AUCyber has delivered a dramatic turnaround in its H1 FY26 results, slashing its statutory loss before tax by 88% from $19.5m to $2.4m. The managed security services provider reported an EBITDA loss of just $0.06m, effectively reaching breakeven compared to a $1.74m loss in the prior corresponding period, marking the completion of a deliberate structural reset programme designed to position the business for sustainable growth.
The AUCyber HY26 results structural reset (ASX: CYB) demonstrates how accepting short-term revenue contraction can create a foundation for long-term profitability. Gross revenue fell to $10.4m from $15.7m, reflecting the planned exit from unprofitable contracts and streamlining of service offerings. The company closed the period with $2.42m in cash and no borrowings, providing a clean balance sheet to support its next growth phase.
How structural resets create leaner, more profitable businesses
A structural reset involves fundamentally reshaping a company’s cost base and operating model to achieve sustainability, even if it means temporarily shrinking revenue. This differs from typical cost-cutting, which aims to preserve existing operations. Instead, a reset eliminates unprofitable activities, consolidates platforms, and creates a scalable infrastructure that can support future growth.
The trade-off is clear: accept near-term revenue decline in exchange for a sustainable cost structure. For investors, the key signal is whether losses shrink faster than revenue falls. In AUCyber’s case, revenue declined 34% while the statutory loss fell 88%, indicating the cost base has been materially restructured. This creates operating leverage, meaning future revenue growth can flow more directly to profit because the fixed cost base is now appropriately sized.
When a company achieves this balance, investors often reward the discipline shown, recognising that prioritising profitability over top-line growth at any cost signals responsible capital stewardship.
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Cost base transformation drives operating performance
The transformation of AUCyber’s cost structure is evident across multiple expense categories. Employee benefits fell 45% to $5.6m from $10.1m, reflecting both headcount reductions and the completion of integration activities following previous acquisitions. Depreciation and amortisation declined 38% to $2.3m from $3.7m, consistent with a streamlined asset base. Other operating costs dropped 48% to $0.89m from $1.72m.
| Cost Category | HY26 | HY25 | Change |
|---|---|---|---|
| Employee benefits | $5.6m | $10.1m | -45% |
| Depreciation & amortisation | $2.3m | $3.7m | -38% |
| Other costs | $0.89m | $1.72m | -48% |
These reductions are structural rather than one-off, creating a sustainable platform for operations. The near-halving of employee costs signals a fundamentally different organisational structure, while lower depreciation reflects reduced capital intensity. Licensing fees increased modestly to $2.84m from $2.63m, consistent with the migration to cloud-based platforms.
Importantly, the HY26 results contained no material non-recurring charges, suggesting the restructuring activities are largely complete and the reported performance reflects the company’s ongoing operational profile.
Platform transformation milestones completed
AUCyber completed several foundational technology initiatives during the half:
- Migration to Kaseya SaaS platform finalised
- Sovereign Cloud and 24×7 Security Operations Centre (SOC) now fully operational
- Migration to HubSpot CRM system completed
- 5GN Enterprise rebrand to AUCyber finalised
These platform upgrades position the company to deliver services more efficiently at scale. The operational SOC and Sovereign Cloud capabilities are particularly relevant for government and regulated sector clients, where data sovereignty and security requirements create barriers to entry for competitors without similar infrastructure.
Growth re-emergence strategy targets disciplined expansion
With the structural reset complete, management outlined a three-pillar growth strategy focused on margin-accretive expansion. The organic growth pillar centres on margin expansion and cross-selling opportunities enabled by automation within the SOC and Cloud platforms. By leveraging the operational leverage now embedded in the cost base, incremental revenue from existing clients can flow more directly to profit.
The inorganic growth strategy involves selective acquisitions of managed service providers (MSPs) and cybersecurity businesses that meet specific criteria. Management has defined a clear acquisition profile targeting businesses with:
- Revenue range of $5m to $35m
- Government or regulated sector exposure
- EBITDA positive operations or a clear pathway to profitability
- Capability to integrate into AUCyber’s existing Cloud and SOC platform
- Recurring revenue contracts
This disciplined approach contrasts with growth-at-any-cost strategies. By targeting profitable or near-profitable businesses with government exposure, AUCyber seeks to acquire revenue that aligns with its platform capabilities and client base. The integration requirement ensures acquisitions can leverage existing infrastructure rather than requiring duplicative systems.
The emphasis on recurring revenue contracts reflects a focus on predictable cash flows, while the EBITDA requirement suggests management will prioritise value creation over empire building.
Balance sheet positioned for opportunistic growth
AUCyber’s balance sheet provides flexibility for the outlined growth strategy. The company held $2m in cash at period end with zero borrowings outstanding, creating optionality for acquisition funding without the burden of debt servicing costs on the restructured operating base. Net assets stood at $5.46m.
Working capital discipline improved during the period, with total assets declining to $12.08m from $16.79m at June 2025, primarily reflecting reduced receivables and other assets. Total liabilities decreased to $6.62m from $8.92m, driven by lower payables and lease obligations.
The debt-free structure provides management with multiple funding pathways for potential acquisitions, whether through existing cash, future operating cash flows, or capital markets access should larger opportunities emerge.
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Outlook for the second half of FY26
Management outlined four strategic priorities for the remainder of FY26:
- Sustain the EBITDA improvement trajectory
- Maintain liquidity discipline
- Pursue selective acquisition opportunities aligned with stated criteria
- Position the business for its disciplined expansion phase
The language throughout the outlook emphasises discipline and sustainability rather than aggressive growth targets. This framing suggests capital allocation will prioritise value creation and profitability over top-line expansion that compromises margins.
The transition from restructuring to growth mode positions AUCyber as a company with a validated operating model now seeking to scale within its proven capabilities. For investors focused on technology and cybersecurity exposure, the AUCyber HY26 results structural reset (ASX: CYB) demonstrates how accepting short-term revenue pressure to build operational sustainability can create a platform for value creation.
Investor Enquiries
Joseph Demase, Chairman
jd@aucyber.com.au
The completion of the structural reset and platform transformation milestones suggests the business is now operating from a stable base with clearer visibility on its path to sustained profitability.
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