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01/11 11:09
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Alarum Technologies shows mixed signals: slight revenue decrease but a shift towards AI customers, and improved net profit. Investments in R&D and infrastructure are raising expenses, affecting margins negatively. The Q&A reveals concerns about low margins and unpredictable demand but highlights potential growth from AI trends. Overall, the company's strategic focus on AI and infrastructure investments could lead to future growth, but short-term profitability and margin recovery are uncertain. Given these mixed factors, the stock price is likely to remain stable in the short term, resulting in a neutral sentiment.
Revenue Second quarter revenue was $8.8 million, compared to $8.9 million in the second quarter of 2024, showing a slight reduction due to a shift in customer mix towards AI-driven customers.
Net Profit Net profit was $0.3 million in Q2 2025, compared to a net loss of $0.4 million in Q2 2024, driven by financial income from interest and reduced expenses related to warrants.
Adjusted EBITDA Adjusted EBITDA was $1 million in Q2 2025, compared to $3.4 million in Q2 2024, reflecting increased investments in infrastructure and R&D.
Non-IFRS Gross Margin Non-IFRS gross margin was 63% in Q2 2025, compared to 78% in Q2 2024, due to increased costs from expanding the proxy network and working with lower-margin AI customers.
Operating Expenses Operating expenses were $5.4 million in Q2 2025, compared to $4.2 million in Q2 2024, primarily due to increased employee salary-related costs, especially in R&D.
Financial Income Financial income was $400,000 in Q2 2025, compared to a financial expense of $2.5 million in Q2 2024, driven by interest income and the absence of warrant-related expenses.
Non-IFRS Net Profit Non-IFRS net profit was $0.3 million in Q2 2025, compared to a net loss of $0.4 million in Q2 2024, attributed to financial income and operational efficiency.
Cash and Liquid Investments Cash and liquid investments were $25 million as of June 30, 2025, unchanged from the end of 2024, with positive pretax cash flow offset by a one-time tax payment.
New AI-driven data collection projects: Collaborations with large-scale AI and e-commerce platforms, including a major online marketplace in Asia, for advanced generative AI model development. These projects involve large-scale data collection and labeling for model fine-tuning.
Product portfolio expansion: Investments in R&D to develop a cooperative suite of data collection products tailored for the AI era, aiming to attract new customers and cross-sell to existing ones.
AI market positioning: Alarum is positioning itself as a key player in the AI market by providing infrastructure for large-scale data collection, essential for training and fine-tuning AI models. The company is targeting major AI players and e-commerce companies.
Customer base expansion: The customer base now includes major tech giants, emerging start-ups, and small businesses, reflecting a shift towards AI-driven clients.
Infrastructure investment: Significant investments in IP proxy infrastructure to support increased demand and optimize network performance, despite lower short-term margins.
Talent acquisition: Expansion of the R&D team to accelerate product development and meet growing customer needs.
Long-term growth strategy: Strategic decision to reinvest earnings into scaling operations, expanding infrastructure, and deepening collaborations with major companies, even at the cost of short-term profitability.
Focus on AI-driven opportunities: Alarum aims to become a central player in the AI revolution by leveraging its data collection capabilities and targeting high-value AI customers.
Lower Gross Margins: The company is experiencing lower gross profit margins due to investments in infrastructure and working with major customers at lower margins. This could impact short-term profitability.
Volatility in AI Market: The AI market is described as highly dynamic and unpredictable, with major customers unable to articulate their needs more than a few months ahead. This could lead to volatility in revenue and operational planning.
High Operating Expenses: Operating expenses have increased significantly, driven by higher employee salary-related costs, particularly in R&D. This could strain financial resources if not managed effectively.
Dependence on Major Customers: The company is increasingly reliant on major AI-driven customers, which could pose risks if these customers reduce or change their demand.
Uncertain Revenue from New Projects: Revenues from new large-scale AI data projects are not guaranteed and are consumption-based, adding uncertainty to financial projections.
Market Infancy and Unpredictability: The AI market is still in its infancy and taking shape, making it highly unpredictable and challenging for long-term strategic planning.
Short-Term Profitability Sacrifices: The company is sacrificing short-term profitability to invest in long-term growth, which could be risky if long-term gains do not materialize as expected.
Revenue Expectations: Revenue for Q3 2025 is expected to range at $12.8 million with an up and down range of 7%, representing around a 78% year-over-year increase. This includes the initial impact of a new large-scale AI data project, contributing approximately $3 million of revenues during the quarter.
Profitability and Margins: Near-term profitability from the new AI data project is expected to be limited due to the early ramp-up stages and infrastructure optimization. Gross margins are expected to decline further in Q3 2025 due to lower profitability margins from strategic customer projects.
Investment in Infrastructure and R&D: The company plans to continue significant investments in infrastructure to support increased demand, particularly from major AI-driven customers. R&D investments will also increase to expand capabilities and broaden the product portfolio.
Market Trends and Opportunities: The company is focusing on capturing opportunities in the AI market, which is described as a once-in-a-generation opportunity. The demand for reliable, scalable, and correct data is broadening massively, driven by the need for data collection for AI model training and fine-tuning.
Strategic Focus: Alarum is prioritizing long-term growth over short-term profitability by reinvesting earnings into scaling operations, expanding infrastructure, and deepening collaborations with major companies. The company aims to become a central player in the AI revolution.
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The earnings call reveals strong revenue growth driven by AI projects, but declining margins and increased expenses. The Q&A indicates high customer satisfaction and potential for margin recovery, yet management's lack of guidance on revenue consistency and infrastructure investment dampens sentiment. The mixed signals, with strong revenue but weak margins and cautious guidance, suggest a neutral outlook for stock movement.
Alarum Technologies shows mixed signals: slight revenue decrease but a shift towards AI customers, and improved net profit. Investments in R&D and infrastructure are raising expenses, affecting margins negatively. The Q&A reveals concerns about low margins and unpredictable demand but highlights potential growth from AI trends. Overall, the company's strategic focus on AI and infrastructure investments could lead to future growth, but short-term profitability and margin recovery are uncertain. Given these mixed factors, the stock price is likely to remain stable in the short term, resulting in a neutral sentiment.
The earnings report indicates a significant decline in revenue, net profit, and EBITDA due to strategic reinvestments, impacting short-term profitability. The competitive landscape is challenging, with regulatory and talent acquisition risks. Despite a strong balance sheet and cash position, the absence of immediate shareholder returns and lower margins are concerning. The Q&A reveals broad-based demand but highlights competitive pressures and unclear market leadership. Overall, the financial performance and strategic focus on long-term growth suggest a negative short-term stock price reaction.
The earnings call presents a mixed outlook: a 15.5% revenue decline and lower margins raise concerns, but strong cash flow and increased shareholder equity are positives. Q&A insights suggest broad-based demand growth and strategic investments, but lack of clarity on market leadership is a downside. The overall sentiment is balanced by optimistic revenue guidance for Q2 2025 and ongoing customer growth, resulting in a neutral stock price prediction.
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