Coda Octopus Group, Inc.

Good morning. Welcome to Coda Octopus's group's second quarter 2024 earnings call. My name is Sherry and I will be your operator today. Before this call, Coda Octopus issued its financial results for the second quarter 2024 ended April 30th, 2024, including a press release, a copy of which will be furnished in a report filed with the SEC. It 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, its CEO, Anne Marie Gale, its interim CFO, Gail Jardine. Following their remarks, we will open up the call for questions. Before we begin, Jeff Turner will make a brief introductory statement. Mr. Turner, please proceed.

Thank you, operator. Good morning, everyone. Welcome to Coder Octopus second 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 statement. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statement, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation or undertaking to update forward-looking statements that reflect circumstances or events that occur after the date the forward-looking statements are made, except as may be required by law. We refer you to our filing, 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 Forms 10-Q for the first and second quarter of this fiscal year. You may get CoderOctopus 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 for replay via a link in the investor relations section of the Sodor Octopus website. Now, I will turn the call over to the company's chair and CEO, Anne-Marie Gayle. Anne-Marie?

Thanks, Jeff, and good morning, everyone. Thank you for joining us for our second quarter 2024 earnings call. Our revenue in the second quarter 2024 was in line with our second quarter 2023 revenue. Despite various challenges in the second quarter, we delivered a solid set of results, including increasing our operating income, net income, and earnings per share. During the second quarter, we observed a slowdown in the pace of placing orders relating to U.S. defense sector programs caused by the funding gaps created by the use of continuing resolutions to fund defense programs instead of a fully funded federal budget. This is not unusual where there is an upcoming presidential election. Notwithstanding these temporary constraints, I am very pleased that we were able to increase our revenue generation outside of the USC, which shows the diversity and resilience in our revenue stream. The marine technology business revenue in the second quarter 2024 was broadly in alignment with the second quarter 2023 revenue. I am particularly pleased with the increased utilization of our rental assets during the second quarter and therefore the improved gross profit margins of 80.2% in the second quarter 2024 compared to 75.3% in the second quarter 2023. We are also very pleased to see better traction in sales emanating from Asia, which was 15.9% higher in the quarter. Sales for this segment from the USA fell from 1.8 million to 0.6 million as a result of funding gaps created by the use of continuing resolutions to fund defense programs. This means that without a federal budget, there is limited funding for these programs and many of these are currently only partially funded. Our engineering business saw an increase in revenue and is making good progress in key areas. This business was also impacted by a reduction in order intake relating to their ongoing defense programs And sales from USA Defense programs for this segment fell from 1.1 million to 0.8 million. This is due to the funding gaps I touched on earlier. Moving to our second quarter 2024 overview. During the second quarter of 2024, we continued to make progress against our key growth drivers. As I mentioned, we saw increased traction for our ex-co-parental services. This resulted in an increase in gross profit margins. Although sales in the USA were significantly down due to the funding gaps relating to defense programs, our team was able to recover some sales in other geographies. I'm particularly pleased with this as it shows the diversification and resilience within our revenue streams. Of great importance, we also provided extensive support to the ongoing operations relating to the Francis Scott Key Bridge collapse. The circumstances surrounding the collapse were tragic and we are pleased that we could have assisted in some small way. This high profile engagement has reinforced the importance of our technology for these sorts of applications and has marketed the Ecoscope to other customers around the world, including in North America. The Ecoscope technology has been the primary sensor used for a broad scope of activities relating to recovery, salvage, and real-time inspection. This high-profile project again highlighted the importance of the capability of the Ecoscope technology, a single sensor for multiple real-time 3D imaging applications, including in disaster recovery programs. Over the years, the Ecoscope has been used globally in many disaster recovery programs, including in South Korea, Japan, and Europe. We made further progress with Naval Information Warfare Center, NIWC, and supplied under a lease agreement two of our compact Ecoscope sonars for their ongoing evaluation of our technology for the Vidiary Defender Platform. We also continue to work with an Allied Foreign Navy, which has selected the Vidiary Platform on integrating our Ecoscope on their vehicles, and we have begun to provide training on the Ecoscope to their personnel. This is a good indication that the Ecoscope technology is included in their census selection program. We also made progress on the ship hull scanning program, which we have been pursuing with our Navy customers. And in the second quarter, we completed successful trials. This ship hull scanning platform which we delivered to the Navy in our third quarter of 2023, includes both the ECOSCOPE and DAVID capabilities. This is an important step forward under this program, which has been executed over a three-year period and for which we received $1 million in funding over this period. We're not aware of any effective solutions in the market for ship hull scanning. And if the company's developed solution is accepted by the Navy as meeting the requirements of this program, this could be significant for our business. Furthermore, there are many different Navy commands that are interested in the solution we have put forward. We also continue to make progress in the adoption of the davit system, and in the second quarter, we partnered with a U.S. service provider to complete a tunnel inspection project using the davit system and our Ecoscoop. We believe this was a resounding success as we were able to show the effectiveness of the DABIT and ECOSCOPE solution for these applications, particularly the return on investment for customers and the superior deliverables achievable with this solution. We're discussing adoption of the technology with this U.S. commercial service provider. We also made good progress in advancing the David Untethered System Customization and Hardening Program and received partial funding of $250,000. We anticipate the remaining $1 million will be released as the budgetary constraints mentioned earlier are removed. Despite this, the program of hardening the David on Tezit system is proceeding, and we are doing everything within our remit to move this program to a successful conclusion for the company and its shareholders. We continue to believe that this is the biggest opportunity for the David technology. Our newly launched AI-based Digital Audio Underwater Communication System has been undergoing Navy evaluation. We have now received overridingly positive feedback on the technology. From a survey conducted by the Navy of its divers involved in this evaluation, 100% of those involved believe that this product increased their diving capability and level of safety by providing clearer and crisper communications. They all said they would use the product on a mission if available and thought that it was superior to existing analog communication systems. We continue to make good progress with our goal of creating the conditions for returning the engineering business to its pre-COVID $10 million revenue profile. To achieve this, we will need to increase the number of new defense programs that we're supplying proprietary sub-assemblies into. We have now seen some new programs materializing, and I'm excited about this. In the second quarter, we received a partial award of $771,000 for production units for a new sub-assembly for an existing program of record, which is being upgraded due to obsolescence of some of the components. We had anticipated an initial award of $1.5 million under this program, but due to the funding gaps mentioned earlier, we received a partial award and expect the remainder when funding becomes available. We are excited about this program of upgrade as there are many existing systems in the field that will need to be upgraded with a new part which we have designed, and this will generate meaningful revenue on this program over time. We also received a new order for Thermite Mission Computers, which relates to a new Navy program. This is for an initial pre-production quantity of eight systems for a contract value of $280,000. We expect the larger production orders for this program in early 2025. Finally, we also continue to perform quality business development activities including working with our newly appointed business development focus group in the U.S., we can already see the promise of the success of this engagement. 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.