Coda Octopus Group, Inc. Q4 FY2024 earnings call

• Financial Results: Revenue was $20.3 million in FY2024, up 5% from FY2023. Gross profit was $14.2 million, gross margin 69.8%. Operating income was $3.6 million, net income was $3.6 million or $0.32 per diluted share.
• Business Segments: Two main segments (Marine Technology and Engineering) with newly acquired Precision Acoustics not included in FY2024 results.
• Technologies: Echoscope and DAVD as growth pillars. DAVD Tethered system in 9 US Navy commands; DAVD untethered variant in development with Gen 4 head-up display delivered. Echoscope integrated into undersea vehicles for various applications.
• Acquisition: Precision Acoustics acquired for acoustic expertise, expected to expand R&D and SG&A, and qualify for larger defense contracts.

The revenue in fiscal year 2024 increased by 5% to $20.3 million. The product segment generated revenue of $12.8 million, a 5.7% increase from fiscal year 2023. The Marine Technology business saw rental revenue increase 84.1% to $2.32 million, equipment sales in Asia rise 19% to $5.47 million, but US defense program revenue decreased 33.4% to $2.83 million. The Engineering business had a 3.8% revenue increase, but US engineering was affected by reduced defense funding. Precision Acoustics Limited was acquired at fiscal year-end 2024, with no material income statement activity included in fiscal year 2024.

• Revenue: Anticipate continued growth, aiming to pivot marine tech to multiyear, multiple sale model like DAVD.
• DAVD: Expect purchases in FY2025 for untethered variant; three new programs around DAVD Gen 4.
• Echoscope: Contender for ship hull and close-range target inspection opportunities.
• M&A: Plan to complete another acquisition in FY2025 subject to due diligence.

• Regulatory and Policy Uncertainty: Tariffs and new administration policies could impact foreign customer demand and export of goods.
• Defense Funding Delays: Reduced funding for defense programs, especially in election years, affecting revenue from US defense operations.
• Integration Risks: Challenges in integrating acquired Precision Acoustics and realizing expected synergies.

Q: Brian Kinstlinger asked about the mix of revenues leading to lower gross margins in Q4.

A: Gayle Jardine said margins are subject to the mix of sales, e.g., equipment vs. rentals, and she doesn't have Q4 mix breakout but it's driven by sales mix.

Q: Brian Kinstlinger inquired about DAVD program revenue and outcomes.

A: Gayle Jardine said FY2024 revenue from US programs decreased due to reduced funding; expects purchases in FY2025, tracking $5M in DAVD revenue this year, excluding foreign opportunities.

Q: Brian Kinstlinger asked about tariffs impact.

A: Gayle Jardine said tariffs can contract demand by affecting free flow of goods and services, with foreign customers being cautious due to policy uncertainty.

Q: John Deysher asked about Precision Acoustics investments and accretion.

A: Geoffrey Turner said Precision Acoustics is profitable, no immediate large capital investment needed; Annmarie Gayle said plan to increase business development, expect accretion over time.

Q: Richard Deutsch asked about Echoscope differentiation.

A: Blair Cunningham said Echoscope allows single sensor to perform mapping and target prosecution, reducing cost and payload for undersea vehicles, and is embedded in early-stage undersea vehicle designs.

Q: Richard Deutsch asked about DAVD heads-up display opportunities.

A: Geoffrey Turner said potential for adjacent markets, focusing on low-visibility environments, but exploring broader applications like above-water uses.

Q: Steve Emerson asked about Precision Acoustics acquisition details.

A: Annmarie Gayle said target purchase price around $12M, in due diligence; will be included in products segment reporting, with incremental R&D and SG&A increase.

Q: Walter Ramsley asked about Precision Acoustics amortization and earn-out.

A: Gayle Jardine said amortization pro forma $477k over 7 years; earn-out target pretax $1.05M before amortization.