Release Date: August 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenues for Q2 2024 increased to $8.9 million, a 27.2% rise from Q2 2023.
- Adjusted EBITDA reached a record $3.4 million, more than three times higher than the same quarter last year.
- Q2 marked the first consecutive quarter of positive cash flow, with a cash balance of over $21 million.
- Significant progress in the data collection and labeling market with new products like the Web Unblocker and AI Data Collector.
- Addition of major high-caliber customers, including a Fortune 100 company, highlighting the robustness of Alarum's offerings.
Negative Points
- Q3 2024 projected revenues are expected to be lower than Q2 due to market dynamics affecting some customers.
- Operating expenses in Q2 2024 were $4.2 million, though down from $12.8 million in Q2 2023, still a significant amount.
- Non-cash finance expenses of $2.5 million due to the fair value increase of warrants issued in 2019-2020.
- Revenue drop in Q3 attributed to a slowdown in usage by some customers, impacting monthly revenues.
- High customer concentration, with a significant portion of revenue generated by a small number of top customers.
Q & A Highlights
Q: 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.
A: (Shachar Daniel, CEO) The NRR indicator measures four quarters versus the previous four quarters, so even if there is a sequential drop, it doesn't immediately impact the NRR. In Q3, we experienced a slowdown from some customers, but we saw positive growth trends from June to August.
Q: Have you lost any customers? And are several of your existing customers expecting to have significantly less usage?
A: (Shachar Daniel, CEO) We haven't formally lost customers. Some customers slowed down their usage, which impacted revenues. However, the majority of our customers continue to show consistency and growth.
Q: Can you share any customer concentration metrics? For example, what percentage of the total revenue in the first half of the year came from the top 5, 10, or 20 customers?
A: (Shachar Daniel, CEO) In the first half of 2024, five customers generated more than $500,000 each, totaling $6.8 million. The next level includes 38 customers generating between $50,000 to $500,000 each, totaling $7.2 million.
Q: What would be over $2 million of expenses on other expenses? Are those cash costs?
A: (Shai Avnit, CFO) The $2.5 million finance expenses are related to the evaluation of old warrants from 2019 and 2020, classified as a liability and evaluated each quarter-end based on the share price. These are non-cash expenses.
Q: Can you dive deeper into the ADCL market opportunity and your data collection capabilities outside of text-based web scraping?
A: (Shachar Daniel, CEO) The market consists of three pillars: infrastructure for data collection (IP proxy network), data collection and labeling (scrapers and data collectors), and data insights (AI analysis). We are progressing with our AI Data Collector and Web Unblocker, aiming to provide comprehensive data solutions.
Q: On the $7 million target with plus or minus 3%, how much certainty is around that range of guidance?
A: (Shai Avnit, CFO) The $7 million target is the most likely number, with the plus/minus 3% range providing a 90% or more confidence level.
Q: Can you discuss any changes in the go-to-market sales strategy to help Alarum penetrate the upper market and land larger customers?
A: (Shachar Daniel, CEO) We have targeted our team to focus on enterprise sales, aiming for Fortune 100 and other large customers. Some of these customers approached us, indicating strong brand awareness and confidence in our network's performance and scalability.
Q: What are some of the enhancements you're thinking of making in AI data collection, and what are the M&A targets you have an interest in?
A: (Shachar Daniel, CEO) We are investigating opportunities in data collection and labeling, as well as data insights and AI. We have established a committee to explore internal development and potential M&A targets to accelerate our progress.
Q: How should we think about the volatility in the consumption aspect of the usage in this market for the rest of the year?
A: (Shachar Daniel, CEO) While we haven't released Q4 guidance, indicators show positive trends. After a drop in May, growth resumed from June to August. New customers in Q2 are expected to generate significant revenue over the next few years, supporting our growth trend.
Q: Do you have any business related to the US election?
A: (Shachar Daniel, CEO) From my best knowledge, we do not have any business related to the US election.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
