Coda Octopus Group, Inc. (CODA) Q1 2026 Earnings Call Transcript
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Overview
The earnings call summary shows strong financial performance with a 28.8% revenue increase and positive growth across all business units. The Q&A section reveals ongoing product developments and encouraging integration into new platforms, despite some uncertainty in market sizing. The company's strategy for revenue growth through technology adoption and defense sector expansion is promising. Although there are challenges in scaling the Echoscope product, the overall outlook is positive due to strong financials and growth opportunities, suggesting a stock price increase of 2% to 8% over the next two weeks.
Key Financial Performance
Total Revenue $6.7 million in Q1 2026, an increase of 28.8% year-over-year from $5.2 million in Q1 2025. The increase was driven by growth across all business units.
Marine Technology Business Revenue $3.4 million in Q1 2026, a 47.4% increase from $2.3 million in Q1 2025. Growth was attributed to increased hardware sales (up 31%) and rental revenue (up 232.8%).
Acoustic Sensors and Materials Business Revenue $1.6 million in Q1 2026, a 20.7% increase from $1.3 million in Q1 2025. The increase was due to a favorable mix of sales.
Defense Engineering Services Business Revenue $1.8 million in Q1 2026, a 9.2% increase from $1.6 million in Q1 2025. Growth was limited due to delays in receiving contract awards caused by funding issues.
Gross Profit $4.4 million in Q1 2026, up from $3.4 million in Q1 2025. Consolidated gross margin slightly decreased to 65.1% from 65.8% due to revenue composition changes.
Marine Technology Business Gross Margin 75.3% in Q1 2026, up from 73.1% in Q1 2025. The increase was largely due to higher rental sales.
Acoustic Sensors and Materials Business Gross Margin 66.8% in Q1 2026, up from 61.7% in Q1 2025. The increase was due to the mix of sales.
Defense Engineering Services Business Gross Margin 44.1% in Q1 2026, down from 58.9% in Q1 2025. The decrease was due to changes in the mix of engineering projects.
Operating Income $1.0 million in Q1 2026, a 52.6% increase from $0.6 million in Q1 2025. The increase reflects higher consolidated net revenue.
Net Income $0.93 million in Q1 2026, slightly up from $0.91 million in Q1 2025. The increase was offset by a higher tax expense ($0.3 million in Q1 2026 vs. $0.05 million in Q1 2025).
Cash and Cash Equivalents $30.5 million as of January 31, 2026, up from $28.7 million as of October 31, 2025. The increase was due to operational cash flow.
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Operating Highlights
Echoscope: A real-time 3D volumetric imaging sonar used in zero visibility underwater conditions. Widely adopted in the commercial offshore marine market. Sales increased significantly in Asia.
NANO Gen Series: Next-generation ultra-small form factor 3D sonars expanding the imaging sonar market. Supports AI-enabled autonomous systems and multi-mission capabilities.
DAVD (Diver Augmented Vision Display): Provides real-time information for diving operations, enhancing safety and efficiency. Untethered variant undergoing Navy use assessment, with potential for broader military adoption.
Defense Market Expansion: Focus on increasing market share for underwater imaging sensors in defense. Echoscope and NANO technologies are positioned for adoption in defense programs globally.
Commercial Diving Market: DAVD technology targets both defense and commercial diving sectors. Untethered variant has significant potential in military and special forces diving.
Revenue Growth: Revenue increased by 28.8% year-over-year to $6.7 million in Q1 2026. Marine Technology Business revenue grew by 47.4%.
Rental Revenue: Rental revenue increased by 232.8%, contributing to higher gross profit margins.
Gross Margins: Marine Technology Business gross margin improved to 75.3%, while Acoustic Sensors and Materials business gross margin rose to 66.8%.
M&A Strategy: Plans to pursue acquisitions in fiscal year 2026 to support growth and pivot revenue models towards multiyear program-based adoption.
AI-Enabled Platforms: Focus on deploying Echoscope and NANO technologies on next-generation autonomous AI-enabled platforms for navigation and obstacle avoidance.
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Risk or Challenges
Defense Engineering Services Business funding delays: The business is reliant on receiving funding on defense programs, which are currently being funded through continuing resolutions. This reduces the funding available for many programs, causing delays in receiving contract awards. Line item appropriations are still pending, impacting the business.
Exchange rate fluctuations: The weakening of the U.S. dollar against the British pound and Danish kroner has increased costs when translated into dollars, impacting operating expenses.
Dependence on defense program adoption: The broader adoption of DAVD technology by the military is contingent on the completion of the Navy Use assessment, which is still pending. This delay could impact the timeline for revenue growth in this segment.
Supply chain and infrastructure risks: The protection of undersea cables and subsea infrastructure is critical, as they are increasingly at risk from heavy shipping traffic, natural disasters, and other factors. This presents challenges in monitoring, protecting, and repairing these assets.
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Guidance & Outlook
DAVD Untethered Variant: The untethered variant of the Diver Augmented Vision Display (DAVD) system is undergoing safety qualification for Navy Use (ANU) assessment, expected to be completed in Q2 2026. Approval would enable broader adoption within the military untethered diving community. Additionally, site acceptance test training with a key European Navy is scheduled for Q2 2026, potentially leading to wider adoption.
NANO Gen Series Sonar: The NANO Gen Series, an ultra-compact 3D sonar system, is expected to see initial adoption in Q3 2026 through defense-funded product improvement programs. It is designed to support multiple mission profiles and aligns with the demand for AI-enabled subsea platforms.
Echoscope Technology: The Echoscope technology is positioned for deployment on next-generation autonomous AI-enabled platforms in fiscal year 2026. It aims to serve as a primary perception center for navigation, obstacle avoidance, and target guidance.
Undersea Infrastructure Protection: The company is focusing on the protection of undersea cables and subsea infrastructure, leveraging Echoscope technology for real-time 3D visualization and rapid damage assessment. This aligns with increasing global demand for infrastructure monitoring and protection.
M&A Strategy: The company plans to close another acquisition in fiscal year 2026 as part of its strategy to pivot the Marine Technology Business towards a multiyear program-based adoption model.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you size the total addressable market in dollar terms in the U.S. for the DAVD?
A:The CEO stated that it is difficult to provide a number at this stage as it depends on the negotiated price with the Navy. Historically, the military diving system has been priced at $50,000 per unit, but this is subject to change.
Q:What is the timing as to when the unmanned underwater vehicle (UUV) market could be an opportunity for Coda from a revenue perspective? Are there any design wins to speak of for Coda? When do you see production for UUVs possibly beginning?
A:The CEO and President of Technology mentioned near-term opportunities for the NANO Gen Series under the product improvement program (PIP), with small batches expected in the third and fourth quarters. They also noted ongoing discussions for new vehicle designs, with some platforms in the design phase. Initial sales are expected to pick up beyond the fourth quarter.
Q:Are the NANO Gen Series replacements under existing vehicles?
A:The CEO clarified that they are not replacements but are being added to existing vehicles to enhance capabilities. The President of Technology added that they are also being integrated into new platforms.
Q:Do you need to be part of a design win for the new generation of vehicles? Are those conversations ongoing? When is the targeted date for some of these vehicles?
A:The President of Technology explained that they are increasingly being included in the design phase of new vehicles, which is encouraging. He noted that some platforms are in the design phase and that the defense community is shifting to shorter design cycles, which could lead to initial sales in the shorter term, beyond the fourth quarter.
Q:How does rising oil prices impact demand for your products? Are you seeing any changes in demand right now?
A:The CEO stated that rising oil prices do not have an immediate impact on demand as the development cycle is not that responsive to such changes.
Q:What is holding back the Echoscope product from scaling today, and what is the long-term growth potential of this product?
A:The CEO attributed the slow scaling to the long gestation period of programs. She emphasized the importance of getting onto recurring sales programs, which take time to mature. Near-term opportunities exist in the PIP programs, and there is progress in defense programs. The DAVD product line is also contributing to Echoscope sales.
Q:Review of Unclear Management Responses
A:The management avoided providing a direct answer to the question about sizing the total addressable market for the DAVD in dollar terms, citing ongoing price negotiations with the Navy. Additionally, the response to the question about the Echoscope's scaling challenges lacked specific details on actionable steps being taken to address the issue.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI readiness
Coda Octopus
Defense Engineering
Echoscope technology
Engineering Services
Gayle
Gen Series
Marine Technology
NANO AI
NANO Gen
Navy
Sensors Materials
adoption
assessment
asset
cable
damage
defense program
diving
generation
highlight
increase margin
margin period
margin unit
milestone
monitoring
perception
period increase
sensor task
sonar
subsea
variant
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The earnings call summary shows strong financial performance with a 28.8% revenue increase and positive growth across all business units. The Q&A section reveals ongoing product developments and encouraging integration into new platforms, despite some uncertainty in market sizing. The company's strategy for revenue growth through technology adoption and defense sector expansion is promising. Although there are challenges in scaling the Echoscope product, the overall outlook is positive due to strong financials and growth opportunities, suggesting a stock price increase of 2% to 8% over the next two weeks.
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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 Report
Frequently Asked Questions
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