Cellebrite DI Ltd.

Welcome to the Celebrite Second Quarter 2024 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 very much, Todd, and welcome everybody to Celebrate's second quarter 2024 financial results call. I'm joined at our offices just outside of Washington, D.C. by Yossi Carmel. Celebrite CEO, and Donna Garner, Celebrite CFO. There's a slide presentation that accompanies our prepared remarks. Please advance the slides and the webcast viewer to follow our commentary. We will 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, along with a transcript of the event. Starting with slide number two. A copy of today's press release and financial statements, including the gap to non-gap reconciliations, this slide presentation, and the quarterly financial tables and supplemental historical financial information for the first and second quarters of 2024 and each quarter of 2023 and 2022 are available on the Investor Relations website at investors.celebrite.com. Also, unless stated otherwise, our discussion of our second quarter 2024 financial metrics as well as the financial metrics provided in our outlook, will be done on a non-GAAP basis only, and all historical comparisons are with the second quarter of 2023. In addition, please note that 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 March 21, 2024, and as amended on April 12, 2024. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. Slide number three provides the agenda of the topics we'll cover on today's call. And with that said, I'd like to now turn the call over to Yossi Carmel, Cellebrite's CEO.

Thank you, Andy, and thank you all for joining us today. We are pleased this morning to share our progress and continued execution across all key metrics, including ARR, revenue, and EBITDA, which are highlighted on slide four. Our strong second quarter performance further validates the appeal of our case to closure platform, the resolve of our nearly 1,100 colleagues, and relentless tailwinds in a healthy growing market. Now, Dana will review the details of our Q2 results, our outlook for the third quarter, and our increased expectation for the full year 2024. In the meantime, what I plan to do is to focus my commentary on the long-term opportunity for our company and the important steps we are taking to further enhance Celebrite's position as the leading platform for accelerating justice around the world. So turning to slide five, let me begin by highlighting the recent formation of Celebrite Federal Solutions as part of our effort to expand our business with the U.S. federal government. Now while Celebrite had already established pervasive growing relationship across a wide range of U.S. federal defense and civilian agencies, our ability to maximize our impact had been constrained by our status as a foreign-owned organization. In order to unlock our contribution to the U.S. federal government and further expand our commercial opportunity, we worked diligently over the past six months to better position Celebrite to work directly with our U.S. federal customers and support a broader range of projects and programs. Last month, We established Celebrite Federal Solutions as a separate, dedicated company with independent board governance, and we acquired SciTech, which brings immediate expertise, experience, and authorized participation in key federal programs. Now, these actions will enable Celebrite to significantly increase its impact and participation in critical federal law enforcement and intelligence initiatives over the long term. This new company is led by Eric Zachrits, who had directed our federal sales for the past several years, and it is overseen by a newly appointed board of four independent directors. These directors are highly accomplished in their respective fields, bringing unique and extremely relevant skills and experiences. By the way, the results from this business will be fully consolidated in our corporate financial reports. These actions closely follow our Q1 launch to gain FedRAMP authorization for our SaaS offerings. We continue to make incremental progress with this initiative as we drive for the full authorization by the end of the first half of 2025. We anticipate that FedRAMP authorization will accelerate deployment of Cellebrite relevant cloud-based offerings by our federal customers. And by meeting the US government's demanding security and technical requirements, we believe that this authorization will serve as a proxy for addressing certain standards outside of the US, as well as with other US state and local government customers. So in summary, these actions reflect our commitment to expand our business in the US federal marketplace over the coming years. And we've been encouraged by the enthusiasm from the marketplace in recent weeks and share their optimism about the impact this will have on both public safety and on Cellebrite. We believe that the initial financial benefits associated with Cellebrite federal solutions will begin to accrue in 2025 and build from there in subsequent years. Turning to our C2C platform, our customers continue to realize substantial value from Cellebrite's built-in artificial intelligence capabilities which enable them to work smarter and faster. AI has been an integral part of our innovation DNA for nearly a decade, and it is now embedded within each of our flagship solutions. At our first Investor Day earlier this year, we showcased a wide range of AI-powered capabilities that enable our customers to accelerate their investigations. Now, while our historic use case has delivered material value, the rapid evolution of generative AI is opening exciting new frontiers for Justice Accelerated, which we have enthusiastically embraced. Our customers report that leveraging our AI-powered capabilities enable them to achieve step function increases in investigative speed, efficiency, and effectiveness. For example, a law enforcement agency can leverage the AI-driven analytics with Pathfinder to substantially reduce the time it takes to complete the larger scale investigation from months to weeks. And in the process, lower overtime costs, decrease the involvement of supporting agencies, help the victim's loved one move toward closure, and reassure the community that justice is being served. And for these reasons, we are aligning key product technology and go-to-market resources to maximize value creation and monetization associated with our AI technology, what we currently refer to as Cellebrite investigative intelligence. In tandem with this work and keeping with Cellebrite's effort to ensure this technology will serve exclusively an agent for good and for protecting public safety, we will continue to evolve a range of controls through internal assessments, customer feedback, and our external independent ethics and integrity advisory board. Responsible innovation in AI will supercharge our ability to advance our mission to make the world a better and a safer place. You can expect to hear more over the coming quarters and years as we make further progress with our work in this area. I want to switch gears now to briefly cover recent capital market activity associated with our ongoing efforts to drive value creation for Celebrite shareholders. First, we're very pleased to announce today a broad warrants redemption program covering 20 million public and 9.7 million private warrants. Now, Dana will share more details around this action, but I want to briefly highlight the significance of these milestones. While a substantial majority of SPAC-originated companies have struggled to create shareholder value over the past few years, Celebrite's exceptional performance has enabled us to take this action. Second, Celebrite's stock price performance over the past 30 days through yesterday has triggered the issuance of one-third of the price adjustment shares and divesting of 40% of our restricted sponsor shares, as outlined in our business combination agreement. The combination of these events is an important milestone that we believe will help optimize our capital structure, support healthy trading liquidity, and simplify our financial reporting, and they complement and augment the steps we've already taken to enhance our investors' communication. Turning to slide six, we are making really good progress executing against our top four strategic priorities. highlights a variety of Q2 deals that delivered meaningful ARR expansion and demonstrated our progress with each priority. I'd like to share a few quick observations related to these priorities. Our first priority is to extend our leadership in the digital forensic units of our customers. To that end, our ongoing investment to enhance our lawful access capabilities for the most modern smartphones on the market is paying dividends. Over the past year, Usage data reflects that more customers are turning to Cellebrite to lawfully access and extract data from both Android and Apple iOS devices. Related to this, we are also making good progress with upgrading our customers to Insights. As noted on our Q1 call, our goal in 2024 is to convert 10% of our install base to Insights. I'm glad to share that market reception has been extremely favorable And we are currently on the pace to exceed this target. Our second priority is to accelerate our growth within the investigative and intelligence unit, what we call the IUs of our law enforcement customers. We continue to grow our Pathfinder footprint with IUs during the second quarter. And I can say that we are excited about our potential to accelerate penetration into the IUs as Pathfinder becomes fully cloud-enabled over the coming quarters. Our third priority is to expand our business in the private sector with enterprises and service providers who primarily rely on Cellebrite's data collection solutions to advance corporate investigation and e-discovery use cases. Related to this, we recently announced an exclusive technology and go-to-market partnership with Relativity that is intended to help our mutual customers collect and manage mobile evidence as key part of their digital investigations with the utmost efficiency. We are collaborating with Relativity to create a streamlined Relativity One and Cellebrite remote mobile collection and conversion integration in which Relativity is the only e-discovery provider to have direct integration with Cellebrite Endpoint Inspector and with Cellebrite Endpoint Mobile Now. We are optimistic that this partnership will deliver compelling value to our mutual customers and help accelerate our growth with enterprise customers and service providers. Our fourth strategic priority is to help our customers harness the power of the cloud. Overall, ARR from cloud and SaaS-based solutions has nearly doubled over the past year and is now generating low teams as a percentage of our ARR, up from the high single digits. We are pleased to see increasing traction for Guardian, our SaaS-based case and evidence management solution. The number of Guardian customers has continued to grow along with the number of users in terms of both examiners and investigators, and data storage volumes have doubled in the past five months alone to over two petabytes. I would like to conclude my prepared remarks on slide seven. So we view our C2C platform as unique in today's marketplace, enabling us to deliver an end-to-end set of integrated software solutions that support our customers' needs throughout the digital investigation lifecycle. We continue to move swiftly and decisively to deliver high-value solutions and responsive support to address the time-sensitive needs of our customers around the globe, fortifying the trust they place in our solutions. In turn, Celerbrite has successfully extended its market and technology leadership, expanded its customer relationship, and delivered strong results. We've also further enhanced our leadership team and board earlier this month. We appointed Sigalit Shavit as our first ever Chief Information Officer, CIO. We look forward to her contributions as we scale our ability to innovate and support customers around the world. We're also thrilled that Troy Richardson, An accomplished technology executive was recently appointed to our board of directors. And as we look ahead, our updated 2024 expectations for ARR growth and adjusted EBITDA indicate that we are well positioned to exceed our performance baseline for Rule of 45 for the second straight year. It is really rewarding to see how our customers are leveraging their investment in Cellebrite technology to accelerate justice. Every quarter, our technology makes an outsized impact on hundreds of thousands of cases, enabling our customers to protect and save lives, stop bad actors, and keep our community safer. Overall, our team has done a great job in the first half of 2024, and I would like to use the opportunity and thank my colleagues for their ongoing commitment and contributions to our continued success. And with that said, I'll now turn the call over to Dana.