Q3 2021 Cellebrite DI Ltd Earnings Call
Yeah.
Yeah.
Good day, ladies and gentlemen, and welcome to the celebrate Q3 2021 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
Anyone should require operator assistance. Please press Star then zero on your Touchtone telephone as a reminder, this call maybe recorded I would now like to introduce your host for todays conference that Ami Kilborne VP Investor Relations for celebrate you may begin.
Thank you Justin.
Welcome.
Third quarter 2021 financial results earnings call. Joining me today are you have to female celebrity Chief Executive Officer and Donald here.
So that's why Chief financial Officer.
This call is being recorded and a replay of this recording as well.
A copy of the presentation that accompanies well will be made available on our website shortly after the call.
A copy of today's press release, and financial statements, including GAAP to non-GAAP reconciliation.
Well as supplemental financial information for the third quarter are available on the Investor Relations website, I think that's exactly right.
Dot com.
Statements made during this call that are not statements of historical fact constitute forward looking statements. All forward looking statements are subject to risks uncertainties and other factors that could cause matters expressed or implied by those forward looking statements not to occur.
It could also cause the actual results to differ materially from historical results and awesome program.
Some of these forward looking statements are discussed under the heading risk factors and elsewhere in the company's registration statement on form S. One declared effective by the SEC on October six 2021.
The company does not undertake to update any forward looking statement.
Future events or circumstances.
Please note that in the coming weeks management will participate in a number of investor conferences as detailed in today's press release.
Visit the events section of the Investor website to access the webcast of our presentations at these conferences where applicable.
With that I'd like to turn the call over to you I think let me answer that my CEO.
Oh, yes. He please go ahead.
Thank you Anna and thank you for joining our call today.
This is our first earnings call as a public company, but many of you have been following our progress since the beginning of the going public process back in April and I would firstly I would like to thank you for your interest and support.
We are thrilled to start our journey as a public company by delivering progress on our strategy.
And all that together with the strong financial results just to refresh our strategy is to lead the digital transformation of our customer's investigative unit and becoming a one stop shop digital intelligence leading vendor.
In Q3, we continued to see momentum with large multi solution deals, which we had highlighted earlier in the year.
We are pleased to report this quarter 25 deals larger than half a million U S dollars compared with 15 such deals in Q3 last year.
Our largest deal ever of approximately $10 million with a U S federal account.
In the first nine months of this year, we had 58 such deals reflecting a growth of 76% compared to the same period last year.
The large deals reflect the successful upsell of additional licenses or new solutions to existing customers as well as the increase in multi year term based deals.
This momentum is a reflection of the success, we have had within the public safety sector as part of the digital transformation process or strategic accounts.
And the success in transitioning these customers to the term based models from their prior preference for onetime perpetual license, giving their budgetary structure.
We're excited to see upsell driven this year by premium or high end collection review solution with new license sales in Q3, two customer such as two federal agencies and one state police forces in the United States and European Ministry of Interior Affairs, and municipal police force in the nearest.
We are also successfully or we successfully launched a premium enterprise solution and began deployment of the orders made even before solution availability, while receiving new orders from customers such as a county police force in the U K to county Sheriff offices in the USA and customs authority.
Others as a reminder.
Premium ease our advanced collection review solution, providing unlock and extract capabilities for leading iOS and Android devices.
It is typically installed in a central location that can meet our strict security requirements now.
The new solution. The premium enterprise is designed to decentralize to our advanced capabilities, while maintaining the strict security requirements found in premium.
The premium enterprise allows remote connectivity to <unk>. The most widely adopted Prime collection review solution and this enables our specialty capabilities on every use it and improving significantly customer's investigative motive operation.
Let me share with you to win stories.
Which provide some color on demand drivers for all solutions.
So typical demand factor and growth driver for celebrate ease back logo with devices that needs to be investigated for example, one of the large wins in the quarter with a national correction facilities network in one of our large markets.
Historically.
Customer spend between 100000 to 20000 U S dollars with us annually.
While the network includes multiple correction facilities. The customer was all the facilities were all working with one lab and a small team.
Now this lab was unable to keep up with the number of mobile devices that were smuggled into prisons on.
Engaging with the senior government officer, and conducting an extensive proof of concept we secured seven digits order, which includes distributing responders are simplified field solution in the correction facilities and also using commander our license management solution in order to ultimately generating.
Data on their usage.
The deal includes services to bolster the customers left capabilities training the teams and implement best practices.
Despite the fact that the customer book this quarter of approximately 10 times. Its previous you spend with US. We believed there was additional upsell potential within this customer in the future.
A second example is a European country National Police force.
Multiple solutions, including <unk> and physical analyzer, paas find the premium euphoric cloud seeker Inspector and digital collector as well as training.
Multimillion three years deal.
Police force will now be able to collect and reviewed data for mobile phone computer video and the cloud.
And I realize they're finding across numerous investigation units throughout the country and not only has so far in central police stations.
This customer is adopting a highly progressive approach to investigations aspiring to expand the adoption of digital intelligence and the police force to overcome bottlenecks and increase efficiency.
We expect this approach to become more widespread as part of global trend digitized multiple aspects of the police force.
Swing was achieved through close engagement with senior level at the agency and a flexible approach that enables tailoring the deployment to the agency strategy and specific needs.
Now these two examples like sure helps explain how we constantly and successfully generate best in class net retention rate, which was 179% for the 12 months ending September 30th 2021.
The more we believe the spending potential of our existing customer base is significant and we are very focused on capturing distributional opportunity.
Now our vision of a comprehensive digital intelligence platform that allows us as an agency to collect review analyze and manage through detailed digital data is a significant step forward from today's siloed manual and backlog process.
The discussions of such a step forward are held at the agency's executive level and in Q3. For example, we engaged with the most senior officers of the police forces at three of the largest 20 cities in the United States to discuss our end to end digital intelligence platform.
Now I have any such discussions.
First and foremost a testament to the quality of our sales force, we invested in high caliber account executive and by that upgraded our ability to manage strategic accounts and second we view such discussions as a positive sign and the continued interest of major law enforcement organizations to educate them.
And adult leading digital intelligence tools now of course.
Such a step forward will also take time.
Processes involved in digital transformation of our complex because it requires not only our solutions, but also investments in infrastructure and personnel on the agency side.
Complexity is one of the reasons, we expanded our service offering as I elaborated on our previous call the consulting services and training we offer our first customer in this transition.
Now in the past few months, we continue to enhance and expand our digital intelligence platform to make the investigative process smarter faster and efficient and pursue our vision of digitizing the entire investigative lifecycle.
Parting with organic developments in Q3, we introduced a new version of Guardian, our digital evidence management solution and the industry's first for mobile collection let.
Let me start with the Guardian.
Well, we view the Guardian solution, we introduced as an important and strategic component in our digital intelligence platform.
The world of digital evidence management is evolving quickly as public safety agencies are very challenged by the need to manage an increasing amount of digital evidence while at the same time, maintaining the channels evidence ensuring compliance protecting privacy and meeting an increasing number of accountability requirements.
Now most agencies today are still managing data manually.
And most of the alternatives to that manual process, our digital evidence management solution that specializes in operational data, which is generated by agencies themselves. For example from in car body worn cameras or constellation Rms systems.
While such solutions are transforming agencies operational ecosystem.
Celebrate Guardian is a digital evidence management solution that specializes in the investigative ecosystem.
It is linked to actual investigative data generation for our collection review offering diesel enables and holistic approach toward data evidence workflow and case management, including elemental storing sharing and review through the investigation process in order to make investigations faster and more efficient.
Now all of this now is offered in a soft solution further enhancing efficiency and cost effectiveness and this is our first soft solution, which is another dimension of strategic importance.
We believe that the readiness of the public safety sector for soft solutions is on the rise and we are committed to enhance and expand our offering in this space.
Adding remote mobile collection the remote mobile collection is an important capability for the private sector, where corporate investigations E discovery and incident response, often required collecting information from a disputed distributed workforce now.
Now with constant based automated remote collection from both computer and mobile devices. The disruption to the workforce is minimized celebrate is the first to market with this capability to our domain expertise on the mobile collection.
Let's discuss the inorganic portfolio expansion.
We recently announced the acquisition of digital clues.
We are obviously excited about this acquisition as we see open source intelligence is an expansion of our digital intelligence offering upgrading celebrates competitive differentiation as an end to end digital intelligence platform provider.
Open source intelligence is the collection and analysis of data from many public publicly available sources, including the surface web deep web and dark web.
Agencies are all engaged in such activities in a simple and manual manner. This can be as basic as checking suspects Facebook profile, but through us and automated solution as part of their investigative workflow.
The addition of these all seem to capability to our digital intelligence platform is a natural extension.
Enables quick information gathering in early stages of the investigation and as such feats, our value proposition of making investigations smarter faster and more efficient.
Our extensive footprint and strong customer base provide a significant cross selling opportunity here and as such it's almost another $1 billion to our town.
Now, reaching the scale will require delivering the strong digital includes cloud based technology as an integrated solution. So that open source intelligence is fused into Pathfinder. Our analytics solution is another layer of data that enriches pathfinders analytics capabilities.
This will require some investment in R&D and it will require time we.
We are excited about this new offering that expands our addressable market and we welcome the digital team, which will join us in the coming days after the upcoming closing of the acquisition.
So in summary.
We are very pleased with our performance in the third quarter.
And with the continued success, we've had in executing on our strategy.
We are excited also that our top customers remain committed to leveraging our suite of solutions to improve their efficiency and outcomes.
We continue to innovate our portfolio by increasing the scope of our offerings as we focus on helping our customers apply the digital transformation initiatives in the investigative workflow.
Now combined with a healthy spending environment.
And budget availability of law enforcement organizations, we have a tremendous market opportunity and we are confident in our ability to execute as more organizations recognize the vast potential of our digital intelligence platform and above all we remain committed to our mission to accelerate justice protect and save lives.
And preserve privacy and I'm proud of our team's success in this quarter.
Now with that I will turn the call over to Donna to discuss the financials.
Thank you Yossi.
Hi, I'm very pleased to present the analysis of our results for the third quarter was 2021.
From a corporate perspective going topic maybe.
For the company.
On the business perspective to continue to deliver something that to me.
Our expectations in many parameters.
What is striking trying to execute on our go to market strategy anybody can call primarily like I mentioned before.
Customer base.
Let's start with revenue.
Well, we enjoy very strong performance in Q3.
Thank you.
Which we expect it to continue in Q4.
Total revenue in Q3.
$5 9 million or 24% here.
For the first nine months.
$178 million.
Interesting.
The first nine months of thinking ahead.
Hey, the first expected.
For the full year 'twenty one.
We are also pleased with our ability to deliver this outperformance.
The supply chain challenges.
And you know electronic components are required for the access to mean that the company itself.
And our formation seemingly first secure their needs so acutely.
In the fourth.
Looking at the difference between.
Army.
We increased the proportion of the patients.
Overall revenue mix.
<unk> revenue was the main driver.
Sure.
46%.
Sure.
We have to think of everything.
Your growth in terms of flight.
131%.
And 175% for the first nine months.
He mentioned, we are seeing an increase in multiyear deals that have been absolute.
Revenue recognition component and they don't get the deal in the high teens.
Therefore, ashish here.
Contributing to the revenue growth of Paradise.
And Tristan.
The beauty of nature of it.
If I imagine, even though if he gets called and maybe here I mean could you.
Great.
Apparently there.
Therefore, it was expected to meet those deeper decline in perpetual license.
I mean compared to previous quarters.
Perpetual licensing and other revenue was $6 $7 million decreased 44% from Q3 last year.
Microphone service revenue come from instructor led training practice, which were negatively affected by social distancing and travel limitations.
19.
The opening of main markets in which we sell professional services revenue of $8 million.
25% that's here.
Let me play out.
And I'm, 42% of people in New York, We think one.
$171 million.
2021.
The main driver.
What happened in class set of additional modules.
Customer which tied in.
Nice retention rate.
Okay.
I have a 42% still kind of alcohol 30.
37% came from that and cross sell in fact.
The majority of the accident.
Generally.
Sebastian human as well.
Yeah.
As mentioned in our previous call. We introduced a third license wonderful P. M on May 29.
And in Chile.
Okay.
Fundamental demand for premium.
Vance capabilities strong for the reasons described and we also believe that the term license where they increased the attractiveness of the solution.
Simplified pricing structure.
The dynamics I thought you said in.
And what a difference your perpetual license.
He has achieved significant market penetration.
That's the right time.
Like tariffs.
Adult confession customer.
In fact, many spaces.
In fact, it can be processed when you model can be lengthy.
With the introduction of the premium enterprise solution described but you'll see we keep the.
The bank to decentralize, the advantage capabilities and having to be more.
Both connectivity for your faith in us.
Our opinion afford the reading that that's true.
At toy fair in a baseball game.
The transition to prepare them nicely with always expect it to be gradual over the coming two to three years given budget fracture in the public sector.
Now that we have gained more insights into customer care and of course, I think we expect it to increase as patterns. If you test linear and more weighted towards 'twenty two 'twenty three customers back a few years and now we got to meet our AOR with Paragon.
Yeah.
Moving to operating expenses.
On a non-GAAP basis share based compensation.
Motivation of intangible assets acquisition related expenses, and one time expenses.
At one.
One time expenses with a C code every large this quarter given the cost related to the completion of the combination in going public.
Evaluation of the financial instruments related to worthy backing pocket. If he goes on our balance sheet, we built it and they sign up.
Eastern Tonight.
It will be evaluated on a quarterly basis, just because the market for Friday.
It needs to be valuation will be presented in the financial income or expense line.
Like I can go back to non-GAAP okay.
Non-GAAP operating expenses of 14 45 million increased 30% from Q3 last year, primarily due to head count increase in travel and marketing related expenses, resulting from the market opening for face to face meeting.
We increased head count by 23 employees during the quarter ending September with 843 employees.
Continues to recruit mainly in the areas of R&D and sales and are aiming to reach 900 employees by the end of March 'twenty two.
Non-GAAP operating income and margins.
<unk> 2021 for $13 5 million doors.
4% respectively.
Yes.
215 million and 22, 8% respectively.
Adjusted EBITDA exceeded our expectations for 15% margins on an annual basis basically reflecting the operating leverage that's easily fixed do you think of anything that expectation for the third quarter at the nine month period.
A 50% margin expectation with Elisa base, when the exclusion of cost associated with becoming a public company, mainly board expenses and directors and officers insurance.
We started incurring these costs fanfare and are pleased to have never debate and even higher than expected profitability Q4 would be the first quarter that would reflect those expenses.
Okay.
Q3, net income was $8 1 million and fully diluted earnings per share with five thing.
Non-GAAP net income was $13 3 million, daughter, and non-GAAP fully diluted earnings per share was eight.
However, please note that these are not representing these figures going forward.
They are based on a share count the weighted average between the two mines.
Sorry go ahead.
Sure and one month of the new work going public ownership structure.
For modeling purposes, we recommend taking into account the fully diluted shares outstanding as it was at the end of Q3, which we estimate to be approximately.
$198.
$5 million.
Yeah.
Yeah.
It's 10 million shares would be added.
Operating cash a cash outflow in the third quarter of 2021 with a median dor impacted mainly by the going public related expenses.
In the 12 months ending September 32021, there was an operating cash flow of approximately $38 million and facial hair can handle it.
We ended September with approximately $172 million of cash cash equivalents and short term investments.
In the coming days, we expect to spend approximately $20 million I mean, they just had a clue acquisition exactly decent coffee Q4, it would not have a significant impact when I was 2021 thing I turn the boat either.
In 2022, we expect digital to have a small positive impact when I'm era.
Maybe Neil.
Sure higher R&D expenses as we integrate open source intelligence into the ice platform.
We will provide an update on our 22 outlook for Q4 'twenty one legal.
And if that I wouldnt parents of our 'twenty one outlook, we are very keen for me, though right.
For the third quarter and the first nine months of the year, which have exceeded our expectations in most of our macquarrie.
Now increase that 2021 guidance.
When you now expect it to be between 241, and a half into having 43 and a half.
The second growth of 24% at the midpoint.
From our previous expectation of 200 kicks me under one.
One for example.
We expect the jacket that'd be that could be between 45, and 46 and a half million door refreshes.
And margin of approximately 19% at the midpoint.
From our previous expectation of $36 million and 15% margin.
S. Why are we not expect to end the year, if ara growth of approximately 34%.
This guidance reflects the mix between term and I can say that the picture of everything is so far in 2021.
There are other administrative and budgetary quotes out there.
Required by our customers in transmission.
So be prepared and I can say and two adult and anchor <unk> digital intelligence platform. If you can maintain at the same time, we see the quality of our AOR improving more than we had when we do need to think that given the higher proportion of multiyear deal. It comprises.
We are constantly evaluating the addition of avenues for investment in our top line growth our expectation to end 2021 with higher earnings compared to the initial pain enables us to make that investment and we are glad to be in this position.
Providing more color on our next call.
And if that I would turn the call to the operator to open the Q&A session.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
John Your question press the pound key please standby, we compile the Q&A roster and once again that is star one if you would like to ask a question.
And our first question comes from Shaul Eyal from Cowen. Your line is now open.
Yeah.
Good morning, or good afternoon, guys congrats on results and guidance.
You'll see as we think about the overall healthy trend.
You are seeing in expressing.
And we apply that into your product offering your end to end platform is it one product, which is standing out rather than the entire portfolio or the strength you were seeing is pretty broad based right now.
Charles Thank you first of all for the congratulations highly appreciated and to your question.
I would say that we are let's say performing very well in all fronts, but particularly particularly in the collection and review piece.
And over there with a premium and with our premium enterprise, the new launched premium and premium enterprise and it has a M. We are about to launched two launch of the management solution. So that's basically not yet in action. We've got commander has been that the.
License management fleet, and then the investigative analytics.
We are growing.
But nothing as compared to at this stage to the success that we had with our premium and premium enterprise.
I'd say that that is a specific reason because we have to remember that in.
In the field out there we've got approximately 28000, new foods, well entrenched as the primary tool for collection and review.
The premium contains specific capabilities, which are related to the highest modems, both Android and iOS and obviously there is a wish to get those special capabilities, but under as I mentioned before.
March strict security environments.
The premium was therefore and based on the fact that I think done a one year ago, we have changed the model right.
Unlimited.
It was basically well embraced and enable the much larger distribution over the premium.
And this is before we just as mentioned came with a premium enterprise, we chose a tremendous impact on the ability over every you fit to get distributed special unlock capabilities to eat you fit in the field and that also improves dramatically not only the ability of <unk> to get those.
Special capabilities, but also enables the forces to improve their mode of operation.
From a slow manual work you know sometimes entities of hundreds of users, but only few premiums. So it really easy to use they sometimes have to move evidence manually between one location to another the fact that we bring right now at distributed capability and de centralized with the premium.
Enterprise basically sold debt issue cost saves expenses and improve the mode of operation. So those are the main reasons that the premium is over achieving and we anticipate that it will continue to be swayed. The sweet spot of this potential opportunity with a premium and premium enterprises are enormous.
Understood understood. Thank you for that and as my follow up.
One of the main discussion points.
Within the technology and non technology sectors over the course of the past few months have been obviously our supply chain on screen.
It would appear from your performance and guidance that you are not supposed to be seen but just want.
I want to hear how you guys are thinking about it internally.
Kind of what your luxury goods.
So thank you show actually we've seen those trains.
More than a year ago, and we started our injecting our supply chain methodologies are.
To be able to purchase Exelon tower for a much a longer lead time components and as such we have add inhibiting succeeded to conclude Q3, and we will be able also to conclude Q4 before and our ability to provide order.
First tells me.
We actually also stepping into 2022 we said very strong gas position and of course, nobody knows what's going on to be there, but we have a good contingency plan.
We hope you'll be able to continue to perform accordingly.
Understood. Thank you so much congrats.
Thank you. Thank you very much.
And thank you.
And our next question comes from Jonathan Ho from William Blair.
Your line is now open.
Hi, Good morning, and let me Echo my congratulations as well.
Yeah, just wanted to start out with I guess can you give us a sense of the customer spending environment. You know maybe how budgets are these days and help us understand how to think about you know potential stimulus from the Baidu and administration.
Yeah, maybe I would tell them, especially in the in the U S market.
First with a few minutes.
We are seeing them.
Actually the opposite of what we we were afraid of which we're a budgetary cuts we see enough budget, if our customers. What we see is mainly the challenge of our catalog to be able to obtain those signs for digital intelligence. Although in some cases many of those even if times were.
A.
Where appropriate cooperated for crime fighting needs due to their increased crime that there is a experienced in the U S. Now so our sales force are actually working with those customers are only to allocate those funds.
Intelligence needs and we don't see any budgetary constraints substantially on our customers.
I would like to read that I would like to say that we see the contrarian, but thank you for the congrats.
And but one year ago, or maybe even two or three quarters ago. The world lots of concerns about police beforehand, and now we hear more and more about police refund and especially in the segment of the state and local in the United States I'm, referring in the U S language.
You know 50% of our.
Strategic accounts are north American accounts, so in that context state and local government. They are basically showing a positive context of of our refunding and indeed, the U S. Fed golfers basically created this rescue funds to be used at the state level, but.
Its funny a win in the U S last week as part of our QBR and plans for next year.
And are those the it's unclear that the usage of many of those funds are if it's not necessarily for the technologies. It's all over the place and that there is a little bit unclear to me on that respect one thing and one trend is clear.
We are if we have concerns three to four quarters ago as I said right now it's more than a day funding and the profiling and where pretty much optimistic about that.
Also for the future it really relates to the fact that the PD is local state.
It will be the major I would say investment segment will celebrate into the future.
Got it and then just as a follow up can you give us some additional color on some of the large deal activity that you're seeing I mean this is picked up pretty significantly can you help us understand how much is coming from up sell to premium versus how much is coming from new product areas and how sustainable.
Is your ability to kind of capture more wallet share from existing customers. Thank you.
I would say are the following first of all one needs to understand that the premium enterprise is he's an uphill it's a.
It's a new solution.
The premium enterprise is not just a feature or a capability, which is just a new version of the premium it's a complete new solution.
And with a complete different distribution system.
Dedicated hardware, which is completely different the very smart doctor protected and to come also very soon to you know to come later on old cleanup in a in a SaaS.
Flavor.
Which by the way enabled not only strategic accounts, but also small long tail and mid sized prime account to get that capability. So first of all premium enterprise is a classic upsell.
As to the wider.
As we said.
From the beginning as we did the journey in an already now we are pretty much confident then and stable with our growth plan and the growth plan is based on the fact that we are sitting I'll take the public the public safety, we're sitting by 5000 agencies.
And out of which ran about 250 by the way going to be a higher number in the beginning of 2020 twos or strategic accounts.
And as we analyzed and our penetration level.
Within those.
Those accounts in comparison to the potential that we analyzed to meet 2020 was around 20%.
So our potential growth within our I would say a few hundreds of strategic accounts and midsized pharma accounts is tremendous and this is why we stand with our.
Forecast or our estimation that on every dollar that we have seen so far in the lab and in the field based mainly on collection and review and slowly, but surely and obviously with services like training Academy and the start of the investigative analytics, we plan to seek additional $4 eight.
From those customers in the coming three years. So it's a wonderful ratio and I have to say that in all the places where we really implement if you remember My example, during the the opening we don't see a ratio of one two for when they do B I investigators for digitized investigative decision or.
Digital transformation, it's actually more of a one to 10, 1% to 15, 1% to 18 ratio. So we are very confident about it we have a great position in the 11 outside of the lab with collection and review and with a great ability to expand.
With more collection and review selling more to new buying centers.
Our new labs, new fusion centers and also grow within the investigative flow with investigative analytics and the Guardian, the management, which is a key element.
So I hope that answers, but that's in a nutshell.
Yeah. That's helpful. Thank you.
Yeah.
Thank you and our next question comes from Mike Cecos from Needham and company.
Your line is now open.
Thanks for thanks for getting me on here guys and I appreciate the questions I have two but the first thing that I did want to come back to just so youre aware, but there was a lot of I guess scratching of papers and then at one point the your earnings call actually went quiet.
For for maybe a couple of minutes.
Just for so you know it was during Donald's comments.
When you were talking to the the last.
I had heard really was the fully diluted share count at the end of Q3 was around $198 5 million shares out.
And then it kind of tuned back in right before you provided the updated guidance on calendar 'twenty, one and I did just wanted to call that out because I know that you're trying to provide.
All of these new disclosures since this is your first quarter and I just.
Just wanted to bring that to your attention. If you wanted to hedge that out again.
The call was quiet earlier.
But I just wanted to make you aware of.
Yeah, I think yeah.
I think he's very thank you very much thought I think I would just you know because we know the compare is very important to dynamically.
Say a few words about that so we are all clear so in principle. If you could also see in the presentation, our current count of shares.
Fully diluted basis was 198 5 million shares which is comprised of 100 million shares and aching 18, and a half million shares underlying the granted employees option, whether it'd be cracked father was the fact that on top of that we had seven and a half million earn out shares owned by cooling catheter with the sponsor.
And 15 million set our earn out shares.
Which are both conditions are reaching certain thresholds of share price and in fact are now concluded.
Now on top of that there are 20 median app happy coring to $9 7 million a private offering.
That can be added to that we do believe that.
Maybe.
For calculation basis.
<unk> looked at it on a on a cashless basis, we see that.
Bring them down to approximately 10 million shares.
What I hate to say.
We forgot the share counts and I hope, it's an EBIT more clear now.
Thank you.
Go ahead.
The explanation about the guidance that you did you hear that where we back by then.
We were Oh, yeah.
<unk> had gotten back right around the time that it started to talk about the.
The reason the revenue.
The new midpoint being plus 24% year on year and then the adjusted EBITDA the updated range with the 19% margin at the midpoint.
So I think the main issue that with my theory.
And trying to get our cash balances.
172 million barrels that we are about the spending in the coming few days.
The.
The acquisition of <unk>.
$2 million and that we do not expect digital cool, taking the fact that the COVID-19. It will be making Q4 will contribute significantly to the financing. We can also see here. Nevertheless, they did mention that we have in 2022 we expect digital because they are a small.
More positively impact on our subscription revenue and have anchor and fewer higher R&D expenses and why do we are integrating the open source intelligence into our platform.
And he's a discussion on the maker, but and I believe then it went to the guidance. So we are now caught up on the entire meeting far thank you.
Yes. Thank you and thank you very much for the clarification I was hoping to get.
Just a couple of questions. Since I know, we were just clarifying some of the prepared remarks and the first question I had was actually about this digital cruise acquisition.
I was curious to hear.
Can you walk us through the criteria that celebrate went through when going.
About it's process on the build versus buy in this acquisition and then the.
The other thing that I wanted to ask you as I noted the acquisition hasn't closed just yet.
What has the initial feedback been like from some of your your customers as an example, I'm curious if customers had been pulling you into ocean.
This is somewhere where you had been planning on evolving the D. I platform, even before the acquisition was announced.
So first of all to the process.
Regarding I call it a make or buy.
We are.
Basically.
The the ore seams.
But the open source intelligence as a discipline, which is emerging on we anticipate that it will emerge within law enforcement is part of I would say standards investigations was always on our radar and not always but in the last one one on off here on our radar.
And it was always an element of a make or buy sorry, an element of whites never an element of make it's a dedicated discipline.
So in in terms of what when I look at our Nonorganic growth major criteria, which are mainly basically increasing the span of the digital intelligence or even the thumb.
By enlarging the ability of celebrate too be it in a in a wider spectrum of investigation one criteria second technical capabilities that we either can do by ourselves that will take long time or cannot and third customers. It definitely ticked the box in the first two.
The open source intelligence was for us a clear error.
Expansion of the digital intelligence offering I would say the relevance of celebrate earlier in the investigation. Because every investigation starts with this open source searches before one go into seizing of any digital device or any digital source and second obviously, bringing in technology technology.
That we are we do not have.
So that's the tick the box about these two.
I started basically already answering the second question, but I will emphasize first and foremost all think there is a natural expansion of the enabling quick information gathering in early stage of an investigation and it's basically adding another source of investigative and intelligence data to the D I offering.
And now the fit is obviously I'm clear.
Clear because when we think about the three main value creation objectives are as I mentioned, then we are taking these boxes and I would say that in terms of the digital intelligence offering it's definitely something that.
I would say as a stand alone it is a value, but when we integrate that and that's what we are planning basically overtime, there will be a roadmap to integration, which will include among other things the ability to ingest open source intelligence data into other celebrate solution such as the investigative analytics.
The Pathfinder and enriching data for other celebrate collection tools with the often detail. So I'll stop here I hope that was clear.
Yes. It was thank you for that and definitely definitely sounds like a check the box, especially when you're talking about the Tam expansion provided by that acquisition as well.
The other question that I had for you and I know that we touched on it earlier, but the upsell opportunity really comes into focus given the number of <unk>.
Different agencies that you're touching into already and the fact that we're talking about these very low penetration rates.
And I'm curious from a from a go to market perspective.
Can you remind us how your.
Oh, you were talking to these customers and continuing to help get that get that cross sell or up sell cross. The finish line is it just a matter of having subject matter experts that are constantly working with these customers or whats the process there.
And maybe to refresh.
And as he said remind we are I'm talking public sector now and within the public sector, where we have to targeted groups of accounts or customers.
The what we call the strategic accounts, those let's say 250 to 300 accounts and they are strategic because we identified first of all our potential growth and there is a threshold of.
750000 average customer lifetime value and revenue in three years. This marks them above the rest are below and there are some hundreds a few hundreds of midsized prime accounts, and which are about to become strategic the way we anticipate that.
And then there is the long tail of the prime accounts, but few thousands prime accounts of celebrate which are less relevant for the entire digital intelligence platform.
Strategic accounts are those accounts were either already decided or about to decide do we anticipate that they decide to do with digital or digitization of the investigative low end to end that the decision maker will implement that part and those accounts are being managed by us with the.
Direct or a dedicated account executives.
A dedicated in most of the cases technical account manager, which is there so that basically that's all so to say for ice principle in the account management and on top of that a group of customer success, which are nurturing the implementation of solutions within these accounts and we intend to basically to invest the majority.
Dorothy in those strategic accounts make over there all possibilities or make the available budget and the relevant processes in order to create upsell and cross sell and nurturing more of digital intelligence solutions and more of each digital intelligent solutions within these accounts in <unk>.
<unk> and within new buying centers within those accounts. So it is a dedicated sales force account management technical account management dedicated account based marketing budgeted for those.
Unlike the long tail of prime accounts, which are being managed by a group of inside sales.
Techniques of one to fuel or one too many and all.
I'll stop here.
Thank you very much I really do appreciate the comments there youll see.
Thank you.
Yeah.
And thank you.
And our next question comes from Louie Dipalma familiar Blair.
Your line is now open.
Great.
Hannah and good afternoon, and congrats on closing the Truing merger.
Thank you. Thank you.
Upselling to you said premium appears to be one of your main near term revenue growth drivers. It seems we are very early in the cycle can you provide an estimate for what percent of your you said base.
Is on you said premium is it is it less than 20%.
And how many years do you estimate that it will take.
For most of your you said base beyond you said premium.
Yeah.
Okay. So in principle, we have signed around 20 and premium enterprise deals immediately.
Before the end of the quarter, we sold I believe only to Oh, that's still complies with a very small number a few FID to be connected.
To the premium we see customers that started to at least their footing store base, but gradually.
No.
I would say that.
I'm out of my memory here now we have around us.
7% to 10% of the fed's been contracted under your premium to be connected to the open premium some of them are in their installed base.
But this is at the very early stage of phase two.
Enterprise pay you for that.
I'll make an order in those in that respect first of all positioning.
There is no <unk> premium the review said the 28000 in trash and there is a premium a solution that we are selling tool versus agencies for several years by now, but only few hundreds and not more than 40 countries. The premium enterprise he's our newest solution and within that solution that has the opportunity to connect.
Are you fed into the premium and that that one is as Dennis said in an early stage and as you can understand I spoke about the mode of operation So far agencies to fuel premiums and sometimes dozens and hundreds of you said without the ability to connect them. So the premium enterprise, which is just the start.
Right now I agree we've done a very early stage, that's the upgrade but a few premiums hundreds of people out there and are not connected to any open because that's the nature of the premium. They are the thousands of 28000 users in the premium enterprise, which is coming now with the new solution is the one with the ability to connect all of the office.
Into the special capabilities and what I tried to say that those deals that we have now we need the fact that we're talking about 5% to 8% of the offense.
And all those good ideas will be implemented will be already connected to the premium.
Premium enterprise, so very strong potential of growth any CEO I'm very strongly chapel Hill.
Yeah.
Excellent that's all I have thanks.
Yeah.
And thank you.
I am showing that is our last question I would now like to turn the call back to Yossi car mill for any further remarks.
First of all no further remarks for my end, Besides and before we conclude today's call I would like to thank you all for joining us.
And thank you for listening and for your support and wishing you all and I say.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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