Q1 2024 Cellebrite DI Ltd Earnings Call
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Speaker Change: Welcome to the celebrate first quarter 2024 financial results conference call.
Operator: Welcome to the Cellebrite first quarter 2024 financial results conference call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. 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.
Speaker Change: 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.
Speaker Change: If you would like to ask a question at that time. Please press star one on your telephone keypad.
Speaker Change: If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
Speaker Change: So others can hear your questions clearly, we ask that you pick up your handset for best sound quality.
Speaker Change: Lastly, if you should require operator assistance, please press star zero.
Speaker Change: I would now like to turn the call over to your first speaker today, Mr. Andrew Kramer Mr.
Speaker Change: Mr. Kramer the floor is yours.
Andrew Kramer: Thank you very much, Leo. Good morning. Good afternoon.
Speaker Change: Thank you very much Leah.
Andrew Kramer: Welcome to Cellebrite's first quarter 2024 Financial Results Conference call. Joining me today from just outside of Tel Aviv are Yossi Carmil, Cellebrite CEO, and Dana Gerner, Cellebrite CFO. There is 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.
Andrew Kramer: Good morning, Good afternoon, welcome to celebrate <unk> first quarter 2024 financial results Conference call.
Speaker Change: Joining me today from just outside of Tel Aviv, or Youll see Carmel celebrate CEO Anton to garner celebrate CFO.
Speaker Change: There is 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.
Andrew Kramer: Starting with slide number two, a copy of today's press release and financial statements, including GAAP and non-GAAP reconciliations, slide presentation, and the quarterly financial tables and supplemental historical financial information for the first quarter of 2024 and each quarter of 2023 and 2022 are available on the Investor Relations website at investors.celebrite.com. Also, unless stated otherwise, our discussion for the first quarter 2022, sorry, 2024 financial metrics, as well as the financial metrics provided in our outlook, will be done on a non-GAAP basis only and all historical comparisons will be done over the first quarter of 2023, unless otherwise noted.
Speaker Change: Starting with slide number two a copy of today's press release and financial statements, including GAAP to non-GAAP Reconciliations slide presentation, and our quarterly financial tables, and supplemental historical financial information for the first quarter of 'twenty 'twenty four and each quarter of 2023 and 2022 are available on the Investor Relations website.
Speaker Change: And investors Dot celebrate dot com.
Speaker Change: Unless stated otherwise our discussion for the first quarter of 2022.
Our 2024 financial metrics as well as the financial metrics provided in our outlook will be done on a non-GAAP basis, only and all historical comparisons with the first quarter of 2023, unless otherwise noted.
Andrew Kramer: In addition, please note that the statements made during this call that are not statements of historical fact constitute forward-looking statements. All forward-looking statements are subject to risks and uncertainties and other factors that could cause the 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 and or from forecasts. Some of these forward-looking statements are discussed under the heading risk factors and elsewhere in the company's annual report on Form 20-F filed with the SEC on March 21, 2024, and as amended on April 12, 2024. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.
Speaker Change: In addition, please note that the statements made during this call that are not statements of historical fact constitute forward looking statements. All forward looking statements are subject to risks and uncertainties and other factors that could cause matters expressed or implied by those forward looking statements not to occur. They could also cause the actual results to differ materially from here.
Speaker Change: Stork, all result indoor from forecast 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 March 21, 2024, and as amended on April 12, 2024, the company does not undertake to update any forward.
Speaker Change: Looking statements to reflect future events or circumstances.
Andrew Kramer: Slide number three provides the agenda for today's call. And as you'll hear, we started 2024 off on a positive note, with another very solid quarter. We move forward with good momentum and are excited about the opportunities we see ahead to further expand our business this year. With that said, I'd like to turn the call over to Yossi Carmil, Cellebrite's CEO.
Speaker Change: Slide number three provides the agenda for today's call and as you'll hear we started off 2024 O on a positive note with another very solid quarter.
Speaker Change: We moved forward with good momentum and are excited about the opportunities. We see ahead to further expand our business this year.
Speaker Change: With that said I'd like to turn the call over to Yossi Carnival celebrate CEO.
Speaker Change: Yes.
Yossi Carmil: Thank you, Andy, and thank you all for joining us today. The financial results highlighted on slide 4 demonstrate that Cellebrite is off to a very solid start in 2020. We delivered a strong first quarter performance, anchored by the further expansion of our business, improved profitability compared with the same quarter one year ago, and meaningful strategic progress. I have to say it is rewarding to see our solutions are making a tangible difference in accelerating justice around the world.
Thank you Andrea and thank you all for joining us today.
Yossi: The financial results highlighted on slide four demonstrates that celebrate is off to a very solid start in 2024.
Yossi Carmil: We delivered a strong first quarter performance and caused by the further expansion of our business.
Yossi Carmil: Profitability compared with the same quarter off one year ago and meaningful strategic progress.
Yossi Carmil: I have to say it is rewarding to see our solutions are making a tangible difference in accelerating justice around the world.
Yossi Carmil: While I plan to share more about the market opportunity, our strategy, our achievements, and our outlook, I would like to turn now to slide four to briefly recap our Q1 results and selected KPIs, and, more specifically, ARR grew 27% to 331.8 million. We continue to see strong ARR growth globally, and our Q1 ARR expansion is primarily driven by our success in expanding existing customer relationships, which is consistent with historical. The total revenue of $89.6 million increased 26% on the strength of a 29% increase in subscription software revenue. Just the debit that was $17.6 million or 20% on a margin basis, and we reported non-gap earnings per share of $8,000.
Speaker Change: While I plan to share more about the market opportunity our strategy, our achievements and our outlook I would like to turn now to slide four to briefly recap our Q1 results and silicon escape the ice.
Speaker Change: And more specifically.
Speaker Change: They all grew 27% to $331 8 million, we continue to see strong growth globally. In Q1, our expansion is primarily driven by our success in expanding existing customer relationships, which is consistent with historical trends.
Speaker Change: Total revenue of $89 6 million increased 26% on the strength of a 29% increase in subscription software revenue.
Speaker Change: Adjusted EBITDA was $17 6 million or 20% on a margin basis, and we reported non-GAAP, earning per share of eight cents.
Yossi Carmil: We also ended the first quarter with cash deposits and investment totaling approximately $347 million, a $15.5 million increase since the end of 2023. After trailing 12 months, our ARR growth rate and adjusted EBITDA margin trended above a baseline target of Rule of 45. Turning to slide five.
Speaker Change: We also ended the first quarter with cash deposits and investment totaling approximately 347 million $15 5 million increase since the end of 2023.
Speaker Change: Trailing 12 months, our growth rate and adjusted EBITDA margin trended above baseline target of rule of 45.
Speaker Change: Yeah.
Speaker Change: Turning to slide five.
Yossi Carmil: Now, as most of you know, Cellebrite hosted its first ever Invest Today in late March this year. This was a great opportunity to provide our analysts and shareholders with a deeper dive into our business and our bright future. During this event, we highlighted the underlying trends, Cellebrite's overarching strategy, and a compelling case to close the platform and flagship solutions as well as key technology and go-to-market initiatives that will enable us to convert meaningful ARR and revenue growth into further improvement in adjusted EBITDA.
Speaker Change: Now as most of you know.
Speaker Change: It sounds like it's hosted the first ever Investor day in late March this year.
Speaker Change: It was a great opportunity to provide our analyst and shareholders with a deeper dive into our business and our bright future.
Speaker Change: During this event, we highlighted the underlying trends.
Hello, Baidu arching strategy.
Speaker Change: Compelling case to closure platform in flagship solution as well as key technology and go to market initiatives that will enable us to convert meaningful they are and revenue growth and to further improvement.
Speaker Change: <unk>.
Yossi Carmil: We expect that our ARR and top-line expansion over the coming years will continue to primarily come from further expansion within our installed base of customers. Now, I'd like to explain why we are so bullish on this opportunity.
Speaker Change: And we expect to talk to you all and top line extension over the coming years will continue to primarily come from further expansion within our installed base of customers now I'd like to explain why we are so bullish on this opportunity.
Yossi Carmil: First, there are several powerful trends that we believe will require our customers to invest more in digital investigative solutions like ours. Most notably, the number of cases that have a digital component continues to increase. And the digital component is often the most meaningful part of investigations today. However, as digital technology becomes more pervasive in crime, the growth in both data volume and data complexity makes it harder for law enforcement to capture and analyze this information.
So first no.
Speaker Change: Several of the powerful trends that we believe will require our customers to invest more in digital investigative solutions like ours.
Speaker Change: Notably the number of cases that has a digital component continues to increase.
Speaker Change: The digital component is often the most meaningful part of investigations today.
Speaker Change: Did you sell it becomes more pervasive and crime the growth in both data volume and data complexity makes it harder for law enforcement to capture and analyze this information.
Yossi Carmil: Those issues are compounded by structural operational inefficiencies arising from siloed, manual, and time-consuming processes, as well as greater scrutiny on law enforcement practices. In an environment where overall budgets and headcounts grow modestly, we continue to see more spending directed to disruptive technologies like ours that can help our customers address these issues and solve more cases faster and more efficiently. We are well positioned with our existing customers to continue increasing our wallet share through the three flagship offerings in our case-to-closure platform, our branded C2C platform.
Speaker Change: Those issues are compounded by structural operational inefficiencies are raising from Siloed manual and time consuming processes as well as greater scrutiny on law enforcement practices.
Speaker Change: In an environment, where overall budgets and head count has grown modestly we continued to see more spending directed to disruptive technologies like ours that can help our customers address these issues and solve more cases faster and more efficiently.
Speaker Change: Second.
Speaker Change: Well, we are well positioned with our existing customers to continue increasing our wallet share through that three flagship offering in our case the closure platform our branded CTC platform.
Yossi Carmil: Now these solutions address the key challenges in the digital investigation life cycle that involves collecting, reviewing, sharing, and analyzing digital evidence. While we're spending on our solutions currently representing just a fraction of our customers' annual budgets, there is a substantial room for upside as digital becomes the primary starting point for an investigation. I would like to take a moment to elaborate on that.
Speaker Change: Now these solutions address the key challenges in the digital investigation lifecycle that involves collecting reviewing sharing and analyzing digital evidence.
Speaker Change: And with spending on our solutions currently representing just a fraction of our customers on all the budgets. There is a substantial room for upside as digital becomes the primary starting point for an investigation.
Speaker Change: I'd like to take a moment to elaborate on that.
Yossi Carmil: Now within the Digital Forensic Unit, the segment where we have established our leadership through relationships with over 5,300 public sector agencies. We are pretty much at the earliest stage of a major product upgrade cycle for Insights, our next-generation digital forensic software solution. Insights delivers a more robust, integrated set of capabilities that helps our customers access more devices, extract more data, and reveal more information relevant to their investigation. With most of our customers relying on Cellebrite for their primary digital forensic software solution to collect and review digital evidence for mobile phones and other digital witnesses, we see substantial opportunity to better support our customers in the digital forensic unit as they broaden the scope of the lab's operation and extend our technology also out into the field to support an expanding range of users.
Speaker Change: Now within the digital forensic units the segments, where we have established our leadership through relationship with over 5300 public sector agencies.
Speaker Change: We are pretty much at the early stage of a major product upgrade cycle and holding insights our next generation digital forensic software solution.
Speaker Change: Insights deliver a more robust integrated set of capabilities that helps our customers access more devises extract more data and reveal more information relevant to their investigation.
Speaker Change: With most of our customers are relying on celebrate for the primary digital forensic software solution to collection of digital evidence for mobile phones and other digital weaknesses, we see substantial opportunity to better support our customers in the digital forensic units as they broaden the scope of the labs operation and.
Speaker Change: And extend our technology also out into the field to support an expanding range of use cases.
Speaker Change: Just as important.
Yossi Carmil: Our customers are increasingly recognizing that they must transform their workflows to drive efficiency and productivity, facilitate better collaboration, and strengthen the chain of custody around digital evidence. Dynamics that open the door for Guardian, our SAS-based case and evidence management solution.
Speaker Change: Most are increasingly recognizing that they must transform their workflows to drive efficiency and productivity facilitate better collaboration and strengthened the chain of custody around digital evidence dynamics, which opened the door for Guardian, our SaaS based case and evidence management solution.
Speaker Change: And there is also the investigative unit, we are augmenting our continued growth in the digital forensic units by accelerating our business in the investigative units of our customers maybe more specifically the digital evidence captured by insight open up cross sell and upsell opportunities for evidence management.
Yossi Carmil: We are augmenting our continued growth in the digital forensics units by accelerating our business in the investigative units of our customers. Maybe more specifically, the digital evidence captured by Insight opens up cross-sell and up-sell opportunities for evidence management and analytic solutions. Our offering for the investigative unit ensures timely, secure access to digital evidence, dramatically reduces the time involved in reviewing digital evidence, and helps surface leads and connections buried in mountains of data, all of which is critical to expediting investigations.
Speaker Change: And analytic solutions.
Speaker Change: Our offering for the investigative unit to ensure timely securely access to digital evidence dramatically reduced the time and holes in your viewing digital evidence and help surface leads and connections bearings with mountains of data all of which is critical to expediting investigation.
Yossi Carmil: As we move forward, we are committed to further enhancing the integration between our flagship offerings and further evolving our pricing and packaging in ways that will support broader and more pervasive use of our solutions by national, regional, and local law enforcement as well as with blue chip enterprises and service providers. To fully realize our growth potential, we're making meaningful, I would say thoughtful, investments in our technology and our goal-to-market initiative that we believe will further strengthen our ability to address our customers' biggest needs.
Speaker Change: As we move forward, we are committed to further enhancing the integration between our flagships offering and further evolving our pricing and packaging in ways that will support broader and more pervasive use of our solutions with national regional and local law enforcement as well as with <unk>.
Speaker Change: Blue Chip enterprises and service providers.
Speaker Change: To fully realize our growth potential, we're making meaningful I would say thoughtful investments in our technology and our go to market initiatives.
We believe will further strengthen our ability to address our customers' biggest pain points.
Yossi Carmil: In terms of our technology investments, we will continue to focus on three key areas. The first area is advanced evidence acquisition, which is about making sure we can help law enforcement obtain all the rich information that resides within today's mobile phones, computers, and cloud applications.
Speaker Change: In terms of our technology investments, we will continue to focus on three key areas.
Speaker Change: The first area is advanced evidence acquisition, which is about making sure. We can help law enforcement to obtain all the reach inflammation that resides within todays mobile phones computers and cloud application.
Yossi Carmil: With Insights, customers who have already upgraded are now extracting substantially more data than they did previously. The second area is helping our customers leverage the power of the cloud, which will provide them with greater computing elasticity, facilitate broader intra-agency and multi-agency collaboration, and minimize IT and security concerns. The third area involves harnessing AI to enable greater automation and increase operational efficiency. We made tangible progress in each of these areas during the first quarter.
Speaker Change: With insights customers have already upgraded now extracting substantially more data than they did previously.
Speaker Change: The second area is about helping our customers leverage the power of the cloud, which will provide will provide them with greater computing elasticity facilitate broader interagency and multi agency collaboration and minimize it and security concerns.
Speaker Change: The third area involves harnessing AI to enable greater automation and increase operational efficiency, we made tangible progress in each of these areas during the first quarter.
Yossi Carmil: From a go-to-market perspective, we are currently broadening our sales coverage in key regions and customer segments in both the U.S. and Europe, while leveraging prior investments to capitalize on opportunities in Asia-Pacific. But just to be clear, we are reallocating existing resources as we globalize and optimize certain areas such as sales operations, technical pre-sale, and post-sale customer experience, which enables us to add more quota-carrying sales reps and specialists dedicated to nurturing long-lead time deals in both digital forensic units and in the investigative.
Speaker Change: From a go to market perspective, we are currently broadening our sales coverage in key regions and customer segments in both the U S and Europe, while leveraging prior investments to capitalize on opportunities in Asia Pacific.
Speaker Change: But just to be clear, we are reallocating existing resources as we globalize and optimize certain areas such as sales operations technical pre sale and post sale customer experience, which enabled us to add more quota carrying sales reps and specialists dedicated to nurturing long lead time deals in both.
Speaker Change: Digital forensic Unix ending the investigative units.
Yossi Carmil: A great example of our ability to blend our technology, go to market, and other strategic initiatives to further expand our business over the longer term is in the U.S. federal market. In mid-March, we announced the launch of the process to authorize our SAS offerings with the Federal Risk and Authorization Management Program, known as FedRAMP.
Speaker Change: A great example of our ability to blend technology go to market and other strategic initiatives to further expand our business over the longer term is in the U S federal market.
Speaker Change: Mid March we announced the launch of the process to authorized our SAS offerings with a federal risk and authorization management program known as federal.
Yossi Carmil: We do believe that advancing our work over the coming quarters to ensure that our SaaS solution meets the highest standards of security and data compliance will play an important role in our broader efforts to unlock more opportunities in the federal marketplace. As we advance these initiatives to capitalize on our upgrade, upsell, and cross-sell opportunities within our installed public sector customer base, we will see our technology deployed more pervasively as we extend our reach into new units, new departments, and new buying centers, what we consider to be new sub-logos within the logos we've already captured.
Speaker Change: We do believe that advancing our work over the coming quarters to ensure that our SaaS solution meets the highest standard of security and data compliance will play an important role in our broader efforts to unlock more opportunities in the federal marketplace.
Speaker Change: As we advance these initiatives to capitalize through our upgrade upsell and cross sell opportunities within our installed public sector customer base, we will still have technology deployed more pervasive Lee as we extend our reach into new units, new departments and new buying centers, what we consider to be new.
Speaker Change: Sub logos within the logos, we've already captured.
Yossi Carmil: We also expect that our organic growth will benefit modestly from annual price increases and from the expansion of our private sector business. And finally, our organic growth will benefit as we continue to win net new customers. Now while new logos typically spend minimally with us in the first year, their spending growth typically keeps pace with the growth of the broader business. And also, thanks to our strong financial foundation, we have the ability to advance opportunities that can accelerate our time to market with high-value technology and capabilities, as well as extend our reach into growth-oriented adjacent markets and capture more of our funds, as we move into 2024. Our top four strategic priorities remain unchanged.
Speaker Change: We also expect that our organic growth will benefit modestly from annual price increases and from the expansion of our private sector business and.
Speaker Change: And finally.
Speaker Change: Our organic growth will benefit as we continue to win net new customers.
New logos typically spend minimally with us in the first year, they're spending growth.
Speaker Change: Keeps pace with the growth of the broader business.
Speaker Change: And also thanks to our strong financial foundation, we have the ability to advance opportunities that can accelerate our time to market with high value technology and capabilities as well as extend our reach into growth oriented adjacent markets and capture move awesome.
Speaker Change: As we move.
Speaker Change: Into 2024.
Yossi Carmil: First, increasing our leadership in the digital forum. Second, accelerating our growth within investigative units. Third, building our business in the private sector, where our differentiated value proposition for data collection by enterprises and service providers is built on supporting a wide range of data sources, different work environments, and deployment flexibility. And fourth, harnessing the power of the cloud. Now I'd like to briefly highlight the Q1 wins, which help illustrate our progress in executing on each of these priorities.
Our top four strategic priorities remain unchanged.
Speaker Change: First increasing our leadership in the digital forensic units.
Speaker Change: Accelerating our growth within investigative units.
Speaker Change: Third building our business in the private sector.
Speaker Change: Differentiated value proposition for data collection by enterprises and service providers is built on supporting a wide range of data sources different work environments and deployment flexibility and fourth harnessing the power of the cloud.
Speaker Change: I would like to briefly highlight the Q1 wins, which illustrates our progress in executing on each of these priorities.
Yossi Carmil: First, our Q1 ARR growth of 27% reflects positively on our ability to extend our leadership in the digital forensics units of our customers. As we look ahead over the next three years, an important strategic objective and fundamental growth driver will be to upgrade the vast majority of our installed base of approximately 32,000 public and private digital forensic software licenses to Insight. During the first quarter of 2024, which is, by the way, the first full quarter that Insights has been available to all customers, we made good initial progress in converting our installed license base to Insights.
First.
Speaker Change: Our Q1 <unk> growth of 27% reflects positively on our ability to extend our leadership in the digital forensic units of our customers.
Speaker Change: As we look ahead over the next three years, an important strategic objective and fundamental growth driver will be to upgrade the vast majority of our installed base of approximately 32000 public and private digital forensic software licenses two insights.
Speaker Change: During the first quarter of 2024, which is by the way the first full quarter that the insights has been available for all customers. We made good initial progress in converting our installed license base two insights.
Yossi Carmil: The Aboriginal Insights delivers substantially higher value in terms of enhanced capabilities and optimized workflows while creating upsell opportunities for customers of all sizes through high-value add-on modules that address their needs for lawful access, workflow automation, extraction of other digital sources, and enhanced evidence management functionality. Now we expect to see upgrade activity accelerate during the second half of this year and into 2025 as customers incorporate these investments into their annual budgets. One notable Q1 Insights upgrade involved a larger national police force in South America.
Speaker Change: It's been sides deliver substantially higher value in terms of enhanced capabilities and optimize workflows, while creating upsell opportunities for customers of all sizes through high value add on modules that address their needs for lawful access workflow automation extraction of other digital sources.
Speaker Change: And then hence evidence management functionality.
Speaker Change: Now, we expect to see upgrade activity accelerated during the second half of this year and into 2025 as customers incorporate these investments into the annual budgets.
Speaker Change: Notable Q1 insights upgrade involved a larger national police force in South America, we choose to upgrade as an opportunity to broaden its local access capabilities to all of its major offices as well as broaden its usual pathfinder as a result, we nearly tripled this customer they are.
Yossi Carmil: We chose that upgrade as an opportunity to broaden its lawful access capabilities to all of its major offices, as well as broaden its use of Pathfinder. As a result, we nearly tripled its customer ARR. In Europe, we are pleased to see a large military agency upgrade to Insights to enhance its counter-terrorism capabilities for faster trials outside of the traditional lab environment, along with using our SmartSearch, our open-source intelligence tool, to generate rapid intelligence on persons and organizations of interest. As a result, the recounts ARR more than doubled.
Speaker Change: In Europe, we were pleased to see a large military agency upgrade to insights to enhance its counterterrorism capabilities for faster outside of the traditional lab environment, along with using our smart search are open source intelligence tool to generate rapid intelligence on presence and.
Speaker Change: Organizations of interest as a result, the recall lets say all or more than doubled itself.
Yossi Carmil: Our second priority is to accelerate our growth within the investigative units of our law enforcement customers. Now, a key offering for investigators is Pathfinder, our AI-powered analytic solution that enables law enforcement agencies to expedite their investigations. Pathfinder substantially reduces the amount of time it can take a detective to view or review text messages, photos, and videos by up to 80% while uncovering and linking data, surfacing new leads, identifying connections, and anomalies to capture the most meaningful evidence.
Speaker Change: Our second priority is to accelerate our growth within the investigative units of our law enforcement customers.
Speaker Change: Now the key offering for investigators these pathfinder, our AI powered analytics solution that enables law enforcement agencies to expedite the investigations.
Speaker Change: That's fine they're substantially reduces the amount of time it can take a detective to view or review text messages photos and videos by up to 80%, while uncovering and linking data surfacing new leaves identifying connections and anomalies to capture the most meaningful evidence.
Yossi Carmil: We are pleased with the trajectory for Pathfinder and believe that the investment to add sales specialists will help us accelerate our progress. Our Q1 Pathfinder wins were highlighted by a medium-sized city police department in the U.S. Southeast region that plans to use our analytics to support their organized crime units' ability to conduct cross-case analysis and accelerate investigations involving multiple forms. Now, this win extended the scope of our relationship with this customer, increasing our ARR by 30%.
Speaker Change: We are pleased with the trajectory for Pathfinder and believe that the investments to add sales specialist will help us accelerate our progress our Q1 pest find the wins were highlighted by a nice sized city police departments in the U S Southeast region that plans to use our analytics to support their organized crime unit's ability.
Speaker Change: To conduct cross case analysis, and accelerates investigation involving multiple funds now between extended the scope of our relationship with this customer increasing by 30%.
Yossi Carmil: Our third priority is to expand our business in the private sector, primarily in support of corporate investigations and e-discovery use cases. We recently appointed a new head of enterprise solutions to lead the strategic direction and drive product development as we support our customers through both SaaS and on-premises solutions to collect data from a wide range of devices, regardless of whether the user is working from home or in the office. During the first quarter, we extended our relationship with a Fortune 250 company in the waste management industry. This customer consolidated its data collection activities with Cellebrite by replacing its encumbered solution for support remote computer collection with our Endpoint Inspector SaaS. The win more than tripled our ARR at this account.
Speaker Change: Our third priority is to expand our business in the private sector, primarily in support of corporate investigations and E discovery use cases.
Speaker Change: We recently appointed a new head of enterprise solutions to lead the strategic direction and drive product development as we support our customers through both SaaS and on Prem solutions to collect data from a wide range of devices, regardless of whether they use those things working from home or in the office.
Speaker Change: During the first quarter, we extended our relationship with a fortune 250 company in the waste management industry. This customer consolidated state the collection activities would celebrate by replacing its incumbent solutions for support remote computer collection with our endpoint inspects owes us the win more than tripled.
Speaker Change: E R R a decent comp.
Yossi Carmil: And the fourth strategic priority is to help our customers harness the power of the cloud to make it easier, faster, and more secure to accelerate the time to actionable evidence. Now, although law enforcement agencies are generally early in the adoption of cloud technologies, approximately two-thirds of our customers expect to adopt cloud-based solutions over the next three years, and we are focusing our development roadmaps and infrastructure investments accordingly. We are pleased with the interest that is building in Guardian, our SaaS-based solution for case and evidence management.
Speaker Change: And the fourth strategic priority is to help our customers harnessed the power of the cloud to make it easier faster and more secure to accelerate the time to actionable evidence.
Speaker Change: Now although law enforcement agencies are generally early into the adoption of cloud technologies approximately two thirds of our customers expect to adopt cloud based solutions over the next three years and we are focusing our development roadmaps and infrastructure investments accordingly.
Speaker Change: And we are pleased with the interest that is building and Guardian, our SaaS based solution for case and evidence management.
Yossi Carmil: During Q1, a large city police department in the U.S. with over 1,000 sworn officers selected Guardian to optimize their evidence management workflow, and more specifically Guardian will help investigators solve more cases by freeing up hours that detectives previously spent on any given case, driving to and from their primary digital forensic laboratories to drop off devices and pick up evidence reports, as well as eliminate the need for detectives to purchase their own flash drives and other external storage devices to view digital evidence, reports, and information. Let's move to slide seven.
Speaker Change: In Q1, a large city police department in the U S. With over 1000 sworn officers selected guardian to optimize their evidence management workflows and more specifically.
Speaker Change: Guardian will help investigators are sold more cases.
Speaker Change: By freeing up hours. The detectives previously spent on any even case driving to and from the primary digital forensic labs to draw Pos devices and pick up the evidence were false.
Speaker Change: As well as eliminate the need for detectives to purchase their own flash drives and other external storage devices to view digital evidence reports in inflammation.
Speaker Change: Let's move to slide seven.
Yossi Carmil: Now we head into the second quarter of 2024 with good momentum, especially with respect to our near-term sales pipeline. We continue to see customer budgets trend favorably in support of their plans to enhance and expand their digital investigative capabilities with our solutions over the coming quarters. To capitalize on this opportunity, we have continued to add talented professionals to our team, which included the appointment of Davy G. as our new Chief Marketing Officer. Looking ahead, we believe we are on track to achieve our 2024 financial targets and have reaffirmed our outlook for this year.
Speaker Change: Now we head into the second quarter of 2024 with good momentum, especially with respect to our near term sales pipeline.
Speaker Change: We continue to see customer budgets trend favorably in support of their plans to enhance and expand our digital investigative capabilities with our solutions over the coming quarters.
Speaker Change: To capitalize we have continued to add talented professionals to our team which included the appointment of David <unk> as our new Chief marketing Officer.
Speaker Change: Looking ahead, we believe we are on track to achieve our 2024 financial targets and have reaffirmed our outlook for this year.
Yossi Carmil: And with that said, we know that there is a lot of hardware that lies ahead for us to achieve our objective this year. So, in summary, Cellebrite is well-positioned with a differentiated and compelling software platform that is making a tangible difference in accelerating justice through more accessible, intelligent, actionable, and sensible digital evidence. And we are pleased to have continued to onboard talented individuals who share our commitment to advancing Cellebrite's mission.
Speaker Change: And with that said, we know that there is a lot of hardware that lies ahead.
Speaker Change: And in order for us to achieve our objectives this year.
Speaker Change: So in summary.
Speaker Change: Celebrate is well positioned with a differentiated and compelling software platform that is making a tangible difference in accelerating justice through more accessible intelligence actionable and defensible digital evidence and we are pleased to have continued to onboard talented individuals who share our commitment to advancing.
Speaker Change: Celebrates mission.
Yossi Carmil: We expect that our strong financial foundation will be further fortified by our anticipated fundamental performance over the coming quarters. As a result, we have sufficient fiscal flexibility to consider a wide range of strategic moves that can help us accelerate time to market with high-value capabilities, extend our reach into growth-oriented adjacencies, and enhance shareholder value. And overall, we move forward with confidence that we have the people, the partners, the products, and the programs that will help us capitalize on the exciting opportunities we see. So that concludes my prepared remarks, and at this point, I'll turn the call over to Dana.
Speaker Change: We expect that our strong financial foundation will be further fortified by our anticipated fundamental performance over the coming quarters and as a result, we have sufficient fiscal flexibility to consider a wide range of strategic moves that can help us accelerate time to market with high value capabilities extend our reach.
Speaker Change: Into growth oriented adjacencies and enhance shareholder value.
Speaker Change: And overall, we move forward with confidence that we have the people the partners the products and the programs.
Speaker Change: Help us capitalize on the exciting opportunities we see.
Speaker Change: So that concludes my prepared remarks and at this point I will turn the call over to Donna.
Speaker Change: Thank you Yossi.
Dana Gerner: As noted in Yossi's comments earlier, our Q1 results demonstrate that we are off to a very solid start for the year. We delivered revenue above our targets, ARR at the higher end of our plan, and stronger than anticipated adjusted EBITDA. So let's begin the review of Q1 on slide 9.
Donna: As noted in your comments earlier, our Q1 results demonstrate that we are off to a very solid start for the year, we delivered revenue above our target.
Donna: The higher end of Brooklyn, and stronger than anticipated adjusted EBITDA. So that's the key to everything off of Q1.
Dana Gerner: We reported first quarter revenue of $89.6 million, an increase of 26%. The 29% increase in subscription revenue was partially offset by a more moderate increase in hardware sales within our other non-recurring revenue and a slight decline in our professional services revenue. Within professional services, the decline in advanced services revenue is correlated with the growth in higher sales of our advanced low-fund access offering, and this decline was mostly offset by the growth in training and certification.
Donna: We reported first quarter revenue of $89 6 million, an increase of 26% in 2000.
9% increase in subscription revenue was partially offset by a more moderate increase of hardware sales, we see now either nonrecurring revenue and a slight decline of our professional services revenue.
Donna: We say professional services the decline in advanced services revenue is correlated with the clause and higher sales of our advanced also access offering.
Donna: This decline was mostly offset by the growth in training and certification.
Dana Gerner: Overall, subscription revenue represented 88% of total revenue, and we expect that it will continue to train within the mid-to-high 80% range over the coming quarter. Slide 10 Details of ARR Growth Trials Our AROW grew 27% year-on-year to $332 million at the end of March 2024. We maintained healthy growth retention of approximately 91% for the first quarter. Our AROW growth was driven primarily by existing customers' expansion, with new logos contributing modestly, which is consistent with our growth strategy.
Donna: Subscription revenue represented 88% of total revenue and we expect that it will continue to trade in the mid to high 80% range over the coming quarters.
Donna: Slide 10 details our AI.
Donna: Driver.
Donna: Oh, AOR grew 27% year on year to $332 million at the analyst March 2024.
Donna: We maintained healthy gross retention of approximately 91% for the first quarter.
Donna: Oh alcohol was driven primarily by existing customers expansion with new logos contributing modestly which is consistently felt growth strategy.
Dana Gerner: In terms of ARR growth by product area, we have continued to see customers expand their use of our Insights, Collect, and Review solution. This growth is complemented by our continued progress cross-selling and upselling our evidence management and AI-powered investigative analysis solutions. Our geographic mix for ARL for the 12 months ended on March 31st, 2024, was generally in line with historical trends, with the Americas representing our largest geography at 52% of total, followed by EMEA at 36% and Asia Pacific at 12%.
Donna: Kansas AOR growth by product area, we have continued to see customers expand their use of insights connected mobile solution. This growth complemented by our continued progress cross selling and Upselling, our evidence management and AI powered investigative underneath it.
Donna: Our geographic mix for <unk> for the 12 months ended March 31st 94 was generally in line with historical trends, we see Americas, representing our largest geography, it's 52% of total followed by EMEA at 36% and Asia Pacific at 12%.
Dana Gerner: We were generally pleased with the ARR expansion during Q1 in each major region, with the Americas growing 28%, EMEA increasing 25%, and Asia-Pacific up 30%. Slide 11 details the historical trends for non-GAAP gross margins and non-GAAP operating expenses, which exclude share-based compensation, amortization of intangible assets, and acquisition-related expenses. We reported a first quarter gross margin of 85.7%, which was slightly above our plans and up 260 basis points from the same quarter one year ago. The improvement is due to further efficiencies introduced within our professional services activities, combined with an improved margin on hardware-related sales.
Speaker Change: We always genuity. Please.
Speaker Change: Expansion during Q1 in each major region with the Americas, growing, 28%, EMEA, increasing 25% and Asia Pacific at 30%.
Speaker Change: Slide 11 details the historical transfer our non-GAAP gross margin non-GAAP operating expenses, which exclude share based compensation amortization of intangible assets and acquisition related expenses.
Speaker Change: We reported first quarter gross margins of 85, 7%, which was slightly above our plan and up 260 basis points from the same quarter one year ago.
Speaker Change: The improvement is due further to further efficiencies introduced machine a professional services activities.
Speaker Change: Finally pending.
Speaker Change: Margin for Fad on housing related.
Dana Gerner: In terms of operating expenses, our first quarter operating costs were $60.9 million, a 14% increase from the prior year. While we have remained disciplined with overall spending, the year-over-year increase primarily reflects the timing and phasing of hiring activity and related costs, as well as the timing and magnitude of certain sales and marketing programs, enhancement of our compliance infrastructure, and the impact of other one-time projects. We ended the quarter with 1,052 employees, which was generally consistent with our plan.
Speaker Change: In terms of operating expenses, our first quarter operating costs were $69 million, a 14% increase from the prior year.
Speaker Change: We have remained disciplined if overall spending the year over year.
Speaker Change: The increase primarily reflects the timing and phasing of hiring activity and related costs, it's well, it's the timing and the magnitude of certain sales and marketing programs enhancement of our compliance infrastructure and the impact of either one time project.
Speaker Change: We ended the quarter with 1052 employees, which was January consistently hurricane.
Dana Gerner: Looking closer at our hiring during the first quarter, more than half of the new talent we added was within our sales and marketing organization. Geographically, most of our first quarter 2024 new hires were added to support the growth of our business in the Americas and the US. Turning to slide 12, the combination of higher revenue and disciplined spending produced another quarter of improved profitability. We reported Q1 adjusted EBITDA of $17.6 million, or 20% on a margin basis, versus 10% one year ago.
Speaker Change: Looking closer at our hiring during the first quarter more than half of the new accounting standard.
Speaker Change: What we see now.
Speaker Change: And marketing organization geographically most of our first quarter 2024, new hires or edits to support the growth of our business in.
Speaker Change: In the Americas and EMEA.
Speaker Change: Turning to slide 12, the combination of higher revenue and disciplined spending produced another quarter of improved profitability.
Speaker Change: We reported Q1, adjusted EBITDA $76 million or 22% on a margin basis versus 10% one year ago, our Q.
Dana Gerner: Our Q1 non-GAAP operating income was $15.9 million, with non-GAAP net income of $16.9 million, or $0.08 on a fully diluted basis. We ended Q1 with $347.3 million in cash equivalents and investments, up $15.5 million from the end of the fourth quarter. The increase for the quarter prior merely reflected the strong fundamental performance. Our first quarter 2024 free cash flow, defined as cash flow provided by operations less capital expenditure and the purchase of intangible assets, was $7.9 billion.
Speaker Change: Q1, non-GAAP operating income was $15 9 million or non-GAAP net income of $16 $9 million or 8% on a fully diluted basis.
Speaker Change: We ended Q1 with 347 3 million in cash cash equivalents and investments.
Speaker Change: $15 5 million tourists from the end of the fourth quarter.
The increase for the quarter, primarily reflected the strong fundamental performance of the business.
Speaker Change: Our first quarter of 2020 for free cash flow defined as cash provided by operations.
Copycat expenditure and the purchase of intangible assets was seven 9 billion.
Dana Gerner: Now let's move to slide 13, which details our financial expectations for the second quarter of 2024 and for the full year. Although it is still early in the year, we believe we are well positioned to achieve our four-year targets and have reaffirmed them.
Speaker Change: Now, let's move to slide 13, which details our financial expectations for the second quarter of 2024 and for the full year.
Speaker Change: Although it did early in the year, we believe we are well positioned to achieve our full year targets and have reaffirmed their.
Dana Gerner: In terms of the second quarter expectations, I'd like to offer some additional content. Our expected Q2 ARR in the ranges of $342-350 million represents growth of 25-28% and reflects the volume of business closed thus far into the quarter plus a range of deals in our near-term pipeline. We expect Q2 revenue in the range of $90 to $94 million dollars. That translates into growth of 17% to 23%. We expect our Q2 gross margins to be at the midpoint to higher end of a full year 2024 gross margin target range of 82 to 84%.
Speaker Change: In terms of the second quarter expectation I'd like to offer some additional color and context.
Speaker Change: Our expected Q2 AOR in the ranges of <unk>.
Speaker Change: <unk> $42 million to $350 million represents call it 25% to 28% and effects the plenty of clothes, that's far into the quarter. That's a range of deals in our near term pipeline.
Speaker Change: We expect Q2 revenue in the range of $90 million to $94 million.
Speaker Change: Translated into growth of 17% to 23%.
Speaker Change: We expect our Q2 gross margin to be in the mid points to higher end of our full year 2020 for gross margin target range of 82% to 84%.
Dana Gerner: We anticipate our Q2 operating costs will increase below to mid-single digits on a percentage basis over Q1 levels as we continue to fully absorb our first quarter hires and further expand our team during the second quarter. These expectations set the stage for Q2 adjusted EBITDA in the range of $16 to $19 million. With approximately 52% of our revenue expected in the second half of the year, we still expect that the majority of adjusted EBITDA will be produced during this period as we manage our cost base with relatively marginal anticipated quarter-over-quarter expansion.
Speaker Change: We anticipate our Q2 operating cost would increase by low to mid single digits on a percentage basis over Q1 levels.
Speaker Change: We continue to fully absorb a first quarter hires and further expand our team during the second quarter. These expectations set the stage for Q2 adjusted EBITDA in the range of $16 million to $19 million with approximately 52% of our revenue expected in the second half of the year, we stood up.
Speaker Change: The majority of adjusted EBITDA during this period.
Speaker Change: Manage our cost base with relatively marginal anticipated.
Speaker Change: Quarter of expansion.
Speaker Change: This implies that we expect approximately 52% to 58% of our anticipated full year 2024, adjusted EBITDA to be generated in the second half of the year.
Dana Gerner: This implies that we expect approximately 52% to 58% of our anticipated full-year 2024 adjusted EBITDA to be generated in the second half of 2020. In summary, Cellebrite delivered a solid first-quarter performance. It has been gratifying to see a valuable position responding in the marketplace, and we move forward with bold positions to support our customers as they increase their spending on our solutions. By delivering the Cellebrite brand promise of justice accelerated and executing against our strategic priorities, we expect to remain on course to achieve our financial objectives this year. That concludes our prepared remarks, and I turn the call back to the operator for Q&A.
Speaker Change: In summary, satisfies delivered solid first quarter performance.
Speaker Change: Been gratifying to see our value proposition resonating in the market place and we move forward well positioned to support our customers as they increase their spending on our solution.
Speaker Change: It makes it easy for me to set up a brand promise of justice accelerated and executing against our strategic priorities.
Speaker Change: And it will remain on course to achieve our financial objectives. This year.
Speaker Change: That concludes our prepared remarks, and I'll turn the call back to the operator for Q&A.
Operator: The floor is now open for questions. At this time, if you have a question or comment, please press Star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing Star 2. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is from Shail Al of TD Cowan.
Speaker Change: The floor is now open for questions.
Speaker Change: At this time, if you have a question or comment please press star one on your telephone keypad.
Speaker Change: If at any point. Your question is answered you may remove yourself from the queue by pressing star two.
Speaker Change: Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you.
Speaker Change: Our first question is coming from shale all of TD Cowen.
Shaul Al: Thank you. Good afternoon. Good morning. Congratulations on the 1Q results. Yossi, the business seems to be kicking on all cylinders. I wanted to start by asking about the potential business upside you could be seeing from FedRAMP, which you guys announced earlier in March.
Speaker Change: Thank you good afternoon. Good morning, Congrats on the <unk> results, you'll see the business seems to be kicking on all cylinders.
Speaker Change: I wanted to start by asking on.
Speaker Change: On the potential business upside you could be seeing.
Speaker Change: From from federal.
Speaker Change: But you know you guys have announced earlier in March.
Speaker Change: [noise] shown a festival. Thank you for that indeed in mid March 2024, we announced the launch of the process to authorize our SaaS offering with syndrome now fed ramp.
Yossi Carmil: Shaul, first of all, thank you for that. Indeed, in mid-March 2024, we announced the launch of the process to authorize our SaaS offering with FedRAMP. Now, FedRAMP is an important initiative, I would say, for us. And in the context of potentially doubling our total addressable market specifically in the federal market space in the United States and, over the longer term, clearly, and opening, I would say, substantial opportunity over the coming years, a clear benefit of accessing additional buying centers within the already existing logo and secure higher budgets in 2025.
Speaker Change: He is an important initiative fever would say for us.
Speaker Change: And in the context of potentially doubling our total addressable market specifically in the federal market space in the United States and over the longer term clearly an opening I would say substantial opportunity over the coming years.
Speaker Change: Clearly benefit of accessing additional buying centers within the already existing logo and secure Ohio budgets in 2025.
Yossi Carmil: The FedRAMP represents an area of significant investment during 2024. This is something which is important to emphasize, which, by the way, has been factored into our 2024 outlook. And the FedRAMP will initially apply to our Guardian platform and the infrastructure that supports it, but once the work is done, it will make it easier to deliver other cloud-enabled offerings of our FedRAMP certified platform. And maybe one thing that needs to be emphasized, FedRAMP is an important element of a broader plan to expand the business with federal customers. And maybe, in that context, just emphasizing that it will contribute clearly to our value proposition, our C2C platform in the context of an end-to-end and clearly long, broad runway for substantial ARR growth in the future.
Speaker Change: <unk> represents an area of significant investment during 2024. This is something which is important to emphasize which by the way had been factored into our 2020 for outlook.
Speaker Change: And deferred Trump will initially apply to our Guardian platform and the infrastructure that supports the guardian, but once the work is done it will make it easier to deliver other cloud enabled offering of our federal certified platform and maybe one thing that needs to be <unk>.
Speaker Change: Besides important element central App is an important element of our broader plan to extend the business with the federal customers.
Speaker Change: And maybe in that context.
Speaker Change: Just emphasizing that it will contribute clearly.
Speaker Change: <unk> value proposition.
Speaker Change: Our <unk> platform in the context of an end to end and clearly long broad runway for a subset of the channel in all our growth in the future.
Shaul Al: understood, maybe you could kind of front run me on maybe double-clicking on the CTC, the case to closure platform that you've just mentioned, and maybe talk about the early adoption you might be seeing among other public sector customers? Anything you can add along these lines?
Speaker Change: Understood.
Speaker Change: Maybe kind of you front run me, maybe double clicking on the CTC the case to closure platform.
Speaker Change: That you've just mentioned.
Speaker Change: Maybe talk about the early adoption you might be seeing among the public sector customers.
Speaker Change: You can add along these lines.
Yossi Carmil: Yeah, absolutely. Look, the C2C, the case to closure, is clearly in a very early stage. We have, and this is very encouraging news basically for any Cellebrite investor because with 5,300 public sales crew customers, the percentage of customers who have deployed is very small. I would say the combination of Insights, Guardian, and Pathfinder as a total package is currently very small. Now, I would say that we are very optimistic about our installed base of public sector customers and their ability to deploy multiple Cellebrite solutions within the C2C platform, especially as we more tightly integrate, and I spoke about it on Investors Day, actually investing a lot in streamlining these solutions, not to mention the cloud enablement side by side with on-premises.
Speaker Change: Yeah, absolutely look.
Speaker Change: The seat to see the case to closure.
Speaker Change: He is clearly.
Speaker Change: Clearly in his early very early stage.
Speaker Change: We have and this is very encouraging news basically for any celebrate investor because with 5300 public sector customers the percentage of customers who have deployed.
Speaker Change: I would say the combination of insights Guardian and Pathfinder as a total package is currently very small now I would say that we are very optimistic of our installed base of public sector customers and their ability to deploy multiple celebrate solutions within the CTC platform, especially as we more tightly.
Speaker Change: Integrate and I spoke about at the Investor day actually investing allotting streamlining these solutions not to mention the cloud enablement a side by side with on trend now we do believe that the cloud enablement, but it is part of this cloud to name a multiple solution will make it even easier for customers to adopt.
Yossi Carmil: Now, we do believe that the cloud enablement, by the way, is part of this. The cloud enablement of our solution will make it even easier for customers to adopt more solutions within the C2C platform, and we expect further progress on our product roadmap in that direction. I hope that I covered your question.
Speaker Change: Both solutions within the <unk> platform and we expect further progress on our product roadmap in that direction I hope that.
Speaker Change: Covers your question.
Shaul Al: No, absolutely loud and clear. Thank you for that. I'll see the floor. I may come back later for additional questions.
Speaker Change: Absolutely loud and clear thank.
Speaker Change: Thank you for that they'll see the Florida I may come back later for additional questions. Congrats.
Speaker Change: Thank you. Thank you.
Operator: Our next question is from Brad Zelnick of Deutsche Bank. Your line is open.
Our next question is from Brad Zelnick of Deutsche Bank. Your line is open.
Brad Alan Zelnick: Great. Thanks for taking our questions. This is Brad Bavinon for Brad, and congrats on the search. Salazar to the year.
Brad: Great. Thanks for taking our questions. This is Brad on for Brad Congrats on the start.
Yossi Carmil: Can you just elaborate a little bit more on insights? And it's great to hear some of the early success that you're seeing there. But just can you give us more elaboration in terms of what drives your confidence that the majority of customers will upgrade over the next three years from you fed to insights? And secondarily, how do we think about the monetization opportunity and the uplift that you might see as customers migrate?
Speaker Change: Solid start to the year can you just elaborate a little bit more on insights and it's great to hear some of the early success that you're seeing there, but just can you give us some more elaboration in terms of what drives your confidence that the majority of customers will upgrade over the next three years from your Fad to insights and secondarily, how do we think about the monetization opportunity in the uplift that you might see us customers.
Speaker Change: Great.
Yossi Carmil: Okay, maybe I'll take it for a start. I shall try it. Look.
Speaker Change: Okay, maybe I'll take it for a start.
Speaker Change: I will take a look.
Speaker Change:
Yossi Carmil: Our goal is to upgrade the vast majority of our installed base to insights over the next three years, and in 2024, my goal would be to upgrade more than 10% of our installed base to insights. I must say that, by the way, during my pitch earlier, that we launched it actually for the first time this quarter in full. And I have to say, and I'm glad to say, that the interest in InFact is high, with very favorable feedback from earlier doctors.
Speaker Change: Our goal is to.
Speaker Change: Upgrade the vast majority of our installed base to insights over the next two years and 2024 goal I would say is to upgrade more than 10% of our installed base between sites.
Speaker Change: I must say that I mentioned that by the way during my by my My Pizza earlier that when launched its actually for the first time in this quarter in full and I have to say and I'm glad to say that the interesting insights is high with very favorable feedback from early adopters and.
Yossi Carmil: And this is, by the way, while we haven't announced any plans to sunset the legacy digital forensic solutions, maybe UFED or the premium, but it is obviously reasonable to expect that in a timely manner, we will sunset them. It will basically accelerate the process. The insights may be to deliver considerably more value than the legacy offering. And the higher value obviously enables us to, I would say, command and enable us a higher price tag that is approximately 20 to 25% higher than the comparable legacy solutions.
Speaker Change: This is by the way, while we haven't announced any plans to sunset to Sunset. The legacy digital forensic solutions, maybe you fit all the premium but it is obviously a reasonable to expect that on a on a.
Speaker Change: Timely manner.
Speaker Change: Right.
Speaker Change: It will basically accelerate the process.
The insights maybe to a deliver a considerable more value than the legacy offering and higher value obviously enable us.
Would take command and enable us higher price tag that is approximately 20% to 25% higher than the comparable legacy solutions and we expect that the operating the vast majority of the installed base of insurance will be completed within the next three years. It maybe last word there is also the.
Yossi Carmil: And we expect that the upgrading, the vast maturity of the installed bits of insights will be completed within the next three years. Maybe last word, there is also the enterprise, the private sector. And for the private sector, we also see good traction as our next generation solution to add the complex data collection requirements for private sector customers and, obviously, for service providers.
Speaker Change: The private sector and for the private sector. We also see a good traction.
Dan: Our next generation solution to add the complex data collection requirements for the private sector customers and obviously for the service providers. So I'll stop here, Dan I don't know if you want to add anything no I think you fully covered the.
Yossi Carmil: So I'll stop here. Dana, I don't know if you want to add anything. No, I think you fully covered the question.
Brad Alan Zelnick: Thank you. That was extremely helpful.
Speaker Change: Question is it.
Dana Gerner: And just one follow-up for me, just on kind of some of the go-to-market changes that you're making and kind of broadening the coverage in the US and EMEA. How should we think about the payback period on some of these investments, given that there are long sales cycles here? And then could there be any disruption as we think about just as you optimize sales operations, customer experience, etc.? Maybe I'll
Speaker Change: Thank you, though that that that was extremely helpful. And just one follow up for me just I kind of kind of some of that go to market changes that youre, making and it kind of broadening the coverage and in the U S and EMEA, but how should we think about the payback period on some of these investments given theres. There are long sales cycles here and then could there be any disruption as we think about just as you optimize sales operation customer Cirrus, etc.
Dana Gerner: Maybe I'll start. Actually, we have a very solid model for return investment in introducing a new quota carrier. So we have clear internal KPIs that we take into consideration when we decide to increase our quota carrier teams. I would say that a reasonable onboarding period for a quota carrier until we see a high level of return on investment is around six months since sales may be shorter. So even with the longer sales cycles, we are seeing return on investment in the manner of two to three quarters with our quota carriers.
Speaker Change: Maybe I'll start.
Speaker Change: Actually we have a very solid model on return on investment of introducing a new quota carrier. So we have a clear internal kpis that we take into consideration when you decide on increasing our quota carrier.
Speaker Change: Team I would say that and reasonable on boarding period for it quite a carrier until we see a high level of return on investment is around six months into it kills maybe shorter so even.
Speaker Change: Even with the longer sales cycles, we are seeing return on investment.
Speaker Change: You may now two to three quarters, our quota carriers.
Speaker Change: Sure.
Dana Gerner: We did mention that we are reallocating OPEX to support the increased quota carriers, America, LMEA mainly, but also in APAC. But it is also from other activities that we do. And we can actually do it by introducing efficiencies into our systems processes, compliance, integration, and so forth. So we do not see or expect any, I would say, shortfall in our ability to support the increased number of patients. Our next question is coming from Jonathan Ho of William Blair.
Speaker Change: We did mention that we are reallocating opex to support the increased quota carriers Americas EMEA, mainly but also in APAC are but it is also from either a activities that we are doing and where we can actually do it by introducing efficiencies into our systems and processes.
Speaker Change: Compliance and integration and so forth. So we do not see or expect any I would say shortfall in our ability to support the increased visits.
Speaker Change: Our next question is coming from Jonathan Ho of William Blair.
Jonathan Frank Ho: Hi, good morning.
Speaker Change: Hi, good morning, and congrats on the strong quarter.
Speaker Change: Wanted to understand just given your strong performance to start the year why not raise the guidance for the full year I'm just trying to understand if there was any deals that came in earlier than anticipated or if there was any movement between the quarters.
Dana Gerner: So I think, you know, first of all, we started the year by saying that we would start providing quarterly guidance. And this was to enhance our transparency and the ability for investors and analysts to have better insights into our plans and our performance.
Speaker Change: So I think you know first of all we started the year by saying that we will start providing quarterly guidance and this was to enhance our transparency and the ability for the investors and the Anthony who have better insights on our plans and our performance and I'm going to say that we've done it last quarter. When you were doing it this quarter in a very.
Dana Gerner: And I'm glad to say that we did it last quarter when we are doing it this quarter in a very consistent manner. We are off to a solid start, but we have considerably more work to do ahead of us, as Yossi mentioned in his prepared comments. And we believe it's a little bit premature to start changing our outlook at this stage of the year, although we are fairly confident with our guidance and our ability.
Speaker Change: Constant banner.
Speaker Change: We are at the awfully facility start, but we all can see we have considerably more work to do ahead of fact that Youll see mentioned in his prepared.
Speaker Change: No comment and we believe it's premature to start changing our outlook at this stage of the year, Although we are fairly confident with our guidance and our ability to execute.
Michael Joseph Cikos: And our next question is from Mike Cikos of Needham.
Speaker Change: And our next question is from Mike Cecos of Needham.
Michael Joseph Cikos: Hey, thanks for taking the questions, guys, and I apologize for any background noise.
Speaker Change: Hey, Thanks for taking the questions guys and I apologize for any for any background noise.
Speaker Change: I wanted to come back to Yossi his prepared remarks.
Speaker Change: I think one of my colleagues asked about insights in this conversion process or upgrade cycle that we're on the cusp of can.
Michael Joseph Cikos: I wanted to come back to Yossi's prepared remarks, and I think one of my colleagues had asked for insights into this conversion process or upgrade cycle that we're on the cusp of. Can you further elaborate on how Q1 played out with respect to how those conversion rates trended versus your internal plan, as well as, I know it's probably early here, but are you guys actually seeing that ASP uplift? I know we're talking about 20 to 25% is what we're expecting, but is that starting to bear out now that we have a full quarter under our belt here?
Speaker Change: Can you further elaborate on how Q1 played out.
Speaker Change: With respect to how those conversion rates trended versus your internal plan as.
As well as I know, it's probably early here, but are you guys actually being that that ASP uplift I know, we're talking about 20% to 25% is what we're expecting.
Speaker Change: Is that starting to bear out now that we have a full quarter under our belt here.
Speaker Change: Well.
Yossi Carmil: I would say the following, um, as I said, I look at it long term, and I'll get to 2024 in a second. As I said, we want to, within a perspective of three years, upgrade the vast majority of the installation. And clearly, there are some factors that can influence that.
Speaker Change: I would say the following.
Speaker Change: As I said.
Speaker Change: I look at it long term and I will get to 2024 in the second.
Speaker Change: As I said, we want.
Speaker Change: In a perspective of three years to upgrade the vast majority of the installed base and our.
Speaker Change: Clearly there are some factors that can influence that for example, one of them the exact percentage over anticipated conversion.
Yossi Carmil: For example, one of them, the exact percentage of anticipated conversion can depend on the timing of the already existing multi-year subscription and, obviously, certain levels of charge. In Q1 2024, I think you're asking about that, there was good initial progress. We are very satisfied with where we stand.
Speaker Change: It can depend on the timing of all of the existing multiyear subscription and obviously certain levels of churn.
Speaker Change: In Q1, 2024, I think you were asking about that those are good initial progress we are very satisfied to where we stand.
Yossi Carmil: I would say that, and I think I mentioned that we are expecting an upgrade of more than 10%. So the 10% plus basis target, I would say, is based on budget cycles. Many customers will build this into their 2025 and into their 2026 budgets. And clearly, obviously, that has been factored to avoid any misunderstanding of our financial expectations. We expect to see an upgrade activity build, I would say, during H2 of this year and basically to build the momentum for 2025. I would say that from the area
Speaker Change: I would say that and I think I mentioned that we are expecting an upgrade of more than 10%. So 10% plus target that will change based on budget cycles. Many customers will build this into the 2025 and into their 2026 budget and clearly obviously that has been factored too.
Speaker Change: Boyd any misunderstanding in our financial expectations, and we expect to see and upgrade activity build I would say during H two of this year.
Speaker Change: And basically to build the momentum for 2025.
Dana Gerner: I would say that from the ARPC, we are seeing high teams increasing prices, which is a great success, considering the fact that those early adopters did not include this increase in their budget. So their ability to introduce it in the first year and not wait for it for the second and third year is very, very encouraging. Our next question is from Eric Martinuzzi of Lake Street.
Speaker Change: I would say that from the RPC, we are seeing high teens.
Speaker Change: Increasing price, which is a great success, considering the fact that those early adopters did not.
Speaker Change: Included in this increase are in their budget so their ability to introduce it in the first year and not wait for each for the second and third year, we find it very very much encouraging.
Speaker Change: Our next question is from Eric Martin Newsy of Lake Street.
Eric Martinuzzi: Yeah, you talked about that.
Speaker Change: Yes, you talked about a gross margin range of 82% to 84% and yet you had the 85, 7% non-GAAP gross margin in Q1, but is there anything to call out in Q1.
Speaker Change: It goes away so to speak in forward quarters.
Dana Gerner: Yeah, I think if you look at the gross margins related to subscription that we provide in the additional financial deck, it's around 7.5% of cost to subscription. With the further introduction of a cloud-based and SaaS offering, we expect our costs around subscription to increase over time, especially around hosting and cloud operations. And further, the more we will, of the install base of Insight will be transitioned to from UFA to Insight, we will see a little bit more also hardware sales come with a very marginal gross profit. As such, this is why, on your basis, we are talking about 82 to 84.
Speaker Change: Yeah, I think if you look at our gross margins related to subscription that we provide and the additional financial deck.
Seven 7.5% of cause that to subscription.
Speaker Change: The further introduction of a cloud based <unk>.
Speaker Change: Offering we expect our.
Speaker Change: Costs around subscription to increase over time, especially around hosting and cloud operation and far there and the more we will oh the installed base of insights will be transitioned to a new facility. In fact, we will see a little bit more forceful hardware conflicts.
Speaker Change: It's very margin of course puffy massage. This is why on the <unk>.
Speaker Change: What are your basis, we are talking about 82% to 84%.
Brian Essex: We'll take our next question from Brian Essex of J.P. Morgan.
Speaker Change: We'll take our next question from Brian Essex of J P. Morgan.
Yossi Carmil: Good morning, and thank you for taking the question. Maybe just to follow up on Shoal's FedRAMP question, I would like to know how that's progressing so far? How long do you think it will take? And do you think you'd be able to complete the process fast enough to benefit from the 3Q federal spending cycle this year? Or is that a longer-term issue more to benefit growth in the following year?
Speaker Change: Hey, good morning, and thank you for taking the question maybe just to follow up on Shoals fed ramp question.
Speaker Change: Like to know how that's progressing so far how long do you think it will take and do you think you'd be able to complete the process.
Speaker Change: Asked enough to benefit from the <unk> federal spending cycle this year or is that a longer term.
Speaker Change: Issue more more benefit growth in the following years.
Brian Essex: I would say that we expect to finish the process, or that initiative, in the first half of 2025, with audits to be ready by the end of 2024. That means that we will be able, and I have to say that we are standing very well right now. We published about the process that we use with a coal fire in order to build the site and the testing and the applicative part.
Speaker Change:
Speaker Change: I would say that our we expect I would say to finish the process or that initiative in the first half of 2025.
Speaker Change: With the audits to be ready by the end of 'twenty 'twenty four that means that we will be able.
Speaker Change: The way, we and and I have to say that we are spending very well right. Now we published about the process that we do with our coal fire in order to to build the site and the testing and the applicative part and I can also say that we have a sponsor and even more than one as part of the process meet.
Brian Essex: And I can also say that we have a sponsor and even more than one as part of the process, meaning that if all goes well for the audit at the end of 2024, it means that we can embed that into discussions with customers about business in 2025 and finish the process in the first half of 2025.
<unk>.
Speaker Change: All of those will all at the end of 2024 it means that we can.
Speaker Change: Bedded up into discussions with customers about the business in 2025, and finishing the process in the first half of 2025.
Yossi Carmil: Great, great, super helpful. And maybe just to follow up, Yossi, in your prepared remarks, you talked about expanding exposure to the private sector, and you particularly called out, I believe, a Fortune 200 waste management provider replacing incumbent solutions there. Maybe a little, could you offer a little color in terms of what you replaced and how applicable this will be to, you know, other customers within the private sector? Mm-hmm, absolutely. First of all,
Speaker Change: Great Great Super helpful and maybe just a follow up you will see in your prepared remarks, you've talked about.
Speaker Change: <unk> exposure to the private sector, and particularly you called out.
Speaker Change: I believe that 14th.
Speaker Change: <unk> 200 waste management provider, replacing incumbent solutions, there, maybe a little could you offer a little color in terms of what you were pleased in how applicable this will be too.
Speaker Change: The customers within the private sector.
Yossi Carmil: Absolutely. First of all, maybe as a... generic statement. Private sector revenue on ARR performed reasonably well in the beginning of the year. By the way, same as it was last year, and over the past six months, and I mentioned one leadership position, we actually upgraded two positions, Q423, a new sales leader as part of the CR organization, and the new head of enterprise solutions, actually in the beginning of Q2 2024.
Speaker Change: Uh-huh, absolutely first of all maybe as.
Speaker Change: It's a generic statement.
Speaker Change: Private sector revenue on air are performed reasonably well in a in the beginning of the year and by the way same as it was last year and over the.
Speaker Change: Past six months and I mentioned, one leadership position we actually.
Speaker Change: Upgraded took positions Q4, 'twenty three and a new sales leader, who is part of the organization.
Speaker Change: The new head of enterprise solution in the actually in the beginning of Q2 2024. So I have to say that we are optimistic that we will achieve our targets for the private sector revenue and half of 2024.
Yossi Carmil: So I have to say that we are optimistic that we will achieve our target for private sector revenue and ARR for 2024. Maybe on top of that, the focus here, and you were asking about the Fortune 250, that customer that I mentioned is part of the Fortune 250. We are clearly targeting blue chip enterprises and large and mid-sized service providers. We are targeting mainly industries where the element of e-discovery and internal corporate investigations is critical and meaningful.
Speaker Change: And is.
Speaker Change: Maybe on top of that.
Speaker Change: The focus here and you were asking about the fortune 250 that customer that I mentioned is part of the Fortune 250, we are clearly targeting to blue chip enterprises, and large and mid sized service providers, we are targeting to mainly to the.
Speaker Change: Tejas.
Speaker Change: Industries, where the element of E discovery and internal corporate investigations is critical and meaningful. So that's part of that effort again major focus for us to be what we all world Champ in advanced remote advanced collection.
Yossi Carmil: So that's part of that effort. Again, our major focus is to be what we are, the world champ in advanced and remote advanced collections. On top of that, I'm glad to say that recently we also executed a strategic review of that entire segment with some clear vectors of progress into the near and mid-term future that makes us also more confident. So I hope I... Gave Enough, Yula.
Speaker Change: On top of that I'm glad to say that our recently.
Speaker Change: We also executed a strategic review of that entire segment with some clear.
Speaker Change: Vectors of progress.
Speaker Change: Into the near and midterm future that makes us feel somewhat confident.
Speaker Change: So I hope I.
Speaker Change: Okay easy enough for you on that.
Jeffrey Van Rhee: We'll take our next question from Jeff Von Rhee of Craig Hallam.
Speaker Change: We'll take our next question from Jeff <unk> of Craig Hallum.
Jeffrey Van Rhee: Great, thanks for taking my questions. Yossi, just, you know, along the levels of the kind of high-level outlook and the second half embedded in the guide, how has your macro thinking evolved in the last 90 to 180 days?
Speaker Change: Great. Thanks for taking my questions.
Jeffrey Van Rhee: You'll see just how long the levels of kind of the high level look in the second half embedded in the guide how is your macro thinking evolved in the last 90 to 180 days.
Yossi Carmil: General about the, I would say the macro environments of the market. [inaudible] I'm glad to say that I'll split it. Obviously, the major focus is related to the public sector, and over there...
Speaker Change: Generally about the I would say that the macro environment. So the market.
Jeffrey Van Rhee: Mhm.
Jeffrey Van Rhee: Yes.
Speaker Change: I'm glad to say that Oh Street at obviously, the major focus is related to the to the public sector and over there.
Jeffrey Van Rhee:
Yossi Carmil: I would say that everything that we had anticipated in terms of factors and drivers remains the same. The market is healthy. The drivers that we spoke about which are pushing our technology in the context of destructive technology are there, and the spending of our customers is anticipated to stay the way they are with the additional possibility of upside. That statement is valid, I would say, both for the state and local government and for the federal government.
I would say that everything that we had anticipated in terms of Oh factors and drivers remain the same as the market. These are lets say the drivers that we spoke which are pushing our technology in the context of destructive.
Jeffrey Van Rhee: Disruptive technology is there and the spending of our customers are anticipated to to stay the way. They are we have even additional a possibility of upside.
Jeffrey Van Rhee: That statement is valid I would say both for the state and local government and for the for the federal.
Yossi Carmil: In that context, by the way, maybe worth emphasizing that and talking about spending, we need to remember that in that relatively healthy environment, the spending on Cellebrite at the moment is really a fraction of what those customers spend. We have pretty much, I would say, a secure ground to believe that what we are anticipating to develop or to execute will be according to what we plan. I hope that helped.
Jeffrey Van Rhee: In that context by the way it may be worth emphasizing that I'm talking about spending we need to remember that in that relatively healthy environment that spending on celebrate at the moment is really fraction or what those customer spend.
Jeffrey Van Rhee: We are pretty much I won't say a secure ground.
Jeffrey Van Rhee: We are anticipating to.
Jeffrey Van Rhee: Developed to execute ER will be according to what we plan I hope that helps.
Jeffrey Van Rhee: It does, understood, and if I could, one other question on the new logo front, understanding the opportunity to go into the base and upsell, but looking at the new logos, are there any lessons to be learned there in terms of the effectiveness of the C2C platform or insights in terms of higher win rates, broader adoption at initial purchase, any observations there?
Speaker Change: It does understood and if I could one other question on the new logo front.
Speaker Change: Understanding the opportunity just go into the base and upsell, but looking at the new logos are there any lessons to be learned there in terms of the effectiveness of the <unk>.
Speaker Change: C to C platformer insights in terms of higher win rates broader adoption at initial purchase any observations there.
Yossi Carmil: As I said to the audience, I would basically like to split my answer on the element we have in the public sector, 5300 agencies. Within those 5,300 agencies, there is a large amount of large, what we call strategic and mid-high-prime accounts. And over there, our, and I mentioned that in my opening, there are many sub-logos, slash new buying centers, untapped buying centers, untapped professional centers within that logo. So, if I go back right now to C2C, one, good news, early stage.
Speaker Change: And as I said to the.
Speaker Change: I would like to basically to split my answer.
Speaker Change #100: The element we have in the public sector 5300 agencies.
Speaker Change #100: Within those 6300 agencies there is a large amount of large what we call strategic and me die from accounts and over there.
Speaker Change #100: Our and I mentioned that in my opening.
Speaker Change #100: There are many sub logos flesh, new buying centers untapped buying centers on tops professional centers within that logo. So.
Speaker Change #101: If I go back right now to the sea to sea.
Speaker Change #101: One good news early stage sector.
Yossi Carmil: Second, the ability, basically, while streamlining it, and while bringing more value between the three flagships, the insights, collector review on the front end, the access on the front end, the pathfinder, AI-based analytics on the back end, and the bridge with evidence management and case management, and the streamlining between them, enables us and will enable us more and more to penetrate into more sub-logos, slash profit centers, slash The good news is, we are in an early stage, but I'm glad to see, I would say, that if I look at our pipeline, the amount or the cases, especially for the large and mid-sized customers, where we see more than one or two solutions, based on that combination, is increasing dramatically, especially, by the way, for the state and local governments.
Speaker Change #101: And the ability basically while streamlining it and while bringing more value between the three flagships that insights collected or if you're on the front end the axis on the front end.
Jeffrey Van Rhee: Got it. Very helpful. Thank you.
Speaker Change #102: The Pathfinder.
Speaker Change #102: AI based analytics on the backend and the breach with evidence management and case management and the streamline between them enable us and will enable us more and more to penetrate.
Speaker Change #102: In more sub logo slash profit centers less buying centers. The good news we are in the early stage, but I'm glad to see I would say that if I look at our pipe B M.
Speaker Change #102: Among all the cases, especially by the large and mid sized customers that we see more than one or two solutions based on that combination is increasing dramatically, especially by the way on the state and local government side.
Speaker Change #102: Mhm.
Speaker Change #103: Got it very helpful. Thank you.
Speaker Change #102: Yeah.
Michael Louie D DiPalma: We'll take our next question from Louis DiPalma of William Blair.
Speaker Change #104: We'll take our next question from Louie Dipalma of William Blair.
Michael Louie D DiPalma: Yossi, Donna, and Andy, good morning. Good morning. Hi.
Speaker Change #105: Yossi, Bob and Andy Good morning.
Speaker Change #106: Good morning, Hi.
Speaker Change #107: It seems price is expected to be a significant driver of growth over the next.
Michael Louie D DiPalma: Um, it seems price is expected to be a significant driver of growth over the next three to five years. And are there three primary upgrades? taking place for the installed base of 32,000 licenses. First, there is the insights upgrade and then the C2C upgrade for the end-to-end ecosystem, and then third, the on-premise upgrade to the cloud. Do all three of these upgrades involve higher pricing for the increased value that you're providing?
Speaker Change #108: Three to five years and are there are three primary upgrades taking place for the installed base of 32000 licenses firstly there.
Speaker Change #109: Insights upgrade and then the C D C.
Speaker Change #109: For the end to end ecosystem and then third.
Speaker Change #110: Premise upgrade to the cloud and do all three of these upgrades involve higher pricing for the increased value that youre providing.
Dana Gerner: I think that if we look at the long-term model, Louis, the main driver of our expansion in the coming years will be really linked to the increased digital data that our customers need to process. So either you can call it a price increase because the insights now can do double the work and much more efficiency, but with much more efficiency. So actually, we are setting up more capacity with the same number of licenses at a reasonably higher price.
Speaker Change #110: So I think that if we look at the long term model I E.
Speaker Change #110: The main driver for our expansion in the coming years will be really linked to the AR increase digital data that our customers need to process.
Speaker Change #110: So either you can call it a price increase because the insights now can do damage to Warwick and much more efficiency, but and with much more efficiencies. So actually we are sitting more capacity at least the same number of licenses.
Speaker Change #110: Reasonably a higher price.
Dana Gerner: Or you can actually look at the expansion that we are looking to do within the investigative units with PetFinder and the Guardian, which I think we discussed in the past. We believe that this market can grow 35% to 50% year-over-year. So these are the main two drivers.
Speaker Change #110: Or you can actually look at the expansion that we are looking to do what we think the investigative unit that's fine there and the Guardian that I think we discussed in the past we believe that these markets can call it 35% to 50% year over year. So these are the main two drivers are the ongoing price increase.
Michael Louie D DiPalma: The ongoing price increase of the same offering year-over-year, I would say baked into our model, is around 4%. So this is not the main issue, and insight is not a price increase. It's a different offering with a different value and a different tag price in our point of view. I hope this was helpful. Great.
Speaker Change #111: Well if the same offering you off of your Ah Yeah, I would say baked into our model is around 4%. So this is not the main issue and in fact, it's not the price increase it's a different offering with a different value and I didn't say that pricing.
Speaker Change #111: Point of view.
Speaker Change #111: I Hope this was helpful right.
Dana Gerner: Yes, and you reached a 20% EBITDA margin in the first quarter, which is typically, Donna, your lowest margin quarter. Is this 20% margin sustainable going forward, even with the increased headcount and investment? And should margins be more stable on a quarter to quarter basis going forward than they have been in the past?
Speaker Change #112: Yes, and you reached 20.
Speaker Change #113: 20% EBITDA margin in the first quarter, which is typically done at your lowest margin quarter.
Speaker Change #114: 20% margin sustainable going forward, even with the increased head count investment then should margins be like smoother I'm not quarter to quarter basis going forward and they happened in the past.
Speaker Change #113:
Dana Gerner: We believe that throughout the years, we will see smoother margins, quarter to quarter, because with the transition to subscription, we'll also see smoother revenue, which will be aligned with the marginal increase in OPEX quarter over quarter. Our model speaks about 20% plus EBITDA in the midterm. We are very, very satisfied with Q1, but Q1 was not fully representing our OPEX plans for the full year in the natural, yeah.
Speaker Change #115: We believe that throughout the year as you will see smooth there in margins quarter to quarter, because with the transition to subscription that we'll see.
Speaker Change #115: The revenue increase which will be aligned with the margin that increase in opex quarter over quarter, a modest speaks about 20% plus EBITDA.
Speaker Change #115: In the midterm, we are very very satisfied with Q1, but Q1 was not fully representing our opex plans for the full year.
Speaker Change #115: In a nutshell.
Michael Louie D DiPalma: That makes sense. Thanks, everyone. And once again,
Speaker Change #116: That makes sense thanks, everyone.
Speaker Change #115: Yeah.
Okay.
Operator: And once again, if you have any questions, please press star one on your telephone keypad at this time. One moment while we queue. We'll take a question from Tomer Zilberman of Bank of America. Hey guys, uh, maybe...
And once again, if you have any questions. Please press star one on your telephone keypad at this time, one moment, while we queue.
Speaker Change #115: Yes.
Speaker Change #117: We'll take a question from Tamara Zelle Berman.
Speaker Change #118: Bank of America.
Speaker Change #117: Okay.
Speaker Change #119: Hey, guys.
Speaker Change #120: Maybe just one quick one to touch up on an earlier question can you just talk about how much visibility you have into demand for the remainder of the year.
Speaker Change #121: Less on expectations.
Speaker Change #121: Our expectation for the guidance, but how much visibility can you see.
Tomer Zilberman: So when we look at the opportunity management process that we have in the company, we have great visibility into the coming two quarters, so Q2 and Q3, and I would say that this makes us very confident in our ability to deliver the full year.
Speaker Change #122: So when we look at the opportunity management process that we have in the company.
Speaker Change #123: A great visibility into the coming two quarters, So Q2, and Q3 and I.
Speaker Change #123: I would say in which make us very confident in our ability to deliver the 40 year.
Speaker Change #123:
Speaker Change #123: International.
Speaker Change #124: Got it thank you.
Michael Joseph Cikos: We do have a follow-up question from Mike Cikos of Needham. Your line is open.
Speaker Change #124: Okay.
Speaker Change #125: We do have a follow up question from Mike Cecos of Needham Your line is open.
Michael Joseph Cikos: Thanks for getting me back on here, guys. I did just want to follow up. I know that I just wanted to get a better sense of, when we think about the guidance that you have constructed today, is that acceleration embedded in the guide, or is that seen as more of a potential upside catalyst?
Michael Joseph Cikos: Hey, Thanks for getting me back on here guys I did just want to follow up I know that.
Michael Joseph Cikos: It's about how you expect an acceleration in upgrade activity in the <unk>.
Speaker Change #127: Half of this year into calendar, 'twenty, five, which which makes sense intuitively is.
Speaker Change #127: Customers are building in additional budget.
Speaker Change #127: But I just wanted to get a better sense. When we think about the guidance that you have constructed today.
Speaker Change #128: Is that acceleration embedded in the guide or is that seen as more of a potential upside catalyst.
Yossi Carmil: The 10% plan is embedded in our plans for the year. The budget for next year, what we will see, the opportunities that start to build this year, most of them will be realized in 2025.
The 10% plus is embedded in our plans for the year are the budgets for next year why do we see the opportunity to start to build a D C or most of them will be realizing 25.
Michael Joseph Cikos: Okay, and with the, I know Marcus, your new Chief Revenue Officer, did a great job at Investor Day in March, but just imagine that he's been charged with helping in some way accelerate growth. Is that where we should think about driving towards when you look at the hires and the go-to-market effort around whether it's pre-sales or instituting some of these different sales operations that you guys have? Is that a fair characterization, or is there something else that we're missing here?
Speaker Change #129: Okay and with the.
Speaker Change #130: I know Mark is your new Chief revenue Officer did a great job at the Investor Day in March.
Speaker Change #131: But just imagine that he has been charged with.
Speaker Change #132: Helping in some way accelerate.
Speaker Change #132: Ability to build that budget right to help your conversions.
Speaker Change #133: Is that where we should think about.
Speaker Change #133: Driving towards when you look at the hires in the go to market effort around whether it's pre sales are instituting some of these different sales operations that you guys have is that.
Speaker Change #134: That a fair characterization or is there anything else that we're missing there.
Yossi Carmil: Mike, I'm not sure that I understand the question, but at least I'll try. First of all, I would agree completely with the statement that Marcus has done, and is doing, and will do a great job. But putting that aside, the focus is on functionality-wise, the focus is on a strong mix between quota carriers and post-sale customer success, which are the two major directions and vectors where we are going to invest the money. And in general, there is a potential for acceleration.
Michael Joseph Cikos: Mike I'm not sure that I understand the question, but at.
Michael Joseph Cikos: At least I'll try.
Michael Joseph Cikos: I guess I'll thanks for that.
Speaker Change #135: First of all I would agree completely with the statement that Marcus has done and he is doing and will do a great job, but putting that aside.
Speaker Change #135: The focus is on.
Speaker Change #135: Functionality wise the focus is on a on a grid on a on a strong mix between quota carriers and post sale customer success, which are the two.
Speaker Change #135: Major direction in Victoria, where we're going to invest the money and in generally there is a potential for acceleration.
Michael Joseph Cikos: I'm sorry to be mixed up on the question here, but is there a way for Cellebrite to help customers accelerate their internal process to help get that budget sooner for this upgrade, right? Are you able to do anything on that front to help them get additional funding for Cellebrite? I'm hoping that question makes sense. Okay, that it makes sense.
Speaker Change #136: I guess.
Speaker Change #137: Thanks for that I'm, sorry to be.
Speaker Change #138: Mixed up on the question here I guess is there a way for celebrate the help.
Speaker Change #138: Help customers accelerate their internal process to help get that budget sooner.
Speaker Change #138: For this upgrade right are you able to do anything on that front to help them get additional funding for celebrate.
Speaker Change #138: Hoping that question makes sense.
Yossi Carmil: Okay, it makes sense, and there are possibilities in that direction. There are cases where there are special grants that are being created by customers. End of last year, by the way, we hired our first people in the area of grant management, who are doing exactly that. And that enables us to support them to create those extra grants and create additional budget opportunities.
Speaker Change #139: Okay. It makes sense and it and there are possibilities in that direction.
Speaker Change #139: There are cases that are there are special grants.
Speaker Change #139: Which are being created by customers.
Speaker Change #139: The end of last year, but the way we hired for the first time.
Speaker Change #139: People in the area of grants management.
Speaker Change #139: We tried doing exactly that and that's what enables us to support them to create those extra grants and create additional budget opportunities.
Speaker Change #139: Okay.
Yossi Carmil: This concludes the question and answer portion of today's call. I would now like to turn the floor over to Cellebrite CEO Yossi Carmil for additional or closing remarks.
Speaker Change #140: This concludes the question and answer portion of today's call I would now like to turn the floor over to celebrate CEO Yossi caramel for additional or closing remarks.
Yossi Carmil: I would like to thank you again for participating. Thank you also for your interest and your trust in Cellebrite, and, above all, I would like to thank my colleagues, the Cellebrite employees, for performing as 4Q1 and well done, and good luck to us for the rest of the year. Thank you. Thank you. This concludes today's Cellebrite.
Yossi Carmil: I would like to thank you again all for participating. Thank you also for the interest and the trust and celebrate and above all I would like to thank my colleagues to celebrate employees for performing as for Q1 and.
Yossi Carmil: Well done and good luck to us for the rest of the year. Thank you.
Operator: Thank you. This concludes today's Cellebrite first quarter 2024 financial results conference call. Please disconnect your line at this time and have a wonderful day.
Speaker Change #141: Thank you. This concludes today's celebrate first quarter 2024 financial results Conference call. Please disconnect. Your line at this time and have a wonderful day.
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