Hyperion

$KRKNF: Odes to the iPhone Suppliers Trades In the early generations of the iPhone, some investors carefully tracked the suppliers and made a fortune. One of them $SWKS supplied key RF chips and derived 56% of it's revenue from Apple (1), and the stock did a 12x from 2007 to 2015. Enter: Anduril In the present day, Anduril is going to revolutionize military equipment for the West. It's no secret that Lockheed, Raytheon, and the whole legacy military complex run ridiculous bloated operations and have delays to incremental improvement programs. Anyone with friends who work there understand that this field is ripe for disruption. Anduril will be the king of drones for the West. The big name startups for software engineers nowadays are the AI Labs, SpaceX, Databricks and Anduril. Anduril started out with aerial drones and land towers, and got to $1B ARR in 2024 with 138% (!) YoY revenue growth (2). It acquired Dive Technologies to start it's autonomous underwater vehicle in 2022 (3) but it's first truly large-scale underwater program will be the Ghost Sharks with a $1.13B contract with the Australian Navy for 2026 production (4). Autonomous Underwater Vehicle (AUV) Unlike the aerial drone industry, the AUV industry is much more consolidated as it's much more expensive to produce an AUV. Two core components for AUVs are sonar and pressure tolerant batteries. Radar doesn't work underwater, so sonar is both the eyes and ears of an AUV. Pressure tolerant batteries are the energy source because diesel engines are loud which makes it easily detected by sonar and it's exhaust is very trackable. Meanwhile, nuclear propulsion is too expensive for an AUV. Enter: Kraken Robotics Kraken Robotics was founded in 2012 by imaging expert Karl Kenny (5). Karl stepped down in 2022 for Greg Ried a finance guy (6); however listening to more than ten interviews of Kraken engineers, I see the engineer culture that got it the best sonar and pressure tolerant batteries (7). Today's sonar technology is Synthetic Aperture Sonar (SAS). Kraken has the best SAS with 3cm resolution and with post-processing, it's able to get 2cm resolution (8). Meanwhile Kongsberg has 4cm resolution (9), Exail has 6cm resolution (10), and Northrop Gruman has 5cm resolution (11). For drones, pricing is also important. There is no public pricing but from an interview (12) with David Shea, their VP of Engineering, Kraken engineered their's with cost in mind as they were a startup at the beginning. Meanwhile, their cracked batteries are rated for 6000m depth and have 200% energy density than standard subsea batteries (13). Supply Chain Connection Kraken has stated it "provides SAS and subsea batteries to Anduril Maritime" (14). Furthermore, Anduril's Dive-LD the precursor to Ghost Shark uses Kraken's SAS and batteries (15). Furthermore, Kraken is building it's new battery production facility in Nova Scotia, Canada for $200m annual revenue (16) which is double it's current revenue across all products. Meanwhile Anduril is building it's Ghost Shark factory in Rhode Island for 200 Ghost Sharks/Year (17). Both in with similar ramp schedules in 2026. If that's not enough, their CEO talked about the "one big customer for XLUV batteries" in the last earnings call (20). The Moat Kraken Robotics is clearly the best in class and cost for sonar and subsea batteries. Anyone with engineer friends in legacy defense companies will be doubtful that legacy defense will catch up, especially not in cost. Anduril and Kraken are like Tesla competing with GM/Ford/VW. The Growth With aerial drones revolutionizing combat in Ukraine, the west will need to rely on drones for naval supremacy. China dominates ship building and conventional naval warfare alone, China can switch it's commercial ship yards to naval to outproduce the west. The exact specs of the Ghost Shark are somewhat secretive but the leading competitor is Boeing's Orca (18). Yes, the Boeing that produced the infamous 737 Max. With military spend in the west increasing at the fastest rate since the cold war (19), and drones a key focus, Anduril and thereby Kraken are set to ride industry tailwinds. Revenue 2026 and Beyond Kraken has guided for 120-135m 2025 Revenue (20) with much of it H2 loaded. While I have seen the forward calculations by @michaelsikand, @Karelw04, @allinkraken that project a ~700m 2026 run rate revenue, I want to provide more conservative but still bullish, working backward calculations for 2026. Their projections are based on the fact that each Ghost Shark is XL size and Kraken has revealed that XL AUV has ~10m of batteries and ~700k of sonar (21). I will provide conservative projections based on capacity. Given that the Nova Scotia Facility will have 200m revenue at capacity, I suspect capacity will be easily filled as the Australia contract alone has multiple dozen of AUVs (22) and each with 10m of batteries . Using the battery to sonar cost ratio, 200m of batteries for Ghost Shark will have 14m of SAS (21). Additionally, this growth is outside of their 30% CAGR so I will apply 30% CAGR to their 135m 2025 Revenue to get 175m. 175m + 200m + 14m = 389m. The bigger picture is whether Kraken 2026 run rate revenue is 390m or 700m, they are going to see explosive top line growth on the order of 3-5x next year and future growth riding on the tailwinds of Anduril, Western military spend, and drones. Risks 1. The stock has already 2.7x YTD from $1.82 to $4.95. 2. Manufacturing and services ramp up risk. @MVanbrunsc47513 might able to speak more about this.

@smartertrader It just not gonna happen Sam. Negotiations will start tomorrow and eventually no additional tariffs will be in place. That’s the way it is. And by the way, i thought you were not political.