Nauticus Robotics (KITT): New CRO on Autonomy, Manipulator Tech, and the Commercial Path Forward

In this episode of the WTR Small Cap Spotlight podcast, Brian Allen, Chief Revenue Officer of Nauticus Robotics, Inc. (Nasdaq: KITT), joins WTR's Tim Gerdeman (Vice Chair, Co-Founder & Chief Marketing Officer) and Peter Gastreich (Managing Director - Energy Transition and Sustainable Investing). 

Brian shared his nearly two decades in underwater robotics and what drew him to Nauticus, the company's commercially ready Nauticus ToolKITT autonomy system and licensing potential, its industry-leading autonomous manipulator technology enabling millimeter-precision subsea tasks, the Forum Energy Technologies partnership validating commercial demand, upcoming Aquanaut sales and European expansion, and a growing defense and wide-area ocean sensing opportunity.

Transcript

SPEAKER_01 0:01

Welcome to the WTR Small Cap Spotlight Podcast. I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research. Today I'm speaking with Brian Allen, Chief Revenue Officer of Nauticus Robotics, NASDAQ Ticker Symbol, KITT. Nauticus Robotics is the only peer play autonomous underwater drone or AUD company we're aware of, delivering a broad range of sub-sea solutions through advanced robotics and specialized software. The company's systems execute complex underwater tasks autonomously, improving safety, efficiency, and carbon intensity for offshore customers. Also joining is my WTR equity research colleague, Peter Gastrite. Good morning, gentlemen, and thank you for joining me today. Brian, just to kick things off, please tell our listeners about your professional background and what led you to the role of CRO at Nauticus Robotics, and feel free to add a summary overview about the company's business model if you like.

SPEAKER_02 1:06

Yeah, sure thing. So I've been in the underwater uh robotics space for well nearly two decades now, just a little shy of uh 20 years. And um in that time I've been lucky enough to see it from pretty much every angle, whether that's um I guess uh salvage at sea when we found 80 tons of silver, or whether it was building oil rigs or wind farms or um basically laying cables, etc., or or fixing um um IMR type items underwater. So almost every angle of underwater robotics. And um started as a trainee 20 years ago and was lucky enough to make it all the way up to uh the fast track to senior leadership at a particular company, and then I founded my own and grew that from essentially nothing to a sales pipeline that was nearly $840 million with a 40% close rate. So not only have I kind of been in the industry for quite some time, I've also seen quite significant growth and what's possible in uh in the sector when you have niche technologies that are really quite useful and different from what everybody else has. And when I was looking for my next opportunity, I didn't want to join a normal company. I needed a company that was at the forefront of autonomy, that had some kind of secret source, and I spent a long time looking for it whilst also coaching other CEOs. And then Nauticus knocked on the door, and I did some due diligence in the company for about six months, and they have some incredible technology that is literally about to be launched. So that's what drew me to the business. It's uh just the opportunity and the timing at the same time.

SPEAKER_01 2:35

Well, I'm actually genuinely excited to actually hear this conversation with you and Peter today. The AUD space is starting to explode. I think investor awareness is on the increase by the day. And so uh this should be very exciting. So I'll turn it over to Peter.

SPEAKER_00 2:49

Hey, thanks, Tim. So hi Brian. So you know, before Nauticus, uh you built and scaled your own uh you know subsidy robotics company, so you have a very you know deep understanding of this landscape. Um, you know, when you were doing your you know technical diligence uh on Nauticus, what did you find about the technology in the team that really you know convinced you that this was the right move?

SPEAKER_02 3:10

So the interesting thing is like Nauticus was on my watch list for years. So I knew of the business. Um what I didn't know is how close they were in terms of um having a commercial autonomy system that was ready for market. Um, what they're doing, or what we're doing now, is very hard. Um, making drones do things underwater, actually follow workflows rather than just follow simple directions is an incredibly complex task. So, firstly, Nauticus has the most commercially ready autonomy system on the market, i.e., it works out of the box, whereas everybody else you need to have essentially developers keeping things running. And the other thing which drew me to them is they have an incredible piece of technology that's still at prototype stage, um not quite ready to come to market, and that'd be about another two years away. And they are the furthest forward in the industry at autonomous manipulation control, which is even harder to solve than the autonomy problem. So once it's finished and it's moved from prototype to commercial, they will essentially be the only company in the industry with autonomous underwater manipulator control, which opens up a much, much larger addressable market in terms of almost the entire construction field.

SPEAKER_00 4:28

And from what I've seen, uh, you know, software licensing seems to be something that you're you know quite excited about. Um, you know, for folks who aren't you know familiar with the product, could you walk us through what Nauticus Toolkit actually does, uh, you know, where it's already out there commercially and why you think of it as uh you know one of the fastest paths to revenue for the company?

SPEAKER_02 4:48

Okay, so Nauticus Toolkit is an autonomy system that enables uh almost any underwater vehicle, or indeed a non-underwater vehicle, because we've had it on track things and land things as well. Um, underwater is really just the first domain that we're tackling, to follow command and direction and set mission plans and to be able to update those mission plans on the fly. Um, most people think, well, that's not a problem, but underwater communication is incredibly difficult. You have to communicate through very, very low bandwidth uh acoustic modems, uh literally 9k. So it's not like megabits of data. And so in those low bandwidths, it's actually quite difficult to send useful signals. So not only can Nauticus Toolkit control how a vehicle behaves and its workflow underwater, but it can also update the mission live at the same time through the command and control system, which is unique, and also send back images of what it's looking at, which is also unique for tetherless vehicles. But the great thing with Nauticus Toolkit is it also works on tethered vehicles, and so the licensing play that we're taking is essentially using it for ourselves on our own autonomy, and also selling it as a licensable system that enables people to do faster work on their own underwater vehicles. So I'll give you an example, uh, we were doing some simple search survey lines, and we were able to, the vehicles were able to move 30% faster with greater accuracy and greater data capture, greater higher quality of data capture at the same time. And the way it's been developed going forward with um sort of piloting assist basically opens up way more of the kind of um the control market, the actual survey market of underwater drones. It kind of makes I hate to um basically push other people's products, but I don't know if anyone, if you know how easy it is to fly an aerial drone, it's like left, right, up, down, and it and you when you take your fingers off the controls, it stops and it stays there no matter what the wind's doing up to a certain point. Underwater vehicles don't do that unless they're running Nautica's toolkit. It just makes it it's like pressing the easy button when you're flying an underwater vehicle. And nobody else has a product that does that.

SPEAKER_00 7:01

And you've also uh uh previously you were calling out the manipulator technology as um you know a big differentiator, you know, uh for the company. Um, how does what Nauticus uh is doing compared to the rest of the market? Um, you know, what kind of commercial opportunity does that open up? You know, whether it's inspection, you know, intervention, repair, uh, or even the data that you're uh collecting along the way?

SPEAKER_02 7:23

So the rest of the market at best uses um kind of like servo positions to actually look at where the vehicle, uh where the manipulator arms are. And the problem is when you have to manipulate or use objects underwater, you need millimeter precision. So if you're a centimeter or two out, you just don't pick up the thing you were trying to pick up. It's just not where you it's not where you're supposed to be. So the difference with what we're doing at Nauticus is we're using vision systems to basically create the pose estimation. So we're actually looking at the object in 3D space and calculating, sorry, looking at the manipulator arm in 3D space and the object and calculating precisely the trajectory that the arm needs to move to go and pick that object up. And it has millimeter precision. So that's kind of the differentiator. It's incredibly hard to do because you have to combine a visual sort of slam system with fine motor control. And in terms of what the rest of the market's doing, they don't have visual slam systems. And they're still doing it the old way, which is um failing. And you you can't do manipulator control underwater unless you bring in visual slam systems. And that's the hard part because that means you have to have software engineers, you've got to keep them all happy, you've got to basically get them building a very, very complex system and having that working at the same time as your vehicles bobbing left and right in the current and still controlling the object and still controlling manipulator is really hard.

SPEAKER_00 8:48

Well, that's that's you know some some great perspective there. And you've talked about uh wanting some you know early uh commercial wins uh to build confidence in the markets. Um so what does that near-term pipeline kind of uh look like for the company right now? And and how are you thinking about turning that into actual uh book revenue over the next uh few quarters or over whatever time frame?

SPEAKER_02 9:10

Yeah. So people think sales is a case of phoning up people and asking them to buy stuff. And sales isn't isn't well sales in part is like that, but it's about building systems that make sales convert on their own. So in the near term, the first thing we had to concentrate on was building out the collateral uh that we have for each of the products and services that we have. So first few months have been spent doing that, building out the collateral. So we're talking about debts, brochures, new websites, um, all of the things that a company with a sales system you'd expect them to have. And because all these products are new, they've all got to be written and they've all got to be polished at the same time. So after that, you're then ready to approach the market, and that's the position that we're in right now. Now, in terms of the pipeline, in the near term, the nearest term, uh we are looking at Nauticus Toolkit enabled ROV services to our existing clients. Uh that's over sort of the near quarters. Uh, early quarters next year is when we're starting to look at Nauticus Toolkit licensed systems to uh other sub-sea services businesses. And at the same time, we're looking to build out uh a European offering which can't really talk about it quite yet, because that will be launching in the next month or two, and this will be taking the business solidly into Europe with some extremely strong both services and technical offerings into the European and Middle East market at the same time. So I can't name individual contracts that wouldn't be right in it for a public company, but uh yeah, I'm seeing an extremely strong pipeline for 2027 and thereafter very strong multiples of growth.

SPEAKER_00 10:55

Okay, that sounds really exciting. So, you know, just turning over to the collaboration with the Forum Energy Technologies on the Olympic ARM platform. That's something which has been you know coming up as an early you know proof point for the licensing model that you're you know building toward. Um, what does the that collaboration tell us about the path forward commercially uh and how repeatable is that model, say, you know, elsewhere in the business?

SPEAKER_02 11:20

So um what's the what's the best way of describing this? So we've had approaches for the Olympic arm for quite some time, um, like for years essentially, but we've had to perfect a product before releasing it to market. And also the electric manipulator arm market is actually a relatively nascent one. Um, but we found one of the industry's largest sub-sea robotics firms, like Forum Energy Technology, was super interested in essentially licensing our technology so that they can deliver those arms to their customers. Now, in terms of the signal that that sends, you're looking at one of the big three sub-sea robotics manufacturers has come to a much, much smaller Nasdaq firm and is essentially essentially very excited about using our technology on its vehicles and to sell our technology to its customers. So that shows that there's confidence in the technology that the company actually builds. Not just it's not just ourselves basically saying that it's good, we've now got formal proof from X outside the business that the manipulator arms that we're delivering are actually very, very strong and wanted by the market. So we're building that into our pipeline from 2027. Uh the licensing model is by everyone knows how that works. It's essentially it's a very, very high profit margin because the technology is licensed, there's no sort of real cost of goods sold, etc., because someone else is actually making those, so the design that we've built. Now, how that model repeats is relatively similar with the rest of the technology that we've built. Same for Nautica's Toolkit, and similarly for the Aquinaut system, the full vehicle, which we're ready to come to market. Uh, well, I'll be taking it to market, and the rest of the team, we're looking to start our sales processes on that imminently. So we're expecting to see the first Aquinaut sales coming through in 2027 as well. So it shows that the technology is strong, it shows the market is interested in stuff that we're that we're actually creating, and it shows like essentially the business is at that point where it's kind of like a coiled spring ready to launch. That's uh it's one of the reasons why I wanted to join. It's a super exciting time for the business.

SPEAKER_00 13:29

And uh and and looking out, uh, you know, you have international expansion and also the growing interest from defense, which which look like a big part of the longer term story, you know, for the company. Um, how do those pieces kind of come together for you? Uh, you know, and what role do they play in terms of diversifying and kind of smoothing out the revenue over time?

SPEAKER_02 13:50

Well, I'm gonna well you mentioned defense quite quickly. I don't know if you've read our press release this morning about the the wide area ocean sensing system that we are uh looking to bring to market over the next uh year or so. We've got a a number of opportunities there. If you think about um how wide area sensing can work underwater, um so a lot of people can't really still see the the implications of this, but you're able to build out a large sensing system using an aquanaut uh vehicle that is able to detect uh both marine life, shipping, anything in the water, anything interacting with things nearby over pretty large areas, which is a particular of particular relevance to defense and of particular relevance to, for instance, uh defense at the moment, particularly in the Middle East, if you're looking at controlling waterways. And we are looking to bring something to market which actually really concentrates in that space. Um so yeah, didn't quite answer your question, but on the defense side, it's actually quite exciting. Um so let's pick up on on the rest of it.

unknown 14:58

Okay.

SPEAKER_01 15:00

Peter, I'm just gonna chime in on this one because this is something near and dear to my my own heart as a military junkie. This is really relevant for investors listening to this podcast if they haven't seen the technology the US deployed this week in Iran uh with uh with autonomous vehicles. It's really eye-opening, so very, very timely conversation.

SPEAKER_02 15:19

Yeah, so so take that uh that news about Iran and look at our press release this morning about seabed sensing and tie the two together, and all of a sudden you have the ability to not only control waterways, but understand exactly what's happening in those waterways at the same time.

SPEAKER_00 15:35

Okay, great, thank you. That's fascinating. So uh, you know, part of your job uh is building out uh sales and marketing at Nautikus uh essentially from an early stage. Uh and you've also structured some of your own compensation to you know tie your interests directly to the company's performance. Um, how are you approaching that build-out and what should investors be measuring you on uh over the next few quarters?

SPEAKER_02 15:59

So um the hard thing is the things that I get measured on are things like pipeline build. And we can't publish our pipeline numbers. So we wouldn't quite be right. So John Gibson gets to measure my uh my performance quite well, as does the board. So the only thing that an investor can really measure um uh me by personally is one that the sentiment of the things that I say on on public calls, and the second thing is going is the news uh launches and the press releases that we make as contracts are won and brought in. So I would essentially, if you're looking at how to measure me as an investor, measure me by the quality of the press releases that you'll you'll be hearing about over the next few months, because you'll you'll be I I I can't say what's coming as a as a public business, but you should see a large uptick in the news that's coming out from the company because of all the exciting things that we've actually uh that we're starting, launching, or about to announce over the next two quarters.

SPEAKER_00 16:58

Okay, great. Well, Brian, thanks so much for your time today. These perspectives have been uh you know fantastic, and we'll be following you uh and uh Mr. Gibson and the company you know very closely here, Watertower Research. But before I pass back over to Tim uh to wrap up the prod podcast, is there anything that we you know missed today or are there any sort of uh you know closing comments you'd like to uh leave for our investors?

SPEAKER_02 17:21

Um yeah, I I guess there's one really. And uh I guess it and it's relatively related to where the business is right now. Um, because I'm a relatively new employee, and one of the reasons why I joined is because of the diligence that I did on the firm and the position that I found it in in the marketplace. And for me, uh looking at a share-oriented compensation package, it was the perfect time to join. Um I can't say much more than that to other shareholders, but I would invite them to do their own due diligence on the business, find out as much as they can about um where the business is and what we're coming to market with, and then make their own decisions. Uh, and hopefully people would decide the same way that I did when they look at the opportunity. Okay, great.

SPEAKER_00 18:06

Thank you very much. Uh Tim, over to you.

SPEAKER_01 18:09

Thanks, Peter. Brian, thanks. That was a fascinating discussion, a really hot topic, uh, real time. So it was great catching up with you. It's a guy who scuba dives every other week off the coast of Florida. You captured my imagination very early this morning. So thanks again for joining us. You are a trooper for uh getting off an international flight to join us.

SPEAKER_02 18:27

Uh thanks very much, Tim, and uh thanks for taking the opportunity to talk.

SPEAKER_01 18:32

Thank you for listening and don't forget to subscribe as well as visiting www.research.com to stage on the company. We will see you next time. Fundamentally, special producer podcasts, crystallized,