Q1 2022 Ocean Power Technologies Inc Earnings Call
[music].
Good morning, and welcome to the Ocean power technologies first quarter fiscal year 2022 conference call.
Webcast of this call is also available on the company's website at Www Dot Ocean power technologies Dot com.
As a reminder, this conference call is being recorded and will be available for replay after its completion.
Today, Joe Stratman, President and Chief Executive Officer, and Matthew Shafer, Senior Vice President Chief Financial Officer, and Treasurer or on the call. Following prepared remarks, we will open the call for questions on September 13th 2021 O. P. T issued its earnings press release and filed its quarterly report on Form 10-Q.
For the quarter ended July 31, 2021, with the Securities and Exchange Commission or <unk> public filings are available on the SEC website at SEC Gov or in the Investor relations of the O P T website.
Please note that management's prepared remarks may contain forward looking statements that are within the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 forward looking statements are identified by certain words or phrases are based on assumptions made by management regarding future circumstances over which the company may have little or no.
Control and involve risks and uncertainties and other factors that may cause actual results to differ materially from any future results expressed or implied by such forward looking statements.
For further discussion on these risks and uncertainties. Please refer to our most recent Form 10-K and subsequent filings with the SEC, we disclaim any obligation or intent to update the forward looking statements in order to reflect events or circumstances discussed in this call now I am pleased to introduce Dr. Phillips Treadmill. Please go ahead Sir.
Thank you and good morning today, I'll review Apt's business operations and provide an update on activities and developments during the first quarter of fiscal year 2022 and up to today then.
And then Matt will review our financials before we open the lines for questions.
Proud to say OTT is making excellent progress as we continue to move toward our future is in ocean data and power services and solutions provider.
Our central is our power buoy technologies auto our solutions, we're keenly aware that these products will not fully satisfy most customers.
We must provide more than just autonomous low to zero carbon power platform.
We are working to provide meaningful solutions that help self that solve the complex challenges operators are facing etsy.
From the needs of offshore energy developers and providers to defense and security organizations and more.
To this end, we are working with experienced software and robotics developers at Fathom, five and green tea to create a leading edge proprietary cloud based maritime domain awareness platform at <unk>.
Features base expandable sensor and analytic capabilities as well as military grade cyber security.
As part of the development process. We are readying. The initial versions of the solution for an ITC trial off the coast of New Jersey, we've received the necessary permits for the locations, where we expect to deploy PV three on hybrid power buoy with the equipment that make up our maritime domain awareness solution packages.
This would allow us to optimize the platforms performance and provide prospective customers with opportunities to see the system at work.
In addition to our focus on services, we will continue to develop power buoy product through a small business innovation Research award the U S Department of energy and investment in our next generation of wave energy conversion devices drives the innovation necessary to tackle the challenges facing the operators in the marine environment.
Moving a mass on spring wave energy conversion almost week system forward is integral to our competitive strategy.
We are seeing the benefits of last fiscal year's acquisition of <unk> technologies as our strategic consulting services area is experiencing steady growth and expanding client base is providing a steady stream of diverse consulting projects for our Houston based team and we're cultivating additional interest in these services.
OTT has been at the forefront of Ocean LNG development, and we are continuing to innovate as we anticipate the needs of the ever evolving markets, we serve and seek to serve will best accomplish that goal by pairing our in house knowledge and expertise with the best available strategic parties on additional inorganic growth if and when it makes.
With that let me turn the call over to Matt to discuss the financials.
Thank you Philip and good morning, everyone revenue.
Revenue for the first quarter of fiscal year, 2022 was $300000 compared to $200000 in the first quarter of fiscal year 2021, primarily as a result of the revenue from strategic consulting services from the <unk> acquisition.
The net loss for the first quarter of fiscal year, 2022 was $4.0 million compared to $7.0 million for the first quarter of fiscal year 2021.
This decrease was mainly attributable to $900000 gain on extinguishment of the company's PPP loan after the SBA granted it's forgiveness during the quarter and an income tax benefit of <unk>.
$1 million received during the quarter.
These gains were partially offset by increases in the quarter for product development and administrative costs.
Turning now to the balance sheet total cash cash equivalents and restricted cash was $81.0 million as of July 31, 2021, net cash used in operating activities was $8.0 million for the first quarter of fiscal 2022, representing an increase of $2.
$6 million over the first quarter of fiscal year 2021, mainly as a result of higher project and employee related costs and the settlement of litigation during the quarter.
With that I'll turn it back to Philip.
Thanks, Matt operator, we're ready to open the call for questions.
Thank you without conducting a question and answer session.
To join the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Yes.
Once again Thats star one to be placed in the question queue.
Our first question today is coming from <unk> from R. E. Silvera <unk> Associates. Your line is now live.
Hi, Scott.
Could you give me some clarification on the litigation payable.
One 2 million can you clarify on that.
Yeah. So this is Matt.
Good to hear from you again.
Yes, that's basically Robert Robert.
Yes, I knew that.
Company.
Okay, I was trying to figure out who that was but I knew youre Robert Robert.
And it's good to hear from you again, I know you call in each quarter for the past few quarters. Thank you.
Yes, so thats from a prior Charleston, Levy, who is a prior CEO of the company.
There was a settlement that we the company finally had with the former CEO that was disclosed in all of our past and case over the past several years.
Right, but now it's actually over it still due to be growable.
No that was paid and so now that's behind us.
Okay rule really gone overboard sounds like.
Thanks.
Instead of later growth in COVID-19 or something like that okay.
As long as long as it's done with now could you give us some clarity on status of projects right.
So a couple of close to Chile.
Sure Yes.
Maybe happy happy to answer some.
Some of the questions around that.
As we mentioned on our previous call and disclosed in our filings.
The beauty of the coast of Chile is installed.
On the buoy.
Is operating.
<unk> is designed for.
For the for the field, where it has been deployed.
We are doing some maintenance work on some of the ancillary equipment. The buoy is powering.
Obviously, given that it's it's winter in the southern hemisphere, so weather delays on some of these issues, but every time when the windows open up we're going out there to do fixes onto the see that equipment.
Okay.
It is functioning as designed.
Customers happy.
From the conversations I have with the customer icon icon speak for them.
And I can't predict what they're going to do but you've seen that they've made public statements about the project.
They are highly supportive of the project.
What may come next uncertainty and conversations we're having this is this is part of our go forward strategy.
Demonstrating to the industry that the buoy can fuel and power a broad range of centers. It starts moving into this whole ocean data set.
Service market for us.
Yeah.
Okay.
How about the other projects.
Whereas as.
As we've announced previously received.
The the ground from the department of energy, which is supporting our future future developments.
The efforts that we've got underway to shift our strategy to utilize our products as platforms to provide.
Power is a service, which we then ultimately obviously leads to ocean data as a service is leading to several advanced discussions that we have with customers around the globe and encouragingly. So.
That is moving discussions outside of what traditionally would have been the oil and gas and offshore markets.
And as I.
I alluded to and as Matt mentioned is seeing a steady steady growth.
And.
<unk>.
Excites me about where <unk> is heading is that many of that growth and into new contracts is coming from customers that weren't there traditional fleet and base.
And a lot of the other work that we've got going on is leading to follow on discussions.
Now that we've concluded work such as the <unk> and <unk> studies.
Okay, although failing whatsoever for.
Future sales next quarter.
Well I can't give you an exact number on where we were.
Sales or leases or services will shake out at.
But I am very encouraged by where I see discussions going on where the industry is heading with large.
Growth.
Okay.
<unk>, specifically with the shift that we are performing towards looking at the.
The power buoy that we have as platforms to fuel solutions and services, which I think.
Evidenced through the work we're doing with <unk> five in Green see I'm very encouraged by the discussions are occurring around that.
Okay. Okay, that's all for mobile.
Thank you.
Okay. Thank you. Our next question today is coming from Peter <unk> from Dawson James Your line is now live.
Yeah.
Hi, how are you guys doing.
Good How're you doing Peter.
I'm doing good.
Questions I have been involved in this company for a long long time.
I'd like to status with Microsoft in the Gulf of Mexico decommissioning of oil wells.
Where does that stand at this point.
So the question for you.
Okay.
Thank you.
If you guys.
When you decommission of Oilwell, how long does it take.
Hum.
Doing well, how many wells out there how do you tap them what is your position to do this.
What I would try I'm trying to understand.
So we don't do decommissioning of wells.
We're not an oilfield services company our efforts around decommissioning are either along the lines of what we did for what was then known as premiere all now hover energy in the North Sea, where we can where we will monitor the exclusion zone around subsea assets that have been.
Plugged and abandoned on pre cutting.
Or it can be one well has been plugged. It will be we will can provide monitoring services for said wells to ensure that there is no seepage.
But the actual decommissioning work itself is entirely outside of argument.
Okay.
And I see your spending is increasing.
Is that hiring more employees is it.
What is that a consistent.
Yes, so Peter that's mainly and especially in this quarter is related to the settlement and payment of the litigation matter, but that one time item. Aside we do have some increased spending as it pertains to the maritime domain awareness, both the software solution itself.
And associated with Green <unk> five as.
As well as some additional personnel to support those efforts.
Yes.
How close are you to to getting a decent order because you.
You did the thing and Shelly and sold them a buoy.
You did stuff with Mitsui engineering was and now you've done stuff with premier oil with any end.
You still don't have really any revenues from all of this and I'm just trying to understand.
What's taking so long.
Yes.
Yes.
I'm just how close are you to winning something.
You have the Navy.
Pretty much no.
Turning involved in this company in a long long time.
Plenty of money on the bank right now, which is great quarters, what are you going to do with $78 million.
No I think I think.
We are now as I mentioned before.
We are really pivoting the company away from a pure product play in providing the buoy as standalone systems and moving into power as a service and ocean data as a service to that extent.
Expanding on the work we've done with Eni with AGP.
With <unk> energy.
And also with the Navy.
And we are building upon that in order to put together a solution that we can utilize and bring into the market and as I mentioned earlier that is leading to some very intriguing discussions that we're having with customers around the globe.
That actually primarily outside of the oil and gas and traditional energy industry and Thats, where we see the the <unk>.
Larger growth.
I would also add.
As we did with <unk>, we will continue to look at inorganic growth opportunities.
Often when they come alone makes sense in terms of valuation and further adds to the execution of the strategy that we filled out.
So so you are using the power ability is.
Mike illegal fishing and.
Monitoring services with the data what about the data centers underwater with like the Microsoft and stuff like that is that what youre talking about.
When I talk about Ocean data is really more where we are looking at one thing. We're building out is the edge computing capabilities on the buoy itself because obviously.
Operating far offshore without any other infrastructure, we're operating in a low bandwidth high latency environment. So part of the efforts that we've got underway at the moment with Green tea and <unk> five is building out the ability to reconfigure. The buoy is to act as gateway notes for other means of communications to be integrated with a whole range of <unk>.
<unk>.
To your question specifically on CIT.
Data centers at the edge.
We have not looked at powering this because most of those are connected via cable straight back to to onshore.
However, similar to decommissioning world there is an opportunity for monitoring exclusion zones around days to prevent anybody accidentally.
Putting dread dredging fishing nets over over <unk> assets on the seabed.
Okay.
So Europe.
Basically an entirely different strategy right now.
Well I guess as we.
As we put in as we had in the 10-K.
Our strategy is really built upon three main sites.
The ultimate aim that we're pushing into his ocean data as a service on providing the solutions around that and what because we have the power buoys that enables us to do ocean data as a service hosted on our buoy platforms, which.
Also enables us as a secondary leg of our strategy.
It provides power as a service still as we've done in the past using our platforms and also other platforms integrated into arrays, where required and that's what we did in the <unk> study.
And then all of that is underpinned by consulting services, which enables us as a company to help our customers at a much earlier stage of the lifecycle before they even know that they may or may not need buoy.
And we firmly believe that this strategy enables us to provide services to customers that may not see a need for the buoy. The primary power source, but it's still enables us to put out substantial numbers of our platforms in order to solve their other needs that they have provided the hyper local data.
Collection that they require to aggregation with the systems.
Okay are you still doing stuff with the underwater submersibles workshops Ci and.
That side of the market are.
Okay.
Absolutely I think the if you're looking at the work we've done for the enabled postgraduate school. It is exactly that that falls into the ability to do actually both in its power as a service to provide recharging for subsea assets.
Also it moves it just move into the Ocean data as a service market because now you can combine the collection of subsea data.
With computing capabilities on the buoy itself to the entrance.
Data back to the shore basis, So, yes, absolutely conversations with companies and USB companies are advancing at a fairly rapid pace for us.
Okay, Great alright, thank you.
Thank you.
Thank you next question is coming from Pablo <unk> from a private Investor. Your line is now live.
Hi, guys.
Okay. Okay.
So you just mentioned you guys are pivoting as a company right.
The question is how has the total addressable market changed over the last.
A few months I would say maybe even year.
This move towards Ocean data as a service.
Power is a service touch based on how that's changed over the last 662 year.
Sure I think I think the.
General shift in the industry has been towards one off.
As of <unk>.
Data as a service as power.
In General in addition to that I think the fact that we are in the UAE decade of Ocean science and the changes in the administration.
Politically.
The United States of America.
Is really enabling a major growth spurt for and kind of the ocean data industry writ large.
We are very encouraged by that we're very encouraged by what we're seeing in terms of companies coming into the market with very interesting sensor products and the pivot that we are carrying out enables us to work with the sensor companies and with other partners.
Out there.
Sell through them and with them through the customer base.
Even if that customer base would have never considered a buoy in the first place. So I think that makes for a very interesting addressable market, which is not constrained by the nation of.
Metal or steel that sits on the seabed.
Alright.
Youre, saying the total addressable market.
<unk> basically increased considerably because of those because of those platforms and I think that those things.
Was it something where you can foresee a year ago now with this with the shift in and government.
And a new.
Policies in place you've seen it. This is this is where the growth is going to come from.
Yes, I think this is exactly where the growth is going to come from I think the I think the kind of the.
Ocean data as a service actionable intelligence on predictive analytics based on data that is collected offshore combined with other data that already exists I think that that is where we see the growth coming from and to that extent. That's one of the reasons why we're working with <unk> five.
And green see not just to build out the computing capabilities on the buoy itself, but to do to develop a cyber secure.
Cloud platform enables the combination of hyper localization data with third party data that comes from other sources in order to provide in a predictive analytics that other people can act upon.
And then one last question guys.
When it comes to R&D right.
What would you say would be your top reallocations in the R&D budget.
Now are we.
Like what would be with Mitsui.
Our budget for R&D in the next year or two.
What would you say top three.
Aspects of the business.
And that too.
Yes, so I mean, there's obviously one is.
Front and center of everything we're doing is building out and testing in dental in version one one of our maritime domain awareness solution and then pushing out the software update for version two point onto those buoy and that does include the life testing of the NDA solutions.
If the coast of New Jersey at three sites that we've got permitted already.
These deployments are starting to occur in the next two or three weeks.
From what from what I understand.
The other bit is as you mentioned the development of our next generation power conversion system, which is a mass on spring wave energy converter or most work, which will become an additional platform product that we can use in order to harness wave power.
In a in a different format and what the PV three to us by removing any external moving parts from from the system.
Certainly two of the major items that we've got going on and then the third item is developing.
<unk> interfaces.
We can integrate.
Other sensors and payloads that exist in the industry. So we don't have to reinvent the wheel, but to the point I made in order to grow in the ocean data as a service market, we need to be a host platform that can enable plug and play all new sensors after being developed and put them in there.
Right.
That makes sense.
Yes, that's pretty much it. Thank you so much and I'm, hoping that you guys can pull through some ourselves.
And actually one last question how are you dealing with how are we doing with the higher power.
We were looking to hire somebody to start working government side of the business.
Of the business how are we doing with that.
Yes.
What we have done we've engaged.
An external advisory firm that is helping us navigate the DC Ocean policy specific landscape.
This isn't a think tank or a partisan body.
But rather a.
A strict policy and sales advisory firm.
And we are in.
Sean.
Discussions and stages of Reconfiguring, our sales and business development team to capitalize on the government and defense market.
Okay.
Alright.
Thank you so much.
Hopefully we can see some some shareholder value here. Thank you.
Thank you Pamela.
Thank you next question today is coming from Turner Smith, a private investor Your line is that right.
And the data services.
Okay.
And then if there is new typical sales cycle time.
Such because it depends it is somewhat industry dependent.
And we have we have discussions.
If you're ignoring ignoring the consulting services side, which tends to be primarily a call on a Friday afternoon for somebody that needs something by Tuesday, lunchtime in order to move a rig on location.
And all of the conversations on oil and gas that were having are around hey, I've got this project I need to do is on a brownfield site in the North Sea can you make something available in the next 12 to 16 weeks.
And we'll work through that when it comes to government is more longer term planning along the lines of he is what we're trying to do in terms of a large government procurement. He had the studies that need to be done in advance of this then qualifies you to participate into providing the equipment on it.
Later stage so the cycles can vary from M&A.
Hey.
I would say two handfuls of weeks to two handfuls of months, that's really what we're seeing.
We were.
Somewhat discouraged by the resurgence of the Delta there and over the course of the summer, which pushed back a lot of face to face meetings that we had planned during during July and August and a lot of that travel got curtailed again.
But.
And generally speaking as I said, it's between weeks and months, depending on who the end customer is.
Foreign governments tend to work on slightly different cycles.
We again, we're working with advisory firms that were making sure that we appropriately address address those cycles.
Sure.
Okay.
With about over 230 million invested of shareholder dollars and virtually no sales.
When are you guys going to execute.
On sales and profits with the with the losses.
On a run rate of -21 of you to produce.
Just $20 million in profit.
Just to breakeven.
Well as I mentioned to you I mean that is one of them.
One of the reasons, we are executing this strategic shift.
Because the notion that <unk>.
Just.
Putting buoy after buoy after buoy out there.
Is one that for the customer.
Is not that appealing.
We are working.
Feverishly on the pivot and moving into <unk>.
Noah overhead market post office.
Ocean data as a service and adding in other services and solutions into the portfolio to accelerate the growth.
That.
We're looking to see.
Also further tanner.
Also about the company culture and moving.
Transforming our company from <unk>.
Our research and development product based company to the data and power service provider.
So we're looking at capitalizing on those areas as we're making these shifts and doing it very rapidly.
As in the past if you may or may not recall in 2015, we went through its strategic pivot, where we moved away from large scale.
Grid connected power.
To the autonomous power and we see the need to shift.
The company the way that total addressable market is shifting to the data and power as a service. So we're moving quickly with the markets.
Yeah.
Okay. Thanks.
Thank you our next our next question today is coming from Jeffrey Campbell from Alliance Global Partners. Your line is now live.
Good morning.
Two questions one.
In response to something you just said.
You mentioned lower overhead markets.
I'm wondering does this imply that you might fund the capital cost supply expertise and strategic locations.
As a platform to then sell data service after that investment.
Hey, Jeff good to hear from me.
It is not something that is firmly in our plans right now.
As I mentioned in response to one of the earlier questions. We are working with other larger partners in the industry.
Certainly have an interest in.
Could it pre deploying.
Data collection devices in the Ocean to then monetize monetize the data that's being collected and putting that out to their customer base. So.
Even if we are not.
Looking at financing that directly ourselves, we're certainly in discussions with partners in order to carry out such such measures.
Okay.
And my other question was I was just wondering we've had a.
A lot of.
Prismatic theoretical discussions about it so I'm just wondering if maybe you could call it together.
By giving US an example of a primary use case for your vision of data as a service.
Once your capabilities are flushed out.
Yes, absolutely.
Take for example, the issue of illegal fishing.
I think we can work with.
And the system you can put out an array of.
Our platforms that host the MDA solution, you pre deploy them NAND no take zones in the Ocean and you start actively monitoring around those areas and then utilize other data that you can pull in from a satellite providers and so on and so forth and whether data.
Fishing ground movements to start alerting the platform as too.
Array that you've got out forward deployed to look in certain quadrants.
It is more likely than not that illegal fishing activities are going to start taking place.
And you sell that advanced data to the customer at the same time.
We reserve, we would reserve the right to also monetize any other data we collect from those buoy smooth it out which is what I mentioned earlier on the kind of in that kind of an approach to solve almost plug and play with sensus because if we got breweries out there that are doing initial fishery illegal fishery monitoring.
Can also measure data that is relevant for climate science and stopped monetizing that by selling it to research institutions and governments.
It's the ability to use one platform in one device.
Given location and monetize the data that they collect multiple times over with a range of customers.
Okay, and just as a follow up to that should we assume that the primary customer or.
Legal 13 data that you use as an example would be a government.
It would be government or government sanction security organizations.
Organizations.
Contracted by governments to Carryout enforcement sensitivities.
To a lesser degree just because of financial constraints on their side. It could also be mgo instead of being tasked to protect certain marine protected areas in the remote parts of the world.
Okay great. Thank.
Thank you and we look forward to seeing your conference next week.
Thank you Jeff.
Thank you. Our next question today is Joe <unk>, a private Investor Your line is now live.
Hello.
Question do we have an update on the deep Star project, one and number two.
Was the buoy off the coast of New Jersey actually.
He had the permits I mean was that launched.
That's all.
Yeah on deep deep star.
<unk> was completed during during this fiscal quarter.
We are now having conversations with the various operators that were involved.
What could possible next steps be.
Obviously.
Power, while I mentioned earlier.
This is to some extent dependent on the speed of adoption of kind of all electric trees, all electric tie backs occurring in the Gulf of Mexico.
Yes.
Use cases that are arising from the <unk> study about well monitoring et cetera that we're looking at.
In terms of the project off the coast of New Jersey.
Is it the.
We've got the permit in hand.
The first test in the auto order in water dump test completed end of <unk>.
Last week, I want to say Wednesday, but it could've been Thursday.
And is it in about two or three weeks time weather window dependent.
The first one will go off the coast of New Jersey. The second one will follow shortly after that and then a third one shortly after that.
Well that demo deployment is going to do.
It's growing.
Going to deploying the maritime domain awareness version one point around one one on those three buoys.
And then swap in and out improvements to set system and in order to further product ties.
The approach and we are also going to be doing life life water demonstrations and tests with various assets going positive.
We push out additional software updates to those assets and then also ultimately start swapping in additional power generating two outlet.
That's kind of what I mentioned earlier with the <unk> device.
It's also going to be something that's going to be we're tested we think it is absolutely imperative.
As a provider of offshore services that all of our all of our equipment is robustly demo.
Our out out in the environment. It is intended for.
So it's.
Is it safe to say that in the next two months there'll be three buoys off off the coast of New Jersey.
I think I think that is.
Fair statement to make.
How far are they launched off the coast.
Yeah.
The three sides of five nautical miles apart from each other and I believe the duties are about five ish nautical miles each from the shoreline.
Okay.
Okay. Good thank you.
Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Thank you just a few months to see.
I do want to restate, how proud I am just being asked to lead. This next chapter of Opt's development.
How excited I am to be in a position to execute.
The company's ambitious plans.
He has a strong team in place from our executive leadership to every department that makes up the company as.
As a result, we are aggressive in our pursuit of growth, whilst remaining agile and responsive to the needs of the marketplace.
Our diverse set of clients, we are aligning our knowledge with other parties to bring the best possible outcomes to our customers and believe we're setting up for a long future of delivering customer and shareholder value.
Thank you for your participation today. This concludes today's teleconference and webcast you may now disconnect your lines at this time.
Yeah.