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BOOK 04 · POR CONVEXITY

RCAT Red Cat Holdings

Army SRR program-of-record selectee. Tiny P&L, thin margin, real procurement path — the multiple is a funded-FRP option.

Core U.S. drone / UASPure-play 88Defense 85Convexity book

4.29

+1.9%

Cap $655.1M · 52w 6–19

Full file

Convexity book. Only works if FRP funds and they can build it. Size as an option, not as AVAV.

Research score

44

Scoring desk weights

Last Q revenue

$20.2M

+527% YoY

Backlog

n.d.

unable

1m tape

-44.9%

1y -57.4%

-44.9%

Why it is in the five

  • Nov 2024 production selection for Army SRR (Black Widow) unseated Skydio. Named PoR, not an MOU.
  • Press/company: LRIP/TD-3 expanded to ~$35M (Nov 2025). FRP commentary ~$220M is the swing — not booked as RPO here.
  • Palantir VNav flight test on Black Widow (Oct 2025) is a real integration.

Why it can fail

  • Q2 revenue only $20.2M, GM 16.1%, TTM EBITDA deeply negative. Selection ≠ five-year funded objective of 5,880 systems.
  • CEO 10b5-1 selling (150k on 17 Aug at $10.45; 150k on 15 Jul at $8.51) plus director sales. Optics matter on a micro-cap PoR.
  • One-program concentration. A recompete or LRIP slip is existential to the equity story.

Model why

  • Procurement validation is above the universe median.
  • Pure-play score 88 — the P&L is actually about drones/C-UAS.
  • U.S. sUAS OEM with a named Army program of record. DRNZ 4.62%.

Model risks

  • Valuation risk is elevated vs. the rest of the book.
  • Dilution / issuance flags are on.
  • Execution risk is a primary discount.