Alarum Technologies Ltd.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Alarm Technology's first quarter of 2024 Corporate Update Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. If you have a question, please press star followed by one on your touchtone phone. If you would like to withdraw your question, please press star followed by two. If you're using speaker equipment, please lift the handset before making your selection. This conference is being recorded today, May 21, 2024. Before we get started, I will read a disclaimer about forward-looking statements. 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 Location Reform Act of 1995 and other federal securities laws. Forward-looking statements include statements about plans, objectives, goals, strategies, future events of performance, and underlying assumptions, and other statements that are different than historical fact. These forward-looking statements are based on 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. Potential risks and uncertainties include those discussed under the heading Risk Factors and Alarms Annual Report on Form 20F filed with the Securities and Exchange Commission on March 14, 2024 and any subsequent violence with the SEC. Also, forward-looking statements, whether written or oral, made on behalf of the company are expressly qualified by these cautionary statements, and such forward-looking statements are subject to risks and uncertainties and we caution you to not place undue reliance on these. At this time, I'd like to turn the call over to Shachar Daniel, the company's CEO. The floor is yours.

Thank you very much, and welcome, everyone, to Alarm Technology's first quarter of 2024 Earnings Results Conference Call. As is customary, with me is Shai Ravneet, our Chief Financial Officer. In this call, I would like to provide a brief review of our business operations, summarize our accomplishments, and then turn the call over to Shai, who will briefly discuss the financial results of the first quarter of 2024 before we will open the call to questions. We are extremely proud to present our first quarter results, demonstrating continuous growth and successful execution in every aspect of our business, trends that continue with us into the second quarter. We started 2024 recording strong sales months resulted in our highest revenues to date. Net net revenues for the first quarter of 2024 totaled to 8.1 million, reflecting growth of 139% year-over-year compared to the first quarter of 2023. The strong momentum is also demonstrated in our net retention rate, NRR. NRR represents the average growth rate for preceding four quarters compared to the equivalent period a year earlier of current customers only without the revenues generated from new customers, but including upsells and cross-sells on one end and churn on the other end. In the first quarter of 2024, our NRR climbed to 1.66. In addition, The first quarter marked the rollout of our previously announced growth engines with the launch of our innovative product, the website and blocker, following our initial product, the SERP API. Already in use by customers, the website and blocker achieved several key goals. First, it enabled us to cross-sell new products to our existing customers. Second, its advanced innovation attracts numerous inbound requests from new customers, expanding our customer base. Lastly, we receive positive feedback from our customers, which is crucial to our reputation and our ability to deliver top-of-the-line products and solutions. During the first quarter, we announced the launch of our revolutionary AI data collector product line. This cutting-edge product line represents a significant leap forward in data collection technology, addressing the challenges of time, intensive collector creation and maintenance that have long plagued business across industries. We believe the AI data collector product line will be one of our growth engines for the upcoming years. It's an important milestone in NetNet's roadmap toward securing its share of the data collecting market and will disrupt current web data collection methods and allow users to scrape internet data tailored to their specific requirements with an intuitive no-code interface, the new AI data collector will enable users to effortlessly generate data collection within minutes from any source without the need to invest in developing designated data collectors for each website. Beyond the value to customers seeking large-scale data for multiple sources, the value for the company is significant as we will have the capacity to automatically develop and create dozens or even hundreds of new scrapers. One of the primary drivers of the data collection market is the resurgence of KIA-based solutions. In the past two years, countless new A products have been introduced and widely accepted. This tool shares a common requirement in order to deliver solid results All AI-based products must have access to massive amounts of real-time data with minimal errors. As such, we continue to invest in our fast, robust, and reliable network, constantly expanding and enhancing its capabilities to meet the increased demand for data by the AI products. Our dedication to expand our business with innovation and strong value propositions resulted in a record quarter with $8.4 million in revenues an adjusted EBITDA of a stunning $3.2 million, growing significantly comparing to the first quarter of 2023. In the first quarter, we presented an IFRS net profit of $1.4 million compared to a net loss in the same period of 2023, and our non-IFRS net profit increased to $2.8 million. The main difference between the two figures is following the sharp rise in the company's share price, where to book non-cash expenses resulting from the fair value increase of old warrants issued in 2019 and 2020 at the amount of approximately $800,000. Before going further, I would like to turn the call over to Shai to discuss the financials for the quarter in more details. Shai?

Thank you, Shachar. As I discuss our first quarter 2024 financial results, I will be making comparisons to the first quarter of 2023, unless otherwise stated. Revenue for Q1 2024 totaled $8.4 million, up approximately 47% over the $5.7 million generated in the first quarter of 2023. The 2024 first quarter revenues were driven by a sharp growth in NetNuts revenues, which more than doubled compared to last year. And despite our strategic decision to scale down the consumer business that led to a material decrease in CyberKicks revenues from $2.3 million in 2023 to only $0.3 million in the first quarter of 2024. Gross profit increased to $6.5 million, up 75% from $3.7 million in the year-ago period. driven primarily by increased efficiency of resources in the enterprise business and the scaled-down strategy of CyberKicks operations, all resulting in a reduction in our cost of revenues. This resulted in a gross margin as a percentage of revenue of 78%, compared to 66% only in Q1 2023. Our Q1 2024 operating expenses decreased 6% year over year to $4 million, down from $4.2 million in Q1, 2023. This improvement was driven primarily by reduced cost in the consumer business, partially offset by increased cost in the enterprise business. I would like to draw your attention to a material non-cash expense within our finance expenses line, which had a significant impact on our IFRS net profit. In the first quarter of 2024, we booked $0.8 million of non-cash expenses resulting from the fair value increase of old warrants issued in 2019 and 2020 due to the recent rise in the company's share price. These warrants, which primarily are out of the money and are expected to expire in 2025, are booked in our balance sheet as a liability that fluctuates up and down based on the company's share price. Following the sharp rise of the share price, the economic value increased, resulting in these non-cash expenses. Also, we accrued in the first quarter of 2024 for NetNut's tax payment for the first time in the amount of $0.4 million, as NetNut became profitable for tax purposes. NetNAT is entitled to a low tax percentage of 12% only on its taxable income, compared to a regular 23% tax imposed on companies in Israel, due to its innovative efforts, which entitled NetNAT to pay taxes under beneficial tax tracks. We will continue to accrue tax expenses during the year, and first payments of these expenses to the tax authorities are expected throughout the year. As a result of the above, net profit for the first quarter of 2024 was $1.4 million, or $0.02 basic profit per ordinary share, which equals $0.23 basic per American depository share, ADS. Compared to IFRS net loss of $0.7 million in the first quarter of 2023, or $0.02 basic loss per ordinary share, which are $0.21 basic loss per ADS. Non-FRS net profit for the quarter was $2.8 million, or $0.04 basic profit per ordinary share, which is $0.45 basic profit per ADS, Compared to non-FRS net loss of $0.1 million in the first quarter of 2023, practically close to $0 basic loss per ordinary share, or $0.03 basic loss per ADS. As of March 31st, 2024, shareholders' equity totaled $17.1 million, or approximately $2.66 per ADS, compared to shareholders' equity of $13.2 million as of December 31, 2023. The increase stems from the 2024 first quarter net profit, as well as warrants and options exercises. As of March 31, 2024, the company's cash and cash equivalents balance totaled $15.1 million compared to $10.9 million as of December 31st, 2023. And lastly, I wanted to touch base on our share count as it stands today. On an outstanding basis, we have around 64.3 million ordinary shares representing approximately 6.4 million ADSs. On a fully diluted basis, we currently have around 78.2 million shares or approximately 7.8 million ADSs outstanding. With that, I turn the call back over to Shahar.