Nauticus Robotics Q2 2024 Earnings Report

Nauticus Robotics EPS Results

• Actual EPS: -$331.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Nauticus Robotics Revenue Results

• Actual Revenue: $0.50 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Nauticus Robotics Announcement Details

• Quarter: Q2 2024
• Date: 8/13/2024
• Time: N/A
• Conference Call Date: Wednesday, August 14, 2024
• Conference Call Time: 11:00AM ET

Nauticus Robotics (NASDAQ:KITT) (NASDAQ: KITT) is a maritime robotics company focused on developing and deploying uncrewed surface and subsea vessels for inspection, survey and maintenance applications. The company’s solutions combine purpose-built hardware with advanced autonomy software and sensor integration, allowing operators to conduct offshore and in-shore missions without personnel aboard. By digitizing routine vessel operations, Nauticus Robotics aims to reduce the time, cost and risk associated with traditional crewed marine services.

The company’s product portfolio includes modular uncrewed surface vessels (USVs) and remotely operated vehicles (ROVs) equipped with high-resolution sonar, cameras and other environmental sensors. These systems are designed for a range of tasks such as hull and subsea infrastructure inspection, environmental monitoring, hydrographic surveying and ocean data collection. Nauticus Robotics also offers “robotics-as-a-service” contracts, providing end-to-end mission planning, vehicle operation and data analysis through a single subscription model.

Founded in 2018 and headquartered in Houston, Texas, Nauticus Robotics completed its public listing in 2021. The company is led by co-founder and Chief Executive Officer Theodore “Theo” Ganitis, whose background spans autonomous systems development and maritime operations. Nauticus serves clients across the oil & gas, offshore wind, defense and research sectors, initially focusing on the U.S. Gulf of Mexico and gradually expanding to international markets. Strategic partnerships with shipyards, energy operators and government agencies support its efforts to scale commercial deployments and broaden its global service footprint.

Nauticus Robotics Q2 2024 Earnings Call Transcript

Key Takeaways

• Focus on 2025 backlog with active commercial and defense contract negotiations expected to drive future revenue.
• Completed a 1-for-36 reverse split on July 22 to meet NASDAQ’s $1 bid requirement and has engaged advisors to satisfy market capitalization standards.
• Partnered with Florida Atlantic University for Aquanaut Mark II testing and plans to begin revenue-generating Gulf of Mexico deployments this month.
• Achieved a simulation Toolkit software breakthrough that speeds AUV testing and could open new high-margin software revenue streams.
• Q2 revenue was $0.5 million with a net loss of $5.4 million, though cash at quarter end rose to $8.1 million after $9.5 million of ATM equity raises, debenture conversions and an upcoming vessel sale.

Presentation

[Operator]

Please note, this call may be recorded. I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Kristen Moorman, Nauticus' Special Projects Leader.

[Kristen Moorman, Special Projects Leader at Nauticus Robotics]

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, outgoing General Counsel, John Symington, incoming 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 now released our results for the second 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. 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.

[Kristen Moorman, Special Projects Leader at Nauticus Robotics]

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

[John Gibson, CEO and President at Nauticus Robotics]

Well, thank you, Kristen. Good morning, and thank you for joining us on our conference call today. It's gonna be a short call today. We're currently really focused on the 2025 backlog, and we have opportunities, both commercial and defense work, that are being worked on, and we'll be press releasing our progress on those contracts as they close. We continue to receive strong support from our existing lenders as they're converting to debentures, which has the dual impact of reducing our leverage and increasing our market cap. So thank you to our lenders. We finished phase one for the largest South American deepwater operator and billed and received payment recently. We received a letter also for the completion of a DIU project, a successful completion, and we'll send that final bill in Q3.

[John Gibson, CEO and President at Nauticus Robotics]

We're planning to go to the Gulf of Mexico with the Aquanaut Mark II vehicle this month, and are finalizing requirements and scope of work with customers now. Daniel, our Head of Operations, is going to cover more of that in his section. Before we turn to our operational and testing activities, though, I want to update you on our progress with meeting Nasdaq's continuing listing standards. I wanna thank our shareholders for approving the reverse split proposal at our June 28th shareholder meeting. This key vote allowed us to perform a reverse split on July 22nd, which has brought our stock price over the $1 minimum bid price required by Nasdaq. We are continuing to work with Nasdaq on our plan to meet the market capitalization requirement and have engaged advisors who are experts in Nasdaq hearings and extensions.

[John Gibson, CEO and President at Nauticus Robotics]

Now, with that, I'm gonna turn the call over to Daniel DeHart, our Field Operations leader, to give you an update on our operations. Daniel?

[Daniel DeHart, Field Operations Leader at Nauticus Robotics]

Thank you, John. Let me bring you up to date on the Aquanaut Mark II vehicle. We have partnered with Florida Atlantic University this summer to test our vehicle so that we can more efficiently progress the technology towards commercial application. The FAU campus, located near Fort Lauderdale, Florida, is extremely cost-effective and provides access to a campus that has immense knowledge of AUV technology. This location has provided the ideal setup to develop the Aquanaut system in a controlled environment and is easily accessible to open water off the coast of East Florida. We have completed survey missions with integrated sensor implementation, began leak detection testing to satisfy an existing contract, and continued testing obstacle collision avoidance movements. We are mobilizing vehicle 2 from FAU to return to the Gulf of Mexico, with plans to deliver the vehicle 1 to FAU for testing during Q4.

[Daniel DeHart, Field Operations Leader at Nauticus Robotics]

We are currently on schedule to mobilize back onto the vessel in August to begin the field application of the Aquanaut vehicle to complete a general field inspection of the oil and gas subsea structures. We are committed to completing the project safely and efficiently. We are eager to introduce the market to supervised autonomy and believe it is the first step to increase commercial activity. I'll now turn it back over to John.

[John Gibson, CEO and President at Nauticus Robotics]

Thank you, Daniel. We're really excited to be headed back to the Gulf of Mexico this month and look forward to revenue-generating work while we're there. Now I'd like to turn the call over to Vicki, to discuss our financial results.

[Vicki Hay, Interim CFO at Nauticus Robotics]

Thank you, John, and good morning. As John mentioned earlier, the 36-to-1 reverse split was completed on July the twenty-second. All references in our 10-Q and press releases in regard to equity and related items are now stated on a post-split basis. I will now discuss in more details our financial results for the second quarter. Revenue for the second quarter was $500,000, which is the same as the first quarter, 2024, and down $600,000 from the same period last year. Revenue recognized in the second quarter is primarily related to our work with the largest South American deepwater operator. Operating expenses for the second quarter were $6.5 million, which is a $1.5 million decrease from Q2 2023 and a sequential increase of $0.5 million.

[Vicki Hay, Interim CFO at Nauticus Robotics]

Notably, the second quarter results include a $0.5 million expense for a loss on contract, which will be incurred in Q3 2024, while Q1 benefited from a $2.5 million expense for loss on contracts that was recognized in Q4 2023 as part of our percentage of completion accounting. Net loss for the quarter was $5.4 million. This is a $26 million reduction from the second quarter of 2023 and a $4.9 million increase sequentially. The large variance between the periods primarily relate to non-cash, $29 million change in fair value of outstanding warrants in Q4 2023, versus a $4.4 million non-cash change in fair value of warrants in Q2 2024.

[Vicki Hay, Interim CFO at Nauticus Robotics]

Adjusted net loss for the first quarter was $8.9 million, compared to $7.4 million for the prior quarter, and $6.8 million in the same period prior year. The first quarter benefited from the Q4 2023 accrual of $2.5 million, relating to the loss-making contracts that otherwise would have hit in Q1 2024. G&A costs for the first quarter were $3.2 million, which is a decrease of $2.3 million compared to the same period in 2023, and a $0.2 million decrease from Q1 2024. We are actively working to reduce G&A costs as we continue throughout 2024. Cash at the end of Q2 2024 was $8.1 million, compared to $0.7 million at the end of 2023.

[Vicki Hay, Interim CFO at Nauticus Robotics]

This is a result of funding received in January of $13.3 million, along with raising $9.5 million through our at-the-market facility in the second quarter. During the second quarter, we moved our DriX out of held for sale back to PPE, as we now have the DriX working on a revenue-generating contract that started in July. Additionally, we have a signed offer on our Hydronaut vessel, which has been in held for sale since December 2023. This is expected to close prior to the end of the third quarter of 2024. I will now pass the call back to John.

[John Gibson, CEO and President at Nauticus Robotics]

Well, thank you, Vicki. Before opening it up for questions, I just wanted to take a few moments to address one more matter. As you may have seen from our public filings, Nick Bigney will be leaving us at the end of this week. When I came over to Nauticus, I reached out to Nick to help me, and I happened to catch him between jobs, and he was willing to come over and put us on the right track here. I'm incredibly grateful to Nick. He's been a good friend, a good sounding board, and a good commercial mind.

[John Gibson, CEO and President at Nauticus Robotics]

We've enjoyed having him here, and we're, we're incredibly pleased that Nick, because of the relationship we have and, and what he sees in the company, has agreed to stay on and transition to our new General Counsel, who I'm going to introduce in just a moment. Nick, any comments you'd like to make?

[Nick Bigney, Outgoing General Counsel at Nauticus Robotics]

Thanks for the kind words, John, and I'm incredibly grateful for my time here. I'm leaving with some real mixed emotions. I'm a big believer in Nauticus's technology, its potential, and its future, but moreover, the leadership team. John has been a mentor and friend for many years now, and it's been a pleasure to work with him, and I believe in the direction the team's setting here. Nauticus is really fortunate to have John Symington coming in as the incoming general counsel. He's very experienced. He's a legal leader with expertise in SEC and Nasdaq matters, and we've been fortunate enough to have a handover this week to make this transition as seamless as possible.

[Nick Bigney, Outgoing General Counsel at Nauticus Robotics]

I'll continue to watch and support Nauticus closely from the sidelines as a shareholder and cheerleader, and I've agreed to make myself available through the coming months to the entire team here to make sure that it's as seamless as possible, and we don't have a gap in institutional knowledge.

[John Gibson, CEO and President at Nauticus Robotics]

Nick, thank you, and I really appreciate what you've done here. And now, if I could, I'd like to introduce John Symington. John, why don't you introduce yourself?

[John Symington, Incoming General Counsel at Nauticus Robotics]

Well, thank you, John. I am delighted to be here, and I look forward to helping this team grow the company. I believe my experiences with growth and transformation at other companies will be helpful to me here. and I believe we really have a rare chance to provide something new and different for our customers here at Nauticus, and it's an exciting place to be.

[John Gibson, CEO and President at Nauticus Robotics]

Well, John, it's good to have you here. I do think that, you know, John joining really emphasizes the fact that we've got a great plan and a great mission. John's a quality talent, could be anywhere. He chose to be here. A strong Nasdaq resume, really strong background with large companies and successful ones, and I'm delighted to have John on board. With that, I'd like to just open it up for any questions if there are any, and so I'll turn it back to you, operator.

[Operator]

Thank you. At this time, if you would like to ask a question, please press star one now on your telephone keypad. To withdraw yourself from the queue, you may press star two. Again, that is star one to ask a question. One moment while we queue. Once again, that is star one to ask a question. We'll take a question from Robert Mendrala. Your line is open.

[Analyst]

Good morning. Yeah, the question was around, what's the current market cap and the number of outstanding shares, total that would be, you know, available to float to the public and then those held inside?

[Nick Bigney, Outgoing General Counsel at Nauticus Robotics]

This is Nick. I can answer that for you. We've got roughly about $4.6 million in the market. Market cap of approximately-

[Nick Bigney, Outgoing General Counsel at Nauticus Robotics]

-about 11, I think, on just what's outstanding. With the ventures converting the real true market cap of the company is closer to about $40 million-$50 million, varies based on the day of the share price.

[Analyst]

Okay. So, so the market cap is closer to $40 million-$50 million? Is, is that my understanding?

[John Gibson, CEO and President at Nauticus Robotics]

On a fully diluted basis, that's correct.

[Analyst]

Okay. So does that meet then the Nasdaq requirement?

[John Gibson, CEO and President at Nauticus Robotics]

That's. We're working with them on that. They will look at certain criteria, but yes, we think we have a path forward there.

[Analyst]

Okay, very good. And then, the other question I had was on revenue. I noted in some of the prior press release that for one of the AUVs, the daily rate would be about $25,000 to about $75,000. Is that a pretty set schedule for revenue? In other words, you know, once it's deployed, count on that revenue, you know, for 5 to 7 days a week, or could you provide a little more color on that, please?

[John Gibson, CEO and President at Nauticus Robotics]

Well, I've got Daniel here, too, can fill in or correct me, whichever one required. When we say $25,000-$75,000, that's really an all-in price to the customer, which includes the consumables, the diesel on the vessel, the vessel. If we have to have an ROV, that would be built in as well. And as we're going through this transition to full autonomy, we're likely to be carrying an ROV for some customers because they're going to want the verification that the performance of the Aquanaut, more of a transition to full autonomy. They want sort of supervised autonomy. And so when you look at that, the bill, you sort of break out the vessel, the consumables, the potential for a small ROV, and then the Aquanaut.

[John Gibson, CEO and President at Nauticus Robotics]

I'd say here in the Gulf of Mexico, we would be modeling 200 days a year, for work. There's due to weather losses and storms, one thing and another. Internationally, it'd be the same. It just happens to be the flip season, so it's summertime in South America, when it's wintertime here. And, and the day rates, in non-US work are higher, and but that doesn't mean the margin is any higher. You, you have very similar margin. It's just that you're going to be running at a higher day rate, but that's the right numbers.

[John Gibson, CEO and President at Nauticus Robotics]

And so the model, 200 days a year, and our hope as we go into 2026, 2027, is that you're operating vehicles in the Gulf of Mexico during the good weather for the Gulf, and you're in the northern hemisphere, and then in the bad weather for the northern hemisphere, you're in the southern hemisphere, whatever it is. So we're looking at trying to get in a full year, but you are going to lose weather days.

[Analyst]

No, I understand. Thank you. So the other vehicle that's being tested at FAU, it's, I guess, set to deploy sometime in Q4. Would that be on a similar type of a daily per diem charge?

[John Gibson, CEO and President at Nauticus Robotics]

So, great question, Robert. It's the one we have at FAU now is actually vehicle two that was in the Gulf of Mexico. It's just about ready to be put back in the box and carried back to the Gulf. So it'll come over to Port Fourchon and go out this month. Vehicle one is the one that we're working on here and assembling in the shop. It will replace vehicle two at FAU, and we'll do the certification and testing and trials there in the Atlantic. And then we are working on contracts for that vehicle. It will leave from there and go, and we should get it there and begin all the certification this year, so that we would have that vehicle available to us next year for revenue.

[John Gibson, CEO and President at Nauticus Robotics]

Then we'll begin assembling vehicle three in the first quarter of 2025. So it's... Imagine, one we've got now going in the next week, two weeks, back to the Gulf to chase revenues. One will go from here to FAU, and then with the third one will be assembled starting Q1 next year.

[Analyst]

Okay, very good. And then let me ask a quick question on ToolKITT. I know that's kind of a industry game changer. How are you looking for revenue there? What could we expect as ToolKITT is more and more adopted and rolled out to the industry?

[John Gibson, CEO and President at Nauticus Robotics]

Your questions are—you could be a director here, Robert. It's an excellent question. We're very excited about ToolKITT. We had a breakthrough this week. You know, one of the things that we do with ToolKITT is we simulate ToolKITT, and our simulation had been slow, and so we weren't getting in the number of runs that we wanted. And so we had one of our developers here, outstanding young man, came in and modified our sim work so that we were able to increase it by an order of magnitude, the speed. That's significant in our ability to test the software without having to have a vehicle in the water, and it performs almost identically to the vehicle when the vehicle's in the water.

[John Gibson, CEO and President at Nauticus Robotics]

We are working with an ROV company right now that's excited about deploying ToolKITT on their ROVs, and we're working through the contract in working with them, and I think that's a press release and a discussion that we'll be able to have in the very near future. I think the software itself is gonna be, I think, the core of the company, if we look out in future years, because you're able to move that so much more quickly than you are the vehicles themselves. It's higher margin and requires a lower capital, faster delivery capability. And so we're focused on making that a commercial product. In fact, I have with me the gentleman doing that here. Jason, would you want to make any comments on it?

[Jason Close, ToolKITT Product Lead at Nauticus Robotics]

Sure, I think we've been engaging a lot with oil and gas operators, service companies who go and acquire data using ROVs, as well as ROV manufacturers and providers. And as John mentioned, we have quite a lot of interest with all the different parties, and we're looking forward to taking those partnerships forward.

[Analyst]

Yeah. I, I think that's a, that's a wonderful pivot. I agree with the AI and the software. It's a great revenue stream, and as you mentioned, it's, it can be rolled out very efficiently, and effectively, fairly easily. Yeah, while the other part of the pivot-

[John Gibson, CEO and President at Nauticus Robotics]

I would say there's no pivot here. Without that ToolKITT, we can't operate the vehicle. It's just that the vision of the company when it started to be platform agnostic and be able to run on anything is facilitating us looking to others to really help them springboard their operations and get them going, and us taking care of the testing and the certification of the system itself. It's an exciting opportunity for it, but no pivot. We must have ToolKITT in order to operate Aquanaut, so it's just fundamental and core to our business. I probably need to jump to another question, Robert, but you feel free to call anytime. I really appreciate your insights in the company. Operator, do we have another... Anybody else in the queue?

[Operator]

We do. We'll take our next question from John Mannion of Geneva Enterprises.

[John Gibson, CEO and President at Nauticus Robotics]

Hey, John, how you doing?

[John Mannion, Retail Investor at Geneva Enterprises]

Good so far.

[John Mannion, Retail Investor at Geneva Enterprises]

So I'm just a regular retail investor in this stock, but I had a few questions. Well, not really a few, but just one primarily. I know back in 2022, you guys announced a contract bid with the Marines, and I think it was through the DIU program, specifically for defense contracting. Is there anything else coming down the pipeline in regards to that specific contract? Any movement or any updates that you can provide in terms of development, cost, revenue, you know, anything relating to that contract specifically? And is there anything in the future that you're looking towards to build on for defense contracting and so on and so forth with regards to obviously the UUV?

[John Gibson, CEO and President at Nauticus Robotics]

Okay, so it's another excellent question. And I'm sitting here looking at my new general counsel, and he's shaking his head about saying anything. We're trying hard not to give any sort of forward-looking statements till we get everything closed, but we are actively negotiating on a potential defense contract right now. And I use all of those waffle words because until we have ink on it, I am prone not to try to make promises at this point. It looks extremely good. The discussions are ongoing, technically and commercially, and so as soon as we have something that is concrete, then we'll get a press release out to you on that.

[John Gibson, CEO and President at Nauticus Robotics]

But the right thing to say is extremely interested in defense work and pursuing that, and believe that we'll have information on that for you as we go forward.

[John Mannion, Retail Investor at Geneva Enterprises]

Awesome. That was, that was the main question that I had, so thank you very much for your time.

[John Gibson, CEO and President at Nauticus Robotics]

You're, you're quite welcome. Operator, do we have any more calls?

[Operator]

We have no further questions at this time. I'd be happy to return the call to John Gibson for closing comments.

[John Gibson, CEO and President at Nauticus Robotics]

Thank you. We're excited about the company. We're excited to have John join. We're excited about the work we're about to go do in the Gulf of Mexico now for customers. We've got calls later today, working on how we're gonna execute that. We have some really good partnerships that are developing with other service providers, and I think, you know, we're at that crucible where we're at an inflection point, and we're working to turn the corner. It's not, you know, it's not that point where I can really say much, but I think all of the indicators are there that we're on the right track. We have the right vehicle. We have the right operating system. We've got the right team in place here.

[John Gibson, CEO and President at Nauticus Robotics]

We've augmented the team with another real professional in John Symington joining us, and so we won't lose any momentum. And we look forward to trying to create wealth for everybody involved in Nauticus, including our employees and our shareholders and our lenders. And we wanna do a great job for customers, and I think that's how you build a fantastic company. And just stick with us. This is. We're right there at that point where I think we're about to come through the inflection point for the company. Appreciate you guys. Take care.

[Operator]

This does conclude today's program. You may now disconnect your lines, and everyone, have a great day.

Participants

Executives

• Daniel DeHart, Field Operations Leader
• Jason Close, ToolKITT Product Lead
• John Gibson, CEO and President
• John Symington, Incoming General Counsel
• Kristen Moorman, Special Projects Leader
• Nick Bigney, Outgoing General Counsel
• Vicki Hay, Interim CFO

Analysts

• John Mannion, Retail Investor at Geneva Enterprises
• Analyst