Possible disruptor? Article on ABC. In short: South Korea has announced plans to deploy lasers to shoot down drones sent by North Korea.
Officials say the technology is invisible, noise-free, runs on electricity alone and costs $AU2.15 per shot.
What's next? The"Block-I" system technology is set to be rolled out this year.
Laser Anti-Aircraft Weapon
This is a high-energy laser weapon system capable of providing protection against small unmanned aerial vehicles and multicopters at key facilities. The application of a mobile platform and increased power/precision will help better deal with more advanced threats.
Small Laser Weapon
As a small, lightweight high-energy laser weapon system capable of providing various laser output levels through modular design, this is available for infantry and mounted on mobile platforms.
The technology has successfully achieved a 100 per cent shoot-down rate in previous tests, and with future improvements, it could become a "game-changing" weapons system capable of countering aircraft and ballistic missiles in the future, DAPA said.
But some analysts like Senior Researcher at the Korea Institute for Military Affairs, Hong Sung-pyo, said it was too early to be sure about the weapon's capabilities.
"Laser weapons have not yet been put to practical use worldwide, and further verification and more time are needed to determine whether they can be utilised as a practical weapon system," he said.
Nice little Order to Start the Day
Hold IRL & SM
Good it be that our highly-esteemed leader and overlord of this forum (aka @Strawman ) yesterday called "peak $DRO"?
What say you, @Saiton ? (Is this the start of a "down wave" or is there another term, like "down Niagara Falls")
Fri 28th June Chart update
I have been holding off writing for DRO as it has proved my wrong a couple of times now. Tricky one. There have been many signals telling a story for a drop over the past couple of weeks however not enpough for me to post on. Today though im seeing some big signals for the drop. To prove me wrong, it would have to blast off again. Take it all with a grain of salt, but I think the drop has arrived.
Chart Update - 3rd Sep24
According to the technical we could be in for a drop.
It will be interesting to see with how much vigor or if they can keep it propped up allowing the 1D and eventually the 3D charts to reset.
Chart Update 18th July 24
Sorry I know Dro has been a bit much on SM especially for those who weren’t part of it, however your opportunity may be on the horizon. See after such exuberance and the a super fast large fall, it tends to take some time for the market to level out at a value thats reasonable. What Im trying to say is that there can be an over reaction to the down side (as people bail out) after the over reaction to the upside. The charts have now given the next ABC down indicator while its still finishing of the original one. You can get overlapping ABC's down which just says "it aint finished yet baby". Not only only has it given the next ABC down set up, its also shown up on the K value of the stochastic indicator. Its way ahead of where it should be and needs to drop back to a reasonable level. To add onto those signals you can see there is good support down just below the aqua C @1.245. There is a support level (pink line),a Blue trend line & the Yellow trend line. For all of the above reasons I feel we will see $1.20 - $1.08 over the next week (maybe even sooner). So now all you fundamentalists can help me with what your thoughts are to: 1) what a fair value for DRO would be 2) Is 1.20 - 1.08 Cheaps. Im seriously considering loading up at those values. Keep in mind it may not bounce back so quick. It should zig zag sideways for quiet a whileas we are now in the W4. This wave is USUALLY slow and protracted.
Oh quick edit: those price points I mention are also in the 76.4% retrace zone (that horizontal white dashed line) of the large W3 we just had, so it will probably stop there also. Just adds another reason for the $ to stop falling.
Another chart update Wed 17th July 24
So you need to drill down to the 10min chart to see how the drop is forming, and now you can see the usual ABC with C wave being 5 waves down. That takes it real close to the Blue Trend line I mentioned yesterday and the 61.8% before fib before we will see it start a bounce of some sought (i believe ).
CHart Update thues 16th July 24
Ok well there it is, about time. I actually gave up posting about it. Now whats going to be interesting is how it now works with my Fib levels. So the rule here is what ever the wave before pushed higher by (wave 3 in this case) so to will the retrace wave (wave 4) lift by. Also another rule is wave 4 usually retaces by 38.2% of wave 3. Well Guess what, we are here. Oh no wait its on the move again as I write. I would like to see it hit that first blue Trend Line first ( so about 1.60) and then have a retrace back up for a bit. Lets see how it goes.
Chart Update Thurs 11th july 23
Ha well, even though DRO keeps on proving me wrong, I'm really enjoying tracking it. So as I mentioned many times, the charts have provided me with signals that the drop is imminent and then it just keeps on keeping on. Well It has now added 2 more signals to the stack that says it needs to drop like a No.2. I now have divergences on the daily and 3d charts. You can see the small target box I had recently. Thats where it should have stopped for a W3 @ the 161.8% Fib (instead it paused, so they thought about it) then it pushed to the next level up 176.4% and paused again before continuing. Now at the 200% which is usually a w5 level not w3. Will it stop here and act out the 2 divergences. As you also now know if it pushes up a level etc on a Target $ then the retracement that follows also lifts by the same amount of levels. That brings w4 down to the target shown by the big box.
Just another thought also, we have all seen good news released to the market for the share $ to fall instead. I believe thats because the $ had already been pump up in anticipation of the good news and then market realised it to be over price. We may see the same here (unless the news is a win on an extraordinarily large contract). This next retrace will certainly be interesting to watch
Chart update Fri26th July 24
Ooo Ooo Ooo look at this. Im loving the setup coming up (lets hope).
Look at all those ABC's down to get to that great support zone I mentioned a week or 2 ago. The next ABC (orange) has just started its C wave down. Its also in a decline wedge (a pattern known for preceding an impulsive move up) & has the ABCDE (3 wave move each wave) although I'm still trying to master this ABCDE pattern. Its will also hitting the 100sma on the daily & a fibonnaci Level of 76.4% retrace of W3 ( its a lot deeper than normal however we all epected that. I just like to see what I beleive is a bottom, happen on a Fibonacci level).
So there are loads of reasons for me to take a position some where after it leaves what I think is the bottom. If I was cautious I would wit for the 1st 1/2 up, however I'm also feeling that the 1st wave up might have some stregth behind it after the market was all on board recently. They will certainly still be waiting and seeing the same as I am.
The Play - So for that reason I might take a 2.5k - 5k token position see how that first 1/2 plays out. If its nice like I'm thinking then after the 1/2 Ill load up. The way I think is I determine the size of holding I dbe happy to end up with, Lets Say 100K -150K. So at the start I will layer in small positions as it proves itself, and then increase proportionally to maintain the 15% profit margin. Obviously the profit will get larger and larger as the overall amount increases till I hit my maximum spent amount of 100K-150K. This all needs to happen in first 3rd of what I work out to be its over all taget of its next large wave up (being W5). This should take quite some time as I have mentioned before, wave 4 down is usually a long one especially in the BIG wave 4 down. To climb to W5 without any Big news could take a long time if DRO keeps winning contracts @ 3-5 million at a time.
Please let me know how you think and would play this out (how you enter, size and techniques). Would love to hear how other think, for or against. Keep it nice though.
SPP substantially exceeded the maximum capped raising amount of $15 million set by the Company, with DroneShield receiving total applications for fully paid ordinary shares (Shares) for $40 million
The initial Plan: (The capital Raising has exceeded DOR wildest expectations)
18 April 2024 ASX RELEASE $70m Fully Underwritten Placement and up to $5m SPP
Net proceeds raised from the Placement and SPP will be used to build up inventory to support DroneShield’s strong pipeline of high-quality customer opportunities as well as the scaling of the engineering team to accelerate development of in-house artificial intelligence (AI) and machine learning (ML) engines and capabilities for enhanced detection, identification and response of drone threats
- Net Profit Margin expected to be Strong
Tues 18.06.2024
Up dated Technical Analysis. New price target 1.15. to 1.23
It bee some time since I have done any analysis on DRO as it blew past my targets and left me confussed as to what rules it was working within. Well turns out it is still working to the same rules I follow, just not applied to daily charts, weekly charts.
Keep in mind it could still climb to 1.64 as its still in the wave 3 zone, however all the indicators are pretty topped out and its due for another draw down into wave 4. At least thats what im going for hence posting it to keep myself accountable. Do as you please with this info. I myself am curious to see if im correct.
I’m getting a bit bearish over the amount of revenue being captured by DRO for the Drone Guns (https://www.droneshield.com/c-uas-products/dronegun-mk4). Looks like > 50% of total revenue from the latest investor presentation
From what I can understand, these guns effectively work to interfere with the signal between the Drone and its operator making it either land safely or better still return to its operator (so you can then counter with your own killer drone or artillery strike). Eg. https://forum.dji.com/thread-281795-1-1.html
The DRO guns are basically little portable/personal versions of the Russian Krasukha Electronic Warfare trucks https://en.wikipedia.org/wiki/Krasukha which disrupt all manner of communications including GPS signals. https://www.popsci.com/technology/russian-electronic-warfare-equipment-ukraine/
Where I am a bit bearish about the future efficacy of these guns is where the Drones start to adopt some AI (as is already happening in the Ukraine conflict) effectively allowing them a level of autonomy if they are subjected to electronic warfare such as the DroneShield DroneGun. Effectively the AI might allow them to continue flying to a target, identify a target (such as a the nearest tank with a Z on the side) and kamikaze into it. Alternatively, cheap drones working in a swarm may also be able to overwhelm the effectiveness of drone guns.
Here's a smattering of articles on the topic:
- https://edition.cnn.com/2024/04/01/energy/ukrainian-drones-disrupting-russian-energy-industry-intl-cmd/index.html
- https://www.livescience.com/technology/engineering/ai-drone-that-could-hunt-and-kill-people-built-in-just-hours-by-scientist-for-a-game
- https://consortiq.com/uas-resources/drone-ai-technology-how-it-works-why-it-matters
- https://shield.ai/
- https://www.dji.com/au/ai-module -
- https://www.nationaldefensemagazine.org/articles/2023/12/13/industry-perspective-autonomous-swarm-drones-new-face-of--warfare
- https://mwi.westpoint.edu/swarm-clouds-on-the-horizon-exploring-the-future-of-drone-swarm-proliferation/
- https://www.axios.com/2024/03/15/drone-swarms-ai-military-war
Has anyone else looked into this in their investment thesis?
Or do you think the bigger risk at the moment is the amount of hype on the DRO share price?
DISC: Held IRL and SM
I know you're supposed to let your winners run, however looking at Droneshield over the last month you've got to start asking the question when will this madness end?
Commsec shows a huge buy side in stark contrast to the sell side as below.
How much is priced in for future revenue, expected growth etc.
I can no longer attach a value to this.
Hold IRL and SM
What do you make of this ASX : C. Listing Rule 3.1, which requires a listed entity to immediately give ASX any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities.
Thinking...Closing the SPP early not good for ones missing out and the offering, was over subscribed anyway so extra 3 to4 days open would not matter. Then do the scale-back on the over subcription.
Peter James Number acquired: 15,323 (via SPP)
NOW Holds 935.3Mill units / shares ..Solid Holding.
Investor Relations — DroneShield Ltd (ASX:DRO) — Droneshield
Chart: left to right direction, Good
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.
- 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)
Nice quarterly Activities report.
Great uptake in QonQ.
I just hope this momentum continues
Disc Held
So Dro is still pushing ahead, which was contrary to my last update, however Im still seeing the setup for the decent pull back I was expecting. The signs are now even stronger, favourable to the down leg Im waiting on. I still hold my target zone below as shown where I have set an alert for me to revisit the technicals (on no positive news). 2 Items on the charts are swaying me to resist taking any position still.
1) The incline wedge it is working within. (look up incline wedge pattern for stocks)
2) The ongoing divergence on the rsi/stochastic indicator (Indicator dropping showing weakness while stock keeps rising)
I also noted an article on Market Index written by a Dr. David Allen from Plato Investment Management on insdier buying and selling showing that last big draw down had an element of DRO management selling. That $11.9m works out to be approx 2.5% of the total approx market cap. It is good to see the ivestors eating it up though with it rising back up (says they are very bullish on the stock). However even the DRO inside sellers thought it was a little too preemptive, hence there partial sell out.
Im also tracking AD8 & TPW waiting for there lows.
Good luck everyone
MMM so whats Drone Shield up to?
Well here's my charts and what I think will happen without any meaningful news. You probably read my last post on the FOMO effect for its last rise to the moon. Its certainly had the top chipped off and the way its shaping I believe its got further to go. My chart shows my plan however the stock is certainly a golden child ATM and as we all feel it probably has a good ways to go over the coming years so long as its run well.
So Im thinking I will run this one with alerts at my targets and if any news comes in Ill certainly be alerted when it pushes through one. I will update this one if anything needs to be revised
Good luck
Just trawling through the recently release 2023 Full Year report to review my valuation. I'm wondering if anyone wiser than me is able to help interpret the taxation & R&D credit situation as it makes quite an impact on overall profitability.
Looks like Earnings before tax is actually only around 3.166m on about 55m of Revenue (so < 6%) but the headline numbers DRO are throwing around are after tax profit of 9.3m (about 3x) which seem to mostly be constituted from Deferred Tax Benefits and R&D Tax incentives. This makes a pretty major difference in future valuations as they are material to the models and it seems difficult to predict what these amounts will be in future years.
They seem to be chewing through their accumulated losses pretty quickly (going from 26.6m in FY22 to 11.34m in FY23)
Additionally there is mention of a 9.9m R&D contract received from Australian DOD which presumably will be treated as revenue.
I suspected something like this might be up 7 days ago
https://strawman.com/forums/topic/8514
Looks like these managers continue to act as a selling block (while they continue to issue themselves more options with lowball targets).
This looks like its really becoming a recurring pattern.
DISC: Held IRL and SM (but looking for a possible exit as I'm losing faith in management's behaviour ... maybe I'll top up my BTC investment with the proceeds)
The Good
- Significant positive cash flow of $21.8m for the quarter. This leaves a solid cash balance of $57.9m. Given the lumpy nature of contracts, this can’t be extrapolated out for every quarter, but it gives an indication of what the business can look like as it continues to deliver.
- Full year revenue of $55.1m with earnings (EBITDA?) of $4m.
- There was only a minor increase in staff costs in Q4. Given staffing sits at 105 with a medium term target of 150, this will likely continue to increase, but now makes up a much smaller portion of the operating costs. Advertising has now jumped to the largest cost behind product costs due to sales commissions.
- Pipeline remains at $400m. Of this there are 7 “high probability” near term contracts to the value of $200m
- Order backlog reduced from $51m to $30m. This is likely able to be delivered in Q1 if the relocation to the new facility doesn’t impact production.
The Not So Good
- Previous updates had the move to the new facility being completed by December 23. This is now revised to the end of January 24. Only a minor slip, especially over the holiday period and when they have been obviously delivering on orders as a priority.
- SaaS revenue which has a medium term target of 50% of the revenue base only increased from 2% to 2.5% of revenue share from FY22 to FY23. This is expected to be slow as hardware is distributed to the market, however current growth is marginal.
Watch Status:
Valuation Status:
What To Watch
- $4m of EBIT reported for FY23. Review the full year report for how this is reported in accounts.
- Completion of move to new facility and how this impacts the speed of order fulfillment.(Carried Over)
- Planned US Federal roll-out of body worn devices (No Update - Carried Over)
- Air Service Australia C-UAS rollout (Carried Over) - Looks to have closed at the end of October 23.
- European framework agreement for 24/25 rollout ($30m+)
- Start of JCO US DoD rollout (Carried Over). Potential updates to this program around March 24?
- Lockheed Martin - Australian DoD Agile Shield Integration
- As the company starts to generate more cash, how this is deployed will be an important indicator for the medium term future of the company. Recent options have a $200m revenue target. Management may start eyeing off potential acquisitions or adjacent technologies. My preference would be to stay focussed on their primary business and continue to grow with the rapidly evolving and expanding market.
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.
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."
I noticed today that Bell Potter had placed a buy rating on DroneShield with a 50c price target, i don't have a subscription so i could only attach a screenshot below and a link to their last buy rating 12 months ago for comparison.
https://onlineresearch.bellpotter.com.au/fileGet.aspx?guid=9d85a6bd-abf7-4b82-9015-28551956ebc5
Also; I remain supportive of the company and very much look forward to whats to come, however i have voted NO to the Incentives at the upcoming AGM.
Not that i am against Incentives, i just feel that $200 million for the dilution is not enough; especially after the recent cap raise and dilution.
remain a holder in RL and SM
Yesterday, I had the incredible opportunity to attend the Dubai Airshow, where Droneshield showcased its cutting-edge technology at the Australian pavilion. The presence of CEO Oleg Vornik and Business Development Manager Louis Gamarra added a personal touch to the event as they openly interacted with the enthusiastic crowd. As a shareholder, I had the privilege of engaging in a detailed conversation with Louis for nearly an hour, gaining valuable insights into the business.
The exhibition featured the impressive DroneGun Mk4 and RFPatrol Mk2, both meticulously manufactured in Australia. It was emphasized that every component is sourced locally to comply with regulations for sales to Five Eyes countries and others. Their commitment to security was evident, with a keen interest in understanding the background of those exploring their products, particularly if they appeared to be Chinese nationals. This vigilance took on added significance when later in the day, I discovered another company, Skyfend (https://www.skyfend.com), with a seemingly identical product line to Droneshield. Interestingly, this Chinese company exhibited products strikingly similar to those of Droneshield. Below Pictures I took of SkyFend Pavilion at 2023 Dubai Airshow
In my inquiry about the differences between the two, the only response from the Skyfend representatives, who were Chinese nationals, was a claim that their product was superior. This raises intriguing questions that warrant further investigation. However, it's worth noting that Droneshield's strategic advantage lies in its accessibility to Five Eyes countries, and given the current global environment, Western countries may be hesitant to embrace Chinese technology in this sector. The competitive landscape promises to be a compelling area for future exploration.
To further underscore Droneshield's commitment to innovation, I learned that the company currently boasts a team of 85 full-time engineers. According to Louis, Droneshield is deeply entrenched in the realm of hardcore engineering, a testament to their dedication to pushing technological boundaries. During our conversation, he provided valuable insights into the intricacies of their technology. Notably, he mentioned that due to stringent regulations in Australia, they conduct their new tech testing exclusively in Virginia, USA.
One prevailing theme that emerged from our discussion was the apparent reluctance of many Western countries to swiftly acknowledge or address the evolving threat posed by drones. This hesitation underscores a substantial opportunity, particularly in safeguarding critical infrastructures such as airports. As the world grapples with the increasing sophistication of drone technology, Droneshield's expertise and forward-thinking approach position them as a key player in mitigating these emerging threats. The company's emphasis on rigorous engineering and global testing reflects a commitment to staying at the forefront of this rapidly evolving landscape.
Shares in Droneshield catching a bit of a bid this morning after they announced the release of their latest product -- DroneSentry-X Mk2
No indication of what this means financially -- they'll just have to wait and see what the take up is like. But good to see some output from all the R&D and the timing of the release ahead of the AUSA 2023 expo can't hurt.
Not sure the news warrants a 10% jump in the share price? But I've long given up trying to find reason in daily share price movements.
ASX announcement here
As expected, the first half results are pretty strong for Droneshield. This slide highlight the key numbers well:
Small point: It's interesting that for a business that is now firmly commercialised and growing, well funded and at the breakeven inflection point, the results preso puts a lot of emphasis on the technology use case and Total Addressable Market. More what you tend to see when there aren't any good financial numbers to do the talking for you! Hard to miss the emphasis on AI too -- they're not blind to what the market is excited about at present.
Anyway, as Oleg said to us recently (see here) the second half is positioned to deliver further growth and the 5 year target of $300-500m in revenue. During our meeting he seemed to suggest around $70m in revenue for the full year (they report on a calendar basis). So that puts shares on a 2.6x sales multiple.
Maybe not that high if they can sustain their growth and hit aspirational targets. I'll try a rough-cut valuation in a moment.
ASX presentation here.
Droneshield has been added to a MSCI index.
Doesn't really change the business, but probably provides a bit of support short term (even if the weighting is likely quite small within the index).
Further to @Summer12sstraw about the ShareCafe interview with Oleg I wanted to add a few notes. (I haven’t watched the Market Herald interview that @slymeats posted yet, but judging from the slide notes the content looks similar) Sometimes Droneshield can be a bit over promotional so I am trying to keep track of some of the statements made to compare to the actual outcomes over FY23.
- The company is now reaching its breakout phase of the growth profile. Size of contracts have been progressively getting larger as Droneshield establishes itself with the government departments globally. This is indicated by the two recent 8 figure contracts. Ongoing contracts are expected to be more of this nature going forward.
- SaaS was 5% of Revenue in FY2021. Oleg re-iterated that the goal is for this to make up 50% of Revenue within 5 Years. How this is tracking / growing will be able to be determined in the upcoming FY2022 results.
- Expecting follow up to multiple R&D contracts. These are great contracts for Droneshield as they develop relationships with the client and are improving their product / SaaS offering to directly meet clients needs. They also further Droneshield’s capacity in the adjacent AI / Machine Learning sectors. There may be some key personnel risk here if the company starts taking on too much work, but the other side of that coin is that they can use these types of contracts to further develop their teams.
- Australian DoD AI electronic warfare contract. The next contract is also expected to be larger than the previous ($3.8m over 2 years. Expected to end in the 2QFY23)
- Australian DoD AI computer vision contract. ($800k over 1 year). Phase 2 expected commence early 2023
- ISREW Panel
- Expecting similar work with US DoD eg. the SBIR Phase 1 JV with Quantam Research - due for completion in Q1FY2023
- Recommendation from the US DoD for Droneshield products to be deployed at military bases across the U.S. The rollout is expected to commence this year. This was a 12 month selection process, where 3 companies were selected to form a panel. I have listed the companies selected below which helps provide some insight into Droneshield’s competitors in the market. A point of interest is that D-Fend Solutions isn’t listed in Droneshield’s slides. It will be worth monitoring which companies are getting contracts and the associated values, in particular LITEYE.
- Droneshield - Detection & Defeat - Announcement
- D-Fend Solutions - Forced Land - Announcement
- LITEYE - Detection & Defeat - Announcement
- Bill amended last year in Australia for critical infrastructure owners to assess and mitigate threats against facilities. This will need to include threats from drones. (This could be a bit of an opportunity for AVA as well)
Drone Shield is a company that provides a range of products and services for detecting, tracking, and mitigating drone threats. The company's products are designed to help organizations protect against unauthorized or malicious drone activity, such as drone surveillance, drone-based attacks, or drone smuggling.
Drone Shield offers a variety of products for detecting and tracking drones, including radar systems, thermal cameras, and acoustic sensors. These products can be used to detect drones at long ranges and in a variety of weather conditions. Droneshield’s three streams of revenue include
- Hardware (drone detection and defeat devices)
- SaaS (device software updates)
- R&D contracts
DroneShield has its own production facility, supplemented by two outsourced manufacturers, to ensure ability to manage large hardware orders. It currently employees over 60 staff made up of engineers, sales and field support and production technicians.
From the 2022 Annual Report the main product range is as follows:
Brief Summary of Current and Past Products
· November 2022 DroneSentry-C2 Command and Control System Upgrade – software platform, providing counter-UAS awareness and reporting capability. https://www.asx.com.au/asxpdf/20221116/pdf/45hn16hsr6375b.pdf
· April 2022 DroneSentry-C2 in partnership with Nearmap https://www.asx.com.au/asxpdf/20220405/pdf/457q1j380l52qg.pdf
· September Sonar One – sonar monitoring device capable of detecting and tracking hostile unmanned underwater vehicles (UUVs) or diver intruders in protected waters. Ideal for deployment around naval vessels, harbours, and critical infrastructure. SonarOne is easy to install and monitor via the DroneSentry-C2. https://www.asx.com.au/asxpdf/20210901/pdf/4501kkmhyww1y5.pdf
· August 2021 CompassOne – device provides real-time military grade location, orientation and direction sensing for deployed static and on-the-go assets. https://www.asx.com.au/asxpdf/20210823/pdf/44zkx2hbhvws67.pdf
· August 2021 DroneSim – a lightweight and rapidly deployable UAS/drone simulator that is able to mimic common drone signals for the purpose of counterdrone (C-UAS) system testing and validation. The device is capable of generating aerial (UAV), ground (UGV) and water surface (USV) drone signals. https://www.asx.com.au/asxpdf/20210817/pdf/44zcmk9tt2ch7r.pdf
· November 2019 DroneSentry-X – vehicle-mounted drone detection and defeat product. Lightweight at approximately 10kg, compact size and easily mountable on most vehicles. https://www.asx.com.au/asxpdf/20191114/pdf/44bkh00sq9q5kk.pdf
· August 2019 RfZero is an omnidirectional drone detection device with a 1km range. It is designed to be a cost effective fixed site alternative to Droneshield’s higher end product RfOne (a 5km radiofrequency direction finder). Completely non-emitting. https://www.asx.com.au/asxpdf/20190802/pdf/4474v1xp18s3zc.pdf
· July 2019 DroneGun MKIII – portable pistol-shape drone jammer, weighting under 2kg. Having a shorter effective range of 500m verus 1-2KM for DroneGun Tactical. https://www.asx.com.au/asxpdf/20190715/pdf/446lzqk0qszn9n.pdf
· May 2019 RFPatrol – body worn drone detection product. Weighing under 1 kg, completely passive (non-emitting product. https://www.asx.com.au/asxpdf/20190501/pdf/444r4gbqzgn2rz.pdf
· October 2018 DroneCannon RW – a lightweight “soft kill” drone jammer for use with “hard kill” remote weapon station. Can be used on a fixed site or a vehicle solution https://www.asx.com.au/asxpdf/20181010/pdf/43z3qbnwk9pthb.pdf
· February 2018 Radar Zero – compact drone detection radar product. At roughly the size of a paperback book, the product can detect up to 750m away and sells for a fraction of the cost of the larger longer-range more conventional radars. Complements existing longer-range RadarOne product. RadarZero is portable and mobile. https://www.asx.com.au/asxpdf/20180207/pdf/43rdb8d4n05gzh.pdf
· January 2018 - DroneGun Tactical No backpack – the product is entirely self-contained within the rifle body, whilst maintaining light weight and long effective range (over 1km). Addition of 433Mhz and 915Mhz frequencies, to ensure complete effectiveness across drone models. Ergonomic body and controls. Further alignment with standard military specifications, including standardised NATO military battery power. https://www.asx.com.au/asxpdf/20180131/pdf/43r5crbpxb8xww.pdf
· September 2017 - DroneGun MKII development of second generation of DroneShield tactical drone jammer.https://www.asx.com.au/asxpdf/20170911/pdf/43m6wfp64xp3y0.pdf
· June 2017 - Thermal Camera and Optical Camera Products – Launch of two new products – DroneHeat, a thermal camera, and DroneOpt, an optical camera, to supplement its existing acoustic products. https://www.asx.com.au/asxpdf/20170614/pdf/43jxmzp3y1thw2.pdf
· January 2017 Drone Sentry Product – an integrated drone detection and countermeasure product. Two key categories of products acoustic drone detection system and second is DroneGun, a drone jammer, effective at distance of up to 2km. https://www.asx.com.au/asxpdf/20170116/pdf/43fb8jddq290dy.pdf
· Dec 2016 – DroneShield - Effectiveness With deployment taking place in a dense urban area, the user has opted for DroneShield’s omnidirectional detection sensors (“omnis”), which provide a wide 180 degree protection with up to 150m range. The omnis provide an alternative to DroneShield long range dish sensor product, which is effective at up to 1km in a 30 degree cone. DroneShield’s detection sensors are not time of day dependent, do not rely on line of sight, completely passive to the surrounding environment, are not subject to export restrictions, and cover all major drone models, including frequency hoppers. https://www.asx.com.au/asxpdf/20161220/pdf/43dvgx88h84k5n.pdf
· Nov 2016 - Drone Gun – a rifle style handheld jammer device, highly effective at 2.4Ghz and 5.8 Ghz frequencies (the standard frequencies of consumer and commercial drones globally). AN optional GPS-jamming capability is also available to customers where lawful. https://www.asx.com.au/asxpdf/20161128/pdf/43d7xbhdc23d5p.pdf
If anyone has used or been exposed or has any more information on DroneShield products would love hear about it. Thanks
This one has taken me a while to work through, and the rest of the sections are still in the works but here is my first pass on the business summary for Droneshield.
• What does the company do and is it easily understandable?
Droneshield is a provider of UAV countermeasures including drone detection, tracking and disruption. They provide products and services to both the public and private sectors.
• What is the problem the company is solving and how are they solving it? - Where? Why does it need solving?
As drone technology becomes more sophisticated, drones are increasingly being used as tools in nefarious activities such as smuggling of drugs and weapons, disruption to airports and other infrastructure, spying, remote controlled explosive devices etc, which are costly to the asset owner in terms of capital, reputation and human cost.
Due to their size drones are unable to be detected using conventional technologies. Droneshield provides a range of fixed and portable equipment which can detect, track and disrupt a drone’s flightpath. These devices can be used to protect critical infrastructure and locations from the threats listed above.
• What is the company business model? What is the pathway from product/service/offering to payment?
Droneshield sells their devices to both private and public entities through a mixture of direct sales and partnerships. Typically a proof-of-performance trial or extended tender period are a precursor to being awarded a contract.
• Is the product offering diverse and therefore income generation diverse?
The company offers a limited range of fixed and portable devices, which can be mixed and matched to provide a tailored solution to their clients needs. The limited range of equipment is a risk in the rapidly evolving technology area, however droneshield are regularly releasing upgrades and new products to compliment the existing product range.
The limited offering could be seen as a potential risk.
Diversity in income is primarily from the range of clients / applications for the technology.
• Is the company a price maker or price taker?
The counter drone equipment space is rapidly becoming more competitive, (8 competitors are listed in the company investor slides) and although Droneshield claim their technology is superior, they are a price taker.
• Does the business generate recurring revenues? How reliable is this recurring revenue?
Recurring revenues are generated through ongoing software upgrades to the equipment. The recurring revenue would be expected to last for the install life of the equipment where it has been taken up by the customer. (Estimate ~5 years?)
Currently recurring revenues only make up around 4% of total revenues as of H1FY22, but as the install base of hardware expands, the recurring revenues from software sales are expected to grow.
The CEO has stated that he expects this component of the business to grow to ~ 50% of revenues in the future.
• Who are the core customers of the business?
Core customers are government entities, such as military & law enforcement, but private sector customers are growing such as airports and infrastructure owners.
Currently defence makes up 75% of revenue and the intelligence community 15%.
• Is the customer base diverse? / • Does the company operate in multiple markets/countries?
Droneshield sells to a global customer base. (Limited by Government approvals etc). Revenue splits for H1FY22 can be seen below.
• Is it easy to convince customers to buy the products/service?
Initial sales are usually led by a proof of performance period or trials of the product, there are also significant onboarding and vetting processes to be able to sell products to many of the government institutions that Droneshield has as customers.
Once these barriers are crossed and droneshield has been awarded a contract, sales become much easier.
As drones increasingly become an problem in need of a solution the global sales pipeline available to Droneshield continues to increase. (Note. As reported by DRO)
• Does the company operate in stable markets?
Both the markets and customer base of Droneshield are stable and low risk of having significant disruptions all at once
• Is there a history of launching new lines of business successfully?
The company has launched several products over the years which complement each other. Each has had progressive trials with several entities leading to contracts.
• Is the company disruptive and innovative in its field?
Droneshield uses similar technologies to many of its competitors using RF Jamming for its defeat options, and RF, EO/IR, Radar for it’s detection technology.
• Are the profit margins attractive (better than industry)?
Currently gross profit margins currently are around 70% (H1FY22)
• What are the CAPEX requirements and are they ongoing?
To be able to deal with additional or large orders, droneshield has manufacturing partners to be able to subcontract to without the need to scale up its own facilities and maintain the ongoing operating expenditures. This does incur additional manufacturing costs but currently contracts are lumpy which make scaling up their own facilities a risk.
• To what degree is the business cyclical?
A large part of droneshield’s current revenue is based on government military spend, which although budgets are usually relatively stable the allocation of the budgets can vary. As Droneshield expands across wider industries and geographies the cyclicality may smooth out.
• What extent does the business experience operating leverage?
Droneshield sells manufactured devices which means there is a fixed cost that is required for each unit sold. There may be elements of efficiencies of scale, but that can’t be relied upon. There are two things working in the favour of Droneshield.
First, most of the business’s main overheads and operating expenses have not been increasing with sales. Once staff costs do the same there will be an element of operating leverage that will appear as sales increase as operating expenses become a smaller portion of the overall expenses.
Second management have indicated that they are targeting for software upgrade sales to increase towards 50% of revenues and SaaS style sales tend to lend themselves much more favourably for demonstrating operating leverage at scale.
• How does interest rate increase and inflation affect the business?
The manufacturing costs and operating costs will be impacted and likely increase at a rate near that of inflation. As each contract is usually tendered at a single point in time supply, cost increases can be passed on to customers.
Droneshield has minimal liabilities so interest rates don’t have any significant impacts.
• Does the company spend a reasonable amount on R&D? Look at how R&D evolves over time in % of sales.
R&D spend has stayed relatively steady at around $200k - $300k per quarter over the last 3 years which has now decreased from over 100% of sales to less than 10%.
• Is the company unknown or misunderstood by the market?
Being at the smaller end of the market and with an average volume of $120k of shares traded per day Droneshield is still a hidden company. Given the sector in which they operate it is easy to dismiss the technology if the partners and client base is not known.
I had a brief look at the FY22 Results. Revenue is lumpy and fell significantly with lower hardware sales and less R&D revenue (grants?). SaaS is going in the right direction but still tiny.
A few other observations/risks:
- $4.9m loss and cash burning fast in last 6 months, down from $9.4m in Dec to $6.6m June (note: $17m was raised via SPP back in Sep 2020)
- Lots of investment in product, sales in multiple countries (not easy)
- They are investing in accreditation for UK military standards
- They are busy delivering a $3.8 million 2-year contract with the Australian Department of Defence
I think it will be important to monitor the performance of operations in the next year as they scale up. Particularly progress on their UK accreditation and AU defence schedule which will be critical for repeat business and as a reference site.
I feels like it is very early to be a shareholder as they scale up through such significant milestones especially given they just hired 40 new people out of a total headcount of 60. I see the recent comments on here regarding their TAM and recent wins but on balance I am happy to watch a little longer.