Ocean Power Technologies, Inc. (AMEX:OPTT) Q3 2024 Earnings Call Transcript
Ocean Power Technologies, Inc. (AMEX:OPTT) Q3 2024 Earnings Call Transcript March 14, 2024
Ocean Power Technologies, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the Ocean Power Technologies Third Quarter of Fiscal Year 2024 Earnings Conference Call. The 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; Bob 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. It’s not my pleasure to introduce Joseph DiPietro. Please go ahead, sir.
Joseph DiPietro: 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 January 31, 2024. 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’m pleased to introduce Dr. Philipp Stratmann.
Philipp Stratmann: Thank you, Joe, and good morning, everyone. We're pleased to have you join us on this call, and your continued support is greatly valued as we advance with our plans to enhance shareholder value. Before we delve into the numbers, on February 28, we conducted our 2023 Annual General Meeting. I am pleased to announce that all of the resolutions proposed at the Annual General Meeting were duly passed by our shareholders, including the reelection of all of our Board members by a strong majority of the votes cast. I'd like to thank you for this vote of confidence. The management team we have put together over the past two years has the right skills to take advantage of the market demand, which is clear. Our customers are procuring autonomous resident and roaming assets that 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 vehicle order from a Latin American customer and the latest subcontract from a U.S.-based prime contractor for multiple maritime domain awareness buoys. We believe we're well-positioned to reward your confidence and turn this momentum into profitable growth and deliver value for our shareholders. Let's talk about some recent developments. We continue to make progress on our path to profitability in line with our November 2023 announcement that we have substantially completed our research and development phase and are primarily focused on commercial activities. This pivot to commercial activities has enabled reallocation of headcount, resulting in approximately $4.5 million in annual run rate savings on a go-forward basis, and a material reduction in third-party expenditures.
The majority of our employees are now dedicated to customer delivery, which includes manufacturing, vehicle operations, and marine deployments. We have built a suite of products and solutions that we believe will be the basis for our current and future commercial success and is driving meaningful progress in backlog, revenue, and profitability, with our pipeline of $77 million increasing over 5X year-over-year. We expect that 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. In February 2024, we received multiple orders of fully integrated WAM-V unmanned surface vehicles, also known as USVs, from clients in Latin America, highlighting the wide-ranging capabilities and applications of the WAM-V USVs and heightened interest and trust in our WAM-V technology from clients across the globe.
These orders underscore the growing demand for OPT's advanced marine technologies and their applications in maritime surveillance, environmental monitoring, and ocean data collection. Also in February 2024, we received funding from the Naval Postgraduate School in Monterey, California, for a year-long deployment of a PowerBuoy in Monterey Bay. The PowerBuoy, integrating OPT's maritime domain awareness system along with cutting-edge satellite communication and AT&T 5G technology, will demonstrate its persistent surveillance and communications capacities in a maritime environment. This advancement is a testament to the ongoing collaboration between OPT and AT&T. In December 2023, we secured our first multi-buoy letter contract. This is a planned subcontract with a U.S.-based prime contractor to deliver maritime domain awareness solutions for U.S. government agencies.
We are currently working on the conversion of the letter contract to a firm order. In addition to these contracts, we also completed several deployments with our WAM-Vs and delivered additional vehicles from our facilities in New Jersey and California. In addition to the aforementioned activities, we continue to see increased levels of commercial demand. The company is positioned well to deliver to our customers in the defense and national security space, and over 20% of our workforce are military veterans. Our opportunity pipeline continues to grow. In addition to the orders I just discussed, we have also continued to add to the top of the pipeline. We are continuing to grow our revenues and our gross profit margins are increasing. Our strategy is working, and we see additional opportunities for multi-system orders, vehicles and buoys on the horizon.
Now, before we dive into the financial highlights, I'd like to introduce our CFO, Bob Powers. Bob will provide you with more detailed information about our financial performance in Q3 2024.
Robert Powers: Thanks, Philipp. Let's begin with revenue. In Q3 2024, our revenues reached $1.8 million, marking an increase of over 2.5X compared to the $0.7 million reported in the same period in the prior year. Year-to-date, our revenue generation is in excess of 2X where we were last year. This growth can be primarily attributed to the conversion of backlog from our strong performance in WAM-V sales and revenue generated from our DOE contract. Our orders are at $3.4 million year-to-date and growing, with backlog standing at $3.3 million at January 31st, 2024. We continue to expect order activity and revenue to ramp meaningfully throughout the final quarter of our fiscal year. Our gross profit for Q3 2024 stood at $.8 million, a substantial improvement compared to the Q3 2023 figure, which showed a gross profit of $.1 million.
This improvement is primarily attributed to our unmanned vehicles business, particularly the higher margin WAM-V leasing business. I am enthused about the progress we've made in this area and the expansion of the progress made throughout fiscal 2024. Our operating expenses for Q3 2024 amounted to $8.5 million and $24.6 million on a year-to-date basis. The year-to-date figure includes approximately $3.2 million in extraordinary expenses related to the company defending litigation and other failed offensive tactics by Paragon Technologies, Inc. to achieve control of OPT without following required applicable legal requirements. As for the net result, we reported a net loss of $6.5 million for Q3 2024 compared to a net loss of $6.1 million in Q3 2023.
This is despite the materially higher extraordinary expenses. We continue to manage our costs tightly, making targeted investments in the personnel and structure needed to support our strategy and plans for growth. As Philipp mentioned, we expect our operating expenses to decrease materially going forward as a result of our plan to achieve profitability. On the balance sheet front, our combined cash, unrestricted cash, cash equivalents, and short-term investments as of January 31st, 2024 totaled $9.1 million. Notably, we continue to maintain a debt-free balance sheet with no bank debt in our financial structure. In terms of cash flow, the net cash used in operating activities for the first nine months of fiscal 2024 amounted to $24.7 million.
This primarily reflects our net loss, the payout of employment bonuses accrued during fiscal year 2023, and the payment of the earnout accrued during fiscal 2023 related to the outstanding performance of our autonomous vehicles business. In addition to payment of expenses related to Paragon activities as I just mentioned. Finally, you will note that our inventory balance increased by approximately $2.5 million to $3.5 million. This investment in inventory was necessary in order to satisfy backlog as well as our planned growth in revenue for fiscal 2024. That covers our financial update. Before we enter Q&A, I'd like to remind everyone that the purpose of today's call is to discuss our 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.
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