How Is X2M Connect Turning Revenue Growth into Profitability Gains?

Strong Revenue Growth and Market Expansion

X2M Connect Limited has delivered a robust first half for fiscal 2026, reporting a 45% increase in revenue to nearly $4.9 million compared to the prior corresponding period. This growth was primarily driven by the company’s expanding footprint in South Korea, where revenue surged 43%, alongside new contract wins in Japan and Taiwan. Notably, X2M secured multiple water digitisation contracts with municipal governments, including the City of Seoul, and began delivering its HelpMe public safety devices, underscoring its strategic positioning in Asia Pacific’s utility IoT sector.

Profitability Gains Despite Net Loss and Impairment

While X2M reported a net loss of $3.25 million, a 2% increase from the previous period, the company improved its adjusted EBITDA loss by 10% to $1.23 million. The loss includes a non-cash impairment charge of $1.2 million related to capitalised development costs, reflecting a reassessment of growth prospects following FY25 results. Operational efficiencies and timing of R&D tax refunds contributed to a positive cash flow from operations of $0.1 million, a significant turnaround from a $1.8 million cash burn in the prior period.

Segment Performance Highlights

The South Korea segment notably turned profitable, delivering a positive adjusted EBIT of $40,000, supported by increased market share and cost reductions. Taiwan’s revenue nearly doubled, driven by initial sales of the Hive.AI data aggregation platform and renewable energy sector opportunities, though it remains in an adjusted EBIT loss position. The Other segment, encompassing Japan and Australia, saw revenue growth through new water digitisation agreements, including a $0.2 million contract with Azbil Kimmon in Japan, but continued to operate at a loss due to corporate and R&D expenses.

Balance Sheet Strengthened by Capital Raising

During the half, X2M raised approximately $5.4 million through placements and entitlement offers, alongside converting $2 million of borrowings into equity. These actions reduced net debt to $0.2 million and increased cash reserves to $1.9 million as of 31 December 2025, improving the company’s liquidity position. The Board’s focus on capital management and cost control aims to support ongoing growth initiatives and operational stability.

Going Concern and Outlook

The independent auditor issued an unmodified review with a material uncertainty related to going concern, citing ongoing losses and working capital deficiencies. However, management’s cash flow forecasts and recent capital injections underpin confidence in the company’s ability to continue operations. The strategic exit from China’s lower-margin hardware market and focus on scalable, recurring revenue streams position X2M for future growth, particularly in the under-digitised water and public safety sectors across Asia Pacific.