Volatus Aerospace Corp. (VOL:TSX; VLTTF:OTCQB) is a small, little-known player that could make a big impact in the burgeoning but rapidly growing multi-billion dollar commercial drone market.
Volatus is one of several players looking to carve a piece out of the global drone market expected to approach US$50 billion in annual revenues in the next seven years.
Earlier this month, the Canadian-based company, which serves the commercial and defense markets with integrated drone solutions, reported record revenue of CA$11.12 million, up 68% over the previous quarter and a 238% jump from the same period a year ago.
Building Revenue
Volatus is building revenue from sales of drone equipment, drones-as-a-service, training services, and crewed aircraft sales and services. The recent jump in revenue was driven by organic growth, scale in drone activities, and an increase in aviation revenue.
Global revenue from drones was valued at US$6.51 billion last year, expected to reach US$8.15 billion this year and jump to US$47.38 billion by 2029, according to a report by Fortune Business Insights.
The war in Ukraine has created a need for drones that will continue long after the conflict has ended, said Volatus Chief Executive Officer Glen Lynch during a conference call about the company's earnings results earlier this month.
"Drones will have a major role to play in the reconstruction . . . of the country," Lynch said. "The conflict in Ukraine literally changed the way countries around the world are looking at the use of drones and modern warfare. So, we're responding to numerous opportunities right now for sales in NATO countries that are not currently engaged in fighting directly in the conflict in Ukraine; we're looking at a fairly robust future for drones in the defense sector."
Volatus provides the commercial and defense markets with integrated drone solutions. It uses a network of more than 1,200 contract pilots across the Americas, providing imaging and security, equipment sales, and support and training.
The company is also providing aerial surveillance and monitoring of oil and gas pipelines, a market Volatus executives believe is valued at US$58.4 billion.
Catalyst: Two New Acquisitions
Volatus may have taken another step toward cornering the market for monitoring the oil and gas pipeline market with its recent acquisition of Synergy Aviation. The company believes Synergy, based in Edmonton, Alberta, will strengthen its position to provide green drone technologies for oil and gas infrastructure monitoring as an alternative to less environmentally friendly helicopters and airplanes.
Volatus also completed an acquisition of iRed Remote Sensing of Emsworth, England, to reinforce the company's ability in infrared inspection while expanding its presence in the UK and Europe.
Today, November 28, 2022, Volatus announced another acquisition, signing to annex Syracuse-based Empire Drone Company LLC. This company is known as one of North America's burgeoning distributors and integrators for unmanned aerial systems. Empire Drone’s projected 2022 revenue is CA$2.5M with a 6% EBITDA margin.
With this acquisition, Volatus will purchase 100% of the company for a cash consideration of US$300,000, and equity of US$350,000 with a minimum floor price of $0.65. This includes, according to the company, "an earn-out of US$350,000 paid in equity after one year anniversary based on the 30-day volume weighted average price (VWAP) with a minimum floor price of US$0.65 per share and assume the long-term debt of US$225,000."
Volatus Taking Off With Drone Sector
Global revenue from drones was valued at US$6.51 billion last year, expected to reach US$8.15 billion this year and jump to US$47.38 billion by 2029, according to a report by Fortune Business Insights.
While the report says drones will likely have several commercial applications, including medical emergency transportation, and filming and photography, it also concluded that a "rise in demand for unmanned systems in the oil and gas, energy, and power generation sector is likely to fuel market growth in the upcoming years."
"I believe it's only a matter of time before it eventually hits US$5.00," Volatus Investor Edward Vranic wrote.
In addition to its third-quarter record revenue growth, Volatus also reported a gross profit of CA$3.3 million, up from CA$2.6 million in the year-ago period. The company also reported a gross margin of 30%, an increase of 127 basis points over its second quarter of this year.
Volatus says its recent acquisitions of Synergy and iRed provide approximately US$7.5 million in proforma revenue and US$1 million in proforma EBITDA for the first nine months, boosting the company's revenue to US$30 million with a proforma EBITDA of US$1.63 million for the same three quarters.
Volatus is also working to improve Beyond Visual Line of Sight (BVLOS), a technology that helps drone operators avoid collisions with other aircraft when their drones are out of visual range. Volatus is currently trading at US$0.30. But the company's stock could see a dramatic rise as it continues to grow aggressively in multiple areas in the drone sector, wrote Edward Vranic, a Volatus investor, in his Canadian small-cap investment blog on Oct. 31.
"I believe it's only a matter of time before it eventually hits US$5.00," he wrote. "With that stock price increase coming from a mix of continued revenue growth, an ability to achieve cash flow positive operations within two years, and improved market sentiment leading to more aggressive valuation multiples. VOL is a thinly traded stock, and it won't take much to send it into rocket ship emoji mode."
Ownership and Share Structure
Top shareholders in the company include CEO Lynch with 26.62% or 38.46 million shares and Chairman of The Board of Directors and Hauge Court advisory member Ian Alexander McDougall with 27% or 39 million shares, according to the company.
It has a market cap of CA$36.18 million with 113.9 million shares outstanding, 36 million of them free-floating. It trades in a 52-week range of CA$0.89 and CA$0.23.
Disclosures:
1) Pete Barlas wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None.
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