Coda Octopus Group (CODA) Q2 2025 Earnings Call June 16, 2025 10:00 AM ET Company Participants Geoff Turner - Investor RelationsAnnmarie Gayle - Chairman & CEOBlair Cunningham - President - Technology & Divisional CEO of Coda Octopus Products IncGayle Jardine - Interim CFOBrian Kinstlinger - MD, Director of Research & Head of Technology ResearchJohn Deysher - Portifolio Manager Operator Good morning, and welcome to Coda Octopus Group's Second Quarter Fiscal twenty twenty five Earnings Conference Call. My na ...

Financial Data and Key Metrics Changes - In Q2 2025, total revenue increased by 31.8% to $7 million from $5.3 million in Q2 2024 [36] - Operating income decreased by 19.5% to $1.1 million compared to $1.4 million in Q2 2024 [40] - Gross profit increased to $4.5 million, but gross margin decreased to 64.1% from 70.2% in the prior year [37][41] - Net income after tax was $900,000 or $0.08 per diluted share, down from $1.4 million or $0.13 per diluted share in Q2 2024 [41] Business Line Data and Key Metrics Changes - The marine technology business generated $3.9 million in revenue, a 10% increase from $3.5 million in Q2 2024 [36] - The marine engineering business saw a revenue increase of 2.3% to $1.84 million [36] - The newly acquired Precision Acoustics Limited contributed 18.5% to consolidated revenue and 13.4% to operating income [17][36] Market Data and Key Metrics Changes - Hardware sales to Asia rose by approximately 105%, reaching $2.2 million compared to $1.1 million in Q2 2024 [14] - The marine technology business accounted for 55.3% of total consolidated revenue in Q2 2025 [6] Company Strategy and Development Direction - The company is focusing on increasing market share in underwater imaging sensors, particularly in the defense sector [9] - The launch of the NanoGen series is aimed at addressing smaller underwater vehicles and enhancing market opportunities [11][24] - The company is pursuing a multi-year, multi-sales model for its marine technology business [47] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging global policy environment but expressed optimism about increasing inquiries and rental utilization [5][15] - The company is focused on executing its growth strategy and adapting to changes in the defense market [46] Other Important Information - The company is under contract for five development programs related to the DAVID system, which integrates with existing diving equipment [55][58] - The company has paused its M&A strategy until the global policy environment stabilizes [47] Q&A Session Summary Question: What led to the stronger than expected second quarter demand from Marine Products? - Management noted strong inquiries around Echoscope technology, particularly from Asia, and a pickup in DAVID program sales [50] Question: What is the expected timing for the new NanoGen release? - The NanoGen series is on the cusp of release, with trials expected to conclude by the end of June [52] Question: Can you provide a range of sizes for the development programs? - The five programs primarily focus on integrating the DAVID system with existing underwater breathing apparatus equipment [55] Question: What progress is CODA making in securing design wins for next-generation underwater vehicles? - Management indicated ongoing evaluations and integration of Echoscope technology into various defense programs [60] Question: Should gross margin percentages be modeled for the back half of the year? - Management expects gross margins to improve in the second half of the year, returning to typical levels [70] Question: What revenue contribution might the delivery of 16 DAVID untethered systems generate? - The expected revenue from delivering 16 units is around $800,000 [78]

Financial Performance - Net revenues for the three months ended April 30, 2025, were $7.02 million, a 31.9% increase compared to $5.32 million for the same period in 2024[11]. - Gross profit for the six months ended April 30, 2025, was $7.93 million, up 16.1% from $6.83 million in the same period of 2024[11]. - Net income for the three months ended April 30, 2025, was $908,762, a decrease of 36% from $1.42 million in the same period of 2024[11]. - Net income for the six months ended April 30, 2025, was $1,821,737, compared to $2,045,126 for the same period in 2024, reflecting a decrease of approximately 11%[16]. - For the six-month period ended April 30, 2025, combined net revenue was $12,227,174, a decrease of 1.1% compared to $12,362,291 for the same period in 2024[59]. - Total net revenues for the three months ended April 30, 2025, were $7,017,459, with the Marine Technology Business contributing $3,878,090[96]. - Gross profit for the three months ended April 30, 2025, was $4,497,281, reflecting a gross margin of approximately 64.1%[96]. - For the six months ended April 30, 2025, total net revenues reached $12,227,174, representing a significant increase compared to $9,784,369 for the same period in 2024, indicating a growth of approximately 25%[109]. Assets and Equity - Total assets increased to $60.59 million as of April 30, 2025, up from $57.54 million as of October 31, 2024, representing a growth of 3.57%[7]. - Total stockholders' equity rose to $55.89 million as of April 30, 2025, compared to $53.13 million as of October 31, 2024, indicating an increase of 5.2%[10]. - Cash and cash equivalents increased to $24.46 million as of April 30, 2025, from $22.48 million as of October 31, 2024, marking an 8.8% increase[7]. - The company’s total fixed assets, net, as of April 30, 2025, were $7,204,814, a slight decrease from $7,236,161 as of October 31, 2024[48]. - Total cash and cash equivalents at the end of the period on April 30, 2025, was $24,462,301, up from $23,709,676 at the end of April 2024[16]. Expenses - Research and development expenses increased to $1.23 million for the six months ended April 30, 2025, compared to $1.03 million in 2024, reflecting a rise of 19.8%[11]. - Total operating expenses for the three months ended April 30, 2025, were $3,409,597, a 43% increase from $2,388,051 in 2024[12]. - Commission costs for the three-month period ended April 30, 2025, were $390,384, compared to $132,222 for the same period in 2024, reflecting a significant increase of 195%[41]. - The company reported total operating expenses of $3,409,597 for the three months ended April 30, 2025[96]. Acquisition and Growth - The company acquired Precision Acoustics Limited (PAL) for $6,538,569 in cash, with a net cash outlay of $4,605,285 after accounting for PAL's cash balance[57]. - In the current quarter, PAL contributed revenues of $1,299,069 and earnings before tax of $173,871 to the consolidated results[59]. - The acquisition of PAL includes contingent consideration arrangements with revenue targets of $5,334,584 for FY 2025 and $5,867,914 for FY 2026[62]. - The company acquired the Acoustics Sensors and Material Business on October 29, 2024, which is expected to enhance its product offerings and market reach[105]. Cash Flow - Cash provided by operating activities for the six months ended April 30, 2025, was $2,103,980, a significant improvement compared to cash used in operating activities of $(1,253,725) in 2024[16]. - The company reported a net cash increase of $1,983,229 for the six months ended April 30, 2025, compared to a decrease of $(739,165) in the same period of 2024[16]. Revenue Recognition - Revenue from the Marine Technology Business is recognized upon delivery and passing of risks, with contracts often requiring advance customer payments[24][25]. - The Engineering Business recognizes revenue based on the percentage of completion method, measured by costs incurred to date relative to estimated total costs[34]. Other Financial Metrics - The company’s effective tax rate for the three months ended April 30, 2025, was 28.2%, up from 17.2% in the same period of 2024[113]. - The company recognized a foreign currency translation adjustment of $87,375 for the six months ended April 30, 2025[16]. - The company reported total other income for the six months ended April 30, 2025, was $450,764, a decrease of 13.0% from $518,392 for the same period in 2024[50].

Orlando, FL, June 02, 2025 (GLOBE NEWSWIRE) -- Coda Octopus Group, Inc. (“CODA” or the “Company”) (NASDAQ: CODA), a global market leader in real-time 3D/4D/5D and 6D imaging sonar technology for real-time subsea intelligence and new generation augmented reality diving technology, will host a conference call on Monday, June 16, 2025 at 10:00 a.m. Eastern time to discuss its results for its fiscal second quarter ended April 30, 2025 (“SQ2025”). A press release detailing these results will be issued before the ...

ORLANDO, FL, March 26, 2025 (GLOBE NEWSWIRE) -- Coda Octopus Group, Inc. ("CODA" or the "Company") (NASDAQ:CODA), a global market leader in 4D/5D/6D imaging sonar technology and acoustic sensors for real time subsea intelligence, today reported that its Salt Lake City based Defense Engineering Services Business, Coda Octopus Colmek, recently received two orders from the US Government totalling $1.3M. These orders relate to the supply of proprietary parts used as sub-components of a larger mission critical D ...

Financial Data and Key Metrics Changes - In Q1 2025, total revenue increased by 16.8% to $5.2 million from $4.5 million in Q1 2024 [34][35] - Operating income rose by 19.2% to $0.7 million compared to $0.6 million in Q1 2024 [40] - Net income after taxes was $0.91 million or $0.08 per diluted share, up from $0.6 million or $0.06 per diluted share in Q1 2024 [41] Business Line Data and Key Metrics Changes - Marine Technology business revenue decreased by 35.8% to $2.3 million from $3.5 million in Q1 2024 [35] - Engineering business revenue increased by 77% to $1.6 million from $0.9 million in Q1 2024 [12] - Acoustic Sensors & Materials business, added in October 2024, generated $1.3 million in revenue, contributing 25.2% to consolidated revenue [13][36] Market Data and Key Metrics Changes - The Marine Technology business faced significant headwinds due to U.S. policy changes affecting offshore renewables, leading to weak demand [9][10] - Increased defense spending in Europe, particularly Germany's expected $428 billion over the coming years, is seen as a favorable factor for the company [11] Company Strategy and Development Direction - The company aims to pivot its revenue model in the Marine Technology business to a multi-year, multi-sales model, particularly with the DAVD product line [47] - The acquisition of Precision Acoustics is expected to enhance the company's competitiveness for larger defense contracts [31][32] Management's Comments on Operating Environment and Future Outlook - Management anticipates a quieter Q2 due to customer hesitance amid uncertain policy environments, but expects a robust Q3 and Q4 [52][53] - The company remains optimistic about long-term growth opportunities due to increased defense spending in Europe and the U.S. [46] Other Important Information - The company has $22.54 million in cash and cash equivalents with no debt as of January 31, 2025 [42] - The gross margin for the Acoustic Sensors & Materials business is expected to be between 57% and 61% on an annualized basis [38] Q&A Session Summary Question: What needs to happen for marine products to recover? - Management noted that customers are currently on standstill due to uncertainty, expecting a quiet Q2 but a robust Q3 and Q4 [52][53] Question: Timeline for tethered and untethered markets? - The company targets $4 million to $4.5 million in revenues for the DAVD system this year, with significant demand for both tethered and untethered systems [57][59] Question: Impact of market conditions on acoustic solutions? - The Precision Acoustics segment appears stable and less exposed to market fluctuations compared to other sectors [72] Question: Status of potential acquisition? - The company is conducting due diligence on one target but is waiting for the global policy environment to stabilize before proceeding [80][84]

Financial Data and Key Metrics Changes - In Q1 2025, total revenue increased by 16.8% to $5.2 million from $4.5 million in Q1 2024 [34][35] - Operating income rose by 19.2% to $0.7 million compared to $0.6 million in Q1 2024 [40] - Net income after taxes was $0.91 million or $0.08 per diluted share, up from $0.6 million or $0.06 per diluted share in Q1 2024 [41] Business Line Data and Key Metrics Changes - Marine Technology business revenue decreased by 35.8% to $2.3 million from $3.5 million in Q1 2024 [35] - Engineering business revenue increased by 77% to $1.6 million from $0.9 million in Q1 2024 [12] - Acoustic Sensors & Materials business generated $1.3 million in revenue, contributing 25.2% to consolidated revenue [36][43] Market Data and Key Metrics Changes - The Marine Technology business faced significant headwinds due to U.S. policy changes affecting offshore renewables, leading to weak demand [9][10] - Increased defense spending in Europe, particularly Germany's expected $428 billion, is anticipated to favor the company's products in the medium to long term [11][12] Company Strategy and Development Direction - The company aims to pivot the revenue model of the Marine Technology business to a multi-year, multi-sales model [47] - Focus on increasing the number of defense programs that utilize the company's technologies, particularly Echoscope and DAVD [28][30] - The acquisition of Precision Acoustics is seen as a strategic move to compete for larger defense contracts [31][32] Management's Comments on Operating Environment and Future Outlook - Management expects a quieter Q2 due to customer standstill amid uncertain policy environments, but anticipates a robust Q3 and Q4 [52][55] - The company is optimistic about the long-term impact of increased defense spending in Europe and the U.S. [46][47] Other Important Information - The company has $22.54 million in cash and cash equivalents with no debt as of January 31, 2025 [42] - The gross margin for the Acoustic Sensors & Materials business is expected to be between 57% and 61% on an annualized basis [38] Q&A Session Summary Question: What needs to happen for marine products to recover? - Management noted that customers are currently on standstill due to uncertainty, expecting a quiet Q2 but a robust Q3 and Q4 [52][55] Question: Timeline for tethered and untethered markets? - Management targets $4 million to $4.5 million in revenues for DAVD this year, with significant demand for both tethered and untethered systems [57][60] Question: Impact of market conditions on acoustic solutions? - The acoustic solutions market appears stable, with no significant slowdown observed [72] Question: Status of potential acquisition? - The company is focused on one target for acquisition, pending further understanding of the global policy environment [80][84]

Financial Performance - Net revenues for the three months ended January 31, 2025, increased to $5,209,715, a 16.7% increase from $4,461,191 in the same period of 2024[15] - Gross profit for the same period rose to $3,428,470, reflecting a gross margin of approximately 65.8%, compared to $3,086,736 in 2024[15] - Net income for the three months ended January 31, 2025, was $912,975, representing a 45% increase from $629,888 in the prior year[15] - The combined net revenue for Coda Octopus Group and Precision Acoustics for the three months ended January 31, 2025, was $5,209,715, compared to $5,572,237 for the same period in 2024, a decrease of 6.5%[65] - Basic earnings per share increased to $0.08 for the three months ended January 31, 2025, up from $0.06 in the prior year[82] - Total revenues for the three months ended January 31, 2025, were $5,209,715, a decrease from $4,461,191 in the same period of 2024, representing a year-over-year decline of approximately 17%[99] Assets and Liabilities - Total current assets decreased slightly to $42,719,311 from $42,982,015 as of October 31, 2024[8] - Total liabilities decreased to $3,784,241 from $4,416,021 as of October 31, 2024, indicating improved financial stability[11] - Total assets as of January 31, 2025, amounted to $56,897,298, compared to $53,012,943 as of January 31, 2024, indicating a 7% increase[95] - The company reported total liabilities of $3,784,241 as of January 31, 2025, compared to $2,863,265 as of January 31, 2024, representing a 32% increase[95] - The accumulated deficit improved to $(6,493,516) from $(7,406,491), showing a reduction of approximately 12.3%[12] Cash Flow and Expenses - Cash and cash equivalents at the end of the period were $22,541,963, a slight increase from $22,479,072 at the beginning of the period[20] - Net cash provided by operating activities was $641,511, compared to a net cash used of $(297,959) in the same period last year[20] - Operating expenses totaled $2,766,448, compared to $2,531,352, with R&D expenses increasing to $543,126 from $485,977[15] - Total stock compensation expense for the three months ended January 31, 2025, was $100,145, up from $77,076 in the prior year, reflecting a 30% increase[86] Research and Development - Research and development expenses increased to $543,126, up from $485,977 in the same quarter of 2024, indicating a focus on innovation[15] - Research and Development expenses totaled $543,126, representing about 10.4% of total revenues for the three months ended January 31, 2025[95] Acquisitions - The acquisition of PAL on October 29, 2024, was completed for $6,538,569, with a net cash outlay of $4,605,285 after accounting for PAL's cash balance[63] - PAL contributed revenues of $1,312,261 and earnings of $556,049 to the consolidated results for the current quarter[65] - The estimated future annual amortization expenses related to the PAL acquisition for fiscal year 2025 is projected to be $460,872[71] - The goodwill from the PAL acquisition is expected to provide future economic benefits, including synergies from integrating PAL's products with existing offerings[69] Revenue Recognition - Revenue from the Marine Technology Business is recognized upon delivery and passing of risks, with contracts sometimes requiring customer payments in advance[27] - The Company recognizes revenue from fixed-price contracts using the percentage of completion method, which is based on the costs incurred to date relative to the estimated total costs[37] - Revenue from goods transferred at a point in time was $2,774,625, while services transferred over time accounted for $1,686,566[100] Inventory and Receivables - Total inventory as of January 31, 2025, was $13,433,561, down from $13,975,529 as of October 31, 2024, indicating a decrease of about 3.9%[50] - Unbilled receivables increased to $2,259,419 as of January 31, 2025, up from $1,657,827 as of October 31, 2024, indicating a growth of 36.3%[55] - Deferred revenue decreased to $1,004,800 as of January 31, 2025, from $1,225,634 as of October 31, 2024, representing a decline of 18.0%[56] Geographic Revenue Breakdown - Major geographic markets for net sales included the Americas ($1,298,837), Europe ($1,901,884), Australia/Asia ($1,964,279), and Middle East/Africa ($44,715)[99] - The Americas generated $1,298,837 in total revenues, a 63.8% increase compared to $792,486 in the same quarter of 2024[99] Taxation - The effective tax rate for the three months ended January 31, 2025, was 2.3%, significantly lower than 19.5% for the same period in 2024[102] - The company did not generate any taxable income in the current quarter, leading to a tax benefit for U.S. companies[102] - A deferred tax benefit of $26,989 was recorded in the current quarter, compared to a deferred tax expense of $187,071 in the previous quarter[102] Other Financial Metrics - The company experienced a foreign currency translation adjustment loss of $1,028,586 during the period[15] - The company incurred commission costs of $245,509 for the three-month period ended January 31, 2025, compared to $293,184 for the same period in 2024, reflecting a decrease of approximately 16.3%[44] - Depreciation expense for the three months ended January 31, 2025, was $205,646, compared to $173,292 for the same period in 2024, representing an increase of approximately 18.7%[52]

Core Viewpoint - Coda Octopus Group, Inc. reported strong financial performance in the fiscal first quarter of 2025, with increases in revenue, operating income, net income, and earnings per share despite a challenging global policy environment [2][7]. Financial Performance - Total revenue for FQ2025 was approximately $5.2 million, a 16.8% increase from $4.5 million in FQ2024 [7]. - Revenue from the Products segment decreased by 35.8% to $2.3 million, while the Services segment saw a 76.6% increase to $1.6 million [7]. - The Acoustic Sensors and Material segment generated $1.3 million in revenue, as this business unit was acquired on October 29, 2024 [7]. - Gross profit increased to $3.4 million, with a gross margin of 65.8%, down from 69.2% in FQ2024 [7]. - Operating income rose to $0.7 million, an improvement of 19.2%, with an operating margin of 12.7% [7]. - Net income after taxes was $0.91 million, a 44.9% increase from $0.63 million in FQ2024 [7]. - Diluted earnings per share increased to $0.08 from $0.06 in FQ2024 [7]. Market Opportunities - The DAVD untethered system (DUS) is identified as a significant market opportunity, with a first order of approximately $800,000 for 16 DUS systems received during FQ2025 [3][4]. - The U.S. Navy's 4,000 active divers predominantly use Full-Face Mask Untethered systems, aligning with the DUS solution [5]. - The company is actively working with foreign navy divers, achieving successful trials that support the adoption of the DUS technology [4]. Strategic Investments - Despite uncertainties in the global policy environment, the company continues to invest in growth strategies, particularly in defense spending and energy production [3][9]. - The acquisition of Precision Acoustics Limited contributed 25.2% to consolidated revenue in FQ2025, enhancing the company's capabilities in the underwater/subsea market [8][16]. Industry Context - The new U.S. Administration's policies on energy and defense spending are expected to create both challenges and opportunities for the company [8][9]. - European nations are increasing defense spending, which may benefit the company's business in the medium to long term [9].

Core Viewpoint - Coda Octopus Group, Inc. will host a conference call on March 17, 2025, to discuss its fiscal first quarter results for the period ending January 31, 2025, with a press release to be issued prior to market opening on the same day [1]. Company Overview - Coda Octopus Group, Inc. is a leader in real-time 3D/4D/5D and 6D imaging sonar technology, providing solutions for subsea intelligence and augmented reality diving technology [1][4]. - The company offers proprietary sonar products, including Echoscope and Echoscope PIPE, which are utilized for underwater imaging in various applications such as mapping, salvage, search and rescue, and offshore renewables [4]. - The recently launched Diver Augmented Vision Display (DAVD) system enhances diving operations by integrating sonar technology, allowing for operations in zero visibility conditions [5]. Recent Developments - The company has acquired Precision Acoustics Limited, expanding its capabilities in acoustics sensor and materials [6]. - Coda Octopus Group also operates two defense engineering businesses, Coda Octopus Martech Ltd and Coda Octopus Colmek, which supply sub-assemblies for mission-critical defense programs [7].