Alarum Technologies Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the Alarm Technologies fourth quarter 2025 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, please press the star key followed by the number two. If you're using a speaker, please lift the handset before making your selections. 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. I would like to thank management for hosting this call. Today, we are joined by Shahar Daniel, Alarm CEO, and Shai Abnit, CFO. Shahar will begin the call with an overview of the fourth quarter, followed by Shai, 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 of performance, and underlying assumptions and other statements that are different than historical facts. 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 2025 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. Potential risks and uncertainties include those discussed under the headings risk factors in allowance annual report on form 20F filed with the Securities and Exchange Commission on March 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. 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 Alarm'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 Shachar Daniel, Alarm Technologies CEO. Shachar, please go ahead.

Thank you very much, Kenny. Good morning, everyone. Thank you all for joining us today. So we started 2025, which was a key year for us, for Alarum, and Q4 kept it with another strong quarter. First quarter revenue, well, $11.8 million, up 60% year-over-year, while full-year revenues reached nearly $41 million, up 28%. Even as we invested a lot in increasing our capabilities throughout the year, we remained profitable. We remained profitable. We reported net profit of $0.2 million and adjusted EBITDA of $1 million. And for the full year, we reported net profit of $1 million and adjusted EBITDA of $4.4 million. This strong world 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. As AI systems become more complex, demand for large-scale, high-quality public web data continues to grow. At the same time, collecting reliable data in 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, data sets 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 became an important competitive advantage for Allaro. Strategic investment and profitability. Allaro invested significantly in its capabilities and scaled the business during 2025. We doubled our headcount, expanded our offices, and strengthened our organization across R&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. These margins 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 and positions allow them 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 new terms of variability in demand. Large AI developers shift spending sharply based on how they are in their model development cycles and the timing of data set refreshes. While the year-over-year growth trend in spending on data is clear, revenue for major customers may vary from quarter to quarter. At the same time, we believe this remains the early stages of a much larger opportunity for Alarm. As demand borders our customers cases base expands and becomes more diversified and model development moves into more structured training cycles, we expect Alarm'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, sub-solutions, data sets, 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. Strategically, it also reflects move from a traditional zero-touch online model to a deeper enterprise relationship that requires dedicated support performance monitoring documentation, and long-term infrastructure collaboration. While this increases operation 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. In summary, 2025 was a transformational year for Alarm. We exerted expanded customer relationships, scaled our infrastructure, broadened our product platform, and further positioned the company to serve the rapidly growing AI data infrastructure market. At this stage, we view Allure as being in a company and a platform-building phase. Our primary focus is on strengthening leadership, expanding infrastructure and product capabilities, and deepening enterprise-customer relationships. We believe this positions us well for the larger market opportunity ahead. I believe allow them as a path to achieving a revenue run rate exceeding $100 million as the market continues to develop. I will now hand it over to Shahid for the financial details and guidance for the current quarter. Shahid.

Thank you, Shachar, 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 periods last year, unless otherwise noted. Following that, I will provide our guidance for the first quarter of 2026. Detailed definitions and reconciliations of our non-IFRS key business metrics can be found in our fourth quarter and full year 2025 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 2025 reached $11.8 million, compared with $7.4 million in the fourth quarter of 2024, an increase of approximately 60% year over year. For the full year of 2025, revenues reached $40.7 million, compared with $31.8 million in 2024, an increase of approximately 28%. 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 margin. Gross profit in the fourth quarter of 2025 amounted to $6.4 million compared with $5.3 million in the fourth quarter of 2024. For the full year, gross profit was $23.8 million compared with $23.9 million in 2024. Gross margin in the fourth quarter of 2025 was $53.8 0.8% compared with 72.4% in the fourth quarter of 2024. 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. 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 2025 were $6.4 million, compared with $5 million in the fourth quarter of 2024. For the full year, operating expenses were $23.6 million, compared with $17.2 million in 2024. The increase was driven by higher revenues and broader operations, primarily attributable to research and development expenses, and to a lesser extent, sales and marketing expenses. Again, this increase is a 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 2025 was $0.2 million compared to what $0.4 million in the fourth quarter of 2024 was. For the full year, net profit was $1 million compared with $5.8 million 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 2025 was $1 million compared with $1.5 million in the fourth quarter of 2024. For the full year, adjusted EBITDA was $4.4 million compared with $9.4 million in 2024. Earnings per share, basic earnings per ADS in the fourth quarter of 2025 were $0.03, compared with $0.06 in the fourth quarter of 2024. For the full year, basic earnings per ADS were $0.14, compared with $0.87 in 2024. Balance sheet, as of December 31, 2025, the company's shareholders' equity increased to $32.1 million, up from $26.4 million as of December 31, 2024. Our cash, cash equivalent, and debt investments, including crude interest, as of December 31, 2025, was approximately $22.5 million, compared with $25 million in the end of 2024. 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 72.5 million shares, representing approximately 7.25 million U.S.-listed ADSs. Guidance. Moving on to our outlook for the first quarter of 2026. 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 2026, revenue will be around $11 million with a range of plus or minus 7%, representing approximately 46% year-over-year growth. Adjusted EBITDA for the first quarter of 2026 is expected to be approximately $1.4 million with a range of plus or minus $0.5 million. 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 shareholders. With that, we will now open the call for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. 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 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.

Yeah, so first of all, hi.

Thanks for joining. So yes, as I mentioned just very short, just a few minutes ago, so as data become really the oxygen of the AI and the LLMs products, So, and we need to scale and everybody needs data in scale. It's become 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. 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 we are doing today, so we can come in and collect available public data.

Sorry. Okay, yeah, that's helpful.

Just a couple more. So, I mean, you've highlighted... 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 seasonality that are emerging? Do you think that 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 Kingsley, something that is very important for me to say, I think I said it over the last quarters and I want to mention it again. 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, a digit after digit, meaning we were in $6 million 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 the second quarter to the third quarter, from around eight to 11, and then 10, and then 11 again. So meaning this exponential growth took us to, to a totally different place 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. 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 loads. Meaning, for example, they are now in the stage, in the 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 their... 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. But this, as we see it, is by nature. We don't see it as a decline. We see this is the nature of the market now. We are going with the market. The opportunity here is endless and unbelievable. And nothing more that I can explain because it's not a decline that comes from something behind that we can explain and elaborate and there is 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. The trend is broadly positive, particularly on the annual trend. Just trying to get a better sense of that seasonality, and it's hard to predict. So last one for me, just by our math, nearly half of the revenue in Q4 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 uh any anything you can share with with other engagements that are in the works okay so i will divide my answers for two parts first of all just to put some light on this part of the nrl so of course the as we just mentioned all the time, this year really changed our lives. So suddenly, very fast, a new vertical came in and became the first place of all our other use cases and verticals. 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 looks like the AI is not a trend. The data demand for AI is not a trend. It's here for stay. It looks like forever. So from this aspect, we think this change, okay, took the NRL down, the new customers cohort down, went up significantly and will bear fruit 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. We are, you know, we are one of the key players that they have. And as I mentioned in the past, Most of these customers are not, as a strategy, 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 we will get more data. Sometimes it will be the first option from their supplier, sometimes it will 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.

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're 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. And so, yes. As I mentioned, most of our, you know, we are investing in both sides. First is to expand our network, to bring more endpoints, to improve our performance and the infrastructure, which is costly. From the other side, as it becomes a game now of huge scales, 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, but vice versa. Every time we see an opportunity, we are investing and buying more endpoints, more infrastructure, improving our infrastructure. 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 and we are progressing and we'll keep this progress at least in 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 a stabilized. We see, we are talking with these customers. We don't, we have more than one that are basically market kind of let's call the market leaders and the, And we see that the demand is here to stay. They need this kind of data, and then they will need, in a few months or quarters, other kind of data. 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 refresh 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.

And this now concludes our question and answer session. I 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 Alarm 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.