FirstWave Faces Revenue Pressure from Telstra Churn Despite Strategic Wins
FirstWave Cloud Technology reports a cashflow positive first half of FY25, driven by strategic contract renewals and new technology launches, despite a slight decline in recurring revenue due to customer churn.
- Cashflow positive first half of FY25
- Key contract renewals with Telmex, NASA, ISSSTE, and Claro Dominican Republic
- 4% decline in Annualised Recurring Revenue (ARR) due to Telstra customer churn
- Launch of new opHA Message-Bus technology enhancing network management
- Stable cash position of $1.68 million at quarter end
Operational Milestone Achieved
FirstWave Cloud Technology Limited (ASX:FCT) has announced a significant operational milestone, delivering a cashflow positive first half for FY25. This achievement reflects the company’s focused operational reforms over the past 18 months, alongside strong renewal rates for major client agreements and the receipt of annual R&D funding. The quarter ending 31 December 2024 was particularly pivotal, with several major contracts up for renewal and all renewed with revenue uplifts.
Strategic Contract Renewals Bolster Growth
Among the renewed agreements, the extension with Telmex stands out as a cornerstone for FirstWave’s strategic positioning in Latin America. Telmex, Mexico’s dominant telecommunications provider with over $5 billion in revenue, increased the contract value by approximately 10%. This renewal not only secures a foundational partnership but also opens pathways for new strategic initiatives across Latin America and other targeted territories. Additional renewals with ISSSTE, NASA, and Claro Dominican Republic further reinforce FirstWave’s diversified client base.
New Technology Launch: opHA Message-Bus
FirstWave introduced its latest innovation, the opHA Message-Bus, a high availability messaging technology designed to enhance network management capabilities for large and critical infrastructure organisations. This technology enables multiple deployments of FirstWave’s network management software to operate in a single cluster with real-time data exchange, providing seamless operational visibility and fail-over capabilities without downtime. This product launch positions FirstWave at the forefront of scalable, high-performance network management solutions.
Financial Performance and Challenges
Despite these positive developments, FirstWave reported a 4% quarter-on-quarter decline in Annualised Recurring Revenue (ARR) to $8.15 million, primarily due to churn from Telstra end-customers following Telstra’s discontinuation of certain firewall and hosting products. Revenue edged up slightly by 1% to $2.21 million, while gross profit declined 7%, reflecting the ARR impact. The company maintained a stable cash position of $1.68 million at quarter end, with normalised cash usage rising modestly to $273,000 per month, influenced by the reduced gross profit.
Outlook and Capital Management
Looking ahead, FirstWave’s board acknowledges the cyclical nature of capital requirements, anticipating increased cash usage from March onwards, albeit at lower levels than previous years. With a low cash balance and prior guidance indicating sufficient funds through Q3, the company is actively exploring options to de-risk its financial position during this period. Investors can expect further updates as these initiatives progress.
Overall, FirstWave’s blend of strategic contract renewals, innovative technology deployment, and disciplined cash management paints a cautiously optimistic picture for the company’s trajectory in FY25.
Bottom Line?
FirstWave’s strategic renewals and technology advances set a solid foundation, but managing churn and cash flow will be critical in the coming quarters.
Questions in the middle?
- How will FirstWave mitigate the ongoing impact of Telstra customer churn on ARR?
- What specific new strategic initiatives will FirstWave pursue with Telmex in Latin America?
- How quickly will the opHA Message-Bus technology be adopted by existing and new clients?
