Coda Octopus Group Inc (CODA) Q3 2024 Earnings Call Transcript Highlights: Strong Financial ...

In this article:
  • Revenue: $5.5 million, up 12% from $4.9 million in Q3 2023.

  • Marine Technology Business Revenue: $3.1 million, up 6.5% from $2.9 million in Q3 2023.

  • Marine Engineering Business Revenue: $2.4 million, up 19.8% from $2 million in Q3 2023.

  • Gross Profit: $4 million, up from $3.4 million in Q3 2023.

  • Consolidated Gross Margin: 73.9%, up from 68.8% in Q3 2023.

  • Marine Technology Business Gross Margin: 82.9%, up from 82.1% in Q3 2023.

  • Marine Engineering Business Gross Margin: 62.6%, up from 50% in Q3 2023.

  • Operating Expenses: $2.7 million, up from $2.5 million in Q3 2023.

  • SG&A Costs: $2.2 million, up 11.7% from $1.9 million in Q3 2023.

  • Operating Income: $1.4 million, up 61.2% from $0.9 million in Q3 2023.

  • Operating Margin: 25.4%, up from 17.6% in Q3 2023.

  • Income Before Taxes: $1.6 million, up from $1.1 million in Q3 2023.

  • Net Income After Taxes: $1.3 million, or $0.11 per diluted share, up from $1 million, or $0.09 per diluted share, in Q3 2023.

  • Cash and Cash Equivalents: $25.2 million as of July 31, 2024, up from $24.4 million as of October 31, 2023.

Release Date: September 16, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Revenue increased by 12% over the third quarter of 2023.

  • Gross profit margin improved to 73.9% from 68.8% in the same quarter last year.

  • Marine technology business revenue grew by 6.5%, and engineering business revenue increased by 19.8%.

  • Operating income rose by 61.2%, reflecting strong financial performance.

  • The company has $25.2 million in cash and no debt, indicating a strong balance sheet.

Negative Points

  • There was a notable slowdown in US defense program orders due to the upcoming presidential election.

  • Sales to North America were down by 35.9%, impacting overall revenue growth.

  • Operating expenses increased to $2.7 million, largely due to higher selling, general, and administrative costs.

  • The gross margin of the engineering business is atypical and may not persist.

  • The company faces challenges in integrating its DAVD technology into commercial offshore providers' analog systems.

Q & A Highlights

Highlights of Coda Octopus Group Inc (NASDAQ:CODA) Q3 2024 Earnings Call

Q: Do you expect near-term pressure on both segments of your business due to the election cycle, and can commercial business offset this pressure? A: (Annmarie Gayle, CEO) Sales from the Americas are down by 35.9% due to the election cycle, but the commercial marine market has shown resilience. The focus remains on defense markets for growth, but commercial marine markets have helped offset the pressure.

Q: Can you discuss the near-term pipeline for the DAVD technology and its adoption? A: (Annmarie Gayle, CEO) The RIMPAC event was pivotal for the DAVD technology, with significant interest from various commands. Despite slower commercial adoption, there is ongoing excitement and requisitions for the technology, indicating its potential for significant growth.

Q: How is the Thermite program advancing, and is it impacted by the election? A: (Annmarie Gayle, CEO) The Thermite program is ongoing with pre-production orders, and a production order is expected in 2025. Another significant opportunity is pending due to contractual negotiations, but the election has not impacted this program.

Q: What is the market opportunity and pipeline for the ship hull scanning feasibility study? A: (Annmarie Gayle, CEO) The ship hull scanning market is global with no existing solutions. The company is close to having a viable solution, with ongoing trials and significant interest from various stakeholders.

Q: Can you provide details on the potential acquisition and its impact on the company's capabilities? A: (Annmarie Gayle, CEO) The acquisition aims to expand the group's capabilities, with a planned expenditure of $6.5 million in cash. Further details will be provided upon successful completion of the acquisition.

Q: What is the status of the digital audio product and its potential applications? A: (Annmarie Gayle, CEO) The digital audio product has passed safety assessments, with expected purchase orders from the Navy in September. There is also potential for medical applications, such as in decompression chambers.

Q: How much revenue was generated from China in the recent quarter, and what is the impact of the current geopolitical situation? A: (Annmarie Gayle, CEO) Approximately $600,000 in revenue was generated from China. The situation is challenging due to increasing restrictions on sales and components, impacting both sales and procurement.

Q: What is the overall market adoption and penetration of Coda Octopus products? A: (Annmarie Gayle, CEO) There is increased utilization of rental assets, particularly in cable laying applications, where Coda Octopus is becoming the standard. The broader acceptance of the Echoscope for real-time monitoring and threat detection is also growing.

Q: How close is the ship hull scanning technology to being approved, and what is the next step? A: (Annmarie Gayle, CEO) The technology is close to being adopted, with ongoing trials and evaluations by the Navy. The focus is on getting the safety assessment and broader global marketing once approved.

Q: What is the status of the R&D contract for ship hull scanning, and what are the next steps? A: (Annmarie Gayle, CEO) The R&D contract has been completed, and the company is now supporting the Navy with ongoing trials. The system is in evaluation, and the company is awaiting further developments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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