Q1 2024 Nauticus Robotics Inc Earnings Call

To all sides on hold we appreciate your patience and ask that you continue to stand by your conference will begin in one minute.

Operator: To all sites on hold, we appreciate your patience and ask that you continue to stand by. Your conference will begin in one minute. Dobson, John Gibson, Jacob Stephan, Rangan Padmanabhan, Kristin Moorman, Victoria Hay, Nauticus Robotics,

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Speaker Change: Press Star Zero.

Speaker Change: [music].

Speaker Change: Good day, everyone and welcome to today's Nautica Robotics, 'twenty 'twenty four Q1 earnings call.

Operator: Please stand by. Your program is about to begin. If you need assistance for your conference today, please press star zero. Good day, everyone, and welcome to today's Nauticus Robotics 2024 Q1 earnings call.

Operator: 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. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. 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, Special Project Manager.

Speaker Change: At this time all participants are in a listen only mode.

Nautica Robotics: Later, you will have the opportunity to ask questions. During the question and answer session you.

Nautica Robotics: You May register to ask a question at any time by pressing the star and one on your telephone keypad you may withdraw yourself from the queue by pressing star two.

Speaker Change: 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 Christian Mormons Special project lead.

Speaker Change: Thank you and good morning.

Kristin Moorman: Thank you, and good morning, everyone. Joining me today and participating in the call are John Gibson, CEO, and President. Vicki 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 and financial results. Following that, we will answer questions. We have already released our results for the first quarter of 2024, which are 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.

Speaker Change: Everyone joining me today and participating in the call are John Gibson, CEO and President.

interim CFO: Hey, interim CFO.

General Counsel: <unk> General counsel and other members of our leadership team.

John Willis Gibson: On today's call. We will first provide prepared remarks concerning our operations and financial results. Following that we will answer questions.

John Willis Gibson: We have now released our results for the first quarter of 'twenty 'twenty, four which are 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.

Kristin Moorman: 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 can cause actual results to differ materially from our current expectations.

Speaker Change: Please note that comments, we make on today's call regarding projections or our expectations for future events are forward looking statements.

Speaker Change: Forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control.

Speaker Change: These risks and uncertainties can cause actual results to differ materially from our current expectations.

Kristin Moorman: We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. 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. Good morning. Thank you, Kristin.

Speaker Change: We advise listeners to review our earnings release and the risk factors discussed in our filings with the S. E C.

Speaker Change: Also please refer to the reconciliations provided in our earnings press release, as we May discuss non-GAAP metrics on this call.

John Willis Gibson: I will now I'll turn it over to John.

John Willis Gibson: Well good morning, Thank you Christian.

John Willis Gibson: And thank you all for joining us for our conference call. I'm extremely excited about the company, but it's my style. I tend to go straight into a couple of challenges that the company faces, and then we're going to switch over to the excitement of the pipeline of opportunities that are building around Aquanaut Toolkit. Now, our listing makes us both unique and valuable. Rather than having to be a limited partner in a venture capital fund, which requires a quarter million dollar minimum to participate, we offer an opportunity to invest directly in an emerging high-growth technology business serving the ocean market, with anticipated revenue in the ocean market ranging from 8 to 15% for offshore drilling and when respectively, through the year 2030.

John Willis Gibson: Thank you all for joining us for our conference call.

John Willis Gibson: Frankly excited about the company that is my style.

John Willis Gibson: Tend to go straight into a couple of challenges that the company faces and then we're going to switch over to the excitement of the pipeline of opportunities that are building around not toolkit.

Speaker Change: Our listing makes us both unique and valuable rather than having to be a limited partner in a venture capital fund, which requires a quarter million dollar minimum to participate we offer an opportunity to invest directly in an emerging high growth technology business, serving the ocean market with anticipated takers.

John Willis Gibson: The ocean market, ranging from 8% to 15% for offshore drilling and with respectively through the year 2013.

John Willis Gibson: We have a talented team and an AUV ready to start generating revenue from the industrial, environmental, commercial, and defense sectors. Nauticus is a high-risk investment, but it has the potential to generate returns greater than the market.

Speaker Change: We have a talented team and AEP ready to start generating revenue from the industrial environmental commercial and defense sectors, not just as a high risk investment, but what is the potential to generate returns greater than the market.

John Willis Gibson: Now, while we are public, we most closely resemble an emerging growth company seeking a B round of funding. We're a technology play in the emerging blue economy with a very unique product that satisfies the needs of our customers to reduce costs, reduce emissions, reduce labor requirements, improve safety, and, most importantly, gather vast quantities of subsea data to enable the sustainable development of the ocean. We have fantastic products coming into a strong market this year. We are shifting from being dependent upon defense to being involved in the industrial, commercial, and environmental sectors as well.

Speaker Change: While we arent public we more closely resemble an emerging growth company. So they can be round of funding.

Speaker Change: We are a technology play in the emerging blue economy, with a very unique product that satisfies the needs of our customers to reduce costs reduced emissions reduced labor requirements improved safety and most importantly gather vast quantities of subsea data to enable the sustainable development of the ocean.

Speaker Change: We have fantastic products coming into a strong market. This year, we are shifting from being dependent upon defense to be entrenched in the industrial commercial and environmental sectors as well were building a company to attract buy and hold investors.

John Willis Gibson: We're building a company to attract buy and hold investors. Now, the first issue: we need for you to vote yes on the reverse split, item number three of the special meeting being held on May 20 2024. We want to remain listed. There are two requirements: bid price and market cap.

John Willis Gibson: We have until July 22 2024 to cure having a bid price below $1. We have until August the 13th 2024 to cure the market cap being less than 35 million. Let's address the bid price being over a dollar first. We believe we are on track to be daily revenue generating in Q3 2024 with the Aquanaut. We have numerous blue chip customers ready to put Aquanaut to work. Operating margins for Aquanaut should be strong because we have conducted an aggressive cost management strategy over the last several months.

Speaker Change: Now the first issue we need for you to vote, yes on the reverse split item number three of the special meeting being hosted on May 20th 2024.

Speaker Change: We want to remain listed there are two requirements mid price and market cap. We have until July 22nd 2020 for secure having a bid price below one dollar we have until August 13, 2020 for secure the market cap being less than 35 Meg.

Speaker Change: The address the bid price being over a dollar first we believe we are on track to be daily revenue generating in Q3, 2024, with the Aqua or not we have numerous blue chip customers ready to put off or not work.

Speaker Change: We're writing margins for Aqua, nor should be strong because we conducted an aggressive cost management strategy over the last several months with revenue we believe the share flash will recover.

John Willis Gibson: With revenue, we believe the share price will recover. However, timing is critical to make July 22, 2024. We cannot control the overall market, the weather, elections, interest rates, inflation, etc. Hence, we need to prepare for what we can control. So what are we doing that we can control?

Speaker Change: Over time, it's critical to make July 22.

Speaker Change: 2024, we cannot control the overall market the weather elections interest rates inflation et cetera, and hence we need to prepare for what we can control. So what are we doing that we can't control well, we're preparing request for six months extension to get in compliance.

John Willis Gibson: Well, we are preparing requests for a six-month extension to get in compliance with the bid price being over a dollar. There's no guarantee that the extension will be granted, but we plan to be ready to submit. To enhance our chances of getting above a dollar, we intend to keep you well informed via AKs and press releases as we convert existing contracts from contracts to revenue and secure new contracts. We have previously announced contracts with Shell, Petrobras, and Equinor.

Speaker Change: The bid price being over a dollar there is no guarantee that the extension will be granted but we plan to be ready to submit.

Speaker Change: To enhance our chances of getting above a dollar we intend to keep you will inform via 8-K and press releases as we convert existing contracts contracts revenue and secured new contracts with.

Speaker Change: We have previously announced contracts with shell Petrobras and Ecuador, all three remain committed to deploying the aqua not as soon as we complete our certification we have found ways with several customers to expand the potential scope of work beyond the announced contracts, we're confident enough in the near term completion of the fiber.

John Willis Gibson: All three remain committed to deploying the Aquanaut as soon as we complete our certification. Additionally, we have found ways with several customers to expand the potential scope of work beyond the announced contracts. We're confident enough in the near-term completion of the final certification that we currently have a vessel on standby in the Gulf of Mexico to get us to a location for daily revenue-generating work. We believe being revenue-generating will immediately improve our share price. How much it improves is uncertain and is very difficult to model.

Speaker Change: Certification.

Speaker Change: That we currently have a vessel old standby in the Gulf of Mexico to get us to location for daily revenue generating work, we believe being revenue generating will immediately improve our share price and how much. It improves has uncertainty and is very difficult model.

John Willis Gibson: What we do know is our recommendation for a reverse share split can solve this problem, and it's 100% within our control. Voting yes on the reverse split, item number three of the special meeting, allows us to get back into compliance on the bid price being above a dollar. Please vote yes. I do not like recommending this vote.

Speaker Change: What we do know is our recommendation for a reverse share split can solve this problem and it's 100% within our control voting, yes on the reverse split item number three of the special meeting less allows us to get back into compliance on the bid price being above a dollar please vote yes.

Speaker Change: Yes, I do not like recommended this boat I understand reverse splits tipped to clear done as a last resort typically result of share price reduction of 10 plus percent following the action.

John Willis Gibson: I understand reverse splits are typically done as a last resort and typically result in a share price reduction of 10 plus percent following the action. At this time, we're recommending the split because it is within our control. It can cure the bid price compliance issue with NASDAQ. And unlike typical situations, it's a needed bridge to get the company to generating daily commercial revenue, and not an ask based upon a company that's failing but an ask from a company that is emerging.

Speaker Change: At this time, we are recommending the split because it is within our control. It can cure the bid price compliance issue with NASDAQ and unlike typical situations. It's a needed bridge to get the company to generating daily commercial revenue and not have as based upon a company thats finally, but at ash from our company.

Speaker Change: That is emerging.

John Willis Gibson: Our second issue, the reverse split does not cure the market cap compliance issue with NASDAQ. However, we do believe with the cure of the bid price, with the reverse split, we can successfully gain an extension of six months from August 13, 2024 to cure the market cap shortfall. We believe the increase in services revenue from leasing Aquanaut in the third quarter will help close the gap on market cap. We could cure the market cap issue without curing the bid price issue, however, at a share price of over 60 cents, and that would still leave us out of compliance on the bid price.

Speaker Change: Our second issue the reverse split does not cure the market cap compliance issue with NASDAQ, We do believe with the cure of the bid price with.

Speaker Change: With the reverse split we can successfully gained an extension of six months from August 13, 2020 for secure the market cap shortfall. We believe the increase in services revenue from leasing off we're not in the third quarter will help close the gap on market cap, we could cure the market cap issue without carrying the <unk>.

Speaker Change: Mid price issue, however, at a share price of over 60 cents.

Speaker Change: And that would still leave us out of compliance on the bid price again, the reasoning for asking for the vote on the reverse split is that we need to get in compliance with the bid price as well now.

John Willis Gibson: Again, the reasoning for asking for the vote on the reverse split is that we need to get in compliance with the bid price as well. Now that we're through with compliance, let's focus on revenue. Things are looking good in the second half of 2024. That's the reason I'm super excited about the future. And for our operational and business development update, I'd like to turn it over to Jorge, or, if you're in Brazil, Georgie. Thank you very much, John. I appreciate that.

Speaker Change: Now that we're through with compliance let's focus on revenue.

Jorge: Things are looking strong in the second half of 2024, that's the reason I'm Super excited about the future and for our operational and business development update I'd like to turn it over to Jorge or if youre in Brazil, a Georgia.

Jorge Georgia: Thank you very much John I appreciate that I am pleased to report positive developments regarding aquanaut vehicle and tool kit, we have secured strong support from our existing customers and are actively collaborating to facilitate aquanauts commercial project eligibility in Q3 of 2024.

Jorge: I'm pleased to report positive developments regarding Aquanaut Vehicle and Toolkit. We have secured strong support from our existing customers and are actively collaborating to facilitate Aquanaut's commercial project eligibility in Q3 of 2024. The Aquanaut vehicle, in conjunction with our toolkit software suite, addresses a significant unmet need within the market.

Jorge: The economic vehicle in conjunction with our toolkit software suite addresses a significant unmet need within the market. The integrated solution offers a compelling value proposition by simultaneously, reducing operational costs and minimizing environmental impact.

Jorge: The integrated solution offers a compelling value proposition by simultaneously reducing operational costs and minimizing environmental impact. I have recently met with several prospective clients, and we are actively cultivating a promising sales pipeline. This pipeline includes six potential long-term blue-chip customers across diverse industry segments, encompassing environmental services, oil and gas operations, and technology companies. Timely certification of Iconaut in 2024 presents a strategic opportunity to secure budget for the remainder of the year and lay groundwork for continued accelerated growth in 2025. We will continue to collaborate with existing customers to expedite

Speaker Change: I have recently met with several prospective clients and we are actively cultivating a promising sales pipeline is pipeline includes six potential long term blue chip customers across diverse industry segments, encompassing environmental services oil and gas operations and technology companies finally.

Speaker Change: <unk> in 2024 presents a strategic opportunity to secure budget for the remainder of the year and lay groundwork for continued accelerated growth in 2025, we will continue to collaborate with existing customers to expedite the echo Dot certification process. We're also actively quantify.

Jorge: We're also actively quantifying the cost savings and environmental benefits of the Aquanaut vehicle and toolkit software to further solidify its value proposition. Back to you, John.

Speaker Change: The cost savings and environmental benefits of the aquanaut vehicles and toolkit software to further solidify its value proposition.

Speaker Change: Back to you John.

John Willis Gibson: I appreciate that, Jorge. Now, this update reflects a very positive trajectory for our company, and it underlies robust market demand for our products and positions our company for significant commercial expansion with our products, both software and aquanaut. You may have noticed that Jorge did not, however, mention our work in the defense sector.

John Willis Gibson: I appreciate that.

John Willis Gibson: That reflects a very positive trajectory for our company and it underlies a robust market demand for our products and positions our company for significant commercial expansion with our products.

Speaker Change: Both software and often that you may have noticed that Jorge did not however mentioned our work in the defense sector. Not just has a long history of defense revenues and as I mentioned on our previous earning calls we intend to seek work in the defense sector to the extent that it is profitable and a fit for us however, because both of our size and the nature.

John Willis Gibson: Nauticus has a long history of defense revenue, and as I mentioned on our previous earnings call, we intend to seek work in the defense sector to the extent that it is profitable and a fit for us. However, because both of our size and the nature of defense spending, our revenue from defense can be uneven and sporadic.

Speaker Change: Defense spending our revenue from defense can be uneven niche frac and so we've chosen to transition to a daily revenue commercial models, and we think Thats a really important change for our company now with that I'm going to turn it over to Vickie to walk you through our financial results Ricky Thanks, John and good morning.

John Willis Gibson: And so we've chosen to transition to a daily revenue commercial model. And we think that's a really important change for our company. Now with that, I'm going to turn it over to Vicki to walk you through our financial results. Vicki. Thanks, John.

Victoria Hay: Thanks, John, and good morning. I am pleased to be presenting our Q1 financial results. Revenue for the first quarter was $500,000, which is down $2.4 million from the same period last year and down $600,000 from the prior quarter. Revenue recognized in the first quarter is a combination of continuing government revenue along with the start of our commercial revenue relating to the astronaut vehicle. Operating expenses for the first quarter were $6.0 million, which is a $2.6 million decrease from Q1 2023 and a sequential decrease of $29.3 million.

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Vickie: Revenue for the first quarter was $500000, which is down $2 4 million from the same period last year and down $600000 from the prior quarter.

Vickie: Revenue recognized in the first quarter is a combination of continuing government revenue along with Scott, while commercial revenue relationships not vehicle.

Vickie: Operating expenses for the first quarter with it.

Speaker Change: Which is a $2 6 million a decrease from Q1, 'twenty three and a sequential decrease of $29 3 million the.

Speaker Change: The fourth quarter results included a 25 3 million dollar impairment on.

Speaker Change: And the $2 5 million blossom.

Vickie: Loss on contract.

Victoria Hay: The fourth quarter results included a $25.3 million impairment and a 2.5 million expense loss on contracts. However, when considering both of these factors, we are seeing a reduction in total costs and expenses by $1.4 million, or 18% compared to Q4-23. G&A costs for the first quarter were $3.4 million, which includes a non-cash stock compensation expense of $0.5 million and non-recurring legal fees of $0.4 million. This is a bit $1.8 million, a decrease compared to the same period in 23 and a reduction of $300,000 sequentially. We continue our focus to further reduce GNA throughout the remainder of 2024 to meet our target of $8.3 million for 24 cash GNA previously disclosed.

Speaker Change: How's that when considering both of these factors, we are seeing a reduction of cost and expenses by $1.4 million.

Speaker Change: Well, 18% compared to Q4 'twenty three.

Speaker Change: G&A costs for the first quarter with $3 4 million.

Vickie: Which includes a noncash stock compensation expense of $5 million and.

Vickie: Nonrecurring legal fees, if not quite $4 million.

Vickie: One 8 million.

Speaker Change: Decreased compared to the same period in 2003, and a reduction of $300000 sequentially.

Speaker Change: We continue our focus to further reduce G&A throughout the remainder of 2004 to meet our targets of $8 3 million for 'twenty for non 24 cash G&A previously disclosed.

Speaker Change: Net income for the quarter with $114000.

Victoria Hay: Net income for the quarter was $414,000. This is a $14.6 million increase from Q1 2023 and a $14.0 million increase from the fourth quarter of 2023. The net income number includes an $8.3 million gain in the fair value of warrant liabilities for the first quarter. Adjusted net loss for the first quarter was $7.4 million, compared to a loss of $8.8 million for the prior quarter and a loss of $10.7 million in the same period last year.

Speaker Change: This is a $14 $6 million increase from Q1, 'twenty three and a 40.0 million increase from the fourth quarter of 2023. The net income number includes an $8 $3 million gain in fair value of warrant liabilities for the first quarter.

Speaker Change: Adjusted net loss for the first quarter for $7 4 million.

Vickie: Compared to a loss of $8 8 million for the prior quarter and a loss of $10 seven.

Speaker Change: $7 million in the same period prior year.

Speaker Change: As you can see from these results we are seeing the benefits of cost cutting initiatives that we embarked on in Q4 2023.

Victoria Hay: As you can see from these results, we are seeing the benefits of cost-cutting initiatives that we embarked on in Q4 2023. Cash at the end of Q1'24 was $6.2 million compared to $0.8 million at the end of 2023. The higher balance in cash was the result of $11.7 million in net cash received from $13.3 million of funding received in January. Per our debt covenant, we are required to have $5.7 million in cash at the end of the first quarter, which we exceeded by $0.5 million.

Speaker Change: Cash at the end of Q1, 'twenty, four with $6 2 million compared to $8 million at the end of 2023.

Speaker Change: The Hyatt.

Speaker Change: And cash was the result of $11 7 million net cash received from $13 3 million.

Speaker Change: <unk> funding received in January.

Speaker Change: Our debt covenants, we are required to have $5 $7 million cash at the end of the first quarter, which we exceeded by not <unk> 5 million.

Victoria Hay: During April, we also received an extra $1 million of funding from current investors. As a company, we are working hard to preserve cash while further reducing costs and gaining efficiencies. The results we are presenting this quarter show a marked improvement from previous quarters, and we expect to continue to see this improve in future quarters as additional savings are realized. I will now pass back over to John.

Speaker Change: During April we also received an extra $1 million of funding from current investors.

As a company we are working hard to preserve cash while further reducing costs and gaining efficiencies. The results. We are presenting this quarter show a marked improvement from previous quarters, and we expect continue to see this improve in future quarters.

Speaker Change: Additional savings are realized I will now pass it back over to John.

John Willis Gibson: Thank you, Vicki. We continue to focus on cost here, and we also focus on getting our vehicles in the market and having them generate days of revenue. Now, to get them in the market does require testing and certification, and as I learned when I came here, that's a pretty expensive endeavor. And we studied that, and, being focused on cost, we came up with a new arrangement I'm excited to announce today.

John Willis Gibson: Thank you Vicky.

John Willis Gibson: We continue to focus on cost here and we also focus on getting our vehicles in the market than having them generating data revenue.

John Willis Gibson: Now to get to them in the market does require that testing and certification.

John Willis Gibson: As I learned when I came here, that's a pretty expensive endeavor and we studied that and being focused on cost. We came up with a new arrangement that I'm excited to announce today, we will be working with Florida Atlantic University, and that's going to allow us to reduce our testing and certification cost for our new vehicles that will be going in.

John Willis Gibson: We'll be working with Florida Atlantic University, and that's going to allow us to reduce our testing and certification costs for our new vehicles that will be going into daily revenue in the market by 90 plus percent from what we spent on certifying and testing the first vehicle. It's a tremendous improvement on what it costs to test and certify a vehicle. What it's also going to do, because Florida Atlantic University is well known for its AUVs and robotics, it allows us to work with a university where we can create a pipeline of new hires and students and train the next generation of operators that are needed for AUVs.

John Willis Gibson: The daily revenue.

John Willis Gibson: The market.

Speaker Change: 90, plus percent from what we spent on certifying it testing the first vehicles, it's a tremendous improvement in what it cost to test and certify vehicle, but it's also going to do because our Florida Atlantic University is a well recognized in <unk> and robotics. It allows us to work with the University, where we can create a <unk>.

Speaker Change: Pipeline of new hires from students and train the next generation of operators that are needed for <unk>.

John Willis Gibson: It's very exciting to take that much cost out of a process that's required and to build a strong relationship with a powerful university in this space. Now, Operator, that will conclude our remarks for today, and we're prepared to take a few questions. Thank you.

Speaker Change: <unk> very excited to take that much cost out of our processes required and to build a strong relationship with a powerful university in this space now with that operator that will conclude our remarks for today and we're prepared to take a few questions.

John Willis Gibson: Well, this will be the first time I've concluded a call with no questions, and I'll either assume that we answered all of them or that you're really excited and you're looking for an opportunity to get out and buy a few shares. I think the combination of the two and our focus on cash preservation and cost management gives us a really exciting future. So thank you so much, and we'll look forward to presenting our numbers on the next call. Take care.

Operator: Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and one to ask a question. We will pause for a moment to allow questions to queue. And once again, that is star number one to ask a question. We'll pause for a few more moments to allow questions to queue, and it appears that we have no questions at this time. I will now turn the program back over to our presenters for any additional remarks.

Speaker Change: Thank you at this time, if you would like to ask a question. Please press the star and one on your telephone keypad.

Speaker Change: You may remove yourself from the queue at any time by pressing star two.

Speaker Change: Once again that is star one.

Speaker Change: To ask a question.

Speaker Change: We will pause for a moment to allow questions to queue.

Speaker Change: And once again that is star one to ask a question, we'll pause for a few more moments to allow questions to queue.

presenters: And it appears that we have no questions. At this time I will now turn the program back over to our presenters for any additional remarks.

Presenter: Well it will be the first time I've concluded a call with no questions and I'll either assume that we answered all up.

presenters: Or that you're really excited and youre looking for an opportunity to go buy a few shares but we just thank you for participating in the call. We're very excited about the commercial team that we've put together here at <unk> over the last several months to augment what is an incredibly strong research and development and technology groups.

Speaker Change: The combination of the two and our focus on cash preservation and cost management gives us a really exciting future. So thank you so much and we'll look forward to presenting our.

Speaker Change: Our numbers here on the next call take care.

Speaker Change: That concludes today's teleconference. Thank you for your participation you may now disconnect.

Operator: That concludes today's teleconference. Thank you for your participation. You may now disconnect.

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