Coda Octopus Group, Inc. (CODA) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with a 30.7% revenue increase and a 24.6% rise in gross profit, despite a slight margin decline. The Q&A highlights potential growth in Europe and strong interest in new products. While management was unclear on some aspects, the focus on acquisitions and the absence of debt are positive indicators. The overall sentiment is positive, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Consolidated Net Revenue $26.6 million, a 30.7% increase year-over-year. The increase is attributed to the addition of the Acoustic Sensors and Materials Business and growth in other business segments.
Marine Technology Business Revenue $13.2 million, a 3.2% increase year-over-year. Growth was driven by increased hardware sales, though rental assets were underutilized due to changes in U.S. policy on offshore renewables.
Acoustic Sensors and Materials Business Revenue $5.4 million, contributing 20.4% to consolidated net revenue. This business was added in October 2024.
Defense Engineering Business Revenue $7.9 million, a 5.6% increase year-over-year. Growth was impacted by delays in contract awards due to the U.S. government shutdown and continuing resolutions.
Gross Profit $17.7 million, a 24.6% increase year-over-year. Gross margin decreased to 66.5% from 69.8% due to the addition of the lower-margin Acoustic Sensors and Materials Business and changes in sales mix.
Marine Technology Business Gross Margin 74.5%, down from 77.9% in the previous year. The decrease was due to a reduction in higher-margin rental sales and an increase in hardware sales.
Acoustic Sensors and Materials Business Gross Margin 58.6%, contributing $3.2 million to gross profit.
Defense Engineering Business Gross Margin 58.6%, up from 55.8% in the previous year. The increase reflects the mix of engineering projects.
Operating Expenses $13.1 million, a 24.0% increase year-over-year. The increase was driven by the addition of Precision Acoustics Limited and currency translation effects.
Selling, General, and Administrative Costs (SG&A) $10.7 million, a 27.9% increase year-over-year. The increase was due to the addition of the new business unit and earn-out provisions.
Operating Income $4.5 million, a 26.6% increase year-over-year. Operating margin was 17.1%, slightly down from 17.6% due to higher operating expenses.
Net Income $4.1 million, a 13.9% increase year-over-year. Net income per diluted share was $0.37, up from $0.32 in the previous year.
Cash and Cash Equivalents $28.7 million, an increase of $6.2 million from the previous year. The company has no debt.
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Operating Highlights
Launch of NANO Gen Series: Introduced ultra-compact 3D imaging sonar designed for AI-enabled autonomous underwater platforms, enabling real-time 3D perception for navigation, obstacle avoidance, and target guidance.
DAVD Untethered System: Completed Hardening Program and delivered 16 units for U.S. Navy evaluation, targeting broader adoption in military diving markets.
Defense Sector Expansion: 46% of Marine Technology Business revenue came from the defense sector, with increased sales of DAVD and Echoscope technologies.
Commercial Marine Sector: 54% of Marine Technology Business revenue derived from commercial marine offshore sector.
Revenue Growth: Consolidated net revenue increased by 30.7% to $26.6 million in FY 2025.
Hardware Sales: Hardware sales rose by 30.5% to $9.4 million, with a 7.7% increase in sales to Asia.
Acquisition Impact: Precision Acoustics Limited contributed 20.4% to net consolidated revenue, enhancing underwater acoustics expertise.
M&A Strategy: Plans to close another acquisition in FY 2026 to pivot revenue model towards program-based adoption and recurring sales.
AI-Enabled Platforms: Positioning NANO Gen Series as a core sensor for emerging AI-enabled subsea robotic systems.
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Risk or Challenges
Rental asset underutilization: Rental assets were significantly underutilized in fiscal year 2025, leading to lower rental revenue and impacting gross profit margins. This was attributed to changes in U.S. policy on funding for offshore renewables, causing many projects to be shelved.
Defense Engineering Services Business dependency: The Defense Engineering Services Business is heavily reliant on receiving funding for defense programs. Delays in contract awards due to the U.S. government shutdown and continuing resolutions impacted revenue and operations.
Gross margin decline: Consolidated gross margin decreased from 69.8% in fiscal year 2024 to 66.5% in fiscal year 2025, primarily due to the addition of the lower-margin Acoustic Sensors and Materials Business and changes in the sales mix.
Currency exchange impact: The weakening of the U.S. dollar against the British pound and Danish kroner increased operating expenses when translated into U.S. dollars, impacting financial performance.
Dependency on defense sector: A significant portion of revenue is derived from the defense sector, which is subject to budgetary constraints and approval processes, creating potential risks for revenue stability.
DAVD adoption hurdles: The untethered DAVD system is undergoing the U.S. Navy's Authorization for Navy Use (ANU) approval process. Broader adoption of this technology is contingent on receiving this approval.
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Guidance & Outlook
Revenue Growth: The company anticipates broader adoption of its DAVD technology by foreign navies and expects Echoscope technology to be adopted on new autonomous AI-enabled platforms in fiscal year 2026. This is expected to drive revenue growth.
Product Launches: The launch of the NANO Gen Series sonar positions the company to support a growing range of AI-enabled subsea robotic and autonomous systems, which is expected to contribute to future growth.
Defense Sector Expansion: The company expects procurement and program decisions for active opportunities involving the NANO Gen Series to be made in early 2026, with initial deliveries anticipated within the fiscal year. These programs are expected to support multi-mission subsea vehicles and provide a foundation for follow-on orders and long-term fleet adoption.
DAVD Technology Adoption: The untethered DAVD system is undergoing final approval for Navy Use, which is expected to support broader operational use and adoption. The company sees this as the largest growth opportunity for the DAVD technology, with a potential user base of approximately 14,000 divers in the U.S. alone.
M&A Strategy: The company plans to continue its M&A strategy in fiscal year 2026, aiming to close another acquisition to further support its growth objectives.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What Coda products were shipped to the Indian Navy? Is this a new customer or an existing one? Are there significant opportunities in India?
A:The CEO, Annmarie Gayle, stated she was not clear about the Indian Navy and was unsure where that information came from.
Q:Can you update on the progress in Europe regarding the delivery of untethered systems to a European Navy?
A:The CEO expressed excitement about the development, mentioning the completion of the DAVD untethered Hardening Program. Two systems were delivered to a European Navy in Q4, and training will be provided in Q2. Broader adoption outside the U.S. is a key focus, with potential opportunities expected in Q3 and Q4.
Q:Can you quantify cumulative deliveries of the untethered DAVD system and provide revenue targets for fiscal 2025 and 2026?
A:In fiscal 2025, $3.7 million was achieved for DAVD. For 2026, the company aims to exceed this but cannot provide a specific target due to pending budget allocations and approval processes. Revenue is expected to be lumpy and back-ended to Q3 and Q4.
Q:How many foreign navies have tested or are testing DAVD? What is the sales cycle and time frame for deliveries?
A:Blair Cunningham mentioned that the product has been presented to multiple navies, including 10 at a single event like RIMPAC. The sales cycle can take years, as seen with a European Navy that took two years to progress. Neighboring navies may follow suit after initial adoption.
Q:What is the customer feedback on the next-generation Echoscope?
A:Blair Cunningham highlighted strong interest from defense, oil and gas, and other markets. The NANO Gen Series is seen as a game-changer, with opportunities for integration into existing platforms and new programs. The focus is on shorter-term opportunities with predictable volume profiles.
Q:How would you characterize the offshore commercial demand environment for 2026?
A:The CEO noted steady opportunities for Echoscope in the commercial market. Rentals saw an uptick in Q4 after a slow start. However, the defense market is the primary focus for growth due to opportunities for multiple sales and long-term revenue.
Q:How will the company allocate its $28 million cash on hand?
A:The CEO stated the priority is accretive value-added acquisitions to provide returns to investors and grow the business. The company is actively seeking acquisition targets.
Q:Review of Unclear Management Responses
A:The CEO avoided directly answering the question about the Indian Navy, stating she was unclear about the information. Additionally, specific revenue targets for fiscal 2026 were not provided due to uncertainties in budget allocations and approval processes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI platform
Cunningham
DAVD Diver
DAVD interest
DAVD system
DAVD technology
DAVD variant
DUS Hardening
Defense Engineering
Dillon
Display system
Gayle
Hardening Program
Navy Use
PIPE sonar
approval
autonomy
class
community DAVD
core perception
defense organization
flexibility
generation DAVD
generation platform
generation subsea
geography sale
government
imaging
market DAVD
mission
navigation obstacle
obstacle avoidance
purpose
subsea market
subsea platform
subsea vehicle
system DAVD
technology DAVD
type
water
CODA Transcript
Real Matters Inc. (REAL:CA) Q1 2026 Earnings Call Transcript
Positive1-29
The earnings call indicates positive sentiment due to significant revenue growth, market share gains, and improved EBITDA performance. The Q&A highlights optimism about refinancing activity, Tier 1 client growth, and market recovery. While management expressed caution about short-term volume declines, they are optimistic about long-term growth and profitability. Additionally, the company is expanding into new channels and has a strong cash position. Despite some management hesitance on specifics, the overall outlook is positive, suggesting a stock price increase in the near term.
Coda Octopus Group, Inc. (CODA) Q4 2025 Earnings Call Transcript
Positive1-29
The earnings call reveals strong financial performance with a 30.7% revenue increase and a 24.6% rise in gross profit, despite a slight margin decline. The Q&A highlights potential growth in Europe and strong interest in new products. While management was unclear on some aspects, the focus on acquisitions and the absence of debt are positive indicators. The overall sentiment is positive, suggesting a likely stock price increase of 2% to 8% over the next two weeks.
Coda Octopus Group, Inc. (CODA) Q3 2025 Earnings Call Transcript
Unknown9-15
The earnings call reveals mixed results: strong revenue growth and positive feedback on new products, but declining margins and dependency on defense funding. The Q&A highlights realistic revenue adjustments and limited China exposure, but management's unclear response on stock buybacks raises concerns. Overall, the financial performance and market strategy show potential, but uncertainties in expenses and defense reliance balance the sentiment to neutral.
Coda Octopus Group, Inc. (CODA) Q2 2025 Earnings Call Transcript
Unknown6-16
The earnings call reflects mixed signals: strong revenue growth, especially in Marine Technology, but declining margins and profits due to increased costs. The Q&A highlights optimism in future quarters and new product releases, but management's vague responses about program timelines and revenue contributions indicate uncertainty. The absence of shareholder returns and paused acquisitions further dampen sentiment. Overall, the positive revenue growth and future expectations are offset by current financial challenges and uncertainties, resulting in a neutral outlook.
CODA Report
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