Review of Operations

The Group's total Adjusted Revenue for the half-year (excluding foreign exchange gains and finance income) decreased by 8% and Adjusted EBITDA losses improved by 23% compared to the six-month period ended 31 December 2024.

Adjusted Revenue and Adjusted EBITDA are non-IFRS measures but included as important metrics for shareholders understanding of the underlying performance of the business. Adjusted Revenue includes adjustments linked to minimum royalty guarantees. Adjusted EBITDA includes earnings before interest, tax, depreciation, amortisation and adjustments for capitalised development costs, restructuring and acquisition related costs, certain tax items, and revenue adjustments linked to minimum royalty guarantees. 

Please refer to Note 3(a) for a reconciliation of Adjusted Revenue and Adjusted EBITDA with their IFRS measures.

OEM division

Seeing Machines continued to strengthen its position in the Automotive Driver and Occupant Monitoring System (DMS/OMS) market during H1 FY2026. As at the end of the period, more than 4.8 million vehicles were on road fitted with the Company's technology, and the Company retained in excess of 50% share of current production volumes, supported by long‑standing relationships with global OEMs and Tier 1 suppliers.

Automotive production volumes increased to approximately 1.1 million vehicles during the half, representing growth of 62% compared with H1 FY2025. Royalty revenue continued to increase as awarded programs progressed further into production, reflecting the ongoing transition from development‑phase revenue toward recurring, scalable royalty income.

The forthcoming implementation of the European General Safety Regulation (GSR) represents an important structural and scaling driver for the business. From July 2026, camera‑based DMS will be mandatory for all new vehicles sold in the European Union. In advance of this requirement, OEMs are accelerating production schedules through H2 FY2026, which is expected to support further growth in production volumes.

The Company's technology portfolio, including solutions currently in production such as the integrated rear‑view mirror offering, as well as recently announced developments in 3D in‑cabin perception, is expected to support continued participation in this regulatory‑driven market expansion. While competition within the market continues to increase, the Company remains focused on maintaining a strong market position as global fitment rates rise.

The Aviation segment delivered a lower contribution during H1 FY2026, primarily reflecting timing impacts and organisational changes within key partner Collins Aerospace. Simulator‑based opportunities continue to progress, supporting the longer‑term potential for fatigue and impairment monitoring solutions within the aviation sector.

•  Royalty revenues, derived from the installation of Seeing Machines' Driver Monitoring System (DMS) technology, increased by 33% compared to the prior corresponding period, reflecting continued growth in high‑margin royalty streams.

• Non-Recurring Engineering (NRE) revenue decreased reflecting the completion of several OEM programs and a corresponding reduction in engineering activity during the period. This included the conclusion of certain Asaphus programs following the acquisition, which did not continue into FY26 after the seller's committed engineering obligations were fulfilled. While NRE typically attracts a lower margin than royalty revenue, it remains a key contributor to the Group's strategy by supporting OEM program launches and driving future royalty streams.

• Revenue from license fees reduced materially, reflecting the conclusion of specific collaboration and exclusivity arrangements, including the expiry of the Magna exclusivity provisions in June 2025. Licence fees are generally unique and one-off in nature.

• Adjusted EBITDA improved, despite lower adjusted OEM revenue overall, driven by sales mix benefits from a higher proportion of high‑margin royalties and lower expenses in the period.

Aftermarket division

The Aftermarket business maintained performance during H1 FY2026, with Guardian Gen 3 established in full production. Revenue was supported by increased hardware sales volumes and a stable base of recurring monitoring services revenue, contributing to resilience and predictability of revenue from the transport sector.

Guardian's growth continues to be supported by a developing global sales pipeline and strategic partnerships, including the Company's relationship with Mitsubishi Electric Mobility Corporation, which provides commercial reach and access to markets across Europe, the United States and Japan.

Regulatory developments in Europe have influenced customer purchasing behaviour during the period, particularly as customers work through vehicle homologation requirements. Notwithstanding these near‑term factors, the Board remains confident in the longer‑term opportunity for Guardian, including the potential for increased factory‑fit discussions alongside traditional retrofit deployments. Manufacturing capacity has been scaled in line with anticipated demand as the sales pipeline continues to mature.

During the first half of FY2026, Seeing Machines announced the establishment of its Future Mobility Group. This new division builds on the Company's existing work with Guardian BdMS in autonomous driving applications and is intended to address the evolving needs of the autonomous vehicle industry, as well as to pursue additional commercial opportunities as automated vehicle initiatives continue to develop globally.

• Hardware and installation revenue from the sale and installation of Guardian units increased by 101%, driven by higher volumes associated with the rollout of the new Generation 3 product across key Aftermarket customers.

• Driver monitoring revenue represents the high margin recurring revenue generated from Guardian connections with revenue. Growth in monitored units in APAC was offset by reduced volumes in Latin America, resulting in flat monitoring revenue for the half-year compared to the prior corresponding period, but representing 4% growth compared to H2 FY2025.   

• Licensing revenue increased by 95%, reflecting support and maintenance services earned during the half‑year under the licensing agreement with Caterpillar entered into in June 2024. The nature of licensing revenue means that it is typically linked to specific contractual arrangements and can vary between periods.

• Non-recurring engineering revenue relates to technology development and consulting projects undertaken with Caterpillar. Revenue decreased by 53% compared to the prior corresponding period, reflecting lower levels of engineering activity as certain projects progressed through completion.

• Adjusted EBITDA losses improved by 29% for the period, driven by a higher mix of high‑margin revenue and lower costs compared to the prior corresponding period.

Gross Profit

Gross profit decreased across the Group from $14,026,000 in H1 FY2025 to $13,330,000 in H1 FY2026. Gross profit margin, however, increased from 55% to 58% over the same period. The improvement in gross margin was largely driven by sales mix changes compared to the prior half‑year, including a higher proportion of high‑margin royalty revenue and improved hardware margins associated with increased sales of the Guardian Generation 3 product.

Expenditure

*Adjusted operating expenses is a non-IFRS measure but included as an important metric for shareholders understanding of the underlying performance of the business. Adjusted operating expenses exclude depreciation and amortisation expense and include capitalised development costs.

Operating expenses for the half‑year reflect the full‑period impact of restructuring and organisational changes implemented during FY2025, which resulted in a structurally lower ongoing cost base in the current period. This is evidenced by a reduction in headcount on a December‑to‑December basis, with headcount decreasing from 455 at 31 December 2024 to 353 at 31 December 2025 following completion of the restructuring program. By contrast, the comparative prior half‑year largely reflects the pre‑restructure headcount for the majority of the period, with only a partial benefit from these actions realised late in that period.

Comparability between periods is also affected by changes in organisational structure and cost allocation, following the appointment of a Chief Operating Officer. During the period, certain functions, including Information Systems and Quality, were realigned from General and Administration to Operations to better reflect management accountability and operational oversight. These changes did not require reclassification of prior period amounts. There was no impact on total operating expenses, operating loss, or reported profit or loss for any period.

Adjusted operating expenses in the prior period included higher one‑off costs, comprising restructuring expenses of $530,000 and acquisition‑related costs of $95,000. In the current period, one‑off costs were lower at $115,000 relating to restructuring expenses. Excluding these one‑off items, the reduction in adjusted operating expenses primarily reflects the structural reduction in the ongoing cost base following the March 2025 restructuring.

Capitalised development costs were lower in the current period, reflecting the completion of several major customer‑awarded development programs within the OEM business and a transition period prior to the commencement of new awarded programs. During this period, development activity was primarily research or preparatory in nature and did not meet the criteria for capitalisation under the Group's accounting policy. As a result, a lower proportion of development expenditure was capitalised compared to the prior period.

Result for the half-year

As a result of above factors, the loss for the half-year ended 31 December 2025 increased by $4,219,000 to $22,456,000 (H1 FY2025 loss: $18,237,000).