Safe-T® Group Ltd. (Nasdaq: SFET) (TASE: SFET) (“Safe-T” or the
“Company”), a global provider of cybersecurity and privacy
solutions to consumers and enterprises, today issued the following
letter to shareholders.
To the Safe-T Group Shareholders:
I write to you today to share my thoughts on the
developments of the past few months, but more importantly, about
the exciting future we are now pursuing for our company.
By any measure, the stock market has experienced
record-breaking volatility and so has our share price. Against this
backdrop, however, Safe-T successfully began its strategic
transition into a consumer cybersecurity and privacy company,
expanding beyond our existing enterprise business while delivering
impressive top-line growth.
As we announced in mid-April, we expect another
record first quarter 2022 revenues of approximately $4 million,
representing growth of ~200%, driven in large part by the success
of our shift into the consumer business and our customer
acquisition programs which have attracted new subscribers. The
impact of this strategic shift has been dramatic, driving
triple-digit, high margin top-line growth and I am glad to report
that we are seeing this trend continue into the second quarter as
revenue in April reached a new monthly record. Supporting this
level of high growth requires investment into our consumer products
and into acquiring new customers, something I wish to explain in
more detail to our investors.
Relying on our solid foundation we created in
the Enterprise business, we initiated a strategic pivot, expanding
from selling unique cybersecurity products to enterprise and
governmental customers into the vast consumer market which
accelerated last year with the successful acquisition of
CyberKick.
This transition has had several impacts on
Safe-T, most notably, 1) a more concerted shift in our entire
business model, both in the Consumer and Enterprise businesses,
away from one-time perpetual licenses towards a recurring,
subscription-based model, and 2) the necessity of making ongoing
investments into customer acquisition.
As is the case in our Enterprise Privacy
business, in our consumer model, we recognize recurring
subscription revenue over time, producing a more predictable cash
flow. We capture monthly subscription revenue from our customers
like traditional antivirus or VPN/privacy providers. In the
consumer market, companies have several metrics they use to
evaluate the value of their customers including what is called
Lifetime Value (“LTV”):
- The LTV metric is simply a calculation of the average dollar
amount of revenue anticipated to be received from subscribers over
their retention period. According to this industry-accepted model,
we can estimate future recurring revenue based upon the number of
users at any given point of time, multiplied by the relevant LTV.
Each product produced by a company has an associated LTV
metric.
The other important element of the subscription
model is a customer acquisition program:
- In a customer acquisition program, companies invest in targeted
marketing of their products to potential users through paid
advertising or product placement conducted online, in social media,
or offline in traditional media. After several months of investment
into customer acquisition for just our first consumer product
launched last year, to date, we have already acquired approximately
15,000 subscribers, demonstrating our team’s ability to
successfully attract users.
To illustrate the value of LTV with recurring
revenue, based upon our monthly model today, the average customer
can become profitable in as little as five months meaning that
their acquisition cost has been recovered and their ongoing monthly
subscriptions can generate margins in excess of 90%. This
demonstrates that subscribers are valuable assets and therefore,
investment in customer acquisition translates into future
high-margin, recurring revenues. Based upon our current LTV model,
investments into consumer acquisition are targeted to generate at
least a 3x return and our acquired subscribers to date are
anticipated to produce millions of dollars in recurring revenues
over the following years.
As we also noted in our first quarter earnings
pre-announcement, the attractive LTV metrics we have produced to
date provide us with confidence in the sales and marketing
efficiency of our customer acquisition program and its ability to
attract profitable customers. This capability will be critical as
we expand our offerings onto multiple platforms including Windows,
Android and Apple iOS mobile devices and desktop computers this
year which we believe will quickly grow our subscriber base,
driving significant increases in recurring revenue. We believe that
continuing to leverage further investments into new and innovative
products as well as accelerating customer acquisitions will
translate into sustained, long-term enterprise value, and
ultimately, bottom-line profitability.
It is important to note that while the consumer
business will become the dominant driver of our growth, we are
still pursuing our enterprise business. In addition to growing
recurring revenues in our Enterprise Privacy business, we have
executed new partnerships with established organizations such as
TerraZone and DreamVPS, allowing us to leverage their
expertise and installed bases of customers to drive marketing and
sales of our enterprise cybersecurity products. Through these new
relationships, we will benefit from partner-led investments into
our technology, helping to ensure that our products and
intellectual property remain at the forefront of their respective
markets without significant investment from Safe-T, eliminating
related operating expenses while sharing in the benefit of future
sales.
As a team, we understand the challenges we see
in the markets and are committed to efficiently managing the
business and making the necessary investments that will support our
continued growth. This will be driven by both new and existing
cybersecurity and privacy solutions which will be launched across
all major mobile and desktop platform over the course of this year.
It is these products, combined with our customer acquisition
programs and our LTV model, that will generate a solid stream of
valuable recurring revenues for Safe-T.
Our confidence is based in our proven ability to
produce triple-digit growth over the past two years with a business
model that has the potential to continue delivering impressive
results month-over-month, and quarter-over-quarter. We believe in
our ability to produce at least 50% revenue growth on an annual
basis and efficiently manage operating costs, assisting us to reach
profitability while driving towards a $50 million revenue target
for 2025.
Our team is energized by the opportunities ahead
of Safe-T, driven by the increasing global urgency around security
and privacy, in both the consumer and enterprise markets. We are
confident in the assets we have built, our growing customer base,
our unique technologies, and a recurring revenue business model
capable of producing strong growth, all of which will allow us to
recognize the true value of our company. Although we have
accomplished much this past year, we know there is still more we
can do to support customers and create shareholder value. Safe-T is
at an exciting inflection point and we look forward to updating our
stakeholders on our progress.
Sincerely,
Shachar Daniel, Chief Executive Officer
About Safe-T Group Ltd.Safe-T
Group Ltd. (Nasdaq, TASE: SFET) is a global provider of
cyber-security and privacy solutions to consumers and enterprises.
The Company operates in three distinct segments, tailoring
solutions according to specific needs. The segments include
enterprise cyber-security solutions, enterprise privacy solutions,
and consumer cyber-security and privacy solutions.
Our cybersecurity and privacy solutions for
consumers provide a wide security blanket against ransomware,
viruses, phishing, and other online threats as well as a powerful,
secured, and encrypted connection, masking their online activity
and keeping them safe from hackers. The solutions are designed for
advanced and basic users, ensuring full personal protection for all
personal and digital information.
Our cybersecurity solutions for enterprises,
designed for cloud, on-premises and hybrid networks, mitigates
attacks on enterprises’ business-critical services and sensitive
data, while ensuring uninterrupted business continuity.
Organizational data access, storage, and exchange use cases, from
outside the organization or within, are secured according to the
“validate first, access later” philosophy of Safe-T’s zero trust.
Our ZoneZero® solutions are available by our reseller, TerraZone
Ltd., a global information security provider, as a solution or
cloud service.
Our privacy solutions for enterprises are based
on our world’s fastest and most advanced and secured proxy network,
enabling our customers to collect data anonymously at any scale
from any public sources over the web using a unique hybrid network.
Our network is the only one comprised of both millions of
residential exit points and hundreds of servers located at our ISP
partners around the world. The infrastructure is optimally designed
to guarantee the privacy, quality, stability, and the speed of the
service.
For more information about Safe-T, visit
www.safetgroup.com
Forward-Looking StatementsThis
letter to shareholders contains 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. Words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “seeks,” “estimates” and similar expressions
or variations of such words are intended to identify
forward-looking statements. For example, Safe-T is using
forward-looking statements in this letter when it discusses
preliminary unaudited estimate of revenues for the three month
period ended March 31, 2022, its outlook for the future, the
Company’s growth potential, pipeline and trends, its ability to use
LTV to estimate recurring revenue, its ability to produce at least
50% revenue growth on an annual basis and efficiently manage
operating costs and to reach profitability and $50 million of
revenue for 2025, its anticipated benefits from partner-led
investments into its technology, its belief that the expanding
recurring revenue stream in the consumer business will be an
important driver of future value and its ability to continue
leveraging its successes through further investments into new and
innovative products and accelerating customer acquisitions and to
translate that into sustained, long-term enterprise value, and
ultimately, bottom-line profitability. Because such statements deal
with future events and are based on Safe-T’s current expectations,
they are subject to various risks and uncertainties and actual
results, performance or achievements of Safe-T could differ
materially from those described in or implied by the statements in
this letter. The forward-looking statements contained or implied in
this letter are subject to other risks and uncertainties, including
those discussed under the heading “Risk Factors” in Safe-T’s annual
report on Form 20-F filed with the Securities and Exchange
Commission (“SEC”) on March 29, 2022, and in any subsequent filings
with the SEC. Except as otherwise required by law, Safe-T
undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated
events.
The Company is providing revenue estimates in
this letter, rather than final amounts, primarily because the
financial closing process and review are not yet complete and, as a
result, the Company’s final results upon completion of its closing
process and review may vary from these preliminary
estimates.
INVESTOR RELATIONS
CONTACTS:
Steve Gersten, Director of Investor Relations Safe-T Group
Ltd.813-334-9745
investors@safe-t.com
Michal EfratyInvestor Relations, Israel+972-(0)52-3044404
michal@efraty.com
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