FirstWave’s Q3 FY25 update reveals steady contract renewals alongside tighter cash reserves, as the cybersecurity firm advances strategic partnerships and operational efficiencies.
- Annual Recurring Revenue (ARR) slightly declined by 1.5% to $8.03 million
- Gross profit margin improved to 91%, up 9 percentage points from prior quarter
- Cash reserves dropped to $0.55 million with normalized monthly cash burn at $220k
- Major client contracts renewed with John Deere and Macquarie Cloud
- Board reshuffle includes appointment of David Garnier and retirement of Daniel Friel
Q3 Financial Snapshot
FirstWave Technology Limited reported a modest contraction in Annual Recurring Revenue (ARR) for Q3 FY25, slipping 1.5% quarter-on-quarter to $8.03 million. This decline was driven by a 6.1% drop in CyberCision ARR, partially offset by a 1.4% increase in Network Management ARR. Despite the slight revenue dip, the company achieved a notable improvement in gross profit margin, rising from 82% in Q2 to 91% in Q3, reflecting better cost management and product mix.
Revenue excluding recharges fell 5.7% to $2.14 million, with CyberCision revenue down 11.9% but Network Management revenue up 15.1%. Gross profit increased by 4.9% to $1.94 million, underscoring operational efficiencies gained during the quarter.
Cash Position and Operational Efficiency
Cash reserves tightened significantly, closing the quarter at $0.55 million, down from $1.68 million in Q2. The company’s normalized monthly cash burn rate stood at $220,000, excluding non-recurring revenues and factoring in interest payments on convertible notes. The CFO highlighted that while normalized cash usage provides a smoothing effect over periodic cycles, actual short-term liquidity requires close monitoring given the current cash balance.
FirstWave has secured an R&D advance facilitating access to 80% of its accrued rebate, with $720,000 drawn from a $900,000 facility year-to-date. However, overdue debtors totaling $0.3 million from a long-term customer present a potential risk to near-term cash flow.
Contract Renewals and Strategic Partnerships
On the commercial front, FirstWave successfully renewed major client contracts with uplifts, notably with John Deere and Macquarie Cloud, reinforcing its foothold in key enterprise accounts. The company continues confidential negotiations with Telstra regarding commercial agreements beyond the current PSA extension, which runs until June 30, 2025. This relationship remains critical given Telstra’s role in hosting and reselling FirstWave’s CyberCision and other cybersecurity products.
Additionally, FirstWave is advancing deployment of its core products, CyberCision, Open-AudIT, and NMIS, on the AWS Marketplace in partnership with AWS and Corent Technology. This move aims to broaden market access and streamline procurement for customers, potentially unlocking new revenue streams.
Leadership Changes and Technology Initiatives
The board welcomed David Garnier, a seasoned corporate finance and banking executive, as a non-executive director, while Daniel Friel retired from corporate life and stepped down from the board. These changes signal a strategic refresh as FirstWave navigates its growth and capital challenges.
Technology leadership remains robust with VP of Products Sharon Hunneybell, recognized among Australia’s top women in technology, spearheading innovation. A product update webinar scheduled for May 7 will showcase FirstWave’s AI capabilities, including its Model Context Protocol and alignment with global security standards, targeting commercialisation of its free user base estimated at 150,000 organisations.
Outlook and Market Positioning
Looking ahead to Q4, FirstWave is actively pursuing multiple avenues to de-risk its capital structure, including ongoing discussions for new capital injections, progressing asset sales, and pursuing operational efficiencies to reduce cash burn further. The company acknowledges heightened uncertainty in key markets such as the US and LATAM due to geopolitical trade tensions, which may impact sales pipelines.
While the company is at a critical juncture with cash management and contract negotiations, its strategic initiatives in technology deployment and client retention position it to navigate the cyclical challenges ahead.
Bottom Line?
FirstWave’s Q3 results underscore the delicate balance between sustaining growth and managing cash, with upcoming capital and contract developments pivotal for its next phase.
Questions in the middle?
- What terms will emerge from the post-June 2025 Telstra commercial agreement?
- How will FirstWave’s AWS Marketplace deployment impact sales and margins?
- What is the timeline and scale for potential new capital or asset sales?