Ocean Power Technologies, Inc.
Q1 2017 Earnings Call Transcript

Published: 13 Sep 2016

[Operator:]

Good morning, ladies and gentlemen and welcome to the First Quarter fiscal 2017 Ocean Power Technologies Conference Call. My name is Karen and I'll be your coordinator for today. Later, we'll conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] I would now like to turn the presentation over to your host of today's call, Mr. Andrew Barwicki.

[Andrew Barwicki:]

Good morning and thank you for joining us on Ocean Power Technologies’ conference call and webcast to discuss the financial results for the three-month period ended July 31, 2016. On the call with me today are George Kirby, President and CEO; and Matthew Shafer, Chief Financial Officer. George will provide an update on the Company's highlights for the quarter, key activities, and strategy. Matthew will then proceed to review the financial results for the first quarter. Following our prepared remarks, we will open the call to questions. This call is being webcast on our website at oceanpowertechnologies.com. It will also be available for replay later today. The replay will stay on the site for on-demand review over the next several months. Yesterday, Ocean Power Technologies issued its earnings press release and filed its quarterly report on Form 10-Q with the Securities and Exchange Commission. All of our public filings can be viewed on the SEC website at sec.gov or you may go to the OPT website. During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous assumptions made by management regarding future circumstances over which the Company may have little or no control that involve risks and 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. We refer you to the Company’s Form 10-K, 10-Q, and other recent filings with the Securities and Exchange Commission for the description of these and other risk factors. And now, I'd like to turn the call over to George to begin the discussion.

[George Kirby:]

Thank you, Andrew. Good afternoon, everyone. Thank you for joining and we appreciate your interest. Today, I'll review our business operations and provide an update on key activities and developments that occurred in the quarter. Matthew will then briefly review our financial results, after which both Matthew and I will be available to answer any questions. At this time, I'd like to recap some of the events that occurred throughout the first quarter. In June, we announced the redeployment of the PB3-A1 PowerBuoy off the coast of New Jersey, after the integration of the National Data Buoy Center Self-Contained Ocean Observing Payload which is also known as SCOOP. We also entered into an agreement with the Wildlife Conservation Society to integrate a marine Mammal Acoustic Tracking sensor into the PB3-A1 in order to determine whether it can be used with the PowerBuoy to identify migratory patterns of marine species that have been tagged with acoustic transmitters in the Mid-Atlantic region. Both the SCOOP and the WCS payload are currently operating on the PB3-A1. In July, we announced the deployment of a second PB3 PowerBuoy which is our first commercial ready unit off the coast of New Jersey as well. The commercial PB3 incorporates multiple enhancements over earlier prototypes, including a redesigned power take off, a high capacity modular energy storage system designed to provide flexibility through expanded battery capacity, a higher voltage and more efficient power management and power distribution system, and a new auto ballasting system, which allows for faster, safer, and less costly deployment. During the first quarter, we raised approximately $5.3 million net, all of which strengthened our balance sheet and provides us with the opportunity to continue to implement our business plan. We believe that these successful capital raises indicate the commitment of our investors and their belief in our business and strategy moving forward. We also entered into a PB3 PowerBuoy lease agreement with Mitsui Engineering and Shipbuilding. The PowerBuoy will be deployed off Kozushima Island in Japan. Under the agreement, we're also providing engineering support, associated deployment planning and logistics, as well as ocean performance data collection and analysis. In partnership with Mitsui, we'll also jointly develop and test an advanced control algorithm with a goal of assessing increased ocean wave energy capture and electric power generation for potential customers in Japan and surrounding countries. The deployment off the coast of Japan will allow us to demonstrate the flexibility of our PB3 Power and Communications platform. We believe that this particular deployment could allow us to target additional opportunities in Japan and throughout the region. Market applications could include National Security and Defense, such as early detection and warning systems for subsea and surface threats, oilfield management and mid-ocean applications for the oil and gas industry and scientific communities. In addition to our commercialization activities within ocean observing, we continue to discuss and pursue opportunities in oil and gas, and security and defense as well as other industries into which we believe we can expand. I’ll now turn it over to Matthew who will review our financial results for the quarter. Matthew?

[Matthew Shafer:]

Thank you, George and good morning everyone. It is my pleasure to review results for the first fiscal quarter of 2017 before we open up the call for questions. For the three months ended July 31, 2016, OPT reported revenue of 200,000 as compared to revenue of 100,000 for the three months ended July 31, 2015. The current year revenues included revenue from our contract with MES related to our commercial PB3 PowerBuoy which we announced in June, while the prior year revenue included revenue from our previous contracts with the U.S. Department of Energy. Operating loss for the quarter decreased to $3.1 million in the quarter ended July 31, 2016, compared with an operating loss of $4.4 million in the prior year quarter. Both product development costs and selling general and administrative costs were favorable in the fiscal first quarter of 2017 compared with the prior year quarter. The prior year quarter included deployment and other costs related to our previous utility scale PB40 PowerBuoy as well as costs related to the PB3 development. Product development costs in the current year quarter include costs related to our redeployment of the PB3 A1, the deployment of our commercial design PB3, as well as estimated costs related to the mooring system from our legacy PB40 utility scale buoy. SG&A costs were lower due to employee related costs, legal costs, and third-party consulting fees. The current year quarter also includes a non-cash charge related to the change in the fair value of the warrants issued during our June and July 2016 common stock and warrant offerings, wherein we raised $5.3 million in net cash proceeds. The net loss for the three months ended July 31, 2016, was $3.8 million as compared to a net loss of $4.1 million for the three months ended July 31, 2015. Turning now to the balance sheet, as of July 31, 2016, total cash, cash equivalents, and marketable securities were $9.1 million, up from $6.8 million as of April 30, 2016. As of July 31, 2016 and April 30, 2016, restricted cash was $0.3 million. As discussed in prior conference calls, we have taken a number of steps over the last months to reduce our cash burn rate while focusing our technical, operating, and business development resources on key initiatives, particularly the PB3. We are encouraged by our recent capital raises in June and July and remain confident in our cash positions. We expect to have sufficient cash to maintain operations into at least the quarter ended April 30, 2017. That concludes my overview, and I would like to turn the call back over to George.

[George Kirby:]

Thank you, Matthew. Before we move on to Q&A, I want to mention that we’ve reached some milestones that we're very proud of. We have two PB3 PowerBuoy deployed simultaneously off the coast of New Jersey with one of them being our commercial PB3 product, and we're receiving a constant stream of performance data from them. We believe that the commercial PB3 PowerBuoy will allow us to pursue additional markets such as oil and gas, ocean observing, security and defense, and communications. And I'd be remiss if I didn't mention that we strengthened our Board by appointing two new directors in the quarter, Steven Fludder and Robert Winters. We're very excited to have them join us, both Steve and Robert bring unique skills which augment our Board. I'm also pleased to welcome Matthew as our new Chief Financial Officer and we look forward to this being the first of many conference calls which we'll be on together. Thank you for your support and time today. Operator, we're now ready to take questions. Thank you. [Operator Instructions] And I have no questions in the queue. I'll turn the call back over to Mr. Kirby for any closing remarks.

[George Kirby:]

Thank you all once again for attending today's call. If you have any further questions, please don't hesitate to contact us. Otherwise, we look forward to speaking with you next quarter.

[Operator:]

Thank you everyone. That concludes our call. You may now disconnect.