Q3 2020 Earnings Call

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Ocean power technologies.

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Good morning, ladies and gentlemen, and welcome to the Ocean power technologies third quarter fiscal year 2020 conference call.

This call is being webcast on the company's website at Www Dot Ocean power technologies Dotcom.

As a reminder, this conference call is being recorded and will be available for replay after its conclusion.

On the call today, or George Kirby, President and Chief Executive Officer, and Matthew Schafer, Chief Financial Officer and Treasurer.

Following prepared remarks, there will be a time for questions.

On March 920, 20 O P.T. issued its earnings press release and filed its quarterly report on form 10-Q for the third quarter fiscal year 2020, but the security.

Exchange Commission.

All public filings can be viewed on the FCC website at <unk> as you see Duchy Lv or you May go to the Investor Relations section of the O.P.T. website Ocean power technologies Dotcom.

Now, let me reference the safe Harbor provisions of the U.S. Securities laws for forward looking statements.

This conference call may contain.

Forward looking statements that are within the safe Harbor provisions of the private Security Litigation Reform Act of 1995.

Forward looking statements are identified by certain words or phrases such as May will aim will likely result belief expect will continue anticipate estimate intend plan contemplates seek to.

Future objective gold project should we will pursue and similar expressions are variations of such expressions.

These forward looking 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.

Some of these factors include among others. The following future financial performance expected cash flow ability to reduce cost and improve operational efficiencies revenue growth and increased sales volume success in key markets.

Competition ability to enter into relationships with parties and other third parties delivery and deployment of Powerbuoys, increasing the power output of Powerbuoys hiring new key employees expected cost apparel booties products and building customer relationships.

Please refer to our most recent forms 10-Q and 10-K.

And subsequent filings with the FCC for further discussion of these risks and uncertainties.

We disclaim any obligation or intent to update the forward looking statements owner in order to reflect these events or circumstances discussed in this call.

Now please to introduce Mr. George Kirby.

Thank you and.

Good morning, everyone.

Im going to review our business operations and provide an update on our commercial activities and developments during the third quarter and up to today.

Then Matt Shaffer will provide a review of our financials after that we'll open the call to questions.

I'm excited that we can report substantially.

Increased third quarter revenue, an increase of more than 170% as a result of revenue generated from DNL Green power project or EGP.

In the first quarter. This fiscal year, we announced the first sale of our Pvthree Powerbuoy and the company's history to EGP.

Last week.

We shipped to Pvthree to South America on schedule to install a turnkey Ocean base laboratory in April off the coast of Chile.

We anticipate recognizing revenues of nearly $1.8 million from this project in fiscal year 2020.

We recently announced the any.

One of the world's largest energy companies has extended its lease of the Pvthree powerbuoy and contracted an additional scope of work.

To provide a power and communication solution for an entirely new application in the Adriatic C.

After more than a year of continuous an error free operation we're looking.

Forward to redeploying the pvthree as any explores ecologically sustainable life extension strategies for oil and gas platforms at the end of their productive phase.

On the heels of our repeat business with any we repeat we recently announced that we're working with Taiwan based BA.

Okay precision.

To provide powerbuoy joint surveillance solutions for government agency contract pursuits for policing territorial waters.

This relationship with an established satellite data solutions provider to industry and government has the potential open to.

New markets to obesity.

Together, we're looking to provide power and data communication solutions for surveillance challenges related to protecting fisheries.

Trafficking and foreign encroachment upon territorial waters.

We also recently announced we're working with.

So to see bad intervention and subsea tie on a groundbreaking carbon free sub sea residencies solution.

For autonomous underwater vehicles known as a movies.

The self contained system exempt from any existing ocean infrastructure has the potential to revolutionize the industrial.

Or use of Davies and make untethered long term residency a cost effective reality.

We are jointly pursuing us government development and demonstration funding for the concepts, which will include development of an innovative integrated morning, and subsea power in data transmission cable that we believe.

Dave will also bring substantial savings to future deployments.

Production of our newest product the hybrid powerbuoys advancing rapidly we plan to have a prototype ready for in water testing before the end of the fiscal year in April.

Discussions are underway with prospective launch customers in advance of.

Open water testing of the hybrid Powerbuoy plan for the spring.

The hybrid Powerbuoy will provide LPC with flexibility in the reliable commercial see power and data communication solutions, we can offer to customers.

The hybrids onboard batteries will be charged with solar power.

With a clean fueled.

The engine as backup when environmental conditions don't allow for solar charging.

Design for easy deployment almost anywhere on the world applications for the hybrid power buoy include surveillance subsea charging and secure data connectivity for offshore industries, including defense security.

And gas science and research Aqua culture and telecommunications.

We've seen a very real desire for carbon reducing autonomous offshore power and communication solutions and we're just beginning to tap into those possibilities. We believe that our success will bring strong financial performance.

Oh, PT and value to our shareholders.

Finally, I'd like to spend a moment reflective on opioids ongoing commitment to safety.

At the end of December we reached a safety milestone with more than 1000 continuous days without a lost time incident.

Several years ago, we made a conscious decision to.

Foster and maintain a culture of safety.

We've built and deployed multiple powerbuoy projects around the world developed new products and even relocated our headquarters and manufacturing base without incident Im Gen genuinely proud of our team safety record and what it means to our relationships with customers and partners.

Now, let me turn the call over to Matt to discuss the financials.

Thank you George and good morning, everyone.

We recorded revenue of $725000 for the third quarter fiscal 2020, an increase of $457000 as compared to $268000.

For the prior year third quarter.

The increase was attributable to revenue generated from the new EGP project.

Cost of revenues increased $281000 to $681000 as compared to $400000.

For the prior year third quarter.

This increase was due to higher upfront spending and materials costs.

On the new customer revenue generating project with EGP.

The net loss for the third quarter of fiscal 2020 was $2.9 million as compared to.

Net loss of $2.6 million for the prior year third quarter.

The 300000 dollar increase in net loss was mainly attributable to a delay in receipt of funds from the sale of net operating losses credits, which was partially offset.

Set by lower spending in product development costs.

We anticipate receiving proceeds from this year's sale of net operating loss credits in the coming weeks.

Revenue for the first nine months of fiscal 2020 was $1.1 million an increase of 700.

Thousand dollars as compared to $400000 for the prior year period. This was mainly attributable to the new project with EGP.

Cost of revenues increased 1.3.

Million dollars during the nine month ended January 31.

Thousand 20 from 1.2 million during the nine months ended January 31 2019.

This increase was the result of higher cost associated with the new EGP project and was offset by lower spending on both debt any and premier oil projects as compared to the same period.

I read in fiscal 2019.

The net loss for the first nine months of fiscal 2020 was $9.1 million.

Compared to a net loss of $9.7 million for the prior year period.

The decrease in net loss was due primarily to the higher.

News lower spending in engineering and product development and a decrease in selling general and administrative related costs.

These were all partly offset by the delay in receipt of funds from the sale of the net operating loss credit.

Turning now to the balance sheet.

Total cash cash equivalents and.

The cash was $10.8 million as of January 31, 2020 down from down $6.4 million from April Thirtyth of 2019.

Our net cash used in operating activities. During nine months ended January 31, 2020 was eight.

Point $6 million, a decrease of $1.3 million compared to $9.9 million. During the nine month ended January 31 2019.

Mainly as a result of increased cost containment efforts and the new revenue.

Leading customer contract with EGP.

With that.

Ill now turn it back to George.

Thanks, Operator, we're now ready for 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 at this time.

For.

And Tom will indicate your line is in the question Q.

Hey Press Star too if you would like to remove your question from the Q for participants using speaker equipment may be necessary pick up your handset before pressing the star keys. Once again that is star one to register questions at this time.

One moment, please while we pull for questions.

Thanks.

Thank you. Our first question today is coming from Robert Silveira of our East ovarian Associates. Please go ahead.

Hello, gentlemen.

Yeah.

Seemed to be doing very well in growing the business.

Hi.

Had a observation.

You said in the North Sea, where you have particularly.

Active wave action, you can actually generate extra power.

Is that correct.

Yes, good morning, Robert and absolutely that's correct.

Okay.

Have you given any thought to taking the extra electric power and using it through electrolysis to convert to hydrogen to some hydrogen.

Which can then be used in hydrogen cells and those cells are capable of driving tremendous.

Electric Motors.

They are now being like a company like plug power. They if you investigate them, you'll see what I'm talking about they're driving vans, they're driving forklifts their customer bases Wal Mart and.

Amazon and.

They are.

Galloping.

For literally for vans on the road.

Trucks on the road for delivery. These are how powerful these hydrogen cells and their compact units.

So I'm thinking here, you've got extra power you can generate hydrogen.

And then that hydrogen can.

Feed these kind of cells to power electric motors on platforms or wherever else you wish to use it and so all self contained in and so all of totally green power the ever given any thought to something like that.

You know rubber we were aware of the technology I think you might.

Even emailed us with some thoughts on that as well, we've we've talked to the team about that as well as our customers and the general feeling predominantly from our customers is they would rather use the extra power that were actually generating.

For onboard payloads. So for instance, the.

Buoy that we had in the North sea.

For the particular payloads that we had onboard we were not using that extra power, but our our customer premier oil is looking at other opportunities to use that additional power directly as opposed to through hydrogen creation and then turning electric.

Motors.

But I appreciate the thought and it's something that like all new technologies. We're we're open to to looking at.

Thank you.

Okay.

Thank you very much.

Once again, ladies and gentlemen that star one to register a.

Our next question is coming from Peter for Jerry of Dawson James. Please go ahead.

Good morning.

Hey, Peter.

Sorry.

A couple of questions for you on the.

The contract with the satellite Comping in Taiwan.

How many how many believe that.

Only because two on monitor illegal fishing activities or what you're doing over there.

That's a good question the little I actually states.

One or more and we're looking at this particular.

Market in particular because of the multi buoy.

Attunitys that are there so I wish I could.

Say, a little bit more about exactly what's going on there and how far we are along in the process but.

Unfortunately, I can't I cannot.

Okay.

On the on the Gulf oil and gas complementary.

What's the status.

With that.

When do you mean, the Gulf of Mexico oil and gas capacity that we announced.

A lot of anyway.

Yes lots here because it was approved us on the last filing.

What's the next stage.

Well first of all we completed that study and we completed acts.

It successfully with that customer.

We have as you may recall from about this time last year, we have an existing master service contract with them, where they can purchase further services or equipment under that MFC, just simply by by writing work orders. If you will so it.

Tremendously simplifies the contracting process.

We continue to talk to them.

There's obviously a lot going on with these oil.

Oil companies right now.

But.

We're far from done with our potential work in the Gulf of Mexico right now.

Okay.

And on Premier oil I know you have you thought ability in there for almost nine months now and it was a nine month lease and then they could go further.

They want to what does that stand right now because its looks like it's coming up for the nine months, Yes, I know that's a great question.

Premier oil and OPGC.

And also the partners that went into this project to enter more impulse.

We decided to bring that buoy backend, it's actually key side right now.

We're looking at bringing that buoy back over to the us to get it refurb, we've got a number of opportunities that we're positioning at four.

So that could require a quick turn on on units with new customers.

With regards to Premier oil.

We we haven't really talked a whole lot about this yet but the customer has gone on record in a very public way about moving forward with obesity.

On new projects in particular.

We're anxious to work with premier around a phase two especially with the decommissioning of the hunting Huntington field coming next April which I had also.

Talked a little bit about out in the public so we're really excited about.

Our oil as a repeat customer.

And we are trying to figure out how we can accelerate.

Work with them here in the near future first step get that but we back here and get it turned around so that we can redeploy it for someone else.

So the ability is not.

So again.

Yes.

Okay.

Im sorry, Peter you're breaking up.

Okay.

Once again, ladies and gentlemen, if you'd like to register a question. Please press star one on your telephone keypad.

Once again, ladies and gentlemen that is star one if you'd like to register question.

Our next question is coming from Bill Carson of Carson accounting. Please go ahead.

Hi, Good morning, gentlemen, two question is what is what do your power.

Police cost.

I know a or the new win and and your.

The other than the P. three whatever and then that's first thing and when do you think you're going to need to go to market for some more finance.

Both very good question so to address the.

The cost question first.

Naturally this is competitive information, but we'll tell you what we've put out in the marketplace. The PB three on the average is anywheres from 700 to $900000 of course that that price will.

We'll go down based on volume because our costs go down naturally and also as we continue to commercialize we're driving costs out of all of our products. So we're able to.

To address it that way.

What I can say about the hybrid because we don't have the prototype released yet is.

Planning on a being a fraction of what the Pvthree is <unk>.

In regards financing.

With regards to financing as we reported right now we have Matt is it's over 10 million.

In in cash that's right at 10.8 million right as of January.

Annually 31, so outside of the current vehicles that we have in place we really don't have any plans.

Raise any capital.

So you think you are good for another nine months or so depending on business I guess.

Well.

We anticipate business picking up I mean, thats, what our anticipation.

One is.

And we're trying to bring that to fruition.

But with regards to our existing vehicles I mean for right now all that I can say is we're not planning on doing anything different.

And then Furthermore.

As we talked about in our 10-Q that we filed yesterday, we have cash into the quarter ended October 30.

31 of this year.

Right.

And maybe a dumb idea, but is it your stock is down to like 50 556 cents.

Which is substantial.

Lee substantially under your cash value and I know you're hurting your money, but is there a possible.

Buyback some of it starts.

For a too.

Decrease the float on the stock and also increase maybe potentially the the price for the stocks once the.

You start doing some some business or.

We.

I have no plans to conduct a stock buyback right now.

Obviously like all public companies right now with the current market conditions, we're watching our share price very closely but.

We believe with with news that we anticipate coming out in the future that.

Yeah.

We're hoping that it has a positive effect for shareholders and resulting in a positive effect on the stock.

And how many shares outstanding the have arena.

Yes, we have 9.1 million shares outstanding.

At the end of last quarter, you had 6.3 million shares.

There's no you get nine point whatever.

Why is that.

Sure.

So we have.

Equity line of credit and an ATM in place.

And at the market facility, which we currently use from time to time.

Okay.

9.3 million shares outstanding now.

Okay. Thank you.

Once again, ladies and gentlemen that is star one if you'd like to register a question at this time.

One moment, please let me pull for additional questions.

Once again that is star one if you do have a question.

Okay.

Ladies and gentlemen, as a final reminder, that is star one to register a question at this time.

At this time.

I'd like to turn the floor back over to management for any additional or closing comments.

Thank you operator, I want to close on the following points Theres a lot of good news coming out of OPGC with new product development, new partnerships and new and returning customers as we look at the long term outlook. There are many more positive developments to calm and.

We fully intend to continue to build on this momentum.

As always I want to thank the entire obesity team for their continuing contributions to our ongoing success.

Thank you all for joining us today.

Ladies and gentlemen, thank you for your participation. This concludes today's event you may disconnect. Your lines are log off the webcast.

At this time and have a wonderful day.

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