Droneshield share price plunges 19% on revenue slump

The drone technology company has reported a 45% decline in revenue.

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Key points

  • The DroneShield share price is down 19.5% today after the drone technology company reported its half-year FY22 results
  • DroneShield reported a 45% decline in revenue in 1H FY21 
  • Looking ahead, DroneShield says there is a "highly favourable macro environment" today

The DroneShield Ltd (ASX: DRO) share price is down 19.5% today after the drone technology company reported its half-year FY22 results.

DroneShield develops and sells hardware and software for the detection and destruction of drones. Its customers include government and military, airports, and commercial venues in more than 120 countries.

The company released its earnings after market close yesterday, when its shares finished at 20.5 cents.

The DroneShield share price opened this morning at 18.5 cents, down 9.75%. The shares continued on a downward trajectory to reach a low of 16.5 cents at the final bell this afternoon.

Let's take a look at the company's report.

DroneShield share price tumbles after 45% revenue decline

The key highlights of the report for the six months to 30 June 2022 are:

  • Revenue down 45% on the prior corresponding period (pcp) of 1H FY21 to $3.67 million
  • Loss from continuing activities after tax up 990% to $4.93 million
  • Cash and cash equivalents down 51% to $6.59 million

What else happened in 1H FY22?

DroneShield says it has a $350 million global sales pipeline, including $100 million in projects from here until the end of 2022. It reckons the total addressable counter-drone market is worth US$10 billion.

A highlight of 1H FY22 was winning a $3.8 million contract with the Australian defence department. It expects a contract extension upon completion of this initial contract in mid-2023.

It is also "successfully progressing" the Defence Innovation Hub.

The company says there has been a "continued rapid increase in the US business, including signing a framework agreement with the State of Texas, receiving a counterdrone contract for protection of IRONMAN Texas, and DroneShield's initial GSA order".

DroneShield said it invested in "substantial inventory acquisition to mitigate supply chain delay risks" in 1H FY22. It has approximately $15 million of inventory on hand as at 30 June 2022.

The company also achieved UK MOD SAPIENT compliance in 1H FY22. This means DroneShield systems are now compatible with military standards in the United Kingdom.

What did management say?

In this half-year report, DroneShield said there was a "highly favourable macro environment" today.

This is "due to increased macroeconomic uncertainties, [the] war in Ukraine demonstrating extensive use of small drones by both sides, and rapidly increasing defence budgets globally including by the Australian Government".

What's next?

Earlier this month, DroneShield announced it had received its biggest government grant to date. The $2 million grant will be used for the research and development of its drone technology.

As my Fool colleague Raymond reported, DroneShield says its artificial intelligence, electronic warfare, and adjacent technology services are "increasingly in demand" amid growing geopolitical tensions.

In its half-year report, DroneShield said it is continuing to move into the software-as-a-service (SaaS) space. It is using subscription pricing models on a range of products. It is also advancing its software-related work, especially in defence signal processing.

The company said: "Over time, the software/SaaS business is expected to account for the majority of the Group's earnings."

DroneShield share price snapshot

DroneShield shares are down 5.7% in the year to date. Over the past 12 months, the shares have lost 19.5%. That puts the DroneShield share price in a position no better and no worse than it was one year ago.

The company has a market capitalisation of $88.7 million.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield Ltd. The Motley Fool Australia has recommended DroneShield Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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