Ocean Power Technologies, Inc. (OPTT) Q1 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Key Financial Performance

Revenue $1.3 million, no change year-over-year (Q1 '25 vs Q1 '24). Delays in backlog opportunities are expected to be realized in Q2 and Q3 of FY'25.

Operating Expenses $4.9 million, a 39% decrease year-over-year. This reduction was due to headcount optimization, material reductions in third-party spend, and efforts to tightly control costs.

Net Loss Decrease of over 35% year-over-year for Q1 '25, primarily driven by the decrease in operating expenses.

Backlog $5.3 million, a 71% increase year-over-year (from $3.1 million in Q1 '24). This increase is driven by expansion into Latin America and recurring revenue from long-term leasing contracts.

Cash and Cash Equivalents $3.3 million as of July 31, 2024, down from $26.9 million in Q1 '24. The decrease reflects cash burn and investments in inventory to support backlog.

Net Cash Used in Operating Activities $6.1 million for Q1 '25, reflecting net loss, payout of employment bonuses, payment of earn-out accrued during fiscal '24, and investments in inventory.

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Operating Highlights

Next Generation PowerBuoy: Completed over four months of offshore testing in New Jersey, equipped with solar and wind power, maintaining 100% data uptime and over 90% battery charge.

Docking and Recharging Buoy Technology: Patent application filed for technology designed for WAM-V, successfully demonstrated to enhance operational efficiency of autonomous marine vessels.

Market Expansion: Signed four new reseller agreements targeting global critical services, including opportunities in the South China Sea, Latin America, and the Middle East.

Pipeline Growth: Pipeline stands at approximately $92 million, the largest in company history, driven by expansion into Latin America and recurring revenue from long-term leasing contracts.

Operating Expenses: Operating expenses decreased by 39% to $4.9 million due to headcount optimization and reduced third-party spending.

Cash Flow: Net cash used in operating activities was $6.1 million, reflecting net loss and inventory investments.

Strategic Partnerships: Advanced partnerships with industry leaders, including integration of AT&T's 5G systems and Teledyne Marine's underwater sensors.

Profitability Goal: On track to achieve profitability by Q4 of calendar 2025.

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Risk or Challenges

Competitive Pressures: Broader geopolitical factors are increasing demand for autonomous ocean security and monitoring systems, which may intensify competition in the market.

Regulatory Issues: There is an increasing appetite for government funding to support the deployment of next-generation autonomous systems, which may lead to regulatory scrutiny.

Supply Chain Challenges: Delays in backlog opportunities beyond the company's control may impact revenue realization in the upcoming quarters.

Economic Factors: The need for offshore operators to lower operational and capital expenditures while accessing more ocean data at lower costs may affect pricing strategies.

Cash Flow Management: The company reported a net cash used in operating activities of $6.1 million, indicating ongoing cash flow challenges despite cost reduction efforts.

Market Readiness: The company faces challenges in demonstrating commercial readiness compared to private competitors, which may affect investor confidence.

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Guidance & Outlook

Strategic Partnerships: Advanced several strategic partnerships with established companies, including four new reseller agreements aimed at supporting global critical services.

Technological Advancements: Completed offshore testing of the Next Generation PowerBuoy, achieving 100% data uptime and over 90% battery charge.

Market Expansion: Expanded efforts in Latin America and the Middle East, enhancing market reach and customer support.

Cost Reduction: Implemented significant cost reduction activities leading to a 39% decrease in operating expenses.

Product Development: Filed a patent for docking and recharging buoy technology, enhancing operational efficiency for autonomous marine vessels.

Revenue Guidance: Expecting to achieve profitability by Q4 of calendar 2025.

Backlog: Current backlog stands at $5.3 million, a 71% increase from the previous year.

Pipeline: Pipeline is approximately $92 million, the largest in company history.

Operating Expenses: Operating expenses for Q1 '25 were $4.9 million, with expectations of maintaining reduced costs.

Cash Flow: Net cash used in operating activities for Q1 was $6.1 million, reflecting ongoing investments in inventory and growth.

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Shareholder Return Plan

Backlog Increase: Our backlog at July 31st, 2024 stands at $5.3 million, a 71% increase compared to the $3.1 million in the prior year.

Operating Expenses Reduction: Our operating expenses for Q1 '25 amounted to $4.9 million, a 39% decrease compared to the operating expenses last year.

Net Cash Used in Operating Activities: The net cash used in operating activities for the first quarter amounted to $6.1 million.

Cash Position: Our combined cash, restricted cash, cash equivalents, and short-term investments as of July 31st, 2024, totaled $3.3 million.

Revenue: In Q1 '25, our revenues were $1.3 million, consistent with the $1.3 million in revenue we experienced in Q1 '24.

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Key Q&A

Q:What do you attribute the main drivers for the continued increase in the pipeline?

A:There are broader geopolitical factors impacting demand for autonomous ocean security and monitoring systems, as well as increased funding from the government for next-generation autonomous systems. Additionally, our systems are commercially available and ready for deployment, which helps drive growth.

Q:Can you confirm if the estimated orders for the quarter are around $2 million and if you feel good about the order guidance for this fiscal year?

A:Yes, we feel good about where things are heading and trending. The increase in backlog and maintained revenues support our confidence in the order guidance.

Q:Is there anything left to do regarding operating expenses, or is the current level a reasonable steady state?

A:We've done a lot of hard work to bring OpEx down, and while there may be some marginal fluctuations, we will continue to manage and contain costs tightly.

Q:Can you compare your commercialization inflection point to other companies in the industry?

A:We feel OPT is commercially ready with a growing pipeline and backlog, and we are seeing actual use cases being deployed, which indicates strong demand.

Q:What is the targeted mix of the business between data as a service and equipment sales in the long term?

A:We see about 50% of the business in defense and security, with a strong long-term leasing model for commercial customers, which provides recurring revenue.

Q:What technology improvements are you focused on over the next 24 months?

A:We are continuously working on integrating customer feedback and improving our systems. We are also focused on remote charging and docking opportunities to enable collaboration with a range of autonomous systems.

Q:Review of Unclear Management Responses

A:Management appeared to avoid giving a direct answer when discussing the specific details of the sales team's evolution and how it has impacted pipeline growth. Their response lacked clarity on the exact changes made.

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