Why Is FirstWave’s Loss Surging Despite a $2.85M Capital Raise?
FirstWave Cloud Technology reported a 15.9% revenue decline and a 47.2% increase in net loss for H1 FY2026, driven by product discontinuations and restructuring costs. The company completed a $2.85 million equity raise and secured a $2.5 million loan facility to bolster liquidity.
- Revenue down 15.9% to $3.8 million
- Net loss increased 47.2% to $3.02 million
- Telstra product discontinuations reduced recurring revenue
- Restructuring costs of ~$700,000 incurred, targeting $450,000 quarterly savings
- Completed $2.85 million equity placement and $2.5 million loan facility
Revenue and Profitability Challenges
FirstWave Cloud Technology Limited has reported a challenging first half of the 2026 financial year, with revenue falling 15.9% to $3.8 million and a net loss widening by 47.2% to $3.02 million. The decline in revenue and profitability primarily stems from the discontinuation of Telstra’s GPA firewall product and the closure of the CSX2 platform, which significantly reduced the company’s recurring revenue base.
The impact of these product exits was compounded by restructuring and higher financing costs, which further pressured the bottom line. Recurring revenue now represents 84.1% of total revenue, down from 96.5% in the prior corresponding period, reflecting the loss of key contracts and customer churn.
Restructuring and Cost Savings
In response to these challenges, FirstWave undertook a significant restructure during the half-year, incurring approximately $700,000 in cash costs. This restructuring is expected to deliver ongoing cash savings of around $450,000 per quarter starting from the third quarter of FY2026. The company has also completed a placement raising $2.85 million before costs, issuing 285 million new shares at $0.01 each, along with attaching options.
Additionally, FirstWave secured a $2.5 million loan facility from Partners for Growth VII, L.P., with a three-year term and a fixed interest rate of 12.5%. The facility includes a six-month interest-only period, followed by principal and interest repayments, and is secured against the company’s assets. This financing arrangement aims to support the company’s liquidity and working capital needs as it navigates the transition.
Balance Sheet and Cash Flow
Despite the operating losses and cash outflows, FirstWave’s cash and cash equivalents increased slightly to $359,153 by 31 December 2025, supported by the capital raising and loan proceeds. However, net cash outflows from operating activities were $1.79 million, a sharp reversal from net inflows of $1.07 million in the prior period, reflecting the ongoing revenue pressures and restructuring expenses.
The company’s net tangible assets per share remained negative at 0.35 cents, marginally improved from 0.37 cents in the previous period, indicating continued balance sheet strain.
Governance and Outlook
Governance changes included the appointment of Roger Buckeridge as Chair in July 2025, replacing John Grant. The company also settled its convertible notes through a combination of cash and share issuance, removing a significant maturity risk.
While the directors acknowledge a material uncertainty regarding going concern due to the losses and cash flow deficits, they remain confident that the completed restructure, revised cost base, capital raising, and loan facility provide sufficient liquidity to meet obligations for at least the next 12 months. The company continues to focus on its core business of network monitoring and internet security software development and sales.
Bottom Line?
FirstWave’s restructuring and fresh capital provide a lifeline, but sustained revenue recovery remains critical.
Questions in the middle?
- Will FirstWave successfully replace lost recurring revenue from Telstra product discontinuations?
- How quickly will the restructuring deliver the targeted $450,000 quarterly cash savings?
- What are the risks associated with the new loan facility’s financial covenants?
