Mobilicom Limited (NasdaqCM: MOB) stock continues to add to its impressive YTD run, evidenced by a closing price last Friday of $1.55 helping it score an over 59% so far in 2023*. After hours trading added to that sizable increase, with MOB bulls pushing shares another 18% higher to close that session at $1.85. The potentially better news for investors at these levels is that with momentum clearly behind the move, the surge could be the precursor to higher highs. Plenty supports that bullish speculation. (*share price from 01/01/23 – 09/08/23 market close, Yahoo! Finance)
Foremost is that Mobilicom has uniquely positioned itself to target a massive small-drone and robotics cybersecurity market opportunity. The company is pioneering the space as one of the first companies to introduce a cybersecurity solution optimized for small-sized drones and robotics, known as the ICE Cybersecurity Suite. That competitive edge puts them in the right place, with the right products, at the right time to seize potentially transformative revenue-generating opportunities. In fact, after investing significant resources to develop innovative cybersecurity solutions for this niche market, Mobilicom entered 2023 better positioned than ever to stake its claim as a leader in the space. The company has since been leveraging that position by providing best-in-class, specialized cybersecurity solutions for clients in the drone, robotics, and un-crewed vehicle market sectors.
Rewards from those efforts show. MOB’s leading market position has allowed it to close significant deals, including one with the Israel Ministry of Defense, which uses its ICE Cybersecurity solution to protect its small-drone assets. Earning that contract is a milestone reached that is more than a value driver; it’s proof that MOB is widening its competitive distance from potential poachers in an already thin competitive landscape. Moreover, providing services at that level could be the precedent needed to secure similar deals in the United States.
Mobilicom Rally Proves Being Different is an Advantage
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 U.S. 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.
For several reasons. Mostly is that competitively speaking, MOB has created some significant barriers to entry. Not only from being early to address a significant and untapped niche sector, but also by maximizing the value inherent to its rigorously tested and validated portfolio of products and platforms. That critical distinction, particularly related to small-drone and AI-fueld vehicles, is exposing a couple of things. First, the focus is fueling organic growth. Perhaps more importantly, though, results are exposing a valuation disconnect between MOB’s assets, revenues, and share price that may be too wide to ignore.
As evidenced by its significant YTD gain, many investors aren’t overlooking the opportunity. That 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 important 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.
Know this, too- small-drone losses from cyber breaches 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.
Mobilicom CEO and Founder Oren Elkayam expects that deal to lead to more, saying, “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 Strengthened By Industry Accolades
More than design wins are perpetuating MOB’s organic growth. Industry accolades and contracts help 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.
It’s also led to a busy few months of activity, much of which can fuel near-term revenue growth. Over the past two years, MOB has earned a growing number of design wins, which generally drive revenues, and 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 a contract earned has its own organic growth potential. In fact, MOB’s strategy is to keep its clients close with recurring revenue through high-margin repeat hardware sales as well as its software and cybersecurity SaaS solutions.
Keep in mind that 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. In other words, MOB can get 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. Plenty of industry accolades support that likelihood.
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.
Thus, despite the rally into the Monday open, there could be plenty more gains in the days ahead. And with the news of the United States’ increased focus on creating its drone fleet, they could accrue sooner rather than later.
Mobilicom Has Plenty Of Capital To Seize Its Opps
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 previously-mentioned 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, and 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 were 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.
Accounting for those deals, MOB has scored 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.
Intrinsic Value And Inherent Potential Stoke Rally Flames
Mobilicom is in a strong financial position to continue building upon its momentum. 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 can leverage its solid infrastructure. That includes its diverse innovative end-to-end solutions-provider abilities that are already helping the company turn aspirations into revenues. Specifically, MOB is leveraging the value of its robust and comprehensive small-drones and robotics space cybersecurity solutions, including its 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. That’s not all.
Mobilicom’s services portfolio is attracting its own significant share of 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.
Unleashing Value From Its Broad-Based Products Portfolio
There’s another element of the MOB story worthy of attention. 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 can keep the trading spreads tight, allowing investors to capitalize on profit-taking, similar to when profits were taken at the 52-week high $3.33 level in July.
However, going forward, investors may want to take profits on advisement. Emerging from the Australian ASX exchange to ultimately trade exclusively on the NASDAQ, Mobilicom is climbing from under the radar to show itself as a cybersecurity sector gem. In fact, side-by-side comparisons with its competitors show that Mobilicom’s products and services offer tremendous, cost-effective, and comprehensive value to a global client list that is advancing small-drone and autonomous vehicle use faster than even the most aggressive estimates have forecast.
Thus, combining the sum of Mobilicom’s parts with a small-drone and an autonomous vehicle market expected to grow exponentially toward 2030, the interest in MOB stock is warranted. In fact, considering the value of a management team that has successfully scaled companies from the startup phase to merging with large corporations, it’s justified.
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