Cellebrite DI Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 14, 2025
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Operator

Welcome to the Celebrite First Quarter twenty twenty five Financial Results Conference Call. At this time, all participants have been placed on a listen only mode and the floor will be open for questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality.

Operator

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

Andrew Kramer
Andrew Kramer
Vice President-Investor Relations at Cellebrite DI

Thank you very much, Erica, and welcome, everybody, to Celebrite's first quarter twenty twenty five financial results call. I'm joined here today at our U. S. Headquarters outside of Washington, D. C.

Andrew Kramer
Andrew Kramer
Vice President-Investor Relations at Cellebrite DI

By our primary speakers, Tom Hogan, Celebrite's Interim CEO and Donna Gerner, Celebrite's CFO. Joining us in person is Marcus Jewell, our CRO and Ronen Armand, our Chief Products and Technology Officer, is participating remotely. Marcus and Ronen will be available during Q and A. There's a slide presentation that accompanies our prepared remarks. Please advance the slides in the webcast viewer to follow our commentary.

Andrew Kramer
Andrew Kramer
Vice President-Investor Relations at Cellebrite DI

We'll call out the slide number we're 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 along with a copy of the prepared remarks. Starting on Slide number two, a copy of today's press release and financial statements, including GAAP to non GAAP reconciliations, the slide presentation the quarterly financial tables and supplemental historical financial information for each quarter of the past couple of years are available on the Investor Relations website at investors.celebrite.com. Also, unless stated otherwise, our discussion of our first quarter twenty twenty five 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 are with the first quarter of twenty twenty four. In addition, please note that statements made during this call that are not statements of historical facts constitute forward looking statements.

Andrew Kramer
Andrew Kramer
Vice President-Investor Relations at Cellebrite DI

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 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 03/18/2025. The company does not undertake to update any forward looking statements to reflect future events or circumstances. Slide number three provides the agenda of the topics we'll cover on today's call.

Andrew Kramer
Andrew Kramer
Vice President-Investor Relations at Cellebrite DI

And with that being said, I'll now turn the call over to Tom Hogan. Tom?

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Thanks, Andy. Let's just jump right in. Celebrite delivered strong 23% year on year ARR growth in the first quarter. Consistent with our stewardship in managing both revenue and spend, we also delivered 34% year on year growth in our adjusted EBITDA resulting in a 22% margin. The combination delivered a 45 rule of X in the quarter and 48 for the trailing twelve months, both within our committed range of balanced performance.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

We remain committed to growth as our priority, while dynamically tuning our spending to support our bottom line objectives. Overall, our value proposition continues to resonate in the market. Interest in our platform remains healthy. Uptake on our insights solution continues to increase and customers are realizing the brand promise of Justice Accelerated. Strength and overachievement in The U.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

S. State and local, LatAm and the Asia Pacific regions were offset by modest shortfalls in The U. S. Federal segment and our EMEA geography. The strength of our total performance was a byproduct of our global diversification in the range of our solutions across federal, state and local, defense, intelligence and the private sector.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Before adding further context to our federal business, I'll highlight two important barometers that continue to signal strength. First, we remain on track with our overall Insights migration, which is a direct reflection of the value delivered with our core digital forensics offering. We finished the first quarter with over 30% of our installed base converted and we've remained on track to hit our 2025 objective of a 50% conversion. Second, as we've shared, extending our value proposition to the critical cloud based Guardian product as adoption of an interest in this purpose built platform for collaboration and chain of custody continues to accelerate. We delivered our third consecutive quarter of year over year ARR growth of over 100%.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

The power of the Celebrite platform is also reflected in our pipeline, where transactions that involve two or more of our flagship solutions carry a disproportionate increase in average deal size, in many cases representing 10x the size of Insight's standalone transactions. Now, let me add some perspective around our federal business. I first want to remind people that this business has produced a 25% CAGR in ARR over each of the past three years and it represents roughly 17% of our 2024 revenue. Today, despite current volatility, our view is that the opportunities for future growth not only remain attractive, but have increased meaningfully over the past two quarters. This is a function of multiple current and emerging tailwinds, starting with the structural changes associated with the recent launch of our Celebrite Federal Solutions unit and our ongoing investment to achieve FedRAMP authorization to operate.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

These actions are amplified by the emerging macros around the increased sophistication of technology used in the pursuit of crime, including AI, along with the increased alignment of our portfolio with the new administration's focus on securing our borders, mitigating the fentanyl epidemic and overall drug trafficking, reducing the heinous human trafficking industry, and finally, improving the overall productivity of all government agencies. While the short term federal environment remains choppy, our full year 2025 pipeline continues to expand. Our solutions are simply mission critical to safety and security across all levels of government and the spend related to the Celebrite solutions remains small relative to both our societal impact and overall department budgets. Dana will cover our second quarter guidance in detail, but I want to share in advance that while our outlook assumes that a continuation of the first quarter federal spending environment will persist into the second quarter, we see a clear opportunity to reaccelerate in the second half given the expanding pipeline and the traditionally strong seasonality of the third quarter in the U. S.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Government. In EMEA, we're equally bullish on our pipeline and interest and expect our investments in our go to market teams will deliver an acceleration in the region in the second half of twenty twenty five. Within the past thirty days, our entire Board and our executive team have spent two full weeks in The UK region and Germany to clearly demonstrate the company's commitment to the region, and both visits were well received by customers, by prospects, and by our team on the ground. Finally, I want to call out one segment in particular across the globe that has witnessed a material increase in opportunities, which is the intelligence and defense sector, which tracks with what I think we're all seeing in global geopolitics. This is a segment we're doubling down on from a messaging, positioning, and coverage perspective to ensure we meet demand and the opportunity.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Before moving forward, I would reiterate that our U. S. State and local, Asia Pac and Latin America units delivered strong growth and continued momentum in the quarter. To summarize our first quarter performance before doing a quick click down on a few strategic milestones, I'd reiterate four things. First, Celebrite continued to deliver robust year over year growth in ARR and revenue to support a Rule of X performance in our target 45 to 50 range.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Second, intelligence and defense needs, combined with digitally enabled crime, continue to escalate in both size and sophistication, thus driving increased demand. Third, our bottom line grew faster than the top line at 34%, highlighting the operating leverage inherent in our business model and reflecting positively on our ongoing commitment to drive profitable growth. And fourth, traction with our insights migration and the strategic penetration of our Guardian and Pathfinder products remain strong and on track. Let me switch gears and talk about a couple of important milestones that were core to our business. First, a major go to market highlight occurred last month when we held our first ever user conference.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

This Washington, D. C. Event was sold out, attracting roughly 700 attendees from approximately three fifty agencies and enterprises spanning 27 different countries. The energy, feedback and collaboration with our customers was both palpable and motivating. We also launched our inaugural Digital Justice Awards.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

The winners of the twenty twenty five Justies represented 10 categories, including the case of the year, and recognized law enforcement and intelligence officers for exceptional service in the pursuit of justice. Our twenty twenty five user conference represented meaningful progress toward our goal of establishing the Justies and this summit as the premier customer event in digital investigations. We look forward to next year's award ceremony, along with a significant expansion in our twenty twenty six summit attendance. From a product and portfolio perspective, we announced our new spring twenty twenty five release on May, featuring our new cloud foundation and AI powered innovations across the portfolio. The evolution of the Celebrite Cloud enables us to deliver a purpose built user experience that scales investigative capabilities and accelerates decision making across public safety, intelligence and enterprise sectors.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

We continue to see strong adoption of our cloud enabled offerings, which are rapidly approaching 20% of our total ARR. At the same time, we delivered new AI powered features and functionality aimed at elevating productivity and efficiency across our flagship offerings, while always keeping human expertise and engagement at its core. To better reflect the emerging importance of Celebrite to both the intelligence and defense segments, as well as our ongoing value in the private sector, the Case to Closure platform has been rebranded as the leading digital investigation platform. Finally, let me update you all on the status of our CEO search. Over the past four months, we've had the pleasure of meeting with a long list of eminently qualified candidates.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

We can't share those names for obvious reasons, and our interest in several of these candidates remains high. As we committed, we've been deliberate in this process to ensure we secure the right, best leader. It's not just our shareholders, our employees, and our customers that deserve a world class leader. Our belief is that safety of our world also depends on it. I want to also assure all of you that this company has not been in a holding pattern while this search has progressed.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

On the contrary, our board, our team of senior leaders, and I have moved with daily urgency, balancing the requisite focus on the present with an equally important eye on our future. As a result, we've elevated work on our strategic options, including, as you would expect, inorganic opportunities to expand our TAM and help fuel our long term growth. As I've discussed in multiple forums over the past three months, I consider my current duties the professional privilege of my lifetime. While I've led organizations 100 times the size, I've never led a company that wakes up every morning dedicated to making our neighborhoods, cities, country, and institutions safer. I'm honored every day to partner with the men and the women at Celebrite and the dedicated and courageous customers we serve.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

My commitment to our board and our shareholders is to optimize value creation, enable the important mission of our customers, grow and reward our people, and usher in the next generation of leadership. Let's turn to slide six to conclude my remarks. We delivered solid first quarter top line growth while modestly expanding operating margins to outperform on the bottom line. We live in unusually turbulent times and the world needs the mission critical IP we uniquely deliver. The tailwinds and malfeasance, now exacerbated by the increased technological sophistication of bat operators, provide a firm foundation for healthy global demand over the coming years.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

As the market leader and technology innovator in this space, we're committed to extending our capabilities in AI, cloud related agility and investigative case and evidential management. Our mission and our impact remain in the early innings as we bring the world's most advanced technologies to ensuring a better, safer world. The future remains incredibly bright for this company. With that, I'll turn the call over to Donna to provide further detail on our results and our outlook. Donna?

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

Thank you, Tom. Despite market turbulence in The U. S. Federal sector, Cetabrite delivered top line results for the first quarter that were in line with our plans, while the combination of our revenue growth and prudent spending enabled us to outperform our Q1 profitability target. Just as important, we remain well positioned to continue expanding our business.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

Let's start our review on slide eight. Our ARR for the twelve month period grew 23% to $4.00 $8,000,000 largely driven by increased spending within our installed base customer. Consistent with Tom's earlier commentary, we enjoyed ARR results that were largely in line with our plans in most geographies and customer verticals, although the spending headwinds within The U. S. Federal and EMEA sectors limited our upside for the quarter.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

As noted on the slide, our gross retention held relatively steady at 92% with standout retention levels in The U. S. And Asia Pacific. Geographically, the March 2025 ARR mix was in line with the prior year. The Americas represented 54% of total ARR, with EMEA at 34% and Asia Pacific at 12%.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

In terms of growth rates by geography, The Americas grew 27% with a vibrant performance in the SLG and Latin America segments. ARR grew 28% in the Asia Pacific region, followed by 15% expansion in EMEA. Let's turn to slide nine to dive a little deeper into the ARR growth drivers from a product family perspective, as well as highlight a few deals that stood out in the quarter. As illustrated on the chart on the left hand side of the slide, the majority of our net ARR expansion was driven by higher demand for our family of insights offering, including our legacy digital forensic solutions. Within the BlueInsights contribution, we outlined the financial uplift associated with transitioning our installed base of legacy digital forensics licenses to Insights, which was a high single digit percentage of the $104,000,000 net increase in ARR.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

To be clear, this is intended to represent only the increased spend by customer when they move to InSight. The first win listed on this slide, a new logo win, a great example of how customers are deploying our technology in the field, in addition to conventional lab environments. We are seeing more opportunities to extend our technology out into the field, as one of our competitors has become increasingly vulnerable in this area. The second deal, in the middle, reinforces our success in expanding adoption of our unlock module when customers convert to InSight, as well as the opportunity within the global defense and intelligence sector. The third win involving Guardian, highlights how this solution is fortifying the chain of custody, while enabling us to expand our wallet share within existing accounts.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

As we look ahead, we remain optimistic about the growth opportunity for both Guardian and Pathfinder, as each product family remains under 5% penetrated across our installed customer base. Guardian's ARR growth rate is accelerating, exceeding 100% for the third straight quarter, as the number of customers using both Insight and Guardian nearly tripled from one year ago. Turning to slide 10, we generated first quarter revenue of $107,500,000 which increased 20% from the prior year, due primarily to subscription revenue growth of 21%. Approximately 89% of total revenue was associated with subscription based software solution. Our Q1 revenue was at lower end of our targeted range due primarily to the timing of orders between US Federal and EMEA theaters.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

Let's move to slide 11 for a view of our non GAAP gross margins and non GAAP operating expenses, which exclude share based compensation, amortization of intangible assets and acquisition related expenses. Our first quarter twenty twenty five gross margins of 84.4% was in line with our full year 2025 target range. The 130 basis point decline from prior year primarily reflects higher incremental costs for hosting and investments to build out our customer success organization. In terms of operating expenses, first quarter operating costs were $68,800,000 a 13% year over year increase. This primarily reflects higher personnel costs associated with higher headcount and annual merit adjustments, increased event costs and higher consulting expenses.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

We ended the first quarter with eleven eighty two employees. Turning to slide 12, the combination of top line growth, solid gross margins and prudent spending resulted in Q1 adjusted EBITDA of $23,700,000 or 22% on a margin basis. The year over year improvement of 2.3 percentage points reflects solid operating leverage, as our top line growth continues to outpace operational spending. We reported first quarter non GAAP operating income of $22,000,000 with non GAAP net income of $26,200,000 or zero one zero dollars on a fully diluted basis. Our diluted non GAAP EPS grew 25% despite a 20% increase in our average weighted diluted shares outstanding.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

We ended the first quarter with $509,800,000 in cash, cash equivalents and investments, an increase of $26,000,000 from the fourth quarter of twenty twenty four and an increase of $162,500,000 from the same period one year ago. Free cash flow for the first quarter, which we define as net cash provided by operating activities less capital expenditure and the purchase of intangible assets, was $18,500,000 up strongly from one year ago due primarily to strong fundamental results. Now let's move to slide 13 for our outlook, along with some insights on the factors trends that we believe will shape this year. A reminder, we have historically generated the majority of our ARR revenue and adjusted EBITDA in the second half of any given year, and we believe that this trend will repeat itself in 2025. Looking at the second quarter, we currently expect Q2 ARR in the range of $416,000,000 to $426,000,000 which represents growth of 20% to 23%.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

While most geographies and customer verticals are anticipated to continue performing well during the first half of the year, we believe it is prudent to model a continuation S. Federal sector. Our pipeline does suggest a possible recovery in the second quarter, but until that manifests itself in closed transactions, we will remain justifiably cautious. Our Q2 revenue outlook ranges from $110,000,000 to $116,000,000 which translates into growth of 15% to 21%.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

This would result in our first half revenue of approximately $218,000,000 to $224,000,000 or approximately 46% of what we expect for our full year 2025 revenue, which is generally consistent with historical trends. The spending climate within The US federal market is also affecting those who provide consulting and other professional services. We are not immune from those headwinds and we see near term pressure on one time professional services revenue from US federal agencies. Consistent with our cautious stance on the second quarter, we have marginally reduced the low end of the full year 2025 revenue by $10,000,000 but also resetting the high end of this range. While we remain optimistic that we will see stronger second half spending by our customers, particularly in The U.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

S. Federal And EMEA, we believe that adjusting the revenue range in such a manner more accurately captures the top line risks associated with an extension in spending constraints. The majority of low end revenue reduction is associated with the shifted timing of new business to the second half of the year, combined with FLORA one time professional services revenue. We are not adjusting our full year guidance on ARR and EBITDA. We expect our Q2 gross margins to be within our full year 2025 gross margins target range of 84% to 85.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

We remain very focused on disciplined cost management, while funding important investments that are critical to the further expanding of our business over the long term. While U. S. Tariff policies remain fluid and require careful assessment in the event of any meaningful changes, we do believe that the current tariff of imports of our powder to The U. S.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

Will be de minimis to our overall cost of goods sold. We anticipate our Q2 operating cost will be in the range of 69,000,000 to $71,000,000 which is flat to slightly higher than over Q1 levels, and consistent with the historical cadence of our operating expense growth from the first quarter to the second. These expectations set to the stand for Q2 adjusted EBITDA in the range of $26,000,000 to $28,000,000 or approximately 24% on a margin basis, which keeps us on track with our full year target. In terms of a weighted average diluted share count, we expect Q2 to approximately be in the mid $250,000,000 share range. In summary, we remain focused on growth, while equally committed to the responsible management of our cost structure in order to achieve our adjusted EBITDA targets in absolute dollar terms under different potential revenue outcomes.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

Since entering the public safety market in 02/2007, we have established a track record for durable, profitable growth, which is reflected in both our absolute ARR and in the strength of our balance sheet. That type of performance speaks volumes about the global need for our solutions and our ability to successfully navigate our business through an area of geopolitical, macroeconomics, and technology shifts. We are executing well against our plans and remain enthusiastic about the prospects for achieving the ambitious target we set for Cerberi this year. That concludes our prepared remarks. Operator, we are now ready for Q and A.

Operator

Thank you. The floor is now open for questions. Our first question is coming from Tomer Zimmerman with Bank of America. Your line is open. Please go ahead.

Tomer Zilberman
Tomer Zilberman
Equity Research Associate at Bank of America

Guys. Good morning. If I think about your commentary last quarter about the Fed, I believe you said that you said that the weakness was really stemming from stabilization of the new administration coming in. And as you look to the outlook today, the question is, are you seeing any deterioration in the demand environment in terms of anything from DOGE or tariffs or policy changes? Anything different that you're seeing from ninety days ago?

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

I'm going let Marcus make a comment here. This is Tom. There's no material change from a leadership decision making perspective. There's still a little bit of fluidity in that environment. But what we are seeing, which gives us the optimism we've alluded to in the second half is the pipeline and new opportunities that are surfacing, given the administration's priorities and where they are allocating dollars is actually, we've witnessed a fairly meaningful uptick.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

The bottom line is crime is not going away. The need for this software is getting more important given the sophistication of technology and the pursuit of crime. And a bulk of the efforts that are sort of Doge related are more focused, we believe, on a combination of personnel and for those of you that follow software, shelfware. And the one thing that Celebrite's never been accused of is shelfware. If anything, agencies are starving for more of our product to keep up with backlogs.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

So the short term is choppy and we wish it weren't so, but as we think about the need, and the opportunity in federal for us, we're actually gaining more optimism, versus concern. I don't know if you want to add anything, Mark.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

Yes, it's a great question, Thomas. So adding to Tom's point, look, we're mission critical. We are not what I call a bright shiny object or an IT widget, as Tom calls pleasantly shelfware. The key there that what we're seeing is certain programs under Doge have come to an end, but they're being replaced by new programs. And let me give you a real life example.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

We had a special funding program into the DoD. We can't name it for obvious reasons, which was multiple millions for Ford deployed operatives, people that are out there doing the real hard graft protecting The U. S. That program is actually replaced by a larger program, which will come into play in the next three months And we feel very comfortable with our position there at the executive level. So what we're seeing is this change through Doge and what we have seen a little bit is everything got wrapped up through the process.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

So when they did the blanket cuts that they did, there was just some freezing and deployment changes, but we feel very comfortable about the future. And in fact, we see new projects accelerating. We're just hoping that the Memorial Day budget, which is a big impact for us, if that gets approved, things settle down to a certain extent and then we'll have more clarity going into Q3.

Tomer Zilberman
Tomer Zilberman
Equity Research Associate at Bank of America

Got it. And maybe as a follow-up to the pipeline comment, if I look back to 2022, you had a trend of deal slippage with kind of low visibility into when that was going to close-up. If we look to the outlook today, what kind of visibility do you have and what indicators are you seeing that suggest that this is really only a timing issue and not indicative of sort of a bigger trend of maybe spending weakness?

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

It's great. Mean, so basically on that basis, what you can look at is what are the use cases we're solving for? And so the use cases we're solving for into federal government are fundamentally around three elements. They're around intelligence, counterintelligence, human trafficking. Those crimes and those necessities are increasing.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

There are certain things which going to happen in The U. S. There's a World Cup coming to The U. S, which if you guys think about will be one of the biggest human trafficking issues that this country is going to face in a long time. It will drive that.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

So we're seeing these new projects come in very early in the pipeline and then mature very quickly, which gives us confidence that on the net adds for what I call early pipeline that is increasing. It's the decision making and the executive teams which are time to settle into their new roles, which means that the second half of the sale has been a little cloudy, but we see that clearing up. And again, I do think, I'm going to repeat that the budget element after Memorial Day will give stability and clarity to some of those projects. And I think that's consistent feedback from other people that sell to the federal market have given in this quarter.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Yes. And if I kicked up that comment one level and having sort of been through the stuff a bunch of times over the last forty five years. The three things you look at are, is your pipeline growing or shrinking? You do the competitive analysis, are you losing to competition? And the answer is no.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And then are the macros changing? And sadly, population's going up, the use of technology's going up. Crime is minimally flat, maybe violent crime, maybe flat to down a little, but crime overall and some of the things like drug trafficking, human trafficking, internet crimes against children, those crimes are going up. So the macros are building in a favorable way. There's no change in the competitive winloss dynamic and our pipeline is improving.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

So now it's just a matter of timing and clearing some of these timing hurdles, and executing.

Tomer Zilberman
Tomer Zilberman
Equity Research Associate at Bank of America

Got it. Thank you.

Operator

Thank you. And we will take our next question from Jeff Van Rhee with Craig Hallum. Please go ahead.

Jeff Van Rhee
Partner & Senior Analyst - Equity Research at Craig-Hallum Capital Group LLC

Great. Thanks for taking the questions. Just a couple for me. Maybe, Tom on FedRAMP at this point, I think midyear was the target June, July, obviously a lot of chaos in federal. But just talk about timing towards FedRAMP and then also what you can do with deal cycles to be ready for when you get the actual FedRAMP certification?

Jeff Van Rhee
Partner & Senior Analyst - Equity Research at Craig-Hallum Capital Group LLC

So a little update there please.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Yes. We're still pushing I think the last time the last call we talked about getting ATO in the third quarter. For those of you that are FedRAMP mavens, there's two pieces to it. One is getting the readiness, which is have you done all the things you need to do to your stack and your product to deliver the security requirements and compliance for FedRAMP certification? That's the long pole in the tent.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

That's the effort that took us a little over a year. As we shared, there's different levels of FedRAMP. We shot for the highest level given our aspirations to solve the most complex sensitive issues in the government, which was level four. We received level four readiness status about three months ago. So the last thing we needed was to get a federal agency to sort of raise their hand and say, we're going to be your godfather and sponsor.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And once that happens, it's typically about a ninety day process to get authorization to operate. Candidly, we think we're close. We thought we were close sixty days ago, sort of on the five or 10 yard line to getting one of two targeted agencies to raise their hand. And just given all the dose related activity, those organizations remain interested but haven't committed yet. So our expectation is to get that done, as I said, in the next thirty days, then add another thirty days for the ATO.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And so we're still pushing for the end of third quarter. To your point on what can you do, the good news is the agencies that would want to take advantage of our FedRAMP status are well aware that we've achieved readiness. Number one, they know we're committed. Number two, we've spent a lot of money and time already to get the readiness status. They all understand the last mile is the sponsorship.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And so we're able to the Celebrite Federal team has been able to engage in discussions with target agencies knowing that this is pending. The last thing we can't do just yet is bid a project that might be scheduled to close, say, in the next quarter or two. By the way, we also shared when we announced this that you shouldn't expect a big uplift in federal bookings and performance in 2025. That is still the case because of the timing issues, But we do think it's important to get this over the line in the timeframe I just discussed so that as people start to plan their 2026 spend, we're able to participate more fully. And so that sort of opportunity and plan remains on track for us.

Jeff Van Rhee
Partner & Senior Analyst - Equity Research at Craig-Hallum Capital Group LLC

Great. Thanks for the color there. And then on the EMEA effort, it sounds like you took the initiative. You mentioned UK, Germany. I don't want to read my color into it.

Jeff Van Rhee
Partner & Senior Analyst - Equity Research at Craig-Hallum Capital Group LLC

Just the promptings to lead you to go do that and the results of that trip.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Yeah. I'd say it was two things. One, we make a point of communicating to the market, to our investors, to our customers, our prospects, our employees that this is truly a global company. Our genesis and our roots are clearly in Israel, but our ownership, as you know, Jeff, is north of 40% owned by a Japanese corporation. Over 50% of our business is conducted in The United States.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Over 50% of our employees are outside of Israel. So we're very much a global and my view is you walk the talk. You don't just tell people you're global. You get off you get out of your office and you get out into the world so that you can meet and greet and put names and faces and demonstrate commitment, not only to our employees, but to our customers. And with our with the big presence and footprint we have in The U.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

S. And here in Washington, D. C, we and the fact that Europe represents Donna, what's the percentage roughly of our revenue?

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

34%.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Thirty four % of our business. We said, When do we bring our executive team? When do we bring our board to Europe? And for that matter, down in Asia Pac. And so this was a decision I took.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

We hosted our executive quarterly off-site meeting, brought the whole leadership team to London Three Weeks ago for a full week of meeting with customers and employees. And then last week, for the first time, we hosted the Celebrite quarterly board meeting in Munich to do the exact same thing. Spent the entire week there, met with multiple agencies, met with the Met Police in London, met with the Fed Police, which is the federal police department in Germany. We hosted a C2C equivalent event that we did two months ago in Washington. We ran one in Germany.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

It was very well attended. So it was really the long answer to your short question is we're a global company, and my view is let's get the leadership of this company out in the field listening and connecting with both our customers and our people.

Operator

Thank you. And we'll take our next question from Mike Sigos from Needham. Please go ahead.

Mike Cikos
Senior Analyst at Needham & Company

Hey, thanks for taking the questions, guys. I just wanted to get a little bit more. I know on the guidance outlook, we've spoken about this a couple of times now, but we have this embedded prudence, if you will, for this June based on what's taking place in federal with the anticipation of the reacceleration in the back half of the year based on the pipeline and the opportunity you're seeing. Just curious, again, we have this pipeline, but why not embed more conservatism in the back half of the year, again, just given this uncertainty out there?

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Why not be more conservative on the second half?

Mike Cikos
Senior Analyst at Needham & Company

What gives you that confidence? Just because it feels like there's such a moving point out there

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

a fair question, and trust me, as you go through these things and we decided in the spirit of transparency and integrity on the revenue given the shift in seasonality, combined with some of the one time services business flow, we felt like it was the right thing to do to adjust the low end by I think we took it down $10,000,000 But as we look at run rates, as we look at pipeline and performance across the rest of the portfolio and I'll highlight again, we had strong performance in The U. S. State and local was extremely strong, which is a reflection of the value and the impact of our software. Latin America is on fire. Asia Pac had a great quarter.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And so and then you come back to federal and say, okay, it's almost 20% of our business. If they show up, even if they just get a little better, I think it positions us to deliver the full year guide that we shared, which we thought was pretty strong to start with. And when you combine that with the fact that if you go I wish all of our investors could sit down with senior leadership at some of these agencies. And I do it every day, every day. And when these people sit across the table from you and tell you how they cannot do their job, they cannot keep up with terrorists and murderers and pedophiles without our software, What that tells you is this isn't a gosh, do we need this, gosh, Elon's pushing us to save 30% and you're a casualty.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

They have to have this software. And so when that's a must have and the macros aren't changing, that's why we believe as soon as this world settles down just a little bit more, we will see an uptick. Now the issue is, is it a big whoosh, which it could be based on some of the pipeline opportunities that were unanticipated that are starting to flow or is it just an uptick? But that's what gives us the confidence that enough confidence to say because you could do which a lot of companies are doing. We're abandoning guidance because we don't know.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Or it's the baby with the bathwater. If you're going to take revenue down, take it all down. Take your lumps now. I mean, you can imagine those conversations take place everywhere. But it's our belief that that's not going to come to pass and that the company is going to rebound and have a strong second half.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

We also have intimate relationships with our largest customers. It's been long standing. They still need to protect the world and we're bearing with them and they're bearing with us. I mean, that's the reality. This is a long standing executive relationship where they know this too shall pass and we will come good.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

Other one other thing that we haven't highlighted yet that we think could contribute to the answer to your question

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

is one area that is not getting, I'll just say, as much pressure on the cost side is the area of intelligence and defense. For reasons that we all understand if you follow geopolitics and what's happening around the world. And just to make an example, we all know that NATO in Europe is amping up their spend in defense. Nobody's confused about that. And as they look at doing that and they look at securing the Eurozone borders, guess who might be able to help them?

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And so Celebrite is moving swiftly to elevate our positioning, our messaging, our coverage to make sure that we're bringing our assets to bear in what is actually emerging as a growth segment that needs our technology contrasted with some of the pressure points in some of the more traditional agencies.

Operator

Thank you. We'll take our next question from Jonathan Ho with William Blair. Please go ahead.

Jonathan Ho
Research Analyst at William Blair

Hi, good morning. One thing I wanted to understand a little bit better is, can you talk a little bit I think you gave some great color around the Guardian and InCites adoption. Can you help us understand how Pathfinder is performing? And does the strong adoption of the other two products maybe help smooth the Pathfinder adoption process over time?

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Yeah, again, and I'll let Marcus comment because he's close on the ground on this. But I would tell you that the Pathfinder is growing more in line with the core business as contrasted with Guardian, which has delivered its third straight quarter over 100%. And we want to avoid specifics, but I would just tell you it's a healthy beat above 100%. So that technology is the market's leading, and we would argue only purpose built repository for collaboration and chain of custody and is also a strategic control point in the enterprise is doing exceptionally well. Pathfinder, is, as I said, is growing more in line with the rest of the business, but we've delivered some new enhancements and capabilities as of very recently that we think will change the trajectory.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Now, that said, we expect the penetration of Pathfinder in perfect world, you'd want 100% penetration of both products relative to InCites. We think a realistic target on Guardian right now is 50%. And that's really only constrained by sovereign level adoption of cloud technologies. So there are certain countries that just don't right now I was just in Germany. And they're pretty reluctant to do anything in the cloud right now.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

And that'll change, but right now, that's where they stand. That's where Japan stands. Pathfinder, think, just given the scale dynamics, is probably a 25% penetration versus 50%. But let me ask Marcus to give you his view on the current, but I think more important, our optimistic view of the future of Pathfinder.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

Yes. So, Pathfinder was a major release of 10/2004, this quarter, which brought a number of additional features including a cloud delivered opportunity, for the product. What we're seeing with Pathfinder is it is excellent product market fit. And a number of people on this call actually saw the demonstrations we did recently at our C2C. And I think you all agreed how powerful that product is.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

What we're now working on is making it more consumable for mass adoption. So when you bring out a product at the top end, you now need to scale it back and that's what we've done in 10/2004. So we're now seeing an increasing pipeline, where we're actually growing and we're very, very focused on the areas that we see adoption. And in line with Tom, we will see penetration rates as he aligned to.

Jonathan Ho
Research Analyst at William Blair

Perfect. And then just as a quick follow-up, are there any specific items in the Memorial Day budget that are maybe earmarked programs that are particularly attractive that you're looking at? Thank you.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

Yes, indeed, there are a number. So the main thing at the Memorial Day budget, fingers crossed it happens, probably not Memorial Day, but I think that the move music is it will happen that week. It allows to move from CR in into the general tax status being set, which actually means then the department heads actually know that they've got their money for an extended period of time. What that then does is it reinvestigates and reinvigorates the special programs. There are a number, we couldn't list them all.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

They're all published on the website. But with our business development team, we've been doing a lot of work on Capitol Hill and at the state and local executive to make sure that we're well positioned for that security. So I would say there's probably eight or nine key programs, which we don't document, which will flow from that program, which are exciting for us. They're all around the same use cases, human trafficking, fentanyl, border safety. So you can look on the Fedgov and see those programs pretty well documented.

Operator

Thank you. And we'll go next to the line of Shaul Eyal with TD Cowen. Please go ahead.

Shaul Eyal
Managing Director - Equity Research at TD Cowen

Thank you. Good afternoon, Tom, Donna, Andy. Tom, my question is on obviously on the federal The U. S. Federal softness.

Shaul Eyal
Managing Director - Equity Research at TD Cowen

I wanted to ask if you or Donna can quantify for us maybe the level of slippage you've seen during the quarter. Is it just a handful of deals that are pushed? And I'm getting some emails from investors asking, was there any business that got canceled? And I have a follow-up.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

So maybe I'll start. So in principle, Q1 for the federal government is usually a very weak or less important spending quarter. And that's what we are seeing in Q1 results. It's very much in line with what we shared with the market, and we feel very comfortable with what we've seen there. But what we are seeing, as was alluded by both Tom and Markus before, is that closing of new business is being deferred and delayed.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

And that is what we are expecting to see in Q2 and impacting our forecast for Q2, and altogether the revenue of the year. Please note, we did not change the ARR, because revenue is impacted by when the programs will come. ARR is rated for the full year is less impactful by that. We assume that some of the new business decisions for Q2 will be deferred to Q3, and we will have an opportunity to have an uplift in Q3 still to be revisited after Memorial Day, as mentioned by Marcus.

Shaul Eyal
Managing Director - Equity Research at TD Cowen

Got it. Thank you for that, Donna. Tom, you've indicated doubling down on the intelligence and defense sector, totally understandable. Curious, who is the buyer within those departments? And I understand the difference between U.

Shaul Eyal
Managing Director - Equity Research at TD Cowen

S. State and local. And maybe just a word about the corporate opportunity. I know it's small, but how has that performed this quarter? Thank you.

Thomas Hogan
Thomas Hogan
CEO at Cellebrite DI

Do you want to take the Bayer?

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

Yes. So the Bayer and DNI, they're two different buyers obviously. So in defense, we are mainly securing forward operations. So if you think about what happens, I mean, can use the Ukraine war. I think Ukraine will talk to us about pretty much 95% of the soldiers captured from Russia will have a cell phone on them.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

And that cell phone will obviously need to be extracted because there'll be very relevant data that's going to protect. So war is very different than people imagine. The second thing in defense use case is mainly security of defense bases, foreign defense bases around the world being defended, contractors come in and those contractors can be terrorists or counter terrorists. So there's a number of, looking at the people that are working on those sites in the civil sector protecting. So that's the defense use case.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

When you then move into intelligence, you're really moving into counter intelligence and triage. This is field agents which are capturing multiple phones and looking for certain amounts of evidence. So what you see is a much bigger scale opportunity because the number of users is exponentially higher than there will be an SLG. So if you think about a DEA agent, maybe a GCHQ agent from or MI5 agent, there's many more of them than there will be a lab technician in SLG. So we're tuning our product to take advantage of that, and the buyer is simply, the person that's in command of those field agents.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

It's the equivalent of a chief of police. It'll be an intelligence chief or a base chief or an army chief will be the actual buyer that we're after.

Shaul Eyal
Managing Director - Equity Research at TD Cowen

Maybe just a word about the corporate opportunity.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

Yeah, I mean, the corporate opportunity, I mean, our enterprise business is growing in line the enterprise market. We feel that we're making progress. I mean we have the who's who of accounts that we always say. We have some significant wins out of Fortune 50 customers this quarter. We are optimistic about our partnership with Relativity adding to that and also partnerships with other service providers.

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

The corporate opportunity led by Phil O'Reilly, who's a world class leader, is really starting to come around and we're satisfied with our revenue in that area.

Shaul Eyal
Managing Director - Equity Research at TD Cowen

Thank you so much for the color.

Operator

Thank you. And we'll move next to Eric Martinuzzi with Lake Street. Please go ahead.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Yeah. A year ago, you laid out a plan to grow to $1,000,000,000 by 2028. Is that anticipated revenue CAGR of 20% and ARR of 24? I'm noticing the midpoint here for 2025 at 19% on the revenue and 23% on the ARR. Are we effectively stepping away from that billion dollar plan, or is the expectation that growth in the out years would recover those three.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

I think when we've given, and thank you, Ari, for the question, we've given this vision and plan to get to the $1,000,000,000 it was relying on a few factors that we are actually seeing being executed. And as you said, it's built on CAGR. Last year, we've done better than that this year. Current guidance alluded that we are slightly below, but doesn't mean that we are getting away from our overall performance expected. What we are seeing this year that's impacting both revenue and ARR is actually what we said before on the spending time, especially with the federal government.

Dana Gerner
Dana Gerner
CFO at Cellebrite DI

And we believe that this will be released and we will see 2026 catching up on what we are missing here. And I think what Marcus spoke before about the World Cup will provide us more opportunities that are currently not captured in our 2025 forecast. Altogether, we are not changing our trajectory to get to a $1,000,000,000 company.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Got it. And then you would discuss the federal business being a little bit slower than expected, but you also called out EMEA. Was that a handful of transactions or an overall kind of across the board delay in decision making on pipeline?

Marcus Jewell
Marcus Jewell
Global Chief Revenue Officer at Cellebrite DI

A combination of both. I mean, the two are actually pretty much interlinked. I would say there was a general slowdown from public safety, but an increase in D and I. And so the D and I has a longer maturation and a longer sales cycle, but the deals are a lot bigger. We have huge faith in our EMEA team that are making the pivot towards where that market is and we're going to see a big uptick from them as that market matures, but there's nothing to see there from really anything outside of normality, as we make those transitions and back our leadership in the region.

Eric Martinuzzi
Senior Research Analyst at Lake Street Capital

Thank you.

Operator

Thank you. And this concludes the Q and A portion of today's call. I would like to now turn the floor over to the Celebrite team for additional or closing remarks.

Andrew Kramer
Andrew Kramer
Vice President-Investor Relations at Cellebrite DI

Great. Well, thank you very much everybody for participating today. We will be participating in a number of investor conferences over the next few weeks. For those of you who have questions, feel free to reach out to Investor Relations and we look forward to seeing you at those conferences. Thank you.

Operator

Thank you. This concludes today's Celebrite First Quarter twenty twenty five Financial Results Conference Call. Please disconnect your line at this time, and have a wonderful day.

Executives
    • Andrew Kramer
      Andrew Kramer
      Vice President-Investor Relations
    • Thomas Hogan
      Thomas Hogan
      CEO
    • Dana Gerner
      Dana Gerner
      CFO
    • Marcus Jewell
      Marcus Jewell
      Global Chief Revenue Officer
Analysts
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Key Takeaways

  • Celebrite delivered 23% year-on-year ARR growth and 34% year-on-year adjusted EBITDA growth in Q1, achieving a 22% EBITDA margin and a Rule of X within its 45–50 target range.
  • The company’s migration to its core Insights platform reached over 30% of its installed base and remains on track for 50% by 2025, while its cloud-based Guardian solution saw ARR more than double for the third consecutive quarter.
  • Despite U.S. federal spending headwinds and modest EMEA shortfalls, Celebrite reports an expanding federal pipeline—bolstered by FedRAMP readiness expected in Q3—and anticipates reacceleration in the second half of 2025.
  • Global diversification drove strong growth in U.S. state and local, Latin America, and Asia Pacific, and Celebrite reinforced its EMEA commitment through executive visits and sold-out regional events.
  • Strategic milestones include a sold-out first user conference with 700 attendees, the launch of the Digital Justice Awards, and the Spring 2025 release featuring cloud foundation and AI-powered innovations—now nearly 20% of ARR is cloud-enabled.
AI Generated. May Contain Errors.
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