Nauticus Robotics, Inc.

Hello and welcome to the Nauticus Robotics earnings conference call for the second quarter ended June 30th, 2023. My name is Maria and I will be your operator today. Today's press release, including the financial tables, are available at the investor relations section of the company's website at www.nauticusrobotics.com. The company also plans to file its Form 10-Q with the SEC later today. Joining us on today's call are Nauticus founder and CEO Nick Radford and its CFO, Rankin following their remarks, we will open the call for questions. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties and assumptions relating to the forward-looking statements, please see the disclosures in the company's earnings release and public filings made with the SEC. Nauticus disclaims 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. Nauticus will also discuss non-GAAP financial metrics and encourages you to read its disclosures and the reconciliation tables to applicable GAAP measures in the earnings release carefully as you consider these metrics. We refer to you to its filings with the SEC for detailed disclosures and descriptions of the business, as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption risk factors in the company's filings. You may get Nauticus SEC filings for free by visiting the SEC website at www.sec.gov. I would like to remind everyone that this call is being recorded and will be made available for replay via a link available in the investor relations section of Nauticus website. Now we'll turn the call over to Nauticus founder and CEO, Nick Radford.

Good morning, everyone, and welcome to our second quarter 2023 earnings call. The second quarter was a transitional quarter for Nauticus. As we move closer to the commercial launch of the Nauticus fleet, we made significant progress finalizing our fleet production and in the commissioning of our first second-generation Aquanaut. Our excitement about the market application for this revolutionary autonomous robot is high, and customers seem to share our feelings as demand signals are increasing. During the quarter, we signed commercial deals with leading energy companies such as Petrobras, Shell, and our Norwegian partner Stinger for Equinor. We are actively working engagements with other household-named customers. These energy companies spend hundreds of millions of dollars a year for this type of work that Aquanaut can do. So the opportunity set ahead of us is significant. During the quarter, we also transitioned to the next phase in a couple of our defense programs. While it's always great to advance to future phases, sometimes there's delays in new contract authorizations. That impacted us in Q2, which is why our government-sourced revenue was down during the quarter. We view this as a temporary dip, and we expect to see revenue rebound in the current quarter. Let's start with the progress we're making on the commissioning of the aquanauts. We've had our first new production unit in the water doing commissioning exercises, and it's logged more than 100 hours offshore to date. I was just up in Vancouver to oversee some of the work, and I can tell you firsthand that our robots would be able to do some amazing things for our customers. Assembly is nearing completion on the other two aquanaut units, and we still expect to have them both in the water later this year. So let's start with Petrobras. This was competitively awarded to Nauticus as ranks as one of a large contract of its kind to date. Aquanaut, our flagship autonomous subsea robot, will be deployed to support Petrobras' offshore activities in one of the world's most active offshore energy basins. At Petrobras' Gibarta field, Aquanaut will perform infield inspection services using Toolkit, our supervised autonomous software technology. While the initial contract for Petrobras was approximately $4.3 million, just over 60 days' worth of work, the market opportunity for Nauticus in offshore Brazil is much larger. Our success in winning this initial award places Nauticus as a relevant player for potential subsequent awards in a market worth over $100 million a year. While no company ever wins 100% of any market opportunity, you can see the size of some of the opportunities we're chasing. We have also recently signed contracts with Shell and with our partner Stinger for Equinor. Both contracts will utilize Aquanaut, but will require very different tasks, highlighting the flexibility of our offering. For Shell, Aquanaut enables contact cathodic protection and pick-and-place of their subsea tools. For Equinor, the project will utilize Aquanaut's advanced perception system to detect leaks in novel ways. Our government division also continues to progress, and as such, we've recently incorporated a wholly-owned subsidiary, NaughtyWorks. to better serve our government customers. We wish we could give you more details on some of these projects we're working, but they're confidential, and we absolutely think they will save lives and enhance national security. As we've discussed previously, some of our programs are nearing an inflection point, where revenues could be materially higher. Hopefully, we'll be in a position to comment more later this year. Lastly, before I turn the call over to Rangan to cover the financials for the quarter, I'd like to comment on our financing plans. Here at Nauticus, we're trying to reshape an industry. And we think our autonomous service offering will have a hugely positive impact on our customers' costs, safety, and the environment. In order to do this, we need to build our fleet. To help finance this, we're currently finalizing commitments for an additional $15 million of non-dilutive capital from existing equity investors, of which $5 million has already been funded in July. And the balance is expected to close shortly. We were also in active discussions with investors for a second second round, a larger round of capital, which will support our service offering expansion. With that said, I'll turn the call over to our CFO, Rangan, to discuss our financials.

Rangan? Thank you, Nick, and hello, everyone. For the second quarter, we generated revenue of $1.1 million compared to $2.8 million in the year-ago comparable period. The decrease in revenue is primarily due to delays in contract authorization with government entities. Our net income for the quarter was 49 cents per share compared to a net loss of 35 cents per share in the prior year period. The increase was primarily due to the positive impact of the change in the fair value of warrant liabilities. Excluding non-recurring items, our adjusted net loss per share for the quarter was 20 cents compared to 35 cents in the prior year period. Our adjusted net loss excludes the $29.7 million gain in fair value of warrant liability. The increase in value resulted from a determination that dilution caused by our existing convertible notes was less likely given the financing plans that Nick discussed. Moving on to our balance sheet and capitalization, as of quarter end, we had $4.6 million of cash and cash equivalents, including our restricted CD. Our net working capital position at the end of the quarter was $11.7 million. These numbers do not include the financing options that Nick spoke about. And the operator also mentioned mistakenly that we are filing later today. We're actually filing on Monday. I just wanted to clear that up. That completes my financial summary. Now I'll turn the call back to Nick.