Earnings call transcript: Alarum Technologies Q2 2025 sees stock surge amid AI focus

Alarum Technologies Ltd reported its Q2 2025 earnings, showcasing a strategic pivot towards AI-driven data collection and infrastructure expansion. Despite a slight dip in revenue from the previous year, the company turned a net profit, contrasting with a loss last year. Following the announcement, Alarum’s stock climbed 7.53%, closing at $17.71, as investors reacted positively to the company’s future prospects and strategic investments. According to InvestingPro data, the company maintains a "GREAT" overall financial health score of 3.67 out of 5, with particularly strong momentum and cash flow metrics.

Key Takeaways

• Alarum reported a net profit of $300,000, reversing a loss from the previous year.
• Revenue slightly declined to $8.8 million, down from $8.9 million in Q2 2024.
• The company emphasized its role as a core provider for AI data collection infrastructure.
• Stock price surged by 7.53% post-earnings announcement.
• Significant investment in R&D and infrastructure to support AI demands.

Company Performance

In Q2 2025, Alarum Technologies demonstrated resilience by achieving a net profit of $300,000, a significant turnaround from a $400,000 loss in the same quarter last year. However, revenue experienced a slight decline to $8.8 million from $8.9 million. The company has been focusing on its strategic role in the AI sector, which has been a key driver for its recent performance, despite a reduction in adjusted EBITDA to $1 million from $3.4 million. InvestingPro analysis indicates the company holds more cash than debt on its balance sheet, with a healthy current ratio of 2.8x, suggesting strong financial flexibility to support its strategic initiatives. Discover 10+ additional ProTips and comprehensive financial analysis with an InvestingPro subscription.

Financial Highlights

• Revenue: $8.8 million, a decrease from $8.9 million in Q2 2024
• Net Profit: $300,000, compared to a net loss of $400,000 in Q2 2024
• Adjusted EBITDA: $1 million, down from $3.4 million in Q2 2024
• Gross Margin: 63%, down from 78% in Q2 2024
• Shareholders’ Equity: Increased to $29.1 million from $26.4 million

Market Reaction

Alarum Technologies’ stock surged by 7.53% to $17.71 following the earnings announcement. This upward movement reflects investor optimism about the company’s strategic direction and potential growth in the AI data collection market. The stock’s performance is notable as it moves closer to its 52-week high of $21.50, indicating strong market confidence. Based on InvestingPro Fair Value analysis, the stock appears slightly overvalued at current levels, with an RSI suggesting overbought territory. The stock has delivered impressive returns, gaining over 150% in the past six months and 55% year-to-date. Access the complete Pro Research Report, available for 1,400+ US stocks, for detailed valuation analysis and expert insights.

Outlook & Guidance

Looking ahead, Alarum projects a significant revenue increase for Q3 2025, forecasting $12.8 million, a 78% year-over-year rise. The company anticipates an adjusted EBITDA of approximately $1.1 million, with major contributions expected from a large AI data project. Despite an expected decrease in near-term profitability due to infrastructure investments, Alarum is optimistic about its long-term growth potential. The company maintains strong fundamentals with a 72.4% gross profit margin and a return on equity of 21% over the last twelve months. Analysts remain bullish, with a consensus "Strong Buy" recommendation and price targets ranging from $15 to $22.

Executive Commentary

CEO Shahar Daniel emphasized the increasing value of data, stating, "Data is becoming significantly more valuable in today’s world." He also highlighted the company’s long-term focus, saying, "We are building the business not just to meet today’s and tomorrow’s massive short-term needs." These statements reflect Alarum’s commitment to sustaining growth through strategic investments.

Risks and Challenges

• High operating expenses due to increased R&D and infrastructure investments.
• Potential challenges in scaling operations to meet growing AI data demands.
• Dependence on market trends in AI and data collection sectors.
• Maintaining profitability amidst strategic reinvestment efforts.
• Competitive pressures from other data collection and AI infrastructure providers.

Q&A

During the earnings call, analysts inquired about Alarum’s new large-scale customer with initially lower margins and the infrastructure challenges associated with high-bandwidth data projects. Executives reiterated the strategic importance of these projects and the expected long-term value over short-term profitability. The growing demand from AI and data insight customers was also a focal point of discussion, highlighting the company’s expanding market opportunities.

Full transcript - Alarum Technologies Ltd (ALAR) Q2 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Alarm Technologies Conference Call for the Second Quarter twenty twenty five. During today’s presentation, all parties will be in a listen only mode. Following management’s presentation, the conference will be open to questions. This conference call is being recorded.

I will now turn the call over to Kenny Green, Investor Relations at Alarm. Kenny, please go ahead.

Kenny Green, Investor Relations, Alarm Technologies: Thank you. Good day to all of you and welcome to

Shahar Daniel, CEO, Alarm Technologies: Alarm’s conference call to discuss the results of

Kenny Green, Investor Relations, Alarm Technologies: the 2025. I would like to thank management for hosting this call. Today, we are joined by Shahar Daniel, Laram’s CEO and Shay Avni, CFO. Shai will begin the call with an overview of the quarter followed by Shai who will review key elements of the financials. Finally, we will

Shahar Daniel, CEO, Alarm Technologies: open the call to our listeners for the

Kenny Green, Investor Relations, Alarm Technologies: 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 securities laws. Forward looking statements include statements about plans, objectives, goals, strategies, future events, performance and underlying assumptions and other statements that are different than historical facts. For example, when we discuss our guidance, our future strategy and longer term vision, our potential for continued sustainable future growth and value creation, sustainable growth estimated margins and long term profitability, the potential of long term collaborations events in the AI landscape, demand for and expansion of our products and services and customer base, future opportunities, momentum and success 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 the allowance annual report on Form 20 F filed with the Securities and Exchange Commission on 03/20/2025 and in any subsequent filings with the SEC. All such forward looking statements, whether written or oral, made on behalf of the company are expressly qualified by those 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.

Non IFRS key business metrics the company uses are EBITDA, 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 and reconciliations of these non IFRS key business metrics are described in the company’s financial results press release, which are available on the Investors’ lobby of Alarm’s website. These non IFRS measures may differ materially from the similarly titled measures used by other companies and should not be considered in isolation from or as a substitute for financial information as in accordance with IFRS. And now I will turn the call over to Shahar Daniel, Alaran Technologies’ Chief Executive Officer. Shahar, please go ahead.

Shahar Daniel, CEO, Alarm Technologies: Thank you very much, Kenny. Good morning, everyone, and thank you for joining us today to discuss our results and recent business developments. To highlight our financial results, we reported second quarter revenue of $8,800,000 net profit was 300,000 and adjusted EBITDA of $1,000,000 Our results were well ahead of the expectations which were announced with quarter one results and in line with the upgraded guidance we issued in early June. I will start with AI market drivers. The key market driver for our strong performance is the huge first for massive amounts of training data for foundational AI models.

The recent trends for Alarm in particular is that our customers are increasingly including some major companies both AI players and e commerce companies and their associated deal sizes potential from this type of customers are much larger as well. We now have customers ranging from major tech giants to emerging startups as well as the small customers that we have traditionally worked with. As data is becoming significantly more valuable in today’s world, these customers and potential customers are turning to us to help them overcome the growing barriers to data access from compliance to geographical distribution and traffic unbroken. We have recently launched new projects with several large scale AI and e commerce platforms, including one of the world’s largest online marketplace in Asia. This particular customer has launched a very large data collection project for a new advanced generative AI model under development that may continue over the coming few months.

While at lower margin compared to our margins in the past year and while revenues are not yet guaranteed and are consumption based, potentially if we generate them, they are expected to be significant for Alarm over the coming months. These collaborations and others we have recently launched cover use cases such as large scale data collection labeling as well as collection for modern fine tuning with fresh and accurate public data. As their evolution reshapes every industry, our offerings from our flagship data collector and website unblocker to a highly robust and expanding proxy network are quickly becoming foundational to how companies collect public web data. Our products enable our customers to acquire massive amounts of data, the key fuel to the AI boom. The market’s first reliable, scalable and correct data is broadening massively and accelerating among more and more players as more models are launched or upgraded.

Models must be trained, retrained, and fine tuned daily with new data consistently. And to do that, they need infrastructure collect like ours it. The opportunities that we have ahead of us with data having become the most valuable commodity on the planet is the once in a generation opportunity. Allowing us position in the perfect nectus all the current data capture trends and we are aiming to invest and pursue as many of the opportunities ahead that we reasonably can. We have already started and we continue to invest strongly in our infrastructure to support the significant new demand as well as in our ability to meet the extensive needs of major customers.

The investment in our IP proxy infrastructure enabled us to support more throughput and serve more of the major demand with fast ROI. As I mentioned, the work we are doing with the major customers is being done at lower gross profit margins because the revenue and long term potential is so high. In addition, the overall investment in expanding our growth network increased the cost of sales, but it also has the long term benefit of optimizing our network infrastructure and product delivery. Therefore, by design, we are currently showing lower margins. Over the short, mid and long term, our investments will allow us to serve more and more customers and importantly, meet the needs of the major AI players, all of which are investing hundreds of millions of dollars on each model they launch.

We want to make sure we are well positioned to capture an increasing portion of that growing pie. We are also growing our high quality talent pool and developing a cooperative field of data collection products designed for the AI era. This is through our R and D investments to expand our capabilities and broaden our product portfolio. The goal is not only to attract new customers, but also be able to cross sell to existing customers and meet more of our customers’ data needs under one roof. While I hope I’ve been able to share my vision for capturing the opportunity ahead of us, I do want to highlight that it is not likely to be a straight pass up, especially over short periods.

It is very early days and the market we are operating is still in its infancy and taking shape. It is highly dynamic and unpredictable, and even our major customers cannot articulate their needs more than a few short months ahead. They may be powered by major customers as they give us the data, stabilize models or adjust strategies which may have outsized impact. Volatility is high and we are planning accordingly. I urge investors to judge our development over periods of many quarters, not quarter by quarter, allowing us to ultimately focus on playing the long game.

We are building the business not just to meet today’s and tomorrow’s massive short term needs, but also over the mid to long term to become the destination for any company, whether a major player, startup or small business with significant data collection needs. In summary, with focused execution, a forward thinking innovative approach, and growing interest from AI driven customers, our goal is not just to participate in the AI evolution, but to become one of the central companies spreading it. As I’ve already shared with you, given the tremendous opportunity with CIL, we have made a strategic decision to increase our investments by leveraging our profitable operations and reinvest earnings back into the company. We are investing in innovation, in infrastructure, in growing our customer base and in deepening collaborations with some of the world’s largest and most influential companies. While the goal is to remain profitable overall, we may sacrifice short term profitability for what we believe will be massive long term revenue and much higher profit stretching over longer periods.

At the same time, we remain focused on efficiency and disciplined execution, which is backing from our strong balance sheet with cash and liquid investments of approximately $25,000,000 Allowance stands in the perfect position to benefit from everything going on today in the AI market and we look forward to cementing our position at the very core of this market. Handing it over to you now, Shay.

Shay Avni, CFO, Alarm Technologies: Thank you, Shahar, and hello, everyone. I will start by reviewing our key financial results for the 2025, comparing them to the same period last year, unless otherwise stated. Following that, I will provide our guidance for the 2025. Detailed definitions and reconciliations of our non IFRS key business metrics can be found in our Q2 twenty twenty five 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. Ahead of original guidance issued following last quarter results and in line with the increased guidance in June, revenues in the 2025 reached $8,800,000 This compared to $8,900,000 in the 2024. The slight reduction in overall revenues is due to the different mix of customers we have in 2025, having seen the AI segment grow significantly and mostly replacing customers from other segments. As a result of the shift, the net retention rate NRR was 0.98. As Shahar mentioned, we made the strategic decision to reinvest earnings into scaling operations, expanding infrastructure and broadening our IP proxy network, positioning our own to capture long term value and meet the demand, particularly from major AI driven customers.

During this phase of transition, we continue to be dedicated to managing our operations efficiently, while ensuring we progress toward long term goals. As a result of this move, our non IFRS gross margin for the 2025 was 63% compared to 78% in the 2024. In the third quarter, we have started working with a highly strategic customer, which is expected to increase our revenues by approximately $3,000,000 per quarter. However, as mentioned in our press release, we will see low profitability margins in the early stages of our work with these customers, and as such, we expect a further decline in our gross margins in the third quarter. Operating expenses in the 2025 were $5,400,000 compared to $4,200,000 in the 2024.

The increase was driven mainly by the increase in employee salary related costs, particularly in R and D, primarily as we diligently grow the team to accelerate product development. As Shahar mentioned, we expect to continue to increase investment in our capabilities, especially R and D, to meet the opportunities ahead. In the 2025, we recorded a financial income of $400,000 compared to an expense of $2,500,000 in the same period last year. The shift to financial income was mainly driven by interest income we generated from our cash in 2025, while in 2024, we recorded high expense due to the fair value increase of warrants issued in 2019 and 2020, an increase that was reversed in the 2024, where the warrants value decreased. These warrants, which are out of the money, will expire within a month, eliminating any future impact of these items.

Non IFRS net profit was $300,000 for the 2025 compared to a net loss of $400,000 in the 2024. Adjusted EBITDA in the 2025 was $1,000,000 compared to $3,400,000 in the 2024. Our current share count is 70,900,000.0 ordinary shares or 7,100,000.0 U. S. Listed ADSs.

On a fully diluted basis, the count is 80,900,000.0 ordinary shares or 8,100,000 ADSs. The 2025 basic and diluted earnings per share were $04 per ADS on non IFRS basis compared to a loss of $05 in the 2024. As of 06/30/2025, the company’s shareholders’ equity increased to a record of $29,100,000 up from $26,400,000 on 12/31/2024. The company’s cash, cash equivalents and long term investment balance, including accrued interest, at 06/30/2024 sorry, 2025 was $25,000,000 compared with same amount as at the 2024 as our positive free tax cash flow was offset with a one time $1,700,000 tax payment in January 2025 on behalf of 2024 NetNut’s taxable income. Allowance continued solid cash balance ensures we can invest strategically while maintaining a focus on sustainable value creation.

Moving on to our outlook for the 2025. Our guidance considers what we see today based on customer orders and backlog and is off today. We anticipate that in the 2025, revenue will range at $12,800,000 with an up and down range of 7%, representing around a 78% year over year increase. The 2025 adjusted EBITDA is expected to be around $1,100,000 with a range of plusminus $05,000,000 Our guidance includes the initial impact of a new large scale AI data project, which is expected to contribute approximately $3,000,000 of revenues during the third quarter. As we are still in the early ramp up stages, it is currently not clear what the full scope and length of the project will be.

As I mentioned earlier, as we are at the initiation stages of this project, we are actively optimizing infrastructure and cost structure, and expect near term profitability from this project to be limited, which impacts our overall profitability in the third quarter. To summarize, 2025 continues with strong momentum, a solid balance sheet, and growing market interest. We remain focused on our commitment to generating long term sustainable value for our stakeholders. With that, we open the call to the question and answer session. Operator?

Conference Operator: Thank you. The floor is now open for questions. The first question today is coming from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

Brian Kinstlinger, Analyst, Alliance Global Partners: Thanks so much for taking my questions. I just want to dig a little bit into that large customer ramp in the third quarter you’re highlighting. I missed part of your prepared remarks. So I’m a bit confused on why it’s not generating incremental EBITDA and the gross margin will be low. Is it a paid proof concept?

Is there major discounts? And if this service does continue, I understood that you are unsure of the time or the length. Will the pricing dynamics or economics change that you would be able to generate more traditional margin contribution?

Shahar Daniel, CEO, Alarm Technologies: Okay. Hi, Brian. Basically,

Brian Kinstlinger, Analyst, Alliance Global Partners: yes, hi.

Shahar Daniel, CEO, Alarm Technologies: There are a few factors for this at this point of time, for these lower margins lower margins than our, let’s say, standard or till today customers or projects. First of all, it’s a new product. It’s a combination of few products, but mostly it’s datasets. And the project is in huge scale. And as we mentioned, the demand for this project was in a very short time.

So, we are now shaping the infrastructure costs for this huge scale data demand. And this is, I think, yes, this is the most this is the biggest differentiation from different products, from different projects that were due to the fact that the cost basically, which is mostly the infrastructure of this project, for this point of time, is much more expensive. And due to this, the margins are lower.

Brian Kinstlinger, Analyst, Alliance Global Partners: Okay, so, first of all, what is that infrastructure, technology, or people? And then the second question to that

Shahar Daniel, CEO, Alarm Technologies: How about is technology? The first question.

Brian Kinstlinger, Analyst, Alliance Global Partners: If it, sorry?

Shahar Daniel, CEO, Alarm Technologies: It’s technology infrastructure, you know, servers and all related. Right.

Brian Kinstlinger, Analyst, Alliance Global Partners: Now assuming the so to in order for the margin to recover, you’ll have to have significant volume increases from $3,000,000 a quarter for this product, not necessarily this customer, to help the margin recover. Is that accurate or no?

Shahar Daniel, CEO, Alarm Technologies: Can you rephrase the question? What do you mean? Well, it sounds

Brian Kinstlinger, Analyst, Alliance Global Partners: like you’re adding $3,000,000 of revenue, but it’s not driving profit right now at all. I mean, you’re incremental from the second quarter. So I’m assuming in order to drive incremental profit, you’ll have to have significantly more volume to offset the COGS. Is that right?

Shahar Daniel, CEO, Alarm Technologies: Yes. So it depends. I will say it again. As we just started the project, hopefully I hope, yes, we are doing all our efforts. And that’s what we did also in the past because then it was not so clear in our financials.

But every time we’re starting a new product or launching a new, let’s say, product in scale, so we are shaping the cost structure of the product, especially the infrastructure and the network cost. So one aspect is that we will improve our cost structure and our infrastructure cost in this project. Second, yes, let’s say if the structure will stay the same of the revenues in the next quarter, and this project will be in the same portion, so we will need to basically to recover by adding more projects to our customers with our standard gross margins. But one more thing that is very important, Brian, is the fact that this kind of, let’s call it, project or kind of business line in our customer, it’s not the only product that is buying from us. And we see it as a very strategic penetration.

We see it as a way to get some cross sells and up sells over the time, not only for this product, for our different products. By the way, this customer is buying so much mostly all of our products. And it’s totally strategic for us, so we are not measuring it only for numbers, EBITDA, profitability, etcetera. Great. I have

Brian Kinstlinger, Analyst, Alliance Global Partners: two more questions. The first one is, what is the product? And how is it different than the products you have right now?

Shahar Daniel, CEO, Alarm Technologies: What? Do you mean this project comparing Yes, to our

Brian Kinstlinger, Analyst, Alliance Global Partners: you’re saying this is a different product, and you’re hiring r and d, to develop a new infrastructure for this product. Is it something different, and and it’s a cross selling opportunity? So can you describe what it does?

Shahar Daniel, CEO, Alarm Technologies: Yeah, the scale, the amount of the data, the volume, the bandwidth, okay? It’s bandwidth that is something unbelievable. It’s a huge amount of bandwidth. And due to this, the cost of the network, the servers, the cloud computing is at this stage, we are reshaping it, or we already improve it all the time. This is the major difference from our project that you saw till today.

Brian Kinstlinger, Analyst, Alliance Global Partners: Okay. The last question is, outside of this customer, can you talk about the broader customer base? Is their usage generally going to be increasing compared to the first half of the year? And then maybe speak to the pipeline of new logos.

Shahar Daniel, CEO, Alarm Technologies: Okay. So as you see the results of this quarter comparing to the previous one, And as you see the projection of the next quarter, you see that besides of this specific let’s call it upsell because it’s from a current customer, you see that we are growing even significantly. We see, as we mentioned now in the call before we move to the question part, we see a huge trend of AI and data needs sorry, data needs from AI or intelligence, let’s call it intelligence customers, not only AI, but all related to data insights in order to train their own models or in order to provide data insights for their customers. And many new logos are coming in. The pipeline is basically it’s a period that is very good for this industry.

We are trying to meet all the demand, not only not infrastructure only from, and scalability, that’s why we invest a lot in our network and infrastructure, but also from the features and the sub product that our customers are asking from us all the time. We see that there is a huge demand for new products, for new features. We are trying to hunt and to meet this demand by recruiting talent and new R and D employees. And that’s the current situation.

Shay Avni, CFO, Alarm Technologies: Okay. Thank you.

Shahar Daniel, CEO, Alarm Technologies: Thank you very much.

Conference Operator: Thank you. The next question is coming from Kingsley Crane of Canaccord Genuity. Please go ahead.

Kingsley Crane, Analyst, Canaccord Genuity: Thanks for taking the question, and and huge congrats on these results and the traction you’re seeing. It’s it’s definitely a big moment for the company. I wanna start just bigger picture. I know it sounds like there there’s been a changing of the guard a bit in the customer base, and that’s kind of why we’re seeing that lower NRR this quarter. But Yeah.

I mean, in your opinion, do you think that this could eventually result in higher customer lifetime value, you know, stability on a quarter to quarter basis? I realize too that, you know, if we’re gonna see surges, it’s not gonna be linear, but just curious about that.

Shahar Daniel, CEO, Alarm Technologies: Okay. Great question. I will elaborate. So, the way, we measure our NRR is basically we are measuring four quarters comparing to the four quarters before, four times. So for example, this quarter, the first measure started in the 2023.

And then you have four measures and the average between them. Now, you know, we are using this method because we thought and we still think that it’s big data, it will not be volatile if one quarter is doing a little bit different for here or there, whatever. And that’s why we chose this way of calculation. But, to be honest, now it’s a period that it might be a little bit, let’s say, a little bit misleading, because we saw a huge trend in the last, let’s say, one year or one and a half years from one side, some sectors and verticals, lowered significantly their presence in our for our product, meaning lower the demand due to some changes in their vertical. And from the other side, the new AI trend and AI companies and big companies came in.

So if we are not publishing it because we have one method, but to say here, if you are measuring, for example, the NRR quarter over quarter from Q1 to Q2, and then to the projected Q3, you will see a significant growth from current customers, Significant growth, okay, a number that is very good. So hopefully, we hope and expect that this trend, you know, these customers are here to stay because it’s a different game than the previous trends because, you know, everybody knows and thinks that the AI and the need for data is here to stay maybe forever. So as time will run and we will, you know, the past period, for example, you know, because every quarter, we are taking one measure for this quarter, and then we are dropping the first one. So, as the time will run, you will start to see the impact of this retention and lifetime value of our customers over the last one year, and it will a little bit, not a little bit, but and the path will be behind us. For this point of time, it still measures mostly the path, so the weight in the average, because it’s, you know, it’s a plain vanilla average, it’s still taking the average or taking the NRR for this direction.

Hope it was clear.

Kingsley Crane, Analyst, Canaccord Genuity: Right. No. Makes perfect sense on the metric, and I think understood on the structural trends as a whole. So just to touch a bit on this customer, you know, you mentioned it it was an existing customer in the release. Has this been a long standing customer?

You know, how impactful were they to to q two results?

Shahar Daniel, CEO, Alarm Technologies: The the this customer, how how impactful it was in the q two?

Kingsley Crane, Analyst, Canaccord Genuity: Yeah. Okay. So, basically, are they ramping up for nothing? Or maybe you wanted to not be specific. Yes.

Shahar Daniel, CEO, Alarm Technologies: No, no, not nothing. Not for nothing. We with him a few months ago, one and a half quarters. It started much before because it’s a longer engagement and negotiation and proof of concept, etcetera. We chose him by him.

And he started a ramp up slowly, slowly. So in this quarter, in the second quarter, he’s already let’s say, he’s not the biggest customer, but it has a very respectful amount of revenues, and now it jumped significantly, not exponentially, but it’s a current customer that is using our more than one product, is using also our scraper, using our IP proxy, and few departments, and we are scaling up into the customer with more and more departments. This project is something that you know is extraordinary, yeah?

Kingsley Crane, Analyst, Canaccord Genuity: Right. And so, with respect to the expected contribution, because I think guidance in general, we’re still sort of we’re still a little bit fresh on that. So, you know, just how much visibility do we have into that 3,000,000 as it is today? Like, how much is is actually committed so far? And then how variable could that spend be specifically in q three?

I realize q four and and longer is another story.

Shahar Daniel, CEO, Alarm Technologies: No. Q q three, we know. Yes. We we published the projection. You know mean?

You know about the q four.

Kingsley Crane, Analyst, Canaccord Genuity: Well, I guess what I just mean is the the range that that 3,000,000 could be within q three. Like, how certain are we of that range? Or, you know, or or, you know, is it committed spend or what kind of clarity do we have on that?

Shahar Daniel, CEO, Alarm Technologies: Yeah. You you know, two two third of the quarter was already behind us. Yeah. Because we’re in the August. Yeah.

So regarding the the last month of the quarter, which is September, no, we have a level of confidence and trust, the projection for next month. Regarding the next quarter or specifically the future, let’s say the short term, I want to emphasize something that is very important. We chose to talk specifically about this specific project at our current customer due to the fact that this is a significant material amount, but not only because of this, mainly because of the margins of these projects and their impact on the all margins, gross margins of the company. But from other aspects, like how much is predictable, what will be the duration of this demand, it’s not different than other projects, product customers. It’s in the same level, meaning in high level, we see a huge demand that is coming.

We are increasing the variety of our customers and the variety of our products, which is supposed to make them more and more sustainable. From the other side, which is great for us at this stage, as you see this incredible growth, but from the other side, this market, as I mentioned a few times, not only in this growth, this market is in the middle of a revolution, and it’s a crazy market, and it can go here and there. Everybody are now shaping their business models, learning their needs, trying to understand what will be the direction of their LLM, if and when it will be profitable, how they can monetize it, because I know it because we are joining in part of this discussion as a major part of this chain. So it’s not something that you can say, okay, I understand the business, I understand how much data it needs, I understand its consumption size, and according to this, I can project my numbers and my volumes for the future. So this is the current situation, and of course, it’s time we learn more and more.

At this point of time, it plays for us, the need is growing. But must be very clear, it’s not so predictable, it’s quite volatile, and hopefully, we will say it’s sustainable, but is the reality.

Kingsley Crane, Analyst, Canaccord Genuity: That makes perfect sense. And so last one, just, we’ve sort of addressed this, but how I’m trying to establish a range of outcomes on the gross margin side. Should we expect that additional revenue in q four and q one would also come at a similar gross like, component gross margin as to this large project? Or maybe on the other side, should we expect that in q four, you were gonna see gross margin improve once again as you optimize?

Shahar Daniel, CEO, Alarm Technologies: Okay. So in case, let’s say, in case the growth or the retention or the numbers, the revenues, let’s say, in Q4, will be mostly, or all of them, from our current business model, our current products, current business models, current customers, new customers, they’re basically asking the same. So, these, our current COGS, can support more clients, more demand in their current numbers. In case that something new will come, you know, tomorrow morning something new will come in the same numbers, even in higher numbers, in lower numbers, and then it will take again the COGS and the gross margins here or there. So in general, it’s something that is not kind of business standard, will not come in, so we expect hopefully to see the gross margins in a good place or any growth.

One more thing that is also very important, I want to emphasize also, I’m talking about it for more than a year, and it comes to reality now, we see the demand and we see the and we look to the future and now realize the demand in general, in our industry, is going to be higher even significantly. And you know, we are in a very competitive landscape, so we want to leverage our profitable operation. We want to leverage our know how. And my, and we are trying to invest and to increase our network, increase and strengthen our servers, our cloud computing capabilities, our endpoints in order to meet demand that we can knock on our door tomorrow morning. We think that at this stage, as we are in the middle of this amazing revolution, and basically, you know, if brand you yourself or basically, you know, you will add yourself as a natural part of this chain with these huge customers and this huge industry in the future, you can bear amazing fruits from it.

So we are trying to push as much as we can. Of course, you know, we have our limits. We are trying to be efficient. We will not push it without limitations, but we think that at this stage the opportunity is amazing and we cannot lose it.

Kingsley Crane, Analyst, Canaccord Genuity: Thanks again and congrats. Appreciate the time.

Shahar Daniel, CEO, Alarm Technologies: Thank you very much, Martin. Thank you.

Conference Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Daniel for closing comments.

Shahar Daniel, CEO, Alarm Technologies: Okay, everybody. So thanks a lot for your time today. We look forward to hosting you again on Allowance Technology next Revance call. Thank you very much.

Conference Operator: Ladies and gentlemen, this concludes today’s event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

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