Q2 2023 Cellebrite DI Ltd Earnings Call

August 8, 2023

Please continue to standby.

[music].

Please press Star zero.

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Welcome to the celebrate our second quarter 2023 financial results Conference call. At this time, all participants have been placed on a listen only mode and the floor will be opened for your questions. Following the presentation.

Like to ask a question at that time, Please press star one on your telephone keypad.

If at any point. Your question has been answered you may remove yourself from the queue by pressing star too. So others can hear your questions clearly, we actually you pick up your handset for best Sound quality. Lastly, if you should require operator assistance. Please press star Zero I would now like to turn the call over to your first speaker today Mr. Andy.

Drew Kramer Mr. Kramer the floor is yours.

Thank you very much Ashley and welcome everybody to celebrate second quarter 2023 financial results call. Joining me today are you a CCAR meal celebrate CEO and Don at Garner celebrates its CFO .

There's a slide presentation that accompanies our prepared remarks. Please advance the slides in the webcast viewer to follow our commentary we will call out the slide number we are referring to in our remarks. This call is being recorded and a replay of the recording will be made available on our website shortly after the call.

So let's start with slide number two a copy of today's press release and financial statements, including the GAAP to non-GAAP reconciliation is slide presentation, and the quarterly financial tables, and supplemental financial information for the second quarter of 2023, the first quarter of 2023 and each quarter of 2022 and 2021 are available on the.

Investor Relations website at investors Dot celebrate dot com.

Also unless otherwise stated our second quarter 2023 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 second quarter of 2022, unless otherwise noted.

Please note that the statements being 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.

They could also cause the actual results to differ materially from historical results <unk> from forecasts.

Some of 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 April 27.

2023, the company does not undertake to update any forward looking statements to reflect future events or circumstances.

To slide number three provides the agenda for today's call and as you will hear we delivered very strong Q2 financial results made important strategic progress and have increased our full year 2023 financial expectations.

With that as the background I'd like to turn the call over now to Yossi Carmel celebrates CEO .

Thank you Lindsay and thank you all for joining us today.

Look I'm excited to discuss our second quarter results, which highlight our continued success in delivering the industry's leading digital intelligence software suites to public and private sector customers around the globe.

As illustrated on slide number four we delivered an excellent second quarter performance on all fronts, we reported strong financial results, while making strategic progress in several areas, which are critical to our long term success.

Our Q2 financial performance was highlighted by the following <unk>.

Total revenue of $76 7 million driven by subscription software revenue growth of 35%.

<unk> grew 28% to $274 million.

Dollar based net revenue retention was 125%, which was our 18th straight quarter above 120%.

We closed 25 large deals each valued at greater than half a million U S dollars.

Adjusted EBITDA of $11 1 million or 14, 5% on a marginal basis and non-GAAP EPS of <unk> <unk> and.

And lastly, we ended Q2 with cash and investments totaling nearly $245 million up $23 million from Q1.

Now with a strong first half of 'twenty three behind US, we now move into the seasonally stronger second half of the year and in a healthy market and as a result, we have increased our financial outlook for the year.

Turning to slide five.

Celebrate customer relationship remains strong in Q2.

Our ongoing investments in powerful customer driven innovation and go to market activities enable us to continue winning in the market.

Our second quarter 2020 revenue growth demonstrates our ongoing success in expanding the scope of our relationship within the digital forensic units of our customers and our progress in extending our reach into the investigative units.

In addition to strong public sector expansion, we delivered our second straight quarter of high teens revenue growth in the private sector.

Geographically, our Q2 revenue an IRR growths were powered by the Americas and EMEA.

In terms of our large deals the average size of our second quarter 2023 large deals grew 16% over last year, even though the number of the deals were slightly below the same period last year importantly, more than half of our large deals included premium.

And approximately 40% included either Pathfinder, our investigative analytics tool.

Guardian, our evidence management solution or both.

So overall the spending environment on digital intelligence solution remains robust around the globe public safety is challenged by rising crime rates increasingly sophisticated criminals. The proliferation of digital evidence across a wide range of smartphones and other devices limited and increasingly.

Trained policemen taller and heightened interest around police operation and priorities.

And to close this gap in public safety law enforcement agencies around the globe continue to invest in digital intelligence solutions that will help modernize the investigative workflow to successfully advance and closed cases keep the community safe and meet other important kpis and as a result, we continue to.

See favorable budget tail winds in the USA Western Europe , Latin America, and key parts of the Asia Pacific region with more customers in the public sector or allocating more money for celebrate solutions than they did last year.

In addition to our strong Q2 performance.

Celebrate made important strategic progress over the past several months.

So in June we announced our plans to introduce you've heard the ultra Revolutionary next generation collection reduce solution that enables digital forensics your needs to locally access and extract digital evidence from the broadest range of mobile phones.

You'll find the ultra is designed to deliver greater ease of use simplified workflows and full size system extraction for even the most advanced smartphones that capability that was previously only available in our premium solution.

And just as important we've continued to see great uptake on our premium suite of solutions.

Which provides local access to the most advanced smartphone on the market and still have significant room for adoption across our installed user license base.

Now I'll leadership in the sector is anchored by differentiate the technological capabilities, thus remains unmatched across both iPhone iOS and Android.

And given these dynamics, we see substantial multi year opportunity to upgrade and upsell Our collection review solutions.

We have also taken important steps to enhance Guardian, our case and evidence management workflow solution.

We recently announced new features and functionalities for Guardian.

That makes it easier and more efficient for examiners took share digital evidence with the investigators.

I'll highlight a couple of great second quarter Guardian wins in a moment.

Guardian, and our premium as a service offering.

Just starting to scratch the surface of the revenue potential of cloud based digital intelligence solutions, we are accelerating our plans to build out our technology technical infrastructure and support the delivery of more high value cloud based solution.

The second quarter was also marked by continued adoption of Pathfinder.

Our artificial intelligence powered investigative analytic solution.

We are on track to significantly expand our pets find our customer base this year and drive faster growth.

Sure.

We believe that the investigative unit present celebrate second primary growth engine augmenting on our growth in digital forensic units. Accordingly, we are mobilizing our R&D sales and marketing resources to ensure that we effectively and efficiently capitalize on this opportunity.

On the R&D front.

It is important to recognize that our investment in artificial intelligence benefits more than just our past sign the investigative analytics and.

Collection review, we have continued to strengthen our market, leading physical analyzer platform with advanced machine learning capabilities, which makes it easier and faster for digital forensic units to identify relevant evidence within the vast volume of digital data across the broadest range of digital devices applications and warrant returns.

Yes.

In conjunction with reporting our results today, we also announced the appointment of Tom Hogan and celebrates executive chairman.

And we believe that this action and hence our corporate governance and support celebrate as it moves into the next chapter of growth and market impacts as a global digital intelligence leader told.

<unk> experienced softer veteran with a proven track record of success, including his most recent work at Vista equity now.

I look forward to his counsel and support as we work together with the board and the broader celebrate team to help shape and drive our strategy forward scale up our business and our largest market and drive value creation for our stakeholders.

Tom's appointment expand our board of directors to 10 members.

And we are also fortunate that the company's former chairman Chaim shunning of its way to growth partners and longstanding celebrate shareholder will continue serving as a director on our board.

Moving to slide six.

I would like to review several of the second quarter deals, which help illustrate some of the key drivers of our success.

As noted earlier adoption of premium by existing customers steadily increasing this quarter, we closed a major expansion of our premium footprint.

Head of schedule with a large north American Federal law enforcement agency, along with an initial pathfinder engagement to accelerate time to resolution on critical cases.

I'll celebrate digital intelligence solutions is expected to help this customer centralized its critical digital forensic capabilities at scale and supercharge investigative capabilities.

And as a result, our IRR in.

This account will nearly triple to approximately nearly 5 million U S dollars.

In terms of new logos, we want a meaningful new customer in the Asia Pacific region that is expected to deliver nearly 250 solids in U S dollars an hour.

This regional Correctional service agencies, deploying you said premium as a service and Pathfinder as part of its efforts to build its own house digital forensic unit to support stronger investigative capabilities rather than also as these activities to other agencies.

I would also like to briefly highlight two deals for Guardian that illustrates our success in leveraging our strength in digital front that you need to extend our reach into new buying centers now in both wins law enforcement agency, serving midsized <unk> with <unk>.

Cds selected Guardian to modernize their evidence management workflow to efficiently track sensitive digital evidence as the advent of investigation.

In one deal the combined purchase of Guardian and premium as a service is expected to increase celebrates IRR at this police department by a factor of 10 to over 200000 U S dollars and the other deal.

Also the Cds deals this will more than double to 330000 U S dollars.

And last in the private sector.

Our intensified focus on larger more strategic accounts is yielding tangible results in Q2.

Service provider expanded its use of endpoint inspector for a more digital data collection from mobile phones computers and cloud applications as part of its forensic practice and that supports its corporate clients legal regulatory and compliance activities.

From the service provider when nearly doubled into the low six figure range.

Let's move to slide seven and update on our outlook.

As we look ahead, we believe that we are well positioned to continue helping law enforcement agencies convert the following three major pain points into advantages.

First the complexity and volume of digital data involving today triumph is rapidly increasing.

Second inefficient workflows are limiting the speeds of investigations and contributing to our growing backlog of devices and third there is a greater public scrutiny on the Essex and accountability of law enforcement.

Operations.

Now based on our results to date, the trajectory of our business into the second half of this year and favorable market conditions, we have raised our annual 2023 guidance.

Our updated revenue and <unk> targets, primarily reflects our ongoing success in gaining more wallet share with existing customers.

As I have discussed demand for our collection review solutions remains strong and this is a momentum by attractive prospects to drive adoption for our investigative analytics and evidence management offering so.

So we expect that the combination of our revenue growth and disciplined spending will enable us to deliver a major improvement in our adjusted EBITDA over the last year, along with strong cash generation in 2023, and Donna will share additional details on our updated guidance in shorts.

Now while there is still a lot of hard work ahead 2023 is shaping up to be a very good year for celebrate it is a very exciting time to celebrate.

<unk> is in front of us are substantial in size and global in scope. Our team is focused on fulfilling our mission to deliver powerful digital intelligence solutions that helps our customers modernize the workflow in support of protecting and saving lives accelerating justice and ensuring data privacy.

And by executing on our second half plans, we believe will stay on track to achieve our updated expectations for 2023.

Sustain our momentum in 2024, and keep celebrates well position for creating shareholder value over the long term and with that I will turn the call over to Donna for her financial review.

Thank you Yossi.

Next Medina with you on slide nine.

We reported second quarter revenue of $76 $7 million, an increase of 23% against a relatively muted second quarter of 'twenty two.

Strong 35% growth in hips.

<unk> revenue was offset by declines in both either nonrecurring revenue and professional services Joe.

Geographically our revenue growth was led by EMEA, 33% followed by the Americas.

As detailed on the slide 88% of our total quarterly revenue came from software subscription versus 80% one year ago.

We expect.

Revenue basically think 85% or more of our total revenue for the foreseeable future.

Slide 10 details our AOR growth, which is an important forward looking kpis for celebrate sales momentum and the trajectory of future revenue.

Yeah.

He also noted.

With 28% year on year to $274 million at the end of Q2.

This was primarily due to the successful expansion of our existing customer relationships.

This category more than 80% of the customary expansion growth came from our clinic and review solution the.

The contribution to existing customer <unk>, former investigative underneath and evidence management solution.

More than doubled from one year ago.

As you likely noticed our sets.

<unk> revenue growth of 35% outpaced our alcohol, which is commentary to the historical trend of subscription revenue modestly lagging a or alcohol.

This is primarily due to two factors.

Are you able to ferret that can be France with chi to.

So with linearity of Q2 sell in.

In 2022, approximately half of our Q2 sales were closed at the end of the quarter, where the majority of this year's Q2 deals closed during the first two months of the quarter.

The balance of the difference is associated with certain large customers will transition from maintenance agreements.

During the second quarter of 2023.

Slide 11 details the historical trend for our non-GAAP gross margin and non-GAAP operating expenses, which exclude share based compensation amortization of intangible assets and acquisition related expenses.

Our second quarter 2000, <unk> gross margins of 83, 6% improved 400 basis points from 79, 6% due primarily to the growth in our higher margin software offering in.

In terms of operating expenses second quarter operating expenses were $54 7 million, an 8% increase from the prior year, primarily due to higher personnel costs and the impact of certain one time project on our G&A expenses.

With that said, our second quarter spending benefited from prudent expense management, and the timing and pace of hiring activity and favorable changes in foreign exchange rates tied to the Israeli shekel.

We ended June with 966 employees, which is unchanged from a year ago. As a reminder, our objective in 'twenty three is to keep stock and head count relatively flat with the year end of 2022 levels.

Turning to slide 12, the combination of higher revenue and prudent spending resulted in adjusted EBITDA in the quarter of $11 1 million.

Or 14, 5% on a margin basis.

This is a major improvement over the same quarter last year and it exceeded our plans entering this quarter.

Q2, non-GAAP operating income was $9 4 million non-GAAP net income of $10 seven medium.

Or five banks on a fully diluted basis.

We had a very good quarter of cash generation, producing $16 $6 million in cash from operations. We finished the first quarter was $244 6 million in cash cash equivalents and investments.

$23 $4 million from the end of the first quarter.

Now, let's move to slide 15.

Detailed in our press release, and our CRC highlighted we've raised our financial 'twenty three targets.

The region had an updated guidance is displayed on the slide.

We have increased our revenue outlook for 2023 in doing so we have raised the midpoint of our updated 2016 revenue range by $5 million we.

We anticipate strong subscription revenue growth in the second half of this year, partially offset by more muted professional services and other nonrecurring revenue.

<unk>, we generate the majority of our revenue in the second half of any given year and we expect this trend to hold true in 2023, 53% to 54% of full year revenue anticipated over the next two quarters.

We have also increased our target range for the year.

Our current view in our anticipated.

Ear and reflect a relatively consistent level of AUR expansion in absolute dollars from Q2 to Q3 and from Q3 to Q4 geographically the Americas and EMEA region have been standout performers and we expect that trend to continue.

As we look ahead, we expect that our timber AOR growth will largely come from expansion within existing customers, which we anticipate will continue to be fueled by our connecting with your solution with growing contributions from both Guardian and Thats fine there in the second half of this year.

From a profitability standpoint, we have raised the range for adjusted EBITDA and adjusted EBITDA margin, even if we think to continue funding important investments it would help us innovate build strong customer relationship and further scale our organization.

We move into the second half of our year with a strong financial foundation that we expect will be further.

Fortified we studied cash inflows from operations over the coming quarters.

This provides us sufficient flexibility.

<unk> ability to reinvest in our business and carefully evaluate opportunities such as potential M&A partnership and alliances that can help us accelerate the innovation around our current product portfolio.

In closing instead of like approach the second anniversary of becoming a public company. Later this month, we are hitting our stride, our strong Q2 results and attractive prospects.

Stable growth in the second half of this year have enabled us to increase our 2016 guidance. We are excited about our strategic direction and opportunities we see to sustain our momentum fortify our leadership and continue making a real difference in public safety.

Operator that concludes our prepared remarks, and we're now ready for Q&A.

Certainly the floor is now open for questions. At this time, if you have a question or comment. Please press star one on your telephone keypad.

At any point. Your question has been answered you may remove yourself from the queue by pressing star too again, we ask that you pick up your handset when posing your question to provide optimal sound quality. Thank you. Our first question will come from Jeff Van <unk> with Craig Hallum. Please go ahead.

Great. Congrats guys looks really good a number of questions from me first maybe just start on Guardian Pathfinder, you called out some pretty good momentum there I wonder if you just spend a minute more talking about the sales motion and what you figure it out with respect to the appropriate buyer. The process just how you feel about that motion what still needs to be improved.

Yeah.

Maybe I will take it for a start first of all.

Guardian.

He is an important solution basically to help digital forensic units and investigative unit.

Basically to I would say modernize the flow.

And contribute to scalability functionality, which is around case management and evidence management.

Now at this stage Guardian was launched or the Guardian was launched last year in 2020, practically 2022, and we are pretty much in <unk>.

Starting to is there are several dozens of guardian customers and hundreds of user at the moment.

We plan to take important steps, but we'd say over the coming quarters to continue driving adoption of this platform into our installed base.

Uh huh.

Obviously.

There is a need if I could say for the Guardian and evidence management and need for more education.

Efforts around customer success, and the sales cycle here is a little bit longer.

When it comes to tax fine there actually we are I would say very pleased at.

These stage.

With our position.

Definitely an important solution, which appeals to not to the judicial forensic unit, but for the investigative unit.

As I said, we believe that this is the second growth engine all celebrate side by side with the digital forensic unit and we are closed dozens of pathfinder deals over the last 12 months.

And cross sell and up sell this offering.

And we are pretty much satisfied with where we stand right now we need just to continue to do the way we are doing right now.

Okay. That's helpful. And then if you maybe just an open ended question on pipeline as you look at what's playing out in the pipeline what variance pro and Con just maybe depth.

Variance large mid small trends product trends competitive landscape any thoughts on what youre seeing in the pipe maybe expand a bit.

Our pipeline of the company is healthy and I would say it's healthy.

Cros.

Ross segments, if I look at the federal in the United States of America on our.

State and local government, both in America and in EMEA.

Basically see a very good picture in terms of pipeline as we look.

Ed.

One can also say that.

Our our sales peaks and especially our sales operation and not only that we have a healthy pipeline, we were able in Q2 to bring deals.

Quicker.

<unk> managed very well the elements of the normal tendency of Lumpiness and large deals and we are very satisfied.

In that respect.

Also the same cycle.

I look at it remains the same in all geographies and in all segments again when it comes to collection review short few weeks to one quarter, we're pretty much sticking to books here and successfully and when it comes to the <unk> and Guardian.

Good pipeline, but the longer sales cycle, which takes can.

It can take between six months to 18 months.

But all in all a good picture.

Yeah, It sounds great and one last if I could sneak it in on the M&A front I know theres a lot of incremental capabilities that would make sense within the suite can you just give a little sense on the urgency depth and breadth of the pipeline what we should expect over the next three to six months.

So.

Regarding M&A first of all organically.

A very clear plan and I think we're clear about that when it comes to M&A.

I would say part of our strategy and we are looking for alternatives and we're looking for options. There are some currently on the radar it has to fit.

In terms of our needs.

I can say that we are looking at opportunities, which are in the mix of small technological bolt on tuck ins.

Each will be suitable for the current portfolio and enabling us to deal better with the fulfillment of our.

Existing plan and side by sides. We are also looking for options for some large opportunities, which will scale us up also in adjacent areas.

Specifically in the private sector I can also share that we're looking at several opportunities, which will give us options, which are going beyond the collection and Ediscovery will real placed right now at the moment.

Yeah very helpful. Okay, great very helpful. Thank you.

Youre welcome.

Thank you we'll take our next question from Jimmy Shelton with Deutsche Bank. Please go ahead.

Hey, guys congrats on the solid execution.

Just a couple of housekeeping questions for me can you provide us what percent of the you said base is now connected to premium as of fiscal <unk> and then I've got one or two follow ups.

So hi, Jamie Thank you for the kind words.

We are expanding our premium.

Offering within our existing base.

No team.

Meetings last quarter, we increased that in past the mid teens this quarter and it's an ongoing effort and continued penetration.

Thank you.

I'm, probably nitpicking here, but I saw the net dollar retention ticked down a few percentage points sequentially.

Is there any additional color that you can provide and I guess for any.

Color on how we should expect that to trend from here.

While the net dollar retention rate is actually following a trend, which we said will converge and then later on with the revenue a revenue CAGR expectation is on the past, 20%. So we expect the AOR to get closer and better retention slightly below.

We also.

Yeah.

And then also maybe if you all see I mean, many of your cyber security public peers are talking about the application of <unk> into the AI within that product set I was interested to get your view and if you can if you see potential application of <unk>.

Security centric large language models within your portfolio.

The question was related to AI artificial intelligence, specifically generative AI and the use of large language models on your data set.

So look first of all we continue to invest in enhancing our capabilities and as I said, both in physical analyzer and <unk> solutions.

It is important for investigators the way we look at it.

Because it helps to ultimately the time consuming tasks and basically make investigations at least in our view and in the view of our customers more efficient. So we believe that AI will play an increasingly important role in digital investigations over the coming years.

And we are investing in each one of our product physical analyzer as part of the collection review and Pathfinder in several areas.

So far our investment has been primarily focused on developing our own machine learning models and we will continue to explore ways I would say to open source based AI models.

We can implement on our own capabilities.

I hope it is helpful.

Great. Thanks, and congrats again guys.

Thank you very much.

Thank you we'll take our next question from Polyone with Bank of America. Please go ahead.

Hey, guys. Thank you for the question. This is Chalmers O'brien on for Tal.

Two questions for me.

First question just wanted to close in on something you mentioned during your prepared remarks, you said that the <unk> growth.

This year was supported by customer expansion to more than 80% of that was collected review now.

And then I think you also mentioned that youre seeing or you're expecting to see significant expansion within pathfinder and to grow air or through that so my question is what you expect the impact of not collect and review, but analytics and management to be on air are this growth and also additionally, what you're expecting the revenue breakout to be within your different product lines.

We currently provide detailed information for each and every of our product offering we just provide general guidance.

<unk>.

The base of both Pathfinder and Guardian is substantially smaller than the base of growth for us.

Correction with you we expect it to contribute on a percentage growth more than the connection I view, but from a dollar perspective, it's still the majority will come from correction I view, both on the AOR and on the revenue growth.

Got it and as a follow up on regional trends you saw growth accelerate in America, and EMEA, but I think you actually saw some slowdown in APAC, so any color youre seeing across the three regions.

So first of all I would say that we believe that the APAC region as a significant growth potential and.

We also informed recently about the appointment of a new regional leader.

And we plan to continue upgrading the regional sales leadership in that area.

I can also say that we continue to see pretty much favorable budget tailwind when it comes to specific.

Sub regions over there, Australia, New Zealand, Japan, and Singapore, and we believe we are only starting basically to scratch the surface over there now while indeed in Q2 revenue grew just 2% trended favorably versus Q1 results and IRR in APAC grew solidly 22.

2%.

And was generally in line.

With our plan. So I would say that we are pleased with the market position. We are pleased with the pipeline and some of the larger market.

And while it will take some times basically to make the relevant changes we are positive and confident that it will look much better as we progress through the year.

Got it and if I can actually sneak in one last question I appreciate the commentary on <unk> ultra.

I know, it's early days, but any initial customer conversations that gives you.

Confidence on.

On the growth potential here and what is your customer target versus just selling normal are you fed along with premium. Thank you.

So.

Sure the short answer it's a little bit too early because in June we announced our plans to introduce deal for the ultra.

Obviously.

We plan that <unk> will deliver great ease of use simplified workflow workflow, we are adding here the full file system, which was part previously only part of the premium current plan is to begin sales and marketing activities, which support the affordable trial before the end of 2023 and.

<unk> timing and general availability will be obviously shared with our customers.

We believe that the feature and functionality will be obviously substantially with greater value on the fly I can say with a relevant and it will be priced accordingly, but it's too early because it's still not there out there in the market the expectations are very high.

And last formed let's not forget that the Eagle Ford also represents a significant upgrade opportunity for thousands of existing use with customers, but it will over 30 <unk>. So that's an amazing business opportunity and an amazing improvement for motive operation of the customers.

Great. Thank you.

And once again as a reminder, that is star and one for your questions. We will take our next question from Louie Dipalma with William Blair. Please go ahead.

Gassy, Donna and Andy good afternoon.

Good afternoon.

When premium customers add.

Pathfinder to their suite on average how much the <unk> increase.

Increased by.

Well it is very to the size of the fine there they will choose in the size of the customer.

Customary Ken correctly few 10, thousands of doors and ramp up cool.

We have thousands and even more.

Okay, great and yeah that seems like it's a big.

Catalysts or the increase and large deal sizes and my next question. We are under the impression that there were price increases that were implemented following the gray shifts and magnet merger have you seen those price increases in the market and has this.

Positively benefited celebrate.

Well, we heard from customers that they've been in contact with the substantial price increase.

Request requirements by Margaret and by Gratiae stay throughout the year until now you'll see that whole corner maybe.

No in that respect indeed, both marketing and ratios to implemented I would say fairly large price increase during the first half of the year I can say that it was not well reviewed and perceived by the customers.

Yeah, we.

Jos at this stage to do.

The modest one which was well perceived by by customers, let's not forget that in the public sector customers are leaving with fixed budgets and they need to do the relevant adoption.

Nothing to add.

Beyond that.

Yes at the end.

Are you still the only.

Software provider that can unlock that iPhone 14, or I have competitors caught up on that front.

I would say that at the moment when it comes to.

The the latest and greatest.

So I'm talking about the operating system 16 each.

We have the best capabilities today unmatched.

To anything else that exists in the market.

Sounds good thanks, everyone.

Thank you.

And we will take our next question from Mike <unk> with Needham <unk> Company. Please go ahead.

Hey, guys. Thanks for getting me on the call here.

I appreciate the walk up guidance that we're receiving today as well.

I wanted to ask you a little bit about hiring and it's more of a philosophy or strategy question.

When I'm thinking about.

When youre thinking about the hiring trends and celebrate.

Help us.

Better understand.

The I guess the trade off you're making because obviously, we're seeing the growth.

Move higher as well as those EBITDA margins and just what gives you the confidence when going through their hiring to ensure that you're appropriately.

Adding talent to support the durable growth story here to celebrate.

If we are looking.

<unk>.

Into the future in terms of our.

I would say exciting challenges.

Which are around.

Continuous of investing in the best of breed and collection in order to be ahead of the market.

We've got today clear pass over maintaining and maintaining.

And based on our reputation successfully hiring additional talent in that respect.

When it comes to the.

Area of evidence management, and I would say also cloudy flying and coming with the SaaS offering which is related to what we do right now Guardian premium as a service, but at the end of the day, we would like to offer everything on cloud we are building right now successfully.

The relevant team in the house and it seems that over the real pretty much successful by hiring and bringing the talent that will help us basically to bind successfully I.

I would say on Prem and cloud in the future to come. So also there a very successful and I would say that we.

If we look at our Opex plant, we are capable to do it and we are doing it.

When it comes to the go to market organization, we clearly need to invest in a good mix between product sellers in the solution and value added sellers that in customer success, especially when it comes to the implementation and cross sell and upsell of solutions, such as Pathfinder and Guardian and <unk>.

Respect.

With a clear view about what we need to recruit and we are also very successful in doing that I don't know if I answered the question, but that's what makes us busy at the moment in terms of variety of I would say future challenges and what we need to bring on board.

And we're pretty much about were pretty confident about what we're doing in retrospect.

No that's great you're actually starting to feed into where I wanted to take that.

So the hiring for the go to market as an example, right.

Can you help us think about.

The average tenure of the sales force.

Our new reps ramping at a similar rate or is there potential acceleration of the amount of time. It takes for them to ramp just because I'm trying to judge that.

I guess some of the pieces under the hood and put that into context.

Execution that the sales force has obviously been demonstrating more recently in this environment.

First of all I want to reemphasize. The fact that our sale takes our sales machine works. If you remember last year, we talked about lumpiness in people, which left and fluctuation.

Could see that in Q2 and in <unk>, we're actually capable to bring things even quicker than a faster cycle.

And industrial effects as I said, we need to make sure that we have a good combination.

Between.

The people that will deal with transactional business and the people that we deal with value added selling and rather complex solutions.

The Onboarding I think you mentioned that well year nothing changed when we bring people for the product selling it as a pretty much quicker onboarding.

What we pulled the sales machine, that's great collector refueled wholesale prime customers etcetera. When it comes to the Onboarding, which is related to solution selling is both more in the area of two quarters, but we are well positioned and well equipped with what we have right now and we are putting a good eye on good people. All the time, we are not waiting for challenges.

What happened we are so to say operating in advance.

Okay. Thank you very much.

Thank you. This concludes the Q&A portion of today's call I would now like to turn the floor over to celebrate.

Yassi Camille for additional or closing remarks. Please go ahead.

Thank you so first of all thank you all for joining.

As I said.

At the end of my Beach, we are in a very good momentum lots of hard work to do but we increased the guidance we are pretty much confidence about our both our ability to grow and to continue the journey and execute our strategy.

Thank you for joining us thank you for the trust.

And have a great day.

Okay.

Thank you. This concludes today's celebrate second quarter 2023 financial results Conference call. Please disconnect. Your line at this time and have a wonderful day.

Hum.

Hmm mm.

[music].

Welcome to the celebrated its second quarter 2023 financial results Conference call.

At this time, all participants have been placed on a listen only mode and the floor will be opened for your questions. Following the presentation.

If you would like to ask a question at that time. Please press star one on your telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing star too. So others can hear your questions. Clearly we ask that you pick up your handset for best sound quality Lastly, if you should require operator assistance.

Please press Star Zero I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer Mr. Kramer the floor is yours.

Thank you very much Ashley and welcome everybody to celebrate second quarter 2023 financial results call. Joining me today are you'll see Carmel celebrate CEO and Donna Garner celebrates its CFO .

So let's start with slide number two a copy of today's press release and financial statements, including the GAAP to non-GAAP Reconciliations this slide presentation, and the quarterly financial tables, and supplemental financial information for the second quarter of 2023, the first quarter of 2023 and each quarter of 2022 and 2021 are available on the <unk>.

<unk> relations website at investors Dot celebrate dot com.

So unless otherwise stated our second quarter 2023 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 second quarter of 2022, unless otherwise noted. In addition, please note that the statements.

Being made during this call that are not statements of historical facts constitute forward looking statements. All forward looking statements are subject to risks and uncertainties and other factors that could cause matters expressed or implied by those forward looking statements not to occur.

They could also cause the actual results to differ materially from historical results <unk> from forecasts.

Some of 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 April 27th.

2023, the company does not undertake to update any forward looking statements to reflect future events or circumstances.

So slide number three provides the agenda for today's call and as you will hear we delivered very strong Q2 financial results made important strategic progress and have increased our full year 2023 financial expectations.

That is the background I'd like to turn the call over now to Yossi Carmel celebrate CEO .

Okay.

Thank you Andrea and thank you all for joining us today.

Look I'm excited to discuss our second quarter results, which highlights our continued success in delivering the industry's leading digital intelligence software suite to public and private sector customers around the globe.

Our Q2 financial performance was highlighted by the following Kpis.

Total revenue of $76 7 million driven by subscription software revenue growth of 35%.

<unk> grew 28% to $274 million.

Dollar based net revenue retention was 125%, which was our 18th straight quarter above 120%.

We closed 25 large deals each valued at greater than half a million U S dollars.

Adjusted EBITDA of $11 1 million or 14, 5% on a marginal basis and non-GAAP EPS of <unk> <unk> and.

And lastly, we ended Q2 with cash and investments totaling nearly $245 million up 23 million from Q1.

Turning to slide five.

Celebrate customer relationship remains strong in Q2.

Our ongoing investments in powerful customer driven innovation and go to market activities enable us to continue winning in the market.

In addition to strong public sector expansion, we delivered our second straight quarter of high teens revenue growth in the private sector.

Geographically, our Q2 revenue on IRR growths were powered by the Americas and EMEA.

And approximately 40% included either Pathfinder, our investigative analytics tool.

Guardian, our evidence management solution or both.

Train police manpower and heightened interest around police operation and priorities.

See favorable budget tail winds in the USA Western Europe , Latin America, and key parts of the Asia Pacific region with more customers in the public sector allocating more money for celebrate solutions than they did last year.

In addition to our strong Q2 performance.

<unk> made important strategic progress over the past several months.

So in June we announced our plans to introduce Uva Ultra a revolutionary next generation collection reduce solution that enables digital forensics you needs to locally access and extract digital evidence from the broadest range of mobile phones.

You've heard the ultra is designed to deliver greater ease of use simplified workflows and full size system extraction for even the most advanced smartphones that capability that was previously only available in our premium solution.

And just as important we've continued to see great uptake on our premium suite of solutions.

Each provides local access to the most advanced smartphone on the market and still have significant room for adoption across our installed user license base.

Now our leadership in this sector is anchored by differentiate the technological capabilities, thus remains unmatched across both iPhone iOS and on Android.

And given these dynamics, we see substantial multi year opportunity to upgrade and upsell Our collection review solutions.

We have also taken important steps to enhance guardian, our caisson evidenced management workflow solutions.

We recently announced new features and functionality for Guardian.

Make it easier and more efficient for examiners to share digital evidence with the investigators.

I will highlight a couple of great second quarter Guardian lands in a moment.

Between garden, and our premium as a service offering we are just starting to scratch the surface of the revenue potential of cloud based digital intelligence solutions, we are accelerating our plans to build out our technology technical infrastructure and support the delivery of more high value cloud based solution.

The second quarter was also marked by continued adoption of Pathfinder, our artificial intelligence powered investigative analytic solution.

We are on track to significantly expand our pet find our customer base this year and drive faster growth.

We believe that the investigative unit represents celebrates second primary growth engine augmenting on our growth in digital forensic units. Accordingly, we are mobilizing our R&D sales and marketing resources to ensure that we effectively and efficiently capitalize on this opportunity.

On the R&D front.

It is important to recognize that our investments in artificial intelligence benefits more than just our pathfinder investigative analytics.

And collection review, we've continued to strengthen our market, leading physical analyzer platform with advanced machine learning capabilities, which makes it easier and faster for digital forensic units to identify relevant evidence within the vast volume of digital data across the broadest range of digital devices applications and warranty.

Yes.

In conjunction with reporting our results today, we also announced the appointment of Tom Hogan.

Celebrates executive chairman and.

And we believe that this action and hence our corporate governance and support celebrate as it moves into the next chapter of growth and market impacts as a global digital intelligence leader.

Tommy's experienced softer veteran with a proven track record of success, including his most recent work at Vista equity now.

I look forward to his counsel and support as we work together with the board and the broadest celebrate team to help shape and drive our strategy forward scale up our business and our largest market and drive value creation for our stakeholders.

Tom's appointment expand our board of directors to 10 members.

We are also fortunate that the company's former chairman timeshare.

Israeli growth partners and longstanding celebrate shareholder will continue serving as a director on our board.

Moving to slide six.

I would like to review several of the second quarter deals, which help illustrate some of the key drivers of our success.

As noted earlier adoption of premium by existing customers is steadily increasing and this quarter. We closed a major expansion of our premium footprint ahead of schedule with a large north American Federal law enforcement agency, along with an initial pathfinder engagement to accelerate time to resolution.

On critical cases.

I'll celebrate digital intelligence solutions is expected to help this customer centralize its critical digital forensic capabilities at scale and supercharge investigative capabilities and as a result, our <unk> and.

This account will nearly triple to approximately nearly 5 million U S dollars.

In terms of new logos, we want a meaningful new customer in the Asia Pacific region that is expected to deliver nearly 250 solid and installer of an IRR.

This regional Correctional Service Agency is deploying you said premium as a service and Pathfinder as part of its efforts to build its own house digital forensic unit to support strong investigative capabilities rather than outsource these activities to other agencies.

I would also like to briefly highlight two deals for Guardian that illustrates our success in leveraging our strengths and digital forensics units to extend our reach into new buying centers now in both wins law enforcement agencies, serving midsized U S. Cds selected guardian to modernize their.

Evidence management folks slow to efficiently track sensitive digital evidence as the advent investigation.

In one deal the combined purchase of Guardian and premium as a service is expected to increase celebrate <unk> <unk> police department by a factor of 10 to over 200000 U S dollars and the other deal.

For the Cds deals this will more than double to 330000 U S dollars.

And last in the private sector.

Our intensified sales focus on larger more strategic accounts is yielding tangible results in Q2, our U S service provider expanded its use of endpoint inspector for a more digital data collection from mobile phones computers and cloud applications as part of its forensic practice and that supports.

Its corporate clients legal regulatory and compliance activities.

From the service provider when nearly doubled into the low six figure range.

Let's move to slide seven an update on our outlook.

As we look ahead, we believe that we are well positioned to continue helping law enforcement agencies convert the following three major pain points into advantages.

First the complexity and volume of digital data involving today <unk> is rapidly increasing.

<unk>.

Now based on our results to date, the trajectory of our business into the second half of this year and favorable market conditions, we have raised our annual 2023 guidance.

Our updated revenue and our targets primarily reflect our ongoing success in gaining more wallet share with existing customers.

As I have discussed demand for our collection review solutions remains strong and this is augmented by attractive prospects to drive adoption for our investigative analytics and evidence management offering so.

Now while there is still a lot of hard work ahead 2023 is shaping up to be a very good year for celebrate it is a very exciting time to celebrate the opportunities in front of us are substantial in size and global in scope. Our team is focused on fulfilling our mission to deliver powerful digital ink.

Diligence solutions that helps our customers modernize the workflow in support of protecting and saving lives accelerating justice and ensuring data privacy.

And by executing on our second half plans. We believe we will stay on track to achieve our updated expectations for 2023 sustained our momentum in 2024, and keep celebrates well position for creating shareholder value over the long term.

And with that I will turn the call over to Donna for her financial review.

Thank you Yossi.

Beginning with you on slide nine.

Second quarter revenue of $76 $7 million, an increase of 23% against a relatively muted second quarter of 2002.

Strong 35% growth in subscription revenue was offset by declines in both either nonrecurring revenue and professional services geographically our revenue growth was led by EMEA, 33% followed by the Americas.

3%.

A detailed on the slide 88% of our total quarterly revenue came from software subscription versus 80% one year ago.

We expect.

<unk> revenue basically think 85% or more of our total revenue for the foreseeable future.

Slide 10 details our <unk>, which is an important forward looking kpis for celebrate sales momentum and the trajectory of future revenue.

He also noted our AOR was 28% year on year to $274 million at the end of Q2.

This was primarily due to the successful expansion of our existing customer relationships.

We've seen this category more than 80% of the customary expansion growth came from our connect and review solution.

Contribution.

And customer <unk> investigative underneath and evidence management solution.

More than doubled from one year ago.

As you likely noticed our subscription revenue growth of 35% outpaced our AOR growth, which is commentary to the historical trend of subscription revenue modestly lagging <unk>.

This is primarily due to two factors.

Curious about to ferret that can be France was tied to getting the arity of Q2.

In 2022, approximately half of our Q2 sales were closed at the end of the quarter, where the majority of this year's Q2 deals we closed during the first two months of the quarter.

The balance of the difference is associated with certain large customers with transition from maintenance agreements and license.

During the second quarter of 2023.

Slide 11 details the technical training for our non-GAAP gross margins and non-GAAP operating expenses, which exclude share based compensation amortization of intangible assets and acquisition related expenses.

Our second quarter 2000, <unk> gross margins of 83, 6% improved 400 basis points from 79, 6% due primarily to the growth in our higher margin software offering.

With that said, our second quarter spending benefited from prudent expense management.

I'm in pace of hiring activity and favorable changes in foreign exchange rates tied to the Israeli shekel.

We ended June with 966 employees.

He is unchanged from a year ago as a reminder, our objective in 'twenty three is to keep stock and head count relatively flat with the year end of 2022 levels.

Turning to slide 12, the combination of higher revenue and prudent spending resulted in adjusted EBITDA in the quarter of $11 1 million.

Or 14, 5% on a margin basis.

This is a major improvement over the same quarter last year and it exceeded our plans entering this quarter.

Our Q2 non-GAAP operating income was $9 4 million <unk> non-GAAP net income of $10 seven medium dose or five banks on a fully diluted basis.

We had a very good quarter of cash generation, producing $16 $6 million in cash from operations. We finished the first quarter was $244 6 million in cash cash equivalents and investments.

$93 $4 million from the end of the first quarter.

Now, let's move to slide 13.

In our press release, and our CRC highlighted we've raised our financial 'twenty three targets.

Celebrate the region had an updated guidance is displayed on the slide.

We have increased our revenue outlook for 2023 in doing Phil we have raised the midpoint of our updated 2015 revenue range by $5 million, we anticipate strong subscription revenue growth in the second half of this year, partially offset by more muted professional services and other nonrecurring revenue.

Historically, we generate the majority of our revenue in the second half of any given year and we expect these trends to hold true in 2023, 53% to 54% of full year revenue anticipated over the next two quarters.

We have also increased our <unk> target range for the year, our current view in our anticipated.

And reflect a relatively consistent level of AUR expansion in absolute dollars from Q2 to Q3 and from Q3 to Q4.

Geographically, the Americas and EMEA regions have been standout performers and we expect that trend to continue.

As we look ahead, we expect that our December AOR growth will largely come from expansion within existing customers, which we anticipate will continue to be fueled by our connecting with your solution with growing contributions from both Guardian and Thats fine there in the second half of this year.

From a profitability standpoint, we have raised the range for adjusted EBITDA and adjusted EBITDA margin, even if we think to continue funding important investments it would help us innovate and build strong customer relationship and further scale our organization.

Moving into the second half of a year.

<unk> Financial Foundation that we expect will be further for <unk>.

Five we studied cash inflows from operations over the coming quarters.

This provides us with sufficient feedstock flexibility to reinvest in our business and carefully evaluate opportunities such as potential M&A partnership and alliances that can help us accelerate innovation around our current product portfolio.

In closing instead of like approach the second anniversary of becoming a public company. Later this month, we are hitting our stride.

Strong Q2 results and attractive prospects for profitable growth in the second half of this year have enabled us to increase our 2016 guidance. We are excited about our strategic direction and opportunities we see to sustain our momentum fortify our leadership and continue making a real difference in public safety.

Operator that concludes our prepared remarks, and we're now ready for Q&A.

The floor is now open for questions. At this time, if you have a question or comment. Please press star one on your telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.

Again, we ask that you pick up your handset when posing your question to provide optimal sound quality.

Our first question will come from Jeff Van <unk> with Craig Hallum. Please go ahead.

Great Congrats guys looks really good.

Number of questions from me first maybe just start on Guardian Pathfinder, you called out some pretty good momentum there I wonder if you just spend a minute more talking about the sales motion and what you figure it out with respect to the appropriate buyer. The process just how you feel about that motion what still needs to be improved.

Maybe I will take it for a start first of all.

Guardian.

He is an important solution basically to help digital forensic units and investigative unit base.

Basically to I would say modernize the flow.

And contribute to scalability functionality, which is around case management and evidence management.

Now at this stage Guardian was launched or the Guardian was launched last year in 2020, practically 2022, and we are pretty much in.

Starting to is there are several dozens of guardian customers and hundreds of user at the moment.

We plan to take important steps will take over the coming quarters to continue driving adoption of this platform into our installed base.

Obviously.

There is a need if I could say for the Guardian and evidence management and need for more education.

Our efforts around customer success and the same cycle here is a little bit longer.

When it comes to tax fine there actually we are I would say very pleased.

These stage.

With our position.

Definitely an important solution, which appeals to not to the GE digital forensics units, but for the investigative unit.

As I said, we believe that this is the second growth engine of celebrate side by side with the digital forensic units and we have closed dozens of pathfinder deals over the last 12 months.

And cross sell and up sell this offering.

And we are pretty much satisfied with where we stand right now we need just to continue to do the way we are doing right now.

Okay.

That's helpful. And then if you maybe just an open ended question on pipeline as you look at what's playing out in the in the pipeline what variance pro and Con just maybe depth.

<unk> variance large mid small trends product trends competitive landscape any thoughts on what youre seeing in the pipe maybe expand a bit.

The pipeline of the company is healthy and I would say it's healthy.

Cros.

Cross segments, if I look at the federal in the United States of America or now.

State and local government, both in America and in EMEA.

We basically see a very good picture in terms of pipeline as we look.

Ed.

One can also see that.

Our our sales peaks and especially our sales operation and not only that we have a healthy pipeline, we were able in Q2 to bring deals.

Quicker.

<unk> managed very well the elements of the normal tendency.

Tendency of Lumpiness and large deals and we are very satisfied in that respect.

Also the same cycle, if I look at it remains the same.

In all geographies and in all segments again, when it comes to collection review short few weeks to one quarter, we're pretty much sticking to books here and successfully and when it comes to the Pathfinder and Guardian.

<unk> pipeline, but the longer sales cycle, which takes.

Can take between six months to 18 months.

But all in all a good picture.

Yes, it sounds great and one last if I could sneak it in on the M&A front I know theres a lot of incremental capabilities that would make sense within the suite can you just give a little sense on the urgency depth and breadth of the pipeline what we should expect over the next three to six months.

So.

Regarding M&A first of all organically.

A very clear plan and I think we're clear about that when it comes to M&A.

Yes.

I would say part of our strategy and we are looking for alternatives and we're looking for options. There are some currently on the radar it has to fit.

In terms of our needs.

I can say that we are looking at opportunities, which are in the mix of small technological bolt on tuck ins.

Each will be suitable for the current portfolio and enabling us to deal better with the fulfillment of our <unk>.

Existing plant and side by sides. We are also looking for options for some large opportunities, which will scale us up also in adjacent areas.

Yeah very helpful. Okay, great very helpful. Thank you.

Youre welcome.

Thank you we'll take our next question from Jamie Feldman with Deutsche Bank. Please go ahead.

Hey, guys congrats on the solid execution.

Just a couple of housekeeping questions for me can you provide us what percent of the usage base is now connected to premium as of fiscal <unk> and then I've got one or two follow ups. Thanks.

So hi, Jamie Thank you for the kind words.

We are expanding our premium.

Offering within our existing base.

There are no teen close to.

<unk> last quarter, we increased that in past the mid teens this quarter and it's an ongoing effort and continuous penetration.

Alright, well thank you.

I'm, probably nitpicking here, but I saw the net dollar retention take down a few percentage points sequentially.

Is there any additional color that you can provide and I guess if any.

Color on how we should expect that to trend from here.

Well the net dollar retention rate is actually following a trend, which we said will converge in the midterm, we see the revenue a revenue CAGR expectation is on the past, 20%. So we expect <unk> to get closer and net dollar retention slightly below.

We also.

Yes.

And then also maybe if you all see I mean, many of your cyber security public peers are talking about the application of journey II within that product set I was interested to get your view and if you can if you see potential application of <unk>.

Just curious you said and correct Lodge language models within your portfolio.

The question was related to AI artificial intelligence.

Specifically generative AI and the use of large language models on your dataset.

So look first of all we continue to invest in enhancing our capabilities and as I said, both in physical analyzer and <unk> solutions.

It is important for investigators the way we look at it.

Because it.

It helps to ultimately time consuming tasks and basically make investigations at least in our view and in the view of our customers more efficient. So we believe that AI will play increasingly important role in digital investigations over the coming years, and we are investing in each one of our product fits.

<unk> analyzer as part of the collection review and Pathfinder in several areas.

So far our investment has been primarily focused on developing our own machine learning models and we will continue to explore ways I would say to open source based AI models.

Which we can implement on our own capabilities.

I hope it is helpful.

Great. Thanks, and congrats again guys.

Thank you very much.

Thank you we'll take our next question from Paul Leone with Bank of America. Please go ahead.

Hey, guys. Thank you for the question. This is Thomas O'brien on for Tal.

Two questions for me. The first question just wanted to close in on something you mentioned during your prepared remarks, you said that the <unk> growth.

This year was supported by customer expansion and more than 80% of that was collected review.

And then I think you also mentioned that youre seeing or you're expecting to see significant expansion within pathfinder and to grow <unk> through that so my question is what you expect the impact of my collect and review, but analytics and management to be on air are this growth and also additionally, what you're expecting the revenue breakout to be within your different product lines.

We currently do.

Hi, detailed information for each and every of our product offering we just provide general guidance.

And as the base of both Pathfinder and Guardian is substantially smaller than the base of growth for <unk>.

Connection with you we expect it to contribute on a percentage growth more than the question I view, but from a dollar perspective, it's still the majority will come from correction I view, both on the AOR and on the revenue growth.

Got it and as a follow up on regional trends you saw growth accelerate in America, and EMEA, but I think you actually saw some slowdown in APAC, so any color youre seeing across the three regions.

The region.

So first of all I would say that we believe that the APAC region as a significant growth potential and.

We also informed recently about the appointment of a new regional leader.

And we plan to continue upgrading the regional sales leadership in that area.

I can also say that we continue to see pretty much favorable budget tailwind when it comes to specific.

Subregions over there was trailing Zealand, Japan, and Singapore, and we believe we are only starting basically to scratch the surface over there now while indeed in Q2 revenue grew just 2% it trended favorably versus Q1 results and IRR in APAC grew solidly 22.

2%.

And was generally in line.

With our plan so.

I'd say that we are pleased with the market position. We are pleased with the pipeline and some of the larger market.

And while it will take us some time basically to make the relevant changes we are positive and confident that it will look much better as we progress through the year.

Got it and if I can actually sneak in one last question I appreciate the commentary on <unk> ultra.

I know, it's early days, but any initial customer conversations that gives you.

Confidence on.

On the growth potential here and what is your customer target versus just selling normally you fed along with premium. Thank you.

So.

The short term the short answer is a little bit too early because in June we announced our plans to introduce deal for the ultra.

And obviously, we plan the Deerfield ultra will deliver great ease of use.

Simplified workflow workflow, we are adding here the full file system, which was part previously only part of the premium current plan is to begin sales and marketing activities, which support the affordable trial before the end of 2023 and specific timing and general availability will be obviously shared with our customers.

We believe that the feature and functionality will be obviously substantially with greater value on the fly and can say with a relevant and it will be priced accordingly, but it's too early because it's still not there out there in the market the expectations are very high.

And last formed let's not forget that the use of digital represents a significant upgrade opportunity for thousands of existing <unk> customers, but it will over 30 <unk>. So that's an amazing business opportunity and an amazing improvement for motive operation of the customers.

Great. Thank you.

And once again as a reminder, that is star and one for your questions. We will take our next question from Louie Dipalma with William Blair. Please go ahead.

<unk> Donna and Andy good afternoon.

Good afternoon.

When premium customers add.

Pathfinder to their suite on average how much the <unk> increased by.

Well it is very to the size of the Pathfinder they will choose in the size of the.

Customary Ken Starkly few 10, thousands of doors and ramp up cool hundreds of thousands and even more.

Okay, great and yeah that seems like it's a big.

Catalysts or the increased and large deal sizes and my next question.

Are under the impression that there were price increases that were implemented following the gray shift and magnet merger.

Have you seen those price increases in the market and has this positively benefited celebrate.

Well, we heard from customers that they've been in contact with the substantial price increase.

Request requirements by Margaret and by Gratiae say throughout the year until now you will see you at all corner maybe.

No in that respect indeed, both marketing and ratios implemented I would say fairly large price increase during the first half of the year I can say that it was not well reviewed and perceived by the customers.

Yeah.

We.

Jos at this stage to do rather modest farm, which was well perceived by by customers, let's not forget that in the public sector customers are leaving with fixed budgets and they need to do the relevant adoption.

Nothing to add.

Beyond that.

Great Yes.

Are you still the only.

Software provider that can unlock that iPhone 14, or I have competitors caught up on that front.

I would say that at the moment when it comes to.

The latest and greatest.

So I'm talking about the operating system in each.

We have the best capabilities today unmatched.

To anything else that exists in the market.

Sounds good thanks, everyone.

Thank you.

And we will take our next question from Mike <unk> with Needham <unk> Company. Please go ahead.

Hey, guys. Thanks for getting me on the call here.

And I appreciate the walk up guidance that we're receiving today as well.

I guess I wanted to ask you a little bit about hiring and it's more of a philosophy or strategy question.

When I'm thinking about.

When youre thinking about the hiring trends and celebrate can you help boost.

Understand.

I guess, the trade off you're making because obviously, we're seeing the growth move higher as well as those EBITDA margins.

What gives you the confidence when going through that hiring to ensure that you're appropriately.

Adding talent to support the durable growth story here at celebrate.

If we are looking.

<unk>.

Into the future.

In terms of our.

I would say exciting challenges.

Which are around.

Continuous of investing in the best of breed and collection in order to be ahead of the market.

We've got today clear pass over entertaining and maintaining.

And based on our reputation successfully hiring additional talent in that respect.

When it comes to the.

Area.

Evidence management and I would say also cloudy flying and coming with the SaaS offering which is related to what we do right now Guardian premium as a service, but at the end of the day, we would like to offer everything on cloud we are building right now successfully.

The relevant team in the house and it seems that over the real pretty much successful by hiring and bringing the talents that will help us basically to bind successfully.

I would say on Prem and cloud in the future to come. So also there very successful and I would say that we.

If we look at our Opex plant, we are capable to do it and we are doing it.

When it comes to the go to market organization, we clearly need to invest in the good mix between product tailored solution and value added sellers and in customer success, especially when it comes to the implementation and cross sell and upsell of solutions such as <unk>.

Guardian and industrial aspect.

A clear view about what we need to recruit and we are also very successful in doing that I don't know if I answered the question, but that's what makes us busy at the moment in terms of variety of I would say future challenges and what we need to bring on board and we're pretty much we're pretty confident about what we're doing in retrospect.

No thats, great Youre actually starting to feed into where I wanted to take that.

Specific to the hiring for the go to market as an example, right.

Can you help us think about.

The average tenure of the sales force.

Our new reps ramping at a similar rate or is there potential acceleration of the amount of time. It takes for them to ramp just because I'm trying to judge that.

I guess some of the pieces under the Hood and put that in the context of the execution that the sales force is obviously demonstrating more recently in this environment.

First of all I want to reemphasize. The fact that our sale takes our sales machine works. If you remember last year, we talked about lumpiness in people, which left and fluctuation.

We could see that in Q2 and in <unk>, we're actually capable to bring things even quicker than as part of the cycle.

And in that respect.

As I've said, we need to make sure that we have a good combination BT.

Between.

The people that will deal with transactional business and the people that we deal with value added selling and rather complex solutions.

The Onboarding I think you mentioned that well year nothing changed when we bring people for the products selling it as a pretty much quicker onboarding.

What we pulled the sales machine that's great collector review of wholesale prime customers etcetera. When it comes to the Onboarding, which is related to solution selling it will have more in the area of two quarters, but we are well positioned and well equipped with what we have right now and we are putting a buda eye on good people. All the time, we are not waiting for challenges too.

Happened, we are sulfate operating in advance.

Okay. Thank you very much.

Thank you. This concludes the Q&A portion of.

Today's call I would now like to turn the floor over to celebrate.

Yassi Camille for additional or closing remarks. Please go ahead.

Thank you so first of all thank you all for joining.

As I said.

At the end of my Beach, we are in a very good momentum lots of hard work to do but we increased the guidance we are pretty much confidence about our ability to grow and to continue the journey and execute our strategy.

Thank you for joining us thank you for the trust.

And have a great day.

Okay.

Thank you.

Today's celebrate second quarter 2023 financial results Conference call. Please disconnect. Your line at this time and have a wonderful day.

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