xReality Group reported fourth-quarter revenue of AUD $8 million, up 69% from a year earlier.
Quarterly cash receipts rose 46% year on year to AUD $6.9 million, while net operating cash flow reached AUD $2.2 million. For the full year, cash receipts totalled AUD $23.9 million and net operating cash flow was AUD $5.8 million.
The Australian virtual reality defence training company increased total contract value for FY26 to AUD $13 million, up 27% from the previous quarter and 15% from a year earlier. Annual recurring revenue reached AUD $8 million, also up 69% from the same period last year.
Its customer base expanded to 118 worldwide, including 108 in the US. That was up 13% from the prior quarter and 76% from a year earlier, highlighting the company's reliance on the US market as it pushes further into defence and law enforcement training.
During the quarter, xReality completed a 20-month AUD $5.6 million subcontract tied to the US Department of Defence, delivered through Acrolect Solutions, which trades as Endurance Group. The project was completed on time and on budget, the prototype was accepted after final testing, and all milestone payments were received.
The company also signed a non-binding memorandum of understanding with Thales Australia covering defence, security and law enforcement training and simulation programmes. Under the arrangement, either party can act as prime contractor or supplier depending on the opportunity.
European entry
xReality secured its first European contract during the quarter, supplying an OP-2 virtual reality tactical training system to an end user within the Swedish Armed Forces. The contract was valued at about AUD $450,000 and was executed through Swedish distribution partner PROMOTEQ i Sandviken.
Delivery was completed and final payment received within the quarter. The deal marked xReality's first deployment with the armed forces of a NATO member and established a reference customer for further European sales efforts.
Outside Europe, xReality continued to build its international pipeline after making its first commercial sale into Japan earlier in the financial year through an Asia-Pacific distribution partner. Its total sales pipeline stood at AUD $80.4 million at quarter end, up 8% from the previous quarter.
Product spend
xReality invested AUD $1.3 million in product development and projects during the quarter. The spending covered work on Interceptor, a counter-drone simulation product aimed at defence and national security customers; a cloud-based content subscription and customer analytics platform; new XR streaming architecture; and Sentinel, a higher-tier system aimed at special operations forces and large training academy customers.
Interceptor is being developed with potential demand in mind from programmes including the Australian Defence Force's LAND 156 counter-drone project, as well as US Department of Defence and law enforcement users. Mixed reality features are also being integrated across the wider product range alongside existing virtual reality modes.
xReality also continued to advance artificial intelligence integration across its products, including personalised training scenarios, de-escalation training, instructor support and adaptive learning.
Portfolio shift
The group's business mix continued to tilt towards Operator XR, with enterprise-related receipts accounting for about 78% of total company receipts in the quarter. The shift comes as xReality seeks to simplify its portfolio and reduce exposure to entertainment operations.
The strategy to exit its entertainment virtual reality businesses is continuing, with the lease at Macquarie Centre due to be finalised later in the year. Equipment from those sites is being repurposed for testing and research and development tied to future Operator XR products.
Its iFLY indoor skydiving venues in Sydney and the Gold Coast delivered performance in line with prior periods during the quarter. A review of strategic options for iFLY remains under way with corporate advisers.
Debt reduction also continued, with AUD $75,000 repaid during the quarter and AUD $800,000 across FY26. The balance on its Causeway Financial facility stood at AUD $4.65 million at quarter end, while the closing cash position was AUD $3.5 million.
The company also made a strategic hire during the quarter, appointing a lead product manager for military and counter-drone systems. Engineering resources freed up after the US Department of Defence project have shifted to enhancing the OP-2 core product and supporting xReality's position in the US law enforcement market.
"Net Operational Cashflow in Q4 FY26 was $2.2m, which results in FY26 achieving $5.8m net operating cash flow for the year, driven by an increase in Operator XR sales throughout the year," xReality said.