Counterdrone Co. Announces AU$4.3M Order from US Government

DroneShield Ltd. (DRO:ASX; DRSHF:OTC) announced it has received a repeat order of AU$4.3 million from a U.S. government customer for its handheld counter-unmanned aerial systems (C-UAS).

The company, based in Australia and America, said it has been working with the customer for several years and filled a number of smaller orders. The new delivery is expected to be complete in the next 15 days, using stock on hand.

"Widespread global conflict continues to provide clear evidence of the rapid evolution of unmanned systems," said Tom Branstetter, director of business development. "This U.S. government end-user has and always will require cutting-edge capabilities to maintain its decisive advantage. This initial order is a testament to our team's unwavering commitment to addressing complex challenges and further highlights our key position in the counter-unmanned systems space."

Drones are being used in conflicts around the globe and are "changing how wars are fought," The Wall Street Journal reported recently, making "combat faster, cheaper and smarter, as shown in Ukraine's fight against Russia and Houthi attacks in the Red Sea."

Laing of Bell Potter commented on DroneShield's current sales pipeline of AU$510 million, with AU$388 million of potential orders this year.

The company showed record results with its first profitable year in 2023, "with AU$9.3 million profit after tax."

"DroneShield has had an outstanding last 12 months, which has been reflected in the share price performance YTD," Bell Potter analyst Daniel Laing wrote in a research note on March 4. Lang gave the stock a Buy rating and an AU$0.90 per share price target.

The Catalyst: Defense Orders Outpacing Equipment Losses

McAlinden Research Partners has rated DroneShield as one of the most important military AI companies.

The research firm recently reported that defense orders are outpacing equipment losses in Ukraine. Following Russia "swinging the initiative in its favor throughout the past several months," it stated that "Ukraine's next chance for a counteroffensive may not arrive until 2025, and the potential for such a maneuver will continue to be heavily dependent upon a revival of U.S. and European aid to the country."

And as the world looks for more military supplies, The New York Times reported that Australia is pushing to "essentially become the 51st state for defense production" as it ramps up the production of munitions.

"The embrace of joint production reflects a wider awakening in Washington and other capitals: The United States by itself cannot make enough of the weapons needed for protracted warfare and deterrence," the Times' Damien Cave wrote. "Vulnerable partners like Taiwan already facing delayed orders for American equipment even as China's military capabilities continue to grow."

Pentagon officials are leading a worldwide campaign "to make more American weapons with friendly nations," and Australia is a steadfast ally, having fought with the U.S. in major conflicts since World War I, he noted.

The global counterdrone market is forecasted to expand at a compound annual growth rate of 26% between this year and 2032. It is estimated the market will hit US$15.3 billion by that year, a 700% increase from US$1.9 billion in 2023, according to a Global Market Insights report.

Key growth drivers, according to the report, are expected to be advancements in drone technology along with increases in three areas: geopolitical security concerns, unauthorized drone activities, and government spending on defense and aerospace.

Protection From a 'Wide Range' of Threats

DroneShield provides C-UAS protection, with a focus on radio frequency sensing, artificial intelligence (AI) machine learning, sensor fusion, electronic warfare, rapid prototyping, and MIL-SPEC manufacturing, its website said.

Its technology uses "a multi-layered artificial intelligence-based solution for both detection and defeat, with smart, non-kinetic defeat."

The company offers "protection against a wide range of improvised threats" through UAV (unmanned aerial vehicles), UGV (unmanned ground vehicles), USV (unmanned surface vehicles), and UUV (unmanned underwater vehicles).

The company has also announced that it has begun the development of custom higher-performance multi-channel software-defined radios (SDRs), that will be used in new evolution capabilities of future generations of its products.

“DroneShield products have undergone extensive evaluations from a number of U.S. government agencies in the last several years, and we're honored by the customer relationship we have and pleased to start seeing the results of these efforts," DroneShield U.S. Chief Executive Officer Matt McCrann said of the new government order. "The ability for us to rapidly deliver DroneShield solutions was important to the customer. We're proud to be able to do so in support of their urgent operational requirements, as drone threats continue to rapidly escalate."

DroneShield's FY23 report also noted that the company has an AU$30 million contracted backlog and a pipeline of over AU$510 million.

Co. 'Set to Succeed'

Technical analyst Clive Maund wrote in 2023 that DroneShield looked "set to succeed." In February, he wrote: "After starting higher again in November, it has advanced in a classic bullish staircase pattern, but over the past week or two the advance has accelerated dramatically with the price at last breaking out to new all-time highs, an impressive move given the number of shares in issue."

Laing of Bell Potter commented on DroneShield's current sales pipeline of AU$510 million, with AU$388 million of potential orders this year.

"DRO's confidence in the sales pipeline is reflected in its recent investment (committed supply chain payments of AU$30m) in its inventory balance, which we view as a leading indicator of near-term sales announcements," Laing noted. 

Darren Odell of Peloton Capital also predicted good things for DroneShield, writing in July 2023 that the company had "already exceeded 2023 revenue estimates."

Ownership and Share Structure

Management and insiders own 11% of the company. CEO Oleg Vornik owns 2.23% of the company with 15 million options. Non-Executive Chairman Peter James owns 0.58% of the company with 920k shares and 3 million options, and Non-Executive Director Jethro Marks owns 0.22%, with 1.5 million options, according to DroneShield.

The company reports that the largest independent investor, Charles Goode, owns 4.41% of the company with 21.5 million shares, while strategic investors own a total of 13.99% of the company.

Eprius Inc. is the second largest shareholder, with 3.16% of the company with 18.5 million shares.

In its February 2023 placement, Droneshield said that it brought ten new institutional investors on board, but it has not yet released more details.

The company reports that there are about 616 million shares outstanding, and about 526 million free-float traded shares. Its market cap is about AU$418.88 million, and it trades in a 52-week range of AU$0.93 and AU$0.21.

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. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
3.  This article does not constitute investment advice and is not a solicitation for any 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. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

For additional disclosures, please click here.