DRO (ASX) Ann: Successful Completion of $120m Underwritten Placement

Originally posted by BrokenClock1215: ↑

yeah i'm sympathetic to this take. one of the things that initially attracted me to DRO was the fact that "AI" hadn't just been tacked on to their marketing copy as a buzzword following the release of chatGPT (Nov 2022) and all the hype. They had been referencing it as far back as 2020 iirc.

[ramblings - by all means skip ahead to main point below...]
i previously lived in the UK and worked for a company that was involved in airport security / threat mitigation. the 2018 Gatwick drone incident always struck me as kinda wild.. to this day, noone knows if it was just some kids playing around, or environmentalists / activists or foreign (Russian) actors behind it. but either way, a couple of cheap hobby drones caused the closure a major international airport for two days – disrupting hundreds of flghts and resulting in several hundred million £s in economic losses. the asymmetry seemed crazy. and I thought if there was a listed company / startup involved in the counter-UAS space, it'd be worth a good look.

anyway, i moved back to Australia judt right before Russia invaded Ukraine in Feb 2022. I came across DRO then and was kinda shocked to learn that it was actually producing / selling finished products - it wasn't conceptual.. so I bought some shares.. then 18 months later, the Middle East starts heating up, part of which has involved major disruptions to Red Sea shipping due to drones (also, shia militia successfully striking a US base in Jordan from Iraq with a drone, killing 2, was also a big deal imo).

so the fundamentals of the company looked solid - they were actually making and selling things, and weren't highly leveraged or diluted - and the market in which they had positioned themselves seemed to be getting more lucrative by the day, amid continued geopolitical turmoil and the increasing prominence of unmanned systems in modern warfare. and then there are the numerous civil applications, like airports (and political rallies...)

[actual point]
I don't have a problem with them raising capital for R&D and to support growth (notwithstanding some misgivings about the way in which they have gone about it..), but the vagueness of it I do find a bit off-putting.. And where they are kinda specific about what their plans / spending will entail, i'm not sure.. namely:

"""
Extending DroneShield’s R&D into new products and new generations of existing products is expected to...enable DroneShield to...expand gross profit margins as its revenue mix shifts toward AI enabled software solutions and accelerate SaaS revenues.
"""

When I read that, I hear them saying they are going to try to transition to becoming a tech company. If they pull it off, basically becoming an AI-centric SaaS company offering counter-drone systems/solutions (with some actual kit/hardware on the side), than we're off to the races.. but it seems kinda risky / capital intensive.. I guess we'll see

Expand

If you're curious about how they apply AI to their products, check out 13:12 - 16:41 DroneShield (ASXRO) - Webinar Presentation - YouTube

A SaaS model imo is required if they want to become a 300 - 500 million revenue company within the next 5 years (a goal stated by Oleg), as it will bring in consistent reoccurring revenue on top of each hardware purchase. They also want to achieve 50% of their revenue coming from SaaS.

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(20min delay)
Last $1.19		Change -0.205(14.8%)		Mkt cap ! $903.6M

Open	High	Low	Value	Volume
$1.15	$1.24	$1.12	$53.70M	45.46M

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