The DroneShield Ltd (ASX: DRO) share price is catching the eye on Friday.
In early trade, the counterdrone technology company's shares are down 8% to 86.5 cents.
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Why is the DroneShield share price tumbling?
The catalyst for today's selling has been the release of the company's third quarter update.
According to the release, third quarter cash receipts were up 18% on the prior corresponding period to $9.1 million. This represents a record performance for its third quarter.
This meant that its cash receipts year to date are now $30.5 million. This is up 20% on the same period in FY 2023, which included $2.4 million in R&D tax incentive.
Things weren't quite as positive on paper for revenue. Year to date, DroneShield's revenue is down 20% to $31.1 million. This is likely to be why its share price is tumbling today.
However, management highlights that this revenue decline reflects the delivery of a material order announced in July 2023 in the prior corresponding period.
It also notes that there are material deliveries already delivered and scheduled for the fourth quarter worth an estimated $24.1 million in revenue. As a result, it estimates that its FY 2024 revenue currently stands at $55.2 million. Importantly, that is prior to any additional new orders being received and delivered prior to the end of the year.
Ready for business
The release highlights that DroneShield is well placed to deliver orders at short notice prior to the end of the year. It has $240 million in existing inventory by sale value held.
And while that sounds like a lot of inventory, it stresses that technology obsolescence is managed by providing quarterly artificial intelligence software updates to a number of products, as well as forecasting inventory requirements by comparing sales pipeline versus the timeframe of release of the next generation of hardware across its products.
Furthermore, it points out that the hardware carries sophisticated componentry, driving the requirement for componentry purchasing in advance due to the build time of 3 to 4 months. And as customers have urgent requirements and are unable to wait months for delivery, it needs to get ahead of the curve with its inventory.
Its sales team is focused on maximising revenues prior to the calendar year-end, with October marking the start of the new US fiscal year. Management estimates that it has a robust sales pipeline worth a cool $1.1 billion.
At the end of the period, DroneShield had a cash balance of $238.3 million and no debt.
