Debt Restructuring Looms as Vection Targets Profitability with Defence Contracts

Strong Financial Turnaround

Vection Technologies Ltd (ASX, VR1) has marked a significant milestone in its fifth year of operations by reporting its first positive underlying EBITDA of $2.8 million for the fiscal year ended June 30, 2025. This turnaround from a $1 million loss in FY24 accompanies a robust 22% pro-forma revenue increase to $42 million, reflecting the full consolidation of its recent acquisition, The Digital Box (Algho AI).

The reported revenue of $37.5 million, up 8.7% year-on-year, underscores the company’s accelerating growth trajectory, particularly driven by substantial contract wins in the defence sector and expanding enterprise adoption across multiple verticals.

Defence Sector Fuels Growth

Defence contracts emerged as a cornerstone of Vection’s FY25 performance, with approximately $19 million in new orders secured. Notably, the company landed its largest single contract ever at $7.2 million from a leading European defence client, alongside a $4.4 million repeat order under a $36 million multi-year program extending through 2030. This momentum aligns with increased government spending among NATO members and positions defence as Vection’s dominant revenue contributor moving forward.

Beyond defence, Vection expanded its footprint in education through a $3.6 million extended reality (XR) license agreement covering 500 Italian high schools, healthcare via a $1.7 million partnership with Laerdal for immersive medical training, industrial digital twin projects worth $1.2 million, and retail deployments with global brands like Nestlé and Natuzzi.

Strategic Acquisition and AI Integration

The Digital Box acquisition, consolidated from January 2025, added valuable AI-driven spatial computing capabilities to Vection’s portfolio, including proprietary generative AI technology and multilingual chat agents. The integration of Algho AI Sign Language on AWS Marketplace further broadens accessibility and market reach.

Vection’s AI-first product stack, combined with Dell-certified edge hardware, has accelerated deployment times and enhanced security, reinforcing the company’s leadership in the emerging spatial computing landscape. These innovations have enabled Vection to develop repeatable, industry-specific templates that reduce sales cycles and increase contract renewal opportunities.

Financial Discipline and Outlook

Despite increased borrowings totaling $19.1 million, including long-term debt with favorable repayment terms and no covenants, Vection maintains a disciplined approach to capital management. The company reported pro-forma cash of $7.5 million and positive operating cash flow of $0.6 million, highlighting operational leverage and a stable fixed cost base.

Management is actively pursuing a debt restructuring plan while continuing targeted investments in AI and international sales. The company aims for sustainable profitability in FY26, leveraging multi-year defence contracts, expanding SaaS revenues, and deepening strategic partnerships with industry leaders like Dell and Xerox.

Positioning for Global Leadership

Vection’s Managing Director, Gianmarco Biagi, emphasized the company’s transition from experimentation to scale, noting the transformative potential of combining spatial computing with generative AI. With a solid capital base, visionary leadership, and a growing recurring revenue model, Vection is well-positioned to capture a significant share of the global market across defence, healthcare, retail, and education sectors.