Q4 2023 Coda Octopus Group Inc Earnings Call
Participants
Jackie Keshner; IR; Gateway Group, Inc.
Annmarie Gayle; Chairman of the Board and CEO; Coda Octopus Group Inc
John Price; Chief Financial Officer; Coda Octopus Group Inc
Brian Kinstlinger; Analyst; Alliance Global Partners
Walter Ramsley; Analyst; Walrus Partners
Fernando Kinta
Richard Davis; Analyst; Standard Securities
William Bremer; Analyst; Vanquish Capital Partners LLC
Presentation
Operator
Good morning. Welcome to Cloetta After Chris's Group Fiscal Year 2023 earnings conference call. My name is Sherry, and I will be your operator today. Before this call could Actavis issued its financial results for fiscal year 2023 ended October 31, 2023, including a press release, a copy of which will be furnished in reports 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 H chair and CEO. and Marie Gayle and its CFO, John price. Following their remarks, we will open the call for questions.
Before we begin, I would like to hand it over to Jackie Cassia from Gateway group will make a brief introductory statement. Thank you. You may begin.
Jackie Keshner
Thank you, operator. Good morning, everyone, and welcome to CO2 offsets versus 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 may 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 required by law, we refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business results, uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified in our Form 10-K and Forms 10-Q for the first, second and third quarters of this fiscal year. You may get coded after both the Securities and Exchange Commission filing 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 CO2 after put this website.
Now I will turn the call over to the Company's Chair and CEO, Emory Gale.
Annmarie Gayle
Henry?
Thanks, Jackie, and good morning, everyone. Thank you for joining us for our fiscal 2023 earnings call. Our results in fiscal 2023 continue to reflect the impact of various macro economic and marine industry headwinds. These have negatively impacted our revenue and therefore, overall financial performance in the fiscal 2023. Not withstanding, I believe in fiscal 2023, we continued to make progress in our overall goals of investing in our growth acceleration strategy, a quick rundown of factors affecting the marine industry and that's our business fiscal 2023. So the cancellation and Shell being of several major offshore renewable projects that many of our industry peers. And we ourselves, I'd anticipated these projects are reported to be on a viable future inflation, higher interest rates and supply chain problems. It is reported that some of these contracts oblige the developers sell electricity at $108 per megawatt hour. What developers require this price to be $178 per megawatt hour for the development to be viable. Mainly these projects were therefore, either canceled or postponed while the contract niches negotiate price reset. Some of the contract majors include ForcePad, Vattenfall, Siemens and BP Equinor. This means that many offshore developments did not go forward in fiscal year 2023, resulting in low demand for our active group solution. This has impacted our rental revenues. Rentals are an important sector of our business and revenues in this sector fell by 31.4%. Contrary to our business plan goal. In addition, the unleashing of the pent-up demand following the removal of COVID winter restrictions in China, which we and many industry peers had anticipated may not occur in the fiscal year 2023. This has impacted on our theme from Asia, a strategic market for us. Sales from Asia fell by 19.5% as our customers in that region. We're also affected by the combination of weak demand from China and higher interest rate inflation and supply chain issues. These macro factors resulted in many underwater construction projects slowing down or being postponed due to the combination of these factors revenue in fiscal 2023 in the Marine Technology business sales by 17.7%, it was approximately $12.1 million compared to 14.7 in the previous fiscal year. Our engineering services business also did not meet its business plan goal in fiscal year 2023, because all the peak was impacted by the war in Ukraine, conflict has caused our defense customers' priorities a shift to land based application with less focus on Maple based solution, the area of relevance for our business. Despite these broader headwinds, we made good progress in advancing adapted on tablet system customization program and also had strong business development and marketing campaigns throughout fiscal year 2023 around our growth pillars. We therefore believe we are well positioned once these macro economic factors are removed for those who are new to CODA.
At this time, I would like to provide an overview of our business. We have two discrete business operation. Our Marine Technology business. I sometimes refer to as product business and our engineering services business. Our Marine Technology business supplied proprietary hardware and software solutions is that on towards the market we have a global base of commercial and defense customers, including offshore MAJOR underwater construction company, Navy and defense, 40 for research bodies and diving company. We have three key technologies that we consider critical, but the acceleration of our growth and which we definitely see as our growth pillars.
I will summarize these briefly. It is called imaging sonar. Our theme is of real-time 3D imaging sonar. The scope is a single sensor or multiple on the water application. This is the only imaging sonar that can generate a real-time 3D image of moving objects, interior visibility conditions underwater. This sensor is protected by patents, and it's the tool of choice for a wide range of underwater applications relating to underwater inspection and monitoring of infrastructure, salvage dredging placements and landing on the seabed and ROV navigation in the repeatability condition. In 2021, we launched our new generation of imaging sonar, Ettrick to pay pipe fee rate is far superior to our previous generation of sonar. It brings much more capability to the subsea market, including the ability to image multiple 3D images. Concurrently, you've seen different interesting images such as frequency field of view range and filters. This allows customers to consolidate their sensor requirements and reduce costs. Competing technologies such as the multi-beam is designed at the seabed mapping tool and not for real-time infection monitoring and placement of objects underwater, including in the repeatability condition. Our technology allows customers to make real-time decisions on the phone that's reducing overhead associated with their underwater projects.
Our next key technology is the data augmented this vision display system or DAB that debit was developed by us in conjunction with the U.S. Navy and Naval Warfare Center Panama City to remain active in the program of certification of Adabas, the road map for the evolution of the debit technology and the future requirement. But damage has the potential to radically change how dieting is performed globally, both in the defense and commercial space. Conventional diving operations are run by voice instructions on the top cited a typo on the water without the ability to provide the data with real time installation for the execution of its diving cost. But that brings a new level of capability to the guided market by providing a real-time information platform, which is fully available to the diaper on the water, the jab, it allows the diaper and the supervisor to, if you like, same on the waters team and to buy that diaper on demand have a range of real-time information such as drawings, photograph, imaging information on remain important time and debt. Furthermore, by pairing the debit system with our access to technology, it enables guiding to be performed in fear of visibility, water conditions, accreditation, which prevents many diving operation from taking place based on the requirements of the U.S. Navy. In the fiscal year 2023, we have completed the development of a digital audio communication system, voice hub four, which offers the market a digital audio communication system, incorporating AI features such as pitch correction, voice signatures and noise removal. This technology moves the market from analog audio communication to a much higher quality digital audience solution. We believe the addressable market for this digital audio communication solution is sizable, and we are excited to be the first mover in this space within our group.
We also have our engineering business segment. This business operates as a subcontractor, two prime defense contractors and design and supplies subassembly for integration into broader mission critical programs, which are led by beef price. It gave the engineering services business, the opportunity to have repeat sole-source orders from these subassemblies for the life of these programs.
The engineering piece, this is important for our group as it has a strong pedigree in defense engineering with stellar relationships with prime defense contractors spanning decades, and it is a critical partner for the group's underwater innovation.
Despite a disappointing fiscal 2023 caused by macro economic factors, which affected key strategic sectors for our business, we continue to believe in our StratiPHY for accelerating growth. We also believe we made key operational progress around our growth pillars in fiscal year 2023. This is simply recap some of these we had good mission results from a number of underwater vehicle programs which are ongoing with Triumph defense contractors. These customers are evaluating the exit school type or inclusion in their new generation of underwater vehicles. This is a key part of our strategy to grow our revenue and realize a multiple recurring fee profile from these programs. Moreover, based on the success with the assets to pipe, a number of these customers are expanding its use into other adjacent programs. This type of cross-selling is another important access point into multiple programs for our technology. We also had good mission results from two successive trials with naval Information Warfare Center NIWeek on the theory Defender as they seek to finalize their sensor package for this class of vehicles. We are continuing to work with NIWeek as they progress the selection of TheraSense, the package we continued to showcase that David and made progress towards adoption of the Teva variants outside of the US may be into both the commercial diving sector and foreign navies in fiscal 2023, we had a number of trials and evaluation of the debit solution, which is down to discussions on adoption with a number of customers, including offshore service providers and to foreign navies. We continue to anticipate decisions on these in fiscal year 2024. We continued to advance the debit on tablet customization program with our customers and happy deliberate evaluation modified on a static system, which our end customers are currently evaluating. This evaluation includes a number of stages which extends to certification. We has been and suitability assessments for defense applications during fiscal 2023, we receive $750,000 on today's program and expect a further $1.25 million in fiscal year 2024 big variant, which addresses the defense and military market such as special forces, is the biggest market opportunity for the database and will continue to support the valuation.
Yes, we completed the development of a new digital audio communication system voice hub for which moves the market from analog audio communication, fix them to a higher quality digital audio capability. It is now in evaluation by the U.S. Navy and a number of other customers.
Furthermore, although the marine industry continued to be affected by macro economic factors, it's come earlier in our first quarter of fiscal 2024, we are seeing signs of increased demand for our rental solutions.
Finally, before we discuss our fiscal year 2023 financial performance in greater detail, I want to welcome our new CFO, John fries. We joined Codell on November 22nd. Jonathan recently served as CFO of NASDAQ-listed assurance Holdings Corp bring the seasoned background in corporate finance and accounting, M&A skills and technology experience.
Let me now turn the call over to John to take you through our financials before I provide my closing remarks.
John Price
Thank you, Marie, and good morning, everyone. Before I take you through the fiscal year 2023 results, I just wanted to say that I'm very pleased to have joined the Company and excited to be onboard to work with you and the company to drive our management goals and prospects forward to the next level of performance.
Let me take you through our full year 2023 financial results.
Starting with revenue. In fiscal year 2023, we recorded total revenue of $19.4 million compared to $22.2 million in the fiscal year 2022, a reduction of 12.9%. The Marine Technology business generated revenue of $12.1 million compared to $14.7 million a 17.7% decrease from the prior fiscal year 2022. As reported earlier by Emory, this decline in our consolidated revenue was a result of weak demand from strategic markets and geographies such as Asia for outright sale in Europe for rentals, particularly in the offshore renewables sector.
Our UK service arm was also affected by delays in receiving key orders due to our customers' focus being on land-based defense applications to support the Ukraine efforts and not the Naval Base applications that apply to our business.
Moving on to gross profit and margin in fiscal year 2023, we generated gross profit of 13.0 million compared to $15.2 million in fiscal year 2022. Gross margin was 67.3% versus 68.3% in the fiscal year 2022. In our Marine Technology business or products business gross margin fell to 76.7% in fiscal year 2023 compared to 80% in 2022, reflecting changes in the mix of sales and higher commission costs in the period. Our marine engineering business, gross margin increased to 51.6% in fiscal year 2023 versus 45.4% in 2022, again, reflecting the mix in sales.
Now moving on to operating expenses, total operating expenses for fiscal 2023 rose slightly to $10.3 million compared to $10.2 million in fiscal year 2022. Sg&a remain below our targeted internal budget, largely related to reduction in staff headcounts in targeted new hire positions remaining unfilled. Our selling, general and administrative costs in fiscal year 2023 total $8.2 million, an increase of 3.1% over fiscal 2020 to $7.9 million as a percentage of revenue our selling, general and administrative costs for the fiscal year 2023 was 42.3% of total revenue compared to 35.8% in the fiscal year 2022.
Looking forward on our cost structure, given the significant progress we have made in R&D in the last four years, we remain focused on aligning a significant portion of our resources and strategy from research and development to global business development, brand-building and Investor Relations. We expect SG&A to increase on a full year basis as we hire new staff and expand our management team. We believe that we've 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.
Operating income in fiscal year 2023 was $2.7 million compared to $5.0 million in fiscal year 2022, a reduction of 45.3%. Operating margin was 14.2% compared to 22.5% in the fiscal year 2022, driven by the change in revenues. As explained previously, net income before taxes in fiscal year 2023 was $3.4 million compared to $5.1 million in fiscal year 2022 net income after taxes. In our fiscal year 2023, it was $3.1 million or $0.28 per diluted share compared to $4.3 million or $0.38 per diluted share in the fiscal year 2022.
Moving now to our balance sheet. As of October 31, 2023, we had $24.4 million in cash and cash equivalents on hand and no debt. This represents an increase of $1.5 million for fiscal year 2022, where the comparable figure was $22.9 million.
That completes my financial summary. So I look forward to working with our management team to accelerate our growth plans. In addition to my core financial duties. I will be looking at acquisitions and investor relations is a priority for us.
Now I will turn the call back over to Enrique for closing remarks.
Annmarie Gayle
Thank you, Joe. And in closing, I would like to reiterate that we have a demonstrated track record over many years of running a solid, profitable business. We have a strong balance sheet. We continued to believe in our growth strategy and also our results were disappointing for the Factive discounts. We are confident that we are making progress to accelerate growth through increased adoption of our technology in pivotal markets. We are pleased with the progress we're making in increasing the number of underwater vehicle programs, which are including the afterschool type progress in making a comprehensive solution for ship house counting and mapping a sizable global market opportunity. If our solution is effective for the problem to be solved progress in achieving adoption of the DAB, a tethered system outside of the US Navy, and we believe we will have adult adopted in fiscal year 2024, progress in advancing at various stages of the database on tablet system customization program the biggest market opportunity for the debit solution progress in adding a new exciting growth pillar, our digital audio communication system. We continue to build our growth strategy around our after-school pipe imaging, sonar, C-BASS, our debit and derivative of our debit technology. In addition, in fiscal year 2024, we will expand our growth strategy to include M&A activities with a goal of acquiring complementary value accretive technologies into our portfolio.
In relation to our growth pillars, some markets that are pivotal for the marine technology is this growth acceleration program. Our underwater imaging center market, 10 underwater vehicles, markets, offshore renewables, underwater construction, ship house scanning and mapping guiding solutions market, including the die being sent to the market. We will focus our efforts on business development in these areas in fiscal year 2024.
To conclude, we just we would like to thank our shareholders for their continued support and reassure them that management understands that it is business imperative, the acceleration of growth, and we remain steadfast on achieving pace for our shareholders.
We're now happy to take your questions. Operator?
Question and Answer Session
Operator
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line miss in the question queue, you may press star two. If you would like to remove your question from the queue For participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Our first question is from Brian Kinstlinger with Alliance Global Partners.
Please proceed.
Brian Kinstlinger
Great things, high memory. And so interest rates, inflation and supply chain have been challenges for a good long time and to all markets revenue for marine products during the fourth quarter, your core business was abnormally low compared to last several quarters. So I guess I guess I'm curious what you think was different about this quarter than the previous several quarters that caused such a shortfall?
Annmarie Gayle
And thank you, Brian. Well, it's all the things that we have south and stage really out our revenues are predicated on certain projects going forward. So underwater construction, really key markets offshore renewables, the key markets for us, what we saw is either projects being really postponed or being shopped in key markets. So overall, order intake was down in the fourth quarter and that continued throughout the year. I think we're having significant delays because the projects are still under discussion Brian, but then eventually get postponed.
And it's all because of the expenses. I mean, if you look at the key numbers coming out of offshore renewables, when a contract prices negotiated the contractors were offering $108 for the electric electricity. Now for that to be viable, they need $178. And this is all because of inflation and just on higher interest rates. So does that result likely to impact on the business and have impacted on our business in the periods?
Brian Kinstlinger
Quick follow-up on that is it getting worse because if you look at the trend know your peak was the January quarter when it went down a little bit in the April quarter, but it went down precipitously in the July and even much more shown in October. So is it that you had projects in the beginning of the year and when they complete, you don't have a replacement? Or is it actually getting worse the or the order intake?
Annmarie Gayle
Well, as we said in the fourth quarter, what we saw a lot of projects totally literally stalling and didn't go forward for the reasons we have discussed. So exiting this year was exceptional. And I really think that offshore renewables and energy market generally were impacted by four factors we discussed earlier. So order intake was much lower for the Marine Technology business.
Brian Kinstlinger
So based on the conversations you're having with at your customers, how how are renegotiations of economic slowing? And you see a rebound in demand in sight? Or is there too much uncertainty in the near term?
Annmarie Gayle
Well, what we're seeing in the first quarter, we're seeing sort of increase inquiries for rentals and contracting for rentals. We have a number of rental projects that are ongoing on several projects in the Middle East, around undersea cables and the breakwater also in Taiwan where we are involved in offshore renewables in three different projects there. And again, in Europe, I'm involved in a number of projects, rental projects around cable repair and offshore cable placement in the Baltics, Baltic Sea. So we're certainly seeing much more inquiries, for example, and also getting some orders around rentals, which is crucial for our business. So and there are positive signs but I think, for example, offshore renewable sector, there's still renegotiating price resets and and I have no visibility on when those contracts will be completed. But those are critical projects for our business.
Great.
Brian Kinstlinger
And lastly, you highlighted in your M&A strategy, where are you in the evaluation of targets is at the very early stages with your newest hire? Obviously, your new CFO.
Congratulations. Are you in advanced stages?
Annmarie Gayle
Just maybe take us through where you are in this journey and it's no, we've really just at the really outset of our strategy. We of course, we always have targets in mind, but we have no ongoing discussions target.
Brian Kinstlinger
Okay. Thank you very much.
Annmarie Gayle
Thank you, Brian.
Operator
Our next question is from Walter Ramsley with Walrus Partners.
Walter Ramsley
Excuse me. The question is for John. In the October quarter, the equity on the books, you have declined by $1.4 million was that due to some write-offs or some adjustment.
Annmarie Gayle
John Emrich here. Sorry, I can tell you, I didn't hear your question.
John Price
Can you repeat them?
Walter Ramsley
Sure. The shareholder equity declined by $1.4 million in the October quarter. Was that caused at least in part by some write-offs or adjustments to the reserve accounts and no, that's not no, it's primarily going to be related to the impact from the P&L.
John Price
And we also have stock-based compensation that rolls through our equity statement on a quarter to quarter basis.
Walter Ramsley
Okay, thank you. And then just one other question on the R & D, I think you indicated that that the amount of money spending is going to decline. So I get that part is the R&D tax credit. Is that going to be affected in the upcoming year?
I'm not sure what the situation is with the federal tax code there.
Annmarie Gayle
So I wanted just on the R&T, I just to be careful about the Cline. I think that what we're seeing we're keeping a lid on R & D expenses. So they'll probably be in line with our previous years meaning we're not investing more over and above our run rate on R & D R & D is a permanent feature of our business because we are a solutions business. So in order to maintain our lead also to support our customers using our technology in the field. It's an ongoing. So we think R&D will be in line with previous years and that's the biggest statement we're making about R&D, not that we expect it to fall, but just wanted to clarify that.
Okay. And the R&D credit that is part of the U.S. tax code, is that going to change or is that going to be the same R&D credits that we have are in relation to our foreign entity, our Scottish business and not our US businesses actually now I say.
Walter Ramsley
Okay, well, thanks again, I appreciate your answering the questions.
Annmarie Gayle
So thank you, Walter. Thank you very much.
Operator
As a reminder, this star one on your telephone keypad. If you would like to ask a question.
Our next question is from Fernando Kinta, private investor.
Annmarie Gayle
Please proceed.
Fernando Kinta
Morning, everybody. I think in relation to the previous question, the results in the midst of all that equity, I think it was due to the loss that the Company had in there and the first quarter right now.
John Price
The other element to think about here is the FX rates. And so we've seen that the FX actually positive over the course of year 23. There's but there's really no write-offs of inventory or accounts receivable that runs through equity.
Fernando Kinta
That is going to be a component of overall net income line, but trial by age on the Junos ammonia on the first quarter, no there were no material write-offs over the course of the year. And again, now I'm hearing that you have a you have about $24 million worth of cash and the stock is getting very close to the book value of you considering buying some shares in the market now that is getting so close to the book value.
Annmarie Gayle
And can I say that I'm trying to understand. I mean, as you know, we do have to stop a liquidity problem. So buying back shares and the market will be very, very problematic for our liquidity profile. We are always discussing different options for, you know, returning value to shareholders, but you know, and that's one of the things we discuss on an ongoing basis with our Board. But I do believe that there's a fundamental problem with a share buyback program because it takes out further on stock out of the market, which is already seemingly treated because of the on its scalability of stock in the markets are right now, we all knew almost completed the first quarter.
Fernando Kinta
How does the first quarter looks looks like?
Annmarie Gayle
Well, you know, I think, Fernando, thanks for that question. Again. As I said, one of the areas where we were here last year, we saw weak demand in key strategic markets such as offshore renewables. What I have just said that in the first quarter, we saw increased contracting. That means order key also the number of projects, rental projects that are ongoing. We've seen an increase in those. So on are very, very positive signs, and I hope we can sustain those signs throughout the year. So I think I see rentals in the core market and let me repeat what they are offshore renewables and on the water construction, we're really seeing good traction there at the moment on to other things that are not contracted, but really which I think is exciting for our business. For example, we have one major offshore service provider who is developing an island in the Middle East. On that project alone, we are quoting six active goods outright sale with ongoing support. That is a first it in the commercial market. The profile I've seen is typically a maximum of two systems. So we haven't gotten the order yet, but I'm seeing I think we have some good, exciting conversations we see on the water construction coming coming back. We see some rentals ongoing. We also one of the things I am personally excited about, and I know it's taken longer than we all wanted, but happening adoption of the DAB it outside of the U.S. Navy. And I have a high level of confidence in from 2024. We will see this last year what we did. We had a significant business development activities, lots of one to one trials. All of those trials were successful. It's now a process for these customers to think about how they're going to adopt adapt, getting their own infrastructure ready would adapt some of the problems there with a customers not having a digital interface to talk to our solution. So they're working on the assets slower than we wanted. But I have a high level of confidence that we will see adoption for the debit solution outside of the US Navy into the commercial field and also with foreign navies.
And another thing that I really want to emphasize on the biggest market opportunity for the debit system. It's the customization program that we have with the U.S. Navy. But no, this is not just the U.S. Navy. That's funding the customization program, major NATO country. This is the first time we've had a joint joints on funding for the DAS, and that's a good indication that we're talking about adoption outside of the U.S. Navy. We also know that the US Navy is also dialed into Adap and with foreign navies, when they do some of their on their trials that they themselves when they work together with the foreign navies are coming and showing to diving assistance. So we're really optimistic about, um, you know, having adoption for the David in in fiscal 2024. So I'm generally still very, very excited about the prospects for our business and our growth strategy around our key pillars when I bought another was what we can expect the first quarter to be more or less similar to the first quarter of last year.
Right? And then going forward, we will see some light at the end of Well I'd like to correct what I said that I saw really good side of rentals rebounding in the first quarter and we've got ongoing projects on rental. So I do know where we will be in relation to the previous first quarter from so I have not commented on that.
Fernando Kinta
Thank you very much and very well.
Operator
Since our next question is from Richard Davis with standard securities.
Annmarie Gayle
Please proceed.
Richard Davis
Yes, thank you for taking my call. You got such a day long-term development program. There's a lot to look at. But my first question would be what is left to do to commercialize the untethered system? And if the untethered system is commercialized, is there any reason for anybody to still use that tethered system?
I'd like to differentiate between the two. Thank you.
Annmarie Gayle
Okay. Thanks for that question as well. The way to think about the customization work that is ongoing, it's more a workflow process than anything. Else. So the work flow for it die for who is, let's call it a Special Force title who is doing something sales operation, the modus operandi or the workflow for that guide die being setup is completely different from the surface diving, which is the catalyst system where you are on and you've got a topside involved in the equation. So the on Cabot's system, it's really about for a different workflow. Then we have to get that the product certified for that particular application, which is on going. So it's not I wouldn't think about it as commercialization. The product is taking our base product and then customizing that for their particular application. And really that's what the program and then also what they call hardening So when the die the system, they've got eight systems and they're diving deep in Angola. And when they died and they might come back to us and say, we don't think the IR lights were effective here. Can you look at a different IRR life because we couldn't see that. So these are the things that we are. You know, they're diving coming back with feedback and then we are making changes based on their experience. So the expectation is that once they come to the end of that evaluation process because we are working hand-in-hand with the with them. We would expect by that time, all of the things they want to see are done and then and they can move on to production systems. So that's that process. And as I said, the untethered system is all about a different type of diving where you have a topside involved.
Okay.
Richard Davis
So is the untethered system then basically completed in terms of its capabilities and you're just going through, as you said, the hardening and the is certifications or is there still more a technical work to be done before it is ready for commercialization, it's largely done.
Annmarie Gayle
But for the three D data side, which is also new for that market, then there are certain hardware developments for its processing books more than anything else to do with the data communication and transfer that there's a part of that development. But we are well along the way with that. I would say that in terms of the on the products, and it's almost fully formed, but we still have about 5% to 6% development work. And as I said, a piggyback program. So we would expect in this year to complete all of the requirements for that market.
And finally, on that sector, what is the range of the untethered system, the well that you can have the depth rating for the system is 330 feet on 100 meters for the catheter system. So the untethered is 100 meters, 100 meters or 330 feet.
Richard Davis
Okay. Okay. Thank you. Thank you very much.
You're welcome.
Operator
Our final question is from William Bremer with Vanquish Capital Partners. Please proceed.
William Bremer
Good morning, Anne-Marie and welcome, John.
Annmarie Gayle
Good morning, Richard.
John Price
Morning, Andrew.
William Bremer
You spoke a lot about the technologies, international activity. What is currently happening here in the North American market?
Annmarie Gayle
Well, if you look at on the on our gross business, really the biggest. And if you look at our revenues also you will see actually our revenues from North America for equipment fees was higher and just finally then on Europe, actually. So what's happening in North America, it's mainly the defense underwater vehicle programs that we have there. So it's a lot of the applications that we have in North America, it's around underwater vehicles and of course, the debit solution, any activity within the infrastructure market of North America, Las Vegas seeing I mean, in terms of infrastructure, if you call me, cables on the seabed, et cetera. We have quite a lot of ongoing business activities.
No Make no mistake.
And when the offshore renewable markets, I mean the US has the biggest budget for energy transition. And some of that is going to get spent when that all happens to extra scope is at the center of that because the Europeans are coming to the U.S. with. They're the ones with the experience and they all have used the excess scope on their projects in Europe without exception. So we see a high level of confidence in the that the offshore renewable markets in North America is significant for the business and also planned within our growth strategy. We also have and in fact, one US operator, who is on the contract and I cannot name that operator on in the last quarter, they bought solutions for that market from us. And you know, they are now since they're already aware that our solution is key for offshore renewals and and our new renewables and they are investing in the technology. So I see very much that's a very big market for us. We do need to see the contractual hurdles that the Europeans have removed. And I think you're negotiating fees. And we know that there are ongoing discussions on price resets, but I feel definitely excited about once those barriers are removed, the excess scope is really at the heart of those operations infrastructure. So anything on the water Make no mistake, anything on the water that involves placing something on the seabed, removing something from the seabed navigating from point A. to point B, that is the eco score. That is the eco school and it's the eco scoop We in-house. So I feel very much that we have quite a lot of opportunities. They just need to, as I see some of the macro factors need to we will move or normalize for us to move forward.
William Bremer
Okay. I understand. I hope that some with the increase of SG&A that some competent sales personnel, we'll be hired for these markets given our infrastructure bill, given the amount of overages that are needed in your technology would be well from here on, I just don't see any tangibility on that front as of yet.
My final question is on the Navy and you have articulated much of the technology. When are we going to start to see appointment of your technologies within a contract that portfolio managers like myself can get our hands on and start to really understand the magnitude of these contracts with the Navy and its allies.
Annmarie Gayle
I'm not sure I followed that question. When you say when are we going to see, could you be a little bit clearer? Sorry, Bill, I didn't know.
Fernando Kinta
I mean the reason why I'm expecting, I think many of us have been for years, ARM had been expecting a deployment of your underlying technologies on to the U.S. Navy Plexur. I'm just wondering when we'll be able to understand which platforms they're on and more importantly, the longevity of those programs?
Annmarie Gayle
Well, as soon as we are awarded one of the programs we're talking about, Bill, if I take about talk about, for example, our ship and ship post scanning comprehensive solution. That's a multi-year program that we started four years ago, four years ago from the feasibility to the prototype concept to on Finally on developing the platform for ship, how scanning we've delivered that now, that's a sizable opportunity for the business, and that runs all for a number of years. So evaluation under these programs can take up to four or five years. And some of the programs we're on are more mature than others, but I think we're making good progress. For example, this year, although we still haven't received an order this year, for example, a Japanese program that we've been working on for four years now and the Japanese program was launched and the eco score type SE500 is a part of that program. So that now I understand that that vehicle is now being assessed and I see it with the end customer. So that's how it all evolves. I know it takes time, but it's an area that we cannot afford not to invest in heavily because this is the opportunity for multiple recurring sales for our business. So I think we're doing the right things on doing the front end for us to go out and get on these programs to ensure at least that we have contended that the first thing I know about the program become contenders support the program, and we're doing a lot of that. But that takes time, Bill, it is a either and that's really where we will see the reward to grow the commercial market.
The profile of sale there, Bill is one seen in a project. I just talked about and Ireland being built. If we get that order for DI systems, then that's exceptional in the commercial market because when there's a project in terms of buying systems, the maximum system will be a two systems and that can be a sizable that would be around $700,000. But still the point is that the opportunity to get multiples of fee and recurring fees comes from these programs, Ship Power scanning program, Sumit detection vehicles might countermeasure critical asset management. These are all the programs that we are on and also don't forget spill over the years. Also, 30 ports in the U.S. carry our underwater inspection system, including New York, including California, you know, New Orleans, all of these at one time or another invested in our underwater inspection system for if the president is coming in is the Echo that's used to treat the port. So you know what I think we're making good progress in the areas where for our growth strategy and you know it, it takes time, but I see it as some of the programs are maturing.
Fernando Kinta
I understand and I appreciate the granularity. Unfortunately, many of us don't know any of these programs. I mean, it would be helpful if yourself the Board considers when you are on these programs. So let us know about so we can track them to give a sense of sometimes they are one-time events like the precedent and coming in that you mentioned, but other times, they're not onetime events. They have annuities and multi years, and we understand that we're in the dark here and it's very difficult to track this company and it's as initiatives.
And also I thank you and thank you for your time today, but I do hope that the Board considers being a little more flexible, a little more friendly to allow communication to its shareholders through the capital markets because as of right now, stock is down 15% today, year to date, it's been underperforming for the last few years has been underperforming. Things have to change and Marie, they really do you have a stellar balance sheet. Now you get a real CFO. I welcome, John. I can't wait to meet him and speak with him, but things in the communication and capital markets need to change and the Board needs to get a little more active for a lot of reasons. And I would love as another investor echoed love to see some insider purchases Form fours, just like the rest of us have used after-tax dollars to invest in your company through the years. I thank you for your time.
Annmarie Gayle
Thank you, Bill, and thank you.
Operator
This will conclude our question-and-answer session. I would like to turn the call back over to Annemarie Yang for closing comments.
Annmarie Gayle
Yes. Thank you for on joining Kodak today, and thank you for your interest.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
