The share price of ASX defence company DroneShield Ltd (ASX: DRO) has been on a tear recently – soaring close to 35% higher in just the last month alone. This continues an impressive run for DroneShield (and its shareholders), with the stock up an eyewatering 440% over the past year.
Investors seemingly can't get their hands on enough DroneShield shares. A recent share purchase plan, announced on 18 April, literally had to close early because of overdemand.
The company was only hoping to raise $5 million from retail investors but received orders for an eye-popping $40 million. The company had to scale back the amount raised to its maximum cap of $15 million and return the remaining funds to investors.
So, what's the big deal about DroneShield? What has got investors so excited – and why has its share price been rising so much this past month?
What does DroneShield do?
DroneShield develops technology to protect military, government, infrastructure and other critical assets against attacks or surveillance by unmanned aerial devices (in other words, drones). Its products include tactical machinery that can be used to detect and disable drone attacks. It also develops software solutions that can analyse and assess drone threats in real time and launch a coordinated response.
Recent military conflicts in Ukraine and the Middle East have demonstrated how prevalent drones have now become in modern warfare. They are cheap and easy to manufacture, which makes them a particularly pernicious threat on the battlefield. So, it's no real surprise that demand for technology that effectively counteracts them has been on the increase.
The financials
This uplift in demand is reflected in DroneShield's recent financial performance. FY23 revenues (for the 12 months ended 31 December 2023) surged 226% higher versus the prior year to a record $55.1 million. DroneShield also reported net profit of $9.3 million for the year — the first time the company has posted an annual profit in its entire history.
And with revenues continuing to trend upwards at such a rapid rate, it's unlikely to be the last.
In its most recent quarterly activities report, for the three-month period ending 31 March 2024, DroneShield stated that revenues were up a mind-blowing 1000% versus 1Q23, to $16.5 million. What makes this result even more eye-catching is that the March quarter is usually DroneShield's weakest in terms of sales — which suggests 2024 is already shaping up to be another bumper year.
DroneShield also maintains a very strong balance sheet, with $56.4 million in cash and no debt (as of 31 March 2024).
Why is the DroneShield share price up over the past month?
DroneShield's share price was buoyed by its 22 May announcement that it had been awarded a $5.7 million repeat contract with a US Government customer – with further 'material orders' expected. The order was for DroneShield's counter-drone ('C-UsX') systems, which are capable of detecting and disabling attacks by unmanned devices on air, land and sea.
And this comes hot on the heals of DroneShield's 17 April announcement that it had been awarded a framework agreement with NATO – the first such agreement awarded in NATO's history. This could increase DroneShield's sales by an 'order of magnitude' over the coming years, according to the company's press release.
What's in store for the future?
Things are going pretty well for DroneShield at the moment, and management is understandably bullish about its near-term outlook.
DroneShield considers the counter-drone market to still be in its infancy. It believes military and security companies are watching conflicts overseas and are realising just how vital counter-drone capabilities are going to be for their ongoing defence. This means spending on counter-drone technology could ramp up even further as militaries around the world bolster their stockpiles. As a global leader in counter-drone technology, DroneShield believes it is well-positioned to take advantage of these emerging trends.
