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 Power, 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.

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.

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 the 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 ready 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 WAM-V autonomous service 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…

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 USB programs, integrated buoy and USV surveillance solutions in 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 3 and 9 months ended January 31, 2026, were $0.5 million and $2.1 million, respectively. Revenues for the 3 and 9 months ended January 31, 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 3 and 9 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 period 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 that we continue to generate revenue…

Thanks, Bob. Stepping back, we are 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 performed consistently in mission-critical environments.

[Operator Instructions] Our first questions come from the line of Sameer Joshi with H.C. Wainright.

Philipp and Bob, starting off with the backlog, the $19.9 million is a solid backlog, do we have a visibility in terms of the cadence of delivering this backlog? And also, can you -- are you able to categorize this in by geography or type of customer?

Yes. Sameer, absolutely. So of that $19.9 million in the contracted backlog, some of that is due for immediate delivery. As we stated in the past, we are working on shipping out the systems for the Department of Security, which we announced in January with the follow-up contract for the installation a couple of weeks ago. We're talking days and weeks here for those to leave our facility here and get ready for in-store. And if you talk in terms of cadence, that is, as we announced, that is a contractor-owned, contractor-operated contract for a 15-month period of performance. So 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 part of that backlog have slightly longer conversion cycles. And if you were to categorize them geographically, I'd say about roughly half of it is North America and the rest is sort of split between Latin America and parts of the Middle East with a couple of outliers in various other parts of the world.

Got it. And 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.

I think what we can say on that is we have assets in country. We have several vehicles and a buoy in the country. We also do have local-based staff who are working -- first and foremost, they're all safe. And secondly, they're working tirelessly on efforts to help support shipping and safe port operations.

Got it. And just going back to sort of the backlog. I just want to make sure it includes revenues expected from the Merrows, which is likely to be a recurring revenues. What portion -- like what level of revenues do you expect? And what is the contracted period for the -- specifically Merrows orders?

That's a great question. It's not like there is specific Merrows contracts in there, but there are contracts like the home and security efforts that utilize the Merrows platform. 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 2 things. One is to stream data to Coast Guard directly. The other one is to stream data to Anduril who is another party on a separate portion of these contracting mechanisms and integrate our data with their system, fortress 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 1 platform into a multiple kind of common operating pictures.

Got it. Understood. And then, on the gross margin front, should we -- these onetime or rather -- yes, onetime effects have been taken care of, going forward, should we expect to see positive gross margins?

Yes. I think, as Bob stated in his remarks, several of the contracts are recently completed, had a lot of their costs already recognized due to GAAP impact with future revenues still to be reflected. So I think particularly on lease contracts or cocoa type contracts, if we're talking U.S. government, we're going to start seeing and working toward -- we're certainly working towards them. We should start seeing an improvement in the gross margin again as we move to larger scale deployments. .

Understood. And last question. The pipeline is also pretty strong and it has grown year-over-year, of course, but also quarter-over-quarter. Who are the kind of -- rather, what is the kind of competition that you are seeing for these potential sort of orders? And what confidence or probability do you assign to conversion of this $164 million pipeline into backlog?

Yes. We recently stated -- we sort of largely completed the retooling of several parts of our team. That has included the commercial team, which now consists of many veterans of the U.S. armed forces. So that has enabled us to truly position the OPT suite of products, be that the underlying fixed assets or be that Merrows into the appropriate parts of the defense and security industry. And the same holds true, obviously, for private customers in the commercial industry. So it's -- we're seeing lots of collaboration in certain aspects of the industry. But competitively, I think OPT is positioned in a good place because we are going after a section of the market that isn't us heavily competed over as the big Navy fast interceptor, far-reaching, kinetic-type USVs. And that is enabling us to have, a, grow the pipeline, but also, b, gaining greater confidence in the conversion of that pipeline to backlog.

Our next question has come from the line of Peter Gastreich with Water Tower Research.

Great. Thank you very much. Philipp and Bob, 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? And are there any multi-asset opportunities there that are comparable and scaled to the DHS contract?

Yes. Peter, absolutely. We recently completed several exercises in Latin America. One was in Brazil, and that was around Aramis, which was demonstrating the capabilities of our USV platforms as a broader tool in part -- for mine countermeasures over there. We also completed a submarine surgeon rescue exercise using 1 of our 8-foot WAM-V in Chile, where we demonstrated the ability to be launched from a manned asset from the Navy in order to locate in a simulated bottomed submarine. And we've got several discussions ongoing around buoys to be deployed for either underwater or surface surveillance operations. Can't comment on the specific countries or use cases where we have detailed dialogues ongoing. But it is fair to say that we continue at pace operating in Latin America and working on converting the backlog to meaningful revenues in the near future.

Okay. Just my next question is just about inventories. So you mentioned before about prebuilding 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 prebuild activity for anticipated orders?

Peter, yes, absolutely. So you can see a little bit of a 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. So, yes, 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.

Okay. Just 1 more a question about your team. So can you discuss how your facility clearance and government-focused team are positioning you to expand beyond coast cards, potentially into other DHS components like CVP? And how is that pipeline developing?

Yes. Absolutely, obviously with our SVP for commercial sales, Jason Weed, obviously, retired navy captain. And below him, we have a team of mainly 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 real needs and real today use cases being discussed, which is positioning us to deliver for the hemispheric defense of our nation and to support our allies in other parts of the world.

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.

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 in 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.

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.