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.
