Q4 2025 Kraken Robotics Inc Earnings Call

April 16, 2026

Speaker #1: Participants are in listen-only mode, and the conference is being recorded. My name is Drew, and I will be your operator today. After the presentation, there will be an opportunity for analysts to ask questions.

Speaker #1: To join the question queue, you may press * then 1 on your telephone keypad. You will hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing * then 0.

Speaker #1: I will now turn the call over to Shaun Madian, Kraken's Director of Capital Markets. Please go ahead.

Speaker #2: Thank you, Operator. Good morning, everyone, and thank you for joining Kraken Robotics' earnings call for the 3 and 12 months ended December 31, 2025.

Speaker #2: Joining today's call from Kraken is Greg Reid, President and CEO, and Joe MacKay, Chief Financial Officer. Before we begin, I want to remind everyone that certain statements in this call may be forward-looking in nature, matters discussed including management estimates, statements involving known and unknown risks, uncertainties, and other factors could cause actual results to differ materially from those expressed or implied in our forward-looking statements, which reflect the company's judgment based on information available at the time of this call.

Speaker #2: I'd also like to refer you to the forward-looking statements, risk factors, and additional detail on non-IFRS financial measures we have provided in our press release, MD&A presentation, and AIF, which are available on Cedar Plus in addition to our website.

Speaker #2: Unless otherwise stated, all dollar amounts mentioned during this call are to denominated in Canadian dollars. I'll now pass the call over to Greg Reid, our President and CEO.

Speaker #2: Greg?

Speaker #3: Thanks, Shaun. Good morning, everyone. During today's call, we'll start off by reviewing our key accomplishments and financial results during the past year. We'll then review our outlook for the business, including our guidance for 2026.

Speaker #3: And lastly, we'll revisit the strategic merits of our recently announced acquisition of the Covellia Group, which is expected to close during the current quarter.

Operator: Good morning, and welcome to the Kraken Robotics Q4 and year-end 2025 results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. My name is Drew, and I will be your operator today. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I will now turn the call over to Shaun McEwan, Kraken's Director of Capital Markets. Please go ahead.

Speaker #3: As background, for those of you new to the story, to the Kraken story, I'll start off by summarizing that Kraken's and Marine Technology Company focus on transforming subsea intelligence.

Speaker #3: Our technologies are dual-use and serve customers globally, supporting the defense industry in various commercial markets such as offshore energy and scientific exploration. We're headquartered in Canada with manufacturing and service operations in Canada, the US, the UK, and Germany, and sales and R&D offices in Australia, Denmark, and Brazil.

Speaker #2: My name is Drew, and I will be your operator today. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then 1 on your telephone keypad.

Speaker #2: You will hear a tone acknowledging your request. Should you need assistance during the conference call, you may reach an operator by pressing star, then 0.

Speaker #3: We report across two lines of business: products and services. For our products business, it's focused on subsea power solutions such as our SeaPower batteries, platforms such as our Catfish, Toad system, and advanced sensors including our synthetic aperture sonar or SAS.

Speaker #2: I will now turn the call over to Sean Madian, Kraken's Director of Capital Markets. Please go ahead. Thank you, operator. Good morning, everyone, and thank you for joining Kraken Robotics' earnings call for the three and twelve months ended December 31, 2025.

Shaun McEwan: Thank you, operator. Good morning, everyone, and thank you for joining Kraken Robotics' earnings call for the 3 and 12 months ended 31 December 2025. Joining today's call from Kraken is Greg Reid, President and CEO, and Joe MacKay, Chief Financial Officer. Before we begin, I want to remind everyone that certain statements in this call may be forward-looking in nature. Matters discussed, including management estimates, statements involving known and unknown risks, uncertainties, and other factors could cause actual results to differ materially from those expressed or implied in our forward-looking statements, which reflect the company's judgment based on information available at the time of this call. I'd also like to refer you to forward-looking statements, risk factors, and additional detail on non-IFRS financial measures we have provided in our press release, MD&A presentation, and AIF, which are available on SEDAR+ in addition to our website.

Shaun McEwan: Thank you, operator. Good morning, everyone, and thank you for joining Kraken Robotics' earnings call for the three and 12 months ended 31st December 2025. Joining today's call from Kraken is Greg Reid, President and CEO, and Joe MacKay, Chief Financial Officer. Before we begin, I want to remind everyone that certain statements in this call may be forward-looking in nature. Matters discussed, including management estimates, statements involving known and unknown risks, uncertainties, and other factors could cause actual results to differ materially from those expressed or implied in our forward-looking statements, which reflect the company's judgment based on information available at the time of this call.

Speaker #2: Joining today's call from Kraken is Greg Reed, President and CEO, and Joe McKay, Chief Financial Officer. Before we begin, I want to remind everyone that certain statements in this call may be forward-looking in nature.

Speaker #3: We also provide services to the offshore energy and defense clients, including sub-bottom imaging, LIDAR, and Catfish solutions for seabed and subseabed imaging surveys. Looking back at our annual results, 2025 was a very successful year for Kraken.

Speaker #2: Matters discussed, including management estimates and statements involving known and unknown risks, uncertainties, and other factors, could cause actual results to differ materially from those expressed or implied in our forward-looking statements, which reflect the company's judgment based on information available at the time of this call.

Speaker #3: We generated record revenue and adjusted EBITDA, which was driven by significant demand for our SeaPower batteries and SAS products, as well as growth in our subsea service business.

Shaun McEwan: I'd also like to refer you to forward-looking statements, risk factors, and additional detail on non-IFRS financial measures we have provided in our press release, MD&A presentation, and AIF, which are available on SEDAR+ in addition to our website. Unless otherwise stated, all dollar amounts mentioned during this call are denominated in Canadian dollars. I'll now pass the call over to Greg Reid, our President and CEO. Greg?

Speaker #3: During the past year, we've taken several steps to help facilitate additional growth in our business, including the expansion of battery manufacturing capacity with the recent completion of our new facility in Nova Scotia, continued product innovation, including a new higher energy density battery design with approximately a 30% improvement in energy density for large and extra-large underwater vehicles, and plans for more compact designs to address smaller and medium-sized UUVs.

Speaker #2: Unless otherwise stated, all dollar amounts mentioned during this call are denominated in Canadian dollars. I'll now pass the call over to Greg Reed, our President and CEO.

Shaun McEwan: Unless otherwise stated, all dollar amounts mentioned during this call are denominated in Canadian dollars. I'll now pass the call over to Greg Reid, our President and CEO. Greg?

Speaker #2: Greg?

Speaker #3: Thanks, Sean. Good morning, everyone. During today's call, we'll start off by reviewing our key accomplishments and financial results during the past year. We'll then review our outlook for the business, including our guidance for 2026.

Greg Reid: Thanks, Sean. Good morning, everyone. During today's call, we'll start off by reviewing our key accomplishments and financial results during the past year. We'll then review our outlook for the business, including our guidance for 2026. Lastly, we'll revisit the strategic merits of our recently announced acquisition of the Covelya Group, which is expected to close during the current quarter. As background, for those of you new to the Kraken story, I'll start off by summarizing that Kraken's a marine technology company focused on transforming subsea intelligence. Our technologies are dual-use and serve customers globally, supporting the defense industry in various commercial markets, such as offshore energy and scientific exploration. We're headquartered in Canada with manufacturing and service operations in Canada, the US, the UK, and Germany, and sales and R&D offices in Australia, Denmark, and Brazil. We report across two lines of business, products and services.

Speaker #3: And lastly, we'll revisit the strategic merits of our recently announced acquisition of the Covelia Group, which is expected to close during the current quarter.

Speaker #3: As background, for those of you new to the story—to the Kraken story—I'll start off by summarizing that Kraken is a marine technology company focused on transforming subsea intelligence.

Speaker #3: We also enhanced our balance sheet strength and expanded our shareholder base through a successful equity financing, resulting in a cash position at over $120 million at year-end.

Speaker #3: Our technologies are dual-use and serve customers globally, supporting the defense industry in various commercial markets such as offshore energy and scientific exploration. We're headquartered in Canada, with manufacturing and service operations in Canada, the US, the UK, and Germany, and sales and R&D offices in Australia, Denmark, and Brazil.

Greg Reid: Our technologies are dual-use and serve customers globally, supporting the defense industry in various commercial markets, such as offshore energy and scientific exploration. We're headquartered in Canada with manufacturing and service operations in Canada, the US, the UK, and Germany, and sales and R&D offices in Australia, Denmark, and Brazil. We report across two lines of business, products and services. For our products business, it's focused on subsea power solutions such as our SeaPower batteries, platforms such as our KATFISH towed system, and advanced sensors, including our synthetic aperture sonar or SAS.

Speaker #3: And we further strengthened our leadership team, including several new senior executives and board members that bring a diverse array of experiences and relationships. Strategically, we also executed the tuck-in acquisition of 3D at Depth in 2025, expanding our service offering to include optical LIDAR technology and our geographic presence within the US.

Speaker #3: We report across two lines of business: products and services. For our products business, it's focused on subsea power solutions such as our SeaPower batteries; platforms such as our Catfish towed system; and advanced sensors, including our synthetic aperture sonar, or SAS.

Speaker #3: Most recently, in March, we announced the acquisition of Covellia Group, bringing two leaders in underwater technology together to create a global marine supplier and mission-critical solutions for maritime security and critical underwater infrastructure inspection.

Greg Reid: For our products business, it's focused on subsea power solutions such as our SeaPower batteries, platforms such as our KATFISH towed system, and advanced sensors, including our synthetic aperture sonar or SAS. We also provide services to the offshore energy and defense clients, including sub-bottom imaging, LiDAR, and KATFISH solutions for seabed and sub-seabed imaging surveys. Looking back at our annual results, 2025 was a very successful year for Kraken. We generated record revenue and adjusted EBITDA, which was driven by significant demand for our SeaPower batteries and SAS products, as well as growth in our subsea service business. During the past year, we've taken several steps to help facilitate additional growth in our business, including the expansion of battery manufacturing capacity with the recent completion of our new facility in Nova Scotia.

Speaker #3: We also provide services to offshore energy and defense clients, including sub-bottom imaging, LIDAR, and catfish solutions for seabed and sub-seabed imaging surveys. Looking back at our annual results, 2025 was a very successful year for Kraken.

Greg Reid: We also provide services to the offshore energy and defense clients, including sub-bottom imaging, LiDAR, and KATFISH solutions for seabed and sub-seabed imaging surveys. Looking back at our annual results, 2025 was a very successful year for Kraken. We generated record revenue and adjusted EBITDA, which was driven by significant demand for our SeaPower batteries and SAS products, as well as growth in our subsea service business. During the past year, we've taken several steps to help facilitate additional growth in our business, including the expansion of battery manufacturing capacity with the recent completion of our new facility in Nova Scotia.

Speaker #3: I'll speak to this strategic acquisition in more detail later during the call. As we look closer at some of the work our teams executed this past year, we saw continued demand from both defense and commercial customers.

Speaker #3: Within our products business, which primarily sells into the defense market, we saw record sales of SeaPower batteries and SAS units in 2025. The number of SAS units sold in 2025 was almost equal to the total units delivered from the previous two years.

Speaker #3: We generated record revenue and adjusted EBITDA, which was driven by significant demand for our SeaPower batteries and SAS products, as well as growth in our subsea service business.

Speaker #3: And in batteries, we have added multiple new UUV OEM customers since mid-2025. This highlights the growing demand for subsea technology and the continued adoption of unmanned underwater vehicles, as well as us winning market share in the battery business.

Speaker #3: Continued product innovation, including a new higher energy density battery design with approximately a 30% improvement in energy density for large and extra-large underwater vehicles.

Greg Reid: Continued product innovation, including a new, higher energy density battery design with approximately 30% improvement in energy density for large and extra large underwater vehicles. Plans for more compact designs to address smaller and medium-sized UUVs. We also developed a new launch recovery system to target smaller unmanned surface vessels and a dual-frequency circular SAS that provides higher fidelity imagery detection, classification, and plausible identification of objects from a single payload. We also enhanced our balance sheet strength and expanded our shareholder base through a successful equity financing, resulting in a cash position at over CAD 120 million at year-end. We further strengthened our leadership team, including several new senior executives and board members that bring a diverse array of experiences and relationships.

Speaker #3: We expect this trend of increased customers continue in 2026, supporting our growth expectations and added diversification. Our Catfish, or Toadfish product, on Catfish, sales were lower than expected during the past year, due to the timing of expected project bids by various navies.

Speaker #3: And plans for more compact designs to address smaller and medium-sized UUVs. We also developed a new launch recovery system to target smaller unmanned surface vessels, and a dual-frequency circular SAS that provides higher-fidelity imagery, detection, classification, and plausible identification of objects from a single payload.

Speaker #3: Since year-end, we've seen an increase in demand for Catfish-related products, including a recent order from the Polish Navy. In total, there are currently over a dozen programs of record for Toadfish vehicles, currently in the RFP stage or expected to go to RFP, from various navies worldwide, with final selection expected over the next two to three navy programs, we are seeing an uptick in inbound interest for our products, given the recent developments in the Middle East, in particular related to solutions for mine countermeasures.

Speaker #3: We also enhanced our balance sheet strength and expanded our shareholder base through a successful equity financing, resulting in a cash position of over $120 million at year-end.

Greg Reid: We also enhanced our balance sheet strength and expanded our shareholder base through a successful equity financing, resulting in a cash position at over CAD 120 million at year-end. We further strengthened our leadership team, including several new senior executives and board members that bring a diverse array of experiences and relationships. Strategically, we also executed the tuck-in acquisition of 3D at Depth in 2025, expanding our service offering to include optical LiDAR technology and our geographic presence within the US.

Speaker #3: And we further strengthened our leadership team, including several new senior executives and board members that bring a diverse array of experiences and relationships. Strategically, we also executed the tuck-in acquisition of 3D at Depth in 2025, expanding our service offering to include optical LiDAR technology and our geographic presence within the US.

Greg Reid: Strategically, we also executed the tuck-in acquisition of 3D at Depth in 2025, expanding our service offering to include optical LiDAR technology and our geographic presence within the US. Most recently, in March, we announced the acquisition of Covelya Group, bringing two leaders in underwater technology together to create a global marine supplier in mission-critical solutions for maritime security and critical underwater infrastructure inspection. I'll speak to this strategic acquisition in more detail later during the call. As we look closer at some of the work our teams executed this past year, we saw continued demand from both defense and commercial customers. Within our products business, which primarily sells into the defense market, we saw record sales of SeaPower batteries and SAS units in 2025. The number of SAS units sold in 2025 were almost equal to the total units delivered from the previous two years.

Speaker #3: Whether in the Middle East, Europe, Indo-Pacific, or the Arctic, we are seeing an increasing trend towards accelerating investment in marine technology, given geopolitical tensions and the need to protect critical underwater infrastructure.

Speaker #3: Most recently, in March, we announced the acquisition of Covelia Group, bringing two leaders in underwater technology together to create a global marine supplier and mission-critical solutions for maritime security and critical underwater infrastructure inspection.

Greg Reid: Most recently, in March, we announced the acquisition of Covelya Group, bringing two leaders in underwater technology together to create a global marine supplier in mission-critical solutions for maritime security and critical underwater infrastructure inspection. I'll speak to this strategic acquisition in more detail later during the call. As we look closer at some of the work our teams executed this past year, we saw continued demand from both defense and commercial customers.

Speaker #3: In the service side of our business, we worked on a number of offshore energy projects in 2025 for both major oil and gas and renewable companies and their

Speaker #1: Are offshore service providers This work included site surveys , UXO site investigations and cable burial assessments for our Subbottom imaging sensors throughout Europe , the US and Asia .

Speaker #1: For example , in the Black Sea , we worked on a deepwater oil development project where Kraken scope of work was performed Non-Ferrous UXO survey support along the export pipeline routes for which we utilized a suite of our Subbottom imager systems Taiwan , we also performed cable burial assessments during the construction of wind farms , including both the Inter-array and export cables , which on a combined basis totaled almost 400km in length Our leader services group , which we Thus , given the need for global energy This is supported by the growing number of final investment decisions expected for major offshore oil and gas projects in the coming years , as well as the forecast for global offshore wind capacity .

Greg Reid: Within our products business, which primarily sells into the defense market, we saw record sales of SeaPower batteries and SAS units in 2025. The number of SAS units sold in 2025 were almost equal to the total units delivered from the previous two years. In batteries, we have added multiple new UUV OEM customers since mid-2025. This highlights the growing demand for subsea technology and the continued adoption of unmanned underwater vehicles, as well as us winning market share in the battery business.

Greg Reid: In batteries, we have added multiple new UUV OEM customers since mid-2025. This highlights the growing demand for subsea technology and the continued adoption of unmanned underwater vehicles, as well as us winning market share in the battery business. We expect this trend of increased customers to continue in 2026, supporting our growth expectations and added diversification. Our KATFISH or Towfish product. On KATFISH, sales were lower than expected during the past year due to the timing of expected project bids by various navies. Since year-end, we've seen an increase in demand for KATFISH-related products, including a recent order from the Polish Navy. In total, there are currently over a dozen programs of record for Towfish vehicles currently in the RFP stage or expected to go to RFP from various navies worldwide, with final selection expected over the next two to three years.

Speaker #3: We expect this trend of increased customers to continue in 2026, supporting our growth expectations and added diversification. Our Catfish, or towfish, product, on Catfish sales, were lower than expected during the past year due to the timing of expected project bids by various navies.

Greg Reid: We expect this trend of increased customers to continue in 2026, supporting our growth expectations and added diversification. Our KATFISH or Towfish product. On KATFISH, sales were lower than expected during the past year due to the timing of expected project bids by various navies. Since year-end, we've seen an increase in demand for KATFISH-related products, including a recent order from the Polish Navy. In total, there are currently over a dozen programs of record for Towfish vehicles currently in the RFP stage or expected to go to RFP from various navies worldwide, with final selection expected over the next two to three years.

Speaker #3: Since year-end, we've seen an increase in demand for catfish-related products, including a recent order from the Polish Navy. In total, there are currently over a dozen programs of record for towfish vehicles currently in the RFP stage or expected to go to RFP from various navies worldwide, with final selection expected over the next two to three years.

Speaker #1: According to Rystad Energy . 42 deepwater final investment decisions are expected in 2026 compared to 37 in 2025 , and increasing to approximately 75 in 2027 .

Speaker #1: Before I pass it over to Joe to discuss our financial results and our 2026 guidance , I'd like to thank our employees for their continued hard work and execution during the quarter and throughout the past year Joe .

Speaker #3: In addition to these Navy programs, we are seeing an uptick in inbound interest for our products given the recent developments in the Middle East, in particular related to solutions for mine countermeasures.

Greg Reid: In addition to these Navy programs, we are seeing an uptick in inbound interest for our products given the recent developments in the Middle East, in particular related to solutions for mine countermeasures. Whether in the Middle East, Europe, Indo-Pacific or the Arctic, we are seeing an increasing trend towards accelerating investment in marine technology given geopolitical tensions and the need to protect critical underwater infrastructure. In the service side of our business, we worked on a number of offshore energy projects in 2025 for both major oil and gas and renewable companies and their offshore service providers. This work included site surveys, UXO site investigations, and cable burial assessments for our sub-bottom imaging sensors throughout Europe, the US, and Asia.

Speaker #2: Thanks , Greg . Today , I'll start by reviewing our full year results ending December 31st , and then move on to our fourth quarter results .

Speaker #2: Consolidated revenue in 2025 totaled 102 million , up from 91,000,000 in 2020 . For the annual revenue growth was driven by significant demand for Kraken sea power batteries and SaaS products , which grew approximately 30% and 60% , respectively .

Speaker #3: In the service side of our business, we worked on a number of offshore energy projects in 2025 for both major oil and gas and renewable companies and their offshore service providers.

Speaker #2: In comparison to the prior year Revenues were also supported by strong results in the company's subsea services division , which grew over 60% in comparison to 2020 .

Speaker #3: This work included site surveys, UXO site investigations, and cable burial assessments for our sub-bottom imaging sensors throughout Europe, the US, and Asia. For example, in the Black Sea, we worked on a deep-water oil development project where Kraken's scope of work was to perform non-ferrous UXO survey support along the export pipeline routes, for which we utilized a suite of our sub-bottom imager systems.

Greg Reid: This work included site surveys, UXO site investigations, and cable burial assessments for our sub-bottom imaging sensors throughout Europe, the US, and Asia. For example, in the Black Sea, we worked on a deepwater oil development project where Kraken's scope of work was to perform non-ferrous UXO survey support along the export pipeline routes, for which we utilized a suite of our Sub-Bottom Imager systems. In Taiwan, we also performed cable burial assessments during the construction of wind farms, including both the inter-array and export cables, which on a combined basis totaled almost 400km in length.

Speaker #2: Four , driven by the continuation from the 3D acquisition and higher utilization of service equipment fleet . During the year , as previously released , our strong revenue growth was partially offset by a decline in our sonar related product revenue due to the timing of catfish and MDS projects Catfish , project activity can vary year to year due to natural procurement cycle associated with these contracts .

Greg Reid: For example, in the Black Sea, we worked on a deepwater oil development project where Kraken's scope of work was to perform non-ferrous UXO survey support along the export pipeline routes, for which we utilized a suite of our Sub-Bottom Imager systems. In Taiwan, we also performed cable burial assessments during the construction of wind farms, including both the inter-array and export cables, which on a combined basis totaled almost 400km in length. Our LiDAR services group, which we acquired last April, worked on a number of projects in 2025, including subsea jumper metrologies and onshore nuclear projects located in South America, Europe, the Middle East, Australia, UK, and US. As we look forward, we remain excited about the long-term prospects for this segment of our business, given the need for global energy.

Speaker #3: In Taiwan, we also performed cable burial assessments during the construction of wind farms, including both the inter-array and export cables, which on a combined basis totaled almost 400 kilometers in length.

Speaker #2: And sonar also lower due to the near completion of the acquisition of the Canadian Navy Project . Gross profit for the year increased 42% to 63 million , while gross profit margin improved to 62% , up from a margin of 49% in the prior year This margin improvement is due in part to product mix due to product sold , products sold during the year and in addition to higher margin service revenue from the acquisition of 3D depth adjusted EBITDA in 2024 .

Speaker #3: Our LIDAR Services group, which we acquired last April, worked on a number of projects in 2025, including subsea jumper metrologies and onshore nuclear projects located in South America, Europe, the Middle East, Australia, the UK, and the US.

Greg Reid: Our LiDAR services group, which we acquired last April, worked on a number of projects in 2025, including subsea jumper metrologies and onshore nuclear projects located in South America, Europe, the Middle East, Australia, UK, and US. As we look forward, we remain excited about the long-term prospects for this segment of our business, given the need for global energy. This is supported by the growing number of final investment decisions expected for major offshore oil and gas projects in the coming years, as well as the forecast for global offshore wind capacity.

Speaker #3: As we look forward, we remain excited about the long-term prospects for this segment of our business, given the need for global energy. This is supported by the growing number of final investment decisions expected for major offshore oil and gas projects in the coming years, as well as the forecast for global offshore wind capacity.

Greg Reid: This is supported by the growing number of final investment decisions expected for major offshore oil and gas projects in the coming years, as well as the forecast for global offshore wind capacity. According to Rystad Energy, 42 deepwater final investment decisions are expected in 2026, compared to 37 in 2025, and increasing to approximately 75 in 2027. Before I pass it over to Joe to discuss our financial results and our 2026 guidance, I'd like to thank our employees for their continued hard work and execution during the quarter and throughout the past year. Joe?

Speaker #2: Increased 21% to 25 million , resulting in adjusted EBITDA margin of 24% , up from 23% in 2020 . For CapEx and intangible assets purchased during the year totaled 30 million , which included significant growth capital related to our new battery manufacturing facility .

Speaker #3: According to Rystad Energy, 42 deepwater final investment decisions are expected in 2026, compared to 37 in 2025, and

Greg Reid: According to Rystad Energy, 42 deepwater final investment decisions are expected in 2026, compared to 37 in 2025, and increasing to approximately 75 in 2027. Before I pass it over to Joe to discuss our financial results and our 2026 guidance, I'd like to thank our employees for their continued hard work and execution during the quarter and throughout the past year. Joe?

Speaker #2: In addition to new marine assets , which includes supporting imagers , catfish equipment , as well as supporting customer trials and demonstrations that occur that will occur throughout 2026 .

Speaker #1: And increasing to approximately 75 in 2027. Before I pass it over to Joe to discuss our financial results and our 2026 guidance, I'd like to thank our employees for their continued hard work and execution during the quarter and throughout the past year. Joe.

Speaker #2: We ended the year with a strong balance sheet , total assets in 2020 . At the end of 2025 were worth 313 million , compared to 162 million in the prior year , and cash at 120 million and working capital at 171 million .

Speaker #1: Thanks , Greg . Today , I'll start by reviewing our full year results ending December 31st , and then move on to our fourth quarter results Consolidated revenue in 2025 totaled 102 million , up from 91,000,000 in 2020 .

Joe MacKay: Thanks, Greg. Today, I'll start by reviewing our full-year results ending 31 December and then move on to our Q4 results. Consolidated revenue in 2025 totaled CAD 102 million, up from CAD 91 million in 2024. This annual revenue growth was driven by significant demand for Kraken's SeaPower batteries and SAS products, which grew approximately 30% and 60%, respectively, in comparison to the prior year. Revenues were also supported by strong results in the company's subsea services division, which grew over 60% in comparison to 2024, driven by the continuation from the 3D at Depth acquisition and higher utilization of service equipment fleet during the year. As previously released, our strong revenue growth was partially offset by decline in our sonar-related product revenue due to the timing of KATFISH and RMDS projects.

Speaker #2: Switching to our Q4 results consolidated revenue in the quarter was flat at 28 million compared to the prior year . Like our annual results , growth in batteries and SaaS and subsea services were offset by declining revenue associated with our MDS project Gross profit in Q4 increased 48% to 20 million , implying a gross profit margin of 70% compared to 48% in the prior year .

Speaker #1: For the annual revenue growth was driven by significant demand for Kraken Sea power batteries and SaaS products , which grew approximately 30% and 60% , respectively , in comparison to the prior year Revenues were also supported by strong results in the company's subsea services division , which grew over 60% in comparison to 2020 .

Speaker #1: Driven by the continuation from the 3D acquisition and higher utilization of service equipment fleet. During the year, as previously released, our strong revenue growth was partially offset by declining year due to the natural procurement cycle associated with these contracts, and sonar revenue was also lower due to the near completion of the acquisition of the Canadian Navy AMD's project. Gross profit for the year increased 42% to $63 million.

Speaker #2: This year over year improvement relates to the combination of product mix , a product sold during the year , and additions to higher margin service revenue and lower than expected costs relating to one project .

Joe MacKay: As previously released, our strong revenue growth was partially offset by decline in our sonar-related product revenue due to the timing of KATFISH and RMDS projects. KATFISH project activity can vary year to year due to the natural procurement cycle associated with these contracts, and sonar revenue will also lower due to the near completion of the acquisition of the Canadian Navy RMDS project. Gross profit for the year increased 42% to CAD 63 million, with our gross profit margin improved to 62%, up from a margin of 49% in the prior year.

Speaker #2: Adjusted EBITDA increased 36% to 9.5 million in Q4 , up from 7 million in the prior year due to stronger gross profit margins Implied adjusted EBITDA margin in the quarter equated to 33.5% , compared to 25% in the comparable quarter Turning to guidance on standalone basis , we reiterate our guidance given on March 3rd and expect revenues to range from 165 million to 175 million .

Joe MacKay: KATFISH project activity can vary year to year due to the natural procurement cycle associated with these contracts, and sonar revenue will also lower due to the near completion of the acquisition of the Canadian Navy RMDS project. Gross profit for the year increased 42% to CAD 63 million, with our gross profit margin improved to 62%, up from a margin of 49% in the prior year. This margin improvement is due in part to product mix, due to products sold during the year, in addition to higher margin service revenue from the acquisition of 3D at Depth. Adjusted EBITDA in 2024 increased 21% to CAD 25 million, resulting in adjusted EBITDA margin of 24%, up from 23% in 2024.

Speaker #1: While gross profit margin improved to 62% , up from a margin of 49% in the prior year . This margin improvement is due to , in part to product mix due to product sold , products sold during the year and in addition to higher margin service revenue from the acquisition of 3D depth adjusted EBITDA in 2024 increased 21% to 25 million , resulting in adjusted EBITDA margin of 24% , up from 23% in 2020 .

Speaker #2: The midpoint of which represents 65% annual growth versus 2025 . Adjusted EBITDA is expected to be between 40 and 50 million . The midpoint of which represents 80% annual growth .

Joe MacKay: This margin improvement is due in part to product mix, due to products sold during the year, in addition to higher margin service revenue from the acquisition of 3D at Depth. Adjusted EBITDA in 2024 increased 21% to CAD 25 million, resulting in adjusted EBITDA margin of 24%, up from 23% in 2024. CapEx and tangible assets purchased during the year totaled CAD 30 million, which included significant growth capital related to our new battery manufacturing facility, in addition to new marine assets, which include Sub-Bottom Imagers, KATFISH equipment, as well as supporting customer trials and demonstrations that will occur throughout 2026. We ended the year with a strong balance sheet.

Speaker #2: This adjusted EBITDA guidance also equates to a margin of over 26% CapEx . It will be in the range of 15 to 18 million in 2026 , down significantly from the prior year due to the recent completion of our new battery facility , manufacturing facility in Halifax .

Speaker #2: Similar to prior years , we expect revenue in 2026 to be weighted towards the second half of the year This guidance is based on existing and expected contracts from the company's battery , SaaS and catfish products These strong orders also reflect growth in the company's customer base , including several new defense customers underpinning a strong demand environment .

Speaker #1: For CapEx and intangible assets purchased during the year totaled $30 million, which included significant growth capital related to our new battery manufacturing facility.

Joe MacKay: CapEx and tangible assets purchased during the year totaled CAD 30 million, which included significant growth capital related to our new battery manufacturing facility, in addition to new marine assets, which include Sub-Bottom Imagers, KATFISH equipment, as well as supporting customer trials and demonstrations that will occur throughout 2026. We ended the year with a strong balance sheet. Total assets at the end of 2025 were CAD 313 million, compared to CAD 162 million the prior year, and cash stood at CAD 120 million, and working capital at CAD 171 million. Switching to our Q4 results, consolidated revenue in the quarter was flat at CAD 28 million compared to the prior year. Like our annual results, growth in batteries, SAS, and subsea services were offset by declining revenue associated with RMDS project. Gross profit in Q4 increased 48% to CAD 20 million, implying a gross profit margin of 70% compared to 48% in the prior year.

Speaker #1: In addition to new marine assets , which include subatomic imagers , catfish equipment , as well as supporting customer trials and demonstrations that occur that will occur throughout 2026 .

Speaker #1: We ended the year with a strong balance sheet , total assets in 2020 . At the end of 2025 were worth 313 million , compared to 162 million in the prior year , and cash at 120 million and working capital at 171 million .

Speaker #2: Given the recent geopolitical events Our 2026 guidance is also driven by expected growth in the commercial service business , including a full year contribution from LiDAR solutions offering from our 3D depth acquisition We do plan on updating our annual guidance upon the closing of the announced acquisition of Cavya Group , and for now , I'll pass that back to Greg for closing remarks .

Joe MacKay: Total assets at the end of 2025 were CAD 313 million, compared to CAD 162 million the prior year, and cash stood at CAD 120 million, and working capital at CAD 171 million. Switching to our Q4 results, consolidated revenue in the quarter was flat at CAD 28 million compared to the prior year. Like our annual results, growth in batteries, SAS, and subsea services were offset by declining revenue associated with RMDS project. Gross profit in Q4 increased 48% to CAD 20 million, implying a gross profit margin of 70% compared to 48% in the prior year.

Speaker #1: Switching to our Q4 results, consolidated revenue in the quarter was flat at $28 million compared to the prior year. Like our annual results, growth in batteries, SaaS, and subsea services were offset by declining revenue associated with our MDS project.

Speaker #1: Thanks , Joe . As you've heard throughout the call , we're very excited about the start to our year and our growth prospects on both the defense and the commercial lines of our business In addition to these organic opportunities , we're looking forward to strategic combination with group , where Kraken is a leader in subsea batteries and synthetic aperture .

Speaker #1: Gross profit in Q4 increased 48% to $20 million, implying a gross profit margin of 70%, compared to 48% in the prior year.

Joe MacKay: This year-over-year improvement relates to the combination of product mix, of products sold during the year, in addition to higher margin service revenue and lower than expected costs relating to one project. Adjusted EBITDA increased 36% to CAD 9.5 million in Q4, up from CAD 7 million in the prior year, due to stronger gross profit margins. Implied adjusted EBITDA margin in the quarter equated to 33.5% compared to 25% in the comparable quarter. Turning to the guidance. On a standalone basis, we reiterate our guidance given on 3 March, and expect revenues to range from CAD 165 million to 175 million, the midpoint of which represents 65% annual growth versus 2025. Adjusted EBITDA is expected to be between CAD 40 and 50 million, the midpoint of which represents 80% annual growth. This adjusted EBITDA guidance also equates to a margin of over 26%.

Speaker #1: This year over year improvement relates to the combination of product mix , a product sold during the year , and additions to higher margin service revenue and lower than expected costs relating to one project .

Speaker #1: Sonar is a leader in subsea navigation , positioning , monitoring , and communications with a diversified customer base and an extensive track record of over 50 years In addition to expanding our product offering and competitive position , this strategic acquisition increases our scale and accelerates our growth potential .

Speaker #1: Adjusted EBITDA increased 36% to $9.5 million in Q4, up from $7 million in the prior year, due to stronger gross profit margins. Implied adjusted EBITDA margin in the quarter equated to 33.5%, compared to 25% in the comparable quarter. Turning to guidance on a standalone basis, we reiterate our guidance given on March 3rd and expect revenues to range from $165 million to $175 million.

Speaker #1: Expands our total addressable market as significant in-house technical capabilities , including additional production capacity and improves our financial profile . As an example , in Q1 has seen solid order intake with total new orders of approximately $135 million from various defense and commercial customers , including products such as sonar , dines , navigation and positioning equipment , and it's wavefront subsidiaries .

Speaker #1: The midpoint of which represents 65% annual growth versus 2025. Adjusted EBITDA is expected to be between $40 million and $50 million, the midpoint of which represents 80% annual growth.

Joe MacKay: Adjusted EBITDA is expected to be between CAD 40 and 50 million, the midpoint of which represents 80% annual growth. This adjusted EBITDA guidance also equates to a margin of over 26%. CapEx will be in the range of CAD 15 to 18 million in 2026, down significantly from the prior year due to the recent completion of our new battery manufacturing facility in Halifax. Similar to prior years, we expect revenue in 2026 to be weighted towards H2. This guidance is based on existing and expected contracts from the company's battery, SAS, and KATFISH products.

Speaker #1: This adjusted EBITDA guidance also equates to a margin of over 26% CapEx . It will be in the range of 15 to 18 million in 2026 , down significantly from the prior year due to the recent completion of our new battery facility manufacturing facility in Halifax .

Speaker #1: Sentinel intruder detection system and vigilant , forward looking sonar Prior to turning the call over to the operator for Q&A , I wanted to take a moment to thank Peter Hunter , who has stepped down as our chairman for personal reasons , but will remain on our board as an independent director Peter joined Kraken's board in 2023 and became chair in 2024 .

Joe MacKay: CapEx will be in the range of CAD 15 to 18 million in 2026, down significantly from the prior year due to the recent completion of our new battery manufacturing facility in Halifax. Similar to prior years, we expect revenue in 2026 to be weighted towards H2. This guidance is based on existing and expected contracts from the company's battery, SAS, and KATFISH products. These strong orders also reflect growth in the company's customer base, including several new defense customers underpinning a strong demand environment given the recent geopolitical events. Our 2026 guidance is also driven by expected growth in the commercial service business, including a full-year contribution from the LiDAR solutions offering from our 3D at Depth acquisition. We do plan on updating our annual guidance upon the closing of the announced acquisition of Covelya Group.

Speaker #1: Similar to prior years , we expect revenue in 2026 to be weighted towards the second half of the year . With this guidance is based on existing and expected contracts from the company's battery , SaaS and catfish products These strong orders also reflect growth in the company's customer base , including several new defense customers , underpinning a strong demand environment .

Speaker #1: period , he's tremendous leadership and guidance and has played an important role in our growth to date . I also want to congratulate Shaun McEwan , who has been appointed as our new chairman .

Joe MacKay: These strong orders also reflect growth in the company's customer base, including several new defense customers underpinning a strong demand environment given the recent geopolitical events. Our 2026 guidance is also driven by expected growth in the commercial service business, including a full-year contribution from the LiDAR solutions offering from our 3D at Depth acquisition. We do plan on updating our annual guidance upon the closing of the announced acquisition of Covelya Group. For now, I'll pass that back to Greg for closing remarks.

Speaker #1: Sean has been with Kraken's board since 2016 , and he's a seasoned executive with over 30 years of experience across technology , manufacturing and defense .

Speaker #1: Given the recent geopolitical events, our 2026 guidance is also driven by expected growth in the commercial service business, including a full-year contribution from LiDAR solutions, offering from our 3D depth acquisition.

Speaker #1: With that , we'll wrap up our prepared remarks . And I'd also point you to our website , Kraken Robotics Inc. for more information .

Speaker #1: We do plan on updating our annual guidance upon the closing of the announced acquisition of Cavya Group, and for now, I'll pass that back to Greg for closing remarks.

Speaker #1: We update our website regularly , including our financial filings and other updates . And you can also find our financial filings on kdr+ .

Joe MacKay: For now, I'll pass that back to Greg for closing remarks.

Greg Reid: Thanks, Joe. As you've heard throughout the call, we're very excited about the start to our year and our growth prospects on both the defense and the commercial lines of our business. In addition to these organic opportunities, we're looking forward to closing our strategic combination with Covelya Group. Where Kraken is a leader in subsea batteries and synthetic aperture sonar, Covelya is a leader in subsea navigation, positioning, monitoring, and communications with a diversified customer base and an extensive track record of over 50 years. In addition to expanding our product offering and competitive position, this strategic acquisition increases our scale and accelerates our growth potential, expands our total addressable market, adds significant in-house technical capabilities, including additional production capacity, and improves our financial profile.

Speaker #2: Thanks, Joe. As you've heard throughout the call, we're very excited about the start to our year and our growth prospects on both the defense and the commercial lines of our business.

Speaker #1: I'll now pass the call back to the operator

Speaker #3: Thank you , Greg and Jo . We will now begin the question and answer session with analysts to join the question queue . You may press star then one on your telephone keypad .

Speaker #2: In addition to these organic opportunities, we're looking forward to closing our strategic combination with Group, where Kraken is a leader in subsea batteries and synthetic aperture.

Speaker #3: You will hear a tone acknowledging your request . If you are using a speakerphone , please pick up your handset before pressing any keys to withdraw your question , please press star .

Speaker #2: Sonar is a leader in subsea navigation, positioning, monitoring, and communications, with a diversified customer base and an extensive track record of over 50 years.

Speaker #3: Then two we will pause for a moment as callers join the queue The first question comes from Benoit Poirier with Desjardins Capital Markets .

Greg Reid: In addition to expanding our product offering and competitive position, this strategic acquisition increases our scale and accelerates our growth potential, expands our total addressable market, adds significant in-house technical capabilities, including additional production capacity, and improves our financial profile. As an example, in Q1, Covelya has seen solid order intake with total new orders of approximately CAD 135 million from various defense and commercial customers, including products such as Sonardyne's navigation and positioning equipment and its Wavefront subsidiary's Sentinel Intruder Detection System and Vigilant Forward Looking Sonar.

Speaker #2: In addition to expanding our product offering and competitive position , this strategic acquisition increases our scale and accelerates our growth potential , expands our total addressable market , adds significant in-house technical capabilities , including additional production capacity and improves our financial profile .

Speaker #3: Please go ahead

Speaker #4: Yeah , thank you very much . Good morning Greg . Good morning Jo . Congrats for the year to date orders for the combined entity .

Greg Reid: As an example, in Q1, Covelya has seen solid order intake with total new orders of approximately CAD 135 million from various defense and commercial customers, including products such as Sonardyne's navigation and positioning equipment and its Wavefront subsidiary's Sentinel Intruder Detection System and Vigilant Forward Looking Sonar. Prior to turning the call over to the operator for Q&A, I wanted to take a moment to thank Peter Hunter, who has stepped down as our chairman for personal reasons, but will remain on our board as an independent director. Peter joined Kraken's board in 2023 and became chair in 2024. During that period, he's provided tremendous leadership and guidance and has played an important role in our growth to date. I also want to congratulate Sean McEwen, who has been appointed as our new chairman.

Speaker #2: As an example , in Q1 has seen solid order intake with total new orders of approximately $135 million from various defense and commercial customers , including products such as sonar designs , navigation , and positioning equipment , and its wavefront subsidiaries .

Speaker #4: It looks like that it's in excess of 200 million . So could you maybe make some comments about your overall bidding pipeline . And especially in light of the situation in Iran ?

Speaker #4: Just wondering if the 200 million in new orders year to date for the combined entity is kind of a sustainable run rate going forward ?

Speaker #2: Sentinel intruder Detection system and vigilant for forward looking sonar . Prior to turning the call over to the operator for Q&A , I wanted to take a moment to thank Peter Hunter , who has stepped down as our chairman , for personal reasons , but will remain on our board as an independent director Peter joined Kraken's board in 2023 and became chair in 2024 .

Greg Reid: Prior to turning the call over to the operator for Q&A, I wanted to take a moment to thank Peter Hunter, who has stepped down as our chairman for personal reasons, but will remain on our board as an independent director. Peter joined Kraken's board in 2023 and became chair in 2024. During that period, he's provided tremendous leadership and guidance and has played an important role in our growth to date. I also want to congratulate Sean McEwen, who has been appointed as our new chairman.

Speaker #4: Thank you

Speaker #1: Thanks , Ben . I'll talk about a few various segments of of our order portfolio . I guess starting with batteries . As most people know , we've seen some strong demand in the XL , UV space with one very significant customer and over the last six months , we've started to add several other customers that have XL , UV development efforts .

Speaker #2: During that period, he's provided tremendous leadership and guidance and has played an important role in our growth to date. I also want to congratulate Sean McEwen, who has been appointed as our new chairman.

Greg Reid: Sean has been with Kraken's board since 2016, and he's a seasoned executive with over 30 years of experience across technology, manufacturing, and defense. With that, we'll wrap up our prepared remarks, and I'd also point you to our website, krakenrobotics.com, for more information. We update our website regularly, including our financial filings and other updates, and you can also find our financial filings on SEDAR+. I'll now pass the call back to the operator.

Speaker #2: Sean has been with Kraken's board since 2016 , and he's a seasoned and with over 30 years of experience across technology , manufacturing and defense , with that , we'll wrap up our prepared remarks .

Speaker #1: So we're pleased to say we've added a number of new customers on the battery side . And obviously bringing on the new facility in Nova Scotia to add significant capacity is all tied into the growth outlook we see in the battery business .

Speaker #2: And I'd also point you to our website, Kraken Robotics Inc., for more information. We update our website regularly, including our financial filings and other updates.

Speaker #1: So very strong demand there on the catfish side , which as we pointed out , some orders last year had slipped at the end of the year .

Speaker #2: And you can also find our financial filings on KDR+. I'll now pass the call back to the operator.

Operator: Thank you, Greg and Joe. We will now begin the question and answer session with analysts. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Benoit Poirier with Desjardins Capital Markets. Please go ahead.

Speaker #1: If we look at the existing Kraken business and we have three pillars to our business , one being sonar , two being batteries and three being services , we could say honestly that the catfish business over the last year has been the the disappointing one versus our original expectations .

Speaker #3: Thank you , Greg and Jo . We will now begin the question and answer session with analysts to join the question queue . You may press star .

Speaker #3: Then one on your telephone keypad . You will hear a tone acknowledging your request . If you are using a speakerphone , please pick up your handset before pressing any keys to withdraw your question , please press star .

Speaker #1: Happy to say now that we think that is turned the corner and we'll see some solid demand on the catfish side this year .

Speaker #3: Then, too, we will pause for a moment as callers join the queue. The first question comes from Benoit Poirier with Desjardins Capital Markets.

Speaker #1: And I'll call it really for two reasons . One was a number of programs that have been coming down the pipeline for several years , working their from initial shaping to request for information to RFP and characterize it .

Benoit Poirier: Yeah, thank you very much. Good morning, Greg. Good morning, Joe. Congrats for the year-to-date orders for the combined entity. It looks like that it's in excess of CAD 200 million. Could you maybe make some comments about your overall bidding pipeline, and especially in light of the situation in Iran? Just wondering if the CAD 200 million in new orders year to date for the combined entity is kind of a sustainable run rate going forward. Thank you.

Speaker #3: Please go ahead

Speaker #4: Yes , thank you very much . Good morning Greg . Good morning Joe . Congrats for the year to date orders for the combined entity .

Speaker #1: What you're going to see over the next 2 to 3 years is a number of programs coming to market that is significantly larger than what the industry has seen over the last 5 to 6 years .

Speaker #4: It looks like that's in excess of $200 million. So, could you maybe make some comments about your overall bidding pipeline, and especially in light of the situation in Iran?

Speaker #1: So that's one driver and then the other . Adding to that is just the obviously mine countermeasures , which is the main application for the catfish product is seeing a lot of attention given what's going on in the Strait of Hormuz and in the Middle East .

Speaker #4: I'm just wondering if the $200 million in new orders year-to-date for the combined entity is kind of a sustainable run rate going forward?

Greg Reid: Thanks, Ben. I'll talk about a few various segments of our order portfolio. I guess starting with batteries, as most people know, we've seen some strong demand in the XL UUV space with one very significant customer, and over the last six months, we've started to add several other customers that have XL UUV development efforts. We're pleased to say we've added a number of new customers on the battery side, and obviously bringing on the new facility in Nova Scotia to add significant capacity is all tied into the growth outlook we see in the battery business. Very strong demand there. On the KATFISH side, which, as we pointed out, some orders last year had slipped at the end of the year.

Speaker #4: Thank you

Speaker #1: And as a result of that , we're seeing lots of customer inquiries and we expect to convert some of that activity . Our fair share of that into revenue .

Speaker #2: Thanks , Ben . I'll talk about a few various segments of our of our order portfolio . I guess starting with batteries , as most people know , we've seen some strong demand in the XL , UV space with one very significant customer and over the last six months , we've started to add several other customers that have XL , UV development efforts .

Speaker #1: So catfish , we expect , will be strong this year . And then as I mentioned on our on our SaaS business , you know , we've seen a real uptick in that in the last couple of years .

Speaker #1: And this year we expect a strong continuation of that . And that is really driven by the growth of underwater vehicles . AUV , UVs and we're one of just a couple of merchant suppliers to AUV companies for synthetic aperture sonar .

Speaker #2: So we're pleased to say we've added a number of new customers on the battery side, and obviously bringing on the new facility in Nova Scotia to add significant capacity is all tied into the growth outlook we see in the battery business.

Speaker #1: And those customers are seeing pretty solid demand strengthening demand for for their vehicle sales . So we'll , we'll participate along there as it relates to Covid .

Greg Reid: Very strong demand there. On the KATFISH side, which, as we pointed out, some orders last year had slipped at the end of the year. If we look at the existing Kraken business, and we have three pillars to our business, one being sonar, two being batteries, and three being services, we could say honestly that the KATFISH business over the last year has been the disappointing one versus our original expectations. Happy to say now that we think that is turning the corner, and we'll see some solid demand on the KATFISH side this year, I'll call it really for two reasons.

Speaker #2: So, very strong demand there on the catfish side, which, as we pointed out, some orders last year had slipped at the end of the year.

Speaker #1: You know , they're , they're business in , in Q1 saw a strong order activity . And that was across the board , both on the defense side and the offshore energy side .

Greg Reid: If we look at the existing Kraken business, and we have three pillars to our business, one being sonar, two being batteries, and three being services, we could say honestly that the KATFISH business over the last year has been the disappointing one versus our original expectations. Happy to say now that we think that is turning the corner, and we'll see some solid demand on the KATFISH side this year, I'll call it really for two reasons. One was a number of programs that had been coming down the pipeline for several years, working their way from initial shaping to request for information to RFP. I characterize it, what you're going to see over the next two to three years is a number of programs coming to market that is significantly larger than what the industry has seen over the last five to six years.

Speaker #2: If we look at the existing Kraken business and we have three pillars to our business , one being sonar , two being batteries and three being services , we could say honestly that the catfish business over the last year has been the the disappointing one versus our original expectations .

Speaker #1: So I don't want to say that , you know , look for 200 million of , of , of new orders , a quarter .

Speaker #1: But just say that both of our businesses are , are having a solid order and new orders start to the year driven by those factors that we just talked about .

Speaker #2: Happy to say now that we think that has turned the corner and we'll see some solid demand on the Catfish side this year.

Greg Reid: One was a number of programs that had been coming down the pipeline for several years, working their way from initial shaping to request for information to RFP. I characterize it, what you're going to see over the next two to three years is a number of programs coming to market that is significantly larger than what the industry has seen over the last five to six years. That's one driver. Then the other, adding to that is just the, obviously, mine countermeasures, which is the main application for the KATFISH product, is seeing a lot of attention given what's going on in the Strait of Hormuz and in the Middle East.

Speaker #2: I'll call it really for two reasons. One was a number of programs that have been coming down the pipeline for several years, working their way from initial shaping to request for information to RFP. And I characterize it, what you're going to see over the next two to three years is a number of programs coming to market that is significantly larger than what the industry has seen over the last five to six years.

Speaker #4: Okay . That's excellent . Greg . And Jill , could you talk maybe a little bit more about the upcoming seasonality , whether Covid is similar to to Kraken legacy , but also maybe about the the working capital requirement this year , you grow the , the combined entity .

Speaker #2: Yeah , the seasonality would be , would be somewhat similar to Kraken legacy . It's they're , you know , just in general are the industry does have a lower revenues in Q1 right across the industry just because of how budgets are kind of flow down .

Greg Reid: That's one driver. Then the other, adding to that is just the, obviously, mine countermeasures, which is the main application for the KATFISH product, is seeing a lot of attention given what's going on in the Strait of Hormuz and in the Middle East. As a result of that, we're seeing lots of customer inquiries, and we expect to convert some of that activity, our fair share of that, into revenue. KATFISH, we expect will be strong this year. Then, as I mentioned on our SAS business, we've seen a real uptick in that in the last couple of years, and this year we expect a strong continuation of that. That is really driven by the growth of underwater vehicles, AUVs, UUVs.

Speaker #2: So that's one driver. And then the other, adding to that, is just the obvious mine countermeasures, which is the main application for the Catfish product. It's seeing a lot of attention given what's going on in the Strait of Hormuz and in the Middle East.

Greg Reid: As a result of that, we're seeing lots of customer inquiries, and we expect to convert some of that activity, our fair share of that, into revenue. KATFISH, we expect will be strong this year. Then, as I mentioned on our SAS business, we've seen a real uptick in that in the last couple of years, and this year we expect a strong continuation of that. That is really driven by the growth of underwater vehicles, AUVs, UUVs. We're one of just a couple of merchant suppliers to AUV companies for synthetic aperture sonar, and those customers are seeing pretty solid demand, strengthening demand for their vehicle sales.

Speaker #2: And as a result of that , we're seeing lots of customer inquiries and we expect to convert some of that activity . Our fair share of that into revenue .

Speaker #2: So , you know , the second half of Cavallo's , very similar to Kraken and it will be will be will be stronger in terms of working capital .

Speaker #2: So catfish , we expect , will be strong this year . And then as I mentioned on our on our SaaS business , you know , we've seen a real uptick in that in the last couple of years .

Speaker #2: Obviously , you know , you know , we , you know , CapEx with the combined entity , you know , would be intensity would be around , you know , 8% .

Speaker #2: So that's going to be coming down from what we've seen in last year . Also , you know , we've had that contract asset on the balance sheet for 10 or 12 million for a while .

Speaker #2: And this year we expect a strong continuation of that . And that is really driven by the growth of underwater vehicles . AUV Uuvs and we're one of just a couple of merchant suppliers to AUV companies for synthetic aperture sonar .

Greg Reid: We're one of just a couple of merchant suppliers to AUV companies for synthetic aperture sonar, and those customers are seeing pretty solid demand, strengthening demand for their vehicle sales. We'll participate along there. As it relates to Covelya, their business in Q1 saw strong order activity, and that was across the board, both on the defense side and the offshore energy side. I don't want to say that, look for CAD 200 million of new orders a quarter, but just say that both of our businesses are having a solid new order start to the year, driven by those factors that we just talked about.

Speaker #2: That relates to one project that will be coming to completion . So that will convert into working capital this year . So , you know , there'll be a small burn on just as we increase inventory just to to meet demand .

Speaker #2: And those customers are seeing pretty solid demand strengthening demand for for their vehicle sales . So we'll , we'll participate along there as it relates to Covid .

Greg Reid: We'll participate along there. As it relates to Covelya, their business in Q1 saw strong order activity, and that was across the board, both on the defense side and the offshore energy side. I don't want to say that, look for CAD 200 million of new orders a quarter, but just say that both of our businesses are having a solid new order start to the year, driven by those factors that we just talked about.

Speaker #2: But it'll be , you know , improvement from , from what we've seen here in the recent past .

Speaker #4: Okay . And last one for me , could you maybe talk about the next milestone related to the closing of the transaction and maybe the next steps in terms of the TSX listing ?

Speaker #2: You know , there , their business in , in Q1 saw a strong order activity . And that was across the board , both on the defense side and the offshore energy side .

Speaker #4: Thank you very much

Speaker #2: So I don't want to say that , you know , look 200 million of , of , of new orders , a quarter .

Speaker #1: Yeah , I'll start with the closing the transaction . And Joe can talk to the TSX listing . But I mean , the next milestone is you will see a press release out of us saying that we closed the transaction .

Speaker #2: But just I'd say that both of our businesses are , are having a solid order . A new order start to the year , driven by those factors that we just talked about .

Speaker #1: When that happens and we've , as we mentioned in the past , there's a few regulatory filings that we've done . And we're making good progress on that front .

Benoit Poirier: Okay. That's excellent, Greg. Joe, could you talk maybe a little bit more about the upcoming seasonality, whether Covelya is similar to Kraken legacy, but also maybe about the working cap requirement this year as you grow the combined entity?

Speaker #4: Okay , that's excellent . Greg and Jill , could you talk maybe a little bit more about the upcoming seasonality , whether Covid is similar to to Kraken legacy , but also maybe about the , the working capital requirement this year , you grow the , the combined entity .

Speaker #1: And our current view is that we will we will close this transaction in the second quarter over the . Regarding the TSX , Joe will comment on that .

Speaker #2: Yeah . You know , TSX remains on our on our roadmap for 2026 . The timing of actually going to the TSX is somewhat determined by the closing of the transaction .

Greg Reid: Yeah. The seasonality would be somewhat similar to Kraken legacy. Just in general, the industry does have lower revenues in Q1 right across the industry just because of how budgets kind of flow down. The second half of Covelya is very similar to Kraken, and it will be stronger. In terms of working capital, obviously-

Speaker #1: Yeah , the seasonality would be , it would be somewhat similar to Kraken legacy . It's they're , they're , you know , just in general , are the industry does have a lower revenues in Q1 right across the industry just because of how budgets are kind of flow down .

Speaker #2: But it continues to be a a major milestone for us . And on our roadmap for , for this year .

Speaker #4: Okay . Thank you very much , Jens

Speaker #1: Thanks , Ben .

Speaker #3: The next question comes from Mike Stephens with National Bank financial . Please go ahead .

Speaker #1: So, you know, the second half of Cavya is very similar to Kraken, and it will be, will be, will be stronger in terms of working capital.

Speaker #5: Good morning guys , and thanks for taking a couple questions here . Maybe just to drill down on the outlook and the guide for Kraken .

Joe MacKay: The CapEx of the combined entity intensity would be around 8%. That's going to be coming down from what we've seen in the last year. Also, we've had that contract asset on the balance sheet for CAD 10 or 12 million for a while. That relates to one project that will be coming to completion, so that will convert into working capital this year. There'll be a small burn on just as we increase inventory just to meet demand. It'll be improvement from what we've seen here in the recent past.

Speaker #5: Obviously good to see the announced 87 million in orders so far . Just on the product side alone . Should we interpret that as a pretty large , you know , weight in hand on the guide ?

Speaker #1: Obviously , you know , you know , we , you know , CapEx with the combined entity , you know , would be intensity would be around , you know , 8% .

Speaker #1: So that's going to be coming down from what we've seen in last year. Also, you know, we've had that contract asset on the balance sheet for $10 or $12 million for a while.

Speaker #5: And I'm not sure if you can frame sort of the expectations for new orders versus what is in hand on the visibility front .

Speaker #1: That relates to one project that will be coming to completion . So that will convert into working capital this year . So , you know , there'll be a small burn on just as we increase inventory just to , to meet demand .

Speaker #1: Yeah . Morning , Mike . I'll start with that . I think just for people that aren't aware of the , of , of the nature of our business generally , the products for the product side of our business , you can see the number of orders that we've announced over the last few months are , and the order of 87 , $88 million .

Speaker #1: But it'll be , you know , improvement from , from what we've seen here in the recent past .

Benoit Poirier: Okay. Last one for me, could you maybe talk about the next milestone related to the closing of the transaction and maybe the next steps in terms of the TSX listing? Thank you very much.

Speaker #4: Okay. And last one for me, could you maybe talk about the next milestone related to the closing of the transaction, and maybe the next steps in terms of the TSX listing?

Speaker #1: Then if you look at our guidance of 165 to 175 for the year , we've got a full we've got a full four quarters of 3D at depth this year .

Greg Reid: Yeah. I'll start with the closing of the transaction, and Joe can talk to the TSX listing. The next milestone is, you will see, a press release out of us saying that we closed the transaction, when that happens. As we've mentioned in the past, there's a few regulatory filings that we've done, and we're making good progress on that front. Our current view is that we will close this transaction in Q2. Over to Joe regarding the TSX. Joe will comment on that.

Speaker #4: Thank you very much

Speaker #2: Yeah , I'll start with the closing the transaction . And Joe can talk to the TSX listing . But I mean , the next milestone is you will see a press release out of us saying that we closed the transaction when that happens and we've as we've mentioned in the past , there's a few regulatory filings that we've done .

Speaker #1: So if you add in our original service business and 3D at depth , we we never announce orders for that business . That is more shorter lead time activity , but generally we've been suggesting that's in the 50 million ish range revenue side .

Speaker #2: And we're making good progress on that front . And our current view is that we will we will close this transaction in the second quarter over .

Speaker #1: So you take that plus the orders that we've announced so far , and you can kind of see what , what , what the gap is to meet our our number for this year .

Joe MacKay: Yeah. TSX remains then on our roadmap for 2026. The timing of actually going to the TSX is somewhat determined by the closing of the Covelya transaction, but it continues to be a major milestone for us and on our roadmap for this year.

Speaker #2: Regarding the TSX, Joe will comment on that.

Speaker #1: Yeah . You know , TSX remains been on our on our roadmap for 2026 . The timing of actually going to the TSX is somewhat determined by the closing of the transaction .

Speaker #1: And like every year that we've been in business , we close a lot of SaaS related business during the year . And some of our other products during the year .

Speaker #1: But it continues to be a major milestone for us, and on our roadmap for this year.

Speaker #1: So that that gives you that should give you a little bit of color on that front .

Benoit Poirier: Okay. Thank you very much, gents.

Speaker #5: Yeah . No , that's , that's super helpful . Appreciate that . And then on the sonar side , you know , you mentioned a lot of RFPs and significantly bigger than the previous few years .

Greg Reid: Thanks, Ben.

Speaker #4: Okay. Thank you very much, Jens.

Operator: The next question comes from Mike Stephens with National Bank Financial. Please go ahead.

Speaker #2: Thanks , Ben .

Speaker #3: The next question comes from Mike Stevens with National Bank Financial. Please go ahead.

Mike Stephens: Good morning, guys, and thanks for taking a couple questions here. Maybe just to drill down on the outlook and the guide for Kraken. Obviously, good to see the announced CAD 87 million in orders so far, just on the product side alone. Should we interpret that as a pretty large weight in hand on the guide? I'm not sure if you can frame sort of the expectations for new orders versus what is in hand on the visibility front.

Speaker #5: Good morning, guys, and thanks for taking a couple of questions here. Maybe just to drill down on the outlook and the guide for Kraken.

Speaker #5: I'm kind of wondering in the non RFP , you know , you've obviously had some orders for catfish direct sales . Is there any way to kind of give us a ballpark of that opportunity and maybe even in light of what's gone on geopolitically recently , if that's , you know , sizable opportunity , just any color there ?

Speaker #5: Obviously, good to see the announced $87 million in orders so far. Just on the product side alone, should we interpret that as pretty large?

Speaker #5: You know, wait in hand on the guide. And I'm not sure if you can frame sort of the expectations for new orders versus what is in hand on the visibility front.

Speaker #1: Yeah , it's tough to frame a market size in the short term on it , but I think what we can say is that across both our SaaS business , where there's OEM customers that or navies that have vehicles in the field already and want to put a SaaS payload on those vehicles , we're seeing a lot of extra interest in that .

Greg Reid: Yeah. Morning, Mike. I'll start with that. I think just for people that aren't aware of the nature of our business, generally for the product side of our business, you can see the number of orders that we've announced over the last few months in the order of CAD 87 million to CAD 88 million. If you look at our guidance of CAD 165 million to CAD 175 million for the year, we've got a full four quarters of 3D at Depth this year. If you add in our original service business and 3D at Depth, we never announce orders for that business. That is more shorter lead time activity. Generally, we've been suggesting that's in the CAD 50 million-ish range revenue side. You take that plus the orders that we've announced so far, and you can kind of see what the gap is to meet our number for this year.

Speaker #2: Yeah . Morning , Mike . I'll start with that . I think just for people that aren't aware of the , of , of the nature of our business generally , the products for the product side of our business , you can see the number of orders that we've announced over the last few months in , in the order of 87 , $88 million .

Speaker #1: So obviously , in mine countermeasure vehicle . And then on the on the catfish side , there's there's a lot of interest . These are urgent operational requirements for a number of navies .

Speaker #2: Then if you look at our guidance of 165 to 175 for the year , we've got a full we've got a full 3D at depth this year .

Speaker #1: Now , given the situation out there and , and one thing that over the last year , we've done part of raising capital was the conscious decision to want to build up inventory and to have assets available to sell to customers for , for a situation and like we see today , and we think that some , you know , we think it's an advantage , our ability to shorter lead time , deliver to customers is going to win us some business , maybe versus some of our larger peers that , you know , might , might take quite a bit of time to deliver a product to customers .

Speaker #2: So if you add in our original service business and 3D at depth , we we never announce orders for that business . That is more shorter lead time activity , but generally we've been suggesting that's in the 50 million ish range revenue side .

Greg Reid: That is more shorter lead time activity. Generally, we've been suggesting that's in the CAD 50 million-ish range revenue side. You take that plus the orders that we've announced so far, and you can kind of see what the gap is to meet our number for this year. Like every year that we've been in business, we close a lot of SAS-related business during the year and some of our other products during the year. That should give you a little bit of color on that front.

Speaker #2: So you take that plus the orders that we've announced so far . And you can kind of see what , what , what the gap is to meet our , our number for this year .

Greg Reid: Like every year that we've been in business, we close a lot of SAS-related business during the year and some of our other products during the year. That should give you a little bit of color on that front.

Speaker #2: And like every year that we've been in business, we close a lot of SaaS-related business during the year, and some of our other products during the year.

Speaker #1: So overall , I would just summarize it by saying , stay and , and we expect this year to be some solid activity as a result of , of what you're pointing out .

Speaker #2: So that gives you—that should give you—a little bit of color on that front.

Mike Stephens: Yeah, no, that's super helpful. Appreciate that. Then on the Sonar side, you mentioned a lot of RFPs and significantly bigger than the previous few years. I'm kind of wondering on the non kind of RFP. You've obviously had some orders for KATFISH, direct sales. Is there any way to kind of give us a ballpark of that opportunity? Maybe even in light of what's gone on geopolitically recently, if that's a sizable opportunity, just any color there.

Speaker #5: Yeah , no , that's , that's super helpful . Appreciate that And then on the sonar side , you know , you mentioned a lot of RFPs and significantly bigger than the previous few years .

Speaker #5: Okay , great . Appreciate that . And maybe just the last one for me on the battery capacity and launch of the new facility , any sense of kind of when that could get up to your full capacity , 150 million in terms of I'm sure it takes time to kind of ramp up to that .

Speaker #5: And then I think previously you guys had mentioned opportunities to maybe unlock additional capacity beyond the total 200 . Any update on that and maybe , you know , opportunities to do so in the next couple of years

Greg Reid: Yeah. It's tough to frame a market size in the short term on it. I think what we can say is that, across both our SAS business, where there's OEM customers or navies that have vehicles in the field already and want to put a SAS payload on those vehicles, we're seeing a lot of extra interest in that. Obviously a mine countermeasure vehicle. Then on the KATFISH side, there's a lot of interest. These are urgent operational requirements for a number of navies now, given the situation out there. One thing that over the last year we've done as part of raising capital was the conscious decision to want to build up inventory and to have assets available to sell to customers for a situation like we see today.

Speaker #2: Yeah , it's tough to frame a market size in the short term on it , but I think what we can say is that across both our SaaS business , where there's OEM customers that are navies that have vehicles in the field already and want to put a SaaS payload on those vehicles , we're seeing a lot of extra interest in that .

Speaker #1: Yep . So starting with Halifax , you know , people have moved in . All the equipment is in there through the through this quarter .

Speaker #1: We'll start to increase production in the current quarter . You know , initial production there . And that will ramp steadily throughout the year as to when we are , you know , going to have that facility full up where I think we're going to just say that we , you know , we see strong demand across our customer base and we're thinking about what , you know , what capacity needs are as we plan it out a few years out here .

Speaker #2: So obviously , in mine countermeasure vehicle . And then on the on the catfish side , there's there's a lot of interest . These are urgent operational requirements for a number of navies .

Greg Reid: One thing that over the last year we've done as part of raising capital was the conscious decision to want to build up inventory and to have assets available to sell to customers for a situation like we see today. We think it's an advantage, our ability to shorter lead time deliver to customers is going to win us some business, maybe versus some of our larger peers that might take quite a bit of time to deliver product to customers. Overall, I just summarize it by saying stay tuned and we expect this year to be some solid activity as a result of what you're pointing out.

Speaker #2: Now , given the situation out there and And one thing that over the last year we've done part of raising capital was the conscious decision to want to build inventory and to have assets available to sell to customers for , for a situation and like we see today , and we think that some , you know , we think it's an advantage .

Speaker #1: But we expect to see very good activity at that facility throughout the year . And definitely into 2027 . In terms of additional capacity , we did take on some additional space in our German facility .

Greg Reid: We think it's an advantage, our ability to shorter lead time deliver to customers is going to win us some business, maybe versus some of our larger peers that might take quite a bit of time to deliver product to customers. Overall, I just summarize it by saying stay tuned and we expect this year to be some solid activity as a result of what you're pointing out.

Speaker #1: I believe that was towards the end of last year , and that gives us a little bit of additional capacity as well . And ultimately in the future , in the US or sorry , in Canada .

Speaker #2: Our ability to shorter lead time , deliver to customers is going to win us some business , maybe versus some of our larger peers that , you know , might , might take quite a bit of time to deliver a product to customers .

Speaker #1: As demand grows and we need it , we also have the opportunity to add a second shift . There . Besides that , we stated in the past that we want to have a bigger presence in the US and we've got a variety of discussions happening with with customers and With , you know , various opportunities that we're looking at to have a more established manufacturing presence in the US as well .

Speaker #2: So overall , I just summarize it by saying , stay tuned and , and we expect this year to be some solid activity as a result of what you're pointing out .

Mike Stephens: Okay, great. Appreciate that. Maybe just a last one for me. On the battery capacity and launch of the new facility, any sense of when that could get up to your full capacity of 150 million in terms of, I'm sure it takes time to ramp up to that. I think previously you guys have mentioned opportunities to maybe unlock additional capacity beyond the total 200. Any update on that and maybe opportunities to do so in the next couple of years?

Speaker #1: And don't want to pin ourselves down on timing on that . But it's something that's important for both ourselves and as well as combined entity .

Speaker #1: .

Speaker #2: And just in general , we're considering , you know , we're just continuing to see increased demand in the battery space . Very good , very good trends .

Speaker #5: And then I think previously you guys had mentioned opportunities to maybe unlock additional capacity beyond the total 200. Any update on that, and maybe, you know, opportunities to do so in the next couple of years?

Speaker #1: Yeah . One thing I would add , I guess we , you know , we're quite excited that we , we feel that we've been winning some share With with some new customers as well , maybe some companies that might have been doing it in-house themselves or trying to do it in-house .

Greg Reid: Yep. Starting with Halifax, people have moved in, all the equipment is in there. Through this quarter, we'll start to increase production in the current quarter, initial production there. That will ramp steadily throughout the year. As to when we are going to have that facility full up, I think we're going to just say that we see strong demand across our customer base, and we're thinking about what capacity needs are as we plan it out a few years out here. We expect to see very good activity at that facility throughout the year and definitely into 2027. In terms of additional capacity, we did take on some additional space in our German facility. I believe that was towards the end of last year, and that gives us a little bit of additional capacity as well.

Speaker #2: Yep . So starting with Halifax , you know , people have moved in all the equipment is in their through the through this quarter .

Speaker #1: And we think that there's , we've got good insight into who in the industry is looking for to , to , to do batteries with us .

Speaker #2: We'll start to increase production in the current quarter . You know , initial production there . And that will ramp steadily throughout the year .

Speaker #1: And we've got a lot of positive discussions . So we said 6 or 9 months ago that you'll see progress on the batteries in terms of other customers .

Speaker #2: As to when we are , you know , going to have that facility full up . Where I think we're going to just say that we , you know , we see strong demand across our customer base and we're thinking about what , you know , what capacity needs are as we plan it out a few years out here .

Speaker #1: We can't name names , but we can just tell you that we did land one large U.S. defense . Another large U.S. defense , US company , as a battery , a battery customer .

Speaker #1: Recently and a number of other fairly well known names that people in the industry would know . So we're making progress there on that front

Speaker #2: But we expect to see very good activity at that facility throughout the year . And , and definitely into 2027 in terms of additional capacity , we did take on some additional space in our German facility .

Greg Reid: In terms of additional capacity, we did take on some additional space in our German facility. I believe that was towards the end of last year, and that gives us a little bit of additional capacity as well. Ultimately, in the future, in Canada, as demand grows and we need it, we also have the opportunity to add a second shift there. Besides that, we've stated in the past that we want to have a bigger presence in the US, and we've got a variety of discussions happening with customers, and with various opportunities that we're looking at to have a more established manufacturing presence in the US as well. We don't want to pin ourselves down on timing on that, but it's something that's important for both ourselves and Covelya, as well as a combined entity.

Speaker #5: Okay , fantastic . Really appreciate the color , guys . Cheers

Speaker #2: Thanks , Mike .

Speaker #3: The next question comes from Kevin Krishnaratne with Scotiabank . Please go ahead .

Speaker #2: I believe that was towards the end of last year . And that gives us a little bit of additional capacity as well . And ultimately in the future , in the US or sorry , in Canada is demand grows and we need it .

Greg Reid: Ultimately, in the future, in Canada, as demand grows and we need it, we also have the opportunity to add a second shift there. Besides that, we've stated in the past that we want to have a bigger presence in the US, and we've got a variety of discussions happening with customers, and with various opportunities that we're looking at to have a more established manufacturing presence in the US as well. We don't want to pin ourselves down on timing on that, but it's something that's important for both ourselves and Covelya, as well as a combined entity.

Speaker #6: Hey there . Good morning . On gentlemen . On on the strong order intake at both Kraken and Covalent . More covalent . I mean , probably not , but just curious understanding the deal has been closed .

Speaker #2: We also have the opportunity to add a second shift . There . Besides that , we've stated in the past that we want to have a bigger presence in the US and we've got a variety of discussions happening with with customers and With , you know , various opportunities that we're looking at to have a more established manufacturing presence in the US as well .

Speaker #6: What extent might be seeing , you know , your combined scale helping there . You know you know , improve sales cycles , cross-selling opportunities and whatnot .

Speaker #6: I mean it's still early and it hasn't closed , but just kind of maybe wondering what is the feedback been with customers and potential customers post the announcement ?

Speaker #6: The combined entity

Speaker #1: Yeah , I think Kevin morning overall , yeah , we're still operating as independent businesses until we close , but general from everyone from our largest customers to the small customers is , you know , a great , a great combination of two companies with complementary technology and the opportunity was probably most exciting for our customers and for us is the ability to provide some integrated solutions in the future that that allow our customers to be operational , to be operational quicker , have less calibration as they put vehicles in the water to , to having to deal with less suppliers and dealing with one bigger trusted supplier group .

Speaker #2: And don't want to pin ourselves down on timing on that, but it's something that's important for both ourselves and Coppélia, as well as the combined entity.

Joe MacKay: Just in general, we're just continuing to see increased demand in the battery space. Very good trends.

Speaker #1: But just in general , we're considering , you know , we're just continuing to see increased demand in the battery space . Very good , very good trends .

Greg Reid: Yeah. One thing I would add, I guess, we're quite excited that we feel that we've been winning some share with some new customers as well, maybe some companies that might have been doing it in-house themselves or trying to do it in-house. We think that we've got good insight into who in the industry is looking to do batteries with us, and we've got a lot of positive discussions. We said 6 or 9 months ago that you'll see progress on the batteries, in terms of other customers. We can't name names, but we can just tell you that we did land another large US defense company as a battery customer recently, and a number of other fairly well-known names that people in the industry would know. We're making progress there on that front.

Speaker #2: Yeah . One thing I would add , I guess we , you know , we're quite excited that we , we feel that we've been winning some share with with some new customers as well .

Speaker #1: So a lot of lot of good feedback from our customers , both on the defense side and the commercial side as well .

Speaker #6: Gotcha . Thanks for that . Maybe , maybe , maybe Joe , can you can you dig in on the gross margin strength that you saw in the quarter ?

Speaker #6: I know there was the one time item , so maybe just comment on what happened in the quarter and then maybe going forward , if you can give us a view gross margin , your key product and service lines , and specifically on the battery product , what you're seeing there , given some of the new innovations that you're discussing there , the the 30% higher energy density battery , and then you're in your newer form factors that you're releasing this year .

Mike Stephens: Okay, fantastic. Really appreciate the color, guys. Cheers.

Joe MacKay: Thanks, Mike.

Operator: The next question comes from Kevin Krishnaratne with Scotiabank. Please go ahead.

Kevin Krishnaratne: Hey there. Good morning. Gentlemen, on the strong order intakes at both Kraken and Covelya, more on Covelya, probably not, but just curious, understanding the deal hasn't closed, to what extent might you be seeing your combined scale helping there improve sales cycles, cross-selling opportunities, and whatnot? It's still early and it hasn't closed, but it just made me wondering, what has the feedback been with customers and potential customers post the announcement of the combined entity?

Speaker #2: Yeah . In the quarter . Thanks , Kevin . In the quarter , it really , you know , there was just lower costs than anticipated on , on one project , we had , you know , anticipated , you know , certain materials to be within a project throughout the year .

Speaker #2: And at the end of the year , those materials were not required . So it resulted in a , in higher gross margin in Q4 .

Speaker #2: What I would guide you on gross profit . We're not going to break down gross profit , gross margin by product just to sensitive and competitive side , but I would , you know , we've got the folks to be , you know , gross profit will be in the 55 to 60% range in 2026 , consistent with , you know , kind of look at the , the first three quarters of this year .

Greg Reid: Yeah, I think, Kevin. Morning. Overall, yeah, we're still operating as independent businesses until we close. General feedback from everyone, from our largest customers to the small customers, is a great combination of two companies with complementary technology, and the opportunity was probably most exciting for our customers and for us is the ability to provide some integrated solutions in the future that allow our customers to be operational quicker, have less calibration as they put vehicles in the water, to having to deal with less suppliers, and dealing with one bigger, trusted supplier group. A lot of good feedback from our customers, both on the defense side and the commercial side as well.

Speaker #2: We were in that range . And I think we anticipate we'll be in that same range in 2026 in our in our guidance .

Speaker #6: Gotcha . Maybe it's the last one for me . Certainly talks a lot on the call today about geopolitical news and that driving momentum for the business .

Speaker #6: But one thing that I , I don't think you mentioned was , you know , the Canadian government has also been stepping up .

Speaker #6: You know , their plans for increased defense spending . And so just curious if you can have a comment on your conversation with the government and how you see Canada as a as a , as a customer over the coming years for Kraken , given just , you know , the upside and spending that the country is seeing here .

David Brown: Gotcha. Thanks for that. Maybe a question for Joe. Can you dig in on the gross margin strength that you saw in the quarter? I know there was the one-time item, so maybe just comment on what happened in the quarter, and then maybe going forward, if you can give us a view, gross margin on your key products and service lines, and specifically on the battery product, what you're seeing there, given some of the new innovations that you're discussing there, the 30% higher energy density battery, and then your newer form factor that you're releasing this year.

Speaker #1: Yeah . I mean , overall , we're quite positive on the activity . The intentions of the new government and the , the defense Industrial strategy are a good first start for sure .

Speaker #1: The devil is really in the details of of how quickly governments are able to execute on their on , on those , their strategic intentions .

Speaker #1: We expect Canada to be a growing customer for us in the future . And there's a number of different opportunities that we're always in discussion with , with them about .

Joe MacKay: Yeah. Thanks, Kevin. In the quarter, there was just lower costs than anticipated on one project.

Speaker #1: So in the grand scheme of things , though , like historically , Kevin , we will continue to get the majority of our business , you know , in the export market and , but there's , there's , we are happy to see the , the increase , the acceptance that the , the defense customers in Canada , are starting to step up activity .

Greg Reid: We had anticipated certain materials to be within a project throughout the year, and at the end of the year, those materials were not required, so it resulted in a higher gross margin in Q4. We're not going to break down gross profit, gross margin by product. They're just too sensitive from a competitive side. Gross profit will be in the 55% to 60% range in 2026, consistent with, if you look at Q1, Q2, and Q3 of this year, we were in that range, and I think we anticipate we'll be in that same range in 2026 in our guidance.

Speaker #1: Throughout the year , and at the end of the year , those materials were not required . So it resulted in a in a higher gross margin in Q4 What I would we're not going to break down gross profit , gross margin by product just to sensitive and competitive side , but I would , you know , we've got folks to be , you know , gross profit will be in the 55 to 60% range In 2026 , consistent with , you know , kind of look at the , the first three quarters of this year .

Speaker #1: And that's the same thing . That's happening . You know , in other NATO countries as well . There's growing view that that countries will will increase their own defense spending and , and same thing that's happening in NATO countries .

Speaker #1: We're seeing it in many other countries around the world . So overall , on the Canadian front , I would also say just stay tuned and we're we're looking forward to future opportunities there .

Speaker #1: We were in that range, and I think we anticipate we'll be in that same range in 2026 in our guidance.

Kevin Krishnaratne: Gotcha. Maybe just the last one for me. Certainly talked a lot on the call today about geopolitical news and that driving momentum for the business. One thing that I don't think you mentioned was the Canadian government's also been stepping up their plans for increased defense spending. Just curious if you can have a comment on your conversations with the government and how you see Canada as a customer over the coming years for Kraken, given just the upside in spending that the country's seeing here.

Speaker #2: Gotcha . Maybe it's the last one for me . Certainly talked a lot on the call today about geopolitical news and that driving momentum for the business .

Speaker #6: Good stuff . Thanks , guys . I'll pass the line

Speaker #3: At this time , I'll pass the call back to management for closing remarks

Speaker #2: But one thing that I , I don't think you mentioned was , you know , the Canadian government's also been stepping up , you know , their plans for increased defense spending .

Speaker #7: Yeah . Thanks everyone for for joining the call today . And if you have additional questions , you can reach out to the Investor relations line and talking to you again soon .

Speaker #2: And so just curious if you can have a comment on your conversation with the government and how you see Canada as a as a , as a customer over the coming years for Kraken , given just , you know , the upside and spending that the country is seeing here .

Greg Reid: Yeah, overall, we're quite positive on the activity. The intentions of the new government and the defense industrial strategy are a good first start for sure. The devil is really in the details of how quickly governments are able to execute on their strategic intentions. We expect Canada to be a growing customer for us in the future, and there's a number of different opportunities that we're always in discussion with them about. In the grand scheme of things, though, like historically, Kevin, we will continue to get the majority of our business in the export markets. We are happy to see the increased acceptance that the defense customers in Canada are starting to step up activity. That's the same thing that's happening in other NATO countries as well.

Speaker #3: Yeah . I mean , overall , we're quite positive on the activity . The intentions of the new government and the defense Industrial Strategy are a good first start for sure .

Greg Reid: We are happy to see the increased acceptance that the defense customers in Canada are starting to step up activity. That's the same thing that's happening in other NATO countries as well. There's a growing view that countries will increase their own defense spending, and same thing that's happening in NATO countries. We're seeing it in many other countries around the world. Overall, on the Canadian front, I would also say, yeah, just stay tuned and we're looking forward to future opportunities there.

Greg Reid: There's a growing view that countries will increase their own defense spending, and same thing that's happening in NATO countries. We're seeing it in many other countries around the world. Overall, on the Canadian front, I would also say, yeah, just stay tuned and we're looking forward to future opportunities there.

Kevin Krishnaratne: Okay. Good stuff. Thanks, guys. I'll pass the line.

Greg Reid: Thanks, Kevin.

Operator: At this time, I'll pass the call back to management for closing remarks.

Greg Reid: Yeah. Thanks everyone for joining the call today. If you have additional questions, you can reach out to the investor relations line. Look forward to talking to you guys soon.

Operator: Thank you. This concludes today's conference call. Thank you for your participation.

Q4 2025 Kraken Robotics Inc Earnings Call

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