Kraken Well Positioned for Strong Growth
ST. JOHN’S, NEWFOUNDLAND, April 26, 2021 /GLOBE NEWSWIRE/ — Kraken Robotics Inc. (TSX-V: PNG, OTCQB: KRKNF), Canada’s Ocean Company, announced it has filed its financial results for the quarter and year ended December 31, 2020. Additional information concerning the Company, including its consolidated financial statements and related management’s discussion and analysis (“MD&A”) for the quarter and year ended December 31, 2020, can be found at www.sedar.com. Unless otherwise stated, all dollar amounts are Canadian dollar denominated.
President & CEO Comments
“In spite of COVID-related challenges and restrictions during 2020, Kraken made significant progress on several fronts, resulting in our strongest product sales pipeline ever,” said CEO Karl Kenny. “This combined with the maturing of Kraken’s service capabilities and the proposed acquisition of PanGeo, provides a strong platform for growth in 2021 and beyond. Our sensor and robotics technology significantly reduce cost, timelines and carbon emissions which is proving to be of keen interest in the offshore sector.”
“We expect revenue in 2021 to grow organically more than 100% from 2020,” said CFO Joe Mackay. “Over the next 12 to 24 months, we expect to deliver upon some significant orders and complete major R&D programs including our multispectral SAS and ThunderFish® XL. With new product orders improving, the proposed PanGeo acquisition, and the build out of a RaaS offering that generates recurring revenue, we expect quarterly financial results to be less variable in the future. We are not focused on near term profitability as the market opportunity is significant and we are competing against well capitalized competitors. As our top line growth continues and we near completion of major R&D programs, we expect to see an acceleration in operating leverage with targeted EBITDA margins in the 30%-35% range. Financial guidance for 2021 will be issued upon completion of the proposed acquisition of PanGeo.”
2020 Operational Highlights
On the Product Side
- Secured over $40 million of orders from both the Danish and Polish navies which we are fulfilling now. These contracts provide a solid revenue base for our KATFISH™ and ALARS products for the next several years and are major wins in the mine countermeasures (MCM) space. We are also involved in active discussions with other NATO and Asia Pacific navies. We are seeing strong interest for our KATFISH™ and ALARS products within the global defense and commercial markets and expect these products to be key growth drivers going forward.
- While year-over-year comparisons for our battery products were down due to a large order in 2019, order activity for our subsea batteries is now improving as we add additional customers primarily in the defense market. We are working towards US Navy certification for our lithium polymer batteries and expect testing to occur with the US Navy this year under a Cooperative Research and Development Agreement. We expect this certification will open new opportunities for our subsea batteries in underwater vehicles and sensors.
- For our AquaPix® sonar sensors, we expect to build on the positive feedback we have received on our light-weight Synthetic Aperture Sonar (SAS) for man portable AUVs under the Foreign Comparative Test program with the US Navy. We are seeing additional interest for our modular sensors across numerous AUV OEM and defense customers for platforms of all sizes. With a recent successful integration of our AquaPix® sonar on an AUV from Dive Technologies Inc., we noted this milestone represented the 20th unique vehicle platform that has been successfully integrated with Kraken’s Synthetic Aperture Sonar. We expect our next generation Multispectral SAS sensor to undergo initial in-water testing later this year.
On the Services Side
- We completed our third successful OceanVision™ offshore campaign in the fall and are currently preparing for our Spring 2021 offshore campaign. This project is accelerating our efforts to develop a more significant recurring revenue base, which we characterize as Robotics / Data as a Service (RDaaS).
- In addition to having our Ocean Seeker R/V with a fully automated SeaScout® survey offering, by this summer we will have several other underwater platforms available including the ThunderFish® Dive AUV (from Dive Technologies) and a Man Portable AUV (from BAE/Riptide) that integrates Kraken’s man-portable SAS. Development work continues on Kraken’s ThunderFish® XL AUV with first in-water tests expected later this year.
- Our SeaVision® laser scanners and profilers and mooring chain inspection tools continue to mature, and we have completed numerous paid demonstrations with several offshore companies. Kraken will offer SeaVision® as a service for the inspection of subsea infrastructure including mooring chains, ship hulls, and wind farms. Over time, this sub-millimeter resolution data acquisition service will allow customers to create 3D digital twins and conduct predictive analytics for inspection and asset integrity for critical subsea infrastructure.
- The proposed acquisition of PanGeo Subsea Inc. announced April 9, 2021, will accelerate Kraken’s transformation to a Robotics/Data as a Service model by increasing recurring service revenue and providing increased exposure to the non-defense market, including the offshore energy and offshore wind markets. PanGeo’s technology augments Kraken’s to provide a more complete range of subsea surveying services. PanGeo’s Synthetic Aperture Sonar 3D seabed penetrating technology, which allows customers to understand the characteristics of the sub-seabed, pairs well with Kraken’s high ultra-high-definition seabed imaging technologies. This is essential to understanding the sub-seabed characteristics for infrastructure builds as well as maintenance and repair (buried pipelines, buried cables, buried UXOs, offshore wind turbine and offshore oil platform construction).
Facilities and Processes
- Kraken made significant operational progress in 2020, in spite of COVID challenges such as the inability for customers, prospects, and Kraken personnel to travel and with various COVID related protocols affecting our workforce.
- We earned ISO 9001:2015 certification for our Quality Management System (QMS), including manufacturing sites located in Mount Pearl, NL and Dartmouth, NS. This demonstrated that Kraken’s commitment to quality extended beyond borders. Kraken’s subsea power subsidiary, Kraken Power GmbH, also holds an ISO 9001:2015 certification, ensuring our complete line of products are produced with the same exacting quality standards.
- We have upgraded our financial and manufacturing software to NetSuite across our Canadian offices and will complete the upgrade to all of our subsidiaries in 2021.
- Kraken Power moved into a larger facility at the end of 2020 and added additional equipment for manufacturing and testing. Kraken Power expects to receive a large new 6000-meter rated pressure tank in Q4 of this year which will allow for increased testing and ultimately shorter cycle times and improved quality control.
- Kraken has leased additional space for its Nova Scotia and Newfoundland facilities to accommodate the recent and expected continued growth.
- On April 9, 2021, Kraken announced that it has entered into a non-binding letter of intent in connection with the proposed acquisition of PanGeo Subsea Inc.
- PanGeo is a private Canadian services company specializing in high resolution 3D acoustic imaging solutions for the sub-seabed.
- Although the LOI remains non-binding, it is anticipated that the purchase price will be between $18 to $24 million, based on PanGeo’s performance over the 2-year period following the acquisition, to be paid by way of cash and stock over that period.
- Under the non-binding LOI, consideration paid to PanGeo at closing of the transaction would be $10 million consisting of $7 million in cash and $3 million in Kraken stock. In addition, Kraken would issue an $8 million unsecured promissory note to the selling shareholders. This note would accrue interest at 6% per annum, with principal and interest repayable at maturity: 2 years post transaction close. The remaining $6 million earnout would be payable with a combination of cash and stock in 2 installments (after 12 months and 24 months) and is based on PanGeo achieving certain earnout milestones.
- Kraken continues with its due diligence and the companies are currently negotiating a Definitive Agreement. It is Kraken’s intent to have closed this acquisition by the end of May at the latest.
13 Robotics Brasil Ltda.
- On April 19, 2021, Kraken announced that it had completed the acquisition of a Brazilian underwater robotics company, 13 Robotics Ltda.
- 13R will operate as Kraken Robotics Brasil Ltda. The company brings expertise in underwater robotic system development and has relationships with leading international energy companies. They will provide Kraken a base of opportunity for Robotics/Data as a Service capabilities in South America.
- With this acquisition, Kraken now has approximately 90 employees in science, software, and engineering for subsea robotics equipment and services.
*Adjusted EBITDA and Adjusted EBITDA margin do not have standardized meaning under IFRS and may not be comparable to similar measures used by other issuers. We define Adjusted EBITDA as revenue less costs of sales, administrative expenses, research and development costs plus investment tax credits. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenues.
ABOUT KRAKEN ROBOTICS INC.
Kraken Robotics Inc. (TSX.V:PNG) (OTCQB: KRKNF) is a marine technology company dedicated to the production and sale of software-centric sensors, subsea batteries and thrusters, and underwater robotic systems. The company is headquartered in Newfoundland with offices in Canada, U.S., Germany, Denmark, and Brazil. Kraken is ranked as a Top 100 marine technology company by Marine Technology Reporter.
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.
For further information, please contact:
Joe MacKay, Chief Financial Officer
Greg Reid, Chief Operating Officer
Sean Peasgood, Investor Relations
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