FirstWave Cloud Technology (FCT) +200% since listing in May 2016

Wentworth Securities

Wentworth Securities

Introduction to Firstwave

FirtWave’s SaaS platform sits between the world’s largest security software vendors, and Telco’s high value clients, looking for security solutions in the cloud environment. There is an enormous tailwind in this cyber security space, which is accelerating. Microsoft CEO, Satya Nadella, estimated cybercrime was costing the global economy around US$3 Trillion p.a. or close to 4% of global GDP! Standard Chartered highlighted, 28% of all viruses EVER recorded were produced in 2015 and 429mn identities were exposed via cyber-crime in 2015. Uniquely, we cannot find a similar offering globally, Firstwave's SaaS platform, sits between the Telco's, and their customers, and the vendors of the security solutions, enabling quick and flexible security solutions in the cloud environment.

How it works - in a Nutshell

In moving your data to the cloud, you would want to have security over email, your web, and have a firewall solution in place. You might want to choose security solutions from various security providers (eg, Cisco, Palo Alto etc), for different reasons and purposes. Further, you would want these security solutions to  be implemented, at the correct point in the data network (this is at the Telco's node). FirtsWave's platform enables all of the above. Further, it adds layers of features and diagnostics for the client, ability to deploy new innovations by security vendors quickly, and all via the Telco's billing account. The two diagrams below talk to this.

The decision making process, at the enterprise and government level, is distinctly different to the personal user experience, we may all be familiar with.

Why do the Telco's like it?

High Margin Revenue!

The decline of the copper network leaves a hole in Telco's revenue. They are looking to new sources of revenues, and increasing ARPU (average revenue per user). Selling data, and the transition to cloud is potentially huge for Telco's. The goal is the "whole package" of services, cloud storage, data transmission, which is enabled by security. The more security options you can give a potential cloud customer, and ease of implementation, the more you sell! FirstWave's solution makes it easy for a Telstra account manager to up-sell the "whole package". It allows the client to basically tick boxes, as to what solutions they wish to utilise. It fully automates the solution, provides a platform for the account manager to sign the client up, and a platform for the end client to get everything they need (reports, changes, upgrades etc). Telstra maintains the client relationship, all in house. As of late June, the automated version of the platform is now available to Telstra. They have some 820 account managers, who can be out selling cloud solutions, with FirstWave at the heart, enabling the offering.

Why do Software Vendors like it?

The vendors of the software solutions, like Cisco, have built their offerings around the server solution historically. Virtualising what they have at a client server level, into the cloud, is made easier when pushed out by the Telco at their node. The vendors, like Cisco, dominated the market, when all the on premise servers needed a "box" to integrate the security solution. Now they understand, in a cloud environment, the Telco's have a dominate relationship with their clients, in selling the cloud transition to their existing clients. Using the Cisco example, via the Firstwave platform, they can offer their solution, via the Telco's marketing channels. ie through one platform they can potentially reach 1000's of high value clients.

Look for FCT to strike better deals with vendors as they gain scale!

Telstra (TLS) Relationship - Recurring Revenue

Telstra uses the platform via a white label. Currently offered under a PSA (Product and Service Agreement).  What strengthens the FCT position, is that the contracts written with a Telstra client, run back to back with FCT. Typically the contracts start around 2-3yrs, with some of the larger government contracts starting at 5yrs. Importantly, FCT has also experience negligible customer churn, with only customers leaving the platform, being those exiting the country or closing down operations.

Is it just another software re-seller?

The answer is no. Whilst it provides a conduit for vendor solutions to be sold to end clients, there are many parts to the service, which have taken years to develop and set it apart. To understand this in detail, is quite technical, however the unique aspects of the offering are: 


  • Multi- tenanted - meaning it can service multiple cloud solutions.
  • Multi vendor - meaning it can incorporate various competing software solutions for the client.
  • Carrier Grade - highly scaleable, highly available.
  • Telco integration - automation of the whole process for the Telco.
  • Global reach - can be pushed out globally to a Telco node, via its North Sydney office.
  • Unique reporting and analytics for the customer
  • In house IP - creates solutions and responses to new threats, with very short turnarounds.


International Expansion

Firstwave has made mention, several times, of this focus since listing. They have an aspirational target of 8 carriers in/by FY18. Note that the Non-Exec Chairman, Drew Kelton, spent 11 years as the head of International for Telstra, so opening doors is not an issue. What they are offering to a Telco, is an additional revenue stream, that can be quickly deployed into a carriers network, just as it is within Telstra's.

We would expect something on this, prior to the end of the calendar year. Proving this capability will be a significant step for the company.

Sources of Revenue

FCT books revenue in 3 ways.


  1. Vendor Product Review Fees - vendors pay fees to review their products to then be offered on the platform.
  2. Platform Fees - base fees paid for the platform. These vary based upon the customisation of the platform. Larger clients (Australia Post for example), may have their own platform.
  3. Client Fees - What the end client pays. Typically the client pays an upfront fee as a one-off, and then an ongoing fee. This might be 20% upfront and 80% recurring.


At the moment, perhaps ~$2m comes from 1&2, and the rest from 3, currently.

Contract Value

For a discussion on sensitivities to additional contracts being signed, please contact us directly.



  1. Telstra  - The company has resourced itself, and made clear, it intends to service the TLS relationship as a priority. So contract wins should continue to flow through over time.
  2. International - A clear priority to progress. Not only to increase revenue, but decrease the perception of single customer risk (TLS). Note that the company came out of TLS labs and has been working with them for years though.
  3. Product IP - exploiting their internal product development, which is very high margin.
  4. Margin Expansion - with scale, the margins should continue to improve, via accessing better terms with vendors.


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