In the wake of its 2023 first-half earnings report, the drone company Parrot is set to redefine its industrial organization and operations to mitigate slow government orders and minimize cash consumption.
Key Strategic Shifts
Three key strategic shifts form the core of Parrot's forward momentum:
- Focusing on Defense & Security: Parrot is narrowing its technological roadmap to concentrate on the development of microdrones for Defense & Security, which stands as a strong market segment. The company's innovations are now pivoted towards this segment, as reflected in their Anafi Ai products.
- Improving Photogrammetry Business: The company is revamping its photogrammetry business to support the latest generations of solutions and complementary equipment. The change aims to counteract declining sales of older products, cutting back resources previously assigned to them.
- Shifting Production from China to South Korea: In response to growing sovereignty and cybersecurity concerns, Parrot is ceasing production and component sourcing in China. The company has chosen a South Korean manufacturer that complements its existing U.S. organization, utilizing South Korea's advanced technological infrastructure.
Financial Overview
Parrot reported a modest revenue growth of 3.3% to €31.6m, with professional microdrones sales increasing by 0.5% and photogrammetry solutions up by 6.5%. The company's gross margin stood at €24.1m (76.5%), reflecting both the new industrial strategy in South Korea and an expansion in photogrammetry.
However, operating expenditure increased to €42.7m, and EBIT for the first half of 2023 was €(21.8)m. The company's net cash at the end of June was €44.8m, down from €68.5m at the end of 2022.
Workforce Reduction and Cost Cutting
The strategic decisions will lead to a 20% reduction in the workforce by the end of the second half of 2023, targeting savings of around €13m for the full year. Parrot's focus on cutting costs is evident across different sectors, including R&D, administrative, production, and quality spending.
Challenges and Outlook
The geopolitical landscape, marked by technological trends and economic slowdowns, has increased drone use but led to uncertainty in recording major orders from government institutions. These orders could be placed during the second half of 2023 or deferred to 2024. Parrot acknowledges this uncertainty but assures that measures to reduce cash consumption will not impact the expected increase in orders.
The company continues to express optimism for growth in 2023, aiming to capitalize on its new industrial organization. The strategy deployed is expected to significantly reduce cash consumption in the second half of 2023 and even more so in 2024, as the company anticipates an acceleration in growth.
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