Announcement of New Motor Product Will increase TAM by Roughly 50% – sUAS Information

Analyst: Barry M. Sine, CFA, CMT – Litchfield Hills Analysis

This week Uncommon Machines introduced an order for drone motors from Purple Cat (RCAT – NASDAQ).
The corporate had not beforehand introduced this product, and it isn’t but on the Protection Division’s
Blue Record of accepted drone elements for army use. With this announcement, the corporate’s whole
addressable market by way of introduced elements will increase by 50% and it will probably now present 64% of
the elements for a typical mid-sized drone, rising its TAM by roughly 50%, from $1.3 billion to $1.9 billion.

We additionally be aware that per a verify of the Blue Record web site, a second Uncommon Machines flight controller has now been added. Administration has additionally been quoted within the press that it has radio receiver and video receiver elements nearing introduction, which might enhance its TAM one other 30%. This would go away
the body, which is comparatively low-tech, as the one main unannounced part required to construct a drone.

The corporate has been in a position to quickly introduce new merchandise this yr as it’s working with companions to
design and manufacture the elements. For instance, Ewing Aerospace designed and manufactures its
flight controllers and the motors announcement with Purple Cat states that the businesses will initially use a
partnered manufacturing facility. UMAC solely has 16 workers, so it’s leveraging its workforce by
efficient use of third events.

However utilizing contract producers, it will probably quickly ramp up manufacturing, with little price and with out the monetary danger of taking over the fastened price of constructing its personal factories. We predict it can in time have its personal inside manufacturing capabilities, however solely when it will probably fairly guarantee itself that these services will probably be sufficiently utilized to not less than cowl fastened overhead bills. It not too long ago introduced the rent of a producing government who labored at Tesla’s Fremont manufacturing facility throughout its manufacturing ramp.

The opposite main constructive is that the corporate’s retail unit, Rotor Riot, can now vertically combine sourcing
elements internally and considerably develop its gross margin.

We reiterate our Purchase score and $20 12-month value goal as we see quite a lot of upcoming
catalysts:

1. Introduction of a radio receiver/transmitter (RX) product, additional rising its TAM.
2. Introduction of a video receiver/transmitter (VTX) product bringing its addressable market to 84%
   of the worth of constructing mid-sized drones.
3. Blue Record certification of its motors.
4. New clients and orders for elements.
5. This autumn earnings in late March. We search for robust retail gross sales income, primarily based the corporate’s gross sales
   promotions (eg, a $499 Professional Starter drone package) and our go to to the Rotor Riot places of work in December.
   This autumn also needs to present some preliminary, minimal orders for elements as the corporate had
   introduced its Courageous 7 flight controller product and a serious buyer then. Our This autumn estimate calls
   for retail income of $2 million and elements income of $100k, for whole income of $2.1
   million. This may convey income for the yr to $5.7 million, forward of free steering for not less than
   $5 million.

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Feb 27, 2025 4:03 PM ET

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