Red Cat Holdings has announced some significant developments in its U.S. Army Short Range Reconnaissance (SRR) program. The company disclosed that the program of record for SRR has been awarded to them, with an authorized acquisition objective (AAO) of 5,880 systems. Each system includes two drones and one controller, with an average price of around $45,000, depending on configuration.
The company's CEO, George Matus, highlighted that the win was the result of over five years of effort, which began after the Army banned DJI and set out to acquire trusted American-made drones. Red Cat's Black Widow drone was purpose-built to meet the Army's technical requirements, incorporating soldier feedback from the start. The drone is designed to be rugged, reliable, fully modular, quiet, with long flight time and range, high-resolution cameras, stealth modes, onboard compute for AI and autonomy, and the ability to operate in electronic warfare environments and even without GPS.
Additionally, Red Cat designed the Webb controller for the SRR program and delivered it alongside the Black Widow as a fully purpose-built system. The controller has received positive feedback for its ease of use, comfort, modularity, and its common battery with the drone, simplifying operations for end-users.
The company's focus on high-volume production readiness has been affirmed by the Army's evaluation of their manufacturing capacity, processes, and quality management system. It's worth noting that the AAO of 5,880 systems was determined before the invasion of Ukraine and the increased recognition of the impact of drones in modern warfare, suggesting potential for additional demand in the future.
The announcement of the program of record for SRR also opens doors for potential adoption by other U.S. government (USG) sectors, including the Department of Interior, Custom Border Protection, and the Department of Homeland Security, which has 16 organizations underneath it. Furthermore, NATO has been patiently waiting for the announcement, and Red Cat anticipates potential adoption by multiple countries, including several European nations.
The company's advocacy efforts have focused on ensuring funding for the SRR program's expansion into the future, particularly in light of the changing nature of modern warfare and the inadequacy of the initial 5,880 systems number in a near-peer geopolitical adversary situation.
In terms of valuation, Red Cat Holdings provided guidance of $50 to $55 million for calendar 2025 without considering the recent win. Comparatively, some of its peers are trading at high revenue multiples, with Shield AI trading at 18.4 times revenue. This raises questions about whether the company is fully valued at its current price.
The details provided in the press release offer a comprehensive picture of Red Cat Holdings' recent achievements and the potential for future growth and demand for its SRR program. As a result of these announcements, the company's shares have moved 34.0% on the market, and are now trading at a price of $6.35. If you want to know more, read the company's complete 8-K report here.
