Kraken Reports Strong Growth in 2018 and Provides Outlook for 2019
V.ACA.P, V.PNG | 1 hour ago
Kraken Forecasting More Than 100% Revenue Growth and Positive Net Income in 2019
ST. JOHN’S, Newfoundland, May 10, 2019 (GLOBE NEWSWIRE) -- Kraken Robotics Inc. (TSX-V: PNG, OTCQB: KRKNF) announced it has filed its financial results for the fourth quarter and year ended December 31, 2018. Additional information concerning the Company, including its audited consolidated financial statements and related management’s discussion and analysis (“MD&A”) for the year ended December 31, 2018, can be found at www.sedar.com. Unless otherwise stated, all dollar amounts are Canadian dollar denominated.
2018 Financial Highlights
Revenue of $6.7 million for the 12 months ended December 30, 2018, up 90% from $3.5 million in 2017;
Net loss (excluding minority interest) of $2.7 million, versus $2.4 million in 2017;
End of year cash balance of $4.9 million as compared to $nil at the end of 2017;
End of year total assets of $14.0 million as compared to $5.3 million at the end of 2017;
At year-end 2018, Kraken had $1.9 million in previously awarded funding to draw upon from government agencies.
“Fiscal 2018 was a transformational year for Kraken, as we saw broader adoption and expansion of our technologies, the acquisition of key people and intellectual properties, and continued demand for our innovative products,” said Kraken CEO Karl Kenny. “We also established several strategic relationships with prominent firms that included: Ocean Infinity, ThayerMahan, Leeway Marine, and the National Oceanic and Atmospheric Administration. Our pipeline remains robust and we are confident that in 2019, we can exceed our 2018 performance of doubling revenues annually.”
2018 Corporate Highlights
$0.4 million AquaPix® order from leading military customer;
Strategic alliance with ThayerMahan, a U.S.-based systems integrator specializing in maritime autonomous systems, to deliver next generation underwater sensors and robotics for military, law enforcement, port and maritime security and environmental monitoring applications.
Kraken Robotik GmbH awarded more than $0.9 million in funding contracts for two development initiatives for evaluation of SeaVision® sensors and AI control software for autonomous underwater vehicles;
Strategic partnership with Ocean Infinity, a next generation offshore ocean survey and ocean exploration company using a fleet of autonomous underwater vehicles. Ocean Infinity made an initial investment of $2.3 million in Kraken’s equity representing ~10% of Kraken shares at that time;
Announced the start of development of an ultra-wideband acoustic remote sensing system for seafloor imaging and mapping;
Announced it had successfully completed military standard certification testing of the KATFISH-M.
Kraken’s new Acoustic Signal Processing Group to develop anti-submarine warfare (ASW) applications. In Q3, Kraken was awarded a $1 million ASW software contract by a large international defense contractor;
Ocean Infinity agrees to purchase $9 million of Kraken’s deep-sea batteries;
Entered in a Cooperative Research and Development Agreement with the US Navy’s Naval Undersea Warfare Center (NUWC) for the testing of Kraken’s KATFISH towed synthetic aperture sonar;
$0.5 million AquaPix order from leading military customer;
Entered a Cooperative Research and Development Agreement with the Office of Ocean Exploration and Research of the National Oceanic and Atmospheric Administration (NOAA) to explore the application of Kraken’s underwater sensor and robotic technologies and systems to NOAA’s ocean observation charter in potentially more effective (less expensive, better results, more environmentally friendly) ways;
Completed, in cooperation with ThayerMahan Inc., a successful demonstration of its SeaScout® Expeditionary Seabed Mapping and Intelligence System during the U.S. Navy’s Advanced Naval Technology Exercise;
Awarded a $0.5 million contract for delivery to the Canadian Department of National Defense (DND).
Completed the acquisition of Kraken Power GmbH with Kraken now owning 75% of Kraken Power.;
During the year, completed equity financings totaling $9.8 million and collected proceeds of $1.4 million from the exercise of warrants and options.
Subsequent Highlights after Year-End 2018
Announced that long-standing customer, ECA Group, is part of winning consortium for Belgium and Dutch Navy mine hunting program. ECA Group’s share of the contract is valued at approximately €450 million. Upon successful contract executions and if all contract options are exercised as quoted, Kraken’s portion of the program is expected to be in excess of C$35 million;
$0.6 million contract from Public Works and Procurement Canada under the Defence Innovation Research Program to develop a low frequency, ultra-wideband Synthetic Aperture Sonar (SAS) for use in underwater operational environments;
$1.7 million of purchase orders from Ocean Infinity for AquaPix SAS sensors and support;
Received proceeds of more than $3.2 million from the exercise of 5.8 million warrants at $0.40 per share (Ocean Infinity) and 3.1 million warrants at $0.30 (investors from April 2017 private placement);
$1 million contract for ThunderFish® from Government of Canada under Canada’s BCIP program;
$1 million financial contribution from the Government of Newfoundland and Labrador under the Innovation and Business Development Funding program. The funding will be used for the initial phase of the OceanVision™ project that Kraken plans to pursue as part of the Ocean Supercluster initiative;
$0.6 million contract for subsea battery solution for a military customer.
Outlook for 2019
“For 2019, we are anticipating revenue of greater than $15 million, more than doubling 2018 revenue,” said Mr. Kenny. “This growth target excludes potential upside from: 1) several, large, multi-unit defense industry bids that are currently in progress or in contract negotiation phase, and; 2) Ocean Supercluster proposal, which Kraken submitted in April 2018. Should we have success in these pursuits, we will adjust our targets accordingly. Fiscal 2018 was a year of significant growth for Kraken across the board. Integration of our Kraken Power GmbH acquisition is progressing, and we have a strong bid pipeline and a contracted backlog entering 2019 of $10.5 million. We are well positioned for strong growth this year and beyond.”
Targeting to more than double revenues to $15+ million. This target excludes any contribution from the Company’s current major defense bids and the Ocean Supercluster;
International Defense & Navy Bids. There is an industry upgrade cycle occurring in the mine warfare segment of navies globally. Kraken is involved in multiple bids with several parties on programs that would use both our sensors and robotic products. In addition, there are other expected bids that have not yet reached the RFP stage that Kraken expects to participate in.
US Military Opportunities. The world’s largest defense market is also seeing an industry upgrade cycle happening in naval mine warfare and increasing adoption of underwater robotics. Kraken expects to have 2019 announcements relating to this market.
Ocean Supercluster. In April 2019, Kraken submitted a proposal for its OceanVision™ project, a 3-year program in which a cross-sectoral group of technology developers, operators, and data consumers would develop an AI-Based, data driven platform that will execute adaptive missions for unmanned exploration and mapping of the seafloor. The result would be the creation of a robotic data analytics as a service: an end-to-end digitalization solution that offers advanced sensors, robots and data analytics as a turnkey service solution for seafloor imaging and mapping. Using rapid high-throughput data analytics will make it possible to significantly reduce the cost of obtaining high resolution seafloor imaging and mapping allowing end-users to make more informed operational decisions in real-time.
Targeting positive net income for the full year. While certain quarters may be adversely impacted due to manufacturing schedules and delivery dates, we anticipate achieving a positive net income for the full year 2019.
Kraken Comments on Delay in Financial Filings
As noted in our May 7 press release, Kraken had expected to release financial statements last week and thus meet the filing deadline. In our view, the delay was primarily due to finalizing the audit of the valuation and resulting consolidation of our Kraken Power acquisition (previously announced on January 7, 2019) and the related allocation of the purchase price paid to the various tangible and intangible assets.
Given various circumstances, some of which were beyond our control, it is fair to say we underestimated the level of effort and difficulty in adopting new accounting standards and dealing with a very complex international acquisition that had a $1 million bargain purchase price gain. This bargain purchase price gain is unusual for accounting purposes but good for the overall business.
While Kraken is still a small company with limited resources, ultimately it is the responsibility of the management to produce financial statements that the auditor will provide an unqualified opinion on in a timely manner. We will take steps to ensure this does not happen again. Changes will be made both internally in our finance group (with an emphasis on public company reporting) and externally.
“Separately from this late filing hiccup, Kraken’s business is making very good progress as evidenced by the improvement in our 2018 financial results and our outlook for 2019”, said Greg Reid, Kraken’s Chief Financial Officer. “Our pipeline of customer opportunities is better than it has ever been, both for military and commercial customers, and our strategic investment by Ocean Infinity in 2018 is a strong vote of confidence for our products and business. We have no need to raise cash in order to meet our 2019 forecasts as our balance sheet is solid. We will continue to improve our internal capabilities to bring on and manage new business. This includes across all areas of the organization: finance, manufacturing, research and development, customer service and support, and business development. Managing rapid growth is challenging. We will continue to work hard, add key capabilities, and make changes across the organization, in order to get it right.”
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