Release Date: November 25, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Alarum Technologies Ltd (NASDAQ:ALAR) reported Q3 2024 revenues of $7.2 million, reaching the high end of their guidance.
• The company achieved an adjusted EBITDA of $1.4 million, exceeding their guidance.
• Cash and cash equivalents increased to $24 million, indicating strong cash flow generation.
• The company's strategic focus on the Netap data collection business unit contributed nearly 100% to quarterly revenues.
• Alarum Technologies Ltd (NASDAQ:ALAR) expanded its market share in the IP proxy network and data collection markets, enhancing its infrastructure and customer offerings.

Negative Points

• Non-IFRS gross margin decreased to 73.6% in Q3 2024 from 79.4% in Q3 2023, due to strategic investments in expanding the IP network.
• Operating expenses increased to $4.1 million in Q3 2024 from $3.7 million in Q3 2023.
• The company recorded a decrease in adjusted EBITDA from $1.9 million in Q3 2023 to $1.4 million in Q3 2024.
• Basic earnings per share decreased to 2 per share in Q3 2024 from 3 per share in Q3 2023.
• Some customers faced industry challenges resulting in lower consumption during the quarter, impacting overall growth.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with ALAR.

Q: Can you clarify if the investments in the IP PM network were fully made in Q3, and were they customer-driven or internally driven? How should we expect gross margins to trend going forward? A: The investments were a combination of customer feedback and internal decisions. In the IP proxy network market, continuous investment is necessary to maintain a fast and reliable network. The goal is to maintain current gross margins unless a unique opportunity arises that may temporarily impact them. However, any short-term impact would be offset by long-term growth and improved margins. - CEO

Q: Regarding the Fortune 200 customer win, how expansive is the deal, and is there potential for further expansion over the next year or two? A: The deal is significant, and the customer has started with lower traffic to evaluate the system. The plan is to potentially triple the traffic, which would directly impact revenues. The engagement is initially for six months, with the expectation of renewal and expansion. - CEO

Q: Could you provide an update on the pace of business development and any changes observed as we progress through Q4? A: Business development is proceeding as usual, with no significant changes to report. We have projected Q4 revenues to be around $7.5 million, plus or minus 3%. - CEO

Q: How is the website unlocker priced, and what factors drive customer expansion? A: The pricing model is similar to the IP PM, based on duration, usage, and bandwidth or request amount. We are still refining the best pricing model for scalability, but currently, it is based on bandwidth and duration. - CEO

Q: Can you discuss the warrants that expire at the end of 2025, including the number and exercise prices? A: There are approximately 240,000 warrants, representing less than 3% of the total fully diluted equity. The exercise prices are around $33 and $12, with some being in or close to the money and others far out of the money based on current share prices. - CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.