Alarum Technologies Ltd. (NASDAQ:ALAR) Q3 2025 Earnings Call Transcript November 26, 2025
Alarum Technologies Ltd. beats earnings expectations. Reported EPS is $0.19, expectations were $0.04.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Alarum Technologies Third Quarter 2025 Earnings Results Conference Call. [Operator Instructions] This conference is being recorded. I will now turn the call over to Kenny Green, Investor Relations at Alarum. Kenny, please go ahead.
Kenny Green: Thank you. Good day to all of you, and welcome to Alarum’s conference call to discuss the results of the third quarter of 2025. I would like to thank management for hosting this call. Today, we are joined by Shachar Daniel, Alarum’s CEO; and Shai Avnit, CFO. Shachar will begin the call with an overview of the third quarter, followed by Shai, who will review key elements of the financials. Finally, we will open the call to our 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 security laws.
Forward-looking statements include statements about plans, objectives, goals, strategies, future performance and underlying assumptions and other statements that are different than historical facts. For example, when we discuss our strategy of prioritizing long-term relationships 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 improvements, 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 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 SEC 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, as 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 use our EBITDA and adjusted EBITDA, non-IFRS gross margin, non-IFRS net profit or loss and non-IFRS basic earnings or loss per share or EPS.
The exact definitions and reconciliations of these non-IFRS key business metrics are described in the company’s financial results press release, which is available in the investor lobby of Alarum’s website. These 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 Mr. Shachar Daniel, Alarum’s, CEO. Alarum — Shachar, please go ahead.
Shachar Daniel: Thank you, Kenny, and good morning, everyone. Thank you for joining us. Let me start with the headline. Q3 was a breakout quarter, $13 million in revenues, up 81% year-over-year and 48% sequentially. This is one of the strongest quarters ever in Alarum’s history and clear evidence that our platform has begun critical infrastructure for some of the world’s leading and most exciting AI labs and global technology companies. This significant jump was driven by increased consumption from major AI customers, continued expansion within existing enterprise accounts and strong adoption of our newer AI-centric products. During the quarter quarter we saw 26% more paying customers, 17% higher average revenue per customer and 48% sequential revenue growth.
While our largest customers contributed just over 1/4 of our revenues and our top two contributed just over 40% growth was growth based. We also continue to see significant traction from our major global e-commerce platforms in Asia, which faced repeat and expanding orders, despite the natural volatility of this yearly hyper growth phase of the AI market, we are confident that demand is broadening and growing sharply, and AI will be a core long-term and significant growth engine for us. Profitability. As we noted last quarter, our gross margin will see a short-term impact by the mix of our two very large customers, both globally recognized brands operating at extraordinary scale. There’s significant consumption at the start of significant work with them naturally comes with our — with lower unit pricings, and for us, higher initial infrastructure costs.
Part of our delivery for these customers only at the early and initial stages of delivery relies on third-party partners and those costs flew directly into cost of revenue. That said, these customers validate the strength of our technology, reinforce our ability to deliver data at native scale and represent significant long-term strategic upside. Earlier this year, given the strong potential we saw, we made the delivery decision to aggressively expand capacity at premium residential infrastructure and build dedicated high throughput pipeline ahead of revenue. And this front-loaded investments are the primary reason for the temporary pressure on margins. And importantly, I strongly believe that this is exactly the right long-term strategy. While remaining profitable overall, we are sacrificing some near-term profitability to strongly capture market share and secure more relationship in the segment growing several hundred percent year-over-year.
Looking ahead, margin improvement. This margin pressure is short-term planned and fully addressable. Several initiatives are already underway and are part of our strategy: one, in-house solutions. Our goal is to serve as the customers’ leading and most reliable provider. To achieve this, we leverage our deep market expertise and long-standing relationships with numerous vendors. And sometimes when needed, we select a partner to collaborate with. And once we validate continued demand for the specific product, we will either develop it in-house, alternative or consider acquiring the solution. This approach will allow us to enhance our capabilities at lower risk and ensuring demand while significantly improving our gross margins over time. Two, network optimization.
We’re identifying large optimization opportunities across our service and network architecture. Improved efficiencies have already begun and will continue to improve over time. Three, shift toward higher-value products. As dataset, scrapers and website unblockers grew as a percentage of the revenue, unit economics and margins will improve also. We remain confident in our ability to expand both growth and operating margins as our product mix continues to shift and our infrastructure becomes more efficient. AI market dynamics. We are operating at the frontier of the largest AI model training runs on the planet. At this stage of the AI build-out, demand from leading labs can move sharply quarter-to-quarter a day; one, refresh massive data sets; two, test new architectures or shift compute priorities.
This volatility is normal in a market that is still in a land grab phase. As models move from research to more structured production and fine-tuning cycles, revenue patterns will naturally become smoother and more predictable. Until then, our major KPIs are year-over-year trends, penetration and quality of relationships. Across all these three, we have never been stronger. Product suite expansion. Our AI-strengthening product suite is scaling rapidly. Dataset and material and fast-growing revenue contributor. Website Unblocker delivered triple-digit sequential growth. Custom scrapers delivered high double-digit sequential growth. IP proxy network stable to growing in absolute terms and continues to support massive AI workloads. Our revenue mix is evolving from a single product proxy business into a diversified multiproduct data infrastructure platform.
This shift is expected to drive stronger long-term margins and healthier unit economics. Outlook and summary. We remain confident that we are in the right position at the early stages of a massive and long-lasting transformation in the data industry. Looking ahead to Q4, and as Shai will detail shortly, we expect revenues approximately of $12 million plus minus 7%, which is up a very significant 62% year-over-year and will allow us to end the year at around $41 million in revenues, up almost 30% year-over-year and well ahead of our internal expectations earlier in 2025. From global tech leaders to fast-growing start-ups, all are increasing their reliance on high-quality real-time public web data at unprecedented scale, and Alarum is uniquely positioned to serve this market.
Our vision was and remain clear. Alarum will become one of the foundation data infrastructuring companies powering the AI area. I will now hand it over to Shai for the financial details and our Q4 outlook. Shai?
Shai Avnit: Thank you, Shachar, and hello, everyone. I will start by reviewing our key financial results for the third quarter of 2025, comparing them to the same period last year, unless otherwise noted. Following that, I will provide our guidance for the fourth quarter of 2025. Detailed definitions and reconciliations of our non-IFRS key business metrics can be found in our Q3 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 and first revenues. Revenues in the third quarter of 2025 reached $13 million compared to with $7.2 million in the third quarter of 2024, an increase of approximately 84% year-over-year.
As Shachar mentioned, the increase was driven mainly by artificial intelligence customers with a significant contribution from one large-scale AI customer, which accounted for about $3.5 million in revenue in the quarter. At the same time, we continue to see a shift in customer segments with strong growth in the AI vertical, offsetting declines in other segments. Gross margins. As a result of our increased investments into our business to capture opportunities ahead and due to the higher share of large-scale projects with AR customers, non-IFRS gross margins for the third quarter of 2025 was 56% compared to 74% in the third quarter of 2024. As Shachar mentioned, the lower margin reflects the work we are doing with large customers, mainly AI companies, which require data gathering at significantly higher scales, necessitating upfront costs, including a larger volume of servers and stronger, higher quality infrastructure as well as lower unit price charges.
In addition, the first material products served in 2025 triggered related third-party costs. Overall, this is consistent with our strategy to engage in large scale, high strategic opportunities that we believe can drive meaningful long-term growth and profitability even at the cost of lower short-term margins that we expect to improve in the future. Expenses. Operating expenses in the third quarter of 2025 were $7.4 million compared to $4.1 million in the third quarter of 2024. The increase was driven mainly by planned operating expenses investments that we discussed last quarter. This includes higher employee-related costs, particularly in R&D and sales-related compensation as we continue to grow the team to accelerate product development, expand our capabilities as well as by the overall increase in the scale of operations.
Net profit in the third quarter of 2025 was $0.1 million compared to a net profit of $4.2 million in the third quarter of 2024. As a reminder, the Q3 2024 profit was particularly high due to a sharp fair value decreases of investors’ warrants related to the share price decreases in the quarter. Those decreases resulted in high financial income of $3.5 million. The vast majority of the warrants expired in 2025, and hence, they do not impact our bottom line anymore. Adjusted EBITDA. Adjusted EBITA in the third quarter 2025 was $1.2 million compared to $1.4 million in the third quarter of 2024. Basic earnings per ADS in the third quarter of 2025 were $0.01 compared to $0.60 in the third quarter of 2024. The high Q3 2024 figure was a result of the onetime financial income I just mentioned.
On a non-IFRS basis, basic earnings per ADS were $0.18 in the third quarter of 2025 compared to $0.20 in the third quarter of 2024. Our current share count is approximately 71.2 million ordinary shares or 7.1 million U.S. listed ADSs. As of September 30, 2025, the company’s shareholders’ equity increased to $31.1 million, up from $26.4 million on December 31, 2024. Our cash, cash equivalents and debt investment balance, including accrued interest as of September 30, 2025, was approximately $24.6 million compared with $25 million at the end of 2024. Alarum’s solid cash position supports our ability to continue investing strategically while maintaining a focus on sustainable value creation. Guidance. Moving over to our outlook for the fourth quarter of 2025.
Our guidance reflects what we see today based on customers’ orders, backlog and current consumption trends and is given as of today’s date. We currently expect that in the fourth quarter of 2025, revenue will be around $12 million with an up and down range of approximately 7%, representing about 63% year-over-year growth. Adjusted EBITDA for the fourth quarter of 2025 is expected to be around $1 million with a range of plus/minus $0.5 million. To summarize, 2025 continues to be a year of strong momentum, a solid balance sheet and growing market interest. We remain focused on our commitment to generating long-term sustainable value for all our stakeholders. With that, we will now open the call for questions. Operator?
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