DroneShield | EQUITY Magazine

The following interview was first published in the March 2025 edition of the Australian Shareholders' Association EQUITY Magazine.

By Oleg Vornik, CEO and Managing Director, DroneShield

Market Position and Competitive Edge

DroneShield (ASX:DRO) operates in a rapidly evolving defence and security sector. What differentiates DroneShield from competitors, and how do you maintain your market leadership?

It really comes down to staying ahead. Cast your mind back to the company’s origin – we introduced leading edge counter-uncrewed aerial systems (C-UAS) capabilities when there was no counter-UAS industry. We saw the potentially devastating impact of drones on the battlefield and to civilian life while most only recognised them as toys. 

What also sets DroneShield apart from competitors is our singular focus on counter-UAS. We remain ahead because we are specialists who have closely analysed drones and their nefarious uses and are therefore at the forefront of innovation.

Commercial Differentiators

DroneShield’s unique advantage lies in its global intelligence network, which provides real-time insights into emerging drone threats from key conflict zones such as Ukraine and the Middle East. Our strong relationships with Tier 1 customers and partners allow us to anticipate and counter the latest drone technologies before they become threats.

• Global Presence & Reputation: DroneShield has a strong global brand and a reputation for innovation and quality. We have a direct presence in key regions, including the U.S. (Virginia) with 20 staff, as well as Europe, LATAM, and the Middle East. This is further supported by a global distributor network spanning over 70 countries.
• Defence Market Barriers to Entry: As the original counter-drone pioneer, DroneShield benefits from industry barriers to entry, including security-cleared staff, international certifications, NATO Stock Numbers, and all products being non-ITAR solutions. This significantly strengthens our position in securing contracts outside the US.
• Established Sales Pipeline: Defence procurement cycles take years to materialise. With a deep sales pipeline nurtured over multiple years, we now have dozens of projects at different stages of maturity. This is a key advantage over early-stage counter-drone companies that are only beginning to build their pipelines.

Technical Differentiators

DroneShield is rapidly scaling its operations and is on track to grow to 330 employees by mid-2025, including an expanding engineering team of over 200 hardware and software engineers. This expansion enhances our subject-matter expertise and strengthens our ability to deliver cutting edge solutions.

• In-House Development: All DroneShield hardware (except radars and cameras) is developed in-house, eliminating reliance on third-party intellectual property, with large-scale manufacturing outsourced to our specifications. Similarly, all SaaS software is developed internally, including AI engines for RF sensors, cameras, sensor fusion, and electronic warfare (EW) applications. This ensures full control over our technology stack. Our technology roadmap is continuously refined based on real-world experience and shifting threats, ensuring we remain ahead of emerging challenges.
• Comprehensive C-UAS Integrator and Solutions: We offer a complete suite of solutions, from body-worn and mobile systems to fixed-site deployments. As both an integrator and sensor manufacturer, we provide flexibility to customers by integrating third-party equipment when needed. In the US for example, we have integrated with defence primes such as SAIC, Thales, and Lockheed Martin.
• Proven AI & Data Capabilities: DroneShield has arguably the world’s largest AI-driven database for radio frequency, sensor fusion, and optical/thermal AI. Our experience in operating our AI model for over 5 years has enabled us to build large, clean datasets, a crucial differentiator in AI-driven defence applications. Unlike competitors who may focus on algorithms, our advantage lies in the scale and quality of our data, supported by a dedicated in-house data engineering team. This depth of experience and data cannot be built overnight.

Growth Strategy

What are the key growth drivers for DroneShield over the next 3–5 years? Are there specific sectors or regions where you see the most opportunity?

After nearly 80 years of relative peace, geopolitical stability is deteriorating, with rising actors like China and Russia seeking to upend the rules-based order. In response, Western nations are increasing military expenditure, a trend further supported by the current US Trump Administration, which is encouraging Europe and other allied nations to expand their defence budgets.

Defence Sector Growth

Within defence, drones and counter-drone technologies will remain front and centre, driven by the strike-and-counter-strike dynamic. Drones offer a significant cost advantage over traditional military assets and eliminate the need to place personnel in harm’s way. The Ukraine conflict has accelerated advancements in small drone technology, reinforcing the need for counter-drone solutions.

A major growth driver is low market saturation, because unlike established defence procurements for helmets, firearms, and night vision goggles which have existed for decades, the drone and counter-drone market is still in its early stages. Military planners are now prioritising counter-drone capabilities and will continue to upgrade and refresh equipment every few years, much like mobile phone and computer hardware cycles.

Civilian Sector Growth

The civilian sector presents significant opportunities across stadiums, airports, data centres, law enforcement, and border protection. However, adoption has been hindered by two key factors:

1. Reactionary customer mindset – Currently, many civilian-sector customers react only after high-profile drone incidents occur. However, as drone threat awareness grows, this will shift, prompting proactive adoption. Once major industries such as data centres and airports begin implementing counter-drone solutions, they will keep their security strategies confidential, further reinforcing the market’s expansion.
2. Legislation and regulatory barriers – Counter-drone technology adoption is currently constrained by legal and policy restrictions. However, as drone-related security incidents increase, this issue will gain more public and political attention, leading to policy and legislative changes that will unlock new commercial markets.

Financial Performance and Revenue Streams 

Can you share insights into DroneShield’s revenue model? How do you balance government contracts, commercial sales, and R&D investments?

DroneShield’s revenue model consists of three key components:

1. Hardware sales are currently the largest contributor to revenue, driven by direct equipment purchases by military and government customers.
2. SaaS (Software-as-a-Service) bundled with various DroneShield hardware products provide ongoing trailing software updates and enhance system capabilities over time.
3. Multi-year R&D contracts in electronic warfare are a highly complementary and mutually beneficial stream that aligns with our core counter-drone business.

All three revenue streams are expected to continue growing, with a strategic focus on increasing SaaS and R&D contracts as a larger share of revenue. DroneShield is already seeing significant gross margins across all product categories including hardware, due to the highly differentiated nature of our solutions.

To date, DroneShield’s revenue has come from government contracts, but we anticipate non-government sales to grow, particularly in drone detection as the civilian sector expands. As regulatory frameworks evolve and awareness of drone threats increases, this market will provide further opportunities.

Historically, the US has accounted for approximately 70 per cent of revenue. From 2025 onwards, we expect significant geographical diversification, as indicated by recent contract wins in Asia-Pacific, Europe, and Latin America:

• In January 2025, DroneShield secured three new contracts worth a combined $11.8 million with a military end customer in an unnamed Asia-Pacific country.
• In January 2025, DroneShield secured a $9.7 million contract from an unnamed military customer in Latin America.
• In December 2024, DroneShield received a repeat order of $8.2 million from a major European military customer for dismounted and vehicle-mounted counter-drone systems.

Regulatory and Geopolitical Challenges

Given the complex regulatory environment around defence technology, how does DroneShield navigate export controls, government approvals, and geopolitical risks?

DroneShield has a dedicated regulatory and compliance team with deep expertise in defence and export controls, ensuring we adhere to all government regulations. We have strict internal processes in place to manage compliance across all aspects of our business.

Our products are subject to Australian Government export controls and, in some cases, US Government approval regulations. To ensure full compliance, our export approval and shipping processes follow strict, established protocols that align with regulatory requirements.

It goes without saying that DroneShield does not conduct business with countries such as Russia, the People’s Republic of China (PRC), North Korea, and Iran.

By maintaining a rigorous compliance framework, we mitigate geopolitical risks while ensuring that our technology is delivered only to approved allied nations and trusted partners.

Technology and Innovation

Counter-drone technology is constantly evolving. What is DroneShield doing to stay ahead in terms of R&D, AI integration, and product innovation?

DroneShield remains at the forefront of counter-drone technology by continuously advancing intelligence gathering, AI integration, and product innovation. Our approach is driven by real-world data, a structured engineering roadmap, and continuous technological advancements.

1. Intelligence and Data Collection

DroneShield has Tier 1 customer relationships across the globe, providing us with intelligence on the latest drone technologies. Our devices can operate in recording mode, collecting real-world data that is sent back to our engineering team in Sydney. This data is used to refine our AI engines, particularly in handling edge cases: scenarios on the far end of the bell curve that are essential for improving AI accuracy. AI performs best when it can recognise and adapt to rare and complex threats, and our approach ensures continuous learning and refinement.

2. Engineering Roadmap & Product Development

DroneShield follows a detailed and evolving engineering roadmap, developed in close consultation with end customers, our sales team, and distributors. Our roadmap includes quarterly deliverables and is supported by our 200+ in-house engineering team, which continues to expand. Additionally, we leverage third-party consulting resources as needed, ensuring we stay ahead in hardware and software innovation. All resulting intellectual property is fully owned by DroneShield, giving us complete control over our technology stack.

3. AI Integration & Sensor Fusion

AI has been a core focus for DroneShield for over five years. Initially, our technology relied on a manual RF “fingerprint” library of drones. However, as drone proliferation accelerated, with novel drone models emerging regularly, we transitioned to a true AI-driven model.

• Library-less AI Approach – Instead of simply comparing received data to a pre-defined database, our AI can detect never-before-seen drones, making our technology future-proof against evolving threats.
• Optical AI Detection – We train our camera-based AI to identify and track drones in complex environments, enabling precise detection and classification.
• Sensor Fusion – We integrate multiple sensor outputs (radio frequency, radar, cameras, and acoustic data) using an AI algorithm originally developed under an Australian Government innovation contract. This multi-sensor fusion significantly improves detection accuracy, maximising drone detection while minimising false alarms—a critical factor in modern counter-drone systems.

4. Product Innovation & Continuous Improvement

DroneShield follows a rapid innovation cycle, releasing new hardware every 2–3 years and software updates every quarter. These developments are driven by direct feedback from end customers, distributors, and our sales team, ensuring our solutions remain aligned with evolving threats.

DroneShield does not view other counter-drone companies as primary competition. Instead, the real challenge comes from drone manufacturers themselves, as drone technology continues to evolve at a rapid pace. Our customers do not expect counter-drone systems to be 100 per cent effective at all times, but they require systems that can mitigate the vast majority of threats and continuously improve over time. This philosophy of ongoing innovation and collaboration with customers is what has made DroneShield a trusted leader in counter-drone technology.

Investor Value and Shareholder Returns 

For investors considering DroneShield, what are the key value propositions? How do you ensure long-term shareholder returns amidst changing global security dynamics?

As previously mentioned, geopolitical tensions continue to drive increasing defence budgets, with counter-drone technology emerging as a key focus area. In both the US and Australia, counter-drone systems are recognised as critical defence capabilities, as demonstrated by Australia’s LAND 156 program, which is expected to be the country’s first major rollout of counter-drone systems.

Key value propositions for investors include:

• Strategic positioning in a high-growth market. Counter-drone technologies are still in its early stages, with military planners globally prioritising its adoption and expansion. DroneShield is well-positioned to capture this growth with strong commercial and technological differentiators.
• A strong financial position. DroneShield is well-funded, with over $200 million in cash reserves, providing the capital necessary to scale operations, invest in R&D, and secure long-term contracts.
• Proven revenue growth. DroneShield has a track record of continuous revenue growth, and 2025 is already shaping up to be another record year. Just two months into the year, we have secured $52 million in revenue, compared to $57 million for all of 2024, which itself was an all-time record year for the company.