KITT

I will now hand the conference over to Kristin Moorman, Corporate Development Lead. Kristin, please go ahead.

Thank you. 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 quarter ending March 31st, 2026, 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. 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 you, Kristin. Thank you to everyone for joining us on the call today. The first quarter of 2026 was a seasonally softer quarter for offshore activity, and that's consistent with what the broader subsea and offshore services market experienced during the winter operating season. We saw similar commentary from larger industry participants, including Helix and Oceaneering, both of which pointed to winter seasonality, lower first quarter utilization, and expectations for stronger activity in the second and third quarters of 2026. For Nauticus, the important point is this: we used the quarter productively. While revenue was not where we wanted it to be, our team focused on the work that positions us for improved execution in the second half of the year as the operating season strengthens.

We advanced fleet readiness, completed significant annual maintenance and refurbishment activities across several of the ROV systems, and continued preparing our systems for higher utilization opportunities during the remainder of the year. We also continued advancing Nauticus ToolKITT, our proprietary autonomy software platform. Nauticus ToolKITT is central to our strategy because it allows us to create value not only through services, but also through software licensing, technology-enabled services, and deployment on customer-owned vehicles. During the quarter, we continued integrating Nauticus ToolKITT across our subsea systems, along with new high-definition camera systems and other advanced sensors designed to improve navigation efficiency, data quality, and customer value. We also made progress with Aquanaut and our autonomous manipulation capabilities. Aquanaut Vehicle One has now completed more than 500 hours of in-water testing on client-driven workflows and more than 200 successful vertical inspection behaviors on mooring lines.

These are important steps towards offshore deployment, and the data from that testing continues to guide our software and engineering improvements. International expansion also remains another important part of our growth strategy. During the quarter, we continued advancing our UAE and broader GCC initiative, including work toward a long-term operational and commercial presence in Ras Al Khaimah. That region represents a meaningful opportunity for Nauticus across offshore energy, technology licensing, manufacturing support, and strategic partnerships. Finally, we're pleased to welcome Brian Allen as Chief Revenue Officer. Brian brings nearly two decades of subsea robotics, autonomy, and commercial leadership experience. His focus is clear: convert customer interest into revenue opportunities across offshore services, software licensing, hardware sales, defense, and international markets.

While Q1 reflected normal offshore seasonality, we believe Nauticus exited the quarter better prepared, more focused on commerciality, and positioned to pursue a strong opportunity set through the balance of the year. With that, I'm gonna turn it over to Jimena to walk you through the financials. Jimena?

Thank you, John, and good morning, everyone. I will now discuss our financial results for the first quarter of 2026. During our first quarter, we remained focused on preserving liquidity, maintaining stockholder equity, and securing financial resources necessary to support the company. Revenue for the first quarter was $0.2 million, which is down $0.9 million sequentially and essentially flat from the same quarter last year. This performance is consistent with the seasonal trends we typically experience in the first quarter and reflects the overall market John just discussed. Operating expenses for the quarter were $5.8 million, which is down $0.2 million from Q1 2024 and down $0.8 million sequentially.

G&A costs for the quarter were $3.2 million, which is an improvement of $1.2 million compared to Q1 2025. Sequentially, G&A has increased $0.6 million due to the non-recurring legal fee credit received in Q4 2025. Net loss for the quarter was $9.3 million. This is a $9.9 million decrease in net loss sequentially and a $1.7 million increase in net loss from Q1 2025. These variations, both positive and negative, are largely related to the changes in fair value of our debt instruments. Adjusted net loss for the quarter was $6.4 million compared to $10.4 million for the fourth quarter of 2025, and $6.6 million in Q1 2025.

Cash at the end of Q1 2026 was $5.9 million compared to $7.6 million at the end of 2025. This decrease is related to cash used in operating activities. As we move into the second quarter, we remain disciplined in our approach to managing the business and preserving financial flexibility. I will now pass the call back to John.

Thank you,Jimena. Now I'm going to turn it over to our leads that are working on international expansion, revenue opportunities. Jason Close will be first with updates on our UAE expansion. Jason?

Thanks, John. Since our last call, we've been focused on moving from strategy into execution around our UAE and broader GCC expansion efforts. While the current regional security environment has limited our ability to travel in person, it has not slowed our progress. In fact, we've continued to advance the foundational work needed to establish a presence in Ras Al Khaimah and support long-term growth in the region. Over the past several weeks, we've been actively engaged in identifying a location in Ras Al Khaimah that can support our long-term operations and commercial goals. We've also engaged a UAE-based marketing agency to support the next phase of our market activation efforts. That work includes improvements to our website, branding, and go-to-market materials, both for the regional market and more broadly as we continue refining how we position the Nauticus portfolio globally.

At the same time, we are seeing that business opportunities in the regions continue to move forward and mature, even with the broader uncertainty. The current environment has also reinforced the relevance of our solution for government and defense-related applications, particularly where unmanned systems, remote operations, and increased operational safety are a priority. We are being careful and disciplined in how we approach those opportunities, but we believe our portfolio is well-aligned with several of the region's long-term needs. In parallel, we're seeing increased interest outside the GCC region as we continue expanding our international commercial engagement efforts. In addition, we continue to make progress in our collaboration with Forum Energy Technologies around the Olympic Arm platform. During the first quarter, the team completed a review of the existing design documents, and in the second quarter, we expect to begin collaborative testing activities around the current prototype.

This remains an important opportunity to further validate our technology and expand its application through established industry channels. Overall, we continue to see long-term potential in these international markets. Remain focused on executing our growth strategy in a disciplined and structured way through 2026. With that, I will now hand the call over to Steve Walsh, our sales lead, for an update.

Thank you, Jason. Good morning. As expected, Q1 sales reflected the seasonal softness that has traditionally impacted operations across the Gulf of Mexico during the winter months. Weather conditions limited offshore activity throughout much of the quarter. Lower oil prices contributed to a more cautious operating environment early in the year. More recently, however, we've seen energy markets begin to strengthen, driven in part by geopolitical instability and the ongoing conflict involving Iran. Despite the slower start to the year, we remain very encouraged by the outlook of the remainder of 2026. We are seeing strong momentum in upcoming offshore activity, with several new contracts recently commencing across both offshore oil and gas sector and the offshore wind industry. This diversification continues to position us well as demand for subsea services expands across multiple energy markets.

In addition, we are continuing to actively pursue project opportunities along both U.S. coasts, throughout the Gulf of America, and in select international markets. We are also expanding our focus within the defense sector, where we believe our subsea capabilities, operational experience, and technology platforms position us well for future opportunities. To that end, we're excited to be deploying resources in early June in support of a large defense contractor, the first work of this variety in over a year. Importantly, our team used the slower offshore period productively. During the quarter, we completed major annual maintenance and refurbishment activities across several of our ROV systems. These efforts ensure that our fleet is operating at peak efficiency and reliability as we move into what we expect will be a significantly more active 2026 operating season. We also continue to make meaningful progress on the technology front.

Nauticus ToolKITT, our proprietary software platform, along with new perception capabilities and other advanced sensor technologies, are being successfully integrated across our subsea systems. These enhancements improve operational capability, data quality, and overall client value while further differentiating us in an increasingly competitive subsea vehicle market. As the year progresses, we believe these operational improvements, combined with strengthening offshore demand, geographic expansion, continued technology integration, and growing exposure to the defense-related opportunities, position the company well for growth and long-term success. Thank you again for your continued support and confidence in our team. With that, I'll turn it over to Brian Allen, our revenue lead, for his thoughts on 2026.

Thank you, Steve, good morning, everyone. I'm Brian Allen, the new Chief Revenue Officer at Nauticus, this is my first earnings call with the company, I want to be straightforward with you about how I see things and what I intend to do. You've heard about the weather conditions that brought about our Q1 results, it's going to be my job to broaden our revenue streams across technology, robotic hardware, and services in other global locations that help smooth this and move us to more of a rapid growth profile.

Briefly on my background, I spent the last decade building a subsea robotics and AI company called Beam from scratch to around 230 people, growing revenue at 60%-100% year-on-year and creating an $840 million sales pipeline that brought in $90 million of sales and order book in my final 12 months. We sold autonomous inspection tech and tech-enabled services into the exact same markets Nauticus operates in. Before that, I spent 10 years at the sea, starting off piloting ROVs, then supervising and managing them to build oil fields and wind farms. I know these customers, I know this market, and I know what it takes to sell advanced autonomy into exactly this industry.

People have asked me why I chose Nauticus, and the honest answer is two things I found during my technical diligence that I have not seen elsewhere in any other marine business. First, Nauticus ToolKITT is the most advanced autonomy software available to purchase today for subsea vehicles. It is the leader in the category that matters commercially, a deployable, supported product that customers can run on their existing vehicles today, and I see several near-term opportunities in the market for this software. Software sales are our clearest route to smoothing seasonality, as they are not tied to weather. Second, and this is what really changed my mind, the company's work on autonomous manipulator control. The IP here is potentially five years ahead of the closest competition.

When you consider how much of the offshore inspection, intervention, and repair market is constrained by pilot ability and vessel costs, reliable autonomous manipulation represents a very significant commercial opportunity. Bringing that to market alongside the core Nauticus ToolKITT platform and offering it with Aquanaut is where I see the real step change for this business. On what I intend to do, my first priority is generating early commercial wins that rebuild market confidence, and I've already identified a small number of near-term Nauticus ToolKITT opportunities and potential high $7, low $8-figure Aquanaut services tender from my own network that I intend to move on quickly. Beyond that, I'm building the marketing function and sales infrastructure to drive tech sales, technology-driven services, and Aquanaut hardware sales globally.

A key part of my role is generating clear commercial signals from the market that Amin and the engineering team can use to direct development efforts. The closer we tie what we build to what our customers are telling us they need, the faster the technology converts into revenue. I operate capital efficiently. That is a necessity in this market, and it's how I've always built businesses. I'm already designing systems that use AI to automate parts of our sales and marketing function, which allows us to strengthen commercial capability rapidly at a fraction of what a traditional approach would cost with fewer headcount. In a company at our stage, every dollar of commercial spend needs to work hard. I want to close with this.

I did have other opportunities on the table. I chose Nauticus because the technology here is genuinely differentiated, which is very rare in this industry. The team here is strong. I see an asymmetric opportunity that is worth committing to. I've taken a shareholding as part of my compensation because I want my interests aligned with all of yours. This isn't spin. I would not have joined if I did not see a bright future for this business. I'm looking forward to updating you all on our commercial progress over the coming quarters. I'll hand back to you, John.

Thank you, Brian. We're excited to have you here. We recognize that Q1 revenue reflects a slower seasonal period, we're encouraged by the direction of the business. Our fleet readiness has improved. Our technology continues to advance. Nauticus ToolKITT is becoming a clearer commercial opportunity and gives the ability to offset some of the seasonality. Our UAE and GCC expansion efforts are moving from strategy into execution. Most importantly, we're sharpening our focus on revenue. With Brian joining the team, a stronger commercial structure, and continued opportunities across software, offshore energy, defense, international markets, software licensing, and the hardware sales, that we believe Nauticus is positioned to build momentum through the remainder of 2026. We appreciate the continued support of our shareholders, our customers, our partners, and particularly our employees. We look forward to updating you on our progress in the quarters ahead.

With that, Operator, I'd like to open up the line for questions.

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Peter Gastreich with Water Tower Research. Peter, your line is open. Please go ahead.

Thank you very much. Good morning, and thanks for taking my questions. It's great to see the new senior hire with Brian and other talent that's been coming into Nauticus recently, and really looking forward to tracking the team's progress, you know, throughout the rest of this year. My first question, just kicking off with the revenue trajectory. You know, Q1, clearly seasonal softness, which should be expected, but it does look a little bit softer than expected. Could you talk about your strategy to reduce those seasonal swings in your business going forward? For example, how software would play a role in that? Also in terms of, you know, cadence into Q2 and second half the year, any, anything you can share about, you know, key revenue drivers there would be helpful. Thank you.

Appreciate the question, Peter. It really straightforward as to how we get balance on revenue, and that is we have to begin to do two things. Number one is we have to sell ToolKITT, and I'll let Brian comment on that in just a moment. That eliminates sort of the seasonality and the weather-related risk that you have on revenues. The second thing we need to do is to have some international exposure so that we're not locked into the seasonality of the Gulf of Mexico or North America. I think those two strategies executed well will cause us to even out and the revenue profile for the company. It's on the software side, Brian, is there any comments you'd wanna make on software and how you think that'll eliminate the seasonality and the softness?

Yeah, of course.

North America?

I mean, I guess the fastest lever that we've got on ToolKITT sales is software licensing ToolKITT sales. The product's mature. It's already deployed on third-party platforms, including the Comanche and VideoRay Defender, and it's outperformed incumbent solutions. One of the great things with software sales is they're year-round. Like, these devices, they're essentially, they're used year-round. Licenses are charged year-round. In terms of smoothing profiles, it's the clearest route to generating a year-round revenue source that's smoother than the lumpiness that you see in offshore services type contracts.

Yeah. I would, I would have also thought we'd have been a little further ahead on activities in the GCC, the conflict has prevented us ramping as rapidly as we want. It's still going well, we've got an excellent opportunity there, and we're excited about it. I'm looking forward to going back over to UAE here probably mid-late June and continuing to develop that opportunity. The conflict there slowed that down a bit, we've lost no momentum there, we're excited about working with them.

It's still early stages at this particular point. I mean, I've been with the company for less than a week now, I've got considerable number of contacts already in the industry who I've already reached out to, there is interest in ToolKITT. There's calls there for me to make, there's meetings for me to have, and there's a market which we can sell into, which is interested. I think ToolKITT's gonna be pretty good for our future. It's just a case of how quickly we can convert that pipeline.

Yeah. Next question, Peter.

Okay. Thank you. With the You know, you have a Northeast ROV, you know, fleet, which would be a good, you know, proof point for ToolKITT. Has that been helpful for you in terms of your licensing discussions, and where do those stand?

It, you know, it's another really good question. You can hardly sell ToolKITT running on ROVs unless you eat your own dog food and put it on your own ROVs. We're excited to have it deployed there. That's also the best testing platform so that we know the quality of the product that we're sending to customers. We're very optimistic about the proof showing them the work that we're doing so that they can see the productivity enhancements that you'll get from deploying this type of autonomy onto the current and existing ROV fleet. It gives them the opportunity to either get greater utilization out of the assets they have, but it also keeps them from having to buy additional ROVs, potentially.

This is a great way to increase the capacity of your fleet. If you have 10 and you can get 20+%, that's two you don't need to buy. I think it's a great financial opportunity for the ROV commercial operators to improve the utilization of their fleets without having to increase the number of assets. Putting it on our own ROV is gonna demonstrate and quantify that for ROV operators, and I think improves our chances of selling the software. Yes, it's up in the Northeast, and I think we should be posting some things about the success with it there as we go through this quarter and we do this work.

Okay. Thanks. Brian mentioned the high 7, low 8 opportunity. Sorry, could you please just repeat that just to make sure I understand what you've mentioned there?

Yeah, of course. Part of my remit is in expanding types of revenue across EMEA, and I'm looking at both technology-enabled services and also ToolKITT licensing and the longer sales cycle Aquanaut hardware sales, which we need to build the infrastructure for to convert that. The two short-term opportunities are essentially, as I said before, software licensing and technology-enabled services. To do that, we have to start building a pipeline of potential services contracts in EMEA. Now these are similar to the work that's already taking place in North America. The company already has this capability. It's using similar assets. It's just geographically different. I'm starting to reach out to my network and bring in tendering opportunities of a similar nature to what the business can already complete in the U.S., albeit geographically closer to where I work from.

Okay. Great. Thank you. This is kind of a bigger picture question here. Just wanna ask to what extent the, you know, budget cycles are important for your emerging customer base. You know, you have, for example, oil and gas. You know, certainly with government type work, you know, I would imagine we might be, you know, past the cycle for the new work in 2026. Is that the way to look at it, that we should be focused more on sort of the opportunities for 2027 now? Do, you know, are there still kind of budgets for 2026 that your customers can work with? Also, you know, in terms of those 2027 budgets, you know, is there, you know, signaling or confirmation for that? You know, time with your customers, annual budget announcements? Just curious, you know, broadly, how that works against your customer cycles.

Okay. A lot of questions in that question, Peter.

Sure.

Let's see how we do here. The first one is, I just got back from Washington and was up marketing and doing business development on the government side. We're there, and we're doing a really good job, I think, of positioning what we can do and how we can influence a lot of government work. Not all I can talk about, but I would tell you that what we have to do is be there right now and marketing in order for us to be successfully included in the 2027 and 2028 budgets. It looks as though they're planning out two years ahead, you wanna be there and be on the ticket for 2027 and 2028. I think that we are very successful in positioning ourselves for that 2027, 2028 budget.

The 2026 budget will require them having probably a vendor default or a vendor issue or an emergency that we can fill in for, and we're positioned to go in and work with them in the event that they have an immediate need. I think the real opportunity for us is to be contracted for the 2027, 2028 work, and we need to be doing that now, and that's what we are doing. We've finally gotten all of the products ready to go in and just bid commercial work at that level and to be considered a vendor for the 2027, 2028 season. Very positive outcome for us. In terms of even our existing customers, we continue in terms of oil and gas. There's still a lot of opportunity.

There's gonna be a lot of transactional and call-out work through the rest of 2026. I think oil and gas prices are gonna be stable at where they are to higher. I would not anticipate opening up the Straits of Hormuz to drop the prices, but only for a short period of time until we understand the damage to the infrastructure, that has occurred during the conflict. Look for longer term, higher oil prices. As a consequence, I think you're gonna see the activity continue to ramp in the oil and gas sector, particularly in the Gulf of America and around the world offshore, as, those are the least expensive barrels to produce. It tremendous opportunity for us.

May I add to that?

Yeah.

I have less history with Nauticus, but I can talk about the industry generally from my previous work doing similar work with similar vehicles in a similar environment. Compared to contracted position from this particular point in the year, you have a certain ability to forecast revenue for the rest of the year, but that never includes spot work and emergency work. In my previous company from where we are today, we typically see a 30%-40% uplift based on forecast revenue. Now, that doesn't directly translate to Nauticus because we're in North America, not EMEA, but you generally see a significant increase in revenue in the latter quarters based on spot work and the spot work market.

Yeah. Another unintended consequence of this conflict is I think you're gonna see a strengthening emphasis on wind energy and the maintenance of the wind farms offshore as people try to offset higher oil and gas prices. Our position in doing the wind work in the Northeast is gonna be very advantageous to us, and Steve's got tremendous connections there, as does Brian. I think we can pursue quite a bit of the offshore wind farm activity, which people will focus on with the price that oil and gas is gonna hold for the longer period. These alternative offshore energy producers are gonna, I think, see quite a lot of activity.

Okay. Great. Thank you. I'll just ask one more question here before getting back in the queue. You have cash sitting at close to $6 million and continued to burn. How should investors think about your funding runway over the next 2-3 quarters?

Hemant, do you wanna answer? I mean, it right now, Q1 was light on cash flow as a result. We've, you know, we'd look towards Q2, Q3 as to when the revenue picks up and the collections. Cash flow is always an issue for a company like this because collections occur after the work is done. We probably continue to look at using the ATM lightly. We'll also use the ELOC, and we have tremendous support from our current lenders. We're not concerned about the availability of the cash. We take as little as we can as we go forward. Our goal here is to get the cash flow break even and not have to use any other method that might dilute shareholders or would give us long-term obligations.

The ability to withstand this long term and to get this company where it needs to be as we go into 2027, 2028 is there. We're focused on creating great products, great results for customers, customer satisfaction, because this is a long-term company, not a short-term company. I think the funding that we need to get through 2026 is available to us, and we need to be self-funding as we go to the end of the year going into 2027.

Great. Thanks very much for taking my questions and the presentation from your team. I'll get back in the queue.

Your next question comes from the line of Alex Latimore with Northland. Alex, your line is open. Please go ahead. Alex, your line is open.

The first one is-

Alex, your line is open. Oh, there you go.

Can you hear me?

Yeah, we can hear you, Alex.

Oh, you can hear me? Okay. I'm not sure how much came through there, but I'm gonna wrap two questions into my first one here. The first one comes, I was wondering if you could describe the advancements that ToolKITT provides for subsea vehicles. If you have, this is still part of the first, if you have any metrics that show the autonomy benefits before and after the system is upgraded. The second part is, do you need to upfit customers' ROVs, or do they already have the necessary hardware to run ToolKITT?

You're a knowledgeable questioner this morning. First off, let's start with the last part, and then we'll go to the first part. In order for you to be able to control and navigate the vehicle, we have to install additional equipment on the ROV, typically an INS, so that we know exactly where the vehicle is, and we have the ability to control it. Yes, there's additional equipment that needs to be installed on the ROV. After the equipment's installed, what we have the ability to do then is to actually control the dynamic positioning of the vehicle so that we can get bottom locks and hold the vehicle at a specified height above the sea floor, and we're able to control it in terms of its navigation from point to point.

Now, what we have done, which to the first part of your question is, the very first time that we used this, we actually did a quantitative test that I think we posted some short videos up on X. What we've discovered was this: when you're doing autonomy on an ROV in the way that we do it with ToolKITT, you don't know anything about current, but what you do is you optimize the path, so the thrusters are continuing to operate at different levels in order to maintain a specified line. What it moves from one point to the other very efficiently in a straight line as it's continually adjusting all eight thrusters in order to maintain connection and fit to that line.

When you're an ROV operator and you're still steering it manually, you're trying to overcome the current, you're trying to pull the umbilical behind you and the, and the tether. Everything is working, and the currents, and you actually have different currents at different depths, and so it's a pretty complicated operation. They're using just the thrusters in order to try to move the vehicle from point to point. What we discovered was that there's at least a 20% reduction in efficiency and inability to stay on that line when you're steering it manually. Now, that has a lot of consequences. One, 20% increase in time as a result of doing it manually, just convert that into 20% of a daily vessel rate, which is running anywhere from, say, $25,000-$150,000.

Let's say in the $40,000-$50,000 a day range, you're saving $8,000 a day just on vessel time. If you're at the $40,000 range, that leaves you a lot of room for a software license on a day rate basis to improve the quality of those ROVs. The second thing that happens is when you're moving laterally back and forth, and you're moving up and down, your data quality is not as consistent, and you're having to do a lot of post-processing on the data in order to get the data that's wanted and desired and the quality that you want. When you hold a fixed position above the bottom and you stay in a straight line, you get much higher data quality and a lot lower effort in terms of data processing after that.

I think it brings advantages to data. It brings tremendous advantages to cost. It actually is improving, the ROV operators themselves are some of our biggest advocates because it reduces what they spend a lot of time doing. They want to concentrate on the task that they're trying to do in terms of inspection and looking at data and observing the infrastructure as opposed to steering the vehicle. You're bringing concentration back to the ROV on the task at hand. There's a lot of benefits to it, and I think the adoption of this for the ROV world, I think, is gonna pick up dramatically. They have some of these capabilities on the heavy duty ROVs, but as we're finding, nobody turns those on. They've never really concentrated on a commercial quality autonomy system for the ROV world. I think we're gonna lead in that.

Okay. That's a great response. That's a amazing color there. Let's see. I guess while we're talking about the data here, I guess if you could rank maybe the top two or three most valuable data points that you collect? Is there any customer interest in buying that data?

Okay. Yeah, I can let some of the other guys here comment too. Typically, we're contracted to collect the data for them, and it's proprietary data. We don't have a data library. It's something I've pondered as to whether or not we could lower the cost of the data and then have a data library. Most of this is proprietary infrastructure. They pay for it, they own it, they use it to manage their infrastructure. You return it to them, and we don't provide that as a data library, like you would with, say, speculative seismic, where you collect data and sell it to multiple people. We don't do that in the industry for most of the work that's done with ROVs.

I'll make sure I'm looking at the folks here to make sure I'm not misleading you on this, but the opportunity to do that exists, particularly when you get to the environmental work where you're doing, you know, looking at coral reefs, et cetera. But where it's for the general good, having that data library, but you still need to have somebody collect that data and pay for the collection of it. Brian, you got any comments you wanna make?

Just on, in the main part, retaining rights on, like, data analysis of customer data is difficult. There are strategies that can be followed there, and we should talk after the call.

Yeah. It belongs to them, to the customer, and all of the customers have a, they wanna maintain confidentiality of it. To them, it's a competitive advantage, so it's difficult to use it for any other purpose other than, basically fee for service. We just deliver the data.

Okay, understood. Got you there. I got one more question. I was just curious what, maybe some of the biggest technology advancements you expect to release this year and next year are. What are the benefits surrounding those? Would it be adding the new manipulator, adding autonomy to the manipulators, something else?

Well, that's another really good question. I think one of the things is a strategic decision that the company made, unlike some of our competitors, is we're not in the sensor business. So we have 22 sensors on board, and we can choose advances in sensors. Whenever we see one that's got tremendous advancement, we can plug that in and pull another one out. So we're not locked in on a sensor that might be two, three, four years old, and so we're seeing some really strong advances in some of the imaging capabilities, and so we're putting state-of-the-art. In fact, I'd say we're testing some of the new sensors for some of these companies right now.

That's an opportunity for us, is to use our platform to test other companies' sensors and have them pay for us to actually put these sensors in play and compare it to other sensors as well. We're constantly looking at what's gonna give us the greatest differentiation and what's the right way to do the imaging and data collection, whether it be for pipelines, for cables. It doesn't matter. We're gonna be a platform for deploying the best technology, not for trying to develop those sensors. That's a very competitive, high R&D cost model that we're not gonna enter into. Exciting. On the autonomy side, we've got the new generation manipulator. The parts are coming in for assembly, and we're very excited about putting that manipulator on the Aquanaut.

I've been talking to competitors and customers, potential customers. This is an absolutely perfectly targeted manipulator for this market. I congratulate our team here. It's a mid-range manipulator. It's not really a small, light-range manipulator like you would see, which are just small arms that can lift, you know, maybe 10, 15 kg. It's also not one for a heavy-duty, work class ROV where it can lift hundreds of kilograms. It's going to be in that 50-70 kg range for operation. It's also really well designed with regard to maintenance. What we learned about using other manipulators and building manipulators is that you have to have spare parts, you have to have them on board.

You want the simplest possible ability to repair and maintain, 'cause you're going to be in the parts business as soon as you start selling manipulators. These guys are hard on them, you need to have the ability to produce replacement parts and have a really good ability to source parts to them as they purchase the manipulators. This manipulator is a 3-7 degree of freedom. If we don't need all those degrees of freedom to do something, we can drop it back to three. If you just want to touch something with a cathodic probe or gather a simple sample or cut something, we don't need 7 degrees of freedom. It doesn't require a human arm to do that.

What you want is the least amount of equipment doing the task the simplest way, so that you can keep the cost out of the system and also reduce the non-productive time, which is the maintenance that occurs when you've got more joints than you need on the arm. I think it's a fantastic design. Last thing is all of this is underpinned by autonomy for arms, which I think is incredibly unique here in the whole of our industry. Even in the terrestrial industry, the ability to use an arm not automated, where it does the same thing over and over, because that's not really possible in the subsea environment because of the position of the Aquanaut, the ROV, et cetera. You have to have some perception in order to address the object that you're working with.

Whereas if you're manufacturing an automobile, you can do automated welding with an arm. You can go to a fixed position, move to a fixed position, pull back, and do that repetitively. That's not the world that we live in in maritime. You need to have the ability to observe the environment and interact with the environment. I think we'll have ToolKITT that comes in several flavors. One's gonna be for the navigation of ROVs. We can strip down some of what's necessary there that we use on the Aquanaut. ROV related ToolKITT, Nauticus ToolKITT. We'll have the manipulator related software, we'll also have it for the Aquanaut or full AUV. It's the whole market for autonomous manipulators looks very, very exciting.

Awesome. That's great. It seems, it seems the tailwinds are blowing in Nauticus's favor here. I'm excited to watch you guys progress. Thank you.

I appreciate it. I mean, we put 2.5 years in getting these products ready. Now we're gonna put the next year in getting them to market and really showing the revenue that can come from the investments that have been made. Appreciate all the shareholders that put money in this 'cause it's put us in a great place.

Your next question comes from the line of Robert Mandrala, a personal investor. Robert, your line is open. Please go ahead.

Thank you, and thank you for the investor update. Brian, welcome to Nauticus. I have a two-part question for you. Given your background scaling subsea robotics and autonomy businesses, and to clarify what might have been mentioned, in this call, where do you believe you can have the earliest impact on revenue, you know, whether it be services, software licensing, hardware sales, or international partnerships? As you look at the opportunity pipeline, how should investors think about the potential size and timing of commercial opportunities? I guess, without getting into too much formal guidance.

Well, great question. Yeah, thank you for the welcome. Let me split that into two parts. On where I see the earliest impact, I think about it as three time horizons running in parallel rather than different buckets. This isn't really a services versus software versus hardware play. They're all interdependent on each other and rely on and bounce off each other. Of all of those, the fastest lever for us to move is the Nauticus ToolKITT software licensing offer. I mean, that can be moved on in a period of months. We already have contacts in the market that are interested. We already have stats on how it's outperformed incumbent solutions in head-to-head trials. We already have it integrated with the Forum Comanche and VideoRay Defender and other vehicles as well.

Currently working on a few different flavors of vehicles. That's a product that I can actually sell now, and the team as a whole have identified quite a number of opportunities that we can work on. That's probably where you'll see the earliest commercial signal. The second lever running alongside it is technology-enabled services, and our services business is the operational engine that proves that technology in the field. It's there that we expect to see margin expansion happen as we substitute autonomy for vessel time and pilot time as ToolKITT comes into our own systems and used in much greater detail now that it's a functional, strong product and commercially hardened. As Steve covered, Q2 and Q3 are the natural seasons for that to start showing improvement as well.

Our third lever that we mentioned is hardware and international partnerships. For conversion at scale, those require a sales infrastructure that doesn't really exist strongly in the company today. We've got early success there and early meetings and interest, we really need a bit more sales infrastructure, which is what I'm gonna be putting in place over the next three-four months. EMEA for the international partnerships, it's a market that I know really well from my previous years, and the operators there are actively looking for this kind of autonomy capability that we've got. Rather than make promises or basically, I'd rather underpromise and overdeliver on international than the reverse. I'd caution against framing this as software versus hardware. The thesis is the services revenue is the development and testing area.

Nauticus ToolKITT software demonstrates real market interest in the software, and then that naturally pulls the hardware through behind it as people see the capability. Aquanaut hardware sales are a longer sales cycle but will generate high tens of millions once that engine's running well in sort of two-four years' time. Right now, the mix shift and my main responsibility is in moving us towards higher margin software and recurring revenue. That's like kind of the direction of travel that I intend to sort of push on at the moment. No, can't give formal guidance. Really wouldn't want to in my first week. The way I'd frame it is the opportunity set's really large and the serviceable market for autonomy-enabled subsea services software runs into the billions.

The consolidation pressure right now in traditional ROV contractors with a lot of those who have created some of their own hybrid solutions creates a window for commercially available autonomy players to take share, and that window's open now. It won't stay open forever, but we're the first mover in that space when there's already commercial pressure as people are trying to compete with others. The honest framing is that you should expect to see a commercial signal and pipeline growth before you see revenue scale because software licensing recognizes differently than from project services, and the bigger international hardware deals have a longer sales cycle. What I'd ask for you to track is the leading indicators, mainly quality and breadth of pipeline.

After that, look for news about third-party deployments, and sort of third-party platforms, partner announcements, and then we'll also be talking about repeat business and framework agreements as those come in. Those are the things that will tell you the commercial engine is working, and they'll show up in the numbers 6-12 months after those sort of announcements. I'll be able to update you on commercial progress each quarter, but I'd rather you measure me on what we actually book than on what I can project from this seat on my first call.

Okay, great. Thank you. Here's another revenue question. Referencing growing opportunities in defense-related applications, can you provide an additional color on where Nauticus is seeing interest? For example, inspection, surveillance, autonomy, intervention, or subsea support, and whether you expect defense to become a more meaningful part of the company's revenue mix over time, and also with respect to the Leidos partnership.

Another good area to talk about, Robert. Appreciate the question. We are actively engaged in a project that's going to commence shortly, and it is principally related to service-related work on working on an AUV. Our knowledge of hardware is what really is our strength in this particular one. As soon as we complete that, it'll be the software on that piece. Those two things will be in this project. I think this is a, you know, smaller project, but it's one that can lead to quite a lot of growth with this particular large defense contractor.

We spent three days at the Sea Air and Space Conference in Washington, meeting with basically all of the large defense contractors. I think our product line fits really well. In fact, it was encouraging to walk around the floor there and see how differentiated we are. You have a lot of people doing USVs. I'd say 70% of the people at the conference were showing unmanned surface vehicles. You have a lot of, well, I'll call it's an AUV, but Aquanaut really isn't an AUV, it's more of an underwater drone than it is a missile, which an AUV tends to be prop on the back, go straight. We saw almost nothing in that space.

We saw quite a number of people doing different sizes, different depth ratings for AUVs, which are just the bullets. Everything was hugely differentiated. Every body we wanted to speak to, we got senior-level meetings and all the meetings were really productive. We have some follow-ups to do with them. I think the defense sector's really, it has a lot of demand for the capabilities and the competencies that we bring. I think we're also ahead of the market in this area. The manipulators themselves, particularly autonomous manipulators, their understanding of how to use those and the demand for those is just now emerging. We are particularly in emerging markets.

I appreciate the patience that shareholders have had because when you're in an emerging market, it's a little harder to get traction and put it out there. Everything we're doing is an underserved market. We're not in the, you know, improving productivity in an existing market. We really are in underserved markets and with new solutions and the defense side's a great area for us right now.

Okay. Thank you, John. That's very helpful. I have one last question. Given the company's technology assets, market opportunity, and current capital needs, how is the board thinking about the full range of options to maximize shareholder value, including strategic partnerships, licensing arrangements, commercial alliances, financing alternatives, or other strategic opportunities?

Another good broad question, Robert. How is the board thinking about this? We have a great board, okay? That's first. Absolutely focused on creating shareholder value. Any proposal that came in on the strategic opportunity side, you would see that they would give it a fair viewing because what they wanna do is increase the shareholder value. Proposals come in, they're gonna get reviewed by the board. There's no filter here on taking things out. It truly is a board review of what should we do that's in the best interest of shareholders. In terms of the licensing, we started down that lane with Forum Energy Technologies. We're really excited as to how that's developing.

We're learning how to be a good partner there, working with them. Licensing is a phenomenal way for us to work without having to actually put all the capital in to manufacture those, but get the benefit of the intellectual property that we've created. In this particular case, it's one of our first manipulator generations that will be used on ROVs. I'm really excited about that. It's a low capital, high margin approach to the manufacturing industry. The same would be true for Aquanauts.

While we will build them in Ras Al Khaimah, under the agreement that we're working on now, that we would be quite amenable to licensing that technology to where that is built and the cost of manufacturing is covered by someone else, and we would get a licensing fee on the Aquanauts. ToolKITT clear licensing. What we have to do overall as a company to get the kind of margins that we would like to have, which is on a blended margin basis, we need to be above 50%. Now, you're looking in the 80% range for the software side of the business. You're looking in the, you know, 25%-35% range for the services side of the business. You're looking in that 25%-30% range for hardware.

I'd like to be in that 15%, 20%, 25% range without having the cost of capital for the manufacturing. That's how we're looking at the licensing capability on the hardware side. Software side's gonna be 80+. Goal is to have blended margins above 50 in our model. With regard to strategic partnerships, we have a good relationship with Leidos at this point and are enjoying communicating with them about potential projects going forward, and we'll continue to do that. That's not an exclusive arrangement. We're talking to many other defense contractors and we'd be excited to be working in a partnership with them on any project that fit what our competencies and capabilities are. We're very open on that, Robert.

We have reached the end of the Q&A session. I will now hand the call back to John Gibson, CEO, for closing remarks.

Appreciate everybody being on the call. You know, you have an investment in an emerging company. We've got great products. We've got a great strategy. I think the testament to that is the quality of people that we have on the management team today. It's incredibly strong, with incredible commitment to what's possible for this company and wanting it to achieve its full potential. I appreciate your patience with us, and I appreciate the investment that you've made. We're gonna continue to work hard to create shareholder value here.

I'd just like to thank our lenders, our board, our shareholders, our employees, our vendors. I mean, there's so many people that play a part in the success of a new company like this that with emerging technology. We're blessed to have all of you. Appreciate it. We'll look forward to updating you, when we get through with the quarter. Take care.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nauticus Robotics, Inc. 2025 fourth quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. To ask a question, simply press star one on your telephone keypad. To withdraw your question, press star one again. It is now my pleasure to turn today's call over to Kristin Moorman, Corporate Development Lead. You may begin.

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 year ending December 31st, 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 our 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. We may discuss non-GAAP metrics on this call. I will now turn it over to John.

Good morning. Thank you, Kristin, and thanks to everyone for joining us today on the call. 2025 was a defining year for us, one where we not only strengthened our foundation but also began to clearly demonstrate the value of what we've been building. We made meaningful progress across every dimension of the business. Financially, we improved our balance sheet and increased our flexibility. Operationally, the integration of SeaTrepid expanded our capabilities and gave us a stronger, more diversified platform on which to execute. Technologically, we made the most important transition from development into real-world deployment, where our solutions are now delivering measurable results. We are getting a lot of time in the water. At the same time, the market's moving in our direction. Demand for autonomy is accelerating as customers seek safer, more efficient, more cost-effective offshore solutions.

We're seeing growing need across commercial, infrastructure, and government applications, and we believe Nauticus is well-positioned at the intersection of those trends. One area we're particularly excited about at the moment is defense. The global defense industry is becoming an increasingly attractive market for us to pursue, not just in the near term but for the foreseeable future. Governments and defense organizations are placing greater priority on autonomous and remotely operated systems that can improve mission effectiveness, expand operational reach, and reduce risk to personnel. Our technology, our software, and our offshore operating expertise align very well with those needs, and we believe this creates a compelling and durable opportunity for Nauticus. We're also beginning to extend the opportunity internationally. Our efforts in the UAE with the Master Investment Group reflect growing interest in our technology in regions that are investing heavily in maritime security, critical infrastructure, and subsea capabilities.

We view that as an encouraging step in expanding our presence in strategically important markets. We have aligned our leadership and organization to capture these opportunities. Jason Close is focused on driving growth and market expansion. Bob Christ is advancing our presence across government and defense channels, and we've strengthened our software leadership with KJ, who is helping unlock the full potential of Nauticus ToolKITT as a scalable, multi-platform autonomy solution. In parallel, we have also enhanced our financial flexibility through the availability of our equity line of credit. We believe that access to capital provides us with an additional tool to support growth initiatives and pursue attractive opportunities as they emerge while remaining disciplined in how we allocate capital. As we enter 2026, we do so with momentum, a clearer strategy, and growing confidence in the markets ahead of us, especially in defense.

We just attended the Sea-Air-Space conference in Washington, and we're very pleased to meet with many customers there, where we see a strong fit with our capabilities and meaningful long-term opportunity. Before we get into the results, let me briefly address the reverse stock split that was executed this week. As you know, we completed an 8-for-1 reverse split of our common shares. This action does not change the underlying value of the company or our shareholders' ownership, as it's intended to support our listing compliance and provide a more stable trading framework for our shares. Importantly, it has no impact on our capital, our strategy, or the progress we're making in executing our business plan. With that, I'll turn it over to Jimena to walk through the financials. Jimena.

Thank you, John, and good morning, everyone. In 2025, we took steps to strengthen our balance sheet, successfully addressed our NASDAQ compliance requirements, and advanced on the integration of SeaTrepid.

We believe these actions position us for more consistent execution as we move into 2026. I will now discuss our financial results for 2025. Revenue for the year was $5.3 million, which is up $3.5 million from 2024. The increase in revenue was largely due to the acquisition of SeaTrepid in early 2025. Operating expenses for the year were $29 million, which is up $3.9 million from 2024. The increase was partially driven by higher activity levels associated with revenue growth. Cost of revenue as a percentage of revenue improved by approximately 300 percentage points, reflecting an efficient integration of the businesses. Depreciation expense also increased year-over-year due to the addition of the SeaTrepid asset base. G&A costs for the year were $14.3 million, which is an increase of $0.7 million from 2024.

This increase was primarily due to non-recurring transaction costs related to the SeaTrepid acquisition, which impacted the first half of the year. In the second half, G&A trended toward pre-acquisition levels as we reduced non-essential spending. Net loss for the year was $40.8 million. This is a $94.1 million decrease in net loss from 2024. This variance is largely attributable to a $127.6 million loss on extinguishment of debt recognized last year. Adjusted net loss for the year was $31.1 million, compared to $26.1 million for 2024. This is an increase in adjusted net loss of $5 million. Cash at the end of 2025 was $7.6 million, compared to $1.3 million last year. The increase was primarily driven by proceeds of our at-the-market offering and other equity financing, partially offset by cash used in operations.

Shareholder equity at the end of 2025 was $7.7 million, compared to a shareholder deficit of $20.4 million in 2024. During 2025, we have worked with our lenders to strengthen the balance sheet, including conversion of portions of outstanding debt into equity, which reduces leverage. In early 2026, we secured additional convertible debt from an existing lender. Combined with continued access to our at-the-market program, this provides liquidity to support the ongoing commercialization of Nauticus products while maintaining financial flexibility. As we move into 2026, our focus remains on executing against our commercialization objectives and maintaining disciplined cost management. I will now pass the call back to John.

Thank you, Jimena. Well, now I'm going to turn it over to our leads that are working on international expansion and the government opportunities. Jason Close will be leading off with updates on our UAE expansion progress, and Bob Christ is going to follow that up with the exciting opportunities that exist in government. Jason?

Thank you, John. As we recently announced, I've stepped into a new role focused on growth and go-to-market strategy, and I'm excited to be leading this next phase of the company's expansion. A key part of that strategy is our entry into the UAE and broader GCC region, supported by our recently announced relationship with Master Investment Group. They are both an investor and a strategic collaborator. Their $3 million initial investment, with the potential to scale that up to $50 million, provides the runway we need to execute on our regional plans. Together, we can establish a strong regional foundation for growth. Our immediate focus is on establishing that solid foundation in the region through market activation. That includes delivering a value-driven message around our solutions, building localized marketing, strengthening our digital presence, developing commercial relationships, and putting the right infrastructure in place to support manufacturing, deployment, and distribution.

The goal is to enter the market in a structured way and position ourselves to grow the business in the region as well as globally. We see Ras al-Khaimah as a strategic hub for long-term expansion. It's an active and strategically important market, and it provides a base to expand more broadly across the GCC. As we progress through 2026, my focus is on continuing to build traction in the region and globally while converting this initial investment into long-term growth for the business. With that, I'll now hand the call over to Bob Christ, our Technical Advisory and Government lead, for an update.

Thanks, Jason, and good morning, everyone. We actively participated in the November 2025 Underwater Minerals Conference in St. Petersburg, Florida. There are unprecedented movements on the permitting issue for subsea minerals. While the UN subdivision, the International Seabed Authority, has been studying the subsea minerals environmental issue for 40 years without issuing a single production permit, the current U.S. administration has moved rapidly towards a full regulatory regime for permit issuance under NOAA Codes 15 CFR Part 970 and 971. What this means is that the first ever marine minerals permit within international waters is expected to be issued in Q3 or Q4 of 2026. We anticipate a gold rush of activity, and we plan on being on that leading edge. On the governmental front, one example.

The situation in the Straits of Hormuz is aligned with our infrastructure integrity assurance and automatic target recognition capabilities. We have recently hosted several defense contractors at our Florida testing facilities, and talks are ongoing. These are new channels of opportunity for Nauticus. The integration of Nauticus ToolKITT onto our Comanche ROV systems has allowed us new autonomous capabilities to differentiate ourselves from competition in the offshore ROV services space. The increase in oil prices has made the offshore wind industry more economically viable, driving further activity from clientele. We anticipate a brisk year in all of our Western Hemisphere offshore oil and gas producing regions, as well as domestic U.S. offshore wind. I am very optimistic for this year's first full year SeaTrepid operation under Nauticus umbrella. With that, I'll hand the call back to John.

Thank you, Bob. Thank you, Jason. I sincerely wish we had all of our assets in the Middle East right now. We're uniquely situated to achieve many of the goals and challenges that they face. Let's continue. I would like to turn it over to our sales and operations leads to discuss activities in their department. First up is Daniel Dehart, our field operations lead for recap of the 2025 commercial season and plans for the upcoming year. Daniel?

Thank you, John. 2025 was a year of meaningful progress and important milestones. The actions we took throughout the year have positioned Nauticus for a stronger and more execution-focused 2026. A key highlight was the acquisition of SeaTrepid, which immediately expanded our operational capabilities, diversified our customer base, and established a more consistent revenue stream. Our ROV systems completed successful projects for new clients, reducing our customer concentration, generating revenue while also serving as a platform to deploy our Nauticus ToolKITT software in commercial operations. This marks the first time Nauticus ToolKITT was installed on a light work class system in the field, delivering enhanced autonomy and operational efficiency. This served as proof of concept as it is opening new opportunities for other manufacturers' ROVs. KJ will provide more details in a few minutes.

The Aquanaut system also achieved a major technical milestone, successfully operating at depths of 2,300 meters offshore. The vehicle is certified to 3,000 meters, but no deeper tests are planned without a commercial contract. Throughout the year, we transitioned from primarily research and development into funded workflow testing, a critical step toward commercial deployment. The progress made in perception-based autonomy, particularly in vertical inspection applications such as mooring lines, chains, and risers, represents a significant advancement in the system's capabilities. Another important development was the establishment of a dedicated, cost-effective testing environment. In collaboration with Advanced Ocean Systems in Stuart, Florida, we secured access to a private lake that has significantly increased our operational tempo. We are now averaging approximately 40 hours per week of in-water testing, compared to limited pool access previously. This expanded testing capability has already supported multiple funded projects, including autonomous leak detection and mooring line inspections.

It allows us to better simulate real-world offshore conditions. The test site has also allowed us to remediate the technical deficiencies that prevented securing 2025 revenue. Customer engagement remains active. Many of the opportunities we advanced in 2025 are now translating into client interest in 2026. Demand for autonomy remains strong. As we look ahead, 2026 will be focused on execution, converting technical progress into commercial outcomes, expanding our customer base, and continuing to build on the operational foundation established this past year. We believe we are significantly better positioned to deliver results and create long-term value. With that, I will now turn it over to Steve Walsh, our sales lead, for a recap of 2025 and an update on our offshore commercial pipeline for this year.

Thanks, Daniel, and good morning. In 2025, we delivered over 190% year-over-year revenue growth, increasing from $1.8 million in 2024 to $5.3 million. This performance was driven by both new customer acquisition and deeper engagement across our existing customer base. Our customer portfolio spans the full spectrum of markets we serve, from super major oil companies and offshore wind operators to small dive companies and municipalities. This breadth highlights the versatility of our offering and provides a strong foundation for sustainable growth. Importantly, this growth is real, repeatable, and increasingly driven by long-term partnerships rather than one-off projects. Today, more than ever, customers are demanding continuous reduction in cost, which will be enabled by a broader deployment of Nauticus solutions. To achieve these benefits requires the adoption of new workflows, utilization of smaller vessels, and fewer personnel, which will result in more efficient execution and higher quality data.

Delivery of reduced costs through the adoption of these technologies will drive deeper commitment to Nauticus. As we move into 2026, our focus is to build on this momentum by strengthening existing relationships while expanding our presence within key accounts. At the same time, we are pursuing targeted opportunities beyond the Gulf of Mexico, where we see strong alignment with our core strengths and proven operating model, our approach remains disciplined. We are expanding where we have visibility, established relationships, and a clear path to profitable growth. These efforts include opportunities along the East and West Coasts of the United States, as well as in select international markets where we have successfully operated in the past. The combination of sustained revenue growth, expanding customer relationships, and disciplined geographic expansion positions us well as we enter 2026.

With that, I'll turn it over to KJ Easton, our new software lead, for an update on Nauticus ToolKITT progress.

Thank you, Steve. I joined Nauticus earlier this year with a background leading engineering teams in autonomy, AI, and real-world deployment. Over the past several weeks, I've been working closely with our engineering and operations teams to understand where our technology is delivering value today and how we translate that into commercial growth. Over the past year, our software platform has made meaningful progress across reliability, operator workflows, autonomy behaviors, and post-mission analysis. These improvements are now being exercised in real-world operations. In 2025, we saw a significant increase in in-water testing, and that exposure has improved system robustness and performance. One of the clearest takeaways for me since joining is that our core advantage is not tied to a single vehicle, it's the software platform itself.

Nauticus ToolKITT is a modular autonomy layer that can be deployed across multiple types of vehicles, with improvements on one platform carrying over directly to others. As we look ahead to 2026, our focus is on translating that capability into repeatable, revenue-generating solutions. We're prioritizing applications with clear demand today, particularly inspection and survey workflows such as mooring lines, risers, and leak detection. On ROV platforms, we're starting with foundational capabilities like station keeping and navigation, where incremental autonomy can improve efficiency and reduce operator workload. This also creates a path to expand Nauticus ToolKITT across existing third-party vehicles, allowing us to scale through software without requiring customers to replace their systems. We're seeing encouraging signals from field use. Operators report that Nauticus ToolKITT reduces repetitive, fatiguing aspects of piloting, allowing them to focus more on inspection quality and data collection.

That shift towards supervised autonomy improves both efficiency and consistency. We're also beginning to see early commercial traction. Our deployment on third-party ROV platforms has opened conversations with service providers and operators. Relationships such as these validate that our software can integrate into real customer workflows beyond our own vehicles. Internally, we're focused on reliability, testability, and consistent deployment in the field, strengthening testing infrastructure, deployment workflows, and the operator experience to move from demonstration to repeatable operations. Overall, we see a clear path forward. Deliver near-term value through targeted autonomy on existing platforms while building toward a broader multi-vehicle autonomy ecosystem powered by Nauticus ToolKITT. We believe this will improve the economics of subsea operations, reducing cost, increasing safety, and enabling more scalable deployment. I'll now hand over to Ameen Albadri, our engineering lead, for an update on Aquanaut and electric manipulators.

Thank you, KJ. In 2025, we made significant progress advancing the Aquanaut system, working closely with key suppliers and industry experts to further improve performance and readiness for commercial deployment. Our continuous lake testing is generating valuable data, allowing us to enhance system reliability, optimize operations, and drive improvements in maintenance efficiency. Regarding manipulators, we continue to progress our efforts with FET on the Olympic Arm and are currently reviewing design files and manufacturing drawings. We look forward to presenting FET's progress in future calls. Internally, we finished the design of a next-generation fully electric three-joint manipulator for deployment on Aquanaut as soon as possible. We have completed parts procurement with all components expected to be received by late Q1 into early Q2 2026, keeping us on schedule for a prototype for use on Aquanaut. Finally, our recently announced collaboration with Master Investment Group strengthens our international growth strategy.

This collaboration will support the expansion of our engineering and manufacturing capabilities in the UAE as we build a strong presence in the GCC region. We are currently in the process of setting up our regional business unit and finalizing staffing plans to support this growth. I will now hand the call back to John.

Thank you, Ameen and KJ and Steve and Daniel. We have such a strong team, and there are a lot of thanks to give out. We emerged from 2025 in a great position, primarily due to our employees. We have a great team here, committed to the company and committed to the success of these technologies and services, and so thank you to all of our employees. Thank you to our lenders who have been very strong in their support. We're excited about the new opportunities with the Master Investment Group and moving into international markets.

I'd like to thank our board, and in particular, I'd like to thank all of those that have invested in the company and have faith in what we're going to be able to accomplish with this platform and the potential that we believe that we're going to be able to achieve. We're confident in both our direction and our positioning. We built a stronger company over the past year, both financially, operationally, and technologically. We now have a more scalable platform, a broader customer base, and a clear path to improve revenues. The progress we've made is not theoretical. It's being validated in the field through customer engagement, through expanding opportunities across multiple markets. What excites us most is the alignment between our capabilities and where the market is going. Autonomy is no longer a future concept. It's becoming a requirement.

Customers are demanding greater efficiency, improved data quality, and lower operational cost. At the same time, new regulatory and geopolitical dynamics are opening doors in areas like subsea infrastructure, offshore energy, and defense applications. We are positioned to lead in this environment. Our focus in 2026 is straightforward. Execute, scale, and convert opportunity into revenue. We are prioritizing near-term commercial application, expanding our footprint with existing customers, and extending our software platform across additional systems and partners. We believe this approach is going to allow us to grow efficiently, differentiate meaningfully, and create long-term value. We appreciate your continued support and interest in Nauticus, and we look forward to sharing our progress as this year unfolds. With that, operator, I'd like to open the line up for questions.

At this time, I would like to remind everyone, in order to ask a question, simply press star one on your telephone keypad. Again, that is star one to ask a question. We'll pause for just a moment to compile the Q&A roster. Our first question is from the line of Peter Gastreich with Water Tower Research. Please go ahead.

Thank you. Good morning, and thanks for taking my questions. I also appreciate the detailed updates from your team. You've had a big year with a lot of promising developments, so congratulations on that and wishing you success as you build on that foundation in 2026. Onto my questions. You have described this year, 2026, as the year that Nauticus would shift from survive to thrive. Looking across ROV services, ToolKITT software, Aquanaut deployments, where are the most executable near-term revenue opportunities, and how are you thinking about the growth cadence for this year?

Well, thank you, Peter. There's no question the market's changed a lot since we talked last. The situation in the Middle East has certainly changed how we look at oil and gas, even here in the Gulf. Where do we think that there's immediate opportunities? We've got a lot of proposals out to utilize the ROVs. We have good support from the super majors and continuing to adopt where the Aquanaut is in untethered work and the savings and improvements in efficiency, reduction in cost, reduction in offshore labor for the Aquanaut. We've got strong discussions going on with them. The ROVs, what we're trying to do, and I would like to focus on for the next call, I think you won't get much of a technology update next time. It's just going to be revenue update.

The very question you're asking is we're trying to prioritize winning awards for long-term contracts on the ROVs as opposed to transactional work. The same with the Aquanaut. We're looking at now, and this has been, not a shift, but just a change in market. If the oil and gas industry's adoption and diffusion rate for the Aquanaut is not picking up quickly, we do see tremendous opportunity to deploy to defense. We have moved our efforts over into the defense sector to say that there are potentially long-term opportunities there. We have proposals in for contracts with the government working on projects not unlike what the company depended on 2, 3 years ago. We're putting in active proposals and have one pending at the moment. I hope that we prevail in. Look at us to be stronger on the defense side.

Hopefully, we're announcing awards in the coming quarters. Look at us pursuing longer-term contracts. We talked about the international ones. Some of the international contracts are more attractive in terms of long-term deployment assets as opposed to the transactional work you see in the Gulf of Mexico. I'd say ROVs, big demand. Not really outfitted at the moment to do the ocean mineral-type work with them, but easy enough to do and modification of the Comanches that we have. The Aquanaut, the behaviors, look at us chasing defense opportunities. It's where we're going to go. We have got to secure long-term, profitable contracts to really make the company successful. We need to cut back on some of these 10-day, 5-day, 15-day opportunities and see if we can't seek long-term engagements.

Okay, thank you. My next question is about the MIG. Clearly, that's something that should be transformational for your company. I just want to ask there, what milestones should investors be watching out for this year? Have there been any initial customer introductions made as a result of that, or is the conflict in the Middle East leading to some disruptions from that perspective?

Well, there was a time when I would have been a larger authority on this than today. I don't quite have the 50 staff working for me that keep up on global issues. The Middle East conflict's awfully complicated. My anticipation would be oil prices are likely to remain high even if the Straits of Hormuz open up, Peter. We don't really understand the level of damage yet to the infrastructure and whether or not production can come back from the Middle East. That's going to take some time for an assessment to come in. What that is doing, and I'll get back to Middle East, is we do see a resurgence of wind work up in the Northeast as people begin to look at alternatives. I think that's going to be robust for us as we go forward. We are picking up wind-related maintenance contracts.

Another thing that is happening in the Middle East, and it's happening everywhere now, is port security looks to be a really robust market, and we're investigating behaviors needed for the Aquanaut to be engaged in port security. I think the main thing is there's a big shift going on right now in corporate thinking. What we need is business development leads in the defense sector. We're actively recruiting defense leads for business development for defense. We just got back from the Sea-Air-Space conference in D.C., and I can tell you, we're one of the few with existing, tested, sea trial-worthy technologies rather than artist renditions, which is the predominance of the show, and we're hugely differentiated in having Aquanaut as an underwater drone with manipulators. That is something that is just not at the show.

We're well-positioned technically on that, and I think that's the reason that we gained such a strong relationship with the Master Investment Group. The opportunity in terms of looking at the securitization of infrastructure and evaluating and inspecting there in the Gulf region I think excited the Master Investment Group and us. They are working on introduction, so I'm hoping to get back over, and there's a delay in what we anticipated to happen there and our ability to execute it in the near term as a result of the conflict. I would have said we would have been over in the UAE working on engagements with customers there and demonstrating the Aquanaut and putting more feet on the ground faster. How long that delay lasts, I don't know. The travel there is speculative, and our ability to ramp up is an unknown still.

I think that they are incredibly well-connected. They are very excited about what we're going to do in terms of manufacturing additional units, and it's a hugely exciting opportunity that we just have to remain patient on. We're here for the long term, not for the short term, and this is a tremendous long-term engagement with a great partner, and we're going to continue to pursue working there in Ras al-Khaimah. I think they are extremely excited about what's possible and committed to the company, and we are committed to that region. It's a great firm. It's a great opportunity. They're a great leader for helping us address the issues that are in the Middle East and in the Gulf, and they have a very strong commitment to manufacturing there in UAE, which is driving their strategy in developing the region.

It sounds like when compared to previous expectations that this ocean mineral strategy is really accelerating. Is that correct? It looks materially accelerating versus the past. If that's the case, if you're moving forward with this strategy more quickly, are there any considerations for depth tests or anything like that that will come with that?

For us to be in the ocean minerals, we have to do some modifications to our equipment to increase its depth rating, because a lot of what people want to look at is in the 5,000-5,500-meter range. To be honest, I'm not interested in doing any more testing of equipment. I'm interested in revenue. The whole focus here is on revenue, generating cash flow for the company. While we will pursue ocean minerals, it's going to take a contract with revenue for us to invest in those vehicles. We're not going to do it on spec. As soon as somebody comes to us, we can give them a definitive timeline, and we know exactly what to do and how long it'll take.

If we have funding for that and a contract to support it, then we will pursue it, and we have money available to us to do that. What we need to focus on now is revenue, not on testing and not on greater depth. We have a sufficient depth range to be out securing contracts now, Peter. That's what we need to do.

Okay, great. Thank you. As you think about deploying the $250 million ELOC, what types of uses are you actively evaluating? How should investors think about the pace of that deployment this year?

Well, there's no question, I think it can be advantageous to us on some of the behaviors, sensor packages, et cetera, that may be required for the defense sector. They likely don't require a lot of capital, but it would be capital that we could acquire via the ELOC in order to go after specific contracts with the defense sector. At the moment, that looks so hot now and in the long term with the increased government spending there, that we've got to ramp up on both development internally to match the needs and the missions there, as well as on sales, because I think that's what's going to strengthen us. Look at ELOC at the moment more for the defense sector, with a little bit of capital loan SPAC there, and then also for ocean minerals, if we can secure a long-term contract.

Okay, great. Thanks very much, John. I'll get back in the queue.

Thank you, sir.

Our next question is from the line of Alex Latimore with Northland. Please go ahead.

Hi, guys. Thanks for taking my question today here. Good information all around. I have just a few questions. I'm just going to start with some broad strokes here at the top. You guys have gone over it a bit here, but I just want to see if there's any extra clarification to kind of refine that. What are your biggest customer opportunities in terms of maybe those long-term revenue contracts in 2026 and then in 2027? What are the most visible there?

It's a good question. I appreciate a long-term question because we intend to be in this for the long term. Thank you, Alex. The big opportunities, when you look at offshore oil and gas, it's super majors primarily and large independents and national oil companies. That's really the only market. You don't have a lot of players there. It's a very narrow market, and we have great relationships there. The adoption rate is the biggest issue with those guys. It's making a shift. With high oil prices, they actually slow down in new technologies. They get on a treadmill of just trying to improve production, and so it's harder to get an audience. They keep doing what they've done instead of changing to better techniques. In some ways, that is an inhibitor to the adoption of new technology.

We anticipate it's national oil companies, and we are talking to them and to their prime contractors where we can be of assistance and improve their solutions. Super majors, and it's the very large independents that we're having discussion with on the oil and gas side. Got good discussion with wind energy over those. In fact, there's potential for trying to address long-term contracts in the wind energy side, in maintaining the infrastructure in the Northeast, even in Europe, and so we're discussing those. The defense sector, when you start looking at the prime defense contractors, working with them and for them, it could be very exciting for us.

We just spent the week with all of the big names in the defense sector in the U.S., and we're going to get a chance to go over to the Middle East to visit with the Middle Eastern defense sector as well shortly with introductions from the Master Investment Group. I'd say defense is a place we're going to have to spend some business development time and that there's good long-term contracts. A lot of interest from the geophysical sector on us being able to deploy subsea nodes and recover the data from those subsea nodes. We've got several proposals that we're working on in that sector as well. That's again, longer term activity, but it's long-term contracts, which is much better than being in the transactional business. When you start on those, it can last for a year or more, as opposed to 10 or 12 days.

We're focused on that. Port security is really interesting. We only need one port to tie up an Aquanaut full time, and so we're discussing opportunities in the port sector as well. Look at defense as something where we're going to increase our sales activity. It's great for us mid, long-term 2027, particularly. The oil and gas industry 2027, I think, is going to be even stronger than 2026 in the market, particularly after we understand what the production capacity is remaining in the Gulf and refining. While it's longer term, we have a great discussion going on here. It's reasonably easy for us to outfit the Aquanaut, and I should have mentioned this, Peter's question on the ELOC to do pipeline inspection and cable inspection on the bottom. We've looked at technologies, and they simply bolt onto the Aquanaut.

We have the right vehicle and the right capability. It's just a matter of implementing the sensor package and tracking that's required. We think that's a very straightforward problem to solve. It's not difficult or interesting. It's straightforward. Not trivial, but straightforward.

Okay, great. That's awesome. That's great color. On the defense side, I want to just touch on that opportunity. I know there's a lot of initiatives going around in terms of UUVs. We have the SOUTHCOM doing maritime border monitoring, you have de-mining in the Strait of Hormuz, maybe port surveillance in the UAE as well. The Strait of Taiwan is a big concern recently. I'm wondering, can you work around all those problems? Out of those, or maybe something I'm also not touching on, what is the most visible near-term defense opportunity there?

The most near term is we have a DIU proposal in that we hope we prevail on. If that gets awarded, I think it'll tie up a lot of our resources, be a good, strong contract for us. When you ask about the defense-related side, there are a lot of people pursuing that in different ways. A lot of them have to do more with AUVs that are single propulsion units that do inspection primarily. They've got a little greater speed than what we have, but what we offer is incredibly unique, and I think we're just now getting out to talk to the prime contractors around how to make proposals to their customer, which is the Navy, the Marines, et cetera. We have the ability to do manipulation. This is unprecedented in the AUV market today.

We are the pinnacle there in terms of our experience and what we built. We have a new generation of those coming out. We have payload capacity that can actually be accessed so that we can both recover and deploy. That's also incredibly unique in the sector as well. There's no real competition in that particular space. What you have to do is think about where recovering and deploying can be advantageous and where the use of manipulators can be advantageous. I think we've got a lot of opportunities that are opening up in defense where deployment recovery is critical. Having payload capacity and being a drone, we're not really an AUV. We have the ability to stop, hover, orbit.

You can't deploy something if you're constantly moving, and so you have to have the ability. If you're going to place something with great accuracy, you need the ability that we have to do a bottom lock and hover and orbit and put it in place. I think that's where we're headed. We've got to do a good job explaining this to the defense sector, but we are super unique.

Sweet. Awesome. On the MIG partnership, can you talk about what the sequence of events looks like between that closing and then the first Aquanaut coming off the production line? When do you expect the initial batch of 10 to be ready as well?

Why we're excited about the Master Investment Group and that question is perfect. What we need to do is get the cost per unit down. What we were doing with the Master Investment Group is saying, we don't want to build one, we want to build 10. Because if we can purchase in volume and we have the support to do that, then we can greatly reduce the cost of these units and that improves, A, profitability and opportunities in the market. The other one is we needed to move up in the supply chain queue as well. When you're ordering onesies and twosies, you've got a lead time of 12-18 months. If you're ordering 10, then you can move that lead time to much, much shorter.

We wanted volume pricing, we wanted to get improvement in our position in the queue and greater leverage with the suppliers that we're purchasing from. I think Master Investment Group brings us all of that. They also bring us great relationships in the Gulf. We really thought that that would be beneficial to us as well. How long will it take? I would say the first unit that we would have come off, I would look at an 18-month window for producing the next generation Aquanaut there in the Middle East. I think that's a very realistic timeline. I think the budgets for these will be greatly improved by having multiple units as opposed to trying to do one at a time here in the shop, which ends up very difficult to support when you build one technology at a time.

They tend to vary from unit to unit. What we want to do is build 10 exactly alike so that we can have the parts that are needed to have robust deployment and high reliability in the field.

Great. One final question from me here. This might be for my own curiosity, but I'd just love to hear about it. How hard is it to find an underwater deposit for mining? And then also on your side, is there CapEx to set up an underwater mine or just anything there would be good?

Well, I love underwater mining and I probably am a bit jaded, right? I spent 10 years in the mining industry on the board of directors for one of the largest lithium companies. I've got a lot of experience here. The oil and gas experience is also apropos. Your biggest issue here is identifying a density of resource that makes the mining profitable. We right now are in the exploration phase in ocean minerals. We're not in the production phase in ocean minerals. There's a lot of work to do, to do production, and that production equipment's going to be billion-dollar equipment. It's not going to be a $10 million AUV for you to go down and move the amount of material you'll have to move in order to collect minerals off the sea floor.

On the exploration side, you have a tremendous ability to use an Aquanaut-like vehicle to assess the density of the ore and the mine-ability of the ore and the cost of removing the ore. I think we're a great exploratory technology. ROVs can do a similar thing, but you're going to need specialized equipment in order to mine that. Where the Aquanaut will be apropos is you're going to have to monitor the plumes that are created when you're doing the mining. You're going to have to look at the contamination in the water as a result of mining operations. They're going to need AUVs like Aquanaut in the water to monitor that in order to meet the environmental regulations.

I think we've got a strong presence in the monitoring business, water sampling, assessing the amount of particulates that we're putting into the water column to protect the flora and fauna. Ocean Minerals, still emerging. I think we're at the front end of the tail of that instead of getting up to the big spending in that area. That big spending is going to be the guys that actually do the production equipment and the mining.

Awesome. Thank you, John. To the rest of the team, thank you as well. Best of luck this year, guys. I appreciate it.

Appreciate the questions.

Your next question comes from the line of Robert Mendiola. Please go ahead.

Good morning. Yes, good morning, everyone. Thank you for the update. I just have a few questions regarding the $5.3 million in revenue for 2025, if that's correct. I just want to understand how that revenue was broken down. I'm looking at three buckets here, like the ROV AUV, the Olympic Arm, which I don't think is revenue producing, and then the KITT software. Could you let us understand how the revenue was produced last year?

I can do that, Robert. Predominance of that revenue was ROV related. The revenue, in my opinion, we had a shortfall in revenue, and the shortfall was a direct result of pulling the Aquanaut from the field. We had work where the ROV was allocated to work with the Aquanaut, and so our scheduling and logistics for the ROV revenue were tied to us doing Aquanaut work. When we canceled the Aquanaut work as a result of finding a technical issue with it, then that also hurt our ROV revenue. We're suboptimal on the ROV revenue for 2025, and we're very suboptimal on the Aquanaut revenue in 2025 because we pulled it due to a technical issue, which was easily resolved. You don't want to have really a negative event with an Aquanaut when you're moving into an emerging market.

Rather than taking a risk with it, we pulled it back and checked everything, and sure enough, we fixed the problem. Everything looks good, and we're ready to go with both the Aquanauts. Having that Aquanaut failure hurt us because of the planning. When you pull it and you haven't taken other jobs, it was hard to backfill for them when we had it planned to go out and work with the Aquanaut, and so the ROV was suboptimal. On the manipulators. No revenue associated with the manipulators. We're currently working with Forum Energy Technologies on the next generation. We've got a good royalty agreement with them. I believe they're a great manufacturer and a partner. I don't have an update for you here. I've got an update for you on the next call as to where we are with FET on the manufacture of those manipulators.

We have a new generation of manipulator that is designed specifically for the Aquanaut that we think will be ready here in just a few weeks. We'll have the first one ready so that we can begin trying to test and deploy on Aquanaut so that we can get that capability to the field with the new generation of manipulator. Manipulators are a hot market. If Aquanaut's hugely differentiated, any kind of electric manipulator in maritime is even more differentiated than the Aquanaut at this point.

Okay, what about the KITT software? How much revenue was produced?

Let's see. How to answer that. That's another really good question. I love your questions. They make me have to stop and think, Robert. That's a good and a bad thing. Some of the difficulty there is. It's not difficulty. What we experienced was this. One of the places we thought we had really good opportunity looks like it is an acquisition target. So as a consequence, they kind of slowed down and stopped talking to us. We still see them as a huge opportunity, but got timed out due to mergers and acquisitions of the people we're talking to. The second one that we still are in pursuit of is an international opportunity, and conversations are live, and we continue to think any day we're going to get it done. We've been thinking any day now for a couple of months.

I'm now getting a little jaded on how easy it is to close some of these international opportunities. A lot of excitement over it. We think that the software revenue will emerge this year, and we continue to pursue that. We're excited to have KJ on board. I think she knows exactly where to go. Also talked to another business development leader that we're actively recruiting that believes that they know exactly where to place this in international markets too, other than the ones that we're currently pursuing. I would look to seeing software revenues for certain this year, and hopefully we can reduce the complexity of signing these agreements. The challenge with software is it's not a software sale like you think of where you go to CompuServe or whatever's open now, Micro Center, and buy a copy of Word.

They're making a long-term commitment on their assets to deploy this, and so there's a lot of upfront questions that have to be asked and qualifications for them to do acceptance. On a contract, you're asking them to depend upon you for their operating systems for their equipment. The sales cycle's longer, but these agreements are sticky. After you get it in there, it'll last for, yeah, 5, 6 more years, and you'll have revenue coming in from it for the long term. They're definitely what we need to pursue because it annuitizes our revenue stream.

Sure. I'd like to learn more about that in the next call, John. Thank you. It's safe to say that $5.3 million primarily, overwhelmingly was the ROVs.

Yes, sir.

I think that if I read in that 10-Q, 10-K, that the majority of the revenue came from six customers. Is that accurate?

That's correct. Which was an increase in the number of customers, but we had quite a number of customers, but a lot of them are that transactional work, which is lower margin. We're trying to shift to where I'll take customer concentration if I can get long-term contracts, and I'll live with the fact that that creates risk. I'd just like to see long-term contracts where we've got stability and cash flow.

I agree. Those six customers, was that by way of the SeaTrepid acquisition?

Yes, primarily.

Okay.

They are customers that we also use the Aquanaut with, and so it's both. It's the same customer that's looking at both those solutions. It's one of the reasons we valued SeaTrepid, is they're calling on the same customers we're calling on for Aquanaut and vice versa.

Yes, that makes sense. Okay. My last question on the Aquanaut. How many now are through testing and deployed? I think you mentioned two, John. Is that accurate?

We have two of them that are in the water. The certification testing's done. We are most likely going to go back into the Gulf of Mexico to work in early May.

Okay. Have either one of those Aquanauts have produced revenue to date?

At the moment, they have not.

Okay. Yes.

Daniel, go ahead.

Oh, yeah. In testing, we have some funded testing that we've used for both the Aquanauts in a more controlled environment. We have done revenue-generating projects previously in the Gulf for one of the vehicles. This year, we are having both ready and available to go do revenue-generating projects in 2026.

Yeah, you're trying to avoid the 10- to 15-day testing projects. You want that long-term contract on the Aquanaut.

Unfortunately, Robert, as they are beginning to make that transition from ROVs to an Aquanaut, they almost all want to have that 10 or 15 days to test it. Our real challenge is getting one to do enough 10 or 15-day tests for them to sign a long-term agreement. That's really the goal. After they've done enough of it, they can just go, "We're going to switch over from an ROV to taking an Aquanaut for the full season." That is the principal target of what we're trying to accomplish. They get confident that they can switch out of using a large vessel and an ROV, and they can use an Aquanaut on a sustained basis for the whole season.

Unfortunately, we're still in that new technology adoption cycle on Aquanauts, and so they want to see it for 10 or 15 days, and then they'll commit. They talk about the commitment long-term.

No, I understand. Yes. Okay. The pricing around the Aquanauts, as you mentioned, you're trying to lower the cost with a larger order through MIG versus a $10 million for a single Aquanaut with a lead time of 12-18 months.

Yeah. I think we've got an opportunity to cut the price of an Aquanaut by 50%. If we build them the same and we order multiple, I think we've got a really good opportunity on volume pricing and design changes that'll get the cost of the unit down. Margin on it is going to be excellent. You're looking at the vessel reduction. The other thing we haven't talked about on this call, which is still a great opportunity for us, particularly in the defense sector as well as in oil and gas, is a combination of leak detection, but doing it with vessel-less work so that we actually launch from shore, and we're continuing to work towards that solution because we can completely take the vessel out of the equation, which is a $15,000-$30,000 a day cost for customers.

I think we can capture a large portion of that and then do ourselves and just launch from the shore.

No, I saw that. I think that's pretty awesome. That's unique.

No, it's super unique. There's some cool technology out there too, though, where these guys are beginning to get ranges for some of these small torpedo-like, not drones. They're not competitive with us, but those guys can go 500 miles. That's incredible range out of these really small vehicles with only one or two sensors on board. We're carrying 22 sensors and manipulators and potentially a payload. It's very different markets that we're trying to address.

Yeah. I don't want to get into the weeds, but what's the distance on the current Aquanaut? I think I read 150 mi.

It's about 240 km.

Okay.

If you think about it operating from shore, it can go out 40-50 km and do 100 km worth of work and then come back and still have enough reserve. You don't have to worry about going to fetch it with a vessel. You want to make sure you've got enough reserve that you can recover at any time without any issue. Imagine, this is my best-case scenario. Let's take one of the larger fields off of Louisiana, Bay Marchand. It's about 7-10 km offshore. It's got thousands of wellbores that need to be addressed from a leak perspective. 7 km offshore, we can travel all day long, come back in, download the data at night, and never put a vessel in the water.

Be close enough to go out there and catch it with a Bass Pro Ranger if we needed to and tow it back because it's not very far. It's just a highly efficient operation to conduct for customers, and I think it greatly reduces their cost and improves their quality because they can assess their assets more often at lower cost, reducing their liability.

Okay. Very good. Well, I look forward to further conversation on that and on a future call. Thank you very much. Appreciate the update.

Appreciate that. We probably should make that the last question, operator. We've been running for an hour.

Yes. With no further questions in queue, I will now hand the call back over to CEO John Gibson for closing remarks.

Again, thank you all of you that are on the call. Particular thanks to employees. We've got such a dedicated group, and we are getting things done here. I look forward to a call where all we talk about is revenue. Let's plan on that being our next call. I would say best chance for that is probably our Q2 call because we get back out in the water in May, and we'll have an understanding of where the revenues are coming from and what we're going to be doing. I'm excited to come back to you and focus on revenue and what we're doing in terms of business development and not just be a tech update. With that, thank you very much for joining us, and we look forward to speaking again at the Q1 call.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.