Coda Octopus Group, Inc. Q1 FY2025 earnings call

• Despite global policy challenges, revenue increased 16.8% in Q1 2025. - Marine Technology faced headwinds due to U.S. policy uncertainty on renewables, but U.S. oil/gas policy and European defense spending increases favor the business in the medium to long-term. - Engineering business revenue grew 77% in Q1. - Newly acquired Precision Acoustics Limited contributed 25.2% to consolidated revenue and 33.3% to operating income. - DAVD technology reached a pivotal milestone with a $800,000 order for 16 untethered systems under the Cabot System Hardening Program. - Echoscope technology is being developed for global defense programs, with involvement in foreign navy trials. - Anticipate completing another acquisition in FY2025 subject to due diligence and policy environment.

In the first quarter of 2025, total revenue was $5.2 million, up 16.8% from the prior year. The Marine Technology business generated $2.3 million in revenue, a 35.8% decrease year-over-year. The Engineering business saw revenue increase by 77% to $1.6 million. The newly acquired Acoustic Sensors & Materials business contributed 25.2% to consolidated revenue. The Marine Technology business had a gross margin of 73.1%, the Acoustic Sensors & Materials business had a gross margin of 61.7%, and the Engineering business had a gross margin of 58.9%.

• Expect Q2 to be quiet due to ongoing policy uncertainty, but anticipate robust Q3 and Q4. - Target $4.5 million in DAVD revenues for FY2025. - Anticipate completing another acquisition in FY2025, pending satisfactory due diligence and policy environment resolution. - Aim to pivot the Marine Technology business to a multi-year, multi-sales model similar to the DAVD product line.

• Uncertain global policy environment impacting demand for Marine Technology products. - Tariffs and trade relations could indirectly affect the business if products are subject to tariffs. - Delays in defense program orders due to uncertainty around U.S. administration spending priorities for defense programs.

Q: What needs to happen for marine products to materially recover from Q1 results?

A: Anticipate Q2 to be quiet as customers wait for policy clarity, but revenues expected to back-end in Q3 and Q4.

Q: Can you frame the timeline for tethered and untethered DAVD markets?

A: DAVD tethered system is operational, targeting $4.5 million in revenues for FY2025, with 20% of that from foreign markets. The untethered system received $800,000 for 16 systems, a critical pre-adoption milestone.

Q: Why wasn't a press release issued for the $800,000 untethered order?

A: The order was received very late in the quarter, and protocols like customer approval prevent immediate press release.

Q: Status of M&A plans?

A: Working on one target, still in due diligence phase, waiting for global policy environment to settle before closing the transaction.