Fund Manager Summary on xReality Group Ltd (ASX:XRG)
xReality Group Ltd (ASX:XRG) has presented a compelling investment case highlighted by recent fund manager commentary from Mereweather Capital. The company is experiencing significant momentum with a 28% quarter-on-quarter recurring revenue growth, largely driven by a key contract with the Texas Department of Safety and a notable two-year, $4.3 million deal, validating the efficacy of its Operator XR training solution. However, investors should be cautious as the company faces cash outflows due to inventory investments, anticipated to reverse as payments for major contracts come in. While the Entertainment segment shows stagnation, the Enterprise segment is rapidly expanding with strategic positioning under Wayne Jones, a former SAS Commander. Overall, XRG represents a promising opportunity in the extended reality sector, although operational cash flow management remains a critical consideration.
Commentary From The Managers
There are 2 insights from 1 fund managers regarding their investment in xReality Group Ltd (ASX:XRG) available on Thesis Tracker.
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Updates are made available to members within 12 hours of being released. The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Mereweather Capital
31 Oct 2025
$0.06
Summary
- Mereweather Capital notes that xReality Group Ltd (XRG) reported a 28% quarter on quarter recurring revenue growth.
- The growth is underpinned by the recent Texas Department of Safety contract.
- There was a substantial cash outflow of approximately $2 million for the quarter, attributed to investments in inventory and new product features.
- This cash outflow is expected to sharply reverse in the coming quarter as XRG anticipates payments for several large projects.
- Mereweather Capital continues to hold its position in XRG based on these growth indicators.
Mereweather Capital
31 Aug 2025
$0.05
Summary
- Mereweather Capital initiated a position in XReality Group (XRG) during a recent capital raise.
- XRG operates in two segments: Entertainment and Enterprise.
- The Entertainment segment, focused on indoor sky diving wind tunnels, generates approximately $7m in revenue annually but is considered ex-growth.
- Free cash from the Entertainment segment was reinvested to develop Operator XR, a training solution combining virtual reality goggles and motion sensors.
- Operator XR targets defence and law enforcement sectors, providing cost-effective training solutions.
- The leadership of Wayne Jones, a former SAS Commander, enhances credibility in the defence sector.
- XRG has rapidly commercialized Operator XR, securing key contracts including those with the US Department of Defence and Australian Federal Police.
- Recent results showed a 36% revenue growth, with a shift to positive EBITDA and free cash flow.
- XRG's largest contract to date is a $4.3m deal with the Texas Department of Public Safety, validating product quality.
- This contract opens opportunities to sell Operator XR to the remaining 30 Departments of Safety in the US.
- Funding for additional positions came from exiting holdings where investment theses were challenged.
The completeness, accuracy or current status of the investments referenced are not guaranteed.
Frequently Asked Questions
Who is investing in xReality Group Ltd (ASX:XRG)?
Fund managers including Mereweather Capital have invested in xReality Group Ltd (ASX:XRG).
Why do fund managers invest in xReality Group Ltd?
Fund managers invest in xReality Group Ltd due to its dual business model, which includes a stable Entertainment segment and a high-growth Enterprise segment specializing in extended reality training for defense and law enforcement. The recent success in securing significant contracts, like the one with the Texas Department of Public Safety, highlights strong revenue growth potential. Additionally, the company has shown a positive shift towards profitability, with a reported 36% revenue increase and positive EBITDA, making the investment attractive despite some cash outflows for inventory and development.
What happened to xReality Group Ltd (ASX:XRG)?
Fund managers like Mereweather Capital are investing in xReality Group Ltd (XRG) due to its strong quarterly performance, highlighted by a 28% growth in recurring revenue, supported by a significant contract with the Texas Department of Safety. Despite a temporary cash outflow of approximately $2 million for inventory and product development, analysts anticipate a quick turnaround as XRG is poised to collect payments from several large projects in the near future.
What is the short interest in xReality Group Ltd (ASX:XRG)?
According to ASIC filings, there is negligible or no short interest in xReality Group Ltd (ASX:XRG).
What does xReality Group Ltd (ASX:XRG) do?
XReality Group Ltd. engages in building and operating virtual reality, augment reality and physical simulation for enterprise, defense and consumer markets. It operates through following segments: Entertainment, Enterprise and Corporate. The Entertainment segment provides indoor skydiving operations run under the iFLY brand and the virtual reality operations run under the FREAK brand. The Enterprise segment is the business delivering virtual reality solutions to enterprises. The Corporate segment provides personnel and business infrastructure to the operational segments, including management, marketing and capital. The company was founded by Wayne Peter Jones and Daniel Christopher Hogan on November 4, 2011 and is headquartered in Brookvale, Australia.