Release Date: June 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coda Octopus Group Inc (CODA, Financial) achieved a 0.4% increase in total revenue for Q2 2024 compared to Q2 2023, reaching $5.32 million.
- The company saw a significant improvement in gross profit margins, increasing to 78.2% in Q2 2024 from 68.3% in Q2 2023.
- Operating income rose by 57.9%, reaching $1.4 million in Q2 2024 compared to $0.9 million in Q2 2023.
- Coda Octopus Group Inc (CODA) maintained a strong cash position with $23.7 million in cash and cash equivalents and no debt as of April 30, 2024.
- The company reported increased traction in sales from Asia, which were up by 15.9% in Q2 2024, indicating successful diversification of revenue streams.
Negative Points
- Sales from the US defense sector fell significantly due to funding gaps, with marine technology sales dropping from $1.8 million to $0.6 million.
- The marine engineering business also faced a reduction in order intake from US defense programs, with sales falling from $1.1 million to $0.8 million.
- Despite the overall revenue increase, the marine technology business saw a 1.6% decrease in revenue compared to Q2 2023.
- The company experienced a slowdown in the pace of placing orders related to US defense sector programs due to budgetary constraints.
- Unbilled receivables increased significantly from $0.9 million to $1.6 million, reflecting accumulated project expenses on uncompleted contracts.
Q & A Highlights
Q: Can you update us on the state of the offshore renewables and underwater construction markets and how the environment is the same or different today?
A: We saw increased utilization of our rental assets, largely driven by offshore renewables and underwater construction activities. This indicates increased demand for our rental solutions in these sectors.
Q: How has the work on the Francis Scott Key Bridge disaster driven awareness or increased adoption of your technology?
A: The high-profile engagement reinforced the capability and uniqueness of our technology, driving global marketing awareness and generating new contacts. This exposure has also reinforced the value of our technology in ongoing defense programs.
Q: Do you see an inflection point in orders for either tethered or untethered systems in the next 12 to 18 months based on the progress you're making?
A: Yes, we see strong interest in the tethered system, which is now an approved Navy use item. The untethered system is also progressing well despite funding limitations. We expect increased orders once budgetary constraints are lifted.
Q: Have you begun to see a recovery in budget allocations since the continuing resolution ended?
A: We are seeing partial funding for many programs, with significant funding expected to be released in July. This is typical in an election year, and we anticipate more visibility on funding soon.
Q: Can you estimate the size of the opportunity for the termite program based on the preproduction order?
A: The potential for the termite program is around 200 units, translating to approximately $7 million over time.
Q: Can you explain the increase in unbilled receivables from $763,000 to $1.58 million?
A: The increase reflects accumulated project expenses on uncompleted contracts. This indicates work done that hasn't yet been billed, which is positive for future cash generation.
Q: Are there any specific verticals or markets you are looking at for growth through acquisitions?
A: We are focused on diversifying our revenue streams and expanding into new geographies, particularly in Asia. We are also excited about our digital audio communication system and its market potential.
Q: Would you consider hosting an Investor Day to showcase your technology to the capital markets?
A: We appreciate the suggestion and will certainly consider hosting an Investor Day to better communicate our technology and business prospects to investors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
