Palladyne AI Corp. Q2 FY2023 earnings call

• Realigned business and refined sales strategy to focus on products with near-term revenue potential and strategic opportunities. • Achieved a 25% workforce reduction and lowered discretionary expenses, aiming for average cash usage of $3 million per month in Q1 2024. • Subsea: Sea Class system addresses shipbuilding repair deficits. • Aviation: Discussions with airports and carriers for baggage handling and aircraft maintenance, planned field trials leading to commercial production in late 2024. • Solar: Completed field trials with engineering companies, collaborating with Blattner for solar panel installation robots, aiming for commercial launch in late 2024. • Software Division: Developing AI software platform for autonomous systems, collaborating with industry partners and having DoD contracts, including an expanded Air Force contract.

In Q2 2023, revenue was $1.3 million (down from $3 million in Q2 2022). Cost of revenue decreased to $900,000 in Q2 2023 from $3.1 million in Q2 2022. The company realigned its focus to Robotic Solutions for subsea, aviation, and solar end markets, plus an Advanced Technology Software Division. Subsea has a Sea Class system for underwater inspection. Aviation is addressing labor challenges in baggage handling and aircraft maintenance. Solar aims to boost worker productivity in solar installations. The Software Division develops AI software for autonomous systems.

• Q3 2023 revenue expected to range $1.1 million to $1.4 million. • Restructuring expenses of ~$6.0 million net, including cash severance. • Quarterly R&D expenses expected to decrease by ~one third in Q3 2023. • General and administrative expenses trending down, sales and marketing expected to decrease by ~50% in Q3 2023. • Estimated cash usage of ~$5.5 million per month in Q3, aiming for average $3 million per month in 2024.

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

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

A: Sea Class opportunities expected in second half 2023, other products launching late 2024.

Q: Inquired about inventory write down.

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

Q: Asked about $2 million expense in July.

A: Included in Q3 cash usage, cash usage expected to ramp down further in Q4 and average $3 million in 2024.

Q: Asked about existing order book and capacity.

A: Active discussions in Subsea, Aviation, Solar, and Software, confident in Salt Lake City facility capacity with Jabil partnership for scaling.