Drone Volt (EPA: ALDRV) Research Update

Highlights:

• Arrowhead is updating its coverage on Drone Volt with a fair value bracket of EUR 0.14 to EUR 0.17 (share price on May 15, 2023: EUR 0.0187) based on the Discounted Cash Flow (DCF) method.

• The revenue for FY 2022 stood at EUR 13.7 mn as compared to EUR 8.6 mn in FY 2021, up by 59.4% YoY. The consolidated gross profit was EUR 2.9 mn, with a gross margin of 21.1% as compared to 34.7% in FY 2021.
• Recently, the company secured the largest order which exceeded EUR 20.0 mn, of which the company has already received a 10% deposit, while the rest of the proceeds are expected to be received during Q2 2023. As a result, the company is poised for impressive growth for FY 2023.
• The company expects to double its revenue in FY 2023, driven by ongoing negotiations on significant orders, a strong customer base, a reinforced geographic network, and expansion of its products and services, coupled with the commercial launch of the LINEDRONE and the development of the “Drone as a Service” offer.
• The newly launched LINEDRONE has been developed in collaboration with Hydro-Quebec and specializes in facilitating complex inspections of high-voltage electricity transmission lines. The company initiated its production after its successful validation tests in real-world scenarios and will be able to deliver its first units by Q2 2023.
• To monetize its second offering, “Drone as a Service”, the company plans to exercise a pay-as-you-go offer which is based on invoicing as per the use. The company believes that this strategy will facilitate commercial deployment as it will replace significant investment for the customers.
• DRV acquired Skytools, a drone distributor and service provider, to grow its revenue base and expand into new markets, which contributed to c. EUR 1.1 mn in FY 2022. The company has also acquired a Danish company, Lorenz Technology ApS, which specializes in drone-based inspection and surveillance solutions.
• The company is continuously expanding its product lines, with plans to unveil new drones in FY 2023. It has obtained a Loan of EUR 2.5 mn granted by Bpifrance to support its research and development (R&D) efforts.
• It has announced its decision to temporarily suspend the invoicing of production licenses to its American partner, AQUILINE DRONE, and will now devote all its commercial efforts to the distribution of the HERCULES 20 model.
• The company has planned to raise 3.0 mn in early FY 2023 as it has terminated its convertible bond financing contract signed with Atlas Special Opportunities.