Coda Octopus Group Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
June 14, 2023

There are 7 speakers on the call.

Operator

Good morning, and welcome to CODA Octopus Group's 2nd Quarter Fiscal Year 2023 Earnings Conference Call. My name is Christine, and I will be your operator for today. Before this call, CODA Octopus issued its Financial results for the fiscal Q2 ended April 30, 2023, 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, Anne Marie Gale and its acting CFO, Mrs. Gail Jarden.

Operator

Following their remarks, we will open the call for questions. Before we begin, Jackie Keshner from The Gateway Group will make a brief introductory statement. Ms. Keshner, please proceed.

Speaker 1

Thank you. Good morning, everyone, and welcome to CODA Octopus' 2nd quarter fiscal year 2023 earnings conference call. Before management begins their formal remarks, We would 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. 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 and 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.

Speaker 1

We disclaim any obligation or undertaking 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 ks and Form 10 Q for the Q2. You may get Cota Octopus' Securities and Exchange Commission's 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 Kota Octopus' website. Now I will turn the call over to the company's Chair and CEO, Anne Marie Gale. Anne Marie?

Speaker 2

Thanks, Jackie, and good morning, everyone. Thank you for joining us for our Q2 2023 earnings call. As a management, we have established over many years a good track record of running a profitable and sound business. We have also spent the last 4 years on the development of our new generation of underwater products and solutions, Including our Echoscope pipe and our diver augmented vision display system, DAVID, which underpin our growth strategy. Management's core focus is now on organically growing the business.

Speaker 2

Our current business target is growing the marine technology business this year by 22.2 percent to reach $18,000,000 and growing the services business by 6.7 percent to reach $8,000,000 We have a strong balance sheet and do not envisage the requirement for new capital to fund our growth. Although at the end of this quarter, we are behind on our full year 2023 Business plan financial goals, we continue to be laser focused on our growth strategy And executing against this. Some Echoscope rental and sales projects we are working on Tap unpredictably slowed mainly in Asia and therefore in the second quarter We did not achieve our revenue target for ECHERSCOPE solution. I'd now like to summarize our 2nd quarter highlights. Within our current business strategy, the 2 pillars of growth for our company are Our ETCOOP real time three d imaging sonar, the new generation of ETCOOP pipe and our recently launched diver augmented vision display system, DAVID system, which is in adoption by the U.

Speaker 2

S. Navy. I will therefore focus my remarks on these two pillars. Turning firstly to the Ecoscoop. The underwater imaging sonar market is growing largely Due to the new generation of underwater vehicles focused on bringing new capabilities to the subsea And underwater market, one of the key requirements for the defense market for these new vehicles It's real time 3 d spatial perception and scene awareness technology.

Speaker 2

It is therefore our strategy to work on increasing the number of defense underwater vehicle programs, which the Ecosco technology is embedded in. If we are successful with our strategy, This would open up long tail and recurring revenues for the business under these programs, which is similar to the business model of our engineering business. In the Q2, Echoscope sales were down and this is largely due to anticipated sales in Asia territory That did not come through in the Q2 as expected. We, however, continue to focus on our overriding To increase our market share of the imaging sonar market, in this quarter, We provided support to 2 of the defense programs that utilize our Echoscope. These programs are now entering their customer trial phase.

Speaker 2

Turning to DAVID. The TevaT DAVID system has now moved from the Navy's R and D phase to their field adoption fees and in the second quarter we sold $1,000,000 DABIT systems which will be distributed to new command within the Navy. Within our 2023 financial year fiscal projections, we have $2,000,000 revenue targeted for DAVID. Thus, in the Q2, we have achieved 50% of our targeted revenue for this product And with the opportunities we are currently pursuing, we believe we will meet our 2023 fiscal year target for Bedavid. We continue to pivot from an R and D focus to sales and marketing and brand building.

Speaker 2

The 2nd quarter saw us having top quality engagements. Some of these were closed door invitation only events with our target markets and we continued to raise awareness about our technology. We participated in several events For the promotion of our products and services, including 2 key events, which were by invitation, Special Operations Forces Week 2023, which was hosted in partnership with United States Special Operations Command and Military Diver Training Continuum in Panama City, which had in excess of 250 military divers participating, A significant target market for the untebert version of DABBET. We also showcased and presented the DABE Tepid solution at the Dutch Diving Regulatory Body, SWAD, Special Weapons Ordnance Device Exchange Event in Pathway, Netherlands, which had a large turnout of diving companies, fire department and the defense labor inspectorates in attendance. We had successful demonstration of DABB to the Dutch Navy In a vessel rescue penetration training facility in the Netherlands.

Speaker 2

We also had successful completion of DABE trials with a major European offshore provider who is actively discussing options for adoption. We also had successful engagement and demonstration of DAVID to new market opportunities for the deep saturation diving sector and multiple nation special forces on tethered diving solutions. We successfully supported 2 different defense for their ongoing sea trials with their end user customer. In the quarter, we also saw Strong inquiries for rental of the David solution for projects that had hindered by low visibility water condition. In the Q2, therefore, we had solid momentum and progress around our key pillars of growth, both the DAVID and Ecoscoop pipe.

Speaker 2

Looking forward, we are also discussing potential adoption by a Japanese construction company, Sales of the valuation system for the David on Teva solution and working with U. S. Project sponsor For the full adoption of the DABIT on Teva system in 2024. Turning to the DABIT adoption curve. DABIT is an important part of our growth strategy And we think it is important to update the market on the likely adoption curve for this recently launched Technology.

Speaker 2

The customer adoption curve for nearly all such opportunities is the same. Stage 1, initial demonstration and trials to establish interest And Stage 2 customer specific trials, which are designed around their workflow, typically on live operational mission and Stage 3, decision on adoption To summarize where we are with some of these initiatives around the DABIT, therefore, turning firstly to DABIT TESBOT variant. David TESBOT variant is an approved Navy use item and is now The Navy has started purchasing field systems As distinct from R and D Systems, in this second quarter, we sold $1,000,000 DABID We're now actively marketing this variant in both the commercial and defense sectors, including extending our model to lease and rental options. Turning to DABEID on TevaD variant. The DABEID on TevaD variant is now delivered And under evaluation with project sponsors, and we expect some initial evaluation systems to be purchased for broader field assessment in the 3rd quarter.

Speaker 2

This variant was the centerpiece of the Special Operation Forces and Military Diver Training Continuum event We attended in the quarter. Coda Octopus will continue to support the field evaluation by Providing training and other technical support that may be required by the project sponsor. Interest has grown in the David in new diving communities, and we are working with Teams in the saturation diving community for both the U. S. Navy and commercial European dive contractors.

Speaker 2

Turning now to ongoing trials and adoption discussions. We have 4 second stage of foreign defense agencies trials Scheduled in our 3rd and 4th quarters. 1 European Offshore Service Provider In 3rd stage and discussing investment plans, 1 European Off Sure. Service provider in 2nd stage and we have already done We are actively discussing adoption options with 1 major Japanese Offshore construction company, who is an established user of our echoscope and who owns up to 15 Echoscope within their operations. Due to their established use of our Turning to expansion of the business model for DAVID Technology Allowing market access.

Speaker 2

We also believe from recent business development efforts that we could fast Track adoption through rental and lease of the DABBIT technology. This will also broaden the accessibility of the technology In the marketplace, we continue to believe that the likely inflection point for the debit therefore is In financial year 2024, where we hope to have acquisition budget lines established with other customers Outside of the U. S. Navy and where the U. S.

Speaker 2

Military command has started purchasing David on TevaT System, our biggest opportunity for the product following completion of their evaluation period. To conclude, therefore, we remain comfortable targeting $25,000,000 in revenue for our technology business on a standalone basis in financial year 2024. In financial year 2022, this business, that is the Marine Technology business, Had revenue of approximately $15,000,000 And this year, we're targeting $18,000,000 for this business on a standalone basis and at the same time maintaining our profitability. Turning now to new products and other progress. A number of key technologies Were developed as part of the DAVID system, including the digital audio communication module And the Subsea Edge enhanced video module.

Speaker 2

The first of these has already been requested as a standalone product by the U. S. Navy and we have a purchase order to deliver the first small batch in our 3rd We are also in discussions with several vehicle manufacturers for the integration of our Subsea Edge These technologies allow us to expand our product portfolio through discrete packaging of already developed technology to further add and diversify Our market reach and revenue. This product is also exciting for the company as the purchase process It's significantly shorter due to the price point of these modules. We also believe that there is a real need to advance Underwater Communication Systems by moving from analog communications to digital communications, Which is what this new digital audio communications module is designed for.

Speaker 2

The addressable market for this we believe is significant if our product meets the addressable market brief. Now turning to our Marine Engineering business. We continue to reiterate that this segment is important for our group as it has Strong pedigree in defense engineering with stellar relationships with prime defense contractors spanning decades. These are important relationships for our group strategy. There is a strong crossover of engineering skills, which is vital for us to maintain our competitive lead in real time three d imaging sonar and our diving technology.

Speaker 2

Into broader mission critical programs on the subcontracts with prime defense contractors. This gives them the opportunity to have repeat orders for these sub assemblies for the life of the program. Within this business segment, we are navigating headwinds from supply chain issues across various defense The supply chain difficulties apply not only to our own sourcing of components, but also crucially to our customers' own supply chain issues in parts of the program unrelated to us. This is resulting in the broader program design requirements being slower to lock in Due to the general unavailability of components, this has led to many instances of multiple iterations of the design proposal being submitted for the same work package, which in turn has resulted in slower order intake in our 1st and second quarters. However, we have 2 new programs, which are now moving from their prototype phase Into production phase, where we expect to receive purchase orders for the manufacturing of these sub assemblies.

Speaker 2

We have successfully completed the environmental assessment test for one of these programs recently And we expect to receive the manufacturing order for these in the financial year. We have also started to deliver the first of a Small batch of thermite mission computers to a NATO country. Let me now turn the call over to our acting CFO, Gail Jardine, to walk you through our financials Before I provide my closing remarks, Gail?

Speaker 3

Thank you, Anne Marie, and good morning, everyone. Let me take you through our fiscal Q2 financial results. Let's begin with revenue. In the Q2 of 2023, we recorded total revenue of $5,300,000 compared to $5,000,000 in the Q2 last year, an increase of 6.4%. The Marine Technology business generated revenue of $3,600,000 compared to $3,500,000 Last year's Q2, a 2.6% increase.

Speaker 3

We're excited about the mix of sales. And as previously mentioned by Anne Marie, In the Q2, we sold $1,000,000 of Daven units, which is 50% of our Daven revenue target for this financial year. Looking now at gross profit and margin. In the Q2 of 2023, We generated gross profit of $3,600,000 compared to $3,000,000 in the Q2 of fiscal 2022. Gross margin in the Q2 of 2023 was 68.3% versus 60.8% in the same year ago period.

Speaker 3

In our Marine Technology business or product business, gross margin fell slightly to 75.3% in the Q2 of 2023 compared to 76.6% in the prior year second quarter, reflected changes in the mix of sales. In the Q2 this year, we had more units of hardware in the mix of sales with less units of rentals and services. Our Marine Engineering business gross margin was 53.9% versus 23.9% in the prior year Q2. In the prior period, there was a high concentration of revenues from a particular low margin project. Now moving to our operating expenses.

Speaker 3

Total operating expenses for the Q2 of 2023 increased 8.5 percent to $2,800,000 compared to $2,600,000 in the Q2 of 2022, driven by a 10.3% increase in selling, general and administrative expenses due to an increase in professional fees for services such tax and audit. Our selling, general and administrative costs in the Q2 of 2023 totaled $2,200,000 increasing from $2,000,000 in the prior year second quarter. As a percentage of revenue, our selling, general and administrative costs for the Q2 2023 increased to 42.3 percent of total revenue compared to 40.8% in the Q2 of fiscal 2022. Looking forward on our cost structure, given the significant progress we've made in R and D in the last 4 years, we remain focused on aligning a We believe we have developed world class products and solutions that provide market leading positions for Coda and that we can make meaningful progress in our markets through these investments to create shareholder value. Now to focus on operating income, which in the Q2 of 2023 was $855,000 compared to $481,000 in the Q2 of 2022.

Speaker 3

Operating margin was 16.1% compared to 9.7% in the Q2 last year. Net income before taxes in the Q2 of 2023 was $1,000,000 compared to $493,000 in the Q2 of 2022. Net income after taxes in our Q2 2023 was $1,000,000 or $0.09 per diluted share compared to $611,000 or $0.05 per diluted share in the same quarter last year. Finally looking at our balance sheet. As of April 30, 2023, we had 23 point $5,000,000 in cash and cash equivalents on hand and no debt.

Speaker 3

This represents a 1,100,000 Cash decreased in the quarter due to the timing of our federal tax and state tax payments for the prior year as well as prepayments for tax in this year, which totaled $1,270,000 This tax payment is also reflected in a $1,000,000 reduction in our current liabilities. For the year to date, we have had a cash build of $500,000 That completes my financial summary. Now I will turn the call back over to Anne Marie for closing remarks. Anne Marie?

Speaker 2

Thank you, Gail. As stated previously, although in the second quarter we are behind in our business plan, We are focused on executing our existing plan and growth strategy. We have Significant momentum around our growth pillars and again our focus is converting these into tangible Near term opportunities for the business. Management will continue its efforts to explore the rental and lease model For the debit with the objective of galvanizing market adoption, We also have a near term growth catalyst from the digital audio communications module. If we're successful with this module, it will provide the company with diversification of revenue, which counterbalances the longer sales cycle of both the Ecoscoop and the DAVID and potentially adds a good stream of additional revenues for the company.

Speaker 2

We have a demonstrated track record of Consistent profitability and we have a solid on leverage balance sheet with cash on hand and no debt, which gives us confidence in our outlook for Coda. Furthermore, with our solid balance sheet, We do not envisage needing growth capital for the growth targets we have set out for the next 2 years. We're now happy to take your questions. Operator?

Operator

Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

Speaker 4

Great. Thanks so much and thank you for all the very detailed information on your markets and the I wanted to start with your financial targets for fiscal 2023, especially the $18,000,000 for marine products. This would mark a substantial increase in demand for the second half of the year, especially with only a modest contribution, if I heard you right, Which is about $1,000,000 more for the DABs. So first, have you seen an improvement in the Asian market? And then Whether you have or have not, what does give you the confidence in the second half of the year you're going to see much stronger results compared to the first half?

Speaker 2

Brian, hi, it's Anne Marie. Thank you very much for that question. Yes, we're really off plan, And as I said, and really by this time, we really should have done around $9,000,000 and But largely what we've seen, really good level of inquiries, good level of proposal writings and Good quality of opportunities that we are pursuing. However, what we've really is a slower pace of conversion from the Asian market, but nothing leads us to believe that the Opportunities have gone away. We still think that they are valid opportunities for 2023.

Speaker 2

So whilst I believe that we are definitely off plan and we've got a lot of Work to do to achieve that $18,000,000 I really think from what I am seeing for our business is that We still could be very close to the projections, the internal projections. Look, we haven't Because then we have no reason to do so. As I said, what we're seeing is slower pace of conversion, But nothing indicating that the opportunities that we are pursuing have gone away. They've just And that's not unusual. I mean, our sales cycle and quarterly sales are not linear, although within our projections, they are just for modeling purposes, linear.

Speaker 2

But Really, our focus is full year revenues and believe on a full year basis, we have no reason at this stage to report cost back.

Speaker 4

Okay. And then as it relates to your 2 underwater vehicles in trials with the Echoscope pipe, Is CODIS technology the only one selected for those trial phases? And how long do you expect a trial phase might last?

Speaker 2

Well, we don't know what's on the defense vehicles that are being what other sensors are there. We only know that our sensor is part of that solution. And I think that the 2 programs that we Worked on this quarter, I think that they are at their advanced stage and from information we have, If this program or trials are successful, they are likely to do a small batch in the beginning of Q1 next year, But it's subject of course to their trials being successful and they continue to execute at the pace that they're currently

Speaker 4

Great. And last quarter you talked about having 4 of these underwater vehicles In the U. S. And one outside the U. S.

Speaker 4

Maybe share any details, you commented on 2. Are the other 3, Have they gone away? Are they still in the pipeline? There's just no update on them? Just trying to understand how that pipeline may or may not have changed.

Speaker 2

No, no. The pipeline is the same. One program is in Japan and Four programs in the U. S. In fact, one program is a commercial opportunity.

Speaker 2

They have launched They're a new program and I think that we are selling into that program. So I think they've done Successful trials with their underwater vehicle and I think that they are in the process of I think this will be for them The rental model, a model to, I think that program is alive. Our technology is part of their solution And the other programs are ongoing, but in this quarter, I think what I tried or the business is trying to emphasize is that The programs that we supported are advancing and moving from just their development fees into customer trials fees, and We're excited about that because it's a significant move forward under the program.

Speaker 4

Got it. Thank you. And then my last question for now is, In the past, you've communicated recent past, you've communicated your plan to invest more in sales and marketing. I see SG and A moved up a little bit, but not a material amount, at least in my opinion. Can you talk about where you are with That piece of the plan and what you have left if you have something to invest in sales and marketing?

Speaker 2

Yes. So we've been doing a lot of legwork in the territories that are important to us. So Europe is really, really important. Asia is really important and the U. S.

Speaker 2

Market. So let's start with Asia. Really what we are doing in Asia is expanding our network of agents and really what the business needs to do is to put Boots on the ground to support agents and support our customers there. So the investments we're making for marketing Supporting our agents in the field with support Start in country. And that's the model that we think will be very effective for our customers there because what our customers want to know, Especially for these programs that we're working on, especially for the DABBID that there's a code of conduct and provide support in country.

Speaker 2

So we are in the process of moving support engineers into Japan to start with and China and South Korea. So that's the first leg. And of course, as I've mentioned, expanding our agents network, which means that appointing more agents. And we have done that In the last since this year, we've appointed a number of new agents and provided training. In fact, in June, We have quite a big team going out to China to do not just demonstrations, but extensive training and our senior hydrographic severe We'll be there for several weeks, providing support and training to our agents.

Speaker 2

So we think that the best way for the Countries where we don't speak the language, the best way to support our customers like expanding our agent network, Ensure that our agents are trained and in country support for the opportunities that are ongoing And also when a customer has a problem on the ground that colder people are at hand to see this is what you need to do or the system needs to go back But we feel that this is the best model for us. So that's that. In the U. S, we continue to And a lot of significant events and we are although marketing costs were down, I think That on a full year basis, it's just timing. We will see marketing being much higher than last year because then we've got quite a lot of Activities planned for the back end of the year.

Speaker 2

And in the U. S, we're still looking to recruit focused Business Development staff and that's ongoing. And similarly, in Europe, We are looking for people that they've got to be the right people with the right background. But I'm pleased to see that we're expanding our agents At the same time and providing quite a lot of support and training for ongoing opportunities.

Speaker 4

Right. I would ask about the DAB, but you provided so much good detail that I don't really have any questions about it. So thanks for all your time.

Speaker 2

Thank you very much, Brian. Thank you.

Operator

Our next question comes from the line of Walter Ramsey with R2. Please proceed with your question.

Speaker 5

Thank you. Hello, Anne Marie. Thanks for all the information. I had a request, I guess. If you could elaborate a little further on The slow performance in Asia, you said the customers are dragging their feet a little bit.

Speaker 5

Is that because their own Business is slowing down or what's provoking that?

Speaker 2

Well, we don't have a lot of Visibility as to the reason for the slow pace of conversion, what we're told that Project has just moved a little bit to the right. It's not gone away. So we don't have any reason to be concerned. We're in Good line of communications with our agent network with the opportunities that we're pursuing and what we're told is that they've just moved to the right. So I can't give you more color as to the reason, but what I can say is that At this point, I am not alarmed because I believe it's just a question that the project is pushed out A little bit from the scheduled Q2 to later on in the year.

Speaker 5

Okay. And as far as the echo scopes in the military, I mean, my understanding is that the military Around the world, there's really accelerating development of these underwater drones Essentially, is that the case or are they kind of not moving as quickly as you would like either?

Speaker 2

Well, it's look, the programs that we are really targeting for getting our vehicles embedded in this, a lot of front end work because then if you think of a vehicle being manufactured to the end user requirement, That will take a couple of years. The work that CODA Octopus needs to do is to be part of that front end. It's a little bit like Tesla. If Tesla is to bring out a new model of vehicle, all the specification for that model is locked And when that vehicle is then produced and supplied to the market, it's the same specification for that model. That's what we are doing.

Speaker 2

So the program might take a couple of years, but really that is simply what happens when you've got New generation of anything, there's a prototype phase, then there's trial phase, then there is production phase. We are doing a lot of prototype of front end work to ensure we are part of that solution. And this is what gives us the confidence that in the future That we are going to capture more market share because we're certainly in a number of programs and It doesn't stop with the 5 programs that we talked about last year. Every year, this is our laser focus, What are the new programs that CODA Office Technology can get into? And we're having lots of Discussions, in fact, one of the systems that we had in the U.

Speaker 2

S. Last year And that now is now been launched to the market. And as I said, we have sold a handful of system last year. That same program has come back to us for a different program that we're now developing for a different So now within our series of sonar, so we're getting good repeat opportunities From, 1st of all, doing that front end work, we're part of that solution. That solution works for them.

Speaker 2

They come back to CODA with a good and excellent And then we get on to another program. So I feel we're doing a lot of the right things And really the impact of those right things, which are the front end work that we're doing to be part of that story, We'll start yielding the results, Walter, of next year and onwards. So that's really what we need to do. Yes. So, and that's all the same time.

Speaker 2

That

Speaker 5

sounds correct. Okay. And then just one last question. These New military programs in particular, when they do a bake off on a new program, what's your success rate? Do you win them all?

Speaker 2

When we do a bake off, what do you mean? I'm not sure I understand what you mean.

Speaker 5

Well, they put out a request for bid or whatever it is Yes. Get an underwater vision system for their new secret drone. And so you Put in your proposal and do other companies put in proposals and do you have a competition and what's your success rate?

Speaker 2

Well, I don't know it because the way it works, it's like a handful of, I mean, most of these companies that are doing Or producing underwater vehicles in the defense market will be your prime defense contractors in the U. S, in Japan, In South Korea. And really, they really have a requirement already that says And where we win is because they're looking for real time three d imaging sonar technology And 1 program knows of the coded solution and we are contacted. And also Where we were at the military continuum in Panama City, there was a huge swell around not just the DAVID system, The CODA exoscope. So there's a lot of word-of-mouth that this is the only imaging sonar That will meet that brief for on imaging in real Time 3 d in zero visibility water conditions.

Speaker 2

In fact, yesterday, I saw a paper that was published on the Code Octopus Technology around and that paper was unequivocal that this is the most advanced sonar technology in the market and the most Capable and we just saw that yesterday. And so there is no it's not controversial that our technology is the most advanced. And I think that the small number of prime defense contractors that are operating in the space, we're kind of well known. So, it's Not usually a competition for the sensor that they're integrating in their vehicles. It usually starts with a dialogue that they're And then we answer a series of questions and then we provide them with data sheets and it goes on until They reached a point where they say, okay, we would like to buy a system for our fees, first fees.

Speaker 2

So we see very much that we have good connections with the primes and that's not just In the U. S, in Japan, in South Korea, we are, for example, on a number of programs in South Korea already, And that we've started supplying, sonars into their new vessels. So it's a small community of users for real time three d imaging. And unfortunately I mean, unfortunately rather, Koda is the shoe in town.

Speaker 5

Yes. Sounds great. Thanks for answering all those questions. Congratulations.

Speaker 2

Thank you very much, Walter.

Operator

Our next question comes from the line of David Wright with Henry Investment Trust. Please proceed with your question.

Speaker 6

Anne Marie, good morning. Thanks for having the call.

Speaker 2

Good morning.

Speaker 6

Question, can you tell us the status of the search For a permanent CFO and whether or not you have a particular geography in mind for that CFO would be stationed.

Speaker 2

Thank you very much, David, for your questions. Yes, that's ongoing. We've had a number of Well, the position is open both in Edinburgh and in Orlando. And so We're having some good quality conversations at the moment, and we're hoping to make an appointment In the next more number of months, so that's where we are. But we're getting some good quality conversations, And we're hoping, as I said before, to make an appointment in a small number of months.

Speaker 2

But of course, we want to emphasize, want to make sure it's the right candidate for CodeOptics.

Speaker 6

Okay. And just to go back into the script, I wanted to make Sure. I didn't misunderstand you. When you were speaking right after describing the Davitt adoption curve and going through, You got to untethered and talked about what was going on with untethered. And then I thought I heard you refer to something called the Saturation Diving Community.

Speaker 6

Did I understand the word saturation correctly?

Speaker 2

Yes, you did exactly. Those are new communities that coming out of the Squad event we attended in Tapendre in the Netherlands and also at the military continuum in the U. S, We started conversations with different teams, including the deep diving saturation team. So, these are new conversations that we've started and for around the debit.

Speaker 6

Okay. If you have another minute, could you just Kind of briefly describe what is saturation diving?

Speaker 2

Well, probably it's just deeper diving Where you dive in like a chamber environment. So it just means right at the moment, we're doing more on surface Diving and we sometimes dive a little deeper at the dive belt, but the saturation diving is much deeper diving And that's where you would have things like the diving suits and that's really where the technology would be embedded in the diving suits.

Speaker 6

Okay. Well, thanks for the elaboration.

Speaker 2

You're simply deeper diving.

Speaker 6

Right. I wasn't sure if it meant So lots and lots of divers saturating an area.

Speaker 4

No. So thanks for explaining.

Speaker 6

Very good. Well, continued good luck going forward.

Speaker 2

Thank you very much. Thank you, David. Thank you.

Operator

Thank you. We have reached the end of the question and answer session. Ms. Gail, I would now like to turn the floor back over to

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