X2M Connect’s Revenue Drops 43% as Adjusted EBITDA Loss Widens to $3.6M
X2M Connect Limited reported a $12.1 million loss for FY25, driven by a 43% revenue drop amid a softer South Korean market and the strategic exit from China. Despite cost cuts and improved margins, the company’s adjusted EBITDA loss widened, prompting a $5.4 million capital raise to shore up its balance sheet.
- Revenue from continuing operations fell 43% to $6.5 million
- Gross margin improved to 47% despite revenue decline
- Adjusted EBITDA loss increased 19% to $3.6 million
- China operations discontinued, contributing to $0.8 million loss
- Post-year-end capital raise of $5.4 million to reduce debt
Financial Performance Overview
X2M Connect Limited has released its preliminary final report for the fiscal year ended 30 June 2025, revealing a challenging year marked by a significant net loss of $12.1 million. This compares to a $6.5 million loss in the previous year, underscoring the financial pressures the company faced amid shifting market dynamics.
The company’s revenue from continuing operations declined sharply by 43% to $6.5 million, primarily due to a softer market environment in South Korea, which remains its largest segment. Despite this revenue contraction, X2M managed to improve its gross margin by 5 percentage points to 47%, reflecting better cost management and a shift away from lower-margin hardware sales.
Operational Adjustments and Cost Control
Operating expenses, excluding cost of sales and share-based payments, were reduced by 14% to $6.9 million. The company attributes this to strong cost control measures, the exit from hardware-only sales, and lower product remediation costs. However, these savings were not enough to offset the revenue decline, resulting in an adjusted EBITDA loss of $3.6 million, a 19% increase from the prior year.
A notable non-cash impairment charge of $4.9 million was recorded against capitalised development costs, reflecting a reassessment of future growth prospects based on current financial forecasts. This impairment significantly contributed to the overall loss and signals a more cautious outlook on the company’s development pipeline.
Strategic Market Exit and Capital Raising
During the year, X2M made the strategic decision to discontinue its operations in China, which resulted in a loss of $0.8 million from discontinued operations. This exit aligns with the company’s focus on more profitable markets and operational efficiency.
To strengthen its financial position, X2M raised approximately $5.4 million through a Placement and Entitlement Offer shortly after the fiscal year-end. Additionally, $1.25 million of borrowings were converted into equity, further reducing debt levels. As of 30 June 2025, the company held $1.6 million in cash against borrowings of $6.3 million, resulting in a net debt position of $4.7 million.
Looking Ahead
Despite the setbacks, X2M reported an increase in enterprise and government customers to 84, up 12% year-on-year, and secured new contracts valued at $5.5 million scheduled for delivery in the first half of FY26. These developments suggest potential for recovery, though the company faces the challenge of navigating a competitive and evolving market landscape.
Bottom Line?
X2M’s FY25 results highlight the tough road ahead as it restructures and refocuses, with its upcoming execution and market conditions critical to reversing losses.
Questions in the middle?
- How will X2M’s exit from China impact its long-term growth prospects?
- Can the company sustain improved gross margins amid ongoing revenue pressures?
- What are the risks and opportunities tied to the new $5.5 million contracts in FY26?
