Counterdrone Co. on Track for Record Revenue in 2024

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This year DroneShield Ltd. (DRO:ASX; DRSHF:OTC) expects to beat 2023's revenue of AU$54.1 million (AU$54.1M) and thereby set a new record high, MT Newswires reported. 

"DroneShield remains a high-quality technology company, operating in a rapidly growing market and is well capitalized to maintain its market-leading position," wrote Bell Potter Analyst Daniel Laing in an Oct. 28 research report. 

For Q4/24 already, the Australian company has secured AU$24.1M revenue from existing orders, which will take overall revenue for full-year 2024 (FY24) to AU$55.2M. Any new orders received and delivered by year-end will increase the total further.

DroneShield has a contracted backlog of AU$42M and as of Oct. 25, a pipeline of AU$1.1 billion, according to its October 2024 Investor Presentation.

The company had AU$238.3M in cash as of Sept. 30 and had no debt or convertibles.

Focused on Growth, Customer Service

This Australian defense technology company develops and offers an array of end-to-end counterdrone solutions that combine its hardware products and its proprietary artificial intelligence (AI)-backed software.

Its counterdrone systems have three functions, which they can carry out in any environment: in the air, on the ground, and at sea. The counter unmanned aircraft systems, or C-UAS, monitor situations in real time using AI. They detect drones using their AI-powered optic and thermal sensing capabilities. They defeat threats with intelligent, responsive soft or hard kills.

To meet the specific needs of end users, DroneShield's systems are available in various configurations, from standalone and plug-and-play to cohesive and fully integrated. The hardware can be used while affixed to a site or while handheld by someone who is stationary or on the move. The company ensures that its products are practically applicable in real-life scenarios.

"DroneShield remains a high-quality technology company, operating in a rapidly growing market and is well capitalized to maintain its market-leading position," wrote Bell Potter Analyst Daniel Laing in an Oct. 28 research report. 

"Providing solutions that deliver a decisive advantage to our end users is what we strive for," DroneShield U.S. CEO Matt McCrann said in a previous news release.

The defense company also offers portable augmented and virtual reality training options so operators may become trained on and certified in its products.

DroneShield's customers include military and intelligence, government, law enforcement and entities protecting infrastructure and assets, including airports, stadiums, ports, correctional facilities, high-profile events, commercial enterprises, energy production sites and more. The U.S. government, which has been DroneShield's largest client, accounting for about two-thirds of its business last year, is expected to remain so in the near future, the company said.

DroneShield is following the strategy it developed to further cement its leading position in the market, as noted in its latest Investor Presentation. This involves accelerating the development of next-generation of maritime counter unmanned systems, or C-UxS, including the RfPatrol Mk3 dismounted detection system, the DroneGun Mk5 defeat system and the DroneSentry-C2 command-and-control system. The enhanced capabilities of these updated products will meet customer needs and, in turn, should increase adoption. The associated AI-enhanced software should lead to gross margin growth.

The second part of the growth strategy is launching new products, including a C-UxS marine system and a multisensor C-UxS vehicle system. These additions would provide more options to existing customers and potentially open new markets. Third, DroneShield intends to develop next-generation, AI-driven software, and infrastructure for deployment throughout its product portfolio.

The defense firm is enhancing its customer service in other ways, too, MT Newswires reported. It has built an inventory, valued at AU$240M, which allows it to deliver ordered products quickly, reported Akra. Further, it intends to boost its manufacturing capacity to AU$500M per year from AU$400M currently by expanding both its facility in Sydney and its supply chain network. Another goal is to increase its team to about 300 members, including 220 hardware and software engineers, by year-end 2025, up from 220 personnel, including 140 engineers.

Market Value to Triple by 2029

The global counterdrone market is forecasted to expand at a 26.7% combined annual growth rate in the five years between 2024 and 2029, reaching US$7.05 billion (US$7.05B) from US$2.16B, according to a new study by Markets and Markets, as reported in an Oct. 21 Military Embedded Systems article.

Shaw and Partners Analyst Akra also has a Buy rating on DroneShield. His target price implies a 29% return for investors.

Three key factors will continue driving market growth, study results showed. They are increased government spending on counterdrone technologies, the growing number of security breaches of critical infrastructure by unauthorized autonomous aircraft, and greater adoption of aerial remote sensing systems to safeguard such infrastructure.

It is likely that most of the counterdrone market in 2029, the researchers noted, will consist of hybrid systems. Combining electronic, kinetic, and laser elements, they are designed to detect, track, identify, categorize, and mitigate drones from a range of distances, from a few to tens of kilometers.

The Catalysts, Company-Wide to Worldwide

Events that could boost DroneShield's stock, according to Analyst Akra, include material contract announcements, NATO orders and quarterly financial results.

More broadly, increasing demand, spurred by various global factors, continues to create opportunities for DroneShield by way of an expanding customer base and additional sales/new orders.

"I expect DroneShield to continue to benefit from the wave of demand that we expect to continue coming our way," Chief Executive Officer Oleg Vornik said in a previous news release.

According to the company, these contributors include rising defense budgets worldwide and governments' growing focus on counterdrone technologies. Others are the rapid, ongoing proliferation of drones, increasing geopolitical tensions and conflicts, and escalating drone use in hot zones and by terrorists.

Akra pointed out that U.S. counterdrone legislation would expand the addressable U.S. market for DroneShield. Optimism is mounting, he noted, that it will be passed as part of the National Defense Authorization Act for Fiscal Year 2024.

Buy Rating, 29% Return Potential

Bell Potter Analyst Laing noted DroneShield is looking good right now for investors. In his Oct. 28 report, he wrote that he upgraded his recommendation on the Australian antidrone company to Buy from Hold and that his target price on it reflects more than 15% upside to the current share price. 

"We believe the current share price provides an attractive entry point considering DRO's strong runway into the calendar year 2025 (AU$18M contracted revenue), robust market demand, and appealing long-term growth outlook," he added.

Shaw and Partners Analyst Akra also has a Buy rating on DroneShield. His target price implies a 29% return for investors.

He wrote, "DroneShield turned free cash flow and EBITDA positive in full-year 2023 and exhibits a strong medium-term growth profile."

Ownership and Share Structure

Management and insiders own 6.88% of the company, according to DroneShield. CEO and Managing Director Oleg Vornik owns 1.63% with 15 million (15M) options, on a fully diluted basis. Nonexecutive Chairman Peter James holds 0.43% with 935,000 shares and 3M options, on a fully diluted basis. Nonexecutive Director Jethro Marks owns 0.16%, with 1.5M options, on a fully diluted basis.

According to Reuters, about 10% of the company is held by strategic investors.

Epirus Inc. is the largest shareholder, with 2.12% or 18.5M shares, Reuters said.

Structurally, DroneShield has 872.12M outstanding shares and 782.40M free float traded shares.

Its market cap is AU$898.28 million. Its 52-week range is AU$0.26−2.72 per share.