Australian Anti-drone Defense Firm Expands US Footprint

DroneShield Ltd. (DRO:ASX; DRSHF:OTC), based in Sydney, New South Wales, Australia, is an anti-drone defense company dedicated to building technologies that protect people, vehicles, and installations from unmanned aerial threats.

Founded in 2014, the firm has developed many different anti-drone technologies over the past decade, including radio frequency sensing, artificial intelligence and machine learning, sensor fusion, electronic warfare countermeasures, rapid prototyping, and MIL-SPEC manufacturing.

The company provides both bespoke counter-drone and electronic warfare solutions and off-the-shelf products designed to suit a variety of terrestrial, maritime, and airborne platforms. These products include DroneGun Tactical, DroneGun Mk4, DroneSentry, DroneSentry-C2, DroneSentry-X, and RfPatrol.

The DroneGun Tactical is a man-portable countermeasure designed for the long-range defeat of drone threats across the operational spectrum. It was notably used to protect Brazil's recent presidential election.

The Catalyst: US Footprint Expansion

On June 20, the company revealed that it was "excited to announce the expansion of its U.S. operations, including the expansion of its U.S. headquarters in Northern Virginia and the addition of top talent to its team."

The release states that "This strategic move comes as a direct response to the remarkable success and heightened demand for DroneShield's advanced Counter-UAS solutions across the United States."

According to a March 27 report from analytics firm Visiongain, "The global anti-drone market was valued at US$614 million in 2022 and is projected to grow at a CAGR of 20.1% during the forecast period 2023-2033."

"With a proven track record of delivering advanced multi-mission Counter-UAS solutions, DroneShield has rapidly emerged as the trusted partner for U.S. government and organizations seeking to protect their personnel, facilities, and critical assets from unauthorized drone activities. This expansion represents a significant milestone for the company's growth trajectory,
further solidifying its commitment to providing unmatched protection and advancing the drone security industry."

Tom Branstetter, DroneShield's Director of Business Development, explained that "The strategic expansion of our U.S. headquarters underscores our position as a key leader in the C-UAS space and allows us to continue to increase our North American presence, which enables the company to penetrate new markets and extend our solutions to a broader audience."

The firm's U.S. headquarters, located in Fauquier County, VA, will serve as the company's central hub for expanded operations, enabling close collaboration with its growing customer base of integrators and end users across the government and the Defense Industrial Base.

Why This Sector? Drones are Reshaping Warfare

According to a March 27 report from analytics firm Visiongain, "The global anti-drone market was valued at US$614 million in 2022 and is projected to grow at a CAGR of 20.1% during the forecast period 2023-2033."

Such rapid growth makes sense once one looks at the figures for drone acquisitions. For example, MarketWatch recently projected that the global market for military drones would "reach US$19,002.47 million by 2031 from US$10,193.83 Million in 2022 at a robust CAGR of 7.49% during the forecast period."

In January, the company announced a new AU$11 million contract, causing Bell Potter to raise its target price by two cents to AU$0.34 per share. 

The same report explained that "The top 5 countries that are expected to invest heavily in military drones in the coming years are the United States, China, Russia, Israel, and the United Kingdom. The United States is expected to lead the market."

"The U.S. Department of Defense has planned to acquire more than 1,000 drones by 2025 [and] has allocated a budget of US$7.7 billion for drones in 2021. Globally Over 3,427 Units of Military Drones Sold in 2022."

Vantage Market Research projects that the "Global Military Drone Market is valued at US$14.51 billion in 2023 and is projected to reach a value of US$34.91 billion by 2030 at a CAGR of 11.60% over the forecast period."

Why This Company? A Decade of Development

DroneShield is at a very important point along its maturation journey. With its main line of products already fleshed out, functional, and scaled for production, it is securing new contracts at a respectable cadence.

In January, the company announced a new AU$11 million contract, causing Bell Potter to raise its target price by two cents to AU$0.34 per share. Bell Potter Analyst Daniel Laing explained in a January 9 research note that "this contract is from a completely different customer to the December 22 order, demonstrating significant demand for the company's products from a variety of sources."

"We have increased our DroneShield valuation to AU$1 (from AU$0.30) based on increased confidence on the closure [of] larger contracts in 2023 and beyond," Peloton Capital analyst Darren Odell wrote. "DroneShield has undertaken material groundwork over the last four years and has finally reached its tipping point."

The previous order mentioned was also for AU$11 million. With those two contracts alone, DroneShield had secured AU$16.5M in contracted revenue for 2023, 62% of Bell Potter's AU$26.5M revenue estimate for the entire year.

The next month brought further good news for the corporation, with Peloton Capital analyst Darren Odell issuing a February 13 research note considerably raising his firm's target price for DroneShield Limited stock.

"We have increased our DroneShield valuation to AU$1 (from AU$0.30) based on increased confidence on the closure [of] larger contracts in 2023 and beyond," Odell wrote. "DroneShield has undertaken material groundwork over the last four years and has finally reached its tipping point."

In addition to the two recently-closed contracts, the company has a sales pipeline of about AU$200 million comprising roughly 20 AU$10M contracts, Odell explained.

"With its footprint in Five Eyes countries, it is reasonable to assume that certain existing contracted customers are likely to grow their DroneShield product base in time," Odell explained, and so Peloton expects DroneShield to seal three larger and several smaller deals — potentially more — as the year progresses.

Why now? Poised for Expansion

As Matt McCrann, DroneShield's U.S. CEO, explains, "DroneShield's expansion in the U.S. emphasizes our commitment to our government and commercial partners as they face increasing threats from advanced unmanned systems while operating both home and abroad."

As Technical Analyst Clive Maund expressed on March 12, "Having reacted back to the price at which major funding was undertaken (which is believed to have been oversubscribed) at AU$0.30, DroneShield is in a position to advance anew. 

"We're thrilled to continue scaling right here in Virginia and strengthening our team's ability to develop and deliver impactful solutions that provide our partners with distinct advantages and increase their mission effectiveness."

To meet the increasing demand for its solutions and maintain its high standards of service, DroneShield has been strategically growing its team with professionals experienced in UAS, sensors, and security technologies for government and enterprise applications.

DroneShield's growth in the U.S. market aligns with its vision of becoming the global leader in multi-mission, counter-drone solutions.  

As Technical Analyst Clive Maund expressed on March 12, "Having reacted back to the price at which major funding was undertaken (which is believed to have been oversubscribed) at AU$0.30, DroneShield is in a position to advance anew. The funding will enable the company to deliver on the large orders it has recently received. Therefore regarded as a Strong Buy again here."

Ownership and Share Structure

Approximately 11% of DroneShield's stock is owned by management. CFO Carla Balanco holds 8.45 million (1.44%). CEO Oleg Vornik owns 8.18 million shares (1.40%), CTO Angus Bean owns 7.39 million (1.26%), and Independent Chairman Peter James owns 6.40 million (1.09%).

According to Reuters, 13.99% is owned by strategic investors. Independent Investor Charles Goode has 21.5 million shares (4.41%).

The largest single shareholder is Eprius Inc., which holds some 18.5 million shares (3.16%).
The company currently has introduced ten institutional investors as part of its February placement. No further details have been released to the public at this time.

DroneShield Limited has a market cap of US$110.32 million, with 585,179,443 shares outstanding and a free float comprising some 83.51% of traded shares.

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Important Disclosures:

1. DroneShield Ltd. is an affiliate of and has a consulting relationship with Streetwise Reports and has paid a consulting fee between US$8,000 and US$20,000. 
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd.
3. Owen Ferguson wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
4. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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