Good morning, and welcome to Coda Octopus Group's Fiscal Year 2025 Earnings Conference Call. My name is Shamali, and I will be your operator today. Before this call, Coda Octopus issued its financial results for the fiscal year ended October 31, 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 Coda Octopus are its Chair and CEO, Annmarie Gayle, its interim CFO, Gayle Jardine, its President of Technology and Director, Blair Cunningham, and Dylan King from their investor relations team. Following their remarks, we will open the call for questions. Before we begin, Dylan King from the company's internal investor relations team will make a brief introductory statement. Dylan, please proceed.

Thank you, operator. Good morning, everyone. Welcome to Coda Octopus' fiscal year 2025 earnings conference call. Before management begins their formal remarks, we would like to remind everyone that some statements we are 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, 2025, and Forms 10-Q for the first, second, and third quarters of our fiscal year 2025. You may get Coda Octopus' 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 Coda Octopus' website. Finally, as a reminder, this is our fiscal year 2025 reporting, and all comparisons, unless explicitly stated otherwise, are with our fiscal year 2024. Now I will turn the call over to the company's Chair and CEO, Annmarie Gayle. Annmarie?

Thanks, Dylan, and good morning, everyone. Thank you for joining us for our fiscal year 2025 earnings call. Despite the challenging global policy environment, our consolidated net revenue in fiscal year 2025 increased by 30.7%, 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 defense engineering services businesses, and our recently added acoustics, sensors, and materials business unit. Within our group, our core business is the marine technology. This business generates most of our revenue, and in the fiscal year 2025, it generated 49.8% of our consolidated net revenue. It is around this business that we are 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 provides vision underwater and allows our customers to make real-time decisions. This technology is a key enabler for the rapidly emerging AI-enabled autonomous capability required by the subsea market as it provides real-time 3D perception underwater. The specific addressable markets which are of relevance are the imaging sonar market and diving market. It is these market segments that our growth strategy is built around. Turning to our flagship imaging sonar, the Echoscope, the Echoscope is a real-time three-dimensional volumetric imaging sonar that can generate a real-time three-dimensional image 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…

Thank you, Annmarie, and good morning, everyone. Today, I will focus on progress that we have made around our core technologies, Echoscope and DAVID. In fiscal year 2025, we saw an increase in sales of both Echoscope and DAVID. We also saw strong interest from the defense community. The Echoscope, our flagship technology, continues to represent the largest opportunity for scalable growth, particularly within the defense and security market. This sector is being fundamentally reshaped by the widespread adoption of next-generation underwater platforms encompassing manned, unmanned, surface, subsurface, and fully autonomous robotic vehicles. The defense subsea market is moving away from large bespoke platforms towards smaller networked and increasingly autonomous vehicles that can be deployed at scale. This transition favors technologies that maximize performance per unit cost and enable rapid production, modular upgrades, and multi-mission flexibility. A significant portion of these new programs is focused on reducing reliance on human-in-the-loop supervision and control for mission-critical decisions. The launch of the Echoscope Ipe Nanogen series, our ultra-compact real-time 3D imaging sonar, marks a critical step in enabling next-generation sub-AI-enabled autonomy. As the subsea industry moves away from vessel-intensive human-in-the-loop workflows, the Nanogen series provides the real-time 3D perception required to unlock scalable software-driven autonomy across a growing range of platforms. The Nanogen series delivers true real-time 3D imaging in an ultra-compact form factor, enabling autonomous systems to perceive, navigate, and make decisions independently underwater. Unlike traditional sonars designed primarily for data collection, the Nanogen series functions as a core perception sensor for AI-enabled platforms, supporting navigation, obstacle avoidance, target guidance, and adaptive mission execution without reliance on bandwidth-limited communications or post-processing. A single Nanogen CV sensor supports multiple high-value use cases, including subsea navigation, inspection, 3D modeling, subsea imaging, change detection, and gas and oil leak detection, allowing operators and platform…

Thank you, Blair. Let me now turn the call over to our interim CFO, Gayle Jardine, to take you through our financials for fiscal year 2025 before I provide my closing remarks.

Thank you, Annmarie, and good morning, everyone. Let me take you through our fiscal year 2025 financial results. Starting with revenue. In fiscal year 2025, we recorded total revenue of $26.6 million compared to $20.3 million in fiscal year 2024, an increase of 30.7%. Our core business, the marine technology business, generated revenue of $13.2 million compared to $12.8 million, representing a 3.2% increase over fiscal year 2024. Our acoustic sensors and materials business, which was added to our group in October 2024, recorded revenue of $5.4 million in fiscal year 2025 and added 20.4% to our consolidated net revenue. Our defense engineering business generated revenue of $7.9 million compared to $7.5 million, representing a 5.6% increase over fiscal year 2024. Moving on to gross profit and margin. In the fiscal year 2025, we generated gross profit of $17.7 million compared to $14.2 million in the fiscal year 2024. Consolidated gross margin was 66.5%, versus 69.8% in fiscal year 2024. This 3.3 percentage points decrease is mainly due to the impact of the lower margin acoustic sensors and material business being added, which accounts for two percentage points, as well as the mix of type and geography of sales in our core business. In our marine technology business, gross margin decreased to 74.5% in fiscal year 2025, compared to 77.9% in fiscal year 2024, reflecting the mix of type and geography of sales. With 30.5% more units of hardware sale compared to a reduction of 36.6% in the higher margin rental sales. The acoustic sensors and materials business realized a gross margin of 58.6%. Our Defense Engineering business gross margin increased to 58.6% in fiscal year 2025, versus 55.8% in the fiscal year 2024, again reflecting the mix of engineering projects during fiscal 2025. Now looking at our operating expenses.…

Thank you, Gayle. I'm very pleased with the increase in revenue in the fiscal year 2025 and our overall financial results, including earnings per share. I'm also pleased with the progress we are making against our key milestones for growing our business. Some of these include, in respect of our revenue structure, we increased sales in the defense sector where 46% of our core business revenue emanated from the defense sector and 54% from the commercial marine offshore sector. Realizing sales of $3.7 million relating to DAVID in the fiscal year 2025, successfully completing the DAVID Hardening program, which paves the way for broader adoption of the DAVID technology by the military diving market subject to receiving approved Navy use status. The launch of our Nanogen series sonar, which we believe is well positioned as a core real-time perception sensor in the rapidly emerging AI-enabled autonomous and semi-autonomous platforms in the subsea market. And finally, receiving our first order from a highly influential European foreign navy for the DAVID untethered system. We certainly believe that fiscal year 2025 was critical for completing key development activities under the DAVID program, which were a prerequisite for broader adoption, as well as for launching the Nanogen series, which positions us to support a growing range of AI-enabled subsea robotic and autonomous systems. In terms of cash deployment, we will continue to prosecute our M&A strategy in fiscal year 2026, and we are continuing to build our M&A pipeline. We are very keen to close another acquisition in fiscal year 2026. Through our strategy, we aim to pivot the revenue model of the marine technology business towards a multiyear program-based adoption model, which supports recurring multiple sales on the programs of record and long-tail revenue as we have started to see with the DAVID product line. We continue to work to create stable long-term shareholder value and execute against our strategy to grow the business, which is our single biggest priority at the group. To conclude, we would like to thank our shareholders for their continued support. We are now happy to answer any questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, while we poll for questions. Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners.

Please proceed with your question.

Great. Thanks for taking my questions. This is Kevin for Brian. First, we were hearing about certain deliveries to the Indian Navy through an international prime. What Coda products were shipped to the Indian Navy, and is this a brand new customer, or have you worked with the Indian Navy in the past? And then broadly speaking, do you see any significant opportunities within India in the near to medium term?

Sorry. Thanks very much for that question. I'm not clear. The Indian Navy, I'm not sure where that has come from.

Okay. Maybe I must be mistaken. I can move on to a different one. Can you update us on the progress in Europe? I believe you delivered two untethered systems to a European Navy. How is the satisfaction? And do you expect larger orders ahead from the Navy?

Right. Thank you very much for that question. So I'm really, really excited about that development. As we mentioned earlier, we've completed the DAVID untethered hardening program. That's really the prerequisite to broader adoption. So what we really feel at this stage on the DAVID technology, which is one of our key pillars for our growth, we feel that we've spent last year focused on completing the hardening program and delivering systems to the US Navy. Really, now we're really waiting for that to complete the approved Navy use status, which then means the product will be operational and will be the catalyst for broader adoption. Then pivoting from outside of the US, really, this year, what is really key for Coda Octopus is broader adoption of the technology outside of the US, and in our fourth quarter, we delivered two systems to a very, very influential European Navy, and we will be providing training to that navy in our Q2, and then we believe that will be the catalyst for further adoption of the DAVID untethered system. So we're really, really excited about that, and we're waiting to support that customer. And we would expect Q3, Q4 would be where we start understanding opportunities for that customer.

Thanks. And then can you quantify cumulative deliveries of the untethered DAVID system? And last quarter, I believe you said Sorry. Could you repeat that? Could you what? Sorry. Could you repeat that? Could you quantify the cumulative deliveries of the DAVID untethered system? And I think last quarter, you said your target was $3.5 to $4 million of DAVID in fiscal 2025. Did you achieve that? And then given the progress you're making, what kind of range do you expect for DAVID contribution for the revenue in fiscal 2026?

So in fiscal 2025, we did $3.7 million for DAVID. And 2026, really, of course, our internal business plan presupposes that we beat this. However, it's really difficult to see as we're waiting for completion of the assessment of the approval, the approved Navy use status for the product, which is the prerequisite for the product being operational. So we expect really to have that close to the Q2. And, really, Q3 and Q4 is where we can really start understanding what revenues will be for the untethered variant in 2026. So DAVID revenue will be lumpy and back-ended to the third quarter and fourth quarter for the simple reason that until it goes through, we've delivered the evaluation systems. And until it gets on the ANU list, which is the approved Navy use list, it's very difficult for us to quantify what the budget is going to be. In addition to that, though, we're really focused on, as I said this year, getting broader adoption for the DAVID technology outside of the US. So we feel we've done all of the development programs. We've got a good understanding of where the trajectory of the product in the US. We're pretty much waiting for budgets and waiting for the budget line appropriation. Programs are now being funded by continuing resolutions. So we really don't know what the 2026 US budget is going to be. There will be a budget, but we don't have the visibility of that right now. But that aside, we take that as a given, and we presuppose that we're going to beat our $3.7 million. But we're really laser-focused now on the broader adoption now that we've finished the development program, broader adoption outside of the US. And this delivery to this European Navy is really a pivotal moment for the technology because this is really a trendsetter navy in Europe. So we're very excited about that. So I can't say what our target is. Really don't know because we're waiting for budget allocation in the US. But I think what we're saying is that we did $3.7 million in fiscal 2025, and we anticipate beating that.

Great. Thank you. And then can you quantify how many foreign navies have tested or are testing DAVID? And once you get in the door, can you discuss the sales cycle? How long might that occur? And then the time frame for deliveries and then what would be a reasonable assumption for large quantity sales?

Blair, did you want to talk about just broadly the business development activities with the broader navy community?

Yes, absolutely. Yeah. I think it's been critical in both 2025 and prior to that, having a very close relationship with the US Navy is critical for the product because, as Annmarie stated, having the ANU, you know, authorization for naval use is critical for the rest of the navies to understand that this is equipment that they can put through to budget lines and move forward. In terms of the number of physical navies where we presented this product to, physically, in diving, we've been involved in a number of what I would call worldwide navy collective missions, including RIMPAC, for example, which is in Hawaii, at which point, even at that single event, I think we had 10 different country navies diving the system. And that's obviously not a statement that all 10 of those navies are going to move forward with that, but it gives an idea of the number of entities that we're working with. I think it's probably easier to focus on the European sector because that's much more, you know, being defined and often maybe we deliver the system. You know, I've personally been working with them for the last two years, just to give you an idea of the gestation cycle. And now that the product is coming close to being, you know, annual deliverable, they are making their early investments into the program, but they are very, very committed. I think they're influential also as such that, you know, that particular navy has a very strong investment in navy diving of all factors about special forces, hard cut diving, salvage, for example, which we cover all bases. But they are incredibly well connected to all of the neighboring navies such that when they place an order, it's fairly well read that the adjacent navies will also follow suit and they will adopt the same level of equipment. And that's exactly what we are seeing today.

So I think as Annmarie said, you were delivering out the first of those systems to that navy. There will, I'm sure, be invites of the other neighboring navies to that training event that I'll be conducting. And then Q3, Q4 is when we really understand how that progression moves forward.

Yeah. Yes. And just to add there, the key benchmark for us in 2026 is to secure meaningful adoption of DAVID outside of the US. That is our key benchmark. We feel in terms of the product, its acceptance on the US side, we take that as a given. As Blair says, we've got very good relationships. The customer is very excited about the technology. I think the team did a great job with really understanding the requirements of the navy, the feedback, delivering the 16 systems based on feedback, and I feel all of that is settled. In addition to that, over the last year, what we saw, we saw real momentum on broadening the scope of the DAVID technology actually. So we had funding from several programs where they want to integrate the DAVID in their as a critical tool for their application. So we feel the DAVID technology is really now mature and, really, all the development that we've been talking about, we feel, you know, we've invested in that. That's behind us. And now we are really focused this year on adoption outside of the US, and that's what we are focused on. And in terms of your question about quantities, I'm really, that's pure conjecture. I really can't say what quantities, but what I really want to emphasize is that last year, we did $3.7 million in DAVID. Our internal business plan assumes that we will beat this number. And one caveat I will say is that DAVID revenue will be lumpy for a number of reasons. We're waiting for the ANU process. We expect our European customers, it's the third and fourth quarter before really any form of procurement will take place. And so I think that that's really where I'll leave it on DAVID and its trajectory.

Thanks. And then last question is for the next generation sonar. Could you give us an update on what customer feedback is like?

Blair, did you want to take that?

Yes. I can take that one. Yeah. Thank you very much for that question. Yeah. I think we are, you know, exceptionally excited to launch our Nanogen series. It really is a game changer for us in terms of really how wide a program we can actually fit our technology. And I think that'd be incredibly swiftly noticed by both the defense and oil and gas and other markets, you know, around the nanotechnology. I feel very much that we have really strong interest from a lot of those programs, and especially on the navy side, where we are already seeing considerable interest for existing funded programs. So they would typically execute what we would call a PIP or a product or platform improvement program. And that really is a formal engineering and funding pathway for upgrading already fielded systems. So either adding new capabilities, addressing, say, system deficiencies, improving reliability, and inserting new technology into existing platforms. So the interest to date from the community has been largely focused on the capability growth enabled by Nano. So we're adding brand new capability to those existing platforms. But the introduction of Nano does actually address multiple of those justification categories. So as a result, I see that the opportunities are much closer to program execution. They're either having lower, you know, acquisition risks. And they're definitely much more shorter term with a predictable volume profile. In other words, we can integrate onto existing platforms that are in the field, and this isn't waiting on perhaps a new funding program for an entire new vehicle. That said, we are also being approached by multiple defense companies for integration of the nanotechnology at a ground-up level, which is also very exciting. But we understand that, you know, those programs have got a longer gestation period. So we're very much, again, laser-focused on the PIP approach where we can integrate our technology onto already well-established programs and products. And I do see also that we will have closer and closer relationships with, you know, some of those, you know, some of those sort of people involved in this program as we integrate the Nano into that program. But really, taking the existing well-proven for twenty odd years at our 3D real-time volumetric sonar, which we still really stand, you know, almost alone in that capability and bringing that to these new AI-enabled, you know, vehicles, be they autonomous, semi-autonomous, or manned. And, you know, we're really excited to see the growth on that.

Thank you.

Thank you.

Ma'am, thank you. And as a reminder, if anyone had any questions, you may press 1. Our next question comes from the line of Nick Waldo, a private investor. Please proceed with your question.

Hey, thanks for taking my question. I just had a quick one and a quick follow-up. So as you look into calendar 2026, how would you characterize the offshore commercial demand environment? Do you see it improving out of 2025? And what indicators do you look for?

Well, look, you know, the commercial market is really our, the commercial marine market, we're well established. And it's less a fight about what the technology can and can't do. So I think year on year out, we see good for the Echoscope within the commercial market. I think what the rental side has been really sort of slow, but Q4, we saw quite an uptick in rentals. And rentals are important for the business insofar as they are the big offshore companies who don't really buy equipment but run these very long projects where you can have multiple Echoscopes and engineering services on those programs. So they're really, really important to us. For the first March, the rental side was But in the fourth quarter, we saw a significant uptick in rental opportunities and rental fees. So looking out for us, the important part for our revenue growth is the defense market. It's always, and the reason for that is because the defense market has opportunities for multiple sales and long-tail revenue. So that's pretty much really where our effort is as a business to grow. And Blair talked very much about we've got a number of programs where the Echoscope is a contender for being embedded in those programs that will yield this long-tail recurring revenue that we talk about, but also, luckily for us, we have broken into some nearer-term catalysts on these PIP programs. So I feel really for us, that for the business to really grow, it is the defense market that really, we are allocating most of our resources and business development effort. Because as I said, in the commercial markets there, we're well established. You know, we've been in this game for, you know, over thirty years. We're well known. It's a small community. But the site that we really have to grow is the defense space, and I'm also very pleased with our core business revenue structure this fiscal year because the previous fiscal year, we did around 40% in the defense space. This year, we did 46%. So I feel we're making progress, and that's what we have to do to see significant growth for our business. And these PIP programs that are near-term catalysts for us with the focus on Nano, it's really, really where we're spending a lot of our time this year. Thank you.

And then looking forward, now that you have $28 million in cash on hand, a pretty hefty amount, how do you think about capital allocation priorities going from here?

Thanks. Well, as I said, actually, in my closing remarks, recognizing we do have quite a lot of cash, we feel the best way to give return to investors and also to grow the business is through accretive value-added acquisitions. So we're really actively looking to complete an acquisition this year. We're still looking at targets. But, of course, we really want to make sure we make the right decision for the group. So we're putting a lot of work into screening what makes sense for our business.

Thank you.

You're welcome.

Thank you. And at this time, this concludes our question and answer session. I'd now like to turn the call back over to Annmarie Gayle.

Thank you, operator. Thank you for attending today's earnings call. Have a great day. Thank you, everyone.

Thank you for joining us today for Coda Octopus' conference call. You may now disconnect.