XPON Grows Recurring Revenue 1% QoQ Amid Strategic Sales Shift

Quarterly Financial Performance

XPON Technologies Group Ltd (ASX: XPN), an AI marketing technology company, released its Q3 FY25 activity report and Appendix 4C cash flow statement, revealing a cautious but steady financial performance. Revenue for the quarter ended 31 March 2025 increased slightly by 1% quarter-on-quarter to $2.09 million, aligning with management’s guidance of softer year-on-year topline results amid a recalibrated sales strategy.

Despite the modest revenue growth, the company maintained a robust gross margin of 75%, up one percentage point from the previous quarter, reflecting ongoing operational efficiencies and cost optimisation efforts. Recurring revenue remained a key strength, accounting for 87% of total revenue, which annualises to approximately $7.26 million, underscoring XPON’s focus on sustainable, high-margin income streams.

Cash Flow and Capital Management

XPON’s cash position stood at $3.9 million as of 31 March 2025, down from $5.46 million at the end of the prior quarter. This decline was driven by net cash outflows from operating activities totaling $1.54 million, despite a 26% year-on-year reduction in payments to suppliers and employees, highlighting the impact of cost control initiatives. The company’s active capital management includes extending the maturity of its $1.125 million convertible note to August 2025, providing additional financial flexibility amid ongoing market uncertainties.

The company reported total receipts from customers of $0.8 million for the quarter, a decrease from the prior quarter primarily due to reduced aged payables. Payments to related parties, including CEO salary and associated costs, amounted to $122,000 during the period.

Strategic Initiatives and Market Position

XPON continues to advance its strategic roadmap for FY25 through several key priorities. Central to its growth plan is the recalibration of its sales strategy to prioritise high-margin, long-term recurring revenue. The company is leveraging its Wondaris Composable Customer Data Platform, now available on the Google Cloud Marketplace, to simplify procurement and deployment for customers, potentially accelerating sales cycles and enhancing value realisation.

Further, XPON is focused on driving AI innovation to maintain its market leadership and is actively pursuing mergers and acquisitions to bolster shareholder value and strengthen its balance sheet. The company also emphasises sustaining a strong corporate culture and managing costs in line with business performance to support sustainable profitability.

Outlook and Investor Considerations

While XPON’s revenue growth remains modest and below prior year levels, the company’s strong recurring revenue base and improved gross margin provide a solid foundation for future growth. The extension of the convertible note maturity signals prudent financial management but also highlights ongoing funding needs. Market uncertainties have delayed some client expansions, pushing potential revenue into Q4 FY25, making the upcoming quarter critical for assessing the effectiveness of the sales strategy recalibration.

XPON’s integration with Google Cloud Marketplace and continued AI innovation position it well to capitalise on emerging opportunities in Australia, New Zealand, and beyond. However, investors will be watching closely to see how these initiatives translate into tangible revenue growth and improved cash flow in the near term.