Cellebrite DI Ltd.

To all sides on hold, we appreciate your patience and ask that you continue to stand by. Please stand by. Your program is about to begin. If you need assistance during your conference today, please press star zero. Welcome to the Celebrite First Quarter 2023 Financial Results Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer. Mr. Kramer, the floor is yours.

Thank you, Shelby. Good morning, everybody. Celebrate's first quarter 2023 financial results conference call. Joining me today are Yossi Carmel, Celebrate's CEO, and Donna Gerner, Celebrate's CFO. There is a slide presentation that accompanies our prepared remarks, and you can advance the slides in the webcast viewer to follow our commentary. We will be sure to call out the slide number we are referring to in our remarks. This call is being recorded, and a replay of the recording will be made available on our website shortly after the call. Let's start with slide number two, a copy of today's press release and financial statements, including the GAAP and non-GAAP reconciliations, the slide presentation, all of that is available on the company's investor relations website at investors.celebrite.com. Please note that the quarterly financial tables and supplemental data for the first quarter and each quarter for the past two years will be posted to our investor relations website after this call concludes. Also, unless stated otherwise, our first quarter 2023 financial metrics as well as the financial metrics provided in our outlook that will be discussed on today's conference call will be on a non-GAAP basis only. All historical comparisons are with the first quarter of 2022 unless otherwise noted. In addition, please note that the statements made during this call that are not statements of historical facts constitute forward-looking statements. All forward-looking statements are subject to risks and uncertainties and other factors that could cause matters expressed or implied by those forward-looking statements not to occur. They could also cause the actual results to differ materially from historical results and or from forecasts. Some of these forward-looking statements are discussed under the heading Risk Factors and elsewhere in the company's annual report on Form 20F filed with the SEC on April 27, 2023. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. Slide number three provides the agenda for today's call. As you will hear, we are pleased with our Q1 financial performance and strategic progress, and we are focused on delivering on our full year 2023 targets. And with that said, I'll now turn the call over to Yossi Carmel, Celebrite's CEO.

Yossi Carmel Thank you, Andy, and thank you all for joining us today. As reflected on slide five, Celebrite's first quarter results and KPIs demonstrate a strong start to 2023. The first quarter of 23 was also marked by Cellebrite's continued progress with key strategic initiatives aimed at advancing innovation and expanding our customers' relationships. It is really rewarding to see customers increasingly turn to Cellebrite for powerful digital intelligence software solutions that will help them modernize their investigative workflow. This is translating into higher usage for collect and review solutions and increasing traction for additional growth engines like our investigative analytics and our case evidence management offerings, all of which is helping grow wallet share within our installed customer base and capture new levels. As a result, we move forward with a solid momentum in a healthy marketplace. Before I share some observations about our market positioning, highlights from the quarter, the market environment, and our outlook for the remainder of 2023, I will briefly review our first quarter results and other select metrics. The Q1 revenue of $71.2 million grew 14% over the prior year, with subscription software revenue growing 27%. Our ARR grew 30% to $261 million. We delivered another quarter with dollar-based NRR greater than 120%. We closed 21 large deals, each valued at greater than half a million US dollars. We reported Q1 adjusted EBITDA of $7.3 million for a margin of 10% and on-gap EPS of 3 cents. And we generated more than $12 million in cash from operations and ended Q1 with cash and investment totaling just over $221 million and no outstanding debts. Turning to slide six, Celebrite is recognized by public and private sector customers, industry experts, and investors as a market leader in digital intelligence software solutions. The cornerstone of our business continues to be our collection review offerings that are trusted by customers around the globe to lawfully extract, decode, and review digital evidence. Now, these offerings, which represent more than 80% of Q123 revenue, are augmented by our investigative analytics and case and evidence management solutions, which are still at the early stage of customer adoption. In addition to these offerings, we deliver high-value professional services, including training, certification, and advanced services that customers use to reduce their backlog of devices by outsourcing digital evidence collection to our experts. During the first quarter, we executed well on our product roadmaps and go-to-market initiatives. In collect and review, the substantial investments we've made in recent years to expand our mobile research capabilities continue to pay off. Earlier this spring, we delivered an industry-first capability on our premium solution for the latest iPhone and iOS versions. Our leadership in iPhone and iOS is complemented by our extensive coverage of Android-based smartphones, which commands more than 70% of the global smartphone market. Looking ahead, we're also excited about our near-term plans to further elevate the value proposition of UFED, our basic collection review offering used by tens of thousands of examiners around the globe. In terms of other notable development progress, we continue to enhance our physical analyzer and Pathfinder investigative analytics by leveraging our ongoing investment in artificial intelligence to further differentiate these offerings. These solutions enable law enforcement professionals to quickly leverage powerful, timely insights into digital evidence, automate time-consuming, often manual tasks, and advance investigations faster and more efficiently. We've also continued to advance Guardian, our SaaS-based platform for case management and evidence management. From a go-to-market perspective, we are gaining solid momentum. The actions we took last year to enhance our strategic accounts management in EMEA, in the USA, as well as bring in new private sector sales leadership, are making a tangible difference in closing new business and building a stronger, high-quality pipeline of opportunities. This is reflected in several ways. Our first quarter NRR of 128% was the 17th consecutive quarter above 120%. Revenue in the Americas grew 20%, while revenue in EMEA increased 14%, its best quarter of top-line expansion in the past year. Our flagship collector review suite of solutions, UFED, Premium, and Physical Analyzer, were at the foundation of the vast majority of our Q1 large deals as expected. Two-thirds of these large deals included more than our mobile data forensic solutions, such as computer, cloud data collection, Pathfinder, and Guardian, as well as training and advanced services. We're also pleased that our revenue growth rate within the private sector has accelerated into the high teams. We are moving forward focused on driving further enterprise expansion through our direct sales, our service provider channels, and other high-value partnerships. Our ARR growth of 30% primarily reflects our success in expanding wallet share with existing customers. Geographically, we continue to produce significant ARR expansion in the Americas, led by continued strength in our U.S. state and local government sales group. We achieved this ARR growth even as we have stopped our new sales activities in dozens of countries as part of our ongoing commitment to operate our business with the highest ethical and professional standards. Dana will share additional insights on this topic in a moment. Moving to slide seven, I will highlight several Q1 deals that best demonstrate our R&D and go to market progress and success. In Latin America, we are helping a large national agency evolve and upgrade their mode of operation in the face of more crime that involves digital evidence, including financial crimes. This customer is now benefiting from extended premium licensing, as well as Guardian and Pathfinder. Just as noteworthy, this is the first customer in this region to use our digital intelligence offering that integrates cryptocurrency data and insights. With this deal, this customer's ARR increased substantially by 13 times to $1.6 million. In our USA state local government accounts, there were two notable Q1 wins that showcased our ongoing success in growing our wallet share with police departments serving mid-sized cities. Now, in both cities, violent crime, especially homicides, have been on the rise. So to help law enforcement move faster, both customers not only added premium, but they also began deploying Pathfinder to accelerate the investigations and guardians, to securely share digital evidence among examiners, investigators, and prosecutors. ARR for one of these customers increased by four times to nearly $600,000, and the other customer is also a great example of our success in harvesting smaller long-tail prime accounts. Now, with this deal in place, ARR for this customer increased by over 10 times to just under $300,000. We were also pleased to see that a specialist intelligence agency in Western Europe expanded its use of our premium solution nationwide, while also renewing the licenses for our other collection review to accelerate their cyber investigation and safeguard their citizens. As a result, these customers' ARR increased by over 60% to $1.2 million. And last, in the private sector, there were two notable deals in Q1 with our service provider partners, who typically generate approximately half of our quarterly enterprise revenue. One service provider in a central European country made its initial purchase of Mobile Elite, our on-prem enterprise solution for collecting digital evidence from advanced smartphones. Another service provider, West Coast Office, made its first purchase of our Endpoint Inspector, software for remote data collection. We believe that the breadth and depth of our product portfolio for the private sector leaves us well-positioned to continue expanding our service provider relationship going forward. So turning to slide eight, we move into the second quarter with solid momentum in a healthy marketplace that is benefiting from multiple tailwinds. With 90% of criminal cases involving a digital element, law enforcement agencies are increasingly recognizing that they must modernize their investigative workflow and evolve their current mode of operation. Our own industry research from late last year adds further support to this, and here are some additional facts. Most law enforcement professionals and prosecutors believe that digital evidence is more important than physical evidence and DNA to successfully prosecute cases. Approximately two-thirds of all phones entering the lab are locked. Nearly 75% of agency managers agree that there is a growing technology skill gap in policing, making it even tougher for police forces to collect, manage, analyze, store, and use the digital evidence required to win convictions. And last, as it relates to digital transformation, almost half of the police chiefs and agency managers describe current strategies as poor to mediocre. Slide nine addresses our outlook. More specifically, based on our performance to date and the opportunities we see going forward, we believe we are on a track to deliver on our 2023 financial targets. I would like to close by reiterating that Celebrite made important strategic progress during the first quarter and executed well against the top priorities that we outlined on our last quarter's call. Now, these include bringing impactful innovation to the marketplace, extending our collection review leadership and broadening our reach into new buying centers that can benefit from our high-value investigative analytics and powerful case management solutions. Our team remains very enthusiastic about the company's prospects in 2023 and beyond, and we work together to deliver powerful digital intelligence solutions that will help our customers around the globe to protect and save lives, accelerate justice, and ensure data privacy. And with that said, I'll ask Dana to begin her financial review. Donna, please.