Nauticus Robotics, Inc. Common stock Water Tower Research Virtual Insights Conference

Thanks for joining us today. This is the Water Tower Research Virtual Insights Conference session with Nauticus Robotics. I'm Peter Gastreich, managing director of energy transition and sustainable investing at Water Tower Research. It's always a pleasure to welcome John Gibson, who's the President and Chief Executive Officer of Nauticus Robotics. John, thank you so much for joining us today.

Good morning, Peter. Glad to be here.

Just bear with me, we have a few housekeeping items before we get going here. First off, Nauticus Robotics' safe harbor statements can be found on the investor tab of the company's website, and I'd encourage you to review those. Second, investor questions are very welcome, so please enter those in the chat box, and we'll make sure those are delivered to John and his team. Finally, very important here, if you'd like to request a meeting with the Nauticus management team, you can register that interest through the conference portal. With that, let's get started. John, let's start at the top here. Could you walk us through kind of a high level what Nauticus Robotics does, the markets that you serve, and how you describe the strategy that you're executing now?

Well, for the new people out there, I would tell you that Nauticus is an underwater robotics and autonomy company. We operate today in the offshore energy, offshore wind, and increasingly, we have opportunities in the defense and government markets. We have three important pieces of technology. We have Aquanaut, which is our autonomous subsea vehicle, Nauticus ToolKITT, which is our shared autonomy layer and software, and our electric manipulation technology and the services that go with those, as well as a pair of Comanche ROVs that we're able to do service work as well. Our strategy has evolved from being primarily an R&D company, to becoming a commercial technology company. We can generate revenue today through conventional subsea services, while we're introducing autonomy into those operations, so to begin that change in the industry.

Longer term, we believe the net scalability comes from software licensing, autonomous vehicles, and particularly our manipulation technology. Objective straightforward is we use robotics and autonomy to perform subsea work more efficiently with fewer people and less surface infrastructure.

Peter. Let's- Yep. Let's move on to.

Thanks for that introduction there, John. We'll move on to the Nauticus ToolKITT in the field and, of course, always keeping in mind that for these fireside chats, we will have a few generalist investors who are new to the story. You mentioned that a Comanche running Nauticus ToolKITT went to work in customer operations this year. Your team said it exceeded expectations. That's what was mentioned at your analyst briefing. Could you start us off, again, for those newer investors, what a Comanche actually is and what the software did on that job, and what the customer ultimately gets out of it?

Well, Peter, let's see how I can do on this. A Comanche, really, it's a work-class Remotely Operated Vehicle, ROV. It's the standard type of subsea robot, and it's really not a robot in some ways. It's just a Remotely Operated Vehicle. It's a type of subsea equipment that's traditionally been connected to a vessel by a tether, and it gets its power from the vessel, and it's operated by a human pilot. Think of it as an airplane with a pilot sitting there, just happens to be connected with a 3-kilometer-long cable. They operate everything to do with the vehicle. Now what we've done is we've demonstrated with ToolKITT, the equivalent of an autopilot on an airplane. We can add autonomy to that existing vehicle, just like it was added to an airplane.

On the customer operation, ToolKITT helps the ROV hold position so they are not constantly struggling to keep the vehicle in the current in a specific location. Because it compensates for currents, it navigates between the waypoints going from one position to the next known position. If you are on the sea floor going from one wellhead to the next wellhead, it does that for you automatically.

It still remains under pilot supervision or pilot observation, just like you would on an airplane. That reduces the pilot workload. It makes the vehicle safer and easier. It improves efficiency by as much as 20%. So think of the ToolKITT as really giving them the ability to do 20% more work, fewer ROVs for them to have to purchase, less capital to deploy. Or if they are doing turnkey work, increasing their profitability by completing that turnkey work more quickly. We think that doing this is really allowing us to implement change management, which is taking people from doing things human supervised to robotics. We are doing it through the platform that they have used historically so that they can begin to move towards using Aquanaut and make that transition to full robotics where it is battery operated, no tether, and does not require a human operator.

You have said before that no autonomous underwater drone in the Aquanaut class carries a manipulator today. Why is that autonomous manipulation such a hard problem to solve, and what does it open commercially that inspection work alone does not for you?

Well, if you really think about what we are trying to do 3 kilometers below the surface of the ocean, we are trying to move an autonomous vehicle through the water, and that is difficult by itself, just doing the navigation. Having that vehicle independently interact with subsea infrastructure and actually interacting with the environment it is in is considerably harder. Okay, because you are trying to do this without human. The manipulator has to identify the object, it has to position the vehicle precisely, it has to understand the environment, and then physically perform a task, so it has to be trained on behavior. That is all without a human pilot continuously controlling it. That is the important part. We believe combining autonomy and manipulation, and believe we are a leader in this. This is not like welding in an automobile factory where it does a fixed move every time.

It's having to adapt based on perception and perform behaviors. That is one of the remaining major challenges in subsea robotics, and I think we absolutely are leading in the development of that in the R&D. Commercially, that's important. Inspection allows you to observe something. Manipulation allows you to interact with those things. So having that manipulator sets us apart from all other AUVs, and having a payload capacity as well, so that we have the potential for turning a valve, recovering a black box, or making an adjustment on infrastructures on the sea floor. So it's pretty exciting to see that our capabilities are absolutely differentiated and that we'll be able to move from inspection to intervention as we move forward and put this new generation of manipulators to work on the Aquanaut.

You recently pointed to substantially stronger third quarter activity, with work underway in two offshore markets in the Northeast and also in the Gulf Coast. What's really changed in the demand that you're seeing and, how much of that reflects the diversification that you've been deliberately building over the last year?