Nauticus Robotics, Inc. (KITT) Q4 2025 Earnings Report, Transcript and Summary

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. [Operator Instructions] 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 31, 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 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. And 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 is 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 are 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 to 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 pursuit attractive opportunities as they emerge while remaining disciplined in how we allocate capital. As we enter 2026, we do so with momentum, a clear 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 advance 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 nonrecurring transaction costs related to the SeaTrepid acquisition, which impacted the first half of the year. In the second half, G&A trended towards pre-acquisition levels as we reduced nonessential 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 $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 $7.0 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 reduced leverage. In early 2026, we secured additional convertible debt from existing lenders, combined with continued success 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 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 Strait of Hormuz moves 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. Further, 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 production -- 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 are uniquely situated to achieve many of the goals and challenges that they face. But let's continue. I'd like to turn it over to our sales and operation leads to discuss activities in their departments. First up is Daniel Dehart, our field operations lead for a 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 was 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 Sea Robotics 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 and 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. 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 the new workloads, 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 America 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 Coast 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. Nautica's 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 Nautica's 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 Nautica's 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 Nautica's 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 in-water 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 3 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 to strengthen 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, I mean, 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 '26 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 system 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.

[Operator Instructions] Our first question is from the line of Peter Gastreich with Water Tower Research.

Also to appreciate the detailed updates from your team. So 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. But on to my questions, you have described this year, 2026 as the year that Nauticus would shift from survive to thrive. So 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 has 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. So 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 and the untethered work and the savings and improvements in efficiency and reduction in cost, reduction in offshore labor for the Aquanaut. So we've got strong discussions going on with them. The ROVs, what we're trying to do, and I would like to focus hone for the next call. I think you won't get much of a technology update next time, it's just going to be a 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. And so 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. And so we are putting in active proposals and have one pending at the moment. I hope that we prevail them. And so look at us to be stronger on the defense side. And hopefully, we're announcing awards in the coming quarters. Look at us pursuing longer-term contracts, and we talked about the international and 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 America. And so I'd say ROVs, big demand. I had 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. And so we need to cut back on some of these 10-day, 5-day, 15-day opportunities to see if we can't seek long-term engagements.

Okay. 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? And 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 repository on this than today. I don't have the 50 staff working for me to keep up with global issues. But the Middle East conflict is awfully complicated. My anticipation would be oil prices are likely to remain high even if the Strait 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 it will get -- I'll get back to the Middle East is we do see a resurgence of wind work up in the Northeast as people begin to look at alternatives. And so I think that's going to be robust for us as we go forward. We are picking up wind-related maintenance contracts. The other 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 not to be engaged in port security. And 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. And so we're actively recruiting defense leads for business development for defense. We just got back from the Sea Aerospace Conference in D.C. And I can tell you, we're one of the few 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 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. Travel there speculative and our ability to ramp up is just -- is an unknown still, but 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. But 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.

And it sounds like when compared to previous expectations that this ocean mineral strategy is really accelerating. Is that correct? I mean, it looks like materially accelerating versus the past. And if that's the case that you're moving forward with the 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 to 5,500 meter range. And so to be honest, I'm not interested in doing any more testing of equipment. I'm interested in revenue. And so the whole focus here is on revenue generating cash flow for the company. And so 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. And so as soon as somebody comes to us, we can give them a definitive time line, and we know exactly what to do and how long it will take. And 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. But we need to see -- 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. And as you think about deploying the ELOC, $250 million ELOC, what types of uses are you actively evaluating? And 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. And so it's -- 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. And so 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. So look at ELOC at the moment more for the defense sector with a little bit of capital on spec there and then also for ocean minerals, if we can secure a long-term contract.

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

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. But 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 the long-term question because we intend to be in this for the long term. So thank you, Alex. The big opportunities, I mean, 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, we have great relationships there. The adoption rate is the biggest issue with those guys. It's making a shift. And 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. So in some ways, that is an inhibitor to the adoption of new technology. But anticipate it's national oil companies, and we are talking to them and to their prime contractors where we can be an assistant 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. We got good discussion with the wind energy over those. In fact, there's potential for trying to address long-term contracts in the wind energy side and maintaining the infrastructure in the Northeast, even in Europe. And so we're discussing those. But 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. And so 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 and visit with the Middle Eastern defense sectors 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. And so 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. But look at defense, it's something where we're going to increase our sales activity. It's great for us long term, '27, particularly. The oil and gas industry, '27, I think, is going to be even stronger than '26 in the market, particularly after we understand what the production capacity is remaining in the Gulf and refining. And 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 for 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 on to 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. And 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 the opportunity. I know there's a lot of initiatives going around in terms of UUVs. We have the CENTCOM doing maritime border monitoring, you have 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? And then 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, yes, we have a DIU proposal in that we hope we prevail on. And if that gets awarded, it will tie up a lot of our resources to be a good, strong contract for us. But 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. And 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. And 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 to actually -- 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. So I think that's where we're headed. And we've got to do a good job explaining this to the defense sector, but we are super unique.

Awesome. And then 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? And then when do you expect the initial batch of 10 to be ready as well?

So while 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. And 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. And 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 to 18 months. If you're ordering 10, then you can move that lead time to much, much shorter. So we wanted to get 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 and we really thought that would be beneficial to us as well. But 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 time line. And 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 in exactly alike so that we can have the parts that are needed to have robust deployment and high reliability in the field.

Great. Great. One final question for me here. This might be 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'm both -- I love underwater mining. And I'm probably a bit jaded, right? I spent 10 years in the mining industry on the Board of Directors, one of the largest lithium companies. So I've got a lot of experience here. And the oil and gas experience is also [indiscernible]. Your biggest issue here is identifying a density of resource that makes the mining profitable. And 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 is going to be $1 billion 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 seafloor. So on the exploration side, you have a tremendous ability to use an Aquanaut like vehicle to assess the density of the ore and the mineability of the ore and the cost of removing the ore. So 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. And then where the Aquanaut will be [indiscernible] 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. So 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. So it's ocean minerals still emerging. I think it's a great -- we're at the front end of the tail of that instead of getting up to the big spending in that area. And that big spending is going to be the guys that actually do the production equipment and the mining.

Your next question comes from the line of Robert [indiscernible].

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 is broken down. I'm looking at 3 buckets here, like the ROV, AUV, the Olympic Arm, which I don't think is revenue producing and then the KITT software. So 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, and we had work where the ROV was allocated to work with the Aquanaut. And so we had -- 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. So 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, but you don't want to have really a negative event with an Aquanaut when you're moving into an emerging market. And so 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 Aquanaut. But 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 a plan to go out and work with the Aquanaut. And so the ROV was suboptimal. On the manipulators, no revenue associated with manipulators. We're currently working with Forum Energy Technology 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. And then 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. And manipulators are a hot market. Aquanaut is hugely differentiated. Any kind of electric manipulator in maritime is even more differentiated than the Aquanaut at this point.

Okay. And then what about the KITT software? How much revenue was produced?

Let's see how to answer that. It's another really good question. I love your questions that make me have to stop and think, Robert. That's a good and bad thing. So some of the difficulty there is not difficulty. It's what we experienced was this. One of the places we thought we had really good opportunity looks like it is an acquisition target. And so as a consequence, they kind of slowed down and stopped talking to us. And 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. But we've been thinking any day now for a couple of months. And so I'm now getting a little jaded on how easy it is to close some of these international opportunities. But a lot of excitement over it. And 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. I also talk 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. So I would look to seeing software revenues for certain this year. And hopefully, we can reduce the complexity of signing these agreements. But the challenge with software is it's not a software sale like you think of where you go to CompuServe or whatever is 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. So the sales cycle is longer, but these agreements are sticky, sticky. After you get it in there, it will last for 5, 6 more years and you'll have revenue coming in from it for the long term. So they're definitely what we need to pursue because it annuitizes our revenue stream.

Sure. And I'd like to learn more about that in the next call, John. So it's safe to say that $5.3 million primarily, I mean, overwhelmingly was the ROVs.

Yes, sir.

And I think that if I read in the 10-Q -- 10-K that the majority of the revenue came from 6 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 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 in cash flow.

I agree. And so those 6 customers, was that by way of the SeaTrepid acquisition?

Yes, primarily. I mean 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. Then my last question on the Aquanaut. How many now are through testing and deployed? I think you mentioned 2, John. Is that?

We have 2 of them that are in the water and the certification testing is done. We are most likely going to go back into the Gulf of America on work in early night.

Okay. Do have either one of those Aquanauts have produced revenue to date? I know [indiscernible].

Daniel, go ahead.

Yes. In testing, we have some funded testing on -- that we've used for both the Aquanaut in a more controlled environment. And we have done revenue-generating projects previously in the Gulf for one of the vehicles. But this year, we are having both ready and available to go to revenue-generating projects in 2026.

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

And unfortunately, Robert, as they are beginning to make that transition from ROVs to an Aquanaut, they almost all will have that 10 or 15 days to test it. And so our real challenge is getting one to do enough 10- or 15-day test for them to sign a long-term agreement. And 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. And 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. But unfortunately, we're still in a new technology adoption cycle on Aquanaut 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. And then the pricing around the Aquanaut, I mean, as you mentioned, you're trying to lower the cost with a larger order through MIG versus like a $10 million for a single Aquanaut with a lead time of 12 to 18 months?

Yes. 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 will get the cost of the unit down. Margin on it is going to be excellent. So it's -- 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 to $30,000 a day cost for customers. And I think we can capture a large portion of that and then to ourselves and launch from the shore.

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

No, it's super unique. I mean it's -- but 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 -- they're not competitive with us. But I mean, those guys can go 500 miles, right? I mean that's incredible range out of these really small vehicles with only 1 or 2 sensors on board. We're carrying 22 sensors and manipulators and potentially a payload. So it's very different markets that we're trying to address.

Yes. What I don't want to get into the weeds, but what's the distance on the current Aquanaut? I think I read it 150, 150 miles.

It's -- we actually -- it's about 240 kilometers. So if you think about it operating from shore, it can go out 40, 50 kilometers and do 100 kilometers worth of work and then come back and still have enough reserve. You don't have to worry about going to patch it with the vessel. And so you want to make sure you've got enough reserve that you can recover at any time without any issue. So imagine this is my best case scenario. Let's take one of the larger fields off of Louisiana, Bay Marchand. It's about 7 to 10 kilometers offshore. It's got thousands of wellbores that need to be addressed from a leak perspective. 7 kilometers offshore, we can travel all day long, come back in, download the data at night and never put a vessel in the water and be close enough to go out there and catch it with a [indiscernible] Ranger if we needed to and tow it back because it's not very far. So 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. Well, I look forward to further conversation on that on a future call.

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

Yes. And 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. I mean 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 revenue. And so let's plan on that being our next call. I would say the best chance for that is probably our Q2 call because that 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. And so 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 the 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.