Good morning, and welcome to this WTR Fireside Chat. I'm Peter Gastreich, Managing Director of Energy Transition and Sustainable Investing at Water Tower Research. I'm very delighted to be joined today by Dr. Philipp Stratmann, who is President and Chief Executive Officer of Ocean Power Technologies, New York Stock Exchange, American ticker OPTT. Philipp, thanks a lot for joining us today. It's always great to have you on our fireside chats, and it seems like it's a really good timing. You've just completed a very strong finish to your 2026 and just kicking off fiscal 2027. Welcome. Thanks, Peter. It's good to be on. Before we begin, I'd like to point out that the company's safe harbor statements can be found on the investor tab of its website at oceanpowertechnologies.com. Please also note that this fireside chat may not be reproduced or transcribed without prior written consent from Water Tower Research. This conversation is also being recorded, so you can access it again in the future and share it with others. Investor questions are also encouraged, so please enter them in the chat box and we'll make sure those questions are delivered to Philipp and his team. With those housekeeping notes out of the way, let's get started. Philipp, with our fireside chats, we always expect to have a few investors who will be new to the story. With that in mind, it'd be great if you could kind of provide a high-level overview of the company, the technologies, the platform, and your strategy. Yeah, absolutely. OPT provides the operational infrastructure layer for autonomous maritime operations. We do that through two main product lines, our autonomous vehicles, essentially maritime drones, and our PowerBuoys. The PowerBuoys are self-recharging, using a combination of solar, wind, and or wave. Our maritime drones utilize electric and gas-powered engines in order to roam around and collaborate with each other, with the buoys, and with other players in the ecosystem. Because this is a rapidly proliferating industry segment that has been growing very, very quickly. We also utilize our systems to provide AI-enabled software solutions, which we've got under our umbrella that we call Merrows, which you can essentially think of as an operating system that allows you to tap into a whole range of sensor feeds, data collection tools, and enables seamless communications over the horizon back to your shore station. Think about it as forward deployed systems that enable you to communicate with assets and operate assets that are required for true ocean operations. Thanks, Philipp. That's a great overview. You recently hosted the Q4 2026 results call, right? In that, I recall that you said that 2026 was really a defining year for you, and I would agree with that. You've had a flurry of announcements that you said amount to really a big story when we kind of piece all that together. With that in mind, it'd be great if you could share your perspective with investors on what's changed inside the business over that past year that makes this shift in your company real now, rather than aspirational, and how does that kind of set you up for fiscal 2027? Yes. If you look at our information from fiscal 2026, it's really been about building out that operational capability. Designing networks of buoys, building buoys, deploying buoys, designing and deploying multiple maritime drones that are operating at any one given time. Building out inventory, building out the fleet size, building out the team that is needed to develop and deploy these assets out in the ocean for our customers. I think that's really what we spend a lot of our time focusing on. I think it's always important, and we just looked at OPT's business model, this is not software as a service. Every time we are working with a customer to bring systems out there, these systems have to be built, they have to be deployed, they have to be installed, they have to be operated. That requires us to build out the team and the capabilities and the capacity to go and fulfill customer needs as and when they arise. We also build record backlog and continue to grow our qualified pipeline. Being able to now focus more on conversion of that pipeline into backlog and then backlog into revenues. That's sort of the foundation we laid during fiscal 2026, to have the right people in place so we can continue scaling the business and actually deliver when orders come in. I think a great example is the recent order that we had from Stevens Institute of Technology, where we announced the fact that we got a purchase order, and within the space of, I think it was either five or six weeks, we were able to then bring that maritime drone and get it into their hands so that they can start using it. I think that is that kind of speed that we're looking for taking forward into fiscal 2027. When I look at my result notes over the last year or so, more often than not, I've got backlog sitting in the headline because I just think it's such an important indicator for your company, and it's just been continued to move up. Your backlog finished the year at a record $19.8 million, and that was up 58% year-on-year. That's very meaningful if you consider that's more than five times what your revenue was last year. At the same time, the revenue itself, it did come down last year, so those things can look maybe contradictory to someone who's looking at your business for the first time. How should investors think about those two things? The revenue last year kind of eased back, but your backlog is surging. I think it's about building out the opportunity set to deliver into. As I mentioned at the beginning, the industry is proliferating and growing rapidly. You see that through us capturing some of that demand in our backlog. Equally, we're then working on converting that backlog into revenues. The conversion of that, unless it is a straight sale, is oftentimes also dependent on the various customer spending cycles and not just the spending cycles, but also the customer's operational cycles. If it's an oil and gas customer and they want to do survey work, they need to do that survey work in advance of when their next drilling or pipeline lay season starts. Therefore, you will sometimes see us capturing backlog, but then the revenue conversion will be staggered as to when the operational need has arrived for them to actually go and do the job that they contracted us for in the backlog. Similar in government spend cycles. A government will allocate budget to do certain projects, and then it is a case of timing on our side going, "Okay, when does government get the permits in hand? When are we therefore able to install when we go offshore?" Also, when do we have all the assets available that are needed to fulfill a contract? It is a capital-intensive industry, and therefore we will use generated backlog in order to help us then do the procurement to help continue building out the fleet. I think that is why you sometimes will see that kind of, I want to say apparent disconnect between backlog and revenue, but the backlog is contracted purchase orders which will convert to revenues. It is just not going to operate on the same cycle that, say, like an enterprise SaaS business would operate under. Okay, thanks. That makes sense. A big part of your backlog story has, of course, been the multi-PowerBuoy program with the U.S. Coast Guard. This is really a big deal for you because it is your largest deployment and largest recurring revenue contract in the company's history. You have talked about ongoing discussions around that contract. What are the prospects? How should we think about prospects for renewal, and how do you see this model extending to other parts of Homeland Security and the wider government? Yeah, it is the company's first ever multi-buoy, multi-quarter deployment project. I think very proud of the team here to have delivered systems for that contract and got them operational out in the Pacific in the time that we did and have them integrated with Anduril's Lattice in order to go and stream offshore data and combine it with the other data Anduril has collected and portray that in front of Coast Guard. I think that is a major advancement and step forward for this company, which I think is phenomenal, and is testament to the operational team that we have built out at OPT. It's a multi-quarter period of performance contract, and as such, we are continuing to utilize the data that's being generated and discuss with Coast Guard and with others of here's what the benefits are having the system in. We're listening to their feedback on any adjustments or changes they want made potentially to future sensors they may want to have integrated. We're listening to them on future regions and areas where they may want to have systems deployed, and using that conversation to advance ongoing future project discussions with Homeland Security. Equally, at the same time, we are using the benefit of having multiple systems deployed in the Pacific, several of which across over the horizon, in order to showcase to other parts of U.S. government, but also to highlight to other entities that here's what these systems can do, here's how they operate, here's where they are operating already, and here are some of the benefits that people might be seeing. I think that is, again, part of that ability that we're building from an operational perspective to have customers, I want to say touch and feel, but they're obviously not going to go out there and kind of touch and feel the buoy, but they can see what it's like to have an operational deployment out there. I think that is exceptionally valuable for the company and for future conversion of the pipeline into backlog. Staying with that, I understand that the contract functions much like a lease, right? So with revenue recognized over the period of performance as the buoys stay deployed and stream data. Could you explain how that model layers revenue over time and what the economics would look like across the life of a buoy? Yes. I think in government parlance, it's called a COCO contract, contractor-owned, contractor-operated, which I think from an accounting perspective is essentially a lease. Like we retain title to the buoys and the moorings. We install the system. Then we charge government for the period that the buoys are installed and operating. If you think about that over the lifetime of a buoy, the buoy has got a useful economic life, I want to say, somewhere between 12, 15 years, depending on maintenance intervals, where you put it, what you put on it, and so on and so forth. But like most offshore equipment, after two-ish years, you achieve cash on cash payback of the system that you paid. Yes, there's maintenance charges that occur at later stages. But once you get to a certain size of an installed base, having the appropriate utilization metrics in place for your systems, that's where the free cash flow generation starts kicking in. It's building up that base and then having it being utilized over and over again for customers. So Philipp, July was a very busy month for you. The government selected your WAM-V for further engagement, coming out of a competitive capability assessment. Then you closed out the month with the CMMC Level 2. Neither one of those is a contract award by itself. But let's talk about what they actually unlock for you, commercially speaking. Yeah. Obviously, OPT as a government contractor, I think it is necessary for us to be compliant with all the various requirements U.S. government has. The CMMC Level 2 self-certification and the fact that we managed to complete that, is a vital step in that kind of gatekeeping sequence into getting into additional projects and contract negotiations and discussions with government. Equally, having our systems, the maritime drones, validated for future evaluation and engagement with certain segments of the U.S. government is a vital step of getting to the next layer of qualification. Think about it, if you're a consumer and you take a step back, most of us wouldn't buy a car sight unseen. You'd go to the dealer's lot and you'd want to at least test drive. Well, these demonstrations are very similar to that. You have to think of CMMC certification example is that's your ticket for someone to be allowed to come to our lot. Now they can come to the lot, and now they can go and test drive it. As we've seen over and over in the past, when people start utilizing our systems, many times that results in additional opportunities for OPT to add to pipeline, to then add to backlog, to then convert to revenues. I think it's a part of the ongoing process of working with government and becoming a trusted supplier into that ecosystem. Let's talk about execution and delivery speed. You delivered a WAM-V to Stevens Institute of Technology just five weeks from order to delivery. That followed the Rutgers PowerBuoy deployment. How important is speed to winning work for you? If it is, what do you have to carry on the inventory and fleet side to keep delivering like that? Speed in and of itself isn't the only criteria. It is speed and the ability to scale, but it's proven ability to scale. I think being able to convert orders or being able to convert discussions into pipeline, into backlog, into revenues quickly gives customers the confidence that they don't need to talk to us a year in advance of wanting to do something. Because they may not know a year in advance that they want to do something. But it gives them the opportunity to slot us more into their kind of common operating approach that they might be pursuing. But equally, us being able to highlight additional scalability and additional speed to deploy for larger orders going forward is vitally important. From that perspective, we're going to continue seeking increases in inventory and fleet sizing, in the mix of the vehicles, in the buoys, and having the appropriate installation partners at hand so that we can quickly respond to a customer, so that we can fit into their normal budgeting and decision making criteria, as opposed to them having to adapt to, "Okay, I need to talk to these guys nine months in advance or 12 months in advance." Because that's not how our customers want to work, and that's not how we want to make it as easy as possible for our customers to have the right systems available for them on the lot, so to speak, so that we can quickly deploy it together with our operators and get them in the hands for the project that they have in mind. Just before we started the call offline, Philipp, we were talking about how much you've been traveling to Europe recently. I want to go to Europe and talk a bit more about what's been happening there. You wrapped up customer training and drone handovers in Italy and Greece over the summer. Then OPT was in Warsaw as well at the National Maritime Security Forum, right? Where the focus there is on Baltic security, of course, and on critical infrastructure. Really, obviously you have a lot of real engagement that's happening there right now. What has to happen ultimately to move that from engagement to signed contracts? Well, I think you look at the Italian and the Greek interactions we are having with our customers, that is going through trusted partners into the region, let's call it Northern Med, Northern and Eastern Med, essentially. In Poland, we're looking at pursuing a very similar approach, similar to what we did in the Middle East, finding a local partner that we can work with to deliver systems that have the appropriate local content and local resources behind them so they can be quickly deployed. I think that's how these things are going to go. I think in terms of market interest, there's lots of activity both in the Baltic and in the Med. I think they are both hotbeds of not necessarily illegal, but certainly suspicious, and sometimes illicit activities that is ongoing. More and more countries around both of these basins are becoming very cognizant that they need to have 24/7 monitoring of what goes on near their borders and inside their economic exclusive zones, so they can figure out whether it is a legitimate tanker crossing their area of influence or whether it's something they need to take a closer look at. If you think, again, you asked me about cost benefits and everything, the other questions earlier, the ability to have buoys and/or maritime drones deployed at a cost of essentially equivalent of a couple of thousand dollars per day means that you can now task your really expensive manned assets that are costing you $50,000-$150,000 per day, and to dispatch them to where they're really needed to take a closer look. I think that's partially what we were talking earlier, we're proving out with the deployment out in the Pacific. In particular, we're very excited about Poland and the leadership that country is taking when it comes to Baltic maritime security, given the vast amount of seabed infrastructure that is deployed in the region. Let's turn a bit to the financials here. You did book a gross loss for 2026 for the fiscal year. I understand much of that was due to some upfront cost recognition on some contracts. You've also said, though, that you expect that the margins are going to be trending back toward that historical 35%-55% range. What's going to get us there from where we are now to that sort of a range, and what kind of markers should investors be tracking in the meantime? Yeah, I think the key thing is going to be the continued build-out and delivery of systems to customers, particularly on a lease basis. We've always said, the initial margins vary, obviously between the drones and the buoys. The buoys have a larger installation cost associated with them, but they're also deployed for longer. So one is quicker delivery, but has a kind of lower total margin because of the system is of a lower value. The other one is a more expensive delivery but has a much longer associated margin run rate associated with it. I think as we continue to scale, we will continue seeing benefits that start materializing from systems that have been deployed and that are operating and that continue to stream, and that we can then extend once they get to the initial period of expiration of their first contract duration contract layer. So that you can layer on revenues on systems that are already in the hands of operators so they can pay for themselves multiple times over their economic life. Okay, got it. Moving to the balance sheet and capital strategy. Cash and short-term investments ended fiscal year 2026 at about $8.7 million. How are we going to fund growth from here? For investors who are focused on the capital structure, what's your message to them? We are continuing to work very diligently on being responsible stewards of the capital that our shareholders have invested into the company that enables us to scale up inventory and operational delivery time frames. We will continue looking at ways of bringing in capital at a cost that is suitable to the overall capital structure that enables us to compete effectively in this industry and enables us to continue scaling and, really importantly, convert that pipeline that the team has built into backlog and then work that backlog into revenues, because that is where the growth is going to come from. We're very mindful that we need to go and monitor our costs. At the same time, we are very mindful that we need to continue building out inventory so that we can deliver, as we just discussed, for our customers in the time frames that they expect. Philipp, there's a question I'd like to ask whenever we host CEOs on our fireside chats and podcasts. Because you speak with a lot of investors, I would just be curious, from your perspective, what do you think that the market most underappreciates about Ocean Power Technologies right now? I think the primary aspect that the market isn't valuing is the operational delivery capability we have built and are continuing to build, and the fact that all the building blocks are in place to generate additional backlog from the pipeline that we've built, and that we are also put in place the building blocks that are needed to then convert that backlog to revenue. These are proven solutions that are hosted on proven and operationally deployed products that we're bringing to market, and that, I think, is materially undervalued in the way that the market is currently looking at OPT. Looking forward in terms of signposts or milestones, what should investors focus on, in fiscal 2027, that will kind of demonstrate that the company is executing on the strategy that you've laid out here? I think the key thing is going to be looking out for additional orders that are received, additional multi-system orders, be that multi buoys, be that multi vehicles. Also successful completion of operational demonstrations that we're carrying out for many of our customers. Because those multi-system demonstrations are necessary gates that the company needs to pass through in order to then get the next level of multi-system orders. I think that is something that we'll continue educating and briefing the market on as we complete these milestones. Okay. That's fantastic. Peter, I'm afraid we're running short on time, but we've managed to cover a lot of ground here today. Is there anything critical that we might have missed, or would you like to leave investors with any closing remarks? Well, I think it's important to highlight that the market we're in, so call it maritime intelligence, operational infrastructure layers, maritime dominance, particularly on the autonomous side, is seeing unprecedented interest from market participants and others. To that extent, we just recently announced that we're working with Bowen, Inc. on reviewing all options available to OPT to enable bringing additional scale to the market in a way that maximizes shareholder value. I think there is a growth in our industry that is enabling additional conversations to be had that may not have been possible a short while ago. Okay. That's great. Well, thank you very much, Philipp. We'll continue to follow your progress very closely here at Water Tower Research, so thanks again. Good luck to you as you kick off fiscal 2027, and we'll look forward to having you back for a check-in with us very soon. Sounds great. Thanks for having me on, Peter. Thanks as well to all investors for tuning in today. If you'd like to submit additional questions or arrange a meeting with the management, please use the conference portal or reach out to us directly. Additional materials and research content on Ocean Power Technologies are available at our website, www.watertowerresearch.com. The views expressed in this fireside chat may not necessarily reflect the views of Water Tower Research LLC and are provided for informational purposes only. This fireside chat may not be distributed or reproduced without the written consent of Water Tower Research and should not be considered research nor a recommendation. WTR is an investor engagement firm, not a licensed broker-dealer, market maker, investment banker, underwriter, or investment advisor. Additional disclaimers can be found at www.watertowerresearch.com. Thank you and have a great day.