Firstwave Cloud Technology Ltd

ASX:FCT

Earnings Call Transcript 2021-Q2

[Neil Pollock, Former Chief Executive Officer]

Hello, and welcome to FirstWave Cloud Technology's Q2 FY '21 Investor Update. My name is Neil Pollock, and I'm the Chief Executive Officer of FirstWave. Joining me today is our Executive Chairman, John Grant; and our Chief Finance Officer, Iain Bartram. Please note the disclaimer on Slide 2. Moving to Slide 3. Our objective today is to report FirstWave's unaudited Q2 and half 1 FY '21 results and update you on Q3. The presentation you're now seeing has been lodged on the ASX portal and e-mailed to the address provided with your registration. During the presentation, we will refer to the slide number we are talking to. The presentation will commence with an update from John. I'll follow with the Q2 and H1 results, and then I'll provide an update on Q3. Following my summary, we'll open the lines for Q&A. Before we get into it, I want to remind you that there is additional content and detail in the appendix, which expands on the main presentation and includes a description of our technology and an investor's guide to our acronyms. I invite you to review the entire slide deck at your leisure and raise any questions you have with us directly today or via e-mail. Let's move on to Slide 4 and the Chairman's update. Good morning, John. Over to you, please.

[John Grant, Executive Chairman & Interim CEO]

Thanks, Neil, and welcome to everyone on the call. Let's move on to Slide 5. Neil will elaborate on all of what I'm now about to say, but in summary, in the first half, total revenue was up on plan and recurring revenue was on plan, with domestic above and international below plan. The continuing impact of COVID-19 on our partners, particularly in EMEA and India, continued into Q2, not unexpectedly, lowering the rate of growth in international revenues. But while we expect COVID to remain with us through the second half, as I've said repeatedly, this is a numbers game, and we have got many irons in the fire around the world. Expenses remained in line with plan in the first half, and the closing cash balance was $1.4 million ahead. But there are many inputs to cash, and we're watching margins, payment flows from partners and foreign exchange. Neil will talk in length [Audio Gap] certainty, but early indicators are positive. Please turn to Slide 6, and I'll hand you over to Neil, who will now add more color to all of this.

[Neil Pollock, Former Chief Executive Officer]

Thank you, John. I'm now moving to Slide 7. Before we get into the results, I think this is an important slide because we use a lot of revenue metrics in this business and they're used throughout this presentation today. At times, it can be quite confusing, so let me take a couple of minutes to explain some of the terms. Firstly, MRR, monthly recurring revenue. This is revenue flowing from monthly subscriptions, normally ranging between 3 and 6 months (sic) [ 3 and 36 months ] that we have with end users. NRR is nonrecurring revenue. This is revenue flowing from one-off professional services engagements with our partners and, on occasions, end-user customers. This is project-type revenue. ARR, annualized recurring revenue. At the end of each month, the annualized value of the subscriptions is reported as the total value of subscriptions in that month, the MRR multiplied by 12. Now we report MRR, NRR and ARR separately for international partners as IMRR, IARR and INRR and our domestic partners as DMRR, DARR and DNRR. TR stands for total revenue in any month, quarter or year and is the sum of the MRR and NRR for each month in that respective period. Okay. With that in mind, let me get into the Q2 key metrics and move to Slide 8. Although performance across the Q2 key metrics was a bit mixed, importantly, total revenue grew 3% quarter-on-quarter and was on plan. While domestic recurring revenue was up 6%, international recurring revenue took the brunt of the impact from COVID-19 continuing in the quarter, and its rate of growth quarter-on-quarter was lowered to 33%, which is 26% down on plan. Nonrecurring revenue was minimal, as you can see, and it's not a metric we give any significant focus to, but its shortfall to plan, combined with the shortfall in international recurring revenue, saw quarter-on-quarter total revenue decline 2%, or 5% down on plan. With product mix favoring lower margins in EPP and e-mail and a shift in the domestic and international revenue ratio away from that in the plan, gross product margin for the quarter was under plan. We are mindful in reporting this that some of the invoices we get from our technology partners for the licenses they provide us to not necessarily follow revenue timing and that gross product margin is more accurate the longer time period over which it is measured. Closing cash was $1.39 million ahead of plan and $8.08 million -- at $8.08 million, and we added 9 billing partners in the quarter. We now have 46 billing partners. These are partners that are generating recurring revenue. I'm on to Slide 9 now. If there is one key metric indicative of the health of this business, it's our annualized recurring revenue and how it trends over time. Slide 9 is a quarter-on-quarter view of this over the last 7 quarters. What it shows is that Q2 total annualized recurring revenue actually grew 5% quarter-on-quarter albeit below plan. International annualized recurring revenue grew 16% quarter-on-quarter to break the $1 million mark in a month for the first time, and importantly, domestic annualized recurring revenue grew 4% quarter-on-quarter to $6.51 million. This is the first quarter-on-quarter growth in domestic recurring revenue in 5 quarters. Critically, for your company, Q2 FY '21 is the first quarter in the company's history that both international and domestic revenue grew. This is a positive trend which we expect to continue despite the current operating environment. I'm now moving to Slide 10. The Q2 cash balance was $1.39 million, ahead of plan at $8.08 million. The company received $2.06 million in R&D refund from the Australian government in early January, lifting the cash balance at the start of Q3 to $10.14 million. You may have noted from the 4C that cash used in the quarter was higher than in Q1, so let me just deal with that for a second. This is a result of changes in the supplier financing agreement with a major customer, which has impacted the timing but not the quantum of the payments from this customer, and several new billing partners being onboarded, we onboarded 9 in Q2, where the establishment of billing and reconciliation processes delayed invoicing and collections. Finally, on Q2, financing activities of $0.31 million in the quarter were due to sub-underwriter options being exercised. Okay. I'm now going to review the half 1 results and provide a regional update. And I'm moving on now to Slide 12. On balance, the half 1 performance was solid and underpinned by growth in total revenue, diligent management of expenses, as you would expect, and a careful watch on cash. This has positioned your company for further growth into the second half. Let me pick the highlights out of this. COVID-19 impacted performance beyond Q1, as you've seen. To date, we estimate the impact is deferral of around $248,000 in annualized recurring revenue. But we still have many irons in the fire, and it is the rate of growth which has been impacted, not the compounding revenue growth itself per se. On the product front, we continue to expand our product portfolio, onboarding a new technology partner, Simplifyd Systems Limited out of the U.K., and launching their WebProtectDNS product to deliver first revenues in December. We also delivered 2 major product features in the half to ensure we maintain product leadership. We now have 13 platforms deployed, up from 11 at June 2020, and our first on-premise platform outside Australia is in production in the Middle East. We now have traffic flowing on platforms on 5 continents. On revenue, we closed the half 5% ahead of plan with total revenue of $4.07 million. Our total annualized recurring revenue closed 6% below plan at $7.51 million due to the international annualized recurring run rate underachievement in Q2. Growth in the domestic annualized recurring revenue, DARR, which was 2% ahead of plan at $6.51 million, partially offset the international revenue, which was down on plan. But at $1.01 million. I just want to say that, that $1.01 million is up 125% from the June 2020 exit. The cash balance at the half was the same as the Q2 exit, and we added 20 billing partners in the half. And Cisco's sales efforts have positioned us stronger than ever in major global accounts with significant advances in particular being seen in North America late in the half. Tata TTL is now selling a full suite of our products in India. But on the other end of the spectrum, DWS in the U.K. has been seriously impacted by COVID with their sales teams remaining furloughed. I'm now going to go into a regional update, and I'm moving to Slide 13, which is the regional review of EMEA. Let's look at what happened in each region. You'll recall our VP, Business Development and Sales Sundar Bharadwaj, who is based out of the U.K., leads this region where the business conditions have remained significantly restricted. The U.K. and Europe are now into another round of lockdowns and business activity, after emerging positively in Q1, effectively returned to the conditions we saw in the second half of last financial year. Yet despite all this, at the end of the half, EMEA has become the largest region by partners and the second largest region in revenue behind ANZ. Half 1 annualized recurring revenue growth was 71%. This is largely because Africa and the Middle East are showing signs of recovery. Our on-premise deployment in the Middle East is on track, and the launch of the new WebProtectDNS product delivered immediate revenue in December. This has partially offset the delays in converting level 2 partners in Europe to revenue, and the signing of the new level 1 partner in Africa has been delayed until Q3. Let's move to Slide 14, APAC. In APAC, we are cautious but encouraged as the region looks to be emerging from the impact of COVID-19. A reminder that India and Asia are covered by both Sundar and your other VP Business Development and Sales, Shekila Ramalingam, where we have the level 1 partners, Vodafone Idea, Vi, and TTL. They are the prime drivers of revenue in this region over time, but there are many smaller but very important partners that have collectively delivered 73% growth in annualized recurring revenue over the half to reach $0.24 million. In this region, we signed a new level partner in AlTel out of Malaysia, but the signing of the new level 1 partner, which was planned in Indonesia, has been delayed into Q3. We're in the process of recruiting an additional BD and sales resource to take advantage of an emerging opportunity with a major telco and the Malaysian government, which has announced almost USD 0.5 billion funding to bolster cybersecurity in the country. Let's move to Slide 15, Cisco. Cisco takes our platform to market globally as the Cisco Security Management Platform, CSMP. Greg Maren, our Director of Global Alliances, and I jointly manage our relationship with Cisco with the support of our presales engineering team. Late in the half, we created an exclusively focused Cisco partner team with a specific mandate to turn current contracts into revenue and accelerate growth with Cisco. In the first half, 13 Cisco partners billed...

[John Grant, Executive Chairman & Interim CEO]

Excuse me, Neil. Sorry to interrupt. But the slide is showing ANZ.

[Neil Pollock, Former Chief Executive Officer]

I beg your pardon, John?

[John Grant, Executive Chairman & Interim CEO]

I think it's the previous one.

[Neil Pollock, Former Chief Executive Officer]

No.

[John Grant, Executive Chairman & Interim CEO]

I think you're talking to a slide that's not in the pack.

[Neil Pollock, Former Chief Executive Officer]

Okay. I will sort that out.

[John Grant, Executive Chairman & Interim CEO]

Apologies, everyone. Go ahead. Keep talking, Neil.

[Neil Pollock, Former Chief Executive Officer]

So in half 1, 13 Cisco partners billed $0.27 million of annualized recurring revenue, which is up over 1,200% from June. Opportunity development in the Cisco region continues. The Middle East opportunity has been delivered. And although revenue growth has been below expectations, our partnership has resulted in Cisco being selected as the preferred supplier to a global Tier 1 telco in North America. I'm now moving to ANZ. ANZ is our largest region by revenue, delivering $6.51 million of annualized recurring revenue in the first half, led by Shekila and managed by Greg and the Australian-based business development and channels team. In this region, Telstra appears to have returned to growth as churn appears to have stabilized. It could still be lumpy as we enter the second half, but the team is focused on continuing to deliver growth in the domestic market. Negotiations on renewal of the Telstra preferred supplier agreement are also underway. Revenue flow from the TBCSS, the Telstra Business Cyber Security Suite, program has been disappointing due entirely to the reallocation of the Telstra team responsible for driving sales to COVID-19 related tasks. Telstra has stated TBCSS is due for relaunch this month, and we are watching that keenly. There is positive momentum from the newly engaged channel partner development lead. And as a major input to cash flow, the annual advance payment, which was scheduled to arrive this month, has been committed to a monthly payment. Let me now move on to the Q3 update. I'm now on Slide 18. Taking into account the experience of Q2, we see the Q3 operating environment has what the Chairman referred to as a few balls in the air. I want to talk briefly about what's changed between June 2020 when we announced our FY '21 plan and now as we enter Q3. I'm going to do this in terms of revenue, margins and cash. In June, we said a key assumption of the FY '21 plan was that business would be back to doing business at pre-COVID levels by the start of Q2. That's clearly not happened, and as I've mentioned a number of times already today, COVID is still present and impacting our partners and their revenues. I also mentioned briefly a few slides ago that we projected our average product gross margin would improve to 59%, driven by product mix, that is higher volumes of firewalls and web security; and by revenue mix, an increasing proportion of international revenue, particularly through Cisco in the overall revenue mix. Today, what we see is higher sales of e-mail and endpoint protection products, which is totally expected in a COVID business world, and a lower ratio of international to domestic revenue. Both of these factors put pressure on our margins, and we're keeping a close watch on this. On the cash front, although the half 1 performance has been strong, Q3 will be impacted by 2 factors: Firstly, the domestic customer annual prepayment, which I've previously mentioned and projected in February, has been commuted to a monthly payment in arrears. Again, let me stress the revenue is not gone but it will now come monthly rather than annually in advance; And secondly, as international revenue grows as a percentage of overall revenue, the impact of any decline in U.S. dollar and Great British pound to the Australian dollar ratio will be felt more keenly. Clearly, this impacts both revenue and expenses, but it was not part of our projections from June 2020. I want to stress that these call-outs are not excuses. They point to the reality of our operating environment, and we're expecting to be dealing with them throughout the second half. You'll see in a minute, however, that we're not just sitting around waiting for it to go away, and what we're doing has already had positive impact on our Q3 revenue. Okay. With the scene set, I'm now going to move on to Slide 19 to update you on what we are doing about this right now. Firstly, we've proactively moved to expand the product portfolio to give our BD and sales teams more options for our partners. We've brought on a new technology partner with a new web cybersecurity offering called WebProtectDNS, as I mentioned earlier, and we've already secured first revenues out of Africa. We've redirected -- we've also redirected the development effort -- our development effort to meet new opportunities emerging under the Cisco OEM agreement. And secondly, we're growing and pivoting our go-to-market team by expanding our Cisco account team with a focus on turning existing partner contracts into revenue, recruiting a new partner account manager domestically to bring on new partners in ANZ, and accelerating our new WebProtectDNS offering into all markets. I'm now moving to Slide 20. Q3 has started well, and I'm confident revenue growth can accelerate. A positive early indicator is that compared to December, we've seen a 38.5% uplift in international annualized recurring revenue to $1.39 million in January, in a single month. This has lifted the total annualized recurring revenue by 5% in 1 month. Domestic revenue has remained flat, which is not unexpected given the Christmas/New Year season in Australia. But importantly, our international revenue now makes up 18% of the total annualized recurring revenue base. This was 3% just 12 months ago. Now what you'll not see on this slide is a Q3 total revenue outlook for March, and that is for all the reasons that I've just spoken to. We're not trying to avoid the issue. The facts are there are simply too many balls in the air for us to be able to accurately forecast at this time. I can imagine you'll have a number of questions about this, and we will get to the Q&A session very soon, but let me try and answer some of the more obvious ones now. Firstly, do I believe we can still make our plan? Well, in this regard, we are all dealing with an operating environment that is being driven by macro factors that are unique, hard to predict and variable and are having a wide range of impacts across partners and customers and geographies. We've referred to having many irons in the fire. Clearly, this refers to the number of opportunities that exist with our partners across these multiple geographies. These have a spread of potential sales revenue outcomes and timing that is hard to predict with confidence given the current operating environment. But what is clear is that there is more business on foot each month. The opportunity pipeline is strong. And while the rate of revenue growth slowed in Q2, January has given us and should give you some comfort. The bottom line, however, is that in order to confidently answer this question, we need to see the actions we are taking play out, and that will take a little more time. So you might then ask, right, so how does this impact on cash? As we said earlier, there are a lot of variables to cash. But what we do know is we're $1.4 million ahead of plan at the half, and there are both positives and negatives to our planned cash flow, which have and will continue to occur. We are tightly and conservatively managing how we apply your cash, and we've diverted some of that cash to activities we believe will give us more positive outcomes in the short term. But again, in order to answer the cash question, some of the inputs such as sales mix, margins, foreign exchange and payments need to firm up to give us greater clarity. So it would be perfectly understandable now for you to say, "That's not very helpful, Neil," and then ask, "So when can you give us clarity?" And the answer to this question is as soon as we can. We will constantly being -- we will constantly be reviewing the situation, as you'd expect. And respectful of your investment in FirstWave and in the spirit of transparency that we've always sought to give you, we will report to you monthly during Q3. Okay. We've covered a lot of ground this morning, and there's a lot of information in this presentation. So let me summarize the key takeouts. Please move to Slide 22. Revenue is growing. International revenue is growing fast. The rate of growth has been lower than projected, but the outlook for Q3 is for this to improve. The reality is, as we've said, that we face a macro environment that is directly impacting the timing and extent of the realization of these opportunities, but the revenue is growing. Costs are in line with plan and are expected to remain so in Q3. Cash is ahead of plan, and the Q3 outlook for cash remains positive. So on balance, the outlook is positive. H1 has given us good momentum. And January revenue has closed strongly, international annualized recurring revenue up 38.5% on December, as I said. So we will report progress to you monthly during Q3 as the balls continue to land. I thank you for your attention. We will now open the line for questions.

[Ruth Sloley]

Neil, we do have one question.

[Neil Pollock, Former Chief Executive Officer]

Ruth, yes.

[Ruth Sloley]

With a miss in international annualized recurring revenue, the December quarter, how does that change your forecast for the $9.5 million international annualized revenue for the June quarter '21?

[Neil Pollock, Former Chief Executive Officer]

Okay. So I think I have -- in fact, I've tried to address that during the presentation in talking about do we believe we can still make our plan. And I just referred to the response to that question that I gave preemptively, I think, in the presentation. We've got a number of irons in the fire in a challenging operating environment. The opportunities have a spread of potential sales revenue outcomes and timing. The challenge with making a definitive statement about this is that it's hard to predict with confidence given the current operating environment. And so in order to build the picture, we're going to report back to you on a monthly basis during this quarter. The thing that I would say is that -- I note that the reference for that is that the miss on international annualized recurring revenue in December went in Q2. The reason it's difficult to predict is because if you look at the growth that's occurred in a single month in January, which basically got us to $1.39 million, $1.4 million of international annualized recurring revenue, which is where we told the market we thought we would be at the end of December, the variables are just too great at the moment for me to be able to make a definitive comment about that.

[John Grant, Executive Chairman & Interim CEO]

So Neil, let me jump into that as well. What we had said, however, was that this is clearly top of mind for us and will be reviewed, ongoing. We will share as much as we know monthly with the shareholders. We can't do better than that. And that's -- so you will know when we know. And as soon as we feel that we've got enough certainty, we will tell you definitively where we think we will end up. Thank you.

[Ruth Sloley]

We've got another question. With current cash burn, what steps are being taken to bend the needle upwards? And if the cash burn does not become positive within the next 6 months, what steps will be taken to maintain solvency?

[Neil Pollock, Former Chief Executive Officer]

I -- so I think the -- not I think. Our update to the market in June last year advised that we expected to be cash flow positive by December or 2022. So I think I've also tried to address that particular question and the impact on cash in the preemptive questions as well. There are a lot of variables to our cash position. Look, it's pleasing that we're ahead of plan at the half by $1.4 million. I think also the -- although we've reported $8.08 million at the end of Q2, when you add in -- as I mentioned earlier on in the presentation, when you add in the R&D refund from the Australian government at just over $2 million, it improves the cash position in early January and entering Q3. Look, we're -- as I've said in today's presentation, we're tightly -- as you'd expect, we're tightly and conservatively managing how we apply that cash. And we've also diverted some of the cash that might have been originally planned for one particular area of the business into other activities, which we believe will give us more positive outcomes in the short term. And let me give you one example of that. The Simplifyd DNS -- Simplifyd Systems Limited product, WebProtectDNS, was originally scheduled not until Q4 of this financial year. When we saw what was happening with the persistence of COVID and other operating environment impacts, we brought that forward. So we acted quickly to -- knowing that it had potential. Instead of leaving it until Q4, we brought that forward into Q2 and in order to try and counter or offset the -- effectively the impact of COVID in U.K. and Europe, which is severe. And that produced immediate results in December, and we generated revenue in December out of that product. So it's -- we're doing everything that we can to closely manage the cash situation. But I just want to stress again -- and probably John will say this if I don't. We're going to -- in order to answer that question, some of the inputs, such as sales mix, margins and ForEx and our client customer payments, need to firm up to give us greater clarity of it. So again, we will keep the market updated on a monthly basis in regards to cash position.

[John Grant, Executive Chairman & Interim CEO]

So just to add, that's -- I think that says everything completely, Neil. And just to add to that, clearly, from a solvency point of view, if the situation changes and as we work ourselves through Q3, we get -- we make determination. And in fact, the cash flow breakeven stage is not going to be reached when we said that we'll tell you. And the opportunities for a company like FirstWave is to raise money. That's why we're in this business. So that's why we're listed. That's not to say anything about the fact that we're doing that, but we do need to know what's happening. So there's -- we've said numerous times in this call already, and we are no different to almost every other business in the world. We're no different because we all need to see how these things play out. By the end of Q3, we'll absolutely know. There's no question about that, and we can be definitive about it then. Thank you.

[Ruth Sloley]

We've got a question from Nick Harris. John and Neil, well done to still grow in a tough quarter globally. You added more billing partners in Q2. Can you please talk a bit about what sort of partners they are, e.g., telcos, IT companies, and any other color you can add on what or who they are selling your solutions to?

[Neil Pollock, Former Chief Executive Officer]

Look -- thanks, Nick. The partners vary. I -- there are -- a couple of those new partners have come out of -- as I've already talked about. One of them is a telco in Malaysia. If I go back to the regional update, there was AlTel out of Malaysia. The -- another -- a couple of work came out of our African business because -- or Africa region from EMEA. We saw in India, we added 1 or 2 MSP, MSSP, smaller partners in that region. So it's -- they vary. The partners that we're bringing on vary, Nick.

[John Grant, Executive Chairman & Interim CEO]

To add to this, I mean that's consistent with the go-to-market model. But primary channel of the market is what we call level 1 partners, the majority of whom are large telcos. However, again, amongst those, of course, we've got SHELT and Dimension Data. Both of them are sort of large-scale systems integrators, managed security service providers. But those channels to market then open to a whole range of other partners. The majority of whom, again, are smaller telcos, but it includes also distributors as with DWS in the U.K., and it includes resellers who sell directly to end-user customers. The end-user customers in terms of their profile, I mean we're targeting our solutions in -- through this channel network primarily at small to medium business. Telstra's taken then 2 small office, home office, interestingly enough, and that is potentially -- and clearly a market opportunity for us, the way we package the platform and the offerings on it. And we are also playing into the upper end of -- all the way up to the upper end of SMB. But as we've said before, because the platform hosts enterprise-grade products, it appeals to all sorts of businesses, including all the way up to enterprise and government. We don't address this channel in any meaningful way at the moment other than those which come across in our path, if you like, which we do on a direct basis. But if a major telco introduces a major partner like that, then we bring them in. So it's a -- the real attribute of this solution is that while we're targeting primarily SMB through the telco channel, the applications themselves and the portfolio is applicable to all sized businesses. And over time, of course, as we get more money to invest and we become more successful, we will open up these other channels using different go-to-market motions than the one we've got through telcos. So it's a broad question, Nick. Hope that's sort of satisfied it. There is a bit of description of this that we've produced in a document that I tabled in the last quarter update, which has been updated on an ongoing basis, which I'm happy to send you, which will elaborate a little bit further.

[Ruth Sloley]

We've got another question. So just to clarify, at the end of January '21, international annual recurring revenue is $1.3 million. And that's the question.

[Neil Pollock, Former Chief Executive Officer]

It's actually $1.39 million. It's closer to $1.4 million. So yes, the -- and let me be clear about this. So if you look at the MRR and it's going to -- in fact, let me stop there. Let me take a pace back. The answer to the question is yes. International annualized recurring revenue at the end of January was $1.39 million.

[Ruth Sloley]

[indiscernible].

[Neil Pollock, Former Chief Executive Officer]

Sorry. So that was -- so December, it was $1.01 million. January, it's $1.39 million.

[John Grant, Executive Chairman & Interim CEO]

Yes. That's a 40% increase in the month of January, and we needn't get too carried away with that which we're not for all the reasons we've said, but it's a very strong indicator. The way I think -- and it might be helpful if I say this to our shareholders. It might be helpful to think of annualized recurring revenue as the money that you get at the start of each month before you open the doors. So we started February, before we opened trading, with $1.39 million of revenue in the kick, would come into February. Therefore, anything that flows in addition to that through all the work we're doing in market adds to the $1.39 million and we'll close February with a higher number. And so it goes on. So the point about annualized revenue is it's under contracts between -- contracts are between 3 and 36 months. And those contracts flow over that period. So then we book them -- we can book them every month. And that's this wonderful leverage channel model that we've been talking about now for a long time.

[Ruth Sloley]

We have a question from [ Mike Fitler ]. I appreciate the difficult operating environment in the short term. Do you have a view on where you see the inflection point when channel partnerships grow exponentially out of fear of not having the service to offer their SMB clients when their competitors do? Would this be a measure of relationships established? Or is there a different measure we should focus our attention towards?

[Neil Pollock, Former Chief Executive Officer]

Ruth, can you -- I'm sorry. Can you ask me that -- just go back and repeat the question, please.

[Ruth Sloley]

Yes. I appreciate the difficult operating environment in the short term. Do you have a view on where you see the inflection point when channel partnerships grow exponentially out of fear of not having the service to offer their SMB clients when their competitors do? This be a measure of relationships -- would this be a measure of relationships established? Or is there a different measure we should focus our attention towards?

[Neil Pollock, Former Chief Executive Officer]

That's a great question. The -- let me deal with the inflection point first. I think one of the things that COVID has done very clearly in this business environment -- and we talked about this in previous presentations, where remote working, accessing over the -- accessing critical data over the Internet rather than under the -- a secure network enterprise network has certainly offered the opportunity to black hat hackers to take advantage of the situation that clean pipe technology and secure Internet connectivity, e-mail security, end device or end point security is hugely problematic across the globe. And in fact, you see it every day, the number of attacks, the number of companies being attacked, the acceleration that CIOs are embedding in their organizations in regards digitization, moving to the cloud, got to get security. An example that I'll give you is an implementation that we did with Voda Idea in India last quarter, where one of the world's largest -- and I won't mention the company name, but one of the world's largest IT services companies went for our PAN next-generation firewall solution because they were operating across 2 geographies. The data that was being accessed was in India, and the company that was -- or the people who were accessing that data were in the United States. So what they needed was -- and the challenge that they had was not only the protection of the data but also the latency in the setup that they currently had to try and protect the access to that data. And we were able to provide that solution, bespoke for them as it was, in a manner that enabled them now -- they're quite satisfied with the reduction in latency and the protection that they get from an enterprise-grade cybersecurity solution such as a Palo Alto Network firewall. So having said that, the inflection point -- I wish I could -- you know what, I wish I could predict the inflection point. I think the inflection -- I don't think there'll be a single inflection point. I think there is a -- not only gradual, a rapid and accelerating move towards total perimeter security. I think one of the things that has changed in answer to this question is that people now or organizations now, businesses now -- 2 things. Businesses now don't just look for a single layer of security. So they're not just looking at e-mail. They're not just looking at end point protection. They are looking at a suite of perimeter cybersecurity options to effectively multi-layer defenses against attack. And we're seeing that with TTL in India being able to sell our full suite of products, to be honest with you. They have sold e-mail, web, firewalls and endpoint protection to their customers. And they are responding directly to the needs of their customers. And it's one of the real strengths of the platform, and they're doing all of that off the AWS platform that we have, CCSP, the cloud content security platform, that we have in Mumbai. So I think it's not so much an inflection point. I think it is more a rapid move to multi-layered, enterprise-grade cybersecurity. The big advantage that we have is that our partners, whether they're telco, MSSP, MSP, whatever, systems integrators, are able to offer their customer base and their end customers of their own partners, a full suite of products from a single platform. So they don't -- I've said this multiple times since I've been with the company. FirstWave is the only platform in the world that enables a telco or an MSSP to offer that full suite of products from a single platform and their enterprise-grade products. So we're not designing our own e-mail or our own firewall or our own web and competing with the Ciscos and the Palo Altos and the Fortinets. Let them do what they're best at and they do because they're the best in the world at it, but let us multi-tenant and integrate them and enable our partners to offer them. That is the key of what we do with our platform, and no one else does it. So I don't know whether there's going to be an inflection point. I believe that we will continue to see accelerated and rapid digitization and move towards multilayer perimeter security. I hope that answers that question.

[John Grant, Executive Chairman & Interim CEO]

Neil, you covered a lot of geography in that.

[Neil Pollock, Former Chief Executive Officer]

I'm sorry.

[John Grant, Executive Chairman & Interim CEO]

It may be my cue to just sharpen a bit of that up. We spoke -- I started talking 18 months ago about the path to revenue. We identified 9 steps in that path to revenue from first making contact with a Tier 1 partner to finally selling the -- a billing partner more solutions from our portfolio. It's referenceable on previous updates. And I mean if it's not clear to you, just send us an e-mail and we can send you a copy of that. That's the first point. The data that you should be looking at is the data that we believe indicates exactly what you're asking, and the first of that is how many partners do we have. What's the number of relationships? The second is how many billing partners do we have because once a partner starts billing, you can start to build momentum. As Neil reported, 46 of those in -- at the end of Q2, up from 26 at the start of the first quarter. So 20, we've already added this year. So the more people you have in the marketplace who are talking to building products with taking to market through their marketing campaigns, then greater is the opportunity for you to connect to the end customer and get revenue. And the other measure is how our -- particularly our -- well, our recurring revenues in general but more particularly our international recurring revenues, how they trend over time. And there was a very complete information in the pack this morning about the trend of growth of international revenue, and that was topped off by the January 40% increase over the previous month. But that's where you should look to see where inflections are being created. That, to me, is the most valuable piece of information. You asked whether that's around a measure of the relationships established. And through the channel network, it clearly is. I hope that, that adds a bit more context to what Neil has covered.

[Neil Pollock, Former Chief Executive Officer]

Well, it makes it crisper. Thanks, John.

[Ruth Sloley]

We've got 2 more questions. There's a question from [ Peter Davis ]. Bringing forward the DNS product may well have assisted in the short term, but does that now leave a vacuum in quarter 4?

[Neil Pollock, Former Chief Executive Officer]

No is the short answer to that question. No. It was brought -- it was going to be brought on anyway. It was there to -- as part of the bridge to H2 revenues. What we've done is we've brought forward the potential opportunity that it delivers. And as I said, we've already seen that with revenue coming in December, additional revenue or incremental revenue coming in January. No. So no.

[John Grant, Executive Chairman & Interim CEO]

In fact, that does the converse because every new product we bring to market starts with no revenue and grows over time. So by bringing forward a Simplifyd DNS -- the WebProtect solution, we've actually bought the revenue forward and the growth in revenue forward, so in fact did have a greater impact on Q4 than it has on Q1 -- sorry, Q3.

[Ruth Sloley]

John, you mentioned the benefit of being listed and raising cash again later if needed. After arguably 2 very encouraging quarters, what is being done to raise the profile of the business and attract new shareholders?

[John Grant, Executive Chairman & Interim CEO]

Yes, a really good question. I don't know who the attendee is but a very good question. And we've been working very hard at this with frankly very limited resources. I mean it comes down to me and Neil and Damian Fielke, who's our marketing manager, and people he's got in his team who cover -- we've got -- so we've got multiple areas, if you like. We're addressing the first in terms of public relations, building the sort of branding of the company. We're out through all the social channels, as you imagine. We've got now the ability to be able to talk directly with journalists within the major publications so that when there are features coming up -- and you may have seen we participated as part of a feature in Q2. So we're pursuing that sort of channel, if you like. And there's no doubt that we're gaining traction in that channel to be -- seen to be one of the players, if you like. We've got a long way to go. That's the first thing. And it needs more time, and it needs frankly more investment, which we haven't got money to do. So that's the first part of it. The second part is in terms of appealing more broadly to the investment community. Our market cap is now sort of around $100 million, up and down around that $100 million. But the stronger the market cap, the more attention you get. And clearly, all of our investors would understand that there are a lot of funders around that don't even look at organizations if they're below $100 million market cap. So, so long as we can stay above $100 million cap, I think we start to get the real opportunity to engage with funds that we're not currently engaged with, and we're actively working that directly and with our advisers. So -- and we'll do as much as we can in that area. But it's a very competitive market at the moment, as you know. There's a lot of stuff that's come to IPO in this last quarter. How that will fare, we'll find out over the next couple of quarters, like all companies. But we're -- so we're doing the things that we can do throughout -- through the channels, the trade media, through the channels, through the broad financial media and through the market itself by virtue of our direct representations. And as I say, we're having some success, but we could do with a lot more investment in that area.

[Ruth Sloley]

Are there any further questions? That's it. There's no further questions.

[Neil Pollock, Former Chief Executive Officer]

Okay. Thank you very much. Let me now go to Slide 24. And I hand back to you to close, John?

[John Grant, Executive Chairman & Interim CEO]

Thanks very much, Neil. Before we do close, I need to let you know that long-term Non-Executive Director, Scott Lidgett, has informed us of his need to step down from the Board. Scott was a Co-Founder of FirstWave Cloud Technology Limited in 2002 and has been a continuous board member for over 15 years, chairing the business on 3 separate occasions, including the period prior to our listing on the ASX. Scott has let us know that his full-time energies are now required in IPSec, a business he founded in 2017. Scott's contribution over the time I've been Chair, and I presume since day 1, has been enormous. He's brought a perspective on the technology and how it plays into our partners' and end customers' businesses that have significantly influenced our product and go-to-market strategies. And he's also contributed his real-world experience of doing businesses from scratch. Scott has indicated he will remain a shareholder and interested party. And to give effect to this, he's agreed to continue as a member of our Technology and Markets Committee. But for me, the best thing is that he said he's leaving -- as he was leaving that he is confident in the team we have assembled to deliver on the promise. We can ask no more than that from a founder and continuing shareholder. Thank you very much, Scott. And ladies and gentlemen, that closes the call. Thank you very much for listening and for your continuing interest. If you've got any questions, e-mail us, and we'll talk again very soon. Thank you, and good morning.