Cellebrite DI Ltd. Q4 FY2024 earnings call

• CEO Search: Working with a Tier 1 executive search firm to find a proven leader with SaaS, cloud, and AI expertise. Priority is a global leader with public sector exposure.
• Milestones: Relaunched customer advisory board; changed Board structure with Adam Clammer as Chairman and Michael Capellas as Lead Independent Director; hosted annual sales kickoff event; launched inaugural Case-to-Closure Summit.
• Segment Priorities: Migrate installed base to Inseyets product suite, aiming for over 50% migration by end of 2025; grow Guardian and Pathfinder solutions; leverage cloud and AI investments; invest in US federal sector growth, including achieving FedRAMP-ready status; elevate customer experience through process modernization.

ARR grew 25% year-on-year to $396 million in 2024. Inseyets was the single largest contributor to ARR growth. Guardian ARR generated triple-digit percentage growth year-over-year, and Pathfinder had ARR expansion in the 35% to 50% range. Geographically, the Americas represented 54% of total ARR, EMEA 34%, and Asia-Pacific 12%. Gross retention was approximately 92% in 2024, reflecting improvement due to lessening impact from prior year market exits and strong public sector renewals.

• 2025 ARR expected to be $480 million to $495 million, a 21% to 25% increase from 2024.
• Q1 2025 ARR expected to grow 22% to 24% to $406 million to $411 million despite transitory headwinds.
• Full year 2025 revenue expected $480 million to $490 million, a 20% to 22% growth.
• Gross margins expected 84% to 85% in 2025.
• Adjusted EBITDA expected $113 million to $123 million, 24% to 25% of total revenue.

• Geopolitical regime changes in various countries causing modest headwinds.
• Timing of federal government budget cycles affecting pipeline building and revenue recognition in the US federal sector.

Q: Please double-click on the CEO search status and impact of US federal and government spending uncertainty.

A: The search firm has cast a net, interviewed at least a dozen candidates, and is looking for a world-class leader. Geopolitical changes are modest headwinds but expected to lead to upside once settled, with Cellebrite's assets helpful in areas like fentanyl traffic and border control.

Q: About the Executive Advisory Board, pain points of customers and impact on product roadmap.

A: Customers face explosion of digital assets in cases and need efficiency tools. Cellebrite is addressing this with Inseyets and Pathfinder platforms.

Q: Quantify impact of exiting specific countries on 1Q and drive to increase unlock attach rate to Inseyets.

A: Exit from certain countries contributed less than 2% in 2024, expected to improve gross retention by 0.5% to less than 1% in 2025-2026. Unlock attach rate can be increased by introducing varied Inseyets packages for different agencies.

Q: C2C penetration goal, new initiatives and lessons from 2024.

A: Learned importance of C2C platform. Now using specialist sales, running own events with high attendance, and focusing on investigative flow.

Q: Trajectory of installed base converting to Inseyets and feedback on GenAI.

A: Transition is a three-year journey, aiming for 50% migration by end of 2025. Customers are excited about GenAI's efficiency and efficacy, with surveys showing positive reception.

Q: FedRAMP update, opportunity in federal, and migration to investigative unit.

A: FedRAMP-ready status doubles TAM potential in federal. Federal is ~20% of revenue, and migration to investigative unit is in mid-innings with a multifaceted approach.

Q: EBITDA beat, gross retention, and US federal revenue.

A: Q4 has higher expenses, Q1 is seasonally lower. Gross retention improvement comes from abandoned customers. US federal revenue is ~20%, mostly subscription, with no impact on renewal.

Q: Main alternative to Guardian and US federal revenue percentage.

A: Guardian is purpose-built for digital investigation, unlike alternatives optimized for other storage. US federal revenue is ~20%, mostly subscription, with new business lagging but renewal unaffected.