• Revenue: $1.3 million, consistent with Q1 '24.

• Operating Expenses: $4.9 million, a 39% decrease compared to last year.

• Net Loss: Decreased by over 35% for Q1 '25.

• Backlog: $5.3 million, a 71% increase compared to the prior year.

• Pipeline: Approximately $92 million, the largest in the company's history.

• Cash and Equivalents: $3.3 million as of July 31, 2024, compared to $26.9 million in Q1 '24.

• Net Cash Used in Operating Activities: $6.1 million for the first quarter.

• Warning! GuruFocus has detected 5 Warning Signs with OPTT.

Release Date: September 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ocean Power Technologies Inc (OPTT) completed over four months of successful offshore testing of their next-generation PowerBuoy, demonstrating 100% data uptime and over 90% battery charge.

• The company announced a significant increase in their pipeline, now standing at approximately $92 million, the largest in the company's history.

• Operating expenses for Q1 '25 decreased by 39% compared to the previous year, reflecting effective cost management strategies.

• Ocean Power Technologies Inc (OPTT) has advanced strategic partnerships with industry leaders like AT&T and Teledyne Marine, enhancing their technological capabilities and market reach.

• The company remains debt-free, maintaining a strong balance sheet with no bank debt, which provides financial stability and flexibility.

Negative Points

• Revenues for Q1 '25 remained flat at $1.3 million, showing no growth compared to Q1 '24.

• The company's cash and short-term investments significantly decreased to $3.3 million from $26.9 million in the previous year, indicating a substantial cash burn.

• Several opportunities in the backlog experienced delays beyond the company's control, pushing expected realizations to Q2 and Q3 of FY25.

• Net cash used in operating activities for the first quarter amounted to $6.1 million, reflecting ongoing financial challenges.

• Despite the reduction in operating expenses, the company still reported a net loss, albeit reduced by over 35% compared to the previous year.

Q & A Highlights

Q: Can you elaborate on the main drivers for the continued increase in your pipeline and how the sales team has evolved over the last few quarters? A: The increase in our pipeline is driven by broader geopolitical factors increasing demand for autonomous ocean security and monitoring systems, as well as domestic funding for next-generation autonomous systems. Our sales team has evolved to focus on US government defense, overseas government, and the marine technology sector, helping create solutions that drive pipeline growth and conversion to backlog. (J. Philipp Stratmann, President, CEO, Director)

Q: Are you still on track with the order guidance for this fiscal year? A: Yes, we feel good about where things are heading. We have increased our backlog and maintained revenues, and with the growth in our pipeline, we are confident in our order guidance for the fiscal year. (J. Philipp Stratmann, President, CEO, Director)

Q: Is the current level of operating expenses a steady state to think about going forward? A: We have done a lot of the hard work to bring OpEx down. There may be some marginal fluctuations due to the full quarter effects of recent efforts, but we continue to manage and contain costs tightly. (J. Philipp Stratmann, President, CEO, Director)

Q: Can you compare and contrast your commercialization inflection point with other companies in the industry? A: Our systems are commercially ready, and demand signals are converting into backlog and revenues. The market is robust with a large TAM, and we are confident in our growth and ability to deliver value for shareholders. (J. Philipp Stratmann, President, CEO, Director)

Q: What is the targeted mix of business between data-as-a-service and equipment sales in the long term? A: We see about 50% of the business on the defense and security side and the balance on commercial. The commercial side will have a strong long-term leasing model, while defense and security will see both long-term leases and sales, depending on deployment needs. (J. Philipp Stratmann, President, CEO, Director)

Q: What are the key technology improvements you are focusing on over the next 24 months? A: We are continuously integrating customer feedback and working on the next-gen PowerBuoy and remote charging and docking opportunities. These advancements will enable collaboration with a range of autonomous systems and support autonomous offshore operations. (J. Philipp Stratmann, President, CEO, Director)

Q: Can you provide more details on the orders and guidance for this fiscal year? A: We have increased our backlog and maintained revenues, and with the growth in our pipeline, we feel good about our order guidance for the fiscal year. (J. Philipp Stratmann, President, CEO, Director)

Q: How do you see the market capitalization upside for your sector? A: The market is ready with a combination of commercially available technologies, particularly on the autonomy side. We feel strongly that our systems are commercially deployable and ready, and we are seeing encouraging projects and use cases. (J. Philipp Stratmann, President, CEO, Director)

Q: What are the main factors contributing to the reduction in operating expenses? A: The reduction in operating expenses is due to headcount optimization, material reductions in third-party spend, and efforts to tightly control and contain costs. (Robert Powers, CFO, SVP)

Q: How is the integration of AT&T's 5G systems progressing? A: We have announced additional developments in our integration of AT&T's 5G systems for our PowerBuoys, notably for the deployment of the Naval Postgraduate School and the integration of Teledyne Marine's underwater sensors. These partnerships will accelerate our growth and drive additional revenue streams. (J. Philipp Stratmann, President, CEO, Director)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.