Alarum Technologies Report Record Revenues in the First Quarter of 2023

Key Financial Highlights for the First Quarter of 2023:

Alarum Technologies (Nasdaq, TASE: ALAR), a global provider of enterprise and consumers internet access solutions, has today announced record financial results for the three months ended March 31, 2023. 

• Revenues climbed to a record high of $5.7 million, an increase of approximately 41% compared to the first quarter of 2022.
• Net loss decreased by 85% to $0.7 million, compared to a net loss of $4.7 million during the first quarter of 2022.
• Achieved positive cashflow from operating activities, and Adjusted EBITDA, for the first time, of $0.06 million, up from an Adjusted EBITDA loss of $3.2 million in the first quarter of 2022.
• NetNut Ltd. (“NetNut”), the Company’s internet access arm for business and enterprise customers, became profitable for the first time.

“I am incredibly proud of the entire Alarum team for their contributions to the generation of cashflow from our operating activities and the first-ever positive Adjusted EBITDA this quarter, alongside our ninth consecutive quarter of revenue growth. We’ve significantly improved our revenue stream, our net loss and the Adjusted EBITDA compared to the previous year as well as the prior quarter. Our key metrics, both financial and non-financial, are moving in the right direction and aligning with our strategic vision. As our enterprise access solutions continue to scale, we believe that we are well positioned for continuous success,” said Mr. Shachar Daniel, Chief Executive Officer of Alarum.

“Achieving positive cash flow from our operating activities is a significant milestone for Alarum, especially when accompanied by continuously sustaining substantial growth. We believe this is a strong indicator of the financial success of our core business activities.  With another solid quarter behind us and sufficient financial resources to support our growth initiatives, we believe that we remain on path to profitability. Our results showcase our ability to drive revenue growth while maintaining operational efficiency, ultimately creating value for our stakeholders,” concluded Mr. Daniel.

Mr. Chen Katz, the Company’s chairman of the board of directors, added, “We began fiscal year 2023 with a solid foundation, delivering robust top-line growth, primarily by expanding sales of our value-added products. We are also demonstrating operational leverage as we maintain cost discipline across the organization and invest wisely to fuel further growth. The impressive results achieved by Alarum are a testament of the successful efforts by our talented leading teams, and I have full confidence in the Company’s ability to continue to thrive.”

First Quarter of 2023 Operational Highlights and Recent Business Developments:

• NetNut experienced surging demand and rapid adoption in Asia, with monthly subscriptions tripling
• NetNut Announced launch of a new white-label consumer internet access privacy solution
• NetNut expanded into the retail artificial intelligence (“AI”) market, securing its first customer for digital technologies and analytics solutions
• CyberKick Ltd., the Company’s Consumer Internet Access subsidiary, extended its $2.0 million revolving line of credit agreement with United Mizrahi-Tefahot Bank Ltd., to support consumer privacy solutions operations, through May 25, 2024
• Further to Alarum’s February 22, 2023, announcement regarding an investigation into potential illegal short selling of the Company’s American Depository Shares, the Company continues to assess suspicious trading activity and will take appropriate corrective actions if necessary

Financial Results for the Three Months Ended March 31, 2023:

• Revenues amounted to $5.7 million (Q1.2022: $4.0 million). The growth is attributed to the organic increase in the enterprise access business revenues.
• Cost of revenues totaled $1.9 million (Q1.2022: $1.9 million). The additional costs for resources in the enterprise internet access business were offset by lower user acquisition costs in the consumer internet access business and lower amortization of intangible assets.
• Research and development expenses totaled $1.1 million (Q1.2022: $1.4 million). The decrease is attributed mainly to reduced expenses in the enterprise security segment after outsourcing to TerraZone Ltd., a global security reseller, in 2022.
• Sales and marketing expenses totaled $2.2 million (Q1.2022: $3.0 million). The decrease resulted mainly from lower media acquisition costs in the consumer internet access business and reduced sales and marketing expenses in the enterprise security business after outsourcing to TerraZone Ltd. in 2022.
• General and administrative expenses totaled $1.0 million (Q1.2022: $2.25 million). The decrease is largely due to reduced professional consulting fees, particularly legal fees related to resolved patent proceedings in May 2022.
• As a result, net loss improved to $0.69 million, or $0.02 basic loss per ordinary share (Q1.2022: net loss of $4.7 million, or $0.16 basic loss per ordinary share).
• Adjusted EBITDA was positive at $0.06 million (Q1.2022: Adjusted EBITDA Loss of $3.2 million).

The Company defines Adjusted EBITDA as net loss before depreciation, amortization, interest, tax and impairment of intangible assets, as further adjusted to remove the impact of (i) impairment of goodwill (if any); (ii) share-based compensation expense; and (iii) contingent consideration measurement (if any).

The following table presents the reconciled effect of the above on the Company’s Adjusted EBITDA or Adjusted EBITDA loss for the year and three months ended March 31, 2023 and 2022, and the years ended December 31, 2022 and 2021:

*Less than $0.01

Balance Sheet Highlights:

• As of March 31, 2023, shareholders’ equity totaled $12.9 million, or approximately $3.93 per outstanding American Depository Share, compared to shareholders’ equity of $13.3 million on December 31, 2022. The reduction is due mainly to the Company’s net loss during the first quarter of 2023.
• As of March 31, 2023, the Company’s cash and cash equivalents balance totaled $3.7 million, compared to $3.3 million on December 31, 2022. The Company’s cash balance does not account for up to an additional $2.2 million in funds available under its credit facility and investment financing.

Use of Non-IFRS Financial Results
In addition to disclosing financial results calculated in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, this press release contains non-IFRS financial measures of EBITDA, Adjusted EBITDA and Adjusted EBITDA Loss for the periods presented that exclude depreciation and amortization, interest and tax, as further adjusted for the effect of impairment of goodwill, contingent consideration adjustments and share-based compensation expenses. The Company’s management believes the non-IFRS financial information provided in this release is useful to investors’ understanding and assessment of the Company’s ongoing operations. Management also uses both IFRS and non-IFRS information in evaluating and operating its business internally, and as such deemed it important to provide this information to investors. The non-IFRS financial measures disclosed by the Company should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with IFRS, and the financial results calculated in accordance with IFRS and reconciliations to those financial statements should be carefully evaluated. Investors are encouraged to review the reconciliations of these non-IFRS measures to their most directly comparable IFRS financial measures provided in the financial statement tables herein.