xReality Group reported record annual results, with revenue rising 43% to AUD $20 million, driven in part by growth in its defence training business, Operator XR.
The ASX-listed group narrowed its net loss to AUD $0.1 million from AUD $3.1 million a year earlier, while EBITDA rose to AUD $3.8 million from AUD $0.6 million. Cash and cash equivalents stood at AUD $2.7 million at year end, compared with AUD $2.8 million the previous year, and net operating cash flow reached AUD $5.5 million.
Operator XR remained the main growth driver. Its global customer base rose 76% to 118 from 67, while annual recurring revenue increased to AUD $8 million. During the year, the business secured AUD $13 million in total contract value after entering the period with a qualified sales pipeline of about AUD $30.4 million.
By year end, that qualified pipeline had expanded to AUD $80.4 million. Deferred revenue also rose sharply to AUD $15.5 million from AUD $7.4 million, giving the company a larger base of contracted revenue yet to be recognised.
Defence push
The company broadened its defence and law enforcement focus across the United States, Europe and Asia during the year. In the US, Operator XR continued targeting law enforcement agencies, which it sees as a large addressable market, and cited the Texas Department of Public Safety contract as a significant reference account.
That contract, announced earlier in the year, was worth up to AUD $5.7 million. It included an initial order of AUD $4.3 million and a further AUD $1.4 million in optional support services. At the time, it was the largest order for Operator XR's OP-2 systems.
Outside the US, the company signed its first European defence contract with the Swedish Armed Forces through distribution partner PROMOTEQ in a sale worth about AUD $450,000. It also recorded its first sale into Japan, extending its Asia-Pacific presence beyond Australia.
While modest in financial terms, those agreements marked first deployments in new markets and gave the business reference customers in international defence programmes. The Swedish contract was also its first deployment with the armed forces of a NATO member.
US programme
Operator XR also completed a US Department of Defence subcontract first announced in an earlier financial year. The 20-month programme was delivered on time and on budget, and the intellectual property created through the work is wholly owned by xReality Group.
After completing that work, the business made its first independent commercial sale of the resulting MR-1 mixed reality platform to a separate US Department of Defence customer in the same financial year. xReality Group presented that as evidence it can turn defence research and development work into products for sale.
Another area of focus was counter-drone training. Rising demand for training against low-cost drone threats generated strong interest from larger military programmes in its Interceptor C-UAS product.
The company also signed a memorandum of understanding with Thales Australia to pursue defence, security and law enforcement training and simulation opportunities together. The arrangement allows either party to lead or support programmes depending on requirements, although it does not guarantee contract awards or revenue.
Technology spend
Alongside sales activity, the group continued to invest in product development. During the year, it opened a satellite office in Melbourne and expanded the Operator XR team, with an emphasis on engineering and product development.
Artificial intelligence formed part of that effort. Operator XR received an AUD $2.1 million grant under the Australian Government's Industry Growth Program to support AI and cloud development, manufacturing capacity, and security and quality certifications.
The company is applying that work to adaptive learning, automated scenario generation and instructor workflows within its training systems. It says these tools can reduce the time instructors spend on repetitive tasks and increase training volumes.
xReality Group also reshaped its leadership team during the year. Kim Hopwood was promoted to Chief Operating Officer, and Ben Smith was appointed Chief Commercial Officer to lead the group's global commercial function.
Entertainment unit
Beyond defence technology, the company's iFLY wind tunnel businesses remained profitable. The entertainment segment generated combined revenue of AUD $7.1 million and operating profit of AUD $1.3 million, providing cash support as the wider group continues shifting towards defence and enterprise technology.
Its exit from FREAK Entertainment was substantially complete, although FREAK Penrith has been retained while options for the wind tunnel assets are assessed. The company described the entertainment operations as cash-generative despite a more difficult consumer environment.
xReality Group also reduced its Causeway debt facility by AUD $800,000 during the year and has begun refinancing discussions ahead of its maturity. It is focused on securing a funding structure that supports its next stage of growth.
The board said the XRG share price more than doubled over the 12 months to the end of the financial year.