Nauticus Robotics Q1 2023 Earnings Call Transcript

There are 4 speakers on the call.

Operator

Good day, and welcome to the Nordicus Robotics Earnings Conference Call for the First Quarter Ended March 31, 2023. My name is Danae, and I will be your operator today. Today's press release, including the financial tables, are available at the Investor Relations section At the company's website at www.norticusrobotics.com. The company also plans to file its Form 10 Queue for the SEC later today. Joining us on today's call are Lorticus' Founder and CEO, Nick Gradwiz and its CFO, Angan Padmanban.

Operator

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 are 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, forward looking statements are made, except as required by law.

Operator

Nordicus will also non GAAP financial metrics and encourages you to read disclosures and the reconciliation tables to applicable GAAP measures and the earnings release carefully as you consider these metrics. We refer 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 at 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 also 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 the Nordicus' website. Now I will turn the call over to Nordicus' Founder and CEO, Nick Bradford, please go ahead, sir.

Speaker 1

Thank you, and hello, everyone, and welcome to our Q1 2023 earnings call. The past quarter was a significant one for the company, representing a major inflection point in Nauticus' history as we officially began the commissioning exercises for the next generation of our commercial subsea robot Aquanaut. This puts us one step closer to getting the Aquanauts in the field and We've also continued to progress the assembly of our second and third units and expect to have them in the water later this year. We've been working towards this goal for over the years, establishing manufacturing partners as well as undergoing testing trials, Where we've been able to refine our technology to offer solutions that will transform the way industries operate in the blue economy. Customers from all over the world have expressed Significant interest in working with our services and robots.

Speaker 1

And as these opportunities materialize, we will have significant revenue upside. In addition, we've also continued to make progress on the government side of our business. Starting with our contract with Leidos, we were awarded a $2,700,000 contract extension for activities related to an Aquanaut derived subsea platform. This extension allows us to further progress toward meaningful future revenue website pending the As previously announced, our proprietary software platform toolkit was a key driver of 2 DIU contract wins, 1 for A2 RV and the other one for AEM RV. In our work to support the U.

Speaker 1

S. Navy, Nonicus completed a live offshore demonstration of our AI enhanced mine countermeasure vehicle, which led to the company's progression into the next phase of DIU's AEM RV program. In this, we're working to transform an existing mine countermeasures platform into an untethered autonomous drone. This allows the vehicle to remotely identify and neutralize subsea mines and other targets of interest while taking U. S.

Speaker 1

Navy EOD divers out of harm's way. As for A2 RV, we successfully completed the first phase and have moved on to the next one. To support the U. S. Marine Corps during amphibious operations.

Speaker 1

Our ongoing collaborations with DIU and Leidos demonstrate the substantial value of our comprehensive solutions which will enable unprecedented autonomous capabilities for our government customers. The success of our government partnerships serves as validation as we look forward to providing future updates on these projects as they become publicly available. With that, I will now turn the call over to Rangan Padmanabhan to discuss our financials. Rangan?

Speaker 2

Thank you, Nick, and hello, everyone. For the Q1 of 2023, we generated revenue of $2,800,000 compared to $2,200,000 in the year ago comparable period. The 26% increase in revenue is primarily due to one new contract as well as the continuation and increased performance on existing contracts from the prior year. Our net loss for the quarter was $0.26 per share compared to a net loss of $0.36 per share in the prior year period. Excluding non recurring items, our adjusted net loss per share for the Quarter was $0.17 compared to $0.36 in the prior year period.

Speaker 2

Our adjusted net loss excludes a $2,200,000 non cash charge for the change in the fair value of warrant liability associated with our convertible debt and a $1,200,000 non cash charge associated with the preliminary Sales tax assessment related to prior years. We currently expect to significantly mitigate this assessment. Moving on to our balance sheet and capitalization. As of quarter end, we had $12,700,000 of cash and cash equivalents, including our restricted CD. Our net working capital position at the end of the quarter was $25,500,000 As of March 31, 2023, we had approximately 47,300,000 shares outstanding.

Speaker 2

As we've mentioned before, this includes 7,500,000 shares in an escrow account that won't vest unless the stock price reaches at least $15 a share. Per GAAP rules, these shares are not included in our weighted average number of shares used to calculate earnings per share. While Q1 revenue exceeded our forecast, some of this was due to revenue on our government contracts being pulled forward from Q2. As a result, we're expecting revenue to dip in Q2 before bouncing back to a more normal range in Q3. That completes my financial summary.

Speaker 2

Now I'll turn the call back to Nick.

Speaker 1

Thanks, Rangan. Looking ahead, we're as optimistic as ever for the future of Nauticus. Over the past several months, we've achieved significant milestones for our government contracts and moved one step closer to generating commercial service revenue from the Nonicus fleet. Our countless hours of hard work over the years are starting to pay off and we're approaching a pivotal moment in Nauticus' history. Our government contracts continue to move forward and we're getting closer to the stage where we can see a step function increase in revenue.

Speaker 1

And as we move through the commissioning and pilot contracts with We expect to be able to deliver strong revenue growth. Remember, each Nauticus fleet pair has the potential to generate $30,000 $50,000 a day of revenue or roughly $6,000,000 to $10,000,000 annually, assuming industry average utilization rates. Given this, It's hard for us not to be excited about the potential for Nauticus right now. In closing, I'd like to thank the people behind the scenes who have made this all possible. The employees of Nauticus, their unwavering commitment and passion towards our mission has been an instrumental part of the company's success and I couldn't be more grateful for their contribution.

Speaker 1

I'd also like to thank our capital partners and shareholders for their continued belief in Nautica as well as we embark on the next stage of our business. This completes our prepared remarks. And we're now ready to take your questions. Operator?

Operator

Thank you, sir. Ladies and gentlemen, we will now be conducting a question and answer The first question we have is from Craig Owen from ROTH MKM Capital Partners. Please go ahead.

Speaker 3

Good evening and thank you for taking my questions. So Nick, with the splashdown of the unit just a couple of weeks ago, and I think you've got another one coming very Soon. Can you talk about the timeline to revenue production of these units? Is there a shakedown phase where you need to have these units in the water and operating to calibrate them before they start actually generating revenue and gross margin for the P and L? Or is this something that could come on fairly quickly?

Speaker 3

And what sort of utilization would you expect on these units, given that you've got lots of customers that are looking for them right now?

Speaker 1

Hey, Craig, it's awesome to hear from you and love the question. We were equally and everybody here was just super excited when we first hit the splashdown with the first unit getting in the water. So naturally, we start and progress it Through, hey, does it leak all the way to is everything working well? And so, there is a period of commissioning where the robot hits the water and gets goes through progressive stages, where we trial it out. So that's all internal, just making sure that everything is as expected.

Speaker 1

And then we have already so our job is essentially to shorten the amount of Between it comes off the assembly line and gets underway. As we say, it's always hard to order an Uber before it's off the assembly line. But we've done a lot of work Paving and priming the pump, so to speak, on which customers are going to accept that into not only a pilot program, but then also into Service days and we have very we've got a great visibility into where these units are going. So we're I'm exceptionally confident that by the year's end and I'll call it early late Q3 or the Q4 That they will be the first one will be in a revenue generating capacity. And the next the following year, we We have visibility into near full utilization for the unit.

Speaker 3

That's very good news. Thank you. So second question I wanted to ask is, this contract expansion with Leidos. So it's nice to see existing customers coming back for more. Can you maybe just give us a little color on how this came together?

Speaker 3

And is this kind of Contract expansion is something that can continue to happen on existing contracts. Does it require more equipment or is this man hours? Any other color that you can give us to understand how this impacts the investment?

Speaker 1

Sure. We've had a good relationship over the years With this particular performer, so yes, we're working with Leidos and have for quite some And I think we disclosed what the overall value and where that's heading. Yes, it's good news when it expands and I also feel like it's probably we'll probably have more of that To come, so far so good on what we've been doing. So like I mentioned in the call, We have a derivative platform that we've been investigating the usage of and it's connected to a particular Customer set and things are going well.

Speaker 3

Excellent. Excellent. That's really good to hear. So then Last question, if I may. The capital needed for the next couple of splashdowns, right, this is going to be On top of mind for investors, you had a very healthy working capital position and obviously your cash is in a strong position The quarter.

Speaker 3

Can you maybe update us on what the cash payments would be? At the time of splashdown, I know a lot of the costs already been covered. But can you maybe just sketch that out for us a little bit so we can understand the necessity of This working capital flowing for you?

Speaker 1

Sure. It's something that we're always evaluating. You and I have Kicked it around in the past on the best way to handle this. But we're always evaluating what expanding looks like and the best way to finance that. So it's something that's always top of mind.

Speaker 1

Right now as we're entering the tail end of our production of these units, a lot of the costs as you mentioned have been incurred. And so we're going to enjoy a little bit of that trailing off. And then As those units go from leaving the nest and then getting out into the wild and under contract, right, we'll see a nice handoff between Us having to qualify them and then getting them into revenue. So, but as we look future and obviously Nauticus is bigger than the 3 units we're producing and we've got ambition to go way beyond that. And so I feel like there's going to we're looking at a couple of different options on how that Expansion could be financed.

Speaker 1

And but I think it's going to come off the back of showing good success in what we already have.

Speaker 3

Excellent. Well, thank you. I'm sure there's lots of other questions from the other analysts. I'll hop back in the queue and Look forward to catching up with you on the call back. Thanks.

Speaker 1

Thanks, Craig.

Operator

Thank you. Now I'll pause a moment to see if we have any further questions. We have a question from Brian Johnson. Apologies. We have a follow-up question from Craig Irwin.

Speaker 3

Excellent. So thank you for taking my Wanted to just talk a little bit about the sales pipeline, right? So you have a number of customers that have shown significant Interest in the equipment, some of the automation technology you bring to Subsea and some of the communications potential you have For possible integration in other platforms, can you maybe update us On the breadth of opportunities that you're looking at there, and how this would potentially come together commercially for Noctis?

Speaker 1

Sure. So our product offerings exist Stratified in a couple of different ways. So in our government centered markets that offering it looks a little bit more like a sale. And in the commercial side, as we've mentioned in the past, we have a robotics as a service where we own and operate our own devices that we are producing. So Since we're in the beginning stages of the expansion of that fleet, as we've mentioned, we think we'll start generating revenue with that fleet Toward the end of the year is the first one gets underway.

Speaker 1

However, there are additional technology, so to speak, that we've created in this engineering Moonshot Endeavor as we've created Aquanaut. We find those standalone products which runs and serves as the foundation of everything that we do. So I think it's not too much of a stretch that that software could find its way Into other platforms as people want to increase the capability of that. I think a good weather vein, so to speak, Is how DIU is already interested in that where they have an existing fleet of ROVs and they've desired them to go untethered and increase their capability. So just the same way the toolkit is serving to advance those systems, There's a lot of commercial analogs, whether it's in aquaculture or other segments where we're seeing Similar technology thrusts where they're trying to up the technology level of other style platforms and that's where Toolkit will serve us well.

Speaker 3

Excellent. And then I appreciated the update on the Defense Innovation Unit. But one customer I was hoping you're going to have a little bit more to say about Shell. I know you're sort of bound by certain nondisclosure agreements sometimes, but Is there any update there as far as the activity with Shell and how she trials and early interaction is done with these guys?

Speaker 1

Unfortunately, nothing that we've publicly stated, but I as we look toward the end of the year, I think that you'll not have a lot to talk about there, but nothing that I think we can disclose at the moment.

Speaker 3

Understood. Well,

Operator

Thank you. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Rodford. Please go ahead.

Speaker 1

Thanks for joining us today and for your interest in Nauticus and our vision for the future. Our commitments transforming the blue economy through our cutting edge

Operator

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Earnings Conference Call
Nauticus Robotics Q1 2023
00:00 / 00:00