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#Valuation
Added 3 months ago

I don't own ASX:DRO, unfortunately.

As a thought experiment I wondered just how much it would have to grow to get justify its current SP.

DroneShield Limited’s operating margin for the half-year ended 30 June 2025 is approximately 7.2%, say in 3 years time it improves to well above industry averages of 10-13%, say 15%. Perhaps the SaaS segment does increase significantly to account for this

If we assume the share price goes nowhere and apply a PE of 40 (high growth company) then revenue would need to be a whisker under $500m to give NPAT of ~$72m. Their presentation states an aspirational pipeline of $5 billion for 2028. I'm assuming that is for revenue.

So, if you believe that there will be no disruption from other technologies and they will hit that aspiration, it's a bargain! Unless my maths is wrong, which it might be!

For those that do hold, I would love to hear your thoughts.

#Counter drone technology
Added 6 months ago

It’s been an interesting space to watch over the last few years. My incomplete understanding is that jamming techniques have essentially been bypassed for small and FPV drones either by effective counter-jamming techniques or using spools to communicate directly.

Not sure if DRO is at all involved in microwave technology but great article summarising the current state of play. It’s entirely possible DRO gets completely left in the dust by this development.

Science & technology |  Battle of the beams

Microwave blasters can down even jam-proof drones

America’s army is already deploying the technology


Illustration: Timo Lenzen

Jun 11th 2025

O

n April 28th Bray McCollum, a USArmy captain, was tasked with conducting a military exercise in the Philippines. His job was to test a new weapon, the army’s first specifically designed to down a swarm of drones with a single shot. The Leonidas IFPC-HPM, as the system is called, fires intense pulses of microwave radiation that “disrupt or destroy” electronic componentry in drones, says Captain McCollum. It worked.

Engineers have experimented with such weapons for many years, with mixed results. But the devastation wreaked by cheap drones in the Russo-Ukrainian war (including Operation Spider Web, in which Ukrainian quadcopters launched from lorries on June 1st struck at airfields deep in Russia) has concentrated minds.


Most attempts to disrupt drones rely on electronic warfare, in which radio signals jam datalinks to remote operators. These techniques are useless against newer drone types, notes Captain McCollum, some of which are controlled through unspooling fibre-optic wire, whereas others use on-board artificial intelligence to navigate and select targets. With the stakes high, the pace of spending on R&D has picked up, as have technological advances.

The US Army currently has a handful of Leonidas weapons, manufactured by Epirus, a defence-tech startup based in Torrance, California. Trailer-mounted and powered by a diesel generator, they are located in the western Pacific and either in or near the Middle East. Officials are mum on the weapons’ range, but Andy Lowery, Epirus’s boss, says it is several hundred metres. A souped-up version, due this summer, should offer a range of more than 1km. The new model will also be able to draw power from a roughly 300kg battery pack.

The microwaves do not typically fry electronic circuitry to a crisp. Instead, the energy they deposit can generate unwanted currents, overheat sensitive components and interfere with normal function. The net result, Mr Lowery explains, is a flood of electromagnetic “noise” that means a drone can no longer “hear itself think”. This causes crashes.

Upfront costs are high. The army’s initial contract for four Epirus microwave blasters, including services, exceeded $66m—roughly enough to buy half a dozen new Abrams tanks. But because microwave air defences only need electrical power to run, rather than ammunition, they are far cheaper to operate.

Other contractors are designing similar kit. Thales, a European giant, has developed RapidDestroyer, a container-size microwave blaster mounted on a lorry. At a test range in Wales in mid-April, the British army used RapidDestroyer to down drone swarms with “near-instant effect”, according to the defence ministry. Its range is thought to be up to 1km.


Another supplier is Leidos, a defence firm based in Reston, Virginia. By early next year Leidos expects to provide America’s Air Force Research Laboratory with an operational microwave blaster called Mjölnir, in a nod to the Norse god Thor’s hammer. Mjölnir’s power output and range are classified, but the system will “screw up” microchips and other electronics in a drone swarm at operationally useful distances, says Billy Schaefer, Leidos’s head of directed energy. Leidos is also designing a shorter-range system that could be carried by two soldiers. Its battery pack could also fire a few shots.

RTX, a big American defence contractor, is developing shipping container-size counter-drone microwave systems: one, called PHASER, that will work over short ranges; and another, called CHIMERA, that will work over longer ranges. Lockheed Martin, an American defence company, is refining MORFIUS, a small microwave weapon packaged in a roughly 14kg drone. The system, a spokesperson says, is designed to fly into an attacking swarm, emit microwave blasts, and return to base.

Microwave blasters pose problems for drone designers. Richard Fisher of the International Assessment and Strategy Centre, a think-tank in Potomac, Maryland, says a race is on to protect drones with reflective metal shielding. Such attempts are unlikely to be entirely effective. For one thing, microwaves heat up the surfaces they reflect off, potentially heating them to temperatures they cannot tolerate.

Microwaves can also produce electrical charges in conductive and semi-conductive protrusions (such as antennae or camera lenses) that can turn into damaging currents. Mjölnir’s ability to change the wavelength of its microwave radiation could allow it to tune beams that slip through gaps between shielding panels or even holes in mesh.

Though the ends are clear, manufacturers are tight-lipped about the technology needed to achieve them. Most systems use variations of the magnetron technology found in microwave ovens, in which electrons moving through vacuum tubes emit microwaves when exposed to a magnetic field. Epirus has taken a different approach, relying on bespoke microchips made with gallium nitride, a semiconductor material. When fed electrical energy, these chips can produce microwave blasts with durations in the millisecond range, compared with the nanosecond range of magnetron emitters.

Unlike drone design, none of this is for tinkerers. The technical challenges are extreme: for one thing, targets must be detected and accurately tracked, a task which typically involves radar and electro-optical systems working in tandem. The weapon’s microwave antenna must also be aimed so that one’s own electronics and, especially, munitions are not accidentally zapped.

One country that would like to get its hands on such kit, and fast, is Ukraine. So says Oleh Donets, who leads projects for the development of non-kinetic air defences at Brave1, a government technology accelerator in Kyiv. Russian forces now often dispatch groups of five or more drones to destroy a single target, he notes. Not long ago, single-drone attacks were the norm.

At least two Ukrainian firms are devising counter-drone microwave weapons. One is Transient Technologies, a maker of ground-penetrating radar systems in Kyiv. It kick-started the weapon programme, quietly, in the wake of Russia’s full invasion. But the firm’s boss, Volodymyr Ivashchuk, laments they are only at the “proof-of-concept stage”. The other is First Contact, a firm in Kyiv that built the drones flown in Ukraine’s raids of June 1st. Its boss, Valeriy Borovyk, says technical assistance from a German defence contractor is being arranged, and a prototype could be ready for testing later this year.


Brave1, for its part, is seeking microwave blasters from allies to test in combat and tweak as required. So far none has arrived. Epirus did request the American government’s permission to send its technology to Ukraine, but failed to obtain it. Recently, however, Mr Lowery was contacted by an official who encouraged Epirus to resubmit its paperwork. The official said that Donald Trump’s thinking on the subject had shifted in favour of granting licences for export to Ukraine.

All this is exciting stuff. The hope, says Mark Montgomery, a former US Navy rear admiral, is to eventually design microwave blasters with the oomph to down drones, and possibly even subsonic cruise missiles, from 10km away. At such ranges, interceptors could still be launched if the blasts fail. For now, though, microwaves offer a promising last line of defence

#Au forces by US drones
stale
Added one year ago

not directly impacting this company but strikes me as a terrible decision hugely expensive ($100k) single use drones vs FPV commercial drones for $ 200

Goes against all data and real life use evidence


https://www.abc.net.au/news/2024-07-08/australian-military-to-buy-small-american-made-lethal-drones/104069310?utm_source=abc_news_app&utm_medium=content_shared&utm_campaign=abc_news_app&utm_content=link

#Industry/competitors
stale
Added 2 years ago

Listened to a great economist podcast (money talks: a shot in the arm). Its subscription only, I'm afraid.

The discussion was around the changing defence industry, in particular how the "cost plus" model that has existed for the last 50 years is no longer fit for purpose. This industry has been dominated by a small number of "primes" that are perversely incentivised to spend as much as possible on developing weapon systems (the more they spend the more they earn (cost of development plus a margin). Much like the NASA development and procurement model has been shown to be no longer effective by the like of SpaceX, so the defence Primes are likely to suffer significant erosion of their market share by nimble start-ups that are predicting what customers will need and building it with their own capital to sell on for a larger margin if/when they have been proven successful.

The example they used was Anduril a US defence company specialising in electronic and drone/counter drone technologies. It takes no special knowledge to predict that warfare will increasingly be heading in this direction as evidenced by any conflict currently under way in the world (Ukraine, Gaza, Houthis etc)

Clearly, the Primes will not enjoy this erosion of their revenue, and will have two options: build in house, or acquire small, specialist companies and throw money at their projects. I think it is very likely that Droneshield will get taken over before too long; it may well attract a significant premium.

I've been watching the progress that Droneshield have been making and I think I now have the confidence that are going to be a success. There are significant challenges that a small defence contractor faces: a poor negotiating position, delayed payments, capital intensive, need to manufacture in bulk before sales so slow capital recycling, difficulty competing with bigger better resourced competitors - there are probably more.

But on balance, I think the likelihood of success is now much better than it was a year ago. They have executed well: revenue is increasing rapidly, they have now got a US military contract that could lead to much bigger things (and make them a more juicy takeover target) and the are cashed up and about to tip into profitability. This might be delayed by the increased cost of new facilities and increased headcount etc.

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P/S is not cheap but on a forward looking basis is not onerous (if they continue to execute as they have indicated).

The additional thing that has attracted me is the increasing percentage of revenue that is predicted to come from the recurring SaaS stream.

The thesis is rounded out by the likelihood of a takeover, but not solely built on it. Additionally, we may see small caps become re-rated as inflation eases and the rate cycle turns.

Not held yet but will do so in the next week or so. As always would like to hear the counter argument.

Nerd fact: Anduril - "Very bright was that sword when it was made whole again; the light of the sun shone redly in it, and the light of the moon shone cold, and its edge was hard and keen. And Aragorn gave it a new name and called it Andúril, Flame of the West."

J.R.R. Tolkien[2]

#Good plug for the company
stale
Added 4 years ago