Alarum Technologies Ltd. Price & Performance (ALAR)

Thank you for joining the conference. Please record the requested information when prompted. Please speak slowly and clearly so that we can more accurately your information. If no information is recorded, or you are having difficulty, please stay on the line for operator assistance. After the tone, please record and spell your email address. Then press the pound key to continue. Thank you. 77%. From 74.3% in 2023. The change in these gross margin metrics related to our strategic decision to enhance our IT network. So we can address our customers' demand for stability responsiveness, and speed. Operating expenses in the fourth quarter of twenty twenty four were $5,000,000 compared to $3,600,000 in the fourth quarter of twenty twenty three. The quarterly change was driven mainly by the increase in operations primarily employee salary related costs. On an annual basis, 2024 operating expenses were down to $17,200,000 from $24,300,000 in 2023. This was mainly due to last year's impairment cost of goodwill and intangible assets and the strategic decision to scale down of the company's consumer Internet access business operations. In the fourth quarter of twenty twenty four, we recorded financial income of $200,000 compared to an expense of $100,000 in the fourth quarter of twenty twenty three.

For the full year 2024, we recorded financial income of $300,000 compared to a financial expense of $300,000 last year. The sheet to financial income in the fourth quarter and full year 2024 was mainly driven by the higher interest income from cash deposits and lower financial expenses related to short and long term loans. IFRS net profit was $400,000 for the fourth quarter of twenty twenty four, compared to a net profit of $1,700,000 in the fourth quarter of twenty three. Mainly correlated to the increase in operating expenses. 2024 IFRS net profit increased to a record of $5,800,000 from a net loss of $5,600,000 in 2023. Mainly the result of revenue growth and last year's impairment costs of goodwill and intangible assets. Partially offset by the increase in operating expenses. Adjusted EBITDA in the fourth quarter of twenty twenty four was $1,500,000 compared to $2,200,000 in the corresponding quarter last year. 2024 annual adjusted EBITDA was a record $9,400,000 up from $5,200,000 in 2023. Our current share count is 69,300,000 ordinary shares or 6,900,000 ADSs. On a fully diluted basis, the count is 18,000,000 ordinary shares or 8,000,000 ADSs. The fourth quarter of twenty twenty four basic earnings per share On an annual basis, 2024 basic earnings per ADS rose to $1.26 on non IFRS basis up from a loss of $1.14 in 2023.

As of 12/31/2024, the company's shareholders' equity doubled to a record of $26,400,000 from $13,200,000 on 12/31/2023. The annual net profit together with warrants and options exercises, contributed to the $13,200,000 increase. The company's cash cash equivalents and cash investments balance including accrued interest, at the December, were up 25 were up to twenty $5,000,000 from $10,900,000 on December 30 sorry, thirty first twenty twenty three. Our solid cash position allows us to sustain strategic investments and drive responsible business growth. Now to our guidance for the first quarter of twenty twenty five. As we look ahead our revenue guidance reflects the ongoing shift in our market. We anticipate that the first quarter of twenty twenty five revenue to range at $7,300,000 plusminus 3%. The first quarter of twenty twenty five adjusted EBITDA is expected to range from $800,000 to $1,200,000 We are navigating a period of adjustment as the industry evolves and while short term revenue growth may be lower than in previous quarters, we remain focused on the bigger picture and on generating long term and sustainable value for the company's stakeholders. With that, I'll hand the call back over to Shahar. Thank you, sir. And the opportunity is unfolding and we are strategically positioning Alarum to be at the heart of this new world.

As demand for data and scale increases, and as AI continues to evolve, those who choose the right path those who look beyond the immediate horizon will emerge the industry's true leaders. And we are determined to be among them. Success will require bold long term strategic decisions and we are channeling our resources toward the development of cutting edge solutions. As we aim to analyze and anticipate the industry's needs. With a clear vision stamina solid execution and a talented driving team, we are building a company poised for long term success. We will now open the call for the Q and A session. Operator?

Thank you.

We will now be conducting a question and answer session. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from the line of Ryan Kingstingler with Alliance Global Partners.

Please proceed with your question. Hi, good morning. Thanks for taking my questions. You mentioned you are navigating a period of adjustment as the industry evolves and so revenue growth may be slower. Can you describe what you're referring to? And I guess I'm trying to reconcile that with comments such as once in a generation opportunity and a spike in demand that we've seen in the fourth quarter for large scale data extraction? Okay. Hi, Brian. So I will divide by yeah. Yeah. Hi. Thank you. So I will divide my answer for two parts. The first and by the way, both are connected. And as as I said, we now see or or starting now in in and now at the stage where companies or huge companies that are getting into the AI game approaching us in order to cooperate because as you know our solution is basically can be a data enabler and can solve this challenges. Now, as I mentioned also, talked a lot about it in the past in the last few quarters, it becomes we see a kind of huge, let's call it, competition between the AI platforms and the websites.

Why?

Because, basically, the AI platform can replace the traffic that is coming into the website instead of it to stay in the AI to get all the customer needs. So for this reason, there is a kind of a technology wall, let's call it a wall just as a metaphor, between the websites and the AI platforms [indiscernible] for this reason, we see spikes and we see we feel volatility due to the fact that websites are implementing [indiscernible] that's supposed to stop that's supposed to stop or to halt AI engines from coming in. Websites are increasingly changed their structure in order to make the life of the AI platforms more challenging And for this, now companies and AI platforms and websites are basically now restructuring their path in this new world. And this is the reason why the market and also us as part of it for the short term experiencing volatility and fluctuation, in the demand And the main reason is that we see that for the long term, when I talked about data and scale, [indiscernible] huge players needs data in huge scale in order to train their AI models and in order to stay up to date.

So we we see that for the short term, it might be spiked by the way here and there, as I mentioned, sometimes it can come. In favor of revenues, sometimes it can take the revenues a little bit down, but for the long term, we see that this trend basically is something that is in favor of us because we are the data enabler and and and and our purpose and our target and the usage of our product is exactly for this need. So so if I'm if I say it another way, [indiscernible] your customer set is essentially in a period of determining their strategy given the these changes with websites. And so they're they're they're not necessarily purchasing this as purchasing your product as quickly because they have to figure out where the landscape is headed. Is that right? Yes.

Yeah. Yes. So so to interrupt you, it's not it's it's it's sometimes that you know, it's not that they are not purchasing our kind of product. Sometimes they are going down for a limited period. In order to restructure their business opportunity to restructure the direction that they are going to. So, we see that they might decrease usage might [indiscernible] or others might increase because they find [indiscernible] basically go over these challenges. So it goes here and there.

Got it. And so, net retention rate declined from the third straight quarter. Is that a function of your customers' like you're saying here may have some less usage essentially?

Absolutely.

And still, by the way, still think that it's a very good NRR, but yes, you see also the volatility in the NRR NAR, but basically it comes direct what we discussed now.

Okay. And then in December, you highlighted a Fortune 200 company began to use your website unblocker. For almost six months, maybe I can't remember from that announcement. Can you tell us the evolution of the volume of that? I'm curious, did it start small? Did it get bigger? Has it remained small? Just kind of understand how a big customer is thinking about using this.

Okay. So, basically, it the upper 35, They increase usage. And, you know, small or big, it's it's it's it's an individual. I don't I don't know how you see it, but it's at this point of time, it's in let's say, it's it's in six digits in US dollars, [indiscernible] ARR, meaning the run rate. [indiscernible] it comes to more than $500,000 a year and the run rate of these customers so at this point.

Guess, where do you see the opportunity, eighteen, twenty four months out? With a large customer like this? Is this can you get twice that? Can you get five times that? I mean, is the opportunity for a large customer?

Okay.

So also, here, I will define the opportunity for two parts. One, is a regular, it can be huge, but still a regular customer that is using our product our product exactly for the needs that I just described. And of course, we can get much more than this And it can come also to expressing revenues. And also in retention and sustainability because this customers are long term customers, and here it's a huge opportunity for us. The second part which is I know if it's more interesting, but it's more strategic, It's the cooperation with those players or giants that aiming to become a significant player in the AI game And for this, they need a kind of strategic operation with the company with our products for the long term and to become basically part of their product, to be the data enabler in this funnel of the AI solutions and platforms they will provide to their customers. So, [indiscernible] can be huge This also can be big. But both of these two opportunities are the most exciting opportunities in this stage. But of course, as I mentioned, Brian, just to add also something related to the previous question, as you know, these customers takes more time than regular customers, although it goes faster than expected.

And second, it's it's the focus. So, in my eyes, and now in my eyes, the management of the company, of course, we allocate most of the resources, the talent of the company and the focus of the company in this future amazing maybe really once in a lifetime opportunity for us.

Great. Last question I have is if you can update us on any planned product launches and as have you as you built up the balance sheet, how do you think about M and A versus developing your own new products?

Okay.

So the first part of your question is about can you repeat for a second? You talked about M and A. Yes. I'm curious curious about plan new products and then are you develop are you gonna develop your own, or how do you think about that versus acquiring companies that have complementary products? Okay.

So I will new products in the space of data collect you know, the AI scrapers, the unblockers, all these very unique products, at this point of time, the plan as we do it just in these days is internal development. We hired really a talent talent from the Israeli eco [indiscernible] And we build our own products. And by the way, the React that we are getting the market is amazing. After they test our product. Here, if we see a new opportunity, you know that we can buy, acquire an asset or a small company that can take us further, we will do it. But But at this point of time, it's not the main plan. The main plan in the other side is to add the additional layer of the analysis. The AI, the analysis, the data insights, which here we are still considering in these days what is the right direction. We meet by the way, we met in the last one year with a lot of companies. And there are many opportunities now in the market. But we still consider if we go this or that direction, For this point of time, nothing specific that is on the table, meaning there is not any specific company that we see as an immediate opportunity.

But I still think that the preferred direction in the insights and AI is to acquire a company that that has basically that that basically can take us further very fast.

And to help us close the loop of, you know, data collection, and data scraping and then data analysis all in one big solution.

Okay. Thank you. Thank you very much, Brian.

Thank you.

Our next question comes from the line of Kingsley Crane with Canaccord Genuity. Please proceed with your question.

Hey, thank you. Couple of questions. So big picture on paper, it makes sense that data collection should become more important, lower cost model services, more models are using domain specific data. It also seems that a lot of the new growth in data collection and labeling could be indexed to data types like audio and video. So I just wanna dive a bit deeper in what you're hearing from these AI driven customer conversations. How important are alternative data types to their model building strategy? And then how do you feel like you're positioned there?

Okay. Hi. How are you? So so, basically, a very good question because it [indiscernible] that we feel that we are now in the period that everybody now are with restructuring and and and and and and and [indiscernible] in this AI world And so we see that this especially big players, that coming all in to the AI and basically instead of being, for example, a huge retail or marketplace company, in few years wants to call an AI company, so they need data in scale video audio, and other kind of data, And they cannot do it Maybe they can do it by themselves with internal development but they must have solutions like our scrapers, like Unblocker, and of course, like IP our IP proxy network, in order not to be blocked in order to get a qualified and transparent data and in order to train their models in huge scales of data, they need a huge scale of data in order to stay up to date. And we see our industry or our sector and ourselves, of course, is a significant player, is the one that's enabling them to collect the data and to focus on their business or on their technology or on their intellectual property, which is the intelligence itself, the the the the insights and the algorithm that can analyze data and provide insights or others.

Thank you, Shahar. That's really helpful. So just a bit deeper on that, just regarding some of the fluctuations in demand in the near term. So it seems like if websites are making it more difficult to gather data based on some of the tactics they're employing. And customers need more data. It seems like that would actually and then you're better at circumventing those tactics than your competitors. It seems like that would give you better positioning and potentially bring more customers. So I guess I'm just trying to get more clarity on what customers are saying when they're pulling back in the near term and reevaluating their strategy.

Okay. So here, when we're when we're talking about the short term, [indiscernible] I'm let let's defer for a second on the AI players, and and let's go back to the regular customers, those that are scraping and and need to scrape data to collect data for for many, many purposes. So if a website investing much more these days in in order to block or in order to sort [indiscernible] those that are coming in So for this website, sometimes it's it's you know, it it it become more challenging in in the past, and they need to help. In order to understand how they are going to do it now.

Of course, that with our product, for us, it's a dream. Yes, that's what we need because we are a solution that can help this you know, you that you need a you don't have a problem, you don't need a solution. So if the problem is increasing, of course, that for us is great, but for the short term, we see that customers are basically getting, for example, from a website, that is they popular website for scraping, [indiscernible] so they need to stop, and now they need to redesign their product. And need to redesign their business opportunity because it's also a question from their side, of course, of profitability. Because if they needed it now to invest that amount in IP proxy or in other solutions in order to enable them to collect the data. Now they need to spend more so they need to stop and rethink and restructure the business plan, their prices. So we see that this period when I think fluctuation, it can go up and down but it's it's it's it's a period that that companies don't know exactly what will happen tomorrow, and and and they are trying to [indiscernible] the the best direction for them in order to stay a player in this huge game because the world is going there definitely that we see all over.

And the data is really the new oil. Everybody needs data. Without data, was nothing in this world. That's the issue.

That helps. I appreciate that. And so last, I just want to confirm So the the AI related customer engagements, though, that was largely conversations in q four. Right? That [indiscernible] was not materially impacting Q4 revenue? Or how much did that impact Q4?

No. Okay. So materially impacted Q4 revenue, no. But it's not just discussions. Meaning we are working together [indiscernible] it's something that is progressing. Quite well. Okay? I I I to keep it Okay.

For for this for this call, want to keep it at this stage, but it it's more than discussions.

Perfect. Okay. That's it for me. Thanks for taking the questions. Thank you very much.

Thank you.

We have reached the end of the question and answer session.

And therefore, I will now turn the call back over to Shahar Daniel for closing comments. Okay. So thank you for your time today. Look forward to hosting you on Alarum Technologies first quarter of twenty twenty five results call. Thanks. And ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time.

Thank you for your participation.

Generally, thank you for all my