Q2 2023 Nauticus Robotics Inc Earnings Call

Speaker 1: So, and welcome to the Nauticus Robotics earnings conference call for the second quarter ended June 30, 2023. My name is Maria and I will be your operator today.

Speaker 1: Today's press release, including the financial tables, are available at the Investor Relations section of the company's website at www.NauticusRubbLubotics.com. The company also plans to file its form 10Q with the SEC later today.

Speaker 1: Joining us on today's call are Natica Stounder and CEO Nick Radford and its CFO . Again, he had monobon. Following their remarks, we will open the call for questions. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward booking statements under securities law and involve a number of risks and uncertainties.

Speaker 1: As a result, we caution you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward looking statements.

Speaker 1: For more detailed risks, uncertainties and assumptions relating to the forward looking statements, please see the disclosures in the company's earnings release and public filings made with the SEC.

Speaker 1: Nauticus disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date, the forward-looking statements are made, except as required by law. Nauticus will also discuss non- GAAP financial metrics and encourages you to read its disclosures and the reconciliation table to applicable.

Speaker 1: GAAP measures in the earnings release carefully as you consider these matrix. We refer to you to its filings with the SEC for detailed disclosures and descriptions of the business as well as on certainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption risk factors in the company's filing.

Speaker 1: You may get Nauticus SEC Filing for free by visiting the SEC website at www.suc.gov.

Speaker 1: I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the best relation section of Notacus website.

Speaker 1: Now we'll turn the call over Nuticus, Thunder, and CEO , McRodford.

Speaker 2: Good morning everyone and welcome to our second quarter, 2020 TREE Erning's call.

Speaker 2: The second quarter was a transitional quarter for Nauticus.

Speaker 2: as we move closer to the commercial launch of the Nauticus fleet.

Speaker 2: We made significant progress finalizing our fleet production.

Speaker 2: and in the commissioning of our first second generation Pac-Wan-Aut.

Speaker 2: Our excitement about the market application for this revolutionary economist robot is high.

Speaker 2: and customers seem to share our feelings as demand signals are increasing.

Speaker 2: During the quarter, we signed commercial deals with leading energy companies such as Petro-Brosch.

Speaker 2: Shell and our Norwegian partner singer for Ecuador.

Speaker 2: We are actively working engagements with other household named customers.

Speaker 2: These energy companies spend hundreds of millions of dollars a year.

Speaker 2: for this type of work that Ockmanok can do. So the opportunity set ahead of us is significant.

Speaker 2: During the quarter, we also transition to the next wave in a couple of art defense programs.

Speaker 2: While it's always great to advance to future phases, sometimes there's delays in new contract authorizations.

Speaker 2: That impact of us in Q2, which is why our government's sourced revenue was down during the quarter.

Speaker 2: We view this as a temporary dip and we expect to see revenue rebound in the crack quarter.

Speaker 2: Let's start with the progress we're making on the commissioning of the Aquinas.

Speaker 2: We've had our first new production unit in the water doing commissioning exercises, and it's logged more than 100 hours off shore to date. I was just up and being hoovered overseas some of the work, and I can tell you firsthand that our robots would be able to do some amazing things for our customers.

Speaker 2: assembly is nearing completion on the other two off, we're not getting it.

Speaker 2: And we still expect to have them both in the water later this year.

Speaker 2: So let's start with Petrobras.

Speaker 2: This was competitively awarded to noticus and ranks as one of the, as ranks as one of a large contract.

Speaker 2: of its kind of date. Ockwinot, our flag should be promised that the Sunsy Road bot will be deployed as the Portrait of Rochester's offshore activities and one of the world's most active offshore energy basins.

Speaker 2: At Petrobras' Dubarte Field, Aquamanautic Conform in Field, Inspection Services, using Toolkit are supervised to tell you software technology.

Speaker 2: While the initial contract for Petrol Ross was approximately $4.3 million just over 60 days worth of work, the market opportunity for Nauticus in offshore Brazil is much larger. Our success in winning this initial award plays as a relevant player for potential subsequent awards and a market worth over 100 million a year.

Speaker 2: Well, no company ever wins 100% of any market opportunity. You can see the size of some of the opportunities were chasing.

Speaker 2: We have also recently signed contracts with Shell and with our partner Stinger for Equinor. Both contracts will utilize Aquina, but will require a very different task highlighting the flexibility of our offering for Shell. We have also signed contracts with our partner Stinger for Equinor.

Speaker 2: off-worn-out enables contact, contact the thought of protection and pick in place of their tires and

Speaker 2: For ECMO, the project will utilize Aquinas Advanced Perception System to detect leaks in novel ways.

Speaker 2: Our government division also continues to progress, and as such, we've recently incorporated a wholly own subsidiary, Nadi Works.

Speaker 2: The better serve our government customers.

Speaker 2: We wish we could give you more details on some of these projects. We're working with their confidential. And we absolutely think they will save lives in a hands-national security.

Speaker 2: as we've discussed previously, some of our programs are nearing an inflection point.

Speaker 3: While revenues.

Speaker 2: where revenues could be materially higher.

Speaker 2: Hopefully we'll be in a position to comment more later this year. Lastly, before I turn the call of a rangen to cover the financials for the quarter, I'd like to comment on our financing plans. Here at Nauticus, we're trying to reshape an industry.

Speaker 2: And we think our autonomous service offering will have a hugely positive impact on our customers' cost, safety, and the environment. In order to do this, we need to build our fleet.

Speaker 2: To help finance this, we're currently finalizing commitments for an additional 15 million of non-delutive capital from the existing equity investors.

Speaker 2: of where 5 million has already been funded in July . And the balance is expected to close shortly.

Speaker 2: We are also an active discussion with investors for a second, second round, a large round of capital which will support our service offering expansion.

Speaker 2: With that said, I'll turn the call over to our CFO Rangdon to discuss our financials.

Speaker 4: Rengetel.

Speaker 5: Thank you, Nick, and hello everyone.

Speaker 5: For the second quarter, we generated revenue of $1.1 million compared to $2.8 million in the year ago comparable period.

Speaker 5: The decrease in revenue is primarily due to delays in contract authorization with government entities.

Speaker 5: Our net income for the quarter was 49 cents per share, compared to a net loss of 35 cents per share in the prior year period.

Speaker 5: The increase was primarily due to the positive impact of the change in the fair value of warrant liabilities.

Speaker 5: Excluding non-recurring items are adjusted net loss per share for the quarter was 20 cents compared to 35 cents in the prior year period.

Speaker 5: Our adjusted net loss excludes the $29.7 million gain in fair value of warrant liability. The increase in value resulted from a determination that delusion caused by our existing convertible notes was less likely given the financing plans that Nick discussed.

Speaker 5: Moving on to our balance sheet and capitalization, as of quarter end, we had $4.6 million of cash and cash equivalents, including our restricted CD. Our networking capital position at the end of the quarter was $11.7 million.

Speaker 5: These numbers do not include the financing options that Nick spoke about.

Speaker 5: And the operator also mentioned mistakenly that we are filing later today. We're actually filing on Monday. I just wanted to clear that up.

Speaker 5: That completes my financial summary, now I'll turn the call back to Nick. All right We will, Nick.

Speaker 2: Thanks, Rankin. And Nauticus, we're trying to build real change, to bring real change into the ocean economy.

Speaker 2: Real change is not easy, but I'm optimistic we can accomplish our goal. We employ some of the best minds in the industry with physicians with the right product and the right time to disrupt its multibillion dollar market. Demand from both commercial and government customers is high.

And as we start working through some of the early contracts, we expect more substantial ones to follow, driving significant future growth for our company. We know funding has been a concern for the market, which is why we've been able, which is why we've been working diligently to secure capital.

While we can't give additional details at this time, we expect to provide an update to the market layer this quarter. This completes our prepared remarks and now we're ready for your questions. Operator? Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

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One moment please, I'll we pull for questions.

Our first question comes from Brian Dubson, with Charden Capital Market.

Please proceed with your question.

Hi, good morning. Congratulations on the recent program wins. You can share some early feedback from those awards. And do you believe these contracts will generate momentum for the business going forward?

Yeah, Brian , hey, good to hear from you. And are you referring to just in totality or the commercial or the government side? First, the commercial side, and then I had a question on the government side.

Yes, sure. With regard to Shell.

We've been working with Shell. We've disclosed that now for some time. And as we've progressed through their different stagegates, the culmination has been moving from the trial type of activities to real live offshore assets.

We are, I'd say hopeful that pending the successful performance that this opens up visibility into larger, larger, more longer term contracts. So as we said earlier, we're in this inflection point, we're finally now realizing all the a priori benefit from all of our hard work with our pre-production prototypes and now as we moved into our production units, we're now winning work for them to accomplish. And since we have little operating history,

It goes without saying that a lot of our contracts have are more contingency, right? We do well and then that unlocks future contracts. And honestly, I think it's to be expected. But...

We've had very positive perception, as we mentioned, both Petra Brush, Shell, and now with our partner singers for Equinor and Norway. It's gonna be a pretty active fall and Q1 for us.

Yeah, and on the defense side, and I apologize there's an airplane flying right overhead. On the defense side, we've continued performing in the current contracts. And so there's all follow on activity, right? And a lot of it has to do with us using Toolkit, this software package that we have. It's platform-edmostic. So in some instances, they really like Aquinod and things that come from that. In other instances, they want us to re-package Toolkit for already existing assets owned by the services. And so we're continuing to perform in both those contracts. We've successfully completed those things.

and as we look forward into next year.

Excellent. And regarding your new subsidiary.

Don't it works? Should we think of that as a skunk work of sorts? And how will that be reported?

Yeah, so obviously it's an inspiration from scunk works. And it's not too, it's not atypical whatsoever to have a lot of the more sensitive government contracting falling under that umbrella. It's wholly owned. It'll be reported.

holistically at the top coast so there won't be any confusion from your side. It's just a lot of what we do is sensitive and having a government contracting entity that works directly with the government allows us more flexibility.

Excellent, thanks very much.

Richard here from Your Highness. Veteran in732

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Jacob with Lake Street. Please proceed with your question. Your response is more than an honest question.

Hey guys, thanks for taking my questions.

Yeah, so what we had previously had mentioned, we had said this year was gonna be, the quarters were gonna be relatively similar in some fashion and a Q2 would have a bit of a dip. Because we knew we were in this moment of renegotiating some of these contracts and sometimes they can take a little longer. So I think it's really worth focusing, however, that on the commercial side, which is really where we feel like the longer term growth comes from.

The efforts of production, and now we're seeing those units come off the assembly line and get under contract, that's the momentum build. The government source revenue, which is very helpful and also leads to its own upside, a little bit of declining Q2 is not representative of our performance, it's representative of some of the negotiations.

rebound back to where we've been running before and likely to stay until we see the appreciable pick up that we're seeing on the commercial side. And a lot of that will be realized in the coming quarters. So, yeah, I mean, that's the sort of the long.

Okay, no, let's understand the top. And then just kind of on the 15 million of non-delutive financing. So...

You know, what kind of revenue levels can we expect to see with that 15 million? I mean, how far does that get you kind of down the road here before we look at the bigger round?

Yeah, so we've closed the first five in July , and we're currently working on closing the balance of it. And the market reception is pretty high and given the capital intensive nature, we want to keep expanding the fleet. And so we are also in very advanced discussions, as you mentioned, but that...

the additional round. And so, we wanna keep our foot on the gas pedal, but the man signals are very strong, and we have to build hard work and the service organization order to capture it. And we'd prefer there not to be any delays due to financing. Thank you.

Okay, awesome. Thanks for taking my questions. Good luck moving forward here.

Thanks and get from the best.

At this time, this concludes our questionnaire answer session. I would now like to turn the call back over to Mr. Radford.

Thank you for joining us. I conclude our question.

Sorry, thank you for joining us today and for your interest in the Noticah story and our vision for the future.

We are committed to transforming the blue economy through our cutting edge autonomous robotics technology, and we remain excited to share progress updates with you along the way.

Have a wonderful day. you

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