Q4 2022 Cellebrite DI Ltd Earnings Call
Okay.
Good day and thank you for standing by welcome to celebrate <unk> fourth quarter 2020 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one.
<unk> on your telephone you will then hear an automated message advising your hand. This race to withdraw your question. Please press star one one again please be advised for today's conference is being recorded I would now like to hand, the conference over to your speaker today simply no Matthews with Investor Relations. Please go ahead screener.
Welcome to celebrate its fourth quarter and full year 2022 financial results earnings call. Joining me today are you know CCAR meal celebrate CEO John Gardner celebrate CFO . This call is being recorded and a replay of this recording as well as the presentation that accompanies this call 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 as well as supplemental financial information for the fourth quarter are available on the Investor Relations website.
Investors don't celebrate dotcom.
Unless stated otherwise our fourth quarter 2022 financial metrics as well as the financial metrics provided in our outlook that will be discussed on today's conference call will be on a non-GAAP basis, only and all historical comparisons are with the fourth quarter of 2021, unless otherwise noted.
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 can also cause the actual results to differ.
She really from historical results or from forecast.
These forward looking statements are discussed under the heading risk factors and elsewhere in the Companys annual report on form 20-F filed with the SEC on March 29, 2022 as amended on April 14th 2022. The company does not undertake to update any forward looking statements to reflect future events or.
Consensus.
Slide number three provides the agenda for today's call with that I'd like to turn the call over to Yossi Carmel celebrate C E O.
Okay.
Yeah.
Thank you Sabrina and thank you all for joining us today.
So I'm pleased to report that in 2022, we've made significant progress advancing our mission to help our customers modernize investigate investigations by digitizing their workflow.
All results and achievements in the fourth quarter and throughout the past year reflect four important things.
First.
The market for investigative digital intelligence solutions remains healthy.
Our leadership position strong.
Long road runway for profitable growth in a market that remains highly underpenetrated.
Third we executed well on our development roadmap and go to market initiatives and fourth.
Thanks to our progress in 2022, we are well positioned to deliver strong results in 2023.
Before I cover each of these areas in more detail.
To quickly review our Q4 results.
And so let's keep your eyes are critical to the health and success of our business.
First our AOR grew 33% year on year to reach $249 million.
Our quarterly net retention rate was 130%.
We closed 21 29 large deals.
Later than half a million U S dollars in the quarter.
We reported Q4 revenue growth of 9% to 74 million largely attributed to subscription revenue growth of 24%.
We delivered Q4, adjusted EBITDA of $16 1 million.
And we also further strengthened our financial foundation, ending the year with cash and investments totaling $206 million and no outstanding debt.
A little bit about the healthy market environment.
So we continue to operate in a healthy market.
The significant growth opportunities in front of us.
Thanks in large part to celebrate your industry leading technology.
Against this backdrop, we continued to implement our growth strategy of.
Expanding business with existing customers through upgrades.
Selling and cross selling and by winning new logos in both public and private sectors.
Celebrate solutions are increasingly attractive to date with strong demand and positive feedback from customers and prospects.
Just as important customer budgets for our type of digital intelligence solutions are expected to remain robust in 2023.
They are generally.
Insulates us from the broader macroeconomic pressures that are currently impacting a wide range of other technology sectors.
Americas, which one do we represented 62% of our fiscal year 2022 revenue law enforcement budgets have historically grown over time.
We anticipate that this trend will continue in 2023.
In the U S incremental U S. Federal funding for law enforcement agencies of all sizes will support increased staffing and additional resources to help them stay current with the latest evidence based practices and.
We expect overall investigative digital intelligence spending by law enforcement and intelligence agencies in other geographies will remain solid in 2023.
No celebrated build a reputation as a trusted digital intelligence market leader, which is best reflected by our success in increasing our wallet share within existing customers.
Over the years, we have leveraged our traditional stronghold in collectively if your solutions to increase our footprint within digital forensics units by helping them make digital evidence more accessible intelligence and actionable.
Now we believe that our newest collection review premium enterprise and premium as a service solutions are true game changer for our customers.
And our physical analyzer continues to be the leading review tool in the investigative shields.
With ongoing investments in collection of you.
And the additional new investigative analytics offering like Pathfinder.
Reporting the natural expansion of our customers' operations and continue unlocking new buying centers to address a growing range of use cases.
Our success in Upselling and cross selling into our installed base is best reflected in Q4 in our <unk>.
Retention rate of 130%.
This was the 16th consequently quarter were reported in our greater than 120% and we are very proud of our <unk>.
Best in class retention rates, which demonstrate the power and the value of our go to market strategy.
The more we closed 29 large deals in Q4, bringing our 2022 total to 101 large deals and this is 22% higher than in 2021.
We expect that winning more business with existing customers will continue to fuel celebrate growth well into the future.
A little bit about the product development and go to market execution.
During 2022.
We took important steps to further advance our portfolio of solutions, while also investing in the cloud infrastructure necessary to scale, our SASSA offering like are the audience solution.
We enhanced our offering by adding new features capabilities and functionality that help our customers extract shelter analyze and manage data and evidenced efficiently and securely.
We collect and review the newest version of our premium service offering.
Rolled out earlier in the year and we were pleased to see success in the U S state and local government agencies.
It is development therefore like these that have helped us.
To address major pain points for customers and underpins our efforts to fortify our longstanding strengths in collection review and extend our reach into adjacent investigative analytics and case management solution.
Now this past year also marked meaningful investment to expand our global sales force.
With an emphasis on strategic accounts management to improve our effectiveness in the U S and in Europe , and we made solid progress our.
Sales organization grew by 10%.
As we put the right talent in the REIT World.
To best serve our customers.
This infusion of resource has helped us to deliver on.
Our MRO and large deal targets.
We delivered excellent results in the U S state and local enforced law enforcement during Q4 and gain greater confidence in our ability to realize the growth potential we see in Europe .
Guardian is gaining traction in the market with hundreds of new users are now benefiting from the simple secure and scalable cloud based solution for investigative and evidence management.
And we see continued growth ahead for our SaaS solutions, which appeal to a broader range of customers will need to modernize their digital operation, but often lack the budget it staff and infrastructure, which is associated with on trend solution.
Let's talk a little bit about the customer success.
So I'd like to briefly highlight some.
All of our Q4 deals.
All of which demonstrates all celebrate technology is helping these customers modernize the operation while expanding our wallet share.
So in the Asia Pacific Region, we grew our long standing relationship with our original law enforcement agency. We're now deploying our premium enterprise solution more broadly into the field to help them accelerate their investigation as a result, our ore from this customer will grow by more than 50%.
To nearly 1 million U S dollars and helps set the stage for further expansion.
In the U S.
Large federal Federal agency selected premium enterprise, two augments use of our <unk> solution and its regional labs and leverage their AWS private cloud infrastructure to move more capability into the field and operate their mode of operation.
Deal increases our IRR from this account by almost 60% to nearly $12 million.
Now I mentioned earlier that our investigative analytic solution. The pathfinder is enabling us to unlock new buying centers and support customers as they modernize their digital investigative workflows and.
So for example, we closed two large pipeline of deals in Q4.
One of which was a mid six figure deal with one of the largest state and local police agencies in the U S.
And the other multiyear low eight figure deal that's triples, our <unk> with the National Law enforcement agency in Western Europe to over $4 5 million U S. Dollar per year now both deals show past fund the unique value in helping law enforcement professionals accelerate investigations by.
Sifting through monitors of digital data to surface. The most relevant the Venus discover connections and collaborate more efficiently.
And finally in the private sector.
We closed four notable deals towards service provider partners and two with Fortune 500 with corporate customers now all of these customers purchased endpoint inspector to improve overall operational efficiency by remotely collecting data from mobile devices and computers.
<unk> substantially upgrading costly time consuming legacy approaches.
In closing.
Our solid execution over the past 12 months.
Has enabled us to enter 2023 prime to further capitalize on the vast market opportunity.
Digital transformation is clearly reach all industries and it's easier to stay.
Our customers, regardless of whether they are national regional or local public sector agencies, all private sector businesses are under increased pressure to modernize the investigative workflows in the face of rising volume of increasingly complex data operational inefficiencies and greater scrutiny around the ethics and accountability.
With our digital evidence is handled throughout its lifecycle and celebrate is playing an important role in enabling our customers to address those challenges.
Now I'm confident that from where we stand today.
The products the programs and the people needed to execute and deliver on our 2023 financial targets.
We have established a scalable model that will support improved fundamental performance, even as we invest for the future.
And as we mobilize to capture demand in a healthy market and further fortify our market leadership our priorities. This year are clear.
First.
We plan to deliver ongoing innovation through state of the art soft solutions paired with on Prem offerings that will help customers modernize the digital investigation workflow.
This will require a sustained investment in R&D across our entire portfolio and in the technology infrastructure that supports it.
Second.
We will focus on extending our leadership and collect some of you by advancing our you've heard and premium solutions that are used extensively by digital forensics labs.
And third we are broadening our reach beyond our stronghold in the labs by accelerating our progress with the high value investigative analytics and case management solutions, which helps investigative unit will foster and collaborate securely to resolve complex time sensitive cases.
Now by executing against the sizable priorities, we expect to accelerate our revenue growth rate delivering improved profitability and generate strong cash flow from operation in 2023.
I would like to use the opportunity and thanks to my colleagues at celebrate for the hard work in 2022, and our continued commitment to make a little safer.
I'm excited for what lies ahead.
Moreover, we remain committed to helping our customers modernize investigation and closed a public safety gap.
And in short I'm confident in our strategic direction and in our ability to capitalize on the attractive opportunities in front of our team.
And with that I will turn the call to Donna.
Thank you Yossi.
If you already mentioned earlier.
Oh, 33% year on year, reaching $249 million for 2022.
This growth reflects our success on the novel front, what's the biggest driver being continued expansion with existing customers.
Subscription licensing.
Over the past several years, we have made tangible incremental progress every quarter to convert customers to a subscription model from traditional perpetual licensing as a result. This transition is now largely complete as we enter 2023.
Total revenue for the fourth quarter was up 9% from the fourth quarter of last year and reached $74 million.
This was driven primarily by strong subscription services revenue growth of 24%.
84% of total quarterly revenue came from subscription services.
From 67% in the same quarter, two years ago and 74% in the same period last year.
With software subscription services now generating a substantial majority of our revenue. We believe that 2023 will be a year in which the power of our subscription based business model will become increasingly apparent.
Our gross margin was 84% in Q4 as compared to 82% from the fourth quarter of last year benefiting from the increased portion of subscription sales, which carry a lower cost of goods sold.
In terms of operating expenses I will discuss these on a non-GAAP basis, excluding share based compensation amortization of intangible assets acquisition related expenses and one time expenses.
Q4, 22, non-GAAP operating expenses were $47 $8 million in the quarter.
As you May recall, the fourth quarter was 2021 was the first quarter carrying full public company costs and was further impacted by the costs from the acquisition of digital cool.
Our fourth quarter 2022 operating costs at least today.
<unk> prudent spending.
With our commitment to deliver sustainable EBITDA improvement, it's well, it's more than anticipated annual incentives and quality valuable compensation costs totaling approximately $4 million.
We ended the month of December with 1004 employees up 12% from the end of December last year and consistent with the revenue at the end of the third quarter.
We believe we now have the appropriate teams in place to address the opportunities and challenges that lie ahead in 2023.
Adjusted EBITDA in the quarter was $16 1 million, daughter, or 22% on a margin basis.
Q4, adjusted EBITDA results reflect the strong performance of subscription revenue in the quarter, which contributed to the higher gross margin supported by cost efficiencies, while continuing our investment in maintaining our technological and market strong position.
Moving forward, we expect to deliver EBITDA growth in 2023, it's an accelerated revenue growth rate coupled with prudent spending.
Is expected to produce operating leverage.
non-GAAP net income in Q4 was $15 3 million and non-GAAP fully diluted earnings per share was 8%.
Pleased to report that we ended the year in a strong cash position, we generated cash from operations in the fourth quarter $36 million as result of our strong quarterly operating performance for the 40 year three fourth it's $26 million of cash inflows from operation.
We ended the month of December we have approximately $206 million of cash cash equivalents and investments versus $182 million at the end of 2021.
I will conclude my remarks by providing some additional context around our 2023 outlook.
We expect our Aon route to grow between 21, and 25% to $300 million to $310 million by the end of 2023.
Please turn with prior years, we anticipate with expansions from existing customers. We have fuel the majority of phone calls because of higher contribution from your local from new logos than last year.
We expect full year 2023 revenue to range from 305 to 315 million doors, which.
13% to 16% growth over 2022.
In other words.
22, ending <unk> of $249 million, representing 79% to 81% of our 'twenty to 'twenty three revenue target.
Combined with a healthy pipeline and reasonably assumptions around net dollar retention rate. We believe that these top line targets are achievable.
In line with historical trends, we expect full year revenue will be weighted towards the second half and quarterly revenue growth rates will be higher in the second half of the year versus the first half of the year.
It is dynamic primarily reflect the wind down of perpetual license deals and the typical year end spending activities associated with our U S federal customers in September and most other accounts.
At December year end.
From a profitability perspective, we expect non-GAAP gross margin to be between 80% to 82%.
non-GAAP operating costs are expected to grow in the range of 7% to 11% to between 217 to 223 million daughter, We currently anticipate adjusted EBITDA in the range of $35 million to $40 million or 11% to 13% of total revenue.
But do you anticipate high higher profitability in each quarter of 'twenty three we believe the most significant gains that occurred in the second half of the year with higher revenue will drive incremental operating leverage we've been.
The investments, we are making to advance our product development roadmap and go to market initiatives. We didn't yield attractive returns that supports further margin expansion in 'twenty four and keep us on track to reach our original long term EBITDA targets of 20% or greater.
In closing I would like to echo, you'll see the excitement about terabyte and within your Eurobank.
Our end markets, either with innovative solutions targeting a large growing global addressable market.
This translates into opportunities to increase penetration into our expansive customer install base complemented by ongoing efforts to win new accounts around the globe.
With much of the heavy lifting associated with converting our customers to subscription license is behind us.
We expect our top line growth rate to accelerate from 'twenty to 'twenty two levels.
Jeff It's notable things to the substantial investments we made last year to build out our organization, we are well positioned to convert storage revenue into improved profitability and stronger free cash flow.
We look forward to helping investors gain a better appreciation for everything that he's doing to create value over the coming months, if we make tangible progress towards the longer term targets. We shared when the company went public a year and a half ago.
With that I want to 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 to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster.
And our first question comes from Jonathan Ho with William Blair. Your line is now open.
Hi, good morning, and congratulations on the strong results.
Just wanted to maybe start out with a couple of questions around guidance could you maybe unpack for us the 2023 guidance a little bit more and help us quantify how to think about the growth in revenue or AAR or for the specific categories. I think it would be helpful too.
Maybe understand.
How each of those is going to contribute to your current guidance.
Yes for sure I'll take it so if you remember.
Remember in 2022, we've seen a continuous reduction in our perpetual.
And one time revenue from licenses, especially towards the second half of the year. We expect all suddenly 23 to see continuous weakness a winding down of this business to a very marginal.
Very Laura once the percentage of revenue.
And as such when we are talking about our growth expectation on our top line if you take into consideration comparing our.
2022 financial.
Around 20.
20% or even I would say, 18% of the business came from one time activity, where their services tonight or licenses the part associated with the one time perpetual will be very <unk>.
<unk>.
So most of the growth would come from a subscription basis.
And print up on it and like it.
Sorry.
Yeah I think my question is more along the lines of you know what is the contribution.
From either the core premium products Pathfinder collecting a review or like how should we think about the growth rates on a on a product basis as opposed to the revenue mix.
So most of the revenue from subscription in 'twenty two came from.
The correction with you.
So I would say around 90% plus of the revenue from subscription came from question review, we expect credit can review to grow.
And be very similar also from their sufficient business in 'twenty three.
This is because we are seeing a very good acceptance and huge potential with far advanced collection capabilities that have been distributed in 'twenty, two or through not only the standard on premium, but the premium enterprise and in the second half it very well the traction of the premium it's a service we do expect V invest.
Forget even that it peaks and management solution to war marginally as a percentage of the pie are in 23 compared to 22.
Great and then just as a follow up.
I guess, what is giving you the most confidence that.
The growth will accelerate in 2023 and can you maybe help us understand what's changed versus 2022 or what investments you've made in 2022 can make you more optimistic about that thank.
Thank you.
Yeah.
You know I always say that comparing 'twenty two to 'twenty, one was actually you're comparing apples to pears, because 21 was still heavily.
Weighted to one time revenues to the nation of perpetual.
And as such it was very difficult to show the true growth through revenue under mainly through growth, what's presented itself, where they are our goals.
Moving into 'twenty, three and especially from Q2 of 'twenty, three where the business expected to be from what we are spending mainly comparing the right mix of revenue tied Q2 of 'twenty two fiscal Q2 of 23 and onwards, we will actually be able to see.
The growth rates are also on the revenue side.
There was also last took time.
Okay.
The long haul.
The level of acceptance.
The solution that we brought in.
I would say Q2 and Q3.
2022 into the market and all the resonates and all the growth.
As you know, we always have to mix all growing with I would say existing products within existing logos, but to additional buying centers that we clearly identify and then adding new logos, which will become something which is much stronger.
Especially if I look at the U S market and if I look at the what we call the long tail.
The sector has thousands of customers.
State and local government adoption rates of the premium is a service we're pretty strong in Q3 and Q4.
The premium enterprise well accepted the number of endpoints, you'll put in which our equipment connected to premium enterprise are growing.
I'm pretty confident also about the fact that.
We we feel very comfortable right now when it comes to the investigative analytics.
With a much more focused oh, we pay go to market.
And.
Relying relying on on the success of Q4, we see it as a very solid growing business engine in 2023, so combined basically the targeted amounts of Hugo logo logo and combine it with a well identified buying centers within.
The existing the adoption rate of the collective of you. So far enough that we feel very comfortable confident and comfortable with the targets and the guidance that we gave.
That's very helpful. Thank you.
Thank you.
One moment.
Our next question.
Our next question comes from the line of Mike <unk> with Needham <unk> Company. Your line is now open.
Hey, guys. Thanks for taking the questions here. The first question I had for you was really more macro in scope and I believe it was in <unk> opening remarks around how law.
La enforcement agencies in Americas have historically demonstrated continued growth of budgets and that helps give you the confidence that these law enforcement agencies in the Americas can continue to grow their budgets in calendar 'twenty three could you I.
I guess discuss that a little bit more and really what I'm curious as to hear how are you.
<unk> been communicating with your agencies and your various customers and how deep you've gone in your conversations with them to ensure that budgets are continuing to grow.
And then the second question I think there's probably more work for Donna.
With respect to the sales head count growth I know that you guys had said that the sales organization grew 10% year to year in calendar 'twenty two.
I think that part of the reason why you guys are talking to these EBITDA margin improvement in 'twenty threes is based on the leverage you've spoken about but could you help us think about.
What more investment needs to take place in that sales organization. How are you guys are thinking about growing head count and that organization is as we look to calendar 'twenty three thank you very much.
Youre welcome and thank you for the question and I Hope that you can hear me well.
Hum.
The conversation you know we've got today only the public sector were a little more than 5000 agencies. So I'd fall than it used to fly pleasant customers.
But the number of meetings that we have done and you know I'm very glad of Covid here.
It was something between 15 to 18000 meetings that we had with customers and I'm talking about only in those accounts worldwide that we manage with a dedicated account executive with a presale.
Let's say visited engagement with customer success.
And I can also say that we are in those hundreds of accounts that we are managing directly with dedicated sales force and presale.
There is.
A very good dialogue on different levels on it.
It'd be a few digital forensics units management level on the ini investigative them.
Intelligence level and also on decision makers, even unconditional level and we are in all those dialogues. We're the same thing more funding. It's not you know overblown in terms of.
That we haven't expected, but the treaty much correlate.
The way, we anticipated the allocation of budget to digital intelligence.
In that specific sector, because if you read our customer survey, where our industry survey.
You can see clearly that then we published by the way that.
The meaning of the meaningful.
Digital data with even mitigation is the most critical element.
In General I'm also glad to say that the go to the go to tool uses the mobile, but almost doubled in percentage than any other digital tools.
So basically it's clear that the east the meaning of digital data growth by more than 80% in the last three years. When it comes to investigation and litigation are basically digital we're pretty confident about that motion and we also see the increase in the budget by ourselves.
So this is to that then I hope that helps.
As for the sales force, maybe I'll hand over to Don about before they're just saying.
We are well equipped we shared with the markets. The fluctuation of the fluctuation that we had in Q1 and especially during each one last year, we said already in Q3 that will recover.
And in that motion. We are we continue with the plan in a mix of a sale.
Sales force, which will manage multiple or effect of a number of accounts directly.
On the SMB side on the federal side and we have also same store, which is making sure that we get.
I would say new business and recurring coming from what we called the Sullivan's long tail climb than it would you like to add something on the same store.
I think we are a very proud by the sales team members, who joined in the second half of 'twenty, two and when we say that we are aware that that means that they are now fully boarded and we expect them to be able to monetize very experienced by bringing the right deals.
Deals in place.
We do not expect to grow.
Substantially all of them.
Or in any manner. The team from an average number per se, but it was really about getting the right people in the white quality to generate the revenue that we expect for this year.
Thank you.
One moment for our next question.
And our next question comes from Tal Leone with Bank of America. Your line is now open.
Hi, guys.
First I never say it on calls, but I wanted to congratulate you on a much better tone this quarter versus previous quarters.
And.
I would like to ask you about the change.
Last quarter. So <unk> was weak <unk> was mixed on foreign exchange and you reduced the guidance for <unk> by $4 million.
And now you are beating the numbers by around $3 million.
So what changed from the previous guidance that you gave that you're beating the numbers by $3 million versus the $4 million reduction before how much of it was foreign exchange I know it was a.
A tailwind for Israeli companies can can you just talk about basically the environment and the Delta from last last year, sorry last quarter. Thanks.
Sure I think and first thank you very much for the kind words.
Well you know we will use our guidance during the Q2, earning call and indeed Q3 was very mixed riffey devaluation.
Our two <unk> to the European currency the Israeli currency.
It had some impact on our.
Forecast.
And when we said it will be on our end we assume that these.
The trend will continue.
I'm not.
Does that give you unfortunately, whatever it was a the currency mixed remain pretty much the same to <unk> until the end of the year and as such we are we have been we have been able to.
To meet our targets and even exceed the dinnerware and of the targets as we said we might be in the end of Q.
Q3.
So from a top line perspective.
On our ALR and we've been a slightly better than what we expected. This was a direct result of their very wide acceptance of our premium. It's a survey, which contributed mainly to the to the AOR lesser to the revenue because of it being discuss a solution.
And.
As I said day on my screen, we took a very hard look into our Opex and we have tried to execute the caution approach towards they expand and opex expenses, including some adjustment and the true.
Through Apple pay variable compensation to the actual results compared to our beginning of the year initial targets.
And how do I think about the difference in trends too.
Two things first can you repeat your targets your long term targets that you gave at the year and a half ago just repeat them. So we have it in front of us.
And second how do I think about the difference between the trends in IRR in the trends in revenues.
Revenues are accelerating.
Or are you grew in 2020 to about 33% youre guiding to about.
1000 basis points below that so it's decelerating, what's the what's the difference in the trends.
So out.
Out of memory, our long term targets worth 22% to 27%, while our revenue targets were 20% plus.
What we have said is that during this transition from perpetual to subscription will first see the growth coming in the AOR and later in the revenue and for the mid long term that we will see revenue in AOR trending the same. So for that reason is we are expecting our revenue growth to be on the 20% plus.
Towards the end of next the end of this year 23, you would see a or are getting closer to the revenue targets when they close.
Our perspective is.
Is it will reflect basically the gross in the revenue which is mostly subscription.
Great.
Thank you.
Welcome.
Thank you.
One moment for our next question.
And our next question comes from the line of Douglas <unk> with J P. Morgan Chase. Your line is now open.
Hey, good morning, and thanks for taking my question. So you had about 15 points of operating margin expansion quarter over quarter can you talk about the biggest drivers and maybe some commentary on timing for those opex cuts.
Can you repeat the question I wasn't sure I heard your property.
Yes.
We're about 15 points of operating margin expansion quarter over quarter can you talk about the biggest drivers behind that and maybe some commentary on the timing for those opex cuts.
So.
The biggest opex there are two drivers of tropics.
Uh huh.
I would say controls and in Q4 why no feat was by the mere fact that is saying we said we did not grow our head count between the end of Q3 to Q4 we've.
Also when we did on the Q3 earnings.
Cool.
We believe that we've reached the right number of people in the company to meet our target to end the year of 'twenty tube and to start to 'twenty three.
And the second was relating to our 112 variable compensation costs, which towards the end of the year when realize the final results of the company, we were trying to variable compensation of bonuses and commission.
We see the actual topline and Bottomline results generating some reduction one time reduction of cost of $4 million in the quarter.
Okay, great. Thank you.
Welcome. Thank you one moment for our next question.
And our next question comes from Jamie Shelton with Deutsche Bank. Your line is now open.
Good morning, and things taking my question.
Wanted to get your view on the potential combination of magnet forensics and great shift by Thoma Bravo. What does this mean for set up right from a competitive landscape perspective. Thank you.
I would say the following.
First of all I would say that.
Currently potential emerge.
I would say should highlight actually the opportunity in the sector.
Let's say it is a clear statement that our market is attractive first and foremost we.
Problems basically as a company, which is larger than the combination of these two businesses.
Thomas and Thomas Bravo, basically took two companies and I think collectively valued them in the $2 billion.
That basically gave us a sign or a clear marker of attractiveness to the market. So this is first.
In many ways I would add we are not surprised.
The two companies have collaborated for several years by now.
And.
Would say that from the context of them that concept it is for us.
Petition, which was goods remained good.
But we have let's say our own way and I'll pass it on roadmap.
We as.
As we look I would say to the Russia now.
The way it was explained it even strength basically our position because the rationale for the merger from one of the most about the fact that the reason mobile expression capability, which is the reason something that we have so it's basically how strong the mobile and how meaningful is the mobile and they defined it even has a real strategic opportunity.
And I would like to say that if I look at us at this stage.
We are as a vendor we combine in one house at.
The offering that these two players bring brighten altogether, we have in our house offering which is extended to investigators and analyst investigative analytics and often.
Ah is a clear solution provider, we continue just family with a plan.
And continue to invest broadly in our solutions and maybe the last thing.
<unk> also positioned in expansion in the market with Bill and international footprint to expand our business in the U S and also outside of the U S.
And I would say already matured I'm talking about us in terms of the expenses, which are relating to that something that we can.
<unk> creates at least on our side more efficiencies. So all in all I embraced the move because it's good for our industry, but we stay filmed with our direction.
Pretty good thanks very much.
Thank you.
And then last question.
Our last question.
Will come from the line of Louis <unk>.
Your line is now open with William Blair.
Yahtzee, Donna and Andy Good morning.
Good morning, or good afternoon here.
Indeed.
I see you announced 29 large deals in the fourth quarter, including that $14 million deal with the agency in Singapore, What does the pipeline look like for large deals in 2023 and in general are your deal sizes, increasing as more.
Customers.
Got you.
Your premium enterprise and.
Your other investigative analytic services.
Yeah.
And I will take it then maybe there is some kind of a data in that mixed on it that I think that you can add.
First of all Louis Thank you for the question.
The number of the larger.
Or the larger size deals is growing and will continue to grow.
And this is basically a reflection of the side of the go to market of celebrates.
Which focuses on increasing wallet share within existing accounts.
This is mainly focused to the areas what we call the strategic accounts on the state and local governments.
And it is related to the federal side.
And over there it is expanding within the accounts nurturing more growing and as we offer more and as the solution each one of them or the total digital intelligence suite of solution resonates, we see basically more budgets larger deal. So again stay tuned again it will grow.
Nevertheless, there is a dual effort that we're doing because there is also the element of our expansion within new logos.
More related I would say to what.
What we call the thousands long tail, we have them well identified and over there side by side I would say with the collection review within the larger accounts the visa rather transactional collective view.
The business with a rather a shorter sales cycle.
And we are still relying and facing.
A large amount of deals which are I would say small reasonable and pretty much fits our go to market on that dual effort great large deals alongside an extension and then basically having debt funds transactional solely the base.
And this is good by the way because that spread the risks of celebrates we are not dependent on a few customers. We are not dependent on a few large opportunities and we have the ability to balance in that environment.
Donna would you like to add something regarding.
Hi, Laurie in principle, we do see and then I see.
Two or three quarters.
Looking at the larger deals those who are above which are about $500000. Some increase in the average mix.
From a dollar perspective, if those deals so certainly we do.
Excellent thanks, everyone.
Thank you. Thank you.
At this time I'd like to hand, the conference back over to Mr. Yahtzee Kamil.
<unk> for closing comments.
So first of all thank you all of you for participating and thank you for your interest and for the questions.
Again, I would like to say we are committed both to the result in the creation of shareholder value.
And obviously to the industry, we serve like to thank again, the celebrate employee fold efforts in 2022.
And thank you.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Yeah.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Sure.
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