Global conflicts spark surge in revenue for Sydney defence-tech DroneShield

Global conflicts spark surge in revenue for Sydney defence-tech DroneShield

Photo: DroneShield.

With $400 million worth of annual hardware production value in market where militaries and security providers are rapidly lifting their counterdrone technology requirements, Australia's DroneShield (ASX: DRO) has experienced a 10-fold increase in revenue in the March quarter to reach $16.5 million.

It is a figure that is close to DroneShield's revenue for the entire year of 2022, and has sent DRO shares closer to the $1 mark at 97 cents per share (cps), implying a market capitalisation that is edging close to $600 million.

This represents 153 per cent growth in the DRO share price since the beginning of 2024.

The Sydney-based company today reported that the first quarter of the calendar year is usually its quietest quarter due to timing issues with its most significant contributor to payments - the US Government, which represented around 70 per cent of revenue last year, from both military and non-military agencies.

The company, now with 120 team members including 95 engineers, highlighted a strong cash balance at the end of March at $56.4 million with no debt, and committed supply chain payments for inventory of $35.4 million over the next nine months.

DroneShield also has a $27 million contracted backlog and a pipeline of more than $519 million.

"Small drones continue to be used extensively in virtually every conflict around the world today, taking advantage of their low cost, ease of use, and versatility," the company stated in today's update.

"They are used to deliver explosive payloads, battle reconnaissance, directing artillery strikes, and more. Outside of the military applications, drones are used to deliver contraband into prisons, disrupt airports, conduct terrorist attacks, disrupt critical infrastructure and shipping, and conduct corporate espionage.

"This is expected to continue to rapidly rise, as the drone technology continues to improve. Geopolitics and conflicts are generally expected to further deteriorate over coming years, by most commentors."

The group claims that counterdrone/counter-UAS (unmanned aerial system) market is at a negligible saturation point today given how new the drones are.

"This is in contrast to markets such as helmets, body armour and tactical radios, as those markets have existed for a relatively long time, and are saturated as a result," the company stated.

"This means the buyers of C-UAS systems, such as military planners and security acquirers are rapidly starting to be aware of the need to fulfil their counterdrone requirements, and are presently gearing up for large acquisitions of C-UAS equipment, following smaller purchases and trials over recent years."

The group's board believes it has a number of technical and commercial differentiators compared to its competitors, developed over years and challenging to disrupt.

"On the commercial side, this includes deep trusted relationships and being written into multi-year requirement plans with key customers across the US Department of Defense (DoD) and other organisations directly, and the defence prime contractors working with the DoD, to support current and coming priorities," DroneShield said.

"Global defence primes are often customers and partners, as opposed to competitors for DroneShield, as they prefer to leverage DroneShield’s expertise and organisational structure to operate and deliver at the required speed of innovation for the C-UAS sector.

"Technically, with over 95 hardware and software engineers, DroneShield is able to continue to rapidly innovate and build on its unique differentiators, which include a dedicated data engineering team with a substantial proprietary database of data samples feeding its artificial intelligence software engines, growing through the ability of the field deployed devices with the customer option to relay the data back to DroneShield for prioritisation of new functionality and capabilities."

In relation to these AI developments, the company's relatively small Software as a Service (SaaS) business doubled in the March quarter to $561,000.

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