Nauticus Robotics - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good day, ladies and gentlemen, and welcome to the Nauticus Robotics 2025 Q1 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. To participate, simply press the star and then the number one on your telephone keypad. You will hear a prompt that your hand has been raised. To withdraw your question, please press the star followed by the number two. If at any time during this call you require meeting assistance, please press the star and the number zero for the operator. This call is being recorded on Thursday, May 15, 2025. I would now like to turn the conference over to Kristin Moorman. Please go ahead.

Kristin Moorman (VP of Corporate Development & Administration)

Thank you, and good morning, everyone. Joining me today and participating in the call are John Gibson, CEO and President; Vicky Hay, Interim CFO; and other members of our leadership team. On today's call, we will first provide prepared remarks concerning our financial and operations results. Following that, we will answer questions. We have now released our results for the first quarter of 2025, 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. 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)

Good morning, and thank you for joining us. Today's call comes at an exciting time for Nauticus Robotics. With the successful acquisition of SeaTrepid in March, we've entered a new chapter marked by operational scale, expanding commercial opportunities, and growing demand for our autonomous subsea technologies. Over the next few minutes, you're going to hear from our executive team on our first quarter financials, operational progress, and our emerging pipeline of offshore work, all pointing to a business gaining momentum and maturing rapidly. While Q1 results reflect the seasonal nature of offshore work and the timing of our acquisition, the quarter also marked the beginning of our 2025 offshore season and the formal start of our integration efforts. Early signs are encouraging. We've mobilized equipment, secured extended contracts, and are seeing enthusiastic interest in our Aquanaut platform from both existing and new customers.

The conversations have shifted from what if to how soon, and that signals real traction. Now, to turn it over to Team Nauticus to explain how we intend to meet the growing demand for safer, smarter, and more sustainable subsea solutions. With that, I'm going to hand it to Vicky, our Interim CFO, and let her get us started on the financial side for Q1. Vicky.

Victoria Hay (Interim CFO)

Thank you, John, and good morning. I will now discuss our financial results for the first quarter of 2025. The SeaTrepid acquisition closed on March 20 and has so far proved impactful to the organization, with revenue being recognized from it in the first quarter and has continued to grow over the past six weeks following the end of the quarter. Other key milestones this quarter included further reducing our debt and associated interest by $3 million as a result of lowering the conversion price of the term loan and subsequent conversions. We also had a $20 million raise from our at-the-market facility to fund the acquisition of SeaTrepid and current year capital investments and operations. Revenue for the first quarter was $0.2 million, which is down $0.3 million sequentially and down $0.3 million from the same quarter last year.

The Gulf of Mexico offshore season just kicked off at the end of March, and we are now under contract. Operating expenses for the quarter were $6 million, which is flat from Q1 2024 and down $0.5 million sequentially. G&A costs for the quarter were $4.3 million, which is an improvement of $0.9 million compared to Q1 2024. Sequentially, G&A has increased $0.4 million due to non-recurring professional fees in Q1 2025, primarily related to the acquisition of SeaTrepid, which included preparing financials for a two-year audit that was needed as part of the transaction and other professional fees related to the restatement of 2024 quarterly financials that was completed in early April. Net loss for the quarter was $7.6 million. This is a $76.9 million decrease in net loss sequentially and a $65.3 million decrease from the net loss in Q1 2024.

This large variance is attributable to the loss on extinguishment of debt recognized in 2024. Adjusted net loss for the quarter was $6.8 million compared to $6.9 million for the fourth quarter of 2024. When removing the non-repeat professional fees that occurred in Q1 2025, there would have been an improvement sequentially of $1.1 million quarter on quarter. Cash at the end of Q1 2025 was $10.1 million compared to $1.2 million at the end of 2024. This is primarily a result of funding received through the at-the-market offering offset by the recent acquisition of SeaTrepid and cash used in operations. With the second quarter already well underway, we are excited about having a full quarter of operational revenue to report for the first time in Q2 while continuing to keep a strong focus on cost control and value-added activities. I will now pass the call back to John.

John Gibson (CEO and President)

Thank you, Vicky. I just, I want to really thank Vicky and the finance team for doing an incredible job. Some of these sea companies filed a 10Q and then just a few weeks later filed a 10K. The restatement caused a delay in getting everything done. They have been really hard at it and did an outstanding job. I am excited that we are shifting from focus on reporting here to focus on executing in the field. It is a welcome change for us. I would like to turn it over to Daniel Dehart, our Field Operations Lead, and Steve Walsh, our Sales Lead, to discuss the emergence of Nauticus' first backlog of offshore commercial work. Daniel.

Daniel Dehart (VP of Field Operations)

Thank you, John. I'm excited to provide an update on our current operations. We recently completed a mobilization of one of our Comanche ROVs onboard a vessel, and we are currently on hire completing a platform inspection off the Gulf Coast. The integration of SeaTrepid and Nauticus operations teams has gone better than expected and continues to expand the commercial forecast for our company. We will mobilize the Aquanaut vehicle once the ROV completes its inspection job in the coming weeks, and then the vessel will roll right into multiple scheduled inspection jobs. We will continue to execute our existing contracts and will utilize any idle time between these projects to complete our 3,000-meter test with the Aquanaut vehicle.

We have now reached a phase of our company that will become a new norm, scheduling current contracts and new opportunities to maximize utilization and margins and continue to diversify our customer base throughout the season. Our goal is to continue to provide autonomy throughout the industry utilizing our combined services with the Aquanaut system and ROV. We are currently negotiating contracts with multiple new customers that are excited about the benefits autonomy can bring to their subsea operations. After significant discussions with our current clients, our technology has the potential to extremely decrease the environmental footprint of offshore operations utilizing an autonomous service vessel, or ASV. We will progress these discussions into funded testing opportunities this summer that include pairing the second Aquanaut vehicle with an ASV.

Our current clients see extreme value in this operation by completing inspection work without the use of a large vessel, eliminating personnel from dangerous offshore environments, and reducing the CO2 footprint exponentially. With that, I'll now turn it over to Steve for an update on our 2025 offshore commercial pipeline.

Steve Walsh (VP of Sales)

Thanks, Daniel, and good morning, everyone. I'm Steve Walsh, Vice President of Sales at Nauticus Robotics. I officially joined the team on March 21 through the SeaTrepid acquisition, and it's been full throttle from day 1. Let me tell you, the momentum here isn't just buzz. It's real. It's growing, and it's translating directly into opportunity. The offshore energy market is surging now, and Nauticus is right at the center of it. We're actively supporting oil and gas operations while making serious inroads into emerging sectors. What's driving this? A clear industry shift towards smarter, safer, lower emissions propelled by autonomous solutions, and that's exactly what we deliver. The response from customers since the merger has been overwhelmingly positive. Combining SeaTrepid's operational legacy with Nauticus's next-gen tech has created a powerful offering. Technologies like the Aquanaut aren't just impressing people. They're changing the conversation.

Operators are now thinking differently about risk, efficiency, and how robotics can reshape offshore operations. There's a strong appetite to remove personnel from hazardous environments, and Aquanaut is opening the doors that were not available before. Since the acquisition, we've been hard at work transferring SeaTrepid's existing master service agreements into the new Nauticus framework while also signing new MSAs with major industry players. That is a clear signal of confidence from the market in what we're building. Here's the key point: demand is not our bottleneck; scaling is. Right now, the only thing holding back revenue acceleration is equipment and personnel capacity. That is a high-quality problem, and we're tackling it aggressively with smart investments and a laser focus on execution. We're also honing our sales strategy around high-impact sectors like deep-water energy, offshore infrastructure, and defense—areas where our expanded portfolio truly stands out.

To wrap it up, the market is ready for the future we're building. Our pipeline is growing, our technology is gaining traction, and our customers are leaning in. It's an incredibly exciting time at Nauticus, and this is just the beginning. We're working toward the shift from selling to order taking. With that, I'll turn it back over to you, John.

I appreciate that, Steve. You know, we made a big shift here from last year to this year. We've really gotten a lot of customer diversification here and have reduced our customer concentration. The number of calls coming in are exciting because it looks as though we can continue to diversify our customer base. Exciting times for us. I mean, it's a great market, and we really like the equipment we have. I do want to introduce to you Ameen and to really sort of talk about our equipment and Jason Close, our software lead, so that you can get some updates from their departments where you can see what's going on in the belly of the beast. With that, I'll turn it over to you guys.

Jason Close (VP of Autonomous Software Solutions)

Thanks, John. Working with SeaTrepid over the past few months has expanded our market reach and introduced us to a wider range of customers and prospects, helping us refine our value proposition and better respond to industry-wide needs. In the first quarter, we made meaningful progress advancing Toolkit across both our primary product line, Aquanaut, and Toolkit-enabled world-class ROVs. For Aquanaut, our efforts were centered on releasing the latest version of Toolkit in support of commercial operations for the remainder of the year. In parallel, we continued developing capabilities for a near-term field deployment and established a structured program for 2025 to broaden Aquanaut's operational envelope and further expand supervised autonomy across the subsea industry. We also reached an important milestone in the development of Toolkit for world-class ROVs.

Following early-on vehicle integration and a rigorous round of hardware-in-the-loop testing, Toolkit is now prepared for pool trials as the final step towards our first commercial deployment. We see strong demand for this capability and expect to integrate Toolkit onto our own ROV fleet in the near future as part of this initial commercial release. That said, our assets remain heavily engaged in offshore work, reflecting the growing customer activity we're seeing across the business. As we move through the year, we're focused on delivering value through Aquanaut operations while preparing Toolkit for broader field adoption, setting the stage for long-term growth across both our service and product offerings. I'll now hand it over to Ameen for an update on Aquanaut and our electric manipulators.

Ameen Albadri (Engineering Lead)

Thank you, Jason. The engineering team is collaborating closely with the operation and software teams to maximize uptime across both Aquanaut vehicles. This joint effort ensures consistent, reliable performance throughout the year with minimal operational disruption. The engineering team has been transitioning from a traditionally R&D-focused approach to a commercially driven development model. This shift is essential for enabling scalable growth and aligning our capabilities with evolving market demands. For Aquanaut, design improvements are being implemented to boost vehicle reliability and reduce the maintenance cycle. These upgrades are critical in transitioning Aquanaut into a robust and reliable platform that can meet rigorous field demands. In tandem with our design improvements, the team is enhancing our design documentation and validation protocols to streamline assembly and support reliable maintenance and servicing.

Looking ahead, we are developing a capital deployment strategy and actively seeking manufacturing partnerships to scale production of the next Aquanaut fleet in alignment with anticipated market demand. With the manipulators, we are making steady progress on the design of our next generation fully electric autonomous manipulator. This system is intended for integration not only with Aquanaut but also with world-class ROVs, expanding our product capabilities and market applications. I'll now hand the call back to John.

John Gibson (CEO and President)

Thank you, Ameen. Thank you, Jason. As you've heard throughout this call, Nauticus Robotics is entering a period of significant opportunity. The integration of SeaTrepid has not only expanded our operational capacity, it has unlocked meaningful customer relationships and accelerated the deployment of our technology, though we are trying to stay disciplined and balanced upgrading equipment and with getting revenue. We will bring it in and make changes as long as it does not interrupt the revenue. We are now seeing real traction in the market with the growing backlog, expanding pipeline, and a clear demand for autonomous solutions that improve safety, lower cost, and reduce environmental impact. Our focus moving forward is clear. It is execute with precision, scale with discipline, and deliver on the promise of autonomy in subsea operations. We are confident in the team, in the strategy, and the momentum we are building.

We believe 2025 is shaping up to be a transformative year for Nauticus and its stakeholders. It really does feel like we have made it through the inflection point. With that, I will turn it back over to the operator, and we will take any questions that are on the line. Thank you.

Operator (participant)

Thank you. Liz and Yoman, we'll now begin the question and answer session. Should you have a question, please press the star, followed by the number one on your touch on the phone. You'll hear a prompt that your hand has been raised. Should you wish to decline from the following process, please press the star, followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Kunal Madhukar from Water Tower Research. Please go ahead.

Kunal Madhukar (Analyst)

Hi. Thank you for taking the questions. Two, if I could. One, on the broader oil and gas industry, with oil prices kind of declining, what are you seeing in terms of consumer demand and the demand for your vehicles? How is that changing?

John Gibson (CEO and President)

Kunal, I appreciate you joining the call and asking the question. It's interesting. For the larger clients that have established bases at higher price points, I think that declining oil and gas price is going to be more difficult. For us, it really gives us an opportunity to displace incumbents and change the market because they're going to be looking for more efficient solutions that are more cost-effective. I think it opens up conversations for us. I'm glad to see oil prices come down. I think it stimulates the economy. Stimulation of the economy stimulates energy demand. It's sort of an interesting combination. For us, I think we're at least 20-25% below the current price points of the alternatives and with as good or better margins. I think it gives us a great opportunity to knock on doors.

What's happening now in the market is I think they'll start knocking on our doors if the pressure increases on them as prices go down. I'd probably be in favor of a little bit further decline in order to help accelerate our business.

Kunal Madhukar (Analyst)

That's a very interesting view. Then, again, you talked about how the season really has—the offshore season has not really started when we're looking at one-tier revenue numbers. Last quarter, when you were reporting Fourth Quarter, you had talked about $16 million in revenue is the outlook you had kind of provided for 2025. Help us bridge the revenue from one-tier 25 to the full-year revenue outlook that you have kind of provided.

John Gibson (CEO and President)

This is a great question, Kunal, and it's the fundamental reason I should never give forward-looking statements because then you have to go back in there and explain them. We actually have a tremendous pipeline, and we have proposals being generated that cover the $16 million. Better than three-fourths of the pipeline is day-rate type work, where you can take a look at the amount of equipment we have, what our day rate is, and you can go create a model for it pretty easy. We still have about a quarter of the $16 million that is tied up in doing software sales and other proposals with regard to both defense and the advancement of our technology that is yet to close. When you start doing the model, we have work to do. We are hard at it.

Our sales team is talking to customers every day. We've got proposals that are being generated. You're going to see a couple of lumpy things that are mixed in next quarter with what the day rates bring in so that you can do a pretty simple model there and then add in the lumpy proposals that are associated with other activities. I think I still feel like we're going to have a tremendous year. It is an inflection point, and we're going to deliver good results year over year.

Kunal Madhukar (Analyst)

Great. As a follow-up, John, if I could, last quarter, you had talked about like $40,000-$60,000 in day rates. So times 90 is how we should kind of look at Toolkit revenue as a base case?

John Gibson (CEO and President)

You know, I really like that $50,000 price point, but it is dependent upon several things: the size of the boat we're using, the use of the ROV, the use of the Aquanaut. It's also, I mean, unfortunately, as you pointed out, the oil price market, the guys with all the heavy assets that have the much higher price points in down markets, they'll discount. We could come under some discounting pressure as a result of doing that. We have the margin in place to be able to always be in the head of those guys. They'd have to lose quite a lot of money to get to our price point. I think we could see some pressure on pricing, but I don't think it'll be very much.

We can hold pricing for a long time, maybe through the whole of the year, without having any impact whatsoever with them lowering their pricing. It will take them a while to get down to us. I think we are in pretty good shape on the pricing, but I think $50,000 is a good number. That is going to vary. It is a question that should be asked every quarter because it is going to depend upon hurricanes. It is going to depend upon boat availability. It is going to depend upon competitive pressures from the likes of Oceaneering and C-Innovation and others. We just monitor the market.

Kunal Madhukar (Analyst)

Great. Thank you so much.

John Gibson (CEO and President)

You're welcome.

Operator (participant)

Thank you. Liz and Yoman, as a reminder, should you have a question, please press the star, followed by the number one on your telephone keypad. Your next question comes from Robert Mandrala, an individual investor. Please go ahead.

Good morning. Thank you for the update. The question, yes, I appreciate the color on the revenue for this year of being around $16 million. It was a smart pivot, definitely, earlier this year with SeaTrepid. The question I have is, how confident are you with the $16 million this year? What is the breakdown on the software, the command center, I think is very crucial. What do you think the revenue will be over the next year or two with the software sales?

John Gibson (CEO and President)

Excellent questions. Appreciate you dialing in. On the $16 million, the reason I made a statement earlier, I hate getting forward-looking information. You never know what the market's going to do or how your equipment's going to perform. What we're doing is trying to make sure we manage a budget and manage our activities. We have to have something that we plan towards. That's current planning horizon. We went ahead and shared it. Okay. How does that break down? As I said a moment ago, about three-fourths of it are going to fall into the utilization of current assets. About a quarter of it's going to fall over into software sales and proposals to advanced solutions that are of high interest to our customers, both in the oil and gas, potentially in wind, as well as in the defense sector.

We've got some pretty exciting opportunities in working on non-boat-driven solutions. If you think about taking the real cost down in this industry, as if we can deploy an ASV with an Aquanaut, no boat whatsoever, if we can deploy from the bank for nearshore fields and go out and come back without having any boat whatsoever, completely autonomous, best solution ever. You don't have to worry about the launch and recovery of the vehicle, etc. We think there's some proposals to advance that that we are working jointly with partners on that have real upside opportunity because that's how you get cost out of the market and let our customers continue to make margin at lower oil and gas prices, is they have to continue to work on what their day rates are.

That movement towards full autonomy, we are extremely advanced in that compared to any other firm. There is no competitor that is looking at doing it in the way that we are. I think that is going to be something that picks up momentum. That is likely a proposal for a group of companies that want to push that cost lower in 2026, 2027. We will work to create that project with partners and to go forward. The software, wow. Everybody talks about AI, AI, AI. AI is very important and certainly utilized here. Autonomy is really what is driving the changes in the marketplace today. That is taking people off the vessels, taking people out of the equation, improving efficiency, reducing total recordable incident rates. It is also driving down that efficiency, brings down carbon footprint. We are in a position on all of those with our solution.

The maturity of the software is coming along. We have the commercial release of the ROV software coming out. Of course, there's nothing better than putting it on your own equipment and demonstrating it before you go out and try to push it in the marketplace. Great conversations occurring there. I think there will be really good traction. We continue to stay platform agnostic. Our software system can run on any robot. We're pursuing other robotics companies to deliver autonomy to them as well. I think that's why I'm confident in our ability to deliver great results this year.

Kunal Madhukar (Analyst)

Thank you, John. One last question. I assume the patents that you have on the software and the hardware basically is 20 years plus. How do you see the Leidos partnership basically rolling out? Secondly, is it possibly an exit down the road?

John Gibson (CEO and President)

You know.

Kunal Madhukar (Analyst)

I should be a director. I know your question.

John Gibson (CEO and President)

The fact I can't answer it doesn't change the fact it's a great question. I can't talk about exit strategies here as a public company. I'll just say that very interested in Leidos and in the partnership with them. There's a tremendous amount of capabilities we have that we know bring value to the maritime industry and in the defense sector. We're excited as that develops. I said this a year ago, I just find the defense sector, particularly given the uncertainty that you have in Washington, overspending and budgets and leadership, that we made a really good decision focusing on the commercial side because the speed at which these contracts will be let. They're going to be let, and they're going to be big.

You want to be there, and you want to participate, and we want to work with a great partner like Leidos. When you're small, that kind of lumpiness is just not something you can endure. We are very excited that we have all this commercial pipeline developing, and it will carry us forward. On the Leidos side, they have contractual commitments to us, and we are working with them. The timing on that is extended over a long period. We will be announcing those as we get to them, but we are working slowly with them. As they navigate the uncertainty with the defense sector and really have more experience and capability than we do, we are delighted to have a great partner and continue to look forward to working closely with them.

Kunal Madhukar (Analyst)

Thank you. I look forward to your email, John. Okay.

John Gibson (CEO and President)

Not a problem. Take care.

Operator (participant)

Thank you. There are no further questions at this time. I will now turn the call over to John for closing remarks. Please go ahead.

John Gibson (CEO and President)

I appreciate all of you joining today. It's really hard to do an announcement like this where you're talking about a quarter to come as opposed to a quarter you completed. Q2 really is our first quarter where we'll be operational for the whole of the quarter. I think you'll have a great opportunity at the end of Q2 to come in and construct models and understand how we're executing and what the margins are going to be and who we're working for. It's an exciting time to be at Nauticus. The next call in August, I think, is where we're really going to talk about the business and the quality of the business and the quality of the work.

We will have really strong statements to make about what we are doing and where we are going at that point because we will actually have a track record. Thank you for sticking with us all this time. I look forward to coming out and talking concretely as opposed to abstractly about what we are doing in the ocean and the value that we are bringing and how customers perceive us. Again, appreciate you guys owning shares. We are trying to create as much value as possible as quick as we can. Take care.

Operator (participant)

Liz and Yoman, this concludes today's conference call. Thank you all for your participation. You may now disconnect.