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Drone Co.'s Core Business Is Strong

Source: Rob Goff

 

December 4, 2023 (Investorideas.com Newswire) While recent third-quarter financial results were not aligned with expectations, Volatus Aerospace has positives in the strong growth of recurring services, noted Echelon analyst Rob Goff.


Volatus Aerospace Corp. (VOL:TSX; VLTTF:OTCQB) reported Q3 2023 revenue and earnings below forecasts, driven by delayed equipment sales amid working capital constraints, noted Echelon Capital Markets analyst Rob Goff in a November 28 report. However, the analyst sees positives in the strong growth of recurring services.

Volatus' product sales were impacted in Q3 by extended working capital cycles and tight cash balances, limiting investment in equipment inventory. This resulted in CA$10 million of unfulfilled demand. The company focused resources on higher margin, recurring services wins.

Core Business Growth Remains Strong

Despite topline headwinds, Volatus grew recurring services revenue by 60% year-over-year in Q3. Services now comprise 60% of total sales, up from 45% last year.

Gross margin also hit a record 36.4% compared to 28.7% previously.

Long-Term Agreements Provide Future Visibility

Volatus recently secured an initial 3-year, CA$60 million services deal with a top ten U.S. utility beginning in 2024. It also signed a CA$4 million agreement with an energy company. The analyst sees over CA$80 million in contracted revenue, providing strong visibility.

Significant Upside If Working Capital Freed Up

The analyst sees room for significant incremental product sales and contract wins if Volatus can secure additional capital to ease working capital limitations.

This, combined with further services growth, underpins a Speculative Buy rating and CA$0.68 price target.


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