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Earnings call · Jul 2026 (Q3 FY26)

Coda Octopus Group Q3 FY26 earnings call CODA

Sep 14, 2026 Source

Executive summary

Coda Octopus Q3 FY26 — Diversified Business Model Drives Growth Despite Geopolitical Headwinds

Coda Octopus delivered solid Q3 FY26 results, with overall revenue and pretax income growth driven by strong performance in Defense Engineering Services and Acoustic Sensors, which offset declines in Marine Technology due to geopolitical instability. The company achieved a significant accounting milestone by reaching positive retained earnings and continues to focus on expanding proprietary technology adoption and evaluating M&A opportunities.

Highlights

5

  • Consolidated revenue increased 9.2% to $7.7 million.

  • Pretax income increased 16% to $1.8 million.

  • Defense Engineering Services revenue increased 68.3% to $2.7 million.

  • Rental revenue in Marine Technology increased 131.1% to $0.7 million.

  • The company achieved positive retained earnings for the first time in its history.

Concerns

4

  • Marine Technology revenue decreased 15.2% to $3.4 million due to geopolitical instability in the Middle East and parts of Asia.

  • Consolidated gross margin decreased to 65.4% from 68.3% in the prior year period.

  • Acoustic Sensors and Materials gross margin decreased to 52.4% from 54.8% due to product mix.

  • Defense Engineering Services gross margin decreased to 56.9% from 58.9% due to contract and program mix.

Segment performance

SegmentRevenueYoYQoQMargin
Marine Technology
Revenue decline primarily due to reduced customer activity in the Middle East and parts of Asia following geopolitical instability. Partially offset by significantly improved rental asset utilization. Gross margin improved due to higher rental contributions and lower commission costs.
Hardware revenue: $2.3 millionHardware revenue YoY: -17.8%Rental revenue: $0.7 millionRental revenue YoY: +131.1%
$3.4 million-15.2%—78.5%
Acoustic Sensors and Materials
Continued growth. Gross margin lower due to product mix during the quarter.
$1.6 million+10.4%—52.4%
Defense Engineering Services
Strong quarter benefiting from increased activity and funding across several long-standing defense programs, resulting in both higher order intake and higher execution levels. Gross margin lower due to product mix.
$2.7 million+68.3%—56.9%

Orderbook & backlog

Spares orders EUR 2.4 million YTD FY26

For sustainment defense systems within the Defense Engineering Services segment.

Product announcements

ProductTypeDetails
DAVD Untethered System with Gen 4 Hubmilestone
DAVD Flex systemsexpansion
NANO Gen Series Sonarlaunch
Voice HUB-4update

Deals & partnerships

PAL Acquisition of an acoustics authority, leveraging their capability across the group.

Mentioned in context of 'PAL earn-out' and leveraging their expertise in acoustics across the group for next-generation technologies.

Risks & headwinds

Geopolitical instability in the Middle East and parts of Asia Q3 FY26, ongoing

Marine Technology revenue decreased 15.2% to $3.4 million; Hardware revenue decreased 17.8%.

Mitigation:Diversified business model, strength in Defense Engineering Services and Acoustic Sensors and Materials. Management views it as a timing issue causing deferrals, not a structural change.

Product mix impacting gross margins Q3 FY26

Consolidated gross margin 65.4% (vs 68.3% prior year); Acoustic Sensors and Materials gross margin 52.4% (vs 54.8% prior year); Defense Engineering Services gross margin 56.9% (vs 58.9% prior year).

Mitigation:Partially offset by higher-margin rental activity within Marine Technology.

What to watch in Q4 FY26

NANO Gen Series SAT trials completion

Q4 FY26
Current Underway, active with vehicles
Target Conclusion of trials

Why it matters

Successful completion is a precondition for potential procurement and broader adoption by other customers, impacting future revenue.

Yes, the SAT trials will be eminent. And actually with the customer as we speak at the moment. So yes, we're in the water active with the vehicles and things are going very, very well. So we hope to conclude that. I wouldn't be able to report that in the fourth quarter, I would hope.

Q&A highlights

Seeking feedback on NANO Gen Series testing with an underwater vehicle OEM and timeline for test/evaluation completion and potential design win announcement.

SAT trials are imminent and progressing well with the customer. Management expects to conclude trials in Q4. A design win would be a significant catalyst, potentially leading to broader adoption by other customers once the initial integration is successful.

“Yes, the SAT trials will be eminent. And actually with the customer as we speak at the moment. So yes, we're in the water active with the vehicles and things are going very, very well. So we hope to conclude that. I wouldn't be able to report that in the fourth quarter, I would hope.”

asked by Brian Kinstlinger · answered by Blair Cunningham

2 min read 5 chapters

Detailed narrative

Diversified Business Model Resilience

Coda Octopus' diversified business model proved resilient in Q3 FY26, with strong growth in Defense Engineering Services and Acoustic Sensors and Materials offsetting a 15.2% decline in Marine Technology revenue. This allowed the company to achieve a 9.2% increase in consolidated revenue to $7.7 million and a 16% rise in pretax income to $1.8 million, despite challenging geopolitical conditions impacting international markets.

Marine Technology Headwinds and Rental Strength

The Marine Technology business, representing 43.8% of consolidated revenue, saw a 15.2% revenue decrease due to reduced customer activity in the Middle East and parts of Asia. However, this was partially mitigated by a significant 131.1% increase in rental revenue to $0.7 million, driven by improved asset utilization, which also positively impacted gross margins within the segment.

Defense Engineering Services Growth and Expansion

The Defense Engineering Services business delivered a strong quarter with a 68.3% revenue increase, benefiting from increased activity and funding across long-standing defense programs. The U.S. defense operations saw strengthening demand for repairs and spares, with spares orders exceeding EUR 2.4 million year-to-date, and expanded into next-generation electronic warfare systems, working with prime contractors on evolving requirements.

Technology Adoption and Milestones

The company continues to advance the adoption of its proprietary underwater technologies, including DAVD, Echoscope, and NANO. A key milestone was the successful completion of the U.S. Navy's Authorization for Navy Use (ANU) assessment for the DAVD Untethered System, enabling broader evaluation and utilization. The NANO Gen Series Sonar is gaining traction with subsea robotic OEMs and defense markets for AI-enabled autonomous underwater platforms.

Financial Strength and Strategic Focus

Coda Octopus maintains a strong balance sheet with $31.7 million in cash and cash equivalents and remains debt-free. The company achieved a significant accounting milestone by transitioning to positive retained earnings for the first time in its history. Management continues to pursue M&A opportunities to strengthen its business and support long-term growth, while also investing in R&D and business development.

AI-generated summary of the company's earnings call. Not investment advice.