votes short um of that you know we've   got just under 56 million shares outstanding  um and yeah we'll just just slightly shorter   the Quorum so we are giving our shareholders an  opportunity to continue putting their votes in   for or against the proposals that we've put  out there and reconvene on January the 13th and uh the first question 2024  does that mean cash flow positive   we're not providing any any  additional guidance uh right   now other than the guidance that we've  put out in the in the earnings release thanks thank you John thank you we're showing no further  questions in queue at this time   I'd like to turn the floor back over  to Mr stratman for closing comments   thank you we appreciate you joining us I hope you  can sense that our company is headed in the right   direction thank you for being shareholders or  potential shareholders of our company we wish   you a great holiday season and look forward to  Future updates have a great rest of your day   ladies and gentlemen thank you for your  participation this concludes today's event you   may disconnect your lines and log off the webcast  at this time and enjoy the rest of your day

2022-12-22 19:17

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