Ocean Power Technologies, Inc (NASDAQ:OPTT)
Q4 2014 Results Earnings Conference Call
August 4, 2014 10:00 AM ET
Deborah Pawlowski - Investor Relation
David Keller - Interim Chief Executive Officer
Mark Featherstone - Chief Financial Officer
Greetings. And welcome to the Ocean Power Fourth Quarter and Full Year 2014 Financial Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)
As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Deborah Pawlowski, Investor Relation for Ocean Power. Thank you. You may begin.
Thank you, and good morning, everyone. We certainly appreciate your time today for Ocean Power Technologies’ fourth quarter fiscal 2014 results conference call. On the call with me today is David Keller, Interim Chief Executive Officer; Mark Featherstone, Chief Financial Officer; and [John Lawrence] (ph), General Counsel. Dave and Mark will provide a review of fiscal 2014, some of our recent developments, and Ocean Power’s strategy going forward.
As you maybe aware, we may make some forward-looking statements during this discussion, as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties, as well as other factors which could cause actual results to differ materially from what was stated here today.
These risks and uncertainties and other factors are provided in the earning release, as well as other documents filed by the company with the Securities and Exchange Commission. These documents can be found at the company’s website or at sec.gov.
So, with that, I will turn it over to Dave to begin. Dave?
Thank you, Deborah, and good morning, everyone. Before I review the details, I would like to introduce myself. I joined OPT as Non-Executive Director in October of last year and assumed the role of Interim CEO on June 10 of this year, and since then have worked with the Board and the members of the management team to redirect our strategy and continue the advancement for our technology.
We have had a very busy few weeks, and I believe that we have developed a sound strategic plan that will enable OPT to focus on the advancement of our promising technologies in the emerging wave energy segment of the renewable energy market.
If you have taken the opportunity to review our 10-K that was filed on July 29, you may have noticed that we have implemented quite a bit of change over the last year and in recent months.
For starters, we have made good progress on our contract with Mitsui Engineering & Shipbuilding. During the year, we recognized $600,000 of the $2.8 million total contract value.
We completed the analysis of methods to maximize buoy energy capture, modeling and wave tank testing, the evaluation of mooring designs, and preliminary overall design reviews. The next steps on this project are to complete design, fabrication, and testing activities and then work with Mitsui to progress toward ocean trials.
Following the summer of 2013 deployment off the Coast of New Jersey of our prototype APB-350 Autonomous PowerBuoy for the testing of radar and acoustic sonar capabilities which were both validated, we determined that several design modifications were required to address critical, operational, and reliability issues.
As a result, we’re planning on addressing additional development efforts on the APB-350 during fiscal 2015. Since the technology requires further advancement, we’re not able to commit to full commercial release of the APB-350 at this time.
During the year, we also canceled the project for a wave energy array in Reedsport, Oregon. Challenges and expenses associated with obtaining the necessary licenses and permits for the project along with higher than anticipated project costs and technical risks lead to our decision to terminate this project.
We are working with the State of Oregon to remove all the anchoring and other related equipment off the coast of Oregon, which we expect will take a few more months to complete.
Following the completion of concept designs and feasibility studies for the PB500 PowerBuoy, we determined that it was not technically feasible or economically viable to continue progressing with this design. As a result, we have discontinued the PB500 program and are focusing our development efforts on the further optimization of our modular power takeoff technology.
We made significant progress on the WavePort project in 2014, including the installation of the innovative modular power takeoff in the PowerBuoy spar. We also completed the assembly of the entire PB-40 PowerBuoy for this project. While the existing contract term ended July 31, 2014, we have successfully secured additional grants to help fund our planned deployment in spring of calendar 2015.
There were additional decisions recently that are consistent with our new strategic direction. The Board formed a special committee on June 9 to conduct an investigation into the agreement between Victorian Wave Partners, which we refer to as VWP, a project specific entity wholly-owned by our subsidiary Ocean Power Technologies, Australasia, and the Australian Renewable Energy Agency commonly referred to as ARENA. The investigation included public statements related to the project. And as most of you are aware, on July 8, VWP tendered a notice of its intent to terminate the project.
In addition, the special committee has determined that investors should not rely on some prior public statements concerning this project, including the ability to provide the expected energy outputs and the economic competitiveness of the larger PowerBuoys proposed for the project.
I should also mention as well that we promoted David Heinz or Duncan as he prefers to be called to Chief Operating Officer. Duncan has quite an extensive history in technology and brings strong leadership skills to the organization.
Strategically, we are making a significant shift to focus our resources on smaller scale devices, which we believe are suitable for both autonomous and utility-related applications, along with targeted deployments.
We believe we are able to move faster to optimize our technology on these smaller scale devices, which can lead to more deployment in a shorter timeframe. Successful deployments are an important step in the advancement of our technology as they provide a demonstrated operating history, which is required before we’re able to proceed with commercial sales.
With that, let me turn the call over to Mark to review our financials.
Thanks, Dave. Good morning, everyone. I will start with a review of our results for the fourth quarter. Revenues for the quarter of $0.4 million were consistent with the three months ended April 30, 2013. Higher revenue from Mitsui Engineering & Shipbuilding in this year’s quarter was offset by the lower revenue from the WavePort project compared with the prior year quarter.
The net loss for the quarter was $3.3 million, which is an improvement over the net loss of $4.2 million that we reported for the prior year period. The improved results are due to reduction of product development costs and a favorable change in contract loss reserves related to the strategic changes that Dave reviewed earlier.
These factors were partially offset by increased SG&A expenses related to site development costs for the VWP project in Australia. As Dave mentioned, the VWP Board made a determination to terminate the project subsequent to the end of the quarter. For the year ended April 30, 2014, we reported revenues of $1.5 million as compared with revenues of $3.6 million for fiscal 2013.
This decrease primarily reflects a decline in revenue related to the Oregon project which is being closed out as well as decreased billable work for our PowerBuoy development projects, and a decrease in the estimated contract value associated with the WavePort project off the coast of Spain. The net loss was $11.2 million for fiscal 2014 compared with $14.8 million for fiscal 2013.
This decline in net loss was due primarily to a decline in product development costs associated with the project of Oregon, a favorable change in contract loss reserve, and a higher income tax benefit due to the sale of New Jersey net operating tax losses and research and development credits.
Importantly, our backlog remains strong at $4.9 million at April 30, 2014, compared with $5.6 million at January 31, 2014. As of April 30, 2014, total cash, cash equivalents, and marketable securities were $28.4 million as compared with $20.4 million as of April 30, 2013. In addition, restricted cash was $7.3 million, compared with $1.4 million as of April 30, 2013.
Included in restricted cash are funds related for the pending repayment to the Australian Renewable Energy Agency or ARENA, related to the termination of the VWP project that was previously announced. Net cash used in operating activities was $6.5 million and $10.8 million for the years ended April 30, 2014 and 2013, respectively.
In addition, we raised $20.5 million during fiscal 2014 through the sale of stock under our ATM facility and an underwritten public offering of our common stock. We believe that based on our cash levels, we will be able to fund our operations including investments in ongoing product development for at least the next 12 months.
Now, I’ll turn back the call to Dave to make some closing comments before turning the call over to questions.
Thank you, Mark. In summary, I’m confident that our strategic shift and recent changes to the management team have set Ocean Power on the right path toward future growth and profitability in the long term.
That concludes our prepared remarks. And with that, I would like to open the line to any questions.
Thank you. (Operator Instructions).
Latonia, if it doesn't appear that anybody is going to be queuing in for questions, I will just ask Dave to make his closing remarks.
Okay. In closing, I want to thank you for joining us for our fiscal year 2014 financial result update. I look forward to updating you on our progress throughout fiscal year 2015. Have a great day.
This concludes today’s teleconference. You may disconnect your lines at this time and have a great day.