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 Pink Cat (RCAT – NASDAQ).
The corporate had not beforehand introduced this product, and it isn’t but on the Protection Division’s
Blue Listing of authorized drone parts for navy use. With this announcement, the corporate’s complete
addressable market when it comes to introduced parts will increase by 50% and it will possibly now present 64% of
the parts for a typical mid-sized drone, growing its TAM by roughly 50%, from $1.3 billion to $1.9 billion.

We additionally notice that per a verify of the Blue Listing 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 parts 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 capable of quickly introduce new merchandise this 12 months as it’s working with companions to
design and manufacture the parts. For instance, Ewing Aerospace designed and manufactures its
flight controllers and the motors announcement with Pink Cat states that the businesses will initially use a
partnered manufacturing facility. UMAC solely has 16 workers, so it’s leveraging its workforce by means of
efficient use of third events.

However utilizing contract producers, it will possibly quickly ramp up manufacturing, with little value and with out the monetary danger of taking over the mounted value of constructing its personal factories. We expect it’s going to in time have its personal inside manufacturing capabilities, however solely when it will possibly moderately guarantee itself that these services shall be sufficiently utilized to no less than cowl mounted overhead bills. It lately introduced the rent of a producing govt who labored at Tesla’s Fremont manufacturing unit throughout its manufacturing ramp.

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

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

1. Introduction of a radio receiver/transmitter (RX) product, additional growing 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 Listing certification of its motors.
4. New clients and orders for parts.
5. This fall earnings in late March. We search for sturdy 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 workplaces in December.
   This fall must also present some preliminary, minimal orders for parts as the corporate had
   introduced its Courageous 7 flight controller product and a significant buyer then. Our This fall estimate calls
   for retail income of $2 million and parts income of $100k, for complete income of $2.1
   million. This might deliver income for the 12 months to $5.7 million, forward of free steering for no less than
   $5 million.

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Feb 27, 2025 4:03 PM ET

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