Brainchip Holdings (ASX:BRN) Q2 2026 Earnings Call

0:00 Good morning to those of you dialing in from Australia. It is my pleasure to welcome you to BrainChip's quarterly investor update for the second quarter of 2026. My name is Troy D'Armes, BrainChip's Head of Investor Relations and Financial Communications, and I'm joined today by Sean Hare, BrainChip's CEO. Good afternoon to you, Sean.

0:21 Hi, Troy. Great to be here with you today, and more importantly, with all of our shareholders.

0:27 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've been asked by shareholders during the period. Over to you Sean.

0:54 Thanks Troy. I think it's always important to start with the market that you serve before you talk about the company, because it sets the appropriate context. And I'm going to start on the right-hand side of this page, if you don't mind, and talk about some of the markets. And we'll talk a little bit later about use cases and companies and things like that. But on the right-hand side, what you're 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 cloud or chat GPT. But the use cases and the type of flexibility associated with the edge market is a market that started later, but it's 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.

1:52 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 your people are concerned about privacy because when you move data around it could 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 defense situation you cannot afford to lose A network.

2:49 You need to do your inference locally. And if you're doing that, you're also, there's an imperative to do that on a battery typically. And so 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 brain shift. That's where we excel is ultra low power. So the brief introduction to the market is the following. Very large growing markets coming to bear right about now. later than the data center market to do inference outside the data center with some real strong drivers that are getting clearer every single day. Next slide, please. So if a company is going to do inference or AI outside the data center, they have some choices to make. And one of the critical questions is, why would you choose BrainShip?

3:41 First and foremost is that top left-hand box that says, first to commercialize neuromorphic. Neuromorphic is an approach that's different than the rest of the industry, which is traditional kind of brute force multiplication or the von Neumann architecture, something that's been around for many, many decades. This company founded on a vision from two founders was about mimicking the human brain, which is the most efficient computational engine on the planet. And basically, your brain ignores things That don't matter. If nothing's happening, your brain sits idle. It only fires when something's happening. That's what neuromorphic is. Or, in the parlance of the computer world, zeros and ones, if something is a zero, we just don't compute. So, that's how we get these attributes of very low power. We're the first to bring this to bear in a commercial form in all kinds of form factors that I'll describe a little bit later.

4:40 As an investor, you should be very concerned, and rightly so, and we're very proud to talk about our patent portfolio. We have a very strong patent portfolio and some critical elements of this technology, and those patents continue to grow every single quarter. You want to make it easy. Now, one of the very interesting dynamics about technology, and I've been in technology a long time, All companies are striving for greater breakthrough, defining in this case lower power, lower latency, high performance in compute, but you've got to make it incredibly easy to adopt. What I drive this company to every single day is the ability to get that breakthrough performance, but easy for our customers to deploy, whether that is putting their models onto our hardware, deploying our IT into their custom chips, It's all about ease of adoption. And quite frankly, it's the customer centricity I drive through the workforce as well. The ability to make things easy for it.

5:36 Think from a customer point of view as we design that for customers. And also all of our customer interactions, customer support. And then, of course, there's this very interesting thing that's happening in the edge market right now about hybrid computing. We're going to have an opportunity to talk a lot more about this later in the presentations, Roy. But the edge market is really was established on discrete individual types of tasks. With hybrid compute, we're seeing it come together, the ability to aggregate shifts and to pool and accomplish greater things. It's those kind of attributes that set BrainChip apart from anybody else in the edge market. Next slide, please. So I talked about just why BrainChip. And I want to illustrate some really important elements on this slide. Instead of walking through the individual pieces of our offering, I just want to kind of put it in the context of the strategy of the company.

6:34 When I joined the company, we had a much smaller set of offerings for our customers. It was a single offering IP. As of this broadcast, customers can now buy three. A few months after that, they'll be able to buy or levels of IP. So we throw different types of models, different requirements that are getting clearer every day in the edge market, listening to our customer feedback. We also now have a plethora of hardware offerings, which you can see right here as well. And these hardware offerings allow us to address other customers who cannot afford IP. So the point of all this, without going through all of the individual parts of this, is to show that We got into the market early, listened to the requirements of the market, expanded the offering based off the customer engagements and the feedback we're having to address a broader set of use cases technology-wise and form factor-wise.

7:31 This is part of the multiyear strategy the company has been on and we're executing exceptionally well. Next slide, please. I'm often asked, are we getting traction? How's it look on the commercial front? What I'm trying to share today is a little bit of insight into that. Our funnel is incredibly strong. It continues to grow quarter over quarter. These are four stages of typical funnel management when you're in a sales organization. Not surprisingly, those that are really early in the conversation says more. As you get down to negotiations, you can get down to less and less of real serious buyers that go through it. But a really important message in here illustrates some of the sectors that are most important in growing well with us. often ask, where do you get the most traction?

8:20 You can see by looking at this that the defense vertical and the wearables are something that are getting a lot of traction. I say wearables, medical, healthcare. Now, there's some reasons for this. These markets have unique and strong requirements. With the state of the world today, the defense world has changed dramatically from more kind of fixed position kind of things to something that requires mobility. If you're doing mobility, you have to do things that you couldn't do before, like AI inference in a mobile platform. If you're going to do that, you need to do it in its platform. So the whole defense world has changed dramatically about how they're going about conducting their business, and the ability to do AI activity on the edge is growing exponentially. No surprise, a lot of activity in that sector from us. Wearables, by definition, if you're going to do something, And you're going to have it, you know, on your body, on your face, you need long battery life.

9:22 You need long battery life, you need a company like BrainChip with neuromorphic technology that allows to have incredibly long battery life. Next slide, please. I'm often asked about how we position ourselves against competitors. And the right way is the simplest way to look at this is this little graphic right here. The edge market can be defined as something, anything outside the data center. And you can see we address, or this market could be something very close outside the data center, which is very large, high number of tops, which is the term to talk about kind of compute power. But in those kinds of examples, you get incredibly high power signature. That is not where BrainChip is competing.

10:09 We go to incredibly low power situations, you can see, Subwat slightly over a watt and it's a more modest kind of compute. That is where the growth is in this market, in the edge market, and this is where we can differentiate ourselves considerably. There is virtually nobody in this market that can do the things that we can do. It's a segment we occupy uniquely. Next slide, please. Another question I get. is, you know, let's talk about some real deployments. And I really could spend a lot of time in here and talk about this, but I'd highlight just a few. More to just highlight the attributes of the product and why it's so important for the edge. The top left onshore, I talked about medical devices.

10:58 This is a company that's creating seizure prediction glasses for people who have epilepsy. In the past, people with epilepsy often could not even leave their home. They were afraid to drive because they were concerned about having a seizure. This company, using our chips, has created a solution on a pair of glasses on somebody's face that can predict within one hour with a 98% accuracy if they're about to have an epileptic seizure. This creates a whole potential freedom of life for people and is very, very powerful. I'd love to share that example about the kind of innovation and creativity going on at the edge. I can talk about some of the things that are happening perhaps around radar and drones with our partners like Raytheon. And I mentioned earlier about traction and defense.

11:48 When you think about defense or radar, traditionally radar would say we sense something is coming, but it lacks the ability to do classification. And it certainly lacks the capability to do this mobility. Our type of solution developed with Raytheon and AFRL, the Air Force Research Lab, Yes, something is coming and classified, which is very powerful in a radar situation. And then I just want to pick on one or two other really important things that are important for us because it highlights some of the other capability. I mentioned some of the IP levels that we talked about. We have a second generation IP, which we have very high hopes on its capabilities. We have a licensee, our first major licensee, Edge AI, which is on track to tape out their chip later this year. So, we're very excited about that.

12:37 Next slide, please. I'd like to highlight a little bit about Q2 and some really 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 Synthi Community Bundle. Here is a wonderful example, not the only example, Noramorphics Very, very important kind of customer for our chips has produced from introducing some very cool modules. So, it's another kind of downstream potential distribution for us and creates more modules for customer choice point.

13:34 And then some of the announcements on the bottom, on the bottom right around Edge AI, Micro IP, and ASIC LAN. ASIC LAN 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 companies, like trial licenses. And as they're out talking to their customers, AsaGlan is a design shop. They'll deploy those licenses, and that creates potential other opportunities for other downstream licensees. The Akita 2500 tape out is going incredibly well. And then I'd like to maybe highlight a little bit on the Akita 1500 chips. I'm often asked about that.

14:14 It's a very important revenue stream for us.

14:17 You saw some of the models we had earlier on the previous slide in there. And we'll talk a little bit further on another slide about the traction we're seeing in there. Next slide, please. I highlight just a moment about the Akita 1500 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 up 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, which we around Akita design. And, of course, the pipeline is growing very, very rapidly now that we have chips in-house.

15:06 So a couple of customers that I highlight is one I mentioned earlier was Onsor Enormorphics, 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. And so 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 times, but I think this is such a really interesting thing that's going on in the future. It is really bright for this. It's the ability to do Distribute work between Akita, CPU, GPUs, other NPUs, whatever that is, because it makes all the sense in the world.

16:01 Without getting overly technical, specialized inference is really what's driving the industry. The ability to put the right platform and the right tool. And at 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 Akita goes. Make some quick decisions. Some of the large 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. And 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, Troy, but let's take some questions.

16:47 Yeah, sure. Great. Sean, thanks so much for the update. As you said, we'll now turn to the questions. So 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 brain chip products in the near term?

17:05 Well, I think we touched upon it in the presentation, which is certainly the defense organizations and the warehouse. 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 are 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. The ones right now are radar and drones, but there are many more that are coming right behind it.

17:48 Yeah, great. The second question we got, and I've sort of amalgamated a few questions from shareholders, but on the Akita 1500 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.

18:10 You know, I think the important thing to note from the beginning, Troy, is this is not an uncommon issue in the silicon world. There are many variables that come to our 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 a very high yield. So we're just isolating it, walking through the process. It takes time, but this is not an unusual problem. We have very high expectations this will be resolved to a satisfactory level.

18:55 And 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 is, There is a strong interest in defense and humanoid robotics right now. Can BrainChip benefit from these segments of the market?

19:13 Of course. I mean, it's similar to the first question. But think about it. You know, robots are very similar to drones and things like that. A robot is 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 would 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're a power source, you want very quick decision-making and quick actions going on, and so these are ideal use cases for our kind of technology.

19:57 Great. What is the revenue model for Akita, given you are now producing silicon chips? Are you moving away from Akita IP?

20:08 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 MPUs. 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, et cetera. But that, we will offer IP, and we think that's incredibly important for a couple reasons from the business model. One, it allows you to get out there. With that, you get a perpetuity, the royalty as the chips come off the line. So we have

20:53 It's foundational that we offer IT.

20:56 It allows us to address a segment of the market in a really critical fashion. 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 silicons. Do we see the trend for more customers, whether it's ASICs or SSEs, 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 in 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 mid-sized companies and even the smaller companies when you have silicon.

21:47 And 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 Akita 1500, but we can make some modules, send it out, get customer feedback. So it's a very supportive virtual circle where they can buy some chips, and we're seeing that on some customer engagements right now, building some prototypes. Putting it out and 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 had envisioned for a period of years. We just had to get to that point where we are now.

22:34 Right. And as you say, it's all about customer choice. The next question is a hot topic, obviously. With $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?

23:02 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 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.

23:52 But my opening comment is really important. We have a line of sight and a plan at some point to make the company cash flow neutral. In the meantime, we'll examine the right options at the right time and bring it to the board. All right.

24:05 Thank you. Question eight. 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.

24:21 Of course, you know, first of all, we're very appreciative, 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 a really important statement is the following. When we built Akita, it was with the idea is to enable a lot of different types of use cases, not necessarily build those use cases ourselves, but to build the fundamental building blocks to do that. So 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.

25:19 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 that as we have more and more capabilities. Just again, I've mentioned our strategy. to expand from a single offering to a 4IP offering to chips and modules. We're seeing the creativity. Look at some of the logos I put up on the previous section here during the presentation. The creativity of the use cases is now expanding now that technology is there. So very appreciative, really great work, cutting-edge work. But the core of this is we built technology that enables this, and we encourage all of our partners to take advantage of it.

26:02 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?

26:15 Yeah, sure. Of course, Troy. 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. But I understand frustrations with shareholders because people like things quicker. But if you understand the journey we were on, expanding from an offering to multiple offerings, it's where we are with the kind of customers and the gains we have now, I think our investors should say we have a lot more confidence now than we ever have. 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 we want it faster.

27:05 We all want it faster. But we're highly confident we're doing the right plan and the execution is going incredibly well.

27:13 Yeah, great. Look, probably associated to that question is how is management held accountable and incentivized? And this came from Ryan, Gary and Paul. Of course.

27:27 So You know, an important part about being held accountable, of course, is, you know, 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. It has two elements. One is called the SDI, short-term incentive, which is a bonus plan. And part of it is the LTIP 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 company in the world. There are certainly moderate or large ones here. But 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?

28:13 We did not achieve our bookings goal last year, so the bonus for the employees and the executives was substantially balanced. 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. 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 on the best over a three-year period. And if we achieve the goals that are set out, and those goals are bookings, revenue, and share price, All perfectly aligned with our shareholders' interests. If we hit it, then everybody gets the number of shares allocated to them as part of the RSU grant.

29:00 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. That means everybody's winning on all those fronts. So I think there's some very solid mechanisms to hold people accountable and to incent them to the right behavior aligned with our shareholders.

29:23 Thanks, Sean. Yes, 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?

29:37 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, many verticals or many, many use cases. Now is not the time to shut these opportunities down. Remember, we started in the beginning talking about a growth market and where the various markets are, and I also talked about how we expand 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 enabling technology to address, you know, the entire market, but it is not spreading ourselves too thin.

30:25 Thanks, Sean. And there's a little talk about data centers and the high power usage. So I guess this question is about can the key to chips be used to create low-power data centers? Specifically, Roger, Mario, Paul, and Glenn have come to this suggestion.

30:44 Yeah, of course, theoretically that's possible, but 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? TrueEdge, where mobility matters, ultra-low power, inference near the device or on the device. That makes the most sense. Extending into hybrid computing when you're working with CPUs and GPUs. To have a purebred Akita data center, in theory possible, in practical, not really. I focus strictly on the edge that we talked about in hybrid computing. Those are the markets that we think we're ideal for.

31:28 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? And this came from Devine and Jacob.

31:41 Yeah. Let me 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 IT 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 expansions, part of our multi-year plan. So that's going very, 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, you know, lumpy. We're pleased with the trajectory, but the right thing to do now is focus on the execution of our strategy And so we have a little more traction on the predictability.

32:29 That's when we should open up and do more forward-looking. But right now, we're focused on the roadmap that you mentioned and winning as much business as possible.

32:38 Great. And does BrainChip still have a technology lead in ultra-low power edge AI markets?

32:47 Absolutely. If you look at the attributes that are talked about, ultra-low power, latency, all those things in the right market segment where I positioned earlier. But I also want to talk about the other things that matter the most. So, yes, technology, we have a very strong lead against our competition. But the other things matter, too. I talk about the model, too. I talk about our software stack ability to put models on easy. We never rest and think it's good enough. I talk about the expansion of our strategy into hardware modules, make sure we have customer choice. So, when you talk about the leader, it's not just technology where we have one. So, yes, I want to answer directly, yes. This is the market that never stands still. It will not stand still. The innovation goes very rapidly, model innovation, etc.

33:32 Our company is all about R&D and productization. We have the best engineers and scientists in the world and we will have to stay ahead of those model trends and make that happen. So the leadership is here and we intend to keep that.

34:05 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 for both could be useful for both our existing investors and for those who are relatively new to our 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.

34:45 A couple of things I would say is Really, you know, 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 GIFs modules. That's all part of the 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. So the ideal thing in any business is to have your products come out at the right time and the market coming 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.

35:40 And I look forward to sharing more with all our shareholders as all those venues you just talked about a moment ago. Thanks so much, everybody.