Q & A Highlights

Q: Could you provide more color on the cadence of revenue growth between Q3 and Q4, and what is needed in terms of order activity to reach the bottom end of the 2026 guidance? A: CFO Joe Mackay stated that the majority of second-half growth will come from the Covelya transaction, with an expected uptick in service revenue due to the timing of oil and gas projects. He noted that the company will likely need to win a specific Catfish contract to meet guidance and guided investors to weight the second half more heavily toward Q4 over Q3.

Q: Are you seeing any customers move their battery manufacturing process internally, and how is Kraken positioned against this risk? A: CEO Greg Reed explained that Kraken is not seeing customers manufacture equivalent pressure-tolerant batteries in-house. He drew an analogy to the sensor and sonar business, where customers have internal expertise but still rely on Kraken's proven technology. Reed highlighted that the company has added almost 10 new UUV battery OEMs as customers in the past 12-20 months, including a recent long-term master supply agreement with an XL UUV manufacturer, and expects strong growth in the subsea battery business for years to come.

Q: Can you provide an update on the pipeline, which was previously reported at over CAD2 billion, and how has the Covelya acquisition impacted it? A: CEO Greg Reed declined to provide a specific pipeline number but stated that directionally, the combined pipeline is "significantly higher" than it would have been a year ago for both Kraken and Covelya as independent businesses. He indicated that more detailed medium-term guidance would be provided later in the year or when issuing 2027 guidance.

Q: Can you elaborate on the stationary sensors opportunity, including the On-Demand Ocean Bottom Nodes (ODOBN) technology, and how should we size this market? A: CEO Greg Reed highlighted that the ODOBN technology, developed with a major operator in Brazil, is a breakthrough for offshore oil and gas. Prototype activity for Covelya last year was north of CAD20-25 million for a single field, and the technology is expected to move into commercial production in 2027. Director of Capital Markets Shant Madian added that this on-demand solution is much more cost-efficient than traditional permanent cable systems, which can cost hundreds of millions of dollars. Reed emphasized that Kraken is the only company with this type of technology, making it a potentially very meaningful business.

Q: Now that the Covelya transaction has closed, what are the cross-selling opportunities, and which ones are the low-hanging fruit? A: CEO Greg Reed explained that as agnostic, independent providers, Kraken and Covelya can offer combined capabilities to customers who currently buy equipment from their vehicle competitors. He noted that customers using various platforms (USVs, ROVs, AUVs) will benefit from fewer vendors to coordinate with, less engineering effort, and optimized size, weight, and power. Reed also mentioned exploring opportunities to transition from product sales to long-term service and monitoring solutions, which could provide recurring revenue streams.

Q: What is the timeline for the CAM program, and how is Kraken positioned with the potential contenders? A: CEO Greg Reed confirmed there are currently four contenders for the CAM program and that Kraken is on several of those platforms. For the one platform Kraken is not on, discussions are ongoing. Reed emphasized Kraken's position as an agnostic independent supplier of batteries, navigation systems, sonar, and optical systems, and expects to be on these platforms as the industry grows.

Q: Regarding the CAD1.5 million revenue recognition reversal in Q2, should we expect any more of that in Q3 and Q4? A: CEO Greg Reed confirmed that the change in scope associated with the integration project is nearing completion, and there will be no further reversals of this nature in the second half of the year.

Q: Can you provide color on the visibility into the 2026 guidance, and is the expectation of winning a Catfish contract a key execution risk? A: CEO Greg Reed noted that Covelya's business has a wider customer base, is less lumpy than Kraken's traditional business, and has good visibility for 2026. CFO Joe Mackay added that the company has strong visibility and visibility on the actual Catfish contract, but the timing depends on the procurement cycle. The Catfish contract remains a key item to secure to meet the guidance.

Q: On the battery side, how do relationships typically progress from initial orders to meaningful production, and when can we expect contributions from new customers? A: CEO Greg Reed explained that new customers often start with prototype vehicles using smaller battery capacities (200-300 kWh) before moving to full production with megawatt-hour-plus batteries. He noted that some customers are transitioning from prototype to producing a few vehicles, and within 12-18 months, some of these could become "fairly meaningful players." Reed highlighted that Kraken is on multiple platforms, and some governments will choose domestic champions, which benefits Kraken's diversified customer base.

Q: On the Catfish side, are there any awards expected in the back half of 2026, and what is the timing for decisions on various programs? A: CEO Greg Reed stated that there are specific Towfish programs that will see increased activity over the next four years, with some awards expected to start this year and into the first half of next year. He described it as a "steady drumbeat of award opportunities" for the industry over the next couple of years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .