Droneshield share price slides 8% on first-half earnings

The Droneshield Ltd (ASX: DRO) share price sunk immediately from the open on Tuesday after the company reported its H1 2024 results.

Shares in the counter-drone technology company are currently swapping hands at $1.18 apiece, nearly 8% down on the day.

Let's see what the company posted.

Droneshield share price dips on solid first-half results

Droneshield's key financial highlights for H1 2024 include the following:

• Revenues of $24.1 million were up 110% year over year, a company record
• Record customer cash receipts of $21.4 million, up 40%
• Net loss of $4.8 million, deepening from $2.9 million
• Software-as-a-Service (SaaS) revenue of $1.3 million, a 93% year-over-year increase
• Cash balance of $230 million with $32 million in contracted backlog.

What else happened in H1 2024?

The Droneshield share price had a strong run in H1 2024, helped by several company updates and major contract wins.

The company's revenue growth was also fuelled by a 100% increase in its sales pipeline, now valued at $1.1 billion.

Droneshield's expansion is largely attributed to rising demand across Asia, Europe, and the US for counter-drone solutions, particularly as drones play an increasingly pivotal role in modern warfare.

According to the investor presentation, this includes a "steady rise in C-UxS demand across [the] US and Europe."

Meanwhile, the company finished its first half with more than $32 million in contracted backlog that it will work through in the coming periods.

Droneshield also raised $235 million during H1 to support its accelerated R&D programs and global expansion. This includes key hires in Europe, the Middle East, and the Americas to boost on-the-ground sales efforts.

It also launched its DroneSentry-X Mk2 Expeditionary Fixed Site Kit, and AI Firmware updates across its global fleet of counter-drone systems.

The Droneshield share price might also be influenced by its capital position at the end of the first half. With $230 million of cash at the end of the period, the company is financially primed for further developments.

What did management say?

In the Director's report of its H1 2024 accounts, management noted growth is typically biased toward the second half of its fiscal year:

The second half of the year has traditionally been a stronger period for the Company, with the 2H23 being 79% of the total FY2023 revenues.

Meanwhile, management said it was obtaining talent whilst keeping a cash balance for growth:

The share-based payment expense for 1H24 was $2.7 million, related to options issued to the company's key employees and Directors, an increase of 207% relative to 1H23 […]

[…] This is due to the issue of 51.4 million options during 1H24 compared to 3.8 million options issued during 1H23. Of the 51.4 million options issued, 45 million were Performance Options where vesting is linked to the Group's revenue or cash receipts.

Equity-based compensation is a key incentive of team performance in DroneShield's rapidly growing business, which enables the Group to attract and retain best talent, whilst minimising the cash spend at this stage of the company's growth.

What's next?

Looking forward, Droneshield is also poised to continue its aggressive expansion strategy, with plans to launch additional SaaS-based solutions over the next 12 months.

The company says it is well-positioned to continue its current growth trajectory:

DroneShield continues to be in a highly favourable environment, with both the counterdrone industry rapidly growing and more generally defence and security budgets rising. The company has a number of unique differentiators (technically and commercially).

The conflicts in Ukraine, Middle East and elsewhere globally are demonstrating the role of drones in modern warfare and driving procurement programs of Government customers around the world seeking to be prepared for the next conflict.

Droneshield share price snapshot

The Droneshield share price is being heavily sold today after the company's H1 2024 results. Whereas, if we zoom out, the stock is up more than 279% over the past 12 months.

The post Droneshield share price slides 8% on first-half earnings appeared first on The Motley Fool Australia.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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