Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cellebrite DI Ltd (CLBT, Financial) reported a 26% year-on-year growth in ARR, reaching $346 million by the end of June 2024.
- The company saw a 25% year-on-year increase in second-quarter revenue, totaling $95.7 million.
- Cellebrite DI Ltd (CLBT) successfully launched Cellebrite Federal Solutions, enhancing its ability to work with US federal customers.
- The company is making significant progress with AI integration, which is expected to improve investigative speed, efficiency, and effectiveness.
- Cellebrite DI Ltd (CLBT) raised its full-year 2024 guidance for both revenue and adjusted EBITDA, reflecting strong performance and future expectations.
Negative Points
- Despite strong revenue growth, the ARR guidance raise was more modest, indicating potential challenges in sustaining long-term subscription growth.
- The company faces ongoing costs related to expanding its sales force and governance, which could impact future profitability.
- There is a moderate decline in professional services revenue, which could indicate challenges in that segment.
- The integration of CyTech and the establishment of Cellebrite Federal Solutions come with incremental governance and operational costs.
- The competitive landscape remains challenging, with other companies emulating Cellebrite DI Ltd (CLBT)'s platform orientation and marketing messaging.
Q & A Highlights
Q: Yossi, it's great to hear you're on track to migrate roughly 10% of the installed base to insights this year. Can you confirm if that's a dollar-based goal or a number of customer goal? Are you seeing the 20% to 25% price uplift as expected?
A: We are currently on pace to exceed our 2024 upgrade targets by 50%, expecting 15% of our installed base to upgrade to insights. This is measured in dollars and number of licenses. The insights offer significant productivity and efficiency improvements, commanding a 20% to 25% higher price than legacy solutions, which we are successfully achieving.
Q: Dana, NRR ticked down slightly. Can you unpack the drivers of that and how to think about it going forward?
A: Our net retention rate (NRR) is usually 2 points below ARR growth, representing around 2% contribution from new customers. The NRR of 124% supports our long-term growth. We have added meaningfully to our quota carriers, especially in the Americas and EMEA, which we expect to contribute further in the second half of the year and into 2025.
Q: Can you help us think about where contract duration stands today? Is this a newer phenomenon or part of a broader trend?
A: Historically, 25% to 30% of our contracts were multiyear, mainly outside the Americas. We are now seeing this trend in all regions, with customers ready to commit for longer periods, especially with the transition to insights. This is particularly true for strategic and large federal accounts.
Q: Are you trending better than expected in terms of hiring sales reps? Are they ramping at a faster rate than historically?
A: We are following our plans for major investments in EMEA and Americas sales organizations. The full contribution of new sales quota carriers takes time, with those joining in Q1 expected to contribute more fully in Q3 and Q4. We expect these investments to bear fruit in the second half of the year and into 2025.
Q: Is there any part of the CyTech acquisition impacting the Q3/Q4 outlook revenue or earnings-wise?
A: The impact is minimal, mainly introduced in our services forecast. The contribution to EBITDA is almost negligible as we have introduced some investment in governance and compliance to support the new business.
Q: How are we measuring the success of Cellebrite Federal Solutions?
A: Cellebrite Federal Solutions was created to directly engage with federal agencies and relevant system integrators. The federal sector was 19% of our ARR in 2023, growing at 21%. We expect this segment to grow significantly, potentially doubling in size over the next three to five years.
Q: What has been the early feedback for C2C? Is it driving Pathfinder adoption?
A: The perception of C2C and the end-to-end approach resonates well with our customer base. While we are in the early days, the percentage of customers implementing C2C is still small. However, we are optimistic that more customers will deploy multiple Cellebrite solutions within the C2C platform, especially as we integrate them more and enable cloud-based solutions.
Q: You raised your full-year EBITDA guidance by 23%. Are there any major margin headwinds on the horizon?
A: We are pleased with our performance and exceeding expectations. At this stage, we are not changing our long-term model. We will revisit and update if necessary early next year. The growth in EBITDA is supported by our revenue performance and consistent growth in operating expenses to support top-line efforts.
Q: What's driving the difference in the magnitude between the revenue guidance raise and the ARR guidance raise?
A: The improved revenue performance is associated with product mix and the proportion of multiyear deals. We enjoyed some multiyear deals in the first half of the year, which generated higher revenue than forecasted. The ARR growth is in line with our targets and reflects our ability to continue expanding our solutions within the customer base.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
