Good morning, and welcome to the Ocean Power Technologies Second Quarter of Fiscal Year 2025 Earnings Conference Call. A webcast of this call is also available and can be accessed via a link on the company's website at www.oceanpowertechnologies.com. This conference call is being recorded and will be available for replay shortly after its completion. On the call today are Dr. Philipp Stratmann, President and Chief Executive Officer; and Bob Powers, Senior Vice President and Chief Financial Officer. Following prepared remarks, there will be a question-and-answer session. I'm now pleased to introduce Bob Powers.

Thank you, and good morning. After the market closed yesterday, we issued our earnings press release and filed our quarterly report on Form 10-Q for the period ended October 31, 2024. Our public filings are available on the SEC website and within the Investor Relations section of the OPT website. During this call, we will make forward-looking statements that are within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include financial projections or other statements of the company's plans, objectives, expectations or intentions. These statements are based on assumptions made by management regarding future circumstances over which the company may have little or no control and involve risks, 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. Additional information about these risks and uncertainties can be found in the company's Form 10-K and subsequent filings with the SEC. The company disclaims any obligation or intention to update the forward-looking statements made on this call. Finally, we posted an updated investor presentation on our IR website. Please take a moment to review it as it provides a nice overview of our company and strategy. Now I am pleased to introduce Dr. Philipp Stratmann.

Good morning, and thank you for joining us today. I'm thrilled to share the second quarter of fiscal 2025 was another transformational period for OPT. Our business remains on track toward achieving positive cash flow by the end of calendar year 2025. And this quarter, we delivered outstanding results across key financial and operational metrics. We achieved remarkable revenue growth, significantly reduced operating expenses, and advanced our strategic partnerships and technological innovations. These milestones reinforce our current trajectory and position us for continued leadership in the rapidly evolving maritime and renewable energy sectors. Today, I will highlight the quarter's most notable achievements, the momentum they create and the exciting opportunities ahead as we pursue our strategic goals for fiscal 2025. To start, I'm excited to share that we achieved record quarterly revenue of $2.4 million, our highest ever. This represents a 170% increase compared to the same period last year, a testament to the effectiveness of our focused strategy and the growing demand for our solutions. Our strategic emphasis on national security, critical infrastructure, and international market expansion continues to deliver results. This reflects not just broader macroeconomic trends, but our ability to penetrate diverse markets and execute for new customers. We are successfully converting our expanding pipeline into revenue, driven by increasing domestic and international demand. Our ability to scale and deliver on large contracts positions us for sustained growth, and we're confident in our ability to capitalize and build on this momentum. On the cost side, we're maintaining a disciplined approach to operational efficiency. Through strategic headcount optimization and rigorous management of third-party spending, we reduced year-over-year operating expenses by 41% and operating cash burn by 39%. These results underscore our proven ability to manage resources effectively while scaling the business for long-term growth. As a result, we remain on track to achieve profitability in the fourth quarter of calendar 2025, a pivotal milestone that we approach with firm resolve and confidence. Strategic partnerships remain central to our growth strategy. This quarter, we made significant progress in expanding our market presence. In Latin America, we announced a partnership that includes $3 million in purchase order commitments over 36 months. This highlights the growing demand for our WAM-V USVs and reinforces our leadership in cutting-edge maritime technology. In the Middle East, OPT partnered with Unique Group to exhibit our WAM-V at ADIPEC and to provide services to commercial customers. We also signed a distributor agreement with Remah International Group in the UAE to focus on defense and security applications. Finally, we entered into a partnership with 3B General Trading and Contracting Co. to explore offshore energy and maritime projects in Kuwait. Our innovative solutions such as PowerBuoys and AI-powered WAM-V USVs equipped with Merrows systems are uniquely positioned to meet the region's need for sustainable, efficient offshore energy across commercial and defense industries. Domestically, we remain steadfast in our commitment to support national defense. This quarter, we successfully completed a second set of exercises under our follow-on contract with EpiSci as part of Project Overmatch. These exercises showcase the power of our WAM-V technology in military applications, validating its operational reliability and further solidifying our position in the defense sector. We are encouraged by the broader trends in defense procurement, which are increasingly shifting toward nontraditional and dual-use technology providers like OPT. This shift aligns with our strengths in delivering innovative, adaptable solutions for military and commercial applications. Importantly, we believe these changes represent significant upside as governments prioritize agility and innovation in their procurement strategies. Our advancements and partnerships demonstrate our continuing leadership in the maritime, AI, and autonomous vehicle space. With sectors such as national security, offshore energy, and marine intelligence poised for significant growth, we are well positioned to make the most of these opportunities and drive innovation forward. In conclusion, I am incredibly proud of the progress we've made this quarter. Our strategic execution, cost discipline, and innovative partnerships are driving us toward our goal of profitability by the end of calendar 2025. The momentum we have built gives us confidence in an even brighter and promising future. Thank you for your continued support. I will now hand it over to Bob, who will provide a detailed review of our financial performance.

Thanks, Philipp. Let's begin with revenue. As Philipp noted earlier, this quarter, we achieved record revenue of $2.4 million, marking a 170% increase year-over-year and a 142% increase sequentially. This represents a significant achievement for Ocean Power Technologies, illustrating the fundamental strength of our strategy, the disciplined execution of our team, and the growing demand for our solutions. Our strategic focus on expanding in Latin America proved instrumental this quarter, with sales from the region contributing approximately one-third of our total revenue, a new high for us. This performance validates our efforts to diversify revenue streams and take advantage of opportunities in high-growth markets. Looking ahead, achieving record revenue is an important step forward in our foundation for sustained growth. To that end, we remain focused on executing our strategy to deliver consistent results and build long-term value for our shareholders. Turning to expenses. Our operating expenses for the second quarter of fiscal 2025 totaled $4.7 million, a 41% reduction compared to the $8 million in the same period last year. This $3.3 million decrease reflects deliberate efforts to optimize headcount, significantly reduce third-party spending, and tightly controlled costs across the organization. As Philipp noted, the reduction in operating expenses, coupled with a 170% revenue increase, reinforces our proven ability to scale operations efficiently. We're confident this model will support our path to profitability as we continue to grow. As a result of these measures, our net loss for the quarter decreased by 46% from $7.2 million in Q2 of last year to $3.9 million this year. This improvement shows our continued commitment to driving financial discipline while supporting our dramatic growth. On the balance sheet front, our combined cash, restricted cash, cash equivalents, and short-term investments totaled $2.3 million as of October 31, 2024, compared to $3.3 million at the close of the prior quarter. In terms of cash flow, year-to-date, net cash used in operating activities totaled $10.9 million, a 30% improvement compared to the $15.5 million in the prior year. This reduction reflects the positive impact of our cost management initiatives, offset by payouts related to employment bonuses and earnouts accrued during fiscal 2024. That concludes our financial update for the quarter. Looking ahead, we are encouraged by the compelling demand signals underlying our strong quarter, and we have several promising opportunities in our pipeline. Additionally, new initiatives such as the partnerships Philipp discussed position us to address emerging customer needs and expand our footprint globally. Thank you for your attention and your continued support of Ocean Power Technologies. With that, we'll open the floor to your questions.

Our first question comes from Shawn Severson with Water Tower Research. Please go ahead with your question.

Thanks. Good morning, gentlemen.

Good morning, Shawn.

Phil, can you discuss how the recurring revenue and as-a-service strategy are progressing? It appears that you're experiencing an increase in deployments beyond just defense applications. How does the recurring revenue model integrate with the current commercialization efforts of the business?

Good morning, Shawn, thank you for the question. We are definitely observing an increase in leases-as-a-service models and various deployments, which contributes positively to our recurring revenues and our ability to project future growth. This trend is evident on both defense and security as well as civilian and commercial applications, serving a diverse range of customers in offshore energy and larger-term exercises. Additionally, we continue to see consistent interest from the sell side. As we mentioned before, significant revenue growth will stem from larger project-based sales, which will then allow us to offer additional service revenues within our established customer base. Over the past few months, we've launched our formal service offering and secured our first couple of customers under contract. This applies to vehicles whether sold or leased and also to buoys, where we provide maintenance services at various tier levels, similar to what you'd expect from other assets you use.

So as I think about a model going out, every time you get these equipment, the equipment sales themselves, right, should we start thinking about or are you going to start guiding towards some type of a recurring revenue pattern that we should think of? So as you get towards your cash flow breakeven that coming, I assume mostly from equipment sales, but then we can look at it and think of these tails of cash flow that come out from the equipment sales. Is there any framework or reference around how we should model that or think about that from equipment sales to recurring revenue?

If you consider the businesses within the ocean and maritime technology sector, especially in oilfield services, there are some established guidelines regarding additional revenues generated once a system is sold and deployed. These revenues will persist throughout the asset's useful economic life while it is in use by the customer. We expect to see an increase in this trend as we recently introduced that service offering. As the next few quarters unfold, we will be able to share more insights on its development and how it might evolve in the future. These revenues are indeed long-term and provide a stable foundation for the company.

Thanks. My last question is about the projects in Latin America and South America. Do these deployments have the potential to become global? Are you collaborating with the customers in these regions? Rather than viewing this as a test, do you see it as a rollout that could lead to following those customers for other oil and gas development projects in the future?

I think it is a mix of both. In the offshore energy sector, some work is very specific to certain regions. However, historically, once we show success with one customer in a Tier 1, Tier 2, or Tier 3 position in that value chain, other customers become much more inclined to replicate that success elsewhere. We have strategically focused on specific regions in Latin and South America, often where security and offshore energy overlap. We're applying the same strategy in the Middle East. As we scale and prove these projects in those areas, we will identify additional logical geographic regions to expand our efforts. This strategy enables us to remain lean while effectively seizing region-specific opportunities.

Great. Thanks for the color, Philipp.

Thanks, Shawn.

Thank you. Our next question comes from the line of Jeff Grampp with Alliance Global Partners. Please proceed with your question.

Good morning, guys. I want to start on the Middle East. You guys highlighted a number of partnerships that you're kind of stacking together out there, and I know you've highlighted that area in particular as a big opportunity for you going forward. What do you really think is kind of the path forward there in terms of kind of getting more orders and scaling that from a revenue standpoint, converting that pipeline? Is that something that happens in kind of the nearest term, maybe calendar '25? Is that something that takes a little bit of a longer timeline to ripe in? How should we think about the maturation of that market, in particular for you?

Thanks for the question, Jeff. I think we feel confident that we will see a lot more activity certainly in terms of bookings and also, to some extent, revenues over calendar 2025 in that region. And it's been enabled by two main factors. One is we had a vehicle with US Navy for close to two years, I want to say, with Task Force 59 out in Bahrain. That enabled us to carry out the hot weatherization of those systems for the vehicles. And equally, the developments that we made to address specific considerations for the region, taking into account hot weather lessons, but also the fact that there's very little wave activity. The fact that we have chosen strong partners, I think, gives us confidence that we will see more over calendar 2025. And we recently, together with Unique group exhibited the 22-foot vehicle that we have at ADIPEC in Abu Dhabi. We are currently working on some defense demonstrations to take place in late winter, early spring of calendar 2025. And then I think that will rapidly lead to follow-on opportunities. What we are benefiting from is that we are demonstrating commercially proven solutions that somebody can then place a purchase order pretty much straight away because we're not in that region to try and find R&D funding. We're in that region to try and help our customers solve the problem that they actually have right in front of them today.

Great. That's really helpful. Thank you. For my follow-up, what would you guys say this path to profitability over the next, let's call it, 12 months? What's the biggest risk or hurdle to maintaining the trajectory that you guys are building on there? What are the, I guess, main factors that keep you guys up at night that could derail that? And then what are you guys doing maybe preemptively to mitigate any of those risks and keep you guys on track? Thanks.

Yeah. No, it's a great question. Thanks, Jeff. I think, obviously, the ability to continue scaling and maintaining the growth pattern that we've set out, converting what we have in the pipeline to backlog, to revenues is obviously always something that we take a very close look at and how we do that in a manner that maintains the cost effectiveness that we've introduced at the company. So, what we're very aware of is pushing the team that we have to the very limit and then looking at what point is the right time to scale up to meet the increased demand that we're seeing, but not getting ahead of ourselves so that we maintain cost effectiveness and efficiency in terms of delivering the revenues that would come from the backlog and from the pipeline.

Great. That's really helpful. Thank you guys for the time.

Thanks, Jeff.

Thank you. Our next question comes from the line of Brian Gordon with Water Tower Research. Please proceed with your question. Mr. Gordon, your line is live.

Sorry about that. Good morning, everyone. I was hoping we could get a bit of an update of where we are in terms of the backlog and the pipeline. And kind of my follow-up question would be, how should we think about how those two revenue streams get converted into actual recognized revenue?

Yeah, absolutely. As I said, we announced record revenues for the last quarter. And at the same time, our pipeline has remained at a very similar level to where it's been for a while. What that shows is that for everything that we pull out of the pipeline, which then becomes a backlog and then we converted into revenues, we add more things into the hopper at the top of the pipeline, so we're maintaining traction. We're seeing leases converting into backlog, but they will convert, similar to Shawn's question earlier, they'll convert into revenue at a lower pace, but are a longer-term horizon from a recurring opportunity side. And we're going to start seeing larger sales converting into revenues at a quicker pace. But obviously, the only recurring part of that is then the maintenance revenues that come behind it. Now that we've put behind us the situation that the company had faced over the past 15-plus months, we are able to fully concentrate on converting pipeline to backlog and then delivering that backlog in a timely fashion to our customers who depend on our systems to carry out their jobs for their customers.

Definitely. Thank you. Have you announced though, like what the actual backlog is given that the pipeline is roughly at that kind of $90 million plus number?

Yeah. We're for the quarter end, we're at about $3.6 million. So that's down a little bit sequentially from where we were. But with some of the opportunities that Philipp mentioned earlier, the anticipation is that will tick up shortly.

Great. Thank you. And I guess if I could sneak in one last question. You guys have talked for the last couple of quarters at least about breakeven in the fourth quarter of this fiscal year. Have you talked about what that OpEx number will be that you guys will reach that breakeven on?

We have indicated that we expect to reach breakeven in the calendar year, specifically in the fourth quarter of calendar 2025, not in the fiscal year which ends in April. Regarding your question about the next 12-month period, we are focused on keeping our operating expenses at cost-effective levels. We do not anticipate any significant increases in operating expenses that would outpace revenue growth. We utilize our current resources efficiently and do not foresee any extraordinary expenses or the need to add costs unrelated to revenue generation.

Great. Well, thank you very much and good luck on the next quarter.

Thanks, Brian.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Stratmann for any final comments.

Thank you for being a shareholder for supporting our ongoing growth and execution of our strategy. We look forward to continuing to deliver for you, our customers and all of our stakeholders. Thank you.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.