Anti-Drone Tech Firm Sees >200% Revenue Growth

Based in Sydney, New South Wales, Australia, DroneShield Ltd. (DRO:ASX; DRSHF:OTC) is an anti-drone defense company. It produces a wide array of technologies designed to protect people, vehicles, and installations from the evolving collection of unmanned aerial threats.

The company provides both custom counter-drone and electronic warfare solutions and off-the-shelf products designed to meet a variety of terrestrial, maritime, and airborne requirements. Its more notable products include the DroneGun Tactical, DroneGun MK3, DroneGun MK4, DroneSentry, DroneSentry-C2, DroneSentry-X, and RfPatrol.

Since its founding in 2014, the firm has developed a wide array of different drone attack abatement technologies. These technologies, deployed in the products listed above, include radio frequency sensing, artificial intelligence and machine learning, sensor fusion, electronic warfare countermeasures, rapid prototyping, and MIL-SPEC manufacturing.

One of the company's most popular products is the DroneGun Tactical, a man-portable countermeasure designed for the long-range defeat of drone threats across the operational spectrum.

The Catalyst: Runaway Revenue

For DroneShield, 2023 has been a year of what the company characterizes as "explosive growth."

This growth has come, in large part, thanks to the firm's revelation on June 20 of "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 analysis firm Markets and Markets, "the global anti-drone market size is projected to reach US$3.8 billion by 2027 from US$1.47 billion in 2023, growing at a compound annual growth rate of 27.7% during the forecast period.

During that announcement, 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."

Following that announcement, the firm's U.S. headquarters, located in Fauquier County, VA, has served as the company's central hub for expanded operations, enabling close collaboration with its growing customer base in the U.S.A.

The results of this shift have been immediate and notable. In 2023, DroneShield secured an AU$33 million government sale, as well as an AU$9.9 million 2-year R&D contract. It completed an AU$40 million capital raise and expanded to 90 employees spread across operations in both Sydney and Virginia. Currently, it's working through an AU$62 million order backlog backed by an AU$200 million pipeline.

Over the coming half decade, the company hopes to expand to employ some 120 to 150 staff supporting revenue of AU$300 million to AU$500 million per year, with roughly half of that income generated via SaaS and software R&D channels that are being developed alongside its manufacturing base.

Why This Sector?: Drones Dominating Modern Warfare

According to analysis firm Markets and Markets, "the global anti-drone market size is projected to reach US$3.8 billion by 2027 from US$1.47 billion in 2023, growing at a compound annual growth rate of 27.7% during the forecast period. The key factors fueling the growth of this market include rising incidence of security breaches, growing use of drones to counter terrorism and prevent illicit activities, and increased adoption of counter drones for remote sensing."

Technical Analyst Clive Maund wrote a piece about DroneShield titled "Stay Long on This Buy Rated Antidrone Co."

Allied Market Research concurs, explaining in a recent report that "The global anti-drone market size was valued at US$1.3 billion in 2021 and is projected to reach US$14.6 billion by 2031, growing at a CAGR of 27.9% from 2022 to 2031."

Fortune Business Insights reports, more conservatively, that "The global anti-drone market size was valued at US$1.34 billion in 2021 and is projected to grow from US$1.58 billion in 2022 to US$6.95 billion by 2029, exhibiting a CAGR of 23.55% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with Anti-Drone experiencing higher-than-anticipated demand across all regions compared to pre-pandemic levels."

Why This Company?: Homegrown Deterrence Without Violence

In a recent article in Australia's Financial Review, DroneShield CEO Oleg Vornik made a case for his company's philosophy of employing drone defense and deterrence without engaging in actual violence.

"We remain bullish on the outlook for DroneShield, with this update pointing to a strong H1/23 setting up the foundation for a record year," Daniel Laing of Bell Potter Securities Ltd. wrote. 

"Yes, we are unmistakably a defense business," he explained, "and I think for a lot of ethical-focused funds that automatically excludes us, but we do try to explain to people that our products are more defensive than offensive in nature. None of our products are able to harm a human being or even harm a drone, for that matter."

"In order for the private sector to execute the government's defense strategy, you need investment into it. And for that, we need the support of capital markets as we now seek to grow the homegrown defense industry."

Why Now? Analysts' Darling

DroneShield has been performing well as a security and, as such, has earned accolades from several analysts. On July 28, Technical Analyst Clive Maund wrote a piece about DroneShield titled "Stay Long on This Buy Rated Antidrone Co."

In it, he explains, "We bought DroneShield Limited at good prices last year, having correctly calculated that the company had a bright future, and never sold it, but mostly lost interest this year when it ran off into a long correction."

"Given what is going on in Eastern Europe and especially Ukraine and what the company manufactures, big orders look very likely soon, and the way that the stock has been behaving in recent days suggests that one or more may be just over the horizon."

"Ordinarily, we would not be interested in chasing a stock that has risen quite a lot toward a zone of resistance and that has almost 600 million shares in issue, but the fact that the stock has been behaving like a young, dynamic stock in recent days implies that something big is in the offing, so the current strong upside momentum looks set to continue and may even accelerate."

"The business environment for the company has been completely transformed over the past year or two due to the war in Ukraine, which NATO seems determined to continue and expand, and the resulting big demand for drones and related paraphernalia looks set to continue to grow rapidly. We, therefore, stay long, and DroneShield is rated a Buy again here."

Daniel Laing of Bell Potter Securities Ltd. came across as equally optimistic in a report a day earlier, stating that the company was "on track for a big year."

Darren Odell of Peloton Capital also wrote about the stock in July, remarking that "recent contract wins cement DroneShield's position as one of the key players in the global market for counter-drone solutions."

"We remain bullish on the outlook for DroneShield, with this update pointing to a strong H1/23 setting up the foundation for a record year," Laing wrote. "On the back of the recent AU$9.9M research and development (R&D) contract and AU$33M U.S. government contract, DroneShield has a record AU$62M contracted order backlog, with a sales pipeline of over AU$200M."

Darren Odell of Peloton Capital also wrote about the stock in July, remarking that "recent contract wins cement DroneShield's position as one of the key players in the global market for counter-drone solutions."

Odell noted that at the time, Peloton had a target price of AU$0.84 per share for the anti-drone equipment and services firm "based on increased confidence on the closure of larger contracts in full-year 2023 (FY23) and beyond."

He pointed out that DroneShield's repeat contracts with the U.S. government have increased in value over a two- to three-year span. The first one was AU$1M. The next was AU$11 M, and the latest was AU$33 M.

"We would expect this trend to remain for the U.S. and Five Eyes countries (including the North Atlantic Treaty Organization)," Odell explained. "The war in Ukraine has ensured elevated interest in the capabilities of the likes of DroneShield, which is not expected to dissipate any time soon." 

Ownership and Share Structure

Approximately 5.16% of the company is held by management and insiders. Charles Goode owns 3.66% with 21.50 million shares, CFO Carla Balanco owns 1.44% with 8.45 million shares, Angus Bean owns 1.26% with 7.39 million shares, Paul Jonathan Shaw owns 0.95% with 5.58 million shares, CEO Oleg Vornik owns 0.86% with 5.03 million shares, and Chairman Peter James owns 0.65% with 3.82 million shares.

Institutions own 8.31% of the company. Epirus Inc owns 3.15% with 18.50 million shares, SR Bennett Pty. Ltd. owns 0.91% with 5.35 million shares, and P & B Shaw FT CB Pty. Ltd. owns 0.59% of the company with 3.43 million shares.

There are 586.9 million outstanding shares, with 496.03 million free-float traded shares. The company has a market cap of AU$ 170.20 million. It trades in the 52-week period between AU$0.16 and AU$0.42.

Important Disclosures:

1. 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. 
2. Owen Ferguson wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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