Coda Octopus Group, Inc.

Good morning. Welcome to CODA Octopus Group's first quarter 2024 earnings conference call. My name is Sherry and I will be your operator today. Before this call, CODA Octopus issued its financial results for the first quarter 2024, ended January 31st, 2024, including a press release, a copy of which will be furnished in a report filed with the SEC and will be available in the investor relations section of the company's website. Joining us on today's call from Coda Octopus are its chair and CEO, Anne-Marie Gale, its interim CFO, Gail Jardine. Following their remarks, we will open the call for questions. Before we begin, Jackie Kirshner from the Gateway Group will make a brief introductory statement. Jackie, please proceed.

Thank you. Good morning, everyone, and welcome to COTA Octopus's first quarter fiscal 2024 earnings conference call. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward-looking statements under securities law and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, we see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. Claim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances, including, but not limited to, risks and uncertainties identified in our Form 10-K for the year ended October 31, 2023, and Form 10-Q for the first quarter of this fiscal year. You may get Coda Octopus's securities and exchange commission filings free by visiting the SEC website at www.sec.gov. I would also like to remind everyone that this call is being recorded and will be made available free play via a link in the investor relations section of Coda Octopus's website. Now, I will turn the call over to the company's chair and CEO, Anne-Marie Gale. Anne-Marie?

Thanks, Jackie, and good morning, everyone. Thank you for joining us for our first quarter 2024 earnings call. Our first quarter 2024 results were in alignment with our internal business plan, but down on our first quarter 2023. Our internal business plan had budgeted for our engineering business revenue for fiscal 2024 to be backloaded. This is largely because of reduced availability of funding for defense programs due to the use of continuing resolutions resulting from the upcoming US elections. We also planned within our forecast for several booked engineering projects to be converted into revenue later in fiscal 2024 due to the lead times for receiving components. Notwithstanding these challenges, We have made some encouraging operational progress with our engineering business segment, and I will discuss this later on in the call. Moreover, we are seeing increased order take by our UK engineering business, which had been significantly affected by delays in receiving orders in fiscal 2023. While the marine technology business revenue was down at $3.5 million compared to $3.8 million in the first quarter of 2023, I am pleased with the recovery progress that this part of our business is making. In the first quarter, we saw increased utilization of our rental assets, which I am very encouraged by, and this trend is continuing. Notable in the first quarter is that outright sales in Asia, a key strategic market for this segment, fell by 26%. A contributory factor to this is weak demand from China caused by macroeconomic factors and increased geopolitical tensions. Encouragingly, though, margins have continued to improve in the marine technology business. Continued progress in the marine technology business is critical to our growth plan. As such, I will give a brief overview of what we are currently seeing in the marine industry. The industry's biggest trade show is oceanology, which occurs every two years and took place last week. We therefore anticipated in our first quarter that outright sales would be down as typically customers postpone significant investment decisions until after this event. Fiscal 2023 results were impacted by the downturn in offshore renewable projects due to inflation, higher interest rates and supply chain problems. It has recently been reported that Equinor and Orsted have both now received provisional contracts in New York's fourth offshore solicitation. We're further encouraged by seeing increased inquiries for our rental solutions for offshore renewables. Although these are early days, this is good news for the marine industry and certainly for us. We're also seeing increased opportunities for some significant underwater construction projects in the Middle East, where some new islands are scheduled for development in calendar year 2024. Moving to our first quarter 2024 overview. During the first quarter of 2024, we continued to make progress against our key growth drivers. As I mentioned, we saw increased traction for our exoscope rental solutions. We also made good progress in advancing the David on Tethered System Customization and Hardening Program, and based on the ongoing evaluation, we have received overridingly positive feedback on the system and its potential. We're also encouraged by the engagement we're seeing with the customer and the pace of the program. This is good news, and we are on track to receive the final tranche of funding of $1.25 million in our second quarter. Following a fleet-wide survey by the Navy of the users who were previously allocated david tethered systems we received broader positive feedback from the various current users it is also interesting to note that the feedback from users cited the echo scope as game changing for their operations furthermore three new navy user groups have requested from their respective commands DAVID and Ecoscope as part of their operations and existing commands have also put in requests for additional systems. This is great news for the success of the DAVID technology and our company. We also had our first sale of the DAVID tethered system outside of the US Navy to a large Asian offshore service provider which is involved in underwater construction and diving, who is also looking at the broader adoption of this technology for their operations. This is a high profile project and the local environmental agency will be involved. This provider intends to create a core of super users and then look at a more systemic adoption of the technology providing their initial project is successful. We continue to work with several offshore service providers globally on their plans for adopting the DAVID. Some of these are waiting for internal management decisions on funding. In February, we had a successful series of demonstrations of our Ecoscope DAVID technology and the digital audio communication system to several bodies in Texas. These include the fire service, Department of Transport, and other law enforcement agencies where our technology is being assessed for bridge inspection, port and harbor security, search and rescue, and diving support. The demonstration was well received by this potential community of users, and we are working with them on progressing their interest in our solution. We are continuing to work with Naval Information Warfare Center, NIWIC, as they advance the selection of their sensor package for the video redefender, and we have provided proposals for accessing the technology for extended operational trials. We believe these trials will start in April 2024. In addition, we continue to work with the foreign Navy on integrating our Ecoscope technology on the video redefender, which they have also adopted. The safety and electrical assessment of our digital audio communication systems, Voice Hub 4, has now been completed by the Navy and they're expected to start trials in April. Our engineering business is making progress in key areas. We're pursuing two significant opportunities for our Thermite mission computers for two new applications, and we're now awaiting the completion of these negotiations. The relevant trials with our Thermite octal were completed pre-COVID, but these programs had stalled due to the pandemic. I am very pleased that these are now advancing and securing these programs will be meaningful to our group. The success of Thermite will mean diversification of revenue for the engineering business and improved margins. We've also received a small batch order for two new defense programs of record. The significance of this, however, is that these are two new programs which are likely to go into the production phase in this fiscal year. This is a key component of success in the engineering business operations, which depends on expanding the number of programs that it supplies proprietary sub-assemblies into. Our UK engineering business is also seeing an uptick in its order take and has received orders for two new programs relating to mine hunting autonomous vehicles and a new line of military land vehicles. We believe the results of the engineering business will improve in fiscal 2024. A significant part of this segment's revenue is backloaded. Let me now turn the call over to our interim CFO, Gail Jardine, to take you through our financials before I provide my closing remarks.