[joelawyer]

Hmmmmm . . . some good spec there, Spec

[spec machine]

The new director was a clear indication that they’re headed for some M&A in the next year or two (that’s the logical deduction from his skill set, no other reason to have that type of person on the BOD of a young, high growth company)

Then the Ocean Infinity Group takes their profits, possibly a “vote cleanup” for easier planning on a merger deal

IOW, they may be an interested party and need to keep the deal “arms length” and avoid conflict of interest

Then BOOM! …. earning blast to the upside

Followers knew the transition to profitability was coming … but these numbers are clearly impressive beyond any doubt

Brilliant future in the deep blue

spec

[joelawyer]

Additional evaluation and commentary by Sean Peasgood of Sophic Capital:

Kraken Robotics [PNG:TSX-V, KRKNF:OTCXB] - Taking A Deeper Dive on Record Q3 Results

We believe investors should look at Kraken Robotics [PNG-TSX-V; KRKNF-OTC], on the back of the Company reporting Q3/23 results this morning. While the stock has moved off the lows and is already up 33% since the middle of November, strong Q3 results and the reiteration of guidance for Q4 2023 provides very good visibility into how undervalued the stock remains compared to peers.

PNG is currently trading at 9x 23 EV/EBITDA vs the peers at 17.5x. If Kraken Robotics were to trade inline with the peers on 2023 EV/EBITDA multiples the stock would be $1.09 (81% upside) and using $20M in EBITDA for 2024 would be $1.41 per share (135% upside). See Comp table below for details.

Kraken Robotics is an underwater drone technology company that has been growing at a 63% CAGR over the last five years and is projecting to grow revenue by 70% in 2023. At recent investor conferences, management has also signalled that they anticipate continued growth of ~40% annually for the foreseeable future.

In this September 6, 2023 presentation, Kraken Robotics CEO Greg Reid explains the Company’s products, the geopolitical backdrop of why the Company has grown and should continue to grow, as well as financial guidance and expectations going forward.

The timing to purchase Kraken Robotics shares is more compelling than it has been in several years. Why?

1. Kraken Robotics is now profitable has a strong balance sheet and just reiterated its strong 2023 guidance and these growth expectations are anticipated to continue into 2024;

2. The Company reiterated 2023 guidance, meaning Q4 results are going to be very strong to end out the year and likely another record high revenue quarter, we believe coming into Q3 results the market did not believe the Company’s 2023 guidance;

3. The business has solid bookings for continued growth into 2024 and beyond with several large contracts in the pipeline that could be announced in 1H/24. Also 2024 should be less back-end loaded like the last few years meaning selling after Q4 won’t be a good strategy this year;

4. Geopolitical factors are driving a very strong tailwind and in the Company’s investor deck they call out $300 million (or over 4x 2023 revenue guidance) of opportunities they are working on;

5. Kraken Robotics is trading at 9x 2023 EV/EBITDA versus comps that trade between 17.5x; and 6.3x 2024 (assuming $20M EBITDA) versus comps at 14.7x.

6. Overhangs on the stock have all recently been removed with $0.60 warrants now all expired and more recently Ocean Infinity selling 21 million shares on November 23, which was all placed with long only fundamental institutional accounts.

Kraken Robotics 3 year Stock Chart


https://d3k81ch9hvuctc.cloudfront.net/company/RvxyY9/images/00a12860-aee4-47f5-976c-725bc8b1d5f6.png


Valuation and what is this stock really worth? Kraken Robotics is trading at one-half the multiple of comps

Kraken Robotics’ top line has now grown to where the Company is now Net Income and EBITDA positive.

Management has said they expect to grow 40-50% annually, meaning that assuming they hit their guidance for 2023 (mid-point of $69M), in 2024 Kraken Robotics could generate revenues of ~$95+M. Management has also said that EBITDA margins should be 20-25% going forward, meaning EBITDA for next year could be ~$19M (20%) - $24M (25%).

Assuming a stock price of $0.60, Kraken Robotics is currently trading at 9.3x EV/EBITDA for 2023, and assuming EBITDA of $20M in 2024, its stock is trading at 6.3x 2024 EBITDA. Below are comp tables from Raymond James Defense & Government Market Intel Report published in November 2023 that illustrates Defense Technology stocks are trading at 17.5x 2023 EV/EBITDA and 14.7x 2024.

If Kraken Robotics were to trade inline with the peers on 2023 EV/EBITDA multiples the stock would be $1.09 (81% upside) and using $20M in EBITDA for 2024 would be $1.41 per share (135% upside). There is no reason that given Kraken Robotics’ leadership in synthetic aperture sonar (SAS) and pressure tolerant batteries as well as the fact the Company has won several NATO Navy bids in the last few years, that the Company should be trading at a discount.

Comp Table for Defense Technology

https://d3k81ch9hvuctc.cloudfront.net/company/RvxyY9/images/f8afb50f-a8a5-44ee-b0ff-c056af56f412.jpeg

Source: Raymond James | Defense & Government Investment Banking November 2023

Finally, Kraken Robotics could be a strategic take out candidate for several large defense companies. Two key technologies that could be strategic for several buyers are:

Kraken Robotics is one of a handful of Companies that have the capability to provide synthetic aperture sonar (SAS) technology. Kraken Robotics not only uses its SAS on its own Katfish towed-fish product but also sells SAS technology to several Companies in the industry. While other defense companies have SAS, only one other (Northrop Grumman (NOC-NTSE)) sells it to other UUV providers, and SAS is now becoming the standard required on all defense and commercial RFPs. Large companies without this capability may want to lock down their own technology to be able to win and potentially block out others in these deals.

Kraken Robotics’ pressure tolerant batteries have seen strong demand over the last several years after illustrating being able to almost double endurance when replaced from traditional battery systems. Kraken Robotics has sold batteries to the U.S. Navy for testing, as well as other defence companies and recently sold several large orders to Anduril. While originally Kraken Robotics would sell between $1M-$1.5M in batteries for the mid-size unmanned underwater vehicles, recently several defense companies have announced programs to build extra large unmanned underwater vehicles, which would require $7M - $10M in batteries per vehicle. As the race for underwater dominance, as well as a desperate need to upgrade naval technology around the world, Kraken Robotics’ battery technology could look very strategic inside a larger defence company to lock down this increased endurance and performance when bidding on multi-billion programs.

While a strategic player could come in at some point and is worth highlighting, the thesis on buying Kraken Robotics now is supported by its valuation and growth opportunities. In the future it is possible that a premium valuation may be warranted if others in the space are looking to secure key technology aiding them in winning multi-billion dollar defence contracts.

[joelawyer]

Kraken Robotics Reports Record Financial Results
Revenue Increases 66% to $20.3 million, Adjusted EBITDA increases 153% to $4.4 million
ST. JOHN'S, Newfoundland and Labrador, Nov. 27, 2023 (GLOBE NEWSWIRE) -- Kraken Robotics Inc. (TSX-V: PNG, OTCQB: KRKNF) ("Kraken" or the "Company"), announced it has filed financial results for the third quarter ended September 30, 2023 (“Q3 2023”).

Management Comments

“With Q3 being our strongest quarter in history and Q4 expected to show further improvement, we are on track to hit our financial guidance for 2023,” said Kraken President and CEO Greg Reid. “More importantly, we are confident that our momentum will continue in 2024 as our sonar and subsea power business are seeing strong growth opportunities.

There is a clear uptick in demand for Uncrewed Underwater Vehicles (UUVs) where we sell both sonar and batteries to AUVs and provide minehunting solutions to Navies with our KATFISH towed synthetic aperture sonar solution. The emergence of a new class of UUVs, the Extra Large UUV (XLUUV) is driving much higher energy requirements in UUVs and our subsea battery business is benefitting. Many countries and Navies around the world are in various stages of upgrading their subsea surveillance equipment, with underwater solutions such as towed sonar or Autonomous Underwater Vehicles (AUVs) that are deployed from crewed or Uncrewed Surface Vessels (USVs). Kraken’s technology portfolio and product and service offering are well positioned to ride this demand wave. Our second largest market, offshore wind, has seen continued solid demand for sub-seabed services. The offshore wind and offshore oil and gas market represents 15-20% of our overall revenue stream.

During the quarter, we eliminated most of our long-term debt as we paid off the PanGeo acquisition debt, with no further contingent consideration, and we almost doubled our credit facilities to $12 million, providing greater flexibility for our working capital requirements. Given our forecast, we believe we have all the cash we need to execute on our business plan, and expect cash balances to improve as orders are executed and we hit various payment milestones. As said previously, we believe our value in the market is not reflective of our significant investment to date, our unique competitive position, and strong pipeline. We will continue our focus on execution as we believe we are in the early days of creating significant shareholder value.”

($ 000s except per share amounts) (unaudited)
Q3 2023
Q3 2022
% change
YTD 2023
YTD 2022
% change

Total revenue
20,342

12,291

66
%
41,575

32,095

30
%


Gross margin
9,995

4,429

126
%
22,242

12,644

76
%


Gross margin percentage
49
%
36
%

53
%
39
%



Adjusted EBITDA
4,423

1,745

153
%
8,366

4,361

92
%


Adjusted EBITDA percentage
22
%
14
%

20
%
14
%













Q3 2023 Financial Highlights

Consolidated revenue for Q3 2023 was $20.3 million compared to $12.3 million, an increase of 66% over the comparable quarter and was Kraken’s strongest revenue quarter to date. Revenue mix was 85% Products / 15% Services.
Product revenue in the quarter was $17.2 million, an increase of 126% over the comparable quarter. The increase was the result of continued sales of subsea batteries, work with the Canadian Navy on its Remote Minehunting and Disposal Systems (RMDS) program, the production of our KATFISHTM product as well as the sale of synthetic aperture sonar (SAS) systems.
Service revenue in the quarter was $3.2 million, a decrease of 32% over the comparable quarter due to a large Acoustic CorerTM project in the comparable quarter a year ago.
Gross margin1 percentage in Q3 2023 was 49% compared to 36% in Q3 2022. The improvement was due to increased sales volumes of higher margin products during the quarter compared to the prior year.
Adjusted EBITDA1 for the quarter was $4.4 million compared to an Adjusted EBITDA1 of $1.7 million in the comparable quarter. Adjusted EBITDA1 margin in the quarter was 22% compared to 11% in the comparable quarter with the increase due to higher revenue and improved gross margin.
Net income in the quarter was $2.3 million, compared to net loss of $0.9 million in Q3 2022.

Highlights year-to-date September 30, 2023

Consolidated revenue year-to-date was $41.6 million compared to $32.1 million, an increase of 30% over the comparable nine-month period ending September 30th, 2022.
Product revenue year-to-date was $33.0 million compared to $19.8 million to September 30th, 2022, an increase of 66%.
Service revenue year-to-date was $8.6 million, a decrease of 30% compared to the comparable period ending September 30th, 2022. The decline is related to having a large Acoustic CorerTM project completed in the prior year that was not repeated in 2023.
Gross margin1 percentage year-to-date was 53% as compared to 39% in year-to-date 2022. The increase is due to sale of higher margin products during the current year compared to the prior year.
Adjusted EBITDA1 year-to-date was $8.4 million compared to an Adjusted EBITDA1 of $4.4 million in the comparable period, an increase of 92%. Adjusted EBITDA1 margin year-to-date was 20% compared to 14% in the comparable year. This is due to higher revenue and improved gross margins.
Total assets were $70.5 million on September 30, 2023, compared to $65.5 million on September 30, 2022.
At September 30, 2023, Kraken had $9.5 million remaining in grant funding to be offset against R&D activities. This off-balance sheet item relates to government or commercial contracts that are not recorded as revenue, but will reduce our actual R&D costs through the end of 2025.

Financial Update

As we approach year end, Kraken is tightening its range for 2023 financial guidance. The Company expects revenue to be in the $66 - $72 million range (previously $66 - $78 million) and adjusted EBITDA1 in the $12 - $15 million range (previously $12 - $17 million). The mid-point of our guidance range ($69 million in revenue and $13.5 million in adjusted EBITDA1) implies revenue growth of 70% and adjusted EBITDA1 growth of 155% over 2022. Capex in 2023 is expected to be approximately $6 million. Consistent with the last two years, we expect to give guidance for 2024 in the April 2024 timeframe. We will enter 2024 with notable contracts in hand, a very strong pipeline, and solid end market demand in our largest market: defense.

[joelawyer]

Quarterly Financials out tomorrow morning pre-market.

[joelawyer]

OCEAN INFINITY GROUP LIMITED ANNOUNCES DISPOSITION OF SHARES IN KRAKEN ROBOTICS INC.

Source: PR Newswire (Canada)
TORONTO, Nov. 24, 2023 /CNW/ - Ocean Infinity Group Limited (formerly Ocean Infinity Limited) (the "Corporation" or "Ocean Infinity") announces the disposition of its shares of Kraken Robotics Inc. (TSXV: PNG) (OTCQB: KRKNF) (the "Issuer" or "Kraken"). This press release is being disseminated as required by National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues by the Corporation in connection with the disposition of shares of the Issuer.

On November 23, 2023, the Corporation sold (the "Disposition") all of the 21,280,000 common shares ("Common Shares") in the capital of the Issuer held by the Corporation, by way of a block trade over Cboe Canada. Aggregate consideration for the Disposition was CDN$ 10,663,408 (or approximately CDN$0.5011 per Common Share).

Immediately prior to the Disposition, the Corporation had beneficial ownership of, or control and direction over, 21,280,000 Common Shares, representing approximately 10.3% of the issued and outstanding Common Shares, on a non-diluted basis (based on the number of Common Shares most recently reported by the Issuer as being outstanding). Following the Disposition, the Corporation no longer has beneficial ownership of, or control or direction over, any Common Shares.

Ocean Infinity held a small minority ownership position in Kraken that became non-core as its business expanded to include surface robotics. The Disposition was made to redeploy funds away from its Kraken position at a good profit after 5 years of ownership. Ocean Infinity remains committed to working with Kraken as one of its key suppliers to its subsea data services business. The Corporation may, from time to time, take such actions in respect of securities of the Issuer, as it may deem appropriate, in light of the circumstances then existing, including the purchase of Common Shares or other securities of the Issuer, subject to applicable securities laws and the terms of such securities.

An early warning report will be filed by the Corporation under applicable Canadian securities laws and once filed will be available on the Issuer's SEDAR+ profile at www.sedarplus.com. Following the above-noted early warning report filing, the Corporation will no longer be required to report under the early warning requirements of National Instrument 62-104 –Take-Over Bids and Issuer Bids, unless its security holdings in the Issuer increase to 10% or more in the future.

The address of the Corporation is:

17 Grosvenor Street
London, United Kingdom
W1K 4QG.

[spec machine]

On technicals alone, Kraken is a great buy @ .37 USD

Military contracts being filled and services gaining traction

On the cusp of profitability

Upward from here but likely a bumpy ride in this market

spec

[CashCowMoo]

Seems so odd that this is under .30 right now with everything they have going on. Hopefully they get out of the OTC. OTC is just too toxic for companies with something good going on.

[The_Gman]

😂 I’m still around! Still have most of my VirTra. I didn’t sell on the last two big runs when I should have. Got out of Kraken at .78 a couple years back and I just got back in a little today.

[joelawyer]

Hey there Ardly! I thought you maybe lost your way - LOL.
Welcome to Kraken. I think it’s a steal here.
VTSI is the puzzle. They are going to easily have .50 - .60 minimum for the full year, and the share price sits at less than $7 - go figure.

[The_Gman]

Hi Joe, Hope all’s well! Bought a few to see if it gets a little bounce on the report.

[joelawyer]

I think the Q2 report will be August 29

[The_Gman]

https://krakenrobotics.com/kraken-robotics-reports-results-of-annual-and-special-meeting-of-shareholders/

[CashCowMoo]

i missed that….what is that all about

[The_Gman]

Thinking about getting back in at this level but haven't been paying much attention. Anyone have any insights or potential timeline for this?

2023 Annual and Special Meeting of Shareholders was held virtually on Tuesday, June 27, 2023, at 1 pm EST. Shareholders voted in favour of all items put forward by the Board of Directors and Management.

Shareholders voted in favour of: Approving a consolidation of the common shares to occur as and when determined by the Board of Directors based on a ratio of between two to seven pre-consolidation shares for each post-consolidation share

[CashCowMoo]

i don’t see anything bad so it must be market manipulation. i agree these prices are a steal and it’s possible down the road they won’t be available like this again.

[joelawyer]

I’m still here. I don’t post much, but follow daily. Yes, there has been much good . . . Make that great . . . News. I’ve added many shares in the last few months. This is an amazing bargain.

[CashCowMoo]

Anyone still watching this? Not sure why this is so low with so much positive news that has come out this year.

[eqinvestor]

Don't forget the AI component to this story

[eqinvestor]

I believe the issue is that people perceive that government contracts and defence take a long time to sell. It's not a super exciting tech story. However, look at the pipeline and I believe the growth will continue for several years.

[joelawyer]

Baffles me, too.

[CashCowMoo]

Yes it is. I blows my mind its been just stuck in the upper 30s and lower 40s

[eqinvestor]

This is one of the highest quality companies on the OTC. Remarkable!!

[CashCowMoo]

Little bit of news: https://krakenrobotics.com/kraken-robotics-to-present-at-houlihan-lokeys-global-industrials-conference-in-new-york-city/

[CashCowMoo]

this should be twice the PPS currently

[spec machine]

Kraken Robotics - $4M follow-on order for Katfish system spares

https://krakenrobotics.com/kraken-receives-4-million-order-from-nato-navy/

Also—
Ocean Business 2023 kicks off today in Southampton, come visit Kraken Robotics at booth H3

Audited financials for FY 2022 should be filed soon, preliminary guidance released earlier

spec

[spec machine]

L2 shows a stacked bid like I haven’t seen for a long time on KRKNF

Currently $.39 USD

I reiterate (LOL) my LONG call .70

Defense spending on subsea tech is about as “recession-proof” as any sector could be in this global geopolitical setting

Kraken’s order book is LIT UP !

spec

[spec machine]

Sea Technology has featured one of Kraken’s recent contract awards in this month’s issue

https://sea-technology.com/kraken-auv-contract

spec

[spec machine]

Money flowing out of equities for weeks now and it only takes a few sellers cashing out

The market for the stock is tiny at this point because they are unproven at their current valuation

A little “risk off” sentiment creates a big downdraft in early stage companies

Upcoming audited financials should ease uncertainty and validate their business model

spec

[CashCowMoo]

Wonder what caused it to dip back into the upper 30s

[spec machine]

KRKNF @ $ .38 USD

if I am reading the waves correctly, we’re going to be getting a big leg up this week

However, if banks are still crumbling it’s likely to delay and weaken the runup

Military spending = as fast as you can build them

Open the spigot, order/make lots of parts, assemble, test, deliver, boom

The RAAS segment will be much slower to scale but probably has a lot more existing capacity that can be tapped

2023 will be the year for them to show what they can do

Assuming that everything and everyone isn’t melting down

GLTY

spec

[CashCowMoo]

No reason for this to dip into the 30s, strange.

[spec machine]

New orders flowing in and we’re getting more validation of the superior performance of Kraken Robotics SAS

Still in the early stages of scaling up and looking good

Spring will bring a flurry of new customers outside of defense sectors

spec

[CashCowMoo]

Still a great long term hold in my opinion. Accumulate and just forget about it for a while.

[spec machine]

Kudos to Kraken Robotics- top honors in the TSX Venture 50 for 2023

https://www.tsx.com/news?id=944&year=2023

Kraken takes the highest ranking in the technology category of the list

Two things will make this company’s share price rock 2023

1- the military contracts begin to hit the top line in a big way

Defense spending is the most recession-proof revenue stream ever

2- Dilution ends as capital needs and founder greeds fade

Clearly there is a selling pressure from early investors and founders bleeding shares into a thin market for the stock

High valuations on early-stage companies are extremely vulnerable to this kind of negativity

The first is in good shape, defense contracts are locked in and future revenues are increasing

The second is going to be the determining factor to determine whether Kraken does well in 2023, or whether it has a remarkable run



spec

[spec machine]

Another positive development for subsea survey buisiness

https://www.science.org/content/article/u-s-proposal-would-make-oil-companies-look-shipwrecks-they-drill

spec

[spec machine]

Kraken SAS on a REMUS AUV (Dec 2022 release)

Kraken Awarded $50+ Million Navy Contract for Royal Canadian Navy Minehunting Program https://t.co/PMj0mOFnB3 pic.twitter.com/S08I3E4zPV

— Kraken Robotics (@KrakenRobotics) December 7, 2022

That contract is a grand slam move and it’s just a portion of the production breadth in Kraken’s offerings

50M CAD contract and what is the shape of the revenue growth chart on this???

Then, how many other countries are investing heavily in subsea military equipment?

Do you sense any urgency in these government military contracts?

Did a Kraken executive recently comment that the spending on subsea robotics was “like someone lit a match” to the sector

I’m not expecting profits yet due to the increased staffing and inventory ahead of the scaled-up production that they are enabling

I do expect a deeper look into those topics on the next filing/presentation

As far as PanGeo, the terabytes of data collected isn’t really information that is useful

Something like man-hours or survey line-miles might be more helpful to approximate a growth rate over time

I’ve pinged a couple contacts who know the sector and have gotten some positive feedback on their penetration and performance

Bright future for certain

spec

[TrendTrade2016]

PNG.V ONE OF THE MOST BULLISH WEEKLY CHARTS OUT THERE

[TrendTrade2016]

PNG.V READY TO FLY

[spec machine]

CAD to USD exchange rates - worth noting that every US dollar today buys over 10% more of any CAD denominated equity (or anything really) than it did back in June

This pressure has a small downward push on the USOTC KRKNF ticker as compared to the PNG.V ticker on the TSX

A strengthening CAD would bring KRKNF prices (in USD) higher, whereas a weakening CAD will diminish the numerical gains of KRKNF on the OTC

spec

USD/CAD chart
https://www.tradingview.com/symbols/USDCAD/

[spec machine]

2023 is going to be a great year for Kraken

The market penetration, especially the military/defense market is pretty remarkable

They are giving clear narrative wording that their contracts and orders are totally lit up!!

Inspection of subsea infrastructure? Energy and communication are critical components in our global economy

What’s the cost of insurance and monitoring for tampering or malfeasance?

I think it’s clear from the current conflicts where the defense dollars will flow, air and sea

Kraken is squarely in the producer pipelines of several countries

Read that part again, several countries

Pause, scan financials, cogitate ….

.40 USD now and my WAG is .75 or better by June 2023

spec

[CashCowMoo]

smart moves

[spec machine]

A downdraft on such positive news today is obviously more a reflection of the broader market sentiment

“Standard equipment” now on the Remus AUV, awesome

That’s a big name buyer and no limit on the upside numbers

A buy time, IMO anything under $.44 (USD) will be happy holders

https://krakenrobotics.com/kraken-to-provide-sas-to-hiis-new-medium-class-uuv/

https://en.m.wikipedia.org/wiki/REMUS_(AUV)

HII - latest Q was $2.6B in revenue

Cheers

spec

PS - as someone who has analyzed (old style analog and digital) side scan sonar images for countless hours …

…. those SAS images are gorgeous !!!

[spec machine]

This has been an excellent chart trader on RSI

I’ve been adding on the bid every time the RSI drops around 65 and ease out a few whenever it pushes over 70

Through scalping those thrusts, I have boosted my core position

The regularity of the bounces on this uptrend has been bountiful

Must be getting old when I can be so happy about regularity, LOL

spec

[spec machine]

Choppy but making nice progress

spec