4C Q1 FY26 (28/10/25)
XRG had it’s 4C out today and an investor presentation, receipts down 724k from last quarter and Operating Cashflow negative -$835k comparted to +$1,341k last quarter, which doesn’t look great, but this is not a worry because it has solid reasons and next quarter will be a knockout.
The Texas DPS deal and Industry Growth Program grant were the big events for the quarter, with the new information being customers are now at 80 up from 67 last month. This is slightly lower growth than the 15 added last quarter, but there has been a massive increase in Pipeline Opportunities, with the number increasing to 347 but value increasing 40% QoQ to $51m.
Due to the Texas DPS contract the ARR and TCV are up by large % as expected, but the issue is the impact on cash flows. The cost of goods for the order of $0.8m fell into this quarter while the receipts of $4.3m will fall into next quarter along with $1.4m from the DoD contract and $0.5m from the Industry Growth Grant.
So Q2 cash receipts will be $6.2m, +55% higher than Q1 before adding new Operator XR customer receipts and receipts from the Entertainment business. Hence, we are looking at around $10m+ in receipts for Q2.
Due to cash flow timing the company flagged they drew down $0.5m on their loan facility in October but this will be paid back by December and I would guess the company will be at or close to Net Cash positive. I expect the loan to remain in place to support liquidity and investment until the 2027 maturity.
Other updates in the presentation and 4C of note:
· FREAK is now closed down, iFLY open to offers but no rush because it is running well as a cash cow in the meantime.
· Distributor activity in ROW is solid particularly in APAC with Europe continuing to expand from UK and Swedish bases. No sales as yet – something to probe Wayne on if we get a SM meeting.
· DoD contract has 6 months to go, with $3.2m in receipts over that time, with the project generating new training capabilities not currently in the market that will be proprietary.
· Product Development has mentioned “Operator XR Sentinel” for the first time, A larger fixed facility product focused on military and federal agency customers.
A great quarter, but the cashflow wont reflect it until next quarter. There was a fair bit of trade today but price was relatively stable, which is reasonable because there wasn’t much in the way of new information.
Besides the announcement of new high value Operator XR contracts the catalyst for value uplifts remain the DoD contract flow on opportunities and Distributor sales channels in the near term. Long term we will see what comes out of the product development and if they can get a good sale for iFLY.
ARR and TCV are below, I think Q1FY24 should be gray for the top 4.1m of the TCV, other than that I like the new format.
Keen as always if anyone else has more to add, especially you @Wini
Disc: I own RL+SM
4C Q4FY25 (31/7/25)
XRG has released it’s 4C which provides a bit more of an update on progress on the mid-June Henslow conference with 2 additional Operator XR customers for a total of 15 in the quarter and now up to a total of 67. Updated figures are in the table below.
They also talked up Europe and APAC distributor engagement and events, including a 3-month trial in the UK with a government agency. So I will be expecting some sales in FY26 that are Ex-US and AU.
The DoD contract is halfway with A$1.7m received and due to the back weighted nature of it more than double (A$3.9m) to be received in FY26. This will underpin FY26 cash flows because it means almost half of the FY25 receipts for Enterprise locked in.
The cashflow results were very good, A$4.7m (A$17.7m FY) in receipts of which over half was Operator XR (A$2.5m Vs A$2.2m for Entertainment) and full year Operator XR receipts were A$8.8m so inline with Entertainment of A$8.9 as the business rotation to Enterprise hits the inflection point and Operator XR grows.
Operating CF in the quarter went from -A$338k to +A$1,341 with FY at +A$3,059 which is very solid. However higher investment in IP (Operator XR development) up from A$2.5m LY to A$3.8m resulted in negative FCF of -A$722k for the year. The A$2m capital raise just prior to year end more than covered this leaving ending cash at A$3.5m Vs A$2.0m LY.
TCV was up 24% QoQ to A$11.3m and ARR also up 24% to A$4.7m but with a caveat that A$0.7m related to an Australian government agency that was going to zero cost from 23 August to 31 October to enable time for internal evaluation which may lead to future procurement. Interesting call out, I look forward to an update.
We are still left wondering about what is happening with the Entertainment business exit, iFly contributed A$8.2m for the year, up 12% which is good and solid. Leaving the unmentioned FREAK business contributing a woeful A$0.7m – but I suppose don’t speak ill of the dead is the motto for FREAK.
So things are tracking well, sales to US Law Enforcement are providing solid growth with additional growth drivers of the DoD and ROW progressing and we will see in FY26 what comes of these.
Disc: I own RL+SM
XRG have been like clockwork on releasing their 4C’s on the last day of the month, so it’s release today, over a week early is… interesting.
On the face of it, the cash flow’s are disappointing as they slip back into negative operating cash flows (-$338k) after 3 quarters of positive and last quarter being the first Free Cash Flow positive quarter in 3 years, FCF was -$1,183k with $1,025k cash on hand. Late sales in the quarter with cash not collected plus high product development costs on the release of the new OP-2 software are cited as causes.
Points of interest:
· Cash balance of $1m is less than the $1.3m cash burn for the quarter.
· Operator XR: ARR up 17% QoQ to $4.2m and TCV up 24% QoQ to $9.2m.
· Receipts were $1.9m from Entertainment and $1.5m from Enterprise. The poor Enterprise receipt were due to late Qtr sales not having cash received in the Qtr.
· 12 new US law enforcement customers added in the quarter which is just under the 13 added in the prior half. Customer additions will be lumpy, but they are at 25 YTD Vs 26 for full year FY24. On track to my forecast of 30+ FY.
· We have our first renewal of a customer announced (early days on renewal rates).
· YTD development (IP) cash usage is $2.9m which is above $2.5m for all of FY24, Wayne had indicated the cash burn for IP would be similar to FY24. Are they accelerating into opportunity with this additional spend or has the planned development cost more than planned and they will have to curtail it or run thin on cash?
· Advertising and Marketing spend is almost double any prior quarter, putting on a big showing at Shot Show in January seems to be the driver.
· Global market interest – appointment of new distributors in Europe and Middle East.
· Ash Crick (AI advisory board lead) is leading initiatives to improve customer ROI and reduce reliance on instructors and generate new revenue opportunities
· Debt has halved and ALERRT program covered in earlier release commentary are rehashed.
Looking for in coming months:
· An announcement on the sale/closure of FREAK. The “Receipts from Customer” graph in the release shows how pitiful this business is (maybe 200k receipts a quarter).
· More details on or sales through the distributors in Europe and Middle East.
· Very strong Operator XR receipts in Q4 with the Q3 carry over – wont be happy if this becomes a regular issue (like EOS/3DP all over again).
· Another 10+ agreements inked in the quarter – sounds like the leads out of Shot Show started to landed towards the end of the quarter, so looking for more to land in Q4.
· Positive Operating and Free Cash Flows expected for Q4
Conclusions:
· The management have run at modest cash levels for many years now, they are cash management focused and have a reasonable amount of flexibility on spend, so the current cash position is Business As Usual.
· Operator XR customer additions proceed at a solid pace and the opportunity set is widening in the US and globally.
· I continue to be a buyer.
Disc: I own RL+SM