Q3 21: good performance of the contract, as promised (Drone Volt)


Drone Volt announced strong growth in Q3 thanks to the positive execution of its contracts with Aquiline Drones. Its rise in H2 drones is at the origin of this growth which should accelerate in Q4. Our guidance remains unchanged.

?? The 9 month income was ?? 6,334k, a 92% year-over-year increase.

?? 9-month Drone Volt Factory revenue reached 2,850k, an increase of 123% year-on-year.

?? 9-month gross margin increased to 35%, an increase of 7 points year-on-year, due to Drone Volt Factory’s gross margin which increased 13 points year-on-year.

?? Q4 expected above Q3 both in terms of sales and margins.

The Aquiline Drones H2 contract is bearing fruit

The third quarter was to be the start of the execution of the contract for 600 H2 drones with Aquiline Drones. Indeed, things are progressing as planned, with 204 H2 drones delivered to T3. The ramp-up of production is expected to accelerate in the fourth quarter, with a 50% increase in production rate per week. We expect Drone Volt to complete its contract by Q4, which should be a record quarter in sales for the company.

Other contracts still pending

First, Aquiline Drones’ other mega contract for the H10 and H20 drones has still not been discussed. We believe that the fourth quarter will be the start of the execution of this contract, which is expected to be lucrative for Drone Volt.

Second, a central European customer’s contract for H20 Spray drones did not result in any deliveries in the third quarter. The customer has rejected the orders, but none have been canceled at this point. This is due to the still strict COVID-19 restrictions that apply in this region. We believe that the lack of deliveries at this stage is of concern, as the delivery target of 275 H20 drones seems increasingly distant. We will revise our estimates downwards for this contract.

Always on the lookout for future acquisitions

Drone Volt has announced that it has not reached an agreement with Skycorp. The objective of this partnership was to combine Skycorp’s hydrogen technologies with Drone Volt drones which would have various advantages on their capacities (longer autonomy, faster recharging time and better environmental impact). Nevertheless, Drone Volt is still actively seeking potential targets to improve its technology portfolio thanks to its strong financial position.

The positive execution of its H2 contract shows that Drone Volt is keeping its promises, with a T4 which should be better than the T3. In addition, the fourth quarter could be the milestone of the first delivery of LineDrone, which would lead to upside potential due to the high price of the latter. However, we will have to reduce our estimates for FY21 as the H20 and H10 contracts have been postponed again. This does not change the mid-term potential of Drone Volt, as there have been no cancellations to date, and we reiterate our buy recommendation.

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