Kraken Robotics Fortifies Balance Sheet for Covelya Takeover Amid Q1 Margin Squeeze

Kraken Robotics shares jump 6% after initial Q1 selloff, as a C$394.5M trust for Covelya acquisition offsets margin pressure and net loss of C$3.3M.

Shares of Kraken Robotics staged a sharp rebound on Friday after initially slumping on the release of first-quarter results that showed the underwater technology specialist burning cash on expansion while margins contracted. The stock traded at €5.19, up 6.13% on the day, having closed at C$7.80 (€4.89) on May 28 – a 4.88% decline on earnings day. Over the past 12 months, the shares have still rocketed more than 200% higher.

The contrasting moves reflect the twin narratives driving the stock. On one hand, Kraken is building formidable financial firepower for its pending acquisition of Covelya, with C$394.5 million sitting in a trust account from a March equity raise. On the other, the core business is feeling the strain from stepped-up investment and rising costs, which pushed the first-quarter net loss to C$3.3 million.

Balance Sheet Transformed by Financing Drive

Total assets swelled to C$715.9 million at the end of March, a fourfold increase from C$179.0 million a year earlier, almost entirely due to the proceeds from the capital increase. Cash and cash equivalents rose to C$108.7 million from C$59.3 million, while working capital improved to C$162.4 million from C$94.6 million. Long-term debt and lease obligations increased more modestly to C$38.4 million.

The trust-held funds are earmarked to partially finance the Covelya acquisition, which is expected to close near the end of the current quarter, subject to regulatory approvals. Kraken plans to issue a combined outlook for the enlarged group once the deal is complete.

Capital Spending Ramped Up, Then Tapered

Capital expenditure in the first quarter reached C$7.0 million, more than double the C$2.8 million spent a year ago. The bulk of this went into the new manufacturing facility for underwater power systems and additional maritime assets to support the services business. For the full year 2026, however, management expects to dial back spending to between C$15 million and C$18 million – well below the C$30.3 million invested in 2025.

Revenue Growth Continues but Profitability Erodes

Revenue climbed to C$21.7 million from C$16.1 million in the prior-year quarter, driven by SeaPower underwater batteries, sonar products, and service revenues. Product sales contributed C$13.8 million, while services added C$7.9 million.

Adjusted EBITDA inched up to C$3.0 million from C$2.8 million, pulling the margin down to 14% from 17%. Gross margin also slipped, falling to 56% from 63%. Kraken attributed the pressure to higher administrative expenses from a growing workforce.

Order Book Builds Confidence in Second-Half Recovery

The company stuck to its stand-alone 2026 guidance, forecasting revenue of C$165 million to C$175 million and adjusted EBITDA of C$40 million to C$50 million. That implies a sharp acceleration in the second half of the year – a pattern consistent with prior years.

Supporting that view, announced product orders for 2026 now stand at approximately C$97 million, up from C$87 million in mid-April. The increase came from additional orders for SeaPower batteries and synthetic aperture sonar systems. Covelya’s own order book for 2026 has also swelled, reaching roughly C$165 million compared with C$135 million last month.

The margin trajectory is expected to improve as volumes ramp, with management targeting a full-year adjusted EBITDA margin above 26% – a steep climb from the first quarter's 14%. Until Covelya closes and a new forecast emerges, the investment case rests on whether the order pipeline can translate into the promised earnings lift-off.