Participants

Kristen Woolman; Corporate Development and Administration Leader; Nauticus Robotics Inc

John Gibson; President, Interim Chief Executive Officer, Director; Nauticus Robotics Inc

Victoria Hay; Interim Chief Financial Officer and Principal Financial Officer; Nauticus Robotics Inc

Daniel Dehart; Field Operations Leader; Nauticus Robotics Inc

Steve Walsh; Sales Leader; Nauticus Robotics Inc

Kunal Madhukar; Analyst; Water Tower Research

Paul Edstrom

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Nauticus Robotics 2024 Q4 and four-year earnings conference call. (Operator Instructions). Also note that this call is being recorded on Wednesday, April 16, 2025.
I would now like to turn the conference over to Kristen Woolman, Corporate Development and Administration Leader.

Kristen Woolman

Thank you and good morning everyone. Joining me today and participating in the call are John Gibson, CEO President, Vicky Hay, interim CFO, Daniel Dayhart, field operations leader, Steve Walsh, sales leader, 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 full year 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-gap metrics on this call.
I will now turn it over to John.

John Gibson

Thank you. Good morning. I appreciate you guys joining us on the call today.
2024 was a transformational year for Nauticus, and we appreciate all of the support that we've had throughout the year. Our cultural shift from a research and development company into a commercial revenue generating company is well underway. We continue to deliver high value solutions to our customers by pushing technological boundaries.
2024 was our inaugural season of offshore operations for the Aquanaut vehicle. We were executing legacy contracts to prove the technology and did. We're excited about the pipeline of new contracts, which we will begin press releasing soon. Our 2025 season should demonstrate significant improvement from 2024 as we implement the lessons learned from for our first commercial offshore season and put them in place to succeed in 25.
We confirmed toolkit software operation on a CTrepid ROV. The initial test reinforced our belief that augmenting an ROV's existing software will enable autonomy, allowing our customers to reduce their overall sub C operational cost. This opens the market for tool kit sales to ROV operators for the very first time. Stay tuned for an announcement of the official release of toolkit for ROVs.
Our manipulator team continues to develop a fit for purpose Olympic car variant and plans to install the first set onto our aquanaut vehicle in the second half of the year. This will make Aquanaut the first autonomous underwater vehicle with autonomous manipulators. In fact, it'll make it the only autonomous underwater vehicle with autonomous manipulators.
The company had a year that was focused on raising money and exchanging our debt.
Vicky's going to really cover the details of that in just a few minutes. We anticipate an inflection point in 2025 as we begin to help the offshore industry move from legacy operations, which means man operated as opposed autonomy to increase trust and reliance on a new way of executing work autonomously. Customers are already showing eagerness to fit our execution model into their current plans, and excitement is building around how their operational models will change. They're coming to us with questions and ideas, and they're sparking a lot of collaborative discussions. Now Daniel and Steve are both with us today, and they'll describe that in their comments in just a moment.
Our acquisition of SeaTrepid last month was a game changer for us. It provides an additional catalyst in this offshore execution transition. Existing Sea Trepid customers and contract relationships have given us easy access to a broader group of early adopters, which effectively reduces our customer concentration. CTrepid and Nauticus Legacy customers are welcoming this combined offering of a vessel with both the Aquanaut vehicle. And an ROV on board and in the near future, an autonomous ROV coupled with an autonomous underwater vehicle. By installing toolkit on both vehicles, the first subsea robotic collaboration solution will be realized and customers can see the immediate value. See Trepid's location in Robert, Louisiana provides a testing facility with much closer proximity to our launching location. For the Gulf of America, improving our logistics and reducing our cost. The government side of the company had a breakthrough in early 2025 by signing an alliance with our long-term customer Lidos to address emerging challenges in the defense sector. Government contracting has longer lead times, larger upside, and greater stability than seasonal commercial contracts. We're excited to pursue these opportunities. Now before we're going to turn this call over to Vicky on her financial activities. I want to update you on our NASDAQ continued listing standards. We cured our non-compliance issues with Nasdaq in early 2025. We are closely monitoring the wider markets and with that, I'd like to turn it over to Vicky to talk about the financial details.

Victoria Hay

Vicky.
Thank you, John, and good morning, everyone.
Let's first address the restatement that was announced on March 19th that was identified as part of the year and audit.
The company yesterday filed restated 2024 financial statements as of and for the quarters ended March 31, June 30, and September 30 due to a correction of accounting treatment for a complex 2,121 2024 debt transaction.
The reason for the restatement revolved around the debt transaction that occurred on January 30, 2024.
The transaction was incorrectly treated as debt modification rather than debt extinguishment.
Because of this change in accounting treatment, the debt was required to be fair valued quarterly using a Monte Carlo statistical model. The inputs variable include volatility, stock price variability, and risk-free rate.
Given this, the change in their value each quarter changed materially.
But all of these adjustments are non-cash and are excluded in our non-gap measures.
The full year non-cash impact of this treatment and the subsequent exchange to preferred stock resulted in an incremental net loss impact of $106.4 million.
This does not impact our shareholders' deficit calculation as the offset to this sits in APIC, giving a net zero impact on our shareholders' deficit.
Important to note this debt no longer exists on the balance sheet as of December 2024, as it was exchanged into Series A preferred stock for a fair value of $110.3 million. This is a non-recurring fair value and will not be further fair valued in future quarters.
This preferred exchange was part of our plan to deleverage our balance sheet and successfully regain listing compliance with Nasdaq, which occurred in February 2025.
In addition to regaining Nasdaq compliance, we have been keenly focused on securing the cash we will need 325 while we ramp up commercialization. We have seen some great progress on this during Q1.
In January 2025, the company conducted further at the market offerings in which we issued and sold almost 7.5 million shares for net proceeds of $19.4 million. A portion of the funds enabled us to do the acquisition of Sea Trepid, which will enhance our financial position as we move through 2025.
In January 25, we reduced the conversion price of the loans under the January 24 term loan agreement to $1.59 which resulted in subsequent conversions which further improved the position of our balance sheet.
I will now discuss in more detail our financial results for 2024.
Revenue for the year was $1.8 million which is down $4.8 million from 23.
The decline in revenue was largely due to the reduction in government contracts in 204.
However, in 24, the company did recognize revenue for commercial operations of the Aquanaut vehicle for the first time in the company's history, and we'll go on this throughout 2025.
Operating expenses for the year were $24.9 million which is a $36.8 million dollar improvement from 2023.
Excluding non-recurring costs in 23 of $25.4 million impairment of property and equipment, $2.5 million loss on contract, and $1.5 million dollar severance costs, op operating expenses dropped $7.4 million year on year, primarily due to continued focus on cost control.
GNA costs for the year was $13.4 million which is an improvement of $4.9 million compared to 23.
This is primarily due to headcount reductions and a result of dedicated focus on reducing costs and eliminating non-value added spend.
Net loss for the year was $134.9 million. This is an $84.2 million increase from the net loss in 23.
This is primarily due to the $127.6 million loss on extinguishment of debt recognized during the year.
Partially offset by the change in fair value of $21.1 million related to warrant liabilities in Devonshires, and 25.4 million impairment recognized in 23, that did not occur again in 24.
Adjusted net loss for the year was $26.1 million compared to $34.3 million for the prior year.
This shows an 8.2 million improvement, even considering the $4.8 million dollar reduction in revenue year on year.
Cash at the end of 24 was $1.2 million compared to $0.7 million at the end of 23.
This is primarily a result of funding received through debt and equity financing and then at the market offering offset by cash used in operations.
Last year we did a lot of work to deleverage and clean up the balance sheet. Throughout the year we converted debt with a principal value of $35.5 million to preferred stock in December 24th. We did take on new debt of $14.3 million in the first half of 2024 and a further $2.1 million with a fair value of $2.5 million in the second half of the year.
With these actions, along with the rays through our at the market facility during Q1 2025, we are in a strong position in 25 to continue the path of commercialization of the Aquanaut vehicle while staying appropriately funded.
I will now pass the call back over to John.

John Gibson

Thank you, Vicky, and thank you. A great deal for the company on all the tireless work you've done to get this prepared.
Just to recap, we substantially reduced our run rate 2024. We substantially improved our balance sheet and we generated commercial revenue for the first time with the aquanaut.
Now, I'm going to turn this over to the exciting part of this call. Things changed here. I much prefer talking about customers and revenue than I do about things that have passed. I'm going to turn it over to Daniel and Steve to discuss the emergence of Nauticus' first backlog of offshore commercial work.

Daniel Dehart

Thank you, John. I'll provide a summary of our readiness for the upcoming offshore season and Steve will then cover the upcoming pipeline.
Aquanaut Vehicle 2, which completed work off the United States Gulf Coast last year, is currently scheduled to mobilize on board a vessel along with the Comanche ROV in the coming weeks.
With the seatrepid acquisition, we expect a significant backlog of work to be contracted for this year for the vessel and are currently working through the schedule to ensure commercial efficiency throughout the year. We plan on working for numerous new customers this year, which will effectively reduce our customer concentration.
We will be conducting inspections highlighting the efficiency and cost reduction potential the Aquana system will provide while maintaining flexibility with high quality ROV service. We also have contract discussions ongoing with our current customers who are eager to take advantage of our service.
Previously, the deepest we have communicated with the aquanaut system was at a depth of roughly 1,300 m, but we are now excited for the opportunity to complete a deepwater communications test after mobilization of the vessel to a targeted goal of 3,000 m.
This untethered test will help set the standard for future applications and expand the operational functionality of the vehicle throughout the offshore industry. As we continue to focus on operational readiness for the offshore commercial work, we also want to continue pushing the aquanaut technology further to enhance the capabilities of the platform.
With that, I'm excited to update that we have completed our factory acceptance test in water on our 2nd Aquanaut vehicle. We have identified another test location in Florida for further testing of the capabilities of the vehicle, with plans to complete a contracted demonstration on leak detection in addition to testing the Aquanaut system with an autonomous surface vehicle or ASV.
We're in communication with multiple customers who are interested in near shore work without the use of a large vessel and believe we can support this concept with a successful test paired with the ASV.
The 3rd Aquaox vehicle build build plan is ongoing and parts are consolidated to maintain readiness to assemble. Workload for this year has created demand for additional vehicles, but the goal is to focus on delivering exceptional service in 2025 and prepare for vehicle 3 assembly to perform future work.
The CTrepid acquisition also provided a great opportunity to expedite the integration of our toolkit software with the Comanche ROV.
We successfully implemented our software into the existing Comanche operating software with plans to test our commercial release on the vehicle in the coming months.
The results of this integration will provide the ROV technological advances that include station keeping and way pointing. These are the first steps towards automating the ROV functionality.
We are currently seeing the busiest offshore market for the Gulf Coast region in quite some time, and we are in great position to take advantage of a hot market this year.
With that, I will now turn it over to Steve for an update on our 2025 offshore commercial pipeline.

Steve Walsh

Thank you, Daniel. I'm excited to be here today and looking forward to what our combined offering will bring to the offshore industry.
I'm pleased to announce we recently commenced a long-term ROV contract with a leading marine transportation company to provide drill support operations off the United States Gulf Coast. The contract is confirmed for 120 days with the potential for additional days if needed.
We're currently operating off the coast of New York in the offshore wind industry.
The project started early this month and is scheduled to return back to the Gulf Coast in early May.
Upon arrival of the ROV to Louisiana, we plan to mobilize on board the DP-2 vessel alongside the Aquanaut vehicle.
The current customers are excited about the potential to utilize our autonomous technology this year.
We have firm work to complete Level 2 and level 3 inspections on multiple producing platforms off the Gulf Coast. These projects are expected to be completed within a 30-day block.
In addition to that, we are in communication with a super major oil and gas company on a large inspection campaign for decommissioned assets. Based on the meetings with this customer, we feel strongly that we will be awarded a minimum of 30 to 45 days of work.
We have continued work. With other super majors who have previously utilized the Aquanaut vehicle and due to the successful initial programs in 2024, they are excited to put the system back in the field this summer. The initial expected duration of these projects is a minimum of 25 days.
Another scope that has recently presented itself off the eastern coast of the United States would include operating the technologies of both the Aquanaut vehicle and the ROV simultaneously, allowing for greater efficiency and utilization of the assets on board.
This is an environmental assessment that could lead to another 20 days of work for the mobilized spread.
With the work described and the additional work expected to come due to the intensity of the market, there is a great opportunity to demonstrate the effectiveness of autonomy and hazardous environments. 2025 is shaping up to be one of the busiest offshore markets of the past decade. We anticipate our contracts to return strong margins in a steady stream of revenue during the North American offshore season.
And with that, I will now turn it back over to John.

John Gibson

Well, I appreciate that, Steve. It's been a real pleasure to be a part of this team and witness all that has been accomplished.
2025 is expected to be another outstanding year as we continue to bring in more and more customers and increase the number of engagements we have. This is a target rich environment offshore right now for equipment and bringing solutions is much like what we have. During the last call we mentioned being on the cusp of achieving what we set out to do, and not because robotics was founded. That's to provide collaborative autonomous underwater robotic solutions for our customers on a commercial basis, and this really is going to help them reduce their operations cost and still have a great solution for our shareholders because it'll be a high margin operation.
We created a new company, new culture 2024.
And now we're focused on customer needs, not just new technology. We're positioned to have a substantial revenue growth and marginal improvement year over year.
And with us today is also the founder of CTrepid, Bob Crist, who joined and I would say let him introduce himself. Bob, hi. I'm Bob Crist. I am delighted to be a part of the team. We are so excited about the new possibilities of the comin companies, and we are working hard to get the aquanaut technology and new autonomous technology onto our traditional menu of services and then to the field.
Bob has been instrumental in enabling us to achieve our vision, their support, their knowledge, and in particular their customer relationships transformational for us. And so glad to have both Steve and Bob on board.
And with that, I'd like to turn it over, operator to questions.

Question and Answer Session

Operator

Thank you, sir.
(Operator Instructions)
Kunal Madhukar at Water Tower Research.

Kunal Madhukar

Hi, thank you for taking my questions. Excited, about 2025. So the first one would be about 2025 and trying to understand what the top line could be.
Thank you for talking about the pipeline. Help us understand one, in a simple P times, number of days in a season that you should be operational at least for 25 and understand that could expand, late in later years, but the number of days in the season, number of vehicles you have, and how should we kind of think of sizing the 2025 potential revenue opportunity.

John Gibson

Daniel, why don't you cover the number of days in the season?
Well.

Daniel Dehart

The season runs from anywhere kind of right where we're at now. March, April is the early portion of the season, and it goes through the October, November based on weather. That's when the weather starts picking up. And so from those months, it's about a 7 month window they can expand a little bit if we're lucky with weather. So that's our target area.

John Gibson

And for our offshore assets, we Actually have 2 Aquanaut vehicles working now, both vehicle 1 and #2. We have 2 Comanches working, and we also have a third aquanaut that requires some capital and assembly and a 3rd ROV and we're looking at the market and if the demand's great enough and we see an opportunity to actually invest in those and put them in the market with a good return on capital, we we would entertain doing that as well, canal.

Kunal Madhukar

Great, so how should we think of like the potential revenue for 2025?

John Gibson

I'm significantly higher than 24. I mean, we would, I, I'd say, I think we announced that, we'd be in, and I'll just repeat a number I've put out before, but I mean, I'm really confident we'll do greater than 16 million in 2025. I'm a little hesitant to say how much greater, but you can assume there's upside in that number, particularly if we found the capital to put the two additional assets to work.

Kunal Madhukar

Great thanks. So the second one would be on, the competitive landscape and there are a number of companies that have autonomous underwater vehicles. What is your differentiation and you kind of alluded to it in terms of manipulators and being the first one out there, but what makes your solution compelling to prospective customers?

John Gibson

Well, it's another really good and hard question. To compare and contrast these, you'd almost have to put together a consumer chart where you had circles that you filled in, and the place where we fill in really strong is we have a leadership position and manipulators for autonomous underwater vehicles, and those manipulators will be something that are not a part of competitive platforms such as, freedom of promotioneering.
We have a payload capacity in the front of the vehicle that allows us to take objects and place them on the sea bottom or pick objects up from the sea bottom and bring them back to the surface. That also can be advantageous in doing fluid sampling if we're looking at leak detection, very differentiating. It wouldn't have to send an ROV out to catch fluid samples after the AUV had discovered a leak or indication. And so we're able to eliminate quite a lot of costs for customers. We are completely untethered.
We still find most of the AUV operators work in this area due to collision avoidance, etc. Are remaining tethered, and our vehicles untethered, and we are depending on our collision avoidance software and continue to certify, verify, and test that as we go to make sure that we're on the very. The leading edge of collision avoidance for underwater vehicles. Fortunately, the speed that we're going makes us much simpler than trying to control a Tesla doing 90. We're just trying to control an underwater vehicle doing 23 knots.
We, our depth is quite good at 3,000 m, and I think most of our competitors have not gone to that depth yet and tried to communicate with the surface. And another if you compare us to say a Hugen is more of a torpedo, a missile in the water, it goes in a straight line, takes a long distance to to turn and it has to continue moving when it comes back.
Our entire design is to work more like an aquacopter. We can stop, hover, and rotate around objects and so that we can get 3 360 degree views, and we can do that efficiently without passing by and coming back. And so speed of operations is significantly higher and the quality of imaging is quite high when you're able to orbit an object as opposed to do flybys.

Kunal Madhukar

That's great. The last question is about, capital and understanding your liquidity, and you talked about, potentially investing in a third aquanaut or a 3rd ROV, if there is demand. So can you talk about the capital requirements for the business?

John Gibson

It's a good question. Obviously, we were just becoming commercial last year and so we use substantial amount of capital in order to prove that the technology we have is commercial and ready for prime time.
Now that we're out and we're seeing a tremendous amount of demand based on this demand, we really need to TRY to put additional assets to work because the more assets we put to work, the greater our income will be here. And so the two we have we have one Comanche and 25, and we have an aquanaut vehicle 3. And we do think Steve and Daniel are tasked with the following, that is, if they can bring a contract in here for those two. Then we believe we can get contract-based lending, so a non-dilutive approach to bringing in capital to put those two assets to work. And if you sort of you look at any one of those assets and you think that the total revenue, including the vessel, the asset is can generate in that 6 to $8 million per season. A revenue and it's just a question of how soon in the season can we get those together and get those contracts in order to to have the funds to assemble those without deluding shareholders.

Kunal Madhukar

It's great.
Thank you so much.

Operator

(Operator Instructions)
Next question will be from Paul Edstrom. Please go ahead, Paul.

Paul Edstrom

Yes, good morning. Thanks for taking the call. I was just curious that you mentioned this season in particular is sounding to be a very good one. And what are the market dynamics that led to that?
Or it led to this, excuse me.

John Gibson

It's it's interesting. I could, I'll let Steve answer this as well, but And it does look like a really good season. Oil prices have been stable and in a position where people can make long term plans. Offshore is a long term investment cycle, so they're looking at full cycle economics offshore, and it's not as much a short term market like you have on onshore shallow drilling. So these are extremely long term commitments they make on platforms and development.
And now they're doing the inspections, etc. Some of it's regulatory as well, Steve, what, what's driving the market?

Steve Walsh

Well, the The atmosphere of drilling is being pursued and pushed by the government, is attractive to our customers.
The decommissioning aspects where companies have brought back old assets that they're looking to.
Understand what's going on.
Inspect and then work on removing and just the general vitality of oil and gas right now and additionally with wind, with some of the other environmental aspects, I guess it's it's many of the disciplines coming together that are working to.

John Gibson

It's not another real macro aspect of it, Paul, is this industry suffers from non-investment for long periods when the market's down, and that's where we are offshore at the moment. There's been a long lull in general investment. Now everybody are bringing, working on their infrastructures, they're expanding their infrastructure, they're improving their infrastructure, and it's just creating a lot of subsidy demand, but hopefully that helps some.

Paul Edstrom

Yes, thank you. I guess having been an investor early on with you folks in the breadth of the market opportunity, I just wonder if it's if it's causing you to pivot at all differently, or I guess it sounds that you're just staying with the opportunities that you've had over the last year or so and executing on those is really where your focus continues.

John Gibson

So, I wouldn't characterize anything about a pivot. I mean, we have a great platform and we're just approaching those markets that have high demand and look like they can return the margins that we need. First off, thank you for being a longtime investor in the company. Appreciate you sticking with us and asking some questions. It's the big difference for us. I was talking to someone earlier is, we're in a market now that's emerging. There's a lot of demand for the aquanaut, a lot of conversations going on. If I look at competition, this is a great place to invest because our competitor really is oceaneering. And if I had to talk about oceaneering, I'd say if you combined both of these fleets together, there's not enough assets to meet the demand that we see coming for autonomous up sea vehicles. So I don't even think of them as a competitor. We both need to do well so that autonomy is adopted faster and the diffusion rate picks up. So we're at that point where this technology's going from a A whiteboard to commercial and it's a matter of getting these in, getting the operational processes in place and just delivering great results for customers.

Steve Walsh

Paul, I'd also like to mention that we've had the opportunity to visit and talk to some of our existing customer base. And introduce Aquana and the the excitement that our clients have to to combine both the ROV capability and technology along with Aquana and the autonomy that it delivers is really exciting and and that scope is expanding and they are providing more and more opportunities for us and so I think that the combined technologies are being very well received by the customer base.

Paul Edstrom

Thank you for your input.

Operator

Thank you. And at this time, Mr. Gibson, we have no further questions. Please proceed.

John Gibson

No, I greatly appreciate all the people that are on the call and particularly our employees and our customers that are listening. We've got incredibly dedicated work.
And we wouldn't have made all this progress without them. A lot of this works hard, long hours, and I just appreciate their sacrifice. I'm also excited about the fact that this is probably the last call that we'll have to do where revenue and and is something that we don't really focus on as much as we should. Q2 we'll be talking about our revenue.
You'll be able to see the revenue. You'll be able to see the margins. And we're excited about the fact that we're shifting into being a true commercial company from an R&D company and stay tuned for Q2. I think good things are on the horizon.
Thank you so much, operator.

Operator

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you please disconnect your lines.