FirstWave Cloud Technology Limited (FCT) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Now I am a firm Wood Company Secretary that core members and declare the Annual General Meeting of Shareholders of FirstWave Cloud Technology Limited. My name is John Grant. I'm the Non-Executive Chair of FirstWave and Chair in today's meeting [or to last] joining once dynamic and also those joining us online where we had another crowd. Thank you very much for joining us. I'm joined here in [ indiscernible ] Sydney by my fellow directors, [ indiscernible ] and Greg Maren [ indiscernible ] left for the grade, it turned to my left, Ray Kiley. And first, David Hwang, which is to write down on [ indiscernible ], CEO of Company Iain Bartram. Joining us online is Sean Lenderman from [ indiscernible ] reported. So I can ask questions which are relevant to the conference and to the auditor and financial reporting statements. The virtual component of today's climate meeting is being held by Automic's online [ indiscernible ] platform. So our shareholders and proxy holders [ indiscernible ] webcast by asking questions to me but the minutes of the -- real is agenda been approved by the order of contacting the Company Secretary. All the right copies here [ indiscernible ]. Our purpose is to handle the meeting today is set over the order meeting that you can see. First is some housekeeping and then ill ask questions. This will be filed in my comments from [ indiscernible ] performance in FY '23, significant events posted year-end but how we see it in a short to midterm. We'll then take any questions you have [ indiscernible ] these comments. We'll then turn to the formal aspects of -- before taking your questions on those and putting the motions and closing the vote. There is [ indiscernible ] reference this presentation and our remarks have been launched on the ASX website. [Operator Instructions] There are questions on one topic [ indiscernible ] will amalgamate them to moderator. We ran a time to answer all your inventions and my intention is that this will not be the case. We will answer them via e-mail and passing responses on our website. Let me turn to my remarks. The 12 months to June 30, 2023 [ indiscernible ] was first full financial year filing transforming the acquisition of Opmantek Limited in January 2022. I'm happy to report and i have reported before and the integration of Opmantek takeover FirstWave business went exceptionally well and the products and median growth expectations that underpin the acquisition were largely realized. Essentially, we are over maintain growth, more than doubling gross profit while maintaining a cost base that was less than the original FirstWave business by its own. [ indiscernible ] is an excellent achievement and one we hope shareholders are [ indiscernible ]. While the integration of Opmantek is now complete the process of transforming if this plan continues, our priorities over the last 18 months has not changed. Firstly, we want to continue building our brand, our product and presence in key target markets, which is North America, Latin America and Australia. During the year, we made several key appointments to our business development teams in these markets. Second, we are [ indiscernible ] revenues year-on-year. [ indiscernible ] doing this by continuing on sales [ indiscernible ] just across the business and [ indiscernible ] similar products and markets with the greatest opportunity. And thirdly, we want to be cash flow positive as quickly as we can, striking the appropriate balance between operating at the lowest cost possible and sensible investment in our [ indiscernible ] products that doesn't compromise growth. [ indiscernible ] ensuring that we are only making investments where we see clear [ indiscernible ] short to medium term. While we have made some [ indiscernible ] drivers over the last 12 months, of course, the challenges remain. And we've been building a strong pipeline of high-quality opportunities over many months. We can manage a small [ indiscernible ] as I said before, building the business the sort of bread-and-butter opportunities to be realized on an [ indiscernible ] basis. There also [ indiscernible ] conversion a series of larger opportunities to jump the business to the next level. [ indiscernible ], we're winning the recommendations on technical than in these larger opportunities, but converting them into sales and revenue from there at the pace we had hoped for. It's been much more challenging than we expect. We attribute these extended purchasing cycles to a much lower desire by decision-makers to change and will consider the approach to spending more capital in our target markets both as a result of economic uncertainty. We have clear line of sight to transactions that would allow us to reach our goal of being cash flow-positive, but the next few months will be [ indiscernible ]. Danny will expand on these comments. I'd like to thank my fellow board members [ indiscernible ]. Hotels has been the [ indiscernible ] business for 16 years, 4 months and 3 days, a long time for [ indiscernible ] in 2016. We've provided critical insights, particularly related to packaging and pricing on that subtle brand market and in resource structure remuneration and enterprise sales process. It's committed to the company's success is incremented [ indiscernible ] best to get in touch with the heads, but it's seen [ indiscernible ] all the ups and downs the company has been through. Stock down at [ indiscernible ].

Yes, I'd just like to thank all of our [ indiscernible ] since my other retiring directors, thank you for [ indiscernible ] assistance in particular all the previous directors who have learned from -- of the sale of the company. But more so I'd like to thank the 3 directors that are seeing the organization because I know that they have a huge commitment to the shareholder base and a huge commitment to doing the right thing by the company and issuing [ indiscernible ] value. I particularly thank John for listening to me all those years ago to come on board [ indiscernible ] okay, and I wish the company has continued success .

Thanks, Paul. Thank you very much. So Dave's time with the company has been a bit shown on call so there's insight on it on taking all matters relating to operating as system company and ensuring corporate governance standard and has been invaluablebase timely and [ indiscernible ] considerably [ indiscernible ] He's also voted [ indiscernible ] point discussions. Thanks, David, for that on behalf of company. David, you wanna say a few words.

Thanks, John. First, I want to congratulate all an incredible innings. It's not easy feat [ indiscernible ]. And again, it's challenge again with an ASX is direct us so conventionally done with that. [ indiscernible ] support our shareholders. I'm also [ indiscernible ] for our directors for the last couple of years. It's been truly transformative with the Opmantek acquisition. And whilst there are some [ indiscernible ] in the market, [ indiscernible ] optimist because I think you've got the right management team the right Board to take that forward. But thank you.

Thank you, David. So a little bit quick there, let me hand over to Danny.

Thanks, John, David and Paul, and welcome, everyone. I'll commence with an overview of the 2023 financial year before providing an update on our progress in the current year. The 12 months to June 30, 2023, were a year of change in transformation for FirstWave as we completed the integration of Opmantek and started on the path to maximizing the benefits we highlighted when we outlined the rationale for the acquisition, which is almost 2 years ago now. The financial results indicate the positive transformation we made during this last financial year. Revenue was up 34% to $12.5 million. Gross profit was up 56% to $9.6 million. Expenses, including the noncash side -- excluding the noncash flow position in payment of $7.6 million were down 14% to $18.1 million. The operating loss excluding the impairment was $5.9 million, which is 57% lower than the $13.5 million reported in the previous year. As a result of all this, the net cash used in operating activities and payments for intangibles was down 58% to $4.66 million. And we reached our target of having a normalized cash flow below $0.5 million per month. But achieving these results during a period where our people are subject to significant change in restructuring is a testament to their commitment and our product's underlying strength and value. Our network management business achieved the vast majority of the growth in the 2023 year. And we determined to record an impairment of $7.6 million against the value of the CyberCision platform and undertake a restructuring of the development team. The restructuring impairment reflects where we see the best short to midterm revenue opportunities for the business and will not affect existing clients of the CyberCision platform. We still see several opportunities for Cybercision, particularly in the ISM compliance sovereign e-mail security platform being developed with us and Telstra. Across the business, the increased revenue was driven by many important subscription-based network management wins and renewals, including L3 Harris, Arizona College of Nursing and [ indiscernible ] North America, and several existing network monitoring clients extended and increased their license agreements, including [ indiscernible ] behind me in North America, which agreed to extend and expand its licenses to support their Artemis missions. We started the current year by acquiring assets of Saisei networks effective in 1st of September. This all-scrip transaction is set to deliver approximately $1 million in annual revenue, 50 new clients and a cash [ indiscernible ] roughly $200,000. We also inherited 6 new network management automation software specialists. Strategically acquiring Saisei expands our expertise in network management and automation while providing more North American service providers that we will look to upsell our complete [ indiscernible ] solution suite. As highlighted by John, one of the biggest challenges we face is deal slippage when comparing our pipeline of sales opportunities into revenue. We have mentioned several times potentially largest transactions in the United States. While we remain deep in the procurement process for this transaction, internal change in that organization that is beyond our control has delayed it several times. We've been assured by the company they will continue the procurement process in early 2024 and that we are still a selected vendor. If contracted, it is an excellent client that will further enhance our credentials in the market. And we'll leave no stone unturned in our efforts to close the deal. While, of course, nothing is ever certain until the deal is done. The progress of this deal is indicative of the complexity of closing up large sales as a small company in this current economic climate. We have made several changes to the business recently to ensure we are focused on enhancing the sales of the culture we have instilled across the company. Our Chief Revenue Officer, Dino Davanzo, has been given responsibility for marketing product strategy. Our CFO, Iain Bartram, has been appointed Chief Operating Officer to focus on operations, customer support and development. And this has freed up some of my time to focus on sales, marketing and business development and converting these opportunities to revenue. Our recent Q1 update provided a detailed assessment of our cash position, which is worth revisiting. Our normalized cash usage remained just under $500,000 per month during the first quarter. This quarter traditionally has high levels of spending related to annual licenses for services with additional one-off cost this year associated with redundancies. At the end of the quarter, we had $2.95 million in cash reserves. Our cash issues will be lower over the next quarters, and we are budgeted to be close to cash flow breakeven for Q2 and Q3 combined. In stating that, I wish to emphasize the cyclical nature of our revenue and that December is the end of financial year for most countries, including USA and Latin America is our most significant months for renewals. These end of calendar year renewals, coupled together with the receipt of our R&D tax concession and this year, the impact of savings associated with the restructuring of the business are the primary reasons that we expect minimal cash burns over Q2 and Q3 combined. We have a positive outlook for the business while acknowledging we have some work to do to reach our goal of being cash flow-positive on an ongoing basis. We must remain absolutely focused on growing our revenue, both recurring and nonrecurring, and our success over the next few months will be critical to our ongoing strategy. I remain confident and committed CEO and shareholder, and I look forward to the next quarterly update when we can continue to see how we're tracking against our goals. Now I'll hand back to John to facilitate some questions and regulation.

Thanks. I'll take on from here. Thanks, Danny, let's just stop for a minute. We want to make break the best questions on our comments. So Iain is going to moderate and can take -- read the questions to us, have we got any questions?.

We have a question that came through via our e-mail right before the meeting. I know that the AGM will see 2 directors retire, but I cannot see any new directors appointed. That leaves the Board of 3, including the Founding Chairman and the CEO. Although that is the minimum allowed as per ASX rules, it is concerning and in violation of sound governance principles.

Yes. So that one is from Kim. Thanks, Kim. Firstly, just to correct the record, I'm not the founding Chairman as we report in 2019 as the independent nonexecutive chair. Both Paul and David have various times to [ indiscernible ] openness to retiring from the Board. The Board will consist of 2 independent directors and an Executive Director. It's not our ideal, but we will maintain the standards of governance you expect, and that's mostly about not allowing the CEO to dominate the Board. Well, a [ indiscernible ], and that's standing at the end of July but [ indiscernible ]. The decision also response to need to lower cost at a minimum level without damaging credit capacity and is also [ indiscernible ] with recent decisions we made to reduce staff [ indiscernible ]. Board of Directors can't endorse those sorts of decisions without reviewing their own position as we had in the past. And secondly, FirstWave is suppposed to be a global company. And as it consolidates it's position, particularly in the U.S. and Latin America, it will lead to turn to directors to the firsthand experience in those markets. We are clearly one of that we put all our efforts towards this. Hope that answered your question.

There's even no other questions at this.

Kind of continue to take questions from or to end and now the formal part of the meeting. Turning to now turn to the items of business. Information on how to those as outlined in the registration and voting guidance, which is in the note that will be by way of poll. No shareholders and attendance are entitled to vote on the [ indiscernible ] shareholders represented and attorneys of shareholders and proxy holders who hold yellow rated cars. They're tending more than in more than one of those capacities, [ indiscernible ] U.S. capacities. Anyone believe they are entitled to vote on this [ indiscernible ] capacity [ indiscernible ] and a member of the shares reimportation [ indiscernible ]. If you are a shareholder and wish to pass all of your votes for a resolution. Please place the mark and against in either the for, against or [ indiscernible ]. Scouts and the corresponding or against next amass and place an insure some of the strip date is not exceeding total holding. If you are a proxy or sartans summary of those discretionary base, [ indiscernible ] cast at your discretion. If you wish to cast the discretionary votes, please place a mark and the corresponding for against or in [ indiscernible ] boxes. If your [ indiscernible ] discretionary votes, you do not need to mark your [ indiscernible ] cards to be handed to the returning officer at the end of those [ indiscernible ]. Shareholders genning online are considered vote by a proxy and wish to vote [ indiscernible ] shareholder to [ indiscernible ] as outlined in the notes of meeting. At any time as I've run [ indiscernible ] questions on any resolution through the portal. Once I read through all the resolutions, our company saturate sweep all the questions we'll address each of them in order. After questions have been answered for shareholders going to finalize voting, and i'll then close today. And this one allows all those shareholders attending to place the value cards in ballot box. They may be recording progress. We made the change at on an any time opportunity time at clear value. I now acclamation by all abuses by providing there from a today estate time point the exclusion of those pilots or tree made feet. We notice of this meeting madam shareholders motorist 20 2023 and Investor A ejections on Kitamori. -- what underaged proxies are eaten Chairman of the meeting the proxy will be cast obtained from resolutions as in convenience of meeting. I appoint from Ken here with us atomica company's share registry, who have examined prepared some of proxies received action Officer and Dr. Pal. Once together have even go for us for at any time on any item to like float. -- out to have the first time of business financial statements and directors are appointed to report on accounts for the year to 23 points to the directors important they contribute demands who we press coffee and being distributed to Matisco that or other companies to have side. Our resolution is not required this pie are pleased and any questions you have on reports by Lazona will handle the end or just question on attendee, we'll handle the peso -- so move to the resolution. Resolution 1 is the adoption of the company's remuneration boom year ended 30 June 2023. As you'll be aware, operations are comprised [ indiscernible ] or disclosed in the director's report in the company's 2022 annual report. While the [ indiscernible ] resolution is not advisory only and nonbinding on the directors or the company, it gives members the opportunity to ask questions or make comments concerning the remuneration for the outcome of the bank, taking into consideration and reviewing remuneration practices and policies. Under the Corporations Act, if 25% or [ indiscernible ] against the other the revenue reported 2 consecutive AGMs, shareholders will be required to vote second to those AGMs on skilled resolution and another [ indiscernible ] be owned in 90 days, which all the companies [ indiscernible ]. Corporation [ indiscernible ] subscriptions on directors at [ indiscernible ] management personnel for the company and their cost related [ indiscernible ] parties [ indiscernible ], for example, as a shareholder, proxy or corporate representing on this resolution. This restriction does not applied for personal including Chairman has been appointed as a proxy for this resolution by another person provided as other personal quite proxy does not themselves subject to restriction. Where I as Chairman have been appointed as a proxy for press committed the Resolution 1. All open proxies in favor. The proxies received for resolution are now back to Resolution Tatiana be Mark German instruction on the oparatirtually contained by the online portal Canada. Again, please and click on next you selected for your votes for all resolutions. Our resolution 2 relates to the reelection of [ indiscernible ] raise background, his experienced adviser to technology startups [ indiscernible ] previously in CEO of Coladox, and Australian Enterprise Software scar, the successfully sold start communications and our self company. [ indiscernible ] it paid a Mackenzie later [ indiscernible ] general House. He sell senior management roles with Telstra, Medibank, CoreLogic [ indiscernible and a bachelor of law others bachelor of science major in computer science from the Australian master. I'll now read the resolution. The [ indiscernible ] the rest of [ indiscernible ] rotation on the company's constitution in Page 6 145 [ indiscernible ]and being eligible, offering software reactions are to the company effective immediately. Proxies received for resolution to are now shown on slide. We go now back to resolution 2, again, the [ indiscernible ], although early on portal. Resolution 3 is the existing 7.1 approval of new [ indiscernible ] securities. The [ indiscernible ] of this resolution is to ensure the [ indiscernible ] equity securities under a 10% price to the facility. Resolution 3 is a special resolution and netwise of 75% of that cast by shareholders present and eligible conversion. The resolution 3s past the company will be able to achieve equity securities up to the combined 25% limit on this 7.1 and any without any further shareholder approval. I'll now read the resolution that the purpose of Slide [ indiscernible ]. For all other [ indiscernible ], the shareholders [ indiscernible ] equity securities up to 70% of issued capital of company time is calculated in accordance with performance prescribed in ASX 7.18.2. And otherwise, the change conditions that our expanded state companies important part of the [ indiscernible ]. Let me also detail the voting exclusion statement. The company will disregard any of votes cast in favour of [ indiscernible ] by or on behalf of persons expecting [ indiscernible ] or we obtain to bend as a result of the cost issue, except at some [ indiscernible ] being a holder of the company or associate backer those ports. However, this does not apply to vodcast a favor of residents in by a person's proxy or attorney for customers and to a one resolution that costed the proxy we intend to dose on the resolution of that way or the Chair of the meeting as proxy for a journey for the person is titled about insertion direction in Genesis shared sites or our home acting salary in a non-Trust in Australian rotisserie beneficiary provided a [ indiscernible ] missions unmet. The beneficiary provides written confirmation of the [ indiscernible ] and the beneficiary are not excluded from voting, and it's not assessed an associate by the person [ indiscernible ] the resolution and the holder notes on the resolution in accordance to directions given by the beneficiary of the [ indiscernible ] in that way. I hope that is clear. Proxies received for resolution 3 and now shown on the slide you can move to resolution 3 again, [ indiscernible ] online. Resolution 4 is a ratification by issues of shares or ordinary [ indiscernible ]. I'll now read that resolution. That the versus of our existing 7.4 and for all other purposes, shareholders ratify the allotment and [ indiscernible ] of 40,571,428 ordinary shares issued on the 21st of September 2023, and otherwise on the terms that they should set out in explanatory statement companies that work for part of the status [ indiscernible ]. The proxies received a resolution for now shown on the slide. Again, you can vote for the resolution for you [ indiscernible ]. Resolution 5 is the readoption of performance -- resolution 5 is the readoption of FirstWave's Performance Rights Plan as a border [ indiscernible ]. and for all our [ indiscernible ] shareholders have company prove the readoption of FirstWave Cloud Technology rights, which is a performance [ indiscernible ] and a summary of which is contained in the explanatory statement, which accommodate the [ indiscernible ] next meeting. As the insurance securities of the company under Performance Rights Plan spent 3 years from the date of this resolution has an exception to receive on 7.1. Proxies received for resolution 5 are now shown on slide [ indiscernible ]. We now move to Resolution 5. That completes reading of the resolutions. I would remind that except for where a resolution concerns a particular director, or Board anonymously recommends that you vote for all relations. So do we have any questions, I'll now just any questions on any of those resolutions? Iain?

We have a quiet a few more on those resolutions.

Okay.

Has there been any interest from new investors, either domestically or internationally? And there's addition at the end of the saying [ indiscernible ] cornerstones and strategics.

Danny, can i head that out to you?

Yes, sure. Yes, it has been. In fact, we recently presented at the Australian MicroCap conference in Melbourne as we continue to get further in the pipeline, we're very interested in bringing on new investors, which obviously would be great for all shareholders. We feel we do need to prosecute some of these larger deals in the pipeline to turn some of this interest into reality, but we're receiving inbound interest as far as from within Australia and inbound interest from the U.S.A. It's nice to see some of that interest picking up, but we do feel we need to convert some of this pipeline before we turn into the actual investment. But yes, definitely, there's growing interest.

You have any more questions there?

No further questions.

Any questions from any one here with us?

Thank you. Yes. So our question is to Danny as a shareholder, what opportunities -- or what transformational opportunities do you see in the FirstWave considering we now have network bench for software -- sell security software, and we've briefly purchased a [ indiscernible ].

Okay. I see the primary transformation for the company. We've done a lot of restructuring of the company. We're really focusing where we're investing on the growth. So it's a long [ indiscernible ] sales. We've got an excellent pipeline, and I see the next transformation for the company being some of these deals coming through the pipeline. But in particular, some of those larger ones we've got in the U.S. We're not -- it's nice to a diversified pipeline as well. So we're not reliant on a single deal coming through or anything like that. So we'll or they will continue to see some nice organic growth. But we see a transformation, we need to see now one of these big transformative deals or customers come through. And for those that have looked at the presentation delivered at the MicroCaps conference, there's lots and lots of slide there that shows the transformation of the company over the last 2 years where we're really ramping up our revenues and our gross profit at the same time as reducing our costs, which in some ways work against each other because we're reducing what we're spending at the same time as we're increasing our revenues [ indiscernible ]. So we're training on quite nicely, but we've got some work to do. And this quarter and the next quarter, it's really key to see some of our sales results.

Any another questions here?

My question is to Dan, our Chief Technology Officer, leave shortly, Simon Ryan. What's your view going forward to replace that loss?

Yes. So we thank Simon for his work for the company for many years, and he's been a been a great asset for the company and will definitely be missed. It's -- our focus -- a lot of our growth is coming from the network management products. And I guess Simon traditionally came from the CyberCision area and a lot of our efforts now are in this sales-led growth and less so into R&D. We're not ignoring research and development. We're still investing in our products. And we have brought on some other technical expertise with the acquisition of Opmantek with just general hiring and also now with the acquisition of Saisei. Of course, with their CTO, John Harper, joining us and 6 new expert developers. So we feel we're quite well covered there, although we're certainly missing, particularly on the CyberCision space, that we've largely built out those products and has done an excellent job in that, and it's now about monetizing them. Yes, it's just a different phase.

Yes, I think I can add to that, too. Simon's team has been looking at business this was founded at previously Telstra program [ indiscernible ] driving and question in 2019, but actually in the business. Can you just comment to that product business has been extraordinary well must say well beyond what the one reasonably expect. And I spoke to you about this, but they need to break. And this opportunity has come because we've taken the senior actually focus more of our investment around the industries into the U.S. and [ indiscernible ]. So we're not working along since we form sites that will, in fact, opportunities to be had here to continue to build on the Telstra relationship through a new initiative around the ISM platforms is critical and is positive, but Simon [ indiscernible ] to be part of that and test actually now [ indiscernible ] his own way it's not above what we really want to happen, but it has to be way necessarily in the company. Danny, as he said, we're really building behind some important of excellent on the development of it. And they're all sitting up at the best thing. The best thing is when people leave this senior roles. You want other people to go to a as roles, and that's the situation we've got. So my thanks to Simon for his commitment to the business over such a long time and obviously all the best for the future as well.

Yes. Likewise. One might be interesting to shareholders, I guess, look forward to know that internally and an exec and Board level, we have a matrix of key employees. So not just those that you would list publicly as key management personnel. But all those people in the business that we find is key. And then we have behind that, the people that back them up to make sure -- pretty much make sure everyone's covered to as much extent as you can. So I think we maintain and track that metric to make sure that we're covered for any losses. And we will people come and go from businesses and we'll see that to we actively manage that.

Any more questions from the anymore questions online here.

No more questions.

Thank you, Iain. Being no further questions, I move the following motions to consider and thought fit to pass down. Remuneration report in the directory port for the year ended June 2023 be adopted, Ray Kiley be elected or reelected the best director of the company, shareholders approve the issue in equity securities up to 10% of the issued capital of the company on the terms or conditions in the [ indiscernible ] treatment memorandum, shareholders ratified there on a prior issue of [indiscernible] ordinary shares issued 31st September 2023 on the terms of the conditions set out in the accenture statement, shareholders readoption FirstWave Cloud Technology right and the performance side strategy. Please ensure you vote on all items. So now i'm going to mention, move to the motion on each of the resolutions to be made on. Thank you. Once again, type of resolutions in which a director can be conflicted Broadly strongly or stronger recommends back for or resolutions. And now of course, [ indiscernible ] to do so, after which are quite a problem. Please cast your vote. [Voting]

Okay, I declare a poll the closed and formerly charge Jonathan's retaining office count for after backing the results of the poll in the Eastern Australian Stock Exchange based on the company's website. That concludes for the business. I thank you all for your attendance and please join us for refreshments.

Yes, and biscuits.

and bicsuits. Thank you all. Thank you all of those who have been online. Thank you all for your attendance and paid of meeting us morning that.

Thanks, everyone.