Ocean Power Technologies Q3 FY2026 Earnings Call - Backlog Jumps to $19.9M, Pipeline Nears $164M Fueled by Defense Wins

Unknown, Conference Call Moderator, Ocean Power Technologies: Good morning and welcome to the Ocean Power Technologies third quarter fiscal 2026 earnings conference call. A webcast of this call is also available and can be accessed by 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 the prepared remarks, there will be a question and answer session. Now I am pleased to introduce Bob Powers.

Bob Powers, Senior Vice President and Chief Financial Officer, Ocean Power Technologies: Thank you and good morning. Last evening, post-market close, we issued our earnings press release for the third quarter of fiscal 2026 ended January 31, 2026 and filed our Form 10-Q with the SEC. 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 and involve risks and uncertainties that may cause actual results to differ materially. Additional information about these risks can be found in the company’s SEC filings. The company disclaims any obligation to update the forward-looking statements made on this call.

Finally, we’ve posted an updated investor presentation on our IR website. With that, I’ll turn the call over to our CEO, Dr. Philipp Stratmann.

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Good morning and thank you for joining us. OPT continues to see increasing traction across our core markets. Backlog reached a record $19.9 million and our pipeline expanded to almost $164 million, reflecting growing engagement with government and commercial customers globally. Importantly, a significant portion of this pipeline is associated with defense and security programs. This quarter reflects more than contract wins. It highlights the role OPT is beginning to play in the evolving architecture of maritime security and autonomy. Our $6.5 million DHS award, together with our integration with Anduril, positions our PowerBuoy systems within a next generation defense sensing network. We believe this validates our role as a provider of persistent offshore infrastructure supporting U.S. national security missions.

The first of these systems is being readied for shipment, and we expect to ship several more in the coming weeks. At the same time, we continue advancing what we believe represents a new category in the maritime domain, scalable autonomy infrastructure at sea. Our goal is to enable autonomous systems to power, recharge, and operate persistently offshore, supporting long-duration missions without the need for traditional logistics support. During the quarter, OPT expanded its global operational footprint. We shipped a WAM-V autonomous surface vehicle to Greece to support ongoing customer operations, further strengthening our presence in international defense and commercial markets. In parallel, we advanced development of our integrated autonomous docking and charging solution, transitioning the system from prototype into full-scale build.

We are targeting an early access commercial launch in calendar year 2026, designed to allow autonomous systems to dock, recharge, and redeploy in support of persistent offshore missions. OPT also progressed system integration and open water validation activities through our collaboration with Mythos AI, enhancing autonomous navigation and control capabilities across our platforms. Taken together, these initiatives support our broader strategy of enabling persistent multi-domain offshore autonomy. We are seeing several opportunities within our pipeline progress into more advanced stages of customer engagement. As deployments increase, we expect a growing portion of our business to include services, data, and system support associated with long-duration offshore operations. Our capabilities align closely with expanding defense priorities around distributed sensing, autonomous systems, and persistent maritime domain awareness.

At the same time, our systems continue to accumulate operational hours in real-world maritime environments, generating valuable operational data that supports product improvements, enhances mission readiness for our customers, and informs the continued scaling of our maritime autonomy infrastructure. More broadly, this progress reflects a business that is steadily building capability, operational experience, and customer confidence. Our focus remains consistent, deliver reliable systems, support our customers’ missions, and execute against the opportunities we see developing across our core markets. From architecture-defining projects such as our DHS award to expanding international WAM-V deployments to advancing autonomous docking and AI-enabled capabilities, we believe we’re building the foundation for what could become a global maritime autonomy infrastructure layer. Over time, this strategy positions OPT not simply as a product provider, but as a platform supporting the future of offshore autonomy.

With that, I’ll turn it over to Bob to discuss backlog in more detail and review the quarter’s financial results.

Bob Powers, Senior Vice President and Chief Financial Officer, Ocean Power Technologies: Thanks, Philipp. I’ll begin with backlog, which provides the clearest view of our future revenue. As Philipp mentioned, backlog as of January 31 was approximately $19.9 million, an increase of $12.4 million and 165% from the same time last year. This reflects conversion of opportunities across defense, government security, offshore energy and commercial applications. Our pipeline for the quarter ended at $163.9 million, up $74.7 million and 84% year-over-year. The pipeline includes larger and more strategic opportunities, including multi-vehicle USV programs, integrated buoy and USV surveillance solutions, and autonomy enabled missions. These indicators reinforce the momentum we are seeing in customer engagements. Production throughput remains stable and we are prepared to meet scaling requirements as additional programs move forward.

Revenue for the three and nine months ended January thirty-first, 2026 were $0.5 million and $2.1 million respectively. Revenues for the three and nine months ended January thirty-first, 2025 were $0.8 million and $4.5 million respectively. The year-over-year decline in revenue was largely driven by timing impacts associated with the U.S. federal government shutdown in October and November 2025. These disruptions shifted a number of OPT deliverables and development activities into subsequent quarters, which reduced our revenue. These timing effects are not indicative of underlying demand, and we expect a portion of the delayed work to convert later in the fiscal year.

Gross profit for the three and nine months ended January 31, 2026 was a loss of $0.8 million and $2.2 million respectively, as compared to a gross profit of $0.2 million and $1.4 million for the corresponding periods in the prior year. Gross margin for the quarter includes recognition of one-time losses associated with certain strategic contracts in accordance with U.S. GAAP. The expenses associated with these projects are now substantially complete, although they will continue to generate revenue over the next several months. Importantly, our core programs and commercial pipeline continue to demonstrate improving margin and operating leverage. Operating expenses increased primarily due to higher non-cash stock-based compensation, which rose by $1.8 million for the three-month period and $6.5 million for the nine-month period compared to the prior year.

Increases in headcount necessary to convert pipeline into backlog and strengthen the company’s competitive position also contributed to the year-over-year increases. Including the non-cash amounts, operating expenses were $8.4 million for the three months ended January 31, 2026 versus $6.1 million in the same period of 2025, and $24.2 million for the nine months ended January 31, 2026 compared to $15.7 million in the prior year period. Excluding stock-based compensation, operating expenses increased approximately 9% for the three-month period and 14% for the nine-month period, with employee related expenses being the primary driver for both periods. Net losses for the three and nine months ended January 31, 2026 were $11.4 million and $29.6 million respectively.

Net losses for the three and nine months ended January 31st, 2025 were $6.7 million and $15.1 million respectively. Combined cash, unrestricted cash equivalents and short-term investments as of January 31st, 2026 was $7.2 million, which compares to $6.9 million at the beginning of the fiscal year. Net cash used in operating activities for the nine months ended January 31st, 2026 was approximately $19.9 million, compared to $14.6 million for the same period in the prior year. With that, I’ll turn the call back to Philipp for closing remarks before Q&A.

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Thanks, Bob. Stepping back, we’re seeing continued positive momentum across our business. Demand signals across our core markets remain strong, with backlog and pipeline levels significantly higher than a year ago. Government engagement is increasing, supported by new programs and initiatives across several agencies, and our international demonstrations are expanding market awareness while validating our capabilities in the field. At the same time, we have aligned our organization to support this growth. Our focus remains on execution, reliability, and delivering solutions that perform consistently in mission critical environments.

Unknown, Conference Call Moderator, Ocean Power Technologies: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for your questions. Our first questions come from the line of Sameer Joshi with H.C. Wainwright. Please proceed with your questions.

Sameer Joshi, Analyst, H.C. Wainwright: Yeah. Good morning, Philipp, Bob. Thanks for taking my questions. Starting off with the backlog, the $19.9 million is a solid backlog. Do we have visibility in terms of the cadence of delivering this backlog? Are you able to categorize this by geography or type of customer?

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Yeah. Good morning, Samir. Thanks for your question. Absolutely. Of that $19.9 million in the contracted backlog, some of that is due for immediate delivery.

Yeah. As we stated in the past, you know, we are working on shipping out the systems for the Department of Homeland Security, which we announced in January with the follow-up contract for the installation a couple of weeks ago. You know, we’re talking, you know, days and weeks here for those to leave our facility here and get ready for install. You know, if you, if you talk in terms of cadence, that is, you know, as we announced, that is a contractor-owned contractor-operated contract for a 15-month period of performance. Once these are installed over the course of the next couple of weeks, that’s when we’re going to start recognizing revenue from them essentially as if it was a lease contract over that 15-month period of performance. The other parts of that backlog, you know, have slightly longer conversion cycles.

If you were to categorize them geographically, I’d say about, you know, roughly half of it is North America, and the rest is sort of split between Latin America and parts of the Middle East with, you know, a couple of outliers in various other parts of the world.

Sameer Joshi, Analyst, H.C. Wainwright: Got it. Thanks for that. This next question could be sensitive, but you do have some activity in UAE waters. Is there any prospect of getting more contracts from there? Like, are you in talks? If you cannot answer this, that is fine.

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: I think what we can say on that is we have assets in country. You know, we have several vehicles and a buoy in the country. We also do have local-based staff who are working, you know, first and foremost, they’re all safe. Secondly, they’re working tirelessly on efforts to help support, you know, shipping and, you know, safe port operations.

Sameer Joshi, Analyst, H.C. Wainwright: Got it. I’ll just going back to sort of the backlog. I just wanna make sure it includes revenues expected from the Merrows, which is likely to be recurring revenues. What portion, like what level of revenues do you expect, and what is the contracted period for the specifically Merrows orders?

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: That’s a great question. It’s not like there is specific Merrows contracts in there. There are contracts like the Homeland Security efforts that utilize the Merrows platform. You know, take the Homeland Security contract again as a great example. It utilizes all of our systems which then go via Merrows into other data-enabling platforms. That utilizing Merrows on the systems that we’re providing enables us to do two things. One is to stream data to Coast Guard directly. The other one is to stream data to Anduril, who is another, you know, party on a separate portion of these contracting mechanisms and integrate our data with their system, you know, for this Lattice in order to kind of provide a unified operating picture.

The fact that we have Merrows enables us to have multiple streaming efforts from one platform into a multiple kind of common operating pictures.

Sameer Joshi, Analyst, H.C. Wainwright: Got it. Understood. On the gross margin front, these one-time effects have been taken care of, going forward, should we expect to see positive gross margins?

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Yeah, I think, you know, as Bob stated in his remarks, you know, several of the contracts are recently completed, you know, had a lot of their costs already recognized due to GAAP impacts with, you know, future revenues still to be reflected. I think, you know, particularly on lease contracts, you know, such as COCO-type contracts, if we’re talking U.S. government, you know, we’re gonna start seeing and working toward them. We’re certainly, you know, working towards them. We should start seeing an improvement in the gross margin again as we move to larger scale deployments.

Sameer Joshi, Analyst, H.C. Wainwright: Understood. Last question. The pipeline is also pretty strong. It has grown year-over-year, of course, but also quarter-over-quarter. Or rather, what is the kind of competition that you’re seeing for these potential sort of orders? What confidence or probability do you assign to conversion of this $164 million pipeline into backlog?

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Yeah. As we recently stated, you know, we sort of largely completed the retooling of several parts of our team. That has included the commercial team, which now consists of, you know, many veterans of the U.S. Armed Forces. That has enabled us to truly position the OPT suite of products, you know, be that the underlying fixed assets or be that Merrows into the appropriate parts of the defense and security industry. The same holds true obviously for, you know, private customers in the commercial industry. It’s. We’re seeing lots of collaboration in certain aspects of the industry. Competitively, I think OPT is positioned in a good place because we are going after a section of the market that isn’t as heavily competed over as the, you know, big navy, fast interceptor, far-reaching, you know, kinetic type USVs.

That is, you know, that is enabling us to have, you know, A, grow the pipeline, but also B, gain greater confidence in the conversion of that pipeline to backlog.

Sameer Joshi, Analyst, H.C. Wainwright: Got it. Thanks for that color, and thanks for my questions.

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: I appreciate it. Thank you.

Unknown, Conference Call Moderator, Ocean Power Technologies: Thank you. Our next question has come from the line of Peter Gastreich with Water Tower Research. Please proceed with your questions.

Peter Gastreich, Analyst, Water Tower Research: Great. Thank you very much. Good morning, Philipp and Bob, and thanks for taking my call. Also congratulations on the great momentum in your pipeline and backlog. It’s very encouraging. Just a few questions. A follow-up on the international defense engagements. Can you update us on the status of your defense engagements in Latin America? Are there any multi-asset opportunities there that are, you know, comparable in scale to the DHS contract?

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Yeah. Good morning, Peter. Absolutely. You know, we recently completed, you know, several exercises in Latin America. You know, one was in Brazil, you know, and that was around, you know, UNITAS, which was demonstrating the capabilities of our USV platforms as part of, you know, for mine countermeasures over there. We also completed a submarine search and rescue exercise using one of our eight-foot WAM-Vs in Chile, where we demonstrated the ability to be launched from a manned asset from the navy in order to locate a, you know, simulated, you know, bottomed submarine. And, you know, we’ve got several discussions ongoing around buoys to be deployed for either underwater or surface surveillance operations.

You know, I can’t comment on the specific, you know, countries or use cases where we have, you know, detailed dialogues ongoing, but it is fair to say that we continue at pace operating, you know, in Latin America and working on converting the backlog to meaningful revenues in the near future.

Peter Gastreich, Analyst, Water Tower Research: Okay. Thank you very much. My next question is just about the inventory. You know, you’ve mentioned before about pre-building buoys ahead of the contract awards to accelerate delivery. How should we think about your inventory strategy going forward? And does the balance sheet reflect additional pre-build activity for anticipated orders?

Bob Powers, Senior Vice President and Chief Financial Officer, Ocean Power Technologies: Hey, Peter. Thank you. Yeah, absolutely. You can see a little bit of the growth on our balance sheet versus where we were at the end of our fiscal 2025, and that absolutely reflects some buildup, particularly on the buoy side, with regard to both current deliveries for what we have in our backlog, as well as anticipated builds for what we see coming through in our pipeline. You can expect to see more of that going forward. That is certainly part of our plan and strategy to build out that inventory in order to react quickly to our orders as they come in.

Peter Gastreich, Analyst, Water Tower Research: Okay. Thank you. Just one more, Mateen, question about your team. Can you discuss how your facility clearance and government-focused team are positioning you to expand beyond Coast Guard, you know, potentially into other DHS components like CBP, and how is that pipeline developing?

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Yeah, absolutely. I mean, you know, with our SVP for commercial sales, Jason Weed, obviously, you know, a retired Navy captain, you know. Below him, we have a team of, you know, mainly, you know, Navy and other parts of the defense and security apparatus veterans. Given our clearance, that is enabling us to participate in conversations where there is, you know, real needs and real, you know, today use cases being discussed, which is positioning us to deliver for, you know, the hemispheric defense of our nation and to support our allies in other parts of the world.

Peter Gastreich, Analyst, Water Tower Research: Okay, great. Thanks very much. I’ll get back in the queue.

Bob Powers, Senior Vice President and Chief Financial Officer, Ocean Power Technologies: Thank you.

Unknown, Conference Call Moderator, Ocean Power Technologies: Thank you. We have reached the end of our question and answer session. I would now like to hand the call back over to Philipp Stratmann for any closing comments.

Dr. Philipp Stratmann, President and Chief Executive Officer, Ocean Power Technologies: Thank you. Before concluding, I’d like to thank our shareholders for their continued support. Our team remains focused on executing our strategy, advancing our technology, and delivering reliable solutions that meet the evolving operational needs of our customers. We believe our continued progress is strengthening the company’s position in the market and building a solid foundation for long-term growth. We appreciate your support and look forward to updating you on our progress in the quarters ahead.

Unknown, Conference Call Moderator, Ocean Power Technologies: Ladies and gentlemen, thank you so much. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.