Good morning, and welcome to the Kraken Robotics 2024 Financial Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. My name is Dave, 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. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I will now turn the call over to Joe MacKay, Kraken's Chief Financial Officer. Please go ahead.
Thank you, Dave. Good morning, everyone. Thank you for joining Kraken Robotics' earnings release call for the three and twelve months ended December 31, 2024. During the call, all participants are in listen-only mode. Following that management commentary, we will conduct a question-and-answer session with the financial community. Media members with questions and retail investors should contact our PR staff and our investor relations staff, which are listed on our press release. Before we begin, I want to remind everyone that certain statements in this call may be forward-looking in nature. Matters discussed on today's call, including guidance and outlooks for 2025 and beyond, statements involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements, reflect the company's judgment based on information available at the time of this call.
Please see our forward-looking statements and risk factors included in our press release, our MD&A, and our AIF, which is available on SEDAR+ and our website. Today's call will include non-GAAP financial measures, and they are reconciled to the GAAP results within the earnings release and the MD&A. One other point, unless otherwise stated, all dollar amounts are denominated in CAD. With all that being said, we'll hand it now to Greg Reid, our President and CEO.
Thanks, Joe. Good morning, everyone. Welcome to Kraken's first earnings call. Since this is our first earnings call, I'll start by providing an overview of Kraken Robotics, our business, and our markets. After this, I'll summarize key highlights during our fourth quarter and our fiscal year 2024. Joe will run through our fourth quarter and annual financial results, and then provide our outlook. We'll finish the call with questions from analysts. Starting with the overview of Kraken's business and markets, Kraken's a marine technology company focused on transforming subsea intelligence through the provision of advanced imaging sensors, endurance solutions, and underwater robotic systems.
Our technologies are used in both military and commercial applications with leading navies, defense contractors, and offshore energy companies such as the Canadian, Danish, Polish, US, and Australian navies, underwater vehicle manufacturers such as HII, Anduril, and Teledyne, and companies in the offshore service supply chain such as Ocean Infinity, Fugro , Technip, and more. For investors not familiar with the subsea domain, it's important to emphasize that this is a very challenging operating environment given factors such as corrosion, extreme pressure, low bandwidth communications, and lack of underwater GPS. The barriers to entry are significant, and in several of the segments we compete in, we do so with just a handful of competitors. Kraken ourselves, where Kraken Robotics was founded in 2012, with a focus on a lower-cost, ultra-high-resolution sensor for seabed imaging and mapping called synthetic aperture sonar, or otherwise known as SAS.
Over time, our product lineup evolved to include platforms such as a towed underwater vehicle that we call KATFISH, autonomous launch and recovery systems, and specialized pressure-tolerant deep-sea batteries under our Sea Power brand. We also offer a robotics-as-a-service, or RaaS, solutions, providing seabed and subseabed imaging surveys for clients. We enhance our RaaS solutions capabilities with the recent acquisition of 3D at Depth, a leader in underwater light detection and ranging, otherwise known as LiDAR. 3D also provides millimeter resolution metrology and digital twin services for underwater assets and infrastructure. Headquartered in Canada, we have manufacturing and service operations in Canada, the U.S., the U.K., Germany, Denmark, and Brazil. With over 350 employees, Kraken serves a global market supporting the defense industry, offshore energy, and scientific exploration markets with solutions that enhance underwater operations. Kraken Robotics reports on two lines of business: products and services.
First, I'll talk about our products business. Kraken's product business focuses on advanced sensors, platforms, and battery solutions tailored for underwater applications for both the defense and commercial markets, particularly in maritime security and offshore energy. In 2024, our product segment represented 72% of our revenue. At the core of our product segment are innovative offerings like Kraken's synthetic aperture sonar, which provides configurable, high-resolution acoustic imaging for detailed seabed mapping, making it ideal for applications like underwater exploration and mine detection. Its compact, configurable design allows it to be integrated into various unmanned underwater vehicles, providing exceptional performance in both commercial and military underwater operations. Another flagship product is KATFISH, a sophisticated towed underwater vehicle platform designed for high-speed, high-resolution seabed surveys, enhancing capabilities in areas such as mine detection and offshore energy exploration.
Equipped with Kraken SAS, KATFISH delivers acoustic imaging, enhancing the precision and efficiency of underwater mapping and reconnaissance missions. Complementing KATFISH are Kraken's autonomous launch and recovery systems. These are advanced solutions designed to streamline the deployment and retrieval of KATFISH from host ships and unmanned surface vessels, enhancing operational efficiency in challenging marine environments. These systems integrate innovative robotics and sensor technology, enabling safe and reliable handling of equipment, which is particularly valuable for defense and offshore energy applications requiring precision and adaptability. Switching to subsea power, our Sea Power subsea battery systems stand out for their pressure-tolerant deep-sea capabilities, enabling reliable power delivery for autonomous underwater vehicles in the demanding conditions of deep-sea environments. These batteries offer exceptional energy-to-weight ratios, significantly extending the operational endurance and efficiency of unmanned underwater vehicles for applications like seabed mapping and offshore energy exploration.
These products collectively position Kraken as a leader in delivering cutting-edge sensor and robotic solutions that address complex underwater challenges. Moving on to our service business, which represented 28% of our revenue in 2024, Kraken's service business is an important part of our growth strategy, capitalizing on the increasing demand for advanced subsea solutions in the offshore energy sector, particularly in commercial offshore wind and oil and gas markets. For these markets, Kraken provides clients with a variety of subsea survey and inspection capabilities. Our solutions are in demand as customers look to reduce costs and risks across all aspects of marine infrastructure planning, construction, operations, maintenance, and decommissioning. The service business benefits from Kraken's integrated approach, where our field operations teams and service customers provide valuable feedback to our business development, engineering, and R&D teams to enhance our product development roadmap.
Now, moving on to the highlights for 2024, before we switch over to Joe for the numbers. First, I wanted to talk about continued growth and improved financial position. 2024 was a year of significant growth and execution at Kraken Robotics. Business was strong across both the products and service segments, with increased defense spending across the globe driving the former. Financially, it was a record year for Kraken Robotics. Joe will go into the results in more detail, but in summary, we're pleased with the financial results generated by Kraken's entire team, which now stands at 350 strong. We again met our annual financial guidance, with total revenue for fiscal 2024 growing 31% year over year to CAD 91.3 million, adjusted EBITDA growing 47% in 2024 to CAD 20.7 million, and adjusted EBITDA margin was a healthy 22.7% for the year.
To accelerate growth during 2024 and beyond, we closed over CAD 70 million of equity financings during the year, as well as CAD 45 million of new committed credit facilities and an uncommitted CAD 30 million accordion facility. An improved balance sheet was a key strategic priority, allowing us to build inventory, to offer customers shorter lead times, to expand manufacturing capacity, and to provide some capital for selective, accretive tuck-in acquisition opportunities. On the operational side, in 2024, Kraken demonstrated a strong commitment to enhancing our operational capabilities through strategic investments and initiatives aimed at driving long-term growth. We made investments across all areas of the business, including a focus on bolstering our project management, engineering, customer success, and business development groups.
Our business development and customer success teams participated in numerous trade shows and industry events, such as the Robotic Experimentation and Prototyping with Maritime Unmanned Systems, otherwise known as REPMUS in Portugal, to showcase our synthetic aperture sonar technology on unmanned underwater vehicles, fostering collaboration with allied nations and advancing our research and development efforts. Our R&D and technology teams continue to refine our technical roadmap across our product and service offerings. We have exciting new product development efforts across our subsea sensor, platform, and power portfolios. By prioritizing these operational initiatives, we are expanding our robust foundation for sustained growth, leveraging our expertise in seabed and subseabed intelligence to meet the increasing demand for surveillance and security of critical underwater infrastructure across our markets. With that, I'll turn it over to Joe for comment on financial results.
Thanks, Greg. Today, I'll start by reviewing the full year results ending December 31, 2024, and then move on to our fourth quarter results. Consolidated revenue for 2024 increased 31% to just over CAD 91 million. Product revenue in 2024 increased 26% during the year to just over CAD 66 million and was driven by significant growth in our subsea battery business and offset by lower revenue in our sonar business. Service revenue in 2024 saw a great growth at 47% and increased to CAD 25 million, and that was driven by an increased number of Sub-Bottom Imager jobs as well as Acoustic Corer projects. Gross profit for the year increased 32% to CAD 44.7 million, while gross profit margin remained unchanged at 49%.
Adjusted EBITDA for 2024 increased 47% to CAD 20.7 million, compared to CAD 14.1 million the prior year, and saw adjusted EBITDA margin improve to 22.7%, compared to 20.3% in the prior year. Net income for the year increased to CAD 20.1 million, compared to CAD 5.5 million in the prior year. You'll notice that we brought the deferred tax assets onto the balance sheet in the quarter, given our profitability outlook, and that had an impact of a deferred tax recovery of CAD 9.7 million in net income for the full year, a positive net income effect. Continuing with the balance sheet, we did a lot of work, as Greg mentioned, to improve the balance sheet during the year. Total assets ended the year with CAD 163 million. Cash stood at CAD 58 million, while working capital stood at CAD 94 million. All those metrics are up significantly over the 2023 levels.
Switching to the Q4 results, consolidated revenue for Q4 was flat at CAD 28.1 million over the prior year. Our subsea batteries, our service revenue, and our sonar revenue grew in the quarter, while our KATFISH and remote mine disposal system revenue declined on a year-over-year basis. Gross profit in Q4 increased 15% to CAD 13.5 million, implying a 48% gross margin percentage compared to 41.8% in Q4 2023. The year-over-year improvement relates to a change in revenue mix over the Q4 in 2023. Adjusted EBITDA increased 23% in the quarter to CAD 7 million, and it was due to improved gross margins as well as strong cost control. Adjusted EBITDA margin in the quarter stood at 25% compared to 20.5% in Q4 in the prior year. With that, I'll hand it back over to Greg.
Okay, thanks, Joe. Now, turning to 25 onwards, I'll touch on some points relative to our largest end markets. That's defense and offshore energy. Starting with the defense markets, macro fundamentals are strong. Geopolitical tensions are accelerating investments in marine technology, driven by escalating conflicts and strategic rivalries across key maritime regions. Ongoing tensions in numerous regions are prompting nations to bolster underwater surveillance and defense capabilities, whether it is Asia-Pacific with the South China Sea, the Black Sea and the Baltic, the Red Sea and the Persian Gulf in the Middle East, and increasingly the Arctic. The growing needs to protect critical underwater infrastructure, such as undersea fiber optic cables, power cables, and pipelines, require innovative and effective technologies such as acoustic surveillance systems and autonomous underwater vehicles.
These trends are compounded by a broader deglobalization and protectionist policies, which could disrupt seaborne trade and necessitate enhanced technological solutions to ensure resilience and security in global supply chains. Countries are increasingly recognizing the strategic importance of securing their exclusive economic zones and critical maritime assets, leading to greater investments in underwater robotics, sensor networks, and mine countermeasures, intelligence surveillance, and reconnaissance and anti-submarine warfare technologies. In addition to the geopolitical factors just mentioned, nations around the world are increasingly looking for unmanned systems, i.e., drones, to play a greater role as future fleets will be a combination of manned and unmanned systems. Many departments of defense are moving to expeditiously integrate unmanned systems in their surface and undersea fleets.
As important, there appears to be a movement to accelerate getting commercial off-the-shelf systems, or COTS, in the hands of the warfighters through modernizing defense procurement and increasingly prioritizing speed, flexibility, and innovation. In summary, increased defense spending, including non-U.S. NATO and allied defense spending, positions Kraken well for defense-related growth. Our sensor and our subsea power solutions are used by the largest and fastest-growing unmanned underwater vehicle manufacturers, and our KATFISH towed platform is ideally suited as a reasonably priced, high-performance mine countermeasure and seabed survey solution. In the commercial market, that is the non-defense market, the largest segments are offshore energy such as offshore wind and offshore oil and gas. We continue to see solid demand for Kraken's high-resolution seabed and subseabed imaging solutions for use in survey and inspection of subsea infrastructure. The U.S. administration's policies towards offshore wind are causing some softness in the U.S.
market, but other markets continue to show strength. We expect growth in our commercial services business to continue with geographic expansion and increasing pool of assets for deployment and the introduction of additional tools and technologies into the service market, such as our KATFISH seabed survey platform and our 3D subsea LiDAR sensors. Switching to the current year, 2025, some of the key activities, and I just wanted to go through them by various areas of our business. First, on subsea batteries, in February, we announced we'd signed the lease for an approximate 60,000 sq ft of space in Nova Scotia, which will put us in a position to meet growing customer demand in the subsea power domain with manufacturing from both Canada and our original facility in Germany.
This new facility allows us to more than triple our battery production capacity and is a strategic response to accelerating demand, especially from the defense sector for uncrewed underwater vehicles. We expect this facility to be operational at the end of this year. In the subsea sensor market, i.e., sonar, 2025 will see continued pursuit of major programs with many countries moving through the various procurement stages of upgrading their subsea mine hunting fleet and equipment. This activity is occurring globally. We have a significant increase in KATFISH and SAS demo activity in 2025 as we prepare for major programs coming to the market. On the technology front, we continue to push forward on new technology developments such as circular and long-range SAS, new subsea power designs, and potentially integrating our 3D LiDAR technology into our product portfolio.
In the subsea services space, in addition to our traditional subseabed service activities, 2025 in services will see a focus on the integration of 3D at Depth subsea LiDAR business, cross-training of the teams, and cross-selling, as well as the rollout of using KATFISH in the commercial market, where we are building an additional two KATFISH for this market in 2025. Now, switching over to financial guidance for 2025. Against the defense and commercial market backdrops that I've described, I'm pleased to provide the following guidance for fiscal 2025: revenues ranging from CAD 120 million-CAD 135 million, the midpoint of which CAD 127.5 million represents 40% annual growth versus 2024. Adjusted EBITDA between CAD 26 million-CAD 34 million, the midpoint of which CAD 30 million represents 45% annual growth versus 2024. Capital expenditures will be in the range of CAD 13 million-CAD 17 million in 2025.
We based our top-line guidance on existing contracts in hand, including the CAD 45 million of year-to-date subsea power orders, combined with a mix of commercial and defense market pursuits. As noted in our earnings press release today, our sales pipeline has grown significantly to over CAD 2 billion versus the CAD 900 million we shared in February of 2024. For those new to the Kraken story, we focus our business on annual targets and note that our actual annual results are often back-end weighted, with this year being no exception. Our quarterly results can vary based on the timing of new orders, product shipments, and seasonality in our offshore business and our European manufacturing business. With that, we will wrap up our prepared remarks by pointing 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+. Please also visit Sophic Capital's website for additional information. Follow them on X, the former Twitter, to get links to announcements and other media. Thanks again for joining us today, and I'll switch the call back to David. Back to you, David.
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're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. Our first question comes from Nicholas Wojcik with Cormark Securities. Please go ahead.
Hey, good morning, guys.
Morning.
Morning.
On the pipeline, you mentioned, obviously, it's grown very well, doubling from CAD 900 million to CAD 2 billion. Can you walk through a little bit a couple of the moving parts within that, specifically whether this is a lot of new demand that's been coming from either navies or other industries, other sectors, or if this is a pull forward of things that you maybe knew of but now have a lot more visibility? Is that a pull forward or new growth, really?
Yeah. Hi, Nick. I would say it's a combination of both. We last provided this pipeline figure just over a year ago. There's been a number of new programs that we had either not a whole lot of granularity of the size and the timing on it. That's become more clear over the last year, as well as there's a couple of programs that we might have had a bit further out in the pipeline that are getting a bit closer given all the recent geopolitical activity. I'll also highlight you're talking about defense-related programs related to KATFISH and underwater vehicles. The emergence of XL UUVs with a number of different potential players in that market should drive some strong growth as well. We're seeing a lot of activity related to our battery business. That's the reason.
Really, across the board in the three areas of our business, being sonar, batteries, and then services, and that's the reasoning for the increase in the number.
Okay. On the battery business specifically, you mentioned the XL UUVs. How should we be thinking about the rest of this year as it relates to those other customers? You mentioned in a press release that you have new form factors you're developing. Can you comment at all on the conversations and how that's going with other customers aside from the one large one that you have mentioned previously?
Yeah. I would say the engineering teams are working on some new battery designs later this year. We are qualifying some new cells right now. We expect that some of those designs will open up some of the smaller vehicle opportunities, small and medium-sized vehicles that we have not traditionally played in. Expanding our market opportunity there, specifically as it relates to XL programs. There are a number of companies out there that have XL development efforts. There are some companies that already have a product in the market. We obviously are a supplier to one of those big ones. We expect, as we work hard through the year, to get some other clients signed up.
We'll see how the year progresses, but we're targeting to have one of these signed by the end of this year, an additional player in the XL market signed by the end of this year. Just across the board on the subsea power business, we're seeing lots of opportunity to expand that side of our business.
Okay. Great. Last from me, just you've got all this demand. Obviously, you mentioned that you have the new battery facility in Halifax. How are you guys feeling about your existing facilities, your existing footprint to meet all that? Is there a need at some point where you're going to need an additional facility for another geography, something like Australia, the U.S.? Any thoughts on that?
Yep. I think the focus this year is really to ramp up to get the new facility up and running, hit the ground running in 2026 to be able to fill that up fairly quickly. In terms of additional capacity requirements on that, we're constantly evaluating that, looking at our pipeline, talking to our customers. I would highlight that today we don't have U.S.-related manufacturing. We did do an acquisition, 3D at Depth, which is a service business, which now we have about 65 of our 350 people based in the U.S. with that acquisition. That could open a door for future manufacturing in the U.S. as well as it may be required to address some program opportunities. Nothing to announce today, Nick, but we're evaluating it. If the business keeps seeing very strong activity, yes, we would have additional manufacturing requirements down the road.
On the sensor side of the house, so talking about KATFISH and SAS, we have runway with existing facilities to ramp up that business without major capital requirements. Thanks.
The next question comes from Benoit Poirier with Desjardins Capital Markets. Please go ahead.
Yes. Thank you very much. Good morning, Greg and Joe. Just in terms of given all the announcements that we've seen this year, is it fair to assume that the majority of your battery capacity for this year is already secure?
Yeah. I would say, yeah, for the current year, we are running full out in the German facility, and we expect a very solid year out of that. Based on the announcements that we've had in the past and other things that we haven't announced yet, yes, our battery business, the numbers that we talk about for our battery business are very solid for the year.
Okay. With respect to the opportunity with the Singapore Navy, obviously, they are going through an election. Would it be fair to say that this potential catalyst is pushed to the right? Do you see any other opportunities for the KATFISH for 2025 to kind of replace this potential order?
Yeah. Thanks, Benoit Poirier . With respect to specific customers or navies, we're not going to talk detail. I would highlight, I mean, I think it's out there in the market. Most people are aware that that particular customer is upgrading its mine hunting equipment, and there was a couple of companies, including Kraken, in consideration for that. We would have expected we would have heard one way or another by now that that program has, in terms of announcements, been pushed along. Nothing to say on that front right now, Ben. In terms of we don't want to delineate the detail of our sales pipeline, there are numerous KATFISH and SAS opportunities programs that are coming to market shortly. There's others that might get awarded this year. We expect that we're well positioned ourselves and a few other competitors will be bidding on them.
Those are, I'll call them, bigger programs where you're delivering equipment over multiple systems over a few years. There's a number of smaller individual opportunities that we are in pursuit of as well. Some of them might come in based on end-of-year money from customers. Other ones, we're almost on a weekly basis, you're hearing about new opportunities because of increased defense spending out of NATO or other countries. I guess that's a way of saying that there's a lot of irons in the fire. If we don't get one particular one, there's a number of other ones that are out there as well.
Okay. Maybe last one, just in terms of working capital assumption in 2025, obviously, if you could give an update on the Canadian Navy RMDS contract, just wondering how it's progressing toward the completion, the timeline, and what we might expect from a working capital standpoint in 2025.
Yep.
Yeah. Thanks, Ben.
Over to you, Joe.
Yeah. Thanks, Ben. If you look at the contract asset on the balance sheet, that's been a bit of a draw on our working capital. That really relates to that contract is more of a milestone-based contract. That contract will be largely completed by the end of 2025. You are going to see a reverse in that working capital draw that you have seen in the past. I would also mention that kind of a draw on working capital has also been contract liabilities. That has come down as we have delivered a lot of product during 2024. With some of these recent announcements that we have made in the last few months, you will see the contract liabilities increase as well. That will reverse as well in 2025. We should be working capital positive in 2025 with those two main items reversing.
The next question comes from Steven Li with Raymond James. Please go ahead.
Hey, guys. Maybe, Greg, to start. Hey, when you talk about numerous RFPs coming to the market shortly, and I know Singapore was probably an outlier in terms of how drawn out it was, but the ones that you have on your slide, on your deck, the U.S., U.K., and so on, usually once the RFP is out, your expectation is the award is within how many quarters? Thanks.
Just I'll explain processes. Every country is different, but generally, how our industry works is RFI comes out, request for information that is then followed by a request for a proposal or request for quote. In some cases, you have the RFP come out, and then things go to contract within six months. In other cases, you might have a year between RFP and actual award and start of the contract. Each country is different, Steven .
Some of the names that you just mentioned there, the RFIs have come out. In other examples, they've had industry-specific days where they invite industry in and talk about the program and give timelines on it. That's the nature of it. It's hard to say that it's always three months or always six months or always nine months. It really depends by country and how they do their procurement.
Okay. Thanks. Very good. Joe, maybe a question to you. Very strong in services. Is 15% organic? Is that still a good target for you guys?
I would say it would be north of 15% organic.
No for 15. And even though you had the acoustic large deal in Q4, so bigger base, and then 3D at Depth on top of that?
Yeah. We're not going to break up guidance by company. I mean, we did give what the 2024 revenue was for 3D at Depth was $14 million. And you can kind of, based on your overall model, you can kind of back into that. That should be north of 20%.
Okay. That also factors the U.S. wind offshore, some of the weakness that Greg referenced on the call, right?
Yeah. No impact from U.S. No impact from U.S. offshore in 2025.
Okay. Perfect. Last one for me. Yeah. Go ahead, Greg.
Yeah. I was just going to clarify that. Within our sales pipeline for the year, we did not have a lot of, in our forecast, we did not have a lot of U.S. offshore wind. Historically, our sub-bottom imaging-related business has been predominantly European-related. We do some business in Taiwan and Australia and other geographies as well. Yes, we have done some business in the U.S. offshore wind space. While we might get some softness related to that, we can make it up in other areas of the service business and other geographies.
Got it. One more for me. You got strongly bid out for next year. How do we think about your cash flow quality profile? Is it a bigger drain in the first half with the CapEx? Thanks, Joe.
No, it shouldn't be. As I said, I mentioned to Benoit's question, working capital kind of reverses. If you look at the kind of the midpoint of our guidance and the midpoint of CapEx, we should be free cash flow of CAD 15 million. With those other, with contract assets and contract liabilities reversing, it shouldn't be, it shouldn't be really a drain on free cash flow.
The next question comes from Doug Taylor with Canaccord Genuity. Please go ahead.
Yeah. Thank you. Good morning. I appreciate you guys hosting this call to give us some more color here. I'll start with another question on the pipeline, which you've updated today. Obviously, pretty impressive expansion of that pipeline. Just helping us understand how we should think about this and the conversion to revenue and growth. I mean, maybe I could get you to talk about how much pipeline of the CAD 900 million last year did convert or reach some sort of decision. Maybe you can wrap some sense of the timing of the overall pipeline and what you would consider adding to it before providing that figure.
Yeah. I would say, Doug, looking at that sales pipeline, we're going to update it annually. We're not going to get into discussing it quarterly. In terms of the two bigger blocks of if you think of the three parts of our business, one being sonar, one being batteries, one being services, the service pipeline, just the business in general, has a different mix to it. You don't go into a year with a huge pipeline. You don't have a multi-year pipeline on the service business where you do have it on the batteries and the sonar business. The biggest drivers of it are the sonar and battery side.
The battery side is up very significantly from last year, and not just because of our existing customers, but also because over the last year, we've had a lot of good, I'll call it unsolicited inbound interest, just as knowledge of our product gets out there, as well as a more dedicated BD focus on the battery side. There are a number of players that are coming into the market across all sizes of underwater vehicles. Obviously, the XL vehicles, the ones that are the size of a subway car, are ones that really move the numbers the most.
On the sonar side, which is a combination of KATFISH product as well as our SAS that goes in other people's underwater AUVs, versus last year, there's a number of new programs that we've become aware of or just, I'll call it, there's been more meat put on the bone. You know that a certain Navy, several NATO navies were talking about upgrading their mine hunting equipment. Now, over the last year, the detail of that, the timing of it, the size of that has become much clearer into focus.
If I look at that, those numbers that I talk about when we talk about $2 billion are really looking forward to four years, sort of saying, "Here's all the programs that we see and what's changed from our number we talked last year at $900 million," was just the visibility to see a number of these other programs and have them have meat put on the bone. Occasionally, there's some that just come out of the blue that we were not aware of or because of increases in naval spending, there are new buckets of money that are becoming available, which are, in some cases, hard to quantify how it flows into some of these opportunities.
I appreciate all that color. I mean, I guess the next question from that is you've had to quantify this into the guidance, which you've provided today in terms of near-term conversion. It's understandable that there's a larger range given some of the chunkier opportunities that would comprise your funnel. Maybe you could help us by understanding the degree of visibility, maybe the bottom end of the range versus the high end, and maybe talk about what some of the variables are that would get you from one end to the other in terms of delivery timetables or future sensor bookings. Anything like that would be helpful.
Sure. I'll start at a high level and say that if you look at our historical growth and the markets that we play in and the solutions that we have, we think we have good wind to the business to be able to continue to grow this business 30%-40% plus a year. That's at a high level. Talking specifically to this year, yes, it is a wider range of guidance than we've done in the past. There are some more moving parts this year. I'd say there are a number of opportunities and programs across all areas of the business that we're working hard to close. We're not going to talk about close rates on business.
I think what we would say on the guidance is that for several years, when we've given guidance, we've ended up at the beginning of the year, we've ended up hitting it at the end of the year. Yes, to hit the top end of the range, we've got work to do. It is not our ability to hit that number, the business is out there. It is closing on some of these opportunities. Those are exclusive of some of these major programs. There are, I'll call them, more individual opportunities that might be not multi-unit opportunities over many years, but specific year-end money or specific short-term programs that will allow us to push towards the high end of those numbers if we can execute.
The next question comes from John Shao with National Bank Financial. Please go ahead.
Hey, good morning. Thanks for taking my question. We understand the strong market demand for your defense product and the fact that your sales pipeline is getting bigger. How should we think about your sales cycle? Is it the same as before, or do you think it's going to expect to accelerate in today's environment given urgency?
Yeah. Good morning, John. I would say that in some areas, you're seeing more opportunities pop up that might be shorter term. You're getting a bit more visibility when you talk about certain, just at a high level, you'll hear about certain NATO countries increasing their spending in certain areas. In terms of overall ability to access some of these opportunities, there's a lot, as I mentioned earlier in the call, there's just a lot of irons in the fire. Yes, there are these multi-year programs that we've seen coming for a while that will come to market, but there is more, call it short-term opportunities as well.
You're also seeing there's a lot of new companies coming into the market, not on the sensor side and tow fish side we play, but there's a lot of new AUV companies and unmanned surface vessel companies that have raised a lot of capital that are in the market out pursuing business. We've had lots of opportunities with both the big traditional incumbents as well as a lot of the new emerging players.
Thanks for the colors. In terms of your battery business, we understand there still seems to be a good portion of the potential customers that are trying to build battery systems on their own. What kind of opportunity do you see out there, and how do you go after them to convince that Kraken is a better option?
Yeah. Thanks for that. That's a good point. Yeah. I mean, there are companies out there that do their own battery systems, and they do their own vehicles and try and do everything. Ultimately, how we try and convince them to outsource their battery manufacturing to a company like Kraken is just through discussion. Those companies might be aware that some of their competitors are using our batteries and getting much more endurance. The sales pitch to them is, "Use our solutions. We've got capacity. We're focused on not being an AUV provider. We're focused on providing some sensors and batteries that go into other people's underwater vehicles and come to a company like Kraken, and we'll improve your battery capabilities and make you more competitive." Yes, there is that outsourcing angle that our sales team is focused on as well.
We will see how that plays out over time.
Thank you. I'll pop the line.
The next question comes from Gabriel Leung with Beacon Securities. Please go ahead.
Good morning. Thanks for taking my questions and congrats on the progress. Greg, you talked a little bit earlier about being super busy with demoing the KATFISH and obviously being in deep discussions with some XL AUV providers to integrate your batteries into the vehicles. We know what's great about your products, but I'm curious to hear whether there's been any notable pushbacks, I guess, on those fronts, whether it's related to around pricing or any capabilities you might be lacking in the products. Just curious to hear what your customers are saying.
Yeah. Hi, Gabe. Good morning. I would say, I mean, people always like to discuss on the battery side as it relates to pricing. You've looked at electric vehicles and batteries, and pricing has been going down. We do get commentary from our customers as well, always looking for lower pricing. Really, how we've been able to maintain the good growth on the battery side and maintain margins is come out with new designs as well, which provide customers much higher kilowatt-hours of capacity for their subsea vehicles. Overall, while yes, sell pricing might have been going down, we're able to, because of the volumes that we do, we are able to get some efficiencies there. With new designs, which have a higher number of kilowatt-hours, our dollar per kilowatt-hours to our customer is getting to the price points that they want it to be.
We're able to meet their needs that way. In terms of other commentary on the KATFISH and the sonar, I mean, it's really about customers are looking for you to continue to innovate. I mentioned some of the things that we're working on this year on the R&D side. We have to continue to put product into the market that the customers are happy with, that they're reliable, that they're easy to integrate, that they're easy to operate. That's the continual push for companies like Kraken and our competitors.
Gotcha. Thanks for that feedback. Just moving over to the services side of the business, with the inclusion of 3D at Depth, are you able to talk about what the revenue capacity actually is for that side of the business now? How aggressively are you looking to build out, I guess, your fleet there to facilitate growth?
Yeah. I would say, thinking about our business, three legs of the stool, batteries, sonar, and then services. Services is an important leg of the stool. Yes, adding in 3D at Depth is really a nice fit where you take your sort of more European-centric, offshore wind-centric business, combine it with 3D at Depth's American and more oil and gas-focused business. It's a nice combination. The combined business, if you look at the two of them, is well over CAD 40 million-CAD 45 million last year. Ultimately, if you think of that, we've got a number of different tools. 3D at Depth brings on the order of 19, 20, or 21 different subsea LiDAR sensors. We've allocated some CapEx to them, so they will continue to grow that amount of, call it, kit that they have.
On our existing kit with our sub-bottom imaging technologies, we're building a couple of other sub-bottom imagers this year off of a base of around eight. That gives you a sense of the growth in that. One thing that we have not done a good job of the last couple of years is taking our KATFISH, which we use for the defense market, and getting it into the commercial market. Part of that was as a result of our growth, where every time we would build the KATFISH to use it in the commercial market, we ended up selling it in the defense market. This year, as we've ramped up manufacturing, we'll have a couple of systems, KATFISH systems, that we'll deploy in the commercial market. Ultimately, across laser sensors, across KATFISH, across sub-bottom imaging, we're adding capacity this year, Gabe.
In terms of how aggressive we will be, we're not going to get out over our skis. We'll see how the utilization of the equipment is and how the demand in the market is, and we can incrementally add capacity to that market. As a reminder for everybody, on our service business, we're not in the boat business. I call it a relatively CapEx-light type service business, where our people are using our kit offshore and then processing the data with our data processors and our scientists analyzing data and providing service to customers. That gives you color, Gabe?
This concludes our question and answer session. I would like to turn the conference back over to Greg Reid for any closing remarks.
Okay. Thank you, David. I just wanted to close by acknowledging the extraordinary accomplishments of our team last year. We exceeded expectations during a period of rapid growth. The teams carried this enthusiasm and hard work into this year. These people are the core of our innovations, creating products and services demanded throughout the world by the most recognized companies and militaries. Joe and I and the rest of the senior management are committed to growing shareholder value. We ourselves are a significant shareholder, so our interests are aligned with yours. Thank you for your continued support, and thank you for joining the call today. We look forward to talking with you again soon.
This brings to a close today's conference call. You may disconnect your lines. Thank you for your participation.