Today’s article will be going through my highlights and reaction to the ALPP shareholder meeting on March 25th. In general, I don’t think anything groundbreaking came out of the meeting, and I generally anticipated what they would say. But we received some key insights into the progress of the business and where they see it going in 2022 and into 2023.
Let’s get to it!
Laying the Foundation – Acquisitions
I’ve talked about this at length, but 2021 was transformative for ALPP in terms of acquisitions. ALPP worked quickly to capitalize on their notoriety and leverage that into several acquisitions. These acquisitions completely changed the base structure of ALPP and finally turned ALPP’s businesses into the pure DSF model we’d been expecting.
So while we all knew this happened, it was nice for them to reiterate this and remind shareholders just how far the company has come in the last 18 months.
FY 2021 Highlights
Once again, we all know these happened, but to highlight their successes:
- The company raised 77m in capital through some shrewdly executed share issuances
- Uplisted to the NASDAQ
- Paid down most of their debt and all of their convertible debt
- Solvent balance sheet (current assets > current liabilities) and positive shareholder equity
- FY 2021 ended quite poorly due to supply chain issues. I’ve been saying this for months, so I’m not surprised at all. And you shouldn’t be either. Do not expect book profits in Q4 2021, nor Q1 2022 most likely.
All in all, though, this is pretty awesome stuff considering where the company was 18 months ago. So again, great to take a step back and recognize it.
2022 Revenue Forecasts
Onto the juicy parts! ALPP forecasted their revenue by business unit as such:
- Manufacturing – 36m
- Defense – 14m
- Aerospace – 4.2m
- Technology – 52m
- Construction – 16m
- Total: 122m (organic)
Let’s discuss some points here…
Top Line Growth – 2022 vs. 2021
ALPP will likely close out FY 2021 with revenue around 60-70m. I have to purely speculate Q4 because it isn’t out yet 😊, but revenue slightly exceeding Q3’s of 18m is likely. So let’s call it a range of 60-70m to be conservative.
Therefore, ALPP is forecasting something like 100% growth year over year which is massive. But it makes sense when you think about it, especially given the acquisition of RCA. But more on that later.
Manufacturing
At 36m for 2022 vs. a personal forecast of around 33m in 2021, that sounds like solid organic growth, but nothing to blow your socks off. However, Alt Labs and QCA were never expected to be your massive growth subsidiaries like Vayu or Elecjet. These are more in the Stabilizer category, so not surprising to me.
The one that could grow much more exponentially, in my opinion, over the next 5 years is QCA given how integral it is to ALPP’s internal growth technology. But for 2022, it doesn’t sound like they’re expecting that quite yet.
Defense
This is quite a small piece of the pie at a forecasted 14m in revenue. But given that this company didn’t generate much revenue in 2021, the growth is definitely there. However, as to temper expectations, ALPP said that they expected the annual run rate of TDI (the only defense subsidiary) to be between 9-13 million. So this, once again, is not forecasting a massive increase.
But nevertheless, we should be seeing the subsidiary come online as originally expected in 2022.
Aerospace
Drones, drones, drones! This is forecasted to earn around 4.2m in revenue in 2022, which sounds like a pittance. However, this would effectively constitute the first revenue generating year for Aerospace and ALPP’s drones (assuming no sales in Q4 2021). We’ll get into this more down below, but it’s pretty clear ALPP is ready to start selling their first-generation frames and should start seeing some small return on their investment.
Technology
This is the biggest chunk of the business now, and rightly so. This businesses constitutes the newest acquisitions, RCA and Elecject. These subsidiaries are planned to work in tandem, along with Vayu, to revolutionize the battery industry, with Elecjet on the development side and RCA on the operations side.
ALPP is expecting 52m for this subsidiary, which makes sense given that RCA was announced with an anticipated 40m in revenue annually. The remainder can be attributed to organic RCA growth, coupled with new Elecjet solid state battery technology being slowly introduced to the market. More down below…
Construction
Forecast at 16m in revenue, this is likely a contraction in revenue versus 2021. That being said, this is also in the business most hard hit by supply chain issues. It is tough out there in the construction market (assuming you don’t own a copper mine 😊), so I’m in no way surprised that this business has been sucking wind. I am not expecting much of anything in this business next year, but it’s so small that I don’t think it matters too much!
2022 Business Updates / Plans
Let’s now jump through the general business updates I thought most important, some of which were hinted at above.
Acquisitions
As I wrote when the shelf offering was announced a few weeks ago, we’re expecting more acquisitions from ALPP. However, the number of current targets is just two, both of which will be in some way related to the aerospace business.
One of these acquisitions sounds relatively close to being announced, and we will likely see this acquisition be funded by the shelf offering. So once again, expect dilution, but this is not anything to be worried about in my opinion.
Elecjet – Battery Production
ALPP was finally able to announce that they have arranged for overseas battery production to begin for Elecjet’s new battery technology. Current capacity is planned to be around 100k units per month, which is huge.
However, I personally pumped the breaks slightly on battery revenue expectations. Why? ALPP has trickled out info over the last few months about Elecjet and have basically said that they are expecting a slower entry into the battery market over 2022.
This, in my opinion, makes complete sense.
This is brand new technology that is supposed to revolutionize the battery industry. We are also in the middle of a massive supply chain shortage which makes this all the more difficult. Finally, these are also supposed to be crucial components in drone technology which is still in the works. All of this points to a slower rollout over the technology, so I’m really expecting this to be more of a big 2024 growth item.
All of that being said, we lastly heard that ALPP should have decided on the location for its own stateside manufacturing site for batteries. We should have that announced by Q3 2022, and then it will take about 18-24 months to build. So, like I said above, expect batteries to be a massive 2024 catalyst.
All in all, I was very excited by the prospects here and what they were planning.
Vayu – Drone Sales and Production
All things pointed to progress with the drone business, which will hopefully calm some jittery investors’ nerves. First, as was announced a few weeks ago, Vayu has already entered into a sales contract to begin selling the older US-1 model drones frames. This will be a great introduction to the market, and I think the company will be able to easily leverage this into future sales of US-1’s/G1’s, but also act as a foundation for its future sales of US-2’s after development.
So, while we’re not expecting much in terms of revenue for aerospace (4.2m), it’s still something. Also, these seem to be mostly for the already manufactured US-1’s before the next generation comes out.
Lastly, the production facility is now complete which is huge. It sounded like that was a massive elephant in the room for the company for a long time. ALPP is big on in-house manufacturing, so it must have been a huge relief to get that completed. There was also the issue of Chinese components which had to be removed from the frames, which is now complete. Current capacity was estimated at 10 G1’s per month, but they have not specified how that translates to the US-2 yet (because it’s not yet complete).
However, the CEO did specify that a G1 frame sells for somewhere around 200-250k. So 120 in a year would be about 24m in top line revenue (roughly) at full capacity. If these sales ever take off as we all expect them to, look for ALPP to extremely expand production capabilities.
So all in all, expect this businesses to start chugging along in 2022, but nowhere near full capacity/potential yet.
Global Autonomous Corporation (GAC)
ALPP also reiterated its plans to further develop and eventually spinoff GAC. This will be its own article in the future given how complicated this is. But in a nutshell, GAC is a specific set of technology and use from its drones that has to do with urban deliveries (for now). It would get spun-off into its own company theoretically listed on the NASDQ. Current shareholders would then receive shares in the new company based on their proportional ownership of ALPP.
Given how complicated this is, I expect this to not happen for at least two years, but I hope I’m wrong 😊.
Wrap Up
All in all, nothing too surprising. But again, it was comforting and actually exciting hear that the company is following through on its promises for the business. Drones are coming, new batteries are coming, supply chain issues are starting to ease, and we should start seeing margin relief. All in all, I’m more confident than ever.
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DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I HAVE A LONG POSITION IN $ALPP. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.
