Kraken Robotics Inc.: Kraken Robotics Reports Strong Q2 2024 Financial Results

ST. JOHN'S, Newfoundland and Labrador, Aug. 22, 2024 (GLOBE NEWSWIRE) -- Kraken Robotics Inc. (TSX-V: PNG, OTCQB: KRKNF) ("Kraken" or the "Company"), announced it has filed financial results for the quarter ended June 30, 2024 ("Q2 2024"). 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.

Q2 2024 Financial Highlights

• Consolidated revenue for Q2 2024 increased 67% to $22.8 million compared to $13.7 million for the quarter ending June 30, 2023.
• Product revenue in the quarter increased 83% to $19.2 million compared to $10.5 million 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 $3.5 million compared to $3.2 million in the prior year with projects using Sub-Bottom Imager, Acoustic Corer, and KATFISH.
• Gross profit in Q2 2024 increased 50% to $11.6 million 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 EBITDA¹ increased 79% in the quarter to $5.4 million compared to $3.0 million 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 $2.6 million, compared to net income of $2.0 million in Q2 2023.
• Total assets were $96.1 million on June 30, 2024, compared to $70.5 million on June 30, 2023. Cash at the end of the quarter totaled $20.4 million.
  

Year-to-date June 30, 2024

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

($ 000s) Unaudited	Q2 2024		Q2 2023		% change		YTD 2024		YTD 2023		% change
Consolidated revenue	22,758		13,655		67	%	43,633		21,233		105	%
Gross profit 1	11,607		7,744		50	%	20,953		12,247		71	%
Gross margin percentage 1	51	%	57	%			48	%	58	%
Adjusted EBITDA 1	5,444		3,040		79	%	9,545		3,943		142	%
Adjusted EBITDA percentage 1	24	%	22	%			22	%	19	%
Net Income	2,609		1,997		31	%	4,784		661		624	%

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 $20 million equity financing and $45 million 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 $8 million acoustic corer project, and a KATFISH related order of $3.7 million.
• 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 1 to 4 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 6 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 $90.0 million to $100.0 million and Adjusted EBITDA¹ in the $18.0 million to $24.0 million range. Capital and intangible asset expenditures in 2024 are expected to range from $6.0 million to $7.0 million. 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.

($ 000s)	Actual		2024 Guidance Range				Implied Change
	2023		Low		High		Low		High
Consolidated revenue	69,581		90,000		100,000		29	%	44	%
Adjusted EBITDA 1	14,094		18,000		24,000		28	%	70	%
Adjusted EBITDA percentage 1	20	%	20	%	24	%	-		400 bps
Capital expenditures/Intangible assets	7,557		6,000		7,000		-21	%	-7	%

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.

($ 000s)	Q2 2024		Q2 2023		2024		2023
Net Income	2,609		1,997		4,784		661
Income Tax	735		238		791		324
Financing costs	559		418		947		971
Foreign exchange loss	138		129		69		270
Share-based compensation	30		98		87		259
Impairment of goodwill	-		2,757		-		2,757
Gain on extinguishment of contingent consideration	-		(4,044	)	-		(4,044	)
Depreciation and amortization	1,373		1,232		2,798		2,495
EBITDA - excluding restructuring and acquisition costs	5,444		2,825		9,476		3,693
Restructuring and acquisition costs	-		215		69		250
Adjusted EBITDA	5,444		3,040		9,545		3,943
Adjusted EBITDA Margin	24	%	22	%	22	%	19	%

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

	Q2 2024		Q2 2023		2024		2023
Revenue	22,758		13,655		43,633		21,233
Cost of sales	11,151		5,911		22,680		8,986
Gross profit	11,607		7,744		20,953		12,247
Gross margin	51	%	57	%	48	%	58	%

Figure 1: Kraken KATFISH Towed Synthetic Aperture Sonar System

ABOUT KRAKEN ROBOTICS INC.

Kraken Robotics Inc. (TSX.V: PNG) (OTCQB: KRKNF) is a marine technology company providing complex subsea sensors, batteries, and robotic systems. Our high-resolution 3D acoustic imaging solutions and services enable clients to overcome the challenges in our oceans - safely, efficiently, and sustainably. Kraken Robotics is headquartered in Canada and has offices in North and South America and Europe. Kraken is ranked as a Top 100 marine technology company by Marine Technology Reporter.

LINKS:

www.krakenrobotics.com

SOCIAL MEDIA:

LinkedIn www.linkedin.com/company/krakenrobotics
Twitter www.twitter.com/krakenrobotics
Facebook www.facebook.com/krakenroboticsinc
YouTube www.youtube.com/channel/UCEMyaMQnneTeIr71HYgrT2A
Instagram www.instagram.com/krakenrobotics

For further information:

Erica Kierstead, Director of Global Marketing
[e-mail]

Joe MacKay, Chief Financial Officer
[phone]
[e-mail]

Greg Reid, President & CEO
[phone]
[e-mail]

Sean Peasgood, Investor Relations
[phone]
[e-mail]

Forward Looking Statements

The Company and its management believe that the statements regarding 2024 revenue and adjusted EBITDA contained in this press release are reasonable as of the date hereof, are based on management's current views, strategies, expectations, assumptions and forecasts, and have been calculated using accounting policies that are generally consistent with the Company's current accounting policies. These statements are considered future-oriented financial outlooks and financial information (collectively, "FOFI") under applicable securities laws. These statements and any other FOFI included herein have been approved by management of the Company as of the date hereof. Such FOFI are provided for the purposes of presenting information about management's current expectations and goals relating to the Company's expected growth in its Products and Services groups. However, because this information is highly subjective and subject to numerous risks, including the risks discussed in the disclaimer for forward looking statements below, it should not be relied on as necessarily indicative of future results. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the FOFI prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Although management of the Company has attempted to identify important risks, uncertainties and factors which could cause actual results to differ materially, there may be others that cause results not to be as anticipated, estimated or intended. The Company disclaims any intention or obligation to update or revise any FOFI, whether as a result of new information, future events or otherwise, except as required by securities laws.

Certain information in this news release constitutes forward-looking statements. When used in this news release, the words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "seek", "propose", "estimate", "expect", and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. In particular, this news release contains forward-looking statements with respect to, among other things, business objectives, expected growth, results of operations, performance, business projects and opportunities and financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Such statements reflect the Company's current views with respect to future events based on certain material factors and assumptions and are subject to certain risks and uncertainties, including without limitation, changes in market, competition, governmental or regulatory developments, general economic conditions and other factors set out in the Company's public disclosure documents. Many factors could cause the Company's actual results, performance or achievements to vary from those described in this news release, including without limitation those listed above. These factors should not be construed as exhaustive. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those described in this news release and such forward-looking statements included in, or incorporated by reference in this news release, should not be unduly relied upon. Such statements speak only as of the date of this news release. The Company does not intend, and does not assume any obligation, to update these forward-looking statements. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

Neither the TSX Venture Exchange Inc. nor its Regulation Services Provide (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release, and the OTCQB has neither approved nor disapproved the contents of this press release.

¹Adjusted EBITDA is a non-GAAP financial measure and gross margin, and adjusted EBITDA margin are non-GAAP ratios, in each case with no standard meaning under IFRS, and may not be comparable to similar financial measures disclosed by other issuers. Refer to the "Non-GAAP Measures" section of this press release.

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/f1e239e1-68b4-41df-85eb-8e96fb59ed5e