Kraken Robotics reports strong Q2 2024 financial results

Kraken Robotics Inc. has filed its financial results for the quarter ended June 30, 2024.

Q2 2024 Financial Highlights

• Consolidated revenue for Q2 2024 increased 67% to $22.8million compared to $13.7million for the quarter ending June 30, 2023.
• Product revenue in the quarter increased 83% to $19.2million compared to $10.5million in the prior year. Product revenue growth was the result of continued sales across key products including subsea batteries, synthetic aperture sonar (SAS) systems, remote mine hunting and disposal system, and KATFISH™.
• Services revenue in the quarter increased 11% to $3.5million compared to $3.2million in the prior year with projects using Sub-Bottom Imager^TM, Acoustic Corer^TM, and KATFISH.
• Gross profit in Q2 2024 increased 50% to $11.6million implying a 51.0% gross margin percentage compared to 56.7% in Q2 2023. The year-over-year change related to product mix. Sequentially, gross margin improved from 44.8% in Q1 2024.
• Adjusted EBITDA[1] increased 79% in the quarter to $5.4million compared to $3.0million in the prior year due to increased revenue. Adjusted EBITDA¹ margin in the quarter improved to 24% compared to 22% in the comparable quarter.
• Net income in the quarter increased 31% to $2.6million, compared to net income of $2.0million in Q2 2023.
• Total assets were $96.1million on June 30, 2024, compared to $70.5million on June 30, 2023. Cash at the end of the quarter totaled $20.4million.

Year-to-date June 30, 2024

• Consolidated revenue year-to-date increased 105% to $43.6million, compared to $21.2million in the comparable 6-month period ending June 30, 2023.
• Product revenue year-to-date increased 122% to $35.3million, compared to $15.8million in the comparable 6-month period to June 30, 2023.
• Service revenue year-to-date increased 59% to $8.4million, compared to $5.4million in the comparable 6-month period ending June 30, 2023.
• Gross profit year-to-date increased 71% to $20.1million implying a 48.0% gross margin percentage year-to-date compared to 58.0% in the comparable 6-month period ending June 30, 2023.
• Adjusted EBITDA¹ year-to-date increased 142% to $9.5million compared to an Adjusted EBITDA¹ of $3.9million in the comparable 6-month period. Adjusted EBITDA¹ margin year-to-date was 22% compared to 19% in the comparable year.

Q2 2024 Financial Summary

Management Comments

“We are pleased to report another strong growth quarter with adjusted EBITDA¹ margins of 24% versus 22% in the year-ago quarter. During the quarter, we strengthened our balance sheet with a $20million equity financing and $45million of new committed credit facilities. The demand environment for our technology solutions has never been better and the opportunities we are seeing in both our defense and offshore energy markets continues to grow,” said Kraken President and CEO Greg Reid.

Recent Company Highlights and Industry Observations

• During the quarter Kraken Robotics announced several meaningful new orders, including over $8 million in subsea battery orders, an $8million acoustic corer project, and a KATFISH related order of $3.7million.
• Industry demand signals are solid with an increasing focus on the surveillance and security of critical underwater infrastructure (CUI), and subsea warfare driven by increased geopolitical tensions. Against this backdrop, the growth of unmanned systems in the subsea domain is accelerating as subsea drones are seen as a complement to very expensive, exquisite surface warfare assets and submarines, providing an attritable capabilities gap filler.
• In the mine warfare arena, navies around the world are in various stages of planning and executing upgrades with multiple large tenders in the market or coming to market in the next one to four years. In some countries, the program sizes being discussed are much larger than industry had been initially expecting. With our growing track record of success in this area, including our expanding customer base and deepening relationships with various UUV and USV companies, we are well positioned to win our fair share of these programs. Year-to-date, we have invested significant time and resources on in-field technology demonstrations and naval defense exercises in Europe and Asia Pacific including exercises such as Minex, Baltops, and RimPac. Historically, these demos have driven future sales.
• Next month, at REPMUS (Robotic Experimentation & Prototyping with Maritime Unmanned Systems), we expect to support Kraken’s synthetic aperture sonar on UUVs from six allied countries. Hosted by the Portuguese Navy and NATO, REPMUS brings together numerous foreign militaries, research institutions, and technology companies and is a core exercise for developing maritime unmanned systems, operational tactics, and command and control.
• Several of our UUV customers have publicly announced facility upgrades or plans for expansion (Anduril, HII, Teledyne Gavia) highlighting the strong demand they are seeing in the market. These are positive indications for our markets, as we are a component and subsystem supplier into these companies (sonar and batteries).
• On the subsea battery front, we are planning for additional capacity as our current customers are seeing strong growth. In addition, we have engineering and business development discussions with a variety of other companies working subsea. These discussions pertain to both existing and next generation designs.
• Our services business, focused on commercial offshore wind and oil and gas, expects a record year, driven by growth in the offshore energy market and requirements for seabed and sub-seabed intelligence during the development, construction, and operations/maintenance part of the subsea asset lifecycle.

2024 Financial Guidance Unchanged

Our annual financial guidance remains unchanged. Kraken expects revenue between $90.0million to $100.0million and Adjusted EBITDA¹ in the $18.0million to $24.0million range. Capital and intangible asset expenditures in 2024 are expected to range from $6.0million to $7.0million. Our 2024 outlook is driven by contracts in hand and reflects strength across both our Product and Service groups addressing defense and offshore energy customers.

NON-IFRS MEASURES

Non-IFRS measures, including certain non-IFRS financial measures and non-IFRS ratios in this press release, are provided where management believes they supplement measures determined in accordance with IFRS and provide readers with an improved ability to evaluate the underlying performance of the Company. Non-IFRS financial measures and non-IFRS ratios do not have any standardized meaning prescribed under IFRS, and therefore they may not be comparable to similar measures employed by other companies. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

Adjusted EBITDA and Adjusted EBITDA Margin

The Company believes that, in addition to conventional measures prepared in accordance with IFRS, Adjusted EBITDA is useful to securities analysts, investors and other interested parties in evaluating operating performance by presenting the results of the Company on a basis which excludes the impact of certain non-operational items which enables the primary readers of this press release to evaluate the results of the Company such that it was operating without certain non-cash and non-recurring items. Adjusted EBITDA is calculated as earnings before interest expense, interest income, income taxes, depreciation and amortization, stock-based compensation expense and non-recurring impact transactions, if any. Adjusted EBITDA Margin is defined at Adjusted EBITDA divided by Total Revenue.

Gross profit is defined as revenue less cost of total sales. Gross margin is defined as gross margin dividend by total sales.

Please refer to the unaudited Consolidated Financial Statements and Management’s Discussion and Analysis (“MD&A”) for the quarter ended June 30, 2024, filed on www.sedarplus.ca for more information. Unless otherwise specified, all dollar amounts are denominated in Canadian dollars.