DroneShield : 2Q22 Investor Presentation

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AI-Enabled Platforms for Protection against Advanced Threats

DroneShield (ASX:DRO)

July 2022

Image: DroneSentry-C2TM Command-and Control AI-powered system

July 2022 Update

Continued progress towards inflection point in 2H22

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• $2.7 million customer and grant cash receipts for the 2Q22 quarter, up 11% on 1Q22
•	$125 million sales pipeline for remainder of 2022 (further $230 million for 2023+), growing
	focus to the US and Australian Government customers. Key revenue drivers for 2H22:
		• Ukraine military aid contracts
		• US Government and NATO contracts across defence, intelligence, homeland
use	security and airports
• Australian Government counterdrone, Electronic Warfare and general sovereign
capability work
		• International pipeline (Middle East, Europe, South-East Asia and others)
• Strong inventory balance of $14 million by sale value (including long lead-time components),
	mitigating supply chain risk and enabling rapid sales
•	Bank balance as at 30 June 2022 at $6.7 million, with monthly gross outflows (before
ersonal
	revenues) of approximately $1.1 million/month.
		• Expect to receive $1.9 million cash grant in the current 3Q22 quarter
		• Reducing net quarterly cash outflows over recent quarters (avg $1.5 million/quarter),
		expected to further reduce and turn into positive cashflow through 2H22*

• Favourable macro environment for DroneShield with rapidly rising counterdrone expenditure globally, as drone incidents continue, and defence and security spending rises globally

* There is no assurance that any of the Company's sales opportunities will result in sales.

Deployment at IRONMAN Texas (April 2022), with sensors acquired by a local homeland security agency

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www.droneshield.com

Investment Highlights

onlyWorld leading proprietary AI platform for protection against drones

useBest in class customer base including

ersonalDepartment of Defence, US Air Force, US State Department

Leverage to the global defence and security technology sector. $10bn counterdrone addressable market, in addition to electronic warfare and Defence AI markets

$5.3m in 1H22 cash receipts, with majority of 2022 receipts expected in 2H22, as the business nears inflection point

Sales pipeline of $125m for remainder of 2022 and $230m for 2023

Repeat customers constitute majority of sales

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www.droneshield.com

Executive Summary

DroneShield	•	Founded in 2014 and listed on the ASX in June 2016, DroneShield (ASX:DRO) provides Artificial Intelligence based platforms for protection against
Overview		advanced threats such as drones and autonomous systems
• Hardware and software solutions that detect and safely neutralise small drones (unmanned aerial vehicles or "UAS") used for nefarious purposes, such as
		high-tech warfare, terrorism, contraband delivery, and airport disruptions
	• Key customers include military, intelligence community, Homeland Security, law enforcement, critical infrastructure, and airports globally
Financial	•	$5.3 million customer and grant cash receipts for 1H22, majority of the 2022 receipts expected in 2H22
Highlights	•	$350m+ near term project pipeline ($125m for remainder of 2022 projects)
	• $6.7m cash in bank (as at 30 June 2022)
Business Model	•	Three streams of revenue: hardware (drone detection and defeat devices), SaaS (device software updates) and R&D contracts
only	• Sales through an experienced in-house veteran salesforce with distribution partners across over 100 countries
•	Regular software updates for hardware products and DroneSentry-C2TM (Command-and-Control software) as a standalone subscription product will lead to a
use		significant proportion of SaaS revenue over the next 5 years
• R&D contracts are expected to rapidly increase, representing an opportunity to develop advanced capability in-house, and attracting and upskilling talent
Propri tary AI	•	Underpinning all hardware products are the Company's proprietary AI-enabled threat awareness software engines RFAITM and DroneOptIDTM
Technology	•	RFAITM and DroneOptIDTM are machine learning and AI based detection and classification software, utilising proprietary techniques to undertake real-time,at
		the edge, detection and identification of unmanned robotic systems and, more broadly, other potential threats in the ISR and Electronic Warfare fields
	• The result is a dramatic increase in detection responsiveness, lower false positives and a significant increase in the speed at which new threats are
		detected, classified and tracked by DRO systems.
	• Customers receive regular software updates via enrolling in a SaaS model at the time of purchase of their systems. Software updates build on the system
		architecture and increase performance and the number of detectable threats
	• Delivering on a A$3.8m contract to provide Electronic Warfare ("EW") capabilities to detect "never seen before threats" to the Australian DoD
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Addressable	•	Large international addressable markets in counterdrone and related EW and tracking systems estimated at approximately US$10 billion worldwide
M rket	•	Rapidly improving and easily available drone technology is driving demand for counterdrone solutions
	• Current geopolitical conflicts make extensive use of drones by all sides
Growth Strategy	•	Today, over 75% of revenues is derived from defence, and approximately 15% of revenue comes from the intelligence community
	• Defence, the intelligence community and border security will continue to be the key focus for DRO, however there is a major opportunity for continued
		expansion into other markets including civilian airports, prisons, stadiums and corporates
Key execution	•	US sales: converting trial and integration successes into large multi-million-dollar contracts
priorities in 2022	•	Australia sales: expanding on the initial A$3.8m Electronic Warfare contract into the next, and larger, contract
	• Technology: rapidly scaling the AI engine software for SaaS deployments, and release of DroneSentry-C2TM	4
	•	M&A: continue to review and successfully implement appealing acquisition options

www.droneshield.com

Continued Rapid Growth (A$m, Dec YE) Moving Towards Positive Cashflow

Rapidly improving financials, as the business stands at an inflection point into 2022

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Strong Revenue Growth

10.6

89% growth

5.6

3.6

1.2

2018

2019

2020

2021

FY

Moving towards Positive Net Cashflow

Q3 2021

Q4 2021

Q1 2022

Q2 2022

-1.3

		-1.5
-2.2		$2m inventory
	-2.6	investment

Rapid Cash Receipt Growth (Sales + Grants)

			14.8	Majority of the
				2022 cash
				receipts are
				expected in 2H22
	3.7	5.4		5.3
1.8
2018	2019	2020	2021	1H 2022

FY 1H

Customer "Stickiness" - Repeat vs First Time Cash Receipts

						13.4
						9.9
							5.2
	3.1	3.7		3.4
1.2	2.1	2.2
3.5
1.5	1.8
	1.0
2018	2019	2020	2021	1H 2022
			Row Labels		Repeat Customers

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www.droneshield.com