Nauticus Robotics, Inc. Q2 FY2025 Earnings Call

Good morning, ladies and gentlemen. Welcome to Nauticus Robotics 2025 Q2 Earnings Conference Call. This call is being recorded on Tuesday, August 12, 2025. I would now like to turn the conference over to Kristin Moorman. Please go ahead.

Thank you, and good morning, everyone. Joining me today and participating in the call are John Gibson, CEO and President; Jimena Begaries, Interim CFO; 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 second quarter of 2025, 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.

Well, good morning. Thank all of you for joining us this morning. Q2 2025 was a quarter of disciplined execution and significant commercial progress. We grew revenue year-over-year. We integrated a strategic acquisition, and we positioned the company to drive long-term profitable growth. Now service revenue for the quarter was over $2 million. That's more than 4 times the prior year period with strong contributions from both oil and gas and environmental compliance work. Our customer base also expanded. We serve 9 clients and revenue concentration improved, meaning that we have more customers and are not dependent on so few. This diversification will allow us to scale as we go forward. The acquisition of SeaTrepid was a key milestone. It expanded our service capacity, it deepened our customer footprint and gave us a channel and unlocked opportunities to deploy our autonomy stack, including Nautics' ToolKITT and Aquanaut across a much larger operating base. We're already seeing the benefits of that integration in backlog and margin profile. Importantly, we now have revenue visibility into the fourth quarter and early 2026, including a pending multi-month contract with a super major oil company. That opportunity, expected to begin in Q4, provides valuable off-season revenue and margin continuity, and it's historically been a challenge to have available work for services in Q4 and Q1. This will reduce our seasonality. We continue to take a disciplined approach to liquidity. Through cost controls and capital execution, we ended the quarter with $2.7 million in cash, up $1.2 million at year-end. This includes proceeds from an aftermarket offering which gives us some additional flexibility as we invest in growth. Looking ahead, our strategy remains focused, drive service revenue with the expanded fleet, scale autonomy products like Aquanaut and ToolKITT, convert inbound interest into long-term recurring contracts, and do so with financial discipline, measured investment and clear milestones. We're entering the second half of the year with real momentum, a growing pipeline, a differentiated platform and customers that really want to see innovation that helps them reduce their costs. With that, I'll now hand it over to Jimena Begaries, our Interim CFO, to get us started. Jimena?

Thank you, John, and good morning, everyone. I'm excited to be speaking with you for the first time as a CFO. I will now discuss our financial results for the second quarter of 2025. During Q2, we recognized further commercial revenue driven by the SeaTrepid acquisition, which has now begun to contribute meaningfully to our financial results. Revenue for the second quarter was $2.1 million, which is up $1.9 million sequentially and up $1.6 million from the same quarter last year. The increase in revenue was a result of the Gulf of America season starting at the end of March, delivering a full quarter of revenue in Q2 2025 for the acquired assets. Operating expenses for the quarter were $8.4 million, which is up $1.9 million from Q2 2024 and up $2.4 million sequentially. General and administrative costs for the quarter were $4.4 million, which is an increase of $1.1 million compared to Q2 2024 and flat compared to last quarter. The first half of 2025 was impacted by the nonrecurring professional fees, primarily due to the SeaTrepid acquisition. Net loss for the quarter was $7.4 million, which is a $0.1 million decrease in net loss sequentially and a $12 million increase in net loss from Q1 2024. This large variance is attributable to the gains in the fair value of our convertible debentures reported last year. Adjusted net loss for the quarter was $7.4 million compared to $6.6 million for the first quarter of 2025 and $6.5 million for the same quarter in 2024. Cash at the end of Q2 2025 was $2.7 million compared to $10.1 million last quarter. This is primarily a result of funding received through an at-the-market offering last quarter, offset by the recent acquisition of SeaTrepid and cash used through operations. During the first weeks of July 2025, we have reissued our aftermarket offering and have raised further funds to support our operational activities. As we look ahead to the third quarter, we expect continued strong operational results. We remain focused on disciplined cost control, prioritizing value-added activities that enhance profitability and support long-term growth. I will now pass the call back to John.

Well, thank you, Jimena. I'm really happy to have Jimena join us and good job. As Jimena pointed out, our current forecast shows much stronger revenues in Q3 than Q2. And we've also added $3 million in additional funding this past week from one of our lenders. So with that, I'm going to turn it over to Daniel Dehart, our field operations leader, and Steve Walsh, our sales lead, to discuss Nauticus' backlog of offshore commercial work. And then over to JD Yamakoski, who will then discuss defense work. Really pleased to get a chance to work with these guys. We've got a strong team. Daniel, pick it up from here.

Thanks, John. As a company at the beginning of the year, we set goals and targets to work towards. And halfway through the year, I can say we have already successfully achieved quite a few of our goals: we completed more commercial revenue than all of 2024 combined; we have successfully diversified our client base by working with 9 new clients already this year. We've also signed multiple Master Service Agreements with new clients to become approved suppliers for offshore work. We have diversified our market reach as we completed work for clients in offshore oil and gas, offshore wind, and commercial offshore government markets. Work to date was accomplished with our ROV system successfully completing multiple inspection campaigns. We currently have both ROVs working, one off the Northeast Coast of the United States for the offshore wind market and one working on board the GO COSMOS vessel in the Gulf of America. As we transition from last year's proof of concept into a commercial platform, we have focused on the commercial metrics needed to be competitive, not with new technology, but with existing solutions. We experienced some delays with getting to the robustness needed to demonstrate our commercial readiness. Consequently, we delayed operations of the Aquanaut system until we are comfortable we can meet those milestones. Vehicle 2 is now mobilized on board the GO COSMOS with the ROV and a record deep dive is planned, and we will focus on the successful completion of our commercial contracts throughout the year or throughout the rest of the season. Our second Aquanaut vehicle, Vehicle One will be heading to Stuart, Florida in the coming weeks to begin our new collaboration with AOS. We are delighted to work with AOS on multiple fronts. The first being accessibility to a better equipped, larger test facility. This allows us to test the full range of our robotic capabilities in an unstructured environment. We will now be able to run complete missions in a 3.5-acre body of water compared to the limited activities that can be conducted in a pool. It also opens up the ability to host clients to see execution in an operational setting. We are also working on a plan to pair the Aquanaut vehicle with an unmanned surface vessel at the AOS facility to utilize the smaller surface expression to conduct inspections with a limited operational spread. We are working with customers who have an interest in this concept to underwrite these tests, and this facility is perfect for demonstrating the surface and subsea vehicles together in a realistic operational environment. With that, I will now turn it over to Steve for an update on our 2025 offshore commercial pipeline.

Thanks, Daniel, and good morning. Q2 was a strong and strategic quarter. We serve 9 clients across offshore wind and offshore oil and gas, supported by a solid backlog extending well into Q3. SeaTrepid assets are providing core revenue and the SeaTrepid channel that is now the Nauticus channel is opening new opportunities for the entire Nauticus portfolio. In offshore wind, we are executing a major Northeast U.S. project. While the sector faces headwinds, tightening wind-only service capacity is opening new opportunities. Our established relationships position us to benefit. Oil and gas remains robust. Our diversified position across energy markets allows us to capture demand wherever it is strongest. Looking to Q4, we are close to signing a multi-month contract with a super major oil company running through Q1 of 2026. This adds meaningful off-season revenue, smoothing our earnings profile and strengthening visibility into next year. Aquanaut interest continues to accelerate. Engagement is coming from independents to super majors domestically and internationally. Aquanaut is increasingly viewed as a category-defining platform, and we are converting that interest into active discussions. Our fundamentals are strong, momentum is building, and we are positioned to continue to grow into 2026. I'm confident that our Q3 revenue will see sequential growth over Q2. With that, I'll turn it over to JD for the defense update.

Thank you, Steve, and good morning, everyone. Astute followers of Nauticus may recall that we announced a strategic alliance with Leidos to advance subsea autonomy solutions in Q1 of 2025. While we don't have any new government contract awards to announce this quarter, it's important to understand that government procurement, particularly in the defense sector, is often a long cycle process. Since that announcement, both companies have been diligently working towards opportunities that align with our complementary strengths to serve the interest of National Defense. I'll now turn the call back over to John.

Thank you, JD, and Steve and Daniel. It's clear that we're beginning to focus on sequential growth in revenues and those opportunities are there for us to seize and execute. That's the mission of the company. We remain committed to securing a defense contract as well, and JD gets up every day and pursues that for Nauticus. But the real opportunity that we have coming forward that can give us revenue that isn't dependent upon wall clock time as services is our software section. And so I'm happy now. I'm going to turn the call over to Jason Close, our software lead. And then after that, Ameen Albadri will give you an update on engineering and so from their departments. So Jason, I'll give it to you.

Thanks, John. In the second quarter, we continued advancing ToolKITT along its two commercial paths, Aquanaut operations and the enablement of world-class ROVs. For Aquanaut, we advanced functional capabilities of the software and preparation for upcoming tests. The testing is scheduled to begin in the third quarter so that we're ready to offer additional trials later this year, followed by a wider range of services to customers in the 2026 Gulf season. In addition, we supported the Aquanaut team with operational readiness work on the vehicle itself which is improving the overall usability of the product and enhancing its attractiveness to future users and customers. We are excited about the AOS test facility because it allows us to further exercise ToolKITT's capabilities in an operational environment. In Q2, we focused on strengthening relationships with prospective customers and partners for the commercial software. We have seen excellent interest in the continued growth and continue to expand and broaden our reach in this space and we're approaching opportunities that we look forward to sharing more about soon. Customer activity across our service operations remains strong. And we remain focused on delivering value today through ROV and Aquanaut services while steadily advancing ToolKITT's capability for a wider market rollout in the near future. I will now hand it over to Ameen for an update on Aquanaut and Electric manipulators.

Thank you, Jason. In the second quarter, we successfully addressed key technical issues that enhance reliability and extend the meantime between failures of our Aquanaut platform. These engineering improvements have been fully integrated into Vehicle 2, which has undergone successful validation testing in a controlled pool environment. Following these results, Vehicle 2 was redeployed to the vessel and is now ready for open water work. Meanwhile, upgrade work is actively underway on Vehicle 1 to bring it up to the same standard. We continue to experience strong market interest in our fully electric subsea manipulator. During the quarter, we made substantial progress on both the 7 and the 3 function variants. However, in light of evolving global trade dynamics, we are experiencing extended lead times for select components across our hardware platforms. The relatively low volume of our procurement orders compared to larger industry players presents prioritization challenges within supplier production queues. This has necessitated a proactive design modification during the quarter to mitigate potential disruptions and ensure continuity in system development. To address these risks, we are actively diversifying our supplier base and exploring alternative sourcing strategies. I will now hand the call back to John.

Well, thank you, Ameen. The most exciting part of this job is seeing customer excitement. And we just completed two jobs with really great success for both customers. And that's what brings you joy when you're in the service sector. I've got excitement around the new technology, excitement around the team that we have building and delivering it, excitement around the changing market. We've got a great team, we've got a great plan, and we're executing and we're beginning to see the revenues that can come from our efforts. So with that, I'd like to turn it back to the operator, and we can open it up for Q&A session. Operator?

And your first question comes from the line of Peter Gastreich with Water Tower Research.

Peter Gastreich here from Water Tower Research. So congratulations to John and the team on the results and key milestones. Really appreciate the color on revenue in the second half and customer discussions and backlog and also hearing from so many members of the Nauticus team today. So thank you. Just a few questions for me. First of all, I'm just curious how you approach your different growth areas and opportunity sets. So when you consider types of jobs, including oil and gas, environmental and wind energy, how do you balance those opportunities? Is there much difference in terms of complexity or safety elements or difference in terms of the day rates you can charge? I'm just curious how you approach those different sets.

That's a good question, Peter. It's great to have you on the call. The best way to describe this is that we prioritize opportunities based on their margin potential. We focus on whichever area will bring us the highest margin, taking into account all associated costs. We examine it holistically to determine where we can generate more revenue, whether it's in the wind sector or elsewhere, all while minimizing idle time. Keeping our assets utilized is crucial since we incur costs regardless of whether they're actively working. We're dedicated to optimizing profitability across different sectors. Fortunately, the capabilities and services we provide apply to various industries, which means we can use the same team, training, and safety practices across the board. Each company may have slightly more stringent compliance requirements, which can add some costs, but the similarities allow us to operate seamlessly across sectors like wind, telecom, oil and gas, environmental, and even defense. We prioritize based on which jobs will yield higher returns. A significant challenge we face is the limited number of assets; currently, we have more work than equipment. Managing the scheduling is tricky, but we recognize the urgent need for additional assets to handle the upcoming work, particularly as we look ahead to 2026 and the anticipated success of our platform.

I have a second question. Recently, there has been some clarity on policies from Washington, D.C. regarding carbon capture and sequestration. I'm curious if you've seen any changes or acceleration in discussions related to CCS this year, as you have previously identified this as an opportunity.

Well, I see a lot of it, probably not so much from the operations perspective and sales at the moment, but as we talk to the strategic players in that market. And JD's actually, I think, attended not so long ago, a carbon capture sequestration here in the state of Texas, it looks pretty exciting because the Bureau of Economic Geology has written papers on using the nearshore Miocene depleted reservoirs for CO2 sequestration. We're still in very early stages. When I talk about Nauticus, I think we'll be able to do a lot in terms of leak detection and monitoring of these fields, but we're on a very early stage. So I wouldn't forecast revenue for carbon capture for Nauticus now. But do I see it ramping up and long-term commitment to it regardless of how this administration feels now? I'd take a long view on CO2 sequestration as opposed to one administration at a time; the priorities could change as we go forward and very excited about their support for oil and gas with the current administration, and that's really a benefit to us. But CO2 will be strong, and it will come back, and we're well positioned for doing the monitoring of that. In fact, we're deploying some new monitors on and centers on our vehicle this year that would enhance our ability to monitor CO2 leaks, but don't expect a lot of revenue from it yet.

Okay. Got it. I'll just put in one more question here before I get back in the queue. Last week, maybe the previous week, there was a lot coming out of D.C. in terms of the drone dominance. Is that tied strictly to aerial systems? Or are there implications for the aquatic as well? You did mention earlier that you have prospects for defense contracts.

Yes. I'll take this question, Peter. Thanks for asking it. There is tremendous interest. It's something we did not address in our prepared comments, but the underwater defense market and underwater drone market is incredibly active right now. And we're very excited. That's why we're very excited with our strategic alliance with Leidos to be working with them. Such a prolific partner in the scene and really looking forward to the opportunities because there is tremendous interest there in the U.S. defense market for these technologies.

Okay. It's great to hear from the whole team today.

Yes, in terms of hearing from the entire team, Peter, the company is not solely about me. It's really about having all the necessary people with the diverse skills required, and I’m very enthusiastic about the quality of this team. I believe this means we can fulfill our commitments.

And your next question comes from the line of Robert Mandrella with Nauticus Robotics.

I'm a shareholder, and I want to thank the team here for a comprehensive earnings call and report. So thank you. I just have a couple of questions. The first one is regarding the SeaTrepid acquisition. Is that fully paid off?

No. Actually, it's not fully paid off. We have another cash payment that's due at the end of September, and then there's an earnout that is to be determined based upon their performance and delivery of revenue targets, which they have not achieved yet. But they have absolute confidence they will achieve, but we still are waiting on the earn-out calculation and another cash payment; half was paid in the upfront and half is due at the end of September.

Okay. I appreciate that. And I just had another question regarding the next quarter or two, and I appreciate the team giving an update on the defense contractors, Leidos, Navy, et cetera, and also on ToolKITT revenue, which from my understanding, it's minimal if nonexistent. But one of the question really comes from a prior press release that the expectation was 9 times what 2024 revenue reported for this year, and I understand that's prorated, but how are we looking in terms of revenue projection to close out 2025?

I want all the people here about questions like yours where it's incredibly thoughtful. It knows the history of the company, and it frames it very well. Yes, we did say 9 times for the services revenue, but due to some of the delays in getting the equipment out and getting the parts, it's a little weaker than I would have expected, softer. It's not off a lot, but it's softer than what we anticipated. But our real opportunity is in the non-wall clock revenue, which is associated with the software and also with defense; we're not exclusive to Leidos, by the way. We do have a relationship with them, but we are looking at other parties to go to the defense sector with as well. And we're excited about those opportunities also. But the software side, we are working diligently because that's the piece that can get us back on track. And on the service side, a little soft because of the delay in getting the equipment to the field. Q2 was a revenue quarter with two assets; Q3 will be a revenue quarter with three assets on the service side. And then as we go into Q4 and beyond, we should have all four of our assets, two Aquanauts, two ROVs out in the field. So you can see how we're going to continue to scale the service revenue, and the upside is in the software side of the business. And the manipulators, there is tremendous interest in the manipulators. We are looking at a licensing model for that where we would license our designs then take a royalty back as opposed to actually building those. I don't know that we're in the position to be a manufacturer. And so Ameen and the team are really making sure that we are prepared to transfer the intellectual property to another third party for manufacture and delivery. And I think that could create a strong royalty opportunity for us. But again, that's going to be a 2026 discussion. It's not something that we look at here in 2025 because we haven't concluded with anybody on licensing and then it will take time for them to get the manufacturing piece up, particularly given the supply chain challenges that we see today.

I appreciate that, John. And so my understanding, so the pro forma short term looks good. And so I have one last question before I turn it back to the queue. Regarding the cash position and $3 million cash from lenders, I think that's very positive, added to the $2.7 million in reserves. How do you see the cash position in this quarter and throughout 2025?

Another great question. We have a lender that is very supportive of the company, and I'm extremely thankful for them. Cash is available when necessary from them, as long as we make a good case and justify it. They have been tremendous. We did add to our debt with a facility for $19 million, and we drew the first $3 million from that facility. I feel secure about the cash position. My goal is to draw the least amount possible while we focus on increasing revenues and our own margins, which will help us avoid taking on additional debt or dilution through an ATM. Our aim is to achieve cash flow positivity. I’m not concerned about cash due to the strong support we have, and that doesn't keep me awake at night. What keeps me awake is ensuring customer satisfaction, the successful performance of equipment in the field, and getting our software package into new markets while exploring licensing for the manipulators. That's where my focus is. I believe our cash position is secure; while it's not optimal because I would prefer it to be entirely based on our performance, that’s where we’re headed, and that’s the plan.

Very good, John. I appreciate that. And congratulations on the SeaTrepid acquisition; I think that was very strategic. And congratulations to the team for all their hard work and effort. I know you guys are really trying hard. And again, I appreciate the comprehensive conference call. It answered a lot of my questions. So I wish the team here, a very good Q3.

Your comments are important to us, as our employees listen to these calls, and it is motivating to have investors who understand our vision and believe in us. Thank you very much for the questions.

Thank you, presenters. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.