DroneShield Ltd: Detecting and Protecting
DroneShield Ltd
Detecting and protecting
DroneShield (ASX:DRO) is a specialist in counterdrone, electronic warfare, radio frequency (RF) sensing, artificial intelligence (AI) and machine learning (ML), sensor fusion, rapid prototyping and military grade (MIL-SPEC) manufacturing. Headquartered in Sydney with teams in the UK and US, DroneShield’s capabilities are used to protect military, government, law enforcement, critical infrastructure, commercial and VIP clients across several jurisdictions. The company has developed almost a dozen proprietary products for wide application across defence and civil requirements. DroneShield listed in June 2016 after raising $7m at $0.20/share in an oversubscribed IPO, giving it a market capitalisation at listing of $27m. The company has subsequently raised an additional $23.57m through share placements and security purchase plans including $17m in August and September 2020 via a placement and SPP. DroneShield reported H1 FY21 revenues, record Q2 cash receipts and expanded its gross profit margin by 1600 basis points over H1 FY20. It ended H1 FY21 with $14.3m cash in hand.
Business model
DroneShield develops counter-drone technology and products with wide application across defence and civil roles. The product suite includes body-worn and dismounted technology including the DroneGun and DroneGun Tactical; fixed site or vehicle/ship mounted technology including the DroneCannon RW and DroneSentry-X; and software DroneSentry- C2TM and DroneOptID AI. The company employs a large engineering team and has spent more than $35m in R&D, marketing and global sales channels establishment over the last 5 years. DroneShield uses both third party distributors as well as its own sales force to sell its products and services, offering customers both bespoke solutions and off-the-shelf products. The company is seeking to move into the SaaS space with subscription pricing for updates to the drone libraries of its products. Recurring revenues are also increasing as a percentage of sales as defence and government agencies renew their contracts. A recent example of this was the renewal of a two-year, $3.8m contract with the Australian Department of Defence.
Strong growth reported in H1 FY21
DroneShield has reported H1 FY21 sales revenue of $6.6m, an increase of 113% on H1 FY20 and an expanded Gross Profit Margin of 74.4% versus 58.4% in H1 FY20 and 67.1% in FY20. The net loss for the half was $0.452m, an improvement on the $1.2m net loss reported in H1 FY20. The company also reported record cash receipts of $7.4m in 2Q21 bringing total cash receipts for the half to $9.1m, compared with $1.3m in the previous corresponding period. DroneShield ended the half with net cash of $13.36m.
Look to ASX defence-related stocks for peers
Australia has a small but growing number of companies with links to the defence and government sector ranging from satellite data and drone systems companies to military equipment suppliers and shipbuilders. Elsight (ASX:ELS), Orbital Corporation (ASX:OEC) and Xtek (ASX:XTE) are the most comparable peers from a market capitalisation and product focus perspective.
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