Volatus Aerospace Corp. (VOL:TSX; VLTTF:OTCQB) reported Q3 2023 revenue and earnings below forecasts, driven by delayed equipment sales amid working capital constraints, noted Echelon Capital Markets analyst Rob Goff in a November 28 report. However, the analyst sees positives in the strong growth of recurring services.
Volatus' product sales were impacted in Q3 by extended working capital cycles and tight cash balances, limiting investment in equipment inventory. This resulted in CA$10 million of unfulfilled demand. The company focused resources on higher margin, recurring services wins.
Core Business Growth Remains Strong
Despite topline headwinds, Volatus grew recurring services revenue by 60% year-over-year in Q3. Services now comprise 60% of total sales, up from 45% last year.
Gross margin also hit a record 36.4% compared to 28.7% previously.
Long-Term Agreements Provide Future Visibility
Volatus recently secured an initial 3-year, CA$60 million services deal with a top ten U.S. utility beginning in 2024. It also signed a CA$4 million agreement with an energy company. The analyst sees over CA$80 million in contracted revenue, providing strong visibility.
Significant Upside If Working Capital Freed Up
The analyst sees room for significant incremental product sales and contract wins if Volatus can secure additional capital to ease working capital limitations.
This, combined with further services growth, underpins a Speculative Buy rating and CA$0.68 price target.
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ANALYST CERTIFICATION Company: Volatus Aerospace Corp.| VOL-TSX I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
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