FY 24: A rapid strategic change undertaken
FY 24: A rapid strategic change undertakenEARNINGS/SALES RELEASES
Drone Volt unveiled a mixed FY24 trading update with a new sales record, despite the brake put on distribution sales in Q4, and announced one (potentially two) new dilutive financing operations to fund its production capacity growth. 2025 should be the year of EBITDA profitability, an enticing prospect for shareholders given that it should depend on a more resilient business model.
FACT
Sales for FY24 grew by 36% from €24.0m to €32.7m, falling short of our estimate of €39.4m.
The gross margin for FY24 increased by 10% from €3.7m to €4.0m, not meeting our expectations of €4.8m.
The company stated that the focus in 2025 will be to reach the objective of a positive EBITDA.
The company also announced the launch of two financing operations: a potentially dilutive €2m bond issuance and a €2.7m capital raising.
ANALYSIS
An abrupt change of course
The company almost stopped its distribution activities in Q4 (less than €500k of sales) to focus on the higher margin business (c.€1.5m) which was expected but we anticipated a smoother transition. The company managed to double the number of internal drones sold to 105 over the year thanks notably to the success of its best-seller Hercules 20.
The gross margin for FY24 grew by 10% from €3.7m to €4.0m, falling short of our expectations of €4.8m, as the company registered a small loss of c.€200k in distribution in Q4 that we did not foresee following this abrupt stop (explained by the desire to reduce WCR). However, the gross margin in DV factory, services and academy missed our expectations by only €70k, implying a small decline in margin rate over the FY from 55% to 53% when we saw a small increase.
All eyes on profitability
The company stated that the focus in 2025 will be to reach the objective of a positive EBITDA, that we expect to be reached thanks to the €400k cost-cutting program (up to €700k) but at the expense of sales growth given the strategic deceleration announced for the distribution activity. The potential mitigating factor on the top-line side could be the new Drone Volt Kobra with sales expected to materialize in 2025. The services business should also benefit from a pick-up in interest for externalized R&D offers.
Fresh money to support operations
The company also announced the launch of two financing operations to support the growth of the production capacity of its internal drones, with first a new capital raising (with subscription rights) of €2.7m with a price of €0.3 per share, a 33.33% discount compared to the stock price of €0.45 of yesterday’s closure. 75% of the amount would be already secured.
The second financing operation is potentially more dilutive for shareholders, as the company borrowed €2m from Atlas Capital Markets with a 6% + Euribor3M rate, a rather attractive rate but with the possibility to transform the 2.000 bonds forming this debt issuance in bond redeemable in cash and shares if authorized by the AGM before February 28th. Otherwise, this €2m amount could be redeemed immediately, showing that the intention might be to use the bonds as a bridge loan.
IMPACT
We will integrate these figures into our model, which should result in a decrease in our target price given the lower turnover realised and expected on the distribution side compared to our previous estimates and the dilutive financing operations. Nevertheless, our positive stance on the stock should not change as the company is close to EBITDA profitability and its business model should become more resilient with the focus on the high-margin services business, notably.
Drone Volt SA. Drone Volt SA is a France-based company principally engaged in the aerospace industry. The Company provides civilian drone manufacturing. It specializes in the production, integration and sale of drones for professionals. Drone Volt is a provider of the audiovisual market in the field of aerial photography by drone. The Company is also present in many other markets such as security and topography, among others. The Company's main product is the Pack PRO FOR GH4 S900. It cooperates with Ministry of Internal Affaires, Ministry of Defense, CERN, Gendarmerie Transports Aeriens (aerial transport police), Dakar 2015, Spie, TF1, Bouygues, CNRS, Bonne Pioche, RAID and GEDEON Programmes, among others. It operates through Dandrone.
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