A Quick Take on Mobilicom

Huge opportunity, modestly priced shares

We did provide you with our Primer and subsequent Quick Take on Mobilicom (MOB), the Israeli provider of communications hardware and cybersecurity software for drones. Here are simply some additional considerations:

• Drones now rule the battlefield in the Ukraine war.

• Europe Faces a Huge Bill to Defend Ukraine. Investors Are Thrilled.

• The company won a new contract with a $4B Tier-1 supplier to the defense industry.

• Mobilicom’s SkyHopper PRO & PRO Lite were added to the Defense Innovation Unit’s Blue UAS Framework, opening up a host of opportunities in the US and other countries. Here is CEO Oren Elkayam:

The Blue UAS Framework is the highest level of approval in the U.S., putting our SkyHopper PRO and PRO Lite datalinks on the shortlist of top performing, cybersecure, safe, and properly sourced NDAA-compliant UAS solutions, marking Mobilicom’s first commercial partnership for OS3.

• A week later, the SkyHopper PRO Micro was added to the same Blue List.

• The company just entered into a strategic partnership with Aitech Systems, which will integrate Mobilicom’s OS3 (Operational Security, Safety, and Standards compliance) cybersecurity platform onto Aitech’s widely deployed rugged computing systems.

• Mobilicom is only one of five companies on that Blue List (per the CEO in a recent interview). It opens a lot of doors, having passed the most stringent qualification. There are 14 companies on the list, but many have non-competing products (we assume the 5 mentioned by the CEO are the more direct competitors, like Doodle Labs and UVX Technologies). Here is the list:

  • Vertiq (Electronic Speed Control)

  • Locus Lock (Global Navigation Satellite System receiver)

  • Pierce Aerospace (B1 Remote ID Beacon)

  • Mobilicom (Skyhopper PRO / Pro Lite)

  • ARK Electronics (Flight Controller)

  • RPX Technologies (EmbIR camera)

  • Greensight (UltraBlue and MicroBlue)

  • TILT Autonomy (Lightweight Starlink PoE)

  • Athena Artificial Intelligence (Athena Computer Vision)

  • Auterion Government Solutions (Skynode S)

  • Doodle Labs (Wi-Fi transceivers)

  • SensorOps (SynDOJO)

  • Primordial Labs (Anura)

  • UVX Technologies (Swappable Radio Module)

• The share price hasn’t done well (but neither have those of other drone stocks).

• We think in uncertain times like these, and with drones becoming an ever-increasing part of modern warfare (not to mention a host of additional uses), it’s only a matter of time before they’ll catch another round of investor interest.

• Interview with the CEO

• At $2 per share, the EV is $7M; given the rapid scaling of revenue and the significant operating leverage, this seems way too low to us.

• The company has $10M+ in cash, and its cash bleed is in the order of $180K per month, which they can sustain for over two years. Combined growth and operating leverage are likely to extend this significantly, and the company has a good shot at reaching cash flow breakeven in these two years.

We see multiple reasons for the shares to be a good buy in the low $2s:

• The company has compelling products that have already gained traction in Tier 1 drone producers and demand will rise when government procurement programs kick into gear.

• Drones have rapidly become an essential instrument in modern warfare, and geopolitical tensions are rife.

• Achieving the coveted Blue UAS Framework designation for three of its products will open doors and will make selling much easier.

• The company has a first notable deal to integrate its cybersecurity software solution into the products of a partner, opening up a stream of high-margin SaaS revenue.

• The shares are modestly priced with an EV in the single digits and minimal cash burn.