Coda Octopus Group, Inc. (NASDAQ:CODA)

A quick PodClip was put out by Maj on  Coda Octopus Group, Inc. (NASDAQ:CODA) ($7.98; 88.4M market cap), a global market leader in real-time 3D/4D/5D and 6D imaging sonar technology for real-time subsea intelligence and diving technology, to accompany the recent CliffsNotes from MS Microcaps and a new GeoInvesting elevator pitch/RFT published this morning.

Even though Maj believes that CODA could be a great long term opportunity, he wanted to make it very clear that volatility in sales, earrings and the stock price is a possible scenario until two new products gain customer traction.

Again, listen to the PodClip in full, here, and view the RFT here.

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As a precursor to additional info/research that we will be following up with on Coda Octopus Group, Inc. (NASDAQ:CODA), we are making available interview notes provided to us by GeoInvesting Research Contributor MS Microcaps. Look for more information tomorrow, and thanks for reading!

• Purpose of technology 

  • Underwater visualization hardware and software

  • Going from point a to b

  • Or trying to place, extract or trace something from the sea bed 

• Revenue

  • Selling hardware equipped with sensors 

    • Excited about 2 new products

      • Echoscope PIPE (A “box”to map the sea bed remotely)

      • Divers Augmented Vision Display (DAVD) (think smart goggles for divers to map the seabed and communicate with onshore command)

  • Selling software solutions 

  • Helping companies design hardware and software solutions, and supply them with on-going design support and parts replacement. This has a recurring revenue component.

• History

  • Had their tech since 2008,but there were some limitations .

    • They bought the  IP

    • Originally only had hardware

      • Hardware was not fully formed.. 

      • Product trials failed 

      • It was very heavy and power hungry and could only be deployed in certain ways. 

  • Eventually bought software IP

  • Hardware and software divisions did not work as a team, exacerbated by the fact that they were located in separate countries ( Norway, Scotland).  This led to the staff having  no “ownership” of the tech.. 

  • First generation products could only image one object at a time

  • ~25 years of providing tech fo the underwater market  

  • First company to digitize sight scan sonar data (I Need to circle back and understand this more).

• New CEO Restructuring Moves

  • She joined 2010/11

    • Before her arrival the company had never earned a profit.. 

  • Started addressing serious issues in 2017

  • Spent the last 5 years and over $10M focusing on building a platform to grow the business.. 

    • Heavy lifting is over 

  • Consolidated staff.. 

  • Over last 5 years

    • Net income and cash flow have each totaled around $ 23M 

    • Product gross margin of 80.4%

    • Service gross margins of  45.4%

    • $24M in cash vs, $827k in 2010

  • Already invested 

    • Can grow organically 

    • Will no have to raise money

• Competitive advantage: Moat (we will need to fact check these claims)

  • Smartphone underwater

    • They are Drone tech underwater

    • Smaller, lighter and smarter than comps

    • Key development:  industry now demands  real time 3d spatial awareness. 

  • Full image vs. profile (comps) to make real time engineering measurements (is not done by comps)

  • Key applications are served only by CODA” 

    • New tech can now image multiple (10) at the same time. 

    • Real time 3D underwater sonar tech .. only solution to give real time 3d images  of moving objects underwater in zero visibility conditions 

    • Real time monitoring and inspection of the sea bed. Real time in 60 seconds.

    • Competition has inferior solutions 

      • Multi-beam is 3D,  but just a map of the sea bed

        • Data has to be analyzed before feedback given (not realtime)

        • Not ideal for zero visibility conditions 

      • 2D imagine realtime, but not 3D

        • Not ideal for zero visibility conditions 

    • End result is the comps can’t provide the same reliable data and will pose more downtime risk to customers

    • Only CODA is able to provide a comprehensive solution to make real time engineering measurements.

      • Can cut production time in half

    • 16 Patents 

    • Some comps

      • Teledyne 

      • Kraken 

      • Comps will have to use CODA tech to qualify for new project requirements!!

• Current Focus 

  • Marketing 

  • Brand building

  • Increased investor relations 

  • Push new products (sensors)

    • Push the Divers Augmented Vision Display- “goggles for divers” (DAVD)

      

    • New Echoscope PIPE

      

  • Plans to takeover the multi-beam market 

    • Chevron abandoned multibeam in a disaster recovery situation.

  • Sell direct to customer as opposed to going through distributors or prime contractors

  • Target defense (currently 40% of revenue)

    • Since can provide recurring revenue from service/engineering/design/selling replacement parts

    • Favorable defense industry  landscape

      • Realtime 3D is the new requirement in defense projects

      • Unmanned underwater vehicles (UUV), sometimes known as underwater drones, are submersible vehicles that can operate underwater without a human occupant. The growth rate for this is on fire

      • Defense will = multiple repeat sales. Will reduce lumpiness in sales.

    • More recurring revenue 

      • Rental revenues

      • Service revenue 

• Use Cases

  • Breakwater block construction used to shelter beach areas (prevent erosion, flooding) and vessels from waves and currents. A customer was using divers and deploying 4 bocks a day.. Now, with CODA, they need less divers.. can do 76 to 200 blocks per day. Huge ROI…  Not using divers prevents casualties (blocks dropped on head). 

  • Diamonds (De Beers): Maneuvering/monitoring a suction drill to extract diamonds 

  • Disaster recovery.. 

    • Platform collapse emergency activities

    •  Remove stuff from below the seabed) Chevron abandoned multibeam

  • Mating parts….Monofort installation.. 8 story  structure that has to be connected with with a base on the seafloor  (mating)

  • Bridge inspection

  • Defense 

    • Mining counts. It is believed that there are likely tens of thousands, if not hundreds of thousands, of underwater mines in various bodies of water worldwide. 

    • Real time threat detection 

  • Critical asset inspection.

  • Ship inspections.