DroneShield wins $33 million US Government contract, shares surge after directors sell down

Counterdrone solutions company DroneShield (ASX: DRO) has won a $33 million order from a US Government agency. The order comprises both DroneShield equipment and multi-year services.

This significant contract follows a $9.9 million order disclosed earlier this month from another customer within the Five Eyes community. The Five Eyes Department of Defence (DoD) granted DroneShield a two-year research and development contract, underscoring its growing prominence in the defence sector and the trust placed in its capabilities by the Five Eyes intelligence alliance, consisting of the United States, Canada, United Kingdom, Australia, and New Zealand.

DroneShield’s US CEO, Matt McCrann, commented, “We’re honoured to receive this award and support this customer. This award is a result of their trust in DroneShield and our solutions, and reflects our commitment to their mission.”

DroneShield anticipates full payment for the order before the conclusion of 2023, and the Company foresees yet another lucrative year, better than the financials it witnessed in 2022. The current order backlog stands at $62 million, with a pipeline of over $200 million spanning more than 80 potential opportunities.

McCrann added, “We’re proud of our team’s efforts, the increasing value we’ve delivered to our customers worldwide, and are excited about continuing to support and grow the business as we look towards 2024 and beyond.”

Shareholders, however, are on the fence about the good news, given that DroneShield’s directors recently sold off portions of their shares. Just last week, director Peter James cashed out 23.55% of his holdings for $641k, but still holds 3.8 million shares. He sold off shares in two tranches: 1,554,108 for $0.2505 per unit and 1,162,558 for $0.2332 per unit.

Fellow director Oleg Vornik offloaded 18.45% of his shares for $827k but still retains 5 million shares. He disposed of 1,977,955 shares for $0.25 per unit and 1,422,045 for $0.23 per share. In May 2023, too, the two directors offloaded shares, with Vornik disposing of $162.5k and James selling off about $84k.

The Company also bought back shares, issuing them to employees in a bid to incentivise them. Both directors cited “personal requirements” for getting rid of their holdings while also referending in their ASX notices that they had been with the business for more than 7 years.

DroneShield ended the first quarter of CY23 with $45.8 million available in funding, and cash receipts of $7 million, up 180% on Q1 CY22.  Strong investor support for a Placement and Share Purchase Plan raised $40 million in March 2023 before the directors started selling down. The use of funds included rapidly building up inventory for faster fulfilment of orders and scaling the engineering and operations teams to support the growth in sales.

Following the announcement, DRO shares reached $0.36 in the first hour of market trading, a 35.8% increase on their previous $0.265 close.