Firstwave Cloud Technology Ltd

ASX:FCT

Earnings Call Analysis

FirstWave Reports Mixed Quarter with Positive Cash Flow and Pipeline Challenges

In its recent earnings call, FirstWave revealed a 15.9% drop in Annual Recurring Revenue (ARR) and a 17.4% decline in revenue mainly due to the removal of low-margin hosting revenue. Encouragingly, gross profit margin increased from 78.3% to over 88%. Despite a challenging sales pipeline, the company secured a cash flow neutral outcome, with monthly cash usage decreasing to approximately $250,000. Management plans to convert existing opportunities, emphasizing significant potential in the pipeline across North America and Latin America. Guidance suggests a focus on growing revenue amid existing operational efficiencies and expected R&D grant inflows of around $1.15 million.

Overview of the Quarter

In the first quarter of FY '25, FirstWave reported a cash flow neutral result, with normalized cash usage significantly reduced to around $250,000 per month. This represents a notable improvement from a previous cash burn of over $1 million per month a couple of years ago. Encouragingly, the company also received a one-time R&D grant rebate of $223,000, contributing to a more favorable cash position.

Revenue and ARR Declines

Despite these positives, FirstWave reported a 15.9% drop in Annual Recurring Revenue (ARR) and a 17.4% decline in total revenue, primarily due to the removal of a low-margin recharge revenue stream linked to Telstra, which accounted for more than 70% of the revenue decline. The company highlighted that this change allows for an increase in gross profit margin, which rose from 78.3% to over 88% as the zero-margin recharge revenue was eliminated.

Gross Profit Insights

While gross profit decreased due to falling non-recurring revenues, which fell from $157,000 in Q4 to just under $59,000, the overall gross profit margin showed improvement as the non-recurring revenue did not affect the margin as significantly anymore. Essentially, restructuring efforts are showing benefits, but fluctuating non-recurring revenues remain a concern.

Sales Pipeline Progress

The management also addressed the strong sales pipeline, noting that many prospective deals are at various stages but have not yet materialized into revenue. Establishing and managing relationships with large organizations like Telstra remains a challenge due to lengthy sales cycles and organizational changes at partners. Despite the delays, the management remains confident about the deals in progress and expects advancements soon.

Future Outlook and Guidance

Looking ahead, FirstWave anticipates cash flow positivity for the financial year '25, supported by ongoing negotiations and potential revenue increases from anticipated project closures. The management stated they have sufficient cash reserves to operate until the end of Q3 FY '25, even without any new revenue growth. This indicates a buffer that could allow the company to strategize without immediate financial pressure.

Strategic Focus and Growth Areas

The company is centered on growth in key areas, particularly in North America and Latin America, while optimizing relationships with existing clients and government partners. Investments are being planned in marketing actions that may be ramped up once conversions in the pipeline begin to close. New lead generation partnerships have also been initiated, which could help in accelerating growth.

Management Commitment and Confidence

There is a strong commitment from the management team, with significant personal investments made into the company by directors, which fosters confidence among shareholders. The focus remains on converting pipeline opportunities into sales while managing costs, demonstrating a disciplined approach toward financial management.

Competitive Landscape and Challenges

Operating at the upper end of the market offers fewer direct competitors, but it also brings longer sales cycles. Efforts are being made to navigate delivery challenges, particularly dealing with clients who already have established solutions in place. This market dynamic presents additional hurdles in fostering quicker conversions.

Earnings Call Transcript 2025-Q1

[Ruth Sloley, executive]

Good morning, and welcome to the FirstWave FY '25 Q1 Shareholder Webinar.

I will now hand over to John to open the webinar.

[John Grant, executive]

Thank you, Ruth, and good morning, and welcome to FirstWave shareholder update for this first quarter.

For those of you who haven't joined one of these updates before, there's not many I can see on the list I'm having. My name is John Grant, and I'm Non-Executive Chair of FirstWave. I'm joined again today by CEO, Managing Director and major shareholder, Danny Maher; CFO and Company Secretary, Iain Bartram; and recently appointed Non-Executive Director, Daniel Friel, based in the U.S.

You can see the agenda for today on the slide. I'll make a few opening comments before handing over to Iain to deal with the financial performance in the quarter. He'll then hand over to Danny, who will build on Iain's comments and talk to our outlook for the next quarter and beyond. And finally, as I indicated at our last update, as an experienced director and start-up investor and U.S.-based, Daniel will give you his point of view on FirstWave. We'll then open up for questions.

So to my opening comments, again, 2 points only. Firstly, we had an encouraging cash quarter, generating a small surplus. As there is in every quarter, there were a number of items that fell our way and a number that didn't. But when the cash burn is reduced as it has been over the last 12 quarters, eventually small changes can put you in a cash positive -- cash flow positive territory, and that's what happened this quarter. That's not to say that this will be the case for the current quarter, but it is encouraging for the directors, the management team and the full team in FirstWave, and we hope it is for you also.

Secondly, the continuing delay in converting what I can assure you is a strong pipeline to revenue in a substantial and meaningful way will be as frustrating for you as it is for us. The Board has looked in detail at the pipeline, and I can only say the deals are real, they are progressing, but they're not home yet. Danny will talk further to this, but suffice to say, and I won't be elaborating on this. In parallel, we're advancing our thinking on all the levers that are available to us to deliver the best outcome for you. But our priority remains as it has and that's to convert our pipeline to sales and lower our expenses as far as we can.

Let me now hand over to Iain to talk through our Q1 financial performance. Iain, over to you. Thanks, John. I will start by sharing the revenue and gross profit slide in the format we have been presenting to you for some time now. The 15.9% drop in ARR and the 17.4% drop in revenue will likely be a shock to some of you. I want to emphasize, though, that the vast majority of these movements come directly from matters that have already been disclosed to the market.

And I will, in the following slides, go into detail on these movements. And you will see, for example, that the removal of the hosting recharge between FirstWave and Telstra that FirstWave makes no margin on accounts for over 70% of the drop in ARR. And given the gross profit margin of this revenue was 0, it was dragging the gross profit margin down. And hence, its removal is the main reason the margin increased from 78.3% in Q4 to over 88% in Q1.

Of the metrics presented on this page, gross profit has the most direct impact on cash flow. And I note it has been reduced by a much smaller amount than ARR and revenue. And that the reason for the drop in gross profit is mostly due to a reduction in non-recurring revenue between the quarters that by its nature is lumpy and unpredictable and does not reflect on the ongoing financial performance of the business.

Looking at ARR in more detail. We can see on this slide exactly how much impact the removal of the recharge revenue and the decommissioning by Telstra of its GPA product has had on FirstWave's ARR. 96% of the drop is explained by these 2 items, which were covered in detail, including the full financial impacts in the ASX announcement we made at the end of the previous quarter.

The [ Guala, ] Guatemala movement did not form part of any announcement, so I will provide some more details around this. Claro GT licenses the NMIS software under a perpetual license agreement and also had an ongoing support agreement directly with FirstWave that contributed $239,000 to ARR. They have switched to an alternative support partner, resulting in the ARR dropping. However, they still use the NMIS software, and should they require upgrades or development work, then FirstWave will receive further license revenues. The drop in Claro GT revenues across the quarters is matched by the growth from key CyberCision customers at Telstra and Microsoft's recent expansion of their NMIS license agreement.

Turning to revenue. We see a similar story. The total was down $475,000 with the biggest impact coming from the reduction in Telstra recharge, which fell from over $300,000 in Q4 to just over $60,000 in Q1. This accounts for more than half of the total revenue decline. And as noted earlier, this revenue is at 0 profit margin and hence, does not impact gross profit.

The decommissioning of Telstra's GPA product is about halfway through, and revenues were $91,000 lower in Q1 than Q4, accounting for 19% of the total drop in revenue. And when combined with the recharge revenue amount to 70% of the movement. Another significant item is the drop in non-recurring revenue, which was $157,000 in Q4 and dropped by just under $100,000 to $59,000 in Q1. This accounts for 20% of the total drop in revenue.

So when looking at gross profit, this difference between the quarters in non-recurring revenues that we just noted on the revenue slide accounted for 67% of the drop and was the largest single component. The Claro GT churn was the next biggest item at 41%, with the balancing item in other being a growth in gross profit across the rest of the business.

In summary, ARR is down, but the majority of the fall is from the removal of 0 margin recharge revenue. Revenue is also down, and again, the main driver is the removal of the recharge revenue. Gross profit is not impacted by this recharge revenue, but is still down with the main reason being the fall in non-recurring revenues. The gross profit margin is up 10 percentage points due to the removal of the 0 margin recharge revenue that was dragging the average down.

If we now move on to cash. The closing cash was very slightly more than the opening, and hence, the quarter was cash neutral, which is a significant change to the $1.82 million usage that we reported in Q4. The change in cash usage from Q4 emphasizes the cyclic nature of the cash flows in the business. There was one unusual event in the quarter being the receipt of $223,000 in R&D grant rebate that resulted from an amended tax return for FY '23, that generated additional credits relating to prior years. This $223,000 is actually less than the $288,000 that would be assumed per quarter for R&D when looking at normalized cash usage.

Normalized cash usage has, in fact, improved by $32,000 over the quarter from $283,000 at the end of Q4 to $251,000 at the end of Q1. This normalized cash usage excludes non-recurring revenue, which over the past 12 months has averaged $50,000 per month. And finally, as stated in the previous quarterly update, the company has sufficient cash to operate at current levels and before accounting for any revenue growth through until the end of Q3 FY '25.

Now let me hand over to Danny for a broader company update.

[Danny Maher, executive]

Thanks, Iain. I'll start by saying how good it was to see a positive cash flow result for the quarter. This is -- I would describe it as encouraging. It's a very encouraging result for us, and it's one that everyone inside the company really enjoyed and worked very hard towards. So it's a bit of a day of celebration for us when we finished the quarter.

It's not the end game for us, of course, it's a bit of a welcome to the starting line really, but it's great to see that we're in shape for the race ahead, and we're looking forward to that. We achieved this cash flow positive result primarily through the benefits of operational savings and synergies, which are implemented in FY '24 and FY '23 and through the receipt of increases in and extensions of our agreements with Microsoft and the significant Australian government client via Telstra. It's -- there was also multiple other deals and new smaller client wins in the quarter, which contributed to this great result from a cash perspective.

I wanted to talk a little bit about our normalized cash burn, which Iain touched on. It has lowered to around $250,000 a month. Now a reminder that normalized cash burn is an approximation of the average cash burn per month without any revenue growth. I note that our cash burn is cyclical, some quarters have higher cash in and others have higher cash out. However, the normalized cash usage number smooths all this out across 12 months, and it basically visualizes what an average month looks like with no revenue growth and our current operational expenditure.

So it's even further encouraging to see this number coming down also as it has been doing for over 2 years. And in fact, if we extended this graph out a couple of years prior, you would see that the normalized cash burn at that time was over $1 million per month. So we are a very, very different company.

Now even more important than ever is for us to grow our revenues, and we continue to sharpen the company's focus on that, so that as many of our resources as possible are doing the things we need to do to close the deals that are in front of us. We continue to have a strong pipeline of new opportunities across Latin America, North America and Australia and New Zealand. We've also got some new opportunities in Asia Pacific. So it's very important for us to close these out.

Our CyberCision growth focus continues to be on the Australian sovereign government ISM-compliant platform. And our NMIS growth focus, and when I say that, I'm including our Open AudIT and STM products also continues to be a global focus with a pipeline biased towards Latin America. We absolutely have significant opportunities in Asia Pacific and the U.S.A. for this suite of products, but we do have a cluster of opportunities in Latin America now that are a particular focus for us to close out, and we're all working very closely to support our team in Mexico who lead the engagement on those opportunities.

So we do have numerous significant deals that remain in play. The long sales cycles, we continue to experience, continue to require close management, but particularly under our current cash levels. But those deals are still there. They aren't lost. They take a long time to close. And we're hoping -- I know we announced some this quarter, and we're hoping to have some more to announce for you soon. It's also pleasing that we continue to see increasing opportunities for sales to our existing clients and partners as we did with the extension and increase with Microsoft and the Australian government clients. So it's really nice to see our existing clients and partners coming forward with more business for us also.

In terms of an outlook for financial year '25, I guess in summary, we could say that the business will continue to benefit from the significant transformation that has been made over the last 18 months in particular. This quarter's sales result is critical to delivering another cash flow positive quarter, of course, but it's also critical to assisting us with our goal of being cash flow positive for this financial year.

I note that our FY '24 R&D grant is expected in this quarter, and that's approximately $1.15 million of cash that will flow into this quarter. And I want to note strongly, very strongly that even without any revenue growth at all, the company has significant cash to operate until the end of Q3 FY '25. Of course, I'd be stunned if we didn't have any revenue growth. Obviously, we are planning on that, and we're investing in that. But to be clear, the business has a range of options to improve long-term outlook, including increasing sales, also asset sales, cost reductions and new capital to name just a few. But the point is that even without any revenue growth at all, we have time to take appropriate actions if we need. And I just want to note that because of our low cash levels.

So moving on, a pleasant introduction that I get to make is to introduce Daniel Friel. Now we announced to the market and mentioned on the last quarterly update that Daniel Friel had joined us on the Board. He is based in North America. He is an extremely experienced and extremely well-connected Executive and Board member, and he's a great guy. And so we thought we'd take the opportunity to get Daniel to say a few words. Thanks, Daniel.

[Daniel Friel, executive]

Thank you, Danny, and good morning to everyone, and good evening here from -- I'm in Charlotte, North Carolina in the U.S. I'm delighted to join the Board. I do have a financial services and technology background. I spent several decades at Bank of America and its predecessors. I started out as the bank's economist, added forecasting the bank's balance sheet to my portfolio, and then ultimately took on the role of evaluating technology companies for the Head of Technology and Operations for the bank.

In that capacity, I had the opportunity to see literally hundreds of technology companies every year. And that background allows me to very much appreciate the scale of the opportunity with FirstWave. I've been very impressed with the existing customer base, especially here in North America and Latin America. That includes Telmex, Microsoft, NASA, the U.S. Air Force, Lockheed Martin and John Deere, just to name a few. And I'll reinforce what both Danny and John have said, there is a strong pipeline and that -- some of that pipeline is included for North America.

I do look forward to working with John, Danny and the team -- and the management team, particularly as we pursue opportunities in North America and with additional global opportunities. So thank you, and back to you, John.

[John Grant, executive]

Thanks very much, Daniel. And can I just add to Daniel's comments, his -- the part he played so far in terms of the Board has been terrific. He just brings so much experience. And I guess he brings a balance that sometimes given where we've been as an organization, a balance which actually gets us back to where we should be in terms of thinking about the opportunities. So it's been great to have him on the Board. He's very experienced. He's very balanced in his commentary, as I've just said, but he's also straight to the point as most Americans are, which is great to see.

So before we move to Q&A, I hope Iain and Danny have added to the 2 points that I made at the start. Firstly, we had a cash flow neutral quarter. The normalized monthly cash usage is now down to $250,000-odd. And secondly, while the deals in our pipeline are real and are progressing, because they are not home yet, we are contemplating all options available to deliver the best outcome for you. I can't elaborate on this, but I do want you to know we are not sitting on our hands. But having said that, our primary focus is on closing out the opportunities in our pipeline and lowering our operating costs.

Let's now move to your questions. You can type them in on either the chat or Q&A functions or raise your hand to speak. Over to you. Any questions?

[John Grant, executive]

So just picking up the Q&A. Great work on the cash flow positive quarter. Now wouldn't it be great to back this up with management and directors buying some stock on market. That will inject enormous confidence into shareholders and help continue this reversal in sentiment performance. It will send a strong message to the market, too, momentum is everything.

Maybe I'll have a crack at that first. I understand the point you're coming from, where you're coming from on that, and I understand the sort of sentiment that you believe that, that will express. Can I just remind you that Danny is already a 16% shareholder in the business. He's got -- he's got his future in this business. And I've been in this business for almost 6 years now, 5.5 to 6 years. And along the way, I've invested personally already, but I've also taken no money from the company on a number of occasions to make sure that we had as much cash in the team to operate the business as we could.

We are fully committed to this business. We've demonstrated that up to this point, and we will continue to demonstrate that. We turn up here every quarter. We talk to every quarter factually about what is going on in the business. And you get all the information that we have. So accept the point that you're making, I understand it, but we're moving -- we are already committed, as I said, and we're just moving ahead trying to make this the best business that it can be.

Any other comments, [ Joel Spagnolo. ] Well done, Danny and the team on the quarterly. Thank you very much.

Any other questions or comments? Is there an update on Saisei Networks, Danny?

[Danny Maher, executive]

Yes. So we had some pleasing results from some Saisei sales. So that product -- it was called Saisei Traffic Manager. It's now called Secure Traffic Manager as part of our portfolio. And yes, there's some really nice opportunities from that product. There's some new ones in U.S.A. There's some in Latin America, and there's a really nice one in Asia Pac as well. So yes, it's -- revenues are growing. It's paying its own way, and we're forecasting further growth with that product. It'd be nice to be able to invest a little bit heavier in integrating it with our NMIS product, but we're chipping away at that technical integration as well, but it's sitting quite nicely in our portfolio.

[John Grant, executive]

Thanks, Danny. Danny from [ Mike Maiolo. ] Good work on the cash flow regime. Has anything changed in the marketing strategy since the last update? Or are you still knocking on the same doors?

[Danny Maher, executive]

So part of our cost reductions, unfortunately, we're not investing in marketing as heavily as we might otherwise, but we -- that's only sensible and rational or prudent business management from my perspective. So we need to see some of these deals start closing and then it will invest further in accelerating the growth further. But first thing is to close some of these deals. There are some new deals.

So following on from the question around STM, the U.S. team, together with Jerome, who's the product specialist here in Australia or General Manager here in Australia for STM, went to the WISPAPALOOZA Conference, which is the Wireless Internet Service Provider Association in the U.S. conference. They picked up some potential new deals there and met up with some partners there. We have recently redone the website. That's having good results, and that's producing new leads. And we have engaged 2 new lead generation firms, one in the U.S. and one in Latin America to generate new leads for us.

So we are seeing new opportunities come in, but we do have long sales cycles. We're dealing with large companies, and we're dealing with companies that -- so we're looking at the network management products, in particular, companies already have one. So they've got to go through the effort of pulling that one out and putting us in, even though they know it's better, it takes some time. And I think some of these deals are coming to a head now. And there's just -- in my view, there's too many of them out there now. So we should start to see some of them drop. So I'm really hoping and planning on that happening. But yes, some new ones -- but the same ones are still there as well and progressing. Some of them are in very late stage.

[John Grant, executive]

Yes. Look, it's not optimal. We've cut our expenses significantly and fractions have to go. It's not optimal. But we're doing the very best that we can in applying the financial resources and human resources we have to get the best outcome. It's an obvious answer, and that's the truth.

Andrew Chamber, do you have a new Chief Revenue Officer to close the pipeline?

[Danny Maher, executive]

We don't. I've taken responsibility for sales directly, in particular, because in Latin America, I've got some very senior personal relationships there, so that makes sense. I've also worked with Omar Vadillo, who runs our Latin American business for over 10 years. So I'm really enjoying and looking forward to working closely with him again. We are looking at the structure of the rest of our sales organization. Our U.S. sales organization is quite thin on the ground. And we have appointed Eric Doherty here in Asia Pacific to take care of Asia Pacific. So that's the current structure. We have the 3 regions with Eric, James in the U.S., and Omar in Latin America. Again, we've got a lot of happening in Latin America. So that's a bit of my focus, and we continue to look at the best structures for our sales organization.

[John Grant, executive]

Maybe I can add to that, too. Again, we've had to take actions here to sort of reduce our capacity in the sales business. What we haven't done is, we haven't taken out the sales front, the people who are actually dealing with the prospective clients. In large part, we haven't done that because if you don't have that, then you're not going to make anything happen. So, Dan is working over time. He's got a number of significant roles inside the business, let alone being CEO and MD. And he's the one who's got the best connection to the existing customers and the existing people in the sales business. So that is the best structure we can put in place at the moment.

[Danny Maher, executive]

I might add, some of you will know and remember people like Sharon Hunneybell, who was most like the entrepreneur at Opmantek. So, we're pleased to have her back working part time with us 2 to 3 days. I hired a lady [ Kristin McNulty ], who is helping with a lot more of the detailed work. So that's how I'm augmenting myself so that I've got time to spend on the sales. So that's what we've been doing.

So we brought in a couple of other resources. We've got another gentleman joining us next month, which really gives me a bit more time to focus on the sales, which is what the business needs.

[John Grant, executive]

[ Joel Spagnolo ] again, Danny. Daniel, you might comment on this question, too, if you would. Is there opportunity to look at dual listing in America to try and attract American investors?

[Danny Maher, executive]

There is. And Certainly, with most of these progressive questions like that, we come back to -- we want to be generating a level of sales. Most of these types of questions that come back. We've got to get the cash burn down, which we have, then we've got to increase our growth rates. But absolutely, we have looked at dual listing on the NASDAQ. We're very, very fortunate to have Daniel on the Board now, who's extremely well connected in investment circles, as well as commercial circles in the U.S.

So as per John's comment, I'll get you to add, Daniel. But yes, that is absolutely an option. But like our investors here, we need to see these sales come through and need to see specific things from the business in order to get new investor eyes on us.

[John Grant, executive]

Daniel, do you want to add to that?

[Daniel Friel, executive]

No, I'd just reinforce that, yes, there's a lot of different options and the potential to chat with other investors that are interested in FirstWave, especially given not only the pipeline, but the existing customer base is certainly there.

[John Grant, executive]

Next question. I appreciate you cannot give too much information on the pipeline of prospects. Can you, at the very least, give us some color on the sales cycle and if it is getting more stretched due to macro or industry-specific changes? I guess I'm looking for a reason to be confident conversions are imminent. Danny?

[Danny Maher, executive]

So there's so much in this answer. So there's just some general -- so I'm going to -- okay, so we've got to split it by product. I'll try and answer it as quickly and succinctly as I can. But so, if we look at CyberCision, Telstra, for example, is our major partner. They've just gone through significant changes in their security team, significant. So we, as a small company, have to spend our time getting to know new people and targeting even new divisions of Telstra in order to maximize our potential there. So that's a challenge for us as a small company with a large partner like that, but it's also an opportunity to have such a large organization with an established brand like that offering our products under their brand is significant.

If we look at -- I'll just group the other products together. Well, I'll focus on network management products, NMIS. We have particular attractiveness at the upper end of town. We have less competitors at the upper end of town. We scale better and we can manage more things at higher scale than our competitors can. So the higher up this food chain we go, the less competitors we have. But with the higher up you go, the longer those sales cycles are and the more difficult those organizations are to deal with. Anytime you're dealing with a large organization, it's difficult, especially if you're a small organization like us. We don't have another engagement with them.

They all have a system already, so they have to get it out. So there's a nature of this market, which is not specific to us at all, where there are long sales cycles and the customers -- it's difficult to create a compelling event for them. We all use technology which we don't like, and we don't take the time to go and change it into something else. So that's kind of where we are, and there's nothing unique about us with that. This is a very fragmented market, and it's a market with long sales cycles.

How do we have confidence that these deals are progressing? We are very fortunate with some of them that the deals are sitting with large organizations that already know our software, love our software, and we have very good relationships with. So that's where a lot of these deals are at the moment. Previously, some of the struggles have been where we're dealing with a large organization that we have no relationship with. And we kind of -- about 12 months ago, as we were refining our focus and reducing our costs, we peeled back from that a little bit and focused more on where we had the relationships, our existing clients or through existing partners. And again, we are, in a way, used to this. We don't lose as many deals as we have slip. And we're close to the deals.

And again, without disclosing too much, these large organizations go through a process, they go through a technical evaluation, for example. And when you're past that and it's being recommended to the business and it's getting closer to the procurement stage, we know that. But it doesn't mean they're for sure. I know it doesn't mean they're for sure. Sometimes you get nice surprises and sometimes you get not so nice surprises.

I don't know if that answers it or anyone wants to add to that. I did my best to crunch it all in, but there's a lot to that answer.

[John Grant, executive]

Yes, I think I can answer the question. But to reiterate, the sales cycles are just unpredictable in terms of the turns that they take. And when you're sitting on the Board looking at this, the frustration you feel and you expressed in your comments about having a reason to be confident that conversions are imminent, sits with the Board as well. We can't get in and run the business, and we're very loath to load the business up with things that we think we need to know in order to feel more comfortable. But there's a bit of a price you pay when you're in this situation. So a bit of that does happen.

It remains -- look, I guess I'd said in my opening comments that you can expect reasonably that we'd be sort of really honed in on the pipeline, which we are. So we -- the Board is familiar with every one of the opportunities. We're familiar with where they are in terms of the stage they're at. We're familiar with the quantum. We've got to the quantum of the pipeline. All the things stack up, but we just can't drive through that conversion.

So I'm not close enough to add anything to Danny's comments. The only observation I've got to make is that we are -- the particular point he made was we're in the top order end of town. And that is true, which means that the deals are sizable deals, which is good news, but there's the other territory -- the things that come with that territory as we're seeing playing out. So I can't offer any more than that.

I don't know whether any of the other directors or Iain, you've got anything to add to that?

[Iain Bartram, executive]

I might add one more thing to what I said, which is that, we've got better coverage. So there's more deals there. And I kind of made that comment that there's enough there that you have to reasonably expect something will drop, whereas if you're relying on 1 or 2 deals, it's different, and we're not. We have multiple deals in this pipeline that are progressing and are progressed. So, many of them with partners or customers that we have relationships with.

This last quarterly update, I was in Mexico when we did this update, and there's a very good reason I was in Mexico. And as I just stated, there's a cluster of deals there.

[Daniel Friel, executive]

Danny, I would like to add that when I look at the coverage, the pipeline coverage relative to what we expect to close, it's quite good. And then the other thing that I'll mention is, here in North America, it's not unusual for these sort of upper end of town, Danny, I love how you say that, by the way, these larger enterprise deals. It's not unusual at all for those to take -- have a sales cycle that runs 12 to 18 months.

[John Grant, executive]

Okay. That's great. Thanks, Daniel. [ Matt Payne ], Danny, you mentioned the potential for asset sales. Given the company's low valuations, anyone looking at buying FirstWave in full or part. I said before, I'm not going to comment on these sorts of things, Matt. I won't hand it over to Danny either. But if someone 'is, could they please let us know? I'm not being flippant when I say that. We're not idiots. So you can expect that we are looking at all opportunities. Next question.

[Danny Maher, executive]

I wanted to add too much, John, but can I just say that we get inbound -- like you'd expect -- you'd look at our client bases and we're playing in cybersecurity. We've got a massive open source user base. So we've got clients all over the world using free products that we've got. So we do get inbound queries. And of course, it makes sense to look at what's coming.

[John Grant, executive]

Next question. O'Connor. How are discussions with new potential investors and funds going? Great time of the journey for new capital to enter. You would think it's a highly appealing investment at current valuations, especially for fresh eyes. It's a really good question, Danny.

[Danny Maher, executive]

Sorry, could you repeat that, John?

[John Grant, executive]

Yes. How are discussions with new potential investors or funds managers going? Are we having them? Great time of the journey for new capital to enter. You would think it's a highly appealing investment at current valuations, especially for fresh eyes. Let me just make a couple of observations.

[Danny Maher, executive]

I agree.

[John Grant, executive]

You're right in terms of your statement. And I suspect when we bring one of those pipeline deals to fruition that the focus will be much more significant. So I probably think there's a lot of people sitting back booking, waiting, but you're right in terms of opportune time for investing in the company. You've just got to have confidence about what we say about the pipeline is real and that we can in fact convert that pipeline and make it a really meaningful difference to where the company's trajectory is at. Danny?

[Danny Maher, executive]

Yes. There are some new investment groups interested in us that we are talking to. On a personal level as a shareholder, I couldn't believe where we got to at the end of tax year selling, and I thought we were an absolute bargain. I wanted to add to that question about management buying on stock. All directors have sacrificed fees in return for stock, and staff and people are doing it. So we are actually exchanging cash for stock. It's not on market, but we are sacrificing remuneration by our own choice to take stock -- to buy stock. So it's a sacrifice of our cash for stock, and we do believe in it.

We have engaged with a new publisher of research that approached us. So you'll start to see some more research on us get out. And we're hoping that that's well-timed with some good things that will happen in the business as well. But again, back to that same thing, we need to see these sales and growth come through. That's what we believe.

[John Grant, executive]

Are there any side decision sales opportunities in the pipeline for Australian state governments, the New Zealand government or Asia Pac countries? And does First Wave have a SOC partner that's part of that?

[Danny Maher, executive]

Yes. The major partner is Telstra, but we do have a number of other partners. So we have numerous platforms. We've got a couple of platforms at Telstra, and then we've got a platform at AWS in Sydney which consolidates multiple partners onto that. And of course, we have the ability to take customers direct, but we don't really go around selling directly by default. So, yes, the major partner there is Telstra, but there are others on the platform that we have in Amazon Sydney, and those partners are not just in Australia, but in other countries around the world.

We're currently internally just having some strategy sessions around the partnership program with CyberCision, especially with how we maximize the opportunities with Telstra and who our other partners should be, especially because we have that ISM technology, which anyone in this business that is interested in picking up government clients should be pretty excited about latching onto that. So we're just having a look at how we leverage that while honoring our relationship with Telstra, of course.

[John Grant, executive]

And the second part, that was the first one, I have a SOC partner.

[Danny Maher, executive]

Well, those are them.

[John Grant, executive]

Those are them, yes.

[Danny Maher, executive]

But to your point, I mean, Telstra, while they're a SOC, they're also a big telco. For a partner that is very specialized in that industry, that's 1 of the conversations that we're having in Australia at the moment. So if there was a particular organization which had the accreditations, for example, that are required to go along with our software to make ISM compliance real, and they've got to focus on government, that could be very interesting for us as long as it sat well with our Telstra relationship. I mean, they could well be a Telstra partner as well, so that could work well.

[John Grant, executive]

And the next question, who was the publisher of the research? I think that the attendee is referring to the research that you mentioned a moment ago.

[Danny Maher, executive]

I'm sorry. Nothing has been published yet, and it's a new agreement. Are we okay with disclosing that, John?

[John Grant, executive]

Yes, we are.

[Danny Maher, executive]

Yes, so it's Pitt Street Research.

[John Grant, executive]

So you can expect, and we're engaging with them on a strong commercial basis from our point of view and their's, engaging with them over a 12-month period to work with those channels. That's acknowledging the contribution that Morgans has made through Nick Harris and Nick's on the call. But the more eyes we can get at this particular time, we think the better off everyone's going to be.

[Danny Maher, executive]

Nick, I'd love to hook you up with these guys, so I'll reach out to you after. It would be great if you could talk to each other.

[John Grant, executive]

From David Heaton, with the with the 4 new Nord relationship, do they provide any growth opportunities in Europe or OEM opportunities?

[Danny Maher, executive]

Good question, David. Nothing that we've tapped into. And if we look at our presence and our focus, it's very much Latin America, U.S.A., Australia and New Zealand, reaching out into Asia Pacific. So we don't have a big focus. We don't have any resources in Europe, forming Nord fund, a lot of companies. I'm not aware that they do a lot of work in stitching those companies together for business development, but we did have a conversation around that early on, and they introduced us to a client here in Australia. But I actually just reached out to them yesterday. So I'll add that to my agenda when we catch up to see if there's some doors they can open for us. On top of the ones Daniel's opening.

[John Grant, executive]

There's a follow-up question. A question 2 will ago, are there any CyberCision sales opportunity in the pipeline for Australian governments, et cetera? The follow-up question is, wasn't that question about upcoming government contract tenders, which we didn't speak to specifically, but what would you say about opportunities that are sort of in market at the moment from Australian government organizations or entities?

[Danny Maher, executive]

So our major contracts are with Telstra. The major contract under that is with that particular -- it's an umbrella type contract, which covers numerous government agencies. So that's the first thing is maintaining and growing the revenues through that agreement. In terms of the new government clients via Telstra, they are on a case-by-case, bid-by-bid basis. We're still working with Telstra on some better productization of the ISM solutions. So at the moment, we bid on a case-by-case basis. Sometimes Telstra bids on things that we're not even aware of. So they go and bid a whole solution, including our e-mail and web security, potentially firewalls, and go and put a bid out to government. So we're not necessarily even aware of all the proposals out there. But yes, certainly, we've got a full-time resource that works with Telstra, as well as our other resources that work alongside Telstra.

But we hired a little over a year ago an account manager full time to pursue that Telstra relationship. With the closure, which Iain noted when he went through the financials of the CSX2 platform with Telstra. We've been actively moving those clients across to Telstra Purple, which has been helpful with our relationship with Telstra Purple. So that's a growing sales relationship as well. So yes, there's definitely proposals out there for CyberCision clients here.

[John Grant, executive]

And [ Chris Jack ] is on the call. Chris, your hand has been raised a couple of times. If you've got a question, just raise your hand again. Otherwise, I think it might have been an error on your part. So any more questions? That's the end of the list.

Okay. Okay. Last opportunity. Thanks very much. Okay. All right. Can I thank all of you for participating in today's update. Can I especially thank Daniel for coming in from the U.S. Our Board meetings have moved to 6:30 a.m. start times, and that's equivalent to 5:30 p.m. start times for Daniel. So that's been exciting. It's interesting too, in putting together the annual report this year, and I'm not too sure whether this is good or bad, but there were 19 Board meetings last year. There were 5, I think, Audit and Committee -- Finance, Audit and Risk Committee meetings. And there were 4, I think, people in culture meetings or Remuneration and Nomination Committee meetings.

Danny as the CEO sees a lot of his Board. And sometimes I don't necessarily think that's as constructive as he'd like it to be, but that's what it is.

Chris, you have your hand up, do you have a question? I'm going to jump into the call. Okay. Sorry, I can't get anything from you.

All right. We're going to close it down. Thanks for everyone. And if not before, we'll see you next quarter. Cheers.

[Danny Maher, executive]

Thanks, everyone.