Palladyne AI Corp. Q4 FY2022 earnings call

• Sarcos acquired RE2 in 2022, integrating their expertise into the Guardian product lineup including Guardian XM, Sea Class, and XT. - Commercializing systems in powering utilities, aviation, defense, maritime, and construction industries. - Completed field trials like with the U.S. Navy for Maritime Mine Neutralization system and outdoor autonomous baggage loading system with Changi Airport Group. - Developed AI-based algorithms for semi-autonomous detection, tracking, etc., and immersive teleoperation technology. - Launched industry-sponsored research efforts with universities and expanded simulations and mixed reality solutions.

For the fourth quarter of 2022, revenue was $6.1 million compared to $1 million in the fourth quarter of 2021. The increase was primarily due to increased revenue from product development contract revenues. Cost of revenue in Q4 2022 was $4.4 million vs $1.1 million in 2021. For the full year 2022, revenue increased to $14.6 million from $5.1 million in 2021, mainly from product development contract revenues. Legacy product sales in 2022 were $330,000 compared to $1.5 million in 2021.

• Anticipate increasing product and product development contract sales to $23 million to $25 million in 2023. - First quarter 2023 revenue expected to be approx $2.3 million, all product development contract revenue. - Cash used in operating activities estimated at avg $6 million per month in Q1. - Full year 2023 revenue range $23M-$25M, product development contract revenue ~80% of mix. - Research and development expenses expected to decrease slightly in 2023; G&A and sales and marketing expenses expected to increase slightly.

• Forward-looking statements include uncertainties about commercial production, product features, market trends, etc. - Risks described in annual report on Form 10-K and earnings press release, including those related to acquisition of RE2 and potential differences between projected and actual results.

Q: Walk through gating factors before recognizing commercial revenue for XM, XT, Sea Class.

A: Gating factors include continuing to secure long lead items, with supply chain team having purchased long lead items. Production ramping up to get to volume units for sales.

Q: Order book status and gating for sales A: Sales force can start negotiating with customers, units available for sales. XM had 10 units produced in Q4, XT in production, Sea Class in production and tested.

Q: Inventory and cash burn in mid-year A: Cash burn expected to decline as year progresses, with consultants' roles rolling off. Producing enough to meet anticipated demand and for demoing, not overmanufacturing initially.

Q: Readiness to sell products to customers A: Ready to sell, with Sea Class having hardware development kit, XT and XM in production and testing ongoing. Each solution is a combination of hardware, software, and platform, with testing in Pittsburgh and Salt Lake City.

Q: Sales cycle for new potential customers A: Robotics lead time reduced via physics-based model and simulation, development and sales cycle time shortened for targeted segments as products can fit needs without redeveloping