Full Year 2023 Coda Octopus Group Inc Earnings Call
Good morning, welcome to call it out extra finishes group's fiscal year 2023 earnings Conference call. My name is Sherry and I won't be your operator today.
Before this clock octopus issued its financial results for fiscal year 'twenty 'twenty. Three ended October 31st 2023, including a press release, a copy of which will be furnished generally reports filed with the FCC and will be available in the Investor Relations section of the car.
Sherry: Let's say joining us on today's call from coda octopus or its chair and CEO.
Sherry: And Murray, Yeah, and its CFO John price following their remarks, we will open the call for questions before we begin I would like to hand, it over to Jacky.
Sherry: Sure.
Jacky: From Gateway group.
I'll make a brief introductory statement. Thank you you may begin.
Jacky: Thank you operator, good morning, everyone and welcome to Dakota occupy since fiscal year 2023 earnings Conference call.
Jacky: Before management begins their formal remarks, I'd 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.
Jacky: 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.
Jacky: I've already told risks uncertainties and assumptions relating to our forward looking statements.
Jacky: Please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission.
Jacky: 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 required by law.
Jacky: We refer you to our filings with the Securities and Exchange Commission for a detailed disclosure and descriptions of our business. It's all of a sudden uncertainties and other variables circumstances, including but not limited to risks and uncertainties identified in our Form 10-K and Form 10-Q for the first second and third quarters of this fiscal year.
Jacky: Coda Octopus, the Securities and Exchange Commission filings free by visiting the FCC website at Www Dot FCC Dot Gov.
Jacky: 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 a coda oftentimes this website.
Jacky: Now I will turn the call over to the company's chairman and CEO and Murray Gill.
Alright, Thanks, Jackie and good morning, everyone. Thank you for joining us for our fiscal 'twenty 'twenty.
Earnings call our results in fiscal 2023 continue to reflect the impact of various macroeconomic and industry headwinds.
Jacky: These have negatively impacted our revenue and therefore overall financial performance in the fiscal 2023.
Speaker Change: Notwithstanding I believe in fiscal 'twenty train three we continued to make progress in our overall goals of investing in our growth acceleration strategy.
Speaker Change: A quick rundown of factors affecting the marine industry and our peers.
Speaker Change: Fiscal 'twenty 'twenty me, so the cancellation and Shaoping chaparral nature offshore renewable project that many of our industry peers and we ourselves had anticipated.
Speaker Change: These projects are reported to be on Bible E G.
Speaker Change: Inflation higher interest rates and supply chain problems.
Speaker Change: It is reported back that most of these contracts are obliged to develop the Hispanic electorate eat at one country than $8 per megawatt hour, what developers the quiet right to be $178 per megawatt hour for the development to be.
Speaker Change: Bible.
Speaker Change: Mainly these projects weren't there for either canceled or postponed while the contract niches negotiate quite meet that.
Speaker Change: Some of the contract me just include horse dead back in fall, Siemens and BP actually Noah.
Speaker Change: This means that many offshore development did not go forward in fiscal year, 'twenty, 'twenty mi, resulting in low demand for our solution.
Speaker Change: This has impacted our ranking rapidly rentals are an important sector of our business.
Speaker Change: And revenues in this sector.
<unk> fell by 31 point for the.
Speaker Change: Contrary to our business plan goals.
In addition, the on leasing of the pent up demand following the removal of hope it means restriction in China, which we and many industry peers had anticipated did not.
Speaker Change: Notes occur in fiscal year 2023.
Speaker Change: This has impacted on our speed from Asia, a strategic market for us.
Speaker Change: Sales from Asia fell by 19.5.
Speaker Change: There are customers in that region were also affected by the combination of weak demand from China, and higher interest rate inflation and supply chain issues.
Speaker Change: These macro factors resulted in many on the water construction projects slowing down or being postponed.
Due to the combination of these factors revenue in fiscal 'twenty three in the Marine technology baseband.
By 17, 7%.
Speaker Change: It was approximately 12 1 million compared to 14.7 in.
Speaker Change: In the previous fiscal year.
Our engineering services business also did not meet its business plan goals in fiscal year 'twenty three.
Speaker Change: Because all the peak was impacted by the war in Ukraine.
Speaker Change: Corn, because corn start with defense customers priority.
Speaker Change: The land based application with less focus on Naples based solution area or relevant for our business.
Speaker Change: Despite these broader hedge when we made good progress in advancing the debate on peptide customization program and also had strong business development and marketing campaign throughout fiscal year 2023 around our growth pillars.
Speaker Change: We therefore believe we are well positioned once these macroeconomic factors are removed.
But those who are new to cuda.
At this time I would like to provide an overview of our business.
Speaker Change: We have two discrete business operation.
Speaker Change: I mean technology based anything sometimes refer to as product.
Speaker Change: And our engineering services business.
Speaker Change: Our marine technology basic supply proprietary hardware and software solutions to the on the water market.
We have a global base of commercial and defense customers, including offshore majors on the water construction company navies and get paint body.
Speaker Change: Port research bodies and diving company.
Speaker Change: We have three key technology, it's that would be considered critical for the acceleration of our growth and which we see as our growth pillars.
Speaker Change: I will summarize briefly.
Speaker Change: After school imaging Sundar.
Speaker Change: Oh excuse me is the real time three D imaging sonar for after school is a single sensor or multiple on the water application.
Speaker Change: It's the only imaging sonar that can generate a real time three D image well.
Speaker Change: Moving objects in theory, they stability condition on the water.
Speaker Change: This center is protected by patent.
Speaker Change: It's the tool of choice for a wide range of on the water application relating to underwater inspection and monitoring of infrastructure, South Beach tracking placement and landing on the seabed and R. O V navigation.
Speaker Change: Disability commutation.
Speaker Change: In 2021 we launched our new generational imaging sonar ethical pipe.
Speaker Change: You mean is far superior to our previous generation up so not really much more capability to the subsea market, including the ability to image multiple three D. Image is concurrently using different interesting pardon me too such as frequency.
Speaker Change: Your field of view range and filters based.
Speaker Change: This allows customers to consolidate their sensor requirements and reduce cost.
Speaker Change: Competing technologies such as the multi beam is designed at the seabed mapping tool and nuts or real time inspection monitoring and placement of objects onto water, including in theater visibility condition.
Speaker Change: Our technology allows customers to make real time decisions on Paul.
Speaker Change: Thus, reducing overhead associated with their own the water project.
Speaker Change: Our next key technology is the diet Oh man.
Speaker Change: They shouldn't display system.
Speaker Change: Or DAP it.
Speaker Change: The damage was developed by us in conjunction with the U S Navy and Naval Warfare Center, Panama City to remain active in the program or certification adapted the roadmap for the evolution of the Babbitt technology and future requirements.
Speaker Change: But that it has the potential to radically change how diving is performed globally, both in the defense and commercial space.
Speaker Change: Conventional diving operations are run by voice instructions on the top side and a diaper onto water without the ability to provide the type of with real time information or the execution of his diaby huh.
Speaker Change: But that brings a new level of capability to the diabetes market by providing a real time information platform, which is fully available to the diaper on the water.
Speaker Change: But that then allows the diaper and to die supervisor to base. Your life. The same on the water seed and provides the diaper on demand.
Speaker Change: A range of real time information such as drawings photographs imaging information on remaining bottom time and debt.
Speaker Change: Furthermore.
Speaker Change: By pairing the diabetes them with our ethics to technology enabled dieting to be performed in zero visibility water conservation.
Speaker Change: Colocation, which prevented many bagging operation from teaching please.
Based on the requirement of the U S. Navy in the fiscal year 2023 we have completed their development of a digital audio communication system voice, how poor which offers the market a digital audio communication system.
Speaker Change: Incorporating features such as pitch correction boys signatures and noise removal.
Speaker Change: Technology moves the market from analog audio communication to a much higher quality digital audio solution.
We believe the addressable market for digital audio communication solution is sizable and we are excited to be the first mover in this space.
Speaker Change: Within our group, we also have our engineering business segment.
Speaker Change: They operate a subcontractor to prime defense contractors and design and supply the sub.
Speaker Change: [noise] assembly or integration into broader mission critical programs, which are led by beach Bryan Kipp.
Speaker Change: It gives the engineering services business the opportunity to have repeat sole sourced or deaths from the beef up with fan blade for the life of these programs.
Speaker Change: The engineering piece that is important for our group assets had a strong pedigree in defence engineering with stellar relationships with Prime defense contractors panning decade.
Speaker Change: And it is a critical partner for the groups on the water innovation.
Speaker Change: Despite the disappointing fiscal 'twenty 'twenty be caused by macro economic factors, which affected key strategic perspective for our business.
Speaker Change: We continue to believe in our strategy or accelerating growth. We also believe we made key operational progress around our growth pillars in fiscal year 'twenty 'twenty piece to me.
Speaker Change: This is simply meet cap some of these.
Speaker Change: We had good Michigan results from a number of underwater vehicle programs, which are ongoing with prime defense contractors.
Speaker Change: These customers are evaluating the ethical type or inclusion in their new generation underwater vehicles.
Speaker Change: This is a key part of our strategy to grow our revenue and realized a multiple recurring theme profile from these programs.
Speaker Change: Moreover, based on the success with the after school pipe and number of these customers are expanding its use into other adjacent program.
Speaker Change: This type of cross selling is another important access point into multiple programs for our technology.
Speaker Change: We also had good mix shouldn't results from two subtractive trial with Naval information Warfare Center 90 weeks on that did you read the tender as they seek to finalize their sensor package for this class of vehicle.
Speaker Change: We're continuing to work with Knight weight as they progress the selection of their sensor package.
We continued to showcase the debate and made progress towards adoption of the Tampa Bay area.
Speaker Change: Site of the U S Navy into both.
Speaker Change: They commercial diving sector and boring naveed.
Speaker Change: In fiscal 'twenty to 'twenty, three we had a number of trials and evaluation of the Dabic solution, which had fallen to discussion on adoption with a number of customers, including offshore service provider and to foreign navies.
Speaker Change: We continue to anticipate decision on these in fiscal year 'twenty 'twenty four.
Speaker Change: We continued to advance the debate on Tampa customization program with our customers and have delivered eight evaluation modified on pet adapted.
Speaker Change: Which our end customers are currently evaluating.
Speaker Change: This evaluation includes the number of stages, which extend to certification testing.
Speaker Change: Testing and shoot.
Usability effect meant for defense applications.
Speaker Change: During fiscal 2023 we received $750000 or if it is proven and expect it's fair, though 1.25 million in fiscal year 'twenty 'twenty four.
Speaker Change: Fair in which addresses the defense and military market such as special forces is the biggest market opportunity or the debate and we continued to support the evaluation effort.
Speaker Change: We completed the development of a new digital audio communication system voice, how poor, which most of the market from analog.
Speaker Change: Audio communication fits them to a higher quality digital audio capability is now in evaluation by the U S Navy and the number of other customers. Furthermore, although the marine industry continued to be affected by macro economic factors.
Speaker Change: Discussed earlier, you know first quarter of fiscal 'twenty 'twenty four we're seeing signs of increased demand for our rental solution.
Speaker Change: Finally, before we discuss our fiscal year 2023 financial performance in greater detail I want to welcome our new CFO, John price, who joined Codell on November 27.
John Price: John who recently served as CFO of NASDAQ listed assure Holdings Corporation brings the season background in corporate finance and accounting M&A scale and technology Experian.
Let me now turn the call over to John to take you through our financials before I provide my closing remarks.
John Price: Thank you Murray and good morning, everyone.
John Price: Before I take you through the fiscal year 2023 results.
Just wanted to say that I'm very pleased to have joined the company and I'm excited to be onboard to work with you and the company to drive our vans brand goes and prospects forward to the next level of performance.
Speaker Change: Let me take you through our full year 2023 financial results.
Speaker Change: Starting with revenue in fiscal year 2023 we recorded total revenue of $19 $4 million compared to $22 $2 million in the fiscal year 2022 a.
Speaker Change: A reduction of 12, 9%.
Speaker Change: The marine technology business generated revenue of $12 $1 million compared to $14 $7 million or 17, 7% decrease from the prior fiscal year 2022.
Speaker Change: As reported earlier about your memory. This decline in our consolidated revenue was a result of weak demand from strategic markets and geographies such as Asia for outright sale in Europe for rentals, particularly in the offshore renewable sector.
Speaker Change: Our U K service arm was also affected by delays in receiving key orders due to our customers' focus being on land base defense applications to support the Ukraine efforts.
Speaker Change: Not the naval base applications to apply to our business.
Speaker Change: Moving onto gross profit and margin.
Speaker Change: Fiscal year 2023, we generated gross profit of $13.0 million compared to $15 $2 million in fiscal year 2022.
Speaker Change: Gross margin was 67, 3% versus 68, 3%.
Speaker Change: In the fiscal year 2022.
Speaker Change: In our marine technology business, our products business gross margin fell to 76, 7% in fiscal year 2020 three.
Speaker Change: 3rd% to 80% in 2022.
Speaker Change: Fucking changes in the mix of sales and higher commission costs in the period.
Our marine engineering business gross margin increased to 51, 6% in fiscal year 2023 versus <unk> 45, 24% in 2022 again, reflecting the mix in sales.
Speaker Change: Now moving onto operating expenses.
Speaker Change: Total operating expenses for fiscal 2023 rose slightly to $10 $3 million compared to $10 $2 million in fiscal year 2022.
Speaker Change: SG&A remained below our targeted internal budget largely related to reduction in staff head count and targeted new hire positions remain unfilled.
Speaker Change: Our selling general and administrative costs in fiscal year, 2023 totaled $8 $2 million, an increase of three 1% over fiscal 2022 for $7 $9 million.
As a percentage of revenue, our selling general and administrative costs for the fiscal year 2023.
Speaker Change: 42, 3% of total revenue compared to 35, 8% in the fiscal year 2022.
Speaker Change: Looking forward on our cost structure, given the significant progress we have made in R&D in the last four years, we remain focused on aligning a significant portion of our resources and strategy from research and development to global business development brand building and Investor Relations we ask.
Speaker Change: SG&A to increase on a full year basis, as we hire new staff and expand our management team.
We believe that we have developed world class products and solutions that provide market leading positions for coda.
Speaker Change: And that we can make meaningful progress in our markets through these investments to create shareholder value.
Speaker Change: Operating income in fiscal year, 2023 was $2 $7 million compared to $510 million in fiscal year 2022.
A reduction of 45, 3%.
Speaker Change: Operating margin was 14, 2% compared to 22, 5% in the fiscal year 2022, driven.
Speaker Change: Driven by the change in revenues as explained previously.
Speaker Change: Net income before taxes in the fiscal year 2023 was.
Speaker Change: $3 $4 million compared to $5 $1 million in the fiscal year 2022.
Speaker Change: Net income after taxes, and our fiscal year, 2023 was $3 $1 million or 28 cents per diluted share compared to $4 $3 million or <unk> 38 cents per diluted share in the fiscal year 2022.
Speaker Change: Moving now to our balance sheet as of October 31, 2023, we had $24 $4 million in cash and cash equivalents on hand and no debt.
Speaker Change: This represents an increase of $1.5 million over fiscal year 2022, whereas the comparable figure was $22 $9 million.
Speaker Change: That completes my financial summary, I look forward to working with our management team to accelerate our growth plans.
Speaker Change: In addition to my core financial duties I will be looking at acquisitions and Investor Relations is a priority for us.
Speaker Change: Now I will turn the call back over to Anne Marie for closing remarks.
Anne Marie: Thank you Sean in closing I would like to reiterate that we have a demonstrated track record over many years of running a solid profitable business with a strong balance sheet.
Anne Marie: We continue to believe in our growth strategy and although our results were disappointing for the factors discussed.
Anne Marie: We're confident that we are making progress to accelerate growth through increased adoption of our technology in pivotal market.
Anne Marie: We're pleased with the progress we're making in increasing the number of underwater vehicle programs, which are including the after school types.
Anne Marie: The progress in making a comprehensive solution for ship house counting and mapping.
Anne Marie: Sizable global market opportunity if our solution is effective for the problem to be solved.
Our progress in achieving adoption of the debate turbine testing outside of the U S. Navy and we believe we will have adult states in fiscal year 'twenty 'twenty four.
Anne Marie: The progress in advancing at various stages of the DAP. It on tablet system customization program.
Anne Marie: Big market opportunity for the tablet solution.
Anne Marie: The progress in adding and new exciting gross tailor our digital audio communication Fishman.
Anne Marie: We continue to build our group strategy around our ethical pipe imaging sonar see base, our debate and derivative of our debit technology.
Anne Marie: In addition in fiscal year 'twenty 'twenty four we will expand our growth strategy to include M&A activities with a goal of acquiring complementary value accretive technology as the <unk>.
Anne Marie: Into our portfolio.
In relation to our growth pillars, the market that are pivotal for the marine technology.
Anne Marie: This growth acceleration program.
Anne Marie: Our underwater imaging sensor market.
Anne Marie: The fendt underwater vehicles market.
Offshore renewables under water construction ship, how scanning and mapping diving solutions market, including the die being sent the market.
Anne Marie: We will focus our efforts on business development in these areas in fiscal year 'twenty 'twenty four.
Speaker Change: To conclude we just we would like to thank our shareholders for their continued support.
Speaker Change: And reassure them that management understands that it is.
These imperatives are the acceleration of growth and we remain steadfast on achieving base for our shareholders.
Speaker Change: We're now happy to take your questions.
Speaker Change: Operator.
Speaker Change: Thank you if he would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.
Pressing that start he is.
Our first question is from Brian Kinsinger with Alliance Global Partners. Please proceed.
Great. Thanks, Hi, Anne Marie.
Brian David Kinstlinger: So interest rates inflation and supply chain have been challenges or for a good long time.
To all markets.
Brian David Kinstlinger: Revenue for marine products during the fourth quarter. Your core business was abnormally low comparator of last several quarters. So I guess I guess I'm curious what you think was different about this quarter than the previous several quarters that caused such a shortfall.
Speaker Change: Thank you Brian well it is it's all the things that we would sell effect really.
Okay.
Brian: Our revenues are predicated on.
Certain projects going forward. So on the water construction really key market for offshore renewables key market for us what we saw is either projects being really postpone or.
Brian: Being shelved in key markets. So overall, all the cheek was down in the fourth quarter and that continued throughout the year I think we're having significant delays because the projects are still under discussion, Brian, but then eventually get postponed.
Brian: And it's all because of Destocking. So I mean, if you look at the key numbers coming out of the offshore renewables when a contract prices negotiated the.
Brian: The contractors were offering $108 for the election electricity.
Brian: Now for that to be viable they need 100 intend to eat all listen this is all because of inflation and higher interest rates. So those factors are.
Brian: Likely to impact on the business and has impacted our business in the theory.
Speaker Change: Quick follow up on that is it getting worse because if you look at the trend you know your peak was the January quarter. When it went down a little bit in the April quarter. Then it went down precipitously in the July and even much more so than in October. So is it that you had projects in the beginning of the year or are they completely you don't have a replacement or is it actually getting worse or the ordering.
Speaker Change: Okay.
Speaker Change: Well as we said in the fourth quarter, what we saw a lot of projects Storlie literally stalling and didn't go forward.
Speaker Change: For the reasons, we have discussed so I think this year was exceptional and I really think that offshore renewables and energy market generally were impacted by four factors, we discussed earlier, so or to take with much lower for the Marines.
Speaker Change: Technology businesses.
Speaker Change: So based on the conversations you're having with.
Your customers.
Speaker Change: How how our renegotiations of economics, Darwin and you see a rebound in demand in sight or is there too much uncertainty in the near term.
Speaker Change: Well, what we're seeing in the first quarter, we're seeing soldiers increased inquiries for rental and contracting for rentals, we have a number of rental projects that are ongoing.
Speaker Change: Several projects in the middle east around only to see tables, and breakwater overseeing Taiwan, where we're involved in offshore renewables in three different projects, there and again in Europe I'm involved in a number of projects rental projects around cable repair.
Offshore keep a placement in the Baltic Sea. So we're certainly seeing much more inquiries for example, and also getting some orders around rentals, which is crucial for our business. So there are positive signs, but I think.
Speaker Change: For example, offshore renewable sector Theres still renegotiating price resets and I I I have no visibility on when those contracts will be complete.
Speaker Change: Completed.
Speaker Change: But those are critical projects for our business.
Speaker Change: Right.
Speaker Change: Lastly, you highlighted your M&A strategy, where are you in the evaluation of targets is at the very early stages with you or just how your obviously your new CFO. Congratulations are you in advanced stages, just maybe take us through where you are in this journey.
No we're really test.
Speaker Change: Really outside of our strategy. We of course, we always have targets in mind, but we have new ongoing discussions with targets.
Speaker Change: Okay. Thank you very much.
Thank you Brian Thank you.
Speaker Change: Our next question is from Walter Ramsey with the Walrus partners. Please proceed.
Thank you [noise] excuse me then this question is for John in the October quarter. The equity on the books declined by 1.4 million was that due to some write offs or some adjustment.
Speaker Change: Yeah.
Speaker Change: Sean.
John Price: Yeah, Mary can you hear me sorry I T.
John Price: So I didn't hear your question could you repeat that.
John Price: Sure.
John Price: Shareholder equity declined by $1.4 million.
John Price: In the October quarter was that caused at least in part by some write offs or adjustments to the reserve accounts.
Speaker Change: No that's that's not.
Speaker Change: No, it's primarily going to be related to the impact from the P&L and we also have stock based compensation that rolls through our equity statement on a quarter to quarter basis.
Speaker Change: Okay.
Speaker Change: Thank you and then just one other question.
Speaker Change: R&D I think you indicated that that amount.
Speaker Change: The amount of money.
Speaker Change: Spending is going to decline so I get that part is the.
Speaker Change: R&D tax credits.
Speaker Change: Gonna be affected in the upcoming year I'm not sure what.
Speaker Change: The situation is with the federal tax code there.
Speaker Change: Well Walter just on the R&D I just to be careful about the Cline I think that what we're seeing or keeping a lid on R&D expenses, so they'll probably be in line with our previous years, meaning we're not investing more over and above our run rate on R&D R&D is a permanent feature of our.
Speaker Change: Business, because we are a solution space and so in order to maintain our lead or to support our customers using our technology in the field. It's an ongoing so we think R&D will be in line with previous years and that's the biggest statement, we're making about R&D that you expect it to fall I just wanted to.
Speaker Change: Clarify that.
Speaker Change: Okay, and the R&D credit.
As part of the U S tax code is that gonna change or is that going to be the same.
Speaker Change: The R&D credits that we have are in relation to our foreign entity, our Scottish business and not our U S. B.
Speaker Change: T.
Speaker Change: Oh I see okay, well, thanks again I appreciate your answering the questions.
Speaker Change: Thank you Walter Thank you very much.
As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from Fernando Canto private Investor. Please proceed.
Good morning, everybody.
Fernando Canto: I think in a in a relation to the previous question.
Fernando Canto: So on the aggregate I think it was due to the loss.
In the fourth quarter right.
Now the other element to think about here is the FX rate and so you know we've seen the FX actually.
Fernando Canto: Positive over the course of.
Fernando Canto: 23.
Fernando Canto: There's a lot there's really no write offs of inventory or accounts receivable that runs through equity that this is gonna be a component of overall net income right, but for operation did you lose.
Fernando Canto: Marty on the on the first quarter.
No.
And there were no material write offs over the course of the year.
Speaker Change: Okay now I know you have.
Speaker Change: Do you have about $24 million worth of cash and install gives you anybody close to the book value have you seen any buying some shares in the market now that it's getting so close to the book value.
Speaker Change: I cannot say that so not just so I mean as you know we do habits is still a liquidity problem.
Speaker Change: Problem, so buying back shares in the market would be very very problematic for our liquidity profile.
Speaker Change: It's we're always discussing different options for returning value to shareholders, but you know and that's one of the things we discussed on an ongoing basis with our board, but I do believe that there's a fundamental problem with E a share buyback program.
Speaker Change: Does it takes out further stock out of the market, which is already seem to be treated because of the on its stated ability of stock in the market.
Speaker Change: Alright, now wheel you almost completed the first quarter, how does the first quarter loops.
Speaker Change: It looks like.
Speaker Change: Well you know I I.
Speaker Change: Thank God Fernando. Thank you for that question again as I said one of the areas, where we were last year, we saw weak demand in key strategic markets such as offshore renewables.
Speaker Change: What I am just said that in the first quarter. We saw increased contracting that means order take also the number of projects rental projects that are ongoing we've seen an increase in those so they're very very positive signs and I hope we can sustain.
Speaker Change: Those signs throughout the year, so I think I see rentals in the core market, let me repeat what they are offshore renewables and on the water construction, we're really seeing good section there at the moment.
Speaker Change: Also all the things that are not contracted but really which I think is exciting for our business. For example, we have one.
Speaker Change: Nature offshore service provider, who is developing an island in the middle East on that project to know, we're quoting six ethical outright C. Wain ongoing support that is.
Speaker Change: First in the commercial market the profile of scene is typically a maximum up to system. So we haven't got the order yet, but I'm, saying I think we have some.
Speaker Change: Good exciting conversations we see on the water construction come in coming back we see some rentals ongoing. We also one thing I am personally excited about and I know, it's taken longer than we all wanted but having adoption off the dabbing.
Outside of the U S Navy and I have a high level of confidence in 'twenty 'twenty four we will see this last year, what we did we had a.
Speaker Change: Significant business development activities lots of one to one trials all of those trials were successful. It's now a process with these customers to think about how they're going to adopt adapt getting their own infrastructure ready for the adapt some of the problems there.
Speaker Change: The customers not having a digital interface to talk to all these solutions. So they're working on that it's slower than we wanted but I have a high level of confidence that we will see adoption for the tablet solution outside of the U S Navy into the commercial field and also wait for a neat.
Speaker Change: Yes.
Speaker Change: And another thing that I really want to emphasize on the biggest market opportunity for the adapt system.
Speaker Change: It's the customization programs that we have with the U S Navy, but no. This is not just the U S. Navy that's funding the customization program. It's a nature NATO country. This is the first time, we've had a joint <unk>.
Speaker Change: Joints funding for the death and got some good indication that we're talking about adoption outside of the U S. Navy. We also know that the U S. Navy. It's also dive into that.
Speaker Change: With foreign navies, when they do some of their their trials that they themselves when they work together with the foreign navies are coming and showing him and then dive into the system. So.
Speaker Change: We're really optimistic about you know having adoption for the adopted in in fiscal 2024, So I'm I'm I'm generally still very very excited about the prospects for our business and our growth strategy around our key pillars.
Yeah.
Alright, but in other words, what we've done so by the first quarter to be more or less human until the first quarter of last year right and then going forward.
Speaker Change: Yeah.
Speaker Change: Well I'd like to correct, what I start that I saw really good signs of rentals rebounding.
Speaker Change: In the first quarter and we've got ongoing projects on rental so I don't know, where we will be in relation to the previous first quarter. So not.
Speaker Change: <unk> not commented on that.
Speaker Change: Thank you very much.
Speaker Change: Yeah, you're welcome.
Speaker Change: Our next question is from Richard Davis with Sutter Securities. Please proceed.
Richard Davis: Yes. Thank you for taking my call you've got such a deep long term development program, there's a lot to look at but.
Richard Davis: My first question would be what is left to do to commercialize the untethered.
Richard Davis: Our system and if the tethered system is commercialized.
Richard Davis: Is there any reason for anybody to still use the tethered system like to differentiate between the two thank you.
Speaker Change: Thanks for that question well.
Richard Davis: The way to think about the customization work that is ongoing it's more a work flow process than anything else. So the work flow for a diaper, who is let's call. It a special force diaper, who is doing something a sales operation.
Richard Davis: Modus operandi or the workflow for that Guy diving set up is completely different from the surface diving, which is the kept the system where you are.
Richard Davis: You've got a top side involved in the equation. So the on Cabot's. This thing it's really about four different workflow.
Richard Davis: Then we have to get back to the product certified for that particular application, which is on going so it's it's not I wanted to think about it as commercialization of the product is of taking our base product and then customizing back for there.
Richard Davis: Particular application and really that's what the program and then also what they call hardening. So when the diet the system, they've got eats and send their diving deep in ankle and when they die and they might come back to us and see we don't think the IR lights were effective here can you look at a different.
Richard Davis: I our life, because we couldn't see that so these are the things that we are you know they're diving coming back with feedback and then we are making changes based on their experience to the expectation is that once they come to the end of that evaluation process because.
Richard Davis: We are working.
Richard Davis: Hand in hand, with the with them, we would expect by that time all of these things. They want to see are done and then they can move on to production system. So that's that Crusade.
Richard Davis: And as I said, the tepid system is all about a different type of diving, where you have a top site involved.
Speaker Change: Oh, Okay. So is the untethered system, then basically completed in terms of its capabilities and you're just going through as you said the hardening in the.
Speaker Change: <unk> or is there still more a technical work to be done before it is.
Speaker Change: Is ready for commercialization.
Speaker Change: It's largely done but for these three D data side, which is also new for that market. Then there's certain hardware development for it's a processing bulks more than anything else to do with the data communication and transfer that there is a part of that development, but were.
Speaker Change: Well, along the way with that.
Speaker Change: I would say that in terms of the the product and how it's almost fully formed but we still have about 5% to 6% development work and as I said a feedback program. So we would expect in this year to come.
Speaker Change: Completes all of the requirements for that market.
Speaker Change: And finally on that.
Speaker Change: Sector, what is the range of the untethered CIS.
Speaker Change: System.
Speaker Change: The well there that that you can the depth, reaching for the system is 330 feet 100 meters for the kept its system.
Speaker Change: So the Untether does is 100 meters.
Speaker Change: I hung kicked me two or 300 and Starkey heat okay. Okay. Thank you. Thank you very much.
Speaker Change: Welcome.
Speaker Change: Our final question is from William Bremer with Vanquish capital Partners. Please proceed.
William Bremer: Good morning, Ann Marie and welcome John.
William Bremer: Good morning Couch it Mike good morning.
William Bremer: And were useful a lot about the technologies international activity. What is currently happening here in the North American market.
William Bremer: Well.
William Bremer: If you look at the gross spending and it's really the biggest thing if you look at our revenues also you will see actually our revenues from North America for equipment sales was higher I'm, just fine fine Europe actually so what's happening.
William Bremer: In not north.
William Bremer: North America, it's mainly the defense underwater vehicle programs that we have there. So it's a lot of the applications that we have in North America, it's around underwater vehicles and of course, the DAP it solution.
Any activity within the infrastructure market of North America.
William Bremer: Yes, we're seeing I mean in terms of infrastructure you call leading tables on the seabed et cetera, we have quite a lot of the ongoing business activities no make no mistake.
William Bremer: When the offshore renewable market I mean, the U S has the biggest budget for energy transition and some.
William Bremer: Some of that is going to get spent.
William Bremer: That's all happening at the school is at the center of that because the Europeans are coming to the U S. With they are the ones with the experience and they all have to use the extra scope on their projects in Europe without exception. So we see a high level of confidence.
William Bremer: In the offshore renewable market in North America is significant for the business and also plans within our growth strategy. We also have in fact, one U S. Operator, who is on the contract and I cannot name that operator in the law.
William Bremer: Last quarter, they bought solutions for that market from US and you know there are Americans, they're already aware that our solution is key for offshore renewals and our new renewables and they are investing in the technology. So I feel very much that is a very big market.
William Bremer: For us we do need to see the contractual hurdles that Europeans have removed and I think they're negotiating fees and we know that there are ongoing discussions on price resets, but I feel definitely excited about once those batteries are removed the episcope is.
William Bremer: Really at the heart of those operations infrastructure, so anything on the water make no mistake anything on the water back in fall.
William Bremer: Placing something onto the seabed, removing something from the seabed navigating from point a to point b that if the ACA scope that is the Echo school and its the Echo school wheelhouse. So I feel very much that we have quite a lot of opportunities that they just need to as I say some of them.
William Bremer: Macro factors need to be removed or normalized for for us to move forward.
Speaker Change: Okay, I understand I hope that with the increase of SG&A, that's some competent sales personnel.
William Bremer: It will be hired for these markets given our infrastructure Bill given the mountain ridges that are needed your technology would be welcome here.
William Bremer: I just don't see any any tangible with you on that front as of yet.
William Bremer: My final question is on the Navy and.
You have articulated.
William Bremer: Much of the technology.
William Bremer: When are we going to start to see a deployment.
William Bremer: Of your technologies within.
William Bremer: Our contract portfolio managers like myself can get our hands on and start to really understand the magnitude of these contracts with the navy and its allies.
Speaker Change: I'm not sure I, followed by a question and when you see when are we going to see could you be a little bit terrorists or I felt like yeah.
Speaker Change: You know I'm expecting I think many of us have been for years.
Speaker Change: Had been expecting a deployment.
Speaker Change: Of your underlying technologies.
Speaker Change: Onto the U S. Navy platforms I'm, just wondering when we'll be able to understand which platform they're on and more importantly, the longevity of those programs.
Speaker Change: Well as soon as we are awarded one of the programs we're talking about you.
Speaker Change: If I take about that.
Speaker Change: I talk about for example, our she posts counting comprehensive solution. That's a multi year program that we started four years ago.
Speaker Change: Four years ago from the C's ability to the prototype concept to finally developing the platform for ship how scanning with deliberate that now that's a sizeable opportunity for the business and that runs over a number of years. So.
Speaker Change: Look at valuation onto these programs can take up to four or five years and some of the programs. We're on a more mature than others, but I think we're making good progress for example, this year, although we still haven't received an order. This year for example, a Japanese broke them down.
Speaker Change: We've been working on for four years now that Japanese program was launched and the extra school type C. 500 is that a part of that program. So that now I understand that that vehicle is now being assessed and let's see with the end customer. So that's how it all at boys.
Speaker Change: But.
Speaker Change: I know it takes time, but it's.
Speaker Change: An area that we can know.
Speaker Change: For the not to invest in heavily because this is the opportunity for multiple recurring sales for our business. So I think we're doing the right things on you know doing the front end for them to go out and get on these programs to ensure at least that we're contending that's the first thing no about.
The program become content to support the programs and we're doing a lot of that but that takes time bill. It is a you know and.
Speaker Change: And that's really where we will see the reward to grow the commercial market. The profile of sale. There then it's one seen in our project I just talked about and island being built if we get that order for type C. Statements. Then that's exceptional in the commercial market because when Theres a project in tariffs.
Speaker Change: By existence, the maximum system will be a two systems and that can be a sizeable that would be around $700000, but still the point is that the opportunity to get multiples of scene recurring themes that comes from these programs ship halls County.
Speaker Change: Program similar detection vehicles mine countermeasure critical assets management. These are all the programs that we're on and also don't forget about you know over the years over 30 ports in the U S. Carey our on the water <unk>.
Speaker Change: Section system, including New York, including California, You know New Orleans, all of CS at one time or another invested in our underwater inspection system for if the president is coming in it's the ethical that's used to treat the ports. So you know I think.
Speaker Change: We're making good progress in the areas where for our growth strategy and you know it.
Speaker Change: It takes time, but I see as some of the programs are maturing.
Speaker Change: I understand and I appreciate the granularity. Unfortunately, many of US don't know any of these programs I mean, it would be helpful. If yourself. The board considers when you are on these programs to let us know about them. So we can track them to get a sense of them, sometimes they were one time.
Speaker Change: Events like the president coming in that you mentioned, but other times, they're not one time events, they have annuities and multi years and we understand that but we're in the dark here and it's very difficult to track This company.
Speaker Change: And it's and it's.
Speaker Change: Initiatives in the puzzle right. Thank you. Thank you for your time today, but I do hope that the board considers it a little more flexible little more friendly to allow communications with shareholders to the capital markets because as of right now the stock is down 15% today year to date it's.
Speaker Change: Been underperforming for the last few years, it's been underperforming things have to change and Murray. They really do you have a stellar balance sheet now you've got a real CFO welcome John I can't wait to meet him and speak with him, but things in the communication of capital markets needs to change in the board needs to get a little more active.
Speaker Change: Well a lot of reasons and I would look at another investor echoed loved to see some insider purchases form fours.
Speaker Change: The rest of us have used after tax dollars to invest in your company through the years I. Thank you for your time.
Speaker Change: Thank you Bill Thank you.
Speaker Change: Okay.
Speaker Change: This will conclude our question and answer session I would like to turn the call back over to Anne Marie have for closing comments.
Speaker Change: Yeah.
Thank you for joining cuda today and thank you for your interest.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Yeah.
Okay.