I think this quarterly highlights a few things for me, both positive and negative:
1.
Cash burn is still high - with the change in revenue model and revenue to date, they surely raise later this year given 1.6 quarters of cash remaining;
2.
Design win strategy is a success - Another 9 customers have come on board, with 60 in total this year.
3.
Change in revenue model will reduce short term revenue - Now that they are allowing customers to spread the upfront cost of Halo over an extended period, the upfront revenue from contract wins is going to be a lot lower. The benefit of this shift though is as the customer grows, the recurring revenue grows.
4.
The drone market is still in its infancy - Yes its great that DroneUp are expanding across 34 sites by end of 2022. However, current FAA regulations don't allow them to deliver outside a radius of 1 mile (1.6km) of the store. So the customer reach is still low. Based on this, I'm going to assume that DroneUp probably only need 3 to 5 drones per site. So the huge contract revenue that people are expecting from DroneUp may not eventuate until FAA approval of larger drone flight paths of BVLOS. Lets say $2k USD per HALO unit (Yoav has previously indicated its around $1 to $3k per unit) at 5 units per site x 34 sites = $340k USD.
5.
FAA regulation is going to be a slow burn - Considering they are only at public consultation of the BVLOS report now, I suspect its another 1 to 2 years away now.
I'm a firm believer in this stock but I am now a realist in terms of the longer investment timeframe required on this stock. Once the drone regulations start to firm up, then the exponential growth of the market will begin and the strategy of locking in customers via the design wins will bear significant fruit.
Maybe the webinar will allow me to challenge some of the above but at this stage, I'm not expecting a significant ROI until 2024. All IMO.
