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 for the sub-seabe
Coverage was initiated March 2017, with addditional notes on October 2017, April 2018, July 2018, December 2018, August 2019. May 2020, January 2021 and September 2021.
News Releases
Oct. 25 - Awarded Robotics as a Service (RaaS) Contract from Government of Canada: A $0.5M engagement for testing of Kraken’s ultra-high resolution survey equipment with the Royal Canadian Navy (RCN).
Oct. 25 -Provides Corporate Update on RaaS Activities: PanGeo’s engineering team has moved into Kraken’s Newfoundland facilities and the teams are working together on several large projects. Notable RaaS activities:
i) Kraken recently completed our first commercial RaaS campaign using our KATFISH™ towed underwater vehicle, undertaking a subsea cable inspection campaign in the Strait of Bell Isle.
ii) Kraken signed a RaaS contract for the Canadian Navy and details are noted in a separate press release today.
iii) Kraken’s SeaVision® laser scanning services have experienced strong interest from the offshore oil and gas and renewable energy markets for critical subsea asset inspection. Kraken has received contracts in North America, Europe, Africa, and Brazil for paid demonstrations of this technology, and expects to complete them during Q4 and into Q1, 2022. Applications include anode inspection at an offshore wind farm, mooring chain inspection for offshore oil and gas infrastructure, and metrology services. Customers are large global offshore energy/renewables providers.
iv) PanGeo is seeing strong Q4 offshore utilization performing sub-seabed imaging in Europe and Asia Pacific.
Nov. 23 - Awarded $7.1 Million of Contracts for Offshore Subsea Inspections: for two contracts from the Newfoundland Offshore Oil and Gas Industry Recovery Assistance (OOGIRA) Fund. The combined projects valued at $9.2 million will be executed from Q4 2021 through Q4 2022. Kraken and PanGeo’s inspection and survey platforms will assist the offshore energy sector to acquire better, faster, and more valuable data enabling better-informed decisions regarding asset integrity, enhance energy recovery and reduce carbon emissions during inspection and survey operations.
Nov. 29 - Reports Q3 2021 Results and Re-Iterates Annual Guidance
Feb. 23 - Awarded $4.8 Million Subsea Battery Contract from Defense Industry Customer: for integration on Autonomous Underwater Vehicles (AUVs) with deliveries occurring in 2022.
Cathy Bennett has resigned from the Company’s Board of Directors.
Feb. 23 - To Equip New AUV Customer with AquaPix® Sonar: An order for 1000-meter rated AquaPix® MINSAS 60 sonar from a new South Korean customer for use in a military application who is bringing a highly advanced autonomous capability to AUV operations. The order is valued at $0.3 million and will be delivered in 2022.
Apr. 4 - Successfully Completes Robotics as a Service (RaaS) Contract from Government of Canada: with the Royal Canadian Navy (RCN), for testing of Kraken’s ultra-high resolution survey equipment.
Apr. 29 -Reports Record 2021 Financial Results: Q4 Revenue of $15.0 million and Adjusted EBITDA of $3.0 million; Annual Revenue Increases by 109%. FY2022 Guidance: For 2022 we expect revenue to be in the $36.0 – $42.0 million.
May 4 - Subsidiary PanGeo awarded Sub Bottom Imager™ Contracts Valued at $3 Million+: Announce the award of several cable depth of burial campaigns in Europe utilizing the company’s 3D acoustic Sub-Bottom Imager™ (SBI). These contracts, with combined value of more than $3 million, will be completed throughout 2022.
Also announces the issuance of 6,330,000 stock options. The grant consists of 5,130,000 options to employees in recognition of their dedication and hard work supporting the interests of the company and 1,200,000 options to directors. These options have a five-year term, with vesting in three equal instalments consisting of the date of grant and on the one and two-year anniversaries of the initial grant. The exercise price on the options is $0.395 cents.
May 12- To Present at Houlihan Lokey’s Global Industrials Conference in New York City: Houlihan Lokey (NYSE:HLI) is a global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation. The firm serves corporations, institutions, and governments worldwide.
May 26 - Q1 2022 Financial Results: Guidance for 2022 remains unchanged from previously issued. In 2022, we expect revenue to be in the $36 - $42 million range, with adjusted EBITDA expected to be in the $5 - $7 million range.
During 2022, Kraken is also expected to receive progress payments on two large contracts amounting to $14.4 million.
May 30 - Awarded $1.6 Million for AquaPix® Synthetic Aperture Sonar Systems: Deliveries will occur in 2022.
Summary
Contracts
A number of engagements were announced in the past nine months totaling roughly $20.7M*.
Kraken Robotics
-$0.5M from Government of Canada (Oct.2021)
-$7.1M from Newfoundland Offshore Oil and Gas Industry Recovery Assistance (OOGIRA) Fund (Nov.2021)
-$4.8M from Defense Industry Customer Confidential (Feb. 2022)
-$0.3M from a new South Korean Customer Confidential (Feb. 2022)
Pangeo (subsidiary)
-$5.0M from Couvillion Group in the Gulf of Mexico (Not included above release list;March 2022)*
-$3.0M for a Windfarm in the UK, also engagements in Taiwan, North Sea and Baltic Sea (May 2022)
Earnings
FY2021 delivered record revenues ($25.7M); doubling FY2020 and with a lower Net Loss ($3.5M vs. $5.5M). Note that a large portion of revenues came in Q4 2021. However, FY2021 revenue came below guidance issued in Q3 2021 Earnings:
We continue to expect revenue for the year ended December 31, 2021, to be $28 million to $30 million, an increase of more than 130% as compared to $12 million in 2020. The forecasted growth is driven by initial deliveries of KATFISH™ 180 towed sonars and Autonomous Launch and Recovery Systems for the Danish and Polish navies, various orders for AquaPix® MINSAS sensors and SeaPower™ batteries, and five months of contribution from the acquisition of PanGeo..
FY2022 Q1 saw strong revenues ($5.5M) but with a significant Net Loss ($2.6M) especially compared to FY2021 ($3.5M). However, Kraken did re-issue Guidance for 2022 ($36M - $42M) with $14.4M progress payment from two contracts.
Options
A total of 6,330,000 stock options were granted; 5,130,000 to employees and 1,200,000 to directors at $0.395 cents.
In short
For the last period, valuation fluctuated as high as $0.50 cents and as low as $0.315 cents (52 week low). For perspective, today's close of $0.32 cents is almost at a 52 week low and well south of the levels of the last financing to acquire Pangeo Inc. ($0.50 cents) despite record earnings for FY2021 ($25M) and a strong guidance of $36-42M for FY2022!
Looking back, the last time Kraken traded at these levels were around i) March 23rd 2020, and ii) July 9th 2018.
Back then it was a much different company but these are also very different times.
The reported cash position in Q1 2022 ($1.2M) is relatively low compared to Q4 2021 ($6.8M). However, the awarded funds ($13.8M) are quite healthy with about 10M of outstanding warrants at 0.60 cents.
At March 31, 2022, Kraken had $13.8 million in previously awarded non-repayable funding to draw upon from government agencies and project partners for research and development, of which cash amounting to $3.6 million has been received for contracts to be completed in 2022.
Overall, Kraken has grown revenue significantly but the market will keep an eye on its Net Income for Q2 and the remainder of FY2022, especially since it is now a much bigger company with Pangeo.
Beacon Securities issued a $1.00 Target on $37M in Revenue for FY2022 (May 2nd) but PNG.V has been down since.
Valuation has been low and within this context the attendance to the Houlihan Lokey conference is noteworthy.
Houlihan Lokey (NYSE:HLI) is a global investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring, and valuation. The firm serves corporations, institutions, and governments worldwide with offices in the United States, Europe, the Middle East, and the Asia-Pacific region.
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