The Good

• Quarterly revenue of $16.5m which has been on a solid upward trend over the last 18 months. What is also positive is that this revenue is only made up of one significant contract announcement ($4.3m in March) which highlights that there is an increasing volume of smaller orders being received. This annualises out to $66m which is dangerous with the type of order flow that droneshield experiences, but is indicative that they are on the right track to exceed FY23.

• Relocation to the new facility has been completed. The new capacity hasn’t been fully realised as can be seen by the drop in product cost spend on last quarter. This has also contributed to the increase in staff (120 up from 105) and administration costs. With the recent capital raise for a further $70m to support build up of inventory. Based on this should expect a ramp up of product and staff costs over the coming quarters.

• Pipeline now up to $519m with an increase in the number of projetcs since February. However, also looking at from where they are preferred or better, it looks like it is for smaller value orders (based on average value)
• 
  

The Not So Good

• SaaS revenue has improved marginally, but still only a small fraction of overall revenue and still looks like 50% of revenue will need some significant changes or a massive increase in install base to get close to this target.

• Operating cash outflows of $10.7m. Management mostly attributed this to timing of payments on the recent US contract, however overall operating costs are rising as well.

• Management are still prone to be overly promotional. $100k difference in QoQ cash receipt. Highest Ever!!

Watch Status: No Change

Valuation Status: No Change

What To Watch

• Targeting the release on additional SaaS based solutions over the next 12 months.
• Planned US Federal roll-out of body worn devices (No Update - Carried Over x 2)
• Air Service Australia C-UAS rollout ( No Update Carried Over x 2) - Looks to have closed at the end of October 23.

https://www.unmannedairspace.info/uncategorized/airservices-australia-publishes-tender-for-drone-surveillance-network-covering-29-airports/

• European framework agreement for 24/25 rollout ($30m+) (No Update - Carried Over)
• Start of JCO US DoD rollout (Carried Over x 2). https://www.c4isrnet.com/unmanned/2023/11/15/pentagon-counter-drone-office-makes-headway-as-services-adopt-new-tech/
• Lockheed Martin - Australian DoD Agile Shield Integration (Carried Over)