Coda Octopus Defense Surge Masks Marine Technology Slump

Coda Octopus Group’s quarterly growth came from an unexpected place: while its core marine technology business contracted, defense sustainment work surged enough to carry the company forward.

Revenue rose 9.2% year over year to $7.7 million in the fiscal third quarter ended July 31, while pretax income climbed 16% to approximately $1.8 million. Diluted earnings reached $0.12 per share, matching the reported analyst consensus, and revenue exceeded the $7.26 million estimate tracked by MarketBeat.

The composition of that growth matters. Marine Technology revenue fell 15.2% to $3.4 million as geopolitical instability tied to the conflict involving Iran delayed procurement and offshore activity in parts of the Middle East and Asia. Chief Executive Annmarie Gayle described the weakness as a timing issue rather than a structural deterioration, but acknowledged that safety, supply-chain and project-execution concerns are deferring customer opportunities.

Defense Engineering Services filled the gap. Revenue in the segment jumped 68.3% to $2.7 million, helped by repairs, sustainment and spare-parts demand tied to long-running U.S. defense programs. One prime contractor customer received a multiyear U.S. government repair and sustainment award during the quarter, opening additional subcontract work for Coda. Year-to-date spare-parts orders had exceeded $2.4 million.

That business is still lumpy. Management said inventory held in defense warehouses is now being consumed and replenished, creating a potentially steadier replacement cycle, though it declined to forecast the opportunity’s ultimate size. The company is also working with prime contractors on rugged electronic-warfare systems for unmanned platforms, helicopters, aircraft pods and ground vehicles.

Coda’s product pipeline supplied another source of momentum. The company booked roughly $1.4 million of orders for its DAVD tethered diving systems and peripherals after the untethered version received U.S. Navy authorization for Navy Use. Its compact Echoscope PIPE NANO sonar is being integrated by at least five underwater-vehicle customers, with sea-acceptance trials expected soon on one development program.

Coda ended the quarter with $31.7 million in cash, no debt and positive retained earnings for the first time. Management said it continues to evaluate acquisitions, but offered no timetable.