A Primer on the Company’s Background, Technology, Business Model, and More



KEY POINTS
  • Over the past few years, OPT has materially shifted its focus by providing autonomous, roaming, or stationary solutions to power ocean intelligence.
  • OPT is transitioning from a product business that focuses on power and energy to a business that deploys platforms that can host technology solutions, hardware, and software in the multi-marine domain awareness space.
  • The company is emphasizing on allowing customers to accomplish more in the ocean with lower opex, capex, and carbon footprints than they would have done in the past.
  • OPT is receptive to collaborate with other players to accomplish large-scale projects like it did with Naval Postgraduate School’s SLAMR initiative, which included OPT, a few other vehicle firms, and AT&T.
  • A service model can provide substantial recurring income, whether on the power/energy or data side. Customers who do not want to buy an asset may rent or contract one on a pay-per-use basis.
  • Comparing the first half of FY23 with the same period in FY22, OPT’s bookings have increased by more than sixfold. The company anticipates orders of $9 million for FY23.
  • OPT continues to work with the US Navy on demonstrating the next-generation Mass-on-Spring Wave Energy Converter funded by the Department of Energy. This will aid in the expansion of its pipeline and expedite the conversion of bookings to revenue.
  • The company has a healthy cash balance to build inventory and has been reducing its R&D spends as it has commercialized a majority of its offerings.
  • Our prior content on OPT can be accessed here.
OUR INSIGHTS

The Opportunities

The offshore power market is expected to see significant growth in the coming years, with OPT focused on data and Power-as-a-Service (PaaS). OPT is uniquely positioned to leverage several mega-trends inside the broader industry. The company has identified several growth opportunities, including military, oil & gas, construction, and wind power. These sectors are prime for remote power needs and big data gathering. The plan is to become an industry leader in offshore data collection, integration analytics, and real-time communication for various crucial applications. This is especially appealing as the model creates the potential for recurring revenue and builds long-lasting customer relationships. The company is well financed, with a liquidity of $52.1 million in cash and equivalents, which the management believes is sufficient to fund its planned expenditures.

The Obstacles

The market is still emerging and the company is in the early stages of commercialization. Customer concentration is also high, with three clients combined accounting for roughly 69%. As a smaller company, the company often must target and engage with large, diverse customers, which creates unique challenges.

Over the past few years, OPT has materially shifted its focus by providing autonomous, roaming, or stationary solutions to power ocean intelligence.

EXECUTIVE DISCUSSION

Executive in Focus: Philipp Stratmann has been with Ocean Power Technologies since 2019 and serves as President and CEO.

Shawn Severson: We have Ocean Power Technologies CEO, Philipp Stratmann with us today. We recently launched coverage of OPT and are excited to have our first Management Series with the company.

Let's start with some background. The company has been around for some time, and the company already has a well-developed technology, but there has been a notable pivot in implementation, strategy, and management. So, starting with addressing the transition and then it would also be helpful to understand your background and what brought you to OPT?

Philipp Stratmann: As you said, there have been a lot of changes at OPT. The company has got quite a storied history and it's been around for a while, but I think it's really been the last 18 to 24 months that things have materially shifted for us here...

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