Palladyne AI Corp.

Good day and thank you for standing by. Welcome to the Q2 2023 Sarcos Technology and Robotics Corporation earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mariah Shilton.

Thank you, operator. Good afternoon, everyone, and welcome to the Sarkozy Technology and Robotics Corporation second quarter 2023 earnings call. Joining us on the call this afternoon are Sarkozy interim president and chief executive officer, Laura Peterson, and Chief Financial Officer Drew Hamer. Laura will start the call with a discussion of business highlights from the second quarter and recent events. And Drew will then talk in more detail about the financial results before management takes questions from analysts. Before we begin, we must state that today's call will contain forward-looking statements, including statements concerning future commercial production and availability of our products, product features and capabilities, target markets and market trends, size and expectations, customer demand and future financial results, condition and cash flows, including future revenues, costs and cost trends, cash usage, restructuring charges, and liquidity. These statements represent management's beliefs and expectations as to future events as of today, but there are many risks and uncertainties that could cause actual results to differ from what we have projected. Among those risks and uncertainties are those described in our report on Form 10-Q filed today with the SEC and those mentioned in today's earnings press release. We encourage you to review the risks and uncertainties described in this press release and 10-Q and in our other filings with the SEC for further information regarding these actual and potential risks and uncertainties. We also encourage you to review the special notes regarding forward-looking statements included in our earnings release and 10Q for the second quarter 2023, filed with the SEC this afternoon, and which will be posted in the investor section of our website at sarcos.com and on the SEC's website. In addition, we will be discussing certain non-GAAP financial measures on our call today. Throughout this call, all financial measures will be GAAP, unless otherwise noted. The reconciliation of any non-GAAP measures to the most directly comparable GAAP measures as well as the description, limitations, and rationale for such measures are included in the earnings release file with the SEC this afternoon, and which is available on our website and on the SEC's website. A recording of this call will also be available on our website until September 9th, 2023. The information that we're giving on the call is as of today's date, and we undertake no obligation to update the information subsequently, except as may be required by law. At this point, I'd like to turn the call over to Laura Peterson, interim president and CEO of Sarkos. Laura?

Thank you, Mariah, and good afternoon to all of you joining us on today's call. I am pleased to be participating on my first call as interim CEO of Sarkos. I am honored to serve the company during this transitional period from being primarily an R&D organization to manufacturing and commercialization. As a member of the board of directors, since Sarkos became a public company, I've had the opportunity to gain insight into the business. I have spent the past few months applying that knowledge, along with my breadth of experience, to analyze and evaluate the business, which in turn has led to decisions about the direction of the company. We have realigned our business and refined our sales strategy to focus on products that show the most potential for near-term revenue growth and on strategic opportunities that show the greatest market traction and meet an acute customer need through tailored solutions. As a result of our actions, we have substantially lowered our cash usage through a 25% workforce reduction and by significantly lowering our discretionary expenses. Ultimately, we expect this to result in an average cash usage rate of $3 million per month in the first quarter of 2024, down from $6.5 million in the second quarter of 2023. Now that we have taken these important steps, we are focused on continued optimization of our operations and execution of solutions delivery for our customers. We are narrowing our focus to robotic solutions for the subsea, aviation, and solar end markets, in addition to commercializing our AI software platform through a new software business division named Advanced Technologies, to drive revenue opportunities. These four businesses are where we see the most immediate customer demand and strategic opportunity. Further, the energy and aviation industries are experiencing significant macroeconomic forces, creating opportunities in those markets. I'd like to take a look at each of these four areas, beginning with subsea, which is the end market for our C-Class robotics solution. Currently, there is a deficit in shipbuilding repair that threatens global security and supply chain. Our solution is a fully integrated C-class system with a video ray remote-operated vehicle, which offers one of the most advanced underwater inspection capabilities on the market today. The next end market we're focused on is aviation. High passenger and cargo volumes, coupled with labor shortages, are putting pressure on the aviation industry. Since the Aviation and Robotics Summit in Pittsburgh in April, there has been a steady pipeline of activity, which is a validation of the potential of this market. We are in discussions with airports and major air carriers for our solutions to labor challenges in baggage handling and exterior aircraft maintenance. Additional field trials are planned this year and early next year in anticipation of commercial production expected to begin in late 2024. Turning to the solar end market, as we have previously pointed out, solar installations will need to increase 50% over the next seven years to meet climate targets, which would require more than 800,000 new workers to meet this goal. Robotics hold the promise of increasing worker productivity to mitigate labor pressures in this market, while simultaneously improving safety on the job. We completed field trials with two of the largest engineering procurement companies. The trials validated the capabilities of our solution and were used to gain valuable input from subject matter experts to optimize the efficiency and workflow of solar panel installation. We are proud to say we exceeded milestone requirements in both trials. We are collaborating with Blattner Company, an industry-leading provider and installer of renewable energy to focus on the development and refinement of our autonomous mobile robotic system designed to optimize worker safety and improve the efficiency of solar panel installation in utility scale projects. Working with Blattner, we intend to test the system through varying environmental conditions across different sites in preparation for commercial launch of the system, currently estimated for late 2024. Our fourth area of focus is our new advanced technology software division, which will drive revenue from AI software solutions. The division's goal is to progress the development and production of our artificial intelligence and machine learning software platform for generalizable autonomy. The AI and ML software platform will be designed to be usable across a variety of autonomous systems, including factory robots and drones. We are collaborating with industry partners and leveraging their knowledge and expertise of market-specific needs to address those challenges. Our work is bolstered by multiple multi-million dollar, multi-year Department of Defense contracts. Just a few weeks ago, we announced the award of an expanded contract with the Air Force Research Laboratory for continued development of AI-driven methods and techniques to control autonomous vehicles. The methods we are developing will harness the power of disparate sensor data to enable accurate autonomous operations in dynamic unstructured environments. We anticipate commercial opportunities for our AI software solutions in addition to more government funding for this type of technology in the future. Our AI technology builds on years of work developing AI autonomy software and the beauty of our solution is that we are designing it to be hardware agnostic, meaning it is relevant not only across our robotic system, but also those manufactured by others. This opens up a tremendous market opportunity with a strong recurring SaaS revenue model. In closing, I know many of you have asked if I'm a candidate to become the permanent CEO. I am not. I was brought in to evaluate the business and make some tough decisions to move the company forward toward commercialization of our products. Coming from the aerospace industry, I understand the possibilities that our solutions enable and the challenges of working in a continually evolving strategic landscape. These past months have involved intensive data-driven analysis with the team in weighing our most compelling opportunities and leveraging the knowledge and the foundational technology built over many years. I have told the board that I will serve in this role until we are firmly on the right path. I am encouraged by the progress we've made in a short time, and we will continue to focus on execution and taking our solutions to commercialization. I'll now turn the call over to Drew to report on the financials.