Cellebrite DI Ltd.

Welcome to the Cellebrite fourth quarter and full year 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 and 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star and 2. So others can hear your question clearly, we ask that you pick up your handset for best sound quality Lastly, if you should require operator assistance today, please press star and 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, Jim, and welcome, everybody, to Celebrite's fourth quarter and full year 2024 financial results call. I'm joined today at our headquarters just outside of Tel Aviv by our primary speakers, Tom Hogan, Celebrite's interim CEO, and Donna Gerner, Celebrite's CFO. Ronan Armand, our Chief Products and Technology Officer, and Marcus Jewell, our Chief Revenue Officer, will be available during the Q&A. 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're referring to in our remarks. The call is being recorded, and a replay of the recording will be made available on our website shortly after the call, along with the transcript of the event. Now, let's start with slide number two, a copy of today's press release and financial statements, including the GAAP and non-GAAP reconciliations, this slide presentation, and the quarterly financial tables and supplemental historical financial information for each quarter of the past three years are available on the Investor Relations website at investors.celebrite.com. Also, unless stated otherwise, our discussion of our fourth quarter and full year 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 comparable periods in 2023. In addition, please note that statements made during this call that are not statements of historical fact 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 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 an agenda of the topics that we'll cover on today's call. And with that being said, I'll now turn the call over to Tom Hogan. Tom?

Andy, thanks, and thanks, everyone, for joining us today. As most of you know, I assumed the role of interim CEO effective the start of January. I'm pleased to share that Celebrite delivered a solid fourth quarter to cap a strong 2024 in which we exceeded our original revenue and adjusted EBITDA targets. and delivered at the higher end of our ARR expectations. Donna will review our quarterly and annual financial performance in detail, but at a high level, slide four helps illustrate our continued success in expanding share of wallet across our install base and converting that top line growth into year-over-year improvements in our profitability and free cash flow. On a full year basis, we delivered a Rule of 50 performance in 2024 with 25% ARR growth and 25% adjusted EBITDA margins, which is also at the high end of our committed Rule of X range of 45 to 50. Strong fundamental performance has once again resulted in another solid year of cash generation with $122 million in free cash flow in 2024. As a cloud-ready, AI-powered market leader with a true end-to-end platform for accelerating justice, the opportunity to help our customers make their communities safer while fueling further value creation at Celebrite remains significant. With multiple macro tailwinds, we believe, show no signs of fading. We entered 2025 with a commitment to sustain top-line growth and to generate attractive profitability and free cash flow. Donna will share greater detail about our 2025 outlook in a few moments. In the meantime, I'd like to focus the balance of my commentary on key developments to start this year, as well as celebrate top strategic priorities for 2025. Let's start on slide five with a topic that I'm guessing is top of mind for many of you, the status of our CEO search. As previously shared on our last quarterly call, we're working with a Tier 1 executive search firm that has the global remit to surface exceptional candidates. Our priority remains a proven leader with SaaS, cloud, and AI software expertise, a global track record, prior exposure to the public sector, and preferably domain-specific expertise. Interest levels have been high given the unique position of Celebrite, is a high-growth market leader with equally strong cash flows, and I think perhaps most importantly, a clearly mission-driven organization. We remain highly selective as we seek an executive whose profile is commensurate with the growth, impact, and quality of this company and pleased with our progress thus far. In the meantime, I jumped in as CEO on Jan 1, and I can promise you we're moving with continued pace and urgency. I've had the opportunity to lead three companies as the CEO and have held senior leadership positions at several other market leading firms. But I can tell you with complete conviction, there is no other organization I've been prouder or more pleased to lead. Every man and woman at Celebrite, from the board down to our newest hires, is committed to accelerating our journey. Celebrite is executing and is truly making the world a better, safer place. Simply said, we're all looking forward to the appointment of a new world-class leader. We aren't waiting for that event, and we're operating with the speed that our customers, employees, and stakeholders expect. I want to briefly highlight a few other important milestones since our last call. First, we relaunched an expanded customer advisory board. This forum brings together 12 to 14 senior level decision makers at some of our largest and most innovative customers to discuss topical forensic and investigative challenges, review trends, policies, and best practices, and explore emerging technologies. We held our inaugural meeting in December in Washington, D.C., and we'll host similar sessions this year in the EMEA and Asia-Pac regions. Second, In early January, we announced an important change to the structure of our board. In keeping with the governance best practice of separating the chairman and CEO duties, Adam Klammer, managing partner of True Wind Capital and former lead independent director, has assumed my former role as board chairman. We also announced the appointment of Michael Capellas as a new director, assuming Adam's prior role as our lead independent. Most of you will know Michael's distinguished track record as a technology leader, having led organizations like Compact and MCI as the CEO, as well as serving as a director on multiple global leaders, including his current role as the lead independent director at Cisco. Aside from his general management experience, Michael brings two specific skill sets that I think will be invaluable to our next chapter. As a legacy CIO, Michael brings to the board unique technical depth and perspective. And just as important, his history of driving corporate strategy will complement the strengths and skills of our current board. To further leverage those skills, our board this week launched a new technology and strategy committee, which Michael will chair with Adam Klammer and Troy Richardson as committee members. Third, we hosted our annual sales kickoff event in Orlando in late January. Nearly 400 Celebrite employees, including many of our most recently hired sales representatives, attended this event, which included a keynote from one of our many important partners, Amazon Web Services. The energy and excitement, as you would expect, were palpable, and the event was a great start to our 2025. As we look forward to 2025, we'll maintain the majority of our priorities while complementing and augmenting them with new and important events and areas of focus. On the event front, we're very excited about the launch of our inaugural Case to Closure Summit. This Celebrite user conference will convene roughly 500 law enforcement, intelligence, and corporate clients from around the world. The event will take place in late March in Washington, D.C., and will deliver hands-on training, educational workshops, and insights from industry experts covering best practices and emerging trends. We believe this event will be a seminal moment and celebrates history and a harbinger of the trusted influence we bring to digital investigations. Slide six outlines our 2025 priorities. We'll continue the migration of our digital forensics install base to the Insights product suite. 2024 exceeded our expectations from both a financial and client satisfaction perspective. We closed 2024 with roughly 20% of the installed base migrated as compared to our initial goal of 10% and enter the new year with the objective of increasing this figure to roughly 50 plus percent. More importantly, the early feedback from migrated clients has been exceptional with most reporting significant improvements in the speed and efficiency of their investigative processes. Our insights migration is also driving important growth with increased attach rates for our unlock capabilities. Our unlock penetration increased to the high 30% range at the end of 2024. Second, as we mature the power of the C2C platform, we're focused on the growth of our Guardian and Pathfinder solutions. Guardian is a key offering within the Cellebrite cloud platform, which is rapidly gaining traction with investigators, analysts, and prosecutors. As part of the Cellebrite cloud platform, Guardian offers management, review, and analysis of digital evidence while protecting the chain of custody and meeting stringent data integrity requirements. Our Guardian ARR generated triple-digit percentage growth year-over-year for the second as the number of customers with both Insights and Guardian nearly tripled and the volume of stored data quintupled. Pathfinder, which is our AI-enabled analytics solution, also delivered strong results in the quarter, with year-on-year ARR expansion in line with expectations of growth in the 35% to 50% range. This asset is critical to investigators as they navigate the mountains of digital artifacts needed to identify high-value patterns, connections, and other evidential insights that are next to impossible to glean quickly through manual review. On the technology front, we'll continue to leverage our investments in the cloud and AI, which we view as critical for driving broader adoption of our solutions. ARR from our cloud-based offerings nearly doubled to 17% of total ARR in 2024. Aggressive expansion of cloud-based ARR over the coming years will bring multiple benefits to both our clients and our shareholders. AI is an equally critical technology for investigations, enabling greater speed, efficiency, and efficacy. We've been at the forefront of AI for over a decade, but see an enormous opportunity to advance our mission and our value as we further expand our capabilities. To that end, we announced just last week powerful new Gen AI features for our Guardian solution. We continue to invest in accelerating our growth within the U.S. federal sector. This sector delivered strong results in 2024 with AR growth in the mid-20% range. We expect that with our recently formed Cellebrite Federal Solutions Unit and its associated clearances, we'll continue to sustain solid growth through 2025 while expanding pipelines that will position us for acceleration in 2026 and beyond. A great example of potential pipeline expansion involves our FedRAMP initiative, which enables the Celebrite cloud platform to meet the U.S. government's demanding security and technical requirements. We've made important progress on this front, having announced just yesterday that we achieved FedRAMP-ready status at a high-level designation, which is reserved for only the most secure and rigorous suppliers. We're focused on achieving the final milestone of full authorization within the next one to two quarters. We'll also maintain our important footprint in the private sector, where Cellebrite's data collection solutions help enterprises and service providers advance corporate investigations and e-discovery. We're encouraged by early progress in expanding our sales pipeline through our exclusive partnership with Relativity, along with the broader adoption of our endpoint inspector offering. In addition to these areas of focus, we've launched a company-wide initiative to elevate the customer experience and to modernize our processes throughout the customer lifecycle. We're advancing a range of programs, including investments in new systems, incentives, dedicated and focused resources, and new processes. Over time, we believe this effort will drive improvement in multiple metrics like time to value, agility, contracting ease, post-sale support, and more, all things that should ultimately drive continuous improvement in our gross retention rates. To be clear, these metrics are already strong, but we're confident with added focus we'll have the opportunity to deliver further gains. I would add that all of these investments are fully contemplated in our 2025 outlook. Ultimately, we expect this initiative will enable the scale we aspire to while protecting the service levels and trust we have built over the past two decades. Finally, underpinning these priorities is the ongoing commitment we make to support our most important asset, the passionate and committed men and women at Celebrite. Our goal is to extend Celebrite's reputation as the place to be in enterprise software. Let's turn to slide seven for the conclusion of my remarks. Celebrite continues to execute. We remain positioned as the market leader in an important segment with sustained macro tailwinds. Crime persists, and the use of digital technologies in the pursuit of crime and violence continues to escalate. Headcounts in justice remain constrained, while attrition rates in law enforcement remain high. There's only one solution to closing this chasm, which is the application of advanced technologies. Our outlook for the coming year reinforces our conviction that linking our technology with the brave professionals dedicated to justice is the clear path forward. I want to thank our analysts and shareholders for their continued trust and support. I also want to thank my colleagues at Celebrite for their hard work, commitment, and for their warm welcome as I transitioned from chair to CEO. We're all inspired every day by the good we do. Democratized nations around the world depend on all of us to accelerate justice, and we're energized by that challenge. With that, I'll ask Donna to take you through the details and outline our commitments for 2025. Donna?