xReality surges on US defence, law enforcement deals

xReality Group has reported a sharp lift in quarterly cash receipts and an expanded sales pipeline, alongside new US law enforcement and defence customers and a larger Sydney headquarters.

The ASX-listed simulation and training business said cash receipts reached AUD $7.4 million for the quarter, up 85% on the prior quarter. Net cash from operating activities came in at AUD $3.1 million. The company closed the period with AUD $3.7 million in cash.

xReality Group said it now serves 89 individual agencies globally. The company said this figure rose 31% year-on-year. The business cited demand from the US law enforcement market, as well as work with the US Department of Defence.

US contracts

The company highlighted a contract with the Texas Department of Public Safety valued at USD $5.7 million. It said the deal includes an initial order and an option for additional support services in later years. The order covered software licences and virtual reality training systems, as well as implementation, training and support.

xReality Group said it shipped all Texas DPS kits across four tranches during the quarter. It said it also completed associated training. The company reported cash receipts of AUD $2.4 million during the quarter. It said it received the balance of AUD $1.9 million in January.

The company also provided an update on a US Department of Defence project that it previously valued at USD $5.6 million. It said the 20-month project continues to progress to plan. It said it remains on track for overall completion by April 2026. xReality Group said it received AUD $0.8 million during the quarter and a further AUD $0.5 million in January. It said a remaining balance of AUD $1.5 million is expected to be received prior to May 2026.

Pipeline growth

The group reported a sales pipeline of AUD $63 million. It said this figure increased 107% year-on-year. It also cited 346 qualified and active sales opportunities.

Annual recurring revenue at the half-year point was AUD $6.2 million, up 28% year-on-year. Total contract value for the first half stood at AUD $7.8 million, up 23% year-on-year.

xReality Group said it recorded its strongest quarter of cash receipts to date for its Operator XR division. It said Operator XR receipts totalled AUD $5.2 million, an increase of 146% on the prior quarter.

The company said it added 11 new law enforcement and military customers in the US during the quarter. It said the US law enforcement market remains its highest growth market. It also pointed to momentum with the US Department of Defence, Europe and the Asia-Pacific region.

Counter-drone system

xReality Group said it launched a counter-drone training system at the I/ITSEC military simulation conference in December. It said the launch generated inbound requests for follow-on work from multiple NATO-aligned stakeholders.

New headquarters

The company said it has secured a new headquarters and warehouse of about 740 square metres at Brookvale on Sydney's Northern Beaches. It said the facility roughly doubles production capacity. It also said it adds dedicated space for software engineering.

Leadership hires

xReality Group said it appointed Benjamin Smith as Chief Commercial Officer during the quarter. It described the position as newly created. It also reported senior hires across software production and engineering management, as well as the appointment of a Head of AI who commenced on 12 January.

"This newly created executive role strengthens XRG's commercial leadership as the Company accelerates global expansion of its Operator XR law enforcement and defence training solutions." said Smith.

Entertainment operations

The group also reported cash receipts from its entertainment segment of AUD $2.15 million for the quarter, up 15% on the prior quarter. It cited school holiday campaigns driven by online sales and gifting.

xReality Group said its iFLY facilities performed well in the lead-up to Christmas. It said a drop in receipts compared with the prior year period reflected a one-off bulk sale of wind tunnel time to professional flyers.

The company said iFLY Downunder experienced a mechanical issue in mid-January and paused operations while specialist equipment shipped from overseas. It said the mechanical works will be covered under insurance policies. It said the facility is expected to be fully operational in the first week of February.

xReality Group said its strategy to exit entertainment virtual reality businesses is almost complete following the closure of FREAK Bondi Junction. It said it expects to close FREAK Macquarie in 2026. It said it is repurposing IT hardware and equipment from the sites for testing and research and development tied to future Operator XR product development.

The company said it plans to attend major trade shows in Germany and the UK in coming months with local partners, featuring live demonstrations of the OP-2 system and the counter-drone training system.