DroneShield secures research and development AI contract worth $600,000

Australian security firm DroneShield (ASX: DRO) has announced that it has received a research and development contract related to its artificial intelligence (AI) and machine learning (ML) algorithms with the defence department of a “five eyes” country.

A “five eyes” country refers to a signals intelligence alliance between the US, Canada, Australia, the UK and New Zealand.

This latest order follows one from last month, which was a $900,000 purchase for its DroneGun Tactical hand-held counter-drone products and also came from a “five eyes” country.

Today’s ML/AI contract hauls in a further $600,000 over the next year – in both cases, DroneShield has remained tight-lipped about the geographic location of its public-sector clients.

DroneShield said the contract covers broader defence applications within the AI and ML space but was unrelated to the counter-drone sector, which is a clear indication that the company’s diversified approach was delivering commercial traction.

In fact, the security company reported $2.3 million in customer orders in Q2 2020 alone and expects the vast majority to be paid this quarter. To date, it has received $5.2 million in firm orders.

“This ground-breaking contract expands DroneShield beyond being a pioneer and global leader in the C-UAS domain, and into the artificial intelligence/machine learning space within the defence sector,” DroneShield chief executive officer Oleg Vornik said.

“The contract leverages off the cutting-edge AI capabilities that DroneShield has developed within its C-UAS products, applying it to wider defence applications.”

“Further, this contract creates a trusted dialogue with this specific high-profile defence customer, allowing us to more deeply understand their requirements and provide them with solutions to address their needs,” Mr Vornik added.

In July this year, DroneShield scooped a $280,000 contract to deploy its DroneSentry detect-and-defeat technology at the Grand Forks airbase in North Dakota.

At the time, Mr Vornik explained that DroneShield’s solution was selected for its ability to leverage AI and tracking automation with minimal impact on manning. The contract pushed the company’s cash receipts beyond $2 million for the year and set the tempo for later deals and almost doubled the company’s valuation over the past six months.

Moreover, in a statement to the market last month, DroneShield said its “high conviction pipeline” was estimated to be “over $100 million” but tempered its performance guidance by clarifying that there are no assurances that the opportunities would necessarily result in sales.

Various developments

DroneShield sells detection and countermeasure products to improve security against aerial threats such as drones.

The company maintains a team of Australian-based engineers, offering customers bespoke solutions and off-the-shelf products designed for terrestrial, maritime or airborne platforms.

The company runs multiple offices spread across the US and UK and specialises in electronic warfare, RF sensing, AI and ML and claims to dabble in sensor fusion, rapid prototyping and MIL-SPEC manufacturing.

As a counterbalance to its strong order growth this year, DroneShield revealed that shipments and payments were drastically affected by COVID-19. The company recorded operating cash inflows of approximately $410,000 in Q3 2020.

However, these have increased to $813,000 for October alone.