OPTT Year-end Report: Finding Something to Celebrate

Earlier this week Ocean Power Technologies (OPTT:  NYSE-AMEX) reported financial results for the fourth quarter and fiscal year ending April 2022.  Shareholders did not have much to celebrate in terms of revenue growth.  Fourth quarter sales increased to $756,000 compared to the same period in the previous year and this only through the company’s consulting work.  The net loss in the quarter was $5.2 million, the same as in the previous year.  The fate of the top- and bottom-lines was easy enough for shareholders to accept. 

Really tough to swallow in the quarter report was the increase in cash usage to support operations.  The company dipped into the cash kitty for $21.3 million to keep the lights on during the full fiscal year 2022.  This compares to a cash burn of $11.7 million in the previous fiscal year.

It is worthwhile looking beyond the headline numbers.  Indeed, understanding the elements that went into spending during the year provides insight into the company’s future. 

First, the company increased engineering and product development activities, primarily to complete work on its proprietary Maritime Domain Awareness (MDA) platform.  The MDA system includes radar, optical and thermal imaging camera capabilities and automatic identification system detection.  The company has strategic partners in the program, including Greensea and Fathom5, to develop the software and robotics components.  The objective is a system sufficiently sophisticated to achieve superior analytics and military-grade cybersecurity.  The company completed testing of its MDA system just off-shore from New Jersey.

Additionally, the company acquired Marine Advanced Robotics (MAR) in November 2021, boosting operating expenses related to the transaction.  Net of cash acquired the company used $4.4 million in cash to close the deal.  For its investment Ocean Power boosts its commercial line with autonomous vehicles for maritime data services.  Importantly, MAR has established a market position and could contribute as much as $2.0 million in revenue in fiscal year 2023. 

Ocean Power also added to its management team, appointing a new chief executive officer and a new chief financial officer.  There is also new blood in sales, marketing, engineering and operations.  More mouths to feed undoubtedly put pressure on operating expenses.  

The change-up in leadership may be behind a clarified corporate mission that has become evident of late.  The company is now characterized as a provider of maritime solutions for several verticals, not the least of which is oil and gas.  It was the oil and gas concerns that were among the first to see applications for the company’s PowerBuoy system.  How well autonomous service vessels and marine robotics services fit in with the company’s proprietary PowerBuoy system is yet to be demonstrated. 

Perhaps more important than a burnished public image, is the difference the new corporate self-identity can make for revenue streams.  The company’s growth strategy is focused on building data-as-a-service and power-as-a-service offerings.  The approach means the company will see recurring revenue streams from service subscribers rather than simply one-time sales of equipment.

Investors have yet to see the merits in the changes at Ocean Power Technologies.  As a consequence, the stock price remains depressed.  For investors with a long-term investment horizon and the tolerance for volatility, the current price level provides a compelling entry point for a company showing new promise.  The company ended the fiscal fourth quarter with $57.5 million in total cash on its balance sheet, providing more than two years runtime at the recent cash usage rate.  The cash hoard may be just enough to see Ocean Power through to a time of higher revenue and maybe even the achievement of breakeven operating results.

 

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.