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Defence solutions group DroneShield (ASX: DRO) is seeking to raise $75 million from investors to help fulfill a raft of new contracts for its drone-defence technology globally.
DroneShield, which this week announced a tenfold increase in revenue in the March quarter to $16.5 million, has a sales pipeline of more than $500 million comprising more than 90 projects with government clients, including a $4.3 million deal secured with the US Government in March.
The Sydney-based company, a developer of artificial intelligence-based platforms for protection against advanced threats such as drones and autonomous systems, is currently fulfilling $27 million in contracts amid a surge in drones usage in armed conflicts globally.
The capital raising also comes on the heels of an announcement this week that DroneShield was awarded a three-year procurement framework agreement for counter-unmanned aircraft systems with NATO, in the first deal of its kind for the Europe-based defence alliance.
DroneShield is raising $70 million through a fully underwritten placement and a further $5 million via a share purchase plan.
The placement comprises the issue of 87.8 million shares to sophisticated and institutional investors at 80c each, which is a steep 28.6 per cent discount to the company’s losing price yesterday of $1.12.
The capital raising will boost DroneShiled’s pro forma cash balance to about $132 million which the company says will fund the build-up of inventory to support its pipeline of opportunities and to scale its engineering team to “accelerate development of in-house artificial intelligence and machine learning engines and capabilities”.
In its latest quarterly update, DroneShield reported a cash balance of $56.4 million at the end of 31 March 2024, with no debt or convertibles.
The company had committed supply chain payments for inventory of $35.4 million over the next nine months, with the company noting that DroneShield hardware carries sophisticated componentry – a feature that it says assists with high margins and differentiates its products from competitors – which necessitates advanced ordering of componentry due to the build time.
DroneShield delivered record revenue of $55.1 million in calendar 2023, up 226 per cent from a year earlier, leading to an after-tax profit of $9.3 million.
When announcing the procurement framework agreement with NATO this week, CEO Oleg Vornik noted that it was one of the “most strategically noteworthy” deals secured by the company since it was founded.
“DroneShield is well positioned for the potential order volume with the new production facilities and production ramp-up announced earlier this year,” said Vornik.
“Additionally, this contract provides further validation to the distributor model, where DroneShield has undertaken a significant investment over last the 10 years to grow its network of highly competent in-country partners in over 70 countries globally.
“This enables the company to leverage off local expertise and relationships in each of these individual country markets.”
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