Nauticus Robotics, Inc. Q4 FY2023 earnings call

• Transformed the company from R&D to customer-centric innovation for profit, adding an Interim CFO, General Counsel, and sales leadership. - Restructured into four business units: Autonomous Solutions, Electrical Manipulators, Autonomy Software, and Government Solutions. - Autonomous Solutions: Testing Aquanaut Mark 2 in Gulf of Mexico, exceeding 1300 meters, with vehicle two in testing, vehicle one being assembled, and vehicle three prepped for assembly in 2025. - Autonomy Software (ToolKITT): Software platform is platform independent, being enhanced for commercialization with focus on user interface and experience. - Electrical Manipulators: Differentiate Nauticus, working on light duty work, discussing supplying manipulators to other subsea providers. - Government Solutions: Completed DoD projects, but government contracts are lumpy, and team is pursuing non-government projects while maintaining potential for defense work. - Financials: Addressed balance sheet by moving assets to held for sale, secured additional funding, and expects to reduce G&A expenses by over 50% in 2024.

Revenue for the fourth quarter of 2023 was $1.1 million, down $2.1 million from the previous year. Full year 2023 revenue was $6.6 million, down $4.8 million from 2022. Revenue primarily came from government contracts. Operating expenses in Q4 2023 were $35.3 million, a $24.9 million increase from 2022, including a $25.3 million impairment charge on Aquanaut units. Net loss for Q4 was $39.5 million and full year was $50.7 million. Adjusted net loss for Q4 was $8.8 million and full year was $34.3 million. Assets worth $2.9 million were moved to assets held for sale, with two Hydronauts sold in Q1 2024 and the third being marketed. Cash at end of 2023 was $800,000, but $13.4 million in additional funding was secured in Q1 2024.

• Expect to reduce G&A expenses in 2024 by more than 50% through reduced headcount, enhanced cost management, and streamlined efficiencies. - 2025 is seen as a meaningful year for an ROV upcycle, with opportunity for Nauticus to benefit as the market uplifts. - Government projects offer potential but are sporadic, so need for revenue continuity is emphasized.

• Dependence on government contracts being sporadic and lumpy, which can affect revenue and cash flow. - Forward-looking statements subject to risks and uncertainties beyond control, which could cause actual results to differ materially from expectations. - Market uncertainties related to the adoption of autonomous subsea technology and competition in the subsea industry.

Q: From contacts in the industry, 2025 could be a meaningful year for ROV upgrade cycle. What are you seeing for next year and key areas of opportunity?

A: ROV market in oil & gas has been stagnant, but 2025 could be an upcycle for ROV manufacturers, creating opportunity for Nauticus as its tested vehicle will be ready in 2024 to benefit from the uplift.

Q: Update on DoD contracts and certificates?

A: Completed two DoD projects in Dec 2023 and Jan 2024, expect to receive certificates of successful completion, but government funding is sporadic so need to branch out into other projects while remaining eligible for defense work.

Q: Changes to SG&A and R&D expenses?

A: Focus is now on certifying the current product, so R&D is minimal, with majority of spending on development and delivery rather than future-related work. Expect R&D to be 'R' silent and 'D' for delivery.

Q: Evolution of relationship with Petrobras?

A: Petrobras is extremely supportive, with customers being enthusiastic champions of the technology, and meetings are ongoing to push towards commercial revenue model.

Q: Number of Aquanauts currently and future plans?

A: Currently, vehicle two is in water being tested, vehicle one is in shop being assembled, vehicle three is in boxes, and no plans for vehicles four, five, or six at this time.

Q: Why no insider buying?

A: Management team has taken a large portion of compensation in shares, with CEO and others putting risk in shares. Window closed due to past merger and material non-public info, but will open soon.