Latest / WTR Small-Cap Spotlight / Drone Volt (ALDRV): Strong 1H26 Results and the Shift to Higher-Value Drone-as-a-Service Operations

Transcript

Drone Volt (ALDRV): Strong 1H26 Results and the Shift to Higher-Value Drone-as-a-Service Operations · WTR Small-Cap Spotlight

• 0:00
  SPEAKER_01: Welcome to the WTMR Small Cap Spotlight Podcast.
• 0:04
  SPEAKER_01: I'm your host, Tim Gerdeman, Vice Chair and Co-Founder and Chief Marketing Officer of Water Tower Research.
• 0:10
  SPEAKER_01: In today's podcast episode, I am being joined by Stefano Valentini, Chairman of Dronevolt, Euronex Paris Ticker Symbol, ALDRV.
• 0:21
  SPEAKER_01: DroneVolt is an aeronautical manufacturer specializing in professional civilian drones and artificial intelligence.
• 0:28
  SPEAKER_01: DroneVolt has operations in France, Benelux, Canada, Denmark, the Netherlands, the US, and Switzerland.
• 0:35
  SPEAKER_01: As a global partner, DroneVolt offers its customers turnkey business solutions, including various services and dronevolt, uh, I'm sorry, drone pilot training.
• 0:46
  SPEAKER_01: Also joining is my equity research colleague, John Roy.
• 0:49
  SPEAKER_01: Good morning, gentlemen, and thanks for joining the podcast today.
• 0:52
  SPEAKER_01: Thanks, Stephen.
• 0:53
  SPEAKER_00: Good to talk to you again.
• 0:55
  SPEAKER_00: Morning, good morning, John.
• 0:56
  SPEAKER_01: Stefano, nice to see you.
• 0:58
  SPEAKER_01: It's been a while.
• 0:59
  SPEAKER_01: Um, so for listeners who may not know Drone Vault as well, can you please remind them from a 30,000-foot perspective and part of my altitude pun, an overview of the company's business model and its corporate strategy?
• 1:11
  SPEAKER_00: Sure.
• 1:12
  SPEAKER_00: Uh Drone Vault was founded in 2011 by a gentleman named uh uh Dmitri Batsis.
• 1:20
  SPEAKER_00: Uh at the beginning, we simply were resellers of um other manufacturers' drones, but in our uh business plan, we've always uh made it a uh one of our objectives to become independent of those manufacturers and then also to move in the in the service industry.
• 1:40
  SPEAKER_00: Uh so basically we uh we started uh by selling DJI as everybody uh started uh and other European manufacturers.
• 1:50
  SPEAKER_00: And in 2018, we uh decided to take the leap and go our own way 100%, designing our own drones, manufacturing them and selling them.
• 2:05
  SPEAKER_00: And at the moment, we are specialized in um various solutions for clients.
• 2:12
  SPEAKER_00: Uh the three pillars of drone vault right now are uh, as you mentioned, drone bolt factory, dronebolt expert, drone as a service.
• 2:20
  SPEAKER_00: We'll look into that later in the discussion, and drone vault academy, where we train our pilots.
• 2:28
  SPEAKER_00: Um the the drones we designed are basically three families, uh the Hercules, which is a rather large heavy lift drone, the line drone for a specific uh market vertical uh power power line inspection, and the Cobra for surveillance security applications.
• 2:49
  SPEAKER_00: Now in 2025, the move to 100% uh uh our own products and our own services took place.
• 3:00
  SPEAKER_00: And so in the first half of 2026, uh we've seen uh the fruits and of course the vindication of our strategy uh with the uh results, the financial results, higher margins um, and higher value work.
• 3:19
  SPEAKER_00: Uh, where do we focus?
• 3:21
  SPEAKER_00: Um energy, critical infrastructure, so power lines, solar, wind, and offshore assets, um, the wind farms, there's lots of them in northern Europe.
• 3:33
  SPEAKER_00: Uh security and other mission critical uh applications, such as of uh surveillance, search and rescue, emergency support, and law enforcement.
• 3:44
  SPEAKER_00: We we've done a lot of work this summer because of the heat wave in search and rescue and helping people get out of the uh huge fires that we've had here in Europe.
• 3:55
  SPEAKER_00: Construction and civil engineering, uh uh visual and thermal inspection, uh 3D modeling, uh, specialized service work, for example, uh doing a 3D model of a mine, an open-pit mine, which have been revived in Germany.
• 4:11
  SPEAKER_00: The the coal mines have been revived because of the other critical problem we're having in Europe.
• 4:16
  SPEAKER_00: That's the uh energy issue.
• 4:20
  SPEAKER_00: Uh geographically, we are, as you mentioned, in Europe and in North America with our Montreal office.
• 4:29
  SPEAKER_00: And as uh as something new that uh we haven't yet announced, but will we have a lot of work in Africa through the our French-speaking uh countries there?
• 4:40
  SPEAKER_00: Uh Dromevolt is based in Paris, so uh we have a lot of work with the francophone world.
• 4:48
  SPEAKER_00: And I uh opened an office here in Switzerland after an 18-month vetting and security screening on a military airport.
• 4:57
  SPEAKER_00: We have an office there uh where we will be able to work uh with um the Swiss Armed Forces but also with the European uh certifying board.
• 5:09
  SPEAKER_00: So Dromebolt will add to one of its services the ability to certify other manufacturers' drones uh at the European level, um, which is huge.
• 5:22
  SPEAKER_00: Um huge because the airport is uh one of the few places in the world where civilian, military, and drones operate at the same time in in the same airspace, and with dedicated drone corridors for experimental drones uh to do what they need to do to get uh to get their uh uh certification.
• 5:49
  SPEAKER_01: Well, thanks for sharing that.
• 5:50
  SPEAKER_01: Those are fascinating developments since last time I caught up with you personally on the podcast.
• 5:54
  SPEAKER_01: And with that, I'll turn it over to John.
• 5:57
  SPEAKER_02: Great.
• 5:57
  SPEAKER_02: Thanks, Tim.
• 5:58
  SPEAKER_02: So funno, um, I know you mentioned that the first half of 26 had some good margins.
• 6:03
  SPEAKER_02: Maybe you can walk us in a little more color on the revenue announcements that were made and how things went in the first half of 26.
• 6:12
  SPEAKER_00: Sure.
• 6:14
  SPEAKER_00: As I said, it's a vindication of our strategy to move away from low marginal uh work to simply selling uh a machine to people.
• 6:23
  SPEAKER_00: We are actually um now uh very heavily invested in drone as a service, which is basically executing the missions for uh clients who do not wish to own drones.
• 6:37
  SPEAKER_00: Um, a drone vault expert in Bordeaux carries those missions out for the client and delivers data to the client.
• 6:46
  SPEAKER_00: The data can be pictures, it could be 3D models, it could be uh immense amounts of uh numbers that they use for whatever it is that they use in their company uh programs.
• 6:59
  SPEAKER_00: Um let's break it down.
• 7:02
  SPEAKER_00: So the first half revenue was essentially about uh 5 million euro, uh 19% year over year increase, which is a pretty good result for us.
• 7:14
  SPEAKER_00: Uh factory services and academy revenue grew 24%.
• 7:21
  SPEAKER_00: So um, as you can see, that is an incredible result and a vindication of our strategy.
• 7:28
  SPEAKER_00: Distribution grew by 8%.
• 7:30
  SPEAKER_00: We have some distribution uh of our own products through resellers.
• 7:35
  SPEAKER_00: Uh, that's also an interesting uh result for us.
• 7:39
  SPEAKER_00: Uh but the most interesting is group uh profit.
• 7:42
  SPEAKER_00: Uh that increased 23% to 2.1 million.
• 7:46
  SPEAKER_00: 23% that is is uh faster than the revenue, and again, of vindication of uh of our group strategy.
• 7:56
  SPEAKER_00: The gross margin for the group uh increased from 42 to 44 percent.
• 8:01
  SPEAKER_00: That's a two-point um increase.
• 8:05
  SPEAKER_00: Um, if we look within the factory services and the academy, uh gross margin there reached 58 percent, also up two points.
• 8:14
  SPEAKER_00: As you can see, that's the point of our spear uh services in the academy.
• 8:20
  SPEAKER_00: Uh the second quarter uh uh uh uh grew uh revenue was 2.8 million uh versus 2.2 for the first quarter.
• 8:31
  SPEAKER_00: That's a 27% increase, uh sequential increase, and it was driven by drone as a service.
• 8:41
  SPEAKER_00: Services represent uh about 40% of our first half revenue and generated about 770% of gross profit.
• 8:54
  SPEAKER_00: Um so um in my view and in the view of our investors and our whole management team, uh the quality of the revenue uh is improving.
• 9:08
  SPEAKER_00: The higher margin parts of the business are growing uh faster uh than the group as a whole, and that's all good news.
• 9:16
  SPEAKER_00: Um we presented this plan to our shareholders way back when.
• 9:23
  SPEAKER_00: Um there was some skepticism as investors and shareholders usually have, uh, but these results have uh have quieted some of that anxiety.
• 9:38
  SPEAKER_02: You mentioned a fair amount about drone as a service.
• 9:41
  SPEAKER_02: Maybe you could give us a little more color on what that is and where that's headed.
• 9:49
  SPEAKER_00: In a nutshell, drone as a service um changes the uh the customer conversation from from uh you know by a drone to buy an operational result.
• 10:04
  SPEAKER_00: Basically, uh we can provide uh complex aerial inspections, um surveillance or geometrics, geomatics, sorry.
• 10:17
  SPEAKER_00: Geomatics is simply uh taking pictures of the ground and and then structuring them in some sort of a 3D model uh or or LIDAR uh mapping of the terrain and presenting that to the client, giving the client all that data without a customer having to own his own fleet of drones.
• 10:37
  SPEAKER_00: So we don't sell him the drone so that he can do that work, we do that work and deliver the data to him, to the client.
• 10:45
  SPEAKER_00: At the same time, if the client then sees that it's a useful thing to have and they have the financial wherewithal to uh you know to equip themselves with the same with the with a drone fleet, then we use Drone Vault Academy, we sell them the drones and we train their pilots.
• 11:03
  SPEAKER_00: We don't do basic training.
• 11:05
  SPEAKER_00: What we do is train them in their specific vertical market.
• 11:09
  SPEAKER_00: So if they have to do um a power line inspection, we expect that their pilots are already certified by whatever governing body, and we will train their best pilots on how to do that power line inspection.
• 11:23
  SPEAKER_00: We can either do it for them or we will sell them the drones and teach them how to do it.
• 11:31
  SPEAKER_00: So drone as a service completes the circle.
• 11:35
  SPEAKER_00: We design and build our own drones for each vertical market.
• 11:40
  SPEAKER_00: We then either train pilots and sell the machines to the customer, or as a door opener, we will do the first few missions for them to show them that the it is a valid solution.
• 11:52
  SPEAKER_00: And um they can then adopt their own fleet.
• 11:56
  SPEAKER_00: Some clients prefer not to have their their own fleet because it's expensive uh in many ways, uh they would rather just simply have the uh the data delivered to them.
• 12:11
  SPEAKER_00: And more and more clients are choosing this this uh this uh uh this way of working with us.
• 12:18
  SPEAKER_00: So the client receives actionable data, um a completed mission uh and not simply a piece of hardware, basically the drone.
• 12:30
  SPEAKER_00: We're giving them what they're actually looking for, that final uh actionable uh information that they need to execute, what basically is maintenance, if we're talking about power line inspection.
• 12:44
  SPEAKER_00: But I I'd like to um to give you a um a bottom line on what the savings are.
• 12:51
  SPEAKER_00: So if I have a uh a ledger here in front of me of what this looks like, I built it over a few months, uh specifically about power line inspection.
• 13:03
  SPEAKER_00: So the uh a legacy inspection portfolio is built around uh foot patrols, just traditional walk walking under the power lines, helicopters, obviously flying over the power lines, uh uh uh live line crews, what we see sometimes on TV, uh specialized live line crews, these guys who are dressed in funny overalls, and actually touch the power lines, very dangerous uh job.
• 13:32
  SPEAKER_00: Uh and this all requires uh uh heavy mobilization and a huge logistics um uh uh train.
• 13:41
  SPEAKER_00: You have to organize it, pay the insurance, find the crews, book the helicopters, book the crews, etc.
• 13:47
  SPEAKER_00: etc.
• 13:47
  SPEAKER_00: etc.
• 13:48
  SPEAKER_00: Or Europe, um power line inspection is a is um uh it's about$270 million a year.
• 13:59
  SPEAKER_00: We call that the legacy base using this legacy method.
• 14:03
  SPEAKER_00: Uh with our method, I've calculated the total costs, but it would cost 91 million.
• 14:11
  SPEAKER_00: That's a 66% savings.
• 14:14
  SPEAKER_00: That's the bottom line.
• 14:15
  SPEAKER_00: You adopt drone as a service or you uh buy the drones and do it yourself, you don't need all those, uh all that heavy mobilization of people in helicopters, and you're saving 66%.
• 14:29
  SPEAKER_00: Uh for the US it's almost the same, it's about 70%, and Canada 71.5%.
• 14:36
  SPEAKER_00: Uh just a quick, just a very fast um um comparison between uh helicopters and drones.
• 14:45
  SPEAKER_00: So uh a helicopter visual inspection, just flying over the power line and visually inspecting it, or using a drone to do that, is a 74% savings.
• 15:00
  SPEAKER_00: And you don't have to book you don't have to book the drone.
• 15:04
  SPEAKER_00: You don't have to book crews, you just drive your truck out there and fly the drone.
• 15:09
  SPEAKER_02: Yeah, it's a great value proposition for sure.
• 15:12
  SPEAKER_02: So you were mentioning that you know nice savings for US as well.
• 15:16
  SPEAKER_02: How are things progressing with US partners at this point?
• 15:21
  SPEAKER_00: Uh for our US, what what we're uh concentrating on is uh um partner uh partner-specific discussions.
• 15:32
  SPEAKER_00: We want high quality um partners that have the same kind of mentality, um, a lot of discipline.
• 15:41
  SPEAKER_00: Um increasingly uh uh converting as we did here from just sales to repeatable business.
• 15:52
  SPEAKER_00: And the idea that um a long-term relationship with with a uh with with the uh the same uh growth strategy that we have adopted here in Europe is what we're looking for in the US.
• 16:10
  SPEAKER_00: Um and the 3.8 million uh capital that was invested in us from US investors uh in our last capital increase was uh is is uh is a vote of confidence in this direction, I think, uh which will uh we'll probably talk about how that's going in in later in the in the uh podcast.
• 16:32
  SPEAKER_02: Excellent, excellent.
• 16:34
  SPEAKER_02: Now, am I correct that you're seeing pretty good demand for Hercules?
• 16:39
  SPEAKER_02: And is your supply chain ready to meet the demand?
• 16:45
  SPEAKER_00: Hercules is uh is a very important uh uh product for us uh because um um at it's one of our first drones.
• 16:54
  SPEAKER_00: Uh we specifically designed it to be very modular so that it can do various different types of mission profiles.
• 17:03
  SPEAKER_00: And uh one of them is uh um cleaning the facades of buildings or or or infrastructure or removing um moss and graffiti, uh that sort of thing.
• 17:18
  SPEAKER_00: So it's it's the drone combined with a ground station.
• 17:23
  SPEAKER_00: It's basically a a uh loaded onto the back of a of a pickup truck or into a van.
• 17:29
  SPEAKER_00: Uh it's a pumping station, but it has a Honda 600cc engine, uh, a couple of tanks, two or three hundred uh gallons of of various types of liquids.
• 17:41
  SPEAKER_00: So it's not just the drone, it's the entire package.
• 17:46
  SPEAKER_00: Uh about$120,000 worth of equipment uh for a very specific vertical market that has seen a huge um uh explosion uh in in the drone industry.
• 18:00
  SPEAKER_00: Uh cleaning, graffiti removal, application of moss removing from from from roof from roofs.
• 18:08
  SPEAKER_00: Uh me uh we have a recurring contract with, for example, with um Euro Disney to clean up the the roof of various uh uh theme parks they have here in uh near Paris.
• 18:22
  SPEAKER_00: Uh we apply a mass removal to their to the roof of uh these buildings uh with the savings that I mentioned earlier.
• 18:31
  SPEAKER_00: They were doing it with crews.
• 18:33
  SPEAKER_00: And as you know, Europe is very uh labor labor protective, and so there's huge costs with employing people to do dangerous work, such as going on a roof, which can be two or three stories up, and doing it with a drone saved Euro Disney millions.
• 18:50
  SPEAKER_02: Excellent, excellent.
• 18:52
  SPEAKER_02: Now, in the US, obviously we have the NDAA and Europe has something similar as well.
• 18:58
  SPEAKER_02: Are is your supply chain pretty much 100% compliant at this point?
• 19:05
  SPEAKER_00: This is uh something we've strived to achieve.
• 19:09
  SPEAKER_00: Um, supply chain sovereignty, it's called, uh, in Europe.
• 19:13
  SPEAKER_00: Um, it's something we initiated during the phase of moving from selling other people's drones to building our own.
• 19:20
  SPEAKER_00: Um we chose suppliers from Europe, made in Europe or made in the USA, for example.
• 19:28
  SPEAKER_00: The flight computers on some of our drones are made in the USA.
• 19:31
  SPEAKER_00: So I can say that we are NDAA compliant.
• 19:35
  SPEAKER_00: We are obviously the equivalent of Europe for Europe's supply chain uh compliant, but we are going to take a further step and have it certified so that we can present clients with an actual piece of paper from um the US um AU uh what is it called AUS uh USI, the the the the uh uh the people who actually do the certification for uh for uh uh for the green and the blue drone uh um certification process.
• 20:09
  SPEAKER_00: So when a client asks asks us, we will be able to give them that certificate and say we're 100% NDA compliant.
• 20:19
  SPEAKER_02: Excellent, excellent.
• 20:21
  SPEAKER_02: So kind of changing gears a little bit, talking about the NASDAQ listing, is that something uh you feel like you're making progress with, or is that something that's uh going to be a little further down the road?
• 20:34
  SPEAKER_00: And not only are we making progress, but it's uh taking up uh 80% of management's time right now.
• 20:41
  SPEAKER_00: We're going through a very uh thorough auditing process in order to complete the uh F1 documentation that we need to then present to the SEC.
• 20:53
  SPEAKER_00: Um we it's uh I think it's 112 pages of documentation.
• 20:58
  SPEAKER_00: Uh the auditors and the lawyers uh are third-party independent, so they're they're combing through everything that Drone Bolt does, not just our accounts, but our our our our the processes that we uh do, uh how our security, all those things that the SEC requires to list a company.
• 21:23
  SPEAKER_00: Um we are aiming for this is not insider information or some kind of uh prognostic, we're aiming for end of September uh with present and presenting the SEC with a documentation sometime end of uh sometime in mid-September.
• 21:42
  SPEAKER_00: So we're going we're going full speed.
• 21:45
  SPEAKER_00: Um some of the management, including me, have not taken holidays so that we can go through this.
• 21:52
  SPEAKER_02: Well that shows some commitment there.
• 21:54
  SPEAKER_02: Excellent.
• 21:55
  SPEAKER_02: So speaking of the rest of uh 2026, can you give us a broad outlook?
• 22:00
  SPEAKER_02: You know, and not asking for specific uh guidance, but what do you guys think for the rest of 26 and end of 27?
• 22:09
  SPEAKER_00: We have some um we have a lot of confidence.
• 22:13
  SPEAKER_00: Uh we are going to continue uh investing and maximizing our services industry uh efforts.
• 22:20
  SPEAKER_00: Uh, we've bought a couple of companies uh in Europe that um are in services and did not have the financial wherewithal to continue, so uh that but they have good technology and good pilots.
• 22:32
  SPEAKER_00: Um pilots are not easy to come by.
• 22:35
  SPEAKER_00: I'm not talking about people who are just certified to fly a DJI to take pictures of somebody's wedding, and we're talking about people who can actually do physical uh work on critical infrastructure, including nuclear power stations.
• 22:50
  SPEAKER_00: So we bought those companies and we've had uh in we've absorbed their pilots into our drone volt experts uh system of work.
• 22:59
  SPEAKER_00: Um nobody lost their job.
• 23:01
  SPEAKER_00: In fact, we're expanding um and training new pilots because uh drone as a service is uh pilot intensive.
• 23:12
  SPEAKER_00: Um we will improve obviously our gross margin, our high quality uh with our higher quality um recurring um uh business.
• 23:24
  SPEAKER_00: I think that the the the absolute bottom line is um execution.
• 23:29
  SPEAKER_00: Um grow the high margin parts of the business, convert service visibility into recurring revenue, um, use our expertise in designing and building these drones for these specific uh uh vertical markets uh so that we can scale internationally.
• 23:49
  SPEAKER_00: And above all, uh for us in Europe, but also our US partners, we have to totally maintain uh an uncompromising operational discipline.
• 24:00
  SPEAKER_00: After all, we're in the aviation business.
• 24:02
  SPEAKER_00: This is a heavily regulated part of the of the industry, and not unlike the uh our bigger cousins who actually have people in the flying system.
• 24:15
  SPEAKER_00: But uh yeah, that's what we do.
• 24:19
  SPEAKER_02: Excellent.
• 24:20
  SPEAKER_02: Thanks so much, Stefano.
• 24:22
  SPEAKER_01: Um, Tim, over to you.
• 24:24
  SPEAKER_01: Thank you, John.
• 24:24
  SPEAKER_01: Stefano, great catching up again.
• 24:26
  SPEAKER_01: My head is spinning for you and the rest of the management team.
• 24:28
  SPEAKER_01: You have so many things uh spinning kind of simultaneously, but very, very exciting times for you.
• 24:33
  SPEAKER_01: So congratulations, best wishes on continuing to make uh progress on all the things you just covered, and uh we look forward to having you back hopefully in the sometime late third quarter or fourth quarter to discuss more.
• 24:44
  SPEAKER_00: Excited.
• 24:45
  SPEAKER_00: Thank you, sir.
• 24:46
  SPEAKER_00: Thank you for having me.
• 24:49
  SPEAKER_01: Thank you for listening, and don't forget to subscribe as well as visiting www.watertowerresearch.com to stay up to speed on the company's small cap written research reports, podcasts, fireside chats, industry specific symposiums, and conference schedules.
• 25:05
  SPEAKER_01: We will see you next time for another edition of the WTR Small Cap Spotlight Podcast.