KITT

Financial and Balance Sheet Priorities

• Completed multiple financing initiatives during the quarter, including finalizing registration for an equity line of credit, filing the Series D Certificate of Designation, and executing debt-to-equity exchanges that reduced outstanding debt by $5.5 million while strengthening stockholder equity.
• Core priorities for H2 2026 remain: strengthening the balance sheet, maintaining disciplined cost management, and preserving financial flexibility to support commercial execution and long-term growth.
• Confirmed that current share price recovery has eliminated the need for an additional reverse stock split to maintain NASDAQ listing compliance, though management continues to monitor regulatory changes and prepare for any required adjustments.

Market and Operating Model Adjustments

• Offshore oil and gas project timing has been negatively impacted: operators planned 2026 capital spending around mid-$50 to $60 per barrel oil prices, leading to a cautious approach in the Gulf of America that has pushed most anticipated 2026 projects into 2027 or later.
• Management adjusted the operating model to align cost structure with current low demand, maintaining flexibility to rapidly deploy personnel and equipment when projects restart, while avoiding the cost of keeping a vessel fully mobilized through the entire work season.

Business Diversification Progress

• Expanded market presence in the offshore wind sector along the U.S. East Coast, completed a project for a major subsea cable company, has scheduled projects on the West Coast, and is pursuing multiple international tender opportunities.
• Actively pursuing growth in the defense sector, which remains in early stages; the company is making strategic investments in business development, capabilities, and alliances to position for long-term growth and diversification in this market.
• Progressing international expansion in the UAE, where a facility has been secured, a local business entity is being established, and manufacturing operations are being planned, with strong collaborative partnerships in place to support regional growth.

Technology and Product Milestones

• Successfully deployed the Comanche ROV fully integrated with Nauticus Toolkit software in customer operations, where the system delivered improved operating efficiency and reduced pilot workload, validating the company's technology strategy of combining intelligent software with proven subsea hardware.
• Formally launched Nauticus Toolkit software for ROVs, available for sale to global underwater fleet operators in the energy and defense sectors; this product is expected to generate recurring, predictable revenue starting in 2027, and the company will begin reporting bookings and backlog in future earnings calls.
• Completed the planned freshwater testing phase of Aquanaut's autonomous mooring line and riser inspection workflows at the Florida test site; next-phase offshore testing will depend on customer budget cycles and site availability.
• Completed the prototype of the next-generation electric manipulator, designed for lower-cost manufacturing aligned with the UAE production strategy; software movement validation is complete, and functional load testing is now underway, with additional prototype builds and design refinements planned.
• Completed initial scope of work for a large multi-phase defense project; if awarded, the project will generate revenue in 2026 and 2027.
• Participating in multiple collaborative proposal efforts for persistent autonomous subsea sensing infrastructure projects with government, commercial, defense, and academic partners, integrating the company's full product portfolio to address missions that are costly or impractical for traditional vessel-based approaches.

Go-to-Market Strategy Changes

• Management identified four core issues that created unpredictable revenue modeling: 1) most work is as a subcontractor, so revenue timing and pricing depend on prime contractor outcomes; 2) time-and-materials pricing means customers capture all efficiency gains from the company's technology; 3) Nauticus Toolkit was not a defined, sellable product until recently; 4) low conversion rates in a soft market require larger pipeline coverage.
• Key strategic changes to address these issues: target significantly expanded pipeline coverage for 2027 from diversified sources (international and defense); pursue international services contracts as the prime contractor to control pricing, scope, and margins; use fixed-price contracting so the company captures margin gains from its autonomous efficiency improvements; and launch the formal commercial Nauticus Toolkit product to generate recurring predictable revenue.

No formal quantitative financial guidance for full-year 2026 or 2027 was provided in the call. Qualitative forward-looking statements from management include:

• Near-term offshore oil and gas revenue will remain depressed due to project deferrals into 2027 and beyond, with management prioritizing higher-margin opportunities over low-value short-term work.
• Nauticus Toolkit commercial sales are expected to begin generating recurring, predictable revenue starting in 2027.
• The large multi-phase defense project that completed initial scoping work is expected to generate revenue in 2026 and into 2027 if awarded.
• Management expects defense and government autonomous maritime markets to grow for many years, creating long-term opportunities for Nauticus' technology portfolio.
• The UAE is expected to become an important regional hub for Nauticus' international expansion and manufacturing operations.
• Management has committed to scheduling an interim business update call before the Q3 2026 earnings call, rather than waiting until the end of the quarter to share progress.

Nauticus Robotics reports consolidated financial results only for Q2 2026, with no separate segment performance breakdown provided. Consolidated Q2 2026 revenue was $0.9 million, which is a $0.7 million sequential increase from Q1 2026 and a $1.2 million decrease year-over-year from Q2 2025. Total operating expenses for the quarter were $6.9 million, a $1.6 million year-over-year decrease and a $1 million sequential increase. G&A expenses were $3.3 million, a $1.1 million year-over-year improvement, with essentially flat sequential growth (less than $0.1 million QoQ). Reported net loss was $11.1 million, compared to $9.3 million in Q1 2026 and $7.4 million in Q2 2025; the larger loss was driven by non-cash losses on debt-to-equity extinguishment transactions. Adjusted net loss was $7 million, compared to $7.4 million in Q2 2025 and $6.4 million in Q1 2026. Cash and cash equivalents at the end of Q2 2026 were $2 million, down from $7.6 million at the end of 2025 due to operating cash outflows.

• Offshore oil and gas capital spending is highly sensitive to oil price volatility; current oil price expectations have led to widespread project deferrals that have reduced near-term revenue and created forecasting uncertainty.
• Operating as a prime contractor on international projects carries higher execution risk than the company's historical subcontractor model, though management has structured the strategy to limit this risk through short-term vessel charters and focused specialization in specific contract types.
• A transition to new markets (defense, offshore wind, international) and product lines (software sales) is still in early stages, and there is no guarantee that these new opportunities will convert to revenue or meet growth expectations.
• The company has continued operating cash outflows and a relatively small cash balance ($2 million at end-Q2 2026), creating ongoing pressure to strengthen the balance sheet and convert pipeline opportunities to contracted revenue.
• Forward-looking statements about future projects, revenue, and market growth are subject to inherent uncertainties that could cause actual results to differ materially from current expectations, including budget cycle timing, customer award decisions, and site availability for testing.

Q: What are the trade-offs, margin impacts, and capital intensity implications of the new strategy to pursue international projects as a primary contractor?

A: Management acknowledges that full primary contracting with long-term vessel charters carries higher risk, but the company will not pursue that structure. Instead, it will use short-term vessel charters booked for specific projects, minimizing idle vessel risk and capital commitment. The company will also specialize only in contract types that align well with Nauticus Toolkit, further reducing risk. The autonomy software creates higher inherent margins that offset the additional flexibility costs, and holding the prime contract allows Nauticus to capture these full margin gains rather than sharing them with a prime contractor.

Q: What is the decision timeline and next steps for the multi-phase defense opportunity that could generate 2026 and 2027 revenue if awarded?

A: The company has intentionally forgone low-margin short-term work to focus internal resources on outfitting assets for this and other large long-term defense opportunities, and active proposals are already submitted. Management is prioritizing larger, multi-year (2-3+ year) contracts that deliver sustained, profitable revenue over low-margin transactional work, even though this discipline suppresses near-term revenue. No revenue has been lost to competitors, all delayed projects remain in the pipeline, and the company's strong operational reputation positions it well for awards. End clients are increasingly requesting Nauticus by name for upcoming projects, supported by the proven strong performance of Nauticus Toolkit in customer operations.

Q: Recent operational use of autonomous underwater systems for mine clearance in the Strait of Hormuz has drawn attention to this market. How does Nauticus fit into this market, and has this shifted defense conversations with customers?

A: Nauticus is currently refurbishing the Aquanaut vehicle, and after completion it will move to offshore testing in Florida specifically for mine countermeasure missions, which is a core use case Aquanaut is well-suited for. The company has recently secured required test assets (target dummies for imaging testing) and expects to host U.S. Department of Defense customers to view test results in the near term. Aquanaut's unique combination of untethered operation and a functional manipulator for environmental interaction gives Nauticus a strong competitive differentiator in this market, as no other competing AUV in this class currently offers this capability.

Q: Does the ongoing slowdown in Gulf of America oil and gas activity create a structural shift in Nauticus' strategy and resource allocation away from oil and gas?

A: Management still expects oil and gas to be a strong market for the foreseeable future, supported by projected high oil prices, and has no plans to exit the sector. However, defense and government opportunities offer substantially higher margins than traditional oil and gas work, so the company is reallocating resources to prioritize these higher-margin opportunities rather than pursuing any work just for revenue volume. This strategic shift leverages the fact that Nauticus' core technology is easily configurable for both commercial and defense missions, so it does not require abandoning the oil and gas market.