Ann: 2Q24 Results Call, page-57

It's not Wolf of Wall Street out there man, these deals take time. We know their strongest quarters are Q3 & Q4, so I'm giving them until years end to execute on the pipeline. For context, our sales cycles are also 6-12 months, same as Droneshield, so I can resonate with them.

I’ll also add that conversion rates increase as industry demand grows and company reputation expands. So Droneshields conversion rates from 2 years ago wouldn’t apply in 2024.

Referring to the example in my previous post, 10% is incredibly conservative as it is. If a sales rep approached management in the businesses I worked for and told them they will convert 10% of the pipeline they have, that rep would’ve been met with a blank stare.

The 1.1 billion in pipeline is spread across multiple sales reps, so each rep would have a pie of the pipeline and is most likely expected to have a 30% conversion rate (as a minimum). Additionally, all sales reps would also be expected each month or each quarter to meet new pipeline generation KPIs, rather than relying on what they currently have (this is evident through the additional 500 mil in pipeline generated since March).

I will assume they also have PIPs, so if certain reps aren’t meeting targets, they will be put on performance improvement plans (PIPs) to fix their performance or be shown the door. On average reps have 2 months to fix their performance once placed on a PIP.

Crowdstrike is the perfect example of a business who overnight, would’ve gone from having a relatively decent conversion rate (due to being market leader) to a horrendous one as a result of the incident that happened. Imagine being a sales rep right now at Crowdstrike. All of their open deals would have been lost or postponed due to prospects questioning the product and most likely began evaluating competitors.

So, the 10% conversion rate I applied to the 1.1 billion in pipeline is a safe number to forecast as it takes into account that 90% of that pipeline will have a combination of: Deals not closing, opportunities being postponed, customer/prospects requirements shifting etc. Even a poor performing sales team can close 10%.

The math says, assuming a 10% conversion rate, out of the $1.1 billion pipeline, $300 million could close this fiscal year, resulting in $30 million in potential revenue. For the remaining $800 million, a 10% conversion rate would generate $80 million in revenue for 2025. (This does not include run-rate, bluebirds and additional pipeline).

For me as an investor, Droneshield have a healthy growing pipeline, hardware/SaaS combo revenue model, brand reputation, all while selling into a high demand industry. Where I will start changing my tune is if by Q4, the revenue doesn't match a 10% conversion rate. Simply there is no excuse not to sell 10% as a minimum.

By Oleg sharing the pipeline numbers, we can now hold Droneshield to account in 6-12 months time. To me, sharing the numbers shows great confidence.