US Gov't Customer Repeats Multimillion-Dollar Counterdrone Order

DroneShield Ltd. (DRO:ASX; DRSHF:OTC) announced it has received a repeat order of AU$5.7 million from a United States government customer for a number of its C-UxS (counter-UxS) systems, which target multi-domain aerial, ground, and maritime surface drones.

The delivery will involve multiple DroneShield product lines, the company said, and is expected to be completed in several stages throughout the remainder of the year.

"Our comprehensive product portfolio paired with high-level manufacturing affords us the ability to rapidly outfit U.S. and partner nations with lifesaving technology, while also addressing a wide range of operational requirements," said Tom Branstetter, DroneShield's director of business development. "It's a privilege to assist the U.S. government and our allies in strengthening security both at home and abroad.”

The stock hit new a new high in April after the NATO Support and Procurement Agency approved the first counter-small UAS (CUAS) procurement agreement in NATO history.

Technical Analyst Clive Maund noted that after a "robust" funding exercise, the stock cooled, but "the outlook for the company is so positive."

According to the Motley Fool, the share price is "up an eye-watering 246% since this time last year, when you could have bought shares for 28 cents."

"After all, the company has an AU$500 million sales pipeline with a target of AU$300 million to AU$500 million in annual revenue, and it has some 90 qualified projects with government customers — including the Australian Department of Defence and the U.S. State Department," Maund wrote April 24.

Maund said the "sky's the limit" for the stock. "The company looks set to make huge profits for years to come and thus should prove to be a solid investment," he wrote.

The Catalyst: Protection From Terrorists, Criminals Using Drones

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."

It announced record results last month with its first profitable year in 2023, "with AU$9.3 million profit after tax." As geopolitical conflicts simmering worldwide continue to expand their use of unmanned aerial systems, said its revenues in the first quarter of 2024 were up tenfold vs. the same time period last year to AU$16.4 million.

According to a report by research firm Markets and Markets, the global anti-drone market was valued at US$1.2 billion in 2022 and is projected to reach US$5.2 billion by 2028, with a compound annual growth rate (CAGR) of 26.6%.

Technical Analyst Clive Maund noted that after a "robust" funding exercise, the stock cooled, but "the outlook for the company is so positive."

"Drones are becoming increasingly sophisticated and capable, and they are being used by a variety of actors, including terrorists, criminals, and rogue states," the report said. "This has led to growing concerns among governments about the potential for drone attacks on critical infrastructure, military assets, and civilian populations. In response to these concerns, governments around the world are increasing their spending on anti-drone technologies."

According to the report, in August 2023, the U.S. Department of Defense planned to spend US$668 million in fiscal 2023 on CUAS research and development and an additional US$78 million to procure the hardware.

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 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.

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 704 million shares outstanding and about 526.8 million free float traded shares. Its market cap is about AU$647.22 million, and it trades in a 52-week range of AU$1.14 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.
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