H1 21: strong growth in revenues, promising H2 ahead

Drone Volt has published solid H1 results, driven by its major contracts with Aquiline Drones and Central Europe starting to generate revenues. The ramp-up of production to fulfill these contracts will accelerate from this month and should lead to a record H2.

• H1 revenues increased by 86% yoy to €3,655k (slightly higher than in H1 19 which was €3.5m).

• Drone Volt Factory increased 142% yoy and now represents 46.4% of revenues (vs 36% in H1 20).

• Gross margin increased by 10bp yoy to 39%.

• Promising H2 ahead.

Aquiline Drones, a profitable partnership

Drone Volt was very active during H1 through its partnership with the American company Aquiline Drones. First, in April 2021, Drone Volt signed an agreement to sell 600 Hercules 2 drones to its partner Aquiline Drones for a total value of €3m. This ramp-up would be achieved by a transfer of know-how from Drone Volt to Aquiline Drones, which would help it to build 50% of its drones at its plant in Connecticut.

Secondly, Drone Volt signed another major contract concerning up to 500 Hercules 20 drones and 200 Hercules 10 for a total value of €15m spread over 2021 and 2022. However, it is not a fixed contract, we believe 60% of this revenue will be received by Drone Volt.

Finally, Drone Volt agreed on a price to sell 50% of Aerialtronics for an added value of €6m. This would give Aquiline Drones access to all of Drone Volt’s technology by adding the Altura Zenith drone and the Pensar camera with the Hercules family to its product portfolio. This exceptional result will be accounted for over the next 36 months. The previously mentioned contracts have barely started to be fulfilled, only €700k out of an estimated €4.6m has been received. The ramp-up of production is starting this month, July 2021, and H2 is expected to witness strong growth.

New financial structure

Drone Volt has adopted a strategy to reduce its debt through the emission of new stocks to improve its financial structure. It has achieved the repayment of an expensive 12% interest rate bond of €800k and other convertible bonds and loans for a total value of €4.3m. This has strengthened its balance sheet, enabling it access further financing more easily, and has reduced the interest expense for FY21. Drone Volt also says it could be looking to acquire new technologies, as it did with Aerialtronics.

Central Europe contract

This contract contains 50 Hercules 20 for 2021. So far, only five have been delivered. We are optimistic that H2 will be the year when it delivers most of the remaining ones. If the contract is fulfilled, we have estimated an additional €660k of revenues for Drone Volt.

An improving margin

The gross margin has strongly benefited from the better product mix with a larger part of the revenue coming from the Drone Volt Factory, which has higher added value. In addition, the gross margin from the Drone Volt Factory itself has improved compared to last year, gaining 12bp to to reach 63%. The execution of the contracts with Aquiline Drones will accelerate in H2 and also be a catalyst for the margins, as the licence contract is pure profit for Drone Volt.

H1 has been a success in terms of contracts signed and partnerships created. However, the fulfillment of these contracts has barely started. Therefore, if Drone Volt manages to ramp up its production and deliver what it announced it could, H2 should be the start of a new stage in Drone Volt’s development. We maintain our positive opinion on the stock.

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