Palladyne AI Corp. Q2 FY2023 earnings call

• Realigned business and refined sales strategy to focus on products with near-term revenue growth and strategic opportunities.
• Achieved a 25% workforce reduction and lowered discretionary expenses, expecting average cash usage of $3 million per month in Q1 2024.
• Focused on Robotic Solutions for subsea, aviation, solar end markets, and an Advanced Technologies software division.
• Subsea: Sea Class system with VideoRay ROV for underwater inspection. Aviation: Discussions with airports and carriers for baggage handling and aircraft maintenance, with field trials planned. Solar: Completed field trials with engineering companies, collaborating with Blattner for solar panel installation. Advanced Technologies: AI software platform development with government contracts.

In Q2 2023, revenue was $1.3 million compared to $3 million in Q2 2022. Cost of revenue decreased to $900,000 in Q2 2023 from $3.1 million in Q2 2022. The company has realigned its business to focus on Robotic Solutions for subsea, aviation, and solar end markets, as well as an Advanced Technologies software division. For Subsea, the Sea Class robotic solution addresses shipbuilding repair deficits. Aviation focuses on labor challenges in baggage handling and aircraft maintenance with field trials planned. Solar aims to address labor pressures in solar installations with completed field trials. The Advanced Technologies division focuses on AI software platform commercialization.

• Third quarter 2023 revenue expected to range between $1.1 million and $1.4 million.
• Anticipate $6.0 million in restructuring expenses related to headcount reduction.
• Quarterly R&D expenses expected to decrease by ~one third in Q3 2023 compared to Q2 2023.
• General and administrative expenses trending down, aiming for ~50% of Q2 2023 levels in Q1 2024.
• Sales and marketing expenses expected to decrease by ~50% in Q3 2023 and remain low.
• Intend to manage average monthly cash usage to ~$3 million in 2024, with sufficient liquidity to operate in 2025 without additional financing.

• Forward-looking statements subject to risks and uncertainties described in Form 10-Q and earnings press release, including those affecting commercial production, product features, market trends, customer demand, and financial results.

Q: Asked about commercialized product shipment in 2023 or Q4.

A: There are products in the market to ramp in second half, but solution-based products launch in late 2024. Sea Class opportunities expected in second half.

Q: Inquired about inventory write down.

A: Narrowing focus to specialized solutions led to writing off inventory as near-term adoption prefers specialized solutions.

Q: Asked about $2 million expense in July and monthly burn rate.

A: Included in $5.5 million cash usage for Q3, cash usage expected to ramp down further, aiming for $3 million average monthly in 2024.

Q: Asked about existing order book and manufacturing capacity.

A: Active negotiations in subsea, aviation, solar, and AI; confident in Salt Lake City facility capacity, with Jabil as backup for larger contracts.