Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Alarum Technologies Fourth Quarter and Full-Year of 2023 Corporate Update Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This conference is being recorded today, March 14, 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 Litigation Reform Act of 1995 and other federal securities laws. Forward-looking statements include statements about plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are different than historical facts. 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 in Alarum's annual report on Form 20-F filed with the Securities and Exchange Commission on March 14, 2024, and any subsequent filings with the SEC. All such 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 not to place undue reliance on these. At this time, I'd like to turn the call over to Shachar Daniel, the company's CEO.

Thank you very much and welcome everyone to Alarum Technologies' 2023 fourth quarter earnings results conference call. As is customary with me, Shai Avnit, our Chief Financial Officer, is here with me. In this call, I would like to provide a brief review of our business operations, summarize our accomplishments, and then I will turn the call over to Shai, who will briefly discuss the financial results of the first quarter and full-year of 2023. We are extremely pleased with our first quarter results showing growth and successful execution in every aspect of our business. Before going into more detail about the first quarter of 2023, I would like to look back at how we started this year. In the first quarter of 2023, we had two business lines: NetNut, our internet access for enterprises, and CyberKick, our internet access solution for consumers. We finished the first quarter with revenues of $5.7 million from both business segments, a net loss of $700,000, and positive adjusted EBITDA of $60,000. The first quarter was also the first time we announced positive cash flow from operating activities. When we started 2023, we began our path to profitability strategy. By the end of the second quarter, following consideration of the current market environment, we made a decision to downsize our investment in the consumer business with measures that we believed would have a positive impact on the company. During the third quarter, we focused all our efforts on supporting NetNut and our data collection solution business. We paused all investments in customer acquisition in the consumer business and sold our cybersecurity business. As a result, the third quarter marked a historic moment in the company's journey as we became profitable with $1.1 million in net profit. From being on the path to profitability, we became profitable and proved our strategy to be the right one for the company. We announced today that we finished the first quarter with revenues of $7.1 million and a record net profit of $1.7 million. The revenues for the first quarter represent not only a record quarter but one that surpassed the revenues generated from both business lines at the beginning of 2023 and demonstrated the strength of NetNut and our business. In the last two years, NetNut has experienced considerable expansion, growing from $6.3 million in revenues in 2021 to $21.3 million by 2023. We are delighted with these outcomes, which reflect our intense effort and commitment to the prosperity of our business. Moreover, we enter the year 2024 witnessing high growth and setting new monthly revenue records in January and February. We are proud of our current strong financial stability, the fact that we are profitable, and we do not have to rely on raising funds to support and sustain our operations going forward. 2023 was a turning point for us that now focuses only on NetNut and the expansion of our product offerings. Today, NetNut is one of the strongest brands in the world of IPPM, known for its fast, advanced, and secure network. The NetNut platform is based on our proprietary reflection technology. Our hybrid network infrastructure comprises of more than 1,000 servers and over 700 proxy servers deployed around the globe connected to 52 million different types of IPs, including ISP and data center IPs in leading data centers, providing full global coverage. During 2023, we entered new market segments including AI-powered sales intelligence, fintech, and AI recruiting, winning leading customers across the board. Building on our network success, we began to expand our product offering in 2023, hiring new talents for our research and development with the goal of delivering innovative and disruptive products to the data collection market. The first product we introduced during 2023 is the Google SERP Scraper API, our first data collector providing enterprises with innovative suite analysis tools for on-demand data access. The SERP Scraper API delivers real-time structured data from global search engines tailored to enterprise needs. Our second product release is the innovative Website Unblocker, designed to allow automated data collection tools access to public facing web data without being tagged by anti-bot and bot management solutions. Our latest announcement was the revolutionary AI-Data Collector product line. This product line will be one of our growth engines for the coming years. It is a significant milestone in NetNut’s roadmap for securing a share of the data collection market and will disrupt current web data collection methods, allowing 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 generate data collection requests effortlessly within minutes. The product's advanced AI will automatically adapt to website changes, ensuring continuous data collection without any downtime. Furthermore, NetNut's proprietary blocking technology will provide seamless access to web data, allowing uninterrupted data extraction at any scale. Users will simply input the target URL, select the desired data subjects, set the timing range, and choose the preferred download format. We are excited about our new data collection product offering and have started to market our initial two products to existing and new customers, receiving great positive feedback. Starting today, we plan to update our customer retention rate, NRR, on a quarterly basis. NetNut’s NRR stood at 153% as of December 31, 2023, and 144% as of September 30, 2023. We sum up the recurring revenues from existing customers for four consecutive quarters and add any expansion revenue or upsells from those same customers during that period. We then subtract any contraction revenue or downgrades from those same customers during the same time. A positive NRR indicates that existing customers are spending more over time through either expansion or add-ons, offsetting any losses due to churn. Conversely, a negative NRR suggests that the company is losing more revenue from existing customers than it is gaining through upselling or cross-selling. Before going further, I would like to turn the call over to Shai to discuss the financials for the quarter in more detail. Shai, the stage is yours.

Thank you, Shachar. I will begin with a summary of our fourth quarter and year-end 2023 financial results, which are compared to our fourth quarter and year-end 2022 results unless otherwise stated. Revenue for the full-year of 2023 totaled $26.5 million, of which $7.1 million was earned in the fourth quarter. This represents a 39% increase compared to the revenues from continuing operations of $18.5 million for the full-year of 2022, of which $5.1 million was earned in the fourth quarter. This sharp growth in revenue is attributed to the increase in the NetNut business. Gross profit for the full-year of 2023 increased to $18.8 million, with the fourth quarter contributing $5.3 million. This is compared to gross profit for the full-year of 2022 of $10.1 million, of which the fourth quarter contributed $2.8 million, representing increases of 85% and 89% respectively. These significant increases in gross profit were primarily driven by rising revenues, while increasing the gross margin to more than 75%. Operating expenses totaled $24.3 million for the full-year 2023. Excluding goodwill and intangible asset impairments related to the consumer Internet access activity scale-down announced by the company on July 6, 2023, operating expenses amounted to $15.8 million, compared to operating expenses of $22.9 million in 2022. IFRS net loss from continuing operations for the full-year of 2023 totaled $5.6 million, or $0.14 basic loss per ordinary share. The loss is attributed to the consumer Internet access goodwill and intangible asset impairment. This is compared to an IFRS net loss of $12.5 million or $0.39 basic loss per ordinary share in 2022. IFRS net profit from continuing operations in the fourth quarter of 2023 reached $1.7 million or $0.03 basic profit per ordinary share, compared to a net loss of $3 million or $0.09 basic loss per ordinary share in the fourth quarter of 2022. Adjusted EBITDA for the full-year of 2023 was $5.2 million, compared to an adjusted EBITDA loss of $8.5 million in 2022. Adjusted EBITDA for the fourth quarter of 2023 was $2.2 million, compared to an adjusted EBITDA loss of $2 million in the fourth quarter of 2022. As of December 31, 2023, shareholders' equity totaled $13.2 million, or approximately $2.20 per outstanding American Depository share, compared to shareholders' equity of $13.3 million as of December 31, 2022. The minor change is due mainly to the goodwill and intangible asset impairment recorded in the second quarter of 2023, offset by the private placement in September 2023 and non-IFRS earnings. As of December 31, 2023, the Company's cash and cash equivalent balance totaled $10.9 million, compared to $3.3 million as of December 31, 2022. Lastly, I wanted to touch on our share count as it stands today. On an outstanding basis, we have around 62.8 million ordinary shares, representing approximately 6.3 million ADS. On a fully diluted basis, we currently have around 78 million shares or 7.8 million ADS outstanding. With that, I'll turn the call back over to Shachar.

Thank you, Shai. Our accomplishments in 2023 have positioned us to utilize our extensive, fast, and dependable network to meet the evolving demands of the AI market. The cornerstone of all current AI solutions lies in the ability to access and extract data. AI technologies require vast amounts of real-time data to deliver good outcomes. Data collection, especially the skills we have developed through years of experience in the industry, is something we excel at. Furthermore, we can identify future challenges for AI solutions as they become increasingly integrated into our daily lives and we are equipped with the necessary tools to address and provide the right solutions. With that, I would like to open the call for any questions.

Thank you. Ladies and gentlemen, at this time, we will be conducting our question-and-answer session. Our first question is coming from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

Great, thanks for taking my questions. My first is a financial one. Your operating margin over the last two quarters has been an impressive 22% and 24%, and your revenue continues to grow. Sales and marketing expenses have been declining. My question is on the operating expenses: at what point do you expect the company will need to make meaningful investments to sustain these growth rates? Is that anytime soon?

First of all, you know, if you measure our operating expenses as a percentage of the revenues, our plan is to stay at the same rate. As I can tell you now in the first quarter, we see growth and basically we stabilize our team and our operating expenses. I don’t think there is a time in the near future when you will see that I may identify as a point that we need to significantly increase our investments in our operations in order to support revenues.

So to be clear, you think the 24% to 25% operating margin is sustainable and you probably won't grow it that much, you'll reinvest the rest into growth, is that accurate?

Yes.

And then the net retention rate you provided was 144% or 153%. Revenue growth is 150%. Can you share with us the customer counts for NetNut and how that compares to a year ago? It sounds like much of the revenue growth is coming from the existing customer base by looking at those two metrics. And so I'm trying to understand new customer counts and help us understand the evolution of a new customer; is the first year a very small contribution, then expands in the second year?

Okay. So let's start with the NRR method. Basically, this method that we choose is one that a lot of SaaS companies are using. We measure four quarters versus four quarters and then we go back one quarter and measure again for four quarters, and repeat this three times. When we come to the next quarter, we will do the same and we will have one more measurement for this quarter and go back for four measurements. It’s called NRR point in time, meaning it's an average of four measurements. So, you cannot take the revenue growth from 2022 versus 2023 directly connected to this measurement, because it's an average. For your question, while I don’t have the exact numbers in front of me, I can say generally that the number of customers has grown by around 20% quarter-over-quarter, year-over-year. It depends, because we have a variety of customers. Some pay us $5,000 a year and others $100,000 a year or more. However, if you check our new deck that we uploaded to the website, we have a slide that describes the split between the size of the customers and the number of customers. If you want, we can go over it now or you can check it later and if we have any questions, we will be happy to answer.

Shachar, can I edit something just to make sure—

Yes, yes.

Brian, the 144% is not a 144% rise compared to the previous period, it’s a 44%. If you compare it to a 150% rise in revenues during 2023, you can see quite clearly that a large portion of it came from new customers. It’s not that it is only expansion from existing customers.

Thank you, Shai. Good comment.

Yes. And then you've got two new products that I think you're excited about, namely the SERP Scraper and the Website Unblocker. I know it's early, but can you talk about how you expect these to drive growth? Is this a 2024 event or more of a 2025 catalyst as they become a bit more mature?

Okay. So you said it's too early, and you're correct. It’s early for me to project because we are just starting our AB testing with our current customers. First of all, we went out with this product because we identified demand and need in the market. We know that the market needs it, and we think that we know exactly what it needs and why our product is innovative and disrupts other products in this market. We believe that, besides the fact that customers will directly acquire this and purchase this product, we will also see strengthened customer acquisition for our IPPN products because we are now able to offer them a broader product portfolio. I anticipate that we will start to see significant revenues from the AI Scraper, which is our main product line, in the fourth quarter of 2024, and hopefully more significant revenues in 2025. The Web Unblocker is currently in beta and is performing well. I hope we will see traction at the end of this quarter, moving into significant revenues towards the end of the year. This is the best data I have right now, and I don’t want to project more than this so I don’t mislead you.

Great. And then the last question just so I understand, the Website Unblocker—that's where you're trying to help customers scrape data from a website, but it's blocked. So this product will help unblock it so you can get from certain sites. Is that right?

Exactly, that’s accurate.

Just wanted to make sure I understood. Okay, thank you so much.

Thank you, Brian.

Thank you. Our next question is coming from Kris Tuttle with Blue Caterpillar. One moment please while I connect you through. Thank you, sir, your line is now live.

Hi, thanks for taking my questions. I just had a couple. One of them is, obviously, your busy NetNut is working very well for you. What do you look at as your governors for growth for the rest of 2024? What are the limiting factors that you're working on addressing?

The limiting factors?

Yes. What governs your overall revenue growth this year?

Essentially, we have a team and infrastructure. If you heard my speech, I talked about the size of our network, which is one of our major intellectual properties. We have thousands of servers globally that serve a vast amount of data and customers. We built the team and the network according to the projected growth we see this year. Of course, if demand exceeds our expectations, potential bottlenecks could arise in our network or team, but I hope that, after years of experience, we know how to plan and project the expected growth and the amount of traffic and customers. So I don’t foresee it being a major constraint.

Okay. One housekeeping question. Can you just remind us of the difference between the number of shares in the current share count and the fully diluted number?

Yes, of course. Shai, you want to take it?

Yes. Basically, it includes two types of securities that are not outstanding. One is the stock option plan for employees and consultants. We have allocated options and RSUs to our employees, which amount to about 700,000 or 800,000...

It's more than 800,000, I believe.

It's over 800,000, I believe.

700,013 for the employees.

The other part includes a series of warrants to investors from previous rounds from 2020 until 2023. Most of these are far out of the money.

Yes, we have 650,000 from this kind of warrants; the weighted average excess is around $40, and the rest is about 900,000 belonging to the employees' option plan. I'm inviting you to check our new presentation uploaded to the website. You can see a pie chart that describes the difference between the outstanding and the fully diluted amounts.

Okay, I'll take a look at that. My last question is just as you look out for 2024 and into 2025, are there any kinds of acquisitions or technology gaps that you feel you need to fill in order to accomplish those plans? Or do you feel like right now you have everything you need in-house with your current resources to achieve your plans over the next 12 to 18 months?

So, the first part of my answer is yes. Currently, we have everything we need to support our growth engines and revenues. I am just investigating the possibility of something interesting that can accelerate growth. We see a significant gap in the AI market between experts who have the algorithms to analyze data but require the data itself. We have established a special committee with industry experts and recognized opportunities there. However, at this moment, we do not have plans for acquisitions.

Okay. Thanks very much for taking my question.

Thank you very much.

Thank you. Our next question is coming from Nick Peters, a Private Investor. Please proceed with your question.

Hi, guys. Thanks for taking my call. Obviously, great job last half year. Are you seeing any pricing pressure? I know when you look at proxy way, they show right data, smart proxies are cutting prices, but those look to be at the lower end, smaller customers. So are you seeing this at the higher size customers?

Just to clarify, are you asking if we see pricing pressure because you think our competitors, like the ones you mentioned, are reducing prices?

Yes, at least from what I see on the website, but again, at the lower sizes?

No, no. The answer is no. I’m not aware of significant price cuts affecting our segment. Customers always negotiate to achieve the best prices, but there’s nothing emerging compared to the previous year.

Okay, excellent. And then the second part of my question is do you foresee any changes to pricing as you add these new products on, possibly to price your network a little bit cheaper and then upsell the higher value-added products over time?

That might be one strategy. However, I prefer to keep that discussion internal as it's part of our commercial strategy. But it is a possible option, yes.

All right, sounds good. That's all the questions I have. Thanks, guys.

Thank you very much.

Our next question is coming from Jeff Hart with Hart Partners. Please proceed with your question.

Yes, congratulations, Shachar. Excellent quarter. You're really executing. I just have one quick question. I see you did not renew your F1. Is there any reason for this?

You mean our F3 shelf prospectus? Yes, it expired. We did not renew it because currently, we are not planning to raise money. Although most companies maintain this F3, we did not renew it due to focus issues but may consider it in the future if the need arises.

All right, very good, excellent. That was my only question. Continue the great job.

Thank you very much.

Thank you. Our next question is coming from Robert Smith with Center Performance Investing. Please proceed with your question.

Thank you. Thanks for taking my questions and congratulations on a superb quarter. You must have a business plan, at least an annual plan, if not a three-year plan. So how much of that could you reveal to us, I mean, as far as what you're looking for this year?

Of course, yes, in details for one year, for two years, for three years. We have not revealed our specifics yet due to certain reasons. I guess in the near future we will start to expose more. As we are growing, we began discussing retention and other key performance indicators in our new presentation. So right now, I will not disclose numbers, but at a high level, we plan to keep our growth as I mentioned in my speech; the first two months of 2024 have been strong and support our growth plans. We want to balance growth and profitability, regarding the operational profit, EBITDA, and other KPIs. We are heavily investing in our new products, following our strategy of moving to the next layer in the data stack, from IPPN to data collection, labeling, and our scrubbers and collectors. We are recognizing gaps in the AI world with existing customers, and we believe our developments will represent significant growth engines for the years ahead. That summarizes what I can share for now.

So on a serial basis, are you suggesting that February was better than January?

Yes, that’s correct.

Okay. And so then stepping ahead a little to your IP situation. What protections do you have?

We have two patents safeguarding us at a high level. Additionally, the entry barriers for our market, which I observe as new players attempt to enter, include our technology and software. One significant aspect of our intellectual property is our network. Building our global network with thousands of servers capable of managing huge amounts of data requires years of effort and a lot of know-how, which provides us with a competitive edge.

So hiring new personnel and research in R&D focus—how much emphasis do you put on that?

We hired several talents last year for R&D as we filled our human resources with excellent talent, not only in R&D but also in sales, marketing, operations, etc. We are trying to maintain our current EBITDA rate, meaning the ratio between operational profit and revenues. I don’t foresee a major impact on our P&L for this year, at least.

In the past, you've mentioned accelerating growth rates. How far into the future do you see that acceleration potential?

We are focused on KPIs, investing significantly in growth, balancing new customers and satisfaction levels of existing customers, reflected in our retention rate. Additionally, we are committed to innovation and exploring future opportunities. We view the AI market as a significant consumer of data, believing our efforts will sustain our growth moving forward.

Is new product development and execution what's differentiating you from the competition?

Yes. The AI collector should be an excellent competitive advantage and differentiator. The Web Unblocker was developed to excel in various parameters, which we believe positions it as the best in the market, set to disrupt existing products. These are our two main products for this year, and we hope to bring significant innovation and differentiation compared to the current market.

What would you say are your two chief concerns going forward?

The technological world is changing rapidly, and we are trying to predict and project future customer challenges. My main concern is that something unforeseen may arise, like new technologies or challenges we didn't foresee. Our commitment to evaluating trends and learning continuously aims to mitigate this risk.

Considering your background and the company's domicile, do you perceive limitations in the global market?

No.

Great job, and I wish you all the best going forward. You're showing terrific growth.

Thank you very much. Appreciate it.

Thank you. It appears we have no additional questions at this time. So I'd like to pass the floor back over to Shachar Daniel for concluding remarks.

Thank you very much. To summarize, looking forward to 2024 with clear goals for continuing to grow our business. We plan on increasing market share in the IPPN vertical, penetrating new regions, engaging with high-profile customers, and increasing our global network infrastructure. Additionally, we aim to penetrate the data collection and labeling market with our AI scraper and Web Unblocker distribution, selling them to existing and new customers. We plan on entering the data analysis world and AI analysis capabilities to our data product and delivering an end-to-end solution for our customers. All our businesses will continue to serve our main goals of solid revenue growth and profitability. Thanks, everybody, for joining us today. Appreciate it.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.