Q3 2022 Nauticus Robotics Inc Earnings Call
[music].
Hello, and welcome to the Nautica <unk> Robotics earnings conference call for the third quarter ended September 32022.
My name is Paul and I will be your operator today.
<unk> press release, including the financial tables are available in the Investor Relations section of the company's website at Www Dot <unk> robotics Dotcom. The company also plans to file its Form 10-Q with the SEC later today.
Joining us on today's call are Nordic as its founder and CEO , Nicholas Bradford and our CFO Langan pod mounted Bob.
Following their remarks, we will open the call for questions before we begin Jeff Grant from the Gateway group will make a brief introductory statement.
Grant.
Thank you Hello, everyone and welcome to the Northern gets robotics third quarter 2022 earnings Conference call before management begins their formal remarks, we would like to remind everyone that some statements. We're making today may be considered forward looking statements under securities law and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors.
Many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward looking statements for more detailed risks uncertainties and assumptions relating to our forward looking statements. Please see the disclosures in our earnings release and public filings made with Securities and Exchange Commission, we disclaim any obligation or undertaking to update forward looking statements to reflect circuit.
Stances or events that occur after the date. The forward looking statements are made except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of.
For our business as well as uncertainties, another variable circumstances, including but not limited to risks and uncertainties identified under the caption risk factors in our filings you may get Nautica and Securities and Exchange Commission filings for free by visiting the SEC website at SEC Doc up I would also like to remind everyone that this call is being recorded and will be made available for replay.
<unk> via a link available in the Investor Relations section of <unk> website.
Now I will turn the call over to <unk>, founder and CEO , Nick Radford Nick.
Thanks, Jeff and welcome everyone to our inaugural earnings conference call as a public company and we sincerely appreciate your interest and not of course since this is our first call I thought it'd be appropriate to start with an overview of <unk> history, Our mission and our business strategy. I'll then cover some of our most recent important business milestones before passing it off to.
Our CFO Rangan Piedmont upon.
To cover some of our financial highlights before my closing remarks, and we'll take some questions.
First.
A bit of a background on myself I'm, the founder of the president and the CEO of <unk> robotics.
I have over 25 years of robotics experience than I was a principal at NASA, where I led many of masses robotics efforts.
[noise], becoming inspired to bring spaceflight robotics tech to the Ocean World I retired from government service and I set out to build a world class team and company.
Our mission is to create the most impactful Ocean robotics company using the latest advancements in autonomous systems.
This will bring about a much needed change for our world's precious oceans.
They are the epicenter for our energy communication minerals and food resources, specifically, our service offering not only result in a meaningful cost and safety improvements, but also.
<unk> and enhancements to the sustainability of the offshore services industry as we can eliminate nearly all of their carbon footprint by removing the large vessels that burn fuel and emit greenhouse gases into the atmosphere, our mission and groundbreaking technology attracted world class strategic investors, including slumber, J and Transocean as well as technology.
Monsters from the U S government.
And we have supplemented our initial high caliber team from NASA with other industry experts and the offshore and energy sectors.
Our technology market opportunity and business progress over the last several years towards commercializing our robotic solutions culminated in the business combination with clean Tech acquisition Corporation, which.
Which closed on September nine.
This year.
This resulted in non listing on the NASDAQ trading under the symbol kit.
Of course as a homage to the 19 eighties television show Knight rider and somewhat of an inspiration to our own artificial intelligence and economy ambitions, which is to say at our core we are an artificial intelligence company and our autonomy software platform is aptly named toolkit and provides our entire ecosystem of surface and sub sea robots.
We believe this combination of transformative ocean robots and autonomous technologies can disrupt the current ocean services paradigm.
Now, let me take a moment to discuss the vast ocean economy, we operate in.
It is our view that while the global the global Ocean economy is massive at an estimated $2 five trillion dollars of value.
It is largely unsung and frankly has typically lagged in innovation over the decades. However, we are witnessing an acceleration in sustainability solutions, including the introduction of increased levels of robotics and autonomy that play right into what we are pioneering here at nautica is.
The market for our technologies in minutes and covers numerous market segments, including offshore renewables oil and gas Telecom Aqua culture mining defense ports and shipping just to name a few.
The near term opportunities, we plan to execute on our.
Primarily in the offshore renewables.
Oil and gas in defense and government markets. These three foundational segments underpinned our strategy.
Offshore wind is a rapidly growing market as the world looks to Decarbonize, the energy production and the industry will see upwards of a trillion dollars of investment over the next 10 years there.
There are currently 120 active offshore wind farms around the world with 170 estimated to be underdevelopment over the next few years 25, Gigawatts are expected to be added to Europe by the end of the decade, and then find administrations 30, Gigawatts by 2030 will add to the U S offshore wind.
Let me put some context behind some of the numbers using offshore wind in the U K as an example, it is estimated that each gigawatt of installed offshore wind capacity requires about $22 million of annual inspection and repairs and maintenance, but they're not a christmas capabilities.
The UK currently has about $12 seven gigawatts of installed capacity and is adding about 2.5 gigawatts per year. So the annual U K offshore wind service market alone is estimated to be about $280 million in growing which equated to a demand of about 35 aquanauts.
By the end of the decade that is estimated to nearly double again just for offshore in the U K.
Globally. There are about 56 gigawatts of installed offshore wind capacity today and that would imply a worldwide market opportunity of about 150 arc with us a number that will only grow with the ambitious offshore wind installations planned around the world.
Additionally, our growing tandem robotics fleet is generating strong interest in the offshore oil and gas market, where there are thousands of offshore oil and gas treatment tens of thousands of kilometers of flow lines and types around the world.
All of these assets require inspection maintenance and repair throughout their useful life.
With thousands of Rovs and <unk> in the industry today supporting this infrastructure there is a significant market available for Nordic is to disrupt.
The defense and government markets are incorporating autonomous ocean robots rapidly in many if not I guess just robotics platforms are dual use serving in this growing domain. The U S continues to invest billions in autonomous naval capabilities and the current geopolitical tensions are accelerating that investment not a guess, it's front and center building of Thomas platforms that AIDS National security.
Our core offering has been nautica fleet, which is comprised of a tandem combination of autonomous robots and 18 meter optionally crude vessel called Hydronaut and aquanaut, It's undersea robotic counterpart. The primary objective of Hydronaut is to support the launch and recovery of real time off of work without <unk>.
Youre not ferries aqua not to and from the work site supports battery recharging as well as the communication link from the local remote op center for supervised autonomous operations.
<unk> went up as an autonomous underwater robot that utilizes machine intelligence and a suite of autonomous behaviours for interaction subsea world around it.
Our key operational technologies collectively allow us to substantially improve the efficiency safety and carbon footprint of operations at a significantly reduced costs over legacy methods.
As I mentioned earlier, they're not cause fleet is powered by a proprietary software suite toolkit.
Each operates the aquanaut.
Other non because robotics vehicles and other third party vehicles.
Toolkit unifies all of <unk> products into a single control architecture, allowing for robotic controls user interfaces sensor integration stimulation data analytics and communication frameworks purpose built to enable subsea work.
<unk> also utilizes our Olympic arm and all electric work class manipulator being all electric allows for more delicate perception driven decision, making for autonomous tasking.
The advanced sensing and control techniques offer improvements to reliability and operating efficiency, while the lack of hydraulics compared to legacy solutions eliminates the risks of oil spills, which are costly they caused delays and harm the environment.
While toolkit and the Olympic arm, our core components of our overall offering. We are also actively executing on plans for these to generate revenue revenue individually.
Yeah.
In terms of what we're competing against the most common legacy solution that not because it's primary disrupt involves the usage of large vessels, which can be the size of a football field deploy hydraulic remotely operated vehicles with costly and constraining them vehicles. This solution has remained largely unchanged since its inception 50 years ago.
Has little to no advanced technology and hydraulic fluid leaks Ah.
Get into the water.
Creating a recordable environmental incident, the cost of utilizing these vessels is significant at upwards of $100000 a day.
Since we have adapted acoustic methods of communicating with our underwater robots, we eliminate the need for an umbilical and therefore drastically transform the cost structure, the safety profile and the environmental footprint in the industry.
When we combine the lack of an umbilical with the latest in machine learning and artificial intelligence for inspection data collection and intervention related activities. We can offer truly a game changing solution and not a guess we employ more software engineers than any other category of personnel. We are deeply committed to being a technology forward leaning company.
And we will lead the way with compelling software enabled solutions.
Now shifting to our business model, we're implementing a robotics as a service or Ras model, we believe maintaining ownership overall robots will provide a better customer experience and generate superior long term value for our shareholders. We estimate the ROI under the RAF model could be up to four times, but it could be in the sales case.
Also most of our targeted customers are already accustomed to a service based rental model, where they pay a day rate for the use of service company assets.
Capital cost per system for us range between $4 7 million, depending on the configuration with annual revenue potential between five and $8 million per system, assuming an industry standard utilization rate.
It's worth, noting however that our solutions may be able to beat the industry standard utilization since we lack the surface footprint and do not need the same scale of human resources that are often negatively impacted by weather.
Based on our expected cost structure, we can generate strong returns while offering our service at a meaningful discount to current market rates, creating significant financial incentives for customers to adopt our service.
In addition to providing our service at a competitive price.
We also reduce our customers' carbon footprint and improve their safety by reducing the requirements for surface infrastructure and related personnel.
Now that I've discussed, our disruptive solution and massive market opportunity.
To update you on the building of Nordic asleep.
When we first announced our business combination and provided our initial outlook almost 12 months ago, we were in quite a different market environment as it related to supply chain raw materials, the geopolitical landscape and the overall global economy.
Since that time, we had seen a tragic war breakout in Ukraine interest rates and fed policy dramatically shift alone the overall capital markets environment.
And the supply chain that has remained challenged and in some cases worsened while we have contingency plans in place and the team has executed very well in the context of these challenges supply chain delays have generally been worse than anticipated, which has delayed the build out of our fleet.
We originally expected 2022 to be a year, where we could commission. Our initial aquanauts ahead of a significant ramp in 2023. However, these world events and near Universal disruptions in the supply chain. The Ocwen up Mark Twos are now expected to be delivered in the first quarter of 2023, which is effectively pushed out of acceleration in growth to later in 2023.
And then 2024 now.
Now to be clear. These delays are not at all a reflection on the lack of interest or traction, we're getting with potential customers and in fact, our conviction and our disruptive technology only continues to grow.
Let me take a few moments to highlight some of the positive progress we've made this year.
We announced a contract with shell.
The largest energy companies in the world to conduct a field trial after successfully completing an initial feasibility study.
The trial advanced and more efficient means of acquiring subsea integrity data using aquanaut in partnership with shell, we will test remote operations using supervised autonomy in tool control that will leverage our acoustic communications technology.
This trial incorporates multiple differentiated capabilities of <unk> that gives us our competitive advantage, including our economy acoustic communications technology and the Olympic arm for gathering integrity data.
That has made a natural fit for this test.
In May we announced an agreement with wood plc, a British multinational engineering and consulting company with over $6 billion in revenue last year.
This formalized our relationship between wood and <unk> to develop integrated service offerings that can provide more cost efficient environmentally friendly maintenance of subsea infrastructure.
Yeah.
We've also had multiple announcements in the defense industry as we have partnered with the government to help commercialize our technology as well as be an early adopter. We are currently working with light us a significant defense contractor to jointly developed an unmanned underwater vehicles, a derivative of aqua not a conserve and numerous use cases that are either dangerous or impossible for humans to accomplish.
Including Ocean floor mapping studying sea life and monitoring water pollution.
We were awarded the contract in 2021 with the initial phase milestone running through the end of this year phase two is expected to begin in the first half of 2023.
As I mentioned earlier, there are also opportunities to generate revenue from some of our solutions that support our flagship aquanaut, including tool kit and the Olympic arm. In 2022, we were awarded two contracts with U S defense innovation unit or <unk>.
The most recent of which was a multimillion dollar award.
We announced in October the contract is for the development of an amphibious unmanned system called turnoff utilizing toolkit for autonomous command and control, which will be capable of helping the military clear shallow waters of mines.
Supporting their focus to get the man out of the minefield.
Upon the successful completion of this contract we will have the opportunity to license toolkit U S Department of defense for use on their existing fleet of defender Rovs, which is an opportunity for hundreds of tool kit licenses now.
Now I'll turn the call over to our CFO Rangan padmanabhan to discuss our financials Reagan.
Thank you, Nick and Hello, everyone.
It's been a busy quarter for the company as we close the merger and prepared for life as a public company.
While I would expect my commentary in the future calls to focus on quarterly results. Since this is our initial earnings call I thought it would also help to discuss some year to date results.
For the nine months ended September 32022, we generated revenue of $8 $2 million representing year over year growth of 153%.
The increase in revenue is primarily attributable to the addition of new service contracts and increased performance on an existing service contracts some of which Nick mentioned.
For the third quarter of 2022, we generated revenue of $3.1 million representing year over year growth of 51%.
For the nine months ended September 32022, we reported total operating costs of $19 5 million and for the third quarter of 2022, we reported total operating costs of $9 million, both of which were higher than the prior year comparable periods.
Both figures include zero point $8 million in one time transaction costs related to our business combination with clean Tech acquisition Corp, which closed in the third quarter of 2022.
Additionally, there were over $1.2 million in one time deal related expenses and cost of revenue and over $1 5 million in G&A, all of which occurred in the third quarter.
Other drivers of the year over year increase primarily relate to higher general and administrative costs as we increased company head count.
And marketing expense and professional fees that are required to handle the additional responsibilities of a public company as well as to position the company to scale with our significant growth opportunities.
Our net loss for the quarter was $11 million or <unk> 67 per share compared to a net loss of $1 $3 million or <unk> 10 per share in the prior year period excluding.
Excluding the nonrecurring items that impacted the quarter, our adjusted net loss for Q3 was $3 $7 million or 22 per share.
Now moving onto our balance sheet and capitalization.
As of September 32022, we had $35 $9 million of cash and equivalents and a net working capital position of $43 $6 million.
Our total principal amount of debt outstanding at quarter end was approximately $36 5 million, which is entirely attributable to the convertible notes, we issued as part of our business combination.
The accounting treatment of the convertible notes requires a portion of the amount to be treated as equity as a result, only $24 million of the principal amount is recorded as debt on our books at quarter end.
As of September 32022, we had approximately 47 3 million shares outstanding. This includes seven 5 million shares in an escrow account that will be released upon certain share price thresholds.
These escrow shares are attributable to our business combination with clean Tech acquisition Corp.
Looking forward, we expect fourth quarter 2022 revenues to be a little more than $3 million. This is lower than what was implied by our previous commentary as supply chain issues have delayed the delivery of commercial units. While we expect these revenues to be realized in future periods. They are no longer expected to begin in 2022.
That completes my financial summary, now I'll turn the call back over to Nick.
Thanks Reagan.
Looking ahead, we have an active deployment schedule for the Nautica suite that we are anxious to launch is it more concretely demonstrates our capabilities. Thus far we've produced two aquanauts, one developmental unit and one unit under contract and in service with U S. Dod customers.
We currently have three aquanauts in production one is expected to be delivered just in January and the remaining two are to be delivered by mid year and commission shortly thereafter.
Key growth markets, we expect to focus on in the near term include the North Sea offshore, Brazil, and the Asia Pac region. In addition to of course, the Gulf of Mexico right in our backyard here in Houston all.
All of these regions are strategically significant hubs of traditional and renewable energy assets and future deployments while.
While the commercial market reception to our Aquanauts has remained strong we have been impacted by the supply chain constraints as I mentioned earlier.
This has resulted in longer construction times than anticipated for our aquanaut units.
Unfortunately, these delays have pushed back our entire program and we currently expect to deliver material commercial service revenue in 2024 versus the anticipated second half 2023 previously.
We also continued to expand and leverage our defense community relationships to find new and innovative ways to deploy our software and assets to address known and emerging applications on the forefront of defense technology.
Although our business model is based on a robotics as a service concept. We had previously agreed to sell four aquanaut hydronaut pairs to an innovative early stage Cleantech Maritime service provider.
The amended sales contract. The first two pairs are scheduled for delivery in Q4 of 2023 future.
Future contract amendments to accommodate the customer's delivery needs supply chain constraints when market conditions May result in further adjustments to the timing or the ability of <unk> to recognize revenue from this contract.
While this dynamic may impact 2023 revenue, we still expect to deliver year over year revenue growth in 2023 with a significant ramp expected in 2024.
So we are disappointed by this we'd like to stress that the market opportunity is just as bright as ever and we currently expect to exit 2023 with multiple aquanauts in our fleet each of which are capable of generating between five and $8 million of high margin revenue per year when.
When we coupled this with sales of products like our Olympic arm and continued strong results from our defense segment, we think the outlook for the Companys growth remains very strong.
It's clearer than ever that our differentiated offerings and the impact we can have on efficiency safety and emissions and the cost of customers' operations makes us a highly attractive partner. We're excited about what's to come in 2023, and we look forward to providing you updates as we execute upon our goals.
Before we wrap up I'd also like to make sure everyone is aware of the potential opportunities to meet and hear from US we will be in New York City on Wednesday November 16th at the 11th annual Roth Technology event.
Water tower research will be hosting us for an open virtual fireside chat on Monday November 21 at 11, a M eastern time.
And we will be in Palm Beach, Florida on Wednesday November 30 at the 10th annual Credit Suisse Global Industrials conference in.
And lastly, I wanted to extend my sincere gratitude to the employees of <unk> for their commitment and their passion towards our mission and their relentless work ethic.
Also like to thank our capital partners and shareholders for their support before during and after our business combination we take your investment seriously and are highly aligned and motivated to see nautica succeed.
This completes our prepared remarks, and we're now ready to take your questions operator.
Thank you we will now be conducting a question and answer session. What you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Press Star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star of Q.
One moment, please while we poll for questions.
Thank you. Our first question is from Craig Irwin with Roth Capital. Please proceed with your question.
Greg is your line on mute.
To ask a question.
Thank you thanks for taking my questions.
The first one is really really a clarification if I could ask you rather than.
So a negative $3 7 million in adjusted net income that you mentioned.
Just need to confirm that this does not exclude the $1 one 3 million.
In and warrant adjustment expenses in the quarter is that correct.
It does also include that.
It was a gain from the value of the warrants going down.
Okay. So Tim can you maybe share with us the other detail other than the the three and a half in merger expenses are there any other components in there.
There is the valuation of the earn out shares that was close to $5 million.
And then there was $1.2 million from cost of goods cost of revenue and one point.
As all part of the $3 five and one five from G&A.
Okay understood perfect.
The revenue generation is a key thing that I think.
All the investors that are looking at your company or most interested in right now it's sort of.
The splash of the.
Of the Aquanaut since you as you have them sort of scheduled over the next number of months first quarter would you expect the the units that are that are gonna be slashing to be revenue productive.
Or is it likely to take a little bit of a shakedown period before we see these units actually start generating.
Revenue for the P&L.
Hi, Craig this is Nick I'll take that.
Youre exactly right. The initial stages of splashed down will be a blend of commissioning and qualification and so Q1 is going to be a lot of commissioning and then we will transition into qualification.
Through through Q2 now the good part about qualification is sometimes and in oftentimes it is customer supported.
So like like the.
The opportunity that we have with shell for our pilot with them. We are that is a stage gated outlook and so we're progressing through that pretty nice and so shell is is a good and large customer and so the demand from them could be quite handsome.
From that.
Understood and actually shell was going to be my my next question can you maybe give us a little more color on precisely what youre doing Michelle These days.
Whether or not you have.
You've been down to the depths of the ocean with them.
You know approximate number of sites you visited or any color to help us kind of sketch out the the more complete picture of.
You know your commercial engagement with this important customer.
Yeah, absolutely so shell has.
<unk> identified a particular task that is rather cumbersome and uses.
It makes use of this very specialized tool its a very forward leaning tool and it's rather difficult to use so they are interested in our ability to use that in a much more supervised autonomous way.
And so we've been able to apply our entire tech stack all the behavior development that we've been doing for quite some time.
And I'm very rapid form be utilizing this tool also requires some acoustic communication to actuate the tool and so they were very excited.
Excited about that part of our tech. So as I also mentioned earlier there is a progressive nature to what we're doing so the the first part of this was a prove out the concepts behind how little data rate that you could actually wait this tool with and then that increases and difficulty toward the ocean so that osha.
Pilot is scheduled for mid.
Mid mid mid next year. So there's there's a lot of gates required to progress through that we are doing quite well.
Excellent excellent and then another another point of clarification. This is the first quarter that you've had.
Our cash flow expense for inventory on the cash flow.
Can you maybe discuss for us.
Why this initiated this quarter and.
Is this really sort of units for future sale versus four.
Our robotics as a service.
How should we look at this and how should we.
Model inventory going forward.
Okay.
We're comfortable with our cash position.
And the inventory that we were looking at earlier is about 1.6 due to the all the arm that we're manufacturing on site and about $4 million of that inventory is in aquanaut and hydro not.
Production that we've done.
Does that tie backs I'm sorry.
So then you know as we look as we look at growing the fleet over the next over the next number of quarters. This inventory will.
Roll on and off.
The balance sheet and the cash flow but.
No.
Originally we were thinking that it would be much more of a traditional capex line can you maybe explain for us.
Whats going on here as far as as far as inventory.
<unk>.
Whether or not this is something that.
Balances and maybe a.
Just a little bit of the ER, the capex versus versus inventory expense and the cash sort of used for for unit construction.
Okay.
In the future that the majority of units that we build that are going to go to the fleet.
Those will roll into Capex not inventory.
If we had units for sale they would eventually they would initially rolled with the inventory and then eventually into the cost of goods sold too.
Match up with the revenue and the appropriate period.
Understood understood.
Last question for me is the service line, so I'm going to assume that it's the growth of the fleet.
It's under services that drives this but.
Is there a component you can maybe describe for us that's not a.
Tightly linked to the number of vessels that are interacting with your customers I E.
Would you expect there.
And material service contribution that's not directly tied to our already deployed vessels.
Yes, so Craig this is Nick Youre exactly right a lot of the business scales as the commercial fleet builds out and when you realize that commercial service revenue there are other elements.
But the company is aligned with that arent.
I don't have that commercial Ras model and a lot of our government interests.
Which are lumpy in nature or are a little bit more on the product sales side and so you're seeing a blend of that right now and as the fleet scales out that will transition from that too much more of the Ras RAF model.
Understood understood well, hey, congratulations on a solid first quarter out and will hop back in the queue.
Thanks, Greg.
Good speaking with you.
Okay.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
Our next question is from Troy Jensen with Lake Street Capital. Please proceed with your question.
Hey, gentlemen, and also wanted to say congrats on your first quarter here as a public company.
Maybe Nick Nick starting with you can you just talk about how the spec of the public offering has increased awareness for the company or maybe a.
Comforted potential customers.
Yeah, absolutely, obviously with a public facing transaction, there's a lot of now socialization and marketing that goes into it. So organically that is that has occurred is just part of the process.
But it's also given us quite a platform to start.
Really highlighting what we're doing I mean, everyone at the company here is just fired up about what were doing its mission driven for US. Our mission is to create the most impactful Ocean robotics company through the deployment of autonomous systems and so there's this whole transaction. It's just been an incredible steppingstone to help.
Bringing an awareness to what we're doing.
Yeah, I can imagine so hey, so I dropped off for like a minute or so where you're talking about 'twenty three our revenue guidance just to know if he gave like a number or a range that we should be thinking about it.
Yeah, so as far as 23 is concerned as we mentioned in the remarks supply chain has not been our friend.
And previously we were anticipating quite a ramp in 'twenty three due to the commercialization of the fleet, which would've started literally now and so things are sliding to the right.
These arent lost opportunities of course, I mean, we're at we're actually seeing tremendous demand and interest and in fact, it's kind of.
Getting us to rethink about how many how many units that we're going to be putting into the water. So I mean, it's I think it's a little too early to lay down strict guidance on 'twenty three I mean naturally.
It is sliding.
The commercialization is taking and has been pushed a little due to due to the supply chain. So.
I mean, that's pretty much what I can guide currently.
Understood.
So here is one more question.
So the program of record deal with the Defense Innovation unit. So you guys won the first stage with a competitor.
We've said on the call, but just development milestones Winston that's kind of baked off you can talk about the ultimate.
Opportunity here with the deal.
Sure there's actually two of them associated with that and then they are both pipelines into programs of record that are looking for technology additions in a lot of the stuff that we're developing so that they are concurrently occurring leveraging a lot of the same software and hardware, which is really great for us but these are.
Driven that are literally every 60 days or so in fact the team just got back from San Diego last week and had a very successful outing out there. So we work very closely with our with the.
Are you interested in and their counterparts.
And so it's been incredible because I'm getting to work on something that is.
So aligned in a lot of our own thinking but gets makes use of our of our tech and actually in a very quick manner. So.
Yes, it's.
Every 60 days Theres, a theres a new milestone associated with these programs.
Okay, well the last part of the question was just you also an opportunity as you guys were to witness.
You know frame up the opportunity in front of you for sure. The first the first one which is very software driven is around the licensing of tool kit.
Into the fleet of existing Rovs in Rovs that are being modified.
The initial outlook is in the hundreds to the mid hundreds so that'd be an excellent reoccurring component and one that is high margin and software driven the second one is around platforms that have both a a significant market for not only the platform, but also software licenses.
Awesome.
Guys, well, congrats and keep up the good work.
Thanks Troy.
Okay.
Thank you. Our next question is from Brian Dobson with Chardan capital markets. Please proceed with your question.
Hi, Thanks, so much.
<unk>.
So congratulations on the partnership with shell when do you think we could expect.
To hear about the outcome of those tests.
And I guess further do you think that a marquee partnerships.
Would increase your call it four week sales momentum our ability to gain new contracts moving forward.
Yeah and in fact, I mean, just as a follow on to the earlier question about our own awareness and socialization due to the business combination it has.
We've received significant customer interest due to the high profile nature of it. So so the transaction has been accretive from our customer acquisition standpoint as well.
The.
The agreement and the work that we're currently doing with shell.
It's one of the largest industries out there and and and pretty small at the same time and and and so people talk and people potential customers have become quite aware of what we're doing with shell and and what we've been accomplishing so I expect that to bear fruit as well in the future and <unk>.
We're very happy with this sort of transition in the outcome.
Okay.
Great. Thanks very much.
When do you expect to.
You are about the outcomes of those testings.
Sure.
Yeah. So as I mentioned were talking progressing into the pilot mid year next year.
And.
There's contractual stage gates that I believe we will be able to make.
Some announcements about and so we have to do that co marketing coordination with them, but I believe there'll be opportunity to voice our success to the market here shortly.
Very good.
And then I guess from a bigger picture point of view do you think you could elaborate on how the Dod's Tac driven third offset strategy.
Towards the development of <unk>.
As Rfps and I guess, how do you see that relationship evolving longer term.
Is the potential there to work with U S allies as well as D O D.
Yeah. So the D O D interest in partnership very early on in the company has been absolutely instrumental we've.
We've had a we had a pretty heavy technology lift over the years and they were an incredible partner to help subsidize that.
The IP generation with the government is also favorable for the performer and so we've been also able to take advantage of that.
So I see that partnership I'm continuing.
They have made quite an investment in us and I think have a vested interest in the successful outcome of that and.
Clearly there are events in the world that might stress the portfolio of D. O D and so we've been on the front end of of helping increase that so I believe also.
We've received considerable interest from allies, especially five eyes, and I believe that everything that we do through the proper channels and proper exports would be very accretive to <unk> portfolio.
Yes excellent.
And then finally I guess looking into your forward bookings.
There are some concerns about lower corporate spending moving forward.
Momentum appears to be very strong.
Yes.
Would you speak to some of the key factors driving that and then as you look to growth in 'twenty three 'twenty four.
You think that's going to be more corporate driven work expense driven in terms of opportunity.
Well I mean, we're all just.
[noise] terribly fired up about getting the commercial fleet and scaling that out at it scales very handsomely, we're not at all.
By a lack of demand in fact, the demand is quite a handful to accommodate.
But as I mentioned before the government is an excellent place to develop new tech with and we we are a vibrant technology company and we create our asymmetric advantage through that technology portfolio. So we are going to continue to look to ways to help offset those R&D costs with government partners.
As which revenue stream is going to dominate the other.
Clearly the commercial business scales and scales and a very.
Nice way defense tends to be a little more lumpy.
But as our revenue sand chart flips, where we're obviously closely.
Biased into government defense at the moment as commercial comes online and so.
That will become a lower proportion of our revenue over time, but.
But still significant and in my estimation.
Excellent and congratulations on your first quarter out of the gate.
Thanks, Thanks, Brian .
Thank you. This concludes our question and answer session I would now like to turn the call back over to Mr. Rod.
And thanks, everyone for joining our call today and of course your interest in <unk>, we look forward to executing on our mission of transforming the blue economy with autonomous robotics portfolio and we will be sure to provide you guys updates along the way on our journey and please have a wonderful day. Thank you.
Thank you for joining us today for not Eclipse Robotics Conference call you may now disconnect.
Okay.