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Why the Droneshield (ASX:DRO) share price will be on watch tomorrow

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The Droneshield Ltd (ASX: DRO) share price will be on watch tomorrow after the counter-drone equipment maker released its full-year results for FY20 after the market closed.

At the close, Droneshield was flat for the day at 17 cents per share. But it will certainly be interesting to see how the market reacts to the results on Friday morning.

Results indicate growth

Droneshield notched up another record year for revenue in FY20. Customer receipts and research and development (R&D) amounted to a total of $5.4 million in revenue. This equates to a 58% rise in overall revenue compared to FY19.

The company was quick to note that its customers continue to grow in depth and quality. Notably, customers now include the US Air Force, the Australian Department of Defence, and the New Zealand Defence Force.

Droneshield chair Peter James also remarked in the 2020 annual report that a large portion of the revenue was derived from high-quality ‘blue-chip’ customers. This includes contracts with government agencies of the Five Eyes community.

The counter-drone company also advised that its high-conviction sales pipeline remained strong at $100 million in active contract discussions. While the total sales opportunities have grown to $200 million.

Additionally, Droneshield reported a strong cash position after the company raised $17 million in late 2020. Borrowings also remain at a low amount, with $107,000 at the end of December.

Lastly, Droneshield’s net loss after tax reduced to $5.87 million, down from $7.70 million in 2019.

Future outlook hazy

With $35 million in R&D since the company’s inception, Droneshield continues to invest in broadening its product and solutions offering. More recently, it has produced software that communicated with Droneshield’s other products. The software provides alerts and visual monitoring to customers.

Droneshield is attempting to expand its software-as-a-service (SaaS) offering through products such as these, which would provide more reliable and steady revenue.

Other than the $100 million high conviction pipeline, there wasn’t much more information provided on Droneshield’s near-future outlook. This is likely due to the lumpy nature of the company’s product sales.

Droneshield share price snapshot

The Droneshield share price has returned a total of 0% over the past 12 months. That’s right – if you invested a year ago, you are right where you started.

Keep in mind that the company has also carried out capital raises which dilutes the share price. Therefore, even though the share price is the same, the company’s total market value has increased.

Based on today’s Droneshield share price, the company’s market capitalisation is now $66.3 million.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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