Cellebrite DI Ltd.

Welcome to the Celebrite Third 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, Todd, and welcome, everybody, to Celebrate's third quarter 2024 financial results call. I'm joined in New York City today by Yossi Carmel, Celebrate's CEO, Donna Gerner, Celebrate's CFO, and Tom Hogan, Celebrites Executive Chairman. 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. The call is being recorded, and a replay of the call will be made available on our website shortly after the call, along with a transcript of this event soon after. Starting with slide number two, a copy of today's press release and financial statements, including gap to non-gap reconciliations, the slide presentation, and the quarterly financial tables and supplemental historical information for the first three quarters of 2024 and each quarter of 2023 and 2022 are available on the Investor Relations website at investors.celebrite.com. Unless stated otherwise, our discussion of our third 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 third 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 actual results different 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 topics we'll cover on today's call. And with that being said, I'll turn the call over to Yossi Carmel, Celebrite CEO. Yossi.

Thank you, Andy, and thank you all for joining us this morning. So we delivered a strong first quarter performance that exceeded expectations thanks to increasing traction with our case-to-closure platform, what we call the C2C platform. the impact of our ongoing investment in market-leading innovation, and solid execution on all fronts. As illustrated on slide four, we produced notable ARR growth, surpassed $100 million in quarterly revenue for the first time in companies' history, and generated outstanding profitability. We are proud that we have consistently delivered a healthy mix, over our growth and profitability, with recent results constantly exceeding our baseline for the rule of 45 performance. So put it simply, Celerbrite business momentum remains strong in the third quarter, and we anticipate a positive finish to our year. Now, Dana will cover this in a few minutes. Beyond the solid quarterly results, we took important strategic actions and accomplishments over the past several months, all of which are architected to drive long-term profitable growth and corresponding enterprise value. Celebrite is uniquely positioned as a differentiated end-to-end platform provider with software offerings spanning the digital investigative lifecycle. Our AI-driven C2C platform enables customers to close more cases faster by elevating their productivity and efficiency for collecting, reviewing, sharing, and analyzing digital evidence. We have taken deliberate steps to anchor our C2C platform around three increasingly integrated flagship software solutions, and I want to give here a brief overview. So Insights is our family of digital forensic software that enables law enforcement to collect and review digital evidence from mobile phones, cloud applications, computers, and many other digital witnesses. Guardian is our set of SaaS-based case and evidence management offerings for managing the examination process, securely sharing evidence, and enabling interagency and cross-agency collaboration. Our Pathfinder investigative suite includes AI-powered analytics and open-source intelligence tools for expediting investigations by surfacing leads, pinpointing connections, and identifying valuable evidence varies within mountains of structured and unstructured data across multiple digital witnesses. So we are mobilizing to capitalize on the extensive opportunities we see to expand our customer spending with us while also winning new logos. To that end, Celebrite Federal Solutions was launched earlier this summer to expand our relationship with the U.S. federal government, and this unit is now fully operational. And I'm pleased to share that we delivered an excellent Q3 in the USA federal sector. In addition, we have continued to augment our quota-carrying sales force in all major geographies to amplify our go-to-market motion for upgrades, upsells, and cross-sells. As we look forward towards 2025, this investment position celebrates with the ramp sales capacity which is required for sustaining solid top-line expansion and extending to new buying centers within our installed customer base. Cellebrite's relationship with over 5,300 public sector customers typically begins by helping examiners and investigators to collect and review digital evidence across mobile phones, computers, cloud, and other digital witnesses. There is a long, broad growth runway ahead for Cellebrite's digital forensic solutions, and part of this expansion is expected to come from upgrading customers from our legacy digital forensic software to our new inside suite. The value proposition for this upgrade is compelling. Insight leverages a modern tech stack, along with both proven and new digital forensic capabilities that enable customers to complete an examination as much as twice as fast while accessing more devices, extracting more data, and revealing more important information. In addition to the Insight upgrade, We believe our customers will want to expand the scope of their deployments, whether it is in traditional technical lab environment or by extending our technology into the field. Just as important, we see substantial opportunity for customers to leverage our modular approach to insight by having high-value capabilities around advanced local access or unlocks, and for automating and accelerating key examination processes. When we launched Insights earlier this year, our goal was to upgrade the vast majority of our installed base over the next three years with 10% adoption in 2024. We increased last quarter our 2024 target to 15%, and we are on track to achieve this new target. Another area of strategic progress is the cloud. we continue to increase our product house investment to cloudify existing capabilities, enhance existing cloud offerings, and develop new cloud-native solutions across our Insights, Guardian, and Pathfinder product suites. And I'm happy to report that we are seeing some very positive returns on this investment. For example, during the past 12 months, Guardian grew more than 100%. as more customers use this SaaS-based solution to transform how they manage and share digital evidence with investigators and prosecutors. Our investments in cloud infrastructure are also opening new doors for our pathfinder analytics, which leverage AI technology to quickly surface leads and identify connections buried within mountains of structured and unstructured data across multiple digital devices. In September, we announced Pathfinder in the cloud with AWS, allowing customers to access Pathfinder through the secure Amazon virtual private cloud. Just as notable, as we look to expand further into investigative and intelligence units, We are building our SaaS-based capabilities and leveraging our ongoing investment in AI through an expanded suite of tools and capabilities that can help analysts and investigators analyze an even broader range of digital data sources, coordinate and collaborate better, and boost productivity by automating time-consuming, burdensome tasks. I would also like to briefly cover the recent capital market milestones which underscore our success in driving shareholder value. First, in mid-September, we completed our previously announced Warrant Redemption Program, which produced 10.1 million net new ordinary shares. Second, our strong stock price performance from mid-August. through early November resulted in multiple triggering events totaling 21 million shares that have further increased our public stock loads. At a high level, these milestones enable us to move forward with a significantly clear capital table, healthy trading liquidity, and simplified financial reporting. Now, Dana will provide more color about these developments in a few minutes. So let's turn to slide six now, which highlights our four strategic priorities. I would like to illustrate how our success in each of these areas has enabled us to produce an NRR north of 120% for 23 consecutive quarters. Our first priority is to extend our leadership in the digital forensic units of our customers. Insights helps customers better address their caseload growth and makes it easier and more affordable for them to lawfully access the newest smartphones on the market. Now, since Insight was launched in Q124, we have seen healthy attachment rates for our Unlock module when customers with no prior lawful access solutions upgrade to Insight. That trend has helped us nearly double the penetration of our advanced lawful access solutions within the install base to the low 30% range during the past 12 months. The win on this slide is a great example of how an insights upgrade with an unlock upsell can generate meaningful error growth. Our second priority is to accelerate our growth within the investigative and intelligence units, or what we call the I&I units, of our law enforcement customers. Now, early this year, we had a dedicated sales specialist within our quota-carrying sales force, targeting the investigative and intelligence units, and we are already seeing this initiative help building a large pipeline of opportunities. Our third priority is to expand our business in the private sector, where Cellebrite's data collection solution helps enterprises and service providers advance corporate investigation and e-discovery use cases. Our strategic partnership with Relativity, which we announced a few months ago, is off to a good start, highlighted by our participation at Relativity's test last quarter. We continue to see Endpoint Inspector maintain good momentum with both enterprises and service providers as the remote data collection solution of choice for mobile devices, computers, and cloud workplace applications. Our fourth strategic priority is to help our customers harness the power of cloud, Earlier on the call, I detailed the investments we are making to expand our range of cloud-based solutions and enhance the infrastructure that supports them. Now, while customers in the U.S. have been the primary early adopters of Guardian, we are starting to make inroads in certain international markets, which is highlighted by our first Guardian deal as part of larger deployment of our full C2C portfolio by a regional police force in a key Western European country. I would like to conclude my prepared remarks on slide seven. Celebrite's market remains very healthy with multiple tailwinds that are producing three major pains. First, today's crime involves more data and increasingly complex data. Second, operational inefficiencies makes it harder for law enforcement to advance their investigations. And third, the need to build public confidence and around the ethics and accountability of law enforcement. So given the constrained lawful enforcement budgets, our customers cannot simply allocate more manpower to solve these challenges. As a result, Cellebrite customers are increasingly recognizing the need to invest in the type of disruptive technology that Cellebrite delivers. This is a major driver, or one of the major drivers, behind our plan to hold our first-ever case to closure, our C2C user summit, at the leading event for digital investigation in late Q1 2020. 25 in Washington, D.C. As we look ahead, we are well positioned to close 2024 on a very positive note. Given our progress to date and the strength of our near-term pipeline, we have once again raised our 2024 target for revenue and adjusted EBITDA while also increasing the low end of our ARR guidance. We look forward to 2025 with confidence in our ability to consistently deliver a balanced mix between ARR, expansion with healthy profitability, that will produce or exceed a baseline for Rule of 45. The mission at Cellebrite is both inspirational and aspirational. It is focused on enabling our customers to deliver justice faster, smarter, and more defensively to help close the public safety gap and create a safer world. The team at Celebrite is making good on the company's brand promise of justice accelerated by delivering an end-to-end set of digital investigative solutions for law enforcement agencies around the world. Celebrite's workforce has performed admirably so far in 2024. While the conflict in Israel escalated during the third quarter, our business has not experienced any disruption. This is a tribute to the focus and results of our team, especially those based in Israel, and we appreciate their ongoing commitment and contributions. So that concludes my comments on our quarterly performance and accomplishments, and I will now turn the call over to Dana. Dana, please.