Sponsored by SPX CommTech (TCI & ECS)
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04 Jun 24. Gooch & Housego points to outsourcing benefits.
The industrial and medical laser markets have been adversely affected by destocking
- Good order visibility
- Focus on margin expansion
Gooch & Housego (GHH) reported a steep fall in statutory profits at the half-year mark, yet group chief executive Charlie Peppiatt reassured investors that “market dynamics for G&H’s technologies and capabilities remain strong in all our target sectors”. The order book for the electronic component manufacturer finished marginally ahead of its September year-end rate at £115.8mn, although that amounts to substantially all of the order cover needed to match market consensus on full-year revenues.
The reality is that revenues and gross profits were broadly flat on the comparable interim release in 2023. The main problem in terms of financial performance is summed up by the fact that the group’s highest pre-tax margin over the past five years is 4.65 per cent. Management had to deal with the same external supply chain and labour market pressures that have made life difficult for manufacturers of all stripes in recent years, but certain parts of the business have dragged on profitability for different reasons.
So, in a bid to bolster margin growth, the group offloaded its EM4 subsidiary towards the end of the reporting period. EM4 is a Boston-based manufacturer of optoelectronic components and laser modules, but it had “struggled to demonstrate that it could provide a differentiated product offering compared with its competitors”.
A plan is in place to improve the return on sales to mid-teens over the medium term. One of the ways designed to achieve this goal is through proactive outsourcing, an area which management maintains is already delivering positive outcomes. The group continues to explore ways to improve supplier arrangements and customer engagement, but the push to develop further third-party manufacturing channels is likely to have the most immediate positive impact on margins.
Cavendish Securities left its full-year adjusted EPS estimate unchanged at 30.1p, rising to 40.7p in FY2025.
In April, management revealed that order levels in the group’s industrial and medical laser markets had been adversely affected by destocking, the impact of which is predicted to end towards the end of 2024. Unfortunately, interim revenues came up well short of the c. £67.5mn guidance provided in the trading update. So, the shares were duly marked down on results day, albeit on a wide(ish) spread. Good order visibility is set against the necessity to build margins. The forward rating of 18 times earnings is about par from an historical perspective, but a PEG ratio of 0.9 times suggests that the stock could be undervalued based on its growth potential. Cautious buy. Last IC View: Buy, 516p, 05 Dec 2023 (Source: Investors Chronicle)
03 Jun 24. SAIC Announces First Quarter of Fiscal Year 2025 Results.
- Revenues of $1.85bn; 0.4% organic growth; organic growth reflects impacts of divestitures
- Net income of $77m; Adjusted EBITDA(1) of $166m or 9.0% of revenues
- Diluted earnings per share of $1.48; Adjusted diluted earnings per share(1) of $1.92
- Cash flows provided by operating activities of $98m; Transaction-adjusted free cash flow(1) of $21m
- Net bookings of $2.6bn; book-to-bill ratio of 1.4
- Company reaffirms Fiscal Year 2025 financial guidance
Science Applications International Corporation (Nasdaq: SAIC), a premier Fortune 500® technology integrator driving our nation’s digital transformation across the defense, space, civilian, and intelligence markets, today announced results for the first quarter ended May 3, 2024.
“We reported solid financial results in the quarter as we began executing against our enterprise growth strategy introduced at SAIC’s 2024 Investor Day,” said SAIC CEO Toni Townes-Whitley. “We are confident that the strategy and investments we are making best position the company to maximize long-term shareholder value. While we are seeing early indications of progress, we expect returns from our investments to further accelerate in FY26 and FY27.”
First Quarter Summary Results
Revenues for the quarter decreased $181m or 9% compared to the same period in the prior year primarily due to the sale of the logistics and supply chain management business (“Supply Chain Business”) ($188 m) in the prior year and contract completions, partially offset by ramp up in volume on existing and new contracts. Adjusting for the impact of the divestiture of the Supply Chain Business, revenues grew 0.4%.
Operating income as a percentage of revenues decreased from the comparable prior year period primarily due to the sale of the Supply Chain Business in the prior year, a gain recognized from the deconsolidation of FSA in the prior year period, and contract completions, partially offset by ramp up in volume on existing and new contracts.
Adjusted EBITDA(1) as a percentage of revenues for the quarter decreased to 9.0% from 9.3% for the same period in the prior year primarily due to contract completions, partially offset by ramp up in volume on existing and new contracts.
Diluted earnings per share for the quarter was $1.48 compared to $1.79 in the prior year quarter. Adjusted diluted earnings per share(1) for the quarter was $1.92 compared to $2.14 in the prior year quarter. The weighted-average diluted shares outstanding during the quarter decreased to 52.1m from 54.8m during the prior year quarter.
Effective February 3, 2024, the first day of fiscal 2025, SAIC completed a business reorganization which replaced its previous two operating sectors with five customer facing business groups supported by the enterprise organizations, including the Innovation Factory. The five business groups represent SAIC’s operating segments and have been aggregated into two reportable segments (Defense and Intelligence, and Civilian) given the similarity in economic and qualitative characteristics, and based on the nature of the customers they serve. See “Schedule 4 – Segment Operating Results” for reportable segment results.
Cash Generation and Capital Deployment
Cash flows provided by operating activities for the first quarter increased $16m compared to the prior year quarter, primarily due to higher cash provided by the Master Accounts Receivable Purchase Agreement (“MARPA Facility”) in the current year, partially offset by higher incentive-based compensation payments in the current year and other changes in working capital.
During the quarter, SAIC deployed $107m of capital, consisting of $81m of plan share repurchases, $20m in cash dividends, and $6m of capital expenditures.
Quarterly Dividend Declared
As previously announced, subsequent to quarter end, the Company’s Board of Directors declared a cash dividend of $0.37 per share of the Company’s common stock payable on July 26, 2024 to stockholders of record on July 12, 2024. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.
Backlog and Contract Awards
Net bookings for the quarter were approximately $2.6bn, which reflects a book-to-bill ratio of 1.4 and a trailing twelve months book-to-bill ratio of 1.0. SAIC’s estimated backlog at the end of the quarter was approximately $23.6bn. Of the total backlog amount, approximately $3.5 bn was funded.
Notable New Awards:
U.S. Space Force: During the quarter, SAIC was awarded a five-year (one year base, plus four, one-year option periods), $444m contract to support Digital Transformation, Acquisition, Modernization and Modification (DTAMM) for the U.S. Space Force’s Space Systems Command and Space Launch Deltas (SLDs) 30 and 45. SAIC will support the modernization of the space launch range instrumentation. The efforts will support an accelerated national launch cadence across the Eastern Range (ER) and Western Range (WR) including Cape Canaveral Space Force Station and Patrick Space Force Base in Florida and Vandenberg Space Force Base in California. Experts from SAIC and partners will collaborate to modernize antiquated instrumentation and processes to enable a faster and more integrated launch environment. SAIC remains at the forefront of national priorities to explore, secure and influence space by leveraging industry expertise and legacy in this domain. In addition to DTAMM, SAIC’s work facilitates future unmanned spacecraft, earth science data-collecting satellites, space-ground systems for military joint all-domain command and control and more.
Office of the Under Secretary of Defense for Research and Engineering: During the quarter, SAIC was awarded a five-year (one year base, plus four, one-year option periods), approximately $90m contract by the Office of the Under Secretary of Defense for Research and Engineering (OUSD(R&E)) to modernize business operations. Through this contract, SAIC will partner with OUSD(R&E) to modernize its policies and procedures through SAIC’s data management, knowledge management and strategic planning capabilities. Enhancements will include an increase in data reuse and the reduction of internal organizational operational delivery times.
U.S. Navy: During the quarter, SAIC was awarded a five-year (one year base, plus four, one-year option periods), $92m contract to provide professional support services in the areas of sustainment, engineering, test and evaluation, logistics, research and development, and ancillary facilities in direct support of Underseas Sensors Branches at the Naval Surface Warfare Center and Crane Division.
Special Operations Command: During the quarter, SAIC was awarded a significant modernization role on the recently awarded $2.8bn SOCOM SITEC 3 EOM contract as part of Peraton’s winning team. SAIC will support the SOCOM mission by contributing to the modernization and sustainment of the IT, networks and infrastructure to support their 80,000 users. SAIC will provide enterprise-wide IT services and the SOF Information Environment to support the SOF global battle space. The contract will impact core services for users in more than 80 countries.
Notable Recompete Awards:
National Aeronautics and Space Administration (NASA): During the quarter, SAIC was awarded a $494m seven year (one year base, plus six, one-year option periods) single-award indefinite delivery, indefinite quantity (IDIQ) recompete contract by NASA to enable safe and reliable exploration of space through the Safety and Mission Assurance Engineering Contract III (SMAEC) program. Performing work at the Johnson Space Center in Houston, Texas and the White Sands Test Facility, N.M., SAIC will work on next-gen space missions like Orion, the lunar Gateway, the International Space Station and human space flight. Consistent with the Company’s policy, the Company included $350m of the IDIQ ceiling in bookings and backlog which represents its current estimate of expected delivery on the contract.
U.S. Navy: During the quarter, SAIC was awarded a six-year (one year base, plus five, one-year option periods), approximately $120m recompete to support the Navy’s afloat and ashore wargaming and fleet readiness. This effort will support the Tactical Training Group Pacific (TTGP), Expeditionary Warfare Training Group Pacific (EWTGPAC), Carrier Strike Group 15 (CSG-15), and Commander, Naval Air Forces Pacific (CNAP) through professional technical services providing FST and LVC wargame development and execution, as well as SME classroom instruction in warfighting doctrine and TTPs utilizing government furnished training systems and facilities, both afloat and shore.
U.S. Space and Intelligence Community: During the quarter, SAIC was awarded approximately $706m of contract awards by space and intelligence community organizations. These awards represent a combination of new business and recompetes.
Other Notable News:
SAIC launched a multi-year growth strategy at 2024 Investor Day and met with key analysts and shareholders to share the company’s new vision for strategic growth to increase its value for customers and stakeholders. SAIC has committed to growing the company through a phased approach that focuses on building the company’s portfolio and go-to-market approach, enhancing the brand and further developing a winning culture.
SAIC appointed Srinivas “Srini” Attili as executive vice president, Civilian Business Group, effective May 6, 2024. In this role, Mr. Attili will report to Chief Executive Officer Toni Townes-Whitley and will further extend SAIC’s position as a leader across Civilian markets through innovation and revenue growth.
SAIC was recognized as a Leader in the IDC MarketScape: U.S. National Government Professional Security Services 2024 Vendor Assessment. The report highlights the evolving challenges in cybersecurity due to emerging technologies, expanding attack surfaces and a significant shortage of skilled cybersecurity professionals. SAIC’s Trust Resilience™ cybersecurity solution provides the most advanced commercial technology to address security gaps and deliver cybersecurity across any enterprise. It aligns to all major zero trust governance models, reduces cyber risks, prevents system disruptions and guards against data loss.
(Source: BUSINESS WIRE)
03 Jun 24. NextFlex® Launches $5.3m Funding Opportunity to Strengthen U.S. Electronics Manufacturing and Promote Commercialization of Hybrid Electronics. NextFlex, the Department of Defense (DoD) sponsored Manufacturing Innovation Institute focused on maturing hybrid electronics, today released Project Call 9.0 (PC 9.0), its latest call for proposals that seek to fund projects that further the development and adoption of hybrid electronics while addressing key challenges in advanced manufacturing. The total PC 9.0 project value is expected to exceed $11m (including NextFlex investment and performer cost-share), bringing the total anticipated investment in advancing hybrid electronics since NextFlex’s formation to $143m.
Building from the success of past Project Calls, PC 9.0 uses broadly defined topics to enable a diverse proposer base, with special emphasis on areas in which hybrid electronics can impact high priority U.S. manufacturing opportunities and areas of emerging importance within the electronics manufacturing community. PC 9.0 emphasizes projects that address critical hybrid electronics manufacturing challenges, enabling the transition of hybrid electronics devices into applications that require superior performance, assured reliability, and improved environmental sustainability.
“NextFlex Project Calls advance the state of the art of hybrid electronics technology and have proven to push the field in new directions, with each marking development milestones that have been collectively achieved by the NextFlex consortium. PC 9.0 continues this trend, with increased emphasis on projects that will lead to technology transitions into both commercial markets and defense programs.” said Dr. Scott Miller, Director of Technology at NextFlex. “As hybrid electronics technologies increasingly find their way into products and manufacturing, these developments will expand the range of applications in aerospace, automotive, structural health monitoring, and medical wearables.”
Proposals focused on manufacturing challenges and advancing technology transitions are sought in these topic areas:
Topic 9.1: Manufacturing of High Resolution, Multilayer Electronic Packages and Devices
Topic 9.2: Thermal Management for Power Electronics
Topic 9.3: Reliable Hybrid Electronics for Extreme Conditions
Topic 9.4: Conformal & Structurally Integrated Hybrid Electronics
Topic 9.5: Additive Processes for Improved Environmental Sustainability of Electronics Manufacturing
Topic 9.6: Open Topic for “New Project Leads”
In addition, NextFlex announces the release of its latest public Hybrid Electronics Technology Roadmaps. Developed by subject matter experts from industry, academia and government. The NextFlex Technical Working Groups in 11 technical areas of emphasis – Automotive; Device Integration & Packaging; Materials; Modeling & Design; Printed Components & Microfluidics; Standards, Test & Reliability; Asset Monitoring Systems; Flexible Power; Human Monitoring Systems; Integrated Antenna Arrays; and Soft Wearable Robotics – update the roadmaps each year. The public roadmaps summarize the detailed information on the current state of the art, market opportunities and needs, key stakeholders, a five-year forward-looking development roadmap, and prioritized technical gaps identified by each Technical Working Group in the full-version roadmaps to which NextFlex members have access. These roadmaps inform the priorities and shape the topics for NextFlex Project Calls. You can access the public version of these roadmaps here.
Proposals are due July 24.
About NextFlex
NextFlex is a DoD sponsored Manufacturing Innovation Institute funded by Air Force Research Laboratory Cooperative Agreement numbers FA8650-15-2-5401 and FA8650-20-2-5506. NextFlex is a consortium of companies, academic institutions, non-profits and state, local and federal governments with a shared goal of advancing U.S. manufacturing of flexible and additive hybrid electronics. Since its formation in 2015, NextFlex’s elite team of thought leaders, educators, problem solvers and manufacturers have come together to collectively facilitate innovation, narrow the manufacturing workforce gap and promote sustainable manufacturing ecosystems. (Source: BUSINESS WIRE)
04 Jun 24. Chemring reports record order book and strong momentum.
Cold front in Tennessee puts freeze on first-half profits
- Revenue goal set at £1bn by 2030
- Investment in growing energetics capacity upped to £200mn
Defence company Chemring’s (CHG) interim results were somewhat frustrating for investors. For all of the talk of record order books and the long-term potential of the business, the short-term performance wasn’t great.
A 24 per cent decline in operating profit was attributed to problems at a countermeasures factory in Tennessee, which was forced to halt operations in January when local temperatures fell to minus 27 degrees Celsius.
An automation ramp-up at the site was also pushed back, while a legacy countermeasures contract signed with the US Department of Defense in 2016 also hit margins. This is set to be completed in the second half, though, and the company is forecasting a significant enough increase in activity to leave its full-year guidance unchanged.
It will require a stronger second-half performance than usual to meet this, though. Chemring’s sales, operating profit and cash flows are normally weighted towards the back end of its financial year, with 60 per cent earned in the second half and 40 per cent in the first, according to Jamie Murray, an analyst at Shore Capital. This year, that weighting “will be closer to 65:35”, he said.
Although this increases the potential for an earnings miss and a subsequent sell-off in the shares of a company that are up by 42 per cent over the past 12 months, this has to be weighed against Chemring’s brighter prospects.
An “unprecedented” increase in demand for energetics used in munitions has meant the company is being handed money (£90mn in total) by the European Union and the Norwegian government to ramp up production at its Chemring Nobel site. This has led it to increase its proposed spend on boosting energetics capacity to £200mn, up from £120mn. Once complete, this will deliver an extra £100mn in sales and £30mn in operating profit a year, with chief executive Mick Ord setting a long-term annual revenue target of £1bn by 2030.
Capex will therefore remain elevated in the short term, and a £34mn spend during the first half (coupled with £28mn on buybacks) pushed net debt higher to £75mn, from £14.4mn at the end of last year.
Net debt still stands at less than one times underlying Ebitda, though, and cash conversion remains strong. Even with Chemring’s shares trading at around 19 times consensus forecasts, above their five-year average of 16 times, it is demonstrating enough momentum for us to maintain our buy call. Last IC view: Buy, 326p, 12 Dec 2023 (Source: Investors Chronicle)
03 Jun 24. Curtiss-Wright Corporation (NYSE: CW) today announced that it entered into an agreement to acquire the stock of Ultra Nuclear Limited and Weed Instrument Co., Inc. (“Ultra Energy”), a subsidiary of Ultra Electronics, for $200m in cash. Ultra Energy is a leading designer and manufacturer of reactor protection systems, neutron monitoring systems, radiation monitoring systems, and temperature and pressure sensors that facilitate the safe and reliable operation of commercial nuclear power generation plants, and support UK nuclear defense, as well as aerospace and industrial applications.
Ultra Energy generated sales of approximately $65m in 2023 and is expected to be accretive to Curtiss-Wright’s adjusted diluted earnings per share in its first full year of ownership, excluding first year purchase accounting costs, and produce a strong free cash flow conversion rate in excess of 100%. The acquisition is expected to close in the third quarter of 2024, subject to UK regulatory approval, and the acquired business will operate within Curtiss-Wright’s Naval & Power segment.
“The acquisition of Ultra Energy significantly increases the breadth of Curtiss-Wright’s global portfolio with highly complementary, critical measurement and control solutions supporting the modernization of existing commercial nuclear power plants, as well as the design of new and advanced power plants including small modular reactors, in both the U.S. and Europe,” said Lynn M. Bamford, Chair and Chief Executive Officer. “The transaction provides an opportunity to leverage Ultra Energy’s relationships and UK-based nuclear manufacturing footprint to further expand Curtiss-Wright’s presence with the leading global designers of advanced nuclear reactors as well as our robust naval defense portfolio to support UK submarines.”
“Building on our successful acquisition track record, Ultra Energy’s critical solutions have a strong alignment to our strategic priorities as highlighted at our 2024 Investor Day. Further, the business is expected to support Curtiss-Wright’s financial objectives including long-term profitable growth and strong free cash flow generation.”
Through its predecessor companies, Ultra Energy’s roots date back to the mid-1950s as a specialist in neutron monitoring and the late-1960s as a manufacturer of temperature and pressure sensors. Today, its diverse portfolio includes neutron monitoring for measuring reactor power and safety management, radiation monitoring for plant safety, reactor protection systems to constantly monitor plant conditions, and highly accurate temperature and pressure sensors.
Ultra Energy employs approximately 300 people and maintains primary operations in Wimborne, UK, and Round Rock, TX. Ultra Energy is a subsidiary of Ultra Electronics, formerly a UK-traded public company.
03 Jun 24. MyDefence, the counter drone technology provider, announces Bridgepoint as new majority shareholder. MyDefence, a Danish specialist developer of counter drone technology, announces new investment via the Bridgepoint Development Capital IV fund. Bridgepoint will support MyDefence in its next stage of growth, including further investments in research and development as well as production expansion.
MyDefence, a leading provider of counter unmanned aerial systems, known as C-UAS or counter drone technology, has announced the global private equity group, Bridgepoint, as its new majority shareholder. The partnership leverages Bridgepoint’s strong track record of supporting international expansion and growth in global technology and advanced industrial sectors. The investment was made via Bridgepoint Development Capital IV, BDC, a fund focused on investing in mid-market growth business across Europe.
MyDefence develops radio frequency-powered products to detect and defeat unmanned aerial systems, such as drones. The company’s products can be worn by personnel or mounted to vehicles and buildings, and its technology is used to protect military or civilian critical infrastructure from the safety risks posed by hostile drones. The company has delivered 115% compound annual revenue growth over the last four years and is well-positioned to become a leader in the $1.1 bn addressable market for drone countermeasure solutions with its unique product offering.
“We are delighted to partner with the Bridgepoint team. Their extensive presence worldwide and their experience helping companies grow is valuable to us. Adding us to Bridgepoint’s vast network not only gives us financial support, but it also puts us on a path for faster development and innovation. C-UAS systems are among the most important next-generation defence technologies and MyDefence is at the forefront of all cutting-edge innovations required to meet the difficulties facing drone defence today,” says Dan Hermansen, CEO at MyDefence.
Poised for global expansion and further innovation
With access to capital and strategic support from Bridgepoint, MyDefence is advantageously placed to expand its reach globally and reinforce its position as a leader in C-UAS and other technologies with civil and defence applications. The partnership will enable MyDefence’s next phase of growth with a focus on the scaling of production, professionalization, and research and development.
– We have built a very strong relationship with Dan and his team, whose wealth of experience bridges the defence and security arenas. With a suite of products at the forefront of technology, MyDefence enjoys an enviable position in the market, underpinned by a robust orderbook and pipeline with significant scale-up opportunities. We look forward to leveraging the complete breadth of capabilities across our international network to help realise this exciting next stage of MyDefence’s journey, says Johan Gustafsson, Partner at BDC.
With a significant number of C-UAS systems supplied already, MyDefence has proven to be a dependable technology-provider in the defence industry. With the support of Bridgepoint, MyDefence is now ready to expand its technology offering, not only in defence but additionally in corporate, governmental and homeland security sectors.
This reflects the growing demand for comprehensive security measures against hostile drone threats across a range of applications, including the protection of critical infrastructure, including utilities like gas and electricity, public venues like stadia and event spaces, and high-security institutions such as prisons.
Financial terms of the transaction were not disclosed.
MyDefence was advised by PwC (M&A adviser), Plesner (legal adviser), and KPMG (financial and tax adviser). Bridgepoint was advised by SEB (M&A adviser), Accura (legal adviser, tax due diligence and structuring), Renaissance Strategic Advisers (commercial due diligence), Alvarez & Marsal (financial and operational due diligence), Crosslake (technology due diligence), ERM (ESG due diligence), and Marsh (insurance due diligence).
About MyDefence
Founded in 2013, the Danish company MyDefence has been developing counter drone defence technology, specializing in the development of radiofrequency-based solutions. Meeting the requirements of global defence organizations, MyDefence is dedicated to enhancing national security and protecting critical infrastructure through technological excellence. Its battle-proven systems have been rigorously reviewed and approved for purchase by NATO member nations. Following the vision of “Saving Lives” since its inception, MyDefence has successfully created a solid position in the C-UAS market as the leading provider of wearable and integrated solutions to protect humans, vehicles, and critical assets against malicious use of drones.
About Bridgepoint
Bridgepoint is one of the world’s leading quoted private asset growth investors, specialising in private equity and private debt. With over €41 bn of assets under management helping primarily European companies to grow, Bridgepoint combines global scale with local market insight and sector expertise, consistently delivering strong returns through cycles.
01 Jun 24. Drone Startup Neros Raises $11m Funding from Sequoia.
LA-based Neros, an autonomous drone startup founded about a year ago, has raised $10.9m in a seed round from Sequoia Capital to build a new factory and manufacture more drones to sell to Ukraine.
When Soren Monroe-Anderson and Olaf Hichwa first met, they were competitors with a lot in common. Both were first-person view drone pilots racing at the professional level, both ran their own businesses designing and selling drone components—and both were still in high school.
Soren grew up racing in Alaska before moving to New England, where his parents took jobs at Dartmouth, while Olaf built his skills near Washington, D.C., where he was part of the extended Sequoia family—his father spent his career as a leader at Oracle, a legendary part of our portfolio. By the time he was 17, Soren was a world champion in the MultiGP drone racing league; Olaf, meanwhile, had ranked third on the league’s global leaderboard a few years earlier and went on to design and sell thousands of drone circuit boards to the world’s top pilots.
MultiGP is like the Formula 1 of the drone world—to succeed at Soren’s and Olaf’s level requires elite skills in not just piloting but engineering. And now, these competitors turned co-founders are using that dual expertise to build the drones that they always wanted—and that they know soldiers need.
When I was in Afghanistan in 2012, the U.S. military was using what were then called drones—but they were large, fixed-wing devices that had more in common with airplanes than with the drones of today. Advances in technology in the decade since are on par with the jump between World War II and Vietnam; for the past two years, Ukraine’s military has defended against the Russia invasion not just with planes, ships and tanks but also electromagnetic energy, Starlink, hypersonic weapons—and modern, quadcopter drones.
Drones are a foundational technology for the future of warfare, with use cases going far beyond offensive missions; they are also used, in massive quantities, to gather intelligence, clear mines and more. But the U.S. is currently far behind in production of both these machines and their components, with 85% of global drone manufacturing capacity owned by China. Under the Department of Defense’s Replicator initiative, large U.S. defense companies will produce thousands of drones, but Ukraine will use an estimated 2.5 m this year alone.
With Neros, Soren and Olaf are determined to change that math.
Last year, a few days after we first met, Soren traveled to the front lines of Ukraine—to share what he knew about flying drones, and to see firsthand what the soldiers there needed. He came back with a clear vision for what Neros should build, and for how they should build it: a new generation of drones, from a fully American supply chain. We partnered soon after.
And then we saw just how quickly Soren, Olaf and their team work. They began in earnest in June, and by September, Neros—still a pre-seed company at the time—had successfully tested and deployed functional drones in Ukraine. Today, those drones remain a critical tool on the battlefield, and Neros recently completed an exercise with the U.S. Army, successfully removing anti-tank landmines in every attempt.
It’s an incredibly impressive track record for any new company, much less one led by co-founders who are barely in their 20s. But once you know Soren and Olaf, it’s difficult to be surprised. They are amazing: laser-focused on understanding their customers and iterating quickly to meet soldiers’ needs, and they are bringing on top talent to help them scale. With this round of seed funding, Neros will continue building that team, and will open a new 15,500-square-foot factory, enabling them to produce thousands of drones each month. From there, Soren and Olaf plan to bring production of more components in house—continuing progress toward their dream of a fully American drone supply chain—and eventually, to expand beyond drones to more aspects of defense, reshoring manufacturing as they go.
Less than a decade after they faced off as racers, these two teenage competitors turned friends and their team are already making a life-saving difference for soldiers in Ukraine—and soon, for the men and women who serve in the U.S. military and all around the world.
(Source: UAS VISION/Sequoia Capital)
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SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR). For more information visit www.tcibr.com and www.enterprisecontrol.co.uk
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