Alarum Technologies (TASE:ALAR) Q4 2025 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by. Welcome to the Alarum Technologies Fourth Quarter twenty twenty five Earnings Results Conference Call. During today's presentation, all parties will be in a listen only mode. Following management's presentation, the conference will be open to questions. If you have a question, please press the star key followed by the number one on your touchtone phone. If you would like to withdraw your question, This conference is being recorded. I will now turn the call over to Kenny Green, Investor Relations at Alarum. Kenny, please go ahead. Thank you. Good day to all of you, and welcome to Alarum's conference call to discuss the results of the fourth quarter and full year 2025.

0:52 I would like to thank management for hosting this call. Today, we are joined by Shahar Daniel, Alarum's CEO and Shay Abnit, CFO. Shahar will begin the call with an overview of the fourth quarter followed by Shay who will review key elements of the financials. Finally, we will open the call for the question and answer session. Before we get started, I want to highlight the forward looking statements disclaimer. This conference call may contain, in addition to historical information, forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward looking statements include statements about plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are different than historical facts.

1:42 For example, when we discuss a strategy of prioritizing long term leadership and market share capture over short term margins and profitability, expected trends in market demand and AI driven growth, our business momentum and pipeline, our expectations regarding future revenue patterns and margin improvement, the anticipated impact of our strategic investments and product mix and our estimates regarding fourth quarter twenty twenty five revenues and adjusted EBITDA, we are using forward looking statements. These forward looking statements are based on the current management expectations and are subject to risks and uncertainties that may result in expectations not being realized and may cause actual outcomes to differ materially from expectations reflected in these forward looking statements.

2:29 Potential risks and uncertainties include those discussed under the headings Risk Factors in Alarum's Annual Report on Form 20 F filed with the Securities and Exchange Commission on 03/20/2025, and in any subsequent filings with the SEC. All such forward looking statements, whether written or oral, made on behalf of the company are especially qualified by these cautionary statements. And as such, forward looking statements are subject to risks and uncertainties, and we caution you not to place undue reliance on them. On the call, the company will also present non IFRS key business metrics. The non IFRS key business metrics the company uses are EBITDA and adjusted EBITDA, non IFRS gross margin, non IFRS net profit or loss, and non IFRS basic earnings or loss per share or ADS.

3:21 The exact definitions and reconciliations of these non IFRS key business metrics are described in the company's financial press release, which is available in the investors' lobby of Alarum's website. These non IFRS measures may differ materially from similarly titled measures used by other companies and should not be considered in isolation from or as a substitute for financial information prepared in accordance with IFRS. And now, I'd like to turn the call over to Shahar Daniel, Alarum Technologies' CEO. Shahar, please go ahead. Thank you very much, Kenny, and good morning, everyone. Thank you all for joining us today. So we summarized 2025, which was a key year for us for Alarum, and Q4 capped it with another strong quarter.

4:13 Fourth quarter revenues were $11,800,000 up 60% year over year, while full year revenues reached nearly 41,000,000 up 28%. Even as we invested a lot in increasing our capabilities throughout the year, we remain profitable. We reported fourth quarter net profit of $200,000 and adjusted EBITDA of $1,000,000 and for the full year, we reported net profit of $1,000,000 and adjusted EBITDA $4,400,000 This strong growth reflects the shift we saw during the year, as demand from AI focused customers become a key growth driver. In 2025, our new AI focused products, which are our growth engines, accounted for about 30% of revenues, growing from around 4% only last year.

5:10 As AI systems becomes more complex, demand for large scale, high quality public web data continues to grow. At the same time, collecting reliable data at scale becomes more difficult, raising barriers to entry and increasing the value of our infrastructure, technology and execution. During 2025, we significantly expanded our work with several major global technology companies developing AI systems. These relationships involve large scale data collection for model training, dataset creation, and ongoing refinement. We also saw a dramatic increase in workloads across our platform with volume rising from between three and four petabytes per month at the beginning of the year to up to 70 petabytes at the end of this year. This sharp increase created greater operational complexity and our ability to perform at this scale becomes an important competitive advantage for Alarum.

6:06 Strategic investment and profitability: Alarum invested significantly in its capabilities and scaled the business during 2025. We doubled our headcount, expanded our offices, and strengthened our organization across R and D products, support customer success, and account management. From a technical standpoint, we strengthened our global proxy network, increased platform capacity and enhanced our data collection abilities to support massive AI workloads and the growing complexity of enterprise scale deployments. This investment now allows us to better support customers operating at massive scale, including both existing major customers and new target customers. The higher investment levels have led to lower short term margins, although we remain profitable.

6:57 These margin pressures were planned and are addressable and as I noted last quarter and even before, we have several initiatives underway to improve margins over the coming quarters. These strategic investments have positioned Alarum at the center of the AI ecosystem as we move through 2026. The global AI market is still in its early stages and that naturally creates some near term variability in demand. Large AI developers shift spending sharply based on earlier in their model development cycles and the timing of dataset refreshes. While the year over year growth trend in spending on data is clear, revenue for major customers may divide from quarter to quarter.

7:42 At the same time, we believe this remains the early stages of a much larger opportunity for Alarum. As demand borders, our customer base expands and becomes more diversified and model development moves into more structured training cycles, we expect ALARUM's revenue pattern to become smoother and more predictable. Product platform expansion. Our business continues to evolve from a proxy focused company into a diversified multi product data infrastructure platform. During 2025, this evolution progressed across websites and blockers, self solutions, datasets and our core proxy infrastructure. This shift from a single product proxy model to a broader platform is expected to support stronger long term margins and healthier unit economics.

8:36 Strategically, it also reflects the move from a traditional zero touch online model to a deeper enterprise relationship that requires dedicated support, performance monitoring documentation and long term infrastructure and collaboration. While this increases operational complexity, it also creates stronger customer relationships and a more strategic role in customers' operations. We believe this evolution is expanding our value proposition and improving the quality of our revenue base over time. '20 In summary, 2025 was a transformational year for Alarum. We excelled in first expanded customer relationships, scaled our infrastructure, broadened our product platform, and further positions the company to serve the rapidly growing AI data infrastructure market.

9:24 At this stage, we view Alarum as being in a company and a platform building phase. Our primary focus is on straining late leadership, expanding infrastructure and product capabilities, and deepening enterprise customers' relationships. We believe this positions us well for the larger market opportunity ahead. I believe Alarum has a path to achieving a revenue run rate exceeding $100,000,000 as the market continues to develop. I will now hand it over to Shari for the financial details and guidance for the current quarter. Shari? Thank you, Shahar, and hello, everyone. I will start by reviewing our key financial results for the fourth quarter and full year 2025, comparing them to the same period last year, unless otherwise noted.

10:14 Following that, I will provide our guidance for the first quarter of twenty twenty six. Detailed definitions and reconciliations of our non IFRS key business metrics can be found in our fourth quarter and full year twenty twenty five financial results press release. And one final note before I begin, the figures I will be discussing are rounded for clarity and ease of reference. Turning now to our financial performance. Revenues. Revenues in the fourth quarter of twenty twenty five reached $11,800,000 compared with $7,400,000 in the fourth quarter of twenty twenty four, an increase of approximately 60% year over year. For the full year 2025, revenues reached $40,700,000 compared with $31,800,000 in 2024, an increase of approximately 28%.

11:14 As Shahar mentioned, the growth was driven mainly by strong demand from large scale customers building foundational AI models, as well as increased sales of our new AI focused products. Gross profit and gross margins. Gross profit in the fourth quarter of twenty twenty five amounted to $6,400,000 compared with $5,300,000 in the fourth quarter of twenty twenty four. For the full year, gross profit was $23,800,000 compared with $23,900,000 in 2024. Gross margin in the fourth quarter of twenty twenty five was 53.8% compared with 72.4% in the fourth quarter of twenty twenty four.

12:09 For the full year, gross margin was 58.5% compared with 75.1 in 2024. The decline in gross margin reflects our work with large scale AI customers, which require data gathering at significantly greater scale and involve higher initial infrastructure costs, including a larger volume of servers and stronger, higher quality infrastructure. In addition, the initial new product sales have triggered related third party costs, which we expect to decrease in the coming quarters. Overall, this is consistent with our strategy to pursue large scale, highly strategic opportunities that we believe can drive meaningful long term growth and profitability even at the cost of lower short term margins.

13:05 I note that as our revenue continues to grow, the company will increasingly benefit from margin increases due to the operating leverage inherent to our business model. Operating expenses. Operating expenses in the fourth quarter of twenty twenty five were $6,400,000 compared with 5,000,000 in the fourth quarter of twenty twenty four. For the full year, operating expenses were $23,600,000 compared with $17,200,000 in 2024. The decrease was driven by higher revenues and broader operations, primarily attributable to research and development expenses and to a lesser extent, sales and marketing expenses.

13:54 Again, this increase is the key part of our strategy to invest in our infrastructure and capacity in order to position the company to capture the significant long term growth opportunities we see ahead of us. Net profit. Net profit in the fourth quarter of twenty twenty five was $200,000 compared with $400,000 in the fourth quarter of twenty twenty four. For the full year, net profit was $1,000,000 compared with $5,800,000 in 2024. While we still maintained our profitability, the decline in profit reflects the increased strategic costs. Adjusted EBITDA. Adjusted EBITDA in the fourth quarter of twenty twenty five was $1,000,000 compared with $1,500,000 in the fourth quarter of twenty twenty four.

14:45 For the full year, adjusted EBITDA was $4,400,000 compared with $9,400,000 in 2024. Earnings per share. Basic earnings per ADS in the fourth quarter of twenty twenty five were $03 compared with $06 in the fourth quarter of twenty twenty four. For the full year, basic earnings per ADS were $0.14 compared with $0.87 in 2024. Balance sheet. As of 12/31/2025, the company's shareholders' equity increased to $32,100,000 up from $26,400,000 as of 12/31/2024. Our cash, cash equivalent and debt investments, including accrued interest, as of 12/31/2025, was approximately $22,500,000 compared with $25,000,000 in the end of twenty twenty four.

15:45 We ended the year with zero debt and our strong balance sheet continues to support our ability to invest strategically while maintaining a focus on sustainable value creation. The outstanding ordinary share count as of today is approximately 72,500,000 shares, representing approximately 7,250,000 US listed ADSs. Guidance. Moving on to our outlook for the first quarter of twenty twenty six. Our guidance reflects what we see today based on customer orders, backlog and current consumption trends and is given as of today's date. We currently expect that in the first quarter of twenty twenty six, revenue will be around $11,000,000 with a range of plus or minus 7%, representing approximately 46% year over year growth.

16:45 Adjusted EBITDA for the first quarter of twenty twenty six is expected to be approximately $1,400,000 with a range of plus or minus $500,000 To summarize, 2025 was a year of significant transformation, strong growth and continued strategic investment. We remain focused on building long term leadership in the AI data infrastructure market and on generating sustainable value for our shareholders. With that, we will now open the call for questions. Operator? Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue.

17:39 And again, for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Kingsley Crane with Canaccord Genuity. Hi, thanks for taking the questions. Shahar, any update on the state of modern website data collection prevention techniques? I I know that the goalposts are always moving. How do you feel like you're keeping up, and what kind of investment do you feel like is needed to keep up specifically on that front? Thanks. Yes. So first of all, hi. Thanks for joining. So, yes, as as I mentioned just just very short in just few minutes ago, So as data become really the oxygen of of of the AI and and the LLM's products, so and and we need to to scale, and everybody needs data in scale, it becomes more and more challenging to collect data, which we see today and maybe forever as an opportunity and not a threat because it basically, you know, it becomes a barrier for small players to come in, and of course, the results for this is positive.

19:05 And yes, websites, not all of them, yes, but some of them are okay with the scraping because it brings them traffic and ranking, but it becomes challenging from, you know, products that are trying to prevent those players from coming in, sometimes false alarms, because those products are looking for cyber attacks and not on scraping, because some of them are not so sensitive for scraping. And our, target, basically, with our product is to come and say, hello. We are collecting only public available data. We are not a threat. We are not, here for a cyber attack. And, if we cross this, let's say, shaking hands in the beginning of the website, as as we are doing today, so, we can come in and collect available public data.

20:06 Sorry. Okay. Yep. That's helpful. Just a couple more. So, I mean, you've last quarter and this quarter, the benefits of the long term infrastructure partnerships with enterprise customers, revenue has declined this quarter, guiding to a decline in Q1. So can you just help us get a better sense of that improving visibility that you have in the business as a result of these longer term partnerships? And, I mean, do you see clear seasonalities that are emerging? Do you think that, like, the back half could be stronger just based on the timing of when these models could need to be trained or fine tuned? Thanks. Okay. So, Keng Zi, something that is very important for me to say, I think I sent it over the last quarters, and I want to mention it again.

21:00 If you take a look on 2025, you will see that suddenly, yes, let's say it like this, suddenly, in the middle of the year, we jumped, you know, over the time, we jumped slowly, slowly, you know, digit after digit, meaning we were in $6,000,000 for a quarter, then we jumped to the class of seven, then to the class of eight. And then, in the middle of the year, we jumped three numbers, yes, from quarter two, from the second quarter to the third quarter, from around eight to 11, and then 10, and then 11 again. Meaning this exponential growth took us to totally different person, and it comes significantly, this growth from this great achievements of us to penetrate with this large LLM that are consuming data in huge scales.

21:56 The only thing is that if you will measure it quarter after quarter, you will still see that the numbers are not sustainable because they are working on data loss. Meaning, for example, they are now in the stage in development, and now the demand is from data, for video data for this kind. So they have a huge demand. They are getting most of the we are we are the suppliers, and we provided most of the demand. And then they slow down a little bit, and then come the next stage and then the next stage. So these workloads, because it's not something in production that is sustainable, also, of course, has an impact on our revenues, and then you can see a quarter of 11.8, 11, then you can see 13, then you can see 12. So but but this, as we see it, is is by nature. We don't see it as a decline. We see this is the nature of the market now.

22:58 We are going with the market. The opportunity here is is is endless and, unbelievable. And nothing more that I can explain because it's not a decline that comes from something, let's say, something behind that we can explain and elaborate, and there's a trend here or trend there. The trend is positive, but the movements can be you know, sometimes a movement of two weeks can have an impact on the full quarter, but not on our strategy and taxes and over the time. Make sense? No. It makes sense that, like, the trend is broadly positive, particularly on the, you know, the annual trend. Just trying to get a better sense of of of that seasonality, and it's hard to predict.

23:46 So last one for me. Just, you know, by our math, nearly half of the revenue in q four came from customers that you didn't have one year ago just based on backing into that number from NRR. So I'm just curious how you think that might trend over the course of the next year and just the potential to sign new customers. Any anything you can share with with other engagements that are in the works? Okay, so I will divide my answer for two parts. First of all, just to put some light on this part of the NRL. So, of course, as we just mentioned all the time, this year was, you know, a really, it changed our lives. So, suddenly, very fast, a new vertical came in and became the first place of all our use cases and verticals.

24:44 And for this, even though you see that the NRR is under than one, you see that the company is growing because those old use cases, let's say, slowed down or dropped, but the new one came and is much bigger than the others. And it, you know, it it looks like that the AI AI is not a trend. The the demand for date the data demand for AI is not a trend. It's here for stay. It looks like forever. So from this aspect, we think that this change, okay, took the NRL down, the new customers' cohort went up significantly, and we'll prefer food from it. For your second question, so yes, we are negotiating all the time. In the last two quarters, we have bids, negotiations, proposals, starting small with mid level LLMs, the biggest LLMs of the world.

25:44 We are one of the key players that they have. And and as I mentioned in the past, most of these customers are not, as a strategy, yes, as a policy, they are not using one vendor. Sometimes it's two. Sometimes it's three vendors. So most of the times, we will come in. Sometimes we will get more demand, and and we will get more data. Sometimes we'll be the first, option from their supplier. Sometimes we'll be the third option, but it can change all the time. But, yes, dramatically, we are investigating new opportunities, new engagements, new big customers, mid level customers, and most of them are around AI and data collection for training models.

26:34 Thank you. Good to speak. Thank you. Thank you very much. Appreciate it. And our next question comes from Brian Kingslinger with Alliance Global Partners. Hi, thanks for taking our questions. This is Kevin with Brian. You spoke last call about bringing in more infrastructure in house and optimizing the network to expand the gross margin. Can you explain a little deeper any progress on these initiatives over the last quarter? And when should we expect to see those start to materially impact margins? Just to make sure I understand your question, so you said that we mentioned last time and even before that we are investing in order to scale our infrastructure to support the huge scale and the huge demand that is coming, especially from the AI, use case.

27:38 And so, yes, as I mentioned, most of our you know, we are investing in both sides. First is to expand our network. We want to bring more endpoints to improve our performance the infrastructure, which is costly. From the other side, as it becomes a game now of huge scale, we are working around the clock with one of our main missions all the time to make our infrastructure to be more efficient and to be in the optimum cost. Meaning, yes, we are not saving money now and but vice versa. Every time we see an opportunity, we are investing and buying more endpoints, more infrastructure, improving our infrastructure.

28:33 From the other side, we have a team that is working around the clock with all our hostels, and, you know, the cloud and the on prem hostels, the servers and the endpoints, suppliers, in order to make our product to be more efficient and in the optimum price, because we are scaling. So both of them are working very well, we are progressing, and we will keep this focus at least this all 2026. Got it. Thanks. And then are there any updates on your large anchor customer, the Asian online marketplace? How's that partnership going and what have they indicated from a demand perspective? Okay, so it's going very well. It's stabilized.

29:18 See we are talking with these customers. We have more than one that are basically market kind of let let's call them market leaders, and and we see that the demand is here to stay. They need this kind of data, and then they will need, in few months or quarters, other kind of data. So the and and they are training this model, and then they are developing another model, and they need to train him. And then in production, they need to stay up to date, and they need to get a refreshed data set. So it's going well. They are, satisfied. We are working with them already for a few quarters. And, thanks, God. It looks, okay. Great. Thanks.

30:07 This now concludes I our question and answer would like to turn the floor back over to Mr. Daniel for closing comments. So thank you, and thank you all for your time today. We look forward to hosting you on Alarum Technologies' next results call. Thank you very much. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.