Q1 Revenues Up Tenfold YoY, Counterdrone Co. Says

As geopolitical conflicts simmering worldwide continue to expand their use of unmanned aerial systems, counterdrone company DroneShield Ltd. (DRO:ASX; DRSHF:OTC) announced its revenues in the first quarter of 2024 were up tenfold vs. the same time period last year to AU$16.4 million.

The company said it had highest ever cash receipts for the March quarter with AU$7.1 million, up from AU$7 million in 1Q 2023. DroneShield noted that the March quarter is often a slow period for cash payments.

"Small drones continue to be used extensively in virtually every conflict around the world today, taking advantage of their low cost, ease of use, and versatility," DroneShield noted in a release. "They are used to deliver explosive payloads, battle reconnaissance, directing artillery strikes, and more."

DroneShield provides counter-unmanned aerial systems (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, the company's website said.

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

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

"DroneShield released a robust 1Q24 update, which demonstrated the significant growth in the business over the last 12 months," Bell Potter analyst Daniel Laing wrote. 

"DroneShield released a robust 1Q24 update, which demonstrated the significant growth in the business over the last 12 months," Bell Potter analyst Daniel Laing wrote in a research note on April 15. The company "has maintained its strong performance in 2024, and we remain positive on the long-term outlook for the company."

Laing gave has moved his Buy rating to Hold but raised his price target from AU$0.90 per share to AU$1. According to Bloomberg, investors who followed the analyst's recommendations on DRO in the past year received a 249% return.

McAlinden Research Partners has rated DroneShield as one of the most important military AI companies as defense orders outpace equipment losses in Ukraine.

The Catalyst: Big Cash Balance, Contract, and Sales Backlogs

In its Q1 results, DroneShield noted that it had a cash balance of AU$56.4 million as of March 31, a contracted backlog of AU$27 million, and a pipeline of over AU$519 million.

DroneShield also said its current manufacturing capacity is AU$400 million per annum.

Its software-as-a-service revenues (SaaS) doubled in Q1 2024 from AU$239,000 in Q1 2023 to AU$561,000. The company also said it plans to launch more SaaS-based solutions this year.

"Small drones continue to be used extensively in virtually every conflict around the world today, taking advantage of their low cost, ease of use, and versatility," DroneShield said in the release. "They are used to deliver explosive payloads, battle reconnaissance, directing artillery strikes, and more. Outside of the military applications, drones are used to deliver contraband into prisons, disrupt airports, conduct terrorist attacks, disrupt critical infrastructure and shipping, and conduct corporate espionage."

Their use is expected to continue to rise rapidly as drone technology continues to improve, the company noted, and geopolitical conflicts escalated worldwide.

"DroneShield products are considered to be market-leading by many governments around the world," DroneShield Chief Executive Officer Oleg Vornik has said. "We pride ourselves on setting the global benchmark."

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."

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

AI Superpowers Chase Drone-Swarming Tech

According to a report by The Associated Press, the world's only two artificial intelligence (AI) superpowers (the United States and China) are "engaged in an arms race for swarming drones that is reminiscent of the Cold War, expect drone technology will be far more difficult to contain than nuclear weapons."

"Drones have been a priority of both powers for years, and each side has kept its advances secret, so it's unclear which country might have an edge," the article continued.

According to the AP, a 2023 Georgetown study of AI-related military spending found that more than a third of known contracts issued by both U.S. and Chinese military services over eight months in 2020 were for intelligent uncrewed systems.

Asian nations are expanding their use of counter-drone systems for military use, C4ISRNET reported.

"Russia's use of kamikaze and surveillance drones against Ukraine and Houthi rebels flying bomb-carrying drones to attack Israel-bound ships in the Red Sea are driving demand for tech that can defend against them," the site reported. 

According to Markets and Markets, the global anti-drone market is set to reach US$5.2 billion by 2028, with a compound annual growth rate (CAGR) of 26.6% between 2023 and 2028.

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, on a fully diluted basis. Non-Executive Chairman Peter James owns 0.58% of the company with 920k shares and 3 million options, on a fully diluted basis, and Non-Executive Director Jethro Marks owns 0.22%, with 1.5 million options, on a fully diluted basis, 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 having 18.5 million shares.

The company reports that there are about 616.5 million shares outstanding and about 526.8 million free-float traded shares. Its market cap is about AU$582.6 million, and it trades in a 52-week range of AU$0.99 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.