Coda Octopus Group ((CODA)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Coda Octopus Group’s recent earnings call painted a mixed picture, with the company showcasing modest revenue growth and impressive strides in the marine technology sector. Despite these achievements, challenges in the US defense market and increased tax expenses tempered the overall optimistic sentiment. The strategic acquisition of Precision Acoustics is expected to drive future growth, providing a silver lining amid current market headwinds.
Revenue Growth
The company reported a 5% increase in total revenue for fiscal year 2024, reaching $20.3 million, up from $19.4 million in the previous year. This modest growth demonstrates Coda Octopus Group’s resilience amidst challenging market conditions.
Marine Technology Rental Revenue Increase
A standout highlight was the substantial rise in rental revenue within the marine technology division, which surged by 84.1%, climbing to $2.32 million compared to $1.26 million in the previous fiscal year. This growth underscores the strong demand for Coda Octopus Group’s marine technology solutions.
Equipment Sales in Asia
The company witnessed a significant 19% increase in equipment sales in Asia, amounting to $5.47 million compared to $4.60 million in fiscal year 2023. This growth reflects the expanding market presence and acceptance of Coda Octopus Group’s products in Asia.
Gross Profit and Margin Increase
Gross profit climbed to $14.2 million, with a gross margin improvement to 69.8% from 67.3% the previous year. This indicates enhanced efficiency and profitability within the company’s operations.
Operating Income and Margin
Operating income saw an impressive increase of 30.8%, reaching $3.6 million with an operating margin of 17.6% compared to 14.2% the prior year. This growth highlights the company’s effective cost management and operational strategies.
Acquisition of Precision Acoustics
The acquisition of Precision Acoustics brings valuable expertise in ultrasound and acoustic measurement to the company, with expected revenue contributions of approximately $5 million and margins of 52%. This strategic move is anticipated to bolster Coda Octopus Group’s future growth trajectory.
Decline in US Defense Program Revenue
Coda Octopus Group faced a significant challenge with a 33.4% decrease in revenue from the US Marine Technology operations, attributed to reduced funding allocations. This decline underscores the impact of geopolitical and economic factors on defense-related revenues.
Engineering Business Challenges
The US engineering business experienced lower than anticipated order intake due to reduced defense funding and uncertainties following the election, highlighting the volatile nature of the defense sector.
Headwinds in Offshore Projects
Uncertainty surrounding new administration policies led to delays in several offshore projects, which are likely to affect the company’s results in the first quarter of 2025.
Increased Tax Expenses
Tax expenses surged by 187%, reaching $0.7 million, with expectations of further increases due to the absence of significant net operating losses.
Forward-Looking Guidance
Looking ahead, Coda Octopus Group remains focused on its strategic growth pillars, including the Echoscope and DAVD technologies. The company anticipates further expansion through its recent acquisition of Precision Acoustics, despite the challenges posed by reduced US defense funding. Management is optimistic about sustaining growth in its core markets and leveraging new opportunities.
In summary, Coda Octopus Group’s earnings call revealed a balanced outlook with both achievements and challenges. While the company has made significant advances in marine technology and strategic acquisitions, setbacks in the US defense market pose challenges. Nevertheless, the company’s focus on innovation and strategic growth initiatives positions it for future success.
