Good day, welcome to the Nauticus Robotics Earnings Conference Call for the first quarter ended March 31, 2023. My name is Danae, and I will be your operator today. Today's press release, including the financial tables, are available at the investor relations section of the company's website at www.nauticusrobotics.com. The company also plans to file its Form 10-Q with the SEC later today. Joining us on today's call are Nauticus founder and CEO, Nic Radford, and its CFO, Rangan Padmanabhan. Following their remarks, we will open the call for questions. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward-looking statements under securities law and involve a number of risks and uncertainties.
As a result, we caution you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to the forward-looking statements, please see the disclosures in the company's earnings release and public filings made with the SEC. Nauticus disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. Nauticus will also discuss non-GAAP financial metrics and encourages you to read disclosures and the reconciliation tables to applicable GAAP measures in the earnings release carefully as you consider these metrics.
We refer you to its filings with the SEC for detailed disclosures and descriptions of the business, as well as uncertainties and other variable circumstances, including, but not limited to, risks and uncertainties identified under the caption Risk Factors in the company's filings. You may get Nauticus SEC filings for free by visiting the SEC website at www.sec.gov. I would also like to remind everyone that this call is being recorded and will be made available for replay via a link available in the investor relations section of the Nauticus website. I will turn the call over to Nauticus Founder and CEO, Nic Radford. Please go ahead, sir.
Thank you, hello, everyone, and welcome to our 1st quarter 2023 earnings call. The past quarter was a significant one for the company, representing a major inflection point in Nauticus history as we officially began the commissioning exercises for the next generation of our commercial subsea robot, Aquanaut. This puts us one step closer to getting the Aquanauts in the field and to start doing work for our customers. We've also continued to progress the assembly of our 2nd and 3rd units and expect to have them in the water later this year. We've been working towards this goal for over the years, establishing manufacturing partners, as well as undergoing testing trials, where we've been able to refine our technology to offer solutions that will transform the way industries operate in the blue economy.
Customers from all over the world have expressed significant interest in working with our services and robots. As these opportunities materialize, we will have significant revenue upside. In addition, we've also continued to make progress on the government side of our business. Starting with our contract with Leidos, we were awarded a $2.7 million contract extension for activities related to an Aquanaut-derived subsea platform. This extension allows us to further progress toward meaningful future revenue upside pending the successful result of the program. As previously announced, our proprietary software platform ToolKITT was a key driver of two DIU contract wins, one for A2RV and the other one for AEMRV. In our work to support the U.S. Navy, Nauticus completed a live offshore demonstration of our AI-enhanced mine countermeasure vehicle, which led to the company's progression into the next phase of the DIU's AEMRV program.
In this, we're working to transform an existing mine countermeasures platform into an untethered autonomous drone. This allows the vehicle to remotely identify and neutralize subsea mines and other targets of interest while taking U.S. Navy EOD divers out of harm's way. As for A2RV, we successfully completed the first phase and have moved on to the next one. In this program, we are tasked to deliver another autonomous mine countermeasure robot known as Terranaut for use in both the surf zone and the beach areas to support the U.S. Marine Corps during amphibious operations. Our ongoing collaborations with DIU and Leidos demonstrate the substantial value of our comprehensive solutions, which will enable unprecedented autonomous capabilities for our government customers. The success of our government partnerships serves as validation as we look forward to providing future updates on these projects as they become publicly available.
With that, I will now turn the call over to Rangan Padmanabhan to discuss our financials. Rangan.
Thank you, Nic, hello, everyone. For the first quarter of 2023, we generated revenue of $2.8 million compared to $2.2 million in the year ago comparable period. The 26% increase in revenue is primarily due to one new contract, as well as the continuation and increased performance on existing contracts from the prior year. Our net loss for the quarter was $0.26 per share, compared to a net loss of $0.36 per share in the prior year period.
Excluding non-recurring items, our adjusted net loss per share for the quarter was $0.17 compared to $0.36 in the prior year period. Our adjusted net loss excludes a $2.2 million non-cash charge for the change in the fair value of warrant liability associated with our convertible debt and a $1.2 million non-cash charge associated with the preliminary sales tax assessment related to prior years. We currently expect to significantly mitigate this assessment. Moving on to our balance sheet and capitalization. As of quarter end, we had $12.7 million of cash and cash equivalents, including our restricted CD. Our net working capital position at the end of the quarter was $25.5 million. As of March 31, 2023, we had approximately $47.3 million shares outstanding.
As we've mentioned before, this includes $7.5 million shares in an escrow account that won't vest unless the stock price reaches at least $15 a share. Per GAAP rules, these shares are not included in our weighted average number of shares used to calculate earnings per share. While Q1 revenue exceeded our forecast, some of this was due to revenue on our government contracts being pulled forward from Q2. As a result, we're expecting revenue to dip in Q2 before bouncing back to a more normal range in Q3. That completes my financial summary. Now I'll turn the call back to Nic.
Thanks, Rangan. Looking ahead, we're as optimistic as ever for the future of Nauticus. Over the past several months, we've achieved significant milestones for our government contracts and moved one step closer to generating commercial service revenue from the Nauticus fleet. Our countless hours of hard work over the years are starting to pay off. We're approaching a pivitoal moment in Nauticus's history. Our government contracts continue to move forward. We're getting closer to the stage where we could see a step function increase in revenue. As we move through the commissioning and pilot contracts with our potential commercial customers, we expect to be able to deliver strong revenue growth. Remember, each Nauticus fleet pair has the potential to generate between $30,000 and $50,000 a day of revenue, or roughly $6 million-$10 million annually, assuming industry average utilization rates.
Given this, it's hard for us not to be excited about the potential for Nauticus right now. In closing, I'd like to thank the people behind the scenes who have made this all possible. The employees of Nauticus, their unwavering commitment and passion towards our mission has been an instrumental part of the company's success, and I couldn't be more grateful for their contribution. I'd also like to thank our capital partners and shareholders for their continued belief in Nauticus as well as we embark on the next stage of our business. This completes our prepared remarks, and we're now ready to take your questions. Operator?
Thank you, sir. Ladies and gentlemen, we will now be conducting a question and answer session . The first question we have is from Craig Irwin from ROTH MKM . Please go ahead.
Good evening, thank you for taking my questions. Nic, with the splash down of the unit just a couple weeks ago, and I think you've got another one coming very soon, you know, can you talk about the timeline to revenue production off these units? Is there a shakedown phase where, you know, you need to have these units in the water, and operating to calibrate them and demonstrate them before they start actually generating revenue and gross margin for the P&L? Is this something that could come on fairly quickly? What sort of utilization would you expect on these units, given that, you know, you've got lots of customers that are looking for them right now?
Hey, Craig, it's awesome to hear from you, love the question. We were equally, everybody here was just super excited when we first hit the splash down with the first unit getting in the water. Naturally we start and progress it through, hey, you know, does it leak? All the way to, you know, is everything working well? There is a period of commissioning where the robot hits the water and goes through progressive stages where we trial it out. That's all internal, just making sure that everything is as expected. We have already. You know, our job is essentially to shorten the amount of time between it comes off the assembly line and gets underway.
As we say, it's always hard to order an Uber before it's off the assembly line. We've done a lot of work, paving and priming the pump, so to speak, on which customers are going to accept that into not only a pilot program, but then also into service days. We've got a great visibility into where these units are going. We're exceptionally confident that by the year's end and, you know, I'll call it, you know, late Q3, early Q4, that they will be the first one will be in a revenue-generating capacity. The following year, we have visibility into near full utilization for the unit.
That's very good news. Thank you. Second question I wanted to ask is, this contract expansion with Leidos. It's Nice to see existing customers coming back for more. Can you maybe just give us a little color on how this came together and, you know, is this kind of contract expansion something that can continue to happen on existing contracts? You know, does it require more equipment or is this man-hours? You know, any other color that you can give us to understand how this impacts the investment?
Sure. We've had a good relationship over the years with this particular performer. Yes, we're working with Leidos and have for quite some time, and I think we disclosed what the overall value and where that's heading. Yes, it's good news when it expands and I also feel like it's probably we'll probably have more of that to come. So far so good on what we've been doing. Like I mentioned, in the call, we have a derivative platform that we've been investigating the usage of, and it's connected to a particular customer set and things are going well.
Excellent. Excellent. That's really good to hear. Last question, if I may. The capital needed for the next couple splashdowns, right? This is gonna be, you know, on top of mind for investors. You know, you had a very healthy working capital position, and obviously, your cash is in a strong position exiting the quarter. Can you maybe update us on what the cash payments would be at the time of splashdown? I know a lot of the costs have already been covered, but can you maybe just sketch that out for us a little bit so we can understand the necessity of this working capital flowing for you?
Sure. It's something that we're always evaluating. You know, you and I have kicked it around in the past on the best way to handle this. You know, we're always evaluating what expanding looks like and the best way to finance that. It's something that's always top of mind. Right now, as we're entering the tail end of our production of these units, a lot of the costs, as you mentioned, have been incurred. We're gonna enjoy a little bit of that trailing off. Then as those units go from leaving the nest and then getting out into the wild and under contract, right, we'll see a Nice handoff between us having to qualify them and then getting them into revenue.
You know, as we look future, and obviously Nauticus is bigger than the three units we're producing, and we've got ambition to go way beyond that. I feel like we're looking at a couple different options on how that expansion could be financed. I think, you know, it's gonna come off the back of showing good success in what we already have.
Excellent. Well, thank you. I'm sure there's lots of other questions from the other analysts. I'll hop back in the queue and look forward to catching up with you on the call back. Thanks.
Thanks, Craig.
Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. I'll pause a moment to see if we have any further questions. We have a question from Brian Johnson. Apologies. We have a follow-up question from Craig Irwin.
Excellent. Thank you for taking my questions. Wanted to just talk a little bit about the sales pipeline, right? You have a number of customers that have shown significant interest in the equipment, some of the automation technology you bring to subsea and some of the commuNications potential you have for possible integration in other platforms. Can you maybe update us on the breadth of opportunities that you're looking at there, and, you know, how this would potentially come together commercially for Nauticus?
Sure. Our product offerings, stratified in a couple different ways. In our government-centered markets, that offering looks a little bit more like a sale, and in the commercial side, as we've mentioned in the past, we have a Robotics as a Service where we own and operate our own devices that we are producing. Since we're in the beginning stages of the expansion of that fleet, you know, as we've mentioned, we think we'll start generating revenue with that fleet toward the end of the year as the first one gets underway. However, there are additional technologies, so to speak, that we've created in this engineering moonshot endeavor as we've created Aquanaut.
We find those a standalone products that might help the already existing ROV products and services industry like standalone manipulators, all the way to ToolKITT, which is our software platform, which runs and serves as the foundation of everything that we do. I think it's not too much of a stretch that that software could find its way into other platforms as people wanna increase the capability of that. I think a good weather vane, so to speak, is how DIU is already interested in that, where they have an existing fleet of ROVs, and they've desired them to go untethered and increase their capability.
Just the same way that ToolKITT is serving to advance those systems, there's a lot of commercial analogs, whether it's in aquaculture or other segments where we're seeing similar technology thrusts where they're trying to up the technology level of other style platforms, that's where ToolKITT will serve us well.
Excellent. Then, you know, I appreciated the update on the Defense Innovation Unit. One customer I was kinda hoping you were gonna have a little bit more to say about is Shell. You know, I know you're sort of bound by certain non-disclosure agreements sometimes, but is there any update there as far as the activity with Shell and, you know, how sea trials and early interaction has gone with these guys?
Unfortunately, nothing that we've publicly stated, but I as we look toward the end of the year, I think that you and I have a lot to talk about there, but nothing that I think we can disclose at the moment.
Understood. Well, thanks again for taking my questions. I'll hop back in the queue.
Thank you. At this time, this concludes our question and answer session. I'd now like to turn the call back over to Nic Radford. Please go ahead.
Thanks for joining us today and for your interest in Nauticus and our vision for the future. Our commitment to transforming the blue economy through our cutting-edge autonomous robotics technology is stronger than ever, and we are excited to share our progress with you all along the way as we can. Have a wonderful day.
Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.