It is my pleasure to welcome you to BrainChip's Quarterly Investor Update for the Second Quarter of 2026. My name is Tony Dawe, BrainChip's head of investor relations and financial communications, and I am joined today by Sean Hehir, BrainChip's CEO. Good afternoon to you, Sean.
Hi, Tony. Great to be here with you today and more importantly, with all of our shareholders.
Thanks, Sean. The format for today includes a short presentation from Sean outlining BrainChip's strategy and how we continue to execute on that strategy, along with a summary of recent activities. At the conclusion of the presentation, similar to our podcast series that some of our investors may be familiar with, I will ask Sean to address a number of questions that we have been asked by shareholders during the period. Over to you, Sean.
Thanks, Tony. I think it is always important to start with the market that you serve before you talk about the company, because it sets the appropriate context. I am going to start on the right-hand side of this page, if you do not mind, and talk about some of the markets, and we will talk a little bit later about use cases and companies and things like that. On the right-hand side, what you are seeing is a whole large market, what they call Edge AI, which is markets or AI outside the data center. I believe all of our listeners are using AI in their daily lives around the world and are very familiar, but most of those implementations are in a data center, things like Claude or ChatGPT.
But the use cases and the type of flexibility associated with the edge market is a market that started later but is maturing very rapidly at this moment in time, and that's what you're seeing on the right-hand side is these kind of markets. All these markets is where BrainChip serves and others as well in here. Now, what constitutes the market? It's basically the ability to do inference outside of the data center without moving things back to the data center, and there's some really important things that drive that kind of why that matters. Some use cases, you just can't do it in the data center, or it doesn't make sense because it takes too long with latency. Sometimes people are concerned about privacy, because when you move data around, it can be a concern because somebody could take your data.
Or perhaps even if you're not concerned about latency, but you're concerned if you lost a network connection, if you're making a decision in space, you're making a decision in a wearable device on somebody's health. You're making a decision in a defense situation. You cannot afford to lose a network. You need to do your inference locally. And if you're doing that, there's an imperative to do that on a battery, typically. And if you want to do it on a battery, you've got to go ultra low power, and you're going to hear me talk a little bit in the next slide about BrainChip. That's where we excel is ultra low power. So the brief introduction to the market is the following. Very large, growing market, coming to bear right about now, later than the data center market to do-
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important things that happened.
We talked about hybrid computing earlier. I'm going to the middle part, and I'm going to talk about the IBM Symphony, a wonderful example of the work that's going on to work in a kind of a hybrid computing model. This was some breakthrough type of work. The work continues on. We work closely with the people that are doing this, and there are other companies that are out there doing more hybrid computing right now. Neuromorphics over there on the top right, very important kind of customer for our chips, has been introducing some very cool modules. So it's another kind of downstream potential distribution for us and creates more modules for customer choice points. And then some of the announcements on the bottom right around Edge AI, MicrochIP, and ASICLAND. ASICLAND is a really important relationship for us. Think about it as a channel relationship.
In that case, they have bought some, what we call MPW licenses from the company, which are smaller company, like trial licenses. And as they're out talking to their customers, ASICLAND is a design shop, they'll deploy those licenses, and that creates potential other opportunities for other downstream licensees. The AKD2500 tape-out is going incredibly well. And then I'd like to maybe highlight a little bit on the AKD1500 chips, because I'm often asked about that. It's a very important revenue stream for us. You saw some of the modules we had earlier on the previous slide there, and we'll talk a little bit further on another slide about the traction we're seeing in there. Next slide, please. I highlighted just a moment about the AKD1500 chips. This is critically important for the company.
We've had great uptick since we placed the original order, with 25% of the chips already sold out. We're also spending part of that inventory to build out the modules we talked about earlier. Those modules are critically important for future sales because it allows people to buy volume and plug and play. We have tremendous interest in some of the reference designs, particularly around Akida design. The pipeline is growing very rapidly now that we have chips in-house. A couple of customers that I highlight is one I mentioned earlier was Onsor and Neuromorphics, but perhaps I'll highlight one more, which is Parsons, a very large defense contractor who's doing some really interesting things with more than one chip on an individual board. It advances not only the chip orders but the hybrid computing model.
They took an initial order of several thousand chips, and it's the first of a multi-year partnership that we look to see that grow considerably in the years to come. Next slide, please. I've already touched upon hybrid computing a couple of times, but I think this is such a really interesting thing that's going on, and the future is really bright for this, is the ability to do distribute work between Akida, CPU, GPUs, other MPUs, or whatever that is, because it makes all the sense in the world. Without getting overly technical, specialized inference is really what's driving the industry. The ability to put the right platform, the right tool. Most of these things, when you look at this graphic or you read some of the posts on there, usually it's right next to the center where the Akida goes, makes some quick decisions.
Some of the larger decisions go up to a centralized CPU for bigger decisions, but it's really that right tool for the right job. We continue to learn every single day, and the use cases look limitless for this. We have very high expectations for this kind of use case going forward. With that, I look forward to taking a lot of questions. I know we covered a lot of material in a short period of time, Tony, but let's take some questions.
Yeah, sure. Great, Sean. Thanks so much for the update. As you said, we'll now turn to the questions. If you're fine, I'll just fire away at you. In terms of commercial success, what verticals or sectors are likely to drive the most demand for BrainChip products in the near term?
Well, I think we touched upon it in the presentation, which is certainly the defense organizations and the wearables, because the demand is so strong there right now. The requirements are just lined up perfectly with our product. But I think probably what's more importantly than picking on the ones that we're seeing the traction right now is where is the ones that are building. We have very strong interest in other type of verticals, one of which would be, let's call it IoT, Internet of Things. The world is waking up to the power of inference on the edge for whether it's preventive maintenance or monitoring and things like that. But the ones right now are radar and drones, but there are many more that are coming right behind it.
Yeah, great. Second question we got, and I've sort of amalgamated a few questions from shareholders, but on the AKD1500 silicon chips, it appears that the yield is lower than expected. What is being done to address this, and when do you expect to have answers? This question came from Rajesh, Tom, and Matthew.
Sure. I think the important thing to note from the beginning, Tony, is this is not an uncommon issue in the silicon world. There are many variables that come to a manufacturing process that can impact the yield process. BrainChip and our design partners and manufacturing partners are analyzing every element of this to find exactly what it is. We have very high expectations that this will be resolved to a satisfactory level. Our MPW had very high yield, so we're just isolating it, walking through the process. It takes time, but this is not an unusual problem, and we have very high expectations this will be resolved to a satisfactory level.
I guess probably good to let our investors know that we'll have more on that in our third quarter update when that comes out. Our third question, there is a strong interest in defense and humanoid robotics right now. Can BrainChip benefit from these segments of the market?
Of course. It's similar to the first question, but think about it, robots is very similar to drones and things like that. A robot is, and obviously defense and drones, require mobility. It's just by the nature. You don't typically have fixed robots, or I'm not sure it'd be a robot. A robot has mobility, and so when you have mobility, you need the ability to do things typically on a battery. Or at least, even if you don't, even if you have a power source, you want very quick decision-making and quick actions going on. These are ideal use cases for our kind of technology.
Great. What is the revenue model for Akida, given you are now producing silicon chips? Are you moving away from Akida IP?
Absolutely not. This is one where we could talk a lot about, but I know our time is limited, but I'll try to do this succinctly. I touched upon it in the presentation. Some of the largest companies in the world will want to build custom computer chips or inference chips or NPUs. In order to do that, you've got to have a pretty large capital budget. You've got to have large technical resources to do the planning and designing, and so for that, we will offer IP. We think that's incredibly important for a couple of reasons from a business model. One, it allows you to get out there with that, you get a perpetuity, a royalty as the chips come off the line. So it's foundational that we offer IP.
It allows us to address a segment of the market in a really critical fashion, so to do that. I also think it's important to know the trends of what's going on in the industry. Big companies are trying to specialize silicon more and more. If you think about the competitive world that they operate in, the ability to get more performance is usually typically coming down to tuning models and tuning silicon. So we see the trend for more custom, whether it's ASICs or SoC to continue, so IP will be a critical cornerstone for them. Having said that, offering silicon is equally important because you've got a whole segment of the market who doesn't have the capabilities. So doing the way we're doing, offering both are additive.
It allows you to address the really large companies and maybe the midsize companies and even the smaller companies when you have silicon. Not to make this overly complicated too, sometimes even the larger companies that want to build a chip will want to buy some computer chips from us first to say, "Let's try and buy, because we're not going to build something exactly like your AKD1500, but we can make some modules, send it out, get customer feedback." So it's a very supportive virtuous circle where they can buy some chips, and we're seeing that on some customer engagements right now, building some prototypes, putting it out, getting customer feedback as they refine their final designs on an IP selection. So IP and chips together and modules is critical, fundamental to our well-planned strategy, something we have envisioned for a period of years.
We just had to get to that point where we are now.
Great. As you say, it's all about customer choice. The next question is a hot topic, obviously. With AUD 20 million in cash at June 2026 and the current burn rate, what is the company's funding strategy? An associated concern is with the number of shares on issue and potential for a capital raising. This comes from Devine, Ryan, Pawan, Gary, Dennis, and Jacob. Did you want to make some comments on this, Sean?
Of course. I think my opening comment would be around, let's call it capital in general. As you know, I report to a board of directors. We do a strategic plan every year at the end of the year, and the board has set requirements around not only the revenue trajectory or the booking trajectory, but some goals around cash flow or cash burn neutrality over a certain period of time, and the board has expectations that I will take the company to that. As and if we need capital raises in between, Ken, our CFO, and myself will examine the best options at the best flexibility, at the best rates as possible and make that presentation to the board. But my opening comment's really important. We have line of sight and a plan at some point to make the company cash flow neutral.
In the meantime, we will examine the right options at the right time and bring it to the board.
All right. Thank you. Question, next one comes from, what is BrainChip's view on Kevin Johnson, and why aren't we doing more with him? This comes from Paul, Roger, Glenn, and Mario. I'm sure you've heard a bit about this, Sean.
Of course. First of all, we're very appreciative of not only Kevin, but IBM, of course, for their support on this. So that's probably the first point. So we're very appreciative of it. As I mentioned in the presentation part, IBM and Kevin are not the only one. We're seeing more and more organizations go into this hybrid kind of compute model in here. But I think what a really important statement is the following. When we built Akida, it was with the idea is to enable a lot of different types of use cases, not necessarily build those use cases ourself, but to build the fundamental building blocks to do that.
I talked about having IP and chips and models and software stack, so companies like IBM can do that, because that's the power when you have a technology that can unlock many use cases across many verticals, then you allow a company like IBM to extend it. That's what we think is a wonderful set of opportunities for us versus us doing it ourselves. And you're seeing more and more of them from a single offering to four IP offering to chips and modules. We're seeing the creativity. Look at some of the logos I have put up on the previous section here during the presentation. The creativity of the use cases is now expanding now the technology is there. So very appreciative, really great work, cutting-edge work.
The core of this is we built technology that enables this, and we encourage all of our partners to take advantage of it.
Yeah, great. Sean, there are a small number of vocal shareholders displeased with the performance of BrainChip and you. Would you like to comment on that?
Yeah, sure, of course, Tony. I think the important thing to say is just what I keep saying a moment ago is we have a vision with a really solid plan, and we are executing on that plan. Of course, we would like to see more bookings, and we anticipate we will, and we will definitely see those bookings, and it will yield the fruit. I understand frustrations with shareholders because people like things quicker. If you understand the journey we were on, expanding from an offering to multiple offerings and to where we are with the kind of customers and engagements we have now, I think our investors should say we have a lot more confidence now than we've ever had. So I think that's the important message for our customers here, which is we've come a long way and we're in the right place.
I understand that we want it faster. We all want it faster, but we're highly confident we're doing the right plan and the execution is going incredibly well.
Yeah. Great. Look, probably associated to that question, is how is management held accountable and incentivized? This came from Ryan, Gary, and Paul.
Of course. So, important part about being held accountable, of course, is I run the company. I do reviews of people in the company, and that's why I hold them. I report to the board, they do reviews on me. The company also has incentive plans. A compensation plan has two elements, one is called the STI, short-term incentive, which is a bonus plan, and part of it is the LTI plan, LTI, which is very consistent with the industry and technology, right? I've been in tech for many, many decades. This is very typical at every tech company in the world, certainly moderate or large ones here. The short-term incentive is about some goals that are set annually, and if we achieve those goals, the employees get something and the executives get some things, right?
We did not achieve our bookings goal last year, so the bonus for the employees and the executives was substantially down. We did not achieve the bookings. My individual goal was set only on bookings or my incentive. We did not get it, so I got no bonus. So that's how you hold that accountability. Around LTI, long-term incentive plan, which again, our shareholders can read about in our disclosure documents, there's a set of shares that are issued to employees and they vest over a three-year period. If we achieve the goals that are set out, and those goals are bookings, revenue, and share price, all perfectly aligned with our shareholders' interest.
If we hit it, then everybody gets the number of shares allocated to them as part of their RSU grant, or if we don't, it gets dramatically dropped, and if somehow we dramatically overachieve, they get more. I would hope every investor wants us to overachieve for the shareholders, because that means everybody's winning on all those fronts. I think there's some very solid mechanisms to hold people accountable and to incent them to the right behavior aligned with our shareholders.
Thanks, Sean. I think you can agree that all the employees are hoping to hit those targets. It seems like you are open to a wide range of potential use cases. Is this spreading your sales team too thinly?
No, not at all. I think this is related to the hybrid computing question we had a little bit, a while ago. This technology is an underlying enabling technology that allows it to deploy to many verticals and many use cases. Now is not the time to shut these opportunities down. You remember as we start in the beginning, talk about a growth market and where the various markets are. I also talked about how we've expanded our offering based off the learning. This is what good tech companies do. You get out, you learn, you expand, and right now they're all growing, so we're going to keep pushing them out, and of course, that is the strategy. Keep that enabling technology to address the entire market, but it is not spreading ourselves too thin.
Thanks, Sean. There's a lot of talk about data centers and high power usage, so I guess this question is about can Akida chips be used to create low-power data centers? Specifically, Roger, Mario, Paul and Glenn have come to us with this suggestion.
Yeah, of course, theoretically that's possible. Do you look at the practicality of that? I think the right way to think about this is focus the technology where it makes the most sense. On the true edge, remember I had a slide up a moment ago about the edge? True edge, where mobility matters, ultra-low power, inference near the device or on the device, that makes the most sense. Extended into hybrid computing, when you're working with CPUs and GPUs, having purebred Akida data center, in theory possible, and practical, not really. I focus strictly on the edge that we talked about and hybrid computing. Those are the markets that we think we're ideal for.
Oh, thanks, Sean. Just a couple more questions. Can BrainChip provide fixed financial targets and deadlines, or perhaps maybe at a high level? Is your roadmap on schedule? This came from Devine and Jacob.
Yeah. Definitely take the second part. Our roadmap is definitely on schedule. I spent an enormous amount of time and rigor as a management team on our roadmap development and execution. I mentioned expanding our IP offering a moment ago and the new one coming in the next six months. I think our investors will be very pleased with the results and where we're going with that, and you saw some of the expansion as part of our multi-year plan. That's going very well. We are not providing fixed targets on financial targets at this point in time because the business is still, let's call it lumpy. We're pleased with its trajectory, but the right thing to do now is focus on the execution of our strategy. Until we have a little more traction on the predictability, that's when we should open up and do more forward-looking.
Right now, we're focused on the roadmap that you mentioned and winning as much business as possible.
Great. Does BrainChip still have a technology lead in ultra-low power Edge AI market?
Absolutely. If you look at the attributes that I talked about, ultra-low power, latency, all those things in the right market segment where I positioned earlier. I also want to talk about the other things that matter the most. Yes, technology, we have a very strong lead against our competition, but the other things matter too. I talk about the Model Zoo, I talk about our software stack, the ability to put models on easy. We never rest and think it's good enough. I talked about the expansion of our strategy into hardware modules to make sure we have customer choice. When you talk about leader, it's not just technology where we have one. Yes, I want to answer it directly. Yes, very strong technology leader, but it's the other attributes on your business model that matter.
Model Zoos, software modules, et cetera, put them all together, I feel very comfortable in our leadership position. I really want to say something, put a bow on that last statement. This is a market that never stands still. It will not stand still. The innovation goes very rapidly, model innovation, et cetera. Our company is all about R&D and productization. We have the best engineers and scientists in the world, and we are going to stay ahead of those model trends and make that happen. The leadership is here, and we intend to keep that.
Oh, that's great, Sean. Great way to wrap up, and I think that should provide our investors with some more confidence. Before we finish today, I would like to highlight in our slide deck a number of additional slides in the appendix that I think could be used story. In particular, in the IR calendar, you will see that Sean will be presenting at an AI and Semiconductors conference on the 22nd of September in Sydney, along with three other listed companies that our investors are welcome to dial into. Sean, did you have any final comments to share before we close out?
Yeah, of course. A couple of things I would say is really, listening to the conversation today, we cover a lot, but I think it's really important for a couple of critical points to be reinforced. It is a conscious part of the strategy we've had, it's to expand the portfolio in the directions we have, and we're executing incredibly well on that. Again, I talk about one to four chips modules, that's all part of a strategy, and we're executing incredibly well. We talk about market dynamics and use cases. The market is coming to what we do at the same time. The ideal thing in any business is to have your products come out at the right time and the market come to you at the right time. We're seeing those dynamics coming.
Again, I know everybody would like to have it quicker, but we see those trends, so we think we're incredibly well-positioned to capitalize on that opportunity, and I personally could not be more excited where we are today. I look forward to sharing more with all our shareholders as all those venues you just talked about a moment ago, Tony Dawe. Thanks so much, everybody.