Coda Octopus Group Inc. Earnings Call Contradictions: UUV Sales Timing and DAVD Revenue Targets Clash

Date of Call: Mar 17, 2026

Financials Results

• Revenue: $6.7M, up 28.8% from $5.2M in Q1 FY25
• EPS: $0.08 per diluted share, flat compared to $0.08 per diluted share in Q1 FY25
• Gross Margin: 65.1%, compared to 65.8% in the prior year
• Operating Margin: 15.1%, compared to 12.7% in the prior year

Business Commentary:

Revenue Growth Across Segments:

• Coda Octopus Group reported total revenue of $6.7 million for Q1 2026, compared to $5.2 million in Q1 2025, representing an increase of 28.8%.
• The growth was driven by a significant increase in the marine technology business, which generated $3.4 million, up 47.4%, and the acoustic sensors and materials business, which increased by 20.7%.

Marine Technology Business Expansion:

• The marine technology business, which constitutes 50% of consolidated net revenue, saw a 47.4% increase in revenue, driven by a 31% increase in hardware sales and a 232.8% increase in rental revenue.
• This expansion was primarily due to strong Echoscope sales in the Asia region and increased utilization of rental assets.

Defense Engineering Services Challenges:

• The defense engineering services business experienced a 9.2% increase in revenue, but this growth was tempered by delays in receiving contract awards due to funding issues related to continuing resolutions and pending appropriations.
• The delays were attributed to the reliance on defense program funding and the slow approval process for line item appropriations.

Acoustic Sensors and Materials Business Performance:

• The acoustic sensors and materials business reported a 20.7% increase in revenue, with a gross profit margin increase to 66.8% compared to 61.7% in the prior year.
• The improvement in profit margin was due to the mix of sale types, reflecting strong performance and demand for its products.

Technological Advancements and Market Opportunities:

• The company is focused on expanding market share for its DAVD and Echoscope technologies, with the DAVD untethered variant targeting a market of approximately 14,000 divers in the U.S. and awaiting Navy authorization.
• The adoption of NanoGen series sonars is expected to drive initial sales in Q3 and Q4 through defense-funded product improvement programs, indicating a strategic pivot towards AI-ready, multi-mission capable sensors.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated 'I am very pleased with the increase in revenue' and 'we have delivered a solid set of results.' Management highlighted progress on key milestones for DAVD and Echoscope technologies and expressed optimism about near-term opportunities under PIP programs and broader adoption.

Q&A:

• Question from Brian Kinstlinger (Alliance Global Partners): Can you size the total addressable market in dollar terms in the US for the DAVD?
  Response: The addressable market size is difficult to quantify as it depends on the negotiated sale price with the Navy, but historically the price has been around $50,000 per unit.

• Question from Brian Kinstlinger (Alliance Global Partners): What is the timing as to when the unmanned underwater vehicle 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?
  Response: Near-term opportunities are expected under Product Improvement Programs (PIPs) in Q3 and Q4 FY26, with initial small batches of NanoGen sonars. Conversations are ongoing for new vehicle designs, with potential sales expected beyond Q4 FY26.

• Question from Brian Kinstlinger (Alliance Global Partners): How does rising oil prices impact demand for your products? Are you seeing any changes this quickly on demand right now?
  Response: Rising oil prices are not having a noticeable impact on demand as development cycles are not responsive to short-term price fluctuations.

• Question from Brian Kinstlinger (Alliance Global Partners): What’s holding back the Echoscope product from scaling today, and how do you think about the long-term growth potential of this product?
  Response: The primary barrier is the long gestation period for defense programs. Growth is focused on near-term PIP opportunities and pull-through sales from the DAVD product line, with progress being made on defense programs.

Contradiction Point 1

UUV (Nano) Sales Timing and Design Win Engagement

Contradiction on when initial sales will occur relative to Q4 2026.

Brian Kinstlinger (Alliance Global Partners) - Brian Kinstlinger (Alliance Global Partners)

2026Q1: Some initial sales are expected to pick up beyond the fourth quarter, with a pivot towards smaller, quicker development cycles in the defense community. - [Blair Cunningham](CFO)

When does Coda expect to capitalize on the evolving UUV market through revenue growth, design wins, and production timelines? - Kevin Pimental (Alliance Global Partners)

2025Q4: Strong interest has been expressed by the U.S. Navy and other defense companies for both PIP integrations and new platform developments. - [Blair Cunningham](CFO)

Contradiction Point 2

DAVD Addressable Market Size and Pricing

Contradiction on the basis for sizing the total addressable market.

Brian Kinstlinger (Alliance Global Partners) - Brian Kinstlinger (Alliance Global Partners)

2026Q1: The total addressable market size is predicated on the sale price, which is still being negotiated with the Navy. Historically, the price has been around $50,000 per unit, but the final acceptance price depends on the customer. - [Annmarie Gayle](CEO)

What is the total addressable market in dollar terms for the DAVD in the US, given there are 14,000 divers? - Kevin Pimental (Alliance Global Partners)

2025Q4: The key 2026 benchmark is securing 'meaningful adoption of DAVD outside of the U.S.' The technology is now mature, and the focus is on expanding beyond the U.S. market. Quantities for large sales were not specified. - [Annmarie Gayle](CEO)

Contradiction Point 3

DAVD Revenue Target and Timeline

Conflicting statements on the achievement and timing of DAVD revenue targets.

What is Brian Kinstlinger's role at Alliance Global Partners? - Brian Kinstlinger (Alliance Global Partners)

2026Q1: Near-term opportunities are expected under Product Improvement Programs (PIP), with small batches of Nano likely acquired in the third and fourth quarters of fiscal 2026... Some initial sales are expected to pick up beyond the fourth quarter. - [Annmarie Gayle](CEO) and [Blair Cunningham](CTO)

What is the timeline for Coda to capitalize on the evolving UUV market, including any design wins and potential production start dates, from a revenue perspective? - Kevin (Alliance Global Partners)

2025Q3: The company is still confident in hitting $4 million in DAVD revenue for the fiscal year, which represents significant growth from the $1.2 million revenue at the same time last year. - [Annmarie Gayle](CEO)

Contradiction Point 4

Growth Outlook and Market Focus for Echoscope

Inconsistent messaging on Echoscope's primary growth driver status and the pace of scaling in the defense market.

Brian Kinstlinger (Alliance Global Partners) - Brian Kinstlinger (Alliance Global Partners)

2026Q1: The primary market for Echoscope is the commercial offshore marine market, which remains strong. The main barrier to scaling in the defense sector is the long gestation period for program maturity. - [Annmarie Gayle](CEO)

What factors are currently hindering Echoscope's growth in scaling, and how do you assess its long-term growth potential? - Richard Deutsch (Private Investor)

2025Q3: Echoscope is still your main short-term revenue driver... Growth is targeted in the defense market, which offers scalable, multi-year sales opportunities... - [Annmarie Gayle](CEO)

Contradiction Point 5

Expected Timing for New Product Opportunities

The timeline for near-term sales opportunities shifts from mid-2026 to late 2026/early 2027.

What are the recent financial results for Alliance Global Partners? - Brian Kinstlinger (Alliance Global Partners)

2026Q1: Near-term opportunities are expected under Product Improvement Programs (PIP), with small batches of Nano likely acquired in the third and fourth quarters of fiscal 2026. - [Annmarie Gayle](CEO)

When could Coda capitalize on the evolving unmanned underwater vehicle market in terms of revenue, design wins, and production timelines? - Brian Kinstlinger (Alliance Global Partners)

2025Q2: The company is seeing a proliferation of promising programs where the Echoscope is a contender... The process is slow and dependent on final evaluations and budget appropriations. - [Annmarie Gayle](CEO)