Ocean Power Technologies, Inc.
Q1 2019 Earnings Call Transcript

Published: 12 Sep 2018

[Operator:]

Good morning, ladies and gentlemen and welcome to the First Quarter Fiscal Year 2019 Ocean Power Technologies Conference Call. My name is Carmen and I will be your coordinator for today. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Steve Calk, Investor Relations for Ocean Power Technologies.

[Steven Calk:]

Good morning, and thank you for joining us for Ocean Power Technologies conference call and webcast. On the call with me today are George Kirby, President and Chief Executive Officer; and Matthew Shafer, Chief Financial Officer and Treasurer. Following our prepared remarks, we will open the call to questions. This call is being webcast on the Company's website at www.oceanpowertechnologies.com. It will also be available for replay after this call. On September 12, 2018, OPT issued it's earnings press release, and filed it's quarterly report on Form 10-Q for the first quarter of 2019 with the Securities and Exchange Commission. All our public filings can be viewed on the SEC website at sec.gov or you may go to the OPT Website, oceanpowertechnologies.com. Now let me reference the Safe Harbor Provisions of the U.S. Securities Laws for forward-looking statement. This conference call may contain forward-looking statements that are subject to significant risks and uncertainties, including the future operating and financial performance of OPT. Although, OPT believes that the expectations reflected in it's forward-looking statement are reasonable, it can give no assurance that such expectations will prove to be correct. Important risk factors that could cause actual results to differ materially from those reflected in the forward-looking statements are included in OPT's filings with SEC. The information contained in this call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later time, and OPT undertakes no obligation to update any information discussed in this call. Now, I am pleased to introduce Mr. George Kirby, President and CEO of Ocean Power Technologies. George?

[George Kirby:]

Thanks, Steve. Good morning everyone. I'll begin with an update on what we're seeing in the industry and the progress we're making on our commercialization plan. Then I'll pass it to Matt Shafer, our Chief Financial Officer, for a review of our financials. After that we will open up the call for questions. I told you last quarter how we were beginning to see signs of building demand for our PowerBuoy solutions. During this last quarter, we saw that demand begin to take shape particularly as the offshore oil and gas markets have become increasingly aware of our technology. We've actually been aided by the stabilization of oil prices which has incentivized operators to reduce costs and make their operations more efficient. In addition, this industry is increasingly aware that their operations need to minimize their carbon footprint. All this has come together to create an environment where our PowerBuoy technology meets the vital need both financially and operationally. The results over the past several months have been nothing short of groundbreaking for OPT. For the first time, we've closed multiple contracts to supply PowerBuoy's in a new market across multiple applications. We successfully shipped our PB3 PowerBuoy for deployment in the Adriatic Sea fulfilling a key milestone with Eni. We're also preparing to deliver a PB3 PowerBuoy to premier oil for our upcoming deployment in the North Sea. As I mentioned last quarter, these combined contract values are worth potentially over $3.1 million. In mid-August, we signed an agreement with Enel Green Power, or EGP, a subsidiary of Enel Group which is a multinational energy company and one of the world's leading integrated electricity and gas operators. Under the terms of that contract OPT will evaluate a PB3 PowerBuoy deployment along the coast of Chile through a detailed feasibility study. In particular, we're evaluating the PowerBuoy as an offshore autonomous platform hosting oceanographic sensor systems. This collaboration with Enel Green Power is a significant opportunity for us, both in the region and in the marine energy space. EGP is a world leader in delivering renewable energy. And we hope to leverage this work to further expand our presence in Chile and throughout South America in multiple areas. These would include monitoring, surveillance, sub-sea charging and connectivity for the offshore oil and gas, science and research, and telecommunications market. I mentioned last quarter that our business development team received significant interest from a number of military and defense contractors over the past few months. That work continues as does our relationship with the Office of Naval Research who has turned its focus to autonomous power over the prior few years. As a reminder, the DOE announced upto $23 million in funding to support marine energy technology projects that aim to reduce capital costs, and shorten deployment timelines. This remains an attractive potential source of funding for us and we look forward to continuing our relationship with the DOE. We've come to be known as the innovator in offshore power and this has broadened demand for our solutions. Currently, we have a pipeline of over 40 active opportunities where we are responding to information requests, actively providing proposals or participating in customer studies where PowerBuoy could be employed. Information requests and requests for proposals are at an all-time high which is evidence that we have successfully built a brand in power solutions. Our pipeline is robust, and we expect to secure more orders to deliver PB3 PowerBuoy's to prospective partners around the world in the coming quarters. Meanwhile at headquarters, our new plant, people and processes are moving full steam ahead and are positioning us to deliver high quality products and services to our customers. First, you may recall that we welcomed Matt May to the OPT team as our Vice President of Global Business Development. In Matt's first quarter on the job, he continues to enable our success in forging a robust pipeline through new and expanding relationships, as we bring our technology to an even broader market. Second, we obtained a new patent which allows us to optimize energy in lower sea states. The technology can be applied to serve additional subsea demands and will be highlighted at upcoming conferences and exhibitions. And finally, our whole team is acting in accordance with our mantra to sell, build and ship high quality PowerBuoy's for our customers. Finally, the team and I were excited to attend the Offshore North Sea Conference in Stavanger, Norway last month. This was our first time attending ONS and it provided an ideal venue to showcase our capabilities in the oil and gas sector. Just to provide some context about this event, there were over 68,000 attendees and over 1,100 companies from 37 countries that exhibited including OPT. We had scores of visitors to our booth representing 29 companies and we easily had over 20 dedicated meetings about the use of our power solutions in potential customer applications. Potential customers and partners were impressed with our technology and platform, in particular, they were interested in how they can apply the technology to various mission critical payloads while extending their range of operation. It was clear that the PowerBuoy is a solution that not only enables real-time decision making but also lowers our operational costs and many parties are actively seeking us out as a solution provider. We remain confident that Ocean Power Technologies offers a unique solution to customers across the globe, our technology and expertise continue to open doors, we're utilizing new technologies for operational cost savings as a key driver. I believe the announcement I mentioned today will be the first in a string of customer wins in the coming quarters. Now, let me turn the call over to Matt to take us through the numbers. Matt?

[Matthew Shafer:]

Thank you, George and good morning everyone. We recorded $31,000 in revenue during the first quarter ended July 31, 2018, as compared to $195,000 in the first quarter of fiscal 2018. The decline in revenue is related to new contracts signed with Eni and Premier Oil in the first quarter of fiscal 2019 which was more than offset by the completion of the MES and ONR contracts during the first quarter of fiscal 2018. This expected decline also reflects our focus on commercial contracts which is now beginning to gain significant momentum. The net loss for the first quarter of fiscal 2019 was $3.2 million as compared to a net loss of $2.7 million in the first quarter of fiscal 2018. This increase in net loss is a direct results of costs associated with scaling, business development engineering, and marketing as we increase our focus on these commercial contracts. Turning now to the balance sheet; as of July 31, 2018 total cash, restricted cash, cash equivalents and marketable securities were $8.4 million, down from $12.3 million on April 30, 2018. Net cash used in operating activities was $3.8 million during the three months ended July 31, 2018 as compared to $4.2 million during the prior year period. On August 13, we were pleased to announce that we entered into a common stock purchase agreement with Aspire Capital. This agreement provides that Aspire is committed to purchase upto an agreement of $10 million of our common shares over the 30 months term of the agreement. In consideration for entering into this agreement, we issued approximately 429,000 shares of our common stock to Aspire as a commitment fee. Additional details about the transaction are available in our August 27 filing with the SEC. We are encouraged and excited by this partnership with Aspire, this agreement gives us greater flexibility and access to additional funding. With that, I'll turn it back to George.

[George Kirby:]

Thanks, Matt. Before we move onto Q&A, let me once again commend our great team. Your hard work and ingenuity have been tremendous, particularly over the last few months as commercialization of our technology has begun in earnest. Our sales and marketing team continues to find new opportunities for our innovative solutions around the world and they are reaping the benefits of our growing brand and reputation. Our support services continue to build world-class policies and procedures to enable business growth while maintaining sound compliance. To summarize, our entire organization is excited and motivated. We are executing on our commercialization strategy and we're building a strong and growing company here at OPT. Operator, we're now ready to take questions.

[George Kirby:]

Before we conclude the call, I want to sincerely thank everyone who has been a stakeholder in the Company, and who has been following us and helping us to rebuild and grow this Company. A couple of things that I'll mention, we are looking to have a commercial update similar to the one that we did in April which would be a deep dive on what we're doing in terms of attacking decommissioning in the offshore oil and gas space, subsea power, talk about our pipeline a little bit more; and also potentially new technologies. As part of our regular course of business, we solicit market feedback on what the market needs and requires, and that's not just offshore oil and gas, it's all the industries that we're going after. There -- and again, as a regular course of business, there may be complementary technologies that offer an immediate opportunity to address demand that we are investigating. And I hope to be able to talk more about that during the commercial update. Finally, we are continuing to build our organization here, we have to in order to deliver to our customers but we're doing it very strategically and very selectively. Not every new hire that we bring on board is additive in terms of costs for the company. Sometimes we're actually able to displace outsourcing of activities that we've routinely been doing by bringing in a permanent full-time source and that helps us drop our cost. We are extremely cost focused right now as we grow our business and we're extremely focused on delivering for our customers. We've got a robust pipeline and we're really excited about what the future holds. So with that, I have no further comments. And thank you for your time.

[Operator:]

And ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Everyone, have a great day.