Mr. Greg Reid reports

KRAKEN ROBOTICS ANNOUNCES CLOSING OF STRATEGIC ACQUISITION OF COVELYA GROUP LIMITED, UPDATED 2026 GUIDANCE AND APPOINTMENTS TO EXECUTIVE TEAM

Kraken Robotics Inc. has closed its previously announced acquisition of Covelya Group Ltd. for approximately $615-million, subject to closing adjustments.

Management comments

"This acquisition positions Kraken as a global provider of mission-critical, dual-use subsea intelligence solutions," said Greg Reid, chief executive officer of Kraken Robotics. "Since announcing the transaction, we have received positive feedback from customers who are looking forward to working with our combined engineering teams on integrated subsea technology solutions. We welcome the new employees to the team and look forward to the many benefits this combination can provide. Together, Kraken and Covelya Group bring complementary products, technological capabilities and customer relationships that we expect will strengthen Kraken's growth potential and long-term outlook. This positive long-term outlook is further supported by the expected increase in defence budgets globally, including growing investment in autonomous underwater systems."

Strategic rationale

The acquisition aligns with Kraken's strategy to deliver value to customers through a portfolio of dual-use technologies and a culture of innovation. As previously announced, the strategic benefits to Kraken from the acquisition include the following:

• Allows for deeper customer relationships in the fast-growing defence and maritime surveillance market;
• Expands product offering and Kraken's total addressable market in subsea technology;
• Adds strategic locations for geographic expansion and improves business diversification;
• Bolsters technical capabilities with an experienced engineering team and highly advanced facilities;
• Financial accretion across key metrics, including $10-million of cost synergies within 24 months.

New product orders and updated 2026 financial guidance

Since reporting its Q1 (first quarter) 2026 results on May 28, 2026, Kraken and Covelya have secured additional product orders of approximately $13-million and $17-million, respectively. These awards bring announced orders in 2026 to approximately $110-million for Kraken and $182-million for Covelya Group. Gross profit margins associated with these orders are consistent with historical gross profit margins.

Kraken is updating its 2026 guidance to reflect the acquisition's July 2, 2026, closing date and the inclusion of Covelya Group, which was excluded from the company's prior guidance.

A summary table and a comparison with Kraken's prior 2026 outlook is provided. Revenue in 2026 is expected to be weighted toward the second half of the year.

As previously outlined at announcement, the acquisition is expected to be accretive across key financial metrics and is expected to generate low-to-mid-double-digit EPS (earnings per share) accretion in 2027, after including the full impact of expected cost synergies.

The company continues to maintain a strong balance sheet, with minimal net debt following the drawdown of the new credit facility, as defined below, and financial flexibility to finance future growth opportunities.

Leadership team and organizational structure

As part of its integration with Covelya Group and its subsidiary companies, Kraken is implementing a new organizational structure and strengthening its leadership team.

The new structure will consist of Kraken Group, which will focus on financial and organizational governance, and a clearly delineated Kraken Robotics operating business, the business units of which will focus on operational excellence, strategic execution and financial performance. These changes are designed to combine the strengths and talents of both organizations while creating a more efficient and scalable platform to support long-term growth.

In conjunction with these organizational changes, Bernard Mills has been promoted to president of Kraken. Mr. Mills brings extensive experience leading large organizations and driving operational performance. Prior to joining Kraken, Mr. Mills served as chief executive officer and managing director of Stelia North America, an advanced materials subsidiary of the Airbus Group. Before that, he was president of Ultra Sonar Systems, where he led a global organization of more than 850 employees.

Kraken's new corporate group leadership will comprise the following:

• Mr. Reid as chief executive officer;
• Mr. Mills as president (formerly Kraken EVP (executive vice-president), defence);
• Joe Mackay as chief financial officer;
• Terra Penrose as chief people officer;
• John Salama as chief information officer;
• Andrew Griffin as chief legal officer (formerly Kraken director, legal).

The executive leadership team working with Mr. Mills within the Kraken Robotics operating business will include:

• Simon Partridge, EVP, technology (formerly chairman of Covelya Group);
• Dr. Graham Brown, EVP, products (previously managing director at Covelya Group's Sonardyne International subsidiary);
• Gary Moynehan, EVP, enterprise performance (previously CFO at Covelya Group);
• David Shea, EVP, strategy and growth (previously EVP, products, and chief technology officer at Kraken);
• EVP, systems and services, a newly created position that is currently vacant, with the company in advanced stages of the recruitment process.

Together, this team combines deep expertise across technology, operations and growth initiatives to support the integration and future expansion of the combined company.

Nat Spencer, chief operations officer, will be leaving Kraken at the end of July to pursue a new opportunity. The company thanks Mr. Spencer for his many contributions to Kraken over the last several years and wishes him well in his future endeavours.

Kraken is establishing an integration plan with a dedicated team, and will begin integrating employees, systems, finance, sales and operations to realize potential revenue and cost synergies. As previously announced, Kraken is targeting approximately $10-million of cost synergies within the first 24 months.

Closing details and subscription receipt conversion

The approximately $615-million purchase price for the acquisition, prior to closing adjustments, comprised approximately $480-million in cash and approximately $135-million through the issuance of 15,882,352 common shares of Kraken at a deemed issue price of $8.50 per common share to Covelya Group's shareholder.

The cash portion of the purchase price was financed from the net proceeds of Kraken's $402.5-million bought deal public offering of subscription receipts, which closed on March 12, 2026, interest earned on such net proceeds and borrowings under the new credit facility.

In connection with the closing of the acquisition, Kraken also closed amendments to its existing credit facility to create a new committed, secured, non-revolving term credit facility in the amount of $125-million, to increase its existing revolving credit facility from $35-million to $60-million and to extend the term of the revolving credit facility to March, 2031, among other amendments. The company drew down the new credit facility in full, with the proceeds applied to pay a portion of the cash consideration for the acquisition.

In conjunction with the closing of the acquisition, each holder of subscription receipts is entitled to receive, automatically and without payment of any additional consideration or further action on the part of the holder, one common share for each subscription receipt held.

Trading in the subscription receipts is expected to be halted, the transfer register maintained by the subscription receipt agent will be closed and the subscription receipts will be delisted from the TSX Venture Exchange, effective as of the close of trading today. The common shares to be issued pursuant to the terms of the subscription receipts are expected to commence trading on the TSX-V tomorrow.

After giving effect to the acquisition and the offering of the subscription receipts, the seller of Covelya Group owns approximately 4 per cent of the issued and outstanding common shares, which are subject to a lock-up agreement providing for release one-third of such common shares on each of the dates that are 12, 18 and 24 months following the closing date of the acquisition.

Kraken plans to report its Q2 (second quarter) 2026 results in late August, 2026, and its Q3 (third quarter) 2026 results, which will include Covelya's contribution, in late November, 2026. With the acquisition now complete, Kraken intends to apply to list its common shares on the Toronto Stock Exchange, subject to satisfying applicable TSX listing requirements and receiving TSX approval. The company expects the process to be completed by year-end 2026 or early 2027.

Non-IFRS (international financial reporting standards) measures

The company has included certain non-IFRS financial measures and non-IFRS ratios in this news release, including adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), adjusted EBITDA margin, gross profit, gross profit margin, adjusted net income and working capital. Management believes that non-IFRS financial measures and non-IFRS ratios, when supplementing measures determined in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the company. Non-IFRS financial measures and non-IFRS ratios do not have any standardized meaning prescribed under IFRS and therefore they may not be comparable with similar measures employed by other companies. These data are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

In this news release, the company uses the following non-IFRS financial measures and non-IFRS ratios with respect to the company: adjusted EBITDA and adjusted EBITDA margin. Explanations of the composition and usefulness of these measures and reconciliations of such measures to the most directly comparable IFRS measures disclosed in the company's financial statements can be found in the section, entitled "Non-IFRS Measures," in the company's management's discussion and analysis (MD&A) for the financial year ended Dec. 31, 2025, which section is incorporated by reference in this news release and is available on SEDAR+.

About Kraken Robotics Inc.

Kraken Robotics is a global marine technology company transforming subsea intelligence through advanced sensors, software and integrated systems. Serving defence, offshore energy and ocean science markets, the company delivers actionable insights in challenging underwater environments. Kraken's integrated subsea solutions span sonar, navigation, positioning, imaging, power, communications, monitoring and data analytics.

On July 2, 2026, Kraken Robotics acquired the Covelya Group, bringing together Sonardyne, EIVA, Forcys, Voyis and Chelsea Technologies. Together, the companies combine highly skilled global teams with a shared commitment to solving complex underwater challenges through world-class, dual-use technologies.

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