Major New Contract Marks Significant Milestone for Counter-Drone Tech Co.

DroneShield Ltd. (DRO:ASX;  DRSHF:OTC), a leader in counterdrone technology, has announced a significant new contract valued at AU$4.7 million from a non-government Swiss international customer. This deal marks a substantial milestone for the company, as it involves the delivery of multiple vehicle-based C-UxS systems. The vehicle-based solution is designed to provide a rapidly deployable platform that can be utilized in both static and On-The-Move (OTM) missions, such as convoy and mobile VIP protection. The order represents the company's ongoing commitment to advancing counterdrone capabilities and expanding its customer base.

DroneShield's CEO, Oleg Vornik, expressed his enthusiasm about the contract, stating, "This order highlights DroneShield's expertise not only as a maker of cutting-edge AI-based C-UAS sensor and effector technologies but also as a system integrator for demanding applications that involve multiple sensor and effector modalities, operating in tough conditions. We are excited to have this new customer onboard and doing more work with them over coming years." Payments for this contract are expected to be received throughout 2024, with the final payment projected for the first quarter of 2025.

The Counter-Drone Technology Sector

The anti-drone market is experiencing robust growth, driven by technological advancements, increased government spending, and the rising demand for effective counter-UAS (C-UAS) solutions.

According to a June 20 report from Whatech, "The anti-drone market is expanding from an estimated US$1.7 billion in 2024 to a colossal US$10.7 billion by 2034, fueled by an impressive CAGR of 20%." This expansion is attributed to the increasing demand for anti-drone systems, which have become essential due to the growing potential threats to national security and surging safety concerns. Non-military as well as military drones are constantly posing security threats to countries around the world, further driving the demand for these systems.

Anti-drone technology is utilized for the protection of airports, critical infrastructure, and other similar areas, including military installations and stadiums. The continuous involvement of market players in the development of anti-drone systems with increased capability to detect, track, destroy, and jam rogue drones is helping them gain a competitive edge in the global market.

As noted in the report, "Various defense and aerospace manufacturers are concentrating on developing more effective anti-drone systems, which work effectively even at night."

The global demand for anti-drone systems is projected to reach a market valuation of US$10.7 billion by 2034, with North America expected to capture 24.3% of this market share by the end of the forecast period.

Sales of drone detection equipment are anticipated to grow at a compound annual growth rate (CAGR) of 18.8%, reaching US$4.1 billion by 2034. Additionally, in South Korea, the demand for anti-drone systems is projected to increase at a CAGR of 20.8% from 2024 to 2034, while global sales within military and defense departments are estimated to grow at a CAGR of 22.7%, reaching US$2.7 billion by 2034.

In a June 3 report, Abraham Akra, for Shaw and Partners, gave DroneShield a Buy recommendation and a price target of AU$1.40. Akra stated, "DroneShield is well-positioned to benefit from the rising global defense spending and the increasing focus on counter-drone (C-UAS) capabilities."

Technological advancements are at the forefront of this growth. According to Fortune Business Insights, "Technological advancements in drone countering systems, such as high-tech laser systems, radar systems, and electronic signal jammers, are driving the market growth." The continuous evolution of these technologies ensures that the market remains dynamic and capable of addressing emerging threats.

Similarly, the Institute for Defense and Government Advancement (IDGA) highlighted the growing importance of C-UAS technology, stating, "Countries are increasingly procuring systems for detection, identification, tracking, alerting, jamming, spoofing, and neutralization of rogue drones."

Government spending is also a crucial driver of the anti-drone market. As the report on Fortune Business Insights continued to explain, "Increasing defense spending by governments to drive the anti-drone market growth. For instance, the U.S. Department of Defense has planned to spend US$668 million on research into new drone defense technologies." This substantial investment underscores the critical role of anti-drone systems in national security strategies. IDGA further projected, "The global market for C-UAS technology is expected to quadruple between 2021 and 2031," highlighting the significant growth potential in this sector.

Markets and Markets also emphasized the impact of technological advancements and rising demand for countermeasures. They note, "companies are developing versatile and long-range counter-drone systems, such as Boeing's compact laser weapon system (CLWS), capable of destroying small UAVs up to 2,000 meters away." The UAV-based segment is expected to grow at the highest CAGR from 2023 to 2028, driven by the need for robust countermeasures against unauthorized or potentially malicious drones. This growing demand highlights the critical need for effective anti-drone solutions across various applications and industries, ensuring the market's continued expansion and innovation.

Company Catalysts

The newly secured contract serves as a catalyst for DroneShield's future growth and development. This deal not only brings immediate revenue but also paves the way for further material orders from the same customer, signaling a potentially long-term partnership. The high-profile nature of the government agency involved underscores the trust and reliability placed in DroneShield's technology and expertise.

The vehicle-based C-UxS systems will be powered by the DroneSentry-C2 command-and-control system, which includes the proprietary AI-based SensorFusion engine. This integration of radio frequency detection, mitigation, radar, and electro-optical sensors into a single platform showcases DroneShield's capability to deliver comprehensive and flexible solutions for complex operational requirements.

Vornik emphasized the strategic importance of this order, noting, "We are excited to have this new customer onboard and doing more work with them over coming years." This statement highlights the potential for ongoing collaboration and additional contracts, reinforcing DroneShield's position as a leading provider in the counterdrone market.

In summary, the AU$4.7 million contract with the Swiss customer not only boosts DroneShield's financial outlook but also enhances its reputation and market presence. The integration of advanced technologies into a deployable platform demonstrates the company's innovative approach and readiness to meet the evolving demands of the security and defense sectors.

Expert Opinions

James Mickleboro, in his June 20 article for MotleyFool, highlighted DroneShield shares pushing higher once again, noting, "At the time of writing, the counter-drone technology company's shares are up a further 3% to a new record high of AU$1.61." He emphasized the company's remarkable market performance, stating, "This latest gain means that the high-flying share is now up 77% since this time last month."

Mickleboro also pointed out the technological advancements driving this growth, mentioning, "It provides a new level of operational flexibility by incorporating DroneShield's radio frequency detection and mitigation, radar, and electro-optical sensors, into a single vehicle-based platform." He added that the company's AI-based sensor fusion engine can track objects, determine their classification, predict trajectories, and assess threat levels, showcasing the advanced capabilities of their technology.

Similarly, Zach Bristow, writing on June 19 for MotleyFoold, also underscored DroneShield's impressive performance in 2024, noting, "DroneShield Ltd (ASX: DRO) shares have been on a tear in 2024, soaring more than 316% into the green since January." He reported the company's stock hitting an all-time closing high of AU$1.54 per share and attributed this stellar performance to the company's "cutting-edge drone detection and disablement technology." Bristow highlighted the company's significant financial growth, stating, "In the first quarter of FY 2024, DroneShield reported a 900% year-over-year increase in revenue to AU$16.4 million."

He also mentioned key milestones, such as securing a major repeat order from a U.S. Government customer worth AU$5.7 million and completing an oversubscribed share purchase plan, raising AU$15 million despite receiving AU$40 million worth of applications.

Furthermore, Bristow cited Bell Potter's recent buy rating for DroneShield, with a forecast of AU$97 million in sales and AU$24.4 million in earnings for FY 2024. He also mentioned CEO Vornik's optimistic projection that DroneShield could grow sales to AU$500 million annually within five years, driven by rising demand for counter-drone technology in both public and private sectors.

In a June 3 report, Abraham Akra, for Shaw and Partners, gave DroneShield a Buy recommendation and a price target of AU$1.40. Akra stated, "DroneShield is well-positioned to benefit from the rising global defense spending and the increasing focus on counter-drone (C-UAS) capabilities." He described DroneShield as a "market leader and early mover in counter-drone (C-UAS) tech," specializing in advanced AI-driven counter-drone and electronic warfare solutions for various platforms.

Akra expressed confidence in DroneShield's growth potential, noting, "We expect DRO's 10-year track record, certifications, product suite across mobile and fixed site CUAS will facilitate sales growth to exceed market growth rates." He highlighted the rising global defense spending, stating, "The U.S. Department of Defence (DoD) is expected to increase its budget by 4% Y-Y in FY25 to AU$850B. NATO member nations are also projected to boost defense spending by 10% Y-Y to AU$380B in CY24. We expect DRO to benefit, as have comps, from a focus on C-UAS."

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 763 million shares outstanding and about 56 million free-float traded shares.

Its market cap is about AU$1.2 billion, and it trades in a 52-week range of AU$1.37 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. James Guttman wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
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