Ocean Power Technologies' Q2 2026: Contradictions Emerge on Pipeline and Backlog Definitions, Government Shutdown Impact, and Headcount Strategy

Date of Call: December 15, 2025

Financials Results

• Revenue: $0.4M in Q2 (3 months ended Oct 31, 2025) vs $2.4M prior-year quarter; 6-month revenue $1.6M vs $3.7M prior-year

Business Commentary:

* Backlog and Pipeline Expansion: - Ocean Power Technologies reported a backlog of approximately $15 million, up $11.2 million from the same period last year, with a pipeline of $137.5 million, up $53.2 million year-over-year. - The growth in backlog and pipeline reflects the conversion of opportunities across defense, government security, offshore energy, and commercial applications.

• Revenue Decline Due to Shutdown:
• Revenue for the 3 months ended October 31, 2025, was $0.4 million, compared to $2.4 million in the prior period, and $1.6 million for the 6-month period compared to $3.7 million a year ago.

• The decline was primarily due to the timing of shutdowns, which delayed several deliverables into subsequent periods.

• Operational and Organizational Changes:

• The company reorganized its delivery and internal R&D teams to strengthen coordination, improve platform readiness, and ensure scalability.

• This move aimed to meet rising demand and execute larger programs, aligning teams and resources for the opportunities developing ahead.

• Government Engagement and International Expansion:

• Ocean Power Technologies conducted demonstrations in Latin America and the UAE with both defense and commercial customers, validating system performance in real-world operating environments.
• International engagement has become an important contributor to pipeline quality and customer diversification, particularly in areas like Latin America, the Middle East, and the Baltic Sea.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized momentum: backlog ~$15.0M (up $11.2M YOY) and pipeline $137.5M (up $53.2M YOY), noted international demonstrations and recent deliveries ('we shipped 8 vehicles...'), and described reorganizations and hires to convert pipeline into revenue.

Q&A:

• Question from Michael Legg (Ladenburg Thalmann): I wanted to dig a little deeper into the pipeline. Obviously, very impressive number. Can you talk a little bit about how many customers, how many orders or some type of magnitude there? Also, what -- from -- which product lines, if there's any concentration there? And then just secondly, you talked about building out the headcount. Can you just get us a little more explanation on where the headcount has grown and how that helps support the pipeline?
  Response: Pipeline is diversified and growing—balanced dollar mix between buoys and vehicles, accelerating U.S. government demand (Homeland Security/DoD) plus international interest; hires broadened commercial and ops teams to convert opportunities.

• Question from Michael Legg (Ladenburg Thalmann): Yes. No, that's great there. And then just on the headcount, how much like biz dev professionals, type of people helping you close this pipeline have you put in place?
  Response: Added a mix of commercial (veterans with DoD/Homeland Security experience) and operational staff (USV operators, marine ops) to support demonstrations, training and convert backlog to revenue.

• Question from Michael Legg (Ladenburg Thalmann): Great. And then just one last piece on the government shutdown impact on revenues this quarter. Is that something that we should see additive to next quarter? Or did it push everything out in sequence?
  Response: Timing uncertain, but recent uptick and quarter deliveries (8 vehicles) plus prebuilt buoys indicate near-term conversions and shipments are likely.

• Question from Peter Gastreich (Water Tower Research LLC): Congratulations on your continued momentum with the backlog, especially given the obvious challenges of the government shutdown. So just first of all, please, a follow-up on the headcount question. Do you feel -- like are you kind of where you need to be now in terms of that headcount expansion for converting the backlog? Or are you still going to be growing the headcount?
  Response: Core hiring to enable conversion is largely complete; future headcount increases will be targeted and tied directly to specific conversions (e.g., MRO hubs) as orders materialize.

• Question from Peter Gastreich (Water Tower Research LLC): And also, there was some recent news about the -- about a federal court striking down some federal freezes on wind permits in 17 states. And I know that defense is bigger momentum focus for you now. But I'm just kind of curious whether this regulatory developments in wind energy have impacted your momentum at all within that industry over the last quarters?
  Response: U.S. offshore wind slowdown limits U.S. civilian survey work, but company remains active in civilian/offshore energy internationally (UAE, Taiwan, sub‑Saharan Africa), so overall international momentum continues.

• Question from Peter Gastreich (Water Tower Research LLC): Okay. That's great. Like are you able to give any sort of color on what the magnitude of international on the wind side when compared to U.S. looks like?
  Response: Cannot quantify; much international work is oil & gas rather than wind, but international civilian projects (including wind-related survey/UXO) are meaningful and cost‑effective for customers.

• Question from Peter Gastreich (Water Tower Research LLC): Okay. Great. Just one more question from me, kind of high level, but I just wonder if you could give us a refresher about how you identify and quantify pipeline versus backlog in terms of timing to conversion or certainty or whatever metrics you use for forming those buckets?
  Response: Pipeline = qualified opportunities under NDA where projects are being discussed; backlog = contracts/POs in hand for immediate or scheduled deliveries.

Contradiction Point 1

Pipeline and Backlog Definition

It directly impacts investors' understanding of the company's sales and revenue forecast, which is critical for decision-making.

Can you explain how you identify and quantify pipeline versus backlog, including the timing to conversion, certainty, and metrics used to categorize them? - Peter Gastreich (Water Tower Research LLC)

2026Q2: Pipeline refers to qualified opportunities with potential customers under NDA discussing actual projects. Backlog consists of contracts in hand, including POs received, which may be for immediate delivery or over a specified period. - Philipp Stratmann(CEO)

Can we estimate how much of the $93 million pipeline could translate into recurring revenue? - Shawn Severson (Water Tower Research)

2024Q2: We are noticing a shift in the pipeline from product sales to more lease opportunities and data and robotics as a service, which are recurring revenue models. - Philipp Stratmann(CEO)

Contradiction Point 2

Government Shutdown Impact on Revenue

This contradiction pertains to the impact of government shutdowns on revenue, which affects financial performance and investor expectations.

Will the government shutdown's revenue impact be additive in the next quarter, or was it delayed in timing? - Michael Legg (Ladenburg Thalmann)

2026Q2: The impact of the government shutdown on revenues is uncertain, but the company is experiencing an uptick in pace since the government reopened. - Philipp Stratmann(CEO)

What are your revenue expectations for the remainder of the year considering the U.S. government shutdown? - Peter Gastreich (Water Tower Research)

2025Q4: Our U.S. government business continued to be negatively affected by the ongoing U.S. government shutdown and the impact of the evolving regulatory requirements. - Philipp Stratmann(CEO)

Contradiction Point 3

Headcount Expansion Strategy

Changes in the headcount expansion strategy can impact operational efficiency and revenue generation, influencing investor decisions.

Have you reached the required headcount for backlog conversion, or will you continue expanding staff? - Peter Gastreich (Water Tower Research LLC)

2026Q2: Significant headcount expansion has been completed to support conversion cycles more effectively. - Philipp Stratmann(CEO)

Can you explain how you compile the number, the background on the conversion process, and how mature the process is? - Glenn Mattson (Ladenburg Thalmann)

2025Q4: We're increasing conversion rates with a new SVP for Commercial, a retired U.S. Navy captain, and other appointees. - Philipp Stratmann(CEO)