• Revenue: $20.3 million, up 5% from $19.4 million in fiscal year 2023.
• Product Segment Revenue: $12.8 million, a 5.7% increase from $12.1 million in fiscal year 2023.
• Gross Profit: $14.2 million, compared to $13.0 million in fiscal year 2023.
• Gross Margin: 69.8%, up from 67.3% in the prior year.
• Operating Income: $3.6 million, a 30.8% increase from $2.7 million in fiscal year 2023.
• Operating Margin: 17.6%, compared to 14.2% in fiscal year 2023.
• Net Income After Taxes: $3.6 million or $0.32 per diluted share, compared to $3.1 million or $0.28 per diluted share in fiscal year 2023.
• Cash and Cash Equivalents: $22.5 million as of October 31, 2024, with no debt.
• Rental Revenue: Increased by 84.1% to $2.32 million from $1.26 million in fiscal year 2023.
• Equipment Sales in Asia: Increased by 19% to $5.47 million from $4.60 million in fiscal year 2023.
• US Marine Technology Revenue: Decreased by 33.4% to $2.83 million from $4.26 million in fiscal year 2023.
• Engineering Business Revenue: Increased by 3.8%.
• Operating Expenses: $10.6 million, a 2.9% increase from $10.3 million in fiscal year 2023.
• SG&A Costs: $8.3 million, a 1.8% increase from $7.9 million in fiscal year 2023.
• Tax Expense: Increased by 187% to $0.7 million in fiscal year 2024.

• Warning! GuruFocus has detected 2 Warning Signs with CODA.

Release Date: January 29, 2025

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

Positive Points

• Coda Octopus Group Inc (NASDAQ:CODA) reported a 5% increase in revenue for fiscal year 2024 compared to 2023, reaching $20.3 million.
• The company's gross profit margin improved to 69.8% from 67.3% in the previous year.
• The marine technology business saw a significant increase in rental revenue by 84.1%, driven by higher utilization of rental assets.
• Coda Octopus Group Inc (NASDAQ:CODA) successfully integrated its Ecoscore systems into new undersea vehicles, expanding its technology footprint within defense programs.
• The acquisition of Precision Acoustics is expected to enhance Coda Octopus Group Inc (NASDAQ:CODA)'s capabilities in the underwater acoustic space and open up new market opportunities.

Negative Points

• Revenue from US defense programs decreased by 33.4% due to reduced funding, impacting the marine technology business.
• The US engineering business faced lower than anticipated order intake due to reduced defense funding and broader global headwinds.
• The company anticipates challenges in the first quarter of 2025 due to ongoing funding delays and uncertainties around new administration policies.
• Coda Octopus Group Inc (NASDAQ:CODA) expects an increase in tax expenses in the future as it has no material net operating losses to offset liabilities.
• The acquisition of Precision Acoustics will lead to increased R&D and SG&A expenses, potentially impacting short-term profitability.

Q & A Highlights

Q: Can you discuss the mix of revenues that led to lower than usual gross margins in both segments during the fourth quarter? A: Annmarie Gayle, CEO: The margins are always subject to the mix of sales. For example, equipment sales carry less margin than rentals. Unfortunately, I don't have the specific Q4 mix, but generally, it's driven by the types of sales we have in the quarter.

Q: How much revenue did the DA programs generate in fiscal 2024, and what are the expectations for the current fiscal year given the funding challenges in the US? A: Annmarie Gayle, CEO: In fiscal year 2024, we saw a significant reduction in funding from US programs, typical in an election year. We expect Q1 to be challenging, but anticipate changes from Q2 onwards. For fiscal year 2025, we are tracking $5 million in DA revenues, with $2 million from tethered systems, $1 million from initial untethered system purchases, and $2 million from other development programs.

Q: Can you elaborate on the potential impact of tariffs on your business? A: Annmarie Gayle, CEO: Tariffs can stymie the business environment by impinging on the free flow of goods and services, potentially reducing demand. Currently, there's a general caution in the environment due to unknowns around new policies.

Q: Regarding the acquisition of Precision Acoustics, what increased investments are needed to achieve potential revenue synergies, and will this acquisition be accretive or dilutive to operating profit in the first 12 months? A: Geoff Turner, Investor Relations: Precision Acoustics is well-equipped, and we don't foresee a need for significant capital investment. The business has been profitable, and we expect it to continue being so. Annmarie Gayle, CEO: We plan to enhance business development by adding sales personnel to grow the business.

Q: Can you provide more details about the addressable markets for your products, particularly in the US underwater warfare and scuba divers sectors? A: Blair Cunningham, President - Technology: For the DA technology, we target a 15% conversion of the US market, which includes approximately 4,000 divers. This represents a $40 million opportunity over five years. The focus is on high-volume applications to yield the biggest returns.

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