Nauticus Robotics, Inc.

Q4 2022 Earnings Conference Call


spk_0: hello and welcome to the not a kiss robotics earnings conference call for the fourth quarter and four year twenty twenty two and a december thirty first twenty twenty two my name is joe and i will be operator today today's press release including the financial tables is available at the investorrelations section of the company's website at www dot nordic robotic stuck on the company also plans to file it's form kincaid with as you see later today not as founder and ceo nicholas radford and it's cfl rangan pad men a ban join us on today's golf ball into remarks we will open a call for questions before management begins to formal remarks he would also like to remind everyone that some statements were making today may be considered forward looking statements under securities laws and involve a number of risks and uncertainties as a result we caution you that as many of which are beyond our control which could cause actual results and events it to differ materially from those described in the forward looking statements from more detailed risks uncertainties and assumptions relating to are forward looking statements please see the disclosures and our earnings release and public filings made with the fcc we did claim any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur after the date the forward looking statements are made except as required by law we will also discuss non gaap financial metrics and encourage you to read our disclosures and a reconciliation table so but to applicable got measures and our earnings release carefully as you consider these metrics we refer you to our filings with the fcc for detail disclosures and descriptions of our business as well as uncertainties and other variable circumstances including but not limited to risks and uncertainties identified under the caption risk factors and are filings you may get not a kisses as you see filings for free by visiting the as you see website at www dot se si
spk_1: he dot gov
spk_0: are also like to remind everyone that this calls being recorded and will be made available for replay the or link available in a of us relationship and section of as as website now i will turn call over to not a kisses founder and ceo nicholas radford
spk_2: thank you and welcome to our fourth quarter and full earnings call i like to begin by give a brief overview of the remarkable opportunity that lies ahead and more importantly how a capitalized on it during twenty twenty eight years after that i'll pass it off to our cfl rang and a lot of and to discuss our fourth quarter and false earnings for twenty twenty two in detail to finish our provide closing remarks before taking your questions not august was born out of this idea of taking spaceflight robotic technology essential to exploring the unknown in our solar system and applying it to our oceans as a cover seventy percent of a planet remaining largely unexplored and are mostly untapped and their potential for sustainable economic activity despite being estimated at a massive to an app trillion dollars of value the ocean economy has lagged and technology innovation let me give you an example the most common legacy solutions for offshore services are mainly unchanged since their inception over fifty years ago they are costly and up to one hundred thousand dollars per day or more riddled with operational inefficiencies and endanger our planet by emitting up to seventy metric tons of c o two and a the atmosphere daily that's sequels on emissions more than five thousand cars and when you multiply that by all the vessels doing work in the ocean you can see how significant impact when i think this greenhouse gas could have in contrast not gets his pioneering new technologies that can not only be performed at a lower cost and the incumbent offerings but are more environmentally friendly removing over ninety percent of the emissions while we want to be known by our big orange robots and our court or an ai company employee more software engineers than any other category personnel we are deeply committed to being a technology for a company that can lead the way with advanced suffer unable to solutions do our premier software platform tool kit we use artificial intelligence to power thomas untethered surface and sub see robotic platforms tool kit unified all our products into a single control architecture allowing for controls user interfaces sensory integration simulation data analysis and communicate to frameworks that a purpose built to enable such to work we're on a mission to create a future were more autonomy and intelligent robots like aquanaut are used to reduce the environmental impact and human safety issues significantly we want to revolutionize the way in which services are performed in the ocean and lately and leave the industry's transformation to an economically efficient environmental
spk_3: a sustainable model
spk_2: as i mentioned our service offerings result and not only a meaningful caught and safety improvements but also significant carbon footprint reductions our mission is supported by a mouse acceleration and interest from customers and investors in the emerging thirty billion dollar industry at ocean robotics in their applications and ocean data and the services market as innovative and sustainable solutions like ours becomes a reality our go to market strategy is twofold first we have partnered with the defense industry and the us government to help fund the maturation of our groundbreaking technologies as well as eight a national and national security and doing so we are developing invalidating our technology in one of the most demanding use cases second we are commercials using the ensuing broad ip portfolio that comprises are solutions for the private sector in order to innovate ocean services the market for our technology the mints and covers numerous market segments including offshore renewables oil and gas fence telecommunications aquaculture mining ports and shipping just to name a few let me start with an update on our collaboration with government the us continues to invest billions in a thomas naval capabilities and the ongoing geopolitical tensions are accelerating that investment the budget for research development testing and evaluation for solutions like ours continues to increase and the maritime services us navy the us marine corps and us coast guard have expressed a commitment to the deployment of ai driven technologies into their fleets just last week air force general glenn then hurt said at a senate armed services committee hearing on fiscal twenty twenty four spinning that quote the future of homeland defense is vastly different than what we see today it's likely including a thomas platforms airborne maritime platforms unmanned platform sub domain awareness answers and factors that are kinetic and nine can egg and quote this is a testimonial for the priority us government science to our mission and capabilities and bodes well for future demand for our technology we continue to work with litas a significant prime to apply technology derived from aquanaut to build a new class of vehicles the cutting edge vehicle has the potential to tackle a wide range of tasks that would be hazardous and a possible for humans and has the potential to enhance our national security as previously announced we have been awarded to contract by the the fence innovation or the i you the most recent of which was a multi million dollar a war that we announced in october for the development of a derivative robot based in part on our advanced suffer capabilities this unmanned and to be a robot katarina utilizes are premier autonomy software package talk it for more intelligent manner control of the mine countermeasures technology care not can be used in the search stone and beach areas to support us marine corps during critical beach landings and had the potential to save lives we have successfully passed the first phase of the project and are advancing towards the next rigorous milestone we also have good news from our other day i you contract we have successfully completed like testing of our ai enhanced underwater response vehicle for the us navy we are committed to supporting the i used to it's process of bringing autonomy to the forefront of the fence problem solving in order to reduce risk to the us navy divers and mitigate disruption to global to apply chance but this logistics and critical sea lanes we will provide further updates on the next steps as soon as they become publicly available let me died in the how we are utilizing our advanced robotics innovate the blue economy commercially our core commercial offering is called the not a fleet a pair of robotic assets comprised of and eighteen meter optionally crude small surface special name hide or not and aquanaut it's undersea counterpart the deployment of the not asleep in multiple offshore industries represents what are the most promising operational and technological step changes in the industry we continue to make excellent progress with the production of our commercial often us while we've been impacted by material shortages we've successfully resolved these challenges and currently expect all three and it's be completed by the end of the second quarter with the first unit starting in water commissioning this week as for your not production were also expecting them to be ready in the third quarter were eager to get the fleet in the water and our potential customers are as well as we continued experience strong man signals for are offering to better service one of the key geographical areas than or see we've recently initiated operating bases and the banger norway and aberdeen scotland we expect at least one of our opponents to be to be deployed in this region falling commissioning another great news were successfully progressing through the phases of our previously announced contract was shelf for to growing this collaboration we are extremely honored to be testing our technology with customers of shelves caliber and are delighted to share the results with investors in the future with that are handed over to our see about rang him thanks net and hello everyone for the year we generated revenue of eleven point four million dollars waiting to year over year growth of thirty three percent the increase is primarily attributable to revenue from for new contracts and increased performance on an existing contract for the fourth quarter we generated revenue a three point two million dollars which is slightly above the guidance we gave on our lost earnings call for the year we reported total operating costs of twenty nine point eight million dollars and for the fourth quarter we report a total operating costs of ten point four million dollars are full your operating expenses include three point five million dollars at one time deal related expenses all of which occurred in the third quarter drivers of the year over year increase are primarily related to higher cost of revenue and higher g and a which is largely due to the costs required of a public company our net loss for the quarter with a point two million dollars or twenty one cents per share compared to a net loss of eleven point two million dollars or a dollar seventeen per share in the prior year period for the year we reported a net loss at thirty three point two million dollars or a dollar seventy five per share compared to fifteen point one million dollars or a dollar fifty seven per share in the prior year
spk_4: excluding nonrecurring items are adjusted net loss per share for the quarter with nineteen cents compared to eighteen cents in the prior year period
spk_2: are adjusted net loss for the year with ninety six cents compared to seventy five cents in the prior year now moving on to our balance sheet and capitalization as a year and we had twenty three million dollars of cash and short term investments this includes five million dollars of short term t bills that were included in short term investments that would now be back to being classified as cash equivalents our networking capital position at the end of the year was thirty three point one million dollars are total principal amount of debt outstanding at quarter and was approximately thirty six point five million dollars which is entirely attributable to our convertible notes the accounting treatment of the convertible notes requires a portion of the amount to be treated as a warrant liability as a result only fifteen point nine million dollars up the principal amount of the note was recorded as debt on her books as of december thirty first twenty twenty two we had approximately forty seven point three million shares outstanding this includes seven point five million shares in an escrow account that won't best and left the stock price reaches at least fifteen dollars you may have noticed that gap rules don't include the shares in are weighted average number of shares used to calculate earnings per share for the first quarter of twenty twenty three we expect revenue to be slightly more than two and a half billion dollars coming mostly from our defense segment while we expect this segment to continue to provide a stable base of revenue this year we're looking forward to complimenting it with revenues from our commercial services division as mentioned material shortages have resulted in production delays and has delayed the delivery of our aquanaut and hydra not units thankfully we have result these and are now in full swing to deliver the nordic a sweet with delivery and commissioning of all units expected to be completed by the end of the third quarter we expect to be in a position to begin generating commercial revenue by the fourth quarter of the year and with each aquanaut hide or not pair having the potential to generate six to ten million dollars of revenue per year the should lead to strong revenue growth that completes my financial summary now i'll turn the call back to nick thanks rang and and summary the future looks exceedingly bullish fanatic us are continuing to progress on our defense contracts and we're getting closer to decisions that could result in significant revenue growth from this segment as we moved more to pronounced product sales and while we're disappointed by the delays we've experienced and the delivery of are commercially in its demand for are offering remains very strong are currently in negotiations with potential customers on multiple continents and were negotiating with customers about putting down deposits to reserve services from future fleet serial numbers as rang and mentioned each not as fleet pair has a potential to generate between six and ten million dollars of annual revenue to just units were currently building have the potential to quadruple or revenue and do this at very high margin while twenty twenty three may be a transition year before our growth really accelerates we couldn't be more optimistic about the opportunity in front of us with that alternate back over to the operator and would be more than happy to take your questions thank you
spk_0: thank you ladies and gentlemen if you like to ask a question please press star one on your telephone keep keypad and a confirmation tomlin to humans in the queue you may prefer star to as you would like to remove your question from the queue for participants using speaker equipment he may be necessary to pick up the handset before pressing the smarties woman please whipple for questions
spk_5: i first question comes from milan of troy jensen with lake three capital markets please proceed he jelena think to take my questions congrats on these result in a tough environment but i'm
spk_4: maybe up for you'd make did you go over deployment schedule again i heard three units by the only key to like one or the and this week soon i you just go over the deployment of these three atlanta
spk_2: enjoy want a choice wonderful hearing from you yeah so and we mentioned we've had to reshuffle some of that and great news for got one of i'm heading however aquanauts getting a lot of this week
spk_6: the stage of their right we had a commission and then there are involved and different qualification programs after that so
spk_7: wade
spk_2: our having the first one the water and and ah be staggered after that as they just come off the assembly line so they're cereal and that nature
spk_5: and they're currently being produced in vancouver's i've talked about the past and then they'll be heading out to their different yeah locations after that so as we mentioned that process yeah you think and anywhere between thirty and sixty days per unit hour before they head out to their customers
spk_8: about ethan hawke legit legit to be clear toggle anhydrous made you get both pay when homes free yep as we mentioned right we are aquanauts are being produced and vancouver and a hydrant offs are being produced on the isle of wight in the uk
spk_5: with with the shipbuilder they're called or summary
spk_4: the perfect events and an thoughts on good visibility be on this denotes behind brady that you can eat these three and lot previously but then you really think the next tranche another her brow robots and the my penis
spk_9: you know we're we're looking at that pretty
spk_2: pretty extensively at the moment and
spk_10: we're looking at different ways to handle that expansion
spk_2: i'd say the north sea is a very quick first mover market for us and that's why we're bracketing that section with both the offices and to banger and aberdeen and so i think the uptick is gonna be based on everything that were currently negotiating and and discussions with the optics gonna be pretty pretty quick and so we're going to get back on the saddle right after that and start looking at and plans for the next one's am i don't want to give a number on on the transhipment of next size i'm it's gonna be ferry boat and on the number of factors but we are is eager as you are to get a little putting now it'll be and status well because we're one of the risk mitigating strategies we've we've been looking at a speed up certain parts of the production as a staging the longleat items and so ill first be
spk_11: it'll first be staged with it with the purchase of of the things that were really pacing the production so that we can have a smoother
spk_5: his mother's family
spk_8: last question healthy the for unison so many prepared remarks but it could you speak specifically about the the problem of record that the unit of underwear on advance into and to descend where we honor yeah so the navy on a lot of fleet of of are obese and these are kind of the more sort of the older style that we've that would that we've talked about the past and there's a lot of different sizes are the it'll show up for this particular unit on the the navy owns a substantial amount of a smaller class or okay and what they found with with not a kiss is a lot of our advanced software was improving the operations and specifically being able to me
spk_2: make these assets on tethered it's one of the biggest hindrances turret keeping servicemen and women out of harm's way is is removing at is removing the proximity and which a with and removing the proximity and and from which the operator as compared to the asset so we obviously that's a bedrock capability to to and to the atlas with his company so the navy was quick to go a trial out the software that that we've been using internally and see if it could be deployed across their their class of assets and so we've been very successful com it's been a fairly extensive program it is connected to a program of record where the navy as purchasing quite a large quantity of their so well we're excited about his we got a pretty large defense funnel this as included in it of course and one of the bullish alex on that is this is connected to actually license out our software into already existing fleet of systems so that that is something that were really interested in but in general are our defense panel which makes which makes
spk_12: you know predicting the future a little hard because it comes as a little lumpy and nature
spk_2: but you know we're we're really progressing through how over the give some programs with the with with the government entities we've been involved with for three to five years
spk_3: i'm and those are finally starting to i'd say parlay and compound into a into bids were were getting and eight figures that to us and and so so i think we are soon to to see the results of that and that's when you're really going to stay a step change in our tech is utilized and and how it's
spk_5: pulled up into on the brought a portfolio of the services
spk_0: mother of new pack it up the good work bag in addition extra
spk_13: or next question comes from the line of dodson was so down please proceed
spk_2: i got at the and for brian dobson on t just share any color that you're seeing on maybe your costs per vehicle i know they were tracking at the higher end of the range and league last time you spoke given the supply chain any any chance that comes out to maybe more the middle middle of the range by say twenty twenty four that you need by the normalization there
spk_8: get a good news is i think people are settling down and you know there is there was a bit of up with the bit of a turn there for a little while you know what none none of us are wearing masks anymore are practically speaking but the supply chain still acts like it sometimes and so the good news is i think we're really beyond that that wave and so things are becoming
spk_2: much more predictable uncertain so the caught the at the cost is a tricky question because we build internationally the pound has been depressed against the dollar so that helped and certain certain cost or structures that we have since we built in the uk but you know there are so there are certain raw materials have have appreciated am no doubt and and we don't build internationally and so we've we've we're there was a little bit a start up costs associated with getting manufacturing up and going so that this would be repeatable process and and now we could produce these units with the quality that that we demand so so it's it's it is trend towards a little bit of a higher range but nothing that's going to eat appreciably into the margins that we will see on this i think one of the main benefits is that we could have you know we can dither around on costs significantly that because we don't sell these we actually own and operate these assets we realize and monetize the asset over to depreciable life which is eight years and so we have income generating potential of anywhere between caught sixty seventy eighty million dollars over that life so if our manufacturing costs go up say ten fifteen even
spk_14: twenty five percent that's not going to get into the long term margins and therefore the profitability the business at all
spk_0: very helpful thanks as a reminder if you like to ask a question please press store one from keep keypad
spk_15: and our next one comes from the line of just grab with alliance global partners please proceed and i can confirm for them
spk_2: a big as on the on the earnings release to the you guys talked about a high case about ten million dollars in annual revenue potential for the units which i believe than eight million with higher and you get to talk about is it fair to say you're getting more conviction in pricing upside down in value proposition you going to the table asia it's wonderful see on the other side and or congrats on on your on your change so yeah we were that that price that that revenue potential comes from direct is that we've been making an affirmation from the customers about what
spk_9: what what we've been able to negotiate so we were pleasantly surprised on on a bit of more that upside with modeled at low and
spk_13: and and happy that it's come out a little bit on that on that side
spk_15: gotta thank you and i'm on the shell and water demonstrations was was there anything you guys learned all
spk_2: that was surprising positively or negatively or with it and a down the fairway from your standpoint and just something shell on the needed to see for themselves i think down the fairway on the capability intrinsic to the machine i think the surprise and i won't speak for the customer but this was my impression the data that we produce just by nature of the robot was something that they weren't necessarily used to and the quality and and and and timeliness and which was processed and it i think come from my impression it started getting the wheels turning on the the far reaching application we might have on based on the sensors sweet that's just inherent to the robot and so yes we love the fact that we're able to intervene
spk_3: in a in a much lower costs profile that we can't forget that the dated a robot generates is the value proposition for that down which often times has a long tail is is probably more valuable
spk_15: that that's really interesting hopeful a lot less on for me
spk_8: yeah down the road i'm happy you get these first person it's in the water as the muslim be appointed time we wanna put go to i'm just going on the next batch do you have any the man i'm only trying to normalize for some of the supply chain noise influence the last you what what kind of michael palms do you think i'm from and make that decision to when you can have units in the way
spk_2: water for about two of you will be are so that that's that's what we are taking into account is how to shorten that and what i had alluded to earlier with troy is that in this first batch just based on how we were capitalized we sort of just went after it all to same times when in fact a more method tickle in measured approach is to stage the long leaves that fit and and dovetail a little bit more into their natural production schedule so that's the tax we're gonna take this time and so on the were obviously the reception we've received from this said customer bases enormous and and yes we're getting our first say production quality machines and water we have issues in the water now
spk_16: and so we're we're eager to augment that fleet longer term
spk_8: but
spk_2: you know as far as the harder your question is concerned
spk_15: the production schedules i think this is the the good news is i think we we know what the upper end and the the worst case scenario is good news moving forward as it's gonna be far better than this
spk_0: yeah now that them a lot of sense and them better than the a big as thank you thank you

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