Coda Octopus Group, Inc.

Good morning and welcome to the COTA Octopus Group's third quarter fiscal 2025 earnings conference call. My name is Melissa and I'll be your operator today. Before this call, COTA Octopus issued its financial results for the third quarter ended July 31st, 2025, 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 COTA Octopus are its Chair and CEO Anne Marie Gale, its Interim CFO Gail Jarden, its President of Technology and Director Blair Cunningham. Following their remarks, we will open the call for questions. Before we begin, Jeff Turner from our Investor Relations team will make a brief introductory statement. Jeff, please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Coder Octopus third quarter fiscal 2025 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. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, 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 to 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 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, 2024, and Forms 10-Q for the first, second, and third quarters of our fiscal 2025 year. You may get Coder Octopus Securities and Exchange Commission filings free by visiting the SEC website at www.sec.gov. I would 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 Coder Octopus website. Finally, as a reminder, this is our third quarter fiscal 2025 reporting, and all comparisons, unless explicitly stated otherwise, are with our third quarter fiscal 2024. Now, I will turn the call over to the company's chair and CEO, Anne-Marie Gale. Anne-Marie?

Thanks, Jeff, and good morning, everyone. Thank you for joining us for our third quarter fiscal year 2025 earnings call. Despite the challenging global policy environment, our revenue in the third quarter 2025 increased by 29%, and I believe that we have delivered a solid set of results. For those who are new to the CODA octopus story, our business is made up of three discrete business operations, the marine technology business, the marine engineering businesses, and our recently added acoustic sensors and materials business unit. Within our group, our core business is the marine technology business. This business generates most of our revenue, and in the third quarter, it generated 56.4% of our net revenue. It is around this business that we're building our growth strategy. The marine technology business operates in the subsea market and is home to key disruptive underwater technologies. These technologies are bringing the smartphone revolution underwater by providing a comprehensive real-time information platform which allows our customers to make real-time decisions and also significantly reducing the cost of these operations while increasing safety. The specific addressable markets that we operate in are the imaging sonar market and diving market. It is these market segments that our growth strategy is built around. Turning to our imaging sonar, the Ecoscope. The Ecoscope is a real-time three-dimensional volumetric imaging sonar that can generate real-time three-dimensional images underwater in zero visibility water conditions. This is widely used in the commercial offshore marine market for a range of underwater applications. A significant part of our annual revenue is derived from the commercial offshore marine market. To achieve the growth that shareholders want to see from our company, we have to increase our market share for underwater imaging sensors in the defense space. There are many ongoing defense programs globally where new classes of underwater vehicles are being adopted. Significant budgets are appropriated for this. The Ecoscope's uniqueness of being a single sensor for multiple undersea activities presents a significant advantage over other technologies. It allows the consolidation of multiple sensors into a single power-efficient unit without compromising the various missions to be executed by the customer. We recently launched our next generation of ultra-small form factor three-dimensional sonars, the NanoGen series. The three-dimensional sonars within our NanoGen series are a shade bigger than a smartphone and have been specifically designed for the small class of underwater vehicles, drones, and diver wearable applications. Our second key technology is the David, the diver augmented vision display system. The David provides the real-time information platform for diving operations, increasing safety and efficiency. The addressable market for David includes both the defense and commercial diving sectors. The untethered variant addresses the special forces type of divers and we believe constitutes the largest addressable market for the David technology. Following the successful conclusion of the funded dust hardening program, in the third quarter, we delivered the 16 David-on-Tether system to the Navy for use by the Special Forces. This now allows select group of Special Forces personnel to start evaluating the David technology on live missions. We're providing all support required to ensure the success of this program and the rollout of the technology to the special forces market. We also deliver the final deliverables under the funded David on Tevid system hardening program to the foreign Navy sponsor. This now puts this foreign Navy in a position to start using the technology in live missions. Now turning to third quarter highlights relating to our core business, the marine technology business. This business sells its products and solutions worldwide and increased revenue in the third quarter by 30.7 percent. Key highlights include 57.7% of revenue generated by this business relates to Ecoscope and 42.3% relates to David. Hardware sales increased by 103.6% and were 2.7 million compared to 1.3 in the third quarter 2024. Hardware sales to Asia decreased by approximately 27.9% and were $1.1 million compared to $1.5 million in the third quarter 2024. This resulted in lower commission costs. rental assets were significantly underutilized in the third quarter, resulting in lower units of rentals and associated services. This also impacted on the gross profit margins of this business. This reflects the change in U.S. policy on funding for offshore renewables, which caused many projects to be shelved, as reported by Shell Orsted and BP. Now turning to highlights relating to the marine engineering business. In the third quarter, our marine engineering business revenue decreased by 33.2% caused by delays in receiving contract awards. Gross profit margin in the third quarter 2025 was 58.9% compared to 62.6% in third quarter 2024, which reflects the mix of engineering projects in the period. This business has long-standing relationships with prime defense contractors and has served the defense market for over 48 years. It is reliant on receiving funding on the defense programs. During the third quarter, it continued to see an increase in the level of inquiries on the defense programs. However, many programs are still waiting for funds to be appropriated under the federal budget, and therefore, this affected contract awards to the engineering business in the period. The success of the marine engineering business is predicated on increasing the number of programs to which it supplies proprietary parts. Now turning to highlights relating to the newly acquired business unit, Precision Acoustics Limited. In the third quarter, this newly added business unit contributed 20.6% to our net revenue and 18% to our operating income. This business unit has added some diversification and resilience to our revenue structure. We continue to be very pleased with this acquisition, which we made in October 2024, and reiterate that it positions a group to collectively respond to larger defense requirements, particularly in the underwater acoustic space. We continue to make it our priority to focus on executing against our growth strategy. And in the third quarter, we saw an increase in sales of both Ecoscope and David. Blair Cunningham, our President of Technology, who is the market maker for our technologies, will be updating you on progress and various milestones around our core technologies. Blair will also be available to answer any questions you may have about our technologies, so please use the opportunity to raise such questions during the Q&A sessions if you have any. I will now turn the call over to Blair Cunningham.