Alarum Technologies Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 21, 2024

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Alarm Technologies First Quarter of 2024 Corporate Update Conference Call. During today's presentation, all parties will be in a listen only mode. Following the presentation, the conference will be open for questions.

Operator

This conference is being recorded today, May 21, 2024. Before we get started, I will read a disclaimer about forward looking statements. 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 of performance and underlying assumptions and other statements that are different than historical fact. 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.

Operator

Potential risks and uncertainties include those discussed under the heading Risk Factors in Alarm's annual report on Form 20 F filed with the Securities and Exchange Commission on March 15, 2000 sorry, March 14, 2024, and 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 these cautionary statements, and such forward looking statements are subject to risks and uncertainties, and we caution you to not place undue reliance on these. At this time, I'd like to turn the call over to Shachar Daniel, the company's CEO. The floor is yours.

Speaker 1

Thank you very much, and welcome, everyone, to Alarm Technologies Q1 of 2024 Earnings Results Conference Call. As is customary with me is Shayravnid, our Chief Financial Officer. In this call, I would like to provide a brief review of our business operations, summarize our accomplishments and then turn the call over to Shay, who will briefly discuss the financial results of the Q1 of 2024 before we will open the call to questions. We are extremely proud to present our Q1 results demonstrating continuous growth and successful execution in every aspect of our business trends that continue with us into the Q2. We started 2024 recording strong sales months resulted in our highest revenues to date.

Speaker 1

Net net revenues for the Q1 2024 totaled to $8,100,000 reflecting growth of 139 percent year over year compared to the Q1 of 2023. The strong momentum is also demonstrated in our net retention rate, NRR. NRR represents the average growth rate for preceding 4 quarters compared to the equivalent period year over year of current customers only without the revenues generated from new customers, but including up sales and cross sales on one end and churn on the hardware. In the Q1 of 2024, our NRR climbed to 1.66. In addition, the Q1 marked the rollout of our previously announced growth engines with the launch of our innovative product, the website and blocker, following our initial product, the SERP API.

Speaker 1

Already used by customers, the website and blogger achieved several key goals. 1st, it enabled us to cross sell new products to our existing customers. 2nd, its advanced innovation attracts numerous inbound requests from new customers, expanding our customer base. Lastly, we received positive feedback from our customers, which is crucial to our reputation and our ability to deliver top of the line products and solutions. During the Q1, we announced the launch of our revolutionary AI data collector product line.

Speaker 1

This cutting edge product line represents a significant leap forward in data collection technology, addressing the challenges of time, intensive collector creation and maintenance that have long plagued business across industries. We believe that AI data collected product line will be one of our growth engines for the upcoming years. It's an important milestone in NetNat's roadmap towards securing its share of the data collecting market and will disrupt current web data collection methods and allow users to scrape Internet data tailored to their specific requirements with an intuitive no code interface, the new AI data collector will enable users to effortlessly generate data collection within minutes from any source without the need to invest in developing designated data collectors for each websites. Beyond the value to customers seeking large scale data from multiple sources, the value for the company is significant as we will have the capacity to automatically develop and create dozens or even hundreds of new scrapers. One of the primary drivers of the data collection market is the resurgence of AI based solutions.

Speaker 1

In the past 2 years, countless new AI products have been introduced and widely accepted. This tool shares a common requirement. In order to deliver solid results, all AI based products must have access to massive amount of real time data with minimal errors. As such, we continue to invest in our fast, robust and reliable network, constantly expanding and enhancing its capabilities to meet the increased demand for data by the AI products. Our dedication to expand our business with innovation and strong value propositions resulted in a record quarter with $8,400,000 in revenues and adjusted EBITDA of outstanding $3,200,000 growing significantly compared to the Q1 of 20 20 profit of $1,400,000 compared to a net loss in the same period of 20 $2,800,000 The main difference between the two figures is following the sharp rate of the company's share price with the book non cash expenses resulting from the fair value increase of all the warrants issued in 2019 2020 at the amount of approximately $800,000 Before going further, I would like to turn the call over to Shai to discuss the financials for the quarter in more details.

Speaker 1

Shai?

Speaker 2

Thank you, Shahar. As I discuss our Q1 2024 financial results, I will be making comparisons to the Q1 of 2023 unless otherwise stated. Revenue for Q1, 2024 totaled $8,400,000 up approximately 47% over the $5,700,000 generated in the Q1 of 2023. The 2024 Q1 revenues were driven by a sharp growth in net net revenues, which more than doubled compared to last year. And despite our strategic decision to scale down the consumer business that led to a material decrease in CyberClick's revenues from $2,300,000 in 2023 to only $300,000 in the Q1 of 2024.

Speaker 2

Gross profit increased to $6,500,000 up 75% from $3,700,000 in the year ago period, driven primarily by increased efficiency of resources in the enterprise business and the scaled down strategy of Cyberkix operations, all resulting in a reduction in our cost of revenues. This resulted in a gross margin as a percentage of revenue of 78% compared to 66% only in Q1 2023. Our Q1 2024 operating expenses decreased 6% year over year to $4,000,000 down from $4,200,000 in Q1 2023. This improvement was driven primarily by reduced cost in the consumer business, partially offset by increased cost in the enterprise business. I would like to draw your attention to a material non cash expense within our finance expenses line, which had a significant impact on our IFRS net profit.

Speaker 2

In the Q1 of 2024, we booked $800,000 of non cash expenses resulting from the fair value increase of old warrants issued in 2019 2020 due to the recent rise in the company's share price. These warrants, which primarily are out of the money and are expected to expire in 2025 are booked in our balance sheet as a liability that fluctuates up and down based on the company's share price. Following the sharp price of the share price, the economic value increased resulting in these non cash expenses. Also, we accrued in the Q1 of 2024 for net net tax payment for the first time in the amount of $400,000 as net net became profitable for tax purposes. Net net is entitled to a low tax percentage of 12% only on its taxable income compared to a regular 23% tax imposed on companies in Israel due to its innovative efforts, which entitled NetNut to pay taxes under beneficial tax tracks.

Speaker 2

We will continue to accrue tax expenses during the year and first payments of these expenses to the tax authorities are expected throughout the year. As a result of the above, net profit for the Q1 of 2024 was $1,400,000 or $0.02 basic profit per ordinary share, which equals $0.23 basic per American Depositary Share, ADS, compared to IFRS net loss of $700,000 in the Q1 of 2023 or $0.02 basic loss per ordinary share, which are 0.21 dollars basic loss per ADS. Non IFRS net profit for the quarter was $2,800,000 or $0.04 basic profit per ordinary share, which is 0.45 dollars basic profit per ADS compared to non IFRS net loss of $100,000 in the Q1 of 2023, practically close to $0 basic loss per ordinary share or $0.03 basic loss per ADS. As of March 31, 2024 shareholders' equity totaled $17,100,000 or approximately 2 point $66 per ADS compared to shareholders' equity of $13,200,000 as of December 31, 2023. The increase stems from the 2024 Q1 net profit as well as warrants and options exercises.

Speaker 2

As of March 31, 2024, the company's cash and cash equivalents balance totaled $15,100,000 compared to $10,900,000 as of December 31, 2023. And lastly, I wanted to touch base on our share count as it stands today. On an outstanding basis, we have around 64,300,000 ordinary shares, representing approximately 6,400,000 ADSs. On a fully diluted basis, we currently have around 78,200,000 shares or approximately 7,800,000 ADSs outstanding. With that, I turn the call back over to Shahar.

Speaker 1

Thanks, Shay. Alongside our ongoing business activities and our efforts to support our growth, we're continuously planning for the future and advancing our roadmap with potential solutions for data analysis and insights. Similar to our latest strategic decisions we have taken in the past 2 years that have proven to be very successful, we invest many resources in choosing the right path for us when it comes to the next generation of our data collection solutions and offering. For that end, we established a special in house committee, which includes Gerard Fraenmarser, recently appointed as Strategic Advisory Board Member as a general corporate of a leading AI venture capital, disruptive AI and the former Colonel Head of the AI and Data Science Intelligence Unit in the Intelligence Unit of the Israeli Defense Forces, Mr. Feynmar Serb brings unparalleled expertise in AI Strategy and Cyber Technology.

Speaker 1

We are excited about the progress we have made in the last few months in our strategic plans and looking forward to update our investors regarding these plans for the future. All our business plans will keep serving our main goal of presenting solid revenue growth and profitability. Operator, please go ahead.

Operator

Thank you. We will now be conducting a question and answer Our first questions come from the line of Chris Tuttle with Caterpillar Investments. Please proceed with your questions.

Speaker 3

Hey guys, thanks for taking my questions. Another great execution period. Couple of quick ones on housekeeping and then I may circle back. So I understand the adjustment in the finance charges for the warrants. Can you give us, what do you expect the kind of run rate number to be on that line given your cash and whatever interest rate you're getting if you back out the one off warrant adjustment number?

Speaker 1

Okay. So first of all, thanks for the compliments, but I'm really sorry. Can you help your question? What is the run rate of what?

Speaker 3

The you're in line with the finance cost, which was affected by the warrant adjustment.

Speaker 1

Okay. You are talking about the non cash expenses that impacted our IFRS net profit?

Speaker 3

Yes, that's correct. But specifically, if you look at the finance expense line on the profit and loss statement, it was 848,000 dollars What would that be if you did not have the warrant adjustment in that particular number?

Speaker 1

I understand. Okay. Shay, you want to take it?

Speaker 2

Yes, of course. If we would have take it out and then you should just subtract around $800,000 from the current figure. So approximately it will be around 0.

Speaker 1

No, but the IFRS net profit would be $2,200,000 without this expenditure.

Speaker 2

This $800,000 would be added back to our net profit and would become $2,200,000 instead of $1,400,000

Speaker 3

Okay. And then related to that, given your cash balance, shouldn't you be earning pretty good interest on that to create a positive variance there in finance?

Speaker 2

Shay? Yes. We are creating some interest on our deposits. On the other hand, there are other ingredients that affect the finance expenses or interest line like this sorry,

Speaker 1

Currency. Currency.

Speaker 2

Currency differences between dollars and U. S. And the dollar and shekel. And also we have some interest expenses relating to our strategic funding that are still on our balance sheet under the liabilities. It is around $1,000,000 so it still carries some interest.

Speaker 2

So the combination of all of these is deducted some of the interest income we had on our deposits. But as long as we continue to increase our cash balances, then in these cases, we do expect to see other than these fluctuations in the warrants, we do expect to see some interest income going forward.

Speaker 3

Okay. All right. Thank you. And then, a couple quick ones here. The your favorable tax rate, does that have a period of time associated with it in terms of number of years?

Speaker 3

Or is it indefinite, you're 12% versus 23%?

Speaker 2

As long as we meet all the conditions for these beneficial tax track, it is indefinite. And these conditions, we do believe that we will continue to meet them. The most important definitions are basically regarding R and D. It's the number of R and D employees as a percentage of the total employees and the amount of R and D expenses as a percentage of the revenues. As long as we continue to be innovative and increase our efforts in development, then we don't see any issues to maintain this to be in this beneficial track and maintain these beneficial tax rates.

Speaker 3

Okay, excellent. Thank you. Last housekeeping question. Can you remind us what is the differential between your the 64,300,000 share count and the 78,200,000 fully diluted? What's the delta there, the big part of it anyway?

Speaker 2

Okay. It's cop out of many of 2 type of warrants. 1 is warrants to investors from various rounds in the past and also from the September 2023 round. And the other part is Aesop, just options and RSUs to employees.

Speaker 3

Okay. And then, the last question, which I think will be of general interest to people is, I'd love to know more about how you're getting your observations on how your customers are responding to some of the new products that you guys are working on, the anti blocker and some of your data, some of the advances on your data. And with a net retention rate of 166%, it's your existing customers are clearly ramping their involvement with you. So I'd love to hear more about what you're observing in terms of your customers and your go to market and with your current and your new products? And then I'll pass the baton to the next questioner.

Speaker 1

Okay. Thank you very much. So as I mentioned in my pitch, so this year we launched our major product, which is website unblocker. Already in the 1st day, we had our beta customers that basically got the product in order to be a kind of partners with us in testing the product in its initial stage. And they expressed high level of satisfaction, and most of them convert this kind of testing stage to production stage and acquired subscribed to this product.

Speaker 1

So we are of course, it's a product in ongoing development. We're developing and improving. We released the first version. And of course, we're about to release every few weeks advanced revisions with more features and capabilities. Of course, some of them come from the market, from the feedback that we get from our customers.

Speaker 1

But I'm saying happily and probably a high level of satisfaction customers are testing this product versus our competitor products and see and some KPIs that are significantly better. I will not give that now to technical KPIs, but in high level. So basically and as I about in a few months, it is in about in a few months. It can be in the end of this year or early in the beginning of next year, we will release our first version of this AI scraper with all its upside and advantages, and we look forward also to get an excitement for the market. And so basically, we just started with the new products.

Speaker 1

And of course, our major product, the IPPN is going very well as you see and the growth, the retention rate, the NRR, etcetera. Hope it answered your question.

Speaker 3

Thanks very much, guys. Appreciate it.

Speaker 1

Thank you very much. Appreciate your time.

Operator

Thank you. Our next questions come from the line of Tao Jacob with Epsilon Tao. Please proceed with your questions.

Speaker 4

Hi. First, I want to congratulate you for the recent excellent results. Your strategic decisions have played significant role in this success. I have few questions about the results and the new products that you will launch soon. We see a robust customer base and usage increases from quarter to quarter.

Speaker 4

However, your current service requires further development and additional functionalities from the customer side, which the AI data collector may reduce. So my first question, how do you foresee the impact of the new AI data collector on your customers and its potential to expand to your customer base? My second question is do you observe any demand from the current customer that willing to adapt the service?

Speaker 1

Okay. Thank you. First of all, again, thanks for the compliments. So just for a second, let's organize the data, okay? I think you're literally confused about 2 products, so I will organize your thoughts.

Speaker 1

Our current product, major product, which most of our revenues coming from is our IP proxy network. This IP proxy network is not related to the AI scraper and to capabilities of the AI scraper to reduce manual work and do everything automatically. Our current product does not require nothing from our customers besides to start to subscribe to our cloud and to start work. What we mentioned is that today the market of the scrapers, most of the scrapers or all the scrapers that we are aware of are requiring manual adjustments to websites and data sources from the customer side or from the vendor side, meaning to invest professional services and human hours in order to make the product more robust and to fit to the market needs. Our product, our planned product, our future product, the AI scraper and the intelligence capabilities of this product will come to express by this that the product itself will be able to adjust itself to almost every website to the structure of the landing page or the pages, the relevant pages in the website and also to adjust themselves to new versions or revisions that each x y is uploading once in a year, 2 in a year, etcetera.

Speaker 1

And by this, the main advantage, yes, will be 1, it will be very fast, Customer does not need to wait for professional services. We don't want professional services. Our We're trying to do everything as automatic as possible without any human being involved. And second, we will have a huge variety of scrapers, which of course will leverage us to much more opportunities versus our customers. Hoped now it makes more sense to you.

Speaker 4

Yes. Thank you. I just to make it clear, I pointed my question regarding the scrapers. So currently, do you see any demand for the AI data collector from these type of customers?

Speaker 1

No, because it's not that we see or do not see this AI scraper is in the middle of the development stage, meaning we didn't start even to approach our customers or new customers or current customers. We are not trying yet marketing and sales. We have our own timeline. And as time will come, as I mentioned, in the end of this year, in the beginning of next year, we will start to organize as always with our 1st beta customers and then go to the big market and start to push it with marketing and sales activities.

Speaker 4

I see. Thank you and good luck with this. My last question is regarding the fact that you are a profitable software as a service company that generate high cash flow. How do you intend to allocate that cash?

Speaker 1

Okay. So basically, as I mentioned also in my pitch, besides pushing our operation and new products and all the financial syndicators, Alongside, we have some strategic internal committees with some experts that joined us external like advisory board members and others in order to research and investigate what will be our next generation of data collection, more in the space of data insights and data analysis, meaning not only to provide the data or the best data for our customers, but also to analyze the data and to provide insights from this data. So what we think now that part of our cash in the future will be allocated for these offers. It can be by internal development, it can be by kind of M and A of full company or just assets or a combination of both. So we don't have any specific now target for this cash.

Speaker 1

And we guess that in the future, we have so many options and this market is so exciting and so many alternatives and with our hundreds of customers, we think that we have a great space to provide the products and technologies that will get an immediate demand of satisfied customers that are basically now using our platform and products.

Speaker 4

Yes, I see. First of all, good luck. I understand from your answer that in the short term, you intend to invest the current cash into new products that will allow the customer analyze

Speaker 1

the data they collect? No, no, no. Again, again, again, I do not I don't have any plan to invest this cash because we are profitable, as you see, even very impressive profitability. And in order to invest this cash, of course, you cannot invest cash. I mean,

Speaker 4

I guess internally, internally in development.

Speaker 1

No, also not internally because in order to invest cash from your bank, so the first thing is you need to lose money. Otherwise, you don't need to use this cash. You can use your profits. So basically, we are using our profits now to see this after this use of our profits, these are the results. Maybe in the future, we'll touch here and there or we'll do something big, open a new division, make an M and A, something like for the short term, we don't have any further plans to use this cash.

Speaker 4

Okay, okay. Thank you very much. Good luck.

Speaker 1

You're welcome. Thank you.

Operator

Thank you. Our next questions come from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

Speaker 5

Hi, great. Thanks for taking my questions. Nice results. I'm wondering if you guys have an active user count you can provide for the Q1 and how that compared to last year with the continuing operation? I think it's kind of relevant now for the new business.

Speaker 1

You mean customers count?

Speaker 5

Yes. What's the installed base? How many customers do you have and how many did you have a year ago?

Speaker 1

Okay. So we have some ways that we are measuring internally our customers' base. In some of the measurements, we do not count small customers that are less than something. And in some others, we are measuring. And we are now working, by the way, Brian, on some new KPIs that we will present to the market maybe in the next quarter also related to, of course, retention churn amount of customers from quarter to quarter.

Speaker 1

I don't have this formally, so I don't want to mislead now because we are really investigating it, I can tell you that we almost doubled the amount of customers this quarter comparing to the previous quarter last year.

Speaker 5

Got it. Okay. Look, I think that customer count would be great in either billings or bookings of some kind on an annual run rate. If you're considering KPIs are 2 that I would provide. Anyway, your net retention rate was 1.66.

Speaker 5

Obviously, that's very high. What's driving this? Is it more volume for collection? Is it new is it cross selling, which I don't think so, because your new products aren't even contributing yet.

Speaker 1

No, it's not cross selling.

Speaker 5

Maybe help us understand. Sorry, go on.

Speaker 1

So it's both, okay. First of all, it's the churn rate is low. When I'm talking about churn, it's not only about lost customers. We measure churn as most of our customers are working by bandwidth, okay. So they can use less.

Speaker 1

So it's a kind of a churn, okay. So the churn rate in a very good place. And we see a significant amount of upsells, not grosses, upsells volumes, customers. Sometimes some of our customers, when they are starting with us, some of our customers are working in parallel with few vendors for high availability to reduce risk, to leverage negotiation on pricing, etcetera, many, many reasons behind. But so there are some of them are starting to work with us in a low volume, testing the product.

Speaker 1

And when they see the performance and it goes very well because we dramatically improved our infrastructure the ITs in the every quarter. So they are starting to transfer volume from other vendors to our products. And then you see the volume is going up every month and it's basically it's an upsell, yes? So it's a combination of upsells, meaning volume, as you mentioned, and great churn rates.

Speaker 5

Got it. So outside the churn, essentially you're saying on performance, they're asking you to collect more you're delivering more data or data collection to your customer base more and more every quarter?

Speaker 1

Yes.

Speaker 5

Yes. Okay. And then we've never really discussed this, maybe you could touch on which industries are you seeing the most demand, technology with AI, financial services, healthcare, where are the biggest pieces of demand, biggest clusters demand for your products?

Speaker 1

Okay. So it's e commerce always is in a good place. E commerce is very stable, yes. Of course, there are periods here and there, but basically it's a great vertical. As I mentioned in my pitch, we see an increasing demand from all intelligence businesses that are analyzing data for their kind of AI companies that are analyzing data for their customers.

Speaker 1

And of course, they need to collect the data to stay up to date, to train their models, etcetera. Advertising companies, always also a stable vertical. In the last few months, we see an increased demand of people data, companies that need data in order to investigate if it's from HR perspective or other. But it's I cannot tell you that there is something it's very it's changing, which is good for us because then we are not relying only on one vertical. So we see the trend here and there every quarter, every month, but basically in higher level, these are the major trends that I see.

Speaker 5

Got it, great. And then in terms of AI data collector, just to make sure I understand, is this an upsell from your IP proxy or is this a completely new customer? I'm just trying to understand if this is new functionality for someone who's already using your product. I couldn't understand from your last answer. Thank you.

Speaker 1

Okay. I will explain. Okay. I will explain. First of all, it's not an upsell for sure, okay.

Speaker 1

It's not a new feature in our product. We have some plans to consolidate, but it's the plans for the next year to do something that can be a game changer. But let's keep it aside for a second. Basically, it's not an upsell because customers that are using our IV PROPSY network product, and they needed some of them are collecting data with scraper, some of them are doing a lot of other things. So it's a cross sell because basically a customer that is using our IP proxy product is basically as a high level of interest in data.

Speaker 1

In order to collect data, proxy is not enough. You need to have scraper, collector, a product that will help you. Now I gave you the keys to the room, but now you're not you need to collect from thousands of pages in this or that website, the relevant data for you and basically to move it from un structured data by a JSON file, for example, in order to upload it to your algorithm or data analysis product. So these customers, it might be very relevant for them. And of course, new customers that do not need the RB proxy because they don't need so many data and they are using only scraper or collector.

Speaker 1

So I see it here and there, but for your question, it's not a new feature or a nature by nature, an upsell or for sure not upsell, it's a core sell.

Speaker 5

Okay. And then in terms of the unblocker, last quarter you said that would be out of beta in the Q3, I think. Is it I'm trying to understand too from the press release in your discussions. Is it readily available for sale now or is it still Yes,

Speaker 1

yes, yes. For sale now, wherever yes, from the 1st week, 1 or 2 days after we launched, let's call it the general availability version, okay, the GA, the production version, we successfully already engaged with a few customers that they waited for this product and we get an amazing feedbacks and it's we are marketing it now. We did an amazing webinar last month. A lot of customers came from this webinar about this product and it's available.

Speaker 5

Yes. Now in terms of sustaining the growth rate, what do you need in terms of investing in sales and marketing? Do you need more direct salespeople, more partners? What does the company have to do as you get larger, right? It's harder to grow as fast sometimes.

Speaker 5

What do you need to do in order to sustain growth from sales and marketing standpoint?

Speaker 1

Okay. So basically, Brian, I will answer you a very going answer. We have our own formulas, but basically, we have the steps and what you need for every step, for every step of revenues or something like this. But if you bring more sales, then you need more marketing and you need more presales and support and some R and D in order to support the highest amount of customers and revenues. So it's not one thing.

Speaker 1

And of course, you need to increase your network, the global coverage, more servers, more IP addresses, etcetera. So it goes all together. So it's one package. You cannot take only one pillar of the company and push it forward because then you might damage your current customers, the quality of your service, etcetera. So nothing specific.

Speaker 5

Okay. All right. And lastly, Shay, two questions. The first is, do we assume that 12% tax rate there in the foreseeable future anyway? And then second question, I didn't quite understand your answer.

Speaker 5

What should we expect just on interest on your cash? Should we expect you're going to generate interest or should we not? I'd be a little bit confused. Thanks.

Speaker 2

Okay. For your first question regarding the tax, yes, we can expect to maintain the beneficial tax rate of 12% as long as the company continues to invest in R and D. If we invest in R and D, then our metrics for the purpose of this beneficial tax rate will remain high and we will be eligible to get these low rates. So I hope this answers okay.

Speaker 1

Yes.

Speaker 2

Regarding the second question, so if we take out those non cash expenses resulting from the warrants, then we have several ingredients within the finance line. The most important one is, of course, interest of deposits. And yes, we do have interest on the deposits, of course, not on all our cash because some of the cash is used daily for operations, but the larger part of it and we get nice interest on it. On the other side, there are some ingredients that deduct this interest income. It can be, 1st of all, we still have in our balance sheet the strategic loan we received 2 years ago.

Speaker 2

We repay it based on the actual income we get for CyberClick sales. And the other part of it is the, of course, the interest expense we pay on this loan, okay? So the interest is lower than the revenues we get from the CyberKick part. And it's still it's only a few tens of 1,000 of dollars for a quarter, but it's still it's being deducted from the interest income. And also, you have bank commissions and other ingredients.

Speaker 2

So all of it created for us only maybe take or give it around 0 interest income. But going forward, since we do expect or hope to increase our cash balances and on the other hand, the loan, we repaid, so the interest should be lower, the interest expenses should be lower, then we do expect to see some interest income in our P and L. And but it's all relatively low figures. It's not 1,000,000. It's all we're talking about tens of 1,000 of dollars, maybe $100,000 $200,000 of interest, but this is the ballpark.

Speaker 2

It's not revenues.

Speaker 5

Okay. Thanks for your responses.

Speaker 1

Thank you, Brian.

Operator

Thank you. Our next question has come from the line of Sean Sweeney with S3 Capital. Please proceed with your questions.

Speaker 6

Hey, 2 quick comments guys. Congratulations on the quarter. And secondly, I think we're all Googling to try to figure out how we can get 12% tax rate in our business also. I think that's a big one. Touching on the IFRS and the non IFRS, can you touch a little bit more in-depth on that?

Speaker 6

And at the same time, when these warrants expire in 2025, will that be a net cash benefit on that quarter?

Speaker 1

Okay. So I would expand and Shai, feel free to comment. So I would expand, I will do it shorter by our permission because we discussed about it a few times, but just to make the point very clear. So yes, it's ridiculous, but sometimes you lose something when the share is going up significantly and the share rise this quarter in about $12 from January 1 to the end of March. And due to this, the evaluation of our old warrants from 2019 2020 from different days of the company.

Speaker 1

Of course, their valuations went up because they are now closer their exercise price is closer to the share price. And for this, we should of course, it's all non cash, but IFRS is non cash. So we should book a record and expense of $800,000 So I hope it answers your first question. Your second question is about what happened if the warrants are when the warrants are expiring next year. So, Shay, you want to advise what's the financial situation in this case?

Speaker 2

1st of all, after the expiration, there will be no expenses, neither income. There can be also income. If the share price goes down, then we will create income. So we do prefer this expense rather than this income. But when they expire, there will be afterwards, of course, no interest at all, no expense, no income.

Speaker 2

And the and if there will be exercise, the exercise action does do nothing to our financials. It's only the share price compared to the exercise price and that's it.

Speaker 1

And that's all. And then after also, they will not have any impact anymore, not expenses, not financial expenses. It's like they expired the same.

Speaker 2

So I just want to summarize, if the share price will continue to go up, we'll continue to see more expenses until the warrants will be expired or exercised. It doesn't matter. If the share price go down, then we will see income. Does this answer your question?

Speaker 6

Yes, perfectly. Thank you.

Speaker 1

Thank you very much.

Operator

Thank you. Our next question has come from the line of Mark Gomes with the pipeline. Please proceed with your questions.

Speaker 3

Hey, gentlemen, another great quarter. Wondering, how if the business trends are continuing in this quarter, you made some comment on that last quarter about how January, February were going. And then any commentary further regarding what we might be able to expect in terms of how pricing can the new products can affect your revenues as well? Thank you.

Speaker 1

Okay. So first of all, I do mention also in this time in the first later you can go back to the transcript The record you will hear that I said in the beginning of my of the call, I mentioned that this trend of all the financial impacts financials, so KPIs, improvements, revenues and profitability and others, these positive trends are continuing with us to the 2nd quarter. So basically according for today, the answer is yes. 2nd, regarding the new product. So I think I mentioned this few times, but I will say it again because I want this point will be very clear.

Speaker 1

And we just started, we are in a very happy about it, yes. But our main product is in the high numbers, yes. And the new product has now need to start a new and kick off and get into production in scale mode. So we are pushing them because we have a huge belief also in their innovation. And by the way, they will bring us more customers also to our current product.

Speaker 1

But a significant impact on the revenues from this product, I don't see this year. Again, if we were $4,000,000 or $5,000,000 company annual revenue, I would say yes. But due to the fact that you see that we are on a run rate, If you take this 8.4x, so 4x to make an annual run rate, So a significant impact on this run rate, we are not there yet.

Speaker 3

Great. Thanks again.

Speaker 1

You're welcome.

Operator

Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Shahar Daniel for closing remarks.

Speaker 1

Okay. So, thank you. Thanks everybody for joining the call and being part of our journey and we look forward to continue to update you on our progress. Thank you very much.

Operator

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

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Earnings Conference Call
Alarum Technologies Q1 2024
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