Drone Volt has published strong revenue figures despite the loss of its licensing contract from Aquiline Drones. Its Distribution activity strongly outperformed our expectations, more than offsetting this headwind. Drone Volt looks well set to reach the €10m milestone, as the costs of participation in various shows are starting to pay off.
• 9M-22 sales stood at €7,972k, a 26% increase yoy.
• Distribution grew by 86% yoy while Drone Volt Factory sales dropped by 48%.
• The 9M gross margin dropped by 11 points yoy to 24%.
• LineDrone is expected to start generating revenues in FY23.
• Strong distribution volumes will enable Drone Volt to obtain more supplier discounts.
• Q3-22 SKYTOOLS sales amounted to €243k.
While Aquiline Drone is on standby…
Drone Volt performed surprisingly well during this quarter. As a reminder, the group saw its licensing revenue from Aquiline Drone suspended last quarter, with no dates of resumption. Aquiline Drone is currently trying to fund its growth (through an IPO or other financing) and will not continue the partnership with Drone Volt until it has sufficient funds. The licensing contract alone represented 16% of H1-22 revenues and is 100% profit. Alone, this caused a 5-point decrease in the sales growth and cost 3 points of gross margin in the 9M results.
This left a significant dent in Drone Volt Factory activity which decreased by 48% yoy. The lower mix of Drone Volt Factory in total sales has logically resulted in a reduced gross margin, as the Distribution activity is less profitable. However, the positive surprise comes from the fact that Drone Volt has managed to grow its Drone Volt Factory gross margin without the licensing contract. It has managed to offset this headwind thanks to increased lucrative activities such as training and educating customers.
…Drone Volt has managed to find alternative customers
Drone Volt’s participation in various shows is starting to pay-off. This has given the company the opportunity to meet new prospects and establish new business partnerships. Thanks to its strong execution history and positive commercial dynamic, Drone Volt has managed to sign a significant win in its Distribution business which resulted in this spectacular growth in Q3. Not only did this save the financial performance of the quarter, but it also opens up a new role for Drone Volt as a drone distributor. This suggests that it will have additional discounts from drone suppliers in the future (the largest one being DJI), which will enable the French company to compete in bids to which it has never before had access. Even though the Distribution activity is less lucrative than the Drone Volt Factory business, it is accretive for the gross profit and should not be disregarded.
In addition, distributing third party drones also enables Drone Volt to develop customer relationships. It will give Drone Volt the opportunity to propose its proprietary drone solutions, which are far more lucrative. It is thus a gateway to further commercial successes.
Drone Volt looks well set to achieve the €10m milestone, which would be its historical record. This is in-line with our expectations which stand at €10.1m. Though the Q4 is not expected to be as strong as Q3, there is a possibility for Drone Volt to beat our expectations. Overall, these sound results should restore confidence in the stock. We reiterate our Buy recommendation.
