Safe-T Group Ltd.
Q4 2020 Earnings Call Transcript

Published: 22 Mar 2021

[Operator:]

Good morning ladies and gentlemen, thank you for standing by. Welcome to Safe-T Group's Fourth Quarter and Year End 2020 Corporate Update Conference Call. During today's presentation all parties will be in listen-only mode. Following the presentation the conference will be open for questions. This conference is being recorded today, March 22nd, 2021. Before we get started, I will read the disclaimer about forward-looking statements. This conference call may contain in addition to historical information forward-looking statements within the meaning of Federal securities laws regarding Safe-T Group. Forward-looking statements include statements about plans, objectives, goals, strategies, future events of performance and underlying assumptions, and other statements that are different from historical fact.

[Shachar Daniel:]

Hi, thank you and welcome everyone to todays fourth quarter and year end corporate update conference call for Safe-T Group. With me are Shai Avnit, our Chief Financial Officer. The story of 2020 has been one of confirmation after our successful migration into recurring revenue model with an indirect sales model focused on partnership engagement and execution. First off, I would like to summarize our accomplishments in 2020 and year-to-date, and then discuss our roadmap for the remainder of 2021 and beyond. We entered into 2020 with solid technology platform and the well-defined augment of education for the year. During Q1 we and the rest of the world responded to the pandemic crisis. With the current shift to work from home, our product enabled them support of their remote work environment that organization required to successfully on securely ride through these challenging times. Combined with a reduction in our overall expenses, and the significant decrease in its debenture and associated interest, the quarter resulted in a significantly improved bottom line. Moving in the second quarter, we continue to make successful progress towards the goals we set at the beginning of the year, including our ongoing development of innovative technology capabilities. We announced the breakthrough solution, prosecute remote access with our Perimeter Access Orchestration Fabric designed to take our leading Zero Trust Network Access, ZTNA Solution to the next level. Safe-T also launched a new Data Center proxy network, allowing our customers to enjoy a fast, reliable and robust proxy solution upon which users can build and expand their businesses, and target reach.

[Shai Avnit:]

Thank you, Shachar. I will begin with a summary of our fourth quarter and year-end 2020 financial results, which are compared to our fourth quarter and year-end 2019 results unless otherwise stated. Revenues for the full year of 2020 totaled $4.9 million, of which 1.3 million or 27% was earned in the fourth quarter. This compared to revenues of $3.3 million for the full year of 2019, of which $1.1 million was earned in the fourth quarter. The increase in revenues is due to the consolidation of revenues generated by the Proxy business throughout the entire year, compared to partial consolidation in 2019, which occurred only from net acquisition in mid year. On top of it, there was also a growth in this revenue. The increase was partially offset by a reduction in sales of the Secure Data Exchange, SDE product, as part of the company's strategic plan focused on the SDP market with its Zero Trust solutions. Gross profit for the full year of 2020 was $2.4 million, of which the fourth quarter contributed $0.5 million compared to gross profit for the full year of 2019 of $1.4 million, of which the fourth quarter contributed $0.2 million. The increase in gross profit was primarily driven by the increased revenues. Operating expenses. Research and development expenses totaled $2.2 million, compared to $2.5 million in 2019. The decrease is due to a significant reduction in the SDE solution development and related costs, partially offset by the consolidation of NetNut’s development cost and subcontractors’ costs related to the new Zero Trust solutions.

[Shachar Daniel:]

Thank you very much, Shai. So in summary during 2020 we learned that remote access is here to stay and we have the right technology to disrupt this market. Since the close of the year we had several additional milestone, I would like to point out. The new way we introduced version 5 of ZoneZero presenting new capabilities alongside improvement and enhancement of existing capabilities. We also launched a new residential network for the multibillion-dollar sneaker resale market. The new product is the first synergy realization of the acquisition of Chi Cooked. Looking ahead, our mission has always been to be leading provider of IP proxy, which is intelligent data collection and cybersecurity solutions rapidly penetrating the plus $10 billion cybersecurity market. And we plan to continue to invest in this vision. We are focused on improving and refining our products with ongoing feedback from the Zero Trust market and our partners. We are leveraging our sales team to expand sales through our current partnerships and growing into new markets. And with the successful integration of Chi Cooked, we will continue to build our pipeline of potential M&A targets that could strengthen our capabilities and offerings and complete our strategy to become a one stop shop for all proxy-related business requirements. With that, I would like to open up the call for any questions. Operator, please go ahead.

[Operator:]

Thank you, Sir. We’ll now be conducting the question-and-answer session. Our first question is from Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

[Brian Kinstlinger:]

Hey, guys. Thanks for taking my questions. Remote Access Security has certainly been put in the spotlight over the last year as you highlighted, can you talk about how your Zero Trust security technology competes against some of the large cybersecurity companies that I'm sure are also focusing on security for VPN and Remote Access?

[Shachar Daniel:]

Okay. So this is Shachar. A great question and I will answer. So 99% of current solution are coming and saying, we're going to replace your current VPN, I will provide you a better and much more secure solution. The only problem or the big challenge of this approach is the fact that this kind of transaction can take between six months to one year, VPN service for at least 20 years, legacy technologies and better deep inside the companies, deep inside the infrastructure. A lot of adjustment, a specific development developed on top of this technology on to replace it is a huge, long and exhaustive project.

[Brian Kinstlinger:]

Great. It's helpful. And then you've been clear, you're using sales partners, but who is your target customer for Zero Trust, meaning are they SMBs at first, is it Fortune 1000? And are there certain industries that right now are the big adopters of this kind of technology versus others?

[Shachar Daniel:]

Okay, good question. So, I need to differentiate between the typical SDP solution and Zero Trust solution. That is basically…

[Brian Kinstlinger:]

Yeah, Zero Trust, I am talking about…

[Shachar Daniel:]

Yes, yes, I know. But in the Zero Trust we have two solutions. One is I just described, is the current of the ZoneZero VPN that we are coming and saying don't replace your VPN. So typically, the customers for this offering will be enterprises, bigger customers, not SMB, large customers. It can be Fortune 1000. It can be even smaller than Fortune 1000. But it's a legacy enterprise with a VPN embedded internally that it takes in so much time and so much energy to replace it. So our SVP and cloud solution, we are running now with one of our partners, one of the biggest partners of the world. So it kind of MSSP solution that will be directed and targeted, especially small and medium business that we’ll run. This partner will manage the remote access by our solution. So the typical view of a class can be the truth is better for the SMB and the ZoneZero VPN we think that the legacy on bigger enterprises - which we’ll buy it

[Brian Kinstlinger:]

Great. And then I got two more questions. The first one is, how many sales partners do you have? And what countries are they located in or they have reached to?

[Shachar Daniel:]

Okay. So we have more than 60 sales partners that we just engaged in the last eight months after we released the first version of our Zero Trust solution. We are proudly saying that we have a global coverage. We have been starting from Australia and Africa, through the Asia Pacific, Europe, and America. The most active now, what we see at this stage is that we do partners and the Asia Pacific partners.

[Brian Kinstlinger:]

Great. And lastly, in terms of the IP Proxy business, I'm not clear, I'm not sure personally Are you still - are you using sales partners for that business as well. And while it's clear, the pandemic has led to increased awareness, in the need for remote access security, how has the IP Proxy market been impacted by COVID?

[Shachar Daniel:]

So way, I can say that some of the segments, for example, we have the province with vertical, so, you know, province vertical has been - has dramatically in the COVID. So they use less IP Proxy, but the other verticals in twist instead. Most of our sets are you know, with the full SaaS model, we have zero attach with the customer, zero attaché with the partners. So it's basically we are not using the typical distribution partners, but different kinds of partners, like partners that are buying the technology from us. And they're using the technology in order to spread the IP Proxy or directly to its customers.

[Brian Kinstlinger:]

Great. Thanks so much.

[Shachar Daniel:]

You're welcome, with pleasure.

[Operator:]

Thank you. Thank you. At this time, we have no additional questions. I will turn the floor back to Shachar Daniel for closing comments.

[Shachar Daniel:]

Okay. So thanks for joining us today. We look forward to continuing to update you on our progress. Thank you very much.

[Operator:]

Thank you. This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.