T3-22: massive distribution dynamics (Drone Volt)

Drone Volt reported strong revenue despite losing its license agreement with Aquiline Drones. Its Distribution business largely outperformed our expectations, more than offsetting this headwind. Drone Volt seems well on its way to crossing the 10 million euro mark, as the costs of participation in the various trade fairs are starting to pay off.

• 9M-22 revenue amounted to €7,972k, up 26% year-on-year.

• Distribution grew 86% year-on-year while Drone Volt Factory sales fell 48%.

• 9M gross margin fell 11 points year-over-year to 24%.

• LineDrone is expected to start generating revenue in FY23.

• Strong distribution volumes will allow Drone Volt to obtain more supplier rebates.

• SKYTOOLS Q3 22 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 revenue from Aquiline Drone licenses suspended in the last quarter, with no date for recovery. 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 agreement alone represents 16% of H1-22 revenue and is 100% profitable. This alone caused a 5 point decline in sales growth and cost 3 gross margin points in 9M results.

This left a significant dent in Drone Volt Factory’s business which was down 48% year-over-year. The drop in the mix of Drone Volt Factory in the total turnover is logically reflected in a drop in the gross margin, the Distribution activity being less profitable. However, the good surprise comes from the fact that Drone Volt managed to increase its Drone Volt Factory gross margin without the license agreement. He managed to offset this headwind through increased money-making activities such as training and customer education.

…Drone Volt succeeded in finding alternative customers

Drone Volt’s participation in various trade fairs is beginning to bear fruit. This gave the company the opportunity to meet new prospects and establish new business partnerships. Thanks to its strong execution history and positive commercial momentum, Drone Volt managed to sign a significant gain in its Distribution business which resulted in this spectacular growth in Q3. Not only did this save the quarter’s financial performance, but it also opens up a new role for Drone Volt as a drone distributor. This suggests that it will benefit from additional discounts from drone suppliers in the future (the most important being DJI), which will allow the French company to participate in tenders it never has before. had access before. Even though the Distribution business is less lucrative than the Drone Volt Factory business, it is accretive to gross margin and should not be overlooked.

In addition, the distribution of third-party drones also allows Drone Volt to develop customer relationships. It will give Drone Volt the opportunity to offer its much more lucrative proprietary drone solutions. It is therefore a gateway to other commercial successes.

Drone Volt seems well on its way to crossing the 10 M€ mark, which would be its historic record. This is in line with our expectations, which amount to €10.1 million. Although the Q4 should not be as strong as the Q3, it is possible that Drone Volt exceeds our expectations. Overall, these good results should restore confidence in the stock. We reiterate our purchase recommendation.

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