DroneShield share price jumps 16% on 'significant' NATO deal

The DroneShield Ltd (ASX: DRO) share price is roaring higher again on Wednesday.

In morning trade, the counterdrone technology company’s shares are up 16% to $1.10.

Why is the DroneShield share price racing higher?

Investors have been hitting the buy button on Wednesday morning after the company made its second big announcement of the week.

As a reminder, on Monday DroneShield released its first-quarter update and reported record first-quarter revenues of $16.4 million. This was a massive 10x increase from $1.6 million in the prior corresponding period.

Management also spoke positively about the future. It advised that it has a $27 million contracted backlog and a sales pipeline of over $519 million.

The good news is that this sales pipeline may have just got even larger thanks to some big news this morning.

What was announced?

According to the release, the NATO Support and Procurement Agency (NSPA) has approved the first counter-small UAS (CUAS) procurement framework agreement in NATO history.

NSPA is NATO’s lead organisation for multinational acquisition, support, and sustainment in all domains.

The NSPA procurement framework agreement has been awarded via COBBS BELUX BV, DroneShield’s in-country Belgium and Luxembourg partner. The initial agreement is for three years but has extension options.

Management notes that the NSPA procurement framework agreement is considered “significant”.

That’s because the total order of magnitude of sales under the framework over the initial three years is expected to be material.

Also, as a result of being on the NSPA framework, it believes that additional end-users are likely to place orders with DroneShield.

European NATO awards are expected to initially account for the bulk of the contracts. However, the exact order amounts cannot be estimated at this time, and DroneShield intends to provide further updates to the market as appropriate.

‘One of the most strategically noteworthy agreements’

DroneShield’s CEO, Oleg Vornik, believes this is an incredibly important agreement. He said:

The importance of being awarded this first framework agreement, which is a distinctive feature of NSPA, is one of the most strategically noteworthy agreements since the Company was founded. DroneShield is well positioned for the potential order volume with the new production facilities and production ramp-up announced earlier this year.

Additionally, this contract provides further validation to the distributor model, where DroneShield has undertaken a significant investment over last the 10 years to grow its network of highly competent in-country partners in over 70 countries globally. This enables the Company to leverage off local expertise and relationships in each of these individual country markets.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DroneShield. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.