Mobilicom Limited (NasdaqCM: MOB) shares are scoring an impressive YTD run, trading 59% higher from where they started in 2023. The better news is that momentum is at the shares’ back. And it should be, considering Mobilicom is uniquely, even ideally, positioned to target a massive small-drone and robotics cybersecurity market opportunity. More than ideally positioned, they are pioneering the space as one of the first companies to introduce a cybersecurity solution optimized for small-sized drones and robotics, its ICE Cybersecurity Suite. (*share price from 01/01/23 – 09/11/23 market open, $0.97 – $1.59, Yahoo! Finance)
That asset, which provides a measurable competitive edge, puts them in the right place, with the right products, at the right time to seize potentially transformative revenue-generating opportunities. And achieving that position is no accident. It’s an intentional result of MOB investing significant resources to develop innovative cybersecurity solutions that are doing more than serving this niche market; those initiatives have also positioned Mobilicom better than ever to claim a leadership role in the small-drone, robotics, and un-crewed vehicle cybersecurity marketplace.
And they are seizing the opportunity. MOB has already closed significant deals, including one with the Israel Ministry of Defense, which uses its ICE Cybersecurity solution to protect its small-drone assets. That contract may lead to more, potentially from the United States’ reported focus on increasing its drone arsenal. Last Friday, a report was published indicating that the Pentagon has started to assess the possibility of developing an artificial intelligence (AI)-powered fleet of drones and autonomous systems that officials argue will allow the US to compete with and counter threats from China. That may have been what sparked the after-hours interest. If so, investors are timely to the MOB value proposition, where its differences are advantages.
Mobilicom 2023 Rally Fueled By Differences That Are Advantages
In fact, competitively speaking, MOB has already made it hard for those trying to break into the space. That results from MOB being original in addressing a niche sector and maximizing the value inherent to a product portfolio that has passed rigorous testing and been validated by large customers. Beyond fueling organic growth, that critical distinction exposes a valuation disconnect between MOB’s assets, revenues, and share price that may be too wide to ignore.
Based on the YTD surge, many investors aren’t overlooking the opportunity. Interest is warranted, especially as headlines relating to the Ukraine-Russia conflict continue to underscore the importance of embedding cybersecurity assets into small-sized drone fleets. Forbes reported in 2022 that Russia’s electronic warfare troops rendered 90% of Ukraine’s drones inoperative. It’s getting worse. An article in the New York Post in May 2023 reported that Ukraine is losing 10,000 drones per month due to Russian electronic warfare. While the stats on the Russian side may be less forthcoming, it’s more likely than not that they are also losing considerable numbers of drones through the same cyber breaches. Thus, it’s essential to understand that physical weaponry isn’t the only threat to small-drone assets, as cyber infiltration is also inflicting substantial damage to mission-critical systems.
Remember that small-drone losses aren’t limited to just the battlefield. Similar vulnerabilities exist for drones operating in the commercial space, affecting delivery applications, utility/oil/gas inspections, the mining & process industry, and even first responders. That’s led to corporate users such as Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT), and Exxon (NYSE: XOM) to invest heavily in small-drone security to safeguard their fleet operations. These small-size drones, also called mini or small drones, typically weigh up to 250 pounds and operate within distances ranging from 1 to 15 kilometers (1 to 10 miles). While small compared to drones used for long-distance missions, don’t under-appreciate their contributions. These roughly $50,000 assets carry essential payloads, including cameras, parcels, and light military equipment. Because of their compactness, lightness, low power consumption, and affordability, businesses and defense forces are utilizing these small drone assets more frequently, noting their abilities to provide the optimal balance between price, size, and performance.
Their need has led to demand, which has led to Mobilicom scoring some impressive deals. The company recently announced receiving a purchase order for its end-to-end cybersecurity solutions from a global autonomous and remote-controlled armor technology provider. That deal resulted from a product and services design win, leading to Mobilicom’s Mobile Ground Control Station 10″ Pro, MCU Mesh Networking, and SkyHopper Datalinks being installed into autonomous and remote-controlled vehicles for customers in the homeland security and defense markets.
More deals could quickly accrue. Mobilicom CEO and Founder Oren Elkayam said, “This purchase order marks the first in a line of expected orders for initial delivery to customers by our design-win partner, an armor and autonomous vehicle provider.” His optimism stems from the value inherent to his company’s impressive IP portfolio, which integrates multiple products into a turn-key bundle ready for deployment.
Design Win Momentum Should Drive Revenues Appreciably Higher
That’s led to Mobilicom earning a significant number of design wins over the past two years. And remember, each win typically results in revenues. The company noted one of its clients has transitioned from the design-win phase to the initial production stage, setting up potentially significant deliveries to the US Department of Defense. Another consideration supporting near-term growth is that contracts earned have their own organic growth potential. In fact, MOB’s strategy is to keep its clients close with recurring revenue through high-margin repeat hardware sales and from its software and cybersecurity SaaS solutions.
In other words, once its technology is embedded, MOB has a significantly better chance to cross-sell bundled solutions with multiple hardware, software, and services to drive higher revenues while providing flexible pricing that can maintain high gross margins. More simply said, MOB can facilitate growth by doing what they do best: providing its clients with an impressive product suite that keeps revenue flowing for them while keeping the barriers to competitive entry high for others. More than clients are appreciating what MOB offers. The industry is giving accolades as well.
Mobilicom has earned innovation awards, grants, certifications, and standards recognition by the US, Japan, and the EU. They have also earned industry leadership awards from AUVSI, the Association for Unmanned Vehicle Systems International, which has helped the company secure meetings with US Congress to advocate for drone cybersecurity. That recognition has led to a busy few months of activity, some of which can immediately increase shareholder value.
For instance, in March, Mobilicom demonstrated a 5G AI Mesh Network for Autonomous Vehicles and announced a share buyback. In April, MOB announced securing a repeat order for its Mobile Ground Control System. In May, Mobilicom technology was chosen by the UAE Government to protect EVs for Homeland Security and defense. Also in May, MOB joined the US cybersecurity Industry standard as a contributor and entered a Strategic Partnership with the US Prime Contractor for the DOD. In June, MOB launched Cybersecure SDR to expand its marketing reach into the mid-sized drone market. In July, the company announced its commercial scale order from Teledyne-FLIR for a drone fleet sold to the US DOD. Then, in August, the company announced further global market traction by doing new client business in Korea, Brazil, and Canada. That’s a lot of groundwork completed for a microcap company.
More importantly, with MOB stock currently trading at $1.59 per share, that work’s combined value supports the bullish side of the investment proposition that more are beginning to recognize.
Mobilicom Has the Capital to Expedite Market Penetration
The better news from a company and investor perspective is that this revenue-generating groundwork brings more than immediate value. Live demonstrations showing the advantages of its end-to-end solutions that deliver a comprehensive and holistic approach to cybersecurity are attracting new client interest. That includes Teledyne-FLIR (NYSE: TDY), one of the world’s largest manufacturers of small-sized drones and robotics. MOB announced TDY’s intent to purchase 120 of Mobilicom’s SkyHopper PRO datalink systems. Like its other design wins, the deal with Teledyne came after its products, services, and platforms passed critical design, development, integration, testing, and validation. In this case, those positive results led to MOB’s largest-ever commercialization order to serve federal agencies and customers in the US markets.
More good news for MOB is that the deal could continue giving, noting that Teledyne-FLIR is expected to continue integrating MOB’s SkyHopper PRO systems into small-sized drones for the US Department of Defense (DOD). Revenues from the deal aren’t all forward-looking, either. Mobilicom said it expects to post considerable income from that agreement this quarter. Other sources are also likely to contribute to a steepening revenue curve.
For example, in July, Mobilicom announced design win sales in Korea, Brazil, and Canada. In Korea, a drone manufacturer ordered Mobilicom’s newly designed and released MCU Maxi Controller PRO, a mobile, handheld Ground Control Station, for integration into its drones. Opening MOB’s market reach in Brazil, a client manufacturing robotics and un-crewed ground vehicles ordered Mobilicom’s SkyHopper Datalinks for its small-sized robotics solutions. MOB’s SkyHopper Datalinks was also ordered by a Canadian drone services provider in the oil, gas, and mining industries, who plan to utilize the technology to distribute real-time sensor feed from drones to on-the-ground users.
Those deals are a part of the 48 design wins as of June 30, 2023. That’s a huge deal, given that each win represents initial sales of Mobilicom’s systems and components being integrated into new autonomous systems designed by manufacturers of drones and robotics. The better news is that MOB describes its growing client book as including at least eight Tier-1 customers. Those deals can be particularly lucrative given the deep pockets that come with them, which should benefit MOB as it scales to serve the increasing commercial demand from uncrewed and autonomous vehicle manufacturers. While those deals are important, so is having the necessary capital to meet that demand. Fortunately, Mobilicom checks that box, too.
Capital To Fuel 2023 Revenue Growth
The company secured $13 million in funding last year, expected to be ample to fuel 2023 growth, considering its monthly cash burn is reportedly less than $500,000. Mobilicom reported having roughly $11 million in available cash, about 24 months of runway, as of last quarter’s end. Better still, with no debt and a potent business pipeline, that capital can be put to work to accelerate MOB’s expansion. That mission is already underway.
Since 2017, MOB has expanded its sales reach into 16 countries, accounting for over 50 unique client contacts. They also have 34 patent claims in two patent families, which add value by protecting and increasing its competitive edge and distance. Its multinational presence also brings considerable revenue-generating opportunities, even more so in the high-dollar defense and commercial drone sectors. Keep in mind that earning a leading position to serve this vast potential comes with a significant prize: the spoils from a small-drone market estimated to be worth over $8.5 billion by 2026.
To make the most of that opportunity, MOB has established a formidable infrastructure to support aggressive growth strategies and initiatives. Assets within it, including its innovative end-to-end solutions-provider abilities, are already helping the company turn aspirations into revenues. Contributing to that cause, MOB is leveraging the value of its robust and comprehensive small-drones and robotics space cybersecurity solutions. Those include Mobile Mesh Networking Aerial terminals that connect multiple drones to a fleet and swarm operation, its Cybersecurity Suite AI-based 360º degree protection of drones’ platforms data and communication channels, and its ControliT, a cloud-based network management software solutions for drone operators. Further value is added from MOB’s SkyHopper Datalinks Bi-directional data links that share and distribute video and data in real-time, all supported by rugged ground terminals.
As noted, Mobilicom’s services portfolio is attracting significant attention. Competitive advantages over competing products and services have led to MOB signing a Who’s Who client list, including Airbus SE, Elbit Systems (NasdaqGS: ESLT), Censys, and several other prominent global players. These contracts will support MOB as it aims to score additional and potentially massive deals with other companies pioneering the drone and autonomous vehicle sector, including Lockheed Martin (NYSE: LMT) and Tesla (NASDAQ: TSLA), the latter keeping no secret of its plans to utilize autonomous vehicle technology in its next generation of vehicles. While all of these deals generate near and long-term value, the biggest takeaway from the agreements is that Mobilicom’s technology extends well beyond the borders of military defense. That difference is an advantage that could generate millions, if not billions, in sales over the next few years as the company scales to meet diverse client needs.
Attractive Capital Structure Adds Value
There’s another metric that must be included in any MOB appraisal. As of August 23, 2023, MOB reported having only 4.8 million shares O/S, with a good portion of those shares tightly held by insiders. Interestingly, despite the low O/S count, liquidity is excellent. Over the past three months, an average of 1.61 million shares exchanged hands daily. That has kept trading spreads tight, allowing investors to capitalize on profit-taking without creating too much downward pressure.
However, going forward, investors may want to take profits on advisement. Leaving the Australian ASX exchange to trade exclusively on the NASDAQ, Mobilicom should reach US investors’ radar screens this month. It should. Combining its parts, MOB can be considered a cybersecurity sector gem concerning its targeted markets. In fact, side-by-side comparisons with competitors targeting the same markets show that Mobilicom’s products and services offer tremendous, cost-effective, and comprehensive value to a global client list advancing small-drone and autonomous vehicle use. Factor in the United States’ expected new production, MOB is indeed doing the right things at the right time to create sustainable shareholder value.
Thus, the rally so far in 2023 is more than warranted; it’s earned. And perhaps the better news from an investor’s perspective is that with the small-drone and autonomous vehicle markets expected to grow exponentially toward 2030, it’s a trend likely to continue.
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