Palladyne AI Corp. Q1 FY2023 earnings call

• Participated in ConExpo, Aviation Robotics Summit, and Offshore Technology Conference, generating interest in Guardian products.
• Signed manufacturing agreement with Jabil to increase production capacity for Guardian family of products.
• Completed final validation in product development contract for robotic solar field construction solution.
• On track to achieve ISO 9001 compliance by end of year, working towards quality standards.
• Guardian family of products leverage machine learning, AI, etc., for unstructured spaces.
• Focus on aerospace, construction, and underwater industries with large TAM opportunities.

For the first quarter of 2023, revenue was $2.3 million compared to $700,000 in the first quarter of 2022. The increase was due to increased revenue from product development contracts. Cost of revenue increased by $1.3 million to $1.8 million. Total operating expenses, including cost of revenues, were $25.5 million in the first quarter of 2023 compared to $6.4 million in the first quarter of 2022. Research and development expenses increased to $9.4 million. General and administrative expenses decreased. Sales and marketing expenses increased. Net loss was $21.5 million. Product development contract revenue is expected to be approximately 80% of the full year 2023 revenue mix, and product sales are expected to be approximately 20%.

• Second quarter 2023 revenue expected to be approximately $2.1 million, with approximately $400,000 from product sales.
• Full year 2023 revenue guidance ranges between $23 million and $25 million, with product development contract revenue making up ~80% and ramping up in the second half, product sales making up ~20% and ramping up in the second half.
• Research and development expenses expected to decrease in 2023. General and administrative expenses expected to increase slightly. Sales and marketing expenses expected to increase slightly.
• Aim to be cash flow positive in 2025 and be on pace to exit 2024 in good shape.

• Actual results may differ from projections due to many risks and uncertainties, including those described in annual report on Form 10-Q and earnings press release. Risks related to market acceptance, technology development, competition, etc.

Q: Steve asked about the cash use rate in Q2 and if there's an inflection for the rest of the year.

A: Drew said the $5 million per month cash use rate includes $2 million adjustments, and taking that out, the run rate is about $4.3 million per month.

Q: Guy asked about Q2 guidance product sales, which products and customers, order book, inventory.

A: Drew said they can't disclose customer details yet, there's a pipeline that should convert, it's a combination of raw materials and finished products in inventory, and there's an order book materializing from events and previous discussions.

Q: Rob asked about supply chain, VideoRay agreement, navy contract.

A: Kiva said Lisa Johnson secured components for build schedule, VideoRay partnership is strong with semi-autonomous capabilities, and the relationship is structured for both selling whole solutions and individual technology; Drew added on the nature of the relationship for selling the system to VideoRay's customers