Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Alarum Technologies Second Quarter 2024 Corporate Update Conference Call. During today's presentation, all parties will be in listen-only mode. Following management's presentation, the conference will be open to questions. This conference is being recorded today, August 26, 2024. Before we get started, I'll read a 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 or 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 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. 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 of these non-IFRS key business metrics are described in the company's second quarter of 2024 financial results press release. I'll now turn the call over to Shachar Daniel, Alarum Technologies’ CEO. Mr. Daniel, the floor is now yours.

Thank you very much and welcome everyone to Alarum Technologies' second quarter 2024 results conference call. With me here is Shai Avnit, our Chief Financial Officer. I will be covering Alarum’s performance, recent developments, the trends we are seeing in the market, and our strategy for long-term vision. Today, for the first time, we provided quarterly guidance and are providing additional KPIs as we constantly strive to enhance transparency. Shai will review the financials and our Q2-2024 guidance. I will then conclude the prepared remarks part with a short summary before opening the call for your questions. Starting with a review of our Q2 2024 key achievements. The end of Q2 marked the first full year since we announced our shift to focusing on Enterprise Internet Access. Total revenues for Q2 increased to $8.9 million, of which $8.7 million were attributed to NetNut, our Enterprise Internet Access arm. Adjusted EBITDA in Q2 reached a record of $3.4 million, more than three times higher than in the same quarter last year. Revenues for the first six months of 2024 increased to $17.3 million, of which $16.8 million was attributed to NetNut, reflecting a 98% year-over-year increase from the $8.4 million NetNut revenues in the first six months of 2023. I'm also very pleased with our continued progress in cash flow generation. Q2 marked our first consecutive quarter of positive cash flow, a significant achievement for a company of our size and stage. We ended the quarter with more than $21 million in cash and cash equivalents. Our cash balance well positions us to invest in opportunities that will drive long-term success and provide the foundation for sustained growth. In line with our strategy and long-term vision, we are on track with our three growth engines. First, increasing our market share in the IP Proxy Network, the IPPN segment. Second, penetrating the data collection and labeling market. Third, providing our customers with data insights. We continued to make progress in each of these growth engines during the past quarter. We added major and highly regarded brands to our customer base as we continue to expand and further our network. We made substantial progress into the data collection and labeling market with our innovative products, the Web Unblocker and the AI Data Collector. We continue to make progress towards adding AI analysis capabilities to our data products. Advancing on these fronts and establishing the broadest data collection and insight offering is the foundation for Alarum’s future growth. Regarding our IPPN customer base, I'm excited to share that during Q2, we added some of the world's largest and most recognized brands. The significance of these new customers, leaders in their respective fields, speaks for itself, highlighting the power and robustness of our offerings. We are extremely proud of these additions to our evolving and diversified customer base and look forward to seeing them enhance the usage of NetNut's offerings over time. While I cannot share their specific names, I would like to provide some insight about them. These new high-caliber customers include one of the largest social media platforms with over 1 billion active users, a leading B2B sales intelligence and sales engagement software company with a database of more than 250 million contracts, and one of the world's foremost screening and background check providers for identity verification, employment, and health screening. This customer, which performs over 100 million background checks annually, will be able to reduce the number of inefficiencies, thereby improving its operational efficiency. As you may recall, towards the end of 2023, we stated that our growth strategy includes engaging with and attracting Fortune 500 and leading global companies. I am excited to report that in Q3, we won a Fortune 100 customer, a leading merchandise retailer. Before selecting NetNut, they evaluated our capabilities, verifying their compliance with their performance, scalability, and reliability standards. This win is a testament to the robustness of our products, the innovations driving our development, and our growing reputation as an industry leader. As part of our strategy to increase our market share in the IPPN segment, we continue to invest in expanding and improving our network, which has now become one of the leading networks in the industry. According to the 2024 Proxyway Market Research, NetNut's network is recognized as a top performer, a significant endorsement of our technological capabilities and potential scale. What really sets us apart is the size of our network's stability and robust functionality coupled with our ongoing global expansion. Our infrastructure now is capable of handling significantly more traffic, which represents a remarkable achievement as it will allow us to scale our revenue significantly while improving our gross margin. This highlights both the robustness of our network and our strategy of building infrastructure that can drive scalable and profitable growth. Moving on to the second pillar, product innovation in the data collection and labeling market. We continue to focus on and invest in broadening the scope of our data collection offerings. Over the past quarter, we made significant progress with our new product entering this market, the Web Unblocker and the AI Data Collector. The Web Unblocker and the AI Data Collector are key components in facilitating our long-term growth and accomplishments in a huge multi-billion dollar prospective market. According to both market research data and our internal assessments, the data collection and labeling market is expected to continue to grow rapidly over the coming years. I'm happy to report that in Q2 we started generating initial revenues from new customers who placed orders for the Web Unblocker. We see a growing pipeline of opportunities for the Web Unblocker, which has been tested and rated as the best on the market by industry experts. The robust Web Unblocker is also key to the success of our AI Data Collector. The Data Collector will enable enterprises to easily generate a collector within minutes, thanks to its intuitive no-code interface. Its advanced AI will enable it to automatically adapt to website changes while ensuring continuous data collection with minimal downtime. With these innovations, we continue to push the boundaries of what's possible in our industry. We also continue to make inroads in our third long-term growth pillar, data insights. In Q2, we continued working intensively on bringing to life our vision of adding AI and analysis capabilities to our data products, aiming to create the most comprehensive solution in the market. The significant investment we have made in the recent years is pivotal to our penetration into the data world. The meteoric rise of artificial intelligence threatens the underlying principle behind this investment. We all acknowledge the importance of data in every aspect of our lives. The conflict between AI and traditional websites regarding access to transparent, high-quality information is at the core of how data consumption and analysis is evolving. AI relies on data sources and on products that generate insights from existing processes, provide recommendations, and forecasts. I would like to touch upon what we are seeing in the market, specifically in our Q3 business so far. The market we operate in is ever-evolving and nascent. Therefore, as we continue to expand our customer base, enhance our offerings, and grow the business, we may experience some short-term variances. Q3 2024 projected revenues are expected to demonstrate year-over-year increase but are also anticipated to be lower than Q2 due to market dynamics that some of our customers are experiencing, which have impacted revenues since June. However, as we approach the end of August, we are observing a positive trend with consistent growth in the monthly revenue rate from June to July, continuing into August. This positive trend is primarily driven by strong performance and retention of our existing customers, complemented by new customers. This will allow me to share some KPIs we use internally to measure our performance and projected midterm revenue growth. Analyzing data from the past three years shows that on average, our NetNut customers have been generating approximately 15 to 18 times the revenue compared to their initial month activity. In Q2 2024, we generated total revenues of nearly $400,000 from dozens of new customers in their first month of activity. This was approximately 60% higher than the revenues generated from new customers that onboarded in the prior quarter, Q1 2024, and was also approximately 35% higher than the average of the last four quarters. According to our model, these new Q2 customers are expected to generate revenues of about $6 million to $7.2 million over the next few years alone, which is a clear indicator of the resilience of our business model. In Q3, in line with the projected year-over-year growth, we expect to continue to enjoy strong, solid customer retention rates across most verticals. In fact, NetNut is expected to surpass the full year 2023 revenue within the first three quarters of 2024. Our ongoing growth trend will be driven by continued investment in our record, the success of our new products, and the expansion of markets, which we anticipate will lead to increasing demand for our solutions, allowing for a long-term focus on maintaining steady, sustained growth and profitability. I will now turn the call over to Shai for a review of the financials. Shai, go ahead.

Thank you, Shachar, and hello, everyone. Over the past quarter, the company has achieved impressive growth, improved its margins, and has become a profitable cash-generating company. This gives us the flexibility and resources to invest in the areas that will drive our future growth. I will summarize the main financial results of the second quarter and first half of 2024, comparing them to our second quarter and first half 2023 results respectively, unless otherwise stated. All figures were rounded for simplicity. Also, today is the first time that we are providing quarterly guidance in parallel to the quarterly results announcements. I will provide guidance for Q3 2024 as we aim to enhance transparency for investors. Let's move on to the numbers. Revenue for the second quarter of 2024 increased to $8.9 million, up 27.2% from the $7 million in the second quarter of 2023. The NetNut portion rose to $8.7 million in Q2 2024, up 72% from $5 million in Q2 2023, while reaching a six-month record of $16.8 million, almost double the $8.4 million NetNut revenues recorded in the first half of 2023. Non-IFRS gross margin for the second quarter of 2024 increased to 78.5%, up from 71% in Q2 2023. The year-over-year increase in gross profit and gross margins was primarily driven by the increase in revenues. We've structured our network in a way that allows us to generate higher revenues while maintaining essentially the same level of fixed costs. This enables us to achieve higher gross margins as revenues increase. Operating expenses in Q2 2024 were down to $4.2 million from $12.8 million in Q2 2023. The Q2 2023 operating expenses included $8.5 million attributed to goodwill and intangible assets impairment from CyberKick, our consumer internet access business, which we have been scaling down since Q3 last year. In Q2 2024, we recorded non-cash finance expenses of $2.5 million resulting from the fair value increase of warrants issued in 2019 to 2020 related to the increase in the company's share price. The vast majority of the warrants are due to expire in 2025. As a result, we recorded a $0.4 million IFRS net loss for the second quarter of 2024 compared to a net loss of $7.7 million in Q2 2023. Excluding these finance expenses and other non-cash costs, our adjusted EBITDA for the second quarter of 2024 was $3.4 million, three times higher than the $1.1 million adjusted EBITDA in the first quarter of 2023. For 2024, non-IFRS basic earnings per share was $0.04 per share or $0.41 per ADS, compared to $0.04 basic earnings per share of $0.45 per ADS in Q2 2023. As of June 30, 2024, the company's shareholder equity totaled $20.4 million, up from $13.2 million on December 31, 2023. The increase in net profit combined with warrants and options exercises contributed to this $6.8 million increase. The company's cash and cash equivalent balance at the end of Q2 2024 was $21.6 million, up from $10.9 million as of December 31, 2023, as we have successfully been generating cash flow from operations. Moving on to the guidance, we are expecting Q3 2024 revenue to demonstrate year-over-year growth with an estimated revenue range of $7 million plus/minus 3%. As a reminder, the NetNut portion of our revenues in Q3 2023 was $6.1 million. Q3 2024 adjusted EBITDA is expected to range between $0.8 million to $1 million. To summarize my part before I turn the call back to Shachar, operating results and cash generation achieved over the past quarter have resulted in improved profitability metrics and positive adjusted EBITDA, as well as a solid cash balance, all of which are outstanding for a company of our size. And they provide us with the flexibility and resources to invest in the areas that will drive the company's future growth. With that, I'll turn the call back over to Shachar.

Thank you, Shai. In Q2 2024, Alarum has once again delivered solid results. As a long-runner, Alarum is focused on expanding its customer base and investing in technological innovation. We are confident that these investments will yield benefits for the company and its various stakeholders. The expansion of our network enables us to serve more and more customers, driving scalable and profitable growth across various verticals today and in the future. We intend to continue to release new products designed to meet evolving market requirements. We will continue to embark on our strategy by adding data insights and AI capabilities to our existing products, ensuring that we stay at the forefront of the industry. We have a clear vision of where we want to go, and we are executing our plan with discipline and focus. We are laying the foundation for future success as a leader in the global data collection market through innovation, strategic investments, and a determined focus on execution. We will now open the call for Q&A session. Operator?

Our first question is from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your questions.

Thanks so much for taking my questions. With your revenue being all subscriptions for the most part and therefore recurring, the net retention revenue was 1.66 in the first quarter and 1.59 in the second quarter. Reconcile those if you could with the major drop in revenue sequentially.

So, Brian, can you repeat the last part of the question?

I'm curious with revenues recurring and your retention rate has been suggesting your existing customers' usage is much higher. Why in the third quarter would revenue drop so steeply? What's causing that?

Okay. So just to refresh the audience and your memory, the NRR indicator that we're using, and not only us, it's an industry standard, basically makes four measurements. It compares four quarters to the previous four quarters, then moving one quarter back, doing the same, and another two times, meaning it takes large data into the calculations. So till now, you remember it, Brian?

Yeah.

So, okay, so even if you see a drop or a dip of sequential quarters or quarter-over-quarter, it doesn't necessarily mean that you will see the impact directly in the NRR because the NRR, as I mentioned, measures quarter comparisons over a year. Now, regarding the second part of your question, as I mentioned in my pitch just a few minutes ago, in the third quarter, we experienced a kind of slowdown for some of our customers, which caused a decline in revenues from Q2 to Q3. However, after we witnessed this slowdown in May, in June, we began to see positive growth trends returning, with growth from June to July continuing into August. This positive trend is driven primarily by the strong performance and retention of our existing customers, complemented by new customers. This presents us with an excellent opportunity to share some KPIs we use internally to measure our performance and projected midterm revenue growth.

A little bit. So I want to make sure I understand, first, have you lost any customers? And second, if I'm understanding what you're saying is, several of your existing customers are expecting to have significantly less usage, so they're going to be paying less. Is that what you're saying?

No, no, okay. So for your question if we lost customers, I cannot formally say that we lost customers because losing a customer means they announced or let you know that they're terminating the agreement and that they have stopped using us, moving to a competitor or something like that. This is not the case here. If you recall, our model is based on duration and consumption. In the middle of Q3, some of our customers slowed down their usage, which is what we refer to as a drop or dip that might impact their renewal in the next month, meaning in June or July. Even if they renewed, they may have purchased much smaller packages from a bandwidth perspective. That's why you see these revenues decline. On the flip side, the majority of our customers are showing consistency and growth, hence we see growth from July to June and then from August to July.

Okay. I'm wondering if you could share any customer concentration metrics. For example, what percentage of the total revenue in the first half of the year came from the top five, ten, or twenty customers?

So, Brian, I don't have this data or those calculations currently available, but let me be more specific. If we discuss May versus June, you can see that from May to June there was not a significant change, just a dip of approximately 20% in monthly revenues, which has gradually recovered, showing growth from July to August.

Okay, just to follow up, is your top twenty customers more than half of your revenue?

Okay, so for the top twenty customers, I can share that in the first half of 2024, we have a pyramid indicating that we have a little over 400 customers that we track, specifically those performing above $100. Among these customers, five generated over $500,000 in the first half of 2024 with an aggregate revenue of $6.8 million, averaging 8.3% per customer for these five customers. The next level, consisting of 38 customers generating between $50,000 to $500,000, contributed an aggregate of $7.2 million, representing an average of 1.15% of the company's revenues in the first two quarters of 2024. Overall, approximately $14 million in revenue for the first half of 2024 was generated by a total of 43 customers. I hope this sheds light on the split.

That's very helpful. I have one last question. You mentioned something that I didn't fully understand. Can you explain what makes up over $2 million in other expenses? You mentioned finance. Are those all cash costs?

Brian, you mean the finance expenses?

Yeah, below the line you have over $2 million of expenses.

Yes, $2.5 million of finance expenses. These are expenses related to the evaluation of old warrants from 2019 and 2020 that are classified as a liability according to accounting standards, hence we need to evaluate them at each quarterly end based on the share price. The higher the share price…

They're not in cash. It's not a cash expense.

Right, it's only non-cash expenses. It has nothing to do with our operating cash flow.

Yeah, not material. Thank you so much.

Thank you, Brian.

Our next question is from the line of Kingsley Crane with Canaccord Genuity. Please proceed with your questions.

Hi, and congrats on the strong results. So, I would like to dive just a bit deeper into the ADCL market opportunity. I'm curious how you're thinking about your data collection capabilities and feature set outside of text-based web scraping and just more on the product roadmap in that regard. Thank you.

Okay, just to clarify your question, you are talking about outside of data scraping. What do you mean by outside of data scraping?

Or rather, just the total picture of data collection, whether that includes text, images, video or other forms of alternative data as well.

Okay. So I'll summarize it succinctly. The market's stake is fundamentally established from three pillars: one is the infrastructure for data collection, which is the IP proxy network, our primary product, allowing data collection without the risk of being blocked, providing transparent, accurate data. This is our major product. The next stage in our architecture is data collection and labeling, including data collectors, scrapers, and other products that convert unstructured data into structured data. We are making significant strides towards developing our AI collector, which should potentially be the most innovative product in the market. The second product, the Web Unblocker, will be released even before the AI Data Collector and is designed to counteract websites that try to block access to public available data. It has been tested by several experts and is regarded as the most innovative and proven solution available; the demand is remarkable because customers cannot find suitable alternatives. As we progress towards production mode, it can likely become a huge success. The final layer aims to offer insights and recommendations, which some of our customers, particularly those in AI, know how to analyze input data and deliver actionable output. This can be applied across various industries. This is how we envision the market.

Thank you, Shachar. That was really helpful. This question is probably more for Shai, but I appreciate the additional metrics you provided and understand that this is the first quarter you've offered quarterly guidance. I think the market is still figuring out that philosophy. Regarding the $7 million target with a plus or minus 3% deviation, should we interpret that as a 95% confidence interval, or how much certainty would you attribute to that range of guidance? I'm trying to get a sense of the potential upside here. Thank you.

We quoted the number $7 million because we feel this is the most likely number we are aiming for. The plus/minus 3% gives you the range that we are confident we will meet probably 90% or more.

Okay, that's simple, that's helpful. Okay, that's it for me. Thank you.

Thank you very much.

Our next question is from the line of Yi Fu Lee with Cantor Fitzgerald. Please proceed with your question.

Thank you for taking my question. Good morning, Shachar and Shai. Great set of results. In terms of moving up market, we see some wins on a Fortune 100 and you guys landing larger with customers spending $400,000 and more. Was wondering if you could discuss any changes in the go-to-market sales strategy to help Alarum penetrate the upper market?

Yes, it was part of our previous presentations and statements over the past year. As we develop the network, our focus is on performance. Given our confidence in the network we've established, our team aimed to make this a significant strategic objective for this year and beyond, specifically targeting larger clients such as those in the Fortune 100. We have sales representatives who possess more experience in enterprise sales, which is distinct from online sales. We have begun to reach out to these clients, and I’m pleased to share that we have secured some through inbound requests, indicating increased recognition of our brand and its expanding presence.

Okay, and then a follow-up to Shai, like on the AI data collection from the last question is, I understand it's probably more of a next year opportunity. What are some of the enhancements you're thinking of making here, and what are the M&A targets do you guys have an interest in?

M&A targets are typically more specific as we progress. M&A can be a great opportunity for each company, including Alarum, as a powerful means to scale. With cash generation and our established brand, we can accelerate our progress. If we delve deeper and find M&A opportunities, then we will focus on areas like data collection and labeling, or advancing to insights involving AI companies that analyze data, provide recommendations, and projections. So, organically, we want to base our developments around both internal and external growth opportunities; everything’s on the table. Thanks for the details, Shachar. Shai, one last question macro in general. While understanding the slowdowns in consumption at the end of the quarter, it seems that the commentary in July indicates a recovery in consumption. While you don’t have a crystal ball, how should we consider volatility in consumption for the rest of the year? To be honest, we did not release guidance for Q4. While we are growing and increasing our level of transparency, we haven’t released future guidance for Q4. Nonetheless, we constantly measure key indicators that provide us with insights into future trends. Indicators show positive signs. First, after the one-time drop in May through June, we managed to get back on track in growth with retention levels showing consistency among current and new customers. The growth pattern between June and July, along with new customer revenues from Q2, illustrates consistent growth and builds our level of confidence that we are in a growth trend. You can analyze this data and make your own calculations.

Yeah, thank you very much for that. Very good color.

Thank you.

Our next question is from the line of Shahar Cohen with Lucid Capital. Please proceed with your question.

Hi guys. A few things. A, what was the main cause to publish the focus right now? Why now? A. B, some people say that you have some business related to the US election.

Can you repeat that? I didn't hear you.

You have some revenue from the US election, maybe not negligible revenue, from the US election. Maybe they don't portray themselves as parties. They can come undercover. But can you state clearly that you have no business related to the US election?

Who is speaking?

Shahar from Lucid Capital.

Regarding your first question, if you track our company over the past two years or so, we decided that part of our maturation process requires increasing the disclosure of indicators, KPIs, and data to the market to enhance transparency. We did it in preceding quarters as well. This time we opted to release more indicators, including projections for the upcoming quarter, which improves transparency and demonstrates growth. Regarding the US election, this is the first time I am hearing of such an association. Therefore, I can confidently say no.

So you don't have business related to the US election as far as you know?

From my best knowledge, we do not have any business related to the US election. However, if you have further insights, please share.

Okay, thank you.

Thank you. At this time, I will hand the call back to management for further remarks.

Thank you, operator. Thank you all for your time today. We look forward to hosting you on Alarum Technologies Q3 2024 results call. Thank you.

Thank you. This will conclude today's call. You may disconnect your lines at this time. Thank you for your participation.