Technology Company Reports Record-Breaking Drone Revenue

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Unusual Machines Inc.'s (UMAC:NYSEAMERICAN) chief executive officer announced the company's fourth-quarter revenue, which was more than US$2 million, a quarter-over-quarter increase of about 31%. This is the company's best revenue quarter of all time.

In a letter to shareholders, Allan Evans noted that with the launch of the company's Blue UAS Framework products for defense and government buyers, approximately 15% of the company's Q4 revenue was from enterprise sales, and its total revenue of US$5.65 million for FY2024 exceeded UMAC's target of US$5 million for 2024 by 13%.

"This is our best revenue quarter of all time (again) and was done while improving gross margins slightly to 28%," Evans wrote.

The revenue growth was achieved without customer concentration, as no single customer represented more than 5% of our total revenue for 2024, Evans noted.

Headquartered in Florida, the company manufactures and sells drone components for defense, commercial, and recreational use. It owns two brands, which it acquired from partner Red Cat Holdings Inc. (RCAT:NASDAQ). One is Fat Shark, specializing in FPV ultra-low latency video goggles for drone pilots. Another is Rotor Riot, a direct-to-consumer online store for small, acrobatic FPV drones and equipment.

Earlier this month, UMAC announced it had secured Red Cat as a customer with an initial order, marking the first time Unusual Machines is building motors to suit a U.S. drone producer's requirements.

In a Feb. 27 updated research note, Litchfield Hills Research Analyst Barry Sine maintained his Buy target on the stock with a price target of US$20 per share, a 151% return when the note was written.

"With this announcement, the company's total addressable market (TAM) in terms of announced components increases by 50%" to US$1.9 billion from US$1.3 billion, Sine wrote of the Red Cat news.

The Orlando, Florida-based company owns two brands. Fat Shark specializes in FPV, ultralow-latency video goggles for drone pilots. Rotor Riot is a direct-to-consumer online store for small, acrobatic FPV drones and equipment.

More Details for FY 2024

However, according to Evans, the "elephant in the room" is the company's net loss realized during fiscal year 2024, when, due to GAAP (generally accepted accounting principles) practices, UMAC realized a net loss of $31.98 million.

"This is almost entirely due to accounting requirements that have no cash flow impact on the operations or health of the business," Evans wrote. "Two particularly significant examples are a US$10 million non-cash loss on goodwill as an adjustment required from the acquisitions of Rotor Riot and Fat Shark and a US$16 million non-cash expense from derivates related to the debt conversion."

The company's practical operating loss for 2024 is about US$4.6 million, Evans said.

Litchfield Hills Research Analyst Barry Sine maintained his Buy target on the stock with a price target of US$20 per share, a 151% return when the note was written.

"The large non-cash losses are due to derivate accounting incurred from our debt conversion and clean-up of the capitalization table," Evans said. "We don't expect similar losses in the future."

He told shareholders managing UMAC's cash position and cash flow are "the most important aspects of our business."

The company started the fourth quarter with US$1.69 million in cash and finished the quarter with US$3.76 million, he said.

"We kept normal operations cash burn below US$0.9 million even though they did come in slightly above expectations," Evans noted. "This cash position has been bolstered by the conversion of US$2.4 million in warrants in Q1 of 2025, and we plan to continue limiting our cash burn as part of our long-term focus on cash flow."

Evans said that given the company's cash position, limited cash burn, improving revenues and margins, and diversified shareholder base, "We believe the company is in a very strong position going into 2025."

Co. in 'Very Healthy Position'

The CEO said UMAC did not expect the "substantial market dynamics" being caused by conflicts in Europe and Israel and tariffs to have a negative impact on the business.

In fact, he said one major change, adding Jiangxi Xintuo Enterprise Co. Ltd. to the list of sanctioned Chinese companies, has actually created "a major market opportunity" for UMAC. The company provided motors to drone manufacturers around the world, but U.S. companies are no longer allowed to do business with them.

Evans said UMAC is "in very healthy position," so the company decided to work with the NYSE to enable options trading on the stock. This went into effect on March 24.

Unusual Machines' priorities moving forward include investing in and expanding Rotor Riot's operations, getting more products Blue Framework certified, and scaling production at its drone motor production facility in Orlando, Florida.

The Catalyst: Industry Due for 'Explosive Growth'

Sine with Litchfield Hills noted there are many ways drones are used besides defense, including in the enthusiast/racing market, the movie and TV production market, agriculture, logistics and delivery, energy and mining, law enforcement, and construction.

"Drones range from small toys available at retailers such as Walmart and Amazon.com for under US$50 to the military’s General Atomics MQ-9 Reaper, which sells for US$32 million," the analyst noted. "Mid-sized commercial and military drones sell for around US$30,000."

Sine said such a wide variation of uses and definitions makes it difficult to truly estimate the entire industry's size but said that the firm does "agree with the consensus that the industry is due for explosive growth."

In the U.S,. between now and 2034, demand for autonomous drones is projected to expand at a 19.7% compound annual growth rate (CAGR), and demand for fixed-wing drones should see a 19.1% CAGR, according to Fact.MR.

The global military defense drone industry is also on a growth trajectory, reported Grand View Research. By 2030, this market's revenue is projected to double from where it is now, hitting US$88 billion from US$40.5 billion. During this forecast period, a 13.9% CAGR is expected. Last year, North America generated the most revenue in this sector.

According to TechSciResearch, the global drones components market was valued at US$15 billion in 2022 and is anticipated to project robust growth in the forecast period through 2028 with a CAGR of 11.4%.

"At the heart of this transformative technology are the various components and subsystems that collectively enable drones to perform their tasks effectively," the research firm said.

Ownership and Share Structure

About 11.1% of the company is owned by management and insiders, UMAC said. The rest, 88.9%, is retail.

Unusual Machines has 16.83 million outstanding shares and 14.59 million free float traded shares. Its market cap is US$112.43 million. Its 52-week high and low share prices are US$23.62 and US$0.98 per share, respectively.