This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good day, everyone, and welcome to today's Nauticus Robotics 2024 Q2 earnings call. 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 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 2. 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, Nautica's Special Project Leader.
spk00: 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 Bickney, 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. 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.
spk07: Well, thank you, Kristen. Good morning, and thank you for joining us on our conference call today. It's going to 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 ventures, 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 deep water 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. We're planning to go to the Gulf of Mexico with the Aquanaut Mark II vehicle this month and are finalizing requirements and scope for 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 want to thank our shareholders for approving the reverse split proposal at our June 28 shareholder meeting. This key vote allowed us to perform a reverse split on July 22, 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. Now, with that, I'm going to turn the call over to Daniel Dayhart, our field operations leader, to give you an update on our operations. Daniel.
spk04: 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 Vehicle 1 to FAU for testing during Q4. We are currently on schedule to mobilize back onto the vessel in August to begin the field application of the Apanod vehicle to complete a general field inspection of the oil and gas subsea structure. We are committed to completing the project safely and efficiently. We are eager to introduce the market to supervised economy and believe it is the first step to increase commercial activity. I'll now turn it back over to John.
spk07: 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 what I'd like to do is turn the call over to Vicki to discuss our financial results.
spk01: Thank you, John, and good morning. As John mentioned earlier, the 36 to 1 reverse split was completed on July the 22nd. All references in our 10Q and press releases in regard to equity and related items are now stated on a post-split basis. I will now discuss in more detail 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 23 and a sequential increase of $0.5 million. Notably, the second quarter results include a $0.5 million expense for a loss on contract, which will be incurred in Q3 24, while Q1 benefited from a $2.5 million expense for loss on contracts that was recognized in Q4-23 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 23 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 23 versus a $4.4 million non-cash change in fair value of warrants in Q2 24. 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 Q4-23 accrual of $2.5 million relating to the loss-making contract that otherwise would have hit in Q1-24. G&A costs for the first quarter were $3.2 million, which is a decrease of $2.3 million compared to the same period of 23 and a $0.2 million decrease from Q1-24. We are actively working to reduce G&A costs as we continue throughout 2024. cash at the end of Q2 24 was $8.1 million, compared to $0.7 million at the end of 23. This is the result of funding received in January of $13.3 million, along with raising $9.5 million to our at-the-market facility in the second quarter. During the second quarter, we moved our DRIX out of health 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 23. This is expected to close prior to the end of the third quarter of 2024. I will now pass the call back to John.
spk07: 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. And we've enjoyed having him here and we're incredibly pleased that Nick, because of the relationship we have and what he sees in the company, is agreed to stay on and transition to our new general counsel who are introduced in just a moment. Nick, any comments you'd like to make?
spk09: 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 not just 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. uh and i believe from the direction of the team setting here uh 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 hand over this week to make this transition as seamless as possible i'll continue to watch and support nauticus closely from the sidelines of the 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.
spk07: Nick, thank you. And I really appreciate what you've done here. And now, if I could, I'd like to introduce John Simon. John, why don't you introduce yourself? Well, thank you, John.
spk08: 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.
spk07: 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 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.
spk02: Thank you. At this time, if you would like to ask a question, please press star 1 now on your telephone keypad. To withdraw yourself from the queue, you may press star 2. Again, that is star one to ask a question.
spk10: One moment while we queue. And once again, that is star one to ask a question.
spk02: We'll take a question from Robert Mandrala. Your line is open.
spk06: 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.
spk09: So this is Nick. I can answer that for you. We've got roughly about $4.6 million in the market, market cap of approximately $2. About 11, I think, on just what's outstanding, with the ventures converting the real true market cap of the companies closer to about 40 to 50, varies based on the day of the share price.
spk06: Okay, so the market cap is closer to 40 to 50 million?
spk09: Is that my understanding?
spk06: On a fully diluted basis, that's correct. Okay, so does that meet then the NASDAQ requirement?
spk09: We're working with them on that. They will look at certain criteria, but yes, we think we have a path forward there.
spk06: Okay, very good. And then the other question I have 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, once the Once it's deployed, we count on that revenue for five to seven days a week, or could you provide a little more color on that, please?
spk07: Well, I've got Daniel here, too, who can fill in or correct me, whichever one's required. When we say $25,000 to $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 billed 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 of the performance of the aquanauts. It's 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 aquanauts. I'd say here in the Gulf of Mexico, we would be modeling 200 days a year for work. Due to weather losses and storms, one thing and another. Internationally, it would be the same. It just has to be flip season, so it's summertime in South America when it's wintertime here. And the day rates in non-U.S. work are higher. But that doesn't mean the margin's any higher. You have a very similar margin. It's just that you're going to be running at a higher day rate. But that's the right numbers. And so the model 200 days a year, and I hope if we go into 26, 27, 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 next.
spk06: 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?
spk07: Great question, Robert. 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 Fort Bouchon 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 complete we can get it there and begin all the certification this year so that we would have that vehicle available to us next year for revenue and then we'll begin assembling vehicle three in the first uh quarter of 2025. and so imagine one we've got now going in the next week two weeks back back to the gulf uh to chase revenues one will go from here to fau and then The third one will be assembled starting Q1 next year.
spk06: Okay, very good. And then let me ask a quick question on Toolkit. I know that's kind of an industry game changer. How are you looking for revenue there? What can we expect as Toolkit is more and more adopted and rolled out to the industry?
spk07: Your questions are – you could be a director here, Robert. It's an excellent question. We're very excited about Toolkit. We had a breakthrough this week. One of the things that we do with Toolkit is we simulate Toolkit, 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, an outstanding young man, uh it came in and modified our stem 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 we are working with an rov company right now that's excited about deploying toolkit on their rovs and we're working through the the the contract the uh 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 is going to be i think the core of the company if we look out in 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 it 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?
spk05: 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.
spk06: I think that's a wonderful pivot. I agree with the AI and the software. It's a great revenue stream. And as you mentioned, it can be rolled out very efficiently and effectively fairly easily.
spk07: While the other part of the business... I would say there's no pivot here. Without that toolkit, 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 them, but no pivot. We must have toolkit 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?
spk02: We do. We'll take our next question from John Mannion of Geneva Enterprises.
spk03: Hey, John. How are you doing? Good so far. So I'm just a regular retail investor in the stocks, and 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 IUD 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, uh, regards to, uh, obviously the, uh, UV.
spk07: Okay. So it's a, another excellent question. Uh, and I'm sitting here looking at my new general counsel and he's shaking my head about saying anything. We're trying hard not to give any sort of forward-looking statements until 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 is concrete then we'll get a press release out to you on that but a right thing to say is extremely interested in defense work and pursuing that and uh and believe that we'll have uh information on that for you as we go forward awesome that was uh that was the main question that i had so thank you very much for your time you're you're quite welcome uh operator do we have any more stalls
spk02: We have no further questions at this time. I'd be happy to return the call to John Gibson for closing comments.
spk07: 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 going to execute that. We have some really good partnerships that are developing with other service providers. And I think we're at that crucible where we're at an inflection point and we're working to turn the corner. 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. We've augmented the team with another real professional and 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 want to do a great job for customers, and I think that's how you build a fantastic company. And just stick with us. 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.
spk02: This does conclude today's program. You may now disconnect your lines and everyone have a great day.
Disclaimer