Kraken Sonar Inc. (TSX.V:PNG) (OTCQB: KRKNF) is a marine technology company dedicated to the production and sale of software-centric sensors, subsea batteries, and underwater robotic systems. The company is headquartered in Newfoundland with offices in Canada, U.S., Germany, Denmark, and Brazil. In July 2021, Kraken acquired PanGeo Subsea, a leading services company specializing in high-resolution 3D acoustic imaging solutions.
Coverage was initiated March 2017, with addditional notes on October 2017, April 2018, July 2018, December 2018, August 2019. May 2020, January 2021 , September 2021 and June 2022.
News Releases
July 11 - Delivers Significant Technical Upgrade for Royal Danish Navy’s Mine Countermeasures (MCM) Efforts: Delivered mine-hunting sonar equipment to the Royal Danish Navy. This includes Kraken’s KATFISH™ towed Synthetic Aperture Sonar, Tentacle® Winch and Autonomous Launch and Recovery System (ALARS).
July 12 - Awarded $2 Million from US Defense Customer for Synthetic Aperture Sonar Systems: New contracts valued at $2.0 million for its 6000-meter rated AquaPix® Synthetic Aperture Sonar (SAS) from a US defense contractor for deployment on Autonomous Underwater Vehicles (AUVs) built by the customer. Due to confidentiality reasons the customer cannot be named. Deliveries are expected to occur in the second half of this year.
Aug. 30 - Reports Strong Q2 2022 Financial Results: Financial guidance for 2022 remains unchanged from previously issued guidance. In 2022, we expect revenue to be in the $36 - $42 million range, mostly driven by the continued delivery of systems to the Royal Danish Navy, a full year impact from the acquisition of PanGeo and continued deliveries of our AquaPix® synthetic aperture sonar and SeaPower™ battery products.
Sep. 6 - Receives $9.0 Million Contract for Additional Upgrades to NATO Navy’s Mine Hunting Capabilities: As part of this new contract, Kraken will deliver additional KATFISH™, Tentacle® Winch and ALARS and topside systems. Kraken’s sonar equipment will be integrated onboard new MCMVs, with deliveries occurring in 2023 and 2024.
Kraken also announces that it has issued 100,000 stock options to an employee. These options have a five-year term, with vesting in three equal instalments consisting of six months from the date of grant and on the one and two-year anniversaries of the initial grant. The exercise price on the options is $0.37.
Sep. 7 - PanGeo Subsea Completes Cable Depth of Burial Campaign to Support Estonian / Finnish Electricity Transmission: Utilizing PanGeo's SeaKite ROTV equipped with the patented Sub-Bottom Imager™ (SBI). PanGeo has completed more than 10,000 kilometers of cable Depth or Burial (DOB) surveys to date.
The SBI produces a 3D acoustic image of the cable exterior to a depth of 5m below the seabed. As an acoustic system, the SBI is non-intrusive, allowing the cables to remain fully operational during survey operations, an essential requirement for power transmission cables. The SeaKite ROTV has an integrated SBI, which enables 3D acoustic surveys at speeds up to 4kts. Removing the need for an ROV to perform cable DOB.
Sep. 12 - Qualified to Sell Directly to Government of Canada under Pathway to Commercialization Program: This qualification for Kraken’s OceanVision™ solution is under Canada’s new Pathway to Commercialization framework.
Sep. 28 - Demonstrates KATFISH High Speed Towed SAS in Royal Navy WISEX Demonstration: WISEX provides an opportunity for industry to showcase new systems for consideration by the RN.
Oct. 5 - Receives $1.1 Million of Contracts for AquaPix® Synthetic Aperture Sonar Systems: (Two customers) Due to confidentiality reasons the customers cannot be named but deliveries will go to the UK and Singapore for integration onto small man portable Autonomous Underwater Vehicles (AUVs).
This represents Kraken’s first sale into Singapore and is reflective of our growing value proposition in the defense market of providing leading technologies at commercially competitive prices.
Oct. 6 - KATFISH Towed Sonar Providing Strong Seabed Intelligence Value Proposition:
Oct. 11 - PanGeo Subsea, a Kraken subsidiary, Completes Acoustic Corer™ Survey for ONE-Dyas off the Dutch Coast: This is PanGeo’s second Acoustic Corer (AC) survey at ONE-Dyas’s GEMS development, supporting the N05-A.
About GEMS: ONE-Dyas aims to deliver the first natural gas to Dutch and German households by the end of 2024. The N05-A project is part of the GEMS area, an area approximately 20 to 100 kilometres north of the Ems estuary in which ONE-Dyas is currently actively exploring in other gas fields in the North Sea.
Oct. 14 - Receives $1.1 Million Follow on Battery Order from AUV Manufacturer: The order is valued at $1.1 million and is a follow on from a $4.8 million order from the same customer earlier this year.
Oct. 27 - Receives $0.6 Million Synthetic Aperture Sonar Order for Activities in Canada’s North: Purchase order from Qikiqtaaluk Corporation (QC) for our AquaPix® synthetic aperture sonar (SAS) which will be integrated to an Autonomous Underwater Vehicle (AUV) that the Qikiqtaaluk Corporation.
Delivery is expected in 2023 and the contract value is more than $600,000.
Oct. 28 - PanGeo Subsea Celebrates Record Year of Contracts valued over $8 Million for the Acoustic Corer: near completion of Acoustic Corer ("AC") contracts valued over $8 million in 2022. This has been the AC's busiest year since its commercialization in 2011, supporting surveys in the US, North and Baltic Seas.
Oct. 31 - Receives $1.1 Million Synthetic Aperture Sonar Order for NATO Navy Customers: An unnamed customer for several of our AquaPix® synthetic aperture sonars (SAS). These systems will be integrated to Autonomous Underwater Vehicles (AUVs) for delivery to two distinct NATO navies. Delivery is expected in the first half of 2023.
Nov. 4 - Signs $8 Million Contract with Global Energy Company: Signed a R&D contract with a global energy company which will provide $8 million of cash funding to Kraken’s Brazilian subsidiary over a 3-year period.
Under this project, Kraken will continue development of Artificial Intelligence, Machine Learning software, and subsea autonomy solutions to intelligently analyze sensor data and learn how to respond to highly dynamic environments in the offshore oil and gas, wind, hydrographic, science, and defense industries.
Due to customer confidentiality, further details cannot be released at this time
Nov. 8 - PanGeo Subsea, Concludes Over $5 Million of Sub-Bottom Imager Project: PanGeo Subsea subsidiary has completed over $5 million in Sub-Bottom Imager (SBI) projects year-to-date. These surveys have supported the development of offshore wind farms in the US, Irish Sea, North Sea, Baltic Sea, and off the coast of Taiwan.
Nov. 18 - Completes Submarine Power Cable Survey with KATFISH Towed Sonar: completion of the offshore portion of a Robotics as a Service (RaaS) contract for the marine inspection of critical underwater infrastructure, including a submarine power cable. The contract value is $0.5 million.
Nov. 28 - Receives $14 Million Order for Subsea Power Systems: An initial order for subsea batteries valued at $14 million, which includes a significant advance payment. Deliveries will occur in 2023.
Nov. 29 - Reports Strong Q3 2022 Financial Results
Nov. 30 - Maritime Defense Industry Leader Joins Kraken Board of Directors
Dec. 7 - Awarded $50+ Million Navy Contract for Royal Canadian Navy Minehunting Program: Awarded a prime contract with the Government of Canada to provide Remote Minehunting and Disposal Systems (RMDS).
If all options in the Acquisition and ILS programs are selected, the total value will exceed $50 million, consisting of approximately $40 million for Acquisition and $10 million for ILS. Kraken’s partners on this program include Kongsberg Maritime Canada Ltd., thyssenkrupp Marine Systems Canada Ltd (tkMS), and SH Defense.
Dec. 9 - Provides Update on PanGeo Earnout:
Dec. 19 -Provide SAS to HII’s New Medium Class UUV: AquaPix® Miniature Synthetic Aperture Sonar (MINSAS) System has been selected as the standard payload offering on HII’s new REMUS 620 Medium Class UUV.
Synthetic Aperture Sonar is quickly becoming the tool of choice for mine countermeasure (MCM) operations due to its significantly increased resolution and higher area coverage rates compared to legacy Side Scan Sonar.
Dec. 21 - Receives $0.8 Million International Robotics as a Service (RaaS) Contract: for the high-resolution inspection of the critical sea routes and critical marine infrastructure. The initial contract is valued at $0.8 million and will be undertaken in Q1/2023 using the KATFISH™ high-speed towed synthetic aperture sonar (SAS) system coupled with Kraken’s Automated Launch and Recovery System (ALARS) on a vessel of opportunity.
For confidentiality reasons, the location of the contract cannot be disclosed.
Dec. 22 - Announces Management Transition: Karl Kenny, Founder and President and Chief Executive Officer, will be appointed Executive Chairman of Kraken and transition the President and Chief Executive Officer role to Greg Reid.
Mr. Reid joined Kraken more than 7 years ago as Chief Financial Officer and since 2019 has been Chief Operating Officer. This transition will become effective January 1, 2023.
Jan. 6 - PanGeo Subsea is now Kraken Robotics.
Jan 10 - Announces Appointment of David Shea as Chief Technology Officer: David Shea, Executive Vice President (EVP) of Products, will take on the additional role of Kraken’s Chief Technology Officer (CTO).
Jan. 12 - Expects to Report $40 Million in 2022 Revenue, up 56% Year-Over-Year: Non-audited preliminary results show that we have met the mid-point of our $38 million to $42 million revenue guidance for 2022.
Update on PanGeo Earnout: The Company elected to satisfy 50% of the First Earnout Amount through the issuance of an aggregate of 4,500,000 common shares at $0.50 and the remaining 50% of the First Earnout Amount in cash.
Jan. 17 - Provides Update on Subsea Laser Scanner Service Activities:
Kraken’s SeaVision inspection technology is primarily used in assisting the offshore energy sector to acquire higher quality subsea asset integrity information, more quickly at a lower cost than competing solutions.
Kraken’s SeaVision business unit continues to make progress across a variety of fronts including:
Feb. 21 - Ranked #1 Technology Company on 2023 TSX Venture Top 50 List
Mar. 7 - Supporting N-Sea with Major Cable Depth of Burial Survey in the North Sea: Kraken Robotics is to support subsea solutions provider N-Sea with cable burial survey services during cable inspection and remedial burial campaign for a major interconnecting power cable asset in the North Sea. While contract values cannot be disclosed, Kraken has secured more than $1.4 million to date in Q1, 2023 in depth of burial and boulder detection projects.
Mar. 8 - Receives $1.3 Million Order for Synthetic Aperture Sonar for NATO Navy: These will be integrated to a NATO Navy’s Autonomous Underwater Vehicles (AUVs) for use in minehunting and security applications.
Mar. 9 - Kraken Receives Additional $1.5 Million of Orders from US Defense Customer: announces $1.5 million in orders from a US defense customer for our AquaPix® synthetic aperture sonars (SAS). These 6000-meter rated systems will be integrated to the customer’s Autonomous Underwater Vehicles (AUVs). Delivery is expected in 2023.
Summary
Contracts
A number of commitments were announced in the past nine months totaling roughly $42.5M*.
-$2.5M from US Defense Customer (Jul.2022)
-$9.0M from Customers in North America, Europe and the Middle East. (Sep.2022)
-$1.1M from Two Confidential Customers (Oct.2022)
-$1.1M from AUV Manufacturer (Oct.2022)
-$0.6M from Qikiqtaaluk Corporation (Oct.2022)
-$1.1M from NATO Navy Customers (Oct.2022)
-$8.0M from Global Energy Company (Nov.2022)
-$14M from Unnamed Customer (Nov.2022)
-$0.8M from Undisclosed Customer (Dec.2022)
-$1.4M from N-Sea (Mar.2023)
-$1.3M from US Defense Customer (Mar.2023)
-$1.5M from US Defense Customer (Mar.2023)
Excluded is the following which is not expected to be revenue uniquely for Kraken.
-$50M* from Royal Canadian Navy (Dec.2022)
Earnings
Like FY 2021, FY 2022 is set to deliver record revenues. Kraken expects revenues to be in the range of $38-$42M. Assuming $40M would represent a 55% YOY growth and would be the best year on record.
Options
100,000 Stock Options at $0.37 cents for 5 years (Sep. 2022)..
In short
For the last period, valuation fluctuated as high as $0.27 (52 week low) to 0.67 cents (52 week high). As displayed in the charts, the acceleration in valuation over the last six months is notable in spite of a small retracement of late.
Based on the revenue guidance (FY 2023, $38-42M), Q4 2022 would be anywhere from $6M to $9M. The key for the upcoming earnings will be the disclosure Net Earnings/Loss as the cash balance disclosed seemed healthy.
“We ended 2022 with a cash balance of $8.2 million, up from $5.7 million at the end of September and accounts receivable/contract assets of $13.0 million,” - Joe MacKay, Kraken Chief Financial Officer.
Surely, the market will be expecting revenue guidance for FY2023. Cormark Securities ($1.00) and Beacon ($1.05; based on $63M Revenue for FY2023) have aggressive price target which needs to be validated by Kraken.
However, the recent insider activities seems to indicate a bullish outlook.
Source: CEO.ca
To put the above in perspective, acquisitions were made at or above the warrants threshold (10M; $0.60 cents)!
This aligns with the pivot point on the chart ($0.60 cents). Hence, resistance is expected at that point. Overall, insider activity at Kraken seems to indicate a strong outlook for FY2023 with the current multiple having room for growth.
DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.
