Q4 2023 Nauticus Robotics Inc Earnings Call
Yeah.
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Unknown Executive: If you need assistance during your conference call today, please press star zero. Good day, everyone, and welcome to today's Nauticus Robotics 2023 Q4 earnings call. At this time, all participants are in a listen-only mode.
Unknown Executive: Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star and 2.
Kristin Moorman: Please note this call is being recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Kristin Moorman, Nauticus Special Project Leader. Thank you, and good morning, everyone.
Kristin Moorman: Joining me today and participating in the call are John Gibson, CEO and President, Vicky Hay, Interim CFO, Nick Bigney, General Counsel, and other members of our leadership team. On today's call, we will first provide prepared remarks concerning our operations, vehicle testing, and financial results. Following that, we will answer questions. We have now released our results for the full year and fourth quarter of 2023, which is available on our website. In addition, today's call is being webcast, and a replay will be available on our website shortly following the conclusion of the call. Please note that comments we make on today's call regarding projections or our expectations for future events are forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties could cause actual results to differ materially from our current expectations.
If you need assistance during your conference today, Please press Star zero.
Yes.
None: Good day, everyone and welcome to today's not a kiss robotics 2023 Q4 earnings call.
None: At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session.
None: You May register to ask a question at any time by pressing the star and one on your telephone keypad.
None: You may withdraw yourself from the queue by pressing star and two.
None: Please note. This call is being recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Kristen Mormon Nautica Special project leader.
Kristen Mormon: Thank you and good morning, everyone. Joining me today and participating in the call are John Gibson, CEO and President.
John Willis Gibson: We advise listeners to review our earnings release and the risk factors discussed in our filings with the SE. Also, please refer to the reconciliations provided in our earnings press release as we may discuss non-GAAP metrics on this call. I will now turn it over to John. Thanks, Kristin.
None: Hey, interim CFO.
None: Next big any general counsel and other members of our leadership team on.
Kristen Mormon: On today's call. We will first provide prepared remarks concerning our operations vehicle testing and financial results.
Kristen Mormon: Following that we will answer questions.
John Willis Gibson: Good morning, and thank you for joining us on the call this morning. I'm pleased to be presenting our quarterly results for the first time as CEO. A great deal has transpired since the last conference call. First, over the last four months, we've initiated a transformation of the company from being a research and development organization to being a customer-centric innovation for profit enterprise. During the fourth quarter, we added an interim CFO, Vicky Hay, with 17 years of public company reporting and operational cost management skills.
Kristen Mormon: We have now released our results for the full year and fourth quarter of 2023, which is available on our website.
Kristen Mormon: In addition, today's call is being webcast and a replay will be available on our website. Shortly following the conclusion of the call.
Kristen Mormon: Please note that comments, we make on today's call regarding projections or our expectations for future events are forward looking statements.
Kristen Mormon: Forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control.
These risks and uncertainties can cause actual results to differ materially from our current expectations.
John Willis Gibson: And we added a general counsel, Nick Bigney, with public company experience as well as complex deal and financing expertise. We've recently added sales leadership with Fortrade Mechanics. Jorge has experience in domestic and international sales, including in Brazil and Norway, two important countries to us, and he is captain of a nine digit multi-year software and service sale in Latin America for previous. He brings superior skills and collaboration with customers combined with the full alignment of our company effort to deliver the contractual requirements we've signed up for. We also have an incredible team of engineers, mechanical, electrical, and software, who are currently certifying the Aquanaut Mark As the year progresses, we will have the leaders from each of our business units present during the earnings call. With a great team, you can expect great results. As you will see in a moment, those results are beginning to bear fruit. But first, let me address a few historical matters.
Kristen Mormon: We advise listeners to review our earnings release and the risk factors discussed in our filings with the S E T.
Kristen Mormon: Also please refer to the reconciliations provided in our earnings press release, as we May discuss non-GAAP metrics on this call.
I will now I'll turn it over to John.
John Gibson: Thanks, Kristen good morning, and thank you for joining us on the call. This morning, I'm pleased to be presenting our quarterly results for the first time as CEO Greg.
John Gibson: Great deal has transpired since the last conference call first over the last four months, we've initiated a transformation of the company from being a research and development organization to being a customer centric innovation for profit underbrush.
John Gibson: The fourth quarter, we added an interim CFO.
John Gibson: 17 years public company reporting and operational cost management skill and we added a general counsel.
John Gibson: With public company experience as well as complex deal and financing expertise.
John Gibson: We've recently added to the team and sales leadership with Jorge.
John Gibson: Well he has experience in domestic and international sales, including in Brazil in Norway to a foreign country Jewish and as captain a nine digit multiyear software and service sales in Latin America for previous company you break superior scale, some collaboration with customers combined with the full launch of our company effort.
John Gibson: Deliver the contractual requirements, we've signed up for.
John Willis Gibson: Previously, we announced a merger with 3D at Depth. When the announcement was made, the share price for Nautica exceeded $2, and the structure was an all-stock deal. After much consideration, both parties agreed the best path forward was to terminate the prior agreement as the situation had materially changed.
John Gibson: So having a critical team of engineers mechanical electrical and software who are currently certified the Austin not Mark two for commercial work during the fall of 2024.
John Gibson: As the year progresses, we will have the leaders from each of our business units present during the earnings call with the great team. We can expect great results as you will see in a moment. Those results are beginning to be realized first let me address historical matters.
John Willis Gibson: We remain collaborative with 3DAdept and continue to seek ways to work together on customer projects. I believe this termination best allows us to focus on transforming our own business. A stronger Nauticus benefits our shareholders in any transaction, and we intend to build a stronger Nauticus. We've built an excellent working relationship with 3DAdept leadership, and we intend to maintain that as we go forward. Speaking of transforming our own business, we've changed our internal structure over the past few months. We've reorganized into four business units: autonomous solutions, electrical manipulators, autonomy, software, and government solutions.
John Gibson: Previously, we announced the merger with <unk>.
John Gibson: When the announcement was made the share price monotocous exceeded $2 and the structure was an all stock deal.
John Gibson: After much consideration both parties agreed the best path forward with determination of prior agreement as the situation has materially changed we remain collaborative with <unk> at that and continue to seek ways to work together on customer projects. I believe this termination best allows us to focus on transforming our own business.
John Gibson: A stronger model benefits our shareholders in any transaction and we intend to build a stronger bottom fish. We built an excellent working relationship with three D. Adept leadership and we intend to maintain that as we go forward.
John Gibson: Now speaking of transforming our own business, we changed our internal structure over the past few months, we've reorganized into four business units autonomous solutions, electrical manipulators autonomy software and government solutions.
John Willis Gibson: Autonomous solutions, electric manipulators, and autonomy soft software were previously part of what was the bigger Aquanaut team. We changed them into three components because each has addressable markets and can grow independently. The capital required to deliver software manipulators is also significantly less than the capital needed to complete the Aquanaut vehicle. Let's start out by talking about the Autonomous Solutions group. The Autonomous Solutions team is responsible for the Aquanaut Mark 2 vehicle. The Aquanaut vehicle is designed for subsea inspection, maintenance, and repair, commonly called IMR work, for projects including oil and gas, wind, telecommunications, midstream, and aquaculture. The level of difficulty increases as you move from inspection to repair. Our initial efforts are focused entirely on inspection.
John Gibson: Polymer solutions electric manipulators and autonomy soft software were previously part of what was the bigger aquanaut team, we change them at the three components because each has addressable markets and can grow independently.
John Gibson: Capital required to deliver software manipulators is also significantly less than the capital needed to complete awkward not vehicles, well I'll start out by talking about the autonomous solutions group. The autonomous solutions team has accountability for the Aqua not mark to be careful.
John Gibson: Aftermarket vehicle is designed for subsea inspection maintenance and repair commonly called <unk> work for projects, including oil and gas wind telecommunications midstream in agriculture. The level of difficulty increases as you move from inspection to repair. Our initial efforts are focused entirely on inspection.
John Willis Gibson: We have contracts currently with an international oil company and a super major oil company, both early adopters, to demonstrate the value of autonomy to oil and gas operations. These untethered autonomy champions are providing regular guidance on what is required to replace their current methodology. The efficiency gains, decreases in staff, reductions in vessel size, and hence emissions. The move to electrification and away from hydraulics to minimize the potential for hydraulic fluid leaks and the ability to work at depth regardless of weather make our AUV platform compelling to the industry. So where are we? We're currently doing full system testing in the Gulf of Mexico, and last week we did testing exceeding 1,300 meters with an ROV monitoring our activity. We've made the transformation from idea to product.
John Gibson: We have contracts currently with an international oil company and a super major oil companies. Both the early adopters to demonstrate the value of autonomy to the oil and gas operations. These untethered autonomy championship, providing regular guidance well what is required to replace their current methodology the <unk>.
John Gibson: The efficiency gauge decreases in staff reductions in vessel size and hence submissions the.
John Gibson: The move to electrification and away from hydraulics to minimize the potential for hydraulic fluids lakes and the ability to work as depth, regardless of whether make our AUC platform compelling to the industry. So we're all of them.
John Gibson: We're currently doing full system testing in the Gulf of Mexico and.
John Gibson: And last week, we did testing exceeding 1300 meters with Rovs monitoring our activity.
John Gibson: We've made the transformation from idea to product during these SaaS, we're doing numerous system SaaS to include practicing and improving our launch and recovery testing acoustic communications emergency procedures to recover descending and ascending optimisation sanction keeping and many more tests.
John Willis Gibson: During these dives, we're doing numerous systems tests to include practicing and improving our launch and recovery, testing acoustic communications, emergency procedures to recover, descending and ascending optimization, station keeping, and many more tests to prove the capabilities of the Aquanaut vehicle. It is going well thus far. The Nauticus team is performing well above expectations, as is the vehicle. We have much to learn and need to validate our ability to conduct several operational tasks to move from testing to commercial work later this summer. We posted a video of some of our testing on our YouTube channel. Best video I've ever posted, by the way.
John Gibson: The capabilities of the off road vehicle it is going well, thus far and office team is performing well above expectations as this debate yet.
John Gibson: We have much to learn and need to validate our ability to conduct several operational past the move from testing to commercial work later this summer.
None: We posted a video of some of our testing to our Youtube channel Best video I've ever posted by the way.
Stu Donnan: You can find a link to the video in our earnings release issued last night. It is also linked in the webcast for those of you listening online. Please take a moment to watch the video which shows our Aquanaut Mark 2 vehicle diving to depths of greater than 1300 meters, performing maneuvers, and hovering less than a meter above the seabed, among other things. The Aquanaut we're testing in the Gulf of Mexico is Vehicle 2. Vehicle 1 is being assembled in our shop now, and Vehicle 3 is being prepped for assembly in early 2025. I'd like to introduce you to a great leader and our Chief Engineer, Stu Donnan, to make a few comments on the testing thus far. Stu?
None: You can find the link to the video in our earnings release issued last night and it is also linked in the webcast for those of you listening online. Please take a moment to watch the video which shows are off were not mark to vehicle diving to depths greater than 1300 meters performing maneuvers and hovering less than a meter above the seatback.
None: Among other things, yes, we're not we're testing in the Gulf of Mexico, which vehicle to vehicle one is being assembled at our shop now and vehicle III as being prepped for simply in early 2025, I'd like to introduce you to a great leader and our chief engineer shoe Donovan to make a few comments on the testing thus far.
Shoe Donovan: See you.
Stu Donnan: Thanks, John. Over the last few days, we've made a lot of great progress confirming the functionality of Aquanaut Mark II in the Gulf of Mexico. Our initial testing has been focused on tetherless commanding and navigation in the deep water environment. We've performed test dives while recording data from all systems to analyze performance and identify any potential issues. Tetherless commanding of the vehicle has been demonstrated at depths greater than 1200 meters, where we have executed various survey patterns and autonomous behaviors.
Shoe Donovan: Thanks, John over the last few days, we've made a lot of great progress confirming the functionality of aquanaut Mark too in the Gulf of Mexico.
Shoe Donovan: Our initial testing has been focused on televised commanding and navigation in the deepwater environment.
Shoe Donovan: Perform tests dives, while recording data from all systems to analyze performance and identify any potential issues.
Shoe Donovan: Commanding of the vehicle that's been demonstrated at depths greater than 1200 meters, where we are.
Shoe Donovan: Executed various survey patterns and autonomous behaviors.
John Willis Gibson: We've also verified functional navigation at these depths. Analysis of the data will continue this week while we wait for the weather to improve and return for more testing. Well, I guess that's the end of yours, you turning it back to me. So let's pick up with talking about the autonomous software in what we call the toolkit. Now, what we've realized in the last couple of months is the value of our toolkit software platform. The architectural decisions during the design of the toolkit software allow this system to be platform independent.
Shoe Donovan: Also verified functional navigation at these depths.
Shoe Donovan: And I also said the data will continue this week, while we wait for the weather to improve and return for more testing.
Shoe Donovan: Yeah.
Shoe Donovan: Okay.
None: Well I guess that till the end of your sheet turning it back to me. So that's picked up with talking about the autonomous software, what we call a toolkit.
None: Now what we've realized for the last couple of months just the value of our toolkit software platform.
None: Architectural decisions during the design tools software allows this system to be <unk>.
That form independent it can be deployed on numerous subsea platforms, both tethered and untethered, we've already successfully used the toolkit software on several subsea robots, both knock US developed as third party developed and shore imagine having numerous different robotic form factors operating on your infrastructure.
John Willis Gibson: It can be deployed on numerous subsea platforms, both tethered and untethered. We've already successfully used the toolkit software on several subsea robots, both Nauticus-developed and third-party developed. In short, imagine having numerous different robotic form factors operating on your infrastructure with a standard software system rather than having proprietary, unintegrated platforms on each of the deployed robots. This facilitates a multi-agent robotic future treating an array of fit-for-purpose robots as an organism rather than as independent operators. To be the operating system of choice, we need to transform our serviceware into commercial software. We're currently addressing the enhancements required to have a commercial software product. The primary enhancements are improvements in the user interface and user experience and a couple of new features.
None: With the standard software system, rather than having proprietary integrated platforms on each of the deployed robots.
None: This facilitates the multi agent robotic future, creating treating an array of fit for purpose robot as an organism rather than as independent operators to be the operating system of choice, we need to transform our service we're into commercial software.
None: We're currently addressing the enhancements required to have a commercial software product the primary enhancements or improvements in the user interface and user experience and a couple of features.
John Willis Gibson: Much of the needed knowledge to drive this development is being gained while we are testing the Aquanaut vehicle. If we move to the electric manipulators, that's what differentiates Nauticus from its competitors. The ability to interact with objects rather than only gathering data sets us apart from our other AUV suppliers. We're striving to offer a path to transition subsea work to an autonomous untethered replacement for the current generation of light duty ROVs. The manipulators are necessary for us to move up the value chain from inspection to maintenance and repair. However, given the power and size of Aquanaut, we will be limited to doing light duty work.
None: This is a needed knowledge to drive this developed let her speak gained while we are testing the aqua not vehicle.
None: If we move to the electric manipulators, that's what differentiates <unk> from its competitors the ability to interact with object rather than only gathering data sets us apart from our other <unk> suppliers, we're striving to offer path to transition subsea work to autonomous untethered replacement for the current generation.
None: And in light duty Aro base, the manipulators are necessary for us to move up the value chain from inspection maintenance and repair given.
None: Given the power and size of off we're not we will be limited to doing light duty work heavy duty rovs are needed, especially for construction related work.
John Willis Gibson: Heavy duty ROVs are needed, especially for construction related work. We're discussing with other subsea service providers the possibility of supplying our manipulators for integration into their vehicles. We also see a move by all subsea providers to electric manipulators like ours to reduce the environmental impact of potential hydraulic fluid leaks. Conventional ROV operation has no autonomy associated with arms.
Discussing with other subsea service providers, the possibility of supply arpin escalators for integration into their vehicles. We also see a move by all subsea providers to electric manipulators like ours to reduce the environmental impact of potential hydraulic fluids lakes conventional ROE V operation has no autonomy asoka.
None: He did with arch.
John Willis Gibson: Our arms are entirely autonomous. We have an outstanding team working on autonomous electrical manipulators, and the same team is investigating how to employ our autonomy on hydraulic manipulators as well. This is a market where we can have an immediate impact. Our government business. While the government market segment is enormous, it's believed to exceed $1.5 billion in 2025, the portion of the total available market we can address is much smaller. We do not have sufficient capital to undertake larger products.
None: Our arms are entirely autonomous we have an outstanding team working on autonomous electrical manipulators and the same team is investigating how to point our autonomy on hydraulic manipulators as well. This is a market where we can have an immediate impact.
None: Our government business, while the government market segment is enormous it's believed to exceed $1 billion 2025. The portion of the total available market. We can address as much smaller we do not have sufficient capital to undertake larger products.
None: Projects. Therefore, we are focused on projects matching our capital and competencies, which are seeking breakthroughs new concepts true innovation, which often gets time Eaton in larger organizations, we have the talent and leadership to succeed and providing innovation.
John Willis Gibson: Therefore, we are focused on projects matching our capital and competencies, which seek breakthroughs, new concepts, and true innovation, which often get stymied in larger organizations. We have the talent and leadership to succeed in providing innovation. During the fourth quarter of 2023, we completed a project for the Defense Innovation Unit of the Department of Defense, DIU, and completed a second project in the first quarter of 2024. We anticipate receiving a letter from DIU indicating we have successfully completed both projects, both of which were related to innovation. We do not currently believe any future work will be awarded related to these projects to Nautica.
None: During the fourth quarter of 2023, we completed the project for the Defense innovation unit of the Department of Defense.
None: <unk> completed a second project in the first quarter of 2024, we anticipate receiving a letter, indicating we've successfully completed both projects.
None: <unk> projects, where innovation related we do not currently believe any future work will be awarded related to these projects to knock us.
John Willis Gibson: Nauticus needs consistent revenue and cash flow, and government contracts are often awarded sporadically. We sometimes call that lumpy, and hence the pipeline and cash flow are hard to project. Consequently, the government team to augment the pipeline for revenue has the freedom to pursue non-government projects that demand our talents and competence. Our government team is extremely talented and is pursuing new non-government related opportunities both domestic and international. We're currently having discussions with companies seeking insights into their robotic programs. We are well suited to assist a variety of larger companies seeking robotics expertise. Work will be taken if it does not disqualify us for U.S. defense industry opportunities.
None: <unk> consistent revenue and cash flow and government contracts are often awarded sporadically we sometimes call that lumpy enhance the pipeline of cash flow are hard to project. Consequently, the government team to augment the pipeline for revenue has the freedom to pursue non government projects that demand our talent and competencies.
None: Our government team is extremely talented and is pursuing new nongovernment related opportunities both domestic and international we're currently having discussions with companies seeking insights into their robotics program, we are well suited to assist a variety of larger companies seeking robotics experience expertise.
None: Work will be taken if it does not disqualify us for U S defense industry opportunities, we have a total available market assessment be conducted for each of our four business units, which should be completed and we can communicate at our next call now with that I will turn it over to Vicki <unk> to review our financials.
John Willis Gibson: We have a total available market assessment being conducted for each of our four business units, which should be completed and we can communicate on our next call. Now, with that, I'm going to turn it over to Vicki Hay to review our financials. Thank you and good morning. As John mentioned, I joined the organization as interim CFO in December last year. I will be covering an overview of our financial performance for the full year and fourth quarter of 2023. Revenue for the fourth quarter was $1.1 million, which is down $2.1 million from the previous year.
Vicki: Thank you and good morning.
Vicki: As John mentioned I joined the organization as interim CFO in December last year, I will be covering an overview of our financial performance for the full year and fourth quarter of 2023.
Vicki: Revenue for the fourth quarter was $1 1 million, which is down $2 1 million from the previous year.
Victoria Hay: Full-year revenue for 2023 was $6.6 million, which is down $4.8 million from 2022. Revenue in 2023 primarily came from government contracts, as mentioned earlier. Operating expenses for the fourth quarter were $35.3 million, which is a $24.9 million increase from the same period in 2002.
Revenue for 2023 was $6 6 million.
Vicki: Thank you is down $4 $8 million from 2022.
Vicki: Revenue was 193, primarily came from government contracts mentioned earlier.
Vicki: Operating expenses for the fourth quarter was $75 3 million.
Vicki: The $24 9 million dollar increase from the same period in 2002.
Victoria Hay: This included a one-time impairment charge of $25.3 million, with $15.1 million being taken on the Aquanaut units after updating the future projected discounted cash flows for these units. We also recorded a $2.5 million loss on the contract relating to testing of the Aquanaut vehicle for an oil and gas commercial contract, the revenue for which will be recognized during 2024. Additionally, in 2023, we recorded a $1.5 million severance charge relating to the executives that departed in the fourth quarter of 23 and the first quarter of 24. Net loss attributable to common stockholders for the quarter was $39.5 million and $50.7 million for the full year. This is a $31.3 million increase from Q4-22 and a $17.5 million increase from Q4-22. Adjusted net loss for the fourth quarter was $8.8 million compared to $5.7 million for the same period in the previous year.
Vicki: This included a one time impairment charge of $25 3 million.
Vicki: With $15 $1 million being taken on the op units after updating the future projected discounted cash flows for each unit.
Vicki: We also recorded a $2 5 million loss on the contract related testing of Fiat cannot vehicle for an oil and gas commercial contract the rest.
Vicki: Can you for which will be recognized during 2024.
Vicki: Additionally, in 2023, we recorded a $1 $5 million severance charge relating to the executives at the pocket in the fourth quarter of 2003, <unk> first quarter 2004.
Vicki: Net loss attributable to common stockholders for the quarter.
Vicki: $9 5 million.
Vicki: $67 million for the full year.
Vicki: This is a $31 $3 million increase from Q4, 'twenty Q and $17 5 million increase from full year 'twenty two.
Vicki: Adjusted net loss for the fourth quarter was $8 8 million compared to $5 $7 million from same period in the previous year, we reported a full year adjusted net loss of $34 3 million.
Victoria Hay: We reported a full-year adjusted net loss of $34.3 million, which is an $18.7 million larger loss than the previous year. As we have been working through the transformation of the business, we have taken a close look at the balance sheet and disposed of items that do not fit the future vision. To that effect, we have moved $2.9 million worth of assets into assets held for sale, which include the three hydranauts, the drips, and numerous smaller excess assets. Two of the hydranauts were sold in the first quarter of 1924, and the third vessel is still being actively monitored. These assets were collectively impaired by $9.9 million to reflect the actual or anticipated sale price.
Vicki: Which is an $18 7 million dollar larger loss than the previous year.
Vicki: As we have been working through the transformation of the business. We have taken a close look at the balance sheet and disbursed if items that do not fit the future vision.
In fact, we have $92 $9 million worth of assets into assets held for sale, which include the three hygiene us the tracks are numerous smaller access assets.
Vicki: The heightened lots were sold in the first quarter of 2004 on the third vessel is still being actively marketed.
Vicki: These assets will let deftly impact by $9 9 million to reflect the actual or anticipated sales price.
Victoria Hay: Cash at the end of 2023 was $800,000. However, during the first quarter of 2024, we secured $13.4 million of additional funding from current investors, which puts us in a stronger position going forward. With the recent organizational changes, we have evaluated additional opportunities to reduce costs. As a result, we are expecting to reduce G&A expenses in 2024 by more than 50% year-on-year through reduced headcount, enhanced cost management, and streamlined efficiencies. Although these financial results are not very positive, the cost management efforts, combined with the right sizing of the organization, are key pillars in the overall transformation of Nauticus to a customer-centric, innovation-for-profit enterprise. I will now pass the call back over to John. Thank you, Becky.
Vicki: Cash at the end of 2023 was $800000. However, during the first quarter 'twenty to 'twenty four we secured $13 4 million of additional funding from current and Baxter, which puts us in a stronger position going forward.
Vicki: With the recent organizational changes, we have evaluated additional opportunities to reduce costs.
Vicki: As a result, we are expecting to reduce G&A expenses in 'twenty to 'twenty four by more than 50% year on year due to reduced head count and cost management and streamlined deficiencies.
None: Well that these financial results are not very positive the cost management effort.
And with the right sizing of the organization.
None: Key pillar and the overall transformation of nasca to a customer centric innovation for profit enterprise I will now pass the call back over to John.
John Gibson: Thank you Vicky.
John Willis Gibson: I am. I'd like to ask a few questions, so I'll turn it back to the operator, and if you would like to ask, please get in the queue. At this time, if you would like to ask a question, please press the star and one on your touch-tone phone. You may remove yourself from the queue at any time by pressing star 2.
John Gibson: And.
John Gibson: Is problem to do a few questions. So I'll turn it back to the operator, if you would like to ask please get in the queue and we look forward to responding.
None: At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone.
None: You may remove yourself from the queue at any time by pressing star two.
Unknown Executive: Once again, that is the star and one to ask a question. We will pause for a moment to allow questions to queue, and we'll take our first question from Brian Dobson with Charting Capital Markets. Your line is open. Hi, good morning.
None: Once again that is star one to ask a question, we will pause for a moment to allow questions to queue.
None: And we will take our first question from Brian Dobson with Chardan capital markets. Your line is open.
Brian H. Dobson: Hi, good morning, Thanks for taking my question.
Brian H. Dobson: Thanks for taking my question. So, you know, from our contacts in the industry, we've been hearing that 2025 could be a meaningful upgrade or a meaningful year in the upgrade cycle for ROVs. What are you seeing for next year? And what are some of the key areas of opportunity?
Brian H. Dobson: So you know we've been from a from our contacts in the industry. We've been hearing that 2025 could be a meaningful upgrade or meaningful year in the upgrade cycle.
Brian H. Dobson: These are what are you seeing for next year and what are the some of the key areas of opportunity meaning.
John Willis Gibson: Meaning, which industries do you find most exciting in 2025? I appreciate your question, Brian. I appreciate you dialing in today. So the ROV market, the oil and gas industry, and commodity prices have really kept the offshore environment from experiencing a lot of growth over the last five or six years. That's apparently also true for the ROV industry, so not a lot of new ROVs have been sold. So you're looking at an upcycle for all the manufacturers; probably, shilling, Perry, and Oceaneering would all be looking at excellent growth in 2025 for sales of their ROVs to begin to replace the aging fleet. I think that also creates a good opportunity for us as we move forward because you're going to see people making a change in their capital infrastructure. And we should have a tested vehicle that's ready to go here during 2024. So we're looking forward to that 2025 market uplift for ROVs in general. I think we'll be able to step in and get our toe in the water and enjoy some of that uplift. Yeah, it was very good.
Brian H. Dobson: Which which industries do you find most exciting 25.
None: I appreciate the question, but I appreciate you dialing in today.
None: So R O V market oil and gas industry.
None: Commodity prices have really kept the offshore environment from having a lot of growth over the last five or six years.
None: That's apparently also true for the RV industry. So not a lot of new Rovs have been sold so youre looking at an up cycle for all the manufacturers probably shelling Perry Oceaneering would all be looking at.
None: Excellent growth in 2025 were sales of their rovs to begin to replace the aging fleet I think that also creates a good opportunity for us.
None: We move forward, because youre going to see.
None: People, making a change in their capital infrastructure and we should have a tested vehicle.
None: Thats ready to go here during 2024, so we're looking forward to that 2025.
None: Market uplift for Rovs in General I think we will be able to do.
None: Step in and get our toe in the water and enjoy some of that uplift.
None: Yes, very good.
John Willis Gibson: You know, you delved into some of the government-related business during your prepared remarks. Could you give us a little bit of an update or any additional color on some of those DoD contracts you had been working on and will receive certificates related to? Yeah, sure. I mean, on the DOD side, we really like that business. We think that our skills and our technology are really suited to providing innovation for that marketplace. However, for our shareholders in our company, it's pretty lumpy, and it's really sporadic.
None: You've dealt into some of the some of the government related business. During your prepared remarks, I guess could you give us a little bit of an update or any additional color on some of those Dod contracts you had been working on well received certificate it's related to.
None: Yes, yes sure.
None: <unk> side.
None: Like that business, we think that our scale and our technology really suited to providing innovation for that marketplace. However for our shareholders and our company.
Its pretty lumpy and its really sporadic and so we need to get continuity and revenue and cash flow and so we do need to branch out and do other projects with that group. So long as it does not exclude us from big defense related work.
John Willis Gibson: And so we need to get continuity and revenue and cash flow. And so we do need to branch out and do other projects with that group, so long as it does not exclude us from doing defense-related work. We did complete two.
None: We did complete two we completed one in December.
John Willis Gibson: We completed one in December, and we completed another in January. And I've personally spoken to them, and I believe we're going to receive our certificates indicating successful completion, and we had a conversation as well. They were very encouraging of us participating in future projects and wanted to make sure that we were excited about submitting proposals as we go forward. So I think we have a great opportunity there. An excellent customer. But, you know, any American would realize that when you're dependent upon the U.S. government coming to conclusions and funding, that's not a place where you want to bet all your money when you're a startup company like we are. Yeah, thanks for that color.
None: <unk> another in January.
None: And partially spoken to them, but I believe we're going to receive our.
None: Certificates, indicating successful completion.
None: Then the conversation as well they were very encouraging.
None: On us participating in future projects, and then and wanted to make sure that we were excited about submitting proposals as we go forward. So I think we have a great opportunity there.
None: Excellent customer but.
None: Any American would realize that when you are dependent upon the U S government.
None: Coming to a conclusion should spud date, that's not a place where you want to bet all in your body. Your startup company like we are.
None: Yes, thanks for that color.
John Willis Gibson: You know, we noticed that you've been making some changes to call it SG&A and also R&D expense moving forward. Can you speak to some of the key levers you've been pulling to reduce those expenses and how you anticipate those, that line item, I guess, over the next call it year or so? Let's see if I can do that, Brian, for you.
None: We noticed that you've been making some changes to call. It SG&A and also R&D expense.
None: Can you speak to some of the key levers you're pulling.
None: So it's expensive.
None: Does that.
None: That line item I guess over the next call it year or so.
None: Let's see if I can do that Brian for you said, it's a difficult question because in this organization.
John Willis Gibson: It's a difficult question because, in this organization, the next product is what would have been the case if you were here a year ago, and now our entire focus is on the current product. And so, while people might be interested in our comments on switching from lithium batteries to fuel cells, that's not what we're doing. We're not currently doing R&D. Instead, we are testing, certifying, and ensuring that the product we have is commercially ready. And so, I'd say we've got the R is small, and the D is large.
None: The next product is what would have been the case. If you were here a year ago and now our entire focus is all the current product and so while people might be interested in water. Our combat so switching from lithium batteries to fuel cells. That's not what we're doing we're not currently doing R&D we are testing certified.
None: And ensuring.
None: Ensuring that the product we have commercially ready.
None: So I'd say, we've got the.
None: <unk> is small and the biggest large it's not quiet silent, but it's close to silence. So the majority of our spending has shifted entirely to development and delivery as opposed to doing any future related work. We're at that point, where we have a great product that needs to be completed we shouldnt start working on anything that would <unk>.
John Willis Gibson: It's not quite silent, but it's close to silent, so the majority of our spending is shifted entirely to development and delivery as opposed to doing any future-related work. We're at that point where we have a great product that needs to be completed. We shouldn't start working on anything that would distract us from getting the Aquanaut Mark II into the market and successful.
None: Tracked us from getting the offer not mark to the market and successful so anticipate us.
John Willis Gibson: So anticipate us, you know, when you say R&D, the R is silent, and the D stands for delivery as opposed to development. So I think that's where we're going at the moment. Yeah, very good. And speaking of deliveries and clients, can you give us a little bit of color on how your relationship with PetroBus is evolving? I could do that.
None: When you say R&D dollar silent and that these stands for delivery as opposed to development. So I think that's where we're going at the moment right.
None: Yeah, very good and speaking of deliveries and clients can you give us a little bit of color on how your relationship with Petrobras is evolving.
John Willis Gibson: Jorge MacNeish is with us too. I'll start out by saying just a couple of things, and then I'll turn it over to Jorge for a comment. I've never seen such enthusiastic champions for this technology as I have with our current set of customers. I mean, they've been entirely engaged, supportive, understand where we are, and continue to talk about the amount of work that we'll win when we get the product certified.
None: Oh, I could do that Jorge niches with astute about I'll start out by saying, it's a tough place I'll turn it over to Jorge for a comment.
Jorge: I've never seen such enthusiastic champions for this technology is I have with our current set of customers.
Jorge: It entirely.
Jorge: Entirely engaged supportive understands where we are and continue to talk about the amount of work that will win when we get the product certified Jorge.
Jorge MacNeish: Thank you very much, John. I can echo that in the context of the customer. The customer is extremely supportive of what we're trying to accomplish offshore Brazil. As you know, that's a major area of offshore development in deep water, has its complexities and significant opportunities.
Jorge: Thank you very much John Mccain and echo that in the context of the customer customers are extremely supportive of what we're trying to accomplish offshore Brazil. As you know that's a major area of offshore development in deepwater has its complexities and a significant.
Jorge: <unk> opportunities.
John Willis Gibson: It's brought us, you know; we really are trying to shift from being a company that was great at marketing to being a company that's great at delivery. And our customers want that too. And I personally, as well as Jorge, we're meeting with them person in person, having discussions, we've got tremendous support, they see the future, they see the value we'll bring. And we just have to bear down on getting this done. And that's what we're doing in the testing. That video is a pretty powerful testament to the fact we have a vehicle that works. We have some enhancements that need to be made and some additional testing, but we are getting very close to being in the commercial revenue model for the core of the business. Yeah, thanks.
It's Brian.
Jorge: Aren't trying to shift from.
Jorge: Sort of being a company that was great at marketing because we have a company that's great it delivery and our customers want that too and I am personally as well as Jorge.
Jorge: We're meeting with them person in person.
Jorge: Having discussions we've got tremendous support.
Jorge: See the future, let's see the value will bring and we just have to bear down on getting this done and that's what we're doing and the testing that video is pretty powerful Testament to the fact, we have a vehicle that works we have some enhancements that need to be made some additional testing, but we are getting very close to being.
And the commercial revenue model for the core of the business.
Yes. Thanks.
John Willis Gibson: And, you know, final, final question, and I know I've asked a lot here. As you take these steps to make the company more customer focused rather than R&D focused, I guess, what do you see as the most important factors for your team to focus on? Actually, the contractual requirements we have are probably number one, the alignment of our culture to be customer-centric as opposed to technology-centric. We've got some work to do there. It's a big cultural transformation here. Another one is just cost being cost conscious.
None: Final final question and I know I've asked a lot here.
None: As you're as you're taking those steps to make the company more customer focused.
None: Rather than R&D focused I guess, what do you see as the most important factors.
None: Okay.
None: Actually their contractual requirements. We have is probably number one the landlord of our culture to be customer centric as opposed to technology centric. We've got some work to do there its a big culture.
None: Cultural transformation here. Another one is just a cough speak tough start yet so I think.
John Willis Gibson: I think Well, we probably haven't had a call on this or written a paper, but we have brought the number of employees down from over 100 to less than 50. We've reduced our G&A costs by more than 50%. We're incredibly focused on being good stewards of the money that we have and returning value to our shareholders and to our lenders and creating tremendous value for our customers. So I mean, we really intend to be great stewards and to turn this into an investment of note. And so that's where the focus is. Thanks very much.
Well, we probably haven't had a call on this written a paper, but we have brought in number of employees down from over 102, less 50, we've reduced our G&A cost by more than 50%.
None: We're incredibly focused on being good stewards of the money that we have and returning value to our shareholders and to our lenders.
None: And creating a tremendous value for our customers. So I mean, we.
None: We are we really intend to be Greg Stewart.
None: And to turn this into an investment a node and so that's where the focus is today.
None: Thanks very much.
None: Thanks, very much Brian.
Unknown Executive: There are other questions. We'll take our next question from David Marin with David Trading. Your line is open. Hi, good morning.
None: Another question.
None: We'll take our next question from David Mann with David Trading your line is open.
David Mann: Hi, good morning.
David Marin: How many Octonauts do you currently have as of today, and how many do you see yourself making in the near future? Excellent question. We currently have one that is completely assembled and in the water, and being tested.
David Mann: How many ox on ox you currently have.
David Mann: Today and how many do you see this as Nathan in the near future.
David Mann: Excellent question. We currently have one that is completely assembled in the water.
David Mann: And being tested and Thats vehicle number two a little confusing but vehicles number one is here in our shop and it's being assembled and we have all of the pieces in the parks were just putting in the batteries from the sensors and completing the vehicle and making the modifications that are necessary as a result of the testing.
John Willis Gibson: And that's vehicle number two, a little confusing, but vehicle number one is here in our shop, and it's being assembled. And we have all of the pieces and the parts; we're just putting in the batteries and the sensors and completing the vehicle and making the modifications that are necessary as a result of the testing of vehicle two, to ensure that it'll be quicker to certify. We're trying to take the cost and the time to certify down as from the learning and experience we gained with vehicle two. Vehicle three is still in boxes and pieces. And we will begin assembly of that probably sometime in Q1 of 2025. Unless we see a tremendous pickup in business and game contracts here as we move forward with vehicle two, We do not have any plans to build a vehicle four or five or six at this point in time; we really need to see commercial success with the three vehicles. We have to really provide some cash flow and some confidence that those vehicles are going to be hugely successful in the market in the near term.
David Mann: A vehicle to to ensure that it will be quicker to certify we're trying to take the cost and the time to certify down from the learnings and experience. We gained with vehicle to vehicle three is still in comex boxes and pieces and we will begin assembly of that.
David Mann: Probably sometime in Q1 of 2025, unless we see a tremendous picked up and in.
David Mann: In business and came contracts here as we move forward the vehicle too.
David Mann: We do not have any plans of building a vehicle for five or six at this point in time, we really need to see commercial success with the three vehicles, we have to really provide some cash flow and some confidence that.
That those vehicles are going to be hugely successful in the market in the near term so people won't vehicle too and the water one in the shop three in a box and no four five or six on the drawing board at this time.
Alright. Thank you one more question.
John Willis Gibson: So people want vehicle two in the water, one in the shop, three in a box, and no four, five, or six on the drawing board at this time. All right, thank you. One more question. Everyone sees this company; everyone sees the intellectual property, and the technology. You guys were saying investors were amazed by this. I'm just wondering, I am too, but why don't we see any insider buying? You see the filings, and, on the contrary, sometimes you see insiders, maybe selling some shares.
None: Everyone sees this company.
None: Intellectual property to technology, you know you guys were saying investors were amazed by the.
None: Just wondering I am too, but I'm just wondering why do we see any.
None: That are buying.
None: You see the filings on the contrary, sometimes you see incentives maybe selling some shares.
None: $10 million valuation effects 2030.
None: That's a very at least to instill confidence in the shareholder why is there anyone.
None: Yeah.
David Marin: I mean, at a $10 million valuation, the stock's 20 cents, 30 cents, just at the very least to instill confidence in the shareholder. Why isn't there anyone buying? Excellent question. I would actually maybe put it a little differently.
None: Hi.
None: Excellent question.
None: I would actually maybe put it a little differently.
None: If you take a look at my compensation I've taken a huge portion of it in chairs.
None: And Thats, because I think thats the greatest opportunity for me to to earn what I'm accustomed to.
John Willis Gibson: If you take a look at my compensation, I've taken a huge portion of it in shares. And that's because I think that's the greatest opportunity for me to earn what I'm accustomed to. And so I'm putting the risk of return here for myself on my own compensation in shares, and it reduces what I would normally consider my base salary.
None: So I'm, putting the risk of return here for myself Antinome all compensation in shares and it produced what I would normally consider my base salary.
None: I think other executives are doing the same here, including our CFO. Our general Counsel. This is share based management team, where we think the future is in the shares and not.
None: And our base salaries, and so while I'm not buying I am.
John Willis Gibson: I think other executives are doing the same here, including our CFO or general counsel. This is a share-based management team where we think the future is in the shares and not in our base salaries. And so while I'm not buying, I am definitely putting the weight of the arrow on the stock. Now why are others not buying? I think there's some opportunity, but the window's been closed for quite a long time as a result of the potential merger with 3D Adept and other non-material, you know, material non-public information. And so we're only going to open the window here in the near future. We'll see what transpires after that.
None: Definitely putting the weight of the the arrow own our own stock.
None: Stock why others arent buying I think theres, some opportunity, but the windows closed for quite a long time as a result of.
None: The potential merger with three DSA up another notch.
None: Material nonpublic information and so we're only going to open the window up here in the near future, we'll see what transpires after that.
And it appears that we have no further questions. At this time I will now turn the program back over to John Gibson for any additional or closing remarks.
Well I guess I want to thank everybody that joined the call.
John Gibson: I'm incredibly appreciative people that do own shares and are committed to the vision of this company long term I think we're on track.
Unknown Executive: And it appears that we have no further questions at this time. I will now turn the program back over to John Gibson for any additional or closing remarks. Well, I just want to thank everybody that joined the call. I'm incredibly appreciative of people that do own shares and that are committed to the vision of this company over the long term. I think we're on track to really make a difference.
John Gibson: To really make a difference I'm also appreciative to the lenders and.
John Gibson: And also would like to thank our board, who has been very patient and this transformation and our employees in particular.
John Gibson: Have a great group of employees here that are dedicated to seeing this.
John Gibson: Become a huge success and transform the market. So we've got a lot of people that were blessed to have onboard with <unk> and I'm blessed to be here. Thanks to all of you.
None: I'll talk to you again soon.
None: That concludes today's teleconference. Thank you for your participation you may now disconnect.
John Willis Gibson: I'm also appreciative of the lenders and would also like to thank our board, who's been very patient in this transformation, and our employees, in particular. We have a great group of employees here that are dedicated to seeing this become a huge success and transform the market. So we've got a lot of people that we're blessed to have on board with Nauticus, and I'm blessed to be here.
None: Okay.
None: [music].
None: Okay.
None: [music].
None: Uh-huh.
None: [music].
John Willis Gibson: Thank you. Thank you all, and we'll talk to you again soon. That concludes today's teleconference. Thank you for your participation. You may now disconnect.
None: Hum.
None: [music].
Unknown Executive: [inaudible] Director, Nauticus Robotic, Nicolaus Radford, Rangan Padmanabhan, Victoria Hay, Nauticus [inaudible]. .. [inaudible] Professor, John Gibson, Nicolaus Radford, Rangan Padmanabhan, Kristin Moorman, Victoria Hay, [inaudible] www.ncbi.nlm.nz, [inaudible]
None: Yeah.
None: Okay.
None: Yeah.
None: Okay.
None: Uh huh.
None: [music].
None: Okay.
None: Yeah.
None: [music].