Ann: DroneShield releases DroneSentry-X Mk2, page-47

In the case of DRO we are really fortunate to have the Alan Kohler interview from April 2022. That interview was no puff piece like what comes out of the Market Herald. He asked some really good closed end questions. Ignore the adjectives and the spin. Focus on specific, measurable data. It was also 18 months ago which gives us plenty of time to check whether Oleg has delivered on what he said he would.

Lets look at the two items I mentioned above.

1. Did they deliver on what they said they’d deliver on in the past?

Here are the claims:

They were roughly cash flow positive in Q1 2022

Will not need to raise capital

Hopefully get $20-30M transformative type orders later this year (2022)

Break-even at $20-25 M

The first two are clear misses. A year and half later they are not cashflow positive and they raised quite a lot of capital. The third is a near miss. They got one $10M order near the end of the year and the transformative order 6 months later. The fourth is a miss. The first half they should have been cashflow positive as they were well over half of $25M in revenue and still burnt several million in cash.

2. Have they performed in the past?

DRO gets high marks on this measure. Its profit has increased substantially year on year.

Analysis: Need to be careful on future promises. Based on past delivery the 2028 target of $300-500M is very unlikely to be achieved. Sales trajectory looks good, but products probably not as profitable as the company suggested. The company is also far too reliant on a small number of large orders which is a risk for repeatability.